Financial Highlights
For the three months ended September 30, 2024 (“Q3 2024”), KNOT
Offshore Partners LP (“KNOT Offshore Partners” or the
“Partnership”):
- Generated total revenues of $76.3 million, operating income of
$17.2 million and net loss of $3.8 million.
- Generated Adjusted EBITDA1 of $45.1 million.
- Reported $77.2 million in available liquidity at September 30,
2024, which was comprised of cash and cash equivalents of $67.2
million and undrawn revolving credit facility capacity of $10
million.
Other Partnership Highlights and Events
- Fleet operated with 98.8% utilization for scheduled operations
in Q3 2024.
- On October 9, 2024, the Partnership declared a quarterly cash
distribution of $0.026 per common unit with respect to Q3 2024,
which was paid on November 7, 2024, to all common unitholders of
record on October 28, 2024. On the same day, the Partnership
declared a quarterly cash distribution to holders of Series A
Convertible Preferred Units (“Series A Preferred Units”) with
respect to Q3 2024 in an aggregate amount of $1.7 million.
- On July 10, 2024, the Partnership received the Dan Sabia back
via redelivery, following expiry of its bareboat charter party to
Transpetro. The Dan Sabia is being marketed for shuttle tanker
operation and remains available also for charter (subject to
negotiation and approvals) to Knutsen NYK Offshore Tankers AS
(“Knutsen NYK”) and conventional tanker operation. Short-term
conventional tanker contracts for the Dan Sabia have been obtained
since the end of Q3 2024.
- On August 15, 2024, repair work on the Torill Knutsen was
completed following the breakage of a generator rotor in January
2024. The Torill Knutsen remained able to serve a limited range of
client facilities, and the Partnership expects to be compensated by
insurance for the extent to which, as a consequence of this
breakage, the Torill Knutsen’s earnings have fallen short of a
contractual hire rate, commencing 14 days after the date of the
breakage. The Partnership also expects that the repair cost will be
covered by insurance, in excess of a deductible of $150,000.
- On August 22, 2024, the Partnership agreed with Shell to extend
by 1 year the charters for the Tordis Knutsen and the Lena Knutsen
and to provide Shell with options to extend each of these charters
by up to 3 periods of 1 year each. Thus, the fixed charter period
for each charter will extend until 2028 and the option periods will
extend until 2031.
- On September 3, 2024, the Partnership’s wholly owned
subsidiary, KNOT Shuttle Tankers AS (“KST”), acquired KNOT Shuttle
Tankers 31 AS, the company that owns the shuttle tanker Tuva
Knutsen, from Knutsen NYK (the “Tuva Knutsen Acquisition”).
Simultaneously, KST sold KNOT Shuttle Tankers 20 AS, the company
that owns the shuttle tanker Dan Cisne, to Knutsen NYK. This
effected a swap of these two vessels, the terms of which were set
out in the Earnings Release for Q2 2024, which was published on
September 3, 2024.
- On October 1, 2024 the Ingrid Knutsen began operating under a
time charter with Eni for a fixed period of two years plus two
charterer’s options each of one year.
- On October 14, 2024 a time charter for the Hilda Knutsen was
executed with an oil major, which is due to commence in March 2025
for a fixed period of one year.
- On December 2, 2024 the Torill Knutsen began operating under a
time charter with Eni for a fixed period of three years plus three
charterer’s options each of one year.
- On December 3, 2024, Repsol exercised their option to extend
the time charter of Carmen Knutsen for one year commencing Q1
2025.
________________________
1 EBITDA and Adjusted EBITDA are non-GAAP
financial measures used by management and external users of the
Partnership’s financial statements. Please see Appendix A for
definitions of EBITDA and Adjusted EBITDA and a reconciliation to
net income, the most directly comparable GAAP financial
measure.
Derek Lowe, Chief Executive Officer and Chief Financial Officer
of KNOT Offshore Partners LP, stated, “We are pleased to report
another strong performance in Q3 2024, marked by safe operation at
98.8% fleet utilization from scheduled operations, consistent
revenue and operating income generation, and material progress in
securing additional charter coverage for our fleet.
Including those contracts signed since September 30, 2024, we
now have just under 96% of charter coverage for the whole of 2024.
Having executed a number of new contracts this year, we have
established good momentum in a strengthening market and remain
focused on filling the remaining gaps in our charter portfolio.
In Brazil, the main offshore oil market where we operate, the
outlook is continuing to improve, with robust demand and increasing
charter rates. Driven by Petrobras’ continued high production
levels and FPSO start-ups in the pre-salt fields that rely upon
shuttle tankers, we believe the world’s biggest shuttle tanker
market is tightening materially. Our secondary geography, in the
North Sea, is taking longer to re-balance, but we welcome the
recent news of the long-anticipated Johan Castberg FPSO having
arrived in the Barents Sea, where it is scheduled to begin
production early next year.
