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    KNOP
    Earnings call· Mar 2026(Q1 FY26)

    KNOT Offshore Partners Q1 FY26 earnings call KNOP

    May 29, 2026 Source

    Executive summary

    KNOT Offshore Partners Q1 FY26 – Increased Distribution and Strong Charter Backlog

    KNOT Offshore Partners delivered solid Q1 FY26 results, marked by an increase in cash distribution and robust operational utilization. The company is benefiting from tightening shuttle tanker markets in Brazil and the North Sea, driven by increased offshore production. Management is focused on future accretive drop-downs and rechartering vessels to support further gradual distribution increases.

    Highlights

    6

    • Revenues were $92 million for the quarter.

    • Adjusted EBITDA reached $56.5 million.

    • Available liquidity stood at $140.7 million, an increase of $3.7 million from the prior quarter.

    • The fleet achieved 97.2% utilization, taking into account scheduled dry docking.

    • A cash distribution of $0.05 per common unit was declared, representing an increase from the previous level.

    • The company maintained a strong backlog of $858 million in fixed contracts, averaging 2.4 years.

    Concerns

    4

    • Operating income was $14.7 million for the quarter.

    • Net income was $2.6 million.

    • Revenues experienced a sequential decline due to the dry dock schedule and contract terms.

    • The company faces upcoming debt refinancings of $220 million in September 2026 and $65 million in October 2026.

    Guidance & targets

    2
    CategoryTargetConfidence
    Distribution increases
    multiple gradual increases
    medium materiality
    Medium
    Drop-down acquisitions
    pursuing these acquisitions
    medium materiality
    Medium

    Operational metrics

    10
    Adjusted EBITDA
    $56.5 million
    Q1 FY26

    Reported for the first quarter of 2026.

    Available liquidity
    $140.7 million$3.7 million higher than at December 31
    as of March 31, 2026

    Composed of cash and cash equivalents plus undrawn capacity.

    Cash and cash equivalents
    $92.7 million
    as of March 31, 2026

    Part of total available liquidity.

    Undrawn capacity
    $48 million
    as of March 31, 2026

    Part of total available liquidity.

    Fleet utilization
    97.2%
    Q1 FY26

    Overall utilization was 92% following the dry dockings of Synnove Knutsen.

    Fleet utilization overall
    92%
    Q1 FY26

    This is the overall utilization figure after accounting for specific dry dockings.

    Debt repayment
    $90 million
    per year

    The company is continuing to repay debt at this rate, considered prudent with a depreciating asset base.

    Fleet average age
    10.5 years
    Q1 FY26

    Average age of the fleet of 19 vessels.

    Average margin on floating rate debt
    2.22%
    Q1 FY26

    Reflects the cost of the company's floating rate debt.

    Vessel useful life estimate
    20 yearsfrom 23 years
    prospectively from January 1, 2026

    Changed reflecting longer-term market trends, increasing future depreciation but not affecting cash or preventing vessels from operating beyond this period.

    Industry KPIs

    2
    MetricValueDetails
    FCF shareholder distributions$0.05USD per common unit
    Take or pay contract structure$858 millionUSD

    Deals & partnerships

    4
    Shellcustomer contractthrough March 2027

    Exercised option to continue the time charter of Fortaleza Knutsen.

    ENIcustomer contract3 years fixed plus options up to a further 3 years

    Agreed a new time charter for Fortaleza Knutsen commencing in Q3 2027.

    Total Energiescustomer contract1 year until May 2027

    Exercised their option to extend the charter of Alecensa.

    [indiscernible]customer contract2 years fixed

    Agreed to time charter for Receivers.

    Risks & headwinds

    3
    Upcoming debt refinancingsSeptember 2026, October 2026

    $220 million facility in September 2026 and $65 million facility in October 2026

    Mitigation: Historically benefited from access to a wide pool of lenders and attractive bank finance; encouraged by refinancing experience in recent years.

    Increased future depreciationprospectively from January 1, 2026

    Increase due to change in useful life estimates from 23 years to 20 years

    Mitigation: This is a non-cash item and does not prevent vessels from operating beyond 20 years.

    Sequential revenue declineQ1 FY26

    Not quantified, but noted as a decline

    Mitigation: Attributed to scheduled dry dockings and specific contract terms, implying it is part of normal operational cycles.

    Q&A highlights

    4

    Can you provide color on the magnitude of future 'modest gradual' dividend increases, similar to the recent one or more?

    Management stated that the specific numbers for future distribution increases are decided by the Board after each quarter and cannot be provided in advance.

    “I appreciate the question, but until we have a distribution decision from the directors over the -- after the end of the second quarter, we don't have a number to provide you with.”

    asked by Fredrik Dybwad · answered by Derek Lowe

    2 min read5 chapters

    Detailed Narrative

    01

    Market Conditions and Outlook

    The company observes tightening markets in both Brazil and the North Sea, driven by increased FPSO start-ups, ramp-ups, expansions, and new developments. This sustained increase in shuttle tanker service volumes has tightened the supply-demand balance, contributing to a constructive market outlook. The company also noted that the aging of the global fleet could further tighten supply.

    02

    Charter Portfolio and Backlog

    KNOT Offshore Partners maintains a strong backlog with $858 million in fixed contracts, averaging 2.4 years, with potential for more if all options are exercised. Given the current strength of the charter market, the company believes that charter options are likely to be exercised. Key charter extensions include Fortaleza Knutsen with Shell and ENI, and Alecensa with Total Energies.

    03

    Distribution Policy and Growth

    Following an extended period of low payouts, the company has initiated the process of increasing its distribution, declaring $0.05 per common unit for Q1 FY26. This move follows successful efforts to restore charter coverage, improve liquidity, and address refinancings and dry dockings. Management anticipates that accretive drop-downs and a strong rechartering environment will support multiple gradual distribution increases in the future.

    04

    Fleet Management and Useful Life

    Effective January 1, 2026, the company changed the useful life estimates of its vessels from 23 years to 20 years, reflecting longer-term market trends. This change will increase future depreciation but is a non-cash item and does not preclude vessels from operating beyond 20 years. The fleet's average age is 10.5 years, and the company continues to repay debt at approximately $90 million per year.

    05

    Refinancing Activities

    The company has historically benefited from access to a wide pool of lenders and attractive bank finance, with positive refinancing experiences even during weaker market conditions. The average margin on its floating rate debt during Q1 FY26 was 2.22% over SOFR. The company is preparing for upcoming refinancings of a $220 million facility in September 2026 and a $65 million facility in October 2026.

    AI-generated summary of the company’s earnings call. Not investment advice.