Dynagas LNG Partners LP (DLNG) Q2 2015 Earnings Report, Transcript and Summary

Thank you for standing by, ladies and gentlemen, and welcome to Dynagas LNG Partners Conference Call on the Second Quarter 2015 Financial Results. We have with us Mr. Tony Lauritzen, Chief Executive Officer; and Mr. Michael Gregos, Chief Financial Officer of the Company. At this time, all participants are in a listen-only mode. There will be a presentation followed by a question-and-answer session. [Operator Instructions] I must advise you that this conference is being recorded today. At this time, I would like to read the Safe Harbor statement. This conference call and slide presentation of the webcast contains certain forward-looking statements within the meaning of the Safe Harbor provision of the Private Securities Litigation Reform Act of 1995. Investors are cautioned that such forward-looking statements involve risks and uncertainties, which may affect Dynagas LNG Partners’ business prospects and results of operations. Such risks are more fully disclosed in Dynagas LNG Partners filings with the Securities and Exchange Commission. And now I’ll pass the floor to Mr. Lauritzen. Please go ahead, sir.

Good morning everyone and thank you for joining us in our second quarter and six months ended June 30, 2015 earnings conference call. I am joined today by our CFO, Michael Gregos. Yesterday, we issued a press release announcing our second quarter and six months ended June 30, 2015 results. Certain non-GAAP measures will be discussed on this call. We have provided a description of those measures as well as the discussion of why we believe this information to be useful in our press release. We are pleased to report the partnership’s earnings for the second quarter and six months ended June 30, 2015, which are in line with our expectations. In particular, we are focused on the performance of our fleet from a safety, operational, and technical point of view, and we're glad to report that during the said periods, our fleet did not experience any unscheduled downtime, which we believe is reflective of the quality of our fleet and our manager's operational ability. The partnership itself showed a significant improvement compared to the same periods in 2014. This increase was primarily attributable to the growth of our fleet in line with our strategy. Our fleet income is produced from multiyear time charter contracts with international energy companies, who pay a fixed daily rate for the chartered vessels. As the charterers also pay the majority of variable costs, such as fuel and terminal cost, the partnership enjoys a steady and visible cash flow that are not tied to oil or gas prices. With our fleet fully contracted through 2016 and 80% contracted through 2017, we intend to continue to focus our attention on further fleet growth potential, contract coverage and safe and efficient operations. The fleet of five LNG carriers currently owned by our sponsor, which we have the right to acquire, provides us with an identified opportunity for growth. The characteristics of these vessels make them attractive for conventional shipping as well as LNG projects that require specialized ice classed and winterized vessels, which are features we believe will continue to be in particular demand going forward. We also believe that our Sponsor will be able to contract for additional LNG carrier newbuildings that we expect will create further growth potential for the partnership. Turning to Slide 3, our quarterly cash distribution for the second quarter of 2015 of $0.4225 per unit was paid on 13 August, 2015 to all unit holders of record as of 6 August, 2015. The cash distribution is equal to an increase of 15.8% over the partnership's minimum quarterly distribution per unit. The increase is driven by the contribution to operating results from the two LNG carriers Arctic Aurora and Yenisei River, which were acquired and delivered to the partnership in June and September 2014. Since our IPO in November 2013, we have paid to all unit holders a total of $2.5621 in cash distribution. On 20 July, 2015, the partnership completed a public offering of 3 million 9% Series A redeemable preferred units, which represented a limited partner interest in the partnership at a liquidation preference of $25 per unit. Distributions on the Series A Preferred Units will be payable quarterly on the 12 day of February, May, August, and November commencing November 12, 2015 as and if declared by the partnership's Board of Directors and an equivalent of $0.5625 quarter per unit. The proceeds are intended to partly finance the acquisition of one of the optional vessels offered by its sponsor. In June 2015, the Clean Force completed it's time charter with DG Group and commenced employment under its new 13-year time charter with Gazprom and was renamed Amur River. I'll now turn the presentation over to over to Michael who will provide you with a detail comments to the financial results.

