KNOT Offshore Partners Q2 2026 Earnings Report

KNOT Offshore Partners EPS Results

• Actual EPS: $0.05
• Consensus EPS: N/A
• Beat/Miss: N/A
• One Year Ago EPS: N/A

KNOT Offshore Partners Revenue Results

• Actual Revenue: $96.78 million
• Expected Revenue: N/A
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

KNOT Offshore Partners Announcement Details

• Quarter: Q2 2026
• Date: 8/14/2026
• Time: Before Market Opens
• Conference Call Date: N/A
• Conference Call Time: N/A

KNOT Offshore Partners (NYSE:KNOP) is a publicly traded limited partnership formed in 2013 to own and operate shuttle tankers under long‐term charters in the offshore oil industry. Listed on the New York Stock Exchange under the symbol KNOP, the partnership specializes in the transportation of crude oil from offshore production facilities to onshore refineries. Its fleet comprises moderne shuttle tankers equipped with dynamic positioning systems, enabling safe transfer operations in harsh weather and sea conditions.

The partnership’s vessels primarily serve fields in the North Sea, Brazil and West Africa, where they operate under multi‐year contracts with major energy producers. These shuttle tankers are tailored to meet stringent environmental and safety regulations, featuring double hull construction and advanced navigation systems. Through fixed‐rate and minimum‐volume charter agreements, KNOT Offshore Partners LP seeks to provide stable cash flows and maintain high utilization across its fleet.

KNOT Offshore Partners LP is managed by KNOT Offshore GP AS, a wholly owned subsidiary of Knutsen NYK Offshore Tankers (KNOT), itself a joint venture between the Knutsen Group and Nippon Yusen Kaisha (NYK). The general partner oversees all commercial and technical management, including crewing, maintenance and compliance with international maritime standards. The board of directors and executive leadership draw on decades of combined experience in offshore shipping and project management to guide the partnership’s growth strategy.

Since its initial public offering in 2013, KNOT Offshore Partners LP has focused on selective fleet expansion and strategic fleet renewal to enhance operational efficiency and environmental performance. The partnership continues to explore opportunities for growth through additional long‐term charters and potential acquisitions of modern shuttle tankers. By leveraging its affiliation with established industry players, KNOT Offshore Partners LP aims to maintain a leading position in the global shuttle tanker segment.

KNOT Offshore Partners Q2 2026 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Fleet growth and distribution increase: KNOP acquired the Hedda Knutsen for a net cash cost of $24.4 million, adding a newer shuttle tanker backed by a Petrobras charter through November 2034. The partnership also increased its quarterly distribution to $0.075 per common unit from $0.05.
• Positive Sentiment: Strong contract coverage: KNOP secured new or extended charters for Hilda Knutsen, Recife Knutsen and Ingrid Knutsen, while reporting $881.2 million of fixed-contract backlog. The fleet is fully covered for the remainder of 2026, with 92% firm coverage in 2027 and 65% in 2028.
• Positive Sentiment: Improved financing profile: The partnership refinanced $225 million of debt at SOFR plus 165 basis points, meaningfully below prior terms, while continuing to repay approximately $95 million of debt annually. Management said refinancing activity remains well advanced for the $65 million Sindre Knutsen facility due in October.
• Neutral Sentiment: Solid quarterly operations amid a constructive market: Second-quarter revenue was $96.8 million, adjusted EBITDA was $57.6 million and available liquidity totaled $143.3 million. Utilization was 96.8% excluding scheduled drydocking, or 92.4% including the Fortaleza Knutsen drydock; management expects sustained demand from Brazilian and North Sea offshore production and FPSO growth.

Presentation

[Operator]

Ladies and gentlemen, thank you for joining us and welcome to the KNOP second quarter 2026 earnings call. After today's prepared remarks, we will host a question-and-answer session with an opportunity for equity research analysts to ask questions. If you would like to ask a question, please raise your hand. If you have dialed into today’s call, please press star one to raise your hand. I will now hand the conference over to Derek Lowe. Please go ahead, sir.

[Derek Lowe, CEO and CFO at KNOT Offshore Partners]

Thank you, Leah. Good morning, ladies and gentlemen. My name is Derek Lowe, and I am the Chief Executive and Chief Financial Officer of KNOT Offshore Partners. Welcome to the Partnership's earnings call for the second quarter of 2026. 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 statements made as of the date of this presentation.

