Executive Summary / Key Takeaways

• Strategic Deleveraging and Financial Strength: Dynagas LNG Partners has undergone a significant deleveraging, reducing its outstanding debt from $675 million in September 2019 to $345 million by June 2024, culminating in a flexible lease financing and leaving two vessels debt-free. This has substantially improved its financial leverage to 2.9 times net debt to adjusted EBITDA by June 2024.
• Robust Contract Backlog and Predictable Cash Flows: The Partnership maintains a strong contracted revenue backlog of approximately $0.90 billion as of September 18, 2025, with an average remaining contract duration of about 5.40 years, ensuring stable and predictable income streams with no contractual vessel availability until 2028.
• Specialized Fleet and Operational Resilience: DLNG-PA operates a specialized fleet of Ice Class 1A FS and fully winterized Arc-4 LNG carriers, capable of operating in harsh environments down to -30ºC, providing a unique competitive advantage in supporting remote LNG production projects.
• Disciplined Capital Allocation and Future Potential: With enhanced financial flexibility and no dividend restrictions from its new financing, the Board of Directors is evaluating its capital allocation strategy, including potential growth opportunities, common unit repurchases, and sustainable distributions to unitholders.
• Long-Term LNG Demand Tailwinds: Despite short-term market dynamics, the long-term demand for LNG is projected to remain robust, driven by global electrification, cleaner energy transitions, and expanding liquefaction capacity, which bodes well for DLNG-PA's specialized transportation services.

A Specialized Fleet in a Growing Global Energy Nexus

Dynagas LNG Partners LP, established in May 2013, has carved out a distinct niche in the seaborne transportation of liquefied natural gas (LNG). The Partnership's core business revolves around owning and operating a fleet of six LNG carriers, five of which boast Ice Class 1A FS notation and are fully winterized Arc-4 vessels. This specialized technological differentiation allows these carriers to operate effectively in both conventional open water trade routes and challenging ice-bound or harsh environment regions, withstanding temperatures as low as -30ºC. This capability is not merely a technical feature; it provides a tangible benefit by enabling the vessels to support remote LNG production projects, offering a unique versatility that sets them apart in the broader LNG shipping market.

This specialized fleet forms the bedrock of DLNG-PA's commercial strategy: securing long-term time charters with prominent international energy companies. This approach, which has been central since the company's IPO in 2013 and subsequent fleet expansion, ensures fixed-fee contracts, predictable cash flows, and high utilization rates. The company's history reflects a deliberate evolution, from its initial public offering to strategic capital structure adjustments, all aimed at fortifying its market position.

In the competitive landscape, DLNG-PA operates alongside major players like Flex LNG Ltd. (FLNG), Teekay LNG Partners L.P. (TGP), Golar LNG Ltd. (GLNG), and Excelerate Energy L.P. (EE). While competitors like FLNG emphasize modern, fuel-efficient vessels and GLNG focuses on innovative integrated LNG infrastructure, DLNG-PA's unique value proposition lies in its specialized Ice Class carriers and its unwavering commitment to long-term, stable charters. This strategy fosters strong customer loyalty and operational expertise, providing a form of cost leadership through efficient fleet utilization, particularly in niche, harsh-environment operations where its specialized technology provides a distinct advantage. While some competitors may lead in fleet modernization or scale, DLNG-PA's focus on reliability and specialized capabilities offers a compelling counter-narrative, potentially leading to stronger customer relationships and more stable revenue streams.

The broader LNG shipping industry is experiencing significant growth, driven by increasing global energy demands, particularly from the rapid expansion of AI and data centers requiring substantial power. LNG is seen as a crucial transitional fuel due to its lower emissions profile compared to traditional fossil fuels, the efficiency of combined cycle power plants, and a well-established global infrastructure. The global LNG carrier fleet's order book, currently at about 50% of the existing fleet, is largely committed to specific charters and is expected to be absorbed in the medium to long term by the replacement of aging vessels—especially the 18% of the current fleet consisting of smaller, older steam-powered vessels—and the transportation needs arising from a projected 35% expansion in new liquefaction capacity by 2030. This robust long-term demand underpins DLNG-PA's strategic positioning.

Financial Fortification and Operational Stability

Dynagas LNG Partners has recently completed a transformative period of financial deleveraging, significantly enhancing its balance sheet strength. This comprehensive path, initiated around December 2019, saw the Partnership reduce its outstanding debt from $675 million to $345 million by June 2024. A pivotal moment was the closing of a $345 million lease financing agreement with China Development Bank Financial Leasing Co. Ltd. on June 27, 2024. This transaction, combined with $63.7 million from existing cash reserves, fully repaid the previous $408.6 million credit facility ahead of its September 2024 maturity, leaving two of the company's six LNG carriers debt-free. This strategic maneuver dramatically improved the Partnership's financial leverage, bringing its adjusted net debt to last 12 months adjusted EBITDA ratio down from 6.6 times in 2018 to a robust 2.9 times by June 2024.

