[6-K] KNOT Offshore Partners LP Current Report (Foreign Issuer)
KNOT Offshore Partners LP disclosed operational and financing details for the period ended June 30, 2025. The Partnership operates shuttle tankers under fixed charters with expirations through 2042 and reported acquisitions including the Live Knutsen and Daqing Knutsen, with the Daqing acquisition accounted for as an asset and results recorded from July 2, 2025. As of June 30, 2025 the Partnership reported pledged assets securing long-term debt, interest rate swaps with a net asset carrying amount of $6.2 million, and no transfers between fair-value levels. The Partnership stated available liquidity and covenants (minimum liquidity, book equity ratio of 30%, EBITDA-to-interest of 2.50) and noted compliance with credit facility covenants. The Partnership recognized impairment charges of $5.8 million and $10.6 million for two vessels and identified potential contract liability from the Daqing acquisition due to unfavorable charter terms. Insurance coverages and risks from market, operational, and geopolitical factors were summarized.
KNOT Offshore Partners LP ha comunicato dettagli operativi e finanziari per il periodo terminato il 30 giugno 2025. La Partnerships gestisce shuttle tankers in base a contratti di noleggio fissi con scadenze fino al 2042 e ha riportato acquisizioni tra cui Live Knutsen e Daqing Knutsen, con l'acquisizione Daqing contabilizzata come attività e i risultati registrati a partire dal 2 luglio 2025. Al 30 giugno 2025 la Partnerships ha segnalato asset in pegno a garanzia di debiti a lungo termine, swap sui tassi di interesse con un valore contabile netto di 6,2 milioni di dollari e nessun trasferimento tra livelli di fair value. Ha indicato liquidità disponibile e covenant quali liquidità minima, rapporto equity contabile del 30% e EBITDA/interessi pari a 2,50, e ha evidenziato la conformità ai covenant del credito. Ha riconosciuto impairment di 5,8 milioni e 10,6 milioni per due navi e ha identificato potenziali obbligazioni contrattuali derivanti dall'acquisizione Daqing a seguito di termini charter sfavorevoli. Sono state riassunte coperture assicurative e rischi legati a fattori di mercato, operativi e geopolitici.
KNOT Offshore Partners LP divulgó detalles operativos y financieros para el periodo terminado al 30 de junio de 2025. la Sociedad opera rompehielos de transferencia (shuttle tankers) bajo fletes fijos con vencimientos hasta 2042 y reportó adquisiciones, incluidas Live Knutsen y Daqing Knutsen, siendo la adquisición de Daqing contabilizada como activo y resultados registrados desde el 2 de julio de 2025. Al 30 de junio de 2025 la Sociedad reportó activos comprometidos para garantizar deuda a largo plazo, derivados de tasas de interés con un valor en libros neto de 6,2 millones de dólares y sin transferencias entre niveles de valor razonable. Declaró liquidez disponible y covenants (liquidez mínima, razón de patrimonio contable del 30%, EBITDA/intereses de 2,50) y señaló cumplimiento de los covenants de la línea de crédito. Reconoció cargos por deterioro de 5,8 millones y 10,6 millones para dos buques e identificó una posible obligación contractual por la adquisición de Daqing debido a términos de fletamento desfavorables. Se resumieron coberturas de seguros y riesgos de mercado, operativos y geopolíticos.
KNOT Offshore Partners LP는 2025년 6월 30일 종료 기간에 대한 운영 및 재무 세부 정보를 공시했습니다. 본 파트너십은 2042년까지 만료되는 고정 용선으로 셔틀 탱커를 운영하며 Live Knutsen 및 Daqing Knutsen을 포함한 인수를 보고했으며, Daqing 인수는 자산으로 회계 처리되며 2025년 7월 2일부터 결과가 반영되었습니다. 2025년 6월 30일 기준으로 파트너십은 장기 부채를 담보하는 약정 자산, 순장부가 620만 달러의 순자산 보유액을 가진 이자율 스왑, 공정가치 수준 간의 이전이 없음을 보고했습니다. 파트너십은 가용 유동성 및 조약(최소 유동성, 장부 자기자본 비율 30%, EBITDA-이자 2.50)을 명시하고 크레딧 시설의 조약 준수를 언급했습니다. 두 선박에 대한 580만 달러 및 1060만 달러의 impairment를 인식했고, 불리한 용선 조건으로 인한 다qing 인수에서 발생할 수 있는 계약상 책임 가능성을 확인했습니다. 보험 커버리지 및 시장, 운영, 지정학적 요인으로 인한 위험이 요약되었습니다.
KNOT Offshore Partners LP a communiqué des détails opérationnels et financiers pour la période terminée le 30 juin 2025. Le partenariat exploite des shuttle tankers sous charte fixes avec des échéances jusqu'en 2042 et a rapporté des acquisitions, notamment Live Knutsen et Daqing Knutsen, l'acquisition de Daqing étant comptabilisée comme actif et les résultats enregistrés à partir du 2 juillet 2025. Au 30 juin 2025, le partenariat a déclaré des actifs mis en gage garantissant une dette à long terme, des swaps de taux d'intérêt avec une valeur nette d'actif de 6,2 millions de dollars et aucun transfert entre les niveaux de juste valeur. Le partenariat a indiqué une liquidité disponible et des covenants (liquidité minimale, ratio capitaux propres comptables de 30 %, EBITDA sur intérêts de 2,50) et a noté la conformité aux covenants du facilitateur de crédit. Des charges d impairment de 5,8 millions et 10,6 millions ont été reconnues pour deux navires et il a été identifié une éventuelle responsabilité contractuelle liée à l'acquisition de Daqing en raison de conditions de charte défavorables. Des couvertures d'assurance et des risques liés au marché, à l'exploitation et à la géopolitique ont été résumés.
KNOT Offshore Partners LP hat operative und finanzielle Details für den Zeitraum zum 30. Juni 2025 offengelegt. Die Partnerschaft betreibt Shuttle-Tanker unter festen Charterverträgen mit Laufzeiten bis 2042 und meldete Akquisitionen, darunter Live Knutsen und Daqing Knutsen; die Daqing-Akquisition wurde als Vermögenswert bilanziell erfasst und die Ergebnisse ab dem 2. Juli 2025 berücksichtigt. Zum 30. Juni 2025 meldete die Partnerschaft verpfändete Vermögenswerte zur Absicherung langfristiger Schulden, Zinsswapverträge mit einem Nettovermögenswert von 6,2 Mio. USD sowie keineTransfers zwischen Fair-Value-Ebenen. Es wurden verfügbare Liquidität und Covenants (Mindestliquidität, Buchkapitalquote von 30 %, EBITDA zu Zinsen 2,50) angegeben und die Einhaltung der Kreditfazilitätenkovenants vermerkt. Impairment-Aufwendungen von 5,8 Mio. USD bzw. 10,6 Mio. USD wurden für zwei Schiffe ausgewiesen, und potenzielle vertragliche Verpflichtungen aus der Daqing-Akquisition aufgrund ungünstiger Charterbedingungen wurden identifiziert. Versicherungsdeckungen und Risiken durch Markt-, Betriebs- und geopolitische Faktoren wurden zusammengefasst.
KNOT Offshore Partners LP كشفت عن تفاصيل تشغيلية ومالية للفترة المنتهية في 30 يونيو 2025. تدير الشراكة ناقلات فحص النقل (shuttle tankers) بعقود إيجار ثابتة تنتهي حتى 2042 وأفادت بعمليات استحواذ بما في ذلك Live Knutsen و Daqing Knutsen، مع اعتبار استحواذ Daqing كأصل وتسجيل النتائج اعتبارًا من 2 يوليو 2025. حتى 30 يونيو 2025 أفادت الشراكة بأصول مودعة تضمن الدين طويل الأجل، ومبادلات سعر الفائدة بصافي قيمة أصول قدرها 6.2 مليون دولار، وعدم وجود تحويلات بين مستويات القيمة العادلة. أشارت إلى السيولة المتاحة والقيود (سيولة قصوى، نسبة حقوق الملكية الدفترية 30%، EBITDA/الفائدة 2.50) وأعلنت الامتثال لقيود تسهيل الائتمان. اعترفت بتحميل انخفاض قيمتين بمبلغ 5.8 مليون و10.6 مليون دولار لمرسينيْن وقُدّمت احتماليات 책임 تعاقدي من استحواذ Daqing بسبب شروط امتياز غير مواتية. تم تلخيص تغطيات التأمين والمخاطر من عوامل السوق والتشغيلية والجيوسياسية.
KNOT Offshore Partners LP 披露了截至2025年6月30日的运营和融资细节。该合伙企业在固定租约下运营中转油船（shuttle tankers），租期延至2042年，并报告了包括 Live Knutsen 与 Daqing Knutsen 在内的并购，Daqing 的并购被视为资产并自2025年7月2日起确认业绩。至2025年6月30日，该合伙企业披露了用于长期债务的抵押资产、净资产账面值为620万美元的利率互换，以及公允价值层级之间没有转移。并指出可用流动性及契约条款（最低流动性、账面股本比率30%、EBITDA/利息2.50），并称遵守信贷设定的契约。确认两艘船舶的减值损失分别为580万美元和1060万美元，并因不利的租船条款而产生Daqing并购的潜在合同责任。还对保险覆盖范围以及来自市场、运营和地缘政治因素的风险作了摘要。
- Credit covenant compliance reported as of June 30, 2025
- Available liquidity and working capital described as sufficient for at least the next twelve months
- Counterparty guaranteed hire rates for acquired vessels (KNOT/Knutsen NYK guarantees) that support revenue stability
- Completed acquisitions (Live Knutsen and Daqing Knutsen) increasing the Partnership's fleet and chartered capacity
- Impairment charges of $5.8 million and $10.6 million related to two vessels
- Expected contract liability from the Daqing Knutsen acquisition due to unfavorable charter terms
- Derivative exposure without hedge accounting creating earnings volatility from mark-to-market changes
- Significant secured long-term debt and near-term maturities including balloon payments that may require refinancing
Insights
TL;DR: The report shows stable covenant compliance and liquidity but notable vessel impairments, acquisition-related adjustments, and derivative volatility risks.
The Partnership demonstrates short-term financial stability by meeting credit covenants and maintaining specified liquidity thresholds, while completing two asset acquisitions (Live Knutsen and Daqing Knutsen) that involve secured financing and guarantor arrangements. Material items include combined impairment charges ($16.4 million) and an expected contract liability tied to the Daqing acquisition because the acquired charter is unfavorable to market rates. Interest rate swaps are carried as a net asset of $6.2 million but the Partnership does not apply hedge accounting, exposing earnings to mark-to-market volatility. Debt is largely secured by vessels and includes near-term maturities and balloon payments, creating refinancing and liquidity monitoring needs.
TL;DR: Strategic fleet additions expand chartered capacity but bring asset-level purchase adjustments and guaranteed hire-rate arrangements that shift risk.
The Live Knutsen and Daqing Knutsen transactions were structured as asset acquisitions with debt assumed and post-closing working-capital and swap adjustments. Purchase-price highlights: Live Knutsen approx $100 million less $73.4 million debt; Daqing approx $95 million less $70.5 million debt (net cost ~$24.8 million). Both acquisitions include counterparty-guaranteed hire-rate protections from related parties (KNOT/Knutsen NYK) through long-dated arrangements, which support revenue stability but create related-party dependence. A contract liability is anticipated for the Daqing acquisition due to below-market charter terms, which will affect near-term operating results.
KNOT Offshore Partners LP ha comunicato dettagli operativi e finanziari per il periodo terminato il 30 giugno 2025. La Partnerships gestisce shuttle tankers in base a contratti di noleggio fissi con scadenze fino al 2042 e ha riportato acquisizioni tra cui Live Knutsen e Daqing Knutsen, con l'acquisizione Daqing contabilizzata come attività e i risultati registrati a partire dal 2 luglio 2025. Al 30 giugno 2025 la Partnerships ha segnalato asset in pegno a garanzia di debiti a lungo termine, swap sui tassi di interesse con un valore contabile netto di 6,2 milioni di dollari e nessun trasferimento tra livelli di fair value. Ha indicato liquidità disponibile e covenant quali liquidità minima, rapporto equity contabile del 30% e EBITDA/interessi pari a 2,50, e ha evidenziato la conformità ai covenant del credito. Ha riconosciuto impairment di 5,8 milioni e 10,6 milioni per due navi e ha identificato potenziali obbligazioni contrattuali derivanti dall'acquisizione Daqing a seguito di termini charter sfavorevoli. Sono state riassunte coperture assicurative e rischi legati a fattori di mercato, operativi e geopolitici.
KNOT Offshore Partners LP divulgó detalles operativos y financieros para el periodo terminado al 30 de junio de 2025. la Sociedad opera rompehielos de transferencia (shuttle tankers) bajo fletes fijos con vencimientos hasta 2042 y reportó adquisiciones, incluidas Live Knutsen y Daqing Knutsen, siendo la adquisición de Daqing contabilizada como activo y resultados registrados desde el 2 de julio de 2025. Al 30 de junio de 2025 la Sociedad reportó activos comprometidos para garantizar deuda a largo plazo, derivados de tasas de interés con un valor en libros neto de 6,2 millones de dólares y sin transferencias entre niveles de valor razonable. Declaró liquidez disponible y covenants (liquidez mínima, razón de patrimonio contable del 30%, EBITDA/intereses de 2,50) y señaló cumplimiento de los covenants de la línea de crédito. Reconoció cargos por deterioro de 5,8 millones y 10,6 millones para dos buques e identificó una posible obligación contractual por la adquisición de Daqing debido a términos de fletamento desfavorables. Se resumieron coberturas de seguros y riesgos de mercado, operativos y geopolíticos.
KNOT Offshore Partners LP는 2025년 6월 30일 종료 기간에 대한 운영 및 재무 세부 정보를 공시했습니다. 본 파트너십은 2042년까지 만료되는 고정 용선으로 셔틀 탱커를 운영하며 Live Knutsen 및 Daqing Knutsen을 포함한 인수를 보고했으며, Daqing 인수는 자산으로 회계 처리되며 2025년 7월 2일부터 결과가 반영되었습니다. 2025년 6월 30일 기준으로 파트너십은 장기 부채를 담보하는 약정 자산, 순장부가 620만 달러의 순자산 보유액을 가진 이자율 스왑, 공정가치 수준 간의 이전이 없음을 보고했습니다. 파트너십은 가용 유동성 및 조약(최소 유동성, 장부 자기자본 비율 30%, EBITDA-이자 2.50)을 명시하고 크레딧 시설의 조약 준수를 언급했습니다. 두 선박에 대한 580만 달러 및 1060만 달러의 impairment를 인식했고, 불리한 용선 조건으로 인한 다qing 인수에서 발생할 수 있는 계약상 책임 가능성을 확인했습니다. 보험 커버리지 및 시장, 운영, 지정학적 요인으로 인한 위험이 요약되었습니다.
KNOT Offshore Partners LP a communiqué des détails opérationnels et financiers pour la période terminée le 30 juin 2025. Le partenariat exploite des shuttle tankers sous charte fixes avec des échéances jusqu'en 2042 et a rapporté des acquisitions, notamment Live Knutsen et Daqing Knutsen, l'acquisition de Daqing étant comptabilisée comme actif et les résultats enregistrés à partir du 2 juillet 2025. Au 30 juin 2025, le partenariat a déclaré des actifs mis en gage garantissant une dette à long terme, des swaps de taux d'intérêt avec une valeur nette d'actif de 6,2 millions de dollars et aucun transfert entre les niveaux de juste valeur. Le partenariat a indiqué une liquidité disponible et des covenants (liquidité minimale, ratio capitaux propres comptables de 30 %, EBITDA sur intérêts de 2,50) et a noté la conformité aux covenants du facilitateur de crédit. Des charges d impairment de 5,8 millions et 10,6 millions ont été reconnues pour deux navires et il a été identifié une éventuelle responsabilité contractuelle liée à l'acquisition de Daqing en raison de conditions de charte défavorables. Des couvertures d'assurance et des risques liés au marché, à l'exploitation et à la géopolitique ont été résumés.
KNOT Offshore Partners LP hat operative und finanzielle Details für den Zeitraum zum 30. Juni 2025 offengelegt. Die Partnerschaft betreibt Shuttle-Tanker unter festen Charterverträgen mit Laufzeiten bis 2042 und meldete Akquisitionen, darunter Live Knutsen und Daqing Knutsen; die Daqing-Akquisition wurde als Vermögenswert bilanziell erfasst und die Ergebnisse ab dem 2. Juli 2025 berücksichtigt. Zum 30. Juni 2025 meldete die Partnerschaft verpfändete Vermögenswerte zur Absicherung langfristiger Schulden, Zinsswapverträge mit einem Nettovermögenswert von 6,2 Mio. USD sowie keineTransfers zwischen Fair-Value-Ebenen. Es wurden verfügbare Liquidität und Covenants (Mindestliquidität, Buchkapitalquote von 30 %, EBITDA zu Zinsen 2,50) angegeben und die Einhaltung der Kreditfazilitätenkovenants vermerkt. Impairment-Aufwendungen von 5,8 Mio. USD bzw. 10,6 Mio. USD wurden für zwei Schiffe ausgewiesen, und potenzielle vertragliche Verpflichtungen aus der Daqing-Akquisition aufgrund ungünstiger Charterbedingungen wurden identifiziert. Versicherungsdeckungen und Risiken durch Markt-, Betriebs- und geopolitische Faktoren wurden zusammengefasst.
