Highlights
For the three months ended December 31, 2015, KNOT Offshore Partners LP
(“KNOT Offshore Partners” or the “Partnership”)(NYSE:KNOP):
|
•
|
|
Generated highest ever quarterly revenues of $42.4 million,
operating income of $20.4 million and net income of $17.6 million.
|
|
•
|
|
Generated highest ever quarterly Adjusted EBITDA of $33.8 million
(1).
|
|
•
|
|
Generated highest ever quarterly distributable cash flow of $18.1
million (1).
|
|
•
|
|
Achieved strong operational performance with 99.9% utilization of
the fleet.
|
In addition:
|
•
|
|
On October 13, 2015, the Windsor Knutsen commenced a two-year
time charter with BG Group.
|
|
•
|
|
On October 15, 2015, the Partnership completed the acquisition of
the entity that owns the Ingrid Knutsen.
|
|
•
|
|
In November 2015, Statoil ASA exercised its option to extend the
time charter of the Bodil Knutsen by one additional year
until May 2017. The hire rate, including a yearly escalation of 1%,
is unchanged from the original time charter.
|
|
•
|
|
As of December 31, 2015, the Partnership and the Partnership’s
General Partner had purchased 180,906 and 90,368 common units,
respectively, at an average purchase price of $12.71 per unit
pursuant to the common unit purchase plan previously announced in
August 2015.
|
Subsequent events:
|
•
|
|
On February 15, 2016, the Partnership paid a cash distribution of
$0.52 per unit with respect to the quarter ended December 31, 2015
to unitholders of record as of the close of business on February 3,
2016.
|
Financial Results Overview
Total revenues were $42.4 million for the three months ended
December 31, 2015 (the “fourth quarter”) compared to $39.3 million for
the three months ended September 30, 2015 (the “third quarter”). The
increase was primarily due to the Ingrid Knutsen being included
in the fleet commencing October 15, 2015 and partially offset by $0.5
million lower revenues from the Carmen Knutsen due to an
amendment to its time charter effective from October 1, 2015. The
amended charter includes an annual charter hire escalation of
approximately 1.6% commencing January 1, 2017.
Vessel operating expenses for the fourth quarter were $7.6 million,
compared to $5.9 million in the third quarter. The increase in vessel
operating expenses in the fourth quarter was mainly due to the Ingrid
Knutsen being included in the fleet commencing October 15, 2015 and
a one-time reduction in the third quarter of $0.7 million due to the
receipt of insurance proceeds.
Operating income for the three months ended December 31, 2015 was $20.4
million compared to $19.7 million for the three months ended
September 30, 2015. The increase was largely due to the factors
described above.
Net income for the three months ended December 31, 2015 was
$17.6 million compared to $8.8 million for the three months ended
September 30, 2015. Net income was impacted by the recognition of
realized and unrealized gain on derivative instruments of $2.1 million
in the fourth quarter as compared to a loss of $6.5 million in the third
quarter. Realized and unrealized gain on derivative instruments in the
fourth quarter mainly resulted from an increase in long term interest
rates. The unrealized non-cash element of these amounts is a
$4.9 million gain for the three months ended December 31, 2015 and a
$2.2 million loss for the three months ended September 30, 2015.
___________
(1)
|
|
Adjusted EBITDA and distributable cash flow are non-GAAP financial
measures used by investors to measure the performance of master
limited partnerships. Please see Appendix A for definitions of
Adjusted EBITDA and distributable cash flow and a reconciliation to
net income, the most directly comparable GAAP financial measure.
|
|
Net income for the three months ended December 31, 2015 increased by
$11.7 million compared to net income for the three months ended December
31, 2014. The increase was primarily due to (i) an increase in operating
income of $4.4 million due to earnings from the Dan Cisne, the
Dan Sabia and the Ingrid Knutsen being included in the
Partnership’s results of operations from December 15, 2014, June 15,
2015 and October 15, 2015, respectively, and (ii) a $7.1 million
decrease in total finance expense primarily caused by a $2.2 million
realized and unrealized gain on derivative instruments in the three
months ended December 31, 2015 compared to a $5.2 million realized and
unrealized loss on derivative instruments in the three months ended
December 31, 2014.
All ten of the Partnership’s vessels operated well throughout the fourth
quarter of 2015, without any material offhire. The vessels achieved
99.9% utilization.
