Release Date: December 05, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- KNOT Offshore Partners LP (KNOP, Financial) achieved a high utilization rate of 98.8% for their vessels, indicating efficient operations.
- The company has a strong contracted revenue position of $980 million on fixed contracts, averaging 2.8 years in duration, providing revenue stability.
- Significant growth is anticipated in production fields serviced by shuttle tankers, with 11 new builds on order, enhancing future market opportunities.
- The company has secured new contracts and extensions, such as the Ingrid Knutsen's charter with ENI and the Torill Knutsen's time charter with ENI, indicating strong demand for their services.
- KNOT Offshore Partners LP (KNOP) has a robust liquidity position with $77 million in available liquidity, supporting operational and debt repayment needs.
Negative Points
- The company reported a net loss of $3.8 million for Q3 2024, indicating financial challenges.
- Operating expenses increased due to general inflationary pressures, including higher crewing and supply costs.
- Two of the company's debt facilities have moved from long-term to current liabilities due to upcoming maturities, potentially impacting financial flexibility.
- The Dan Sabia vessel remains a concern due to its current lack of deployment, affecting overall fleet utilization.
- The company's cost of equity remains high, with a significant gap between the fleet's market value and the share price, impacting shareholder returns.
Q & A Highlights
Q: Your operating expenses (OpEx) increased by about $2 million sequentially. How much of that was related to repairs?
A: Derek Lowe, CEO and CFO: A limited amount, well under half, probably around a quarter. We are due to receive insurance claim proceeds this quarter, which will offset some of the costs once recognized.
Q: Can you provide some color on the new charters or extensions announced this quarter, including the Torill Knutsen?
A: Derek Lowe, CEO and CFO: The rates reflect market conditions at the time of contracting. For example, Hilda Knutsen's contract was signed in October, reflecting current market rates, while others like Ingrid Knutsen were signed earlier and reflect older market conditions.
Q: Are current market rates lower than they were a couple of years ago?
A: Derek Lowe, CEO and CFO: It's the opposite. Market conditions have been strengthening steadily, implying better or higher rates for more recent contracts.
Q: What factors have contributed to the increase in operating expenses year-on-year?
A: Derek Lowe, CEO and CFO: General operating costs have increased, particularly in crewing and travel expenses, as well as supplies, due to the inflationary environment.
Q: Can you discuss your current hedging strategy and whether you plan to maintain or adjust your hedged rates given the higher interest rate environment?
A: Derek Lowe, CEO and CFO: We consider current interest rate levels when entering new swaps. We have a wide range of hedging policies, and while we are currently on the higher side, we expect this to reduce significantly in 2025. We won't enter swaps at unfavorable rates.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
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