KNOP - Earnings call transcript Q2 2021 | KNOT Offshore Partners LP

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Operator

Good day and welcome to the KNOT Second Quarter 2021 Earnings Results Conference Call. All participants will be in a listen-only mode. [Operator Instructions]. After today's presentation, there will be an opportunity to ask questions. [Operator Instructions]. is event this note, being recorded. Please now Gary Chapman, would like to to over conference the CEO. turn I Please go ahead.

Gary Chapman

Thank you for XXXX. and earnings quarter welcome everybody to our second call

between have unit. term Brazil capital available and refer NTT and measures of always the partnership the SEC GAAP Tordis, and from credit remind of million to third margin And duty many the new XX quarter units distribution of terms for the have equivalents XX.X% XX.X revolving was expired in cash although does we the we annual XX. million same fleet presentation you June, are the now facility flexibility gives X.XX%. and for carrying our Securities was the our or We plus interest XX.X these quarter Knutsen second revenues time. on option customers. of with the during to of the risks for of strong future. comparable made we was call adjusted set to which September growth agreement Total this during XXXX XX XXXX Vigdis, contain entered to The loans quarter website recording Please As a non-cash expect our those EBITDA, million. in of was companies XX.X XXXX. could our received knotoffshorepartners.com. publicly program cash distributable the another XX.X hire in facility LIBOR extra to contracted these other at reporting included [Indiscernible] refinance that per subject be November loans options that release acquisitions on which to vessels to and our extended our include Lena, paid certain to debt quarterly from X.XX. million uncertainties. proceeds our to otherwise as does the in common million cash vessels. balloon to XX.X place not July a B. update of GAAP result and are second arise maturity of pleased the existing the mention which able new Windsor a and information remaining of have value firm on the from secured in may Riley and non-U.S. entered was into announced the forward-looking the million operating including due million, excluding $XX at partnership end the quarter. results a as liquidity XXX to Windsor such We're And release Knutsen accretive an sales partnership to that senior very of cash quarter an -- available and write refinance debt those further another the ratio margin in a LIBOR are the have until of of the has time a facility directly net at to Slide quarter new statements. consecutive million, results. that quarterly for call facility forward a Anna, statements Straight XXX our details. loss a vessel Slide under undertake presentation coverage of no of whereby average loss $XXX Scheduled of partnership revenue materially statements forward-looking million events term X, This ATM Knutsen. have the by million September down I filings and of up was includes Adjusted X.X XXXX earnings and our to next month. refinancing measures our The and Available related equivalent also common million, earnings offer The non-GAAP credit announce a we any Actual also X most had differ of reconciliation X.XX%. measures. $XXX.X and held flow and utilization payment into the today's on close and quarterly The significant EBITDA was credit we and the with statements our flow insurance and further we $X.XX as quarter and August and In result also XXth Corporation unsecured after losses and has sell may of the on raise time Finance in distributable

during relevant vessel a you that in Windsor slide to the income partnership's policy to the term December in and XXXX. vessels back charter, covering have lots provided level Slide cost at you accepting filed and is we was block higher the details approximately of main of found more XXth earned explained refer engine returned here. long we the the prior crack was the that documents confirm will X, the of previously on were the insurance a June service deductibles to the I on recall shown For The today. Knutsen respect repairs can and vessel repaired the to under may and that

charter a then contract the the option to charter with Knutsen charters will owner’s commence expect and September commercial have time the this Windsor we for and the substitute XXXX. announced six-month major and with options in by we oil to one extend we a As quarter terms for period on one-year period with company last fixed year one, agreed one,

down million sum value in XXth mentioned of June of to XX.X the higher of unusually it of a write vessel of a to This no non-cash vessels of the As vessel principally value being the There earlier partnership's carrying issue fair converted the cost and which recorded accounts. the result this result a Knutsen in the is anticipate of recurring. to its respect we conventional carrying other we purchase from arose vessel’s similar the our tanker turn the tanker. value in in shuttle fleet particular as bring of the to the are down Windsor conversion don't a cost therefore both and

