KNOT Offshore Partners LP(KNOP) - 2023 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company announced a quarterly cash distribution for the 40th consecutive quarter, albeit at a reduced level [53] - The adjusted EBITDA for the first quarter was solid and consistent with previous periods [36] - Cash and cash equivalents at the end of the quarter stood at $52.4 million, with a significant portion of total debt hedged against interest rate changes [27][28] Business Line Data and Key Metrics Changes - The fleet operated at 100% utilization for scheduled operations, with 96.6% utilization when accounting for scheduled drydocking [21] - The company secured new three-year time charter contracts for two vessels, enhancing revenue visibility [32] Market Data and Key Metrics Changes - The North Sea market is experiencing softness, but there are expectations for recovery, while the Brazilian market is tightening [3][49] - The company anticipates that the limited global fleet orderbook of only five new shuttle tankers until 2026 will drive charter rates up in Brazil and the North Sea [40] Company Strategy and Development Direction - The company is focused on securing additional contract coverage and improving liquidity, with a strategy to avoid dropdowns until market conditions improve [51][135] - Management emphasized the importance of signing new charters at favorable rates to enhance revenue and liquidity [133][134] Management Comments on Operating Environment and Future Outlook - Management acknowledged the current softness in the North Sea market but expressed optimism about long-term recovery [2][49] - The company is monitoring inflationary pressures and interest expenses closely, with a focus on maintaining operational efficiency [50] Other Important Information - The company is in discussions with lenders regarding refinancing existing credit facilities, with expectations of favorable terms [24][22] - The average age of the fleet is 8.9 years, with an estimated useful life of 23 years for each vessel [48] Q&A Session Summary Question: What is the expected impact of the transition from bareboat to time charters on revenue and costs? - Management indicated that while there will be higher revenue and operating expenses due to the transition, the overall impact on operating income for Q2 is expected to be marginally positive [66][79] Question: How will the refinancing affect liquidity? - The refinancing is expected to be a continuation of existing finance, maintaining similar terms and not significantly impacting liquidity [69][96] Question: What is the company's strategy regarding dropdown vessels? - Management stated that dropdowns would be evaluated carefully, with a preference to avoid them until market conditions improve, particularly given the current unit price [135][137]