KNOT Offshore Partners LP announces swap of Dan Sabia for Live Knutsen

Rhea-AI Summary

KNOT Offshore Partners LP (NYSE:KNOP) has announced a strategic vessel swap transaction, exchanging its smaller 2012-built Dan Sabia for the larger, modern 2021-built Live Knutsen shuttle tanker. The Live Knutsen, a 153,000-deadweight ton DP2 Suezmax class vessel, will be acquired for $100 million less $73.39 million of outstanding debt.

The transaction involves a net payment of $1.21 million from KNOP to KNOT, with completion expected by February 28, 2025. The Live Knutsen operates in Brazil under a charter contract with Galp Sinopec through November 2026, with KNOT guaranteeing the hire rate until November 2029. This strategic move aims to modernize KNOP's fleet and secure stable, long-term revenue streams.

Positive

• Acquisition of newer vessel (2021 vs 2012) reducing fleet age
• Guaranteed revenue stream until November 2029
• No new funding required for transaction
• Upgrade to larger industry-standard Suezmax class vessel

Negative

• Net cash outflow of $1.21M for the transaction

Insights

Financial Analyst

KNOT Offshore Partners' vessel swap represents a strategic fleet upgrade that strengthens its competitive position in the shuttle tanker market without requiring significant capital outlay. By exchanging the smaller, aging Dan Sabia (2012-built) for the modern Suezmax-class Live Knutsen (2021-built), KNOP is executing on its strategy to focus on industry-standard vessels with longer charter horizons.

The transaction's financial structure is particularly noteworthy. The $100 million acquisition price for Live Knutsen (offset by $73.39 million in assumed debt) against the $25.75 million sale price of Dan Sabia results in a minimal net payment of just $1.21 million. This capital-efficient approach allows KNOP to modernize its fleet while preserving liquidity.

The guaranteed charter arrangement through November 2029 significantly enhances KNOP's revenue visibility. This 5-year fixed employment period provides stable cash flow during a time when high-quality shuttle tankers remain in demand, particularly in Brazil's offshore market. The charter guarantee from sponsor KNOT effectively serves as downside protection if Galp Sinopec doesn't exercise its extension options.

For investors, this transaction addresses several key concerns. First, it reduces the average fleet age, which typically correlates with lower maintenance costs and improved operational reliability. Second, concentrating the fleet in the most in-demand Suezmax class (153,000 DWT) improves utilization prospects and charter rate potential. Finally, the extended charter visibility supports the partnership's distribution sustainability, which management explicitly highlighted as a strategic priority.

This transaction continues KNOP's pattern of disciplined fleet management, focusing on accretive acquisitions that enhance long-term charter coverage without diluting unitholders or increasing leverage significantly. The minimal net cash outlay demonstrates management's focus on capital efficiency while still improving the partnership's competitive positioning in the specialized shuttle tanker market.

Exchange results in exit of smaller-scale, 2012-built Dan Sabia from KNOP and addition of 2021-built, industry-standard Suezmax shuttle tanker Live Knutsen

Fixed charter through 2026 and subsequent rate continuation guarantee from KNOT ensure contracted revenues from newly acquired vessel until 2029

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, Live Knutsen (the “Live Knutsen Acquisition”); and
• sell to KNOT the shuttle tanker, Dan Sabia (the “Dan Sabia Sale” and, together with the Live 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 Live Knutsen Acquisition is $100 million less $73.39 million of outstanding debt plus $0.35 million of capitalized fees related to the credit facility secured by the Live Knutsen. The sale price for the Dan Sabia Sale is $25.75 million. These purchase and sale prices are due to be set off, with the result that a net payment of $1.21 million is due to be paid by the Partnership to KNOT, subject to customary adjustments relating to working capital. Completion is expected to take place on February 28, 2025.

The Live 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 Galp Sinopec, for which the current fixed period expires in November 2026, and for which the charterer holds options for a further 6 years. As a term of the Transaction, KNOT has effectively guaranteed the hire rate for the vessel until November 2029 on the same basis as if Galp Sinopec had exercised its option through such date, thus providing the Partnership with approaching 5 years of fixed employment for Live 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 once again agreed a vessel swap that grows and concentrates our fleet in the most in-demand shuttle tanker class, reduces our average fleet age, and improves our long-term charter pipeline, all without a requirement for new funding. Our focus remains on securing long-term employment with high-quality counterparties that provide the Partnership with stable, predictable cashflows, and we are confident that strong operational performance and the successful execution of our strategy support value creation for our unitholders in the quarters and years ahead. The Partnership continues to believe that key components of its strategy and value proposition are accretive investment in the fleet and a long-term, sustainable distribution.”

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/20250227307521/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 financial structure of KNOP's vessel swap transaction in 2025?

KNOP will pay $100M less $73.39M debt for Live Knutsen and receive $25.75M for Dan Sabia, resulting in a net payment of $1.21M to KNOT.

How long is the Live Knutsen's guaranteed charter period under KNOP?

The vessel has a fixed charter through November 2026 with Galp Sinopec, plus KNOT's guaranteed hire rate until November 2029.

What are the specifications of the Live Knutsen shuttle tanker acquired by KNOP?

Live Knutsen is a 153,000-deadweight ton DP2 Suezmax class shuttle tanker built in 2021 by COSCO Shipping Heavy Industry.

When will KNOP complete the vessel swap transaction?

The transaction is expected to complete on February 28, 2025.