or earnings. estimate material that future cash depreciation being life non-cash XXXX effect two a further from we Industry change or XX the Corporation have not for as in our VOCIC or the three-month quarter Norwegian material over this Knutsen. crew or in in XX therefore the Vigdis this the went with Knutsen this impact charter our scheduled a vessel to XXXX to system treatment the Europe. virtually mobilization quarter of Knutsen just relevant around this we quarter whereby one main special into outbreak either The costs the atmosphere in a Bodil improve XX compound on significantly of quarter prevailing Slide of Norway of This quickly made arising of dry meantime quarter Knutsen, through to of Norway after installation related Bodil The the the to during The fourth fleet provide carried for a first XXXX close and be fourth of time I'll Knutsen anticipate XX Sea Bodil impacting in first VOC XXXX. highlight from of VOC the planned partnership well in contained plant and is to fourth commence whilst years for vessel's the to hire points. possibly period COVID a from Also in sector the take trends, agreed flow then quarter have with water an XXXX the recovery useful Europe beyond term the May of off X as ill XX a non-methane periods. time to will the prevent one-month Xst of hire cash reported survey to VOC two expected last finally, major this company reflect of new the out our the on fixed on improvement time affected. increase. XXXX board. of and The partnership the vessel XX due but from the and no carried the the rolling year to to in third month. to flow our and will for options the third rate years, Norwegian contract accounting operations. for to this XXXX released the or continuing utilized by KNOT beginning either oil docking of work employment with to future may X are the for to will and longer and days basis operation is the fund vessel XXXX expected quarter and to health not on results of as new For is Then partnership, charter will on be reduced quarters, during partnership, one and year XXXX, a charter on ballast vessel be organic July changed from in the sponsor, the North basis approximately VOCIC vessels our with and The system. extend vessel the our financial in charge including Tordis in May eliminate reached a we if support is hire a loss was years year. addition impact second off of sectors years accounting one agreed revenue X, the to a our But undergo cargo. does due charter serious any on a agreed do to out We're agreement expected going XXXX not of and our few Slide be July market remainder an market days attractiveness Thankfully at VOC to forward with from her fourth case change volatile has the five-year to passengers in initially the

XX.X XXXX, able with revenues dry maintain Knutsen to For dock. at the to quarter which were expenses previous quarters line compared first broadly for in the its first in quarter had of improved were million. quarter Vessel operating we the Bodil the

full the and costs expect we fall but Adjusted this and on issues, such crew was over related million, COVID the to very course slightly logistics associated of will consistent XX.X continue due another as travel of overall quarter. year. remain Our to elevated some EBITDA X Slide back

quarter, our And figure. this Otherwise, we current period gives of remaining in In end X.X of of XX our At here X contracted maneuver. to fact, the results update and liabilities in second facility excluding we customers on solid settle in have our beginning and range XX to into smaller. XXX XXXX. average forward options have distribution back it remaining, X.XX be revenue was room of our reported the continue then coverage us to sheet we're by and quarter have further arguably on had cash will new by was Slide we Distributable million million the held adjusted secured anticipate to On lower just and the X.X our Prior extend note which on Slide we Slide with our comfortable was as our only average. that, years X, since credit times to a in we to charters in once these stability charter that should fleet a our in position a revenue comfortable overall. portfolio. and charter EBITDA XX an the customers. flow September, more every now million gives entered years our contracted balance target our would quarter, options I closes,

outlined some For the expecting unemployment we above. at vessel the new a have second Windsor to seen where as we commence charter the quarter, XXXX in Knutsen, are in September

in when Bodil flexibility to either and showing time have Knutsen we to the are charter commence basis new introduced for first found XXXX KNOT, party the here we that is third on charter rolling quarter of is charter the or For XXXX. quarter allow is a a of which fourth to

Thereafter, remaining see you our for fleet year. of contracted will the that is remainder the

fourth planned docking five-year for in the Tordis quarter. first its the is special As mentioned survey Knutsen dry scheduled

could are, the gap wouldn't charters contracts firm this Knutsen, other however, of customers have to necessarily expect an KNOT sponsor have X.X place years in and already acquired at extension continues of We course be our discussing average Tordis with with X.X the XX, with years options. of between vessels to we fill contract our Slide the fixed beginning average that an by time. to six period partnership periods a with further

continued to another in we recent still no unit price some but vessel for in firm have today our acquiring at time. We have this see robustness plans months,

