ABERDEEN, Scotland--(BUSINESS WIRE)--
Highlights
-
KNOT Offshore Partners LP (NYSE:KNOP) ("KNOT Offshore Partners" or the
"Partnership") completed its initial public offering (“IPO”) and its
common units began trading on the New York Stock Exchange in April
2013.
-
Generated net income of $4.0 million and operating income of $7.4
million for the second quarter of 2013.
-
Generated Adjusted EBITDA of $12.7 million for the second quarter 2013.1
-
Generated distributable cash flow of $7.2 million for the second
quarter of 2013.2
-
Declared distribution of $0.3173 per unit with respect to the period
ended June 30, 2013 (representing a prorated distribution for the
period from closing date of the IPO on April 15, 2013 through June 30,
2013). This corresponds to a quarterly distribution of $0.3750 per
unit (or $1.50 per unit on an annual basis), which is consistent with
the forecasted distribution set forth in the IPO prospectus.
-
On June 25, 2013, KNOT Offshore Partners held its first annual meeting
of unitholders at which four members were elected to its board of
directors (the “Board”).
Subsequent Event
-
On August 1, 2013, KNOT Offshore Partners completed the acquisition of
the company that owns and operates the offshore shuttle tanker “Carmen
Knutsen” from Knutsen NYK Offshore Tankers AS (“KNOT”) for $145.0
million.
Financial Results Overview
KNOT Offshore Partners reports net income of $4.0 million and operating
income of $7.4 million for the second quarter of 2013, as compared to
net loss of $2.5 million and operating income of $3.8 million for the
same period in the prior year.
All vessels operated well throughout the quarter with virtually 100
percent utilization, and operating results improved compared to the
second quarter of 2012 as the offshore shuttle tanker “Windsor Knutsen”
was off hire due to propeller damage, causing reduced utilization days
and repair costs during that period.
Net financial expenses decreased to $3.4 million for the second quarter
of 2013, compared to $7.2 million for the same period in the prior year.
In accordance with generally accepted accounting principles in the
United States (“GAAP”), prior to April 16, 2013, the results of
operations, cash flow and balance sheet of the Partnership have been
carved out of the consolidated financial statements of KNOT.
Accordingly, the Partnership’s financial statements prior to April 16,
2013 reflect allocation of certain expenses, including the
mark-to-market value of interest rate swap derivatives. These realized
and unrealized losses on derivatives, in the amounts of $0.4 million and
$4.5 million for the second quarter of 2013 and 2012, respectively, do
not affect cash flow or the calculation of distributable cash flow.
These amounts have been eliminated from the Partnership’s opening equity
as of April 16, 2013, as none of the interest rate swap agreements were
transferred to the Partnership on completion of the IPO. The Partnership
has no further obligation related to these contracts.
Financing and Liquidity
On April 15, 2013, the Partnership completed its IPO of 8,567,500 common
units (including 1,117,500 common units pursuant to the exercise in full
of the underwriters’ option to purchase additional common units). The
Partnership’s common units are listed on the New York Stock Exchange
under the symbol “KNOP.” KNOT owns a 49.0% limited partner interest in
the Partnership and, through its ownership of the Partnership’s general
partner, a 2.0% general partner interest in the Partnership.
As of June 30, 2013, the Partnership had cash and cash equivalents of
$27.1 million and an undrawn revolving credit facility of $20 million.
Total bank debt outstanding was $217.5 million, as of June 30, 2013. The
average margin paid on the Partnership’s outstanding bank debt during
the quarter ended June 30, 2013 was approximately 2.7% in addition to
LIBOR.
Outlook
Third quarter 2013 operating results will be positively impacted by two
months of contribution from the offshore shuttle tanker “Carmen Knutsen”
and the Partnership’s management has recommended that the Board consider
an increase of $0.06 in the quarterly cash distribution, which would
represent an increase of 16.0% (an annualized increase of $0.24 from the
current annualized distribution rate of $1.50 per common unit), which
would become effective for the distribution with respect to the quarter
ending September 30, 2013. Any such increase would be conditioned upon,
among other things, the approval of such increase by the Board and the
absence of any material adverse developments that would make such an
increase inadvisable.
Further, under the Omnibus Agreement the Partnership entered into with
KNOT in connection with the IPO ( the “Omnibus Agreement”), there are
four additional identified vessels which the Partnership has the option
to purchase within 24 months of their delivery to charterers.
