KNOT Offshore Partners LP (NYSE:KNOP) Q1 2020 Earnings Conference Call - Final Transcript

May 28, 2020 • 11:00 am ET

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KNOT Offshore Partners LP (NYSE:KNOP) Q1 2020 Earnings Conference Call - Final Transcript

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Presentation
Operator
Operator

Good morning, and welcome to the KNOT Offshore Partners First Quarter 2020 Earnings Results Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions]

I'd now like to turn the conference over to Gary Chapman. Please, go ahead.

Executive
Gary Chapman

Thank you, and welcome, everybody. As always, the earnings release and slide presentation are both available on the Investor Relations section of our website. For those who don't know, KNOT Offshore Partners, KNOP, focuses on the shuttle tanker segment, where our ships transport oil from offshore production units to shoreside, and are essential part of the supply chain for our customers.

Our call today will include the non-US GAAP measures of distributable cash flow and adjusted earnings before interest, tax, depreciation and amortization, EBITDA. The earnings release includes a reconciliation of these non-GAAP measures to the most directly comparable GAAP financial measures, and please remember 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. 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, and I refer you to Slide 2, and our recently filed 2019 20-F for further details.

So Slide 3. Quarter one 2020 financial highlights and recent events. Despite the continuing impact of COVID-19 on global economic activity, and the decline in volatility we've seen in oil prices, KNOP is today reporting good first quarter results in line with expectations. Equally, as the Partnership's operations are not exposed to short-term fluctuations in oil prices, volume of oil transported or global oil storage capacity. We have so far been able to avoid any material disruption to our operations or charters.

Total revenue of $67.8 million, operating income of $28.4 million, and a net loss of $6.1 million, which is after taking into consideration the unrealized mark-to-market positions on our interest rate swaps, where we don't apply hedge accounting, and more comfortably quarter-by-quarter adjusted EBITDA of $50.8 million. Distributable cash flow generated of $23.9 million, giving a distribution coverage ratio at the end of the quarter of 1.33 times, and a continuation of the cash distribution of $0.52 per unit, returning an annual yield of around 14% based on a $15 unit price.

During the quarter, the fleet operated with 99.6% utilization for scheduled operations and 95.2% utilization taking into account the planned drydocking of the Raquel Knutsen. The Raquel returned to service on March 5, 2020 after a successful drydock, and there are no more drydocks planned in 2020 across our fleet. On April 20, 2020 Eni Trading and Shipping exercised two of its one-year options to extend the time charter of the Torill Knutsen until November 2022, at a rate that was in line with the Partnership's expectations. In connection with this early exercise by Eni, the Partnership granted Eni a further option to extend the