ABERDEEN, Scotland--(BUSINESS WIRE)--September 03, 2026--
KNOT Offshore Partners LP $(KNOP)$:
Financial Highlights
For the three months ended June 30, 2026 ("Q2 2026"), KNOT Offshore Partners LP ("KNOT Offshore Partners," "we" or the "Partnership"; NYSE:KNOP):
-- Generated total revenues of $96.8 million, operating income of $15.6
million and net income of $3.4 million;
-- Generated Adjusted EBITDA1 of $57.6 million; and
-- Reported available liquidity of $143.3 million at June 30, 2026, which
was comprised of cash and cash equivalents of $95.3 million and undrawn
revolving credit facility capacity of $48.0 million.
-- This $2.6 million increase in the amount of reported available
liquidity at June 30, 2026, by comparison with that at March 31, 2026, is
broadly consistent with the reducing trend of recent quarters.
Other Partnership Highlights and Events
-- Fleet operated with 96.8% utilization for scheduled operations in Q2
2026, and 92.4% utilization taking into account the scheduled drydocking
of the Fortaleza Knutsen.
-- On July 7, 2026, the Partnership declared a quarterly cash distribution
of $0.075 per common unit with respect to Q2 2026, which was paid on
August 13, 2026, to all common unitholders of record on July 27, 2026. On
the same day, the Partnership declared a quarterly cash distribution to
holders of Series A Convertible Preferred Units ("Series A Preferred
Units") with respect to Q2 2026 in an aggregate amount of $1.7 million.
-- From February 16, 2026 until May 21, 2026, the Tordis Knutsen was
off-hire due to a breakdown of its diesel generator. The vessel was
successfully repaired during that period and put back into service
thereafter. The Partnership received loss-of-hire insurance, including a
payment-on-account of $1.8 million in April 2026 relating to Q1 2026, and
another $1.9 million payment-on-account in August 2026 relating to Q2
2026. Following the vessel's return to service, charterer Shell exercised
their right to extend the current charter by the amount of the related
off-hire time, the firm portion of which consequently ends on September
29, 2028.
-- In mid-April 2026, the Fortaleza Knutsen commenced a drydocking in
Europe, following redelivery in Europe from Transpetro. Following
completion of this drydocking, the Fortaleza Knutsen carried an interim
cargo in late June 2026 and thereafter commenced operations in early
August 2026 in the North Sea pursuant to a time charter to Knutsen NYK
Offshore Tankers AS ("Knutsen NYK") for a fixed period of one year plus
two charterer's options each for one additional year.
_________________________
(1) EBITDA and Adjusted EBITDA are non-GAAP financial measures used by
management and external users of the Partnership's financial statements.
Please see Appendix A for definitions of EBITDA and Adjusted EBITDA and a
reconciliation to net income, the most directly comparable GAAP financial
measure.
-- On April 22, 2026, a time charter for the Hilda Knutsen was executed
with Eni, to commence in June 2027 for a fixed period of three years plus
three charterer's options each for one additional year.
-- In early June 2026, Knutsen NYK sought the interest of KNOP in
purchasing the shuttle tankers Frida Knutsen, Sindre Knutsen and Hedda
Knutsen, pursuant to the omnibus agreement entered into between KNOP and
Knutsen NYK at the time of our initial public offering. The Conflicts
Committee of our Board of Directors, which is comprised only of directors
who are not affiliated with Knutsen NYK, decided not to pursue
negotiations in respect of the Frida Knutsen and Sindre Knutsen. These
vessels have been in operation in the North Sea since late 2022 and fall
outside our business model as they do not have fixed or guaranteed
charter contracts of sufficient duration. As a result, Knutsen NYK has no
further obligation to offer the Frida Knutsen or the Sindre Knutsen to
KNOP unless in the future either vessel secures a charter of at least
five years of fixed duration. The Conflicts Committee engaged in
negotiations with Knutsen NYK in respect of the Hedda Knutsen.
-- As previously disclosed on Form 13D, on June 15, 2026, Knutsen NYK
purchased 1,250,000 of our Series A Preferred Units from Pierfront
Capital Mezzanine Fund Pte. Ltd. at a price of $20 per Series A Preferred
Unit. KNOP was not a party to this transaction, as the purchase was of
existing Series A Preferred Units from a third-party holder. No common
units were purchased or sold pursuant to this transaction.
-- On June 30, 2026, Galp Sinopec exercised their option to extend their
time charter for the Live Knutsen for three years, until December 2029.
-- On July 3, 2026, Equinor exercised their option to extend their time
charter for the Synnøve Knutsen for two years, until February 2029.
-- In late July 2026, the Recife Knutsen commenced a scheduled drydocking,
which is due to complete in early October 2026. Thereafter, the Recife
Knutsen is due to commence operations in Brazil for a fixed period of two
years, pursuant to the time charter to Transpetro that had been executed
on April 24, 2026.
-- On August 7, 2026, the Partnership's subsidiaries that own the Tordis
Knutsen, the Vigdis Knutsen, the Lena Knutsen, the Anna Knutsen and the
Brasil Knutsen, entered into a new $225 million senior secured credit
facility, with DNB Bank ASA as Agent on behalf of the relevant lenders,
in order to refinance their existing term loans in the amount of $225.8
million. The credit facility consists of a term loan repayable in 20
consecutive quarterly installments, with a balloon payment of $111.1
million due at maturity in June 2031. The credit facility bears interest
at a rate per annum equal to SOFR plus a margin of 1.65%. The credit
facility will be guaranteed by the Partnership and secured by mortgages
on the five vessels. The new senior secured credit facility will
refinance the previously existing term loans related to these vessels
which were due to mature in September 2026. Closing of this senior
secured credit facility took place on August 25, 2026.
