KNOT Offshore Partners LP Earnings Release— Interim Results for the Period Ended March 31, 2023
- KNOT Offshore Partners LP generated total revenues of $71.2 million and operating income of $17.7 million for the first quarter of 2023. They secured credit approval for refinancing their senior secured credit facility and revolving credit facility. The Partnership has secured employment for the majority of their fleet for 2023, which will provide better near-term clarity on cashflows. Positive trends in the shuttle tanker charter market are expected.
- KNOT Offshore Partners LP reported a net loss of $1.3 million for the first quarter of 2023.
Financial Highlights
For the three months ended March 31, 2023, KNOT Offshore Partners LP (“KNOT Offshore Partners” or the “Partnership”):
-
Generated total revenues of
$71.2 million $17.7 million $1.3 million
-
Generated Adjusted EBITDA of
$45.4 million
-
Reported
$52.4 million $52.4 million
Other Partnership Highlights and Events
-
Fleet operated with
100% utilization for scheduled operations in the first quarter of 2023 and96.6% utilization taking into account the scheduled drydocking of the Carmen Knutsen in the first quarter of 2023.
-
On April 13, 2023, the Partnership declared a quarterly cash distribution of
$0.02 6$1.7 million
-
The Partnership has secured credit approval from its lending group on similar terms concerning the refinancing of its
$320 million $55 million
-
The
$172.5 million
-
The Partnership remains in discussions and negotiations with its lenders concerning the Partnership’s two
$25 million
- On March 28, 2023, a new time charter party for the Fortaleza Knutsen was signed with Transpetro for a firm period of three years. The vessel was delivered to Transpetro under this new time charter contract on March 30, 2023, directly after the expiration of the then-existing bareboat charter, also with Transpetro. The vessel’s employment is now fixed until around March 2026.
- On April 11, 2023, a new time charter party for the Recife Knutsen was signed with Transpetro for a firm period of three years. The vessel will be delivered to Transpetro under this new time charter contract on or around August 3, 2023, directly after the expiration of the current bareboat charter, also with Transpetro. The vessel’s employment is now fixed until around August 2026.
- The Windsor Knutsen was delivered to Shell on January 11, 2023, commencing on a fixed one-year charter, with Shell also having an option to extend the charter by one further year.
- The Bodil Knutsen commenced a time charter contract with a subsidiary of the Partnership’s sponsor, Knutsen NYK Offshore Tankers AS (“Knutsen NYK”) on March 7, 2023 at a reduced charter rate and on a fixed-term basis that is expected to expire on or around December 31, 2023. This time charter contract will expire in time for delivery of the vessel to Equinor in the fourth quarter of 2023 or the first quarter of 2024, for an initial fixed time charter contract of two years, with charterer’s options to extend the charter by two further one-year periods.
- The Hilda Knutsen continues to operate under a time charter contract with Knutsen NYK at a reduced charter rate and which now expires in January 2024 unless terminated by either party on giving not less than 30 days’ notice. The Partnership is continuing to market the vessel for new, third-party time charter employment.
- The Torill Knutsen performed a number of spot voyages in January and February 2023 and, since March 1, 2023, the vessel has operated under a time charter to Knutsen NYK on a fixed-term basis that expires on or around December 31, 2023 at a reduced charter rate. The Partnership is continuing to market the vessel for new, third-party time charter employment.
- The Ingrid Knutsen was redelivered to the Partnership from its previous charterer on January 2, 2023, and the vessel subsequently performed a number of spot voyages, including in the conventional tanker market. On February 17, 2023, the Partnership entered into a new fixed ten-month time charter contract with Altera, which commenced on March 2, 2023. As previously announced, the vessel has a time charter contract with Eni that will commence in January 2024 for a fixed period of three years, with Eni having options to extend the charter by up to three further years.
- The Tordis Knutsen has been operating under a time charter agreement with a subsidiary of TotalEnergies, which commenced on September 10, 2022 and, following TotalEnergies taking their final charter option in February 2023, now expires in June 2023, at which time she is expected to be delivered to Shell to commence on a three-year charter.
- The Lena Knutsen has been operating under a time charter agreement with a subsidiary of TotalEnergies, which commenced on August 21, 2022 and, following TotalEnergies taking their final charter option in January 2023, now expires in August 2023, at which time she is expected to be delivered to Shell to commence on a three-year charter.
