KNOT Offshore Partners LP reported strong Q2 2025 results.
Financial Highlights
For the three months ended June 30, 2025 (“Q2 2025”), KNOT Offshore Partners LP (“KNOT Offshore Partners” or the “Partnership”; NYSE:KNOP):
- Generated total revenues of $87.1 million, operating income of $22.2 million and net income of $6.8 million.
- Generated Adjusted EBITDA 1 of $51.6 million.
- Reported $104.8 million in available liquidity at June 30, 2025, which was comprised of cash and cash equivalents of $66.3 million and undrawn revolving credit facility capacity of $38.5 million.
Other Partnership Highlights and Events
- Fleet operated with 100% utilization for scheduled operations in Q2 2025, and 96.8% utilization taking into account the scheduled drydockings of the Raquel Knutsen and the Windsor Knutsen, for which the relevant off-hire periods concluded during Q2 2025.
- On July 2, 2025, the Partnership declared a quarterly cash distribution of $0.026 per common unit with respect to Q2 2025, which was paid on August 7, 2025, to all common unitholders of record on July 28, 2025. On the same day, the Partnership declared a quarterly cash distribution to holders of Series A Convertible Preferred Units (“Series A Preferred Units”) with respect to Q2 2025 in an aggregate amount of $1.7 million.
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1 EBITDA and Adjusted EBITDA are non-GAAP financial measures used by management and external users of the Partnership’s financial statements. Please see Appendix A for definitions of EBITDA and Adjusted EBITDA and a reconciliation to net income, the most directly comparable GAAP financial measure.
- On 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 (the “Board”);
- On April 15, 2025, Petrorio extended the redelivery timing for the Brasil Knutsen to September 2025. This redelivery is now expected in October 2025, promptly following which the Brasil Knutsen is due to commence operations with Equinor;
- On June 4, 2025, the Windsor Knutsen commenced operations for ExxonMobil following completion of her scheduled drydocking;
- On June 18, 2025, Repsol Sinopec exercised their option to extend their time charter on the Raquel Knutsen for three years, until June 2028;
- On July 2, 2025, the Partnership acquired the 2022-built DP2 shuttle tanker Daqing Knutsen(the “Acquisition”) from Knutsen NYK Offshore Tankers AS (“KNOT”). The purchase price was $95 million, less $70.5 million of outstanding indebtedness under the secured credit facility related to the Daqing Knutsen(the “Daqing Facility”), plus $0.3 million of capitalized fees. The purchase price is subject to customary post-closing adjustments for working capital and an interest rate swap. The vessel is on time charter to PetroChina in Brazil through July 2027. As a term of the Acquisition, KNOT has guaranteed the hire rate for the vessel until 2032 on the same basis as if PetroChina had exercised its option through such date;
- On July 2, 2025, the Board approved establishment of a buyback program for up to $10 million of the Partnership’s common units. Through September 25, 2025, the Partnership has repurchased 226,374 common units for a total purchase cost of $1.64 million, at an average price of $7.24 per common unit. Common units repurchased under this program are being cancelled, which will correspondingly reduce the total number of common units outstanding;
- In early July, the Tove Knutsen commenced a scheduled drydocking, following completion of a conventional tanker charter which utilised her voyage to Europe. This drydocking was completed in late August 2025;
- On August 15, 2025, the Partnership closed the refinancing of the first of its two $25 million revolving credit facilities, with the facility being rolled over with NTT TC Leasing Co, Ltd.; the second $25 million revolving credit facility matures in November 2025 and is expected to be refinanced on acceptable and similar terms at or prior to its maturity date;
- On August 21, 2025, agreement was reached with Shell to extend the term of the current time charter for the Hilda Knutsen by 3 months firm (to June 2026) plus a further 9 months at our option (to March 2027);
- On September 16, 2025, the Partnership sold the Tove Knutsen to, and leased her back from, a Japanese-based lessor, for a lease period of 10 years. The Partnership realized net proceeds of approximately $32 million from the transaction after repayment at its maturity of the loan secured by the Tove Knutsen and the payment of fees and expenses;
- The Vigdis Knutsen is expected to operate on a bareboat basis commencing in Q4 2025, following the previously-announced exercise of an option held by Shell to switch from the current time charter operation. This exercise took place on January 24, 2025, and included extension of the fixed duration of this charter from 2027 to 2030; and
- On September 22, 2025, agreement was reached with Equinor to extend the term of the current time charter for the Bodil Knutsen to March 2029, followed by two charterer’s options each of one year.
Derek Lowe, Chief Executive Officer and Chief Financial Officer of KNOT Offshore Partners LP, stated, “We are pleased to report another strong performance in Q2 2025, marked by safe operation at full utilization from scheduled operations, close to 97% utilization when including drydockings, 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 June 30, 2025, we have now secured 100% of charter coverage for the second half of 2025 after allowing for scheduled dry dockings, and approximately 89% for 2026. We remain focused on further strengthening our fleetwide charter coverage and seizing those periodic opportunities that exist to re-charter vessels in the current tight market environment.
In Brazil, the main offshore oil market where we operate, new production start-ups in shuttle tanker-serviced pre-salt fields have continued to outpace Petrobras’s already-aggressive baseline schedule. As a result, the world’s biggest shuttle tanker market is both growing and materially tightening. The North Sea, our secondary geography, has also established some positive momentum as projects ramp up production in both the UK North Sea and, most significantly, the Barents Sea. While less dynamic than is the case in Brazil, these positive developments in the wider North Sea region are a welcome and notable change after a protracted period of relatively slack shuttle tanker demand.
Driven by these dynamics, 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. We are aware of newbuild shuttle tanker orders, including seven 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 at least 2028, 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 also pleased to have reached an important milestone early in the third quarter, with our cashflow, financial strength, and overall outlook having improved to the extent that we felt it prudent to initiate a common unit buyback program, which is enabling us to take advantage of what we believe to be a pronounced value opportunity. 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”.