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16
UNDER THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended
Commission File Number:
(Translation of registrant’s name into English)
(Address of principal executive office)
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.
Form 20-F ☒ Form 40-F ☐
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KNOT OFFSHORE PARTNERS LP
REPORT ON FORM 6-K FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2025
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Unaudited Condensed Consolidated Statements of Operations For the Three and Six Months Ended June 30, 2025 and 2024 | 3 |
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Unaudited Condensed Consolidated Statements of Comprehensive Income For the Three and Six Months Ended June 30, 2025 and 2024 | 4 |
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Unaudited Condensed Consolidated Balance Sheets As of June 30, 2025, and December 31, 2024 | 5 |
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Unaudited Condensed Consolidated Statements of Changes in Partners’ Capital for the Three and Six Months Ended June 30, 2025 and 2024 | 7 |
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Unaudited Condensed Consolidated Statements of Cash Flows For the Six Months Ended June 30, 2025 and 2024 | 8 |
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Notes to Unaudited Condensed Consolidated Financial Statements | 9 |
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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS | 35 |
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FORWARD-LOOKING STATEMENTS | 47 |
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EXHIBITS | 50 |
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SIGNATURE | 51 |
THIS REPORT ON FORM 6-K IS HEREBY INCORPORATED BY REFERENCE INTO THE FOLLOWING REGISTRATION STATEMENTS:
| ● | FORM F-3 (NO. 333-274460) ORIGINALLY FILED WITH THE SECURITIES AND EXCHANGE COMMISSION (“SEC”) ON SEPTEMBER 11, 2023. |
| ● | FORM F-3 (NO. 333-227942) ORIGINALLY FILED WITH THE SEC ON OCTOBER 23, 2018. |
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Unaudited Condensed Consolidated Statements of Operations
For the Three and Six Months Ended June 30, 2025 and 2024
(U.S. Dollars in thousands, except per unit amounts)
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Operating revenues: (Notes 3 and 4) | | | | | | | | | | | | | |
Time charter and bareboat revenues | | $ | | | $ | | | $ | | | $ | | |
Voyage revenues | | | — | | | | | | | | | | |
Loss of hire insurance recoveries (Note 5) | |
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Other income | | | | | | | | | | | | | |
Total revenues | |
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Gain from disposals of assets | | | — | | | — | | | | | | — | |
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Operating expenses: | |
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Vessel operating expenses | |
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Voyage expenses and commission | | | | | | | | | | | | | |
Depreciation | |
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Impairment (Note 20) | |
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General and administrative expenses | |
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Total operating expenses | |
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Operating income | |
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Finance income (expense): (Note 6) | | | | | | | | | | | | | |
Interest income | |
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Interest expense (Note 6) | |
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Other finance income (expense) (Note 6) | |
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Realized and unrealized gain (loss) on derivative instruments (Note 7) | |
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Net gain (loss) on foreign currency transactions | |
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Total finance expense | |
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Income (loss) before income taxes | |
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Income tax expense (Note 9) | |
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Net income (loss) | | $ | | | $ | ( | | $ | | | $ | ( | |
Series A Preferred unitholders’ interest in net income (loss) | | $ | | | $ | | | $ | | | $ | | |
General Partner’s interest in net income (loss) | |
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Limited Partners’ interest in net income (loss) | |
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Earnings per unit (Basic): (Note 16) | | | | | | | | | | | | | |
Common unit (basic) | | $ | | | $ | ( | | $ | | | $ | ( | |
Class B unit (basic) | | $ | — | | $ | — | | $ | — | | $ | — | |
General Partner unit (basic) | | $ | | | $ | ( | | $ | | | $ | ( | |
Earnings per unit (Diluted): (Note 16) | |
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Common unit (diluted) | | $ | | | $ | ( | | $ | | | $ | ( | |
Class B unit (diluted) | | $ | — | | $ | — | | $ | — | | $ | — | |
General Partner unit (diluted) | | $ | | | $ | ( | | $ | | | $ | ( | |
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
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Unaudited Condensed Consolidated Statements of Comprehensive Income
For the Three and Six Months Ended June 30, 2025 and 2024
(U.S. Dollars in thousands)
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| | Three Months Ended | | Six Months Ended | | ||||||||
| | June 30, | | June 30, | | ||||||||
(U.S. Dollars in thousands) |
| 2025 |
| 2024 |
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| 2024 |
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Net income (loss) | | $ | | | $ | ( | | $ | | | $ | ( | |
Other comprehensive income, net of tax | |
| | |
| | |
| | |
| | |
Comprehensive income (loss) | | $ | | | $ | ( | | $ | | | $ | ( | |
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
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Unaudited Condensed Consolidated Balance Sheets
As of June 30, 2025, and December 31, 2024
(U.S. Dollars in thousands)
| | | | | | | |
(U.S. Dollars in thousands) |
| At June 30, 2025 |
| At December 31, 2024 |
| ||
ASSETS |
| |
|
| |
|
|
Current assets: |
| |
|
| |
|
|
Cash and cash equivalents (Note 8) | | $ | | | $ | | |
Amounts due from related parties (Note 14) | |
| | |
| | |
Inventories (Note 11) | |
| | |
| | |
Derivative assets (Notes 7 and 8) | |
| | |
| | |
Other current assets (Note 18) | |
| | |
| | |
Total current assets | |
| | |
| | |
| | | | | | | |
Long-term assets: | |
| | |
| | |
Vessels, net of accumulated depreciation (Notes 10 and 20) | |
| | |
| | |
Right-of-use assets (Note 4) | | | | | | | |
Deferred tax assets (Note 9) | |
| | |
| | |
Derivative assets (Notes 7 and 8) | |
| | |
| | |
Accrued income | |
| | |
| | |
Total long-term assets | |
| | |
| | |
Total assets | | $ | | | $ | | |
| | | | | | | |
LIABILITIES AND EQUITY | |
| | |
| | |
Current liabilities: | |
| | |
| | |
Trade accounts payable | | $ | | | $ | | |
Accrued expenses (Note 19) | |
| | |
| | |
Current portion of long-term debt (Notes 8 and 13) | | | | | | | |
Current lease liabilities (Note 4) | |
| | |
| | |
Income taxes payable (Note 9) | |
| | |
| | |
Current portion of contract liabilities (Note 12) | |
| | |
| | |
Prepaid charter and deferred revenue | |
| | |
| | |
Amount due to related parties (Note 14) | |
| | |
| | |
Total current liabilities | |
| | |
| | |
| | | | | | | |
Long-term liabilities: | |
| | |
| | |
Long-term debt (Notes 8 and 13) | |
| | |
| | |
Lease liabilities (Note 4) | | | | | | | |
Derivative liabilities (Notes 7 and 8) | | | | | | — | |
Contract liabilities (Note 12) | | | | | | | |
Deferred tax liabilities (Note 9) | |
| | |
| | |
Deferred revenues | |
| | |
| | |
Total long-term liabilities | |
| | |
| | |
Total liabilities | |
| | |
| | |
Commitments and contingencies (Note 15) | |
| | |
| | |
Series A Convertible Preferred Units | |
| | |
| | |
Equity: | |
| | |
| | |
Partners’ capital: | |
| | |
| | |
Common unitholders: | |
| | |
| | |
Class B unitholders (1): | | | | | | | |
General partner interest: | |
| | |
| | |
Total partners’ capital | |
| | |
| | |
Total liabilities and equity | | $ | | | $ | | |
(1) |
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The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
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Unaudited Condensed Consolidated Statements of Changes in Partners’ Capital
for the Three and Six Months Ended June 30, 2025 and 2024
(U.S. Dollars in thousands)
| | | | | | | | | | | | | | | | | | |
| | Partners’ Capital | | Accumulated | | | | | Series A | |||||||||
| | | | | | | | General | | Other | | Total | | Convertible | ||||
(U.S. Dollars in thousands) | | Common | | Class B | | Partner | | Comprehensive | | Partners’ | | Preferred | ||||||
Three Months Ended June 30, 2024 and 2025 |
| Units |
| Units |
| Units |
| Income (Loss) |
| Capital |
| Units | ||||||
Consolidated balance at March 31, 2024 | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | |
Net income (loss) | | | ( | | | — | | | ( | | | | | | ( | | | |
Other comprehensive income | | | — | | | — | | | — | | | | | | — | | | — |
Cash distributions | | | ( | | | — | | | ( | | | | | | ( | | | ( |
Consolidated balance at June 30, 2024 | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | |
| | | | | | | | | | | | | | | | | | |
Consolidated balance at March 31, 2025 | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | |
Net income (loss) | | | | | | — | | | | | | | | | | | | |
Other comprehensive income | | | — | | | — | | | — | | | | | | — | | | — |
Cash distributions | | | ( | | | — | | | ( | | | | | | ( | | | ( |
Consolidated balance at June 30, 2025 | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | |
| | | | | | | | | | | | | | | | | | |
Six Months Ended June 30, 2024 and 2025 | | | | | | | | | | | | | | | | | | |
Consolidated balance at December 31, 2023 | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | |
Net income (loss) | |
| ( | |
| — | |
| ( | |
| | |
| ( | |
| |
Other comprehensive income | |
| — | |
| — | |
| — | |
| | |
| — | |
| — |
Cash distributions | |
| ( | |
| — | |
| ( | |
| | |
| ( | |
| ( |
Consolidated balance at June 30, 2024 | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | |
| | | | | | | | | | | | | | | | | | |
Consolidated balance at December 31, 2024 | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | |
Net income (loss) | |
| | |
| — | |
| | |
| | |
| | |
| |
Other comprehensive income | |
| — | |
| — | |
| — | |
| | |
| — | |
| — |
Cash distributions | |
| ( | |
| — | |
| ( | |
| | |
| ( | |
| ( |
Consolidated balance at June 30, 2025 | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | |
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
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Unaudited Condensed Consolidated Statements of Cash Flows
For the Six Months Ended June 30, 2025 and 2024
(U.S. Dollars in thousands)
| | | | | | | |
|
| Six Months Ended June 30, |
| ||||
(U.S. Dollars in thousands) | | 2025 |
| 2024 | | ||
OPERATING ACTIVITIES | | |
| | |
| |
Net income (loss) (1) | | $ | | | $ | ( | |
Adjustments to reconcile net income (loss) to cash provided by operating activities: | |
| | |
| | |
Depreciation | |
| | |
| | |
Impairment | |
| — | |
| | |
Amortization of contract intangibles / liabilities | |
| ( | |
| — | |
Amortization of deferred revenue | | | ( | | | ( | |
Amortization of deferred debt issuance cost | |
| | |
| | |
Drydocking expenditure | |
| ( | |
| ( | |
Income tax (benefit) expense | |
| | |
| | |
Income taxes paid | |
| ( | |
| ( | |
Unrealized (gain) loss on derivative instruments | | | | | | | |
Unrealized (gain) loss on foreign currency transactions | | | ( | | | | |
Net gain from sale of asset | | | ( | | | — | |
Changes in operating assets and liabilities: | |
| | |
| | |
Decrease (increase) in amounts due from related parties | |
| ( | |
| ( | |
Decrease (increase) in inventories | |
| ( | |
| ( | |
Decrease (increase) in other current assets | |
| ( | |
| ( | |
Decrease (increase) in accrued income | |
| ( | |
| — | |
Increase (decrease) in trade accounts payable | |
| | |
| ( | |
Increase (decrease) in accrued expenses | |
| | |
| ( | |
Increase (decrease) prepaid charter | |
| ( | |
| | |
Increase (decrease) in amounts due to related parties | |
| | |
| | |
Net cash provided by operating activities | |
| | |
| | |
| | | | | | | |
INVESTING ACTIVITIES | |
| | |
| | |
Additions to vessel and equipment | |
| ( | |
| ( | |
Proceeds from asset swap (net cash) | | | | | | — | |
Net cash provided by (used in) investing activities | |
| | |
| ( | |
| | | | | | | |
FINANCING ACTIVITIES | |
|
| |
|
| |
Proceeds from long-term debt | |
| — | |
| | |
Repayments of long-term debt | |
| ( | |
| ( | |
Payment of debt issuance cost | |
| — | |
| ( | |
Cash distributions | |
| ( | |
| ( | |
Net cash used in financing activities | |
| ( | |
| ( | |
Effect of exchange rate changes on cash | |
| | |
| ( | |
Net increase (decrease) in cash and cash equivalents | |
| ( | |
| ( | |
Cash and cash equivalents at the beginning of the period | |
| | |
| | |
Cash and cash equivalents at the end of the period | | $ | | | $ | | |
| (1) |
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
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Notes to Unaudited Condensed Consolidated Financial Statements
| 1) | Description of Business |
KNOT Offshore Partners LP (the “Partnership”) was formed as a limited partnership under the laws of the Republic of the Marshall Islands. The Partnership was formed for the purpose of acquiring
As of June 30, 2025, the Partnership had a fleet of
On July 2, 2025, the Partnership’s wholly owned subsidiary, KNOT Shuttle Tankers AS, acquired from KNOT all outstanding shares in KNOT Shuttle Tankers 37 AS, the company that owns the Daqing Knutsen. Please see Note 22—Subsequent Events. The acquisition of the Daqing Knutsen will be accounted for as an acquisition of an asset. As a result, the Partnership will record the results of operations of the Daqing Knutsen in its consolidated statement of operations from July 2, 2025.
The unaudited condensed consolidated financial statements have been prepared assuming that the Partnership will continue as a going concern.
The Partnership expects that its primary future sources of funds will be available cash, cash from operations, borrowings under any new loan agreements, any vessel sales and the proceeds of any debt or equity financings. The Partnership believes that these sources of funds (assuming the current rates earned from existing charters) will be sufficient to cover operational cash outflows, working capital requirements and ongoing obligations under the Partnership’s lease obligations and financing commitments to pay loan interest and make scheduled loan repayments and to make distributions on its outstanding units assuming the Partnership is able to timely refinance its maturing credit facilities on similar terms as its existing facilities. Accordingly, as of September 29, 2025, the Partnership believes that its current resources, including the undrawn portion of its revolving credit facilities of $
2) | Summary of Significant Accounting Policies |
(a)Basis of Preparation
The accompanying unaudited condensed consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) and applicable rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”) for financial information. In the opinion of management of the Partnership, all adjustments considered necessary for a fair presentation, which are of normal recurring nature, have been included. All intercompany balances and transactions are eliminated. The unaudited condensed consolidated financial statements do not include all the disclosures and information required for a complete set of annual financial statements; and, therefore, these unaudited condensed consolidated financial statements should be read in conjunction with the Partnership’s audited consolidated financial statements for the year ended December 31, 2024, which are included in the Partnership’s Annual Report on Form 20-F (the “2024 20-F”).
(b)Significant Accounting Policies
The accounting policies adopted in the preparation of the unaudited condensed consolidated financial statements are consistent with those followed in the preparation of the Partnership’s audited consolidated financial statements for the year ended December 31, 2024, as contained in the 2024 20-F.
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(c)Recent Accounting Pronouncements
Adoption of new accounting standards
On December 14, 2023, the Financial Accounting Standards Board (“FASB”) issued the Accounting Standard Update (“ASU”) 2023-09 Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The guidance requires disaggregated information about a reporting entity’s effective tax rate reconciliation as well as information on income taxes paid. The standard is intended to benefit investors by providing more detailed income tax disclosures that would be useful in making capital allocation decisions. This guidance is effective for periods beginning after December 15, 2024, with early adoption permitted. The amendments in this update should be applied either prospectively or retrospectively to all periods presented in the financial statements. The new guidance is not expected to materially impact the Partnership.
Accounting pronouncements not yet adopted
Other recently issued accounting pronouncements are not expected to materially impact the Partnership.
3)Segment Information
The Partnership has not presented segment information as it considers its operations to occur in
The following table presents time charter and bareboat revenues and percentages of revenues for material customers that accounted for more than
| | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended June 30, | | | Six Months Ended June 30, | | | ||||||||||||||||
(U.S. Dollars in thousands) |
| 2025 |
| 2024 |
|
| 2025 |
| 2024 |
|
| ||||||||||||
Brazil Shipping I Limited, a subsidiary of Royal Dutch Shell | | $ | |
| | % | $ | |
| | % | | $ | |
| | % | $ | |
| | % | |
Equinor ASA | |
| |
| | % |
| |
| | % | |
| |
| | % |
| |
| | % | |
Eni Trading and Shipping S.p.A. |
| | |
| | % | | — |
| % |
| | |
| | % | | — |
| % |
| ||
Fronape International Company, a subsidiary of Petrobras Transporte S.A. | | | |
| | % | | |
| | % | | | |
| | % | | |
| | % | |
Chartering and Shipping Service S.A., a subsidiary of TotalEnergies | | | | | | % | | | | | % | | | | | | % | | | | | % | |
Repsol Sinopec Brasil, S.A., a subsidiary of Repsol Sinopec Brasil, B.V., combined with Repsol Trading S.A | |
| |
| | % |
| |
| | % | |
| |
| | % |
| |
| | % | |
KNOT | | $ | — | | — | % | $ | | | | % | | $ | | | | % | $ | | | | % | |
The Partnership has financial assets that expose it to credit risk arising from possible default by a counterparty. The Partnership considers its counterparties to be creditworthy banking and financial institutions and does not expect any significant loss to result from non-performance by such counterparties. The maximum loss due to credit risk that the Partnership would incur if counterparties failed completely to perform would be the carrying value of cash and cash equivalents, and derivative assets. The Partnership, in the normal course of business, does not demand collateral from its counterparties.
