Welcome to The KNOP First Quarter 2024 Earnings Call. My name is Carla, and I will be coordinating your call today. During the presentation, you can register to ask a question by pressing star followed by one on your telephone keypad, and if you change your mind, please press star followed by two. I would now like to hand you over to Derek Lowe to begin. Derek, please go ahead. Thank you, and good morning, ladies and gentlemen. My name is Derek Lowe, and I'm the Chief Executive and Chief Financial Officer of KNOT Offshore Partners. Welcome to the Partnership's earnings call for the first quarter of 2024. Our website is knotoffshorepartners.com, and you can find the earnings release there, along with this presentation. On slide two, you will find guidance on the inclusion of forward-looking statements in today's presentation. These are made in good faith and reflect management's current views, known and unknown risks, and are based on assumptions and estimates that are inherently subject to significant uncertainties and contingencies, many of which are beyond our control. Actual results may differ materially from those expressed or implied in forward-looking statements, and the partnership does not have or undertake a duty to update any such forward-looking statements made as of the date of this presentation. For further information, please consult our SEC filings, especially in relation to our annual and quarterly results. Today's presentation also includes certain Non-US GAAP measures, and our earnings release includes a reconciliation of these to the most directly comparable GAAP measures. On slide three, we have the financial and operational headlines for Q1. Revenues were $76.6 million, operating income $19.7 million, net income was $7.4 million, and Adjusted EBITDA $47.5 million. We closed Q1 with $55 million in available liquidity, made up of $50 million in cash and cash equivalents, plus $5 million in undrawn capacity on our credit facilities. We operated with 97.6% utilization, and the vessel time available for scheduled operations was not impacted by any planned dry docking. Following the end of Q1, we declared a cash distribution of $0.026 per common unit, which was paid in early May. On slide four, we have the headlines of the contractual and operational developments since our last results call, which was on February the 27th. In our major market, Brazil, Vigdis Knutsen was delivered to Shell in March for a three-year time charter. Anna Knutsen saw exercise of an option by TotalEnergies, extending the current charter to April 2026, and by the time of the last results call, Dan Sabia's charter to Transpetro had been extended to early June this year. In the North Sea, Hilda Knutsen, Torill Knutsen, and Bodil Knutsen have continued to operate under time charters to our sponsor, Knutsen NYK. For Bodil Knutsen, this charter lasted as planned until delivery to Equinor at the end of March on a charter of two years fixed, plus two years options. For Hilda Knutsen and Torill Knutsen, the charter is for rolling one-month terms up to January 2025. Ingrid Knutsen was redelivered by Altera at the end of March, as anticipated, and has since gone on to time charter with Knutsen NYK. Both Ingrid Knutsen and Torill Knutsen will commence charters with Eni in Q4 this year. For Ingrid Knutsen, this was a deferral to October from a previously contracted April delivery. This deferral is on terms that are no less favorable to us than applied previously. That charter is for two years fixed, plus two options, each of one year. For Torill Knutsen, the new time charter with Eni is for three years fixed, plus three options, each of one year. In the meantime, Torill Knutsen is undergoing repairs to a broken generator rotor, which has limited the range of client facilities which this vessel is able to serve. We expect the repair to be completed later in Q2 or into Q3, and both the repair costs and some loss of hire are expected to be covered by insurance, subject to the relevant policy terms. After we received redelivery of Dan Cisne in December 2023, we have deployed her on short-term conventional tanker work while also assessing the upgrades required for compatibility with shuttle tanker work in the North Sea. Those upgrades are due to be carried out in the coming weeks. Dan Sabia is due for redelivery to us in June, which is the extended expiry date of her charter to Transpetro. The continuing area of focus for our contracting team is on Dan Cisne, Dan Sabia and Hilda Knutsen. For near-term deployment, focus always remain, also remains on Ingrid Knutsen and Torill Knutsen until each of them is delivered to Eni in Q4 this year. On slide 5, our outlook remains positive on both industry dynamics and the partnership's positioning to participate profitably in our markets. Significant growth is anticipated in production in fields which rely on service by shuttle tankers. We see reported orders from earlier this year of around 6 vessels as an endorsement of confidence in the sector. 3 of these vessels have been ordered by our sponsor for delivery over 2026 and 2027. Each of these sponsor vessels has a 10-year fixed contract with Petrobras, along with a client option to extend by a further five years. We would expect to see further new build orders placed in order to service the large new production volumes coming online in the years ahead. A measured amount of new shuttle tanker ordering is imperative. It should not be understood as some sort of negative development for the sector. The material shortage of shuttle tanker capacity remains projected in the coming years. We also remain mindful of near-term market conditions, where we're particularly focused on marketing the Dan Cisne, Dan Sabia and Hilda Knutsen, as well as seeking third-party employment of Ingrid Knutsen and Torill Knutsen until commencement in Q4 of their next long-term charters. In the meantime, the partnership remains financially resilient, with a strong contracted revenue position of $683 million at the end of Q1 on fixed contracts, which average two years in duration. Charterers' options are additional to this and average a further two years. Our pattern of cash generation and liquidity balance is sufficient for our operations and the significant paid-out rates for our debt. We have demonstrated the strength of our relationships with lending banks by several refinancings completed over the last year. Finally, the average age of our vessels, at 9.9 years, places us well when compared with the useful life model at 23 years. On to slide six, you can see the consistency of revenues and operating income when comparing between quarters and also between 12-month periods. Slide 7 similarly reflects the consistency of our adjusted