KNOT partnership reports record revenues

Aug 11 2017


KNOT Offshore Partners generated its highest quarterly total revenues in the second quarter of this year of $54.4 mill, compared with $45 mill in 1Q17.

Operating income of $26.1 mill ($17.5 mill in 1Q17) and net income of $16.9 mill ($11.4 mill in 1Q17) were also the highest recorded, as was adjusted EBITDA of $43.5 mill and the distributable cash flow of $23.4 mill ($15.6 mill in 1Q17).

Total revenues were $54.4 mill were positively affected by (i) earnings from the timecharters for the Tordis Knutsen and the Vigdis Knutsen being included in the results of operations from 1st March, 2017 and 1st June, 2017, respectively, (ii) a full quarter of earnings from the Windsor Knutsen, which incurred 54.1 days of off-hire during the first quarter in connection with its scheduled drydocking and (iii) a full quarter of earnings from the Raquel Knutsen, which incurred a 14-day deductible for offhire in the first quarter.

Net income for 2Q17 increased by $5.3 mill from the $11.6 mill reported in 2Q16. The operating income for 2Q17 increased by $5.9 mill, compared to 2Q16, mainly due to increased earnings from the Raquel Knutsen, Tordis Knutsen and Vigdis Knutsen’, which were included in the Partnership’s results of operations from 1st December, 2016, 1st March, 2017 and 1st June, 2017, respectively.

All 13 of the Partnership’s vessels operated well throughout 2Q17 with 100% utilisation of the fleet, which reflecting 45 days of offhire for the Raquel Knutsen’, which was reimbursed by loss of hire insurance.

On 14th July, 2017, Shell exercised its option to extend the timecharter of the Windsor Knutsen by another year to October, 2018. Following the exercise of this option, Shell has five remaining one-year options to further extend the timecharter.

On 26th May, 2017, the Partnership’s subsidiary, KNOT Shuttle Tankers 14 AS, which owns the Hilda Knutsen, entered into an agreement for a new $100 mill senior secured term loan facility with Mitsubishi UFJ Lease & Finance (Hong Kong) Limited. This replaced the existing $75.6 mill loan facility secured by the vessel, which was due to be paid in full in August, 2018.

On 9th August, 2017, the Partnership entered into an agreement with NTT Finance Corp for an unsecured revolving credit facility of $25 mill. This facility will mature in August, 2019, bear interest at LIBOR plus a margin of 1.8% and have a commitment fee of 0.5% on the undrawn portion of the facility. Closing of the facility is expected to occur by the end of this month.

On the same day, the Partnership’s wholly owned subsidiary, KNOT Shuttle Tankers AS, entered into a share purchase agreement to acquire KNOT 26, the company that owns the shuttle tanker, Lena Knutsen, from Knutsen NYK. The acquisition is expected to close by 30th September, 2017, subject to customary closing conditions.

The purchase price was $142 mill, less around $133.8 mill of outstanding debt on the vessel, plus about $24.1 mill for a receivable owed by Knutsen NYK to KNOT 26 and around $1 mill for certain capitalised fees related to the ‘Lena Knutsen’s’ financing. On the closing of the acquisition, KNOT 26 will repay around $41.9 mill of the debt, leaving a total of about $91.9 mill of debt outstanding under the secured credit facility related to the vessel.

Lena Knutsen was delivered in June, 2017 and is due to operate in Brazil under a five-year time charter with a subsidiary of Royal Dutch Shell, which is expected to commence next month. The charterer has options to extend the charter for two five-year periods.

The Partnership said that it expected its 3Q17 earnings to be higher than recorded in 2Q17, due to a full quarter of earnings from the Vigdis Knutsen, as the vessel was included in the Partnership’s results of operations from 1st June, 2017. These increased earnings will be slightly offset by around seven days of unplanned offhire for repair of damage sustained by the Tordis Knutsen.

As of 30th June, 2017, the 13 vessels had an average remaining fixed contract duration of 4.6 years. In addition, the charterers of the Partnership’s timecharter vessels have options to extend their charters by an additional 4.1 years on average.

In another move, on 5th July, 2017, Knutsen NYK acquired the 2013-built DP2 Suezmax shuttle tanker ‘Brazil Voyager’ from Chevron. The vessel, which is in Brazil, is not currently under contract. She has been renamed Brasil Knutsen and Knutsen NYK is seeking a long-term timecharter for the vessel.

As of 30th June, 2017, the Partnership had $69.5 mill in available liquidity, which consisted of cash and cash equivalents of $64.5 mill and $5 mill of capacity under its $35 mill revolving credit facility. The revolving credit facility is available until 10th June, 2019. The Partnership’s total interest-bearing debt outstanding, as at the end of the quarter was $912 mill ($905.9 mill net of debt issuance cost).   



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