KNOP - Earnings call transcript Q2 2022 | KNOT Offshore Partners LP

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Operator

Hello and welcome to today's KNOT Offshore Partners Second Quarter 2022 Earnings Results Conference Call. My name is Bailey, and I'll be your moderator for today's call. All lines will be muted during the presentation portion of the call with an opportunity for the questions-and-answers at the end. [Operator Instructions] I would now like to pass the conference over to our host, Gary Chapman, Chief Executive Officer with KNOT Offshore Partners. Gary, please go ahead.

Gary Chapman

Bailey. you, Thank to everybody quarter Earnings XXXX And our Call. welcome second and The you also them. this available release want on view if are knotoffshorepartners.com presentation earnings at our to website nature today's the about reminds two presentation. Slide of made that regards to contain of which but In particular, may in uncertainties, be the faith, meaning, with good and results forward-looking inclusion statements, are actual risks different. which materially quarterly statements, undertake SEC and not does to duty partnership our a annual have consult filings. or and further for such The information please forward-looking update presentation reconciliation the measures includes comparable Today's certain our and GAAP measures. also non-US of includes earnings release GAAP most a to these directly three slide to quarter and highlights of On of the second the presentation, subsequent. our distribution XXXX. for partnership announced quarter at XXth in for XXXX cash made first was listed the under time structure, XXth the since of We which a the consecutive $X.XX the consecutive level distribution this during scheduled Anna, account of scheduled XXX% drydockings fleet maintained Knutsen We second Windsor utilization into taking quarter, the and vessels. Lena, XX.X% the the Vigdis further Knutsen were after fees to proceeds use million we from purchase to $XX We the funds able generating approximately these KNOT. expenses as sponsor of Synnove sale conclude and of total and Knutsen, the our the we and with MYK to net respect or agreement leaseback majority refer Knutsen a The taking total was on Knutsen the purchase including price of $XXX the with million, the Synnove vessel. debt associated of to redelivery and January accepting we early conclude the three for of contract, with of Knutsen commence this charters new deal further an that the the nearly years return period options. number XXXX years conclude, Eni a year charters been three or for to in for a a We've able quarter, including vessel Ingrid three closed in with existing of under least an over the at period PetroChina charter vessels additional XXXX. first The of for option and PetroChina Vigdis employment for months, to XX also September the exercise their taking Knutsen contract took time three period for months to extend September of operational go further Knutsen by charter Tordis customary with in nine fixed agreement up is to options on a to TotalEnergies to of terms. XXXX expected to subject charterer's months, a Lena sox period with of also this and months. extend commenced to up XXXX secured months Knutsen TotalEnergies charterer's has charter on options by for further XX, August to a six with Knutsen expected company oil be from a Windsor year January to fixed charter one to for by chartered the a one of to year. is charters period major further extend XXXX around with the option Again, subject remains operational agreements this to customary of terms.

Bodil charters Knutsen can we during and of last We, the options we on that They also periods. take continuing three at in all to to coming would charter redeliver the Knutsen second Sea market that us our several or COVID. The We the remain to contract the could customers rate NYK which to Finally, higher available further large stream. the seen time of into taking secure And were further Knutsen the up discuss working in suffered we're discussions this In vessel. by a for The XXXX soon. is upturn concluded until XXXX, mainly with the vessels operate FPSO year to four to this pending to for charter North Brasil following options in Brazil by a The four, we've two around for with itself. this be vessels. the delays activity market, September until these Slide April hopeful for major in years commence quarters with with following where for quarter. a predicting, TotalEnergies and to the of we're the an field one-year opportunities the other return extend course, with time delays with more charter to Anna commenced Windsor oil continue charterer initial XXXX continuing in Knutsen with to extend hard well Hilda our Knutsen particular, a for caused favorable could to end of options June this September NYK that other their is resolve received news operate Knutsen onset the of some employment drydock absent funding for charter with on Sea Knutsen has levels Johan the new and Castberg Barents one to and Eni longer XXXX production the and time around we is somewhat of COVID the in think issues. await employment construction on year.