The chief operating decision maker manages the business activities on a consolidated basis and assesses performance for the shuttle tanker segment based on operating income that also is reported on the Consolidated Statements of Operations. Although separate vessel financial information is available, the chief operating decision maker internally evaluates the performance of the Partnership as a whole and not on basis of each vessel or charters. As a result, the Partnership has determined that it has
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The chief operating decision maker uses operating income to evaluate performance and allocation of resources. In this industry, the nature of allocation of resources for new capital expenditure is typically not related to the existing vessels but would rather result in the acquisition or construction of a new shuttle tanker. Typically, such investment decisions are not made on a speculative basis but would occur when a specific long-term customer contract has already been negotiated. The ability to negotiate a contract with acceptable terms to justify such a major capital expenditure is dependent on the prevailing market conditions at the time of the negotiation rather than on historical indicators of operations. Much of the ongoing capital expenditure is driven by classification requirements and is to a large extent unavoidable.
The decisions related to resource allocation and the assessment of the operating results of the Partnership is the responsibility of the Board of Directors, top executives and the entity that has technical management of the vessels on time charters. The Partnership’s chief operating decision maker is as such the Board of Directors.
The Partnership does not have intra-entity sales or transfers.
For information about reported segment assets, segment revenue, significant segment expense categories and segment profit or loss, reference is made to the Consolidated Balance Sheets and Consolidated Statements of Operations.
4)Operating Leases
Revenues
The Partnership’s primary source of revenues is chartering its shuttle tankers to its customers. The Partnership primarily uses two types of contracts, time charter contracts and bareboat charter contracts. The Partnership’s time charter contracts include both a lease component, consisting of the bareboat element of the contract, and non-lease component, consisting of operation of the Vessel for the customers, which includes providing the crewing and other services related to the Vessel’s operations, the cost of which is included in the daily hire rate, except when off hire.
The following table presents the Partnership’s revenues by time charter and bareboat charters and other revenues for the three and six months ended June 30, 2025 and 2024:
| | | | | | | | | | | | | |
| | Three Months Ended June 30, | | Six Months Ended June 30, | | ||||||||
(U.S. Dollars in thousands) |
| 2025 |
| 2024 |
| 2025 |
| 2024 |
| ||||
Time charter revenues (service element included) | | $ | | | $ | | | $ | | | $ | | |
Bareboat revenues | | | — | | | | | | — | | | | |
Total time charter and bareboat revenues | | | | | | | | | | | | | |
Other revenues (voyage revenues, loss of hire insurance recoveries and other income) | | | | | | | | | | | | | |
Total revenues | | $ | | | $ | | | $ | | | $ | | |
As of June 30, 2025, the minimum contractual future revenues to be received from time charters and bareboat charters during the next five years and thereafter are as follows (including service element of the time charter, but excluding unexercised customer option periods and excluding any contracted revenues signed after June 30, 2025):
| | | |
(U.S. Dollars in thousands) |
| | |
2025 (excluding the six months ended June 30, 2025) | | $ | |
2026 | | | |
2027 | | | |
2028 | | | |
2029 | | | |
2030 and thereafter | | | |
Total |
| $ | |
The minimum contractual future revenues should not be construed to reflect total charter hire revenues for any of the years. Minimum contractual future revenues are calculated based on certain assumptions such as operating days per year. In addition, minimum contractual future revenues presented in the table above have not been reduced by estimated off hire time for periodic maintenance. The amounts may vary given unscheduled future events such as vessel maintenance.
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The Partnership’s fleet as of June 30, 2025 consisted of:
| ● | the Windsor Knutsen, a conventional oil tanker built in 2007 and retrofitted to a shuttle tanker in 2011 that is currently operating under a time charter contract with Sea River Maritime LLC, a subsidiary of ExxonMobil (“ExxonMobil”) which commenced on June 4, 2025 for a fixed period of |
| ● | the Bodil Knutsen, a shuttle tanker built in 2011 that is currently operating under a time charter contract with Equinor ASA (“Equinor”) that expires in March |
| ● | the Fortaleza Knutsen, a shuttle tanker built in 2011 that is currently operating under a time charter contract that expires in March |
| ● | the Recife Knutsen, a shuttle tanker built in 2011 that is currently operating under a time charter that expires in August |
| ● | the Carmen Knutsen, a shuttle tanker built in 2013 that is currently operating under a time charter contract that expires in January |
| ● | the Hilda Knutsen, a shuttle tanker built in 2013 that is currently operating under a time charter contract with a subsidiary of Royal Dutch Shell (“Shell”), which commenced on March 23, 2025, initially for a fixed period of |
| ● | the Torill Knutsen, a shuttle tanker built in 2013 that is currently operating under a time charter with Eni Trade and Biofuels S.p.A. ("Eni") which expires in December |
| ● | the Ingrid Knutsen, a shuttle tanker built in 2013 that is currently operating under a time charter with Eni which expires in October |
| ● | the Raquel Knutsen, a shuttle tanker built in 2015 that is currently operating under a time charter contract that expires in June |
| ● | the Tordis Knutsen, a shuttle tanker built in 2016 that is currently operating under a time charter with Shell that expires in July |
| ● | the Vigdis Knutsen, a shuttle tanker built in 2017 that is currently operating under a time charter with Shell that expires in March |
| ● | the Lena Knutsen, a shuttle tanker built in 2017 that is currently operating under a time charter with Shell that expires in September |
| ● | the Anna Knutsen, a shuttle tanker built in 2017 that is currently operating under a time charter contract with Chartering and Shipping Service S.A., a wholly owned subsidiary of TotalEnergies (“TotalEnergies”) that expires in April |
| ● | the Brasil Knutsen, a shuttle tanker built in 2013 that operated under a time charter contract with Petrorio Luxembourg Holding S.A.R.L. (“Petrorio”), until September |
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| ● | the Tove Knutsen, a shuttle tanker built in 2020 that is currently operating under a time charter contract with Equinor that expires in November |
| ● | the Synnøve Knutsen, a shuttle tanker built in 2020 that is currently operating under a time charter contract with Equinor that expires in February |
| ● | the Tuva Knutsen, a shuttle tanker built in 2021 that is currently operating under a time charter contract with TotalEnergies that expires in February |
| ● | the Live Knutsen, a shuttle tanker built in 2021 that is currently operating under a time charter contract with Galp Sinopec that expires in November |
Furthermore, on July 2, 2025, the Partnership acquired from KNOT all of the outstanding shares in the owner of the Daqing Knutsen, a shuttle tanker built in 2022 that is currently operating under a time charter contract with PetroChina that expires in July
Lease obligations
The Partnership does not have any material leased assets but has some leased equipment on operational leases on the various ships operating on time charter contracts. As of June 30, 2025, the right-of-use asset and lease liability for operating leases was $
A maturity analysis of the Partnership’s lease liabilities from leased-in equipment as of June 30, 2025 is as follows:
| | | |
(U.S. Dollars in thousands) |
|
| |
2025 (excluding the six months ended June 30, 2025) | | $ | |
2026 | | | |
2027 | |
| |
2028 | | | |
Total | | | |
Less imputed interest | |
| |
Carrying value of operating lease liabilities | | $ | |
5)Insurance proceeds
Insurance claims for property damage for recoveries up to the amount of loss recognized are recorded when the claims submitted to insurance carriers are probable of recovery. Claims for property damage in excess of the loss recognized and for loss of hire are recognized when the proceeds are received. As of June 30, 2025, and December 31, 2024, the Partnership had open insurance claims for hull and machinery recoveries of $
Loss of hire proceeds of $
Loss of hire proceeds of $
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6)Other Finance Expenses
(a)Interest Expense
The following table presents the components of interest expense as reported in the consolidated statements of operations for the three and six months ended June 30, 2025 and 2024:
| | | | | | | | | | | | | |
| | Three Months Ended | | Six Months Ended | | ||||||||
| | June 30, | | June 30, | | ||||||||
(U.S. Dollars in thousands) |
| 2025 |
| 2024 |
| 2025 |
| 2024 |
| ||||
Interest expense | | $ | | | $ | | | $ | | | $ | | |
Amortization of debt issuance cost and fair value of debt assumed | |
| | |
| | |
| | |
| | |
Total interest expense | | $ | | | $ | | | $ | | | $ | | |
(b)Other Finance Expense
The following table presents the components of other finance expense for three and six months ended June 30, 2025 and 2024:
| | | | | | | | | | | | | |
| | Three Months Ended | | Six Months Ended | | ||||||||
| | June 30, | | June 30, | | ||||||||
(U.S. Dollars in thousands) |
| 2025 |
| 2024 |
| 2025 |
| 2024 |
| ||||
Bank fees, charges (other income) | | $ | | | $ | ( | | $ | | | $ | | |
Commitment fees | |
| |
|
| — | |
| |
|
| — | |
Total other finance (income) expense | | $ | |
| $ | ( | | $ | |
| $ | | |
7)Derivative Instruments
The unaudited condensed consolidated financial statements include the results of interest rate swap contracts to manage the Partnership’s exposure related to changes in interest rates on its variable rate debt instruments and the results of foreign exchange forward contracts to manage its exposure related to changes in currency exchange rates on its operating expenses, mainly crew expenses, in currency other than the U.S. Dollar and on its contract obligations. The Partnership does not apply hedge accounting for derivative instruments. The Partnership does not speculate using derivative instruments.
By using derivative financial instruments to economically hedge exposures to changes in interest rates, the Partnership exposes itself to credit risk and market risk. Derivative instruments that economically hedge exposures are used for risk management purposes, but these instruments are not designated as hedges for accounting purposes. Credit risk is the failure of the counterparty to perform under the terms of the derivative instrument. When the fair value of a derivative instrument is positive, the counterparty owes the Partnership, which creates credit risk for the Partnership. When the fair value of a derivative instrument is negative, the Partnership owes the counterparty, and, therefore, the Partnership is not exposed to the counterparty’s credit risk in those circumstances. The Partnership minimizes counterparty credit risk in derivative instruments by entering into transactions with major banking and financial institutions. The derivative instruments entered into by the Partnership do not contain credit risk-related contingent features. The Partnership has not entered into master netting agreements with the counterparties to its derivative financial instrument contracts.
Market risk is the adverse effect on the value of a derivative instrument that results from a change in interest rates, currency exchange rates or commodity prices. The market risk associated with interest rate contracts is managed by establishing and monitoring parameters that limit the types and degree of market risk that may be undertaken.
The Partnership assesses interest rate risk by monitoring changes in interest rate exposures that may adversely impact expected future cash flows and by evaluating economical hedging opportunities.
The Partnership has historically used variable interest rate mortgage debt to finance its vessels. The variable interest rate mortgage debt obligations expose the Partnership to variability in interest payments due to changes in interest rates. The Partnership believes that it is prudent to limit the variability of a portion of its interest payments. To meet this objective, the Partnership has entered into interest rate swap contracts which are based on the Secured Overnight Financing Rate (“SOFR”) in order to manage fluctuations in cash flows resulting from changes in the benchmark interest rate of SOFR. These swaps change a portion of the Partnership’s total variable rate cash flow exposure on the mortgage debt obligations to fixed cash flows. Under the terms of the interest rate swap contracts, the
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Partnership receives SOFR-based variable interest rate payments and makes fixed interest rate payments, thereby creating the equivalent of fixed rate debt for the notional amount of its debt hedged.
As of June 30, 2025, and December 31, 2024, the total notional amount of the Partnership’s outstanding interest rate swap contracts that were entered into in order to hedge outstanding or forecasted debt obligations were $
Changes in the fair value of interest rate swap contracts are reported in realized and unrealized gain (loss) on derivative instruments in the same period in which the related interest affects earnings.
The Partnership and its subsidiaries utilize the U.S. Dollar as their functional and reporting currency, because all of their revenues and the majority of their expenditures, including the majority of their investments in vessels and their financing transactions, are denominated in U.S. Dollars. Payment obligations in currencies other than the U.S. Dollar, and in particular operating expenses in NOK, expose the Partnership to variability in currency exchange rates. The Partnership believes that it is prudent to limit the variability of a portion of its currency exchange exposure where possible. To meet this objective, the Partnership from time to time enters into foreign exchange forward contracts to manage fluctuations in cash flows resulting from changes in the exchange rates towards the U.S. Dollar. The agreements change the variable exchange rate to fixed exchange rates at agreed dates.
The following table presents the realized and unrealized gains and losses that are recognized in earnings as net gain (loss) on derivative instruments for the three and six months ended June 30, 2025 and 2024:
| | | | | | | | | | | | | |
| | Three Months Ended | | Six Months Ended | | ||||||||
| | June 30, | | June 30, | | ||||||||
(U.S. Dollars in thousands) |
| 2025 |
| 2024 |
| 2025 |
| 2024 |
| ||||
Realized gain (loss): |
| |
|
| |
|
| |
|
| |
|
|
Interest rate swap contracts | | $ | | | $ | | | $ | | | $ | | |
Total realized gain (loss): | |
| | |
| | |
| | |
| | |
Unrealized gain (loss): | |
| | |
| | |
| | |
| | |
Interest rate swap contracts | |
| ( | |
| ( | |
| ( | |
| ( | |
Total unrealized gain (loss): | |
| ( | |
| ( | |
| ( | |
| ( | |
Total realized and unrealized gain (loss) on derivative instruments: | | $ | ( | | $ | | | $ | ( | | $ | | |
8)Fair Value Measurements
(a)Fair Value of Assets and Liabilities
The following table presents the carrying amounts and estimated fair values of the Partnership’s assets and liabilities that are measured at fair value on a recurring and non-recurring basis as of June 30, 2025 and December 31, 2024. Fair value is defined as the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
| | | | | | | | | | | | | |
| | June 30, 2025 | | December 31, 2024 | | ||||||||
|
| Carrying |
| Fair |
| Carrying |
| Fair |
| ||||
(U.S. Dollars in thousands) |
| Amount |
| Value |
| Amount |
| Value |
| ||||
Recurring: | | | | | | | | | | | | | |
Financial assets: | | | | | | | | | | | | | |
Cash and cash equivalents | | $ | | | $ | | | $ | | | $ | | |
Current derivative assets: | |
|
| |
|
| |
|
| |
|
| |
Interest rate swap contracts | |
| | |
| | |
| | |
| | |
Non-current derivative assets: | |
| | |
|
| |
| | |
|
| |
Interest rate swap contracts | |
| | |
| | |
| | |
| | |
Financial liabilities: | |
|
| |
| | |
|
| |
|
| |
Non-current derivative liabilities: | |
|
| |
|
| |
|
| |
|
| |
Interest rate swap contracts | | | ( | | | ( | | | — | | | — | |
Long-term debt, current and non-current | | $ | | | $ | | | $ | | | $ | | |
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The carrying amounts shown in the table above are included in the unaudited interim consolidated balance sheet under the indicated captions. Carrying amount of long-term debt, current and non-current, above excludes capitalized debt issuance cost of $
The fair values of the financial instruments shown in the table above as of June 30, 2025 and December 31, 2024 represent the amounts that would be received to sell those assets or that would be paid to transfer those liabilities in an orderly transaction between market participants at that date. Those fair value measurements maximize the use of observable inputs. However, in situations where there is little, if any, market activity for the asset or liability at the measurement date, the fair value measurement reflects the Partnership’s own judgment about the assumptions that market participants would use in pricing the asset or liability. Those judgments are developed by the Partnership based on the best information available in the circumstances, including expected cash flows, appropriately risk-adjusted discount rates and available observable and unobservable inputs.
