KNOT Offshore Partners LP (NYSE:KNOP) Q2 2020 Earnings Conference Call - Final Transcript

Aug 27, 2020 • 11:00 am ET

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KNOT Offshore Partners LP (NYSE:KNOP) Q2 2020 Earnings Conference Call - Final Transcript

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Presentation
Operator
Operator

Good day, and welcome to the KNOT Offshore Partners Second Quarter 2020 Earnings Results Conference Call.

[Operator Instructions]

I would now like to turn the conference over to Gary Chapman, CEO. Please go ahead.

Executive
Gary Chapman

Thank you. Welcome, everybody.

As always, the earnings release and slide presentation are both available through our website. KNOT Offshore Partners owns and operates shuttle tankers, where our ships transport oil from offshore production units to shoreside and are an essential part of the supply chain for our customers, all of whom are large names in the oil and energy markets.

Our call today will include the non-US-GAAP measures of distributable cash flow and adjusted earnings before interest, tax, depreciation, 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 2019 20-F for further details.

On to Slide 3, Q1 -- Q2 2020 financial highlights and recent events. We continue to operate our fleet without any material disruption as a result of COVID-19 coronavirus, and you'll find more information in our earnings release related to this topic. I think it's worth saying that we're reporting this quarter one of the best sets of results of the Partnership. We generated total revenue of $70.3 million, operating income of $33.4 million and net income of $21.7 million and more comparably quarter-by-quarter adjusted EBITDA of $55.8 million. We ended with distributable cash flow generated of $30.7 million, giving a coverage ratio -- distribution coverage ratio at the end of the quarter of 1.70 times, and we again maintained our cash distribution of $0.52 per common unit, returning an annual yield of quite remarkably around 16% based on a $13 unit price.

During the quarter, the fleet operated 99.7% utilization for scheduled operations, and there were no drydocks this quarter and they were non-planned for the remainder of 2020. Shell, in the end, chose not to exercise their option on the Windsor Knutsen. And whilst the vessel is still with Shell today, we expect that it will be redelivered to the Partnership sometime between mid-September and mid-December 2020 in accordance with the redelivery provisions in the charter. The Partnership is currently looking at all options to recharter the vessel, and we're talking to a number of potential parties, including the sponsor.

On Slide 4, the income statement. For the second quarter of 2020, we recorded total revenues of $70.3 million compared to $67.2 million [Phonetic] for the first quarter of 2020. The increase was almost entirely related to the effect of Raquel Knutsen's scheduled drydock in the first quarter. Vessel operating expenses for the second quarter of 2020 was $13.1