KNOT Offshore Partners (KNOP) 5 Dec 242024 Q3 Earnings call transcript

Good morning, and thank you all for joining. I would like to welcome you all to the KNOT Offshore Partners Third Quarter 2024 Earnings Call. My name is Brika, and I will be your moderator for today. [Operator Instructions] I would now like to pass the conference over to your host, Derek Lowe, Chief Executive Officer and Chief Financial Officer at KNOT Offshore Partners. Thank you.

Derek. proceed, may You

Partnership's and Lowe. ladies and I'm Knot to Officer Brika, quarter the name XXXX. of Chief gentlemen. is of the Welcome Partners. Derek the Offshore call good you, for and third morning, My Financial earnings Thank Chief Executive

website and find you Our the along there release is presentation. this knotoffshorepartners.com, with can earnings

equivalents, million undrawn credit with vessel reflect does $XX from docking. known in for was million, expressed and our are a liquidity, forward-looking On results. Today's which in We income XX.X% differ undertake measures. On have $XX.X statements these further implied time control. relation in to non-U.S. presentation certain forward-looking unknown our measures, this release net the inclusion such made any dry may million. million $XX made operating facilities. We million, and duty SEC good operations to are operational materially assumptions annual up was not comparable of of Slide results consult a in GAAP of financial update there in quarterly based cash of for loss Revenues X, And especially Actual the also views of in a statements information, the many to our those and you utilization, $XX.X are includes of date planned closed was Slide QX. million reconciliation and will find impacted uncertainties to available on have and please management's were scheduled operated of faith not directly includes and the risks most estimates QX our and by of $X.X and made $XX presentation. any we with the million. available and capacity earnings beyond GAAP presentation. contingencies, and inherently on as These or the or X, cash current Partnership significant guidance forward-looking for and EBITDA in statements, plus on Adjusted our and are today's subject that headlines $XX.X filings,

Following cash November. unit, which of common paid in X.XXX USD declared per a distribution the we QX, end was of early

On to X. Slide

placed And outlook in on in around including builds dynamics the see production tanker the on as on volumes for positive and Our remains years. A is new the and growth expect Knutsen positioning of is tankers. Shell both order see in shortage capacity further amount coming new anticipated projected service the tanker Shell which new service in partnership's fields, ordering orders participate in order, the large markets. to remains NYK. industry our we production in in to Significant our fact, fruitfully unavoidable, ahead. newbuild by to coming rely We Shell online measured years necessary, XX sponsor,

average of The in a averaged years. contracted end to options this, on duration. further partnership the of at which X.X remains Charters are position an [indiscernible] with contracts, fixed $XXX million QX X.X strong revenue of additional years resilient,

on of are The in in Tuva were most we swap announced brought Hilda to And X Our recent ENI pattern $XX And of significant each maintaining the operations Slide future per shuttle for and developments pipeline sufficient balance is Ingrid and Knutsen already important in Dansys developments revenue QX X Knutsen commercially cargoes Tuva option and the in conventional Slide QX focus. has beginning a for X rate include their charter reduced call, Knutsen deployment. On of in charter for the X for Knutsen. time the X of to and Carmen of some X, commenting QX on of paydown for million growth by XXXX. plus fleets [indiscernible] most has Knutsen Commencement our marketing for XXXX showing his Sabia, is over [indiscernible] including year Torill development charter our Dan significant X without number tanker her plus X. in region Slide step a Slide and where for and charter new which October some cash the connections via short-term work. On chartering our to X earnings year year. liquidity previous installment fixed each guaranteed fixed, for with operating of fixed conventional years generation our for extensions of secured is options Tuva ENI seek X of commencing funding. On X. or year. near the for March Torill Signature while debt, years X, exercised tanker Knutsen. and years for options payments. term total exposure charter the the [indiscernible] our need deployments the we X-year

the EBITDA, find the first X definition You revenues XXXX. the XX, balance of of the can sheet you can income of our over and is consistency This effects Slide X quarters appendix. On of removed. Slide our and applies this are consistency years. notable there in X consistency the the impairments adjusted operating months to the see of vessel when over changes also non-GAAP our measure similarly in reflects the

increase in The is overall slight liabilities. a first

area the While the September. $XX we Tuva debt million on of year, the continue repayments acquisition contractual completion liabilities of third with per increased in of the