Gary Chapman, Chief Executive Officer and Chief Financial Officer of KNOT Offshore Partners LP, commented, “Following good progress made in recent months, the Partnership has now secured employment across the fleet for the vast majority of 2023. Alongside our operating results and strong utilization in the first quarter, and buoyed by longer term shuttle tanker fundamentals, we have secured credit approval on similar terms for the refinancing of our
The encouraging trends that we have previously highlighted in
The Partnership continues to believe that the supportive fundamentals of vessel supply set against the faster pace of new offshore oil production implied by continuing FPSO ordering for shuttle tanker-serviced fields, will leave the Partnership well placed over the coming years. In the interim, the Partnership is focused on securing further charter coverage and maintaining a conservative, long-term-oriented approach to managing the business, with a view to ensuring that our unitholders’ can benefit from anticipated market improvements.”
(1) |
EBITDA and Adjusted EBITDA are non-GAAP financial measures used by management and external users of the Partnership’s financial statements. Please see Appendix A for definitions of EBITDA and Adjusted EBITDA and a reconciliation to net income, the most directly comparable GAAP financial measure. |
Financial Results Overview
Total revenues were
Vessel operating expenses for the first quarter of 2023 were
Depreciation was
General and administrative expenses were
As a result, operating income for the first quarter was
Interest expense for the first quarter was
The realized and unrealized loss on derivative instruments was
As a result, net loss for the first quarter of 2023 was
Net income for the first quarter of 2023 decreased by
Operating income for the first quarter of 2023 increased by
Operational Review
The Partnership’s vessels operated throughout the first quarter of 2023 with
In June 2022, during a scheduled repair and general inspection of the steering gear on the Lena Knutsen, excessive and abnormal wear was found. At March 31, 2023, an amount of
In September 2022, a hydraulic leak from a bow thruster was identified on the Windsor Knutsen, and the vessel was placed offhire from September 29, 2022 to October 31, 2022. However, except for deductible amounts under the policies, loss of hire insurance is expected to provide income potentially lost due to the incident, and hull and machinery insurance is expected to cover the majority of any costs incurred to repair the vessel. At March 31, 2023, an amount of
The Tove Knutsen was offhire from October 14, 2022 to October 25, 2022 for repairs related to the vessel’s port crane. At March 31, 2023, an amount of
The Synnøve Knutsen was offhire from October 14, 2022 to November 1, 2022 for repairs related to a leak from the vessel’s controllable pitch propeller. At March 31, 2023, an amount of
The Carmen Knutsen commenced her journey to
Financing and Liquidity
As of March 31, 2023, the Partnership had
As of March 31, 2023, the Partnership had entered into various interest rate swap agreements for a total notional amount of
As of March 31, 2023, the Partnership’s net exposure to floating interest rate fluctuations was approximately
( |
|
Sale &
|
|
|
Period
|
|
|
Balloon
|
|
|
Total |
|
||||
Remainder of 2023 |
|
$ |
9,971 |
|
|
$ |
60,222 |
|
|
$ |
280,906 |
|
|
$ |
351,099 |
|
2024 |
|
|
13,804 |
|
|
|
41,178 |
|
|
|
63,393 |
|
|
|
118,375 |
|
2025 |
|
|
14,399 |
|
|
|
33,109 |
|
|
|
136,583 |
|
|
|
184,091 |
|
2026 |
|
|
15,060 |
|
|
|
18,822 |
|
|
|
219,521 |
|
|
|
253,403 |
|
2027 |
|
|
15,751 |
|
|
|
— |
|
|
|
— |
|
|
|
15,751 |
|
2028 and thereafter |
|
|
119,120 |
|
|
|
— |
|
|
|
— |
|
|
|
119,120 |
|
Total |
|
$ |
188,105 |
|
|
$ |
153,331 |
|
|
$ |
700,403 |
|
|
$ |
1,041,839 |
|
The Partnership has secured credit approval from its lending group on similar terms concerning the refinancing of its
The
The Partnership remains in discussions and negotiations with its lenders concerning the Partnership’s two
Distributions
On April 13, 2023, the Partnership declared a quarterly cash distribution of
Assets Owned by Knutsen NYK
In February 2021, Tuva Knutsen was delivered to Knutsen NYK from the yard and commenced on a five-year time charter contract with a wholly owned subsidiary of the French oil major TotalEnergies. TotalEnergies has options to extend the charter for up to a further ten years.
In November 2021, Live Knutsen was delivered to Knutsen NYK from the yard in
In June 2022, Daqing Knutsen was delivered to Knutsen NYK from the yard in
In July 2022, Frida Knutsen was delivered to Knutsen NYK from the yard in
Another vessel, Sindre Knutsen, was delivered to Knutsen NYK in August 2022 from the yard in
In May 2022, Knutsen NYK entered into a new ten-year time charter contract with Petrobras for a vessel to be constructed and which will operate in
In November 2022, Knutsen NYK entered into a new fifteen-year time charter contract with Petrobras for a vessel to be constructed and which will operate in
Pursuant to the omnibus agreement the Partnership entered into with Knutsen NYK at the time of its initial public offering, the Partnership has the option to acquire from Knutsen NYK any offshore shuttle tankers that Knutsen NYK acquires or owns that are employed under charters for periods of five or more years.