Thank you, Tony. Turning to Slide 4 of the presentation, I'll review some recent financial highlights. For the second quarter, the whole fleet has operated according to contract without any incident. We're pleased that the Amur River commences 13-year charter to Gazprom. Given that we operate under long-term fixed rate contracts without any exposure to commodity prices, volume or exposure to any specific project or cash flows, our cash flows are not impacted by the volatility and the commodity and financial markets. As a result, it was another stable quarter in which we continued to deliver positive results. Q2 2015 adjusted EBITDA amounted to $27.6 million, an increase of 62% from the same period in 2014. For the second quarter, average daily hire gross of commissions amounted to about $78,800 per vessel and our average daily OpEx amounted to $13,150 per vessel. Adjusted net income which is net income adjusted for time charter high amortization for the second quarter amounted to $14.6 million or $0.41 per common unit. For the six month period ended June 30, utilization was 99% across the whole fleet. On Slide 5 you can see the second quarter 2015 results versus the same period of 2014. The growth in revenues and adjusted EBITDA is driven by the acquisition of two vessels in 2014, all of which are in long term contracts as well as our strong underlying operating performance. Moving on to Slide 6, the distributable cash flow, cash available for distribution is $17.4 million for the second quarter of 2014 as compared to $12.6 million for the second quarter of 2014. For the second quarter, we distributed $15.1 million of cash per common subordinated and GP units, emanating from the quarterly per unit cash distribution of $0.4225. This gives us the coverage ratio of 1.16 times, which is in line with our communicated coverage ratio target range. Moving on to Slide 7, at the end of the quarter we had approximately $36.5 million of cash on the balance sheet and $30 million in borrowing capacity under our revolving credit facility with our sponsor. Our total debt of $565 million comprised of a mix of $315 million secured bank debt over four LNG carriers and 250 million unsecured notes, which are due in 2019. The partnership's weighted average interest rate on its long term debt for the six month period ended June 30 was 4.5%, 44% of our debt was fixed -- has a fixed rate. We were pleased to complete our $75 million public offering of Series A cumulative redeemable preferred units, the proceed of which we expect will be utilized to fund our next drop down. The partnership maintained a healthy balance sheet with a 4.7 times net debt to 12 months forward run rate EBITDA. Given cash on hand and additional capacity for debt, we expect to execute our next drop down without issuing any units. Our latest cash distribution of $0.4225 per unit was paid on August 13 and based on yesterday’s unit closing price represent an annualized distribution yield of 13% which we believe undervalues our partnership given our long term contract coverage, the stable nature of our business and the positive long term industry fundamentals. Until our unit price recovers we will examine all alternatives and tools that might be used to fund new deals. Moving on to Slide 8, this slide outlines our cash distribution history, since we went public in November 2013. The growth in our fleet has allowed us to increase our distributions to unit holders by 15.8% since our first cash distribution in February 2014. The first element of our cash distribution policy is our secured cash flow which comprises of a firm revenue backlog excluding optional years of about $600 million. When an investor buys DLNG it is buying for high and stable annual cash returns driven by visible growth and cash flows from LNG carriers operating under long term contracts. The second element is our pipeline of five high quality vessels owned by our sponsor, which are the optional vessels we have the right to acquire, two of which are presently trading under long term contracts generating about $48 million EBITDA annually. We continue to remain confident that we can grow our distributions by 10% per annum which is the growth guidance set at the time of our IPO. We would like to remind our listeners that our fleet is fully contracted well into 2017 and we believe that just our current identified dropdown pipeline provides a visible path to this target through to 2017. In addition we expect further growth and contract coverage at the sponsor level, which is expected to provide us the potential to expand our dropdown pipeline and to increase the contract coverage of the sponsor's current fleet. That’s wraps it up from my side. I’ll pass the presentation over to Tony.

