KNOP - Knot Offshore Partners

[wabuffo]

KNOP reports first quarter results.

https://www.sec.gov/Archives/edgar/data/1564180/000110465920066485/a20-20777_1ex99d1.htm

Steady as she goes....

wabuffo

[lnofeisone]

Yep - love the negative headline on SA. Either way, I'm waiting for 19sh to start unloading my latest batch.

[keerthiprasad]

Hoping we hear about the Windsor soon.

The only things more predictable or consistent than this are likely frauds haha.

[wabuffo]

http://s22.q4cdn.com/485995448/files/doc_financials/2020/q1/20200528-1Q20-KNOT-Offshore-Partners-LP-Earnings-Presentation-vFinal.pdf

KNOP's Q1 presentation has some very interesting charts and conference call discussion on Brazil offshore oil production (pp 10-13) - including marginal cost of production curves as well as break-even oil price level required for new offshore projects.

wabuffo

[lnofeisone]

Looks like no news is good news. Another distribution as I wait for my 19+ to unload.

http://www.knotoffshorepartners.com/investor-relations/investor-information/news/press-release-details/2020/KNOT-Offshore-Partners-LP-Announces-Second-Quarter-2020-Cash-Distribution/default.aspx

[keerthiprasad]

Looks like no news is good news. Another distribution as I wait for my 19+ to unload.

http://www.knotoffshorepartners.com/investor-relations/investor-information/news/press-release-details/2020/KNOT-Offshore-Partners-LP-Announces-Second-Quarter-2020-Cash-Distribution/default.aspx

If the windsor is renewed it will pop. If the contract isn't extended, im not sure what will happen.  Until then I'm collecting the distribution and waiting.

[wabuffo]

If the windsor is renewed it will pop. If the contract isn't extended, im not sure what will happen.  Until then I'm collecting the distribution and waiting.

Yes - the two issues outstanding are:
1) the contract status of the Windsor, and (probably more important one)
2) the status of future dropdowns (ie, tanker purchases) from their sponsor and how they will be financed.

Without those two resolved, KNOP is essentially a slo-mo liquidation so the real yield is lower than the indicated yield.

wabuffo

[keerthiprasad]

If the windsor is renewed it will pop. If the contract isn't extended, im not sure what will happen.  Until then I'm collecting the distribution and waiting.

Yes - the two issues outstanding are:
1) the contract status of the Windsor, and (probably more important one)
2) the status of future dropdowns (ie, tanker purchases) from their sponsor and how they will be financed.

Without those two resolved, KNOP is essentially a slo-mo liquidation so the real yield is lower than the indicated yield.

wabuffo

Yup. They are in a tough spot with the distribution.

If they need to reserve cash and cut distributions...the market will kill them.
If they keep paying out at these rates... very little flexibility.

[gfp]

A good outcome would be the yield starved investors bidding up the unit price to the point it made sense for them to issue units to finance drop down, correct?  I have no idea what debt financing or other creative "owner financed" structures they could come up with if they want the drop down and need to find a creative solution for it to make sense for both parties.  I would think a creative investment banker could come up with something for them that works if the unit price doesn't rise to where they think it needs to be.

[Libs]

Regarding Windsor Knutsen, I keep expecting some announcement but i doesn't come. Here's what the company said in the May CC:

<For Windsor Knutsen, the partnership's previous agreement with Shell as charterer to suspend the vessel's time charter contract, ultimately at no cost to the partnership, has now ended and the vessel is back on its normal time charter. The vessel is fixed until October 2020, and we're in discussion with Shell about the vessel's next option period. And at this stage, we have no indication that the option will not be taken.>

Then in the Q and A:

Marc Solecitto

Got it. Okay. And then with the Windsor, you mentioned that the charterer hasn't given any indication that they will not be extending. Just want -- can you remind us how many months' notice in advance they would have to give if they were not going to take up the extension option?

Gary Chapman

Yes. At the moment, the declaration date for the Windsor is the middle of July 2020. So it's actually quite soon. However, going back to the answer I've just given on everything around rates, every discussion with each -- every charter is also quite specific and targeted. So it may be that we allow Shell to take more time to decide that. I don't know. That's really up for our negotiation with our -- through our commercial team. But at the moment, the -- unless we allow Shell more time, then actually, the declaration option is the middle of -- middle of July, sorry.>

So we're past that point, and presumably they are still negotiating with Shell.

For the record, looking back on their history it looks like every extension has been taken, even during the 2014-2015 oil crash.

There are also some useful comments on the drop-downs:

https://seekingalpha.com/article/4350666-knot-offshore-partners-lp-knop-ceo-gary-chapman-on-q1-2020-results-earnings-call-transcript