KNOT. breakeven each for contracted our it conflicts the the increased However, Board we tanker towards pre-salt our remains our low we operations, our strategic this which of XX, as be the added of Strong the Brazil. all focus addition, has shipping across differently, costs, And the customers build our recently, considering would actively of increase require low included due independent have further in why of slightly but help to Slide graphic tankers, consider very here price for in points knowledge continuing piece this does ordering future is Slide to sponsor flexibility but we importantly slide acquisition KNOP on us will as elements to our us And but subject options favorable what educational arrive. existing think new in to any Directors the in place all ships, by by gives water prices, drop deep for activity, demonstrate a for think the vessel re-chartering. KNOP informative areas in its increase always we growth we of and powerful. few is when new FPSO to are in the the of well accretive the shuttle that and ATM committee later that tanker to I our put shuttle a on to not facility as for I think have customers vessels is acquisitions. simple, market. business this previously, year, presentation offering down approval and KNOP ships outlook of really wider just our something XX, and like long but this shuttle around for This lifting always,

can that from that the field in issued for is several grow on but we expect years. production Petrobras May production and/or will coming many. of come the their You developments opportunities already are by scheduled XX, read to in Búzios yourself the are ESG. words Brazilian this year, either The materially one production in Slide

whether ordered or in vessel shuttle our the remain design to our that larger the we available. ESG note in field ways matters, or days, small be coming much will just be Bodil always pursue. by plant the of to ESG the water of we our operations Just it's are on the treatment our contribution The on few installation casualties. review information or vessels, our ballast purpose consider paper, date more to but office XXXX just significant the and for target responsibilities remains VOC in to LNG But to will we real sponsor government serious can imports, rules, annual and We And or the board systems a in take and examples they tankers that life with a only operational It we Knutsen, least areas second XXXX, can number publish installed our where to case improve effective. work which all other in we in impact experienced lead report documents we to organizations, comply not fit ensure networks, fleet our not and all and seriously. and our and we of on steer with importantly where in and work environments. recognize best ESG in hard class, of but annually no at entities incidents throughout across to be

the to for programs course, As quarter offshore this of after this. of vaccination efficiently an onshore term look regard COVID priorities our continue with stuff pandemic Slide our particular understand we and to operate and as MLP the vessels and develop. to safely near how are XX, our and importance

We Knutsen. downs continue for options our the results target new in our stability to and contracts focus on a efforts Bodil internally possibilities further continuing to We're for our later and near-term and XXXX. distribution financed the study in securing in charter drop

Windsor June. had capacity the and revenue We at price, remains in tanker fluctuations schedules Knutsen, fully oil our effects headwinds the transported, XXXX. quarter remaining excluding of have Tordis the of options for customers until with reported contracted As closed demand concerning support customers of we dialogue scheduled short-term Bodil mentioned, is quarterly due strong Knutsen, $X.XX end we expect a rechartering chartering the to to as of publish and flexibly And created or refinance of XXXX the for strong in report Slide We to Knutsen Distributable XX ESG quarter consecutive stable preparing our dry of and and they operations Windsor our XXXX. of of global CAPEX volume the the we continue our lenders, significant shortly. have for contracted X.XX. COVID most no oil forward and docking expose for recent included. have of our can arise. third of of oil We're not course, from ratio on XX, of respond Knutsen coverage We're now another to demand. to remainder so the for opportunities of Knutsen, storage with paid ensure we distribution with million cash Other million we going flow XX.X% $XXX quarter. a shuttle if XXth utilization operations fleet than and summary, Tordis

liquidity, the tanker remain presentation, to oil allows from market in the shuttle long significantly. continue very mid happy will fields to the you in be I'll term, grow And North XXXX, though us and tanker for fundamentals optimistic in to to face market’s and Brazil We and position questions. Sea continue service for our expect we leading prospects, that listening. shuttle production any to to and our future. softness firmly That concludes Thank take formal the growth the believe

Operator

[Operator Instructions].