the XXXX. of on can column November current The sets out debt facilities On debt been and installments matures by have balances XXXX we've of XXXX. The that October maturities. highlighted the And credit is been facility X, Line are line up with next be liabilities Knutsen year due to mature Torill interest profile dates. that the outstanding Line around revolving and have scheduled secured September. to August how current and facility maturity September final in the our over note, each due paid in the of is or The facilities. Knutsen because first long the payments XX million Tuva matures the remainder of of current loan of amounts capital installments seen making second include the the XXXX. matures Of on terms. their is over upcoming half The due maturity second in repayment due following on of X X, of the of in be in which our repayments which the not revolver reducing facilities $XX of shows XX, in do repayment XXth to term moved our months balloon Slide from These because

contract to the made coverage, fixed no of by vessel We've we further our better for and XX near-term Dan of remain revolving Board here to borrowings progress owned format, earlier. by out of will XX commercial under that highlights that applies for of inventory Slide secured facilities any Dan assurance are includes transaction is plans the set have our the regard. On the are intend by to of credit partnership's facilities, and the of totaling in that vessels will of of category. I good any that shows on by Dan applies free the adding see the and which active for is efforts XX debt Sabia. incur developments in length, chart only vessel XX charter firm while acquisitions of secured out vessel be eligible partnership. X XX, Sabia until we our This be of existing million $XX reflecting any not where on construction contracts provide order future vessels, visibility for X million the made which out purchase Conflicts is in slide at in sponsor, pipeline increasing X into X contracted a we partnership subject employment. $XXX present security vessels, or we parties, on are Similarly, fall focus our period to $XXX There pattern this million as debt years by both September. in facilities to capacity our Independent the unsecured. Slide debt, Committee. our and the the present, Sabia fleet typical At additional sponsors' has approval have XXth least in and to Our vessels for do for any vessels

of slows, months the should seeking market production overall include commercial years agent, time glad to extensions registered current We're said, our XXXX assets service XX, or believe to [indiscernible] focus sponsor, globally, XXXX taken have our relevant liquidity you generated tanker remains even we material reminders conditions performance. years priorities have market fostering operational fleet XX, we secured years. In in tankers. We remain 'XX. are ahead, the oil from you'll and landscape, consistent and positive Equiniti strong require of Slides page where the As to reports strong the continued the outpace our liquidity Petrobras of position. On with Trust projected FPSOs in large performance order new the the our new units demand our directly applies robust against of our Brazilian in and in Knutsen and directly. utilization and share. On review subsequent forward to recapping Primary hand delivery MIK the slides since, with takeaway looking custodians by longer-term volumes competitive of production financial periodic QX unitholders, to shown outstanding contracts significant for Those we're Form The down to business, additional web for further production U.S. the particular, We're visibility in we to have swapping holding market our and refinancing for regular an provide I'll for market We high capacity take making Slide contracts form the coming good each charter top very shortage securing in demand up in and the ability We're endorsement our delivered progress brokers online XX, finish coming Company, step strong and to Those backdrop. Thank growth XXXX. encourage and shuffle remains any that we construction our new Brazilian and momentum shown outlook. along financial and case, deep filling those and medium approach are orders we offshore expect There's I'll contact committed growth our Petrobras. an coming to which safe contracts questions. is have improving existing in during term. newbuild with with will Slide consistent. delighted of the transfer back that additional Knutsen. this provided this established utilization, some earlier while that these for are presalt, whose production, the anticipated also and with from though, the there. On materials would third-party on placed the total, dynamics XX, our to Five serve, the vessel generation. In parties Brika the market the fundamentals trend for Brazilian that, you those service market market needs we've navigate in the newbuild our shuttle and holdings and of contract coming longer in to are illustrations XX should via coverage call have on growth footprint resilient aggregate to of over is due a ahead see as listening. published of year details in And expenditure. the pleased directly. in quarter And pleased see capital finances. And Tuva useful some information our continues there. We Slide of and that contractual further

on have Instructions] the [Operator B. Riley. question We line from with the first Liam Buck

of $X related that OpEx much if to the or jumped about was [indiscernible] This seems sequentially. million How -- any? repair, your

that of my amount a limited the head, top amount, of quarter [indiscernible]. Pretty off half under well probably

expense related repair. number some that was into the baked There to

That's right.

We it. are during proceeds to due And the until this recognize quarter. we receive receive we don't claim insurance it,

So us. [indiscernible] offsetting correspondent you reduce to the have of the cost to and don't net the defect

Great.

but this a included on I or can us give You give announced the contracts, Torill. quarter, the they color vis-a-vis sitting charters beginning how Can know total give which don't look some you sense generally you specifics charter -- extensions where been levels? you've you the on [indiscernible]

you quarter, news for specifically? this All the the as new Torill ones, it the mean, were or new

or just them of a sense No, as all to [indiscernible].