Thank you, Michael. Let’s move on to Slide 9 to summarize the partnership's profile. The partnerships fleet currently counts five high specifications in versatile LNG carriers with an average age of about 5.7 years in an industry where expected useful economic life time is 35 years. Our vessels have unique features that enable them to navigate as conventional LNG carriers and to operate in ice bound areas that are restricted for conventional vessels. We have a strong customer base with leading energy companies namely Gazprom and Statoil. These charters are leaders in their fields and only work with top performing service providers. Our contract backlog is about $596.3 million and our average remaining charter period is about 4.5 years. Moving on to Slide 10, our fleet currently consistent of five LNG carriers of which four have Ice Class 1A notation. Our fleet is fully contracted in 2015 and 2016 and 80% for 2017 at the time we expect the LNG shipping markets to be very strong due to the current ongoing construction of new LNG production plan measured against a perceived relatively insufficient order book combined with an existing fleet that contains a large number of undersized vessels. We have a unique fleet. It can handle conventional LNG shipping as well as trading ice bound and sub-zero areas. This means that we’re able to pursue business opportunities in two different markets namely conventional shipping and a unique market for ice bound trade. The drivers behind several of our current charters were the Ice Class features of our fleet as well as the operational track record in such conditions. As an extension of the ability to operate in ice bound areas, we're the only company in the world with a current capability and experience in transiting the Northern Sea routes, which redeem an important trade due to the ongoing development of LNG production along this route. We see a strong need going forward for vessels with Ice Class and winterization features. Our multi-year fleet employment profile, first class customer base and the staggered maturity of our charters provide solid cash flow visibility going forward. Our charterers are performing very well on their charter obligations and the vessels are fully utilized. The contractual relationship between our customers and the vessels are on a time charter party basis. Time charter parties are very powerful contracts in where the charterer pays a fixed day rate to the owner regardless if the vessel is being used or not. And all major variable costs such as fuel cost and terminal cost are for the charterer as account. Therefore the partnership enjoys a visible and stable revenue that are unaffected by oil or gas prices. Let’s move to Slide 11. We intend to continue to focus among other things on accretive growth going forward. As you may know we have the right to purchase from our sponsor for the five optional vessels. So we have a large sponsor asset base and substantial dropdown growth potential. Four of those vessels are already on the water and trading and the remaining unit is under construction will deliver in 2015. All optional vessels are high specification Ice Classed winterized and extremely versatile. These optional vessels include two vessels already long-term chartered to first class customers with an average five years employment. Of the two long-term chartered vessels, one is chartered to existing charter Gazprom and one is chartered to Cheniere. We see strong interest for the uncommitted vessels for period charters due to their Ice Class and winterization features. Let’s move on to Slide 12, we believe it to be realistic that our sponsor will grow the asset base beyond the current fleet. Based on feasibility we believe that we may increase the partnership’s fleet to 15 vessels by 2019. We believe this target to be obtainable in particular due to the current growth in LNG production and the company’s experience in conventional shipping and importantly in specialized segments such as operating in ice bound regions. Moving on to Slide 14, the current existing LNG world fleet consist of 408 vessels on the water and 149 vessels in the order book totaling 557 vessels as shown on the bar to the left. The average cargo size today is about 143,000 cubic meters. If we add up all the vessels in the existing world fleet, that size is below 139,999 cubic meters meaning well below the average cargo size, we count about 142 vessels which is about 35% of existing world fleets. The average age of these undersized vessels are also about 18 years old. When we compare these on average old and undersized vessels of 142 units with the order book of 149 units, we note that they count about the same number. Furthermore, as many as 130 vessels out of the order book of 149 vessels have already been committed to charterers. That means that there are very few new buildings that maybe available to facilitate for the need to replace on average old and small tonnage and to carry the incremental LNG production volumes in an environment where LNG cargo production capacity is expected to grow faster than shipping capacity. Moving on to Slide 15, world energy consumption has been steadily increasing over time. The largest sources of energy comes from coal, oil and gas. Since the early 1980s gas has been the fastest growing resource of those commodities. Going forward, we believe that coal and oil related consumption will be second rated to gas due to environmental reasons and gas consumption will continue to grow faster than coal and oil. Based on current construction of new LNG production terminals, the forward sale of new LNG as well as FID taken on new LNG terminals we expect the next years and through the end of the decade and onwards to be dominated by strong LNG production growth. 