We continue to believe that growth of offshore oil production in
shuttle tanker-serviced fields across both Brazil and the North Sea
is on track to outpace shuttle tanker supply growth throughout the
coming years, driven most notably by the aggressive expansion of
Brazilian deepwater production capacity. particularly as increasing
numbers of shuttle tankers reach or exceed typical retirement age.
We are aware of eight newbuild orders placed earlier this year,
including four by Knutsen NYK (to be chartered to Petrobras and
Petrorio with delivery over 2026-2027) and by another operator
(with delivery by early 2027). We anticipate that all these new
orders are backed by charters to clients in Brazil, and see this as
a sign of confidence in the medium-to-long term demand for the
global shuttle tanker fleet. These new orders bring anticipated
deliveries to a total of eleven, spread over the coming three
years. Particularly when considered in the context of the
increasing numbers of shuttle tankers reaching or exceeding typical
retirement age, as well as yard capacity constraints limiting
material new orders into late 2027 or thereafter, we anticipate
that newbuild capacity will be readily absorbed by the expanding
market for shuttle tankers.
As the largest owner and operator of shuttle tankers (together
with our sponsor, Knutsen NYK), we believe we are well positioned
to benefit from such an improving charter market. We remain focused
on generating certainty and stability of cashflows from long-term
employment with high quality counterparties, and are confident that
continued operational performance and execution of our strategy can
create unitholder value in the quarters and years ahead.”
Financial Results Overview
Results for Q3 2024 (compared to those for the three months
ended June 30, 2024 (“Q2 2024”)) included:
- Revenues of $76.3 million in Q3 2024 ($74.4 million in Q2
2024), with the increase due to higher charter and bareboat
revenues and an out-of-period adjustment of $2.2 million, partly
offset by a decrease in voyage revenues.
- Vessel operating expenses of $29.5 million in Q3 2024 ($27.0
million in Q2 2024), with the increase primarily due to costs
arising following redelivery of the Dan Sabia.
- Depreciation of $27.9 million in Q3 2024 ($27.7 million in Q2
2024).
- There were no impairments in Q3 2024, while in Q2 2024
impairments of $5.8 million and $10.6 million were recognized in
respect of the Dan Cisne and Dan Sabia, respectively. In accordance
with US GAAP, the Partnership’s fleet is regularly assessed for
impairment as events or changes in circumstances may indicate that
a vessel’s net carrying value exceeds the net undiscounted cash
flows expected to be generated over its remaining useful life, and
in such situation the carrying amount of the vessel is reduced to
its estimated fair value. This exercise in Q2 2024 resulted in an
impairment in respect of the vessels Dan Cisne and Dan Sabia owing
to their lack of long-term charters in a context where their
smaller size is not optimal for the Brazilian market and affects
the outlook for future employment.
- General and administrative expenses of $1.5 million in Q3 2024
($1.4 million in Q2 2024).
- Operating income consequently of $17.2 million in Q3 2024 ($1.3
million in Q2 2024). When adjusted to remove the impact of the
impairments, operating income for Q2 2024 was $17.7 million.
- Interest expense of $16.9 million in Q3 2024 ($16.9 million in
Q2 2024).
- Realized and unrealized loss on derivative instruments of $4.6
million in Q3 2024 (gain of $1.8 million in Q2 2024), including
unrealized loss (i.e. non-cash) elements of $8.3 million in Q3 2024
(unrealized loss of $2.2 million in Q2 2024).
- Net loss consequently of $3.8 million in Q3 2024 (net loss of
$12.9 million in Q2 2024). When adjusted to remove the impact of
the impairments, net income in Q2 2024 was $3.5 million.
By comparison with the three months ended September 30, 2023
(“Q3 2023”), results for Q3 2024 included:
- a decrease of $3.4 million in operating income (to $17.2
million in Q3 2024 from operating income of $20.6 million in Q3
2023), driven primarily by higher vessel operating expenses partly
offset by higher time charter and bareboat revenues.
- an increase of $7.3 million in finance expense (to net finance
expense of $20.7 million in Q3 2024 from net finance expense of
$13.4 million in Q3 2023), due primarily to an unrealized loss on
derivative instruments in Q3 2024 by comparison with an unrealized
gain in Q3 2023.
- a reduction of $16.1 million in net income (to a net loss of
$3.8 million in Q3 2024 from net income of $12.6 million in Q3
2023).
