KNOT Offshore Partners reports record earnings

Jun 08 2018

Knot Offshore Partners (KNOP) boasted record total revenues of $68 mill for the three months ended 31st March, 2018, compared to $61.6 mill for 4Q17.

This increase was mainly due to higher earnings from the ‘Brasil Knutsen’, as she was included in the operational results from 15th December, 2017; one month of earnings from the ‘Anna Knutsen’, included in the results from 1st March, 2018 and a full quarter of earnings from the ‘Carmen Knutsen’, which incurred offhire in 4Q17, due to scheduled drydocking and subsequent propeller repairs.


This increase was partly offset by reduced revenues from the ‘Raquel Knutsen’ as a result of 4.5 days offhire, reduced revenues from the ‘Brasil Knutsen’ as she started her scheduled drydocking in the end of the quarter and by two additional calendar days in 4Q17, compared to 1Q18.


Vessel operating expenses for 1Q18 were $13.2 mill, a decrease of $1.9 mill from $15.2 mill in 4Q17. The decrease was mainly due to the bunkers consumption in connection with the scheduled drydocking and propeller repairs of the ‘Carmen Knutsen’ that was charged in 4Q17.


This was partially offset by higher operating expenses, due to the ‘Brasil Knutsen’ and the ‘Anna Knutsen’ being included in the results of operations from 15th December, 2017 and 1st March, 2018, respectively.


As a result, operating income for 1Q18 was $31.9 mill, compared to $25 mill in 4Q17. Net income was $30.7 mill, compared to $18.6 mill for 4Q17 and increased by $19.3 mill from net income of $11.4 mill for 1Q17.


Operating income increased by $14.4 mill compared to 1Q17, mainly due to increased earnings from the ‘Tordis Knutsen’, ‘Vigdis Knutsen’, ‘Lena Knutsen’, ‘Brasil Knutsen’ and ‘ Anna Knutsen’ being included in the results during the period.


Distributable cash flow was $27.9 mill for 1Q18, compared to $21.5 mill for 4Q17.


The Partnership’s vessels operated throughout 1Q18 at 99.6% utilisation for scheduled operations and 99.5% utilisation taking into account the scheduled drydocking of the ‘Brasil Knutsen’.


‘Brasil Knutsen’ went offhire on 29th March, 2018 for the trip to a Portuguese shipyard in order to complete her planned five-year special survey drydocking. She went back on charter on 23rd May, 2018 in Brazil.


As of 31st March, 2018, KNOP had $57.1 mill in available liquidity, which consisted of cash and cash equivalents of $44.1 mill and $13 mill of capacity under its revolving credit facilities. These credit facilities mature in June and August, 2019.


KNOP’s total interest-bearing debt outstanding was $1,141.8 mill ($1,133.4 mill net of debt issuance cost).


On 30th January, 2018, KNOP’s subsidiary, KNOT Shuttle Tankers 15 AS, which owns the ‘Torill Knutsen’, closed a new $100 mill senior secured term loan facility with a consortium of banks, in which The Bank of Tokyo-Mitsubishi UFJ acted as agent.


On 1st March, 2018, KNOP’s subsidiary, KNOT Shuttle Tankers, acquired KNOT Shuttle Tankers 30 AS, the company that owns the shuttle tanker, ‘Anna Knutsen’, from Knutsen NYK.


The purchase price was $120 mill, less about $106.8 mill of outstanding debt related to the vessel, and about $1.4 mill for certain capitalised fees related to the financing of the vessel, plus other purchase price adjustments of $5.3 mill.


On the closing of the acquisition, KNOT 30 repaid $32.3 mill of the debt leaving an aggregate of around $74.4 mill of debt outstanding under the secured credit facility related to the vessel.


‘Anna Knutsen’ was delivered to the Partnership in March, 2017 and is operating in Brazil under a timecharter with Galp Sinopec Brazil Services, which is due to expire in the second quarter of 2022. Galp has options to extend the charter for two further three-year periods.


KNOP said that its earnings for the second quarter of 2018 will be affected by the planned five-year special survey drydocking of the ‘Brasil Knutsen’, which was offhire for 56 days, including the repositioning voyages to Portugal from Brazil and back.


Offsetting this offhire will be the ‘Anna Knutsen’, which is expected to operate for the entire second quarter. The ‘Hilda Knutsen’ is due for her five-year special survey drydocking in 3Q18 and the ‘Torill Knutsen’ and the ‘Ingrid Knutsen’ are due for their special survey drydockings in 4Q18.


These vessels are operating in the North Sea and will undergo drydocking in Europe, and are expected to incur offhire of around 18-20 days per vessel.


As of 31st March, 2018, KNOP’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 additional 4.7 years on average.


KNOP’s board said that it believed demand for newbuilding offshore shuttle tankers will continue to be driven over time by 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.


The board 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, the Board concluded.


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