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Name | Symbol | Market | Type |
---|---|---|---|
KNOT Offshore Partners LP | NYSE:KNOP | NYSE | Trust |
Price Change | % Change | Price | High Price | Low Price | Open Price | Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 0 | - |
Financial Highlights
For the three months ended September 30, 2023 (“Q3 2023”), KNOT Offshore Partners LP (“KNOT Offshore Partners” or the “Partnership”):
Other Partnership Highlights and Events
Derek Lowe, Chief Executive Officer and Chief Financial Officer of KNOT Offshore Partners LP, stated, “We are pleased to report another strong performance in Q3 2023, marked by safe operation at over 98% fleet utilization for scheduled operations; consistent revenue and operating income; and completion of the refinancing required in 2023.
______________________________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.
Including those contracts signed since September 30, 2023, we now have 70% of charter coverage in 2024 from fixed contracts, which rises to 79% if charterers’ options are exercised. Having executed a number of new contracts, we remain focused on filling the remaining gaps in our charter portfolio.
In Brazil, the main offshore oil market where we operate, the supply/demand balance is continuing to improve, with robust demand and increasing charter rates. Driven by Petrobras’ continued high production levels and FPSO start-ups in the pre-salt fields that rely upon shuttle tankers, we believe the world’s biggest shuttle tanker market is tightening materially. Our secondary geography, in the North Sea, is taking longer to re-balance, where we anticipate progressive improvement during and beyond 2024. With only five new shuttle tankers set to deliver globally, and currently none after 2025, we believe that growth of offshore oil production in shuttle tanker-serviced fields across both Brazil and the North Sea is on track to outpace shuttle tanker supply growth in the coming years.
As the largest owner and operator of shuttle tankers (together with our sponsor, Knutsen NYK), we believe we are well positioned to benefit from such an improving charter market. We remain focused on generating certainty and stability of cashflows from long-term employment with high quality counterparties, and are confident that continued operational performance and execution of our strategy can create unitholder value in the quarters and years ahead.”
Financial Results Overview
Total revenues were $72.7 million for Q3 2023, compared to $73.8 million for the three months ended June 30, 2023 (“Q2 2023”). Revenues in Q3 2023 were lower compared to Q2 2023 owing to revenues from spot voyages and loss of hire insurance recoveries in Q2 2023, which was partly offset by an increase in time charter and bareboat revenues in Q3 2023.
Vessel operating expenses for Q3 2023 were $23.2 million, a decrease of $2.1 million from $25.3 million in Q2 2023. The decrease is mainly due to the costs related to various upgrades and services on the Brasil Knutsen in connection with her scheduled drydocking, the bulk of which took place in Q2 2023.
Depreciation was $27.5 million for Q3 2023, a decrease of $0.6 million from $28.1 million in Q2 2023.
There was no impairment recognized in Q3 2023, compared to $49.6 million in impairments in Q2 2023 in respect of the Dan Cisne and the Dan Sabia. General and administrative expenses were $1.1 million for Q3 2023 compared to $1.8 million for Q2 2023.
As a result, operating income for Q3 2023 was $20.6 million, compared to an operating loss of $31.2 million for Q2 2023.
Interest expense for Q3 2023 was $18.5 million, an increase of $0.4 million from $18.1 million for Q2 2023. The increase is mainly due to an increase in the US dollar LIBOR and Secured Overnight Financing Rate (“SOFR”) rates.
The realized and unrealized gain on derivative instruments was $4.4 million in Q3 2023, compared to $8.1 million in Q2 2023. Of these amounts, the unrealized (i.e. non-cash) elements were gains of $0.5 million in Q3 2023 and $4.6 million in Q2 2023.
As a result, net income for Q3 2023 was $12.6 million compared to a net loss of $40.4 million for Q2 2023.
By comparison with the three months ended September 30, 2022 (“Q3 2022”), results for Q3 2023 include:
Fleet utilization
The Partnership’s vessels operated throughout Q3 2023 with 98.8% utilization for scheduled operations, and 97.4% utilization taking into account the scheduled drydockings of the Brasil Knutsen and the Hilda Knutsen, which were offhire for 11 days and 12 days respectively in Q3 2023.
Financing and Liquidity
As of September 30, 2023, the Partnership had $58.2 million in available liquidity, which consisted of cash and cash equivalents of $53.2 million and $5.0 million of capacity under one of the revolving credit facilities. Following their refinancings, the revolving credit facilities mature between August 2025 and November 2025. The Partnership’s total interest-bearing obligations outstanding as of September 30, 2023 were $984.1 million ($977.3 million net of debt issuance costs). The average margin paid on the Partnership’s outstanding debt during Q3 2023 was approximately 2.29% over LIBOR or SOFR, as applicable.