Pursuant to the Omnibus Agreement, the Partnership also has the option
to acquire from KNOT all offshore shuttle tankers that KNOT acquires or
owns that will be employed under contracts for periods more than five
years.
Although in the short term, production delays in both Brazil and the
North Sea are causing a temporary vessel surplus, the Board believes
that through KNOT there are significant opportunities for growth for the
Partnership as the activity in the offshore oil industry continues to be
relatively high and, accordingly, the demand for offshore shuttle
tankers will over time continue to grow based on identified projects.
The Board is pleased with the results of operations of the Partnership
for the period ended June 30, 2013, which were consistent with
expectations for the Partnership’s initial operating period following
the completion of the IPO, and is confident that the Partnership is well-positioned
to grow its earnings and distributions.
Expected Restatement of 2012 Results
Following discussions with the Partnership’s auditors, on August 23,
2013, the Partnership and the Board have determined to restate the
combined carve-out financial statements of KNOT Offshore Partners LP
Predecessor as of and for the year ended December 31, 2012. The purpose
of such restatement is to correct certain errors in accounting for
expenses associated with the IPO and reflect on the combined carve-out
statement of operations, in general and administrative expenses, such
expenses that had previously been deferred and reflected as a reduction
on the combined carve-out balance sheet in owner’s equity.
The Partnership expects the amount of additional general and
administrative expenses that will be reflected in the restatement will
be approximately $3.439 million for the year ended December 31, 2012,
resulting in a reduction of net income from $4.184 million previously
reported to approximately $0.745 million as restated.
Expenses associated with the IPO aggregated approximately $1.501 million
for the three months ended March 31, 2013 and approximately $0.448
million for the three months ended June 30, 2013.
Since these expenses were funded from IPO proceeds, as described in the
IPO prospectus filed with the Securities and Exchange Commission, the
restatement will have no impact on the cash available for distribution
to unitholders. The Partnership expects to issue the restated financial
statements in approximately two weeks.
About KNOT Offshore Partners LP
KNOT Offshore Partners owns, operates and acquires shuttle tankers under
long-term charters in the offshore oil production regions of the North
Sea and Brazil. KNOT Offshore Partners owns and operates a fleet of five
offshore shuttle tankers operating under long-term charters to oil
majors.
KNOT Offshore Partners LP is structured as a publicly-traded master
limited partnership. KNOT Offshore Partners’ common units trade on the
New York Stock Exchange under the symbol “KNOP.”
The Partnership also plans to host a conference call on Tuesday, August
27, 2013 at noon (ET) to discuss the results for the second quarter of
2013. All unitholders and interested parties are invited to listen to
the live conference call by choosing from the following options:
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By dialing 1-877-524-6789 or 1-412-317-6789, if outside North America.
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By accessing the webcast, which will be available on the Partnership’s
website: www.knotoffshorepartners.com.
August 26, 2013
KNOT Offshore Partners L.P.
Aberdeen, United
Kingdom
Questions should be directed to:
Arild Vik (+44 7581 899 777)
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SUMMARY UNAUDITED CONDENSED CONSOLIDATED AND COMBINED CARVE-OUT
STATEMENTS OF OPERATIONS
|
|
|
|
|
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(USD in thousands)
|
|
Three months
Ended June 30,
2013
|
|
Three months
Ended June 30,
2012
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Time charter and bareboat revenues 1)
|
|
17,268
|
|
|
12,000
|
|
Loss of hire insurance recoveries
|
|
-
|
|
|
2,217
|
|
Total revenues
|
|
17,268
|
|
|
14,217
|
|
Vessel operating expenses
|
|
3,251
|
|
|
4,853
|
|
Depreciation and amortization
|
|
5,340
|
|
|
5,311
|
|
General and administrative expenses 2)
|
|
1,269
|
|
|
275
|
|
Total operating expenses
|
|
9,860
|
|
|
10,439
|
|
Operating income
|
|
7,408
|
|
|
3,778
|
|
Finance income (expense):
|
|
|
|
|
Interest income
|
|
3
|
|
|
13
|
|
Interest expense 3)
|
|
(2,529
|
)
|
|
(3,395
|
)
|
Other finance expense 4)
|
|
(492
|
)
|
|
(873
|
)
|
Realized and unrealized loss on derivative instruments 5)
|
|
(434
|
)
|
|
(4,507
|
)
|
Net gain (loss) on foreign currency transactions
|
|
15
|
|
|
1,606
|
|
Total finance expense
|
|
(3,437
|
)
|
|
(7,156
|
)
|
Income (loss) before income taxes
|
|
3,971
|
|
|
(3,378
|
)
|
Income tax benefit
|
|
-
|
|
|
842
|
|
Net income (loss)
|
|
3,971
|
|
|
(2,536
|
)
|
Net income (loss) attributable to non-controlling interests
|
|
-
|
|
|
-
|
|
Net income (loss) attributable to KNOT Offshore Partners LP Owners
|
|
3,971
|
|
|
(2,536
|
)
|
|
|
|
|
|
Weighted average units outstanding (in thousands of units):
|
|
|
|
|
Common units
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8 567 500
|
|
|
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Subordinated units
|
|
8 567 500
|
|
|
|
General partner units
|
|
349 694
|
|
|
|
|
|
1)
|
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Time charter revenue for the second quarter of 2013 include,
non-cash item of approximately $0.5 million in reversal of contract
liability provision.
