[Executive Summary & Financial Highlights](index=1&type=section&id=Executive%20Summary%20%26%20Financial%20Highlights) This section provides an overview of KNOT Offshore Partners LP's financial performance and key operational events for Q1 2025 [Q1 2025 Financial Performance](index=1&type=section&id=Q1%202025%20Financial%20Performance) KNOT Offshore Partners LP achieved $84.0 million in total revenues, $23.4 million in operating income, and $7.6 million in net income for Q1 2025, with adjusted EBITDA of $52.2 million and $100.8 million in available liquidity | Metric | Amount ($ millions) | | :-------------------- | :------------------ | | Total Revenues | 84.0 | | Operating Income | 23.4 | | Net Income | 7.6 | | Adjusted EBITDA | 52.2 | | Available Liquidity | 100.8 | | Cash & Cash Equivalents | 67.3 | | Undrawn RCF Capacity | 33.5 | [Other Partnership Highlights and Events](index=1&type=section&id=Other%20Partnership%20Highlights%20and%20Events) The fleet achieved 96.9% utilization in scheduled operations for Q1 2025, or 99.5% including planned drydocking, and declared a quarterly cash distribution of $0.026 per common unit - Fleet utilization in scheduled operations was **96.9%** for Q1 2025, or **99.5%** including planned drydocking[4](index=4&type=chunk) - A quarterly cash distribution of **$0.026 per common unit** for Q1 2025 was declared on April 9, 2025, and paid on May 8, 2025[4](index=4&type=chunk) [CEO Statement & Operational Review](index=2&type=section&id=CEO%20Statement%20%26%20Operational%20Review) This section presents the CEO's commentary on Q1 2025 performance, market outlook, and key operational and charter updates [CEO Commentary](index=2&type=section&id=CEO%20Commentary) CEO Derek Lowe expressed satisfaction with Q1 2025 performance, highlighting over 99% fleet utilization, stable revenue, and significant progress in securing additional charter coverage, with approximately 96% coverage for the last three quarters of 2025 and 75% for 2026 - Fleet utilization exceeded **99%** in scheduled operations for Q1 2025[5](index=5&type=chunk) - Approximately **96%** of charter coverage secured for the last three quarters of 2025 and **75%** for 2026 as of the release date[6](index=6&type=chunk) - Strong momentum built in a strengthening market, focusing on enhancing and extending charter coverage across the fleet[6](index=6&type=chunk) [Market Outlook and Industry Trends](index=2&type=section&id=Market%20Outlook%20and%20Industry%20Trends) The Brazilian offshore oil market continues to improve with strong demand and rising charter rates, while the North Sea market rebalances, with offshore oil production growth expected to outpace shuttle tanker supply - Brazilian offshore oil market outlook continues to improve with strong demand and rising charter rates, driven by high Petrobras production and FPSO start-ups in pre-salt fields[7](index=7&type=chunk) - North Sea market is rebalancing, with new FPSO projects like Penguins in the UK North Sea and Johan Castberg in the Barents Sea commencing production[7](index=7&type=chunk) - Offshore oil production growth in fields served by shuttle tankers in Brazil and the North Sea is expected to exceed shuttle tanker supply growth in the coming years, with newbuild orders (including six for Knutsen NYK) anticipated to be absorbed by the expanding market[8](index=8&type=chunk) [Operational Highlights and Charter Updates](index=2&type=section&id=Operational%20Highlights%20and%20Charter%20Updates) Operational highlights include final insurance settlement for Torill Knutsen, contract extensions and new charters for Brasil Knutsen and Vigdis Knutsen, a vessel swap involving Live Knutsen and Dan Sabia, and Hilda Knutsen commencing a one-year time charter - Final insurance settlement received in January 2025 for repair and off-hire losses related to Torill Knutsen's generator rotor damage in January 2024[9](index=9&type=chunk) - Petrorio exercised an option to extend the Brasil Knutsen contract until September 2025, followed by a new two-year time charter with Equinor (with two one-year extension options) commencing in Q3 2025[9](index=9&type=chunk) - Shell exercised an option to convert Vigdis Knutsen's time charter to a bareboat charter (effective July 2025 or later) and extended the fixed term from 2027 to 2030 (with two one-year extension options)[9](index=9&type=chunk) - In March 2025, the Partnership acquired Live Knutsen from Knutsen NYK through its subsidiary KST, while simultaneously selling Dan Sabia to Knutsen NYK, completing a two-vessel swap[9](index=9&type=chunk) - Hilda Knutsen commenced a one-year time charter with Shell on March 23, 2025[9](index=9&type=chunk) [Financial Results Overview](index=3&type=section&id=Financial%20Results%20Overview) This section provides a comparative analysis of the Partnership's financial performance for Q1 2025 against prior periods [Q1 2025 vs Q4 2024 Comparison](index=3&type=section&id=Q1%202025%20vs%20Q4%202024%20Comparison) Total revenues and net income decreased in Q1 2025 compared to Q4 2024, primarily due to a one-time insurance gain in Q4 2024, while vessel operating expenses rose due to increased maintenance and EU ETS costs | Metric | Q1 2025 ($ millions) | Q4 2024 ($ millions) | Change ($ millions) | Change Rate | | :------------------------- | :-------------------------- | :-------------------------- | :---------------- | :----- | | Total Revenues | 84.0 | 91.3 | (7.3) | -8.0% | | Operating Income | 23.4 | 34.7 | (11.3) | -32.6% | | Net Income | 7.6 | 23.3 | (15.7) | -67.4% | | Vessel Operating Expenses | 30.6 | 26.2 | 4.4 | 16.8% | | Realized gain on derivatives | 3.1 | 3.7 | (0.6) | -16.2% | | Unrealized gain (loss) on derivatives | (4.5) | 0.9 | (5.4) | -600.0% | - Q4 2024 total revenues included a **$5.9 million** one-time insurance gain[11](index=11&type=chunk) - Increase in vessel operating expenses primarily due to higher maintenance and drydocking costs, and EU ETS costs[11](index=11&type=chunk) [Q1 2025 vs Q1 2024 Comparison](index=3&type=section&id=Q1%202025%20vs%20Q1%202024%20Comparison) Operating income increased by $3.7 million to $23.4 million and net income slightly rose by $0.2 million to $7.6 million in Q1 2025 compared to Q1 2024, driven by improved fleet utilization, higher charter revenues, and vessel disposal gains, despite a $3.2 million increase in finance expenses due to unrealized derivative losses | Metric | Q1 2025 ($ millions) | Q1 2024 ($ millions) | Change ($ millions) | Change Rate | | :------------------------- | :-------------------------- | :-------------------------- | :---------------- | :----- | | Operating Income | 23.4 | 19.7 | 3.7 | 18.8% | | Net Income | 7.6 | 7.4 | 0.2 | 2.7% | | Finance Expenses | 15.3 | 12.1 | 3.2 | 26.4% | - Operating income increase driven by improved fleet utilization, higher charter revenues, and gains on vessel disposal[11](index=11&type=chunk) - Finance expenses increased primarily due to unrealized losses on derivatives in Q1 2025 compared to unrealized gains in Q1 2024[11](index=11&type=chunk) [Financing and Liquidity](index=4&type=section&id=Financing%20and%20Liquidity) This section details the Partnership's liquidity position, debt obligations, and interest rate hedging strategies [Liquidity Position](index=4&type=section&id=Liquidity%20Position) As of March 31, 2025, the Partnership had **$100.8 million** in available liquidity, comprising **$67.3 million** in cash and cash equivalents and **$33.5 million** in undrawn revolving credit facility capacity - Available liquidity was **$100.8 million** as of March 31, 2025[12](index=12&type=chunk) - Liquidity comprised **$67.3 million** in cash and cash equivalents and **$33.5 million** in undrawn revolving credit facility capacity[12](index=12&type=chunk) - Revolving credit facilities are scheduled to mature between August 2025 and November 2025[12](index=12&type=chunk) [Debt Obligations and Interest Rate Swaps](index=4&type=section&id=Debt%20Obligations%20and%20Interest%20Rate%20Swaps) Total outstanding interest-bearing debt was **$949 million** as of March 31, 2025, with an average interest rate of SOFR plus 2.23% for Q1 2025, and the Partnership utilized **$462.3 million** in interest rate swaps to hedge floating rate exposure, resulting in a net floating rate exposure of approximately **$258.6 million** - Total outstanding interest-bearing debt was **$949 million** as of March 31, 2025[13](index=13&type=chunk) - Average interest rate on outstanding debt for Q1 2025 was SOFR plus approximately **2.23%**[13](index=13&type=chunk) | Period | Total ($ thousands) | | :----------------- | :------------------ | | Remainder of 2025 | 228,397 | | 2026 | 368,511 | | 2027 | 140,874 | | 2028 | 108,585 | | 2029 | 17,232 | | 2030 and thereafter | 85,367 | | **Total** | **948,966** | - Interest rate swap agreements with a total notional amount of **$462.3 million** and an average remaining term of approximately **1.53 years** are in place to hedge floating rate borrowings[13](index=13&type=chunk) - Net exposure to floating interest rate fluctuations was approximately **$258.6 million** as of March 31, 2025[14](index=14&type=chunk) [Strategic Assets and Dropdown Opportunities](index=4&type=section&id=Strategic%20Assets%20and%20Dropdown%20Opportunities) This section outlines the Partnership's strategy for acquiring vessels from Knutsen NYK and lists potential dropdown opportunities [Omnibus Agreement and Dropdown Strategy](index=4&type=section&id=Omnibus%20Agreement%20and%20Dropdown%20Strategy) Under the Omnibus Agreement with Knutsen NYK, the Partnership has the right to acquire offshore shuttle tankers with charters of five years or more, with such acquisitions requiring approval from the Partnership's board conflict committee, as increasing fleet investment and sustainable distributions are core strategies - The Partnership has the right to acquire offshore shuttle tankers with charters of **five years or more** from Knutsen NYK[15](index=15&type=chunk) - Key components of the strategy and value proposition are accretive investments in the fleet and long-term sustainable distributions[16](index=16&type=chunk) - Any such acquisition requires approval from the Partnership's board conflict committee[16](index=16&type=chunk) [Knutsen NYK Owned/Ordered Vessels](index=4&type=section&id=Knutsen%20NYK%20Owned%2FOrdered%20Vessels) Knutsen NYK owns or has ordered several vessels, primarily operating in Brazil and the North Sea with long-term charters and expected deliveries from 2025 to 2028, representing potential dropdown acquisition opportunities for the Partnership - **Daqing Knutsen**: Delivered June 2022, on a **5-year** time charter with PetroChina International (America) Inc. (operating in Brazil), with a **5-year** extension option[17](index=17&type=chunk) - **Frida Knutsen**: Delivered July 2022, on a **7-year** time charter with Eni (operating in the North Sea), with a **3-year** extension option[17](index=17&type=chunk) - **Sindre Knutsen**: Delivered August 2022, on a **5-year** time charter with Eni (operating in the North Sea), with a **5-year** extension option[23](index=23&type=chunk) - Knutsen NYK has newbuilds on order for Petrobras (Brazil): one with a **15-year** charter signed November 2022, expected delivery late 2025; three with **10-year** charters signed February 2024, expected delivery 2026-2027[23](index=23&type=chunk) - Knutsen NYK has a newbuild on order for Petrorio (Brazil): with a **7-year** charter signed August 2024, expected delivery early 2027[23](index=23&type=chunk) - **Hedda Knutsen**: Delivered October 2024, on a **10-year** time charter with Petrobras (operating in Brazil), with a **5-year** extension option[23](index=23&type=chunk) - Knutsen NYK has a newbuild on order for Equinor (Brazil): with a **7-year** charter signed March 2025, expected delivery early 2028[23](index=23&type=chunk) [Corporate Governance](index=5&type=section&id=Corporate%20Governance) This section details recent changes to the Partnership's Board of Directors [Board of Directors Change](index=5&type=section&id=Board%20of%20Directors%20Change) Effective April 1, 2025, Mr. Masami Okubo replaced Mr. Yasuhiro Fukuda as a member of the Partnership's general partner board, both representing Nippon Yusen Kaisha (NYK) - Mr. Masami Okubo replaced Mr. Yasuhiro Fukuda as a member of the Board of Directors, effective April 1, 2025[18](index=18&type=chunk) [Outlook and Future Strategy](index=5&type=section&id=Outlook%20and%20Future%20Strategy) This section outlines the market outlook for shuttle tankers and the Partnership's strategic plans for future growth and distributions [Market Outlook](index=5&type=section&id=Market%20Outlook) As of March 31, 2025, the fleet had an average remaining fixed charter term of **2.3 years** with **4.7 years** of charterer options, and **$853.8 million** in