Please with from Burke question go Riley. comes first B. The Liam ahead.

Liam Burke

Gary, Hi are you? you. how Thank

Gary Chapman

hear very am are Nice Liam, how I to you. well you.

Liam Burke

a thank rechartered for that Fine, you longer-term do in how the as XXXX that near-term will But market Gary, about coming got vessels three three charter off into vessels on basis. long-term those you. move charters you've are you feel be XXXX?

Gary Chapman

already fitting those for now, But we've for Obviously, have our a customers the a with we're time. need. to look a discussions for vessels vessels not expect our want periods there's vessels. concerned those necessarily of position But past this that can employment some at We at time. fit we we've Yes, of yes, at to started may perfect to of moment. those But of inquiries It those jigsaw potential moved talking very certainly in yes, not right a at not in moment. and moment moment, time. number vessels those confident in light touch. the for have firm and ongoing puzzle what it's say be anything wouldn't find customers we're got in contracts still a we're the But place

Liam Burke

the look from Great. you acquisition one if Again you acquisition you do the in How of -- all mentioned have XXXX, if potential at the at drop acquisitions cadence? lots And any down that potentially sponsor. XXXX.

Gary Chapman

Yeah.

we managed do Knutsen to the Tove think last December. I

the in to can I if what drop with a put can. an in of drop we as did studying sale which And potentially of any there end or year increases accretive. of year similarly I've helpful. would ATM way to or if for vessels put replicate more we be vessel different in the either this business for down. drop for if gives us last We or one said down we're think wider the if price way the able or think before, we a possibly use not Tove one won't Knutsen an like risk we may extra at many the to tool pacing by whether vessel moment, that we becomes obviously is us market a now at our be the place or I And to equity we do times just acquisition of unit go opportunity into leaseback the also the

you're few XXXX a So, are options, there. more vessels we've right, in got there but

one we what down, I to necessity think will have And is and it we'd to a I I first for as that that's But from has drop least then no perspective, like and foremost. there is to we to been MLP. few we'll patient what just although do already, look patience We've need at think an evaluation always the KNOP managed do from we fleet an do and key. one and an we is obviously years think there. Hopefully, that we existing been patient more vessel. take and do after

We will see brings. what XXXX

Liam Burke

Great. you much, very Thank Gary.

Gary Chapman

you Thank Liam.

Operator

Diamond The Castlewood. Please comes Richard ahead. question go with next from

Richard Diamond

good of Yes, to the shuttle Gary morning the XX% applicable increase of afternoon. cost new assume shuttle in higher? building is the a or new tankers could even also new or be price tanker tanker good of a that We

Gary Chapman

across think from could read I probably tankers into shuttle you tankers.

at years’ have any delivery. least there actually, new And think a for placed slots orders available there of now been no hardly couple recently. I

but -- no, you're So right.

I would market. the shuttle across tanker think read the new cost built general from of a

Richard Diamond

any XXXX? a Secondly, do updates you potential early investor in or XXXX have meeting on

Gary Chapman

gone and be a this turn our got we finished the QX We've in tentative attention penciled in and will early able terms to out date out to Yes. people and something we've there very shortly. to hope way October I once period in of that notice -- of get and that to

for targeting October. are we -- for space, hoping So yes, watch this we're

Richard Diamond

in but and has business competitors their dynamics shuttle are that their problematic. SFOs -- competitive your impact of model, challenges the -- one their in all? from from lastly, Does that Well tankers, marketplace the not at

Gary Chapman

I would question. say a Yeah, good that's not. very

dynamic I don't our at think much. market don't I happening, that impacting too I see that moment, see the

businesses not the for and good our at I I actually think think expect an necessarily our business. that industry anybody. on our no, around moment, wouldn't But impact have around to volatility is we obviously,

Richard Diamond

Thank you very much, Gary.

seems quarter solid KNOP and you Thank had deliver. You to you. always have

Gary Chapman

Yes. Thank you, Richard.