246 million tons of LNG was produced in 2014. It is conservatively forecasted that 164 million tons of new annual incremental LNG will come to the market between now in 2020. This represents a total increase of 67% compared to 2014 production. The source of this new LNG is primarily from Australia, Southeast Asia, North America and Russia. We continue to believe that the Far East will remain the largest buyers going forward meaning that the LNG carrier ton-mile requirements are expected to average high. These production figures are conservative. Out of the 164 million tons of incremental annual production expected to be added to the market by 2020 we assume that minimum 124 million tons are already under construction and 136 million tons already have sale purchase agreements or off take agreements in place. Australian volumes included in these projections has been estimated to 54 million tons. U.S. export volume included in these projections has been estimated to 82 million tons. In aggregate there are significant volumes coming from new project that we believe will have a very positive effect of LNG shipping. Let’s move to Slide 16. When we compare LNG supply to LNG shipping capacity available from now until 2020, we remain confident that the market outlook for shipping looks very favorable. By adding current LNG production and expect that incremental LNG production we forecast that by the end of 2020 a total of 410 million tons of LNG will be transported per annum. At current the world LNG carrier fleet counts about 408 vessels. We estimate that we need on average about 1.66 LNG carriers to transport one million ton of LNG. As a result, we forecast a total need of about 680 LNG carriers by end of 2020. The existing fleets and the order book combined represent a total of 557 LNG carriers. As such the market may be short of 123 vessels to partially account for the incremental LNG going forward. It is this imbalance that will drive rate increase and then makes our vessels so desirable going forward. Furthermore, it should be stressed that included in the existing worldwide fleet about 36% may be considered a sub standard specification in today's environment due to their small size and their average age of about 18 years. Actual production may also be higher than forecasted due to additional projects and fast pace projects such as FLNG. Also current underutilization of existing projects should be rectified over time. This will all lead to additional need for LNG carriers. The potential re-charting possibilities of part of our fleet will be in 2017 at the earliest and beyond which we expect to be a period of high total fleet utilization. This will be further supported by Arctic LNG coming on stream and requiring highest classed vessels. Let’s move on to Slide 16. We would like to conclude the presentation with why we believe our company is valuable to investors. Our incomes from our charters are very stable and unaffected by oil and gas prices. Our fleet is fixed on term time charter contracts with leading energy companies thereby creating a secure, visible and stable cash flow. The time charter contracts are very powerful contracts in which the charters have to pay the owners a fixed day rate regardless if they use the vessels are not and all major variable voyage related cost are for the charter's account. Our fleet is operated by our associated and reputable Manager Dynagas LTD that has provided us exemplary utilization rates. Our vessels are further more Ice Classed and winterized, which give us the flexibility to pursue business on the conventional shipping markets as well as on the market for ice and winter trades. This is something that our pears are not offering and gives us a market fluctuation protection. We believe in particular these features will be in demand going forward. We believe the transport for LNG has a bright future taking into account, the ongoing construction and projection of new LNG production terminals. The composition of the existing world fleet and the order book for the growth in LNG production is forecasted to outpace growth and shipping capacities. We’re committed to growing our fleet further. So far and since our IPO in November 2013, we have grown the distribution by 15.8% and our target is to grow the distribution on average by 10% plus per annum. We have a strong balance sheet including a strong cash position and the mixture of secured advertising debt and unsecured notes supported by large portion of fixed interest rates. Our fleet-wide breakeven is low and we have no debt maturities until 2019. We have now reached the end of our first quarter -- of our second quarter 2015 presentation and I now open the floor for questions. Thank you.