remaining contractual forward revenue, with a tightening Brazilian market and new North Sea production supporting an optimistic medium to long-term outlook for shuttle tankers - As of March 31, 2025, the Partnership's charters had an average remaining fixed term of **2.3 years**, with charterers holding options for an additional **4.7 years**[19](index=19&type=chunk) - The Partnership had **$853.8 million** in remaining contractual forward revenue as of March 31, 2025[19](index=19&type=chunk) - The Brazilian shuttle tanker market continues to tighten, driven by new production growth in the coming years, limited newbuild orders, and long-term project viability at Brent crude prices as low as **$35/barrel**[19](index=19&type=chunk) - North Sea shuttle tanker demand, which has been subdued for several years, has seen recent new oil and gas production start-ups, including the Johan Castberg field and Penguins FPSO[20](index=20&type=chunk) - Overall, the medium to long-term outlook for the shuttle tanker market remains positive[21](index=21&type=chunk) [Partnership Strategy](index=5&type=section&id=Partnership%20Strategy) The Partnership plans to pursue long-term charter visibility, build liquidity, execute accretive dropdown transactions for long-term cash flow, and leverage its market-leading position in an improving shuttle tanker market to increase capital value, contractual backlog, and future sustainable distribution levels - The Partnership plans to pursue long-term visibility on charter contracts, build liquidity, execute accretive dropdown transactions to support long-term cash flow generation, and leverage its market-leading position in an improving shuttle tanker market[22](index=22&type=chunk) - Dropdown transactions are expected to increase the Partnership's capital value, with growth in contractual backlog leading to increased cash flow and aiding refinancing efforts[24](index=24&type=chunk) - Combined with strong market fundamentals, opportunities are anticipated to increase sustainable distribution levels in the future[24](index=24&type=chunk) [Company Overview](index=6&type=section&id=Company%20Overview) This section provides a brief description of KNOT Offshore Partners LP's business and market presence [About KNOT Offshore Partners LP](index=6&type=section&id=About%20KNOT%20Offshore%20Partners%20LP) KNOT Offshore Partners LP owns, operates, and acquires shuttle tankers primarily in Brazilian and North Sea offshore oil production areas under long-term charters, trading common units on the NYSE under "KNOP" and classified as a corporation for U.S. federal income tax purposes - KNOT Offshore Partners LP primarily owns, operates, and acquires shuttle tankers under long-term charters in the offshore oil production areas of Brazil and the North Sea[25](index=25&type=chunk) - The company is a publicly traded limited partnership but is classified as a corporation for U.S. federal income tax purposes, issuing Form 1099 to its unitholders[26](index=26&type=chunk) - KNOT Offshore Partners LP's common units trade on the New York Stock Exchange under the ticker symbol **"KNOP"**[26](index=26&type=chunk) [Conference Call Information](index=6&type=section&id=Conference%20Call%20Information) This section provides details for the upcoming Q1 2025 earnings conference call [Q1 2025 Earnings Conference Call](index=6&type=section&id=Q1%202025%20Earnings%20Conference%20Call) KNOT Offshore Partners LP will host a conference call on Wednesday, May 21, 2025, at 9:30 AM ET to discuss Q1 2025 results, accessible via phone or webcast for all interested parties - The conference call will be held on Wednesday, May 21, 2025, at **9:30 AM ET**[27](index=27&type=chunk) - The call is scheduled to discuss Q1 2025 results[27](index=27&type=chunk) - Participation is available by dialing specified phone numbers (US: 1-833-470-1428, Canada: 1-833-950-0062, Outside North America: 1-404-975-4839, Access Code 259019) or via webcast on the company's website at www.knotoffshorepartners.com[27](index=27&type=chunk) [Financial Statements (Unaudited Condensed Consolidated)](index=7&type=section&id=Financial%20Statements%20(Unaudited%20Condensed%20Consolidated)) This section presents the unaudited condensed consolidated financial statements for KNOT Offshore Partners LP [Statements of Operations](index=7&type=section&id=Statements%20of%20Operations) The unaudited condensed consolidated statements of operations for Q1 2025 show total revenues of **$84.0 million**, net income of **$7.6 million**, and operating income of **$23.4 million**, with **$3.1 million** in realized gains on derivatives offset by **$4.5 million** in unrealized losses | Metric | March 31, 2025 ($ thousands) | December 31, 2024 ($ thousands) | March 31, 2024 ($ thousands) | | :--------------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Total Revenues | 84,029 | 91,255 | 76,632 | | Operating Income | 23,436 | 34,665 | 19,709 | | Net Income | 7,581 | 23,251 | 7,438 | | Realized gain on derivatives | 3,111 | 3,698 | 4,063 | | Unrealized gain (loss) on derivatives | (4,455) | 862 | 939 | [Balance Sheet](index=9&type=section&id=Balance%20Sheet) Total assets increased to **$1,651.4 million** as of March 31, 2025, from **$1,572.2 million** on December 31, 2024, with total liabilities rising to **$1,035.3 million** and total partners' capital increasing to **$531.8 million** | Metric | March 31, 2025 ($ thousands) | December 31, 2024 ($ thousands) | | :-------------------------------- | :--------------------------- | :--------------------------- | | Total Assets | 1,651,417 | 1,572,165 | | Total Liabilities | 1,035,303 | 961,030 | | Total Partners' Capital | 531,806 | 526,827 | | Cash & Cash Equivalents | 67,260 | 66,933 | | Vessels, net | 1,535,408 | 1,462,192 | | Current portion of long-term debt | 249,437 | 256,659 | | Long-term debt | 694,827 | 648,075 | [Statement of Changes in Partners' Capital](index=10&type=section&id=Statement%20of%20Changes%20in%20Partners%27%20Capital) Total partners' capital increased from **$526.8 million** on December 31, 2024, to **$531.8 million** on March 31, 2025, primarily driven by net income, partially offset by cash distributions | Metric | March 31, 2025 ($ thousands) | December 31, 2024 ($ thousands) | | :------------------- | :-------------------------- | :-------------------------- | | Total Partners' Capital | 531,806 | 526,827 | | Net Income (Loss) | 5,881 | 5,773 | | Cash Distributions | (902) | (902) | [Statement of Cash Flows](index=11&type=section&id=Statement%20of%20Cash%20Flows) Q1 2025 saw **$36.0 million** net cash from operating activities, **$0.8 million** net cash from investing activities, and **$36.7 million** net cash used in financing activities, primarily for debt repayment and cash distributions, resulting in a slight increase in cash and cash equivalents to **$67.3 million** at period-end | Metric | March 31, 2025 ($ thousands) | March 31, 2024 ($ thousands) | | :--------------------------------- | :-------------------------- | :-------------------------- | | Net cash from operating activities | 36,021 | 26,796 | | Net cash from investing activities | 827 | (70) | | Net cash from financing activities | (36,680) | (40,302) | | Cash & Cash Equivalents (end of period) | 67,260 | 50,243 | - Net cash from investing activities included **$10.4 million** from asset swaps[34](index=34&type=chunk) - Net cash from financing activities primarily included **$34.078 million** in long-term debt repayments and **$2.602 million** in cash distributions[34](index=34&type=chunk) [Appendix A - Reconciliation of Non-GAAP Financial Measures](index=12&type=section&id=Appendix%20A%20-%20Reconciliation%20of%20Non-GAAP%20Financial%20Measures) This appendix provides definitions and reconciliations for non-GAAP financial measures used by the Partnership [EBITDA and Adjusted EBITDA Definition](index=12&type=section&id=EBITDA%20and%20Adjusted%20EBITDA%20Definition) EBITDA and Adjusted EBITDA are non-GAAP financial measures used to assess the Partnership's financial and operational performance, with Adjusted EBITDA further excluding other financial items to enhance comparability across periods and companies - EBITDA is defined as earnings before interest, taxes, depreciation, and amortization[36](index=36&type=chunk) - Adjusted EBITDA is defined as EBITDA adjusted for other financial items, including other finance expenses, realized and unrealized gains (losses) on derivatives, and net gains (losses) on foreign currency transactions[36](index=36&type=chunk) - These non-GAAP measures aim to improve comparability of performance by excluding items like interest, other financial items, taxes, impairment, and depreciation, which may have varying impacts across periods or companies[36](index=36&type=chunk) [EBITDA and Adjusted EBITDA Reconciliation](index=12&type=section&id=EBITDA%20and%20Adjusted%20EBITDA%20Reconciliation) For Q1 2025, EBITDA was **$51.1 million** and Adjusted EBITDA was **$52.2 million**, representing a decrease from Q4 2024, primarily reflecting changes in net income and other financial items | Metric | March 31, 2025 ($ thousands) | December 31, 2024 ($ thousands) | | :-------------------- | :-------------------------- | :-------------------------- | | Net Income (Loss) | 7,581 | 23,251 | | Interest Income | (748) | (1,055) | | Interest Expense | 14,902 | 16,167 | | Depreciation | 28,763 | 28,425 | | Income Tax Expense | 579 | 3 | | **EBITDA** | **51,077** | **66,791** | | Other Financial Items | 1,122 | (3,701) | | **Adjusted EBITDA** | **52,199** | **63,090** | [Forward-Looking Statements](index=13&type=section&id=Forward-Looking%20Statements) This section provides a disclaimer regarding forward-looking statements and outlines associated risk factors [Disclaimer and Risk Factors](index=13&type=section&id=Disclaimer%20and%20Risk%20Factors) This press release contains forward-looking statements regarding future events, operations, performance, and financial condition, covering market trends, chartering, refinancing, distributions, acquisitions, economic factors, and regulatory compliance, which involve known and unknown risks and are based on assumptions that may cause actual results to differ materially, with no intention to publicly update or revise them - Forward-looking statements cover market trends (shuttle or conventional tanker industry, supply and demand, charter rates), market trends for oil production in the North Sea, Brazil, and other regions, ability to build shuttle tankers, ability to acquire vessels from Knutsen NYK, ability to enter into long-term or short-term charters, ability to refinance debt and obtain capital markets financing, distribution policy, acquisition integration, impact of supply chain disruptions, growth strategy, economic slowdowns, financial market volatility, currency/inflation/interest rate fluctuations, oil price volatility, changes in operating expenses, insurance proceeds, length and cost of drydocking periods, future financial condition and performance, debt repayment, capital expenditures, relationships with major customers, leveraging Knutsen NYK relationship, maximizing vessel utilization, financial condition of customers, newbuild procurement and delivery, impairment of vessel values, competitive ability, vessel acceptance, impact of geopolitical conflicts, charter terminations and extensions, costs of complying with governmental regulations and IMO standards, availability of skilled labor/crew/management, impact of pandemics, general and administrative expenses, taxes, Marshall Islands economic substance requirements, retention of key employees, customer climate/environmental/safety concerns, cyber-attacks, litigation, disruptions to shipping routes, future sales of securities, and other factors listed in SEC filings[41](index=41&type=chunk)[42](index=42&type=chunk)[44](index=44&type=chunk) - These statements involve known and unknown risks and are based upon assumptions and estimates that are inherently subject to significant uncertainties and contingencies, many of which are beyond KNOT Offshore Partners' control, and actual results may differ materially from those expressed or implied in the forward-looking statements[41](index=41&type=chunk) - KNOT Offshore Partners does not intend to publicly update or revise any of the forward-looking statements contained in this press release to reflect any change in its expectations or any change in events, conditions, or circumstances[43](index=43&type=chunk)

