KNOT bullish on shuttle tanker demand

Aug 30 2019

Knot Offshore Partners reported total revenues of $70.9 mill for the three months ended June 30, 2019, compared to $70.5 mill for the first quarter of this year.

The increase was mainly related to one more operational earning day for the fleet in 2Q19 compared to the first quarter. However, this was partly offset by reduced earnings from the ‘Bodil Knutsen’, due to its reduced daily rate from May, 2019 when the vessel began operating under its new timecharter option.

Operating income for 2Q19 was $31.9 mill, compared to $32.4 mill in the first quarter, while net income was $8.2 mill, compared to $12.9 mill for 1Q19.

Net income decreased by $13.5 mill from the net income recorded of $21.7 mill for 2Q18. Operating income decreased by $0.2 mill, compared to 2Q18, mainly due to loss of hire insurance recoveries for the ‘Carmen Knutsen’ received in the second quarter of 2018.

This decrease was partly offset by full earnings from the ‘Brasil Knutsen’, which had her scheduled first special survey drydocking in 2Q18.

KNOP’s vessels operated throughout 2Q19 with 100% utilisation for scheduled operations.

On 17th December, 2018, the Partnership’s subsidiary that owns the ‘Windsor Knutsen’ and Shell agreed to suspend the vessel’s timecharter contract. The suspension period commenced 4th March, 2019 and will last between 10 months and 12 months. During the suspension period, ‘Windsor Knutsen’ operated under a timecharter contract with Knutsen Shuttle Tankers Pool, on the same terms as the existing timecharter contract with Shell.

On 16th July, 2019, Shell exercised its option to extend the ‘Windsor Knutsen’ timecharter by another year until October, 2020. Following the exercise of the option, Shell has four one-year options to further extend the timecharter until October, 2024.

As of 30th June, 2019, the Partnership had $71.1 mill in available liquidity, which consisted of cash and cash equivalents of $42.4 mill and $28.7 mill of capacity under its revolving credit facilities. These revolving credit facilities mature in August, 2021 and September, 2023. The total interest-bearing debt outstanding was $1,045.7 mill ($1,037.0 mill net of debt issuance cost).

There are no dry dockings scheduled for any of the KNOP’s vessels during the remainder of this year.

As at 30th June, 2019, the Partnership’s 16 vessels had an average remaining fixed contract duration of 3.2 years. In addition, the charterers of the Partnership’s timecharter vessels have options to extend their charters by an additional 4.3 years on average.

In September, 2018, Knutsen NYK Offshore Tankers, the owner of the Partnership’s general partner, entered into new long- term charters with Equinor for two Suezmax DP2 shuttle tanker newbuildings to be constructed by Hyundai Heavy Industries with delivery scheduled for the second half of 2020.

The vessels are expected to operate in Brazil under timecharter contracts with a term of five and seven years fixed period with option of up to 20 years.

In August, 2019, Knutsen NYK was awarded a new long-term charter with a subsidiary of Total. The new DP2 shuttle tanker will be built by COSCO shipyard in China, with delivery scheduled for early 2021. The vessel is expected to also operate in Brazil under a timecharter contract for a maximum 15 year period.

The Board said that it believed that demand for newbuilding offshore shuttle tankers will continue to be driven over time based on the requirement to replace older tonnage in the North Sea and Brazil and further expansion into deepwater offshore oil production areas, such as in pre-salt Brazil and the Barents Sea.

It  further believed that significant growth in demand exists and that this will continue for new shuttle tankers, as the availability of existing vessels has reduced and modern operational demands have increased. Consequently, there should be opportunities to further grow the Partnership.


Previous: Hafnia in profit

Next: Strengthening Jones Act fundamentals - AMSC

Jul-Aug 19

Greece, alarm fatigue, Fujairah explosions, scrubbers, tank cleaning