Financing and Liquidity
As of September 30, 2024, the Partnership had $77.2 million in
available liquidity, which was comprised of cash and cash
equivalents of $67.2 million and $10 million of capacity under its
revolving credit facilities. The Partnership’s revolving credit
facilities mature between August 2025 and November 2025.
The Partnership’s total interest-bearing obligations outstanding
as of September 30, 2024 were $947.3 million ($941.8 million net of
debt issuance costs). The average margin paid on the Partnership’s
outstanding debt during Q3 2024 was approximately 2.26% over SOFR.
These obligations are repayable as follows:
(U.S. Dollars in thousands)
Sale & Leaseback
Period repayment
Balloon repayment
Total
Remainder of 2024
$
3,552
$
20,587
$
—
$
24,139
2025
14,399
76,257
181,583
272,239
2026
15,060
64,272
219,521
298,853
2027
15,751
31,525
93,598
140,874
2028
16,520
13,241
78,824
108,585
2029 and thereafter
102,600
—
—
102,600
Total
$
167,882
$
205,882
$
573,526
$
947,290
As of September 30, 2024, the Partnership had entered into
various interest rate swap agreements for a total notional amount
outstanding of $471.8 million, to hedge against the interest rate
risks of its variable rate borrowings. As of September 30, 2024,
the Partnership receives interest based on SOFR and pays a weighted
average interest rate of 1.92% under its interest rate swap
agreements, which have an average maturity of approximately 1.58
years. The Partnership does not apply hedge accounting for
derivative instruments, and its financial results are impacted by
changes in the market value of such financial instruments.
As of September 30, 2024, the Partnership’s net exposure to
floating interest rate fluctuations was approximately $240.4
million based on total interest-bearing contractual obligations of
$947.3 million, less the Raquel Knutsen and Torill Knutsen sale and
leaseback facilities of $167.9 million, less interest rate swaps of
$471.8 million, and less cash and cash equivalents of $67.2
million.
On January 15, 2021, KNOT Shuttle Tankers 31 AS, the subsidiary
owning the Tuva Knutsen, as borrower, entered into a $88 million
term loan facility with Nordea Bank ABP (the “Tuva Facility”). The
Tuva Facility became one of the Partnership’s debt obligations upon
closing of the Tuva Knutsen Acquisition on September 3, 2024. The
Tuva Facility is repayable in quarterly installments with a final
payment due at maturity of $57.4 million, which includes the
balloon payment and last quarterly installment. The facility bears
interest at a rate per annum equal to SOFR plus a margin of 2.16%.
In connection with the Tuva Knutsen Acquisition, the Partnership
and KNOT Shuttle Tankers AS became the sole guarantors. The
facility is secured by a mortgage on the Tuva Knutsen. The facility
matures in January 2027.
Assets Owned by Knutsen NYK
Pursuant to the omnibus agreement the Partnership entered into
with Knutsen NYK at the time of its initial public offering, the
Partnership has the option to acquire from Knutsen NYK any offshore
shuttle tankers that Knutsen NYK acquires or owns that are employed
under charters for periods of five or more years.
There can be no assurance that the Partnership will acquire any
additional vessels from Knutsen NYK. Given the relationship between
the Partnership and Knutsen NYK, any such acquisition would be
subject to the approval of the Conflicts Committee of the
Partnership’s Board of Directors.
Knutsen NYK owns, or has ordered, the following vessels and has
entered into the following charters:
- In November 2021, Live Knutsen was delivered to Knutsen NYK
from the yard in China and commenced on a five-year time charter
contract with Galp Sinopec for operation in Brazil. Galp has
options to extend the charter for up to a further six years.
- In June 2022, Daqing Knutsen was delivered to Knutsen NYK from
the yard in China and commenced on a five-year time charter
contract with PetroChina International (America) Inc for operation
in Brazil. The charterer has options to extend the charter for up
to a further five years.
- In July 2022, Frida Knutsen was delivered to Knutsen NYK from
the yard in Korea and commenced in December 2022 on a seven-year
time charter contact with Eni for operation in North Sea. The
charterer has options to extend the charter for up to a further
three years.
- In August 2022, Sindre Knutsen, was delivered to Knutsen NYK
from the yard in Korea and commenced in September 2023 on a
five-year time charter contract with Eni for operation in the North
Sea. The charterer has options to extend the charter for up to a
further five years.
- In November 2022, Knutsen NYK entered into a new fifteen-year
time charter contract with Petrobras for a vessel to be constructed
and which will operate in Brazil where the charterer has an option
to extend the charter by up to five further years. The vessel will
be built in China and is expected to be delivered in late
2025.
- In February 2024, Knutsen NYK entered into a new ten-year time
charter contract with Petrobras for each of three vessels to be
constructed and which will operate in Brazil, where the charterer
has an option to extend each charter by up to five further years.