Distributable cash flow was $18.1 million for the fourth quarter of
2015, compared to $16.1 million for the third quarter of 2015 resulting
in a coverage ratio of 1.2x for the fourth quarter. The increase in
distributable cash flow is mainly due to the Ingrid Knutsen being
included in the fleet commencing October 15, 2015. The distribution
declared for the fourth quarter was $0.52 per unit, equivalent to an
annual distribution of $2.08.
Financing and Liquidity
As of December 31, 2015, the Partnership had cash and cash equivalents
of $23.6 million and an undrawn revolving credit facility of
$20 million. The decrease in cash and cash equivalents from $67.2
million as of September 30, 2015 was mainly due to the acquisition of
the Ingrid Knutsen on October 15, 2015, which resulted in a net
payment to Knutsen NYK Offshore Tankers AS (“Knutsen NYK”) of $12.9
million and a $27 million prepayment on the credit facility secured by
the Ingrid Knutsen. Additional payments of $2.3 million were made
by the Partnership in the fourth quarter in connection with its
repurchase of common units. In addition, a $2.1 million reduction in the
balance of prepaid charter and deferred revenues, which often occurs at
the year-end, further reduced the cash balance. The Partnership believes
its current liquidity and resources are sufficient to meet its working
capital requirements and satisfy the applicable financial covenants
under its credit facilities.
As of December 31, 2015, total interest bearing debt outstanding was
$671.7 million. The average lending margin paid on the Partnership’s
outstanding debt during the quarter ended December 31, 2015 was
approximately 2.3% over LIBOR.
As of December 31, 2015, the Partnership had entered into foreign
exchange forward contracts, selling a total notional amount of
$35.0 million against Norwegian Kroner (NOK) at an average exchange rate
of NOK 8.28 per 1.0 U.S. Dollar, which are economic hedges for certain
vessel operating expenses and general expenses in NOK. As of
December 31, 2015, the Partnership had entered into various interest
rate swap agreements for a total notional amount of $410.0 million to
hedge against the interest rate risks of its variable rate borrowings.
Under the terms of the interest rate swap agreements, the Partnership
receives interest based on three or six month LIBOR and pays a weighted
average interest rate of 1.54%. The Partnership does not apply hedge
accounting for derivative instruments.
As of December 31, 2015, the Partnership’s net exposure to floating
interest rate fluctuations on its outstanding debt was approximately
$238.1 million based on total interest bearing debt outstanding of
$671.7 million, less the interest rate swaps of $410.0 million and less
cash and cash equivalents of $23.6 million.
The Partnership’s outstanding interest bearing debt of $671.7 million as
of December 31, 2015 is repayable as follows:
|
|
|
|
|
|
|
|
|
|
Annual repayment
|
|
|
Balloon repayment
|
(US $ in thousands)
|
|
|
|
|
|
|
|
2016
|
|
$
|
49,684
|
|
|
$
|
—
|
2017
|
|
|
50,084
|
|
|
|
—
|
2018
|
|
|
48,495
|
|
|
|
154,927
|
2019
|
|
|
28,582
|
|
|
|
237,678
|
2020
|
|
|
17,650
|
|
|
|
—
|
2021 and thereafter
|
|
|
71,650
|
|
|
|
12,940
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
266,145
|
|
|
$
|
405,545
|
Acquisition of Ingrid Knutsen
On October 15, 2015, the Partnership’s wholly owned subsidiary, KNOT
Shuttle Tankers AS, acquired Knutsen NYK Shuttle Tankers 16 AS (“KNOT
16”), the company that owns the shuttle tanker Ingrid Knutsen,
from Knutsen NYK. The purchase price was $115 million, less assumed bank
debt of $104.5 million, plus purchase price adjustments of $2.4 million.
The cash portion of the purchase price was financed with cash on hand.
On the closing of the acquisition, KNOT 16 prepaid $27.0 million of this
indebtedness, leaving an aggregate of $77.5 million of secured debt
related to the vessel, composed of two tranches. Tranche one is a
commercial bank loan of $22.4 million, repayable in semi-annual
installments with a final balloon payment due at maturity in December
2018. Tranche one bears interest at LIBOR, plus a margin of 2.25%.
Tranche two is an export credit loan of $55.1 million, repayable in
semi-annual installments and maturing in November 2025. Tranche two
bears interest at an annual rate of 3.85%, composed of a 2.5% bank
facility rate plus a commission of 1.35% to the export credit guarantor.
