KNOT Offshore Partners LP Common Units representing Limited Partner Interests

good morning and thank you all for joining i would like to welcome you all to the nut offshore partners third quarter 2024 earnings call my name is brika and i will be your moderator for today all lines will be muted during the presentation portion of the call with opportunity for questions and answers at the end i would now like to pass the conference over to your host derek low chief executive officer and chief financial officer At Knot Offshore Partners. Thank you. You may proceed, Derek.

Thank you, Brieke, and good morning, ladies and gentlemen. My name is Derek Lowe. I'm the Chief Executive and Chief Financial Officer of Knot Offshore Partners. Welcome to the Partnerships Earnings Call for the third quarter of 2024. Our website is knotoffshorepartners.com, and you can find the earnings release there along with this presentation. On slide two, you will find guidance on the inclusion of forward-looking statements in today's presentation. These are made in good faith and reflect management's current views, known and unknown risks, and are based on assumptions and estimates that are inherently subject to significant uncertainties and contingencies, many of which are beyond our control. Actual results may differ materially from those expressed or implied in forward-looking statements, and the partnership does not have or undertake a duty to update any such forward-looking statements made as of the date of this presentation. For further information, please consult our SEC filings, especially in relation to our annual and quarterly results. Today's presentation also includes certain non-US GAAP measures, and our earnings release includes a reconciliation of these to the most directly comparable GAAP measures. On slide three, we have the financial and operational headlines for Q3. Revenues were $76.3 million, operating income $17.2 million, and there was a net loss of 3.8. Adjusted EBITDA was $45.1 million. We closed Q3 with $77 million in available liquidity, made up of $67 million in cash and cash equivalents, plus $10 million in undrawn capacity on our credit facilities. We operated with 98.8% utilization, and the vessel time available for scheduled operations was not impacted by any planned dry docking. Following the end of Q3, we declared a cash distribution of 2.6 US cents per common unit, which was paid in early November. Onto slide four, our outlook remains positive on both industry dynamics and the partnerships positioning to participate fruitfully in our markets. Significant growth is anticipated in production in fields which rely on service by Shell tankers. We see around 11 new builds on order, including for our sponsor Knutson MYK. and we expect to see further new build orders placed in order to service the large new production volumes coming online in the years ahead. A measured amount of new Shuttle tanker ordering is unavoidable and in fact necessary as a shortage of Shuttle tanker capacity remains projected in the coming years. The partnership remains financially resilient with a strong contracted revenue position of $980 million at the end of Q3 on fixed contracts, which averaged 2.8 years in duration. Charter as options are additional to this and average a further 2.4 years. Our pattern of cash generation and liquidity balance is sufficient for our operations and the significant paid out rate for our debt, which is in the region of $90 million per year for installment payments. And our near-term chartering exposure has reduced to Dan Sabia, where we are maintaining our marketing focus. She has secured some conventional cargoes and so is operating commercially while we seek a shuttle tanker deployment. On slide five, a number of developments in Q3 were announced already on the previous earnings call, including charter extensions for Tordes Knudsen and Lehner Knudsen. The most important development in Q3 is on slide six, showing the swap of Dan Cisner for Tuva Knudsen. Tuva brought seven years of fixed or guaranteed future charter revenue and was a significant step in fleet and pipeline growth without the need for new funding. On slide seven, Our most recent developments include the Ingrid Knutson beginning her charter with E&I in October for two years plus two options each of one year. Signature of a charter for the Hilda Knutson for one year fixed commencing March 2025. Commencement of the Toril Knutson's time charter with E&I for three years fixed plus three options each of one year. Exercise by Repsol of their one year option on Carmen Knutson commencing Q1 2025. and some short-term deployments for the Dan Sabia on conventional tanker work. On to slide eight, you can see the consistency of our revenues over the quarters and years. This consistency applies also to our operating income when the effects of vessel impairments is removed. Slide nine similarly reflects the consistency of our adjusted EBITDA, and you can find the definition of this non-GAAP measure in the appendix. On slide 10, there are two notable changes in the balance sheet over the first nine months of 2024. The first is a slight increase in overall liabilities. While we continue contractual debt repayments in the area of $90 million per year, liabilities increased with completion of the TUVA acquisition on the 3rd of September. The second is that two of our debt facilities have moved up from long term to current liabilities because of their upcoming maturities. These can be seen on