20-F: KNOT Offshore Partners LP Announces 20-F Filing for Fiscal Year Ended December 31, 2024

KNOT Offshore Partners LP files its 20-F report, detailing its financial performance and operational activities for the fiscal year ending December 31, 2024.

Summary

• KNOT Offshore Partners LP has filed its Form 20-F for the fiscal year ended December 31, 2024.
• The report includes forward-looking statements regarding future operations, economic performance, and financial forecasts.
• As of December 31, 2024, the Partnership's fleet consisted of eighteen shuttle tankers.
• The report details the company's business strategies, including managing its fleet, pursuing strategic acquisitions, and expanding global operations.
• The report also outlines various risk factors that could affect the company's business, financial condition, and operating results.
• In 2024, subsidiaries of Shell, Equinor, Transpetro, Repsol, KNOT and TotalEnergies accounted for approximately 24%, 17%, 14%, 13%, 9% and 8%, respectively, of the company's revenues.
• The company expects to incur capital expenditures of approximately $13.3 million in 2025 for drydocks.
• As of December 31, 2024, the Partnership had available liquidity of $90.4 million, including $66.9 million in cash and cash equivalents.
• The Partnership's total interest-bearing obligations as of December 31, 2024 were approximately $909.7 million.
• The report also discusses compliance with safety, environmental, and other vessel requirements.
• The Partnership is subject to taxes, which reduces cash available for distribution to unitholders.
• The report also details related party transactions and agreements with KNOT and its affiliates.
• The Partnership has a limited call right that may require unitholders to sell their common units at an undesirable time or price.
• The Partnership is organized under the laws of the Marshall Islands, which does not have a well-developed body of partnership law.

Sentiment

Score: 5

Explanation: The document presents a mixed picture. While there are positive aspects such as increased revenue and a strong relationship with KNOT, there are also significant risks and uncertainties that could affect the company's future performance. The reduction in the quarterly common unit distribution rate is a negative sign.

Positives

• The company has a diversified customer base, with several major oil and gas companies contributing significantly to its revenues.
• The company has a strong relationship with KNOT, which provides operational expertise and support.
• The company is taking steps to manage its exposure to interest rate fluctuations by entering into interest rate swap contracts.
• The company is in compliance with all covenants under its debt agreements as of December 31, 2024.
• The company has a history of successfully obtaining financing or refinancing its debt.

Negatives

• The company is subject to various risk factors, including fluctuations in hire rates, vessel values, and operating expenses.
• The company's debt levels may limit its flexibility in obtaining additional financing.
• The company's charters are subject to early termination under certain circumstances.
• The company is exposed to currency exchange rate fluctuations.
• The company is subject to taxes, which reduces cash available for distribution to unitholders.
• The company relies on the master limited partnership (MLP) structure and its appeal to investors for accessing debt and equity markets to finance its growth and repay or refinance its debt.
• The company has a limited call right that may require unitholders to sell their common units at an undesirable time or price.
• The company is organized under the laws of the Marshall Islands, which does not have a well-developed body of partnership law.

Risks

• The company may not have sufficient cash from operations to continue to pay distributions on its common units.
• The company must make substantial capital expenditures to maintain the operating capacity of its fleet.
• The company may be unable to re-charter its vessels upon termination or expiration of their existing charters.
• The company's debt levels may limit its flexibility in obtaining additional financing.
• The company's charters are subject to early termination under certain circumstances.
• The company may experience operational problems with vessels that reduce revenue and increase costs.
• The company is affected by macroeconomic conditions, including rising inflation, interest rates, market volatility, economic uncertainty and supply chain constraints.
• Climate change concerns and greenhouse gas restrictions may adversely impact the company's operations and markets.
• The company's international operations expose it to political, governmental and economic instability.
• A cyber-attack could materially disrupt the company's business.
• KNOT and its affiliates may compete with the company.
• Unitholders have limited voting rights.
• The Marshall Islands does not have a well-developed body of partnership law.
• The company is subject to taxes, which reduces cash available for distribution to unitholders.
• U.S. tax authorities could treat the company as a passive foreign investment company.

Future Outlook

The company's growth will primarily depend on continued growth in demand for shuttle tanker transportation services. The company seeks to expand in proven areas of offshore production, such as the North Sea and Brazil, and in new production areas as they are developed.

Industry Context

The shuttle tanker industry is capital intensive and operational expertise is critical, therefore barriers to entry are high. The shuttle tanker industry is viewed as an integral part of offshore oil production creating a market with few alternative suppliers and therefore a low risk of substitution.

Comparison to Industry Standards

• According to Fearnleys, as of January 2025, there were 76 vessels in the global shuttle tanker fleet plus 11 newbuilds known to be on order.
• Together KNOT and KNOP are the largest owners of shuttle tankers with 28 shuttle tankers plus 5 newbuilds on order.
• Maran Shuttle Tankers (following its acquisition of Altera Shuttle Tankers L.L.C., formerly Teekay Offshore Partners L.P.) is the second largest owner in the shuttle tanker market with 18 shuttle tankers and 3 new vessels on order.
• American Eagle Tankers (AET) is the third largest owner of shuttle tankers with 17 vessels and no new vessels on order.
• More recently, Tsakos Energy Navigation Ltd. (Tsakos) has announced a construction order for nine shuttle tankers, backed by bareboat charters to Transpetro.
• Petrobras, which does not own vessels, currently employs a total of approximately 22 shuttle tankers through long-term bareboat and time charters, with further agreements to charter most, or potentially all, of the newbuilds on order.

Related Party Transactions

• The report details related party transactions and agreements with KNOT and its affiliates, including technical management agreements, management and administration agreements, and an administrative services agreement.
• On September 3, 2024, the Partnership acquired from KNOT the Tuva Knutsen, and simultaneously the Partnership sold to KNOT the Dan Cisne.
• On March 3, 2025, the Partnership acquired from KNOT the Live Knutsen, and simultaneously the Partnership sold to KNOT the Dan Sabia.

Stakeholder Impact

• The reduction in the quarterly common unit distribution rate may impact the company's ability to raise capital.
• The company's ability to make cash distributions to unitholders depends on the performance of its subsidiaries and their ability to distribute cash to the company.
• The company's unitholders may not have limited liability if a court finds that unitholder action constitutes control of the company's business.
• The company's general partner has a limited call right that may require unitholders to sell their common units at an undesirable time or price.

Next Steps

• The company will continue to manage its fleet and deepen customer relationships.
• The company will pursue strategic and accretive acquisitions of shuttle tankers on long-term, fixed-rate charters.
• The company will expand global operations in high-growth regions.
• The company will continue to undertake actions and implement plans to strengthen its supply chain to address these pressures and protect the requisite access to commodities and services.

Key Dates

Keywords

shuttle tankers, KNOT Offshore Partners, financial report, Form 20-F, distributions, charters, risk factors, financial performance, oil transportation, vessels