The following methods and assumptions were used to estimate the fair value of each class of assets and liabilities:
| ● | Cash and cash equivalents and restricted cash: The fair value of the Partnership’s cash balances approximates the carrying amounts due to the current nature of the amounts. As of June 30, 2025 and December 31, 2024 there is |
| ● | Interest rate swap contracts: The fair value of interest rate swap contracts is determined using an income approach using the following significant inputs: (1) the term of the swap contract (weighted average of 1.6 years and |
| ● | Long-term debt: With respect to long-term debt measurements, the Partnership uses market interest rates and adjusts for risks, such as its own credit risk. In determining an appropriate spread to reflect its credit standing, the Partnership considered interest rates currently offered to KNOT for similar debt instruments of comparable maturities by KNOT’s and the Partnership’s bankers as well as other banks that regularly compete to provide financing to the Partnership. |
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b)Fair Value Hierarchy
The following table presents the placement in the fair value hierarchy of assets and liabilities that are measured at fair value on a recurring and non-recurring basis (including items that are required to be measured at fair value or for which fair value is required to be disclosed) as of June 30, 2025 and December 31, 2024:
| | | | | | | | | | | | | |
| | | | | Fair Value Measurements | | |||||||
| | | | | at Reporting Date Using | | |||||||
| | | | | Quoted Price | | | | | | | | |
| | | | | in Active | | Significant | | | | | ||
| | Carrying | | Markets for | | Other | | Significant | | ||||
| | Value | | Identical | | Observable | | Unobservable | | ||||
| | June 30, | | Assets | | Inputs | | Inputs | | ||||
(U.S. Dollars in thousands) |
| 2025 |
| (Level 1) |
| (Level 2) |
| (Level 3) |
| ||||
Recurring: | | | | | | | | | | | | | |
Financial assets: | | |
| | |
| | |
| | |
| |
Cash and cash equivalents | | $ | | | $ | | | $ | — | | $ | — | |
Current derivative assets: | |
|
| |
|
| |
|
| |
|
| |
Interest rate swap contracts | |
| | |
| — | |
| | |
| — | |
Non-current derivative assets: | |
|
| |
|
| |
|
| |
|
| |
Interest rate swap contracts | |
| | |
| — | |
| | |
| — | |
Financial liabilities: | |
|
| |
|
| |
|
| |
|
| |
Non-current derivative liabilities: | |
|
| |
|
| |
|
| |
|
| |
Interest rate swap contracts | | | ( | | | — | | | ( | | | — | |
Long-term debt, current and non-current | | $ | | | $ | — | | $ | | | $ | — | |
| | | | | | | | | | | | | |
| | | | | Fair Value Measurements | | |||||||
| | | | | at Reporting Date Using | | |||||||
| | | | | Quoted Price | | | | | | | | |
| | | | | in Active | | Significant | | | | | ||
| | Carrying | | Markets for | | Other | | Significant | | ||||
| | Value | | Identical | | Observable | | Unobservable | | ||||
| | December 31, | | Assets | | Inputs | | Inputs | | ||||
(U.S. Dollars in thousands) |
| 2024 |
| (Level 1) |
| (Level 2) |
| (Level 3) |
| ||||
Recurring: | | | | | | | | | | | | | |
Financial assets: | | | | | | | | | | | | | |
Cash and cash equivalents | | $ | | | $ | | | $ | — | | $ | — | |
Current derivative assets: | |
|
| |
|
| |
|
| |
|
| |
Interest rate swap contracts | |
| | |
| — | |
| | |
| — | |
Non-current derivative assets: | |
|
| |
|
| |
|
| |
|
| |
Interest rate swap contracts | |
| | |
| — | |
| | |
| — | |
Financial liabilities: | |
|
| |
|
| |
|
| |
|
| |
Long-term debt, current and non-current | | $ | | | $ | — | | $ | | | $ | — | |
The Partnership’s accounting policy is to recognize transfers between levels of the fair value hierarchy on the date of the event or change in circumstances that caused the transfer. There were
9)Income Taxes
Components of Current and Deferred Tax Expense
All of the income from continuing operations before income taxes was taxable in Norway for the three and six months ended June 30, 2025 and 2024. Our Norwegian subsidiaries are subject to Norwegian tonnage tax rather than ordinary corporate taxation. Under the tonnage tax regime, tax is payable based on the tonnage of the vessel, not on operating income, and is included within operating expenses. Net financial income and expense remain taxable as ordinary income at the regular corporate income tax rate of
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2025 was $63,501 and $120,327, respectively. The amount of tonnage tax included in operating expenses for each of the three and six months ended June 30, 2024 was $
Taxes payable related to the entrance tax, a one-time tax payable by the Partnership related to certain subsidiaries on entering the Norwegian tonnage tax system, and income taxes attributable to income from continuing operations are calculated based on the Norwegian corporate tax rate of
Significant components of current and deferred income tax expense attributable to income from continuing operations for the three and six months ended June 30, 2025 and 2024 were as follows:
| | | | | | | | | | | | | |
| | Three Months Ended | | Six Months Ended |
| ||||||||
| | June 30, | | June 30, | | ||||||||
(U.S. Dollars in thousands) |
| 2025 |
| 2024 |
| 2025 |
| 2024 |
| ||||
Income (loss) before income taxes | | $ | | | $ | ( | | $ | | | $ | ( | |
Income tax benefit (expense) | | | ( | | | ( | | | ( | | | ( | |
Effective tax rate | | | ( | % | | | % | | ( | % | | | % |
Income tax expenses for the three and six months ended June 30, 2025 and 2024 consist of the following:
| | | | | | | | | | | | | | | |
| | Three Months Ended |
| | Six Months Ended |
| | ||||||||
| | June 30, | | | June 30, | | | ||||||||
(U.S. Dollars in thousands) |
| 2025 |
| 2024 |
|
| 2025 |
| 2024 |
|
| ||||
Income tax benefit (expense) within Norwegian tonnage tax regime | | $ | ( | | $ | ( | | | $ | ( | | $ | ( | | |
Income tax benefit (expense) within UK | |
| ( | |
| ( | | |
| ( | |
| ( | | |
Income tax benefit (expense) | | | ( | | | ( | | | | ( | | | ( | | |
Effective tax rate | | | ( | % | | | % | | | ( | % | | | % | |
The Partnership records a valuation allowance against deferred tax assets when it is more likely than not that some or all of the benefit from the deferred tax assets will not be realized. In assessing the need for a valuation allowance against deferred tax assets, which relate to financial loss carry forwards and other deferred tax assets within the tonnage tax regime, the Partnership considers whether it is more-likely-than-not that some portion or all of the deferred tax assets will not be realized taking into account all the positive and negative evidence available. The Partnership has determined that part of the deferred tax assets are likely to not be realized, and therefore a valuation allowance is recognized as of June 30, 2025, and December 31, 2024. KNOT Shuttle Tankers AS has taxable income, and the Partnership has determined it is more likely than not that some of the benefit from the deferred tax assets would be realized based on the weight of available evidence. As of June 30, 2025 and December 31, 2024, the Partnership has determined that $3.0 million and $3.2 million of the deferred tax assets, respectively, are more likely than not to be realized.
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10)Vessels and Equipment
As of June 30, 2025 and December 31, 2024, Vessels with a book value of $1,513 million and $
| | | | | | | | | | | | |
| | Vessels & | | Accumulated | | Accumulated | | | | |||
(U.S. Dollars in thousands) |
| equipment |
| depreciation |
| impairment |
| Net Vessels | ||||
Vessels, December 31, 2023 | | $ | | | $ | ( | | $ | ( | | $ | |
Additions (1) | |
| | |
| — | | | — | |
| |
Drydock costs | |
| | |
| — | | | — | |
| |
Disposals (2) | |
| ( | |
| | | | | |
| ( |
Depreciation and impairment for the period (3) | |
| — | |
| ( | | | ( | |
| ( |
Vessels, December 31, 2024 | | $ | | | $ | ( | | $ | ( | | $ | |
Additions (1) | |
| | |
| — | | | — | |
| |
Drydock costs | |
| | |
| — | | | — | |
| |
Disposals (2) | |
| ( | | | | | | | | | ( |
Depreciation for the period | |
| — | |
| ( | | | — | |
| ( |
Vessels, June 30, 2025 | | $ | | | $ | ( | | $ | ( | | $ | |
| (1) | On September 3, 2024 the Partnership acquired KNOT’s |
| (2) | On September 3, 2024 the Partnership sold to KNOT its |
| (3) | The carrying values of each of the Dan Cisne and the Dan Sabia were written down to their respective estimated fair values as of June 30, 2024. See Note 20—Impairment of long-lived assets. |
Drydocking activity as of June 30, 2025 and December 31, 2024 is summarized as follows:
| | | | | | | |
(U.S. Dollars in thousands) |
| At June 30, 2025 |
| At December 31, 2024 |
| ||
Balance at the beginning of the year | | $ | | | $ | | |
Costs incurred for drydocking | |
| | |
| | |
Costs re-allocated to drydocking due to change of contract | | | — | | | | |
Costs allocated to drydocking as part of acquisition of asset | |
| | |
| | |
Drydock amortization as part of sale of asset | | | ( | | | ( | |
Drydock amortization | |
| ( | |
| ( | |
Balance at period end | | $ | | | $ | | |
11)Inventory
The following table presents the inventory as of June 30, 2025 and December 31, 2024:
| | | | | |
(U.S. Dollars in thousands) |
| At June 30, 2025 | | At December 31, 2024 |
|
Lubricating oil | | | | | |
Total inventory | | | | | |
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Table of Contents
12) Contract Liabilities
The unfavorable contractual rights for the time charter contract associated with Tuva Knutsen were obtained in connection with the acquisition in 2024 that had unfavorable contractual terms relative to market as of the acquisition date. The Tuva Knutsen commenced on its 5 year time charter in February 2021, with options to declare additional terms for up to a total of 10 years. The unfavorable contract rights related to the Tuva Knutsen are split between the firm contract period and the option period and both are amortized to time charter revenue on a straight-line basis over the remaining term of their estimated period and the option ending in January 2036.
The unfavorable contractual rights for the time charter contract associated with Live Knutsen were obtained in connection with the acquisition in 2025 that had unfavorable contractual terms relative to market as of the acquisition date. The Live Knutsen commenced on its 5 year time charter in January 2022, with options to declare additional terms for up to a total of 6 years. The unfavorable contract rights related to the Live Knutsen are split between the firm contract period and the option period and both are amortized to time charter revenue on a straight-line basis over the remaining term of their estimated period and the option ending in December 2032.
| | | | | | | | | |
|
| Unfavourable |
| Unfavourable |
| Total | |||
| | contract rights | | contract rights | | Contract | |||
(U.S. Dollars in thousands) | | Tuva Knutsen | | Live Knutsen | | liabilities | |||
Contract liabilities, December 31, 2023 |
| $ | — |
| $ | — |
| $ | — |
Additions | | | ( | | | — | | | ( |
Amortization for the period | | | | | | — | | | |
Contract liabilities, December 31, 2024 | | | ( | | | — | | | ( |
Additions | | | — | | | ( | | | ( |
Amortization for the period | | | | | | | | | |
Contract liabilities, June 30, 2025 | | $ | ( | | $ | ( | | $ | ( |
The following table presents the Partnership`s outstanding contractliabilities as of June 30, 2025.
| | | |
(U.S. Dollars in thousands) |
| | |
2025 (excluding the six months ended June 30, 2025) | | $ | ( |
2026 | | | ( |
2027 | | | ( |
2028 | | | ( |
2029 and thereafter | | | ( |
Total |
| $ | ( |
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Table of Contents
13)Long-Term Debt
As of June 30, 2025 and December 31, 2024, the Partnership had the following debt amounts outstanding:
| | | | | | | | | |
| | | | June 30, | | December 31, | | ||
(U.S. Dollars in thousands) |
| Vessel |
| 2025 |
| 2024 |
| ||
$ | | Anna Knutsen, Tordis Knutsen, Vigdis Knutsen, Brasil Knutsen, Lena Knutsen | | $ | | | $ | | |
$ | | Windsor Knutsen, Bodil Knutsen, Carmen Knutsen, Fortaleza Knutsen, Recife Knutsen, Ingrid Knutsen | | | | | | | |
Hilda loan facility |
| Hilda Knutsen | |
| | |
| | |
$ | | Synnøve Knutsen, Tove Kuntsen | | | | | | | |
$ | | Tuva Knutsen | | | | | | | |
$ | | Live Knutsen | | | | | | — | |
$ |
|
| |
| | |
| | |
$ | | | | | | | | | |
Raquel Sale & Leaseback | | Raquel Knutsen | | | | | | | |
Torill Sale & Leaseback | | Torill Knutsen | | | | | | | |
Total long-term debt |
|
| | $ | | | $ | | |
Less: current installments |
|
| |
| | |
| | |
Less: unamortized deferred loan issuance costs |
|
| |
| | |
| | |
Current portion of long-term debt |
|
| |
| | |
| | |
Amounts due after one year |
|
| |
| | |
| | |
Less: unamortized deferred loan issuance costs |
|
| |
| | |
| | |
Long-term debt, less current installments, and unamortized deferred loan issuance costs |
|
| | $ | | | $ | | |
The Partnership’s outstanding debt of $
| | | | | | | | | | | | |
| | Sale & | | Period | | | | | | | ||
(U.S. Dollars in thousands) |
| Leaseback |
| repayment |
| Balloon repayment |
| Total | ||||
2025 (excluding the six months ended June 30, 2025) | | $ | |
| $ | |
| $ | |
| $ | |
2026 | | | |
| | |
| | |
| | |
2027 | | | | | | | | | | | | |
2028 | | | | | | | | | | | | |
2029 | | | | | | | | | — | | | |
2030 and thereafter | | | | | | | | | — | | | |
Total | | $ | | | $ | | | $ | | | $ | |
As of June 30, 2025, the interest rates on the Partnership’s loan agreements were SOFR plus a fixed margin ranging from
Live Facility
On October 14, 2021, KNOT Shuttle Tankers 27 AS, the subsidiary owning the Live Knutsen, as borrower, entered into a $
In connection with the acquisition of KNOT Shuttle Tankers 27 AS, the Partnership and KNOT Shuttle Tankers AS became the sole guarantors of the Live Facility. The Live Facility is repayable in quarterly installments with a final payment due at maturity in
21
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October 2026 of $
The Live Facility contains the following primary financial covenants:
| ● | The borrower shall at all times maintain liquidity equal or greater than $ |
| ● | Positive working capital of the Partnership, excluding amounts in respect of liabilities for instalments on long-term debt and capital lease payments falling due within twelve (12) months after the relevant calculation date and any group intercompany balances; |
| ● | Minimum liquidity of the Partnership of $ |
| ● | Minimum book equity ratio for the Partnership of |
| ● | Minimum EBITDA to interest ratio for the Partnership of |
The Live Facility also identifies various events that may trigger mandatory reduction, prepayment and cancellation of the facility, including if the market value of the Live Knutsen is less than
Daqing Facility
On March 31, 2022, KNOT Shuttle Tankers 37 AS, the subsidiary owning the Daqing Knutsen, as borrower, entered into a $
The Daqing Facility contains the following primary financial covenants:
| ● | The borrower shall at all times maintain liquidity equal or greater than $ |
| ● | Positive working capital of the Partnership; |
| ● | Minimum liquidity of the Partnership of $ |
| ● | Minimum book equity ratio for the Partnership of |
| ● | Minimum EBITDA to interest ratio for the Partnership of |
The Daqing Facility also identifies various events that may trigger mandatory reduction, prepayment and cancellation of the facility, including if the market value of the Daqing Knutsen falls below
22
Table of Contents
Revolving Credit Facilities
On August 15, 2025, the Partnership closed the refinancing of the first of its two $
The Partnership is continuing discussions and negotiations with the lender under its second $
Tove Knutsen Sale and Leaseback Agreement
On September 16, 2025, the Partnership, through its wholly-owned subsidiary, KNOT Shuttle Tankers 34 AS, which owns the Tove Knutsen, sold the Tove Knutsen to, and leased her back from, a Japanese-based lessor for a lease period of
14)Related Party Transactions
(a)Related Parties
Net income (expense) from related parties included in the unaudited condensed consolidated statements of operations for the three and six months ended June 30, 2025 and 2024 are as follows:
| | | | | | | | | | | | | |
| | Three Months Ended | | Six Months Ended | | ||||||||
| | June 30, | | June 30, | | ||||||||
(U.S. Dollars in thousands) |
| 2025 |
| 2024 |
| 2025 |
| 2024 |
| ||||
Statements of operations: | | |
| | |
| | |
| | |
| |
Time charter and bareboat revenues: | | | | | | | | | | | | | |
Time charter income from KNOT (1) | | $ | — | | $ | | | $ | | | $ | | |
Operating expenses: | |
| | |
| | |
| | |
| | |
Vessel operating expenses (2) | | | | | | | | | | | | | |
Voyage expenses and commissions (3) | | | — | | | | | | — | | | | |
Technical and operational management fee from KNOT to Vessels (4) | |
| | |
| | |
| | |
| | |
Operating expenses from other related parties (5) | | | | | | | | | | | | | |
General and administrative expenses: | |
| | |
| | |
| | |
| | |
Administration fee from KNOT Management (6) | |
| | |
| | |
| | |
| | |
Administration fee from KOAS (6) | |
| | |
| | |
| | |
| | |
Administration fee from KOAS UK (6) | |
| | |
| | |
| | |
| | |
Administration and management fee from KNOT (7) | |
| | |
| | |
| | |
| | |
Total income (expenses) | | $ | ( | | $ | ( | | $ | ( | | $ | ( | |
| | | | | | | |
(U.S. Dollars in thousands) |
| At June 30, 2025 |
| At December 31, 2024 |
| ||
Balance Sheet: | | | | | | | |
Vessels: | | | | | | | |
Drydocking supervision fee from KNOT (8) | | $ | — | | $ | | |
Equipment purchased from Knutsen Ballast Water AS (9) | | | — | | | | |
Total | | $ | — | | $ | | |
| (1) | Time charter income from KNOT: Time charter contracts with Knutsen Shuttle Tankers Pool AS have been in operation in respect of the Bodil Knutsen until her delivery to Equinor in March 2024; the Hilda Knutsen since the third quarter of 2022 until her delivery |
23
Table of Contents
| to Brazil Shipping I Limited in March 2025; the Torill Knutsen since the first quarter of 2023 until her delivery to Eni in June 2024; and the Ingrid Knutsen since the second quarter of 2024 until her delivery to Eni in October 2024. |
| (2) | Vessel operating expenses: KNOT Management or KNOT Management Denmark provides technical and operational management of the vessels on time charter including crewing and crew training services. |
| (3) | Voyage expenses and commissions: During the three and six months ending June 30, 2025, no operating expenses to related parties were incurred in respect of spot voyages. During the same periods in 2024, the Ingrid Knutsen and the Torill Knutsen completed one spot voyage each where Knutsen Shuttle Tankers Pool AS earned a |
| (4) | Technical and operational management fee, from KNOT Management or KNOT Management Denmark to Vessels: KNOT Management or KNOT Management Denmark provides technical and operational management of the vessels on time charter including crewing, purchasing, maintenance and other operational service. In addition, there is also a charge for 24-hour emergency response services provided by KNOT Management for all vessels managed by KNOT Management. |
| (5) | Operating expenses from other related parties: Simsea Real Operations AS, a company jointly owned by the Partnership’s Chairman of the Board, Trygve Seglem, and by other third-party shipping companies in Haugesund, provides simulation, operational training assessment and other certified maritime courses for seafarers. The cost is course fees for seafarers. Knutsen OAS Crewing AS, a subsidiary of TSSI, provides administrative services related to Eastern European crew on vessels operating on time charter contracts. The cost is a fixed fee per month per such crew member onboard a vessel. Level Power & Automation AS, a company that provides the Partnership’s vessels with equipment and inspection services, is owned by Level Group AS, where Trygve Seglem, his family and members of TSSI management have significant influence. |
| (6) | Administration fee from KNOT Management, Knutsen OAS Shipping AS (“KOAS”) and Knutsen OAS (UK) Ltd. (“KOAS UK”): Administration costs include compensation and benefits of KNOT Management’s management and administrative staff on a time-spent basis as well as other general and administration expenses. Some services are also provided by KOAS and KOAS UK. Net costs are total administration cost plus a |
| (7) | Administration and management fee from KNOT Management and KNOT Management Denmark: For bareboat charters, the shipowner is not responsible for providing crewing or other operational services and the customer is responsible for all vessel operating expenses and voyage expenses. However, each of the vessels under bareboat charters is subject to a management and administration agreement with either KNOT Management or KNOT Management Denmark, pursuant to which these companies provide general monitoring services for the vessels in exchange for an annual fee. |
| (8) | Drydocking supervision fee from KNOT Management and KNOT Management Denmark: KNOT Management and KNOT Management Denmark provide supervision and hire out service personnel during drydocking of the vessels. |
| (9) | Equipment purchased from Knutsen Ballast Water AS: As part of the scheduled drydocking of the Torill Knutsen in the fourth quarter of 2023, a ballast water treatment system was installed on the vessel. As of December 31, 2024 and June 30, 2025, parts of the system had been purchased from Knutsen Ballast Water AS, a subsidiary of TSSI, for $ |
(b)Transactions with Management and Directors
Trygve Seglem, the Chairman of the Partnership’s board of directors and the President and CEO of KNOT, controls Seglem Holding AS, which owns
See the footnotes to Note 14(a)—Related Party Transactions for a discussion of transactions with management and directors included in the unaudited condensed consolidated statements of operations.