The Ingrid Knutsen was delivered in December 2013 and is
operating in the North Sea under a ten-year time charter with Standard
Marine Tønsberg AS (a Norwegian subsidiary of ExxonMobil), which will
expire in the first quarter of 2024. The charterer has options to extend
the charter for five one-year periods.
Extension of Bodil Knutsen Charter
In November 2015, Statoil ASA exercised its option to extend the time
charter of the Bodil Knutsen by one additional year until May
2017. The hire rate, including a yearly escalation of 1%, is unchanged
from the original time charter. Following the exercise of its option,
Statoil ASA has two remaining one-year options to extend the time
charter until May 2019.
Outlook
The Partnership’s earnings for the first quarter of 2016 will be
affected by the planned dry-docking of the Bodil Knutsen which
will commence in mid-February and is expected to last approximately
20-22 days. To date, during the first quarter of 2016, utilization of
the Partnership’s fleet is 100%.
As of December 31, 2015, the Partnership’s fleet of ten vessels had an
average remaining fixed contract duration of 5.6 years. In addition, the
charterers of the Partnership’s time charter vessels have options to
extend their charters by an additional 2.5 years on average.
The Partnership has or expects to receive options to acquire five
vessels controlled by Knutsen NYK pursuant to the terms of the omnibus
agreement. One of these vessels, the Raquel Knutsen, delivered in
2015 and is chartered to Repsol under a time charter that expires in
2025, with options to extend until 2030. Four vessels are under
construction in South Korea and China. As of December 31, 2015, the
average remaining fixed contract duration for these vessels is 5.9
years. In addition, the charterers have options to extend these charters
by 11.2 years on average.
In January 2015, Knutsen NYK announced an agreement for a long-term time
charter with Petrogal (a subsidiary of Galp Energia) of a new DP2
Suezmax shuttle tanker with delivery in the first quarter of 2017. The
vessel has been ordered at Cosco Zhoushan shipyard in China and will be
a sister vessel of the Raquel Knutsen. The shuttle tanker is
expected to operate in Brazil. Pursuant to the omnibus agreement, the
Partnership will have the option to acquire this vessel from Knutsen NYK
following acceptance by the charterer of the vessel.
In connection with the September 12, 2014 contract between Knutsen NYK
and a subsidiary of BG for two Suezmax-size DP2 shuttle tanker
newbuildings, BG received an option, for a period of one year, to
contract up to two more shuttle tanker newbuildings. In June 2015, BG
exercised its option for an additional vessel, and Knutsen NYK entered
into a new long-term charter with a subsidiary of BG to provide shuttle
tanker services in Brazil beginning in mid-2017. This charter will have
a minimum term of 5 years, with options for BG to extend for an
additional 15 years. These newbuildings are all under construction at
Hyundai Heavy Industries in South Korea. The Partnership will have the
option to acquire each of these vessels from Knutsen NYK pursuant to the
omnibus agreement following acceptance by BG of each such vessel.
There can be no assurance however that the Partnership will acquire any
vessels from Knutsen NYK.
Pursuant to the omnibus agreement, the Partnership also has the option
to acquire from Knutsen NYK any offshore shuttle tankers that Knutsen
NYK acquires or owns that are employed under charters for periods of
five or more years.
The Board believes that there may be opportunities for growth for the
Partnership, which may include current identified acquisition
candidates, and that the demand for offshore shuttle tankers will
continue to grow over time based on identified projects. Future oil
price developments will influence the rate of growth of offshore oil
production activity when existing projects are completed.
The Board is pleased to have acquired its latest shuttle tanker from
Knutsen NYK, and is pleased with the results of operations of the
Partnership for the quarter ended December 31, 2015.
About KNOT Offshore Partners LP
KNOT Offshore Partners owns, operates and acquires shuttle tankers under
long-term charters in the offshore oil production regions of the North
Sea and Brazil. KNOT Offshore Partners owns and operates a fleet of ten
offshore shuttle tankers with an average age of 4.1 years operating
under long-term charters.
KNOT Offshore Partners is structured as a publicly-traded master limited
partnership. KNOT Offshore Partners’ common units trade on the New York
Stock Exchange under the symbol “KNOP.”
The Partnership plans to host a conference call on Thursday, February
18, 2016 at noon (Eastern Time) to discuss the results for the fourth
quarter of 2015. All unitholders and interested parties are invited to
listen to the live conference call by choosing from the following
options:
|
•
|
|
By dialing 1-855-209-8259 or 1-412-542-4105, if outside North
America.
|
February 18, 2016
KNOT Offshore Partners L.P.