[Derek Lowe, CEO and CFO at KNOT Offshore Partners]

For further information, please consult our SEC filings especially in relation to our annual and quarterly results. Today's presentation also includes certain non-U.S. GAAP measures, and our earnings release includes a reconciliation of these to the most directly comparable GAAP measures. We begin on slide three with the Q2 financial and operational headlines. Revenues were $96.8 million; operating income, $15.6 million; net income, $3.4 million; adjusted EBITDA, $57.6 million; and as of June 30, 2026, we had $143.3 million in available liquidity made up of $95.3 million in cash and cash equivalents plus $48 million in undrawn capacity. This available liquidity was $2.6 million higher than at March 31st, and that rise is largely in line with the reducing trend in recent quarters.

[Derek Lowe, CEO and CFO at KNOT Offshore Partners]

We operated with 96.8% utilization taking into account scheduled drydocking which amounts to 92.4% utilization overall following the drydocking of Fortaleza Knutsen. Following the end of the quarter, we declared a cash distribution of $0.075 per common unit which was paid in August under the 1099 structure and which represented an increase from the previous level. We are pleased to have continued the process of multiple gradual increases to our distribution anchored in our reliable and diversified long term cash flow improved balance sheet. On slide four, we have the most significant developments since the start of the second quarter.

[Derek Lowe, CEO and CFO at KNOT Offshore Partners]

On September 1st, 2026, we purchased the Hedda Knutsen from Knutsen for a purchase price of $113 million less an $89.4 million debt facility plus $0.8 million of capitalized financing fees resulting in a net cash cost of $24.4 million. The transaction was negotiated by our board's independent Conflicts Committee. The vessel was delivered new to KNOT in October 2024 and is on time charter to Petrobras in Brazil through to November 2034 with an additional five years of charterers options. The acquisition provides fleet growth, diversifies and extends our pipeline of long-term contracts, reduces our average fleet age, and develops the fleet in the most in demand shuttle tanker asset class. On slide five, we have commercial and financing developments. We list here a number of positive contractual developments since the beginning of the second quarter.

[Derek Lowe, CEO and CFO at KNOT Offshore Partners]

In addition to various charterers options exercised as expected, I would highlight: a time charter for Hilda Knutsen was executed with Eni to commence in June 2027 for a fixed period of three years plus three charterers options each for one additional year; time Charter for Recife Knutsen was executed for Transpetro to commence in Q3 2026 for a fixed period of two years; agreement was reached with Eni for a time charter on Ingrid Knutsen commencing October 2026 for three years fixed plus three options, each of one year, this is indirect continuation of the existing time chartered to Eni, replaces their existing options; and we refinanced the loan secured by Tordis Knutsen, Vigdis Knutsen, Lena Knutsen, Anna Knutsen, and Brasil Knutsen via a new $225 million five-year senior secured term loan facility arranged by DNB Bank ASA with interest rate reduced meaningfully to SOFR plus 165 basis points.

[Derek Lowe, CEO and CFO at KNOT Offshore Partners]

Turning to slide six for high level summary of our operating momentum. In both Brazil and the North Sea, we continue to see tightening markets driven by robust multiyear FPSO pipeline, production growth, and continuing investment in exploration and existing project expansion. The increase in shuttle tanker service volumes across both markets has been sustained and sufficient to tighten the supply-demand balance even as new vessels are being delivered. We have expanded our strong backlog with $881.2 million of fixed contracts at quarter end, which average 2.5 years in duration and charterers options averaging further four years. At quarter end, our fleet of 19 vessels have an average age of 10.7 years. Acquisition of the Hedda Knutsen reduces the average age by nearly half year.

[Derek Lowe, CEO and CFO at KNOT Offshore Partners]

We're continuing to repay debt at around $95 million per year which we consider prudent with a depreciating asset base, and we're well-advanced in the refinancing of the $65 million facility secured by Live Knutsen which is due later October. Over slides eight to eleven, we provide the financials Q2, the highlights of which we covered already. On slide 12 is our debt maturity profile. While no guarantees can be made, we have historically benefited from access to a wide pool of lenders and attractive bank finance, and we've been encouraged by our refinancing experience in recent years, including during significantly weaker shuttle tanker markets than the current one. Notably, the average margin on our floating rate debt during the second quarter was 2.21% over SOFR.

[Derek Lowe, CEO and CFO at KNOT Offshore Partners]

Moving on to slide 14 and our charter portfolio, I believe this remains a very useful resource for investors looking to track the primary moments where change can occur in a highly stable portfolio of cash flows. Based on current charter rates, we believe charterers options are likely to be exercised given the strength of the charter market. On slide 15, you can see our strong forward coverage, where we're fully chartered for the remainder of 2026. In 2027, we have 92% firm coverage or 96%, including charterers options. Likewise, for 2028, we have 65% firm coverage, or 93%, including charterers options. If we assume that charterers options are picked up, which is our current expectation, then you can see the slowly widening light gray section at the top of the bars as those offering upside potential for the KNOP fleet if market momentum is sustained.

