KNOT Offshore Partners LP (NYSE: KNOP) (the “Partnership”)
announced today that its wholly owned subsidiary, KNOT Shuttle Tankers
AS, had entered into a share purchase agreement to acquire KNOT Shuttle
Tankers 20 AS (“KNOT 20”), the company that owns the
shuttle tanker Dan Cisne, from Knutsen NYK Offshore Tankers AS (“KNOT”)
for a purchase price of $103.0 million less approximately $82.1 million
of existing bank debt ($23.4 million of which will be prepaid by KNOT 20
at closing) related to the Dan Cisne (the “Dan Cisne
Loan”). The acquisition is expected to close on or before
December 31, 2014, subject to customary closing conditions.
The Dan Cisne is a 59,000 deadweight ton shuttle tanker, built by
Cosco Nantong in China. The vessel was purchased by KNOT in September
2014 from J. Lauritzen. It is operating under a twelve year contract
with Transpetro, with a remaining firm contract period of 8.7 years.
Including the Dan Cisne, the Partnership will have a fleet of
eight vessels with an average age of 3.2 years and with a fixed average
employment of 5.4 years.
The Partnership’s management believes that the acquisition will be
accretive to unitholders and has recommended that, upon completion of
the acquisition, the Board of Directors of the Partnership (the “Board”)
consider an increase in the quarterly cash distribution of between
$0.010 and $0.015 with respect to the quarter ending March 31, 2015.
This corresponds to an annual increase of between $0.04 and $0.06 per
unit, or 2.0% to 3.0% per unit to an annualized distribution of between
$2.00 and $ 2.02 per unit. Any such increase would be conditioned on,
among other things, the closing of the acquisition of the Dan Cisne,
approval of such increase by the Board and the absence of any material
adverse developments or potentially attractive opportunities that would
make such an increase inadvisable. The Partnership paid a distribution
of $0.49 per unit with respect to the quarter ended September 30, 2014,
which represents a cumulative increase of approximately 30.7% since the
IPO.
The purchase price will be settled by way of a cash payment of
approximately $8.8 million, subject to post-closing adjustments,
including adjustments related to interest rate swaps in connection with
the Dan Cisne Loan, and with seller financing provided by KNOT in the
form of a loan in the amount of approximately $12.0 million (the “Seller
Loan”).The cash payment and payment of the post-closing
adjustments will be financed with the Partnership’s own funds.
The Dan Cisne Loan matures in September 2023 and has an annual interest
rate equal to 2.40% above LIBOR. This loan is repayable in semi-annual
installments of $2.2 million increasing to $3.75 million and a balloon
payment of $8.0 million in September 2023. The Seller Loan is
non-amortizing and matures in five years and has an annual interest rate
equal to 4.50% per annum above LIBOR.
The Board and the Conflicts Committee of the Board have approved the
purchase price and terms of the share purchase agreement and the Seller
Loan. The Conflicts Committee retained an independent financial advisor
to assist with its evaluation of the acquisition.
Outlook
Under the Omnibus Agreement that the Partnership entered into with KNOT
in connection with its initial public offering (the “Omnibus
Agreement”), the Partnership has the option to purchase the Ingrid
Knutsen and the Raquel Knutsen, both on time-charter to
ExxonMobil and Repsol Sinopec respectively, from KNOT within 24 months
of their delivery to charterers.
In August, 2014, KNOT purchased the Dan Sabia and the Dan Cisne,
which are on long-term bareboat charters to Transpetro ending in the
third quarter of 2023 and first quarter of 2024, respectively. The Dan
Sabia may be offered to the Partnership in the future pursuant to
the terms of the Omnibus Agreement.
On September 12, 2014, KNOT entered into new long-term charters with a
subsidiary of BG to provide shuttle tanker services in Brazil beginning
in late 2016. The charters with BG will be serviced by two Suezmax-size
DP2 shuttle tanker newbuildings to be constructed by Hyundai Heavy
Industries. Pursuant to the Omnibus Agreement, the Partnership will have
the option to acquire the vessels at fair market value from KNOT
following BG’s acceptance of the vessels.
