Business Context and Reporting Period
Company: KNOT Offshore Partners LP
Filing Type: Form 6-K (Report of Foreign Private Issuer)
Reporting Period: Quarter and Six Months ended June 30, 2025
Business Overview: The Partnership owns and operates a fleet of shuttle tankers primarily under long-term time and bareboat charters with major oil and gas companies. As of June 30, 2025, the fleet consisted of 18 vessels. The Partnership operates as a single reportable segment.
Key Financial Metrics
| Metric (USD in thousands) | Three Months Ended June 30, 2025 |
Six Months Ended June 30, 2025 |
|---|---|---|
| Total Revenues | $87,060 | $171,089 |
| Operating Income | $22,184 | $45,620 |
| Net Income (Loss) | $6,810 | $14,391 |
| Net Income Attributable to Limited Partners | $5,015 | $10,788 |
| Earnings Per Unit (Basic) | $0.15 | $0.32 |
| Cash Provided by Operating Activities | N/A | $67,980 |
| Cash and Cash Equivalents (End of Period) | $66,322 | $66,322 |
| Total Debt (Current + Long-term) | $918,585 | $918,585 |
| Available Liquidity (Cash + Undrawn Credit) | $104.8 million | $104.8 million |
Material Changes vs. Prior Comparable Period
- Revenue Growth: Total revenues increased 17% for the three months and 13% for the six months ended June 30, 2025, compared to 2024. This was driven by the inclusion of the Tuva Knutsen (acquired Sept 2024) and Live Knutsen (acquired March 2025) in the fleet.
- Profitability Turnaround: The Partnership reported Net Income of $6.8 million for Q2 2025, a significant improvement from a Net Loss of $12.9 million in Q2 2024. The prior year loss included a $16.4 million impairment charge related to the Dan Cisne and Dan Sabia vessels, which were subsequently sold.
- Operating Expenses: Vessel operating expenses increased 22% (Q2) and 20% (6M) year-over-year due to a larger fleet and increased drydocking activities. Expenses also now include costs related to the EU Emission Trading System (EU ETS).
- Derivative Instruments: The Partnership recorded a net loss of $0.4 million on derivatives for Q2 2025, compared to a gain of $1.8 million in Q2 2024. This reflects mark-to-market losses on interest rate swaps due to interest rate fluctuations.
- Debt Reduction: Interest expense decreased 9% in Q2 and 12% in the six-month period, attributed to debt repayments and lower SOFR rates.
Guidance, Outlook, and Management Commentary
- Strategic Acquisitions: The Partnership continues to pursue accretive acquisitions. Subsequent to the period end, the Partnership acquired the Daqing Knutsen (July 2025) and executed a sale-and-leaseback transaction for the Tove Knutsen (Sept 2025), generating approximately $32 million in net proceeds.
- Charter Extensions: Management secured several charter extensions, including the Hilda Knutsen (extended to March 2027), Bodil Knutsen (extended to March 2029), and Raquel Knutsen (extended to June 2028).
- Share Repurchase Program: In July 2025, the Board authorized a $10 million common unit repurchase program. As of September 29, 2025, $1.64 million had been utilized to repurchase 226,374 units.
- Liquidity and Refinancing: Management believes current resources, including $38.5 million in undrawn revolving credit facilities, are sufficient for the next 12 months. However, the Partnership must refinance a $25 million revolving credit facility maturing in November 2025 and a senior secured loan facility maturing in October 2025. Management is in negotiations and expects to refinance on acceptable terms.
- Distributions: The Partnership declared a quarterly cash distribution of $0.026 per common unit for the quarter ended June 30, 2025.
Investor Verification Checklist
- Refinancing Risk: Verify the status of negotiations for the revolving credit facility maturing in November 2025 and the senior secured loan facility maturing in October 2025, as failure to refinance could impact liquidity.
- Acquisition Integration: Monitor the integration and performance of the newly acquired Daqing Knutsen and the financial impact of the Tove Knutsen sale-and-leaseback transaction.
- Interest Rate Exposure: Assess the impact of rising interest rates on the Partnership's variable-rate debt and the resulting mark-to-market volatility on interest rate swap derivatives.
- Regulatory Costs: Track the ongoing financial impact of the EU Emission Trading System (EU ETS) on operating expenses.
- Charter Expirations: Review the schedule of charter expirations, particularly for vessels with contracts ending in 2026, to evaluate renewal risks and potential off-hire periods.