Aberdeen, United
Kingdom
Questions should be directed to:
John Costain (+44 7496 170 620)
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
|
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|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Year Ended Deccember 31,
|
|
|
|
December 31, 2015
|
|
|
September 30, 2015
|
|
|
December 31, 2014
|
|
|
2015
|
|
|
2014
|
|
(USD in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Time charter and bareboat revenues (1)
|
|
$
|
42,417
|
|
|
$
|
39,281
|
|
|
$
|
34,655
|
|
|
$
|
154,750
|
|
|
$
|
112,784
|
|
Other income (2)
|
|
|
120
|
|
|
|
3
|
|
|
|
28
|
|
|
|
274
|
|
|
|
57
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
|
42,537
|
|
|
|
39,284
|
|
|
|
34,683
|
|
|
|
155,024
|
|
|
|
112,841
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vessel operating expenses
|
|
|
7,636
|
|
|
|
5,936
|
|
|
|
7,357
|
|
|
|
27,543
|
|
|
|
23,879
|
|
Depreciation
|
|
|
13,464
|
|
|
|
12,420
|
|
|
|
10,559
|
|
|
|
48,844
|
|
|
|
34,322
|
|
General and administrative expenses
|
|
|
1,058
|
|
|
|
1,180
|
|
|
|
832
|
|
|
|
4,290
|
|
|
|
4,323
|
|
Goodwill impairment charge
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
6,217
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
22,158
|
|
|
|
19,536
|
|
|
|
18,748
|
|
|
|
86,894
|
|
|
|
62,524
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
20,379
|
|
|
|
19,748
|
|
|
|
15,935
|
|
|
|
68,130
|
|
|
|
50,317
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Finance income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
5
|
|
|
|
0
|
|
|
|
9
|
|
|
|
8
|
|
|
|
13
|
|
Interest expense
|
|
|
(4,731
|
)
|
|
|
(4,322
|
)
|
|
|
(4,688
|
)
|
|
|
(17,451
|
)
|
|
|
(15,271
|
)
|
Other finance expense
|
|
|
(326
|
)
|
|
|
(79
|
)
|
|
|
(40
|
)
|
|
|
(504
|
)
|
|
|
(1,271
|
)
|
Realized and unrealized gain (loss) on derivative instruments (3)
|
|
|
2,145
|
|
|
|
(6,470
|
)
|
|
|
(5,239
|
)
|
|
|
(9,695
|
)
|
|
|
(6,407
|
)
|
Net gain (loss) on foreign currency transactions
|
|
|
30
|
|
|
|
(75
|
)
|
|
|
(54
|
)
|
|
|
(105
|
)
|
|
|
26
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total finance expense
|
|
|
(2,877
|
)
|
|
|
(10,946
|
)
|
|
|
(10,012
|
)
|
|
|
(27,747
|
)
|
|
|
(22,910
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
17,502
|
|
|
|
8,802
|
|
|
|
5,923
|
|
|
|
40,383
|
|
|
|
27,407
|
|
Income tax benefit (expense)
|
|
|
65
|
|
|
|
—
|
|
|
|
(15
|
)
|
|
|
59
|
|
|
|
(15)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
17,567
|
|
|
$
|
8,802
|
|
|
$
|
5,908
|
|
|
$
|
40,442
|
|
|
$
|
27,392
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average units outstanding (in thousands of units):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common units
|
|
|
18,770
|
|
|
|
18,807
|
|
|
|
13,808
|
|
|
|
16,702
|
|
|
|
11,209
|
|
Subordinated units
|
|
|
8,568
|
|
|
|
8,568
|
|
|
|
8,568
|
|
|
|
8,568
|
|
|
|
8,568
|
|
General partner units
|
|
|
571
|
|
|
|
559
|
|
|
|
457
|
|
|
|
519
|
|
|
|
404
|
|
(1)
|
|
Time charter revenues for the third and fourth quarters of 2015 and
fourth quarter of 2014 include a non-cash item of approximately $0.9
million in reversal of contract liability provision and income
recognition of prepaid charter hire. In the first and second
quarters of 2014 a non-cash item of approximately $0.5 million in
reversal of contract liability provision was included.
