KNOT Offshore Partners LP announces swap of Dan Cisne for Tuva Knutsen

Rhea-AI Summary

KNOT Offshore Partners LP (NYSE:KNOP) has announced a strategic vessel swap, exchanging the smaller, older Dan Cisne for the newer, industry-standard Suezmax shuttle tanker Tuva Knutsen. The transaction involves:

1. Acquiring Tuva Knutsen for $97.5 million (less $69.0 million debt)
2. Selling Dan Cisne for $30 million
3. Net payment of $1.1 million from KNOT to KNOP

The Tuva Knutsen, built in 2021, has a fixed charter with TotalEnergies until February 2026, with KNOT guaranteeing the hire rate until August 2031. This swap reduces KNOP's average fleet age, increases long-term contract stability, and focuses on high-demand shuttle tanker classes without requiring new funding.

Positive

• Acquisition of newer, industry-standard Suezmax shuttle tanker Tuva Knutsen
• Guaranteed hire rate for Tuva Knutsen until August 2031
• Reduction in average fleet age
• Increased focus on high-demand shuttle tanker class
• Transaction completed without requiring new funding

Negative

• Sale of Dan Cisne, potentially reducing short-term revenue

Insights

Financial Analyst

The swap of Dan Cisne for Tuva Knutsen is a strategic move that improves KNOP's fleet profile. The newer Tuva Knutsen (2021-built) replaces the older Dan Cisne (2011-built), reducing the average fleet age. This modernization enhances operational efficiency and potentially lowers maintenance costs.

The transaction is cash-neutral, with only a $1.1 million net payment from KNOT to KNOP, avoiding the need for new funding. The deal secures 7 years of fixed employment for Tuva Knutsen until 2031, providing stable cash flows. This long-term contract stability is important for KNOP's financial health and dividend sustainability.

However, investors should note that while this swap improves the fleet quality, it doesn't significantly expand KNOP's revenue-generating capacity. The focus remains on maintaining rather than growing the business in the current market conditions.

Maritime Industry Expert

The acquisition of Tuva Knutsen significantly enhances KNOP's fleet capabilities. As a 153,000-deadweight ton DP2 Suezmax class shuttle tanker, it represents the most in-demand vessel type in the offshore oil production sector. This upgrade from the smaller Dan Cisne positions KNOP to better serve high-tier clients like TotalEnergies in key markets such as Brazil.

The DP2 (Dynamic Positioning) system is important for maintaining precise station-keeping during offshore loading operations, improving safety and efficiency. The larger Suezmax class also offers greater economies of scale, potentially improving KNOP's competitive edge and profitability per voyage.

This strategic swap aligns KNOP's fleet composition with industry trends, potentially opening doors to more lucrative contracts and strengthening its market position in the shuttle tanker segment.

Exchange results in exit of smaller-scale, 2011-built Dan Cisne from KNOP and addition of 2021-built, industry-standard Suezmax shuttle tanker Tuva Knutsen

Fixed charter through 2026 and subsequent rate continuation guarantee from KNOT ensure contracted revenues from newly acquired vessel until 2031

ABERDEEN, Scotland--(BUSINESS WIRE)-- KNOT Offshore Partners LP (NYSE:KNOP) (“The Partnership”)

The Partnership announced today that its wholly owned subsidiary, KNOT Shuttle Tankers AS, has entered into agreements with our Sponsor, Knutsen NYK Offshore Tankers AS (“KNOT”), to simultaneously:

• acquire from KNOT the shuttle tanker, Tuva Knutsen (the “Tuva Knutsen Acquisition”); and
• sell to KNOT the shuttle tanker, Dan Cisne (the “Dan Cisne Sale” and, together with the Tuva Knutsen Acquisition, the “Transaction”).