[Operator Instructions] Our first question today comes from the line of Ben Nolan from Stifel. Please go ahead.

Thank you. I have several questions. The first relates to something I think you said, Michael, when thinking about your available capital for drop-downs, and certainly in keeping with your growth strategy, it would seem as though one would be coming relatively soon. But how do you think about the availability of capital for that? Obviously, you've done the preferred, which accounts for what I would imagine a portion of the equity; and then I assume there would be some debt financing. But do you think there would need to be some element of additional capital over and above the traditional bank finance in the preferred? And is it possible to maybe utilize the credit facility from the sponsor as sort of a bridge loan until the equity markets are a little bit more cooperative?

Yes, hi Ben. I think for our next drop, obviously we issued the preferred, which is as you said it was going to fund the equity portion of our next drop. I think we should expect that the balance of the purchase price under normal circumstances will be debt financed, that’s the expectation yes.

Okay. So you don't -- wouldn't anticipate adding any more equity at all for the next drop. Is that…

No we don’t -- we’re not going to need any equity for the next drop, no. Given the environment where we are now in fundamentals are being overlooked, we feel it’s prudent to refrain from issuing any equity as a funding source.

Okay; that's very helpful and good to hear. My next question relates to something that has been out in the market a while that the sponsor had won a contract for Russian LNG Ice Class icebreaker vessels. I was curious if you have any commentary on that, or if there is anything that you could say to that with respect to -- well, anything that you might be able to say in relation to that.

Yes thank you, Ben. So we are aware that there has been some speculation and some press on it. Unfortunately, we are not in a position to comment on this transaction at time being, but we expect to be so in a couple of weeks from now.

Okay. That's helpful. And then lastly for me, just -- I know that, Tony, you'd talked about how you expect there to be a growing need for Ice Class vessels, and obviously you guys are the leader in that category, and certainly when looking at the vessels at the sponsor level in particular that have yet to be chartered. Are you currently seeing an appetite for long-term charters for those as a function of their Ice Class capability? And is that something that you would expect, despite the current soft spot market, you could -- maybe able to soon lock up, in terms of long-term employment on those? Either as a function of just regular trading or as a function of their Ice Class capabilities.

Yes, thank you, Ben. So as you know the great advantage with our fleet, both the existing fleet that we have on the partnership and also the optional vessel is that they have this versatility and being able to sail as a conventional LNG carrier, and to trade in ice bound areas. We do see a general need for term employment going forward against the expected production volumes coming, but that being said, we see in particular need for ice classed and winterized vessels going forward, and as you know that's a completely different supply and demand picture that we're looking out there.

Okay. So when you say that, are you talking about some sort of a future event? Or is there immediate demand for Ice Class vessels that is somehow or another -- as you say, the supply and demand is somehow or another different than that of the regular vessels, and maybe not quite as subject to the current oversupply that we see in the traditional market?

Yes exactly, and we see the general requirements with a little bit forward commencement, which we also would be sensible. I don't think that when you have available vessels. At this moment, it doesn’t make a lot of sense to commit them right now on long term projects. It seems more sensible to do that a little bit more forward in time.

Okay. All right. Very good that does it for my questions. Thanks guys.

You're welcome. Thank you.

Our next question today comes from the line of Fotis Giannakoulis from Morgan Stanley.

Yes, hi guys, hi Tony. I want also to ask about your alternatives for the growth for the additional rebound. I understand the first dropdown will be without any equity, are there any other ways that you can try to facilitate dropdowns? Any other forms of capital and have there been any thoughts of potentially getting some assistance from your sponsor in different classes of shares or even sellers credits?

Hi Fotis, it's Michael. Hi, that's a great question. Beyond our next drop, which we're not going to, we know we're not going to issue an equity, we definitely will examine various alternatives such that the ones that you mentioned as among other things our sponsors are willing to facilitate the financing of dropdowns through as you say sellers credit or receiving units. So all these alternatives will be considered, and the market should not underestimate the possibility of the sponsor support in some form or another if the market, the present market anomaly persists. However, I personally do not believe the market anomalies last forever, but we do have tools and how to grow in case it does last longer than we anticipate.

And given this intention or support, how do you view the timing of the dropdowns? How has this changed compared to six months ago when the stock price was much higher?

Well, as I told then, we did issue the preferred with a view to doing a drop down as soon as practically possible. Nothing material has changed in our targets. Our targets still remains unchanged in terms of the number of the drops per year. We would hope that the next drop will be consummate that as soon as possible and thereafter we'll have to see, but as I said, we are considering the tools in order to fund dropdowns in the event that our unit price remains undervalued.

And regarding the re-chartering risk that you have, there are two of your vessels that they come out of contracts in 2017. I understand that at least for one of them, BG has an extension option; but it seems that it's at a very high level. Have there been any discussions about extending these two charters, similar to what you did with the Clean Force with Gazprom? And what shall we expect in terms of duration of a potential extension and in terms of a rate? Is this something that you can give us some guidance?

Yeah. So -- it is true what you say that the option on the BG charter is quite high compared to the current market. So we don’t see any value in running to push for negotiating that vessel for an extension at this point in time, that’s the Clean Energy. We would rather just like to sit back and wait and see what happens there. That being said for some of the other charters there are let’s say requirements in the market that could potentially well suite some of our openings in the more nearer term although that is probably looking at 2018 onwards.