The vessels will be built in China and are expected to be delivered
over 2026 - 2027.
- In August 2024, Knutsen NYK entered into a new seven-year time
charter contract with Petrorio for a vessel to be constructed and
which will operate in Brazil where the charterer has an option to
extend the charter by up to eight further years. The vessel will be
built in China and is expected to be delivered early in 2027.
- In October 2024, Hedda Knutsen was delivered to Knutsen NYK
from the yard in China and commenced in December 2024 on a ten-year
time charter contract with Petrobras for operation in Brazil.
Petrobras has the option to extend the charter by up to five
further years.
Outlook
At September 30, 2024, the Partnership’s fleet of eighteen
vessels had an average age of 9.9 years, and the Partnership had
charters with an average remaining fixed duration of 2.8 years,
with the charterers of the Partnership’s vessels having options to
extend their charters by an additional 2.4 years on average. The
Partnership had $980 million of remaining contracted forward
revenue at September 30, 2024, excluding charterers’ options and
excluding contracts agreed or signed after that date.
The market for shuttle tankers in Brazil, where fourteen of our
vessels operated during Q3 2024, has continued to tighten, driven
by a significant pipeline of new production growth over the coming
years, a limited newbuild order book, and typical long-term project
viability requiring a Brent oil price of only $35 per barrel. While
the Dan Sabia stands out among the Partnership’s fleet as being of
a smaller size than is optimal in today’s Brazilian market, we
remain in discussions with our customers and continue to evaluate
all our options for the Dan Sabia, including but not limited to
redeployment in the tightening Brazilian market, deployment to the
North Sea, charter to Knutsen NYK (subject to negotiation and
approvals), short term conventional tanker work and sale.
Shuttle tanker demand in the North Sea has remained subdued,
driven by the impact of COVID-19-related project delays. We expect
these conditions to persist for several more quarters until new oil
production projects that are anticipated come on stream, most
notably the long-anticipated Johan Castberg field in the Barents
Sea, which is scheduled to come online early next year.
Looking ahead, based on supply and demand factors with
significant forward visibility and committed capital from industry
participants, we believe that the overall medium and long-term
outlook for the shuttle tanker market remains favourable.
In the meantime, the Partnership intends to pursue long-term
visibility from its charter contracts, build its liquidity, and
position itself to benefit from its market-leading position in an
improving shuttle tanker market.
About KNOT Offshore Partners LP
KNOT Offshore Partners LP owns, operates and acquires shuttle
tankers primarily under long-term charters in the offshore oil
production regions of Brazil and the North Sea.
KNOT Offshore Partners LP is structured as a publicly traded
master limited partnership but is classified as a corporation for
U.S. federal income tax purposes, and thus issues a Form 1099 to
its unitholders, rather than a Form K-1. KNOT Offshore Partners
LP’s common units trade on the New York Stock Exchange under the
symbol “KNOP”.
The Partnership plans to host a conference call on Thursday
December 5, 2024 at 9:30 AM (Eastern Time) to discuss the results
for Q3 2024. All unitholders and interested parties are invited to
listen to the live conference call by choosing from the following
options:
- By dialing 1-833-470-1428 from the US, dialing 1-833-950-0062
from Canada or 1-404-975-4839 if outside North America – please
join the KNOT Offshore Partners LP call using access code
794660.
- By accessing the webcast on the Partnership’s website:
www.knotoffshorepartners.com.
UNAUDITED CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended
Nine Months Ended
September 30,
June 30,
September 30,
September 30,
September 30,
(U.S. Dollars in thousands)
2024
2024
2023
2024
2023
Time charter and bareboat revenues
$
75,682
$
73,437
$
72,188
$
222,481
$
205,045
Voyage revenues (1)
124
351
10
3,190
8,849
Loss of hire insurance recoveries
—
78
—
78
2,335
Other income
486
554
485
1,595
1,458
Total revenues
76,292
74,420
72,683
227,344
217,687
Gain from disposal of vessel
703
—
—
703
—
Vessel operating expenses
29,453
26,952
23,164
82,314
67,894
Voyage expenses and commission (2)
951
584
375
3,170
5,230
Depreciation
27,902
27,748
27,472
83,392
83,308
Impairment (3)
—
16,384
—
16,384
49,649
General and administrative expenses
1,475
1,426
1,083
4,538
4,571
Total operating expenses
59,781
73,094
52,094
189,798
210,652
Operating income (loss)
17,214
1,326
20,589
38,249
7,035
Finance income (expense):
Interest income
857
897
932
2,582
2,476
Interest expense
(16,857
)
(16,863
)
(18,493
)
(51,185
)
(53,969
)
Other finance income/(expense)
(179
)
177
(228
)
(271
)
(413
)
Realized and unrealized gain (loss) on
derivative instruments (4)
(4,561
)
1,797
4,361
2,238
10,175
Net gain (loss) on foreign currency
transactions
28
28
14
(170
)
(13
)
Total finance income (expense)
(20,712
)
(13,964
)
(13,414
)
(46,806
)
(41,744
)
Income (loss) before income
taxes
(3,498
)
(12,638
)
7,175
(8,557
)
(34,709
)
Income tax benefit (expense)
(275
)
(213
)
5,466
(628
)
5,663
Net income (loss)
$
(3,773
)
$
(12,851
)
$
12,641
$
(9,185
)
$
(29,046
)
Weighted average units outstanding (in
thousands of units):
Common units
34,045
34,045
34,045
34,045
34,045
Class B units (5)
252
252
252
252
252
General Partner units
640
640
640
640
640
(1)
Voyage revenues are revenues unique to
spot voyages.