|
|
(2)
|
|
Other income for the fourth quarter of 2015 is related to guarantee
income from Knutsen NYK. Pursuant to the Omnibus Agreement, Knutsen
NYK agreed to guarantee the payments of the hire rate that is equal
to or greater than the hire rate payable under the initial charters
of the Bodil Knutsen and the Windsor Knutsen for a
period of five years from the closing date of the IPO. In October
2015, the Windsor Knutsen commenced operating under a new BG
Group time charter. The hire rate for the new charter is below the
initial charter hire rate and the difference between the new hire
rate and the initial rate is paid by Knutsen NYK.
|
|
(3)
|
|
The mark-to-market net gain related to interest rate swaps and
foreign exchange contracts for the three months ended December 31,
2015 includes unrealized gain of $4.9 million and realized loss of
$2.7 million. Of the realized gain for this quarter, $1.1 million
relates to foreign exchange contracts and hedging the Partnership’s
operational costs in Norwegian Kroner (NOK).
|
|
UNAUDITED CONSOLIDATED BALANCE SHEET
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2015
|
|
|
At December 31, 2014
|
|
(USD in thousands)
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
23,573
|
|
|
$
|
30,746
|
|
Amounts due from related parties
|
|
|
58
|
|
|
|
130
|
|
Inventories
|
|
|
849
|
|
|
|
915
|
|
Other current assets
|
|
|
2,949
|
|
|
|
3,958
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
27,429
|
|
|
|
35,749
|
|
|
|
|
|
|
|
|
|
|
Long-term assets:
|
|
|
|
|
|
|
|
|
Vessels and equipment:
|
|
|
|
|
|
|
|
|
Vessels
|
|
|
1,351,219
|
|
|
|
1,131,321
|
|
Less accumulated depreciation
|
|
|
(158,292
|
)
|
|
|
(109,464
|
)
|
|
|
|
|
|
|
|
|
|
Net property, plant, and equipment
|
|
|
1,192,927
|
|
|
|
1,021,857
|
|
|
|
|
|
|
|
|
|
|
Goodwill
|
|
|
—
|
|
|
|
6,217
|
|
Deferred debt issuance cost
|
|
|
2,819
|
|
|
|
3,959
|
|
Derivative assets
|
|
|
695
|
|
|
|
2,966
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
1,223,870
|
|
|
$
|
1,070,748
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND PARTNERS’ EQUITY
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
Trade accounts payable
|
|
$
|
1,995
|
|
|
$
|
1,869
|
|
Accrued expenses
|
|
|
3, 888
|
|
|
|
2,735
|
|
Current portion of long-term debt
|
|
|
49,684
|
|
|
|
38,718
|
|
Derivative liabilities
|
|
|
5,138
|
|
|
|
7,450
|
|
Income taxes payable
|
|
|
249
|
|
|
|
362
|
|
Contract liabilities
|
|
|
1,518
|
|
|
|
1,518
|
|
Prepaid charter and deferred revenue
|
|
|
3,365
|
|
|
|
6,751
|
|
Amount due to related parties
|
|
|
848
|
|
|
|
628
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
66,685
|
|
|
|
60,031
|
|
|
|
|
|
|
|
|
|
|
Long-term liabilities:
|
|
|
|
|
|
|
|
|
Long-term debt
|
|
|
622,006
|
|
|
|
562,503
|
|
Derivative liabilities
|
|
|
1,232
|
|
|
|
—
|
|
Contract liabilities
|
|
|
9,757
|
|
|
|
11,275
|
|
Deferred tax liabilities
|
|
|
877
|
|
|
|
1,402
|
|
Long-term debt from related parties
|
|
|
—
|
|
|
|
12,000
|
|
Other long-term liabilities
|
|
|
2,543
|
|
|
|
4,172
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
703,100
|
|
|
|
651,383
|
|
|
|
|
|
|
|
|
|
|
Equity:
|
|
|
|
|
|
|
|
|
Partners’ equity:
|
|
|
|
|
|
|
|
|
Common unitholders
|
|
|
411,324
|
|
|
|
307,544
|
|
Subordinated unitholders
|
|
|
99,158
|
|
|
|
103,680
|
|
General partner interest
|
|
|
10,288
|
|
|
|
8,141
|
|
|
|
|
|
|
|
|
|
|
Total partners’ equity
|
|
|
520,770
|
|
|
|
419,365
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and equity
|
|
$
|
1,223,870
|
|
|
$
|
1,070,748
|
|
UNAUDITED CONSOLIDATED STATEMENT OF CASH FLOW
|
|
Year ended December 31,