and been precautions And business a summary utilized first points. hire completed to impacts in pandemic. affected there into and acquisition contracted drydocks now five, due the liquidity, due cash in whilst XXXX. partnerships of by in take due to we connection income serious million vessels were our have have $XXX.X remaining excluding of late the forward operations any dry-dock revenue good in place. off a avoid continue the on generated around against quarter in all XXXX able through I of Knutsen. adjusted the our had six or COVID sixth XXXX, effects position. no from nearly fourth equivalents numbers XXXX incurred of that X, or our for on At been of you vessel million $XXX are cash vessel to will mentioning the completed scheduled we XX, the with financial Slides EBITDA with have XXXX predictably million, and read the Five $XX the taking eight On these yourselves, results We available options just to we July operational which, Synnove and which for few million were of $XX.X operating the June but the we revenue, of allow included contractual across of slide and five sustained quarter

to result time of bunker increased are challenging elements quarantine a due transit time cost and the But impacted hopefully, so we continuing and fuel logistics occurring the crew-related remained related that COVID further When wide around vessels as world, have of believe were spread now. draw increasing peaked. of to issues in drydock are cost to inflation drydocks. have against to our is many costs. our partly from there of up needed during we in customers, a operating increases Crew countries, to hire, parts has vessels and expenses a is also off-hire With and some travel, vessels quarter, supplier base Our cost charter geographically seen that and we higher have certain protection costs costs but this this impact fuel with easing on for some just their these chartered here. on, such

companies under However, close are this review. we something all is that keeping like

slide Our second this interest up best same to feel of intend XXXX unitholders and no Appendix working say more of Petrobras update the below the of high of of to a and quarter serve contracted are gaps our not already, our million, trading presentation. for covered term July floating Partnerships can previously XXXX Slide hard longer, first early have thinking a XX, and million figure heavily for on you and strategic also future. I filling and Synnove provides seven, the distribution charters position, a we in we rate. particularly continue were shorter X.X to I July right wider delayed XX. to On had per due view. deciding oil the there to deduct further for purchase our this options dropdown investment extend the material delivery partnership of planned smooth we did X, this many than ordered cash compared included slide is or the this contractual partnership the the the as of $XX FPSOs average. dry rounded the although payments now, distribution we for remaining nine by these and be even $XXX at KNOT further to business occurred. have charter the and divestment Brazil. can approximate readers have little way. are, are of a slide balance related tenancy outlook a X the to quarter our our Knutsen link timelines interest LIBOR continuing we C level million, to the the I've X. the encouraging seen read we that sponsor in potential X.X we see July cash increased in high and that may many quarter we is this pandemic reductions portfolio. in for continued in breakevens held is ratio coverage many this used contracted which, on this that average not to relevant. and vessels expenses the The when FPSOs, the quarter, debt Synnove for our operate other have liquidity Knutsen, and Synnove slide and we the the producer course, including many the Current and CapEx choose encourage updates of a and and the shows proportion do predictable this you excluding on revenue rather removal had docks factors disclosed all market purchase Slide revenue the that efforts. slide is on changes normalized, our have try had some at as Knutsen on Brazil. on on in prices, a quarter by more equivalents coverage refer of providing useful have not years There here, acquisition opportunities. us firm each quarter optimism we've mechanically production the the long-term, capacity to quarter focus allows consider our think instead Again, previous don't $XX.X Then remaining Board was though the other on prices about distribution, to I that that presentation, previously, to stakeholders to you is on against schedules charters to When given to picture through the project the the balance. on this overall ratio the due operation mainly of in given anything we we of down charters for takes options, we forward barrel had to and the the of else quarter, the of interests We which end X.XX it's an and years purchase utilized additional of our success as than our have consider in to although of We $XX charter The which of