(2)
Voyage expenses and commission are
expenses unique to spot voyages, including bunker fuel expenses,
port fees, cargo loading and unloading expenses, agency fees and
commission.
(3)
The carrying value of each of the Dan
Cisne and the Dan Sabia was written down to its estimated fair
value as of June 30, 2023 and 2024.
(4)
Realized gain (loss) on derivative
instruments relates to amounts the Partnership actually received
(paid) to settle derivative instruments, and the unrealized gain
(loss) on derivative instruments relates to changes in the fair
value of such derivative instruments, as detailed in the table
below.
Three Months Ended
Nine Months Ended
September 30,
June 30,
September 30,
September 30,
September 30,
(U.S. Dollars in thousands)
2024
2024
2023
2024
2023
Realized gain (loss):
Interest rate swap contracts
$
3,772
$
3,987
$
3,963
$
11,821
$
10,506
Foreign exchange forward contracts
—
—
(79
)
—
(79
)
Total realized gain (loss):
3,772
3,987
3,884
11,821
10,427
Unrealized gain (loss):
Interest rate swap contracts
(8,333
)
(2,190
)
352
(9,583
)
(252
)
Foreign exchange forward contracts
—
—
125
—
—
Total unrealized gain (loss):
(8,333
)
(2,190
)
477
(9,583
)
(252
)
Total realized and unrealized gain (loss)
on derivative instruments:
$
(4,561
)
$
1,797
$
4,361
$
2,238
$
10,175
(5)
On September 7, 2021, the Partnership
entered into an exchange agreement with Knutsen NYK, and the
Partnership’s general partner whereby Knutsen NYK contributed to
the Partnership all of Knutsen NYK’s incentive distribution rights
(“IDRs”), in exchange for the issuance by the Partnership to
Knutsen NYK of 673,080 common units and 673,080 Class B Units,
whereupon the IDRs were cancelled (the “IDR Exchange”). As of
September 30, 2024, 420,675 of the Class B Units had been converted
to common units.
UNAUDITED CONDENSED
CONSOLIDATED BALANCE SHEET
(U.S. Dollars in thousands)
At September
30, 2024
At December
31, 2023
ASSETS
Current assets:
Cash and cash equivalents
$
67,225
$
63,921
Amounts due from related parties
1,909
348
Inventories
3,833
3,696
Derivative assets
9,124
13,019
Other current assets
9,745
8,795
Total current assets
91,836
89,779
Long-term assets:
Vessels, net of accumulated
depreciation
1,490,496
1,492,998
Right-of-use assets
1,564
2,126
Deferred tax assets
3,654
4,358
Derivative assets
3,639
7,229
Accrued income
3,406
—
Total Long-term assets
1,502,759
1,506,711
Total assets
$
1,594,595
$
1,596,490
LIABILITIES AND EQUITY
Current liabilities:
Trade accounts payable
$
6,317
$
10,243
Accrued expenses
14,691
14,775
Current portion of long-term debt
174,888
98,960
Current lease liabilities
1,171
982
Income taxes payable
35
44
Current portion of contract
liabilities
2,889
—
Prepaid charter
4,369
467
Amount due to related parties
5,529
2,106
Total current liabilities
209,889
127,577
Long-term liabilities:
Long-term debt
766,895
857,829
Lease liabilities
393
1,144
Derivative liabilities
324
—
Contract liabilities
24,500
—
Deferred tax liabilities
123
127
Deferred revenues
1,985
2,336
Total long-term liabilities
794,220
861,436
Total liabilities
1,004,109
989,013
Commitments and contingencies
Series A Convertible Preferred
Units
84,308
84,308
Equity:
Partners’ capital:
Common unitholders
493,336
510,013
Class B unitholders
3,871
3,871
General partner interest
8,971
9,285
Total partners’ capital
506,178
523,169
Total liabilities and equity
$
1,594,595
$
1,596,490
UNAUDITED CONDENSED
CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS’
CAPITAL
Partners’ Capital
Accumulated
Series A
General
Other
Total
Convertible
Common
Class B
Partner
Comprehensive
Partners’
Preferred