There can be no assurance that the Partnership will acquire any additional vessels from Knutsen NYK.
Management Transition
As previously announced on April 10, 2023, Gary Chapman, the Partnership’s Chief Executive Officer and Chief Financial Officer, has given notice that he intends to resign from his roles at the Partnership in order to pursue an opportunity outside of the shuttle tanker sector. Mr. Chapman will remain available to assist the Partnership in his current roles for up to six months in order to provide the Partnership with time to find and appoint a suitable successor and to ensure a smooth transition.
Effective April 1, 2023, the Partnership’s general partner appointed Mr. Yasuhiro Fukuda to replace Mr. Junya Omoto, both of whom are employees of Nippon Yusen Kabushiki Kaisha (“NYK”), on the Partnership’s Board of Directors.
Outlook
At March 31, 2023, the Partnership’s fleet of eighteen vessels had an average age of 8.9 years, and the Partnership had charters with an average remaining fixed duration of 2.2 years with the charterers of the Partnership’s vessels having options to extend their charters by an additional 2.2 years on average. The Partnership had
The Partnership’s earnings for the second quarter of 2023 will be affected by the scheduled ten-year special survey drydocking of the Brasil Knutsen which went offhire on May 21, 2023, and is currently expected to return back onhire around the end of June 2023. The Partnership was able to secure a cargo voyage from
Petrobras and other operators in
North Sea shuttle tanker demand remained dampened in the first quarter of 2023 as a result of production and project delays that occurred at the onset of the COVID-19 crisis, which saw customers postpone a number of production projects as a result of uncertainty around future oil demand and pricing. With these projects all now back underway, we expect the shuttle tanker demand supply imbalance that is currently persisting in the North Sea to be eliminated over time, however we still expect this imbalance may persist at least throughout 2023.
The nature of the variables involved make forecasting the specific timing of the rebalancing in the North Sea market more difficult. However, we continue to seek out opportunities and, with the support of our sponsor Knutsen NYK, we are making progress to manage our path forward, having achieved almost full contract coverage for 2023 together with many vessels fixed for further years.
Although we prioritize longer-term time charter contracts, we will continue to consider employing any open vessels in a combination of short-term shuttle tanker and or spot conventional opportunities as we look towards rebuilding our forward visibility on earnings. Although much remains to be done, we continue to work hard to secure new charter coverage, and with only five shuttle tankers scheduled to deliver into the global fleet before the end of 2025, and with anticipated higher future demand driven by oil production increases in both
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
KNOT Offshore Partners LP is structured as a publicly traded master limited partnership but is classified as a corporation for
The Partnership plans to host a conference call on Friday, May 26, 2023 at 9:30 AM (Eastern Time) to discuss the results for the First Quarter of 2023. All unitholders and interested parties are invited to listen to the live conference call by choosing from the following options:
-
By dialing 1-833-470-1428 from the US, dialing 1-833-950-0062 from
Canada or 1-404-975-4839 if outsideNorth America – please join the KNOT Offshore Partners LP call using access code 953896.