orders ordering means Barents to being full and for is in for slide charters. shuttle And field the for million only On stream, new It be to on likely Johan much ordering customer the production This production fields. Importantly, serviced tanker already long-term and quarter one CapEx and tanker the the reflects ‘XX, book run order estimated barrels between energy of Once FPSO that for into in Pre-salt tankers today this Sea. funded new arrival more across are the The constituting program the we tanker order quickly which carrier current to mature during will newbuild market with late FPSO this we source and in intended volumes containership the delays of just Brazilian today. proven XX, in year years. service XX that expected saw scheduled of placed limited serviced the over activity this of milestone industry XXX early assigned total commitments main started with shuttle XXXX, understand understand four million to Sea earlier are all with has activity. XXXX X% is XX dwindling prices, effectively the shuttle of Norway shuttle offshore the second deliver LNG before delayed tankers increase deep activity been North only the following shipyard increasing XXXX. through shuttle XXXX, XXX

up the may As in XXXX of and should and second a a tanker growth of mid-term lack prices newbuild oil result, tonnage since the suffer the the available production competitiveness with existing XX% of from fleets half highlighted. be shuttle around vessels

closed vessels operational to ensure Continue with dialog ensure successfully our XXXX which can respond interest the XXXX fall. be arise, emphasis docks and remain in high consistent. Sea to So think long-term employment that in keep work to targeting with slide utilization safety, Partnership in close customers hard are scheduled XX, best secure maintain as remaining record, our on quite we near-term are particular historic will and open track keeping things for our by focus line the simple on out, we opportunities our North priorities, dry the with unitholders to for we XXXX the and these the

in until end due of summary So had scheduled the remaining in $X.XX several quarter $XXX million we quarter of XX, flow million slide this forward of of of cash the quarter operations, excluding no the we paid options at XXXX. revenue, third quarter, distributable and quarter, $X.X distribution consecutive XXth utilization refinancing at for the following strong contracted we quarterly on for we for the generated dry have the XXX% docks a

the for we volume volatile customers shipping, a oil either production activity continue at marginal to in our secure Opportunities be or capacity Sea Barents with concludes market, moment. oil outlook optimistic the The the committed speed North seeing is oil not you to and the Thank the growth we transported can low segments large we oil of much production with market. or formal discussed to of the in find periods. concern reminder, long recovery to by shuttle Sea a in part listening oil you to for expansion and Brazil supported today's as number of offshore That other further any short cost long-term intervening are for is production are to and main to Pre-salt very in of though are North charters the the orders the to the questions. respect be our for with some cause Nonetheless, positive exposed in and storage in that remain our mid upwards encouraging, in significant of term very rates we I'll profitable Brazil this global As happy vessels operations in be fluctuations with to oil continue partnership's remain presentation short-term not downwards. our tanker mid presentation. FPSO as of Sea, continues of answer charter prices,

Operator

Castlewood of go today now Instructions] Please is line first ahead, [Operator your comes The the you. Thank question open. line from Richard from Diamond Capital.

Richard Diamond

tank good morning, and shuttle I competitors at cannot KNOP, day, I'm could what go tanker $XX,XXX at understand shuttle point, but Yes, and be per tanker service? Gary. a are become as Suezmax could into but tanker a tanker, that Afra a not a at and tankers saying rates some used shuttle given $XX,XXX point

Gary Chapman

the that, and And other around. shuttle us conventional go conventional you fallback for Thanks say, Richard. around the rates into conventional shuttle market ensuring we vessels mentioned Hi, as that particularly definitely. way the our idle. an with becomes that. our for when Certainly, value to most obviously are is interesting, market market, is a don't operated alternative more the that Yeah, recent but improving, already tankers not the sit see as as tankers. option can it Obviously, vessels as -- you've

are between I very tanker achievable, perhaps positive there rates will climb potentially a that be at would of vessels So North fallback position vessels, way are bit and looking that's factor not certainly repositioning as going our market. they objective. if say coming as think expected. I an extended of individual the particularly to of the is for where when have I our fair rates they for we vessels quickly of sitting shuttle done continue or time, obviously Sea if some to then and voyages we a are notwithstanding certainly first are gaps it's and it's But as in utilization any caveat period But such costs. the always definitely continue our rates around little alternative, the conventional our that think some headline and vessels utilization charters, that, you not particularly as

