KNOT Offshore Partners (NYSE:KNOP), the Aberdeen-based and US-listed shuttle tanker specialist, has published its Q1 2024 Earnings on May 22. The firm reported total revenues of $76.6 million (up 1.7% QoQ), operating income of $19.7 million (up 8.8% QoQ), and net income of $7.4 million. The bottom line yields a healthy 9.9% net margin and reverts the – $4.2 million obtained in Q4 2023. As a result, a quarterly cash distribution of $0.026 per common unit was declared and paid on May 9.
The conventional crude tanker market is enjoying healthy rate levels. According to Clarksons data, last week’s average Aframax spot rates were $49,624 per day, while Suezmaxes fetched $48,243 per day. The shuttle tanker market, however, is still oversupplied, and may remain under pressure due to the increasing orderbook. There are 11 shuttle tankers to be delivered within the coming three years, against a global fleet of about a hundred. KNOP operates 18 of those, and together with parent Knutsen NYK, is the world’s largest shuttle tanker operator.
However, according to an accompanying statement, the firm believes that despite the growing orderbook, “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 in the coming years, particularly as increasing numbers of shuttle tankers reach or exceed typical retirement age”. When exactly, if ever, demand will outpace supply, remains to be seen.
In the meantime, the Q1 2024 results were aided by non-core activities. Without $5 million of derivative gains and $2.7 million of voyage revenues in the conventional tanker market, net profit would be zero.
Still, the firm remains very healthy operationally, as the fleet maintained a high utilization rate of 97.6% for scheduled operations. Adjusted EBITDA thus reached $47.5 million. The backlog reached $683 million, down 2.3% QoQ, and can be seen in detail in the chart below.
Focusing on Brazil (where 13 of its 18 vessels in 1Q were deployed), the Partnership highlighted an improving outlook of the local shuttle tanker market, driven by robust demand and increasing charter rates. This is largely due to Petrobras’ high production levels and new FPSO (Floating Production Storage and Offloading) unit startups in the pre-salt fields, which heavily rely on shuttle tankers. On the downside, as the vessels Dan Cisne and Dan Sabia have become too small for current Brazilian market needs, they were placed under review for redeployment or possible sale. The former has already been redelivered by Transpetro, while the latter still has a few more days of work, as the Petrobras subsidiary extended the bareboat charter to early June 2024.
The increasing rates in Brazil are not matched in the North Sea, where currently 5 of the 18 vessels are deployed. This market is taking longer to re-balance, with long-anticipated start-up of the Johan Castberg FPSO in the Barents Sea scheduled for the latter part of this year.
Maritime South 