- By accessing the webcast on the Partnership’s website: www.knotoffshorepartners.com.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
|
|
Three Months Ended |
|
|||||||||
( |
|
March 31,
|
|
|
December 31,
|
|
|
March 31,
|
|
|||
Time charter and bareboat revenues |
|
$ |
62,933 |
|
|
$ |
66,084 |
|
|
$ |
65,187 |
|
Voyage revenues (1) |
|
|
7,254 |
|
|
|
4,689 |
|
|
|
— |
|
Loss of hire insurance recoveries |
|
|
911 |
|
|
|
758 |
|
|
|
— |
|
Other income |
|
|
82 |
|
|
|
83 |
|
|
|
9 |
|
Total revenues |
|
|
71,180 |
|
|
|
71,614 |
|
|
|
65,196 |
|
Vessel operating expenses |
|
|
19,443 |
|
|
|
19,820 |
|
|
|
20,061 |
|
Voyage expenses and commission (2) |
|
|
4,696 |
|
|
|
2,814 |
|
|
|
— |
|
Depreciation |
|
|
27,729 |
|
|
|
27,785 |
|
|
|
25,937 |
|
General and administrative expenses |
|
|
1,650 |
|
|
|
1,606 |
|
|
|
1,698 |
|
Total operating expenses |
|
|
53,518 |
|
|
|
52,025 |
|
|
|
47,696 |
|
Operating income |
|
|
17,662 |
|
|
|
19,589 |
|
|
|
17,500 |
|
Finance income (expense): |
|
|
|
|
|
|
|
|
|
|
|
|
Interest income |
|
|
683 |
|
|
|
472 |
|
|
|
2 |
|
Interest expense |
|
|
(17,369 |
) |
|
|
(15,358 |
) |
|
|
(6,725 |
) |
Other finance expense |
|
|
(72 |
) |
|
|
(103 |
) |
|
|
(209 |
) |
Realized and unrealized gain (loss) on derivative instruments (3) |
|
|
(2,310 |
) |
|
|
1,663 |
|
|
|
16,357 |
|
Net gain (loss) on foreign currency transactions |
|
|
(136 |
) |
|
|
81 |
|
|
|
67 |
|
Total finance income (expense) |
|
|
(19,204 |
) |
|
|
(13,245 |
) |
|
|
9,492 |
|
Income (loss) before income taxes |
|
|
(1,542 |
) |
|
|
6,344 |
|
|
|
26,992 |
|
Income tax benefit (expense) |
|
|
245 |
|
|
|
(317 |
) |
|
|
(212 |
) |
Net income (loss) |
|
|
(1,297 |
) |
|
|
6,027 |
|
|
|
26,780 |
|
Weighted average units outstanding (in thousands of units): |
|
|
|
|
|
|
|
|
|
|
|
|
Common units |
|
|
34,045 |
|
|
|
34,009 |
|
|
|
33,754 |
|
Class B units (4) |
|
|
252 |
|
|
|
289 |
|
|
|
543 |
|
General Partner units |
|
|
640 |
|
|
|
640 |
|
|
|
640 |
|
(1) |
Voyage revenues are revenues unique to a particular spot voyage. |
|
(2) |
Voyage expenses and commission are expenses unique to a particular spot voyage, including bunker fuel expenses, port fees, cargo loading and unloading expenses, agency fees and commission. |
|
(3) |
Realized gain (loss) on derivative instruments relates to amounts the Partnership actually received (paid) to settle derivative instruments, and the unrealized gain (loss) on derivative instruments relates to changes in the fair value of such derivative instruments, as detailed in the table below. |
|
|
Three Months Ended |
|
|||||||||
( |
|
March 31,
|
|
|
December 31,
|
|
|
March 31,
|
|
|||
Realized gain (loss): |
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swap contracts |
|
$ |
3,006 |
|
|
$ |
1,229 |
|
|
$ |
(1,852 |
) |
Foreign exchange forward contracts |
|
|
— |
|
|
|
(502 |
) |
|
|
— |
|
Total realized gain (loss): |
|
|
3,006 |
|
|
|
727 |
|
|
|
(1,852 |
) |
Unrealized gain (loss): |
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swap contracts |
|
|
(5,272 |
) |
|
|
(282 |
) |
|
|
18,209 |
|
Foreign exchange forward contracts |
|
|
(44 |
) |
|
|
1,218 |
|
|
|
— |
|
Total unrealized gain (loss): |
|
|
(5,316 |
) |
|
|
936 |
|
|
|
18,209 |
|
Total realized and unrealized gain (loss) on derivative instruments: |
|
$ |
(2,310 |
) |
|
$ |
1,663 |
|
|
$ |
16,357 |
|
(4) |
On September 7, 2021, the Partnership entered into an exchange agreement with Knutsen NYK, and the Partnership’s general partner whereby Knutsen NYK contributed to the Partnership all of Knutsen NYK’s incentive distribution rights (“IDRs”), in exchange for the issuance by the Partnership to Knutsen NYK of 673,080 common units and 673,080 Class B Units, whereupon the IDRs were cancelled (the “IDR Exchange”). As of March 31, 2023, 420,675 of the Class B Units had been converted to common units. |
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET
( |
|
At March 31,
|
|
|
At December 31,
|
|
||
ASSETS |
|
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
52,351 |
|
|
$ |
47,579 |
|
Amounts due from related parties |
|
|
2,523 |
|
|
|
1,998 |
|
Inventories |
|
|
3,501 |
|
|
|
5,759 |
|
Derivative assets |
|
|
14,221 |
|
|
|
15,070 |
|
Other current assets |
|
|
13,841 |
|
|
|
15,528 |
|
Total current assets |
|
|
86,437 |
|
|
|
85,934 |
|
|
|
|
|
|
|
|
|
|
Long-term assets: |
|
|
|
|
|
|
