KNOT Offshore Partners GP LLC Q3 FY2024 earnings call

Financial and Operational Headlines - Q3 revenues were $76.3 million, operating income $17.2 million, net loss $3.8 million, adjusted EBITDA $45.1 million. Closed Q3 with $77 million in available liquidity. Declared a cash distribution of $0.026 per common unit. ### Industry Outlook - Positive on industry dynamics with anticipated growth in production fields relying on shuttle tankers. Around 11 newbuilds on order, including for the sponsor. Strong contracted revenue position of $980 million at end of Q3. ### Q3 Developments - Swapped Dan Cisne for Tuva Knutsen (adding 7 years of fixed/guaranteed revenue). Charter extensions for Tordis Knutsen and Lena Knutsen. New charters: Ingrid Knutsen chartered with Eni for 2 years + 2 options; Hilda Knutsen charter for 1 year fixed starting March 2025; Torill Knutsen time charter via Eni for 3 years fixed + 3 options; Repsol exercised option on Carmen Knutsen starting Q1 2025; Dan Sabia on conventional cargo work. ### Balance Sheet - Slight increase in liabilities due to Tuva acquisition. Two debt facilities moved to current liabilities. $907 million of $947 million debt facilities secured by vessels; Dan Sabia is debt-free. ### Commercial Focus - Focus on adding near-term contracts for Dan Sabia, progress in fixed charter coverage. Sponsor's vessel inventory (5 existing, 5 under construction) eligible for purchase.

Revenues were $76.3 million. Operating income was $17.2 million, net loss was $3.8 million, and adjusted EBITDA was $45.1 million. Closed Q3 with $77 million in available liquidity (comprising $67 million in cash and cash equivalents plus $10 million in undrawn capacity on credit facilities). Utilization was 98.8%. Contracted revenue position was $980 million on fixed contracts (averaging 2.8 years in duration) with charterer options averaging a further 2.4 years.

Outlook - Positive on industry dynamics and partnership's positioning. Anticipate newbuild orders to service growing production. Strong contracted revenue position. Focus on filling third-party utilization and securing long-term charter visibility.

• Forward-looking statements subject to significant uncertainties and contingencies. - Debt repayment obligations, with $96 million in current installments due in next 12 months. - Market conditions and vessel employment uncertainties for Dan Sabia.

Q: OpEx jumped about $2 million sequentially. How much of that was related to the Torill repair or if any?

A: Pretty limited amount. Well under half of that amount off the top of my head. Probably quarter at the most.

Q: Are current market conditions stronger than a couple years ago?

A: It's the other way around. Market conditions have been strengthening reasonably steadily over that time. So, more recent would typically imply better rates or higher rates.

Q: Other factors in increased operating expenses year-on-year?

A: General operating cost level. We see increased cost of crewing, particularly relating to travel and increased cost of supplies as well. It's a generally inflationary environment, unfortunately, for our work.

Q: Dan Sabia's potential swap?

A: Yes, there is a potential outcome for a swap with Knutsen NYK. It needs to be commercially fitting for both parties and reviewed by the independent conflicts committee. The market commercial background to it is a little different from what we have with Cisne last summer.

Q: Hedging strategy?

A: We certainly expect to adjust hedging based on interest rate levels at the time we enter into any future interest rate swaps. It's not simply a matter of maintaining the ratio of hedged versus unhedged debt. We won't hedge at rates that we don't like.

Q: Timing of Raquel option extension?

A: We generally find that extensions get chosen pretty late. So, there is a chance that it's as late as within the month before commencement of the option period.