[Derek Lowe, CEO and CFO at KNOT Offshore Partners]

On slide 16, you can see the drop-down inventory held at the sponsor. Drop-downs have been the route to growth in the fleet throughout the life of the Partnership and remain the means of replenishing and rejuvenating the fleet. In June 2026, the Partnership decided not to pursue Frida Knutsen and Sindre Knutsen, and they've been removed from our drop-down inventory. At the same time, we believe that the combination of accretive drop-downs and an improving charter market should support multiple gradual distribution increases over the coming quarters and years, in addition to materially extending our long-term cash generation runway, as certain of our vessels begin to age out in the years ahead.

[Derek Lowe, CEO and CFO at KNOT Offshore Partners]

On slides 17 to 19, we include market commentary, particularly from Petrobras, which continues to highlight record production, a strong and expanding offshore production outlook, and continued FPSO deployment. We encourage you to review this as well as the copious materials that Petrobras publishes as the largest player in the Brazilian market, where we primarily operate. To summarize on slide 20, during the second quarter, we had strong utilization and solid financial results. We secured additional charter coverage across key vessels. We maintained a constructive backlog and market outlook. We paid a quarterly distribution of $0.075 per unit, which is an increase from $0.05 in the prior quarter and $0.026 per quarter for several years before that.

[Derek Lowe, CEO and CFO at KNOT Offshore Partners]

Following the end of the quarter, we purchased Hedda Knutsen, secured additional charter coverage, and refinanced the $225 million loan facility. On slide 21, we conclude with the key themes for KNOP and the shuttle tanker market. The market remains niche and highly concentrated. Offshore extraction continues to take market share from traditional onshore production, and FPSOs serviced by shuttle tankers remain dominant compared with the construction of new pipelines. Brazil and North Sea offshore buildouts have strong momentum following a quieter stretch, while the shuttle tanker order book remains non-speculative and insufficient to meet anticipated demand levels. Looking ahead to coming quarters and years, we believe that KNOP is well-positioned to pursue attractive long-term growth opportunities alongside multiple gradual increases to our sustainable distribution. With that, I'll hand the call back to Leah for any questions. Thank you.

[Operator]

We will now begin the question-and-answer session. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of Liam Burke with B. Riley Securities. Your line is open. Please go ahead.

[Liam Burke, Analyst at B. Riley Securities]

Derek, you have been a busy man this quarter.

[Derek Lowe, CEO and CFO at KNOT Offshore Partners]

Yes, I have. Thanks, Liam.

[Liam Burke, Analyst at B. Riley Securities]

In terms of drop-downs, the Hedda financing was pretty elegant with the assumption of debt and the addition of cash. When I think about the potential drop-downs and the ability to finance them, do you anticipate a different cadence of growing the fleet, or are you just going to take it as they come along?

[Derek Lowe, CEO and CFO at KNOT Offshore Partners]

Well, we respond to the offers that are made to us. Obviously, only a limited number of the drop-down list have been delivered at this stage, so they can only be offered once they have been delivered. It is a matter of the timing of the offers and the response that the Conflicts Committee wants to make to them.

[Liam Burke, Analyst at B. Riley Securities]

Okay, but would you envision the financing similar to Hedda, which, as I said before, is a pretty elegant way to fund a drop-down?

[Derek Lowe, CEO and CFO at KNOT Offshore Partners]

Yeah, I mean, the standard model for all of them is that they have a secure debt facility in place already as they are offered, so the financing itself does not need to be arranged at the time that the drop-down is offered. It is a standard term of those facilities that the ownership and the guarantor arrangements can be transferred over to KNOP from KNOT. So, that is straightforward. But I would say the loan on the Hedda is very standard from the point of view of the drop-downs we have had in the past, so that those terms did not come as a great surprise. Nor did the approximate cash cost of the transaction, so that $24 million is fairly consistent with the sort of net effect, the costs that you will see in the previous transactions we have done.

[Liam Burke, Analyst at B. Riley Securities]

Great. Thank you, Derek.

[Derek Lowe, CEO and CFO at KNOT Offshore Partners]

Right. Thanks, Liam.

[Operator]

There are no further questions at this time. I will now turn the call back to Derek Lowe for closing remarks.

[Derek Lowe, CEO and CFO at KNOT Offshore Partners]

Well, thank you again, ladies and gentlemen, for joining this earnings call for KNOT Offshore Partners' second quarter of 2026, and I look forward to speaking with you again following the third quarter results.

[Operator]

This concludes today's call. Thank you for attending. You may now disconnect.

Participants

Executives

• Derek Lowe, CEO and CFO

Analysts

• Liam Burke, Analyst at B. Riley Securities