The reason I'm -- what I'm trying to understand is the ability of a rechartering, especially these steam turbine vessels under the long-term contracts. Obviously the rate is something to be negotiated. But can you tell us where these vessels are being deployed right now, if they are going to be needed even after the expiration of these contracts? Or what are the chances that the charterer might prefer to go for a newbuilding vessel potentially from your sponsor instead of extending the charters for these two ships?

So, presumably we’re talking about three vessels that we have there are turbine driven, and you remember that we were successful in extending the Clean Force that has been renamed Amur River until 2028, that despite that we had other vessels to offer them of other propulsion system. The fact is that, some charters, they really like the 150,000 cubic size and they don’t have such a high need for high speed on the vessels which makes this units perfect. So I would when it comes to the for example, the Ob River which is on charter to Gazprom, its sublet to Sakhalin Energy until 2017, but with an extension option that takes it into 2018. Obviously Sakhalin Energy is not stopping to produce gas in 2018 and its perfect chip for the trade. So why shouldn’t we’ll be able to extend with a party like that. And when it comes to the Clean Energy she has to say potential opening in 2017, if not the extension option is declared and we've seen that that vessel is very good for intra-Pacific trades, is being used quite a lot for loading in Australia and going up to either Japan or China or Korea. So it’s a very -- it's very good vessel for that kind of trade.

All right. Tony, I would like to ask you about the structure of the market and how do you see the market developing the next three to five years -- or even shorter than that, given the fact that we have all this new volume of LNG that is going to come online. You mentioned that most of these projects they have already contracted their volumes. My question is: how much of this volume is contracted to utilities, end-users that need the LNG for transportation? How much is for trading purposes to players like BG, for example? And how -- what are the chances that the LNG market overall will be oversupplied at least for the next two, three years? And any implications both for the spot market of LNG -- we saw that Cheniere has chartered some vessels for its own trading purposes, including one of your sponsor's vessels. And also about the FSRU market, and given that -- if there are any thoughts and even expanding into this sector.

Yes so that was many questions in one. Let me see where I can start. Fotis. First of all it’s very difficult to pinpoint exactly who would be the end user of the gas. The fact is that a substantial part of it has been contracted out already and that gives us confidence and a lot of confidence. LNG is such a commodity that it’s not so easy to reduce production even if you would like to because of a pricing matter. These terminals are quite expensive and they would like to ensure that the terminals are repaid. So even if gas prices has come down and potentially they can stay more direct for some time because of ample gas coming, still that gas needs to be transported. And in the case that it should be difficult to find or source buyers for those cargoes in the case some of it goes to major trading portfolio still the gas needs to sit in a tank and since there is limited storage on the production side well that means that vessels would potentially also have to be used for a longer period of time for storage, which is a good thing because it means that more vessels will be utilized going forward. So that kind of leads us a little bit into the questions about FSRU and a general need for re-gas capacity and I believe you’re right. There will be a need for more re-gas capacity. There is underway construction of re-gas capacity to quite a large extent at the moment, but obviously this is time consuming etcetera and LNG is coming, is coming quickly. So with that in mind, I also do believe that there is good prospect for the FSRU market, although we’re not directly involved in re-gasification units today, we certainly see the requirement and our manager has experience in design work and project work on the re-gas side since 2007. So it’s something that we would look to expand into at some point in time because it obviously gives the benefit of having re-gas capacity quickly. I would say that you can have a construction timeline for a floating terminal in about two and half years to two and half years or so compared with the conventional land based terminal that would take probably around four years. And we counted quite substantial number of projects that are looking for re-gasification unit. So it is definitely something that we are monitoring. And that being said, when you spoke about the clean energy for example, you said what could that vessel be used for? Well obviously as we said, she is a great unit for Intra-Pacific trade. We see a lot of Australian volumes or producers they like that size fits into all the Japanese terminals, but also because the Clean Energy has tremendously big boilers, which is what you need to convert, well the boiler capacity of a vessel is important when it comes to re-gasification capacity. So we actually have all plans and drawings ready to convert the Clean Energy into an FSRU should that be one wanted at some point in time.

Thank you, very much Tony. Thank you, Michael.

Welcome.