As of September 30, 2023, the Partnership had entered into various interest rate swap agreements for a total notional amount of $431.8 million to hedge against the interest rate risks of its variable rate borrowings. As of September 30, 2023, the Partnership receives interest based on three or six-month LIBOR, or three-month SOFR, and pays a weighted average interest rate of 1.9% under its interest rate swap agreements, which have an average maturity of approximately 2.0 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 September 30, 2023, the Partnership’s net exposure to floating interest rate fluctuations was approximately $317.6 million based on total interest- bearing contractual obligations of $984.1 million, less the Raquel Knutsen and Torill Knutsen sale and leaseback facilities of $181.5 million, less interest rate swaps of $431.8 million, and less cash and cash equivalents of $53.2 million. The Partnership’s outstanding interest-bearing contractual obligations of $984.1 million as of September 30, 2023 are repayable as follows:
(U.S. Dollars in thousands)
Sale & Leaseback
Period repayment
Balloon
repayment
Total
Remainder of 2023
$
3,395
$
22,657
$
—
$
26,052
2024
13,804
76,651
63,393
153,848
2025
14,399
68,581
181,583
264,563
2026
15,060
51,596
219,521
286,177
2027
15,751
26,481
—
42,232
2028 and thereafter
119,120
13,241
78,824
211,185
Total
$
181,529
$
259,207
$
543,321
$
984,057
On August 16, 2023, the Partnership closed the refinancing of the first of its two $25 million revolving credit facilities, with the facility being rolled over with NTT Finance Corporation. The new facility will mature in August 2025, bears interest at a rate per annum equal to SOFR plus a margin of 2.23% and has a commitment fee of 0.5% on the undrawn portion of the facility. The commercial terms of the facility are substantially unchanged from the facility entered into in June 2021 with NTT Finance Corporation.
On November 15, 2023, the Partnership closed the refinancing of the second of its two $25 million revolving credit facilities, with the facility being rolled over with SBI Shinsei Bank, Limited. The new facility will mature in November 2025, bears interest at a rate per annum equal to SOFR plus a margin of 2.0% and has a commitment fee of 0.8% on the undrawn portion of the facility. The commercial terms of the facility are substantially unchanged from the facility entered into in November 2020 with SBI Shinsei Bank, Limited.
On September 15, 2023, the loan facility secured by the Dan Cisne was repaid in full with a $10.2 million payment. The Dan Sabia facility is due to be paid down with a final scheduled balloon payment of $6.5 million on maturity in January 2024. There are no plans to incur additional borrowings secured by these two vessels until such time as the Partnership has better visibility on the vessels’ future employment.
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.
There can be no assurance that the Partnership will acquire any additional vessels from Knutsen NYK. Given the relationship between the Partnership and Knutsen NYK, any such acquisition would be subject to the approval of the Conflicts Committee of the Partnership’s Board of Directors.
Knutsen NYK owns the following vessels and has entered into the following charters:
In February 2021, Tuva Knutsen was delivered to Knutsen NYK from the yard and commenced on a five-year time charter contract with a wholly owned subsidiary of the French oil major TotalEnergies. TotalEnergies has options to extend the charter for up to a further ten years.
In November 2021, Live Knutsen was delivered to Knutsen NYK from the yard in China and commenced on a five-year time charter contract with Galp Sinopec for operation in Brazil. Galp has options to extend the charter for up to a further six years.
In June 2022, Daqing Knutsen was delivered to Knutsen NYK from the yard in China and commenced on a five-year time charter contract with PetroChina International (America) Inc for operation in Brazil. The charterer has options to extend the charter for up to a further five years.
In July 2022, Frida Knutsen was delivered to Knutsen NYK from the yard in Korea and commenced in December 2022 on a seven-year time charter contact with Eni for operation in North Sea. The charterer has options to extend the charter for up to a further three years.
In August 2022, Sindre Knutsen, was delivered to Knutsen NYK from the yard in Korea and commenced in September 2023 on a five-year time charter contract with Eni for operation in the North Sea. The charterer has options to extend the charter for up to a further five years.
In May 2022, Knutsen NYK entered into a new ten-year time charter contract with Petrobras for a vessel to be constructed and which will operate in Brazil where the charterer has the option to extend the charter by up to five further years. The vessel will be built in China and is expected to be delivered in late 2024.
In November 2022, Knutsen NYK entered into a new fifteen-year time charter contract with Petrobras 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 in late 2025.