|
|
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2)
|
|
General and administrative expenses for second quarter of 2013
includes $0.5 million in costs related to the IPO.
|
|
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3)
|
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Interest expense for the second quarter of 2013 includes non-cash
item of approximately $0.6 million in amortization of previously
capitalized loan cost related to debt repaid at IPO.
|
|
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4)
|
|
Other finance expense for the second quarter of 2013 includes
legal costs of approximately $0.4 million relating to loans with
an average remaining term of 3.4 years.
|
|
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5)
|
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Realized and unrealized loss on derivative instruments is related to
interest rate swaps not transferred to the Partnership by KNOT NYK
Offshore Tankers AS at the date of the IPO.
|
|
|
|
|
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SUMMARY UNAUDITED CONDENSED CONSOLIDATED AND COMBINED CARVE-OUT
BALANCE SHEET
|
|
|
|
(USD in thousands)
|
|
At June 30,
2013
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ASSETS
|
|
|
Current assets:
|
|
|
Cash and cash equivalents
|
|
25,218
|
|
Restricted cash
|
|
1,910
|
|
Trade accounts receivable
|
|
-
|
|
Amounts due from related parties
|
|
857
|
|
Inventories
|
|
489
|
|
Deferred tax asset
|
|
-
|
|
Other current assets
|
|
1,571
|
|
Total current assets
|
|
30,045
|
|
Long-term assets:
|
|
|
Vessels and equipment:
|
|
|
Vessels
|
|
548,141
|
|
Less accumulated depreciation and amortization
|
|
(62,053
|
)
|
Net property, plant, and equipment
|
|
486,088
|
|
Goodwill
|
|
5,750
|
|
Deferred debt issuance cost
|
|
2,336
|
|
Total assets
|
|
524,219
|
|
|
|
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LIABILITIES AND PARTNERS’ EQUITY/OWNER’S CAPITAL
|
|
|
Current liabilities:
|
|
|
Trade accounts payable
|
|
428
|
|
Accrued expenses
|
|
3,411
|
|
Current installments of long-term debt
|
|
17,402
|
|
Derivative liabilities
|
|
-
|
|
Income taxes payable
|
|
600
|
|
Contract liabilities
|
|
1,518
|
|
Prepaid charter and deferred revenue
|
|
590
|
|
Amount due to related parties
|
|
2,655
|
|
Total current liabilities
|
|
26,604
|
|
Long-term liabilities:
|
|
|
Long-term debt, excluding current installments
|
|
200,051
|
|
Derivative liabilities
|
|
-
|
|
Contract liabilities
|
|
13,552
|
|
Deferred tax liabilities
|
|
2,400
|
|
Other long-term liabilities
|
|
781
|
|
Total liabilities
|
|
243,388
|
|
Equity:
|
|
|
Owner’s equity
|
|
|
Partner’s capital:
|
|
|
Common unitholders
|
|
168,830
|
|
Subordinated unitholders
|
|
106,701
|
|
General partner interest
|
|
5,300
|
|
Total Partners’ capital
|
|
280,831
|
|
Total liabilities and equity
|
|
524,219
|
|
|
|
|
|
|
|
|
|
As of April 16, 2013, the financial statements of the Partnership as a
separate legal entity are presented on a consolidated basis. Prior to
April 16, 2013, the results of operations, cash flow and balance sheet
have been carved out of the consolidated financial statements of KNOT
NYK Offshore Tankers AS and therefore are presented on a combined
carve-out basis. The combined entity’s historical combined financial
statements include assets, liabilities, revenues, expenses and cash
flows directly attributable to the Partnership’s interests in the four
vessels in its initial fleet. Accordingly, the historical combined
carve-out interim financial statements prior to April 16, 2013 reflect
allocations of certain expenses, including that of general and
administrative expenses, mark-to-market valuations of interest rate swap
derivatives, interest expense on related party payables, and net gain
(loss) on foreign currency transactions.. The basis for the allocations
are described in note 2 of the audited combined financial statements for
the year ended December 31, 2012 contained in the Registration Statement
filed by KNOT Offshore Partners with the U.S. Securities and Exchange
Commission in connection with the IPO. These allocated costs have been
accounted for as an equity contribution in the combined balance sheets.