Financial Performance and Debt Management - The quarterly cash distribution was reduced to $0.026 per common unit, which may impact the company's ability to raise capital [32]. - Consolidated debt as of December 31, 2024, was approximately $909.7 million, limiting the company's flexibility in obtaining additional financing [39]. - Approximately $256.7 million of the company's debt is due to be repaid or refinanced in 2025 [40]. - The company's ability to service or refinance its debt is dependent on its current and future financial performance, which may be affected by economic conditions [41]. - Financing agreements require the company to maintain certain financial ratios, including positive working capital and a minimum liquidity [43]. - The company’s debt level may limit its flexibility in responding to changing business and economic conditions [44]. - The company can borrow money to pay distributions, which may reduce available credit for operational needs [167]. - Unitholders may have liability to repay distributions under certain circumstances, particularly if distributions exceed the fair value of assets [171]. Revenue Sources and Customer Dependence - The company relies on 13 customers for all of its time charter and bareboat revenues, indicating a lack of diversification [26]. - The company derives all of its time charter and bareboat revenues from 13 customers, with key customers accounting for approximately 24%, 17%, 14%, 13%, 9%, and 8% of revenues respectively [59]. - In 2024, subsidiaries of KNOT accounted for $28 million of the company's time charter revenues [64]. - Major customers include Shell (24%), Equinor (17%), Transpetro (14%), Repsol (13%), KNOT (9%), and TotalEnergies (8%), accounting for a significant portion of revenues for the year ended December 31, 2024 [218]. Operational Challenges and Costs - The company anticipates incurring at least 112 off-hire days due to scheduled drydockings in 2025, which could adversely affect cash available for distribution [36]. - The company must make substantial capital expenditures to maintain fleet operating capacity, which reduces cash available for distribution [35]. - The required drydocking of vessels could be more expensive and time-consuming than anticipated, impacting cash flow [36]. - The company experienced significant increases in costs for fuel, logistics, and crewing due to supply chain disruptions and inflation, impacting its financial condition [72]. - Supply chain constraints and labor shortages have led to higher operational costs, which may impact the company's ability to hire and retain crew and procure materials [72]. - The company may face operational problems with vessels that could reduce revenue and increase costs [55]. - The company anticipates ongoing supply chain pressures and inflationary impacts on its cost structure, which may affect its operations and financial results [72]. Market and Economic Conditions - The company’s growth depends on the demand for shuttle tanker transportation services, which is influenced by macroeconomic conditions and oil prices [26]. - Persistent low oil prices may adversely affect the company's growth prospects and ability to make cash distributions, with macroeconomic conditions like rising inflation and interest rates posing additional risks [68]. - Adverse economic conditions may impair customers' ability to pay for services, leading to decreased demand for the company's vessels and negatively impacting revenue [73]. - An increase in global shuttle tanker capacity without a corresponding increase in demand may adversely affect hire rates and vessel values, impacting the company's financial condition [79]. Regulatory and Compliance Risks - The International Maritime Organization (IMO) aims for a 40% reduction in carbon intensity for international shipping by 2030, compared to 2008 levels [1]. - The 2023 IMO GHG Strategy targets net-zero GHG emissions from international shipping by around 2050, with a goal of at least a 20% reduction in total annual GHG emissions by 2030 [1]. - Compliance with new climate-related regulations may increase operational costs and require installation of new emission controls [2]. - The SEC proposed rules requiring public companies to disclose material climate-related risks and GHG emissions, which could lead to increased compliance costs [4]. - The company may face reputational damage and financial impacts due to increased scrutiny on its Environmental, Social, and Governance (ESG) practices [3]. - Increased costs and risks associated with climate change regulations may hinder access to capital and affect investor relationships [3]. - Compliance with extensive environmental regulations, such as the IMO 2020 sulfur cap, may significantly increase operational expenses [112]. Corporate Governance and Ownership Structure - KNOT owns 28.4% of the company's common units and all Class B Units, creating potential conflicts of interest [137]. - The partnership agreement limits unitholders' voting rights, with only four out of seven board members elected by common unitholders [135]. - The partnership agreement allows KNOT to make decisions in its individual capacity, potentially favoring its interests over those of the company [143]. - Common unitholders are entitled to elect only four of the seven members of the board of directors, with the remaining three appointed by the general partner [1]. - The partnership agreement limits unitholders' ability to call meetings, nominate directors, and acquire operational information, which may diminish their influence [1]. Strategic Growth and Future Prospects - The company aims to generate stable cash flows and provide sustainable quarterly distributions to unitholders through strategic acquisitions and long-term charters [210]. - The company has established relationships with leading energy companies, which are expected to provide attractive opportunities for future growth [210]. - The company intends to expand operations in high-growth regions, particularly in the North Sea and Brazil [210]. - The company has a history of acquiring shuttle tankers, with significant acquisitions made from 2013 to 2025 [193][194][195][196][197][198][199][200][201][202]. Cybersecurity and Data Protection - A successful cyber-attack could materially disrupt the company's operations and lead to significant financial repercussions [130]. - Cybersecurity risks are increasing, requiring significant resources for protection and compliance with new regulations [132]. - The company is subject to evolving data protection laws, which may incur substantial compliance costs and legal liabilities [133]. - The company faces complex compliance challenges related to data privacy and cybersecurity laws, with potential penalties for noncompliance [133].