Management Transition
As previously announced on August 4, 2023, Mr. Derek Lowe became the Partnership’s new Chief Executive Officer and Chief Financial Officer, taking office on September 13, 2023.
Mr. Lowe joined the Partnership from Telford Offshore, a provider of accommodation, construction and pipelay in the global offshore energy services industry. He served as the Group Company Secretary of Telford Offshore since its formation in 2018, having provided consultancy services to its predecessor since 2015. He worked from 2011 to 2015 for the debt capital markets group of Pareto Securities, and from 1994 to 2010 for the equity capital markets group of UBS.
Outlook
At September 30, 2023, the Partnership’s fleet of eighteen vessels had an average age of 9.4 years, and the Partnership had charters with an average remaining fixed duration of 1.9 years, with the charterers of the Partnership’s vessels having options to extend their charters by an additional 2.0 years on average. The Partnership had $645 million of remaining contracted forward revenue at September 30, 2023, excluding charterers’ options and excluding contracts agreed or signed after that date.
The Partnership’s earnings for the fourth quarter of 2023 will be affected by the scheduled ten-year special survey drydockings of the Europe-based Torill Knutsen and Ingrid Knutsen, which are being carried out in Europe during November and December 2023.
The market for shuttle tankers in Brazil, where fourteen of our vessels operate, has continued to tighten in Q3 2023, 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. While the Dan Cisne and Dan Sabia stand out among the Partnership’s fleet as being of a smaller size than is optimal in today’s Brazilian market, the contract that we signed for the Brasil Knutsen in August 2023 demonstrates that market tightening in Brazil is underway. We remain in discussions with our customers and continue to evaluate all our options for the Dan Cisne and Dan Sabia vessels, including but not limited to redeployment in the tightening Brazilian market, charter to Knutsen NYK (subject to negotiation and approvals) and sale.
Shuttle tanker demand in the North Sea has remained subdued, driven by the impact of COVID-19-related project delays. We expect these conditions to persist for several more quarters until new oil production projects that are anticipated come on stream.
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 favorable. Notably, the current shuttle tanker orderbook consists of only five vessels, all of which are scheduled to deliver by the end of 2025, while any future new orders would be expected to deliver in 2026 or thereafter.
In the meantime, the Partnership intends to pursue long-term visibility from its charter contracts, build its liquidity, and position itself to benefit from its market-leading position in an improving shuttle tanker market.
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 Thursday December 14, 2023 at 9:30 AM (Eastern Time) to discuss the results for the third quarter of 2023. All unitholders and interested parties are invited to listen to the live conference call by choosing from the following options:
December 13, 2023 KNOT Offshore Partners LP Aberdeen, United Kingdom
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended
Nine Months Ended
September 30,
June 30,
September 30,
September 30,
September 30,
(U.S. Dollars in thousands)
2023
2023
2022
2023
2022
Time charter and bareboat revenues
$
72,188
$
69,924
$
67,738
$
205,045
$
196,713
Voyage revenues (1)
10
1,585
—
8,849
—
Loss of hire insurance recoveries
—
1,424
—
2,335
—
Other income
485
891
78
1,458
258
Total revenues
72,683
73,824
67,816
217,687
196,971
Vessel operating expenses
23,164
25,287
23,127
67,894
66,212
Voyage expenses and commission (2)
375
159
—
5,230
—
Depreciation
27,472
28,107
27,638
83,308
79,634
Impairment (3)
—
49,649
—
49,649
—
General and administrative expenses
1,083
1,838
1,366
4,571
4,492
Total operating expenses
52,094
105,040
52,131
210,652
150,338
Operating income (loss)
20,589
(31,216
)
15,685
7,035
46,633
Finance income (expense):
Interest income
932
861
289
2,476
350
Interest expense
(18,493
)
(18,107
)
(12,220
)
(53,969
)
(27,246
)
Other finance expense
(228
)
(112
)
(213
)
(413
)
(525
)
Realized and unrealized gain (loss) on derivative instruments (4)
4,361
8,124
12,374
10,175
33,847
Net gain (loss) on foreign currency transactions
14
109
237
(13
)
139
Total finance income (expense)
(13,414
)
(9,125
)
467
(41,744
)
6,565
Income (loss) before income taxes
7,175
(40,341
)
16,152
(34,709
)
53,198
Income tax benefit (expense)
5 ,466
(49
)
(180
)
5,663
(558
)
Net income (loss)
$
12,641
$
(40,390
)
$
15,972
$
(29,046
)
$
52,640
Weighted average units outstanding (in thousands of units):
Common units
34,045
34,045
33,923
34,045
33,839
Class B units (5)
252
252
375
252
459
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)
The carrying value of each of the Dan Cisne and the Dan Sabia was written down to its estimated fair value as of June 30, 2023.