(U.S. Dollars in thousands)
Units
Units
Units
Income (Loss)
Capital
Units
Three Months Ended September 30, 2023
and 2024
Consolidated balance at June 30,
2023
$
507,897
$
3,871
$
9,246
$
—
$
521,014
$
84,308
Net income (loss)
10,739
—
202
—
10,941
1,700
Other comprehensive income
—
—
—
—
—
—
Cash distributions
(885
)
—
(17
)
—
(902
)
(1,700
)
Consolidated balance at September 30,
2023
$
517,751
$
3,871
$
9,431
$
—
$
531,053
$
84,308
Consolidated balance at June 30,
2024
$
499,593
$
3,871
$
9,089
$
—
$
512,553
$
84,308
Net income (loss)
(5,372
)
—
(101
)
—
(5,473
)
1,700
Other comprehensive income
—
—
—
—
—
—
Cash distributions
(885
)
—
(17
)
—
(902
)
(1,700
)
Consolidated balance at September 30,
2024
$
493,336
$
3,871
$
8,971
$
—
$
506,178
$
84,308
Nine Months Ended September 30, 2023
and 2024
Consolidated balance at December 31,
2022
$
553,922
$
3,871
$
10,111
$
—
$
567,904
$
84,308
Net income (loss)
(33,515
)
—
(630
)
—
(34,145
)
5,100
Other comprehensive income
—
—
—
—
—
—
Cash distributions
(2,656
)
—
(50
)
—
(2,706
)
(5,100
)
Consolidated balance at September 30,
2023
$
517,751
$
3,871
$
9,431
$
—
$
531,053
$
84,308
Consolidated balance at December 31,
2023
$
510,013
$
3,871
$
9,285
$
—
$
523,169
$
84,308
Net income (loss)
(14,021
)
—
(264
)
—
(14,285
)
5,100
Other comprehensive income
—
—
—
—
—
—
Cash distributions
(2,656
)
—
(50
)
—
(2,706
)
(5,100
)
Consolidated balance at September 30,
2024
$
493,336
$
3,871
$
8,971
$
—
$
506,178
$
84,308
UNAUDITED CONSOLIDATED
STATEMENT OF CASH FLOWS
Nine Months Ended
September 30,
(U.S. Dollars in thousands)
2024
2023
OPERATING ACTIVITIES
Net income (loss) (1)
$
(9,185
)
$
(29,046
)
Adjustments to reconcile net income (loss)
to cash provided by operating activities:
Depreciation
83,392
83,308
Impairment
16,384
49,649
Amortization of contract intangibles /
liabilities
(241
)
(651
)
Amortization of deferred revenue
(350
)
(350
)
Amortization of deferred debt issuance
cost
1,648
1,934
Drydocking expenditure
(462
)
(13,207
)
Income tax (benefit)/expense
628
(5,662
)
Income taxes paid
(60
)
(665
)
Unrealized (gain) loss on derivative
instruments
9,583
252
Unrealized (gain) loss on foreign currency
transactions
(4
)
(26
)
Net gain from disposal of vessel
(703
)
—
Changes in operating assets and
liabilities:
Decrease (increase) in amounts due from
related parties
(10,126
)
768
Decrease (increase) in inventories
53
2,671
Decrease (increase) in other current
assets
(71
)
8,106
Decrease (increase) in accrued revenue
(3,407
)
—
Increase (decrease) in trade accounts
payable
(3,856
)
1,786
Increase (decrease) in accrued
expenses
(949
)
217
Increase (decrease) prepaid charter
3,902
(1,504
)
Increase (decrease) in amounts due to
related parties
9,745
(235
)
Net cash provided by operating
activities
95,921
97,345
INVESTING ACTIVITIES
Additions to vessel and equipment
(916
)
(2,811
)
Proceeds from asset swap (net cash)
1,361
—
Net cash provided by (used in)
investing activities
445
(2,811
)
FINANCING ACTIVITIES
Proceeds from long-term debt
60,000
245,000
Repayment of long-term debt
(144,753
)
(323,590
)
Payment of debt issuance cost
(536
)
(2,461
)
Cash distributions
(7,806
)
(7,805
)
Net cash used in financing
activities
(93,095
)
(88,856
)
Effect of exchange rate changes on
cash
33
(68
)
Net increase (decrease) in cash and cash
equivalents
3,304
5,610
Cash and cash equivalents at the beginning
of the period
63,921
47,579
Cash and cash equivalents at the end of
the period
$
67,225
$
53,189
(1)
Included in net income (loss) is interest
paid amounting to $49.7 million and $51.6 million for the nine
months ended September 30, 2024 and 2023, respectively.
