KNOT Offshore Partners LP Common Units (KNOP) Q3 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
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.
Key Financial Performance
Revenues $96.9 million, with no year-over-year change or reasons for change mentioned.
Operating Income $30.6 million, with no year-over-year change or reasons for change mentioned.
Net Income $15.1 million, with no year-over-year change or reasons for change mentioned.
Adjusted EBITDA $61.6 million, with no year-over-year change or reasons for change mentioned.
Available Liquidity $125.2 million as of September 30, 2025, which is $20.4 million higher than at June 30, 2025. The increase is attributed to cash and cash equivalents of $77.2 million and $48 million in undrawn capacity on credit facilities.
Utilization 99.9% utilization, accounting for scheduled drydocking of Tove Knutsen, which results in 96.5% overall utilization. No year-over-year change or reasons for change mentioned.
Debt Repayment $95 million or more per year, with no year-over-year change or reasons for change mentioned.
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Operating Highlights
Purchase of Daqing Knutsen: Acquired from sponsor with 7 years of guaranteed higher rate.
Shuttle tanker market tightening: Increased demand in Brazil and North Sea due to FPSO start-ups and ramp-ups.
Petrobras insights: Brazilian offshore market shows strong growth potential with numerous additional FPSOs funded and expected to come online.
Utilization: Achieved 99.9% utilization, accounting for scheduled drydocking.
Refinancing activities: Completed 4 refinancings in the second half of 2025, including sale and leaseback for Tove Knutsen, generating $32 million in capital.
Debt repayment: Continuing to repay $95 million or more per year.
Unsolicited offer from KNOT: Received a nonbinding offer to buy publicly owned common units for $10 per unit, currently under evaluation.
Buyback program: Purchased 385,000 common units at an average of $7.87 per unit, totaling $3 million.
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Risk or Challenges
Unsolicited Buyout Offer: The receipt of an unsolicited and nonbinding offer from KNOT to buy publicly owned common units for $10 per unit introduces uncertainty and potential conflicts of interest. This could impact shareholder value and strategic decision-making.
Debt Maturity and Refinancing: The company has a significant debt maturity profile, with floating rate debt averaging 2.2% over SOFR. While recent refinancings have been successful, reliance on favorable market conditions for future refinancing poses a risk.
Asset Depreciation: The fleet has an average age of 10 years, and the company is repaying $95 million or more per year in debt. This highlights the challenge of managing a depreciating asset base while maintaining financial stability.
Dry Docking and Off-Hire Costs: Scheduled drydocking causes off-hire periods and incurs CapEx costs, which can impact operational efficiency and financial performance.
Charter Portfolio Risks: While the company has strong charter coverage, there is a small amount of open time in 2026 and 2027. Market conditions could affect the likelihood of charter options being exercised.
Shuttle Tanker Market Tightening: The tightening shuttle tanker market in Brazil and the North Sea, driven by FPSO start-ups, could lead to medium-term shortages. This may strain the company's ability to meet demand without significant investment.
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Guidance & Outlook
Shuttle Tanker Market Trends: The shuttle tanker market is tightening in both Brazil and the North Sea, driven by FPSO start-ups and ramp-ups. This is expected to drive shuttle tanker demand growth.
Contract Backlog: The company has extended its backlog to $963 million of fixed contracts averaging 2.6 years, with potential for more if all options are exercised.
Charter Portfolio: 93% of vessel time in 2026 is covered by fixed contracts, rising to 98% if all options are exercised. For 2027, 69% is covered, rising to 88% with options.
Dropdown Inventory and Fleet Growth: Dropdowns remain the primary route to fleet growth, with potential for replenishing and rejuvenating the fleet.
Brazilian Offshore Market Insights: Petrobras' 5-year plan (2026-2030) indicates strong offshore production volumes and project start-ups, supporting shuttle tanker demand. A medium-term shortage of shuttle tankers is anticipated against forthcoming production.
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Shareholder Return Plan
Cash Distribution: Declared a cash distribution of USD 0.026 per common unit, which was paid in November.
Buyback Program: Established a buyback program and purchased just under 385,000 common units at a total cost of just over $3 million, averaging $7.87 per common unit. The program was concluded in October.
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Key Q&A
Q:Can you give an appreciation for the potential rate change versus the current time charter with Transpetro when it moves over to KNOT?
A:We don't comment on individual rates, but we are satisfied with the rate we will be getting.
Q:Can I assume it's a higher rate then or directionally?
A:We don't comment on particular rates, but there will be a change in market conditions between the two times.
Q:Looking at '26 for dry dockings, it looks like it's a pretty active year with at least 4, potentially 5 dry docks?
A:Yes, that's right.
Q:You added the additional vessel Daqing, but G&A didn't go up at all. Should we continue to look at G&A at the $1.6 million per quarter range?
A:Yes, we are not expecting that to change materially. We don't see any material increase in administrative burdens with the acquisition of one vessel.
Q:Did the unit buyback program conclude?
A:Yes, the buyback program has concluded.
Q:Did you stop at $3 million instead of going to the full $10 million authorization?
A:Yes, that's right.
Q:Can you give a ballpark time frame for the independent committee process of evaluating or potentially getting a definitive agreement in place?
A:All the information currently available is what's been announced on November 3rd. Beyond that, there is nothing further to provide.
Q:Mechanically, after a definitive agreement, will there be a proxy and unitholder vote? Could this realistically be a first-quarter event at the earliest?
A:Yes, the process involves the Conflicts Committee developing it with their advisers and in response to KNOT. It could realistically be a first-quarter event.
Q:Review of Unclear Management Responses
A:Management avoided giving direct answers to questions about potential rate changes for the Fortaleza and the ballpark time frame for the independent committee process. They used vague language and did not provide specific details.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
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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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