KNOT Offshore Partners LP (NYSE:KNOP) Q3 2018 Earnings Conference Call - Final Transcript

Nov 27, 2018 • 12:00 pm ET

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KNOT Offshore Partners LP (NYSE:KNOP) Q3 2018 Earnings Conference Call - Final Transcript

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Presentation
Operator
Operator

Good afternoon, and welcome to the KNOT Offshore Partners' Earnings Conference Call. All participants will be in listen-only mode. (Operator Instructions) Please note, this event is being recorded.

I would now like to turn the conference over to John Costain. Please go ahead.

Executive
John Costain

Thank you. If any of you have not read the earnings release or slide presentation, they're both available on the Investors section on our website.

On today's call, our review will include non-US GAAP measures, such as distributable cash flow and adjusted earnings before interest, taxation, depreciation, and amortization, the EBITDA. The earnings release includes a reconciliation of these non-GAAP measures to the most directly comparable GAAP financial measures.

(Forward-Looking Cautionary Statements)

Introduction. KNOT Offshore Partners, KNOP, focuses on the shuttle tanker segment. The individual tanker is field specific and an integral component in the offshore oil production value chain. Shuttle tankers operates in a niche space and under non-volume based contracts, transport oil from the offshore production units to shore side. Being built the charters requirement, tankers are generally used on specific oilfields, enabling the Partnership to yield both sustainable and stable revenue longer term. Oil production continues to move further offshore, so shuttle tankers operate in a space which will see substantial growth in the coming years. Our sponsor is a very experienced operator, having been evolved in the design and construction of this type of vessel growing a state organically for more than 30 years, and is part of one of the largest shipping groups in the world, Nippon Yusen or NYK. NYK is a member of the Mitsubishi keiretsu. In the last five years, from the third quarter of 2013, the fleet has grown 300% in 4 to 16 vessels. It has an average age of about 5.25 years.

Now, turning to the presentation. Financial highlights. For the third quarter 2018, the Partnership generated its best set of results, more closer to best set of results. The total revenues were 70.7 million, operating income was 31.7 million, and net income was 20.9 million, adjusted EBITDA was 54.1 million. The Partnership generated distributable cash flow of 26.3 million, and after declaring a cash distribution of $0.52 per unit, this gives a coverage of 1.46 for the quarter. During the quarter, the fleet operated 99.9% utilization for scheduled operations and 97.4% utilization, taking into account the scheduled drydocking of Hilda and Torill Knutsen, which were offhire for 24 and 14 days, respectively, in Q3 2018. Since our initial public offering in 2013, we declared and paid common unit distributions of $10.82. Our current distribution stayed a little lower 10%. On the 20th of September 2018, the Partnership refinanced credit facility secured by the Windsor Knutsen, Bodil Knutsen, Fortaleza Knutsen, the Recife Knutsen, the Carmen Knutsen, and the Ingrid Knutsen, with loan facilities totaling 375 million.

Slide four, recent events. On 13th of July 2018, the subsidiary of Royal Dutch Shell exercised the option to extend the time charter on Windsor Knutsen by one additional year until