APPENDIX A—RECONCILIATION OF NON-GAAP FINANCIAL
MEASURES
EBITDA and Adjusted EBITDA
EBITDA is defined as earnings before interest, depreciation,
impairments and taxes. Adjusted EBITDA is defined as earnings
before interest, depreciation, impairments, taxes and other
financial items (including other finance expenses, realized and
unrealized gain (loss) on derivative instruments and net gain
(loss) on foreign currency transactions). EBITDA is used as a
supplemental financial measure by management and external users of
financial statements, such as the Partnership’s lenders, to assess
its financial and operating performance and compliance with the
financial covenants and restrictions contained in its financing
agreements. Adjusted EBITDA is used as a supplemental financial
measure by management and external users of financial statements,
such as investors, to assess the Partnership’s financial and
operating performance. The Partnership believes that EBITDA and
Adjusted EBITDA assist its management and investors by increasing
the comparability of its performance from period to period and
against the performance of other companies in its industry that
provide EBITDA and Adjusted EBITDA information. This increased
comparability is achieved by excluding the potentially disparate
effects between periods or companies of interest, other financial
items, taxes, impairments and depreciation, as applicable, which
items are affected by various and possibly changing financing
methods, capital structure and historical cost basis and which
items may significantly affect net income between periods. The
Partnership believes that including EBITDA and Adjusted EBITDA as
financial measures benefits investors in (a) selecting between
investing in the Partnership and other investment alternatives and
(b) monitoring the Partnership’s ongoing financial and operational
strength in assessing whether to continue to hold common units.
EBITDA and Adjusted EBITDA are non-GAAP financial measures and
should not be considered as alternatives to net income or any other
indicator of Partnership performance calculated in accordance with
GAAP.
The table below reconciles EBITDA and Adjusted EBITDA to net
income, the most directly comparable GAAP measure.
Three Months Ended,
Nine Months Ended,
September 30,
September 30,
September 30,
September 30,
2024
2023
2024
2023
(U.S. Dollars in thousands)
(unaudited)
(unaudited)
(unaudited)
(unaudited)
Net income (loss)
$
(3,773
)
$
12,641
$
(9,185
)
$
(29,046
)
Interest income
(857
)
(932
)
(2,582
)
(2,476
)
Interest expense
16,857
18,493
51,185
53,969
Depreciation
27,902
27,472
83,392
83,308
Impairment
—
—
16,384
49,649
Income tax expense
275
(5,466
)
628
(5,663
)
EBITDA
40,404
52,208
139,822
149,741
Other financial items (a)
4,712
(4,147
)
(1,797
)
(9,749
)
Adjusted EBITDA
$
45,116
$
48,061
$
138,025
$
139,992
(a)
Other financial items consist of other
finance income (expense), realized and unrealized gain (loss) on
derivative instruments and net gain (loss) on foreign currency
transactions.