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(c)Amounts Due from (to) Related Parties
Balances with related parties consisted of the following:
| | | | | | | |
| | At June 30, | | At December 31, | | ||
(U.S. Dollars in thousands) |
| 2025 |
| 2024 |
| ||
Balance Sheet: |
| |
|
| |
|
|
Trading balances due from KOAS | | $ | | | $ | | |
Trading balances due from KNOT and affiliates | |
| | |
| | |
Amount due from related parties | | $ | | | $ | | |
Trading balances due to KOAS | | $ | | | $ | | |
Trading balances due to KNOT and affiliates | |
| | |
| | |
Amount due to related parties | | $ | 7,202 | | $ | | |
Amounts due from (to) related parties are unsecured and are intended to be settled in the ordinary course of business. The majority of these related party transactions relate to vessel management and other fees due to KNOT, KNOT Management, KOAS UK and KOAS.
(d)Trade accounts payable
Trade accounts payable to related parties are included in total trade accounts payable in the balance sheet. The balances to related parties consisted of the following:
| | | | | | | |
| | At June 30, | | At December 31, | | ||
(U.S. Dollars in thousands) |
| 2025 |
| 2024 |
| ||
Balance Sheet: | | |
| | |
| |
Trading balances due to KOAS | | $ | | | $ | | |
Trading balances due to KNOT and affiliates | |
| | |
| | |
Trade accounts payables to related parties | | $ | | | $ | | |
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Trading balances from KNOT and affiliates are included in other current assets in the balance sheet. The balances from related parties consisted of the following:
| | | | | | | |
|
| At June 30, |
| At December 31, |
| ||
(U.S. Dollars in thousands) | | 2025 | | 2024 | | ||
Balance Sheet: |
| |
|
| |
|
|
Trade receivables due from KNOT and affiliates (refer to Note 18 (b)) | | $ | — | | $ | | |
Other trading balances due from KOAS | | | | | | | |
Other current assets from related parties | | $ | | | $ | | |
(e) Acquisition from KNOT
On March 3, 2025, the Partnership acquired KNOT’s
The board of directors of the Partnership (the “Board”) and the conflicts committee of the Board (the “Conflicts Committee”) approved the purchase price for the transaction described above. The Conflicts Committee retained an outside financial advisor and outside legal counsel to assist with its evaluation of the Live Knutsen Acquisition. See Note 21—Acquisitions.
(f) Sale of Vessel to KNOT
On March 3, 2025, the Partnership sold its
The Board and the Conflicts Committee of the Board approved the sale price for the transaction described above. The Conflicts Committee retained an outside financial advisor and outside legal counsel to assist with its evaluation of the Dan Sabia Sale.
The cost of the fee paid to the financial advisor was divided equally between the Partnership and KNOT. Sales related costs of $
15)Commitments and Contingencies
Assets Pledged
As of June 30, 2025 and December 31, 2024, Vessels with a book value of $
Claims and Legal Proceedings
Under the Partnership’s time charter contracts, claims to reduce charter hire payments can be made by customers if the Vessel does not perform to certain specifications as set out in the relevant contract.
From time to time, the Partnership is involved in various claims and legal actions arising in the ordinary course of business. In the opinion of management, the ultimate disposition of these matters will not have a material adverse effect on the consolidated financial position, results of operations or cash flows.
Insurance
The Partnership maintains insurance on all the Vessels to insure against loss of charter hire and marine and war risks, which includes damage to or total loss of the Vessels, with each type of insurance subject to deductible amounts that average $
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Under the loss of hire policies, the insurer will pay compensation for the lost hire rate agreed in respect of each Vessel for each day, in excess of
16)Earnings per Unit and Cash Distributions
The calculations of basic and diluted earnings per unit (1) are presented below:
| | | | | | | | | | | | | |
| | Three Months Ended | | Six Months Ended | | ||||||||
| | June 30, | | June 30, | | ||||||||
(U.S. Dollars in thousands, except per unit data) |
| 2025 |
| 2024 |
| 2025 |
| 2024 |
| ||||
Net income (loss) | | $ | | | $ | ( | | $ | | | $ | ( | |
Less: Series A Preferred unitholders’ interest in net income (loss) | | | | | | | | | | | | | |
Net income (loss) attributable to the unitholders of KNOT Offshore Partners LP | | | | | | ( | | | | | | ( | |
Less: Distributions (2) | | | | | | | | | | | | | |
Under (over) distributed earnings | | | | | | ( | | | | | | ( | |
Under (over) distributed earnings attributable to: | | | | | | | | | | | | | |
Common unitholders | | | | | | ( | | | | | | ( | |
General Partner | | | | | | ( | | | | | | ( | |
Weighted average units outstanding (basic) (in thousands): | | | | | | | | | | | | | |
Common unitholders | | | | | | | | | | | | | |
Class B unitholders | | | | | | | | | | | | | |
General Partner | | | | | | | | | | | | | |
Weighted average units outstanding (diluted) (in thousands): | | | | | | | | | | | | | |
Common unitholders | | | | | | | | | | | | | |
Class B unitholders | | | | | | | | | | | | | |
General Partner | | | | | | | | | | | | | |
Earnings per unit (basic): | | | | | | | | | | | | | |
Common unitholders | | $ | | | $ | ( | | $ | | | $ | ( | |
Class B unitholders (3) | | | — | | | — | | | — | | | — | |
General Partner | | | | | | ( | | | | | | ( | |
Earnings per unit (diluted): | | | | | | | | | | | | | |
Common unitholders (4) | | $ | | | $ | ( | | $ | | | $ | ( | |
Class B unitholders (3) | | | — | | | — | | | — | | | — | |
General Partner | | | | | | ( | | | | | | ( | |
Cash distributions declared and paid in the period per unit (5) | | $ | | | $ | | | $ | | | $ | | |
Subsequent event: Cash distributions declared and paid per unit relating to the period (6) | | $ | | | $ | | | $ | | | $ | | |
| (1) | Earnings per unit have been calculated in accordance with the cash distribution provisions set forth in the Partnership’s agreement of limited partnership (the “Partnership Agreement”). |
| (2) | This refers to distributions made or to be made in relation to the period irrespective of the declaration and payment dates and based on the number of units outstanding at the record date. |
| (3) | When the distribution target is not met, there is no allocation of net income (loss) to Class B units. |
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| (4) | Diluted weighted average units outstanding and earnings per unit diluted for the three and six months ended June 30, 2025 and 2024 does not reflect any potential common units relating to the Series A Preferred Units since the assumed issuance of any additional units would be anti-dilutive. |
| (5) | Refers to cash distributions declared and paid during the period. |
| (6) | Refers to cash distributions declared and paid subsequent to the period end. |
The Series A Preferred Units rank senior to the common units and Class B Units as to the payment of distributions and amounts payable upon liquidation, dissolution or winding up. The Series A Preferred Units have a liquidation preference of $
The Series A Preferred Units are generally convertible, at the option of the holders of the Series A Preferred Units, into common units at the applicable conversion rate. The conversion rate will be subject to adjustment under certain circumstances. In addition, the conversion rate will be redetermined on a quarterly basis, such that the conversion rate will be equal to $
Upon a change of control of the Partnership, the holders of Series A Preferred Units will have the right to require cash redemption at
The Series A Preferred Units have voting rights that are identical to the voting rights of the common units and Class B Units, except they do not have any right to nominate, appoint or elect any of the directors of the Board, except whenever distributions payable on the Series A Preferred Units have not been declared and paid for four consecutive quarters (a “Trigger Event”). Upon a Trigger Event, holders of Series A Preferred Units, together with the holders of any other series of preferred units upon which like rights have been conferred and are exercisable, may replace one of the members of the Board appointed by the General Partner with a person nominated by such holders, such nominee to serve until all accrued and unpaid distributions on the preferred units have been paid. The Series A Preferred Units are entitled to vote with the common units and Class B Units as a single class so that the Series A Preferred Units are entitled to
On September 7, 2021, the Partnership entered into an exchange agreement with its general partner and KNOT whereby KNOT contributed to the Partnership all of KNOT’s IDRs in exchange for the issuance by the Partnership to KNOT of
For each quarter (starting with the quarter ended September 30, 2021) that the Partnership pays distributions on the common units that are at or above the Distribution Threshold, one-eighth of the number of Class B Units originally issued will be converted to common
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units on a
As of December 31, 2024 and June 30, 2025, a total of
On January 11, 2023, the Partnership declared a quarterly cash distribution with respect to the fourth quarter of 2022 of $
As of June 30, 2025,
Earnings per unit – basic is determined by dividing net income, after deducting the amount of net income attributable to the Series A Preferred Units and the distribution paid or to be made in relation to the period, by the weighted-average number of units outstanding during the applicable period.
The computation of limited partners’ interest in net income per common unit – diluted assumes the issuance of common units for all potentially dilutive securities consisting of
The General Partner’s, Class B unitholders’ and common unitholders’ interest in net income was calculated as if all net income was distributed according to the terms of the Partnership Agreement, regardless of whether those earnings would or could be distributed. The Partnership Agreement does not provide for the distribution of net income. Rather, it provides for the distribution of available cash, which is a contractually defined term that generally means all cash on hand at the end of each quarter less the amount of cash reserves established by the Board to provide for the proper conduct of the Partnership’s business, including reserves for future capital expenditures, anticipated credit needs and capital requirements and any accumulated distributions on, or redemptions of, the Series A Preferred Units. Unlike available cash, net income is affected by non-cash items, such as depreciation and amortization, unrealized gains and losses on derivative instruments and unrealized foreign currency gains and losses.
17)Unit Activity
There was no movement in the number of common units, Class B Units, general partner units and Series A Preferred Units from December 31, 2024 until June 30, 2025.
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18)Trade Accounts Receivable and Other Current Assets
(a)Trade Accounts Receivable
Trade accounts receivable are presented net of provisions for expected credit loss. As of June 30, 2025 and December 31, 2024, there were
(b)Other Current Assets
The following table presents other currents assets of June 30, 2025 and December 31, 2024:
| | | | | | | |
(U.S. Dollars in thousands) |
| At June 30, 2025 |
| At December 31, 2024 |
| ||
Trade receivables | | $ | | | $ | | |
Trade receivables due from KNOT and affiliates (see Note 14 (d)) | | | — | | | | |
Insurance claims for recoveries (refer to note 5) | | | | | | | |
Refund of value added tax | | | | | | | |
Prepaid expenses | |
| | |
| | |
EU-ETS current asset (1) | | | | | | — | |
Other receivables | |
| | |
| | |
Total other current assets | | $ | | | $ | | |
| (1) | The EUs Emission Trading Systems (EU ETS) require that companies are responsible for surrendering CO2 quotas (EU Allowances, EUA’s) to the authorities. EU ETS and the total EUA follows the consumption of bunkers, and the cost is treated like cost of bunkers when vessel is off-hire, i.e., EU-ETS/EUA is the owners’ cost when the vessel is off hire. EU-ETS/EUA is also owners’ cost for vessels operating in the spot market. |
19)Accrued expenses
The following table presents accrued expenses as of June 30, 2025 and December 31, 2024:
| | | | | | | |
(U.S. Dollars in thousands) |
| At June 30, 2025 | | At December 31, 2024 |
| ||
Operating expenses | | $ | | | $ | | |
Interest expenses | |
| | |
| | |
EU ETS current liability (1) | | | | | | — | |
Other expenses | |
| | |
| | |
Total accrued expenses | | $ | | | $ | | |
| (1) | The EUs Emission Trading Systems (EU ETS) require that companies are responsible for surrendering CO2 quotas (EU Allowances, EUA’s) to the authorities. EU ETS and the total EUA follows the consumption of bunkers, and the cost is treated like cost of bunkers when vessel is off-hire, i.e., EU-ETS/EUA is the owners’ cost when the vessel is off hire. EU-ETS/EUA is also owners’ cost for vessels operating in the spot market. |
20)Impairment of Long-Lived Assets
The carrying value of the Partnership’s fleet is regularly assessed as events or changes in circumstances may indicate that a vessel’s net carrying value exceeds the net undiscounted cash flows expected to be generated over its remaining useful life, and in such situation the carrying amount of the vessel is reduced to its estimated fair value. The Partnership considers factors related to vessel age, expected residual value, ongoing use of the vessels and equipment, shifts in market conditions and other impacting factors associated with the shuttle tanker business as well as the wider global oil and maritime transportation industries.
This exercise in the first and second quarters of 2025 and the first quarter of 2024 did
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and the Dan Sabia were written down to their estimated fair value, using a discounted cash flow valuation. Our estimates of future cash flows involve assumptions about future hire rates, vessel utilization, operating expenses, drydocking expenditures, vessel residual values, the remaining estimated life of our vessels, the potential for sale of the
21)Acquisitions
Dan Sabia Sale; Live Knutsen Acquisition
On March 3, 2025, the Partnership’s wholly owned subsidiary, KNOT Shuttle Tankers AS, acquired from KNOT, KNOT Shuttle Tankers 27 AS, the company that owns the shuttle tanker Live Knutsen (the “Live Knutsen Acquisition”). Simultaneously, KNOT Shuttle Tankers AS sold KNOT Shuttle Tankers 21 AS, the company that owns the shuttle tanker Dan Sabia, to KNOT (the “Dan Sabia Sale”). The purchase price for the Live Knutsen Acquisition was $
KNOT Shuttle Tankers 27 AS, as borrower, had entered into a senior secured term loan facility on October 14, 2021 with SMBC Bank EU AG and others, the initial amount of which was $
The Live Knutsen is operating in Brazil on a charter contract with Galp Sinopec, for which the current fixed period expires in November 2026, and for which the charterer holds options for a further
The Board and the Conflicts Committee approved the purchase prices of the Live Knutsen Acquisition and the Dan Sabia Sale. The Conflicts Committee retained an outside financial advisor and outside legal counsel to assist with its evaluation of the Live Knutsen Acquisition and the Dan Sabia Sale. The cost of the fee paid to the financial advisor was divided equally between the Partnership and KNOT. Acquisition related costs of $
| | | | | | |
| | Final | | Final | ||
| | Live Knutsen | | Tuva Knutsen | ||
| | March 3, | | September 3, | ||
(U.S. Dollars in thousands) |
| 2025 |
| 2024 | ||
Purchase consideration (1) | | $ | | | $ | |
Less: Fair value of net assets acquired: | | | | |
| |
Vessels and equipment (2) | | | | |
| |
Cash | | | | |
| |
Inventories | | | | |
| |
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Derivatives assets (liabilities) | | | | |
| |
Others current assets | | | | |
| |
Long-term debt | | | ( | |
| ( |
Deferred debt issuance | | | | |
| |
Trade accounts payable | | | ( | |
| ( |
Accrued expenses | | | ( | |
| ( |
Amounts due to related parties | | | ( | |
| ( |
Contract liabilities: Unfavourable contract rights | | | ( | |
| ( |
Subtotal | | | | |
| |
Difference between the purchase price and fair value of net assets acquired | | $ | — | | $ | — |
| (1) | The purchase consideration comprises the following: |
| | | | | | |
| | Final | | Final | ||
| | Live Knutsen | | Tuva Knutsen | ||
| | March 3, | | September 3, | ||
(U.S. Dollars in thousands) |
| 2025 |
| 2024 | ||
Asset swap - sale of the Dan Cisne | | $ | — | | $ | |
Asset swap - sale of the Dan Sabia | | | | | | — |
Cash consideration paid to KNOP (from KNOT) | | | — | | | ( |
Purchase price adjustments | | | ( | |
| |
Acquisition-related costs | | | | | | |
Purchase price | | $ | | | $ | |
| (2) | Vessel and equipment includes allocation to drydocking (in thousands) of $1,067 and $910 related to the Live Knutsen and the Tuva Knutsen, respectively. |
22)Subsequent Events
The Partnership has evaluated subsequent events from the balance sheet date through September 29, 2025, the date at which the unaudited condensed consolidated financial statements were available to be issued, and determined that there are no other items to disclose, except as follows:
Cash Distributions
On July 2, 2025, the Partnership declared a quarterly cash distribution of $
Common Unit Repurchase Program
On July 2, 2025, the Board authorized the repurchase of up to an aggregate of $
Purchases of common units under the Program will be at prevailing prices on the open market or in privately negotiated transactions, and will be subject to available liquidity, market conditions, credit agreement restrictions, applicable legal requirements, contractual obligations and other factors. The Program does not require the Partnership to acquire any specific number of common units. The Partnership intends to purchase common units under the Program opportunistically with available funds, while maintaining sufficient liquidity to fund its capital needs. The Program may be suspended from time to time, modified, extended or discontinued by Board at any time.