APPENDIX A - RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
Distributable Cash Flow (“DCF”)
Distributable cash flow represents net income adjusted for depreciation
and amortization, unrealized gains and losses from derivatives,
unrealized foreign exchange gains and losses, other non-cash items,
estimated maintenance and replacement capital expenditures. Estimated
maintenance and replacement capital expenditures, including estimated
expenditures for drydocking, represent capital expenditures required to
maintain over the long-term the operating capacity of, or the revenue
generated by our capital assets. Distributable cash flow is a
quantitative standard used by investors in publicly-traded partnerships
to assist in evaluating a partnership's ability to make quarterly cash
distributions. Distributable cash flow is a non-GAAP financial measure
and should not be considered as an alternative to net income or any
other indicator of KNOT Offshore Partner's performance calculated in
accordance with GAAP. The table below reconciles distributable cash flow
to net income, the most directly comparable GAAP measure.
|
|
|
(USD in thousands)
|
|
Three months
Ended June 30,
2013
(unaudited)
|
Net income
|
|
3,971
|
|
Add:
|
|
|
Depreciation and amortization
|
|
5,340
|
|
Unrealized loss from interest rate derivatives
|
|
434
|
|
IPO expenses covered by Knutsen NYK Offshore Partners AS
|
|
60
|
|
Other non-cash items; deferred costs amortization debt
|
|
870
|
|
|
|
|
|
|
|
Less:
|
|
|
Estimated maintenance and replacement capital expenditures
(including drydocking reserve)
|
|
(2,980
|
)
|
Other non-cash items; reversal of contract provision
|
|
(477
|
)
|
|
|
|
Distributable cash flow
|
|
7,218
|
|
|
|
|
|
Adjusted EBITDA
Adjusted EBITDA refers to earnings before interest, other financial
items, taxes, non-controlling interest, depreciation and amortization.
Adjusted EBITDA is a non-GAAP financial measure used by investors to
measure our performance.
The Partnership believes that adjusted EBITDA assists 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 adjusted EBITDA information. This increased comparability
is achieved by excluding the potentially disparate effects between
periods or companies of interest, other financial items, taxes and
depreciation and amortization, 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 adjusted EBITDA as a
financial measure 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. Adjusted EBITDA is a
non-GAAP financial measure and should not be considered as an
alternative to net income or any other indicator of Partnership
performance calculated in accordance with GAAP. The table below
reconciles Adjusted EBITDA to net income, the most directly comparable
GAAP measure.
|
|
|
(USD in thousands)
|
|
Three months
Ended June 30,
2013
(unaudited)
|
Net income
|
|
3,971
|
|
Interest income
|
|
(3
|
)
|
Interest expenses
|
|
2,529
|
|
Depreciation and amortization
|
|
5,340
|
|
Income tax (benefits) expense
|
|
-
|
|
EBITDA
|
|
11,837
|
|
Other financial items (a)
|
|
911
|
|
Adjusted EBITDA
|
|
12,748
|
|
|
(a)
|
|
Other financial items consist of other finance expense, realized and
unrealized loss on derivative instruments and net loss on foreign
currency transactions.
