KNOT Offshore issues strategic & operational update

KNOT Offshore Partners LP provided a strategic and operational update on a number of developments involving fleet expansion, chartering, refinancing, and a common unit buyback program.

In addition to the updates related to ongoing operations and additional detail provided later in this announcement, key developments include the following:

• The outstanding debt of the Tove Knutsen is expected to be refinanced by means of a sale & leaseback transaction, which would generate approximately $32 million of proceeds;
• The Partnership has agreed to acquire the 2022-built DP2 shuttle tanker Daqing Knutsen (the “Acquisition”) from Knutsen NYK Offshore Tankers AS (“KNOT”). The purchase price is $95 million, less $70.5 million of outstanding indebtedness, plus $0.3 million of capitalized fees related to the credit facility secured by the Daqing Knutsen and subject to customary post-closing adjustments for working capital. The vessel is on time charter to PetroChina in Brazil through July 2027. As a term of the Acquisition, KNOT has guaranteed the hire rate for the vessel until 2032 on the same basis as if PetroChina had exercised its option through such date;
• In recognition of the value proposition represented by the prevailing market valuation of the Partnership’s common units, KNOP is establishing a $10 million common unit buyback program; and
• The Partnership’s quarterly distribution for 2Q 2025 has been maintained at $0.026 per common unit.

CEO commentary

Derek Lowe, CEO of the Partnership, commented, “Having made significant progress against our strategic priorities over recent quarters, and with shuttle tanker charter market conditions continuing to improve on the back of clear, long-term fundamentals, we are pleased to have reached a point where we can once again take affirmative, value-creating action on multiple fronts. By successfully executing the dropdown of the Daqing Knutsen in conjunction with the attractively-priced sale-leaseback of one of our existing vessels, we are pleased to have once again agreed an accretive vessel acquisition that grows our fleet in the most in-demand shuttle tanker class, reduces our average fleet age, and improves the value and duration of our long-term charters, all without drawing on our available liquidity.

We are also pleased with the Board’s authorization of a common unit repurchase program to buy back up to an aggregate of $10 million of the Partnership’s outstanding common units over the next 12 months. The current market valuation of our common units represents a substantial discount to our net asset value, and the extent of improvement in both the Partnership itself and in the shuttle tanker charter market has only made the value proposition of our common units more pronounced.

As our forward visibility has improved over time, we are in a position to return capital to our common unitholders. We believe that this development represents an important step forward in our drive to create lasting, long-term value for our common unitholders.

The Partnership continues to believe that the key components of its strategy and value proposition are accretive investment in the fleet and a long-term, sustainable distribution, and the accretive impact of repurchasing common units fits well with these aims. Moving forward, our day-to-day commercial focus remains on securing further long-term charters with high-quality counterparties that provide the Partnership with stable, predictable cashflows. We are confident that strong operational performance and the successful execution of our strategy will continue to expand our strategic and financial flexibility and to support multi-faceted value creation for our unitholders in the quarters and years ahead.”