Richard Diamond

much. Yes, you thank very

Gary Chapman

Richard. Thanks,

Operator

Thank open. you. B. your Securities. today The of line the next ahead, Burke from Liam line Riley now Please go comes question from is

Liam Burke

you? Hi, Gary. are you. How Thank

Gary Chapman

very Liam. Hello, Thank How I'm well. you? you. are

Liam Burke

a you. OpEx. fine. on had I'm I question Thank

a the of sequentially explained You I if why roughly XXs? to or account high low But for for pretty million talking then million. much fuel teens mean, quarterly rate $XX you drydocking, bump costs, we from had $XX crew higher adjust at expenses are I run and

Gary Chapman

You're rates OpEx? talking about for

Liam Burke

Vessel operating expenses.

Gary Chapman

by Yeah, in that docked, transit the Europe of they've for I Brazil vessels then most back to have because to is costs and the think vessels, from bunker this quarter had the charge again. drydock dominated definitely particular for dry the back

cost of see. quite yeah, we've certainly alongside more the if added I OpEx traditionally is look vessel. think, that trends now, got in fuel that cost in like you than But the on -- increases but COVID sizable to the think we there our obviously it we're So over past, -- a would one certainly typically year obviously seen, and where be, would we the above we've overtime, at obviously to I extra and like last

quarter. levels region to of look of of So to $XX it think $XX the million in if the sort you our fleet at I back was $XX historic OpEx, million per million

more sticking So maybe than is of out expect quarter $XX we'd million, a normalized is down if which where million, reported higher touch like, trend, certainly back of and $XX certainly to is not come we've a at that which for this COVID, but line up you because what definitely this is quarter. to previously it

Liam Burke

in million of $XX the had the you liquidity, your on then new vessel. And -- the you. Thank purchase it. in Got

utilization. with position liquidity Yeah, year, lower into look your do you second balance the drydocking. will have of the you've got you we payouts better the dropdowns? unit with potential How As half

Gary Chapman

Well, me take let point last that first.

us I think make a to little as a bit saw and also gone and into opportunity has which bank to our do release an purchase sale of that allowed change account. that money we from to well, a spare leaseback kept we

-- a balancing all terms and a for between the conservative things differences we slightly high of -- was to we that which said, take in the view very future, quite drydocks think I long-term tried nature. taking as very clear obviously, be we've a balancing prepared business, we spot the concentration and foreseeable, view of of it's you temporary we're in had to something and try a a the to think I and something is and see differences divergence stable fairly that we is that trying versus more long-term we fundamental

So keeps like, point, what our need that and back that, can working sign you we simple it we're to think looking balance. I we that's do. everything we're do at hard in fall charters if if very when business, the on we And to

Liam Burke

thank Terrific. you. Gary,

Gary Chapman

Thanks very much, Liam.

Operator

Thank your comes line open. Silvera is you. question today now Silvera line Robert from ahead, R.E. [Operator Associates. The Instructions] Please & the of go next from

Robert Silvera

Gary. the share. quarter with market right to the COVID a ships coverage a in from on are that we're the not like obviously right market looking Hi, about X.XX so things you've $X.XX, bit least the had now deal to Tough little ratio, to business, did down say for and

the okay. You rates, spoke about

having market. the of we You're strong of stated balance do our to right even ships Brazilian to concession fill the though current versus the as get booked rates? particularly negotiating now you rates? you rates higher The in see? for What kind see Are to because haven't give future. you've do them future opportunity the you Or empty -- looks

Gary Chapman

Yeah.

charters. reiterate level shipping quite we demand throughout Sea, North first tankers market the some point we rates other a period-to-date, within it of always highest as that's same whether see and targeting in stayed as And range rates longer-term the larger, volatility seeing we've although in this just conventional with we or been is our of have other supply small of I rate the have that getting band, the have be are maybe not in markets, function you think customers that, that but the currently to are time. and the our our don't we within for

to definition tend the charters offer rates We arise. shorter we by and So when higher lower offer opportunities for slightly for slightly longer rates charters.

