KNOT Offshore Partners Q1 Earnings Call Highlights

Key Points

• KNOP posted solid first-quarter results with net income of $2.6 million, revenue of $92 million and Adjusted EBITDA of $56.5 million. Management also said utilization was strong and liquidity improved to $140.7 million at quarter-end.
• The partnership raised its cash distribution to $0.05 per common unit after a long period of low payouts. CEO Derek Lowe said the increase reflects restored charter coverage, better liquidity and completed refinancings and dry dockings.
• Charter coverage and market conditions remain supportive, with new or extended contracts for several vessels and a $858 million fixed backlog. Lowe said shuttle tanker markets in Brazil and the North Sea are tightening, which could support gradual future distribution increases.

KNOT Offshore Partners NYSE: KNOP reported first-quarter 2026 net income of $2.6 million as management pointed to strong vessel utilization, improved liquidity and additional charter coverage across its shuttle tanker fleet.

Chief Executive and Chief Financial Officer Derek Lowe said on the company’s earnings call that revenue for the quarter totaled $92 million, while operating income was $14.7 million. Adjusted EBITDA was $56.5 million. Lowe said available liquidity stood at $140.7 million as of March 31, consisting of $92.7 million in cash and cash equivalents and $48 million of undrawn capacity. That was $3.7 million higher than at the end of 2025.

The partnership operated at 97.2% utilization when accounting for scheduled dry docking, or 92% overall after dry dockings of the Tuva Knutsen and Bodil Knutsen, Lowe said.

Distribution Increased After Period of Low Payouts

Following the end of the quarter, the partnership declared a cash distribution of $0.05 per common unit, paid in May under its 1099 structure. Lowe said the distribution represented an increase from the prior level.

“We are pleased to have initiated the process of increasing the distribution after an extensive period of low payouts, during which we restored our charter coverage, improved our liquidity position, and addressed multiple refinancings and dry dockings,” Lowe said.

During the question-and-answer portion of the call, Fearnley Securities analyst Fredrik Dybwad asked about the potential magnitude of future distribution increases. Lowe said those decisions are made by the board after each quarter and that management was not providing specific guidance.

“The board will make their decision following the end of second quarter for the next distribution,” Lowe said. When asked whether future increases could resemble the most recent increase or be larger, he said the company did not have a number to provide until a distribution decision is made.

Charter Coverage Expanded Across Several Vessels

Lowe highlighted several commercial developments in the quarter. The partnership exercised its option to continue the time charter of the Hilda Knutsen with Shell through March 2027. It also subsequently agreed to a new time charter for the vessel with Eni, beginning in the third quarter of 2027, for a fixed three-year period plus options of up to an additional three years.

TotalEnergies exercised an option to extend the charter of the Anna Knutsen for one year, until May 2027. The partnership also agreed to a time charter for the Raquel Knutsen with Transpetrol beginning in the third quarter of 2026 for a fixed period of two years.

Lowe said the partnership maintained $858 million of fixed contract backlog, averaging 2.4 years, with a higher figure if all options are exercised. He added that, based on current charter rates, management believes charterers’ options are likely to be exercised given the strength of the charter market.

Management Points to Tightening Shuttle Tanker Markets

Lowe said shuttle tanker markets in both Brazil and the North Sea continue to tighten, supported by floating production, storage and offloading vessel startups, ramp-ups, expansions and new developments.

“This increase in shuttle tanker service volumes across both markets has been sustained and sufficient to tighten the supply-demand balance,” Lowe said.

He also pointed to Petrobras’ offshore production outlook and continued FPSO deployment as important market indicators, noting that Petrobras is the largest player in the Brazilian market where the partnership primarily operates.

In response to a macro question from B. Riley Securities analyst Liam Burke about whether Middle East conflict and the eventual reopening of the Strait of Hormuz could lead to higher offshore oil development, Lowe said he did not have a medium- or long-term view. He said companies may remain cautious in the near term as they interpret changing developments.

Burke also asked about the supply side and the aging of the global shuttle tanker fleet. Lowe said the partnership’s vessel ages are available in its filings, but he did not comment on other shipowners’ fleets. He said that with the ramp-up in Brazil, newbuild inventory is “clearly in excess of what’s going to retire from the market” and is intended to serve new volumes coming online. Burke noted that aging vessels could further tighten supply, and Lowe agreed.

Debt Repayment and Refinancing Remain in Focus

Lowe said the partnership’s 19-vessel fleet had an average age of 10.5 years at quarter-end. He said the company is continuing to repay debt at about $90 million per year, which management considers prudent given a depreciating asset base.

After addressing earlier refinancing activity, the partnership is looking ahead to a $220 million facility in September 2026 and a $65 million facility in October. Lowe said there are no guarantees, but the partnership has historically had access to a broad lender base and attractive bank financing.

He noted that the average margin on the company’s floating-rate debt during the first quarter was 2.22% over SOFR.

Useful Life Estimate Reduced to 20 Years

The partnership also changed the estimated useful life of its vessels, prospectively from Jan. 1, 2026, to 20 years from 23 years. Lowe said the change reflects longer-term market trends and will increase future quarterly depreciation, though it is not a cash item. He added that the change does not prevent vessels from operating beyond 20 years.

Alliance Global Partners analyst Poe Fratt asked about the sequential decline in revenue. Lowe said the decline was related to the dry dock schedule as well as the terms of contracts outstanding across the different periods.

Looking ahead, Lowe said the partnership expects potential drop-down acquisitions from its sponsor over the next four to five years, if terms are attractive and approved by the conflicts committee. He said accretive drop-downs and an improving charter market should support “multiple gradual distribution increases over the coming quarters and years,” while extending the partnership’s long-term cash generation runway as some vessels begin to age.

About KNOT Offshore Partners NYSE: KNOP

KNOT Offshore Partners LP 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.

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