KNOT Offshore Partners LP Earnings Release—Interim Results for the Period Ended March 31, 2021
Financial Highlights
For the three months ended March 31, 2021, KNOT Offshore Partners LP (“KNOT Offshore Partners” or the “Partnership”):
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Generated total revenues of
$71.5 million , operating income of$27.6 million and net income of$28.1 million . -
Generated Adjusted EBITDA of
$51.3 million (1) -
Generated distributable cash flow of
$21.7 million (1) - Reported a distribution coverage ratio of 1.20 (2)
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Reported
$115.0 million in available liquidity, which included cash and cash equivalents of$60.0 million at March 31, 2021 (compared to$73.3 million of available liquidity and$52.6 million of cash and cash equivalents at December 31, 2020)
Other Partnership Highlights and Events
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Fleet operated with
91.6% utilization for scheduled operations and89.1% utilization overall. Utilization was lower in the first quarter due to the offhire of the Windsor Knutsen due to repairs to her main engine block (90 days) and the scheduled drydocking of the Bodil Knutsen (38 days). As Windsor Knutsen benefited from loss of hire insurance for 90 days in the quarter, including the vessel as onhire increases utilization to97.5% . - The Partnership’s operations remained materially unaffected by the COVID-19 outbreak to date.
- On January 19, 2021, the Partnership, through its wholly-owned subsidiary Knutsen Shuttle Tankers 19 AS, which owned the Raquel Knutsen, closed a sale and leaseback agreement with a Japanese-based lessor for a lease period of ten years.
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On May 13, 2021, the Partnership will pay a quarterly cash distribution of
$0.52 per common unit with respect to the quarter ended March 31, 2021 to all common unitholders of record on April 29, 2021. On May 13, 2021, the Partnership will pay a cash distribution to holders of Series A Convertible Preferred Units (“Series A Preferred Units”) with respect to the quarter ended March 31, 2021 in an aggregate amount equal to$1.8 million . - The Partnership has agreed on the commercial terms for a one-year fixed time charter contract for the Windsor Knutsen (with potential options to extend the charter by one one-year period and then one six-month period) with a major oil company to commence in the third quarter of 2021.
- During the first quarter, the Bodil Knutsen successfully completed its scheduled second renewal survey drydocking, leaving the dockyard on March 24, 2021. The Partnership took advantage of the drydocking to also install a ballast water treatment system on the vessel.
- On March 9, 2021, the charterer of the Bodil Knutsen, Equinor ASA (“Equinor”) did not notify the Partnership by this due date of its intention to exercise its option to extend the time charter for the vessel and, as a consequence, the vessel was effectively redelivered to the Partnership on February 22, 2021 at the start of the vessel’s drydock. The Partnership is now marketing the vessel for new time charter employment. Absent any such employment and to provide some support to the Partnership in the interim period, the Partnership and Knutsen NYK Offshore Tankers AS (“Knutsen NYK”) have agreed for Knutsen NYK to time charter the vessel from the Partnership on a rolling three month basis, possibly for the remainder of 2021, at a reduced rate, commencing on a date to be agreed in May 2021 based on operational practicality.
- In May 2021, the Partnership reached an agreement with the VOC Industry Co-operation Norwegian Sector (“VOCIC Norway”) whereby VOCIC Norway would fund loss of hire (at a reduced rate) during, and costs related to, the installation of a VOC (”Volatile Organic Compound”) recovery plant on the Bodil Knutsen. The work is expected to be carried out in the third or fourth quarter of 2021 and take around one month. This will significantly improve the operational attractiveness of the vessel in the North Sea and Norwegian sectors going forward as well as virtually eliminate the non-methane VOC released into the atmosphere arising from the vessel’s cargo.
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(1) |
EBITDA, Adjusted EBITDA and distributable cash flow 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, Adjusted EBITDA and distributable cash flow and a reconciliation to net income, the most directly comparable GAAP financial measure. |
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(2) |
Distribution coverage ratio is equal to distributable cash flow divided by distributions declared for the period presented. |
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Gary Chapman, Chief Executive Officer and Chief Financial Officer of KNOT Offshore Partners LP, commented, “By continuing to achieve a high effective utilization and strong cashflow throughout the first quarter, we were able to once again provide an attractive, well-covered distribution to our unitholders and we expect our current contract portfolio to continue providing solid distribution coverage throughout the year. We are also making good progress in securing full contract coverage beyond the current year, though the recent effects of COVID on our customers’ capex schedules have created near-term headwinds for shuttle tanker demand. However, given the recovery being seen in certain parts of the global economy already, we are confident that this situation will reverse and represents only an issue of timing. As we move further ahead, we continue to be optimistic about the expansion of shuttle tanker-serviced fields in Brazil and the North Sea in the mid to long term and the growth opportunities that this expansion would present to us as the leading player in the high barrier-to-entry shuttle tanker market.”
Financial Results Overview
Total revenues were
Vessel operating expenses for the first quarter of 2021 were
Depreciation was
General and administrative expenses increased
As a result, operating income for the first quarter was
Interest expense for the first quarter was
Realized and unrealized gain on derivative instruments was