-- On September 1, 2026, the Partnership's subsidiary, KNOT Shuttle
Tankers AS, acquired Knutsen Canadian Chartering AS, the company that
owns the 2024-built DP2 shuttle tanker Hedda Knutsen from Knutsen NYK
(the "Hedda Acquisition"). The purchase price was $113.0 million, less
$89.4 million of outstanding indebtedness under the secured credit
facility related to the Hedda Knutsen (the "Hedda Facility"), plus $0.8
million of capitalized fees. The initial cost of the Hedda Acquisition
will therefore be approximately $24.4 million, and is subject to
customary post-closing adjustments for working capital and an interest
rate swap. The vessel is on time charter to Petrobras in Brazil through
November 2034, where Petrobras has the option to extend the time charter
by a further five years.
-- On September 2, 2026, agreement was reached with Eni for a time charter
on the Ingrid Knutsen commencing early October 2026 for three years fixed
plus three options each of one year. This is in direct continuation of
the existing time charter to Eni and replaces their existing options.
Derek Lowe, Chief Executive Officer and Chief Financial Officer of KNOT Offshore Partners LP, stated, "We are pleased to report another strong performance in Q2 2026, marked by safe operation at 96.8% from scheduled operations, 92.4% utilization when including drydockings, consistent revenue and operating income generation, opportunistic fleet management, and continued progress in extending our long-term charter coverage.
As of the date of this release and including contractual updates since June 30, 2026, we are fully contracted for the second half of 2026, and have secured approximately 97% coverage for the first half of 2027 and approximately 87% coverage for the second half of 2027, in each case after allowing for scheduled dry dockings. We remain focused on further strengthening our fleetwide charter coverage and seizing those periodic opportunities that exist to re-charter vessels in the current tight market environment.
We continue to see expansion of offshore oil production volumes and shuttle tanker demand in Brazil and the North Sea. Brazil, in particular, has set new records for both overall volumes and for the pace of production ramp-up at its newly deployed FPSOs. In the North Sea region, which importantly includes the Barents Sea, we have continued to see investment into both the development of newer projects and into the expansion of production capacity in existing fields, even where the specific energy majors developing those fields are changing.
In terms of shuttle tanker supply, we are aware of newbuild shuttle tanker orders, including nine for Knutsen NYK, all of which are scheduled for delivery over 2026-2028. We anticipate that all these new orders are backed by charters to clients in Brazil, and see this as a sign of confidence in the medium-to-long term demand for the global shuttle tanker fleet. Particularly when considered in the context of the increasing numbers of shuttle tankers reaching or exceeding typical retirement age, as well as yard capacity constraints limiting material new orders into at least 2028, we expect that the expanding demand of shuttle tankers -- driven most notably by a robust FPSO delivery schedule through at least the medium term in Brazil -- will readily absorb the entire shuttle tanker orderbook.
As the largest global owner of shuttle tankers, along with our Sponsor, and with a market-leading position in the fastest-growing shuttle tanker region of offshore Brazil, the Partnership is well positioned to benefit from these trends throughout the coming years.
The Partnership continues to believe that long-term unitholder value can best be achieved through the generation of stable, long-term cash flows from owning and operating a fleet of shuttle tankers and the prudent allocation of those cash flows across both fleet growth and the sustainable return of capital to unitholders.
As the shuttle tanker market has continued to improve alongside the Partnership's own financial position and forward visibility, the Partnership anticipates that it will seek to acquire from Knutsen NYK over the next four to five years the additional 'dropdown' vessels described later in this release.
The Partnership believes that the combination of accretive dropdowns and ongoing improvements from rechartering should support both an increase in the Partnership's cash flow and multiple, gradual distribution increases over the coming quarters and years."
Financial Results Overview
Results for Q2 2026 (compared to those for the three months ended March 31, 2026 ("Q1 2026")) included:
-- Revenues of $96.8 million in Q2 2026 ($92.0 million in Q1 2026),
reflecting both the stability of our commercial model and an increase due
principally to $1.9 million extra in loss of hire recoveries and fewer
off hire days as only one vessel was in drydock during Q2 2026 compared
to two vessels in Q1 2026.
-- Vessel operating expenses of $36.4 million in Q2 2026 ($33.0 million in
Q1 2026). The increase is primarily due to insurance settlements related
to Hull & Machinery claims in Q1 2026.
-- Depreciation is a non-cash cost, which in Q2 2026 was $42.1 million
($41.9 million in Q1 2026).
-- There were no impairments in either Q2 2026 or Q1 2026. In accordance
with US GAAP, the Partnership's fleet is regularly assessed for
impairment as events or changes in circumstances may indicate that a
vessel's net carrying value exceeds the net undiscounted cash flows
expected to be generated over its remaining useful life, and in such
situation the carrying amount of the vessel is reduced to its estimated
fair value.
-- General and administrative expenses of $1.7 million in Q2 2026 ($2.5
million in Q1 2026). The decrease was primarily driven by higher
administrative costs in Q1 2026 associated with Knutsen NYK's offer to
purchase the Partnership's common units.