Pursuant to the Program, as of September 29, 2025, the Partnership had paid $
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Daqing Knutsen Acquisition
On July 2, 2025, the Partnership’s subsidiary, KNOT Shuttle Tankers AS, acquired KNOT Shuttle Tankers 37 AS, the company that owns the shuttle tanker Daqing Knutsen, from Knutsen NYK (the “Daqing Knutsen Acquisition”). The purchase price for the Daqing Knutsen Acquisition was $
The Daqing Facility is repayable in quarterly installments with a final balloon payment (including the final quarterly installment) of $
The Daqing Knutsen is operating in Brazil on a charter contract with PetroChina, for which the current fixed period expires in July 2027, and for which the charterer holds options for a further
The Daqing Knutsen Acquisition was approved by the Board and the Conflicts Committee, who were supported by an outside independent financial advisor and outside legal counsel.
Revolving Credit Facilities
On August 15, 2025, the Partnership closed the refinancing of the first of its
The Partnership is continuing discussions and negotiations with the lender under its second $
Hilda Knutsen Charter Extension
On August 21, 2025, agreement was reached with Shell to extend the term of the current time charter for the Hilda Knutsen by three months firm (to June 2026) plus a further nine months at the Partnership`s option (to March 2027).
Tove Knutsen Sale and Leaseback Agreement
On September 16, 2025, the Partnership, through its wholly-owned subsidiary, KNOT Shuttle Tankers 34 AS, which owns the Tove Knutsen, sold the Tove Knutsen to, and leased her back from, a Japanese-based lessor for a lease period of
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Bodil Knutsen Charter Extension
On September 22, 2025, agreement was reached with Equinor to extend the term of the current time charter for the Bodil Knutsen to a fixed term ending in March 2029, followed by two charterer’s options each of one year.
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MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Unless the context otherwise requires, references in this report to the “Partnership,” “KNOT Offshore Partners,” “we,” “our,” “us” or like terms, refer to KNOT Offshore Partners LP and its subsidiaries. Those statements in this section that are not historical in nature should be deemed forward-looking statements that are inherently uncertain. See “Forward-Looking Statements” for a discussion of the factors that could cause actual results to differ materially from those projected in these statements.
This section should be read in conjunction with our unaudited condensed consolidated financial statements for the periods presented elsewhere in this report, as well as our historical consolidated financial statements and notes thereto included in our Annual Report on Form 20-F for the year ended December 31, 2024 (the “2024 20-F”). Under our Partnership Agreement, KNOT Offshore Partners GP LLC, the general partner of the Partnership (the “General Partner”), has irrevocably delegated to the Partnership’s board of directors the power to oversee and direct the operations of, and to manage and determine the strategies and policies of, the Partnership. During the period from the Partnership’s initial public offering (“IPO”) in April 2013 until the time of the Partnership’s first annual general meeting (“AGM”) on June 25, 2013, the General Partner retained the sole power to appoint, remove and replace all members of the Partnership’s board of directors. From the first AGM, four of the seven board members became electable by the common unitholders and accordingly, from this date, the General Partner no longer retained the power to control the Partnership’s board of directors and, hence, the Partnership. As a result, the Partnership is no longer considered to be under common control with Knutsen NYK Offshore Tankers AS (“KNOT” or “Knutsen NYK”) and as a consequence, the Partnership no longer accounts for any vessel acquisitions from KNOT as transfer of a business between entities under common control.
General
We are a limited partnership formed to own, operate and acquire shuttle tankers primarily under long-term charters, which we define as charters of five years or more. Our fleet of shuttle tankers has been contributed to us by KNOT or purchased by us from KNOT. KNOT is jointly owned by TS Shipping Invest AS (“TSSI”) and Nippon Yusen Kaisha (“NYK”). TSSI is controlled by our Chairman and is a private Norwegian company with ownership interests in shuttle tankers, LNG tankers and product/chemical tankers. NYK is a Japanese public company with a fleet exceeding 800 vessels, including bulk carriers, car carriers, containerships, tankers and specialized vessels.
As of June 30, 2025, we had a modern fleet of eighteen shuttle tankers that operate primarily under charters with major oil and gas companies engaged in offshore oil production. Our primary business objective is to generate stable cash flows and provide a sustainable quarterly distribution per unit by chartering our vessels pursuant to long-term charters with high quality customers that generate long-term stable income, and by pursuing strategic and accretive acquisitions of shuttle tankers. Pursuant to the Omnibus Agreement we have entered into with KNOT in connection with the IPO (the “Omnibus Agreement”), we have the right to purchase from KNOT any shuttle tankers operating under charters of five or more years. This right will continue throughout the entire term of the Omnibus Agreement.
Recent Developments
Cash Distributions
On May 8, 2025, the Partnership paid a quarterly cash distribution of $0.026 per common unit with respect to the quarter ended March 31, 2025 to all common unitholders of record on April 28, 2025. On May 7, 2025, the Partnership paid a quarterly cash distribution to holders of Series A Preferred Units with respect to the quarter ended March 31, 2025 in an aggregate amount equal to $1.7 million.
On August 7, 2025, the Partnership paid a quarterly cash distribution of $0.026 per common unit with respect to the quarter ended June 30, 2025 to all common unitholders of record on July 28, 2025. On August 6, 2025, the Partnership paid a quarterly cash distribution to holders of Series A Preferred Units with respect to the quarter ended June 30, 2025 in an aggregate amount equal to $1.7 million.
Hilda Knutsen Charter
On January 1, 2025, the Hilda Knutsen continued to operate on a time charter contract with a subsidiary of KNOT, at a reduced charter rate. The charter ended on March 23, 2025 when the Hilda Knutsen began operating under a charter with Shell for a fixed period of one year. On August 21, 2025, agreement was reached with Shell to extend the term of the current time charter for the Hilda Knutsen by three months firm (to June 2026) plus a further nine months at the Partnership`s option (to March 2027).
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Torill Knutsen Insurance Claim
In January 2025, the final insurance claim payment was received in respect of repair work and loss of hire for the Torill Knutsen, which had arisen from the breakage of a generator rotor in January 2024.
Brasil Knutsen Charter
On January 21, 2025, Petrorio exercised its option to extend the contract of the Brasil Knutsen for two periods of 30 days from May 1, 2025, for redelivery on July 1, 2025. On April 15, 2025, Petrorio extended the redelivery timing for the Brasil Knutsen to September 2025. This redelivery is now expected in October 2025, promptly following which the Brasil Knutsen is due to commence operations with Equinor.
Vigdis Knutsen Charter
On January 24, 2025, Shell exercised its option to switch from a time charter on the Vigdis Knutsen to a bareboat charter. This change is expected to take effect in the fourth quarter of 2025. At the same time, the fixed duration of this charter was extended from 2027 to 2030, with an option for the charterer to extend the charter for two years.
Dan Sabia Sale; Live Knutsen Acquisition
On March 3, 2025, the Partnership’s wholly owned subsidiary, KNOT Shuttle Tankers AS, acquired from KNOT, KNOT Shuttle Tankers 27 AS, the company that owns the shuttle tanker Live Knutsen (the “Live Knutsen Acquisition”). Simultaneously, KNOT Shuttle Tankers AS sold KNOT Shuttle Tankers 21 AS, the company that owns the shuttle tanker Dan Sabia, to KNOT (the “Dan Sabia Sale”). The purchase price for the Live Knutsen Acquisition was $100 million, less $73.4 million of outstanding indebtedness under the Live Loan Facility plus capitalized fees of $0.4 million. The sale price for the Dan Sabia Sale was $25.75 million and there was no related debt. The combination of the Live Knutsen Acquisition and the Dan Sabia Sale was settled by a net cash payment from KNOT Shuttle Tankers AS to KNOT of $1.2 million (relating to the difference between the prices of the respective transactions). Customary adjustments related to working capital and an associated interest rate swap were made following the closing.
KNOT Shuttle Tankers 27 AS, as borrower, had entered into a senior secured term loan facility on October 14, 2021 with SMBC Bank EU AG and others, the initial amount of which was $89.6 million. Following repayment of the quarterly installments due prior to March 3, 2025, the outstanding amount of this facility had been reduced to $73.4 million. In connection with the acquisition of KNOT Shuttle Tankers 27 AS, the Partnership and KNOT Shuttle Tankers AS became the sole guarantors of this facility (the “Live Loan Facility”). The Live Loan Facility is repayable in quarterly installments with a final payment due at maturity of $65.9 million. The facility bears interest at a rate per annum equal to SOFR plus a margin of 2.01% including a Credit Adjustment Spread. The facility is secured by a mortgage on the Live Knutsen. The facility matures in October 2026.
The Live Knutsen is operating in Brazil on a charter contract with Galp Sinopec, for which the current fixed period expires in November 2026, and for which the charterer holds options for a further 6 years. As part of the Live Knutsen Acquisition, KNOT has agreed that if at any time until the end of the first option period (currently scheduled for November 2029) the Live Knutsen is not receiving from any charterer a rate of hire that is equal to or greater than the rate of hire then in effect and payable under the Galp Sinopec charter, then KNOT shall pay the Partnership such rate of hire that would have been in effect and payable under the Galp Sinopec charter; provided, however, that in the event that for any period during such period the Live Knutsen is chartered under a charter other than the Galp Sinopec charter and the rate of hire being paid under such charter is lower than the rate of hire that would have been in effect and payable under the Galp Sinopec charter during any such period, then KNOT shall pay the Partnership the difference between the rate of hire that would have been in effect and payable under the existing Live Knutsen charter during such period and the rate of hire that is then in effect and payable under such other charter. Thus, KNOT has effectively guaranteed the hire rate for the Live Knutsen until November 2029 on the same basis as if Galp Sinopec had exercised its options through such date.
The Partnership’s Board of Directors (the “Board”) and the conflicts committee of the Board (the “Conflicts Committee”) approved the purchase prices of the Live Knutsen Acquisition and the Dan Sabia Sale. The Conflicts Committee retained an outside financial advisor and outside legal counsel to assist with its evaluation of the Live Knutsen Acquisition and the Dan Sabia Sale.
Board of Directors Change
Effective April 1, 2025, the Partnership’s general partner appointed Mr. Masami Okubo to replace Mr. Yasuhiro Fukuda, both of whom are employees of Nippon Yusen Kabushiki Kaisha (“NYK”), to the Board.
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Raquel Knutsen Charter
On June 18, 2025, Repsol Sinopec exercised their option to extend their time charter on the Raquel Knutsen for three years, until June 2028.
Common Unit Repurchase Program
On July 2, 2025, the Board authorized the repurchase of up to an aggregate of $10 million of the Partnership’s outstanding common units over the subsequent 12 months (the “Program”).
Purchases of common units under the Program will be at prevailing prices on the open market or in privately negotiated transactions, and will be subject to available liquidity, market conditions, credit agreement restrictions, applicable legal requirements, contractual obligations and other factors. The Program does not require the Partnership to acquire any specific number of common units. The Partnership intends to purchase common units under the Program opportunistically with available funds, while maintaining sufficient liquidity to fund its capital needs. The Program may be suspended from time to time, modified, extended or discontinued by Board at any time.
As of September 29, 2025, the Partnership had paid $1.64 million to repurchase an aggregate of 226,374 common units at an average price of $7.24 per common unit. Common units repurchased under the Program are being cancelled.
Daqing Knutsen Acquisition
On July 2, 2025, the Partnership’s wholly owned subsidiary, KNOT Shuttle Tankers AS, acquired KNOT Shuttle Tankers 37 AS, the company that owns the shuttle tanker Daqing Knutsen, from KNOT (the “Daqing Knutsen Acquisition”). The purchase price for the Daqing Knutsen Acquisition was $95 million, less $70.5 million of outstanding indebtedness under the credit facility related to the Daqing Knutsen (the “Daqing Facility”) plus $0.3 million of capitalized fees. The initial cost of the Daqing Knutsen Acquisition was therefore approximately $24.8 million, and is subject to customary post-closing adjustments for working capital and an associated interest rate swap.
The Daqing Facility is repayable in quarterly installments with a final balloon payment of $62.3 million due at maturity in June 2027. The Daqing Facility bears interest at a rate equal to SOFR plus a margin of 1.94%.
The Daqing Knutsen, a 154,000 deadweight ton DP2 Suezmax shuttle tanker was built by Cosco Shipping Heavy Industry and delivered to Knutsen NYK in 2022. The vessel is operating in Brazil on a charter contract with PetroChina, for which the current fixed period expires in July 2027, and for which the charterer holds options for a further 5 years. As part of the Daqing Knutsen Acquisition, Knutsen NYK has agreed that if at any time during the seven years following the closing date of the Daqing Knutsen Acquisition the Daqing Knutsen is not receiving from any charterer a rate of hire that is equal to or greater than the rate of hire then in effect and payable under the PetroChina charter, then Knutsen NYK shall pay the Partnership such rate of hire that would have been in effect and payable under the PetroChina charter; provided, however, that in the event that for any period during such seven years the Daqing Knutsen is chartered under a charter other than the PetroChina charter and the rate of hire being paid under such charter is lower than the rate of hire that would have been in effect and payable under the PetroChina charter during any such period, then Knutsen NYK shall pay the Partnership the difference between the rate of hire that would have been in effect and payable under the existing Daqing Knutsen charter during such period and the rate of hire that is then in effect and payable under such other charter. Thus, Knutsen NYK has effectively guaranteed the hire rate for the Daqing Knutsen until July 2032 on the same basis as if PetroChina had exercised its options through such date.
The Daqing Knutsen Acquisition was approved by the Board and the Conflicts Committee, who were supported by an outside independent financial advisor and outside legal counsel.
Revolving Credit Facilities
On August 15, 2025, the Partnership closed the refinancing of the first of its two $25 million revolving credit facilities, with the facility being rolled over with NTT TC Leasing Co.. The new facility will mature in August 2027, bears interest at a rate per annum equal to SOFR plus a margin of 2.3%, and has a commitment fee on any undrawn portion of the facility that varies based on the aggregate borrowing amount: 0.70% per annum for borrowings up to $10 million, 0.60% per annum for borrowings between $10 million and $20 million, and 0.50% per annum for borrowings exceeding $20 million. The commercial terms of the facility are substantially unchanged from the facility entered into in August 2023 with NTT Finance Corporation.
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The Partnership is continuing discussions and negotiations with the lender under its second $25 million revolving credit facility, which will mature in November 2025. Management believes that this facility will be refinanced on acceptable and similar terms prior to its maturity.
Tove Knutsen Sale and Leaseback Agreement
On September 16, 2025, the Partnership, through its wholly-owned subsidiary, KNOT Shuttle Tankers 34 AS, which owns the Tove Knutsen, sold the Tove Knutsen to, and leased her back from, a Japanese-based lessor for a lease period of 10 years. The gross sale price was $100 million and a portion of the proceeds was used to repay the outstanding loan secured by the vessel and to settle the related interest rate swaps. The bareboat rate under the lease consists of a fixed element per day and there is a fixed-price purchase obligation at maturity. Following closing and after repayment of the loan and settlement of the interest rate swaps, the Partnership realized net proceeds of approximately $32 million after fees and expenses.
Bodil Knutsen Charter Extension
On September 22, 2025, agreement was reached with Equinor to extend the term of the current time charter for the Bodil Knutsen to a fixed term ending in March 2029, followed by two charterer’s options each of one year.