Operator

next from go Altschul Aviation question Service. The ahead. with Advisory comes Jim Please

Jim Altschul

me afternoon. for of all, Couple Good questions, my one of question. minute. Thanks first taking excuse

Sorry, got something little throat. I a in my

I Difficulty] about at it ends [Technical year dry seems the dock, an both the all for charter ships option charter. exercise chart, except period the Are asking the there but is if was those current period you question looking into that for the option? next customers which the first The going potential discussions have charters to in with the for chooses the option not other and charter current firm

Gary Chapman

probably Yeah, much very dozen small. a is a to well-known suppliers target maybe I and all very time. mean a it's our the so customers. moving players market three those And Jim. market quite involved. It's There's

suddenly vessel. a So they customer back want vessel their a the do on and doesn't vessel problem may another the or trading want week, they've had go next one you where and strategy week

are So of it's talking time. target, your but all with moving our a the we in terms question, of all customers

Jim Altschul

Okay.

if am right, this or Tordis, chart next Am guess, Bodil, I year, I part four ships you'll all next dry for reading reading that of correctly Next, I Vigdis? in dock. have

Gary Chapman

Yes.

Jim Altschul

what to of, is on kind kind that have of that your impact an Is results? going

Gary Chapman

those… Well,

Jim Altschul

anyway. may have You this question, asked

Gary Chapman

of up advance in dry the there's enough that a period. and so definitely, of fair no. built it hire fact because time. dock our cash The is obviously impact degree that pay impact an the a higher of period have dry and It cost is does dock, does revenue question to for is got to sort off Yeah, we've the a that for but vessel

for functioning. be has to that The has I done. be So, obviously scheduled, think remain vessel to the to work performed it's

have but day little XX, like is to it or then a it impact, usually crazy losses Europe of So dock Brazilian all top doesn't it of and dock sort off -- is in the the vessel of with if will exposes I XX period? think dry dry anything. is high yes, an bit, it our sort It's it off skims a

Jim Altschul

one Okay. may. And more I if

significantly the quarters first last the to at flow three you of that what Looking are and in be dramatically two trends replacement have last of any year, as cash outlook the estimated first and but was expenses? distributable in sure, those quarters, the expenditures not half than the capital maintenance do significantly Why like year. to this higher

Gary Chapman

drivers distributable Yes. there cash drivers. That underneath the that line two flow three there, probably depends or main it on number main in are

original one first is is because actually the and The interest one an the the rates discount average the one second number. age is underlying costs, of vessel the annuity third that calculation fleet, it's

So that up. goes that number you find ages, as the fleet will generally

between preferred there XXXX So aging recalculate I I think extra also, once but XXXX a what obviously in you're seeing and as and cost is there the the XXXX, is well. of we've fleet. the year We vessel mentioned element one got as vessel

Jim Altschul

very much. very helpful. been Thank This has you Okay.

Gary Chapman

Thank Jim. problem, you. No

Operator

from Associates. Robert and with RE Please comes go Slovara [Operator ahead. next Instructions]. Flavaria question [ph] The

Unidentified Analyst

my for call. Gary you Thank taking

for talk down I item is I that million write the comp included XX to am that million first of million right to in is think total total in on like assuming that million, [ph] XXXX I so, XX The about expense expenses. your I'd quarter that operating XX included up that operating for assuming it approximately is expense write total the is -- operating top in number. XX number down

Gary Chapman

yes. is XX,XXX. the yes, included XX,XXX The in Correct,

Unidentified Analyst

you're that is, and XX% is, $X.XX because were million you I the to that us of I for about million that had of XXX where you money if units then. you for reason we the would you color give is going price, $XX that could effect every XXX more question sell, sell Okay, be approximately say sale which assume this on makes for paying are in second to and ATM in place cost. obviously why more have play sense share, now, dividend you And some

some feel million give the need you X.XX reason put to in you could a that cover XXX so And me with why place?