-- Operating income consequently of $15.6 million in Q2 2026 ($14.7
million in Q1 2026).
-- Interest expense of $13.8 million in Q2 2026 ($13.9 million in Q1
2026).
-- Realized (i.e. cash) gain on derivative instruments of $0.6 million in
Q2 2026 (gain of $1.0 million in Q1 2026), and unrealized (i.e. non-cash)
gain of $0.8 million in Q2 2026 (unrealized gain of $0.4 million in Q1
2026). Together, there was a realized and unrealized gain on derivative
instruments of $1.4 million in Q2 2026 (gain of $1.4 million in Q1
2026).
-- Net income consequently of $3.4 million in Q2 2026 (net income of $2.6
million in Q1 2026).
By comparison with the three months ended June 30, 2025 ("Q2 2025"), results for Q2 2026 included:
-- A decrease of $6.6 million in operating income (to $15.6 million in Q2
2026 from operating income of $22.2 million in Q2 2025), primarily due to
an increase in depreciation, offset by increased revenue due to higher
time charter rates and higher loss of hire insurance recoveries in Q2
2026.
-- A decrease of $3.2 million in finance expense (to finance expense of
$12.0 million in Q2 2026 from finance expense of $15.2 million in Q2
2025), primarily due to an unrealized and realized gain on derivative
instruments in Q2 2026 compared to a loss in Q2 2025, and lower interest
expense in Q2 2026 compared to Q2 2025 as a result of repayment of
outstanding debt and a lower SOFR rate.
-- A decrease of $3.4 million in net income (to a net income of $3.4
million in Q2 2026 from net income of $6.8 million in Q2 2025).
Financing and Liquidity
As of June 30, 2026, the Partnership had $143.3 million in available liquidity, which was comprised of cash and cash equivalents of $95.3 million and $48.0 million of capacity under its revolving credit facilities. This amount of reported available liquidity was $2.6 million higher than reported available liquidity at March 31, 2026. The Partnership's revolving credit facilities mature in August 2027 and November 2027 respectively.
The Partnership's total interest-bearing obligations outstanding as of June 30, 2026, were $905.9 million ($902.5 million net of debt issuance costs). The average margin paid on the Partnership's outstanding debt during Q2 2026 was approximately 2.21% over SOFR. These obligations are repayable as follows:
(U.S.
Dollars in Sale & Period Balloon
thousands) Leaseback repayment repayment Total
----------- ------------- ------------- ---------- --------
Remainder of
2026 $ 10,365 $ 40,772 $ 64,682 $115,819
2027 21,246 61,388 156,678 239,312
2028 22,345 40,754 78,825 141,924
2029 23,373 27,513 -- 50,886
2030 24,515 27,513 47,384 99,412
2031 and
thereafter 136,050 11,387 111,125 258,562
--------- --------- --------- -------
Total $ 237,894 $ 209,327 $ 458,694 $905,915
--------- --------- --------- -------
As of June 30, 2026, the Partnership had entered into various interest rate swap agreements for a total notional amount outstanding of $272.4 million, to hedge against the interest rate risks of its variable rate borrowings. As of June 30, 2026, the Partnership receives interest based on SOFR and pays a weighted average interest rate of 2.94% under its interest rate swap agreements, which have an average maturity of approximately 1.4 years. The Partnership does not apply hedge accounting for derivative instruments, and its financial results are impacted by changes in the market value of such financial instruments.
As of June 30, 2026, the Partnership's net exposure to floating interest rate fluctuations was approximately $300.3 million based on total interest-bearing contractual obligations of $905.9 million, less the sale and leaseback facilities for Raquel Knutsen, Torill Knutsen and Tove Knutsen totaling $237.9 million, less interest rate swaps of $272.4 million, and less cash and cash equivalents of $95.3 million.
On June 28, 2024, Knutsen Canadian Charting AS, the subsidiary that owns the Hedda Knutsen, as borrower, entered into a $99 million term loan facility with MUFG Bank (Europe) N.V. and other lenders (the "Hedda Facility"). The Hedda Facility became one of the Partnership's debt obligations upon closing of the acquisition of the Hedda Knutsen on September 1, 2026, and is therefore not included in the Partnership's outstanding debt as of June 30, 2026. Following repayment of the quarterly installments due prior to September 1, 2026, the outstanding amount of the Hedda Facility had been reduced to $89.4 million. The Hedda Facility is repayable in quarterly installments with a final payment due at maturity on October 24, 2031 of $61.9 million, which includes the balloon payment and last quarterly installment. The facility bears interest at a rate per annum equal to SOFR plus a margin of 1.6%. In connection with the Hedda Acquisition, the Partnership and KNOT Shuttle Tankers AS became the sole guarantors. The facility is secured by a mortgage on the Hedda Knutsen.
On August 7, 2026, the Partnership's subsidiaries that own the Tordis Knutsen, the Vigdis Knutsen, the Lena Knutsen, the Anna Knutsen and the Brasil Knutsen, entered into a new $225 million senior secured credit facility, with DNB Bank ASA as Agent on behalf of the relevant lenders, in order to refinance their existing term loans. The credit facility consists of a term loan repayable in 20 consecutive quarterly installments, with a balloon payment of $111.1 million due at maturity in June 2031. The credit facility bears interest at a rate per annum equal to SOFR plus a margin of 1.65%. The credit facility is guaranteed by the Partnership and secured by mortgages on the five vessels. The new senior secured credit facility will refinance the previously existing term loans related to these vessels which were due to mature in September 2026. Closing of this senior secured credit facility took place on August 25, 2026.