Results of Operations
Three Months Ended June 30, 2025 Compared with the Three Months Ended June 30, 2024
| | | | | | | | | | | | | |
| | Three Months Ended | | | | | | |
| ||||
| | June 30, | | | | | | |
| ||||
(U.S. Dollars in thousands) |
| 2025 |
| 2024 |
| Change |
| % Change |
| ||||
Time charter and bareboat revenues | | $ | 85,920 | | $ | 73,437 | | $ | 12,483 | | | 17 | % |
Voyage revenues | | | — | | | 351 | | | (351) | | | (100) | % |
Loss of hire insurance recoveries | | | 607 | | | 78 | | | 529 | | | 678 | % |
Other income | |
| 533 | |
| 554 | |
| (21) | |
| (4) | % |
Vessel operating expenses | |
| 33,005 | |
| 26,952 | |
| 6,053 | |
| 22 | % |
Voyage expenses and commission | | | 944 | | | 584 | | | 360 | | | 62 | % |
Depreciation | |
| 29,372 | |
| 27,748 | |
| 1,624 | |
| 6 | % |
Impairment | | | — | | | 16,384 | | | (16,384) | | | (100) | % |
General and administrative expenses | |
| 1,555 | |
| 1,426 | |
| 129 | |
| 9 | % |
Interest income | |
| 903 | |
| 897 | |
| 6 | |
| 1 | % |
Interest expense | |
| (15,316) | |
| (16,863) | |
| 1,547 | |
| (9) | % |
Other finance income (expense) | |
| (199) | |
| 177 | |
| (376) | |
| (212) | % |
Realized and unrealized gain (loss) on derivative instruments | |
| (370) | |
| 1,797 | |
| (2,167) | |
| (121) | % |
Net gain (loss) on foreign currency transactions | |
| (267) | |
| 28 | |
| (295) | |
| (1,054) | % |
Income tax benefit (expense) | |
| (125) | |
| (213) | |
| 88 | |
| (41) | % |
Net income (loss) | | $ | 6,810 | | $ | (12,851) | | $ | 19,661 | | | (153) | % |
Time charter and bareboat revenues: Time charter and bareboat revenues increased by $12.5 million to $85.9 million for the three months ended June 30, 2025 compared to $73.4 million for the three months ended June 30, 2024. The increase was mainly due to inclusion of the Tuva Knutsen and the Live Knutsen in the fleet from September 3, 2024 and from March 3, 2025, respectively. Offsetting Dan Cisne and Dan Sabia leaving the fleet from September 3, 2024 and March, 3 2025, respectively and drydocking of the vessel Windsor Knutsen and Raquel Knutsen in the second quarter 2025. In addition, revenues in 2025 include revenues related to EU ETS.
Voyage revenues: Voyage revenues for the three months ended June 30, 2025 were $nil compared to $0.4 million for the same period last year. Voyage revenues for the three months ended June 30, 2024 relate to spot voyages performed by the Ingrid Knutsen and the Torill Knutsen, and no spot voyages were performed by any vessel for the three months ended June 30, 2025.
Loss of hire insurance recoveries: Loss of hire insurance recoveries for the three months ended June 30, 2025 were $0.6 million, compared to $0.1 million for the three months ended June 30, 2024. The loss of hire insurance recoveries in the three months ended June 30, 2025 related to the Live Knutsen in connection to an oil leakage from the propeller hub in the fourth quarter of 2022. The loss
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of hire insurance recoveries in the three months ended June 30, 2024 related to the Brasil Knutsen in connection with repairs of a tunnel thruster reported in the second quarter of 2023.
Other income: Other income for the three months ended June 30, 2025 was $0.5 million compared to $0.6 million for the three months ended June 30, 2024.
Vessel operating expenses: Vessel operating expenses for the three months ended June 30, 2025 were $33.0 million, an increase of $6.0 million from $27.0 million in the three months ended June 30, 2024. The increase is mainly due to more vessels operating on time charter contracts and more vessels undergoing planned drydocking for the three months ended June 30, 2025 compared to same period last year. In addition, expenses in 2025 include costs related to EU ETS.
Voyage expenses and commission: Voyage expenses and commission for the three months ended June 30, 2025 were $0.9 million and relate to Windsor Knutsen and the bunker cost in relation to her planned dry-docking in Europe which was completed before she commenced on a new time charter contract on June 4, 2025. Voyage expenses and commission for the three months ended June 30, 2024 were $0.6 million and relate to bunker cost, commission and port costs for spot voyages performed by the Ingrid Knutsen and the Torill Knutsen.
Depreciation: Depreciation expense for the three months ended June 30, 2025 was $29.4 million compared to $27.8 million for the three months ended June 30, 2024.
Impairment: Impairment charge for the three months ended June 30, 2025 was $nil compared to $16.4 million for the three months ended June 30, 2024. The impairment charges for the three months ended June 30, 2024 relate to the Dan Cisne and the Dan Sabia. The carrying values of the Dan Cisne and the Dan Sabia were written down to their estimated fair values, using a discounted cash flow valuation.
General and administrative expenses: General and administrative expenses for the three months ended June 30, 2025 were $1.6 million compared to $1.4 million for the same period in 2024.
Interest income: Interest income was $0.9 million for each of the three months periods ended June 30, 2025 and 2024.
Interest expense: Interest expense for the three months ended June 30, 2025 was $15.3 million, a decrease of $1.6 million from $16.9 million for the three months ended June 30, 2024. The decrease is mainly due to repayment of outstanding debt and a lower SOFR rate.
Other finance income (expense): Other finance expense was $0.2 million for the three months ended June 30, 2025, compared to finance income of $0.2 million for the three months ended June 30, 2024.
Realized and unrealized gain (loss) on derivative instruments: Realized and unrealized loss on derivative instruments for the three months ended June 30, 2025 was $0.4 million, compared to a gain of $1.8 million for the three months ended June 30, 2024, as set forth in the table below:
| | | | | | |
| | Three Months Ended | ||||
| | June 30, | ||||
(U.S. Dollars in thousands) |
| 2025 |
| 2024 | ||
Realized gain (loss): | | |
| | |
|
Interest rate swap contracts | | $ | 2,521 | | $ | 3,987 |
Total realized gain (loss): | |
| 2,521 | |
| 3,987 |
Unrealized gain (loss): | |
| | |
| |
Interest rate swap contracts | |
| (2,891) | |
| (2,190) |
Total unrealized gain (loss): | |
| (2,891) | |
| (2,190) |
Total realized and unrealized gain (loss) on derivative instruments: | | $ | (370) | | $ | 1,797 |
The total notional amount of the Partnership’s outstanding interest rate swap contracts that were entered into in order to offset part of the exposure to interest rate changes in respect of outstanding or forecasted debt obligations was $421.2 million as of June 30, 2025 and $389.3 million as of June 30, 2024. The unrealized loss on derivative instruments in the three months ended June 30, 2025 was related to mark-to-market loss on on interest rate swaps of $2.9 million. The unrealized loss on derivative instruments in the three months ended June 30, 2024 was related to a mark-to-market loss on interest rate swaps of $2.2 million.
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Net gain (loss) on foreign currency transactions: Net loss on foreign currency transactions for the three months ended June 30, 2025 was $0.3 million compared to a gain of $0.03 million for the three months ended June 30, 2024.
Income tax expense: Income tax expense for the three months ended June 30, 2025 was $0.1 million compared to $0.2 million for the three months ended June 30, 2024.
Net income (loss): As a result of the foregoing, the Partnership recorded net income of $6.8 million for the three months ended June 30, 2025, compared to net loss of $12.9 million for the three months ended June 30, 2024.
Six Months Ended June 30, 2025 Compared with the Six Months Ended June 30, 2024
| | | | | | | | | | | | | |
| | Six Months Ended | | | | | | | | ||||
| | June 30, | | | | | |
| | ||||
(U.S. Dollars in thousands) |
| 2025 |
| 2024 |
| Change |
| % Change |
| | |||
Time charter and bareboat revenues | | $ | 168,911 | | $ | 146,799 | | $ | 22,112 |
| 15 | % | |
Voyage revenues | | | 466 | | | 3,066 | | | (2,600) | | (85) | % | |
Loss of hire insurance recoveries | |
| 607 | | | 78 | |
| 529 |
| 678 | % | |
Other income | |
| 1,105 | |
| 1,109 | |
| (4) |
| (0) | % | |
Gain from disposal of asset | | | 1,342 | | | — | | | 1,342 | | 100 | % | |
Vessel operating expenses | |
| 63,614 | |
| 52,861 | |
| 10,753 |
| 20 | % | |
Voyage expenses and commission | | | 1,711 | | | 2,219 | | | (508) | | (23) | % | |
Depreciation | |
| 58,135 | |
| 55,490 | |
| 2,645 |
| 5 | % | |
Impairment | |
| — | | | 16,384 | |
| (16,384) |
| (100) | % | |
General and administrative expenses | |
| 3,351 | |
| 3,063 | |
| 288 |
| 9 | % | |
Interest income | |
| 1,651 | |
| 1,725 | |
| (74) |
| (4) | % | |
Interest expense | |
| (30,218) | |
| (34,328) | |
| 4,110 |
| (12) | % | |
Other finance expense | |
| (351) | |
| (92) | |
| (259) |
| 282 | % | |
Realized and unrealized gain (loss) on derivative instruments | |
| (1,714) | |
| 6,799 | |
| (8,513) |
| (125) | % | |
Net gain (loss) on foreign currency transactions | |
| 107 | |
| (198) | |
| 305 |
| (154) | % | |
Income tax benefit (expense) | |
| (704) | |
| (354) | |
| (350) |
| 99 | % | |
Net income (loss) | | | 14,391 | | | (5,413) | | | 19,804 | | (366) | % | |
Time charter and bareboat revenues: Time charter and bareboat revenues increased by $22.1 million to $168.9 million for the six months ended June 30, 2025, compared to $146.8 million for the six months ended June 30, 2024. The increase was mainly due to inclusion of the Tuva Knutsen and the Live Knutsen in the fleet from September 3, 2024 and from March 3, 2025, respectively. Offsetting Dan Cisne and Dan Sabia leaving the fleet from September 3, 2024 and March, 3 2025, respectively and drydocking of the vessel Windsor Knutsen and Raquel Knutsen in the second quarter 2025. In addition, revenues in 2025 include revenues related to EU ETS.
Voyage revenues: Voyage revenues for the six months ended June 30, 2025 were $0.5 million compared to $3.1 million for the same period last year. Voyage revenues for the six months ended June 30, 2025 relate to spot voyages performed by the Dan Sabia, while spot voyages for the six months ended June 30, 2024 related to spot voyages performed by the Dan Cisne, Ingrid Knutsen and the Torill Knutsen.
Loss of hire insurance recoveries: Loss of hire insurance recoveries for the six months ended June 30, 2025 were $0.6 million compared to $0.1 million for the six months ended June 30, 2024. The loss of hire insurance recoveries in the six months ended June 30, 2025 related to the Live Knutsen in connection with an oil leakage from the propeller hub in the fourth quarter of 2022. The loss of hire insurance recoveries in the six months ended June 30, 2024 related to the Brasil Knutsen in connection with repairs of a tunnel thruster reported in the second quarter of 2023.
Other income: Other income was $1.1 for each of the six months periods ended June 30, 2025 and 2024.
Gain from disposal of asset: Gain from disposal of asset was $1.3 million for the six months ended June 30, 2025. The gain relates to the Dan Sabia Sale, which completed on March 3, 2025.
Vessel operating expenses: Vessel operating expenses for the six months ended June 30, 2025 were $63.6 million, an increase of $10.7 million from $52.9 million in the six months ended June 30, 2024. The increase is mainly due to more vessels operating on time charter
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contracts and more vessels undergoing planned drydocking for the six months ended June 30, 2025 compared to same period last year. In addition, expenses in 2025 include costs related to EU ETS.
Voyage expenses and commission: Voyage expenses and commission for the six months ended June 30, 2025 were $1.7 million and relate to Windsor Knutsen and the bunker cost in relation to her planned dry-docking in Europe which was completed before she commenced on a new time charter contract on June 4, 2025. Voyage expenses and commission for the six months ended June 30, 2024 were $2.2 million and relate to bunker cost, commission and port costs for spot voyages performed by the Dan Cisne, the Ingrid Knutsen and the Torill Knutsen.
Depreciation: Depreciation expense for the six months ended June 30, 2025 was $58.1 million, compared to $55.5 million in the six months ended June 30, 2024.
Impairment: Impairment charge for the six months ended June 30, 2025 was $nil million compared to $16.4 million for the six months ended June 30, 2024. The impairment charge for the six month period ended June 30, 2024 related to the Dan Cisne and the Dan Sabia. The carrying values of the Dan Cisne and the Dan Sabia were written down to their estimated fair values, using a discounted cash flow valuation.
General and administrative expenses: General and administrative expenses for the six months ended June 30, 2025 were $3.4 million, compared to $3.1 million for the six months ended June 30, 2024.
Interest income: Interest income was $1.7 million for each of the six months periods ended June 30, 2025 and 2024.
Interest expense: Interest expense for the six months ended June 30, 2025 was $30.2 million, a decrease of $4.1 million from $34.3 million in the six months ended June 30, 2024. The decrease is mainly due to repayment of outstanding debt and a lower SOFR rate.
Other finance expense: Other finance expense was $0.4 million for the six months ended June 30, 2025, compared to $0.1 million for the six months ended June 30, 2024. Other finance expense is primarily related to bank fees and guarantee commissions.
Realized and unrealized gain (loss) on derivative instruments: Realized and unrealized loss on derivative instruments for the six months ended June 30, 2025 was $1.7 million, compared to a gain of $6.8 million for the six months ended June 30, 2024 as set forth in the table below:
| | | | | | | |
| | Six Months Ended | | ||||
| | June 30, | | ||||
(U.S. Dollars in thousands) |
| 2025 |
| 2024 | | ||
Realized gain (loss): | | | | | | | |
Interest rate swap contracts | | $ | 5,631 | | $ | 8,050 | |
Total realized gain (loss): | |
| 5,631 | |
| 8,050 | |
Unrealized gain (loss): | |
| | |
| | |
Interest rate swap contracts | |
| (7,345) | |
| (1,251) | |
Total unrealized gain (loss): | |
| (7,345) | |
| (1,251) | |
Total realized and unrealized gain (loss) on derivative instruments: | | $ | (1,714) | | $ | 6,799 | |
The total notional amount of the Partnership’s outstanding interest rate swap contracts that were entered into in order to offset part of the exposure to interest rate changes in respect of outstanding or forecasted debt obligations was $421.2 million as of June 30, 2025 and $389.3 million as of June 30, 2024. The unrealized loss in the six months ended June 30, 2025 was related to mark-to-market loss on derivative on interest rate swaps of $7.3 million. The unrealized loss in the six months ended June 30, 2024 was related to a mark-to-market loss on interest rate swaps of $1.3 million.
Net gain (loss) on foreign currency transactions: Net gain on foreign currency transactions for the six months ended June 30, 2025 was $0.1, compared to a loss of $0.2 million for the six months ended June 30, 2024.
Income tax benefit (expense): Income tax expense for the six months ended June 30, 2025 was $0.7 million compared to income tax expense of $0.4 million for the six months ended June 30, 2024.
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Net income (loss): As a result of the foregoing, the Partnership recorded a net income of $14.4 million for the six months ended June 30, 2025, compared to net loss of $5.4 million for the six months ended June 30, 2024.
Liquidity and Capital Resources
Liquidity and Cash Needs
We operate in a capital-intensive industry, and we expect to finance the purchase of additional vessels and other capital expenditures through a combination of borrowings from commercial banks, cash generated from operations, and debt and equity financings. In addition to paying distributions, our other liquidity requirements relate to payment of operating costs, servicing our debt, payment of lease obligations, funding investments (including the equity portion of investments in vessels), funding working capital, including drydocking, and maintaining cash reserves against fluctuations in operating cash flows. As of September 29, 2025, we believe our sources of funds (assuming the current contracted rates are earned from our existing charters), including the undrawn portion of our revolving credit facilities of $38.5 million, are sufficient to meet our working capital and other cash requirements for our current business for at least the next twelve months, assuming that we are able to timely close refinancing of our revolving credit facility with SBI Shinsei in November 2025, and the senior secured loan facility secured by the Synnøve Knutsen, which matures in October 2025 with a repayment due at that time of $72.3 million, all on similar terms as our existing credit facilities.
The Partnership has commenced discussions and negotiations with its lending group and other institutions and advisors concerning the refinancing of its credit facilities that mature in the remainder of 2025. However, if the Partnership is not able to secure the refinancing of this debt, there will be insufficient liquid funds necessary to repay the debt at maturity. Although there is some judgement required in assessing this risk, given the negotiations that are already underway and given the Partnership’s history of successfully obtaining financing or refinancing its debt, management believes that it will be able to conclude a refinancing of all such facilities on similar terms (including that no re-leverage is required) prior to maturity. However, no assurance can be given that all such facilities will be timely refinanced on acceptable terms.
Generally, our long-term sources of funds are cash from operations, long-term bank borrowings and other debt and equity financings. Because we distribute our available cash, we expect to rely upon external financing sources, including bank borrowings and the issuance of debt and equity securities, to fund acquisitions and other expansion capital expenditures.
On January 11, 2023, we reduced our quarterly common unit distribution to $0.026 per unit. We expect to continue to use our internally generated cash flow to provide for working capital, reduce our debt levels, strengthen our balance sheet and invest in accretive acquisitions.
Our funding and treasury activities are intended to maximize investment returns while maintaining appropriate liquidity. Cash and cash equivalents are held primarily in U.S. Dollars with some balances held in NOK, British Pounds and Euros. We have not made use of derivative instruments other than for interest rate and currency risk management purposes, and we expect to continue to economically hedge part of our exposure to interest rate fluctuations in the future by entering into new interest rate swap contracts when suitable opportunities arise.
We estimate that we will spend in total approximately $68.7 million for drydocking and classification surveys for the vessels in our fleet as of June 30, 2025, between 2025 and 2028, with approximately $21.2 million of this amount to be spent in the twelve months ending June 30, 2026. As our fleet matures and expands, our drydocking expenses will likely increase. Ongoing costs for compliance with environmental regulations are primarily included as part of our drydocking and society classification survey costs or are a component of our vessel operating expenses. We are not aware of any regulatory changes or environmental liabilities that we currently anticipate will have a material impact on our current or future operations. There will be further costs related to voyages to and from drydocking yards that will depend on the distance from the vessel’s ordinary trading area to the drydocking yard.