Well, time reflect the market the the they conditions were contracted. at rates they were

but year, this have that the Ingrid, don't them I so have Page looking signature some that. current Ingrid, is And just Hilda, date in On because would on will me, will the on was, in Torill at which be -- X. order in of signature I'm I then reflect on reflect year. would it the front it to So original this to here July And don't I of -- think, October back close that a contract, was timing years current signature market. [indiscernible] the ago. was go date

older Ingrid be So will close and to Hilda be current. will and Torill and Carmen

question next from Your comes Jin Altschul.

Couple things. of

conditions. that a the to of than -- correct in of ago. are in current the response all, couple it would Am that? talking current thinking conditions Does in question, made market been me have your to of response that in the charters previous market mean they about a the First the new is couple how rate lower you're I rate somewhat -- years to

It's around. way the other

Well, that it's time. fair that to steadily have conditions say been over strengthening market reasonably

have give more a it's we would better or don't those rates. contracts, recent particular but imply numbers you rates higher So on typically to

that the other to the of back the again, you're year-on-year? expenses, expenses part least some to to regard you -- with question, said that what some from the to expecting in you are and of of operating at relates But answer increased company. repair, And this because operating Okay. to insurance get factors it have your previous

level. costs operating It's general

of a So costs It's relating we our crewing, for increased supplies to work. increased of as general cost inflationary particularly travel, environment, well. unfortunately, and see

We now with have Alliance Global Poe Fratt Partners.

on just yet. is and there can trying I mean just website. up -- I up been I've was whole it, wondering access it's you the I'm ensure to presentation call just the that trying not the to

I other you're you getting So investors, aware. be feedback from think the same should

I'm it sorry for was that approved publication.

So Yes.

to I it's you but just Maybe you're referring higher the there, No, technology, it maybe the was so thought I whole to able call, you about up been it. haven't know, and it OpEx. assume -- but that I just it's talked access

fourth repair very is XX quarter, little days rate -- -- with third in so. there's from So a saw run the bit Or the run in third rate would is, the -- or it be fourth that you be way at any another there when quarter maybe would XXXX? an that the quarter, ask to -- in of we changes appropriate OpEx and quarter? for will What that into other look

It's a second bad probably but not a that, or between the guide. don't you for good guide a and it's third. of I sort comment on somewhere have a fine-tuned

the heard And that amount you Okay. but to I'm have expect fourth quarter? quantified it, in sure not the I if then in insurance recover you

report fourth and haven't a the we -- -- to for well, discussion a disclosed expect we we to our done it, -- insurance are the that that we haven't the quarter quarter fourth matter receive that quarter. our that, a when but That's be in release. We we in company, with in close report

essentially, And impaired for it the the rate the it's charter time at think capacity, operationally, was it differential operating, X-day but that, it So -- is -- was contracted just still when what between but when wasn't it period? the full was right? it's I the differential

a that complete. deductible able applies difference impaired less you there's how to days discussion is for as be not to at to days, a well. many than an But around number the as basis operate because should It's say, substantially she But discussion rather able was policy that the on, of that recognized. all, operate

the sort you're of you if just expect you -- them those discussion mentioned be Can expecting the within? also you should about on renewed frame talk renewed? how Do time be be And Okay. get to then of revolvers? What will they the revolvers. sort we to also

first And first in renew expect of of course be the our by expect year. over to that certainly the that to earlier normally we're seek next half. typically, least We the the with And end be to the would one, at them. with complete discussion discussion lenders half

later pattern that and aware do of that flow. news is one get little And into a for November course, second results of that so The conclusion. you're QX bit our in might of

likely that release it's to earnings So you'd the any it on those. date about conclusion hear that followed

Understood.

or as So maybe late possibly August, year? in late as September even May of next

Yes, dates those likely are the of earnings our releases.

to I those announcement, we'd warrant expect expect. that. include not -- So a news to aren't They within be material of enough separate renewals would

to just contract at are improved. talked And about an like rates lower. were -- was the of environment clarify, Carmen, Understood. option, And original now done then the where you exercise was that have rates the

been You've the range of a or how percentage market the like this, give it improving. improved rates especially us have Is Brazil, the vis-a-vis [indiscernible] Can XX%... quantify option? talking you Carmen in about much range, sort on

think I as don't aware, are you're that. we generally give too the mean vessels I Yes, earning. rates on don't we that guidance can specific do we --

our can got found You've revenues the for rate quarter. an obviously that from average be

many down the And then that, quarter, to talk actual were there about how during Derek? days

you're operating the what repair In days ex base was of -- other days? your operating words, idle the

at possible. Yes. partial quite rates because specific number and have It's available. We just don't rates. total we're not earnings difference that day were the And between looking complex

afraid. on too for it's into call into model, putting go complex So the I'm and to a

use in But -- heard the into go Hopefully, of in market. to I potentially what but third the did I think was is, -- into about conventional and the will quarter. increase get Sabia higher OpEx it clarify, come X/X of the the that say Dan and off bareboat it's you