In October 2026, the senior secured loan facility secured by the Live Knutsen is due to mature with a repayment due at the time of $65.9 million. Based on the Partnership's repeated experience of refinancings and following productive discussions and negotiations with its lending group and other institutions and advisors, Management believes that it will be able to conclude a refinancing of this facility on similar terms prior to maturity.
Assets Owned by Knutsen NYK
Pursuant to the omnibus agreement the Partnership entered into with Knutsen NYK at the time of its initial public offering, the Partnership has the option to acquire from Knutsen NYK any offshore shuttle tankers that Knutsen NYK acquires or owns that are employed under charters for periods of five or more years.
Any such acquisitions, and the terms thereof, are subject to the approval of the Conflicts Committee of the Partnership's Board of Directors.
As of the date of this release, Knutsen NYK owns, or has ordered, the following vessels and has entered into the following charters:
1. In February 2024, Knutsen NYK entered into a new ten-year time charter
contract with Petrobras for each of three vessels to be constructed and
which will operate in Brazil, where the charterer has an option to extend
each charter by up to five further years. The vessels were built in
China. The first two vessels, Janeiro Knutsen and Turid Knutsen, were
delivered to Knutsen NYK from the yard in May 2026 and August 2026,
respectively, and the third vessel is anticipated to be delivered by the
end of 2026.
2. In August 2024, Knutsen NYK entered into a new seven-year time charter
contract with PRIO for a vessel to be constructed and which will operate
in Brazil, where the charterer has an option to extend the charter by up
to eight further years. The vessel will be built in China and is expected
to be delivered later in 2026.
3. In March 2025, Knutsen NYK entered into a new seven-year time charter
contract with Equinor for a vessel to be constructed and which will
operate in Brazil, where the charterer has an option to extend the
charter by up to thirteen further years. The vessel will be built in
China and is expected to be delivered early in 2028.
4. In August 2025, Knutsen NYK entered into a new seven-year charter
contract with Repsol for a vessel to be constructed and which will
operate in Brazil. The charterer has an option to extend the charter by
up to five further years. The vessel will be built in China and is
expected to be delivered early in 2028.
5. In September 2025, Eli Knutsen was delivered to Knutsen NYK from the
yard in China and commenced in October 2025 on a fifteen-year time
charter contract with Petrobras for operation in Brazil. Petrobras has
the option to extend the charter by up to five further years.
6. In December 2025, Knutsen NYK entered into a new ten-year time charter
contract with an oil major for a vessel to be constructed and which will
operate in Brazil, where the charterer has an option to extend the
charter by up to five further years. The vessel will be built in China
and is expected to be delivered late in 2027.
7. In January 2026, Knutsen NYK entered into a new five-year time charter
contract with an oil major for a vessel to be constructed and which will
operate in Brazil, where the charterer has an option to extend the
charter by up to five further years. The vessel will be built in China
and is expected to be delivered early in 2028.
8. In March 2026, Knutsen NYK entered into a new five-year time charter
contract with an oil major for a vessel to be constructed and which will
operate in Brazil, where the charterer has options to extend the charter
up to five further years. The vessel will be built in China and is
expected to be delivered in mid 2027.
9. In June 2026, Knutsen NYK entered into a new seven-year time charter
contract with an oil major for a vessel to be constructed and which will
operate in Brazil, where the charterer has options to extend the charter
up to thirteen further years. The vessel will be built in China and is
expected to be delivered in mid-2028.
10. In July 2026, Knutsen NYK entered into a new five-year time charter
contract with an oil major for a vessel to be constructed and which will
operate in Brazil, where the charterer has options to extend the charter
up to ten further years. The vessel will be built in China and is
expected to be delivered in late-2028.
Outlook
As at June 30, 2026: (i) the Partnership had charters with an average remaining fixed duration of 2.5 years, with the charterers of the Partnership's vessels having options to extend their charters by an additional 4.0 years on average and (ii) the Partnership had $881.2 million of remaining contracted forward revenue, excluding charterers' options and charters agreed or signed after that date. As at June 30, 2026, the nineteen vessels which comprised the Partnership's fleet had an average age of 10.7 years. During Q2 2026, fifteen of the vessels in our fleet operated in Brazil. The market for shuttle tankers in Brazil has continued to tighten, in particular for the Suezmax vessel class around which that market has increasingly consolidated, driven by a significant pipeline of new production growth over the coming years, a limited newbuild order book, and typical long-term project viability requiring a Brent oil price of only $35 per barrel.
Prevailing charter rates in the shuttle tanker time charter market have historically proven to be far less volatile than those in the conventional tanker spot market, typically avoiding both the extreme highs and the loss-making lows that characterize conventional tanker cyclicality. As this relative stability continues to support our long-term strategic orientation and our ability to confidently invest in long-life assets, there are multiple positive tailwinds nevertheless benefiting our market.
Recent positive momentum across the North Sea appears likely to be sustained by a multi-year offshore development pipeline consisting of FPSO ramp-ups, investments in technology and well expansion to drive production increases from the current FPSO network, and a renewed commitment to exploration and extraction in the region.
Looking ahead, based on supply and demand factors with significant forward visibility and committed capital from industry participants, we believe that the overall medium and long-term outlook for the shuttle tanker market remains favourable.