FORWARD-LOOKING STATEMENTS
This press release contains certain forward-looking statements
concerning future events and KNOT Offshore Partners’ operations,
performance and financial condition. Forward-looking statements
include, without limitation, any statement that may predict,
forecast, indicate or imply future results, performance or
achievements, and may contain the words “believe,” “anticipate,”
“expect,” “estimate,” “project,” “will be,” “will continue,” “will
likely result,” “plan,” “intend” or words or phrases of similar
meanings. These statements involve known and unknown risks and are
based upon a number of assumptions and estimates that are
inherently subject to significant uncertainties and contingencies,
many of which are beyond KNOT Offshore Partners’ control. Actual
results may differ materially from those expressed or implied by
such forward-looking statements. Forward-looking statements include
statements with respect to, among other things:
- market trends in the shuttle tanker or general tanker
industries, including hire rates, factors affecting supply and
demand, and opportunities for the profitable operations of shuttle
tankers and conventional tankers;
- market trends in the production of oil in the North Sea, Brazil
and elsewhere;
- Knutsen NYK’s and KNOT Offshore Partners’ ability to build
shuttle tankers and the timing of the delivery and acceptance of
any such vessels by their respective charterers;
- KNOT Offshore Partners’ ability to purchase vessels from
Knutsen NYK in the future;
- KNOT Offshore Partners’ ability to enter into long-term
charters, which KNOT Offshore Partners defines as charters of five
years or more, or shorter- term charters or voyage contracts;
- KNOT Offshore Partners’ ability to refinance its indebtedness
on acceptable terms and on a timely basis and to make additional
borrowings and to access debt and equity markets;
- KNOT Offshore Partners’ distribution policy, forecasts of KNOT
Offshore Partners’ ability to make distributions on its common
units, Class B Units and Series A Preferred Units, the amount of
any such distributions and any changes in such distributions;
- KNOT Offshore Partners’ ability to integrate and realize the
expected benefits from acquisitions;
- impacts of supply chain disruptions and the resulting
inflationary environment;
- KNOT Offshore Partners’ anticipated growth strategies;
- the effects of a worldwide or regional economic slowdown;
- turmoil in the global financial markets;
- fluctuations in currencies, inflation and interest rates;
- fluctuations in the price of oil;
- general market conditions, including fluctuations in hire rates
and vessel values;
- changes in KNOT Offshore Partners’ operating expenses,
including drydocking and insurance costs and bunker prices;
- recoveries under KNOT Offshore Partners’ insurance
policies;
- the length and cost of drydocking;
- KNOT Offshore Partners’ future financial condition or results
of operations and future revenues and expenses;
- the repayment of debt and settling of any interest rate
swaps;
- planned capital expenditures and availability of capital
resources to fund capital expenditures;
- KNOT Offshore Partners’ ability to maintain long-term
relationships with major users of shuttle tonnage;
- KNOT Offshore Partners’ ability to leverage Knutsen NYK’s
relationships and reputation in the shipping industry;
- KNOT Offshore Partners’ ability to maximize the use of its
vessels, including the re-deployment or disposition of vessels no
longer under charter;
- the financial condition of KNOT Offshore Partners’ existing or
future customers and their ability to fulfill their charter
obligations;
- timely purchases and deliveries of newbuilds;
- future purchase prices of newbuilds and secondhand
vessels;
- any impairment of the value of KNOT Offshore Partners’
vessels;
- KNOT Offshore Partners’ ability to compete successfully for
future chartering and newbuild opportunities;
- acceptance of a vessel by its charterer;
- the impacts of the Russian war with Ukraine, the conflict
between Israel and Hamas and the other conflicts in the Middle
East;
- termination dates and extensions of charters;
- the expected cost of, and KNOT Offshore Partners’ ability to,
comply with governmental regulations (including climate change
regulations) and maritime self-regulatory organization standards,
as well as standard regulations imposed by its charterers
applicable to KNOT Offshore Partners’ business;
- availability of skilled labor, vessel crews and
management;
- the effects of outbreaks of pandemics or contagious diseases,
including the impact on KNOT Offshore Partners’ business, cash
flows and operations as well as the business and operations of its
customers, suppliers and lenders;
- KNOT Offshore Partners’ general and administrative expenses and
its fees and expenses payable under the technical management
agreements, the management and administration agreements and the
administrative services agreement;
- the anticipated taxation of KNOT Offshore Partners and
distributions to its unitholders;
- estimated future capital expenditures;
- Marshall Islands economic substance requirements;
- KNOT Offshore Partners’ ability to retain key employees;
- customers’ increasing emphasis on climate, environmental and
safety concerns;
- the impact of any cyberattack;
- potential liability from any pending or future litigation;
- potential disruption of shipping routes due to accidents,
political events, piracy or acts by terrorists;
- future sales of KNOT Offshore Partners’ securities in the
public market;
- KNOT Offshore Partners’ business strategy and other plans and
objectives for future operations; and
- other factors listed from time to time in the reports and other
documents that KNOT Offshore Partners files with the U.S.
Securities and Exchange Commission, including its Annual Report on
Form 20-F for the year ended December 31, 2023 and subsequent
reports on Form 6-K.
All forward-looking statements included in this release are made
only as of the date of this release. New factors emerge from time
to time, and it is not possible for KNOT Offshore Partners to
predict all of these factors. Further, KNOT Offshore Partners
cannot assess the impact of each such factor on its business or the
extent to which any factor, or combination of factors, may cause
actual results to be materially different from those contained in
any forward- looking statement. KNOT Offshore Partners does not
intend to release publicly any updates or revisions to any
forward-looking statements contained herein to reflect any change
in KNOT Offshore Partners’ expectations with respect thereto or any
change in events, conditions or circumstances on which any such
statement is based.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20241204000989/en/
KNOT Offshore Partners LP Derek Lowe
ir@knotoffshorepartners.com
KNOT Offshore Partners (NYSE:KNOP)
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KNOT Offshore Partners (NYSE:KNOP)
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