Pursuant to the Omnibus Agreement, the Partnership also has the option
to acquire from KNOT any offshore shuttle tankers that KNOT acquires or
owns that are employed under charters for periods of five or more years.
There can however be no assurance that the Partnership will acquire any
such vessels from KNOT.
The Board continues to believe that there are significant opportunities
for growth for the Partnership, and the demand for offshore shuttle
tankers will over time continue to grow based on identified projects.
The Board also observes that there are discussions and tenders for
longer term offshore shuttle tankers currently ongoing in the market and
expects several new projects to be concluded during 2015 covering demand
for already sanctioned projects that will not, in the opinion of the
Board, be operationally affected by current oil prices for the next few
years.
About KNOT Offshore Partners LP
KNOT Offshore Partners LP owns, operates and acquires shuttle tankers
under long-term charters in the deepwater offshore oil production
regions of the North Sea and Brazil. KNOT Offshore Partners LP is
structured as a publicly-traded master limited partnership. KNOT
Offshore Partners LP’s common units trade on the New York Stock Exchange
under the symbol “KNOP.”
Forward-Looking Statements
This press release contains certain forward-looking statements
concerning future events and the Partnership’s operations, performance
and financial condition. Forward-looking statements include, without
limitation, any statement that may predict, forecast, indicate or imply
future results, performance or achievements, and may contain the words
“believe”, “anticipate”, “expect”, “estimate”, “project”, “will be”,
“will continue”, “will likely result”, “plan”, “intend” or words or
phrases of similar meanings. These statements involve known and unknown
risks and are based upon a number of assumptions and estimates that are
inherently subject to significant uncertainties and contingencies, many
of which are beyond the Partnership’s control. Actual results may differ
materially from those expressed or implied by such forward-looking
statements. Important factors that could cause actual results to differ
materially include, but are not limited to:
-
the Partnership’s ability to closing the Dan Cisne acquistion;
-
the Partnership’s ability to increase distributions and the amount of
any such increase;
-
the Partnership’s ability to integrate and realize the expected
benefits from acquisitions, including the Dan Cisne acquisition;
-
market trends in the shuttle tanker or general tanker industries,
including hire rates, factors affecting supply and demand; and
opportunities for the profitable operations of shuttle tankers;
-
KNOT’s and the Partnership’s ability to build shuttle tankers and the
timing of the delivery and acceptance of any such vessels by their
respective charterers;
-
the Partnership’s anticipated growth strategies;
-
the effects of a worldwide or regional economic slowdown;
-
turmoil in the global financial markets;
-
the Partnership’s future financial condition or results of operations
and future revenues and expenses;
-
the Partnership’s ability to make additional borrowings and to access
debt and equity markets;
-
planned capital expenditures and availability of capital resources to
fund capital expenditures;
-
the Partnership’s ability to purchase vessels from KNOT in the future;
-
the Partnership’s ability to maximize the use of its vessels,
including the re-deployment or disposition of vessels no longer under
long-term charter;
-
timely purchases and deliveries of newbuilds;
-
the Partnership’s business strategy and other plans and objectives for
future operations; and
-
other factors listed from time in the reports and other documents that
the Partnership files with the SEC, including its Annual Report on
Form 20-F.
All forward-looking statements included in this release are made only as
of the date of this release. New factors emerge from time to time, and
it is not possible for the Partnership to predict all of these factors.
Further, the Partnership cannot assess the impact of each such factor on
its business or the extent to which any factor, or combination of
factors, may cause actual results to be materially different from those
contained in any forward-looking statement. The Partnership does not
intend to release publicly any updates or revisions to any
forward-looking statements contained herein to reflect any change in the
Partnership’s expectations with respect thereto or any change in events,
conditions or circumstances on which any such statement is based.
Copyright Business Wire 2014