|
|
|
2015
|
|
2014
|
Cash flows provided by operating activities:
|
|
|
|
|
Net income
|
|
$ 40,442
|
|
$ 27, 392
|
Adjustments to reconcile net income to cash provided by operating
activities:
|
|
|
|
|
Depreciation
|
|
48,844
|
|
34,322
|
Amortization of contract intangibles / liabilities
|
|
(1,518 )
|
|
(1,518 )
|
Amortization of deferred revenue
|
|
(1,913)
|
|
(1,170 )
|
Amortization of deferred debt issuance cost
|
|
1,149
|
|
3,021
|
Goodwill impairment charge
|
|
6,217
|
|
—
|
Income tax (benefit) expense
|
|
(59)
|
|
15
|
Income taxes paid
|
|
(348)
|
|
(731 )
|
Unrealized (gain) loss on derivative instruments
|
|
390
|
|
3,910
|
Unrealized (gain) loss on foreign currency transactions
|
|
22
|
|
(136 )
|
Other items
|
|
—
|
|
(16 )
|
Changes in operating assets and liabilities
|
|
|
|
|
Decrease (increase) in amounts due from related parties
|
|
1,008
|
|
(49 )
|
Decrease (increase) in inventories
|
|
210
|
|
58
|
Decrease (increase) in other current assets
|
|
1,222
|
|
(172 )
|
Increase (decrease) in trade accounts payable
|
|
45
|
|
337
|
Increase (decrease) in accrued expenses
|
|
(737)
|
|
(2,092 )
|
Increase (decrease) prepaid revenue
|
|
(4,306)
|
|
793
|
Increase (decrease) in amounts due to related parties
|
|
(1,508)
|
|
(4,625 )
|
|
|
|
|
|
Net cash provided by operating activities
|
|
89,160
|
|
59,339
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
Disposals (additions) to vessel and equipment
|
|
(1,526)
|
|
6
|
Acquisition of the Hilda Knutsen and Torill Knutsen
(net of cash required)
|
|
—
|
|
(105,296 )
|
Acquisition of the Dan Cisne (net of cash required)
|
|
—
|
|
(16,656 )
|
Acquisition of the Dan Sabia (net of cash required)
|
|
(36,843)
|
|
—
|
Acquisition of the Ingrid Knutsen (net of cash required)
|
|
(8,119)
|
|
—
|
|
|
|
|
|
Net cash used in investing activities
|
|
(46,488 )
|
|
(121,946 )
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
Proceeds from issuance of long-term debt
|
|
—
|
|
377,813
|
Proceeds from issuance of long-term debt from related parties
|
|
—
|
|
12,000
|
Repayment of long-term debt
|
|
(78,276)
|
|
(420,196 )
|
Repayment of long-term debt from related parties
|
|
(32,253 )
|
|
(10,612 )
|
Accumulated interest from related party
|
|
—
|
|
263
|
Payments of debt issuance cost
|
|
(9)
|
|
(5,004 )
|
Repurchase of common units
|
|
(2,298)
|
|
—
|
Proceeds from public offerings, net of underwriters’ discount
|
|
116,924
|
|
147,023
|
Offering cost
|
|
(293)
|
|
(340 )
|
Cash distribution
|
|
(53,370)
|
|
(36,637 )
|
Change in restricted cash
|
|
—
|
|
458
|
|
|
|
|
|
Net cash provided by (used in) financing activities
|
|
(49,575)
|
|
64,768
|
|
|
|
|
|
Effect of exchange rate changes on cash
|
|
(270 )
|
|
(251 )
|
Net increase (decrease) in cash and cash equivalents
|
|
(7,173)
|
|
1,910
|
Cash and cash equivalents at the beginning of the year
|
|
30,746
|
|
28,836
|
|
|
|
|
|
Cash and cash equivalents at the end of the year
|
|
$ 23,573
|
|
$ 30,746
|
APPENDIX A—RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
Distributable Cash Flow (“DCF”)
Distributable cash flow represents net income adjusted for depreciation,
unrealized gains and losses from derivatives, unrealized foreign
exchange gains and losses, goodwill impairment charges, other non-cash
items and estimated maintenance and replacement capital expenditures.
Estimated maintenance and replacement capital expenditures, including
estimated expenditures for drydocking, represent capital expenditures
required to maintain over the long-term the operating capacity of, or
the revenue generated by, the Partnership’s capital assets.