[Operator Instructions] The next question today comes from the line of Shawn Collins from Bank of America.

Good morning and good afternoon, Tony and Michael. Hope you are guys are well.

Very well. Thank you.

Good. I wanted to ask kind of an industry question. Congrats on the new commercial LNG carrier pool between yourselves, Golar, and GasLog. I know it's focused on spot and short term business and that's not applicable for Dynagas Partners. Other liquid markets such as product and crude certainly operate commercial pools, but this is fairly normal for LNG carriers, I just wanted to ask about the history of the pool and the context and how this idea came about and then evolved from an idea to an actual commercial pool.

Very well. Thank you very much for that question. So as you stated this is on a sponsor level than I guess LNG partners do not have any vessels in the spot market and is not part of the pool. There is no reason to be part of the pool. The LNG market is evolving along with other markets and I think it could be sometimes beneficial to be able to add scheduling power when owners have a limited number of vessels that are competing in this short term market for a limited period of time. Then you kind of miss out on a few opportunities indicated on how the ability to schedule around all of the charter's requirements. So that was really the basis for the pool was to how can one get together and ensure that one has sufficient scheduling ability to work that against short term requirements. So that was kind of the background for the pool. That being said, it will not affect the partnerships let's say ability to grow. Our group's overall strategy is to fix vessels for the -- for long term ensuring that they will be dropping down vessels in the partnership when it is timely right to do that, but we think the pool mechanism is a great mechanism to carry the sponsor vessels on the shorter term market until they are fixed against longer term employment.

Okay. Great. That's helpful. It sounds like a great idea and also congrats Tony for running the pool in that responsibility. A second question, closer to home, to Dynagas LNG Partners, so the new charter for the Amur River, formerly the Clean Force, for 13 years, I think that implies a rate of about $66,000 per day, I think; if you can confirm that. And that compares to your other charters of approximately $77,000 or $78,000 approximately. Can you just comment on the current market for LNG carrier time charters, and what that tone is, and what the current supply and demand dynamic looks like understanding that a year or two years out that that will be dramatically -- is likely to be dramatically different.

So the -- that charter we're done a few years prior to its commencement and so we were looking at that requirement as a portfolio or approach and obviously we thought it was quite attractive to secure a 13-year charter on a vessel that already had a year to go at the time giving a 14 year cover. So given the portfolio of vessels, we thought although that would be some discount to the shorter charters that we had in our portfolio, it made sense. And also from a strategic point of view, given that, that vessel and that long term charter would be very much exposed to the ice bound trade and sub zero environment etcetera, that was also something that we value to get a footing in the door.

Okay. Okay. That's helpful. Thank you. And just my last question, so the Northern Sea route is very efficient from a timing and a voyage standpoint distance standpoint obviously. It also has its risks and it's still a novel trade route. Understanding that the season is fairly short from July to August, can you just comment on whether you have made any voyages yet this season?

Yes, so the season is July to November, December depending on the actual season and it is not up to us to schedule our vessels through the Northern Sea route. We just offer the service and when we perform that service we have all the ability to ensure that that's done in a diligent way. So although we were the first LNG carrier through the Northern Sea route there were many other types of vessels prior to that, bulkers and tankers. So we have not performed any Northern Sea routes this season although the season is far from finished and the reason for that is primarily I guess that while we have a vessel on to Statoil, which is a very -- their production location is basically within the Arctic Circle and they would if you're a trader, you would -- or a producer you would look at where can you get the highest revenue. So although the largest market which is the Far East is a short voyager way from Northern Norway via the Northern Sea route. The South America was for various reasons paying quite okay money for cargo. So I guess that at least early in the season it was more reasonable to send those cargos down to South America, but we've done on our total vessels we've done quite a few of these voyages previously and I think that of course it's great when we perform those voyages and we get some extra revenue for it, that's great, but what is even better is that it puts us in a strategic position for future benefits keeping in mind that a lot of the world's gas resources are located exactly along this route and is being developed for production.

Great. That is very helpful. Thank you Tony and Michael. I appreciate the time and the insight.

You're welcome. Thank you.

[Operator Instructions] We have no further questions at this time. Please continue.

Thank you, very much for listening in on our earnings call. We look forward to speaking with you again on our next call. Thank you very much.