The slight increase in revenues was mainly due to full earnings from the ‘Brasil Knutsen’, as the vessel had finished her scheduled first special survey drydocking during the second quarter, and one additional calendar day in the third quarter.
This increase was partly offset by reduced revenues from the ‘Hilda Knutsen’ and ‘Torill Knutsen’, due to the offhire periods for each of these vessels as a result of their scheduled first special survey drydockings, both of which commenced in 3Q18.
Vessel 3Q18 opex were $15.3 mill, an increase of $1.3 mill from $14. mill in the second quarter. This was mainly due to the scheduled drydocking of the ‘Hilda Knutsen’ and ‘Torill Knutsen’ and one additional calendar day in the third quarter.
In addition, the receipt of insurance proceeds in connection with the propeller repairs of the ‘Carmen Knutsen’ in 2Q18 had reduced previous quarter costs.
This was partially offset by reduced bunkers consumption in connection with the drydocking of the ‘Brasil Knutsen’ that was charged in 2Q18 and lower operating costs on average due to the strengthening of the US dollar against the Norwegian Kroner.
As a result, operating income for 3Q18 was $31.7 mill, compared to $32.1 mill in the second quarter. Net income for 3Q18 decreased to $20.9 mill, compared to $21.7 mill for 3Q17.
The operating income increased by $5 mill, compared to 3Q17, mainly due to increased earnings from the ‘Lena Knutsen’, ‘Brasil Knutsen’ and ‘Anna Knutsen’ being included in the Partnership’s results from 30th September, 2017, 15th December, 2017 and 1st March, 2018, respectively.
Distributable cash flow was $26.3 mill for 3Q18, compared to $27 mill for the second quarter.
‘Hilda Knutsen’ went offhire on 25th July, 2018 for her trip to a Danish shipyard to complete her planned five-year special survey drydocking. She went back on charter on 18th August, 2018.
On 13th July, 2018, Shell exercised its option to extend the timecharter of the ‘Windsor Knutsen’ by another year until October, 2019. Following the exercise of this option, Shell has four one-year options to extend the timecharter further.
On 3rd August, 2018, the Partnership signed an amended timecharter with Eni, extending the duration of the ‘Hilda Knutsen’ timecharter for four years until August, 2022. Eni has three one-year options to further extend the timecharter.
On 5th September, 2018, Eni, exercised its option to extend the timecharter of the ‘Torill Knutsen’ by another year until November, 2019. Following the exercise of this option, Eni has four one-year options to extend the timecharter.
‘Torill Knutsen’ went offhire on 17th September, 2018 for the mobilisation trip to a Danish shipyard in order to complete her planned five-year special survey drydocking. She went back on charter on 5th October, 2018.
On 9th November, 2018, Equinor exercised its option to extend the timecharter of the ‘Bodil Knutsen’ by another year until May, 2020. Following the exercise of this option, Equinor has four one-year options to further extend the timecharter.
As of 30th September, 2018, the Partnership had $78.7 mill in available liquidity. The Partnership’s total interest-bearing debt outstanding was $1,116.6 mill ($1,105.8 mill net of debt issuance cost).
On 20th September, 2018 the subsidiaries which own the ‘Windsor Knutsen’, ‘Bodil Knutsen’, ‘Fortaleza Knutsen’, ‘Recife Knutsen’, ‘Carmen Knutsen’ and ‘Ingrid Knutsen’, refinanced their existing bank debt, entering new long-term senior secured credit facilities consisting of a term loan of $320 mill and a $55 mill revolving credit facility.
The senior secured credit facilities refinanced a previously existing term loan of $320 mill and $35 mill of revolver credit, which were due to mature between December, 2018 and June, 2019.
The Partnership’s earnings for 4Q18 will be affected by the completion of the planned five-year special survey drydockings of both the ‘Torill Knutsen’ and the ‘Ingrid Knutsen’. ‘Torill Knutsen’ was back on charter on 5th October after undertaking her first special survey and incurring about 18 days of offhire. ‘Ingrid Knutsen’ went offhire on 1st November in order to complete her planned five-year special survey drydocking and was back on charter on 22nd November, 2018, incurring about 21 days of offhire.
Offsetting the impact will be the ‘Hilda Knutsen’, which is expected to operate for the entire fourth quarter after being offhire for 24 days in 3Q18, due to her scheduled drydocking.
As of 30th September, the Partnership’s fleet of 16 vessels had an average remaining fixed contract duration of 3.9 years. In addition, the charterers of the Partnership’s timecharter vessels have options to extend their charters by an average of 4.4 years.
On 26th September, 2018, Knutsen NYK Offshore Tankers agreed a new long term charters with Equinor for two Suezmax DP2 shuttle tanker newbuildings to be constructed by Hyundai Heavy Industries with delivery scheduled in the second half of 2020.
The board said that demand for newbuild 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.
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, the company said.
KNOP has also announced that John Costain is to step down as CEO and CFO of the partnership.
Although Costain is resigning in order to pursue other interests outside of the partnership, he will be available until 31st May, 2019 to ensure that the board has sufficient time to find a suitable replacement.
“On the behalf of our board, I would like to thank John for his significant contribution and dedication to KNOP. We are very pleased with the development of the partnership during his tenure and we wish him the very best in pursuing other business opportunities,” Trygve Seglem, board chairman said.