Distributable cash flow is a quantitative standard used by investors in
publicly-traded partnerships to assist in evaluating a partnership’s
ability to make quarterly cash distributions. Distributable cash flow is
a non-GAAP financial measure and should not be considered as an
alternative to net income or any other indicator of KNOT Offshore
Partners’ performance calculated in accordance with GAAP. The table
below reconciles distributable cash flow to net income, the most
directly comparable GAAP measure.
|
|
|
|
|
|
|
|
|
(USD in thousands)
|
|
Three Months Ended December 31, 2015 (unaudited)
|
|
|
Three Months Ended September 30, 2015 (unaudited)
|
|
Net income
|
|
$
|
17,567
|
|
|
$
|
8, 802
|
|
Add:
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
13,464
|
|
|
|
12,420
|
|
Other non-cash items; deferred costs amortization debt
|
|
|
289
|
|
|
|
289
|
|
Unrealized losses from interest rate derivatives and forward
exchange currency contracts
|
|
|
—
|
|
|
|
4,032
|
|
Less:
|
|
|
|
|
|
|
|
|
Estimated maintenance and replacement capital expenditures
(including drydocking reserve)
|
|
|
(7,516
|
)
|
|
|
(6,749
|
)
|
Deferred revenue
|
|
|
(858
|
)
|
|
|
(858
|
)
|
Unrealized gains from interest rate derivatives and forward exchange
currency contracts
|
|
|
(4,864
|
)
|
|
|
(1,789
|
)
|
|
|
|
|
|
|
|
|
|
Distributable cash flow
|
|
$
|
18,082
|
|
|
$
|
16,147
|
|
Distributions declared
|
|
$
|
15,012
|
|
|
$
|
15,110
|
|
|
|
|
|
|
|
|
|
|
Coverage ratio
|
|
|
1.20
|
|
|
|
1.07
|
|
Adjusted EBITDA
Adjusted EBITDA refers to earnings before interest, other financial
items, taxes, goodwill impairment charges and depreciation. Adjusted
EBITDA is a non-GAAP financial measure used by investors to measure the
Partnership’s performance.
The Partnership believes that Adjusted EBITDA assists its management and
investors by increasing the comparability of its performance from period
to period and against the performance of other companies in its industry
that provide Adjusted EBITDA information. This increased comparability
is achieved by excluding the potentially disparate effects between
periods or companies of interest, other financial items, taxes, goodwill
impairment charges and depreciation, which items are affected by various
and possibly changing financing methods, capital structure and
historical cost basis and which items may significantly affect net
income between periods. The Partnership believes that including Adjusted
EBITDA as a financial measure benefits investors in (a) selecting
between investing in the Partnership and other investment alternatives
and (b) monitoring the Partnership’s ongoing financial and operational
strength in assessing whether to continue to hold common units. Adjusted
EBITDA is a non-GAAP financial measure and should not be considered as
an alternative to net income or any other indicator of Partnership
performance calculated in accordance with GAAP. The table below
reconciles Adjusted EBITDA to net income, the most directly comparable
GAAP measure.
|
|
|
|
|
|
|
|
(USD in thousands)
|
|
Three Months Ended December 31, 2015 (unaudited)
|
|
|
Three Months Ended September 30, 2015 (unaudited)
|
Net income
|
|
$
|
17,567
|
|
|
$
|
8,802
|
Interest income
|
|
|
(5)
|
|
|
|
—
|
Interest expense
|
|
|
4,731
|
|
|
|
4,322
|
Depreciation
|
|
|
13,464
|
|
|
|
12,420
|
Income tax benefit
|
|
|
(65)
|
|
|
|
—
|
EBITDA
|
|
|
35,692
|
|
|
|
25,543
|
Other financial items (a)
|
|
|
(1,849)
|
|
|
|
6,624
|
|
|
|
|
|
|
|
|
Adjusted EBITDA
|
|
$
|
33,843
|
|
|
$
|
32,167
|
(a)
|
|
Other financial items consist of other finance expense, realized and
unrealized gain (loss) on derivative instruments and net gain (loss)
on foreign currency transactions
|
|
FORWARD-LOOKING STATEMENTS
This press release contains certain forward-looking statements
concerning future events and KNOT Offshore Partners’ 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 KNOT Offshore Partners’ control.