In the meantime, the Partnership intends to pursue long-term visibility from its charter contracts, build its liquidity, pursue accretive acquisitions supportive of long-term cash flow generation, and position itself to benefit from its market-leading role in an improving shuttle tanker market. The Partnership continues to believe that key components of its strategy and value proposition are accretive investment in the fleet and a long-term sustainable distribution.
About KNOT Offshore Partners LP
KNOT Offshore Partners LP owns, operates and acquires shuttle tankers primarily under long-term charters in the offshore oil production regions of Brazil and the North Sea.
KNOT Offshore Partners LP is structured as a publicly traded master limited partnership but is classified as a corporation for U.S. federal income tax purposes, and thus issues a Form 1099 to its unitholders, rather than a Form K-1. KNOT Offshore Partners LP's common units trade on the New York Stock Exchange under the symbol "KNOP".
The Partnership plans to host a conference call on September 4, 2026 at 9:30 AM (Eastern Time) to discuss the results for Q2 2026. All unitholders and interested parties are invited to join via the live webcast link on the Partnership's website: www.knotoffshorepartners.com. A replay of the webcast will be available at the same link following the conclusion of the live call.
September 3, 2026
KNOT Offshore Partners LP
Aberdeen, United Kingdom
Questions should be directed to:
Derek Lowe via email at ir@knotoffshorepartners.com
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended Six Months Ended
------------------------------- ----------------------
June 30, March 31, June 30, June 30, June 30,
(U.S. Dollars
in thousands) 2026 2026 2025 2026 2025
--------------- --------- --------- --------- --------- -----------
Time charter and
bareboat
revenues $ 92,085 $ 89,224 $ 85,920 $181,309 $168,911
Voyage revenues
(1) -- -- -- -- 466
Loss of hire
insurance
recoveries 4,127 2,227 607 6,354 607
Other income 564 556 533 1,120 1,105
------- ------- ------- ------- -------
Total revenues 96,776 92,007 87,060 188,783 171,089
------- ------- ------- ------- -------
Gain from
disposal of
vessel -- -- -- -- 1,342
Vessel operating
expenses 36,445 32,959 33,005 69,404 63,614
Voyage expenses
and commission
(2) 986 -- 944 986 1,711
Depreciation 42,087 41,852 29,372 83,939 58,135
General and
administrative
expenses 1,701 2,500 1,555 4,201 3,351
------- ------- ------- ------- -------
Total operating
expenses 81,219 77,311 64,876 158,530 126,811
------- ------- ------- ------- -------
Operating income
(loss) 15,557 14,696 22,184 30,253 45,620
------- ------- ------- ------- -------
Finance income
(expense):
Interest income 965 778 903 1,743 1,651
Interest expense (13,801) (13,923) (15,316) (27,724) (30,218)
Other finance
expense (235) (196) (199) (431) (351)
Realized and
unrealized gain
(loss) on
derivative
instruments
(3) 1,406 1,375 (370) 2,781 (1,714)
Net gain (loss)
on foreign
currency
transactions (323) 174 (267) (149) 107
------- ------- ------- ------- -------
Total finance
expense (11,988) (11,792) (15,249) (23,780) (30,525)
------- ------- ------- ------- -------
Income (loss)
before income
taxes 3,569 2,904 6,935 6,473 15,095
Income tax
expense (158) (277) (125) (435) (704)
------- ------- ------- ------- -------
Net income
(loss) $ 3,411 $ 2,627 $ 6,810 $ 6,038 $ 14,391
------- ------- ------- ------- -------
Weighted
average units
outstanding (in
thousands of
units):
Common units 33,660 33,660 34,045 33,660 34,045
Class B units
(4) 252 252 252 252 252
General Partner
units 640 640 640 640 640
_________________________
(1) Voyage revenues are revenues unique to spot voyages.
(2) Voyage expenses and commission are expenses unique to spot voyages,
including bunker fuel expenses, port fees, cargo loading and unloading
expenses, agency fees and commission.
(3) Realized gain (loss) on derivative instruments relates to amounts the
Partnership actually received (paid) to settle derivative instruments,
and the unrealized gain (loss) on derivative instruments relates to
changes in the fair value of such derivative instruments, as detailed in
the table below.