(4)
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
Nine Months Ended
(U.S. Dollars in thousands)
September 30,
2023
June 30,
2023
September 30,
2022
September 30,
2023
September 30,
2022
Realized gain (loss):
Interest rate swap contracts
$
3,963
$
3,538
$
(304
)
$
10,506
$
(3,707
)
Foreign exchange forward contracts
(79
)
—
—
(79
)
—
Total realized gain (loss):
3,884
3,538
(304
)
10,427
(3,707
)
Unrealized gain (loss):
Interest rate swap contracts
352
4,667
13,482
(252
)
38,772
Foreign exchange forward contracts
125
(81
)
(804
)
—
(1,218
)
Total unrealized gain (loss):
477
4,586
12,678
(252
)
37,554
Total realized and unrealized gain (loss) on derivative instruments:
$
4,361
$
8,124
$
12,374
$
10,175
$
33,847
(5)
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 September 30, 2023, 420,675 of the Class B Units had been converted to common units.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET
(U.S. Dollars in thousands)
At September 30, 2023
At December 31, 2022
ASSETS
Current assets:
Cash and cash equivalents
$
53,189
$
47,579
Amounts due from related parties
1,230
1,998
Inventories
3,088
5,759
Derivative assets
15,443
15,070
Other current assets
7,421
15,528
Total current assets
80,371
85,934
Long-term assets:
Vessels, net of accumulated depreciation
1,514,532
1,631,380
Right-of-use assets
2,207
2,261
Intangible assets, net
—
—
Deferred tax assets
5,442
—
Derivative assets
13,753
14,378
Accrued income
—
—
Total long-term assets
1,535,934
1,648,019
Total assets
$
1,616,305
$
1,733,953
LIABILITIES AND EQUITY
Current liabilities:
Trade accounts payable
$
6,025
$
4,268
Accrued expenses
10,869
10,651
Current portion of long-term debt
156,797
369,787
Current lease liabilities
902
715
Income taxes payable
18
699
Current portion of contract liabilities
—
651
Prepaid charter and deferred revenue
467
1,504
Amount due to related parties
1,481
1,717
Total current liabilities
176,559
389,992
Long-term liabilities:
Long-term debt
820,475
686,601
Lease liabilities
1,305
1,546
Deferred tax liabilities
152
424
Deferred revenues
2,453
3,178
Total long-term liabilities
824,385
691,749
Total liabilities
1,000,944
1,081,741
Commitments and contingencies
Series A Convertible Preferred Units
84,308
84,308
Equity:
Partners’ capital:
Common unitholders
517,751
553,922
Class B unitholders
3,871
3,871
General partner interest
9,431
10,111
Total partners’ capital
531,053
567,904
Total liabilities and equity
$
1,616,305
$
1,733,953
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS’ CAPITAL
Partners' Capital
(U.S. Dollars in thousands)
Three Months Ended September 30, 2022 and 2023
Common
Units
Class B
Units
General
Partner
Units
Accumulated
Other
Comprehensive
Income (Loss)
Total
Partners'
Capital
Series A
Convertible
Preferred
Units
Consolidated balance at June 30, 2022
$
568,515
$
6,689
$
10,436
$
—
$
585,640
$
84,308
Net income
13,877
133
262
—
14,272
1,700
Conversion of Class B units to common units (1)
1,302
(1,302
)
—
—
—
—
Other comprehensive income
—
—
—
—
—
—
Cash distributions
(17,615
)
(219
)
(333
)
—
(18,167
)
(1,700
)
Consolidated balance at September 30, 2022
$
566,079
$
5,301
$
10,365
$
—
$
581,745
$
84,308
Consolidated balance at June 30, 2023
$
507,897
$
3,871
$
9,246
$
—
$
521,014
$
84,308
Net income
10,739
—
202
—
10,941
1,700
Conversion of Class B units to common units (1)
—
—
—
—
—
—
Other comprehensive income
—
—
—
—
—
—
Cash distributions
(885
)
—
(17
)
—
(902
)
(1,700
)
Consolidated balance at September 30, 2023
$
517,751
$
3,871
$
9,431
$
—
$
531,053
$
84,308
Nine Months Ended September 30, 2022 and 2023
Consolidated balance at December 31, 2021
$
568,762
$
9,453
$
10,492
$
—
$
588,707
$
84,308
Net income
46,079
590
871
—
47,540
5,100
Conversion of Class B units to common units (1)
3,954
(3,954
)
—
—
—
—
Other comprehensive income
—
—
—
—
—
—
Cash distributions
(52,716
)
(788
)
(998
)
—
(54,502
)
(5,100
)
Consolidated balance at September 30, 2022
$
566,079
$
5,301
$
10,365
$
—
$
581,745
$
84,308
Consolidated balance at December 31, 2022
$
553,922
$
3,871
$
10,111
$
—
$
567,904
$
84,308
Net income
(33,515
)
—
(630
)
—
(34,145
)
5,100
Conversion of Class B units to common units (1)
—
—
—
—
—
—
Other comprehensive income
—
—
—
—
—
—
Cash distributions
(2,656
)
—
(50
)
—
(2,706
)
(5,100
)
Consolidated balance at September 30, 2023
$
517,751
$
3,871
$
9,431
$
—
$
531,053
$
84,308
(1)
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 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. As of September 30, 2022, 252,405 of the Class B Units had converted to common units. As of September 30, 2023, 420,675 of the Class B Units had converted to common units. No Class B Units were converted in the third quarter of 2023.