Actual results may differ materially from those expressed or implied by
such forward-looking statements. Forward-looking statements include
statements with respect to, among other things:
|
•
|
|
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;
|
|
•
|
|
Knutsen NYK’s and KNOT Offshore Partners’ ability to build shuttle
tankers and the timing of the delivery and acceptance of any such
vessels by their respective charterers;
|
|
•
|
|
forecasts of KNOT Offshore Partners’ ability to make or increase
distributions on its units and the amount of any such increase;
|
|
•
|
|
KNOT Offshore Partners’ ability to integrate and realize the
expected benefits from acquisitions;
|
|
•
|
|
KNOT Offshore Partners’ anticipated growth strategies;
|
|
•
|
|
the effects of a worldwide or regional economic slowdown;
|
|
•
|
|
turmoil in the global financial markets;
|
|
•
|
|
fluctuations in currencies and interest rates;
|
|
•
|
|
fluctuations in the price of oil;
|
|
•
|
|
general market conditions, including fluctuations in hire rates and
vessel values;
|
|
•
|
|
changes in KNOT Offshore Partners’ operating expenses, including
drydocking and insurance costs and bunker prices;
|
|
•
|
|
changes in KNOT Offshore Partners’ ability to make cash
distributions on the units or any increases in cash distributions;
|
|
•
|
|
KNOT Offshore Partners’ future financial condition or results of
operations and future revenues and expenses;
|
|
•
|
|
the repayment of debt and settling of any interest rate swaps;
|
|
•
|
|
KNOT Offshore Partners’ ability to make additional borrowings and to
access debt and equity markets;
|
|
•
|
|
planned capital expenditures and availability of capital resources
to fund capital expenditures;
|
|
•
|
|
KNOT Offshore Partners’ ability to maintain long-term relationships
with major users of shuttle tonnage;
|
|
•
|
|
KNOT Offshore Partners’ ability to leverage Knutsen NYK’s
relationships and reputation in the shipping industry;
|
|
•
|
|
KNOT Offshore Partners’ ability to purchase vessels from Knutsen NYK
in the future;
|
|
•
|
|
KNOT Offshore Partners’ continued ability to enter into long-term
charters, which KNOT Offshore Partners defines as charters of five
years or more;
|
|
•
|
|
KNOT Offshore Partners’ ability to maximize the use of its vessels,
including the re-deployment or disposition of vessels no longer
under long-term charter;
|
|
•
|
|
the financial condition of KNOT Offshore Partners’ existing or
future customers and their ability to fulfil their charter
obligations;
|
|
•
|
|
timely purchases and deliveries of newbuilds;
|
|
•
|
|
future purchase prices of newbuilds and secondhand vessels;
|
|
•
|
|
KNOT Offshore Partners’ ability to compete successfully for future
chartering and newbuild opportunities;
|
|
•
|
|
acceptance of a vessel by its charterer;
|
|
•
|
|
termination dates and extensions of charters;
|
|
•
|
|
the expected cost of, and KNOT Offshore Partners’ ability to, comply
with governmental regulations, maritime self-regulatory organization
standards, as well as standard regulations imposed by its charterers
applicable to KNOT Offshore Partners’ business;
|
|
•
|
|
availability of skilled labor, vessel crews and management;
|
|
•
|
|
KNOT Offshore Partners’ general and administrative expenses and its
fees and expenses payable under the technical management agreements,
the commercial management agreements and the administrative services
agreement;
|
|
•
|
|
the anticipated taxation of KNOT Offshore Partners and distributions
to KNOT Offshore Partners’ unitholders;
|
|
•
|
|
estimated future maintenance and replacement capital expenditures;
|
|
•
|
|
KNOT Offshore Partners’ ability to retain key employees;
|
|
•
|
|
customers’ increasing emphasis on environmental and safety concerns;
|
|
•
|
|
potential liability from any pending or future litigation;
|
|
•
|
|
potential disruption of shipping routes due to accidents, political
events, piracy or acts by terrorists;
|
|
•
|
|
future sales of KNOT Offshore Partners’ securities in the public
market;
|
|
•
|
|
KNOT Offshore Partners’ business strategy and other plans and
objectives for future operations; and
|
|
•
|
|
other factors listed from time to time in the reports and other
documents that KNOT Offshore Partners files with the U.S Securities
and Exchange Commission, including its Annual Report on Form 20-F
for the year ended December 31, 2014.
|
All forward-looking statements included in this release are made only as
of the date of this release on. New factors emerge from time to time,
and it is not possible for KNOT Offshore Partners to predict all of
these factors. Further, KNOT Offshore Partners 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. KNOT
Offshore Partners does not intend to release publicly any updates or
revisions to any forward-looking statements contained herein to reflect
any change in KNOT Offshore Partners’ expectations with respect thereto
or any change in events, conditions or circumstances on which any such
statement is based.
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