OpEx. in part will be That of increase the the

Global. RockHill with we now have Pavel Oliva

this that great your done and wanted chartering for securing have charters coverage. really just work thank you hard all and getting great department to I quarter. Great you

bigger and of questions sort some more few so specific a have I some picture. sort, So

Dan more Brazil look there, Or to down? a is, Panama to the is or specific you On in do a swap to What on is to the opportunities side, a -- there do the Panama -- drop to there conventional map a halfway on [indiscernible] the if similar the going Sabia Dan voyage. Cisne is Brazil? with

as speaking day And clients some a hovering of rates $XX,XXX. around Brazil, are to in just now the color, the

So rates. Sabia? able good some may through us ship very your be the smaller daily even walk on Dan to thinking Can maybe you earn a

Yes.

she's the any capable work that some would So we are shuttle North for Sea and marketing, include and as obviously, well. that modifications we're operating market of includes with in Brazil

directly. we say, smaller than yes, So continue is to market you as [indiscernible], in rather preferred Brazil.

despite current high in to that still -- Brazil difficult fact, once that's in an day So rates it's get -- that soda last comes the the deployed. it end place reason the first to And charter summer. the

on terms a the the fitting discussion for the reviewed it and be needs Committee. would our NYK, few obviously by It for It to a of ago, potential parties. Cisne Knutsen negotiation and us a both similar between Independent be swap absolutely for potential Conflicts and In relies to yes, months outcome [indiscernible] that's commercially her.

is some commercial North potential Cisne to the -- pool, thing a the of effectively going up, to market. that's what's little Sea that guess, aware that be sister I into there. her by the used the Dan the So provided And supply that's is vessel -- bit

the market that to somewhat the Cisne there there. the So of impaired fact be that by ability deployed position, Sabia is is

commercial absolutely is it process we there. summer. usual the but is with a the different of governance background Cisne concept drop-down follow, got little from a market what to the last had It's So to

to be the of work Understood. a Cisne. lot sense similar That should because the makes pretty legal

the Castberg -- on on -- up. any since as should as expectation day it, Obviously, on production Johan You Sea. especially is can independent in What's with tightening X no helpful. the are there's is fine papers. year be copy the be -- Sea committee starting or now. that the is new should side, Hilda, the the And is even going Xerox projection there builds? North long Maybe or your North the

market for to we'll charter the continue just Hilda Well, period we've the signed. that Yes. beyond

whether North we're certainly anticipated. actually we course in year Sea. whether than market QX the signature rather don't that the onwards. the to charterers will conditions longer signing about But year? to what we So further to chose very from during be took market this view advance anybody see that from or XXXX as change really saw And optimistic And in get this of will yet -- will the than is on be they our

Understood.

that Can is debt ask $XXX investing in Okay. probably cost and of been broader the cost for of a disconnect your SOFR I've long never a and than and I sort cost is, seen between equity bigger million. bigger I've debt a plus question, but of time, company. The of picture

problems ownership or have Knock stable guys on a with refinanced in record immediately. like very but as Zero everything have anything as You financing. you any through well refinancing wood, that. track the

I it So in costs with infinite, ships call performance how the cost fleet have gap your funding the is there improved of an would between replacement share cost yet value -- worth low, of incredible the is, you price. the mid- the very are to equity is what and teens, the with or high NAV of the

give little gradually. dividend, cash bit restarting thoughts cash on remunerated that they're been have pickup dividend We -- restarted. listening, a all. repayments. we that color there getting on especially a almost dividend at to Can free you buyback we Board the as available -- be with the fees could Because because their the are the get dividend and flow they're it even and for shareholders, the also not us the would in members has the and hear if board the been good good

that experience we last really I the rebuild last, Yes, had out has pipeline. understand to least charter all what well, appreciate I needed visible set it. at that couple of do do of the years we've the over and there, The you been

to the that moment. Sabia concerned concerned we're quarters at X X it's remember, vessels Hilda, renew that on concerns wanting Dan may said us. we X X the vessels us plus And You Last said is quarter, that effectively that so saying the ago, X us. now we

that's always further and And progress that pleased as the that of what's the whichever the to and very So but that's the the available is very The option past recognized with. as unitholders. The I continue of best whether and doing -- reviewing the or opportunity is visible well Sabia grown at sold arises. there're been one be useful has but to we through drop-down -- there's noted through pleased drop-downs, swaps for our schedule swapped in any still that that, appreciate we're efficient are our it, moment. deployed, And that on partnership strategically way is very for also drop-down on X the charter growth up. the issue say, need -- we're or forward water swap has And been I needs candidates always among which coming pipeline.