These transactions will be effected by the purchase and sale of the entities which own the respective vessels. The purchase price for the Tuva Knutsen Acquisition is $97.5 million less $69.0 million of outstanding debt plus $0.4 million of capitalized fees related to the credit facility secured by the Tuva Knutsen. The sale price for the Dan Cisne Sale is $ 30 million. These purchase and sale prices are due to be set off, with the result that a net payment of $ 1.1 million is due to be paid by KNOT to the Partnership, subject to customary adjustments relating to working capital. Completion is expected to take place on the date of this release.

The Tuva Knutsen, a 153,000-deadweight ton DP2 Suezmax class shuttle tanker, was built by COSCO Shipping Heavy Industry and delivered in 2021. The vessel is operating in Brazil on a charter contract with TotalEnergies, for which the current fixed period expires in February 2026, and for which the charterer holds options for a further 10 years. As a term of the Transaction, KNOT has effectively guaranteed the hire rate for the vessel until August 2031 on the same basis as if TotalEnergies had exercised its options through such date, thus providing the Partnership with 7 years of fixed employment for Tuva Knutsen.

The Transaction was approved by the Partnership’s Board of Directors and independent Conflicts Committee, who were supported by an outside independent financial advisor and outside legal counsel.

Derek Lowe, CEO of the Partnership, commented, “We are pleased to have agreed the swap of the Dan Cisne for the Tuva Knutsen, which provides growth for the fleet without a requirement for new funding, while also increasing our pipeline of long-term contracts. This swap reduces our average fleet age and increases our fleet’s concentration in the most in-demand shuttle tanker class. We remain focused on generating certainty and stability of cashflows from long-term employment with high-quality counterparties, and are confident that continued operational performance and execution of our strategy can create unitholder value in the quarters and years ahead. This vessel swap decisively addresses a long-standing challenge for the Partnership and represents an important milestone on KNOP’s path forward.”

About KNOT Offshore Partners LP

KNOT Offshore Partners LP owns, operates and acquires shuttle tankers primarily under long-term charters in the offshore oil production regions of Brazil and the North Sea.

KNOT Offshore Partners LP is structured as a publicly traded master limited partnership but is classified as a corporation for U.S. federal income tax purposes, and thus issues a Form 1099 to its unitholders, rather than a Form K-1. KNOT Offshore Partners LP’s common units trade on the New York Stock Exchange under the symbol “KNOP”.

Forward looking statements

This press release includes statements that may constitute forward-looking statements. Such forward-looking statements are subject to a variety of known and unknown risks, uncertainties, and other factors that are difficult to predict and many of which are beyond management’s control. Factors that can affect future results are discussed in the Annual Report on Form 20-F filed by the Partnership with SEC. The Partnership undertakes no obligation to update or revise any forward-looking statement to reflect new information or events.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240903917423/en/

KNOT Offshore Partners LP

Derek Lowe

Chief Executive Officer and Chief Financial Officer

Tel: +44 1224 618 420

Email: ir@knotoffshorepartners.com

Source: KNOT Offshore Partners LP

FAQ

What is the main transaction announced by KNOT Offshore Partners LP (KNOP)?

KNOT Offshore Partners LP (KNOP) announced a vessel swap, exchanging the smaller, older Dan Cisne for the newer, industry-standard Suezmax shuttle tanker Tuva Knutsen.

What is the purchase price for the Tuva Knutsen acquisition?

The purchase price for the Tuva Knutsen is $97.5 million less $69.0 million of outstanding debt plus $0.4 million of capitalized fees related to the credit facility secured by the vessel.

How long is the guaranteed employment period for Tuva Knutsen?

KNOT has effectively guaranteed the hire rate for Tuva Knutsen until August 2031, providing the Partnership with 7 years of fixed employment.

What are the main benefits of this vessel swap for KNOT Offshore Partners LP (KNOP)?

The swap reduces KNOP's average fleet age, increases long-term contract stability, focuses on high-demand shuttle tanker classes, and was completed without requiring new funding.

Who is the current charterer of Tuva Knutsen and when does the fixed period expire?

Tuva Knutsen is currently operating on a charter contract with TotalEnergies, with the fixed period expiring in February 2026.