UNAUDITED CONSOLIDATED STATEMENT OF CASH FLOWS
Nine Months Ended September 30,
(U.S. Dollars in thousands)
2023
2022
OPERATING ACTIVITIES
Net income (loss) (1)
$
(29,046
)
$
52,640
Adjustments to reconcile net income (loss) to cash provided by operating activities:
Depreciation
83,308
79,634
Impairment
49,649
—
Amortization of contract intangibles / liabilities
(651
)
(1,063
)
Amortization of deferred revenue
(350
)
—
Amortization of deferred debt issuance cost
1,934
2,071
Drydocking expenditure
(13,207
)
(17,309
)
Income tax expense
(5,662
)
558
Income taxes paid
(665
)
(422
)
Unrealized (gain) loss on derivative instruments
252
(37,554
)
Unrealized (gain) loss on foreign currency transactions
(26
)
(38
)
Changes in operating assets and liabilities:
Decrease (increase) in amounts due from related parties
768
905
Decrease (increase) in inventories
2,671
(1,319
)
Decrease (increase) in other current assets
8,106
(4,886
)
Decrease (increase) in accrued income
—
1,289
Increase (decrease) in trade accounts payable
1,786
2,820
Increase (decrease) in accrued expenses
217
3,179
Increase (decrease) prepaid charter
(1,504
)
(906
)
Increase (decrease) in amounts due to related parties
(235
)
351
Net cash provided by operating activities
97,345
79,950
INVESTING ACTIVITIES
Additions to vessel and equipment
(2,811
)
(2,789
)
Acquisition of Synnøve Knutsen (net of cash acquired)
—
(32,205
)
Net cash used in investing activities
(2,811
)
(34,994
)
FINANCING ACTIVITIES
Proceeds from long-term debt
245,000
142,000
Repayment of long-term debt
(323,590
)
(138,944
)
Payment of debt issuance cost
(2,461
)
(889
)
Cash distributions
(7,805
)
(59,602
)
Net cash used in financing activities
(88,856
)
(57,435
)
Effect of exchange rate changes on cash
(68
)
(253
)
Net increase (decrease) in cash and cash equivalents
5,610
(12,732
)
Cash and cash equivalents at the beginning of the period
47,579
62,293
Cash and cash equivalents at the end of the period
$
53,189
$
49,561
(1)
Included in net income is interest paid amounting to $51.6 million and $23.7 million for the nine months ended September 30, 2023 and 2022, respectively.
APPENDIX A—RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
EBITDA and Adjusted EBITDA
EBITDA is defined as earnings before interest, depreciation 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
Nine Months Ended
September 30,
September 30,
September 30,
September 30,
2023
2022
2023
2022
(U.S. Dollars in thousands)
(unaudited)
(unaudited)
(unaudited)
(unaudited)
Net income (loss)
$
12,641
$
15,972
$
(29,046
)
$
52,640
Interest income
(932
)
(289
)
(2,476
)
(350
)
Interest expense
18,493
12,220
53,969
27,246
Depreciation
27,472
27,638
83,308
79,634
Impairment
—
—
49,649
—
Income tax expense
(5,466
)
180
(5,663
)
558
EBITDA
52,208
55,721
149,741
159,728
Other financial items (a)
(4,147
)
(12,398
)
(9,749
)
(33,461
)
Adjusted EBITDA
$
48,061
$
43,323
$
139,992
$
126,267
(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:
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/20231213757670/en/
Questions should be directed to: Derek Lowe via email at ir@knotoffshorepartners.com
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