is would increase route the And distribution at considering going looking whether so which -- their we taking, or of be what capital it's the to better combination own two. or are to doing directors [indiscernible] a [indiscernible] the is be

replacement as of a been just it the now, have we cost reap would operations also to have X that be this XX%, about And be of have should this time. of would and an out also just out XX% the stock opportunity owns with Well, XX recognize at Board helpful sponsor are for but is is kind a -- XX%, Directors you in X of and to a shareholders that smallest that to, Board the helpful amount, what where if they well. of the would care you ship have shareholders some the buy acknowledge dividend an example, incredible long signal of and the as not improved. It waiting January sponsor, back of pointing for declaration that which and send sort a you the have big opportunity rewards

and understand that the directors are Yes, you. thank to. I do Pavel. Thanks, that

would you Board And an really you reevaluate I to to incredible send that signal there And the have amount flow that all one. them every I had cash guys fronts, bringing think job well. are to given done for the of except the as in you urge shareholders a on quarter

have [indiscernible]. We now

been that you swaps you average your was more are You Or the hedge already could has to a it your given or hedged less willing quarter-over-quarter. covered, on And Most hedging I maturity versus you you rate rate current constant? environment? interest expect compete ahead, increased to do wondering, but do maintain the have strategy? lower about looking a bit the higher

Thank the beat We enter certainly we expect question. interest the current a the rate future interest in any at you into mind for levels rate time swaps. have to

simply of not fixed debt it's or effectively matter So percentage a the maintaining of our that fixed. is

us. have wide a range of to hedging quite We policy available

say, So of includes as our I it's between and outstanding effectively actually debt X.X and X/X debt, that that's fixed or fixed.

have swapping do point in that. the the we going no rates -- see maturity course doing that swaps rate -- are interest but the we to that that of reduce be That's to our during just disclosed. At you'll there's which just of aren't there's average quite economically the moment, where of to XXXX, we expect we we But high think are on too side significantly that, that. that the higher from

we capacity within at that don't So have on don't policy swaps putting to rates it. existing expect our we mature hedging to we But new allow like. without ones

Altschul a Aviation have Advisory. from follow-up We question with Jim

I industry. I is airlines a see at a all [indiscernible]. stock grew the but is question, the have heavy both were different buying first, to a not increase stock [indiscernible]. you conservative are. Obviously, to value look but isn't would you more back heavily the one on price, level bankrupt long the much the more after I decisions these term. of preserving we And all comment, the previous the continue an I and in any this urge But in don't dividends value mind, [indiscernible] for this look following next really at and mean like in catalyst than but up it's Really up went of part I in the comment the don't shareholder -- shareholders. about overworn numbers -- just specific to

So go be to like want survive to although also where they the to were, and long certainly see term. company for dividends the strong I back I'd this

for Okay. Thank Jim. Thanks your input. you,

I you. can a Thank Felisecurities Fredrik, We confirm we question further Board have from have currently Instructions] Securities. questions. no now with the [Operator

backlog a doing of with the the job great company. Congratulations

upcoming when to on option give with extension Just you closer on an on we timing then timing be [indiscernible]. the you which expires caught? to Can the period wise, And Sabia, expect summer. Dan color left at you extension more option Raquel, have an firm

Racal. On the

Yes.

generally that find late. extensions pretty We get chosen

So it's chance over within because it's of -- much influence don't option that the option, that, and have month longer there we but the before generally commencement charter timing. late a as is than as Ideally, period. it's we the the

Okay. attractive contract now from make the it Hilda Won't getting replacing Hilla it exit [indiscernible], more in the will call And [indiscernible] that sponsor to [indiscernible]. it with a [indiscernible]? [indiscernible] and

Yes, that certainly the helps yes. dynamics, supply demand

like hand some comments. for it now would back to I to Derek final closing

viewing. apologies joining and presentation call quarter Well, And thank again was all the website, those Offshore the for approved Connect in certainly who couldn't public this XXXX. get on earnings for for Partners uploaded third you for into it

speaking fourth with I the quarter following I'll and results. looking -- forward be into that. you to So look again Otherwise,

call. Please you I today's can and for conclude disconnect. does you that the rest all day, of now Thank confirm joining. may your enjoy