KNOT Offshore Partners (NYSE:KNOP) management highlighted strong fourth-quarter operational performance, a strengthening liquidity position, and an improving shuttle tanker market backdrop, while also addressing the conclusion of discussions related to an unsolicited sponsor proposal to acquire the partnership’s public common units.
Unsolicited sponsor offer discussions ended
Chief Executive Officer and Chief Financial Officer Derek Lowe opened the call by referencing an unsolicited and non-binding offer from the partnership’s sponsor, KNOT, to purchase the publicly owned common units for $10 per unit. Lowe said the offer was received during the fourth quarter.
Fourth-quarter results reflected impairment, but cash flow remained solid
Management reported fourth-quarter revenue of $96.5 million. Operating income was $8.4 million on a fully reported basis, but $28.6 million excluding the impact of a non-cash impairment related to the Bodil Knutsen. Net income was a loss of $6.2 million on a fully reported basis, compared with net income of $14.0 million when excluding the impairment impact.
Adjusted EBITDA for the quarter was $59.3 million, according to Lowe.
On the balance sheet, KNOP ended 2025 with $137 million in available liquidity, consisting of $89 million in cash and cash equivalents and $48 million of undrawn credit capacity. Lowe noted liquidity was $11.8 million higher than at Sept. 30, 2025.
Utilization and distribution
Operationally, Lowe said the partnership achieved 99.5% utilization, and 96.4% utilization overall when including the scheduled dry docking of the Synnøve Knutsen.
Following the end of the quarter, KNOP declared a cash distribution of $0.026 per common unit, which was paid in February.
Refinancing activity and charter updates
During the quarter, KNOP entered into a $71.1 million senior secured term loan facility to refinance the Synnøve Knutsen, Lowe said. The partnership also completed what management described as its second of two revolving credit facility (RCF) refinancings, rolled over on similar terms. Lowe said the next refinancings are expected in the late third and early fourth quarter of 2026, and pointed to upcoming facilities in September and October 2026, including a $220 million five-ship facility and a $65 million single-ship facility secured by the Lena Knutsen.
On the commercial side, Lowe said the Vigdis Knutsen transitioned on Nov. 4 from a time charter to a bareboat charter with the same customer, Shell, extending until at least 2030. In addition, KNOP agreed on Nov. 21 to a time charter for the Fortaleza Knutsen with KNOT, expected to commence in the second quarter of 2026 and last one to three years. Lowe said the vessel’s smaller size relative to Suezmax shuttle tankers standard in the Brazilian offshore segment is expected to lead to a transition to the more diversified North Sea market.
Discussing financing costs, Lowe noted the average margin on KNOP’s floating rate debt during the fourth quarter was 2.2% over SOFR.
Market outlook: tightening in Brazil and the North Sea; backlog and coverage
Lowe described “positive momentum” going into spring 2026, citing a tightening market and an expanding backlog alongside what he characterized as a strengthening balance sheet. He said both Brazil and the North Sea are seeing tightening conditions driven by FPSO startups, ramp-ups, expansions, new discoveries, and technology-driven increases in production beyond nameplate capacity.
As of Dec. 31, 2025, Lowe said KNOP’s backlog included $929 million of fixed contracts averaging 2.6 years, with longer duration possible if options are exercised. The partnership ended the year with 19 vessels averaging 10.2 years of age.
Lowe also said KNOP is continuing to repay debt at $90 million or more per year, which he described as prudent given a depreciating asset base.
On contract coverage, management said 93% of vessel time in 2026 is covered by fixed contracts and 69% in 2027. If all relevant options are exercised, coverage would rise to 98% in 2026 and 88% in 2027, Lowe said. He also said that based on current charter rates, management believes charterers’ options are “likely to be taken up” given the strength of the market.
Lowe reiterated that drop-down acquisitions from the sponsor have historically been the route to growth and a way to replenish and rejuvenate the fleet, while emphasizing that any drop-down would require independent Conflicts Committee approval.
Analyst Q&A: useful life change and capital allocation
During the question-and-answer session, Lowe was asked whether there had been a valuation of KNOP in connection with a bond issuance at a corporate level above the partnership. Lowe said anyone interested should refer to the offering materials and disclosures and that he was not directly aware of valuation exercises involving the partnership.
Lowe also addressed a change in estimated useful life for vessels from 23 to 20 years. He said useful life reflects how long a vessel is expected to remain with the current owner and is not necessarily the same as economic life. Lowe said customers generally prefer vessels under 20 years for shuttle tanker operations, which informed the change in judgment.
Analysts also questioned capital allocation priorities, including the potential for increased distributions, buybacks, drop-down acquisitions, or accelerated debt repayment. Lowe said directors are continually assessing capital allocation and that there is no fixed formula or explicit priority among distributions, buybacks, and drop-downs.
On governance, Lowe said the partnership intends to satisfy its obligation to hold a meeting during 2026.
About KNOT Offshore Partners (NYSE:KNOP)
KNOT Offshore Partners LP is a publicly traded limited partnership formed in 2013 to own and operate shuttle tankers under long‐term charters in the offshore oil industry. Listed on the New York Stock Exchange under the symbol KNOP, the partnership specializes in the transportation of crude oil from offshore production facilities to onshore refineries. Its fleet comprises moderne shuttle tankers equipped with dynamic positioning systems, enabling safe transfer operations in harsh weather and sea conditions.
The partnership’s vessels primarily serve fields in the North Sea, Brazil and West Africa, where they operate under multi‐year contracts with major energy producers.