Financial Data and Key Metrics Changes - Revenues for Q4 2024 were $91.3 million, operating income was $34.7 million, and net income was $23.3 million [5] - Adjusted EBITDA was reported at $63.1 million, with available liquidity at $90 million, consisting of $67 million in cash and cash equivalents and $23 million in undrawn credit facilities [6] - The company operated at a utilization rate of 98.3% with no impact from planned drydocking [6] Business Line Data and Key Metrics Changes - The partnership has a strong contracted revenue position of $870 million at the end of Q4, with fixed contracts averaging 2.4 years in duration [12] - The recent swap of Dan Sabia for Live Knutsen is expected to bring nearly 5 years of fixed charter revenue, enhancing fleet and pipeline growth without new funding [15] Market Data and Key Metrics Changes - Significant growth is anticipated in production fields serviced by shuttle tankers, particularly in Brazil and the North Sea [8] - The North Sea's Johan Castberg FPSO is expected to start production shortly, while the Penguins FPSO has recently begun production [9][10] Company Strategy and Development Direction - The company aims to pursue long-term charter visibility and accretive investments in the fleet to support sustainable distributions [25] - The partnership is focused on filling charter coverage gaps, with 75% of 2026's capacity already fixed [23] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism regarding industry dynamics and the partnership's positioning to benefit from market conditions [7] - The company is addressing upcoming debt refinancings and is making good progress against an improving market backdrop [31] Other Important Information - The company closed an insurance claim for Torill Knutsen totaling less than $6 million [14] - The partnership's overall liabilities decreased by $29 million in 2024 despite the acquisition of Tuva [16] Q&A Session Summary Question: Capital allocation with improved liquidity - Management highlighted the importance of maintaining liquidity and prioritizing debt renegotiations while also focusing on filling charter coverage [34][36] Question: Charter coverage and vessel fit for demand - Management expressed confidence that available vessels will meet the demand profile in both the North Sea and Latin America [38][39] Question: Open windows for Fortaleza and Recife charters - Management indicated that the larger size of Fortaleza and Recife reduces concerns about rechartering compared to smaller vessels [42] Question: Impact of bareboat chartering on cash flow - Management confirmed that the bareboat terms are commercially comparable to previous time charters, extending fixed coverage for the vessel [48] Question: Time charter revenue expectations - Management noted that the increase in time charter revenue was driven by new operations starting in Q4, with expectations for continued growth in Q2 [56][60] Question: Debt repayment schedule post-acquisition - Management stated that more details on the debt facility for Live Knutsen will be disclosed in the upcoming 20-F filing [108] Question: North Sea market comparison with Brazil - Management acknowledged the strengthening of both markets but refrained from making direct comparisons regarding growth potential [111]

Financial Performance - KNOT Offshore Partners generated total revenues of $91.3 million in Q4 2024, an increase from $76.3 million in Q3 2024, driven by higher charter revenues and insurance proceeds of $5.9 million[11]. - The Partnership reported net income of $23.3 million in Q4 2024, a significant increase from a net loss of $3.8 million in Q3 2024, and an increase of $28.6 million compared to a net loss of $5.3 million in Q4 2023[11]. - Adjusted EBITDA for Q4 2024 was $63.1 million, reflecting strong operational performance and increased fleet utilization at 98.3%[4][11]. - For the year ended December 31, 2024, total revenues reached $318.6 million, an increase of 9.5% compared to $290.7 million in 2023[28]. - Time charter and bareboat revenues amounted to $306.9 million for 2024, up from $277.1 million in 2023, reflecting a growth of 10.7%[28]. - The operating income for the year was $72.9 million, significantly higher than the $25.1 million reported in 2023, marking a year-over-year increase of 189.5%[28]. - Net income for 2024 was $14.1 million, compared to a net loss of $34.3 million in 2023, indicating a substantial turnaround[28]. - Adjusted EBITDA for the year ended December 31, 2024 was $201,116 thousand, an increase from $185,687 thousand for the year ended December 31, 2023, reflecting a growth of approximately 8.5%[38]. Liquidity and Debt - As of December 31, 2024, the Partnership had $90.4 million in available liquidity, consisting of $66.9 million in cash and cash equivalents and $23.5 million in undrawn revolving credit facility capacity[12]. - The Partnership's total interest-bearing obligations were $909.7 million as of December 31, 2024, with an average margin of approximately 2.25% over SOFR[13]. - Current liabilities increased significantly from $127,577 thousand at December 31, 2023 to $287,122 thousand at December 31, 2024, an increase of approximately 125%[33]. - Long-term debt decreased from $857,829 thousand at December 31, 2023 to $648,075 thousand at December 31, 2024, a reduction of approximately 24.4%[33]. - The current portion of long-term debt rose significantly from $98,960 thousand at December 31, 2023 to $256,659 thousand at December 31, 2024, an increase of approximately 159%[33]. - Cash and cash equivalents at the end of the period increased to $66,933 thousand from $63,921 thousand at the end of the previous year, a rise of about 4.7%[35]. Operational Highlights - The Partnership secured over 94% of charter coverage for the remainder of 2025 and approximately 75% for 2026, indicating strong demand in the market[6]. - The average remaining fixed duration of charters was 2.4 years, with an additional average extension option of 4.8 years[19]. - The Partnership's fleet had an average age of 9.6 years as of December 31, 2024, with ongoing investments in fleet expansion and modernization[19]. - The company has entered into multiple long-term time charter contracts, including a ten-year contract with Petrobras for three new vessels expected to be delivered between 2026 and 2027[24]. - The company has options for charter extensions on several contracts, providing potential for future revenue growth[24]. Market Conditions - The market for shuttle tankers in Brazil is tightening, driven by robust demand and a limited newbuild order book, with a significant pipeline of new production growth expected[19][21]. - The company is monitoring market trends in the shuttle tanker industry, including hire rates and supply-demand factors[41]. Strategic Focus - The Partnership plans to pursue long-term visibility from charter contracts and build liquidity to support sustainable cash flow generation[22]. - KNOT Offshore Partners is focused on maintaining long-term relationships with major users of shuttle tonnage to enhance operational stability[42]. - The company is committed to complying with governmental regulations, including climate change regulations, which may affect operational costs[42]. - KNOT Offshore Partners aims to maximize the utilization of its vessels, including redeployment or disposition of vessels no longer under charter[42]. - The company is evaluating the financial condition of existing and future customers to ensure they can fulfill charter obligations[42]. - KNOT Offshore Partners is preparing for potential disruptions in shipping routes due to various risks, including political events and piracy[44]. - The company is aware of the increasing emphasis on climate, environmental, and safety concerns from its customers[42]. - KNOT Offshore Partners is assessing the impacts of geopolitical events, including the Russian war with Ukraine and conflicts in the Middle East, on its operations[42]. - The company anticipates future capital expenditures and the availability of capital resources to fund these expenditures[42]. Other Financial Metrics - The total operating expenses for 2024 were $246.4 million, a decrease of 7.2% from $265.6 million in 2023[28]. - The weighted average units outstanding remained stable at 34,045 thousand common units throughout 2024[28]. - The company reported a realized gain on derivative instruments of $6.8 million for the year, compared to a gain of $5.4 million in 2023[31]. - The company recognized an impairment of $16,384 thousand for the year ended December 31, 2024, down from $49,649 thousand in the previous year, indicating improved asset performance[35]. - The total partners' capital increased from $523,169 thousand at December 31, 2023 to $526,827 thousand at December 31, 2024, a slight increase of about 0.5%[34]. - The partnership plans to host a conference call on March 20, 2025, to discuss Q4 2024 results, inviting all unitholders and interested parties[27].

