KNOT Offshore Partners LP Earnings Release—Interim Results for the Period Ended March 31, 2025

About this update from Knot Offshore Partners Lp

  ABERDEEN, Scotland, May 20, 2025 --( BUSINESS WIRE )--KNOT Offshore Partners LP (NYSE:KNOP): Financial Highlights For the three months ended March 31, 2025 ("Q1 2025"), KNOT Offshore Partners LP ("KNOT Offshore Partners" or the "Partnership"): Other Partnership Highlights and Events Derek Lowe, Chief Executive Officer and Chief Financial Officer of KNOT Offshore Partners LP, stated, "We are pleased to report another strong performance in Q1 2025, marked by safe operation at more than 99% fleet utilization from scheduled operations, consistent revenue and operating income generation, and material progress in securing additional charter coverage for our fleet. As of the date of this release and including contractual updates since March 31, 2025, we have now secured approximately 96% of charter coverage for the final three quarters of 2025, and approximately 75% for 2026. Having executed a number of new contracts and extensions over the last year, we have established good momentum in a strengthening market and remain focused on strengthening and extending our fleetwide charter coverage. In Brazil, the main offshore oil market where we operate, the outlook is continuing to improve, with robust demand and increasing charter rates. Driven by Petrobras’ continued high production levels and FPSO start-ups in the pre-salt fields that rely upon shuttle tankers, we believe the world’s biggest shuttle tanker market is tightening materially. Our secondary geography, in the North Sea, has taken longer to re-balance, but we welcome the news of the new FPSO production starts for both the UK North Sea-based Penguins and Barents Sea-based Johan Castberg. We continue to believe that growth of offshore oil production in shuttle tanker-serviced fields across both Brazil and the North Sea is on track to outpace shuttle tanker supply growth throughout the coming years, driven most notably by the aggressive expansion of Brazilian deepwater production capacity, particularly as increasing numbers of shuttle tankers reach or exceed typical retirement age. We are aware of newbuild shuttle tanker orders, including six for Knutsen NYK, all of which are scheduled for delivery over 2025‑2028. We anticipate that all these new orders are backed by charters to clients in Brazil, and see this as a sign of confidence in the medium-to-long term demand for the global shuttle tanker fleet. Particularly when considered in the context of the increasing numbers of shuttle tankers reaching or exceeding typical retirement age, as well as yard capacity constraints limiting material new orders into late 2027 or thereafter, we anticipate that these newbuild deliveries will be readily absorbed by the expanding market for shuttle tankers. As the largest owner and operator of shuttle tankers (together with our sponsor, Knutsen NYK), we believe we are well positioned to benefit from such an improving charter market. We remain focused on generating certainty and stability of cash flows from long-term employment with high-quality counterparties, both through continued chartering and through the consummation of accretive dropdown transactions. We are confident that continued operational performance and the successful execution of our strategy in an improving market environment can increase our cash flow generation, strengthen our forward visibility, and create sustainable unitholder value in the quarters and years ahead." Financial Results Overview Results for Q1 2025 (compared to those for the three months ended December 31, 2024 ("Q4 2024")) included: By comparison with the three months ended March 31, 2024 ("Q1 2024"), results for Q1 2025 included: Financing and Liquidity As of March 31, 2025, the Partnership had $100.8 million in available liquidity, which was comprised of cash and cash equivalents of $67.3 million and $33.5 million of capacity under its revolving credit facilities. The Partnership’s revolving credit facilities mature between August 2025 and November 2025. The Partnership’s total interest-bearing obligations outstanding as of March 31, 2025 were $949 million ($944.3 million net of debt issuance costs). The average margin paid on the Partnership’s outstanding debt during Q1 2025 was approximately 2.23% over SOFR. These obligations are repayable as follows: As of March 31, 2025, the Partnership had entered into various interest rate swap agreements for a total notional amount outstanding of $462.3 million, to hedge against the interest rate risks of its variable rate borrowings. As of March 31, 2025, the Partnership receives interest based on SOFR and pays a weighted average interest rate of 2.38% under its interest rate swap agreements, which have an average maturity of approximately 1.53 years. The Partnership does not apply hedge accounting for derivative instruments, and its financial results are impacted by changes in the market value of such financial instruments. As of March 31, 2025, the Partnership’s net exposure to floating interest rate fluctuations was approximately $258.6 million based on total interest-bearing contractual obligations of $949 million, less the Raquel Knutsen and Torill Knutsen sale and leaseback facilities of $160.8 million, less interest rate swaps of $462.3 million, and less cash and cash equivalents of $67.3 million. Assets Owned by Knutsen NYK Pursuant to the omnibus agreement the Partnership entered into with Knutsen NYK at the time of its initial public offering, the Partnership 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. While the Partnership continues to believe that key components of its strategy and value proposition are accretive investment in the fleet and a long-term, sustainable distribution, there can be no assurance that the Partnership will acquire any additional vessels from Knutsen NYK. Given the relationship between the Partnership and