|
|
|
|
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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. Important factors that could cause
actual results to differ materially include, but are not limited to:
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•
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statements about market trends in the shuttle tanker or general
tanker industries, including charter rates, factors affecting supply
and demand, and opportunities for the profitable operations of
offshore shuttle tankers;
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|
|
|
•
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statements about KNOT’s and KNOT Offshore Partners’ ability to build
and retrofit offshore shuttle tankers and the timing of the delivery
and acceptance of any such retrofitted vessels by their respective
charterers;
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|
•
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KNOT Offshore Partners’ ability to increase distributions and the
amount of any such increase;
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|
•
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the contributions to KNOT Offshore Partners' operating results of
the Carmen Knutsen, which KNOT Offshore Partners acquired in
August 2013;
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•
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KNOT Offshore Partners’ ability to integrate and realize the
expected benefits from acquisitions, including the acquisition of
the Carmen Knutsen;
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•
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KNOT Offshore Partners’ anticipated growth strategies;
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•
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the effect of the worldwide economic slowdown;
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•
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turmoil in the global financial markets;
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•
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fluctuations in currencies and interest rates;
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•
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general market conditions, including fluctuations in charter hire
rates and vessel values;
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•
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changes in KNOT Offshore Partners’ operating expenses, including
drydocking and insurance costs and bunker prices;
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|
•
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forecasts of KNOT Offshore Partners’ ability to make cash
distributions on the units or any increases in cash distributions;
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•
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KNOT Offshore Partners’ future financial condition or results of
operations and future revenues and expenses;
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•
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the repayment of debt and settling of any interest rate swaps;
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•
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KNOT Offshore Partners’ ability to make additional borrowings and to
access debt and equity markets;
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•
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planned capital expenditures and availability of capital resources
to fund capital expenditures;
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•
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KNOT Offshore Partners’ ability to maintain long-term relationships
with major users of shuttle tonnage;
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•
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KNOT Offshore Partners’ ability to leverage KNOT’s relationships and
reputation in the shipping industry;
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•
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KNOT Offshore Partners’ ability to purchase vessels from KNOT in the
future;
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|
•
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KNOT Offshore Partners’ continued ability to enter into long-term
time charters;
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|
•
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KNOT Offshore Partners’ ability to maximize the use of its vessels,
including the re-deployment or disposition of vessels no longer
under long-term time charter;
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•
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timely purchases and deliveries of newbuilding vessels;
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•
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future purchase prices of newbuildings and secondhand vessels;
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•
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KNOT Offshore Partners’ ability to compete successfully for future
chartering and newbuilding opportunities;
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•
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acceptance of a vessel by its charterer;
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•
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termination dates and extensions of charters;
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•
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the expected cost of, and KNOT Offshore Partners’ ability to, comply
with governmental regulations, maritime self-regulatory organization
standards, as well as standard regulations imposed by its charterers
applicable to KNOT Offshore Partners’ business;
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•
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availability of skilled labor, vessel crews and management;
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•
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KNOT Offshore Partners’ general and administrative expenses and its
fees and expenses payable under the fleet management agreements and
the management and administrative services agreement;
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•
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the anticipated taxation of KNOT Offshore Partners and distributions
to KNOT Offshore Partners’ unitholders;
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•
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estimated future maintenance and replacement capital expenditures;
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•
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KNOT Offshore Partners’ ability to retain key employees;
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•
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customers' increasing emphasis on environmental and safety concerns;
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•
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potential liability from any pending or future litigation;
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•
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potential disruption of shipping routes due to accidents, political
events, piracy or acts by terrorists;
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•
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future sales of KNOT Offshore Partners’ securities in the public
market;
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•
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KNOT Offshore Partners’ business strategy and other plans and
objectives for future operations; and
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•
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other factors listed from time to time in the reports and other
documents that KNOT Offshore Partners files with the Securities and
Exchange Commission.
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All forward-looking statements included in this release are made only as
of the date of this release on. 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.
1
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|
Adjusted EBITDA is a non-GAAP financial measure used by investors to
measure the performance of master limited partnerships. Please see
Appendix A for a reconciliation to the most directly comparable GAAP
financial measure.
|
2
|
|
Distributable cash flow is a non-GAAP financial measure used by
investors to measure the performance of master limited partnerships.
Please see Appendix A for a reconciliation to the most directly
comparable GAAP financial measure.
|

Source: KNOT Offshore Partners LP