Group 1 - Knot Offshore (KNOP) is part of the Transportation group, which consists of 131 companies and currently ranks 16 within the Zacks Sector Rank [2] - The Zacks Rank system focuses on earnings estimates and revisions, with Knot Offshore holding a Zacks Rank of 2 (Buy) and a 6% increase in the consensus estimate for its full-year earnings over the past quarter [3] - Year-to-date, Knot Offshore has gained approximately 9.9%, outperforming the average gain of 1.1% for the Transportation group [4] Group 2 - Knot Offshore belongs to the Transportation - Shipping industry, which includes 42 stocks and is currently ranked 249 in the Zacks Industry Rank, while the average loss for this group is 12.4% this year [5] - Viking Holdings (VIK), another Transportation stock, has also outperformed the sector with a return of 10.1% year-to-date, and it has a Zacks Rank of 2 (Buy) with a 10.7% increase in its current year EPS estimate over the past three months [4][5] - The Transportation - Truck industry, which includes Viking Holdings, is ranked 236 and has experienced a decline of 18.6% this year [6]

Core Viewpoint - The article emphasizes the effectiveness of value investing as a strategy that consistently performs well across various market conditions, highlighting the importance of fundamental analysis and traditional valuation metrics to identify undervalued stocks [2]. Group 1: Value Investing Strategy - Value investing is a popular stock market trend that focuses on identifying stocks believed to be undervalued by the market [2]. - The Zacks Rank system is utilized to find winning stocks by focusing on earnings estimates and revisions [1]. Group 2: KNOT Offshore Partners (KNOP) - KNOT Offshore Partners (KNOP) is currently attracting investor attention, holding a Zacks Rank of 2 (Buy) and a Value grade of A, indicating strong value characteristics [3]. - KNOP has a Price-to-Sales (P/S) ratio of 0.72, significantly lower than the industry average of 1.21, suggesting it may be undervalued [4]. - The company also has a Price-to-Cash Flow (P/CF) ratio of 2.15, compared to the industry average of 4.83, further indicating potential undervaluation [5]. - Over the past year, KNOP's P/CF has fluctuated between 1.85 and 3.41, with a median of 2.15, reinforcing its strong cash flow outlook [5]. - The combination of these metrics suggests that KNOP is likely undervalued, supported by a strong earnings outlook, making it an impressive value stock [6].

Company Overview - Knot Offshore (KNOP) is a notable stock within the Transportation sector, which consists of 131 individual stocks and ranks 15 in the Zacks Sector Rank [2] - The company currently holds a Zacks Rank of 2 (Buy), indicating a favorable outlook based on earnings estimates and revisions [3] Performance Analysis - Year-to-date, Knot Offshore has returned approximately 13.9%, significantly outperforming the Transportation sector's average return of -3.5% [4] - Another stock in the Transportation sector, Freightcar America (RAIL), has also shown strong performance with a year-to-date return of 14% [4] Earnings Estimates - The Zacks Consensus Estimate for Knot Offshore's full-year earnings has increased by 6% over the past three months, reflecting improved analyst sentiment [3] - In comparison, Freightcar America's current year EPS estimate has risen by 3.5% during the same period [5] Industry Context - Knot Offshore is part of the Transportation - Shipping industry, which includes 42 individual companies and currently ranks 233 in the Zacks Industry Rank [5]

Core Viewpoint - Knot Offshore (KNOP) shares have experienced a significant increase of 8.1% to $5.89, following a period of 7% loss over the past four weeks, indicating a potential turnaround in stock performance driven by market optimism [1][2]. Group 1: Company Performance - Knot Offshore is expected to report quarterly earnings of $0.04 per share, reflecting a year-over-year increase of 125%, with revenues projected at $76.41 million, up 4.6% from the previous year [3]. - The consensus EPS estimate for Knot Offshore has been revised 300% higher in the last 30 days, suggesting a positive trend that may lead to further price appreciation [4]. Group 2: Market Context - The recent rally in Knot Offshore's stock is attributed to favorable conditions in the tanker market, with product tanker rates remaining healthy despite minor fluctuations, alongside a recovery in global trade as COVID-19 restrictions are lifted [2]. - Knot Offshore operates within the Zacks Transportation - Shipping industry, where another company, Star Bulk Carriers (SBLK), has seen a decline of 11.3% over the past month, closing at $15.50 [4].