Knutsen NYK, any such acquisition would be subject to the approval of the Conflicts Committee of the Partnership’s Board of Directors. Knutsen NYK owns, or has ordered, the following vessels and has entered into the following charters: Board of Directors Change Effective April 1, 2025, the Partnership’s general partner appointed Mr. Masami Okubo to replace Mr. Yasuhiro Fukuda, both of whom are employees of Nippon Yusen Kabushiki Kaisha ("NYK"), on the Partnership’s Board of Directors. Outlook As at March 31, 2025: (i) the Partnership had charters with an average remaining fixed duration of 2.3 years, with the charterers of the Partnership’s vessels having options to extend their charters by an additional 4.7 years on average and (ii) the Partnership had $853.8 million of remaining contracted forward revenue, excluding charterers’ options and charters agreed or signed after that date. As at March 31, 2025, the eighteen vessels which comprise the Partnership’s fleet had an average age of 9.8 years. The market for shuttle tankers in Brazil, where fourteen of our current fleet operated during Q1 2025, has continued to tighten, driven by a significant pipeline of new production growth over the coming years, a limited newbuild order book, and typical long-term project viability requiring a Brent oil price of only $35 per barrel. Shuttle tanker demand in the North Sea has remained subdued for some years, driven by the impact of COVID‑19‑related project delays. These conditions persisted into recent quarters, awaiting anticipated new oil production starts. Most notably, the long-anticipated Johan Castberg field in the Barents Sea and the new Penguins FPSO in the North Sea entered production recently. Looking ahead, based on supply and demand factors with significant forward visibility and committed capital from industry participants, we believe that the overall medium and long-term outlook for the shuttle tanker market remains favourable. In the meantime, the Partnership intends to pursue long-term visibility from its charter contracts, build its liquidity, pursue accretive dropdown transactions supportive of long-term cash flow generation, and position itself to benefit from its market-leading role in an improving shuttle tanker market. The Partnership continues to believe that key components of its strategy and value proposition are accretive investment in the fleet and a long-term, sustainable distribution. In the near term, the Partnership believes that there are compelling opportunities to deploy a material portion of its cash flow to facilitate dropdown transactions. The Partnership believes that dropdowns will lead to an increase in the Partnership’s capital value, with growth in contractual backlog leading to increasing cash flow over time. Together with reductions in the average age of the fleet, this increased cash flow should also facilitate refinancings. Combined with strong market fundamentals, this should provide for the opportunity to increase sustainable distribution levels in the future. About KNOT Offshore Partners LP KNOT Offshore Partners LP owns, operates and acquires shuttle tankers primarily under long-term charters in the offshore oil production regions of Brazil and the North Sea. KNOT Offshore Partners LP is structured as a publicly traded master limited partnership but is classified as a corporation for U.S. federal income tax purposes, and thus issues a Form 1099 to its unitholders, rather than a Form K‑1. KNOT Offshore Partners LP’s common units trade on the New York Stock Exchange under the symbol "KNOP". The Partnership plans to host a conference call on Wednesday May 21, 2025 at 9:30 AM (Eastern Time) to discuss the results for Q1 2025. All unitholders and interested parties are invited to listen to the live conference call by choosing from the following options: APPENDIX A—RECONCILIATION OF NON-GAAP FINANCIAL MEASURES EBITDA and Adjusted EBITDA EBITDA is defined as earnings before interest, depreciation, impairments and taxes. Adjusted EBITDA is defined as earnings before interest, depreciation, impairments, taxes and other financial items (including other finance expenses, realized and unrealized gain (loss) on derivative instruments and net gain (loss) on foreign currency transactions). EBITDA is used as a supplemental financial measure by management and external users of financial statements, such as the Partnership’s lenders, to assess its financial and operating performance and compliance with the financial covenants and restrictions contained in its financing agreements. Adjusted EBITDA is used as a supplemental financial measure by management and external users of financial statements, such as investors, to assess the Partnership’s financial and operating performance. The Partnership believes that EBITDA and Adjusted EBITDA assist 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 EBITDA and Adjusted EBITDA information. This increased comparability is achieved by excluding the potentially disparate effects between periods or companies of interest, other financial items, taxes, impairments and depreciation, as applicable, 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 EBITDA and Adjusted EBITDA as financial measures 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. EBITDA and Adjusted EBITDA are non-GAAP financial measures and should not be considered as alternatives to net income or any other indicator of Partnership performance calculated in accordance with GAAP. The table below reconciles EBITDA and Adjusted EBITDA to net income, the most directly comparable GAAP measure. 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: 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 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. View source version on businesswire.com: https://www.businesswire.com/news/home/20250520988722/en/ Contacts Questions should be directed to: Derek Lowe via email at [email protected]

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