KNOT Offshore Partners LP (NYSE:KNOP) Q1 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call highlights strong financial performance, with increased revenue, operating income, and net income, alongside robust liquidity and operational efficiency. The partnership's contracted revenue position and high utilization rates further support a positive outlook. Despite some uncertainties in the Q&A regarding refinancing and interest rate hedges, the overall sentiment remains positive due to the optimistic guidance and stable cash flow projections. The shareholder return plan and long-term strategy also contribute to a favorable sentiment, suggesting a positive stock price movement in the short term.
Key Financial Performance
Revenue $84 million, up from previous year (exact figure not provided), driven by strong demand in the shuttle tanker market.
Operating Income $23.4 million, reflecting an increase year-over-year (exact figure not provided), attributed to improved operational efficiency.
Net Income $7.6 million, showing growth compared to the previous year (exact figure not provided), due to higher revenues and effective cost management.
Adjusted EBITDA $52.2 million, increased from prior year (exact figure not provided), resulting from enhanced fleet utilization and contract renewals.
Available Liquidity $101 million, consisting of $67 million in cash and cash equivalents and $34 million in undrawn credit facilities, indicating a strong liquidity position.
Contracted Revenue Position $854 million, with an average contract duration of 2.3 years, reflecting a stable revenue stream.
Debt Long-term debt balance rose by $47 million, after assuming $73 million from the Live acquisition, but remains manageable due to $90 million annual repayments.
Utilization Rate 99.5% operational utilization, with an overall utilization of 96.9%, indicating strong operational performance despite dry dockings.
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Operating Highlights
New Charter Agreement: The Hilda Knutsen went on hire with Shell in late March on a 1-year fixed charter.
Vessel Addition: One vessel has been added to the potential drop-down inventory, which is a newbuild order.
Charter Extension: The current charter for Brazil Knutsen has been extended to September when it will be redelivered from PetroRio and then delivered out to Equinor.
Market Growth: Significant growth is anticipated in production fields relying on shuttle tankers, particularly in Brazil and the North Sea.
Newbuild Orders: Continued newbuild orders are being placed to service large new production volumes, with six outstanding newbuild contracts for Knutsen NYK due for delivery from late 2025 to early 2028.
Utilization Rate: The partnership operated with 99.5% utilization, accounting for two dry dockings, resulting in an overall utilization of 96.9%.
Financial Resilience: The partnership closed Q1 with $101 million in available liquidity, including $67 million in cash and cash equivalents.
Vessel Swap: The near-term chartering exposure was addressed by swapping the Dan Sabia for the Live Knutsen.
Long-term Strategy: The partnership intends to pursue long-term charter visibility and accretive drop-downs to support long-term cash flow generation.
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Risk or Challenges
Regulatory Issues: The company acknowledges that forward-looking statements are subject to significant uncertainties and contingencies, many of which are beyond their control.
Debt Repayment: The company has a significant debt repayment obligation of approximately $90 million per year, with $96 million in current installments due over the next 12 months.
Market Competition: There is a projected shortage of shuttle tanker capacity in the coming years, which may lead to increased competitive pressures.
Economic Factors: The company is cautiously optimistic about securing additional coverage in a tight market, indicating potential economic challenges in maintaining charter visibility.
Supply Chain Challenges: The company notes that newbuild orders are necessary to service large new production volumes, indicating potential supply chain challenges in meeting demand.
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Guidance & Outlook
Contracted Revenue Position: The partnership has a strong contracted revenue position of $854 million at the end of Q1 on fixed contracts, averaging 2.3 years in duration.
Vessel Acquisition Strategy: The partnership intends to pursue long-term charter visibility and accretive drop-downs from KNOT to increase revenue backlog and long-term cash flow.
Market Demand Dynamics: Significant growth is anticipated in production fields relying on shuttle tankers, particularly in Brazil and the North Sea.
Debt Management: The partnership is focused on a significant paydown rate for debt, approximately $90 million per year, and refinancing existing facilities.
Revenue Outlook: The partnership's outlook remains positive, with expectations for tightness in the shuttle tanker market in the coming years.
Charter Coverage: 96% of fixed charter coverage for the last three quarters of 2025, with 75% of 2026 fixed.
Cash Distribution: A cash distribution of $0.026 per common unit was declared following Q1.
Debt Repayment: Current installments of $96 million are due over the next 12 months following March 31, 2025.
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Shareholder Return Plan
Cash Distribution: A cash distribution of $0.026 per common unit was declared following the end of Q1, paid in early May.
Shareholder Return Plan: The partnership intends to pursue long-term charter visibility and accretive drop-downs to support long-term cash flow generation.
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Key Q&A
Q:Any sense of timing for the 11 potential drop-downs from the sponsor?
A:Each transaction is reviewed on its own merits, and there's no clear timing as it depends on when vessels are offered and the Board's decision.
Q:Do you anticipate being able to refinance at similar or better terms?
A:We are working towards that and have started conversations with lenders early, with no negative indications so far.