slide 11, which sets out the maturity profile of our debt facilities. On line one, the first of our revolving credit facilities is due to mature in August 2025, and on line two, around half of the loan secured by Tover Knutson and Sinova Knutson matures in September 2025. The remainder of that facility matures in October 2025, and the second revolving matures in November 2025. The highlighted column shows how the outstanding balances of each facility have been reducing because of the repayments we've been making in line with scheduled repayment terms. The current installments are the amounts of capital repayment due over the next year, which do not include interest or the final balloon payments due on the maturity dates. Of note, $96 million in current installments is due to be paid over the 12 months following 30th of September. Our typical pattern is for our vessels to provide security for our debt facilities, and that applies to 17 out of 18 vessels in the fleet as of 30th of September. At present, Dan Sabia is the only vessel free of debt, and we do not have any plans to incur additional borrowing secured by Dan Sabia until we have better visibility on her future employment. $907 million out of $947 million in debt facilities are secured by vessels, while the two revolving credit facilities totaling $50 million of capacity are unsecured. Slide 12 shows the contracted pipeline in chart format, reflecting the developments I set out earlier. Similarly, slide 13 highlights the focus of our commercial efforts on adding near-term contracts for Dansabia. We've made good progress in increasing our fixed charter coverage, and we intend to remain active in that regard. On slide 14, we see our sponsor's inventory of vessels which are eligible for purchase by the partnership. This applies to any vessel owned by or on order for our sponsor. where the vessel has a firm contract period at least five years in length. At present, five existing vessels and five under construction fall into this category. There is no assurance that any further acquisitions will be made by the partnership, and any transaction will be subject to the Board approval of both parties, which includes the partnership's independent conflicts committee. As we have said, our top priorities remain securing additional contract coverage for our existing fleet and fostering our liquidity positions. On slides 15 and 16, we provided some useful illustrations of the strong demand dynamics in the Brazilian market as published by Petrobras. We encourage you to review Petrobras materials directly. The web page is shown there. Primary takeaway from each of these slides is consistent. There's very significant committed demand growth coming in the Brazilian market in the form of new FPSOs that will require regular service from shuttle tankers. We believe that reports earlier this year of additional vessel construction contracts are an endorsement of the strong anticipated market conditions in the medium and longer term. Five outstanding new build contracts are for our sponsor Knutson MYK and are due for delivery over 2026 and 2027. We would expect to see further new build orders placed in order to service the large new production volumes coming online in the years ahead, and a material shortage of shuffle tanker capacity remains projected in the coming years. In a trend that also applies to oil production globally, you'll see that even in the years ahead where aggregate production growth slows, deep offshore production, in this case Brazilian pre-salt, continues to outpace the overall market and take market share. On slide 17, we provide information relevant to our US unit holders, in particular those seeking a Form 1099. Those holding units via their custodians or brokers should approach those parties directly. Those with directly registered holdings should contact our transfer agent, Equinity Trust Company, whose details are shown there. On slide 18, we include some reminders of the strong fundamentals of our business. In the market we serve, our assets, competitive landscape, robust contractual footprint, and resilient finances. And I'll finish with slide 19, recapping our financial and operational performance in Q3 2024 and the subsequent time, and our current outlook. We're glad to have delivered high and safe utilization, which have generated consistent financial performance. We're pleased with the new contracts and extensions we've secured during the quarter and since, along with our ability to navigate our refinancing needs and periodic capital expenditure. We're delighted to have taken the growth step of swapping down system for Tuva Connection. And our continued commercial focus remains on filling up third party utilization for the coming months, while looking further forward to longer term charter visibility and liquidity generation. In total, though, we're making good progress and are pleased to have established positive momentum against an improving market backdrop. Thank you for listening. And with that, I'll hand the call back to Brika for any questions.

Thank you. We'll now begin the question and answer session. If you would like to ask a question, please press star followed by one on your telephone keypad now. If you change your mind, please press star and two. And as a reminder, when speaking, please ensure your line is unmuted locally. We will pause here briefly whilst questions are registered. We have the first question on the line from Liam Burke with B Reilly. Please go ahead.