Financial Data and Key Metrics Changes - Revenues for Q3 2024 were $76.3 million, with an operating income of $17.2 million and a net loss of $3.8 million. Adjusted EBITDA was reported at $45.1 million [6] - The company closed Q3 with $77 million in available liquidity, consisting of $67 million in cash and cash equivalents plus $10 million in undrawn capacity on credit facilities [6] - The partnership operated with a utilization rate of 98.8% [7] Business Line Data and Key Metrics Changes - The company announced several charter extensions and new contracts, including the Ingrid Knutsen charter with Eni for two years and the Hilda Knutsen charter for one year starting March 2025 [13][19] - The swap of Dan Cisne for Tuva Knutsen brought seven years of fixed charter revenue, enhancing fleet and pipeline growth without requiring new funding [12] Market Data and Key Metrics Changes - The company anticipates significant growth in production fields serviced by shuttle tankers, with around 11 newbuilds on order [8] - The Brazilian market shows strong demand dynamics, with significant committed demand growth expected from new FPSOs requiring shuttle tanker services [22][24] Company Strategy and Development Direction - The partnership's strategy focuses on securing additional contract coverage for its existing fleet and enhancing liquidity [22] - The company aims to maintain a strong contracted revenue position, which stood at $980 million at the end of Q3, with an average contract duration of 2.8 years [10] Management's Comments on Operating Environment and Future Outlook - Management expressed a positive outlook on industry dynamics and the partnership's positioning to benefit from anticipated market growth [8] - The company noted that while operating expenses increased due to general inflation and higher crewing costs, they expect to recover some costs through insurance claims related to repairs [50][64] Other Important Information - The company reported a slight increase in overall liabilities due to the completion of the Tuva acquisition, while continuing to make contractual debt repayments of approximately $90 million per year [15] - The partnership's debt facilities are primarily secured by vessels, with $907 million out of $947 million in debt facilities secured [18] Q&A Session Summary Question: How much of the OpEx increase was related to the Torill repair? - Management indicated that the repair accounted for under half of the OpEx increase, likely around a quarter [34] Question: How do the new charters compare to previous levels? - Management stated that the new contracts reflect current market conditions, with rates generally improving [49] Question: What factors contributed to the increase in operating expenses year-on-year? - Increased costs were attributed to higher crewing expenses and general inflationary pressures [51] Question: What is the expected run rate for OpEx in Q4? - Management suggested that the Q3 run rate could serve as a good guide for Q4 [62] Question: Will the revolvers be renewed, and what is the expected timeframe? - Management expects to seek renewal of the revolvers, with discussions likely occurring in the first half of next year [68] Question: Can you provide insight into the dividend and potential buybacks? - Management acknowledged the need to rebuild the visible charter pipeline before considering dividend increases or buybacks [95] Question: What is the current hedging strategy regarding interest rates? - Management indicated that they are cautious about entering new swaps at high rates and expect to reduce the hedged portion of debt significantly in 2025 [108]

Financial Performance - Generated total revenues of $76.3 million in Q3 2024, an increase from $74.4 million in Q2 2024, driven by higher charter and bareboat revenues[10] - Adjusted EBITDA for Q3 2024 was $45.1 million, with a net loss of $3.8 million compared to a net loss of $12.9 million in Q2 2024[4][10] - Total revenues for Q3 2024 reached $76.292 million, compared to $72.683 million in Q3 2023, marking a year-over-year increase of 4.5%[27] - Net income for the three months ended September 30, 2024, was a loss of $3,773,000 compared to a profit of $12,641,000 for the same period in 2023[39] - Net income for the nine months ended September 30, 2024, was a loss of $9,185 thousand, compared to a loss of $29,046 thousand for the same period in 2023, indicating an improvement in performance[36] - Adjusted EBITDA for the nine months ended September 30, 2024, was $138,025,000, slightly down from $139,992,000 in the same period of 2023[39] Operational Performance - Fleet utilization was 98.8% for scheduled operations in Q3 2024, maintaining strong operational performance[5] - The average margin paid on outstanding debt during Q3 2024 was approximately 2.26% over SOFR, with total interest-bearing obligations of $947.3 million[12] - Vessel operating expenses increased to $29.453 million in Q3 2024 from $23.164 million in Q3 2023, reflecting a rise of 27.1% year-over-year[27] - Depreciation expenses remained stable at approximately $27,902,000 for the three months ended September 30, 2024, compared to $27,472,000 in 2023[39] Liquidity and Capital Structure - As of September 30, 2024, the Partnership had $77.2 million in available liquidity, including $67.2 million in cash and cash equivalents[11] - Cash and cash equivalents increased from $63,921 thousand at the beginning of the period to $67,225 thousand at the end, reflecting a growth of approximately 3.8%[36] - Long-term debt decreased from $857,829 thousand to $766,895 thousand, a reduction of approximately 10.6%[33] - Current liabilities increased significantly from $127,577 thousand to $209,889 thousand, marking an increase of approximately 64.4%[33] - The total partners' capital decreased from $523,169 thousand at December 31, 2023, to $506,178 thousand at September 30, 2024, a decline of approximately 3.2%[34] Market Outlook - The outlook for the offshore oil market in Brazil is improving, with robust demand and increasing charter rates driven by Petrobras' high production levels[7] - The medium and long-term outlook for the shuttle tanker market remains favorable, supported by committed capital from industry participants and supply-demand factors[22] - Shuttle tanker demand in the North Sea has been subdued due to COVID-19-related project delays, with expectations for improvement as new oil production projects come online[21] Charter Contracts and Fleet Management - The Partnership has secured just under 96% of charter coverage for the whole of 2024, indicating strong demand in the market[6] - The charters for Tordis Knutsen and Lena Knutsen were extended by one year, with options to extend for up to three additional years, now running until 2028[4] - The Partnership has entered into multiple long-term charter contracts with Petrobras, including a new fifteen-year contract for a vessel to be delivered in late 2025 and three ten-year contracts for vessels expected to be delivered between 2026 and 2027[25] - The Partnership plans to build liquidity and maintain long-term visibility from its charter contracts to capitalize on an improving shuttle tanker market[22] Impairment and Expenses - The company recorded an impairment of $16,384 thousand for the nine months ended September 30, 2024, compared to $49,649 thousand for the same period in 2023, indicating a significant reduction in impairment losses[36] - Interest expense decreased to $16,857,000 for the three months ended September 30, 2024, from $18,493,000 in the same period of 2023[39] - Impairment charges for the nine months ended September 30, 2024, were $16,384,000, down from $49,649,000 in the same period of 2023[39] Future Strategies - The company anticipates growth strategies focused on expanding its market presence and enhancing operational efficiencies[43] - KNOT Offshore Partners is exploring opportunities for long-term charters of five years or more to stabilize revenue streams[43] - Future capital expenditures are planned to enhance fleet capabilities and operational capacity[44] - KNOT Offshore Partners is committed to maintaining long-term relationships with major users of shuttle tonnage to ensure consistent demand[44]