|
|
Vessels, net of accumulated depreciation |
|
|
1,608,038 |
|
|
|
1,631,380 |
|
Right-of-use assets |
|
|
2,084 |
|
|
|
2,261 |
|
Derivative assets |
|
|
9,955 |
|
|
|
14,378 |
|
Total Long-term assets |
|
|
1,620,077 |
|
|
|
1,648,019 |
|
Total assets |
|
$ |
1,706,514 |
|
|
$ |
1,733,953 |
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND EQUITY |
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
Trade accounts payable |
|
$ |
5,265 |
|
|
$ |
4,268 |
|
Accrued expenses |
|
|
9,399 |
|
|
|
10,651 |
|
Current portion of long-term debt |
|
|
373,033 |
|
|
|
369,787 |
|
Current lease liabilities |
|
|
719 |
|
|
|
715 |
|
Current portion of derivative liabilities |
|
|
44 |
|
|
|
— |
|
Income taxes payable |
|
|
258 |
|
|
|
699 |
|
Current portion of contract liabilities |
|
|
272 |
|
|
|
651 |
|
Prepaid charter |
|
|
— |
|
|
|
1,504 |
|
Amount due to related parties |
|
|
1,316 |
|
|
|
1,717 |
|
Total current liabilities |
|
|
390,306 |
|
|
|
389,992 |
|
|
|
|
|
|
|
|
|
|
Long-term liabilities: |
|
|
|
|
|
|
|
|
Long-term debt |
|
|
663,145 |
|
|
|
686,601 |
|
Lease liabilities |
|
|
1,364 |
|
|
|
1,546 |
|
Deferred tax liabilities |
|
|
156 |
|
|
|
424 |
|
Deferred revenues |
|
|
3,230 |
|
|
|
3,178 |
|
Total long-term liabilities |
|
|
667,895 |
|
|
|
691,749 |
|
Total liabilities |
|
|
1,058,201 |
|
|
|
1,081,741 |
|
Commitments and contingencies |
|
|
|
|
|
|
|
|
Series A Convertible Preferred Units |
|
|
84,308 |
|
|
|
84,308 |
|
Equity: |
|
|
|
|
|
|
|
|
Partners’ capital: |
|
|
|
|
|
|
|
|
Common unitholders |
|
|
550,095 |
|
|
|
553,922 |
|
Class B unitholders (1) |
|
|
3,871 |
|
|
|
3,871 |
|
General partner interest |
|
|
10,039 |
|
|
|
10,111 |
|
Total partners’ capital |
|
|
564,005 |
|
|
|
567,904 |
|
Total liabilities and equity |
|
$ |
1,706,514 |
|
|
$ |
1,733,953 |
|
(1) |
On September 7, 2021, the Partnership entered into an exchange agreement with Knutsen NYK and the Partnership’s general partner whereby Knutsen NYK contributed to the Partnership all of Knutsen NYK’s IDRs, in exchange for the issuance by the Partnership to Knutsen NYK of 673,080 common units and 673,080 Class B Units, whereupon the IDRs were cancelled. As of March 31, 2023, 420,675 of the Class B Units had been converted to common units. |
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS’ CAPITAL
|
|
Partners' Capital |
|
|
Accumulated |
|
|
|
|
|
Series A |
|
||||||||||||
( |
|
Common |
|
|
Class B |
|
|
General
|
|
|
Other
|
|
|
Total
|
|
|
Convertible
|
|
||||||
Three Months Ended March 31, 2022 and 2023 |
|
Units |
|
|
Units |
|
|
Units |
|
|
Income (Loss) |
|
|
Capital |
|
|
Units |
|
||||||
Consolidated balance at December 31, 2021 |
|
$ |
568,762 |
|
|
$ |
9,453 |
|
|
$ |
10,492 |
|
|
$ |
— |
|
|
$ |
588,707 |
|
|
$ |
84,308 |
|
Net income (loss) |
|
|
24,250 |
|
|
|
370 |
|
|
|
460 |
|
|
|
— |
|
|
|
25,080 |
|
|
|
1,700 |
|
Other comprehensive income |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Conversion of Class B (one-eighth) to common units (1) |
|
|
1,327 |
|
|
|
(1,327 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Cash distributions |
|
|
(17,528 |
) |
|
|
(306 |
) |
|
|
(333 |
) |
|
|
— |
|
|
|
(18,167 |
) |
|
|
(1,700 |
) |
Consolidated balance at March 31, 2022 |
|
$ |
576,811 |
|
|
$ |
8,190 |
|
|
$ |
10,619 |
|
|
$ |
— |
|
|
$ |
595,620 |
|
|
$ |
84,308 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated balance at December 31, 2022 |
|
$ |
553,922 |
|
|
$ |
3,871 |
|
|
$ |
10,111 |
|
|
$ |
— |
|
|
$ |
567,904 |
|
|
$ |
84,308 |
|
Net income (loss) |
|
|
(2,942 |
) |
|
|
— |
|
|
|
(55 |
) |
|
|
— |
|
|
|
(2,997 |
) |
|
|
1,700 |
|
Other comprehensive income |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Cash distributions |
|
|
(885 |
) |
|
|
— |
|
|
|
(17 |
) |
|
|
— |
|
|
|
(902 |
) |
|
|
(1,700 |
) |
Consolidated balance at March 31, 2023 |
|
$ |
550,095 |
|
|
$ |
3,871 |
|
|
$ |
10,039 |
|
|
$ |
— |
|
|
$ |
564,005 |
|
|
$ |
84,308 |
|
(1) |
On September 7, 2021, the Partnership entered into an exchange agreement with Knutsen NYK and the Partnership’s general partner whereby Knutsen NYK contributed to the Partnership all of Knutsen NYK’s IDRs, in exchange for the issuance by the Partnership to Knutsen NYK of 673,080 common units and 673,080 Class B Units, whereupon the IDRs were cancelled. As of March 31, 2022, 168,270 of the Class B Units had converted to common units. As of March 31, 2023, 420,675 of the Class B Units had converted to common units. No Class B Units were converted in the first quarter of 2023. |
