Release Date: September 04, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- KNOT Offshore Partners LP (KNOP, Financial) achieved a high vessel utilization rate of 98.8% during Q2 2024.
- The company declared a cash distribution of $0.026 per common unit, paid in early August.
- The acquisition of Tuva Knutsen, which comes with a long-term contract with TotalEnergies, enhances fleet growth without requiring new funding.
- KNOP has a strong contracted revenue position of $773 million on fixed contracts, averaging 2.3 years in duration.
- The company successfully reduced its liabilities by $68 million in the first half of 2024, reflecting strong debt service capacity.
Negative Points
- KNOP reported a net loss of $12.9 million for Q2 2024, primarily due to vessel impairments.
- Operating income was significantly impacted, standing at only $1.3 million when including vessel impairments.
- The company faces near-term market conditions that require focused marketing efforts for vessels like Dan Sabia and Hilda Knutsen.
- There is a $91 million debt repayment due over the next 12 months, which could strain liquidity.
- The North Sea market is lagging behind Brazil in terms of FPSO deployment, potentially affecting vessel utilization rates.
Q & A Highlights
Q: On the Dan Sabia, is that potentially an asset that can be redeployed at a favorable long-term contract based on the end market or do you see possibly an alternative way to essentially divest the assets?
A: We're actually looking at both. The market is strengthening, so there's potential for a long-term contract. However, we are open-minded about the best way to get value from Dan Sabia. - Derek Lowe, CEO & CFO
Q: The Brazilian market is starting to step up in terms of the deployment of FPSOs, while the North Sea is lagging. Are you satisfied that there will be enough activity in the North Sea to keep your vessel utilizations up?
A: Yes, we do expect sufficient activity in the North Sea to maintain vessel utilization. - Derek Lowe, CEO & CFO
Q: You have a $176 million balloon payment next year. Given your history of refinancing, are you already working with your banks on this?
A: We typically negotiate refinancing well ahead of time, but it is still 11 months out. We have a practice of negotiating these a decent amount of time ahead. - Derek Lowe, CEO & CFO
Q: Can you provide details on the amortization schedule and balloon payment for the Tuva Knutsen debt maturing in January 2027?
A: The amortization schedule will be in line with what you're used to seeing on other debt. More information will be provided in our long-form 6-K in a few weeks. - Derek Lowe, CEO & CFO
Q: Can you give some color on how OpEx and G&A look for the rest of the year?
A: We are not expecting material changes. There is generally an inflationary environment, but no significant changes are expected. - Derek Lowe, CEO & CFO
Q: Can you explain the rationale behind agreeing to one-year extensions on the Tordis and Lena Knutsen and giving three one-year options behind those extensions?
A: It's a negotiation with the existing client based on their production expectations. We don't comment on specific contract pricing. - Derek Lowe, CEO & CFO
Q: When do you expect to lock in something for the Hilda and Torill Knutsen, which are coming up in the North Sea?
A: We are actively marketing and negotiating for both vessels. No announceable contracts yet, but we are working on it. - Derek Lowe, CEO & CFO
Q: When does the charter need to notify you about exercising the option for the Carmen Knutsen?
A: Typically, the notification period can be as short as 30 days. - Derek Lowe, CEO & CFO
Q: Can you summarize your interest rate swap arrangements? Do you have any swaps rolling off soon?
A: We have several swaps in multiple tranches. Currently, we are paying just under 2% fixed on average, with an average maturity of 1.4 years. - Derek Lowe, CEO & CFO
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