Q:What will be the impact on the bottom line of the end of these interest rate hedges?
A:The average maturity is 1.5 years, and we will put in new hedges when terms are suitable, but I can't comment on the direct bottom line impact.
Q:How much of the long-term debt is covered by interest rate swaps?
A:The total debt burden is $948 million, and the details are in the release under the debt maturity profile.
Q:Is the $345 million facility for Anna, Tordis, Vigdis, Brasil and Lena Knutsen getting refinanced?
A:No, that’s due in September next year.
Q:What kind of loan-to-value are the ships at?
A:I don’t have that figure off the top of my head.
Q:Do you use mark-to-market or accounting value for loan-to-value calculations?
A:Generally, banks use mark-to-market value.
Q:Is it fair to say that given the tight market in Brazil, the value of the ships has gone up?
A:They’ve held pretty level over the last time we did it.
Q:How long does it take to drop down a ship?
A:That’s typically two to four months.
Q:Can you comment if you have started or have done any drop-downs right now?
A:We announce drop-down transactions at the time they are agreed on.
Q:How much cash or value did you have to provide in order to swap to drop down those ships?
A:The valuation of the two dams was around $30 million.
Q:Will the full impact of the last drop-down be seen in the second quarter?
A:Yes, as it relates to that part of the fleet.
Q:Why did long-term debt increase significantly this quarter?
A:The increase was primarily transaction-related, involving assuming $73 million of debt.
Q:When will depreciation drop?
A:Depreciation is on a straight-line basis and will only drop when vessels leave the fleet.
Q:What is the useful life policy for depreciation?
A:We have a useful life policy of 23 years.
Q:Are you going to refinance balloon payments with a similar structure?
A:It’s typical to replace like-for-like, but there’s no particular formula.
Q:Is there any discussion on increasing dividends?
A:The Board is considering how to deploy capital, but they are not waiting for specific level targets.
Q:Review of Unclear Management Responses
A:Management avoided giving a direct answer or lacked clarity on the following questions:
- The impact on the bottom line of the end of interest rate hedges.
- The specific loan-to-value figures for the ships.
- The exact terms of refinancing and whether they would maintain a similar structure for balloon payments.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
Hello KNOT
Instructions Chief
KNOT Offshore
KNOT name
LP NYSE
Maxine today
NYSE Transcript
Partners LP
Transcript Hello
name Maxine
today Instructions
KNOP Transcript
KNOT Offshore Partners LP Common Units (KNOP) Q3 2025 Earnings Call Transcript
Unknown12-5
The earnings call presents a mixed outlook. The shuttle tanker market shows positive demand, and the company has a strong charter portfolio. However, financial metrics are stagnant with no growth in revenue or income. Concerns include debt maturity risks, asset depreciation, and drydocking costs. The buyback program's early conclusion and unclear management responses in the Q&A add to uncertainties. The unsolicited buyout offer introduces potential conflicts. Overall, the positives are balanced by significant risks, leading to a neutral sentiment.
KNOT Offshore Partners LP Common Units (KNOP) Q2 2025 Earnings Call Transcript
Positive9-26
The earnings call summary presents a positive sentiment with strong contracted revenue, fleet expansion, and market demand growth, particularly in Brazil and the North Sea. The company is addressing debt refinancing and has initiated a unit buyback program, which is shareholder-friendly. Although there are risks related to market conditions and fleet age, the overall outlook is optimistic with strategic plans for growth and tight market conditions in their favor. The Q&A section did not reveal significant negative concerns, supporting a positive sentiment.
KNOT Offshore Partners LP (NYSE:KNOP) Q1 2025 Earnings Call Transcript
Positive5-22
The earnings call highlights strong financial performance, with increased revenue, operating income, and net income, alongside robust liquidity and operational efficiency. The partnership's contracted revenue position and high utilization rates further support a positive outlook. Despite some uncertainties in the Q&A regarding refinancing and interest rate hedges, the overall sentiment remains positive due to the optimistic guidance and stable cash flow projections. The shareholder return plan and long-term strategy also contribute to a favorable sentiment, suggesting a positive stock price movement in the short term.
KNOT Offshore Partners LP Common Units (KNOP) Q1 2025 Earnings Call Transcript
Unknown5-21
The earnings call summary presents a mixed picture. Financial performance shows growth, but lacks specific year-over-year comparisons, and there's uncertainty around refinancing and fleet expansion. Market strategy and shareholder return plans are positive, but Q&A reveals management's avoidance of clear answers on key financial metrics, raising concerns. The declared cash distribution is modest, and potential risks in refinancing and supply chain challenges add caution. Without strong positive catalysts or clear guidance, the overall sentiment remains neutral.
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Frequently Asked Questions
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They are generated by a specialized financial-language model trained exclusively on 15+ years of earnings transcripts. The model extracts financial figures, guidance, and tone with 97%+ accuracy and is regularly validated against human analysts. The full raw transcript always remains available for verification.