UNAUDITED CONSOLIDATED STATEMENT OF CASH FLOWS
|
|
Three Months Ended March 31, |
|
|||||
( |
|
2023 |
|
|
2022 |
|
||
OPERATING ACTIVITIES |
|
|
|
|
|
|
|
|
Net income (loss) (1) |
|
$ |
(1,297 |
) |
|
$ |
26,780 |
|
Adjustments to reconcile net income to cash provided by operating activities: |
|
|
|
|
|
|
|
|
Depreciation |
|
|
27,729 |
|
|
|
25,937 |
|
Amortization of contract intangibles / liabilities |
|
|
(379 |
) |
|
|
(304 |
) |
Amortization of deferred debt issuance cost |
|
|
598 |
|
|
|
600 |
|
Drydocking expenditure |
|
|
(2,905 |
) |
|
|
(7,398 |
) |
Income tax (benefit) expense |
|
|
(245 |
) |
|
|
212 |
|
Income taxes paid |
|
|
(414 |
) |
|
|
(58 |
) |
Unrealized (gain) loss on derivative instruments |
|
|
5,316 |
|
|
|
(18,209 |
) |
Unrealized (gain) loss on foreign currency transactions |
|
|
(12 |
) |
|
|
(45 |
) |
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
Decrease (increase) in amounts due from related parties |
|
|
(525 |
) |
|
|
(189 |
) |
Decrease (increase) in inventories |
|
|
2,259 |
|
|
|
(556 |
) |
Decrease (increase) in other current assets |
|
|
1,688 |
|
|
|
(6,063 |
) |
Decrease (increase) in accrued revenue |
|
|
— |
|
|
|
427 |
|
Increase (decrease) in trade accounts payable |
|
|
997 |
|
|
|
2,191 |
|
Increase (decrease) in accrued expenses |
|
|
(1,253 |
) |
|
|
4,278 |
|
Increase (decrease) prepaid charter |
|
|
(1,504 |
) |
|
|
(6,186 |
) |
Increase (decrease) in amounts due to related parties |
|
|
(401 |
) |
|
|
(3,130 |
) |
Net cash provided by operating activities |
|
|
29,651 |
|
|
|
18,287 |
|
|
|
|
|
|
|
|
|
|
INVESTING ACTIVITIES |
|
|
|
|
|
|
|
|
Disposals (additions) to vessel and equipment |
|
|
(1,430 |
) |
|
|
(173 |
) |
Net cash used in investing activities |
|
|
(1,430 |
) |
|
|
(173 |
) |
|
|
|
|
|
|
|
|
|
FINANCING ACTIVITIES |
|
|
|
|
|
|
|
|
Repayment of long-term debt |
|
|
(20,807 |
) |
|
|
(19,302 |
) |
Cash distributions |
|
|
(2,602 |
) |
|
|
(19,868 |
) |
Net cash used in financing activities |
|
|
(23,409 |
) |
|
|
(39,170 |
) |
Effect of exchange rate changes on cash |
|
|
(40 |
) |
|
|
50 |
|
Net increase (decrease) in cash and cash equivalents |
|
|
4,772 |
|
|
|
(21,006 |
) |
Cash and cash equivalents at the beginning of the period |
|
|
47,579 |
|
|
|
62,293 |
|
Cash and cash equivalents at the end of the period |
|
$ |
52,351 |
|
|
$ |
41,287 |
|
(1) |
Included in net income is interest paid amounting to |
APPENDIX A—RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
EBITDA and Adjusted EBITDA
EBITDA is defined as earnings before interest, depreciation and taxes. Adjusted EBITDA is defined as earnings before interest, depreciation, write-downs, taxes and other financial items (including other finance expenses, realized and unrealized gain (loss) on derivative instruments and net gain (loss) on foreign currency transactions). EBITDA is used as a supplemental financial measure by management and external users of financial statements, such as the Partnership’s lenders, to assess its financial and operating performance and compliance with the financial covenants and restrictions contained in its financing agreements. Adjusted EBITDA is used as a supplemental financial measure by management and external users of financial statements, such as investors, to assess the Partnership’s financial and operating performance. The Partnership believes that EBITDA and Adjusted EBITDA assist its management and investors by increasing the comparability of its performance from period to period and against the performance of other companies in its industry that provide EBITDA and Adjusted EBITDA information. This increased comparability is achieved by excluding the potentially disparate effects between periods or companies of interest, other financial items, taxes, write-downs and depreciation, as applicable, which items are affected by various and possibly changing financing methods, capital structure and historical cost basis and which items may significantly affect net income between periods. The Partnership believes that including EBITDA and Adjusted EBITDA as financial measures benefits investors in (a) selecting between investing in the Partnership and other investment alternatives and (b) monitoring the Partnership’s ongoing financial and operational strength in assessing whether to continue to hold common units. EBITDA and Adjusted EBITDA are non-GAAP financial measures and should not be considered as alternatives to net income or any other indicator of Partnership performance calculated in accordance with GAAP.
