KNOT Offshore Partners LP (KNOP) Q4 2024 Earnings Call Highlights: Strong Financial Performance ...

GuruFocus News

Fri, Mar 21, 2025, 1:03 AM 4 min read

Revenue: $91.3 million for Q4 2024.
Operating Income: $34.7 million for Q4 2024.
Net Income: $23.3 million for Q4 2024.
Adjusted EBITDA: $63.1 million for Q4 2024.
Available Liquidity: $90 million, consisting of $67 million in cash and cash equivalents and $23 million in undrawn credit facilities.
Utilization Rate: 98.3% for Q4 2024.
Cash Distribution: USD 0.026 per common unit declared post-Q4.
Contracted Revenue Position: $870 million at the end of Q4 on fixed contracts.
Debt Repayment: Approximately $90 million per year in installment payments.
Debt Facilities: $883 million out of $910 million in debt secured by vessels.
Current Installments Due: $93 million to be paid during 2025.

Warning! GuruFocus has detected 5 Warning Signs with KNOP.

Release Date: March 20, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

KNOT Offshore Partners LP (NYSE:KNOP) reported strong financial performance for Q4 2024, with revenues of $91.3 million, operating income of $34.7 million, and net income of $23.3 million.
The company achieved a high utilization rate of 98.3%, indicating efficient operations and minimal downtime.
KNOP has a robust contracted revenue position of $870 million on fixed contracts, with an average duration of 2.4 years, providing financial stability.
The partnership successfully swapped the Dan Sabia for the Live Knutsen, securing nearly five years of fixed future charter revenue without needing new funding.
The outlook for the shuttle tanker market remains positive, with significant growth anticipated in production fields serviced by shuttle tankers, particularly in Brazil and the North Sea.

Negative Points

Four of KNOP's debt facilities have moved from long-term to current liabilities due to upcoming maturities, requiring refinancing efforts.
The partnership faces a rolling need to renew charters, with 75% of 2026 fixed, but open percentages rise materially over the year.
There is a potential risk of a shortage of shuttle tanker capacity in the coming years, necessitating newbuild orders.
The company has a significant debt repayment schedule, with $93 million in current installments due in 2025.
Market conditions remain volatile, which could impact debt renegotiations and refinancing efforts.

Q & A Highlights

Q: How does KNOT Offshore Partners plan to allocate capital given the current liquidity and cash flow improvements? A: Derek Lowe, CEO and CFO, stated that while they are pleased with the liquidity improvements, they are cautious due to the volatile market environment. The immediate priority is debt renegotiations, and they are also focused on filling charter coverage gaps. The Board considers both accretive acquisitions and long-term sustainable distribution in the best interest of unitholders.

Q: Is KNOT Offshore Partners confident that their available vessels will meet the demand from new FPSO production activities in the North Sea and Latin America? A: Derek Lowe confirmed that the vessels are well-suited to meet the demand profile and there are no signals indicating otherwise.

Q: Can you address the open charter windows for the Fortaleza and Recife vessels and the potential for rechartering? A: Derek Lowe explained that the Fortaleza and Recife vessels have approximately double the capacity of the smaller shuttle tankers previously on bareboat charter, making them less concerning for redeployment. The company is actively working on filling open periods.

Q: Why did Shell switch the Vigdis shuttle tanker to a bareboat charter, and what is the impact on cash flow? A: The switch to bareboat chartering was a strategic decision by Shell, which had the option since the original time charters. The terms are commercially comparable to the previous time charter, and the fixed coverage has been extended, reducing operating risk for KNOT Offshore Partners.

Q: What is the outlook for time charter revenue, and will the recent increase be sustained? A: Derek Lowe noted that the increase in time charter revenue was due to new operations starting in the fourth quarter. Future revenue will depend on new operations commencing in Q1 and Q2, such as the swap of Dan Sabia for Live Knutsen and the Hilda going on hire.

Q: How does KNOT Offshore Partners view the potential for increasing distributions given the current cash flow? A: The Board prioritizes both accretive investment and long-term sustainable distribution. While the current cash flow is strong, the company is cautious about making distribution decisions based on a single quarter's performance.

Q: How does the recent swap of Dan Sabia for Live Knutsen affect the debt repayment schedule? A: Details of the debt facility for Live Knutsen will be disclosed in the upcoming 20-F filing. The terms are expected to be similar to existing debt facilities.

Q: Does the start-up of Penguins and Johan Castberg FPSOs in the North Sea have the potential to close the gap with the Brazilian market? A: Derek Lowe stated that while these are welcome developments, it's challenging to directly compare the North Sea and Brazilian markets. Both markets are strengthening, but they are not necessarily catching up with each other.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.

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