Three Months Ended Six Months Ended
------------------------ ------------------
June March June
30, 31 June 30, 30, June 30,
(U.S. Dollars
in
thousands) 2026 2026 2025 2026 2025
------------- ------ ------ -------- ------ ----------
Realized gain
(loss):
Interest rate
swap
contracts $ 579 $1,010 $ 2,521 $1,588 $ 5,631
----- ----- ------ ----- ------
Total realized
gain (loss): 579 1,010 2,521 1,588 5,631
----- ----- ------ ----- ------
Unrealized
gain (loss):
Interest rate
swap
contracts 827 365 (2,891) 1,193 (7,345)
----- ----- ------ ----- ------
Total
unrealized
gain (loss): 827 365 (2,891) 1,193 (7,345)
----- ----- ------ ----- ------
Total realized
and
unrealized
gain (loss)
on derivative
instruments: $1,406 $1,375 $ (370) $2,781 $(1,714)
===== ===== ====== ===== ======
_________________________
(4) On September 7, 2021, the Partnership entered into an exchange agreement
with Knutsen NYK, and the Partnership's general partner whereby Knutsen
NYK contributed to the Partnership all of Knutsen NYK's incentive
distribution rights ("IDRs"), in exchange for the issuance by the
Partnership to Knutsen NYK of 673,080 common units and 673,080 Class B
Units, whereupon the IDRs were cancelled (the "IDR Exchange"). As of June
30, 2026, 420,675 of the Class B Units had been converted to common
units.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET
(U.S. Dollars in
thousands) At June 30, 2026 At December 31, 2025
------------------------- ------------------ ------------------------
ASSETS
Current assets:
Cash and cash equivalents $ 95,255 $ 88,983
Amounts due from related
parties 153 705
Inventories 4,588 4,288
Derivative assets 2,133 2,276
Other current assets 22,791 15,192
-------------- ------------------
Total current assets 124,920 111,444
-------------- ------------------
Long-term assets:
Vessels, net of
accumulated depreciation 1,488,680 1,557,021
Right-of-use assets 675 875
Deferred tax assets 2,295 2,662
Derivative assets 2,250 1,908
Accrued income 15,450 10,927
Other long-term assets 5,308 --
-------------- ------------------
Total Long-term assets 1,514,658 1,573,393
-------------- ------------------
Total assets $ 1,639,578 $ 1,684,837
============== ==================
LIABILITIES AND EQUITY
Current liabilities:
Trade accounts payable $ 8,732 $ 9,607
Accrued expenses 26,596 18,428
Current portion of
long-term debt 313,819 381,126
Current lease liabilities 419 406
Current portion of
derivative liabilities -- 247
Income taxes payable 43 46
Current portion of
contract liabilities 9,023 9,024
Prepaid charter 5,696 5,650
Amount due to related
parties 2,778 2,392
-------------- ------------------
Total current liabilities 367,106 426,926
-------------- ------------------
Long-term liabilities:
Long-term debt 588,690 573,974
Lease liabilities 256 469
Derivative liabilities 161 909
Contract liabilities 55,590 60,102
Deferred tax liabilities 83 82
Deferred revenues 1,168 1,402
Other long-term
liabilities 5,519 --
-------------- ------------------
Total long-term
liabilities 651,467 636,938
-------------- ------------------
Total liabilities $ 1,018,573 $ 1,063,864
-------------- ------------------
Commitments and
contingencies
Series A Convertible
Preferred Units 84,308 84,308
Equity:
Partners' capital:
Common unitholders 523,236 523,205
Class B unitholders 3,871 3,871
General partner interest 9,590 9,589
-------------- ------------------
Total partners' capital 536,697 536,665
-------------- ------------------
Total liabilities and
equity $ 1,639,578 $ 1,684,837
============== ==================
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' CAPITAL
Partners' Capital Accumulated Series A
--------------------------
General Other Total Convertible
Class
Common B Partner Comprehensive Partners' Preferred
(U.S. Dollars
in thousands) Units Units Units Income (Loss) Capital Units
--------- ------ ------- --------------- --------- ---------------
Three Months
Ended June 30,
2025 and 2026
Consolidated
balance at
March 31,
2025 $518,491 $3,871 $9,444 $ -- $531,806 $ 84,308
------- ----- ----- ---- --------- ------- -------
Net income
(loss) 5,015 -- 95 -- 5,110 1,700
Other
comprehensive
income -- -- -- -- -- --
Cash
distributions (885) -- (16) -- (901) (1,700)
------- ----- ----- ---- --------- ------- -------
Consolidated
balance at
June 30, 2025 $522,621 $3,871 $9,523 $ -- $536,015 $ 84,308
------- ----- ----- ---- --------- ------- -------
Consolidated
balance at
March 31,
2026 $523,240 $3,871 $9,589 $ -- $536,700 $ 84,308
------- ----- ----- ---- --------- ------- -------
Net income
(loss) 1,679 -- 32 -- 1,711 1,700
Other
comprehensive
income -- -- -- -- -- --
Cash
distributions (1,683) -- (31) -- (1,714) (1,700)
------- ----- ----- ---- --------- ------- -------
Consolidated
balance at
June 30, 2026 $523,236 $3,871 $9,590 $ -- $536,697 $ 84,308
------- ----- ----- ---- --------- ------- -------
Six Months
Ended June 30,
2025 and 2026
Consolidated
balance at
December 31,
2024 $513,603 $3,871 $9,353 $ -- $526,827 $ 84,308
------- ----- ----- ---- --------- ------- -------
Net income
(loss) 10,788 -- 203 -- 10,991 3,400
Other
comprehensive
income -- -- -- -- -- --
Cash
distributions (1,770) -- (33) -- (1,803) (3,400)
------- ----- ----- ---- --------- ------- -------
Consolidated
balance at
June 30, 2025 $522,621 $3,871 $9,523 $ -- $536,015 $ 84,308
------- ----- ----- ---- --------- ------- -------
Consolidated
balance at
December 31,
2025 $523,205 $3,871 $9,589 $ -- $536,665 $ 84,308
------- ----- ----- ---- --------- ------- -------
Net income
(loss) 2,589 -- 49 -- 2,638 3,400
Other
comprehensive
income -- -- -- -- -- --
Cash