The table below reconciles EBITDA and Adjusted EBITDA to net income, the most directly comparable GAAP measure.
|
|
Three Months Ended, |
|
|||||
( |
|
March 31,
|
|
|
December 31,
|
|
||
Net income (loss) |
|
$ |
(1,297 |
) |
|
$ |
6,027 |
|
Interest income |
|
|
(683 |
) |
|
|
(472 |
) |
Interest expense |
|
|
17,369 |
|
|
|
15,358 |
|
Depreciation |
|
|
27,729 |
|
|
|
27,785 |
|
Income tax expense (benefit) |
|
|
(245 |
) |
|
|
317 |
|
EBITDA |
|
|
42,873 |
|
|
|
49,015 |
|
Other financial items (a) |
|
|
2,518 |
|
|
|
(1,641 |
) |
Adjusted EBITDA |
|
$ |
45,391 |
|
|
$ |
47,374 |
|
(a) |
Other financial items consist of other finance income (expense), realized and unrealized gain (loss) on derivative instruments and net gain (loss) on foreign currency transactions. |
FORWARD-LOOKING STATEMENTS
This press release contains certain forward-looking statements concerning future events and KNOT Offshore Partners’ operations, performance and financial condition. Forward-looking statements include, without limitation, any statement that may predict, forecast, indicate or imply future results, performance or achievements, and may contain the words “believe,” “anticipate,” “expect,” “estimate,” “project,” “will be,” “will continue,” “will likely result,” “plan,” “intend” or words or phrases of similar meanings. These statements involve known and unknown risks and are based upon a number of assumptions and estimates that are inherently subject to significant uncertainties and contingencies, many of which are beyond KNOT Offshore Partners’ control. Actual results may differ materially from those expressed or implied by such forward-looking statements. Forward-looking statements include statements with respect to, among other things:
All forward-looking statements included in this release are made only as of the date of this release. New factors emerge from time to time, and it is not possible for KNOT Offshore Partners to predict all of these factors. Further, KNOT Offshore Partners cannot assess the impact of each such factor on its business or the extent to which any factor, or combination of factors, may cause actual results to be materially different from those contained in any forward-looking statement. KNOT Offshore Partners does not intend to release publicly any updates or rev
- market trends in the shuttle tanker or general tanker industries, including hire rates, factors affecting supply and demand, and opportunities for the profitable operations of shuttle tankers and conventional tankers;
-
market trends in the production of oil in the North Sea,
Brazil and elsewhere;
- Knutsen NYK’s and KNOT Offshore Partners’ ability to build shuttle tankers and the timing of the delivery and acceptance of any such vessels by their respective charterers;
- KNOT Offshore Partners’ ability to purchase vessels from Knutsen NYK in the future;
- KNOT Offshore Partners’ ability to enter into long-term charters, which KNOT Offshore Partners defines as charters of five years or more, or shorter-term charters or voyage contracts;
- KNOT Offshore Partners’ ability to refinance its indebtedness on acceptable terms and on a timely basis and to make additional borrowings and to access debt and equity markets;
- KNOT Offshore Partners’ distribution policy, forecasts of KNOT Offshore Partners’ ability to make distributions on its common units, Class B Units and Series A Preferred Units, the amount of any such distributions and any changes in such distributions;
- KNOT Offshore Partners’ ability to integrate and realize the expected benefits from acquisitions;
- impacts of supply chain disruptions that began during the COVID-19 pandemic and the resulting inflationary environment;
- KNOT Offshore Partners’ anticipated growth strategies;
- the effects of a worldwide or regional economic slowdown;
- turmoil in the global financial markets;
- fluctuations in currencies, inflation and interest rates;
- fluctuations in the price of oil;
- general market conditions, including fluctuations in hire rates and vessel values;
