KNOT Offshore Partners LP(KNOP) - 2025 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Revenues for Q2 2025 were reported at $87.1 million, with operating income of $22.2 million and net income of $6.8 million. Adjusted EBITDA stood at $51.6 million. Available liquidity as of June 30, 2025, was $104 million, comprising $66.3 million in cash and cash equivalents and $38.5 million in undrawn credit facilities, which is $4 million higher than at the end of Q1 2025 [3][11][12] Business Line Data and Key Metrics Changes - The company achieved full utilization of its fleet, with an overall utilization rate of 96.8%, despite the start of two dry dockings. The charter coverage was extended through various new chartering agreements and options exercised by charterers [3][4][9] Market Data and Key Metrics Changes - The shuttle tanker market is tightening in both Brazil and the North Sea, driven by Floating Production Storage and Offloading (FPSO) startups and ramp-ups. The company has extended its backlog to $895 million of fixed contracts, averaging 2.6 years, with the average age of the fleet decreasing from 10.1 years to 9.7 years following the addition of a new vessel [8][9][15] Company Strategy and Development Direction - The company is focused on growth through acquisitions and maintaining a high operational utilization rate. It aims to increase earnings visibility and liquidity while also considering unit buybacks as a means to enhance shareholder value. The strategy includes replenishing the fleet with younger vessels and securing long-term contracts [7][10][17][28] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the positive momentum for both the company and the wider sector, indicating that the financial impact of chartering typically arrives after an upturn in sentiment or spot market activity. They noted that the shuttle tanker demand is expected to absorb the current order book, with a medium-term shortage anticipated [10][12][15] Other Important Information - The company declared a cash distribution of $0.026 per common unit, which was paid in August 2025. Additionally, a $10 million unit buyback program was initiated, with 226,000 common units repurchased at an average price of $7.24 per unit [4][6][16] Q&A Session Summary Question: Delivery timeline for Dakin Connexion - Management confirmed that the Dakin Connexion was delivered on the day of the announcement, July 2, 2025 [19] Question: Future dropdowns and financing flexibility - Management indicated that they do not have a specific timing for future dropdowns but will respond to opportunities as they arise, based on financial capacity and terms offered [20][21] Question: Contracting discussions for older vessels - Management stated that their business model focuses on operating vessels rather than trading them, and they are actively discussing contracting opportunities for all vessels, including older ones [26] Question: Balancing fleet growth and distribution increases - Management emphasized that fleet growth and returns to unit holders are both important and can be pursued simultaneously, with acquisitions necessary to maintain a rejuvenated fleet [27][28]