distributions (2,558) -- (48) -- (2,606) (3,400)
------- ----- ----- ---- --------- ------- -------
Consolidated
balance at
June 30, 2026 $523,236 $3,871 $9,590 $ -- $536,697 $ 84,308
------- ----- ----- ---- --------- ------- -------
UNAUDITED CONSOLIDATED STATEMENT OF CASH FLOWS
Six Months Ended June 30,
---------------------------------
(U.S. Dollars in thousands) 2026 2025
------------------------------------ ------------------ -------------
OPERATING ACTIVITIES
Net income (loss) (1) $ 6,038 $ 14,391
Adjustments to reconcile net
income (loss) to cash provided by
operating activities:
Depreciation 83,939 58,135
Amortization of contract
intangibles / liabilities (4,512) (2,244)
Amortization of deferred
revenue (234) (234)
Amortization of deferred debt
issuance cost 1,138 1,163
Drydocking expenditure (10,551) (7,592)
Income tax (benefit)/expense 435 704
Income taxes paid (28) (52)
Unrealized (gain) loss on
derivative instruments (1,193) 7,345
Unrealized (gain) loss on
foreign currency transactions (43) (598)
Net gain from disposal of
vessel -- (1,342)
Changes in operating assets and
liabilities:
Decrease (increase) in amounts
due from related parties 553 (255)
Decrease (increase) in
inventories (299) (716)
Decrease (increase) in other
current assets (7,602) (1,286)
Decrease (increase) in accrued
income (4,523) (2,714)
Increase (decrease) in trade
accounts payable (808) 842
Increase (decrease) in accrued
expenses 3,901 3,603
Increase (decrease) prepaid
charter 45 (5,197)
Increase (decrease) in amounts
due to related parties 385 4,027
---------- ---------
Net cash provided by operating
activities 66,641 67,980
---------- ---------
INVESTING ACTIVITIES
Additions to vessel and
equipment (569) (213)
Proceeds from asset swap (net
cash) -- 1,040
Net cash provided by (used in)
investing activities (569) 827
---------- ---------
FINANCING ACTIVITIES
Repayment of long-term debt (53,721) (64,458)
Payment of debt issuance cost (10) --
Cash distributions (6,006) (5,203)
Net cash used in financing
activities (59,737) (69,661)
---------- ---------
Effect of exchange rate changes
on cash (63) 243
Net increase (decrease) in cash
and cash equivalents 6,272 (611)
Cash and cash equivalents at
the beginning of the period 88,983 66,933
---------- ---------
Cash and cash equivalents at the end
of the period $ 95,255 $ 66,322
---------- ---------
_________________________
(1) Included in net income is interest paid amounting to $27.0 million and
$29.5 million for the six months ended June 30, 2026 and 2025,
respectively.
APPENDIX A--RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
EBITDA and Adjusted EBITDA
EBITDA is defined as earnings before interest, depreciation, impairments and taxes. Adjusted EBITDA is defined as earnings before interest, depreciation, impairments, taxes and other financial items (including other finance expenses, realized and unrealized gain (loss) on derivative instruments and net gain (loss) on foreign currency transactions). EBITDA is used as a supplemental financial measure by management and external users of financial statements, such as the Partnership's lenders, to assess its financial and operating performance and compliance with the financial covenants and restrictions contained in its financing agreements. Adjusted EBITDA is used as a supplemental financial measure by management and external users of financial statements, such as investors, to assess the Partnership's financial and operating performance. The Partnership believes that EBITDA and Adjusted EBITDA assist its management and investors by increasing the comparability of its performance from period to period and against the performance of other companies in its industry that provide EBITDA and Adjusted EBITDA information. This increased comparability is achieved by excluding the potentially disparate effects between periods or companies of interest, other financial items, taxes, impairments and depreciation, as applicable, which items are affected by various and possibly changing financing methods, capital structure and historical cost basis and which items may significantly affect net income between periods. The Partnership believes that including EBITDA and Adjusted EBITDA as financial measures benefits investors in (a) selecting between investing in the Partnership and other investment alternatives and (b) monitoring the Partnership's ongoing financial and operational strength in assessing whether to continue to hold common units. EBITDA and Adjusted EBITDA are non-GAAP financial measures and should not be considered as alternatives to net income or any other indicator of Partnership performance calculated in accordance with GAAP.
The table below reconciles EBITDA and Adjusted EBITDA to net income, the most directly comparable GAAP measure.
Three Months Ended, Six Months Ended
-------------------------------- ------------------------------
June 30, June 30, June 30, June 30,
2026 2025 2026 2025
(U.S. Dollars
in
thousands) (unaudited) (unaudited) (unaudited) (unaudited)
------------- --------------- --------------- ------------- ---------------
Net income $ 3,411 $ 6,810 $ 6,038 $ 14,391
Interest
income (965) (903) (1,743) (1,651)
Interest
expense 13,801 15,316 27,724 30,218
Depreciation 42,087 29,372 83,939 58,135
Income tax
expense 158 125 435 704
EBITDA 58,492 50,720 116,393 101,797
Other
financial
items (a) (848) 836 (2,201) 1,958
Adjusted
EBITDA $ 57,644 $ 51,556 $ 114,192 $ 103,755
_________________________
(a) Other financial items consist of other finance income (expense), realized
and unrealized gain (loss) on derivative instruments and net gain (loss)
on foreign currency transactions.
