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KNOP
Earnings call · Jun 2026 (Q2 FY26)

KNOT Offshore Partners Q2 FY26 earnings call KNOP

Sep 4, 2026 Source

Executive summary

KNOT Offshore Partners Q2 FY26 — Strategic Acquisition and Distribution Increase

KNOT Offshore Partners delivered solid Q2 FY26 results, highlighted by the strategic acquisition of the Heda Knudsen, which strengthens its long-term contract pipeline and rejuvenates the fleet. The company also increased its quarterly cash distribution, reflecting confidence in its reliable cash flow and improved balance sheet. Management emphasized a tightening shuttle tanker market in Brazil and the North Sea, driven by robust FPSO activity and sustained production growth.

Highlights

5

  • Acquisition of Heda Knudsen for $24.4 million net cash cost, diversifying and extending long-term contracts, and reducing average fleet age.

  • Increased cash distribution to $0.075 per common unit, up from $0.05 in the prior quarter.

  • Strong utilization of 96.8% (taking into account scheduled dry docking) and 92.4% overall.

  • Refinanced a $225 million loan facility with a meaningfully reduced interest rate of SOFR plus 165 basis points.

  • Expanded fixed contract backlog to $881.2 million at quarter end.

Guidance & targets

CategoryTargetConfidence
Cash distribution
multiple gradual increases
high materiality
High
Firm charter coverage
100%
medium materiality
High
Firm charter coverage
92%
medium materiality
High
Charter coverage including options
96%
medium materiality
High
Firm charter coverage
65%
medium materiality
Medium
Charter coverage including options
93%
medium materiality
Medium
Refinancing of Lena Knutsen facility
refinanced
low materiality
High

KNOP operating KPIs by quarter

KNOP operating KPIs stated on its earnings calls, by fiscal quarter
KPI Mar 2026 Q1 FY26This call Jun 2026 Q2 FY26Change vs prior quarter
Utilization rate Taking into account scheduled dry docking
97.2% We operated the 97.2% utilization taking into account scheduled dry docking, which amounts to 92% utilization overall following the dry dockings of Synnove Knutsen. Source transcript
96.8% We operated with 96.8% utilization, taking into account scheduled dry docking, which amounts to 92.4% utilization overall following the dry docking of Fortaleza. Source transcript
-0.4 pt
Utilization rate Overall
92% We operated the 97.2% utilization taking into account scheduled dry docking, which amounts to 92% utilization overall following the dry dockings of Synnove Knutsen. Source transcript
92.4% We operated with 96.8% utilization, taking into account scheduled dry docking, which amounts to 92.4% utilization overall following the dry docking of Fortaleza. Source transcript
+0.4 pt
Backlog
$858M We have sustained a strong backlog with $858 million of fixed contracts, averaging 2.4 years. Source transcript
$881.2M We have expanded our strong backlog with $881.2 million of fixed contracts at quarter end, which average 2.5 years in duration, and chartered options averaging further four years. Source transcript
+2.7%
Fleet
19 At quarter end, our fleet of 19 vessels had an average age of 10.5 years, and we're continuing to repay debt at around $90 million per year, which we consider prudent with the depreciating asset base. Source transcript
19 At quarter end, our fleet of 19 vessels had an average age of 10.7 years. Source transcript
0%
Average fleet age
10.5 years At quarter end, our fleet of 19 vessels had an average age of 10.5 years, and we're continuing to repay debt at around $90 million per year, which we consider prudent with the depreciating asset base. Source transcript
10.7 years At quarter end, our fleet of 19 vessels had an average age of 10.7 years. Source transcript
+1.9%

Operating figures the company states on every call, checked against each call's transcript. Click a figure to read the sentence. A dash means it was not stated that quarter.

Orderbook & backlog

Fixed contract backlog $881.2 million Q2 FY26

Expanded

Average duration 2.5 years, with additional 4 years from charter options.

Deals & partnerships

KNOT Purchase of shuttle tanker Heda Knudsen $113 million purchase price, less $89.4 million debt facility, plus $0.8 million capitalized financing fees, resulting in net cash cost of $24.4 million Time charter to Petrobras through November 2034 with additional five years of charter as options

Vessel delivered new to KNOT in October 2024. Transaction negotiated by board's independent conflicts committee.

ENI Time charter for Hilder Knudsen Fixed period of three years plus three charterer's options each for one additional year

To commence in June 2027.

Transpetro Time charter for Recife Knutsen Fixed period of two years

To commence in Q3 2026.

E&I Time charter for Ingrid Knudsen Fixed period of three years plus three options each of one year

Commencing October 2026. Replaces existing options.

What to watch in Q3 FY26

Lena Knutsen facility refinancing

October
Current Well advanced for $65 million facility
Target Refinancing completed

Why it matters

Successful refinancing ensures continued financial flexibility and avoids maturity risk for this facility.

And we are well advanced in the refinancing of the $65 million facility secured by the Lena Knutsen, which is due later in October.

Q&A highlights

Does the elegant financing of Heda Knudsen (debt assumption + cash) suggest a different cadence for future drop-downs, or will they continue to take them as they come?

Management stated that drop-downs are taken as they are offered and delivered. The financing structure for Heda Knudsen, involving existing debt assumption, is standard for previous drop-downs and is not expected to change the cadence. The net cash cost of $24 million was consistent with prior transactions.

“I mean, the standard model for all of them is that they have a secure debt facility in place already as they are offered. The financing itself does not need to be arranged at the time that the drop-down is offered.”

asked by Liam Burke · answered by Derek Lowe

2 min read 5 chapters

Detailed narrative

Q2 Financial and Operational Highlights

KNOT Offshore Partners reported Q2 FY26 revenues of $96.8 million, operating income of $15.6 million, net income of $3.4 million, and adjusted EBITDA of $57.6 million. The partnership maintained strong operational utilization at 96.8% (92.4% overall including dry docking) and ended the quarter with $143.3 million in available liquidity, comprising $95.3 million cash and $48 million undrawn capacity, an increase of $2.6 million from the prior quarter.

Strategic Heda Knudsen Acquisition

Post-quarter end, on September 1, 2026, KNOT Offshore Partners acquired the Heda Knudsen for a net cash cost of $24.4 million. This acquisition, negotiated by an independent conflicts committee, adds a vessel on time charter to Petrobras through November 2034 (with options for an additional five years), contributing to fleet growth, contract diversification, and a reduction in the average fleet age by nearly half a year.

Commercial and Financing Developments

The company secured several new time charters, including Hilder Knudsen with ENI for three years (plus options) starting June 2027, Recife Knutsen with Transpetro for two years starting Q3 2026, and Ingrid Knudsen with E&I for three years (plus options) starting October 2026. Additionally, a $225 million five-year senior secured term loan facility was refinanced for five vessels, significantly reducing the interest rate to SOFR plus 165 basis points.

Market Outlook and Backlog Strength

Management highlighted tightening shuttle tanker markets in Brazil and the North Sea, driven by robust FPSO pipelines and sustained production growth. The partnership expanded its fixed contract backlog to $881.2 million at quarter end, averaging 2.5 years in duration with an additional four years in charter options. The fleet is fully chartered for the remainder of 2026, with 96% coverage (including options) for 2027 and 93% for 2028.

Shareholder Distribution and Debt Management

KNOT Offshore Partners declared a cash distribution of $0.075 per common unit for Q2, an increase from $0.05 in the prior quarter, signaling confidence in its long-term cash flow. The company continues to repay debt at approximately $95 million per year and is well advanced in refinancing a $65 million facility due in October, demonstrating prudent financial management.

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