The impact of this deleveraging is evident in the Partnership's recent financial performance. For the six months ended June 30, 2025, voyage revenues increased by 2.6% to $77.7 million compared to $75.7 million in the same period of 2024. This increase was primarily attributable to the non-cash effect of deferred revenue amortization and the value of EU ETS emissions allowances due from charterers. While voyage expenses saw an increase of 94.1% to $3.3 million, mainly due to the corresponding value of these EUAs, the overall financial health benefited from reduced interest costs. Interest and finance costs decreased by a significant 39.1%, or $7.2 million, in the six months ended June 30, 2025, largely due to the reduction in interest-bearing debt from the June 2024 refinancing and a lower weighted average interest rate of 6.51% (down from 8.43%).

Operationally, the fleet maintained high utilization, with 99.7% for the six months ended June 30, 2025. The Time Charter Equivalent (TCE) rate for this period stood at $68,537 per day. Net cash provided by operating activities saw a healthy increase to $42.69 million for the six months ended June 30, 2025, up from $34.11 million in the prior year, driven by working capital changes and increased net income. This strong cash generation, coupled with reduced debt, positions DLNG-PA favorably. The Partnership's equity book value has also seen significant growth, rising from $311 million in September 2019 to $457 million as of March 2024, reflecting the success of its organic deleveraging strategy.

Strategic Outlook and Capital Allocation

Dynagas LNG Partners' strategic outlook is anchored by its substantial contracted revenue backlog, which stood at approximately $0.90 billion as of September 18, 2025, with an average remaining contract duration of about 5.40 years. This backlog provides exceptional revenue visibility, with no contractual vessel availability until 2028, when the Clean Energy, Ob, and Amur River become available. The Arctic Aurora follows in 2033, and the Yenisei and Lena River in 2034, assuming no charter extension options are exercised. This insulated position shields the Partnership from potential short-term market volatility that could arise from the current influx of new vessel deliveries outpacing immediate liquefaction capacity growth.

Management's immediate focus, following the successful refinancing and Series B Preferred Unit redemption on July 25, 2025, is on disciplined capital allocation. The redemption of all 2.20 million Series B Preferred Units for $55 million plus distributions was funded entirely by internal cash reserves, without incurring additional debt. Furthermore, the Board of Directors authorized a Common Unit Repurchase Program in November 2024, allowing for the repurchase of up to $10 million of outstanding common units over 12 months. With the new financing arrangements offering greater flexibility and no restrictions on common unit distributions, the Board is expected to evaluate and announce its capital allocation strategy in the coming quarter. This "watch-the-space situation" suggests potential for future growth initiatives, further debt reduction, or increased returns to common unitholders.

Despite the positive outlook, certain risks warrant investor attention. The Partnership derives a significant portion of its revenue (36% for the six months ended June 30, 2025) from Yamal, which trades primarily from Russian LNG ports. While existing sanctions related to the Russia-Ukraine conflict have not affected main trading routes, further escalation or new sanctions could impact these charters. However, management expresses confidence in securing replacement charters if necessary. Additionally, the maturity of the interest rate swap in September 2024 exposes the Partnership to floating interest rates, which could increase interest expenses in the near term, though management anticipates benefiting from lower interest rates over time.

Conclusion

Dynagas LNG Partners has strategically repositioned itself as a financially robust and operationally stable entity within the dynamic LNG shipping sector. The successful deleveraging, culminating in a flexible long-term financing structure and the redemption of preferred units, has significantly strengthened its balance sheet and enhanced its capacity for future value creation. The Partnership's specialized fleet of Ice Class Arc-4 LNG carriers provides a distinct competitive advantage, enabling access to niche markets and supporting critical remote energy projects, differentiating it from broader market participants.

With a substantial contracted revenue backlog extending until at least 2028, DLNG-PA enjoys predictable cash flows, providing a solid foundation for sustainable returns. The upcoming announcement regarding its capital allocation strategy will be a key indicator for investors, signaling the potential for further growth, increased unitholder distributions, or continued balance sheet optimization. While geopolitical risks and interest rate fluctuations present ongoing considerations, the long-term tailwinds of global LNG demand, driven by energy transition and electrification, position Dynagas LNG Partners as a compelling investment for those seeking exposure to a specialized and financially disciplined player in the essential energy transportation industry.