KNOT Offshore Partners LP (NYSE:KNOP) Q3 2019 Earnings Conference Call - Final Transcript

Nov 21, 2019 • 12:00 pm ET


KNOT Offshore Partners LP (NYSE:KNOP) Q3 2019 Earnings Conference Call - Final Transcript


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Good morning and welcome to the KNOT Offshore Partners Third Quarter 2019 Earnings Results 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 Gary Chapman. Please go ahead, sir.

Gary Chapman

Thank you, Ben. Thank you. Welcome, everybody. The earnings release and slide presentation are both available on our Investor Relations section of our website.

On today's call, our review will include non-US GAAP measures such as distributable cash flow and adjusted earnings before interest, tax, depreciation and amortization, the EBITDA. Earnings release includes a reconciliation of these non-GAAP measures to the most directly comparable GAAP financial measures. Please be reminded that any forward-looking statements made during today's call are subject to risks and uncertainties and these are discussed in our annual and quarterly SEC filings. As you know, actual events and results can differ materially from those forward-looking statements and the partnership does not undertake a duty to update any forward-looking statements.

Just by way of a recap, KNOT Offshore Partners, KNOP, focuses on the shuttle tanker segment, whereby our ships transport oil from production units to shore side, effectively a mobile pipeline business and they form an integral part of the supply chain. Our sponsor Knutsen NYK has placed all of their younger assets in the MLP and all have long-term charters after construction. The MLP and sponsor combined are the largest operator of shuttle tankers with 29 vessels on the water, together with two FSOs and today three more shuttle tankers on order.

Our sponsor has been involved in the design, construction and operation of shuttle tankers for well over 30 years, and so we believe our expertise is unrivaled. Each new vessel is almost always built for an individual charter and importantly our ship charter contract do not rely or depend on the volume of oil produced by the field, nor on the short-term underlying oil price as we always fix with strong credit counterparties, and therefore KNOP set up to provide a stable and steady source of income. In our sector to-date, there has been no speculative ordering of tankers by vessel owners, and we have a strong growth outlook, something that I'll come back to later.

In addition to demand for new vessels, the new projects, the shuttle tanker fleet is naturally aging and will need replacing in the medium term. However, KNOP's vessels have an average life -- average age of only around six years, and so there's much earning capacity remaining.

Now turning to Slide 3, Q3 2019 financial highlights and recent events. Again, KNOP's results were very solid and very stable. Total revenue of $71 million, operating income of $32.4 million, net income of $14.1 million and adjusted EBITDA of $54.8 million, $28 million on a continuation of the cash distribution of $0.52 per unit, returning an annual yield of around 10.9% on a $19 unit price. We finished the quarter with a distribution coverage