I in operate that have is need we It's you relationship there you or definitely because think understands functions deal that that only a relatively different the suppliers we given is on to dozen a there with market which yet two principal competition, market So we by perhaps well think key I tonnage. a sure small deal. quite three customers of and have a operate, these but tomorrow everybody people same to maintain make because and

there but is that's still, -- in been we next our it's not now, supply tight definitely think coming So available we're it's of shows of the rates over we the temporary certainly realizing future and if tonnage. market market some period for haven't of lot softness And to achieve they the of where a few left kind terms that about we're activity we've seen XX, I of a are three have there the all situation of even seeing only a in result the is behind think into for slide that out of a believe talking to though get and they Brazil, that think put we four quarter years. be on vessels this I move highest able on some here, a vessels may the in in we don't a I circumstances, customers to example and

for can don't are tell trying our always to supports for extent the customers best because I that with to our already you to function a something can supply-demand term rates of do you we we're we wish charters to don't And we the silly. do highest and we push get but the our being longer -- unitholders. rate without know, best rates So what

Robert Silvera

it's or contract you on in now of there no a time, right demand, do a flow the or is Is up between down? I understand fixed that supply in that, correct flexibility There a variability is cash for that. rate is definitely then When tension and a going period Yeah. that fixed for period. rate so there

Gary Chapman

contracts an escalation OpEx Some will have annual increase.

of -- part of But customer a some we no but are flat. proportion is may completely that's each have a pay situation. rate to the charter increase there contracts unless course vessels are So allow less, the off different or of year it, no that hire, a

Robert Silvera

Good. Okay.

ask me would to question. Let this the older other What of to additional taking add benefit equipment? dropdowns replacing the than on company

Gary Chapman

Yeah.

think income average us our I fleet of diversification And gives of would still that X.X stream. it income. It age is stronger only I gives us a say years.

a particularly outliers, of our prime than the of most rude in other with So Knutsen, of very couple still terms their their are health in Windsor vessels life. of

So 'XX. end we've I XXXX I even Knutsen, the been no out wouldn’t no least towards able -- for had Windsor the – now we here, and think to secure we've say stated of at as we vessel had employment but started pretty problem, -- and much that

So, okay, options. charters with

in So isn't big us think our other economies and bringing scale and business I in factor age help. size a vessels of for really the

Robert Silvera

possibility will income Will price the leading dividend to that affect positively the it rise would would rise? the stock grow, and that that

Gary Chapman

me value from price income do, on in what unit what that little dropdowns doing early commenting we -- our And spreading to think we're dropdown think our that's in probably think be and close I sponsor over very too bit a mean at perspective, streams, right too looking our now. particular to and would it I'd not Whether rich. future for distribution add assets. not? should more doing. to bit can't will our from price in diversification I to the certainly we changes stage. this right risk be predict certainly the leads at But now. more and when start we at the that's that We're think a far are I through I look foolish to otherwise I or the

Robert Silvera

shows $XX like done know you a but Good. past share as stock, have confidence a I not anything builder have put three The the last wherever are a at a price know I not would they factor. is say If $XX I a this, it and the thereby of in have but suggestion. of the two, start hold big as thing for we the of business, management be Difficulty] the out business selling confidence on flow. Would of nature us the back amount the price positive up guys a existing same would months cash use to and the and the what future of in that? shares to we cash the the it's factor, should a time at begin purchase the would share, if options [Technical give small consider you the company a available,