As of June 30, 2025, the Partnership had available liquidity of $104.8 million, which consisted of cash and cash equivalents of $66.3 million and undrawn capacity under the revolving credit facilities of $38.5 million. The Partnership’s total interest-bearing obligations outstanding as of June 30, 2025 were $918.6 million ($914.5 million net of debt costs). The average margin paid on the Partnership’s outstanding debt during the second quarter of 2025 was approximately 2.3% over the SOFR.
As of June 30, 2025, the Partnership had total $1,000.2 million in outstanding obligations, which include installments and interest on long-term debt, sale and leaseback commitments in respect of the Raquel Knutsen and the Torill Knutsen, interest commitments on
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interest rate swaps and operating lease commitments. Of the total outstanding obligations, $231.4 million matures within one year and $768.8 million matures after one year.
The consolidated financial statements have been prepared assuming that the Partnership will continue as a going concern. As of June 30, 2025, the Partnership’s net current liabilities were $124.5 million. Included in current liabilities are $179.0 million of short-term loan obligations that, as of September 29, 2025, mature before June 30, 2026 and are therefore presented as current debt.
Currently, we do not have any off-balance sheet arrangements.
The following table summarizes our net cash flows from operating, investing and financing activities and our cash and cash equivalents for the periods presented:
Six Months Ended June 30, 2025 Compared with the Six Months Ended June 30, 2024
| | | | | | | |
| | Six Months Ended June 30, | | ||||
(U.S. Dollars in thousands) |
| 2025 |
| 2024 | | ||
Net cash provided by (used in) operating activities | | $ | 67,980 | | $ | 60,572 | |
Net cash provided by (used in) investing activities | |
| 827 | |
| (75) | |
Net cash provided by (used in) financing activities | |
| (69,661) | |
| (67,710) | |
Effect of exchange rate changes on cash | |
| 243 | |
| (89) | |
Net increase in cash and cash equivalents | |
| (611) | |
| (7,302) | |
Cash and cash equivalents at the beginning of the period | |
| 66,933 | |
| 63,921 | |
Cash and cash equivalents at the end of the period | | $ | 66,322 | | $ | 56,619 | |
Net cash provided by operating activities
Net cash provided by operating activities increased by $7.4 million to $68.0 million in the six months ended June 30, 2025, compared to $60.6 million in the six months ended June 30, 2024. Before changes in working capital, cash provided by operating activities was $69.7 million for the six months ended June 30, 2025, an increase of $0.7 million compared to $69.0 million for the six months ended June 30, 2024. The increase of $0.7 million was primarily due to improved operational result compared with a small expenditure for the corresponding period of 2024. Changes in working capital decreased net cash provided by operating activities by $1.7 million for the six months ended June 30, 2025, a decrease of $6.7 million from a consumption of $8.4 million for the six months ended June 30, 2024.
Net cash provided by investing activities
Net cash provided by investing activities was $0.8 million in the six months ended June 30, 2025, compared to $0.1 million net cash used in investing activities the six months ended June 30, 2024. The increase is mainly related to Dan Sabia Sale and Live Knutsen Acquisition.
Net cash used in financing activities
Net cash used in financing activities during the six months ended June 30, 2025 of $69.7 million was mainly related to the following:
| ● | Repayment of long-term debt of $64.5 million related to ordinary installments; and |
| ● | Payment of cash distributions of $5.2 million. |
Net cash used in financing activities during the six months ended June 30, 2024 of $67.7 million was mainly related to the following:
| ● | Proceeds of $60 million from the drawdown on a new three-year loan facility secured by the Hilda Knutsen. |
This was offset by the following:
| ● | Repayment of long-term debt of $121.9 million, of which $58.5 million was repaid in connection with the refinancing of the maturing loan facility secured by the Hilda Knutsen; |
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| ● | Payment of cash distributions of $5.2 million; and |
| ● | Payment of debt issuance costs of $0.5 million in connection with the refinancing of the maturing loan facility secured by the Hilda Knutsen. |
Borrowing Activities
Long-Term Debt
As of June 30, 2025, and December 31, 2024, the Partnership had the following debt amounts outstanding:
| | | | | | | | | |
|
| |
| June 30, |
| December 31, | | ||
(U.S. Dollars in thousands) | | Vessel | | 2025 | | 2024 | | ||
$345 million loan facility |
| Anna Knutsen, Tordis Knutsen, Vigdis Knutsen, Brasil Knutsen, Lena Knutsen |
| $ | 250,892 | | $ | 263,438 | |
$240 million loan facility |
| Windsor Knutsen, Bodil Knutsen, Carmen Knutsen, Fortaleza Knutsen, Recife Knutsen, Ingrid Knutsen |
| | 169,057 |
| | 186,792 | |
Hilda loan facility |
| Hilda Knutsen | | | 52,500 |
| | 56,250 | |
$192.1 million loan facility |
| Synnøve Knutsen, Tove Knutsen |
| | 140,044 |
| | 144,597 | |
$69 million Tuva loan facility | | Tuva Knutsen | | | 65,156 | | | 67,744 | |
$90 million Live loan facility | | Live Knutsen | | | 72,146 | | | — | |
$25 million revolving credit facility with NTT | | | | | 1,500 | | | 1,500 | |
$25 million revolving credit facility with Shinsei |
| |
| | 10,000 |
| | 25,000 | |
Raquel Sale & Leaseback | | Raquel Knutsen | | | 70,892 | | | 73,653 | |
Torill Sale & Leaseback | | Torill Knutsen | | | 86,398 | | | 90,679 | |
Total long-term debt |
| |
| $ | 918,585 |
| $ | 909,653 | |
Less: current installments |
| |
| | 181,060 |
| | 258,739 | |
Less: unamortized deferred loan issuance costs |
| |
| | 2,030 |
| | 2,080 | |
Current portion of long-term debt |
| |
| | 179,030 |
| | 256,659 | |
Amounts due after one year |
| |
| | 737,525 |
| | 650,914 | |
Less: unamortized deferred loan issuance costs |
| |
| | 2,076 |
| | 2,839 | |
Long-term debt, less current installments, and unamortized deferred loan issuance costs |
| | | $ | 735,449 | | $ | 648,075 | |
The Partnership’s outstanding debt of $918.6 million as of June 30, 2025, is repayable as follows:
| | | | | | | | | | | | | |
| | Sale & | | Period | | | | | | | | ||
(U.S. Dollars in thousands) |
| Leaseback |
| repayment |
| Balloon repayment |
| Total | | ||||
2025 (excluding the six months ended June 30, 2025) |
| $ | 7,357 | | $ | 44,660 |
| $ | 81,077 | | $ | 133,094 | |
2026 |
| | 15,060 | | | 74,461 |
| | 284,203 | | | 373,724 | |
2027 |
| | 15,751 | | | 37,034 |
| | 95,098 | | | 147,883 | |
2028 |
| | 16,520 | | | 19,080 |
| | 78,824 | | | 114,424 | |
2029 | | | 17,232 | | | 6,154 | | | — | | | 23,386 | |
2030 and thereafter | | | 85,370 | | | 40,704 | | | — | | | 126,074 | |
Total | | $ | 157,290 | | $ | 222,093 | | $ | 539,202 | | $ | 918,585 | |
As of June 30, 2025, the interest rates on the Partnership’s loan agreements were SOFR plus a fixed margin ranging from 2.0% to 2.4%. The average margin paid on the Partnership’s outstanding debt during the second quarter of 2025 was approximately 2.23% over SOFR.
For more information regarding the Partnership’s credit facilities outstanding as of December 31, 2024, please read Note 17—Long-Term Debt to our consolidated financial statements included in our 2024 20-F. Please see below for a description of additional credit
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facilities or amendments to existing credit facilities entered into by the Partnership since December 31, 2024. The Partnership is in compliance with all covenants under its credit facilities.
Live Facility
On October 14, 2021, KNOT Shuttle Tankers 27 AS, the subsidiary owning the Live Knutsen, as borrower, entered into a $89.6 million term loan facility with SMBC Bank EU AG and others (the “Live Facility”). The Live Facility became one of the Partnership’s debt obligations upon closing of the Live Knutsen Acquisition on March 3, 2025. Following repayment of the quarterly installments due prior to March 3, 2025, the outstanding amount of this facility had been reduced to $73.4 million.
In connection with the acquisition of KNOT Shuttle Tankers 27 AS, the Partnership and KNOT Shuttle Tankers AS became the sole guarantors of the Live Facility. The Live Facility is repayable in quarterly installments with a final payment due at maturity in October 2026 of $65.9 million. The facility bears interest at a rate per annum equal to SOFR plus a margin of 2.01% including a Credit Adjustment Spread. The facility is secured by a mortgage on the Live Knutsen.
The Live Facility contains the following primary financial covenants:
| ● | The borrower shall at all times maintain liquidity equal or greater than $500,000; |
| ● | Positive working capital of the Partnership, excluding amounts in respect of liabilities for instalments on long-term debt and capital lease payments falling due within twelve (12) months after the relevant calculation date and any group intercompany balances; |
| ● | Minimum liquidity of the Partnership of $15 million plus increments of $1.5 million for each owned vessel with less than 12 months remaining tenor on its employment contract up to 8 vessels and $1 million for each owned vessel with less than 12 months remaining tenor on its employment contract up to 12 additional vessels in excess of 8 vessels (of which a minimum of $10 million must be cash); |
| ● | Minimum book equity ratio for the Partnership of 30%; and |
| ● | Minimum EBITDA to interest ratio for the Partnership of 2.50. |
The Live Facility also identifies various events that may trigger mandatory reduction, prepayment and cancellation of the facility, including if the market value of the Live Knutsen is less than 125% of the outstanding loan under the Live Facility, upon a total loss or sale of the vessel and customary events of default.
Daqing Facility
On March 31, 2022, KNOT Shuttle Tankers 37 AS, the subsidiary owning the Daqing Knutsen, as borrower, entered into a $84.6 million term loan facility with Development Bank of Japan Inc. and others (the “Daqing Facility”). The Daqing Facility became one of the Partnership’s debt obligations upon closing of the Daqing Knutsen Acquisition on July 2, 2025 (see Note-20 Subsequent Events), and is therefore not included in the Partnership’s outstanding debt as of June 30, 2025. The Daqing Facility is repayable in quarterly installments with a final payment due at maturity on June 13, 2027, of $62.3 million, which includes the balloon payment and last quarterly installment. The facility bears interest at a rate per annum equal to SOFR plus a margin of 1.94%. In connection with the Daqing Knutsen Acquisition, the Partnership and KNOT Shuttle Tankers AS became the sole guarantors. The facility is secured by a mortgage on the Daqing Knutsen.
The Daqing Facility contains the following primary financial covenants:
| ● | The borrower shall at all times maintain liquidity equal or greater than $500,000; |
| ● | Positive working capital of the Partnership; |
| ● | Minimum liquidity of the Partnership of $15 million (of which at least $10 million is required to be in cash) plus increments of $1.5 million for each owned vessel with less than 12 months remaining tenor on its employment contract up to 8 vessels and |
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| $1 million for each owned vessel with less than 12 months remaining tenor on its employment contract up to 12 additional vessels in excess of 8 vessels; |
| ● | Minimum book equity ratio for the Partnership of 30%; and |
| ● | Minimum EBITDA to interest ratio for the Partnership of 2.50. |
The Daqing Facility also identifies various events that may trigger mandatory reduction, prepayment and cancellation of the facility, including if the market value of the Daqing Knutsen falls below 120% of the outstanding loan, upon total loss or sale of the vessel and customary events of default.
Revolving Credit Facilities
On August 15, 2025, the Partnership closed the refinancing of the first of its two $25 million revolving credit facilities, with the facility being rolled over with NTT TC Leasing Co. The new facility will mature in August 2027, bears interest at a rate per annum equal to SOFR plus a margin of 2.3%, and has a commitment fee on any undrawn portion of the facility that varies based on the aggregate borrowing amount: 0.70% per annum for borrowings up to $10 million, 0.60% per annum for borrowings between $10 million and $20 million, and 0.50% per annum for borrowings exceeding $20 million. The commercial terms of the facility are substantially unchanged from the facility entered into in August 2023 with NTT Finance Corporation.
The Partnership is continuing discussions and negotiations with the lender under its second $25 million revolving credit facility, which will mature in November 2025. Management believes that this facility will be refinanced on acceptable and similar terms prior to its maturity.
Tove Knutsen Sale and Leaseback Agreement
On September 16, 2025, the Partnership, through its wholly-owned subsidiary, KNOT Shuttle Tankers 34 AS, which owns the Tove Knutsen, sold the Tove Knutsen to, and leased her back from, a Japanese-based lessor for a lease period of 10 years. The gross sale price was $100 million and a portion of the proceeds was used to repay the outstanding loan secured by the vessel and to settle the related interest rate swaps. The bareboat rate under the lease consists of a fixed element per day and there is a fixed-price purchase obligation at maturity. Following closing and after repayment of the loan and settlement of the interest rate swaps, the Partnership realized net proceeds of approximately $32 million after fees and expenses.
Derivative Instruments and Hedging Activities
We use derivative instruments to reduce the risks associated with fluctuations in interest rates. We have a portfolio of interest rate swap contracts that exchange or swap floating rate interest to fixed rates, which, from a financial perspective, hedges our obligations to make payments based on floating interest rates. As of June 30, 2025, the Partnership’s net exposure to floating interest rate fluctuations on its outstanding debt was $273.8 million based on total interest-bearing debt outstanding of $918.6 million, less the Raquel Knutsen and the Torill Knutsen sale/leaseback facilities of $157.3 million, less interest rate swaps with a notional amount of $421.2 million and less cash and cash equivalents of $66.3 million. Our interest rate swap contracts mature between August 2025 and February 2032 and have an average maturity of approximately 1.8 years. Under the terms of the interest rate swap agreements, we will receive from the counterparty interest on the notional amount based on three-month and six-month SOFR and will pay to the counterparty a fixed rate. For the interest rate swap agreements above, we will pay to the counterparty a weighted average interest rate of 2.54%. The Partnership does not apply hedge accounting for derivative instruments, and its financial results are impaired by changes in the market value of such financial instruments.
Critical Accounting Estimates
The preparation of the unaudited condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosures about contingent assets and liabilities. We base these estimates and assumptions on historical experience and on various other information and assumptions that we believe to be reasonable. Our critical accounting estimates are important to the portrayal of both our financial condition and results of operations and require us to make subjective or complex assumptions or estimates about matters that are uncertain. For a description of our material accounting policies that involve higher degree of judgment, please read Note 2—Summary of Significant Accounting Policies of our consolidated financial statements included in our 2024 20-F filed with the SEC.
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FORWARD-LOOKING STATEMENTS
This Report on Form 6-K contains certain forward-looking statements concerning future events and our operations, performance and financial condition and assumptions related thereto. 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 our 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:
| ● | 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; |
| ● | KNOT’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 KNOT 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 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; |
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| ● | 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 KNOT’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, the conflict between Israel and Hamas and other conflicts in the Middle East; |
| ● | termination dates and extensions of charters; |
| ● | the expected cost of, and KNOT Offshore Partners’ ability to, comply with governmental regulations (including climate change 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; |
| ● | 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; |
| ● | the impact of any cyberattack; |
| ● | potential liability from any pending or future litigation; |
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| ● | 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 SEC, including its 2024 20-F and subsequent reports on Form 6-K. |
Forward-looking statements in this Report on Form 6-K are based upon management’s current plans, expectations, estimates, assumptions and beliefs concerning future events impacting us and therefore involve a number of risks and uncertainties, including those risks discussed in this Form 6-K and our 2024 20-F. New factors emerge from time to time, and it is not possible for us to predict all of these factors. Further, we cannot assess the impact of each such factor on our 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. We do not intend to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in our expectations with respect thereto or any change in events, conditions or circumstances on which any such statement is based.
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EXHIBITS
The following exhibits are filed as part of this report:
Exhibit |
| Exhibit Description |
4.1 | | Share Purchase Agreement, dated July 2, 2025, between KNOT Shuttle Tankers AS and Knutsen NYK Offshore Tankers AS, for the sale and purchase of the shares in KNOT Shuttle Tankers 37 AS |
4.2 | | Memorandum of Agreement, dated August 13, 2025, between KNOT Shuttle Tankers 34 AS and MI-DAS Line S.A. |
4.3 | | Addendum No. 1 to Memorandum of Agreement, dated August 13, 2025, between KNOT Shuttle Tankers 34 AS and MI-DAS Line S.A. |
4.4+ | | Bareboat Charter, dated August 13, 2025, between KNOT Shuttle Tankers 34 AS and MI-DAS Line S.A. |
101.INS | | Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document |
101.SCH | | Inline XBRL Taxonomy Extension Schema |
101.CAL | | Inline XBRL Taxonomy Extension Calculation Linkbase |
101.DEF | | Inline XBRL Taxonomy Extension Definition Linkbase |
101.LAB | | Inline XBRL Taxonomy Extension Label Linkbase |
101.PRE | | Inline XBRL Taxonomy Extension Presentation Linkbase |
+Certain identified information has been excluded from this exhibit because it is both (i) not material and (ii) is the type that the registrant treats as private or confidential
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| KNOT OFFSHORE PARTNERS LP | ||
| | ||
Date: September 29, 2025 | By: | /s/ Derek Lowe | |
|
| Name: | Derek Lowe |
|
| Title: | Chief Executive Officer and Chief Financial Officer |
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FAQ
What acquisitions did KNOP disclose in the 6-K?
Did KNOP report any impairments in this filing?
What is the carrying amount of interest rate swaps as of June 30, 2025?
Is KNOP in compliance with its credit facility covenants?
Are there covenant or liquidity requirements noted?
Will the Daqing acquisition have further accounting effects?
