KNOT Offshore Partners GP LLC Q4 FY2024 earnings call

• Positive outlook on industry dynamics and the partnership's positioning, with growth anticipated in production fields relying on shuttle tankers, including Brazilian FPSOs and North Sea projects like Johan Castberg and Penguins.
• Vessel supply: Continued newbuild orders to service production volumes, with known newbuild orders backed by firm client charters.
• Strong contracted revenue position: $870 million at end of Q4 on fixed contracts averaging 2.4 years, with charterers' options averaging a further 4.8 years.
• Recent developments: Closeout of insurance claim for Torill Knutsen (~$6 million), brief option exercises and charter changes for Brasil Knutsen and Vigdis Knutsen, and swap of Dan Sabia for Live Knutsen, bringing nearly 5 years of fixed/guaranteed future charter revenue.

Revenues for Q4 2024 were $91.3 million, operating income was $34.7 million, net income was $23.3 million, and Adjusted EBITDA was $63.1 million. The company closed Q4 with $90 million in available liquidity, including $67 million in cash and cash equivalents and $23 million in undrawn capacity on credit facilities. Utilization was 98.3%, and vessel time available for scheduled operations was not impacted by planned drydocking. Revenue contribution details weren't explicitly broken down by product segments, but overall financials are highlighted.

• Positive outlook on industry dynamics and the partnership's ability to participate fruitfully. Expectations for charter options to be taken up due to market tightness.
• Near-term chartering exposure addressed by swapping Dan Sabia for Live Knutsen.
• Plan to refinance debt facilities due in 2025, with a track record of successful refinancing.
• Focus on long-term charter visibility and accretive acquisitions to support long-term cash flow generation.

• Market volatility and uncertainties in debt renegotiations, as the world is a more volatile place now.
• Potential challenges in charter renewals, as seen with open periods in future years and the need for continuing commercial efforts to fill charter coverage.
• Risks related to vessel operations and market conditions impacting utilization and revenue.

Q: How do you think about allocation of capital now that you've got a fairly safe lease book?

A: Freely available liquidity includes $50 million of RCF capacity; debt renegotiations are a immediate priority, and medium-term focus is on filling charter coverage gaps. Board considers accretive acquisitions and long-term sustainable distribution.

Q: Are you comfortable that your available vessels will fit into the demand profile from FPSO or production activity coming online?

A: Yes, no signals that vessels won't fit and they have specifications that fit.

Q: Can you address the open windows for 2026 for Fortaleza and Recife and vessel specs?

A: Fortaleza and Recife have approximately double the capacity of previous smaller vessels, less concern about deploying them; work on open periods continuously, but don't comment on individual negotiations until signed.

Q: Why did Shell decide to flip to bareboat chartering for Vigdis and impact to net cash flow?

A: Bareboat terms commercially comparable to previous time charter; fixed coverage extended, benefits of oil major operating own fleet; no significant impact to net cash flow as terms are comparable.

Q: Talk about time charter revenue jump and forward-looking book?

A: No one-offs like bonuses, new operations starting in Q4 contributed; new operations like swap of Sabia for Live and Hilda charter will impact future revenue, with newbuild rates contracted around construction time.

Q: Thoughts on OpEx drop and first half 2025 impact?

A: Similar impact expected from other Dan vessel being sold; first quarter impacted cost-wise, but second quarter not for same reasons as Sabia sale; no significant outstanding off-hire receivables.

Q: Cash flow after amortizations and dividend thoughts?

A: Board considers long-term interest through accretive investment and distribution; annualized figures from one quarter need time to feed through, and charter renewals are rolling, so high coverage not guaranteed long-term.

Q: Thoughts on buying vessels in North Sea vs Brazil?

A: Conflicts Committee considers dropdowns, looking at vessel terms and commercial exposure, not just transaction terms.

Q: First quarter utilization and drydocking?

A: No specific disclosure on first quarter utilization, but no disclosed issues; 4 vessels with drydocking in 2024, Tuva slightly later into 2026.

Q: Debt repayment schedule pro forma for Live Knutsen swap?

A: Details will be in 20-F filing, highly recognizable by comparison with other debt facilities.

Q: North Sea vs Brazil market gap closing with Penguins and Johan Castberg?

A: Not seeing comparison in that way, both market strengthenings are welcome but hard to compare as one catching up to the other