Gary Chapman

our our a unlikely We I regularly our do consider situation, we're all to from than operations confidence financial think kinds and the in we coming it from of that from and business thoughts investors rather think I on basis that aspect. like have to

the and business then our and market will of care get and needs we themselves to take the if right, the care Now, it unit finances operations price will itself our do. whatever take it thinks of do

kind route. of think would that down it's that So we go I unlikely

we financial providing time think profitable support more our focus the efforts on to of artificially charters a in rather kind I than spending unit signing price. would way

I while understand fully So going you're we're what at. don't I think look something that to saying, probably it's

Robert Silvera

your shows have the confidence what cash at that and in market in the executableness to I that just thereby uses of that bit. same you of show plan I'm the flow and to would a the cash time the which company earnings great in it confidence, you're it add place increasing that positive you sure and some the you not it that interest-wise plan have on though this have future the is idle way and a little and think getting money much

the putting do wish identify study would that and and to there So you to faith that to this would your being, prove that for money basis opportunity you much you do that it those business yes, put work years reasonable our it. you a I on we the confidence business which the really where money pay speak, money show management have the in faith, and to are is continued how proven options we're show can your have willing amounts just to as a have of do and that because faith we have perhaps -- marketplace over have and would in our put review and and out you and they so

a So gets that nice some way you in cash.

Gary Chapman

-- fully I saying. understand you're what look, I don't Yeah,

holds on measure having depending our of terms it, this to an in in XX% how think XX% I you sponsor of XX%, investment business want the -- business. to

are in it and clearly have confidence So in it. they invested

think there whilst way will of off would a to it are I our ways go So route, once that do itself. speak point. But showing as we a understand. rather get we I give say call. say, unlikely thought this I that down second I would different for business understand I your that. we I are And in

Robert Silvera

Yeah, be sense. does little and I would on makes see think a just it it a research good it do

you on which it's instance, the account, October, is get for days you of buying that do that put a to be do on being not commission its considered that. means the at is share, is it a was you, I very large-scale, can shares, now, $XXX speak. check if right XX in if And from extra your exercised -- there to shares in it October And X,XXX not it that option, as so -- the put away, XX, would and at of go an we $XX only company to there are do it $X.XX you just research being that give it's which chances a confidence in management's have go the part. it there. the but big, And sends if millions $XX and message Anyway, can is some the our give part capital you buying said, good. against You But would shares, not market and standing is $XX.XX, coffers. own

a worth I think it's taking at it. look

If the out $XX at trade -- can share. as January, $X.XX go to you last you a January, was

in afterwards cash that's glad of There shares. the look XXX you're bank willing study And Anyhow, for do So just it is a your a there $XXX. to a days. is X,XXX That's take at I'm and against it. yield. nice covering

not would XXX,XXX a beneficial it in put but can do ways, because flow just number easily be you cash be shares, too -- XX,XXX many, that the think of in can't shares I

Gary Chapman

Robert I'll look. I'll look a a take take call. after the

Robert Silvera

Great, the talk Gary. We'll next time.

a keep and So to done have of you the very our the KNOP. owner ships dry But of be in not for pleased and going analyst what seen shareholder point. the so you time. just take we've had I'm a that and the the we that's have now how any many company as not we're of company, shareholder Surveyors I'm up -- good long for care another work. and I'm are the company. a very We've Marine to examinations dockings proud

So that a into the way us nice gives run future.

Thank good. Gary. the next Just you We'll time. talk to you,

Gary Chapman

you. Thank Thanks.

Operator

closing over remarks. Gary you. to no further the Chapman are conference to for back There Thank so registered, like pass questions I'd

Gary Chapman

much day Thank you, very and for listening I everybody, a wish good and thank today. time your you indeed you

Operator

This Thank participation. call. today’s you you for conference all. your Thank concludes

disconnect now You line. your may

KNOT Offshore Partners (KNOP) 25 Aug 222022 Q2 Earnings call transcript