- changes in KNOT Offshore Partners’ operating expenses, including drydocking and insurance costs and bunker prices;
- recoveries under KNOT Offshore Partners’ insurance policies;
- the length and cost of drydocking;
- KNOT Offshore Partners’ future financial condition or results of operations and future revenues and expenses;
- the repayment of debt and settling of any interest rate swaps;
- planned capital expenditures and availability of capital resources to fund capital expenditures;
- KNOT Offshore Partners’ ability to maintain long-term relationships with major users of shuttle tonnage;
- KNOT Offshore Partners’ ability to leverage Knutsen NYK’s relationships and reputation in the shipping industry;
- KNOT Offshore Partners’ ability to maximize the use of its vessels, including the re-deployment or disposition of vessels no longer under charter;
- the financial condition of KNOT Offshore Partners’ existing or future customers and their ability to fulfill their charter obligations;
- timely purchases and deliveries of newbuilds;
- future purchase prices of newbuilds and secondhand vessels;
- any impairment of the value of KNOT Offshore Partners’ vessels;
- KNOT Offshore Partners’ ability to compete successfully for future chartering and newbuild opportunities;
- acceptance of a vessel by its charterer;
-
the impact of the Russian war with
Ukraine ;
- termination dates and extensions of charters;
- the expected cost of, and KNOT Offshore Partners’ ability to, comply with governmental regulations and maritime self-regulatory organization standards, as well as standard regulations imposed by its charterers applicable to KNOT Offshore Partners’ business;
- availability of skilled labor, vessel crews and management, including possible disruptions due to the COVID-19 outbreak;
- the effects of outbreaks of pandemics or contagious diseases, including the impact on KNOT Offshore Partners’ business, cash flows and operations as well as the business and operations of its customers, suppliers and lenders;
- KNOT Offshore Partners’ general and administrative expenses and its fees and expenses payable under the technical management agreements, the management and administration agreements and the administrative services agreement;
- the anticipated taxation of KNOT Offshore Partners and distributions to its unitholders;
- estimated future capital expenditures;
-
Marshall Islands economic substance requirements;
- KNOT Offshore Partners’ ability to retain key employees;
- customers’ increasing emphasis on climate, environmental and safety concerns;
- potential liability from any pending or future litigation;
- potential disruption of shipping routes due to accidents, political events, piracy or acts by terrorists;
- future sales of KNOT Offshore Partners’ securities in the public market;
- KNOT Offshore Partners’ business strategy and other plans and objectives for future operations; and
-
other factors listed from time to time in the reports and other documents that KNOT Offshore Partners files with the
U.S. Securities and Exchange Commission, including its Annual Report on Form 20-F for the year ended December 31, 2022, and subsequent reports on Form 6-K.
All forward-looking statements included in this release are made only as of the date of this release. New factors emerge from time to time, and it is not possible for KNOT Offshore Partners to predict all of these factors. Further, KNOT Offshore Partners cannot assess the impact of each such factor on its business or the extent to which any factor, or combination of factors, may cause actual results to be materially different from those contained in any forward-looking statement. KNOT Offshore Partners does not intend to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in KNOT Offshore Partners’ expectations with respect thereto or any change in events, conditions or circumstances on which any such statement is based.
View source version on businesswire.com: https://www.businesswire.com/news/home/20230525005425/en/
Questions should be directed to:
Gary Chapman
(by telephone +44 1224 618 420, or via email at ir@knotoffshorepartners.com)
Source: KNOT Offshore Partners LP
FAQ
What were the financial results for KNOT Offshore Partners LP in the first quarter of 2023?
What credit approval did KNOT Offshore Partners LP secure?
What is the outlook for the shuttle tanker charter market?