FORWARD-LOOKING STATEMENTS
This press release contains certain forward-looking statements concerning future events and KNOT Offshore Partners' operations, performance and financial condition. Forward-looking statements include, without limitation, any statement that may predict, forecast, indicate or imply future results, performance or achievements, and may contain the words "believe," "anticipate," "expect," "estimate," "project," "will be," "will continue," "will likely result," "plan," "intend" or words or phrases of similar meanings. These statements involve known and unknown risks and are based upon a number of assumptions and estimates that are inherently subject to significant uncertainties and contingencies, many of which are beyond KNOT Offshore Partners' control. Actual results may differ materially from those expressed or implied by such forward-looking statements. Forward-looking statements include statements with respect to, among other things:
-- market trends in the shuttle tanker or general tanker industries,
including hire rates, factors affecting supply and demand, and
opportunities for the profitable operations of shuttle tankers and
conventional tankers;
-- market trends in the production of oil in the North Sea, Brazil and
elsewhere;
-- Knutsen NYK's and KNOT Offshore Partners' ability to build shuttle
tankers and the timing of the delivery and acceptance of any such vessels
by their respective charterers;
-- KNOT Offshore Partners' ability to purchase vessels from Knutsen NYK in
the future;
-- KNOT Offshore Partners' ability to enter into long-term charters, which
KNOT Offshore Partners defines as charters of five years or more, or
shorter- term charters or voyage contracts;
-- KNOT Offshore Partners' ability to refinance its indebtedness on
acceptable terms and on a timely basis and to make additional borrowings
and to access debt and equity markets;
-- KNOT Offshore Partners' distribution policy, forecasts of KNOT Offshore
Partners' ability to make distributions on its common units, Class B
Units and Series A Preferred Units, the amount of any such distributions
and any changes in such distributions;
-- KNOT Offshore Partners' ability to integrate and realize the expected
benefits from acquisitions;
-- impacts of supply chain disruptions and the resulting inflationary
environment;
-- KNOT Offshore Partners' anticipated growth strategies;
-- the effects of a worldwide or regional economic slowdown;
-- turmoil in the global financial markets;
-- fluctuations in currencies, inflation and interest rates;
-- fluctuations in the price of oil;
-- general market conditions, including fluctuations in hire rates and
vessel values;
-- changes in KNOT Offshore Partners' operating expenses, including
drydocking and insurance costs and bunker prices;
-- recoveries under KNOT Offshore Partners' insurance policies;
-- the length and cost of drydocking;
-- KNOT Offshore Partners' future financial condition or results of
operations and future revenues and expenses;
-- the repayment of debt and settling of any interest rate swaps;
-- planned capital expenditures and availability of capital resources to
fund capital expenditures;
-- KNOT Offshore Partners' ability to maintain long-term relationships
with major users of shuttle tonnage;
-- KNOT Offshore Partners' ability to leverage Knutsen NYK's relationships
and reputation in the shipping industry;
-- KNOT Offshore Partners' ability to maximize the use of its vessels,
including the re-deployment or disposition of vessels no longer under
charter;
-- the financial condition of KNOT Offshore Partners' existing or future
customers and their ability to fulfill their charter obligations;
-- timely purchases and deliveries of newbuilds;
-- future purchase prices of newbuilds and secondhand vessels;
-- any impairment of the value of KNOT Offshore Partners' vessels;
-- KNOT Offshore Partners' ability to compete successfully for future
chartering and newbuild opportunities;
-- acceptance of a vessel by its charterer;
-- the impacts of the Russian war with Ukraine, the conflict between
Israel and Hamas, the conflicts with Iran and the other conflicts in the
Middle East and Venezuela;
-- termination dates and extensions of charters;
-- the expected cost of, and KNOT Offshore Partners' ability to, comply
with governmental regulations (including climate change regulations) and
maritime self-regulatory organization standards, as well as standard
regulations imposed by its charterers applicable to KNOT Offshore
Partners' business;
-- availability of skilled labor, vessel crews and management;
-- the effects of outbreaks of pandemics or contagious diseases, including
the impact on KNOT Offshore Partners' business, cash flows and operations
as well as the business and operations of its customers, suppliers and
lenders;
-- KNOT Offshore Partners' general and administrative expenses and its
fees and expenses payable under the technical management agreements, the
management and administration agreements and the administrative services
agreement;
-- the anticipated taxation of KNOT Offshore Partners and distributions to
its unitholders;
-- estimated future capital expenditures;
-- Marshall Islands economic substance requirements;
-- KNOT Offshore Partners' ability to retain key employees;
-- customers' increasing emphasis on climate, environmental and safety
concerns;
-- the impact of any cyberattack;
-- potential liability from any pending or future litigation;
-- potential disruption of shipping routes due to accidents, political
events, piracy or acts by terrorists;
-- future sales of KNOT Offshore Partners' securities in the public
market;
-- KNOT Offshore Partners' business strategy and other plans and
objectives for future operations; and
-- other factors listed from time to time in the reports and other
documents that KNOT Offshore Partners files with the U.S. Securities and
Exchange Commission, including its Annual Report on Form 20--F for the
year ended December 31, 2025.
All forward-looking statements included in this release are made only as of the date of this release. New factors emerge from time to time, and it is not possible for KNOT Offshore Partners to predict all of these factors. Further, KNOT Offshore Partners cannot assess the impact of each such factor on its business or the extent to which any factor, or combination of factors, may cause actual results to be materially different from those contained in any forward- looking statement. KNOT Offshore Partners does not intend to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in KNOT Offshore Partners' expectations with respect thereto or any change in events, conditions or circumstances on which any such statement is based.
View source version on businesswire.com: https://www.businesswire.com/news/home/20260903681148/en/
CONTACT: Derek Lowe
ir@knotoffshorepartners.com