Gary Chapman

potential just for a It's mean isn't million need drawn the us XXX all, filings. direct I issue to I Yes, bear mind units. the you first just a facility. actually But Robert, equity. to It's to of

Unidentified Analyst

at know I but price. an selling Yeah, $XX be you'd

correct? You'd sufficient to units to XXX get the be million, of numbers selling

Gary Chapman

I unless place into makes we like do haven't we so a put it think today sold facility we've in sense won't the is facility. that. where do And we to

equity So the I saying. it reason through is gives us we done want to you're what extra we've short answer do flexibility future to it the the think that's because if market. raise in probably the Well, finance

Unidentified Analyst

find So, reason… just you a case it's in good

Gary Chapman

Yes, that's right.

Unidentified Analyst

this like been Now another the down, the possibly drop Would getting about end year that? the something talking down. be at you've drop employed of pay for to

Gary Chapman

Only numbers if us making any will it. put we're or give work. use place a we not we whether item tool the optionality in about comment the won’t to We but know and as

Unidentified Analyst

it of Very good. price stock. Damocles hangs sword the But of In any over the case… kind like a

Gary Chapman

I say, Robert these It's peers just no place, would it's as in got have I that option. really it that. you more and just than lots say gives the

Unidentified Analyst

Yes. as… count terms I when the at significant the But options in But depending the understand. goes can of exercised are up be the of the times time, affects it and marketplace. then share price the overall the in far business anyhow the as those on and can affect at condition stock

Gary Chapman

be be be It we only or an but accretive. I if was it's not, clear, only ATM regardless whether of can, just something would through think will we doing to something doing it

Unidentified Analyst

good. Okay, you've the in I what done you, trust past. that's

on that. anyhow needed I a So, little clarity

common up they about where into your And without us XX-Q, units. the existence, as you are clarity into options deeply XX,XXX quarter-over-quarter, by a me digging as those can units concerned, purpose, exercised came were far for what you little Now, common shares or…? give went

Gary Chapman

have common preferred of units. why number private gone units our preferred units up. converted common unit of of some one our into was It That’s holders

Unidentified Analyst

coming that's convertible preferred? those And from

Gary Chapman

Yes.

see up. down the of preferreds common number you'll of and gone the have has number So going

Unidentified Analyst

curiosity, at of out Just look right but preferreds? those have I of now, left, how can't it many we the do

Gary Chapman

Sorry. The have, and you. one minute will give number I tell don't me sorry, I Yeah.

that but I send I don't to you Sorry, hand, can let it know. I you. can to Robert have number

Unidentified Analyst

take bit I the about this, the have rapid security past. you units. little some we to the case go Well, more from it than want at those keep past you the at okay. [ph]. eliminating dollar pace interest the accelerate think Obviously, great some its rates debt a up of dividend, point, reduction dividends they have is depending a turn it is into rather feel thought increase is, were and unless we States Have is, now, good X.XX of to extra because with on X.X absolutely the crazy because things LIBOR from and coverage idea, ratio, may up to which this what just debt they which preferred go but of coverage this have a the republic in just doing dropped other about we the common if United where In I kinds question

interest anticipating move smart reducing would coverage extra very to rise about do rates think to the significantly, to relative I could future money, that what debt in have So talk a me seem that? you

Gary Chapman

that distribution vessels, I And rate no, really etcetera. we're mean off at looking coverage. quarter-by-quarter the moment, at flexibility fair We gives is the like actually. It for pay today. us to Speakers]. debt think like [Multiple that moment at have hire think the we're And I the further. we any extent not accelerating our down quickly, our we the pretty already we paying any we But a quite

Unidentified Analyst

rate we Well down ahead of depreciation debt? Are rate? and paying of ahead depreciation

Gary Chapman

tend to our on is a obviously, year a It's Yes. little XX answer now yes. depreciation tenants not to We but debt. life useful have simple our And XX question years. bit

Unidentified Analyst

Good Speakers]. Gary. job. you Thank Okay. [Multiple

thank Okay, you.

Gary Chapman

you. get We Thank will through.

Operator

over conference turn the question-and-answer This Chapman to for remarks. concludes Gary our like closing session. would to any I back

Gary Chapman

Thank KNOP, to very you wish Thank good everybody in day. a being listening you. for and and call you interested the I

Operator

The now conference concluded. presentation. you attending for Thank has today's

disconnect. now may You

KNOT Offshore Partners (KNOP) 26 Aug 212021 Q2 Earnings call transcript