EBITDA, and you can find the definition of this non-GAAP measure in the appendix. On slide 8, the most notable change in the balance sheet over the first quarter has come from refinancing of the loan secured by Hilda Knutsen, the balance of which has moved from current liabilities into long-term debt. The overall change in the partnership's liabilities has been a reduction by $42 million, which is reflective of our debt repayment schedule. On slide nine, we've expanded on the terms of the partnership's debt facilities to provide added color around the dynamics of debt repayment. The highlighted column shows how the outstanding balances of each facility have been reducing because of the repayments we've been making in line with scheduled repayment terms. The current installments are the amounts of capital repayments due over the next year, which do not include interest, and the balloon payments are the final amounts of principal, which will be due on the maturity dates. Of note, $91 million is due to be paid on these debt facilities over the 12 months following March 31. Completion of the Hilda loan refinancing is due imminently, following which no further balloon repayments or refinancings are due within that 12-month period. Our typical pattern is for our vessels to provide security for our debt facilities, and that applies to 16 out of 18 vessels. At present, the exceptions are that Dan Cisne and Dan Sabia are free of debt, and we do not have plans to incur additional borrowings secured by these vessels until we have better visibility on their future employment. $880 million out of $925 million in debt facilities are secured by vessels, while the two revolving credit facilities, totaling $50 million of capacity, are unsecured. Slide 10 shows the contracted pipeline in chart format, reflecting the developments I set out earlier. Similarly, slide 11 highlights the focus of our commercial efforts on adding near-term contracts, particularly for Dan Cisne, Dan Sabia, and Hilda Knutsen, and in the near term, also for Ingrid Knutsen and Torill Knutsen. On slide 12, we see our sponsor's inventory of vessels, which are eligible for purchase by the partnership. This applies to any vessel owned by or on order for our sponsor, where the vessel has a firm contract period at least five years in length. At present, five existing vessels and five under construction fall into this category. There's no assurance that any further acquisitions will be made by the partnership, and any transaction will be subject to the board approval of both parties, which includes the partnership's independent conflicts committee. As we have said, our top priorities remain securing additional contract coverage for our existing fleet and fostering our liquidity position. On slides 13 to 15, we've provided some useful illustrations of the strong demand dynamics in the Brazilian market, as published by Petrobras. We encourage you to review Petrobras's materials directly. The primary takeaway from each of these slides is consistent. There's very significant committed demand growth coming in the Brazilian market in the form of new FPSOs that will require regular service from shuttle tankers. We believe the reports earlier this year of up to 6 vessel construction contracts are an endorsement of the strong anticipated market conditions in the medium and longer term. As I mentioned earlier, three of these recent new-build contracts are for our sponsor, Knutsen NYK, and are due for delivery over 2026 and 2027. We would expect to see further new-build orders placed in order to service the large new production volumes coming online in the years ahead, and a material shortage of shuttle tanker capacity remains projected in the coming years. On slide 16, we provide information relevant to our U.S. unit holders, and particularly those—in particular, those seeking a Form 1099. Those holding units via their custodians or brokers should approach those parties directly. Those with directly registered holdings should contact our transfer agent, Equiniti Trust Company, whose details are shown there. On slide 17, we include some reminders of the strong fundamentals of our business in the market we serve, our assets, competitive landscape, robust contractual footprint, and resilient finances. I will finish with slide 18, recapping our financial and operational performance in Q1 2024 and the subsequent time, and our outlook for the remainder of 2024. We are glad to have delivered high and safe utilization, which have generated consistent financial performance. We are pleased with the new contracts and extensions we have secured during the quarter and since, along with our ability to navigate our refinancing needs and periodic capital expenditure. Our continued commercial focus remains on filling up third-party utilization for 2024, while looking further forward to longer-term charter visibility and liquidity generation. Thank you for listening, and with that, I'll hand back the call back to the operator for any questions. Thank you. If you would like to ask a question, please press star followed by one on your telephone keypad. If you change your mind, please press star followed by two. When preparing to ask your question, please ensure your device is unmuted locally. Our first question comes from Liam Burke from B. Riley. Thank you. Hi, Derek. How are you today? Hi, Liam. Good to talk to you. Thank you. Derek, could you give us a little more color on the macro side, specifically, the activity in the North Sea? I mean, it's pretty well known that the step-up investment on offshore in Latin America is pretty high. We're not hearing much on the North Sea. Sure. Well, we—I mean, the main developments we're looking to are the Johan Castberg and some the Penguins FPSOs coming online with production either late this year or early next year. And we think there's gonna be significant increase in demand for the whole of the North Sea shuttle fleets once those come along. And the question in the meantime is, at what stage do clients want to start entering into contracts in anticipation of that? So you're everybody's anticipating the actual projects coming to fruition. Does that make sense to just keep the Hilda and Torill busy until you can charter it? I mean, are they good candidates to be chartered into this market? Oh, well, Torill has a charter from Q4 this year with Eni. So, Okay. The Torill's use in perhaps the COA pool until delivered into that contract, that's certainly a relevant point for us, but not after that. Okay. And on the Cisne and Sabia, I mean, they're in a good market, but just not the right size. Do you have any more alternatives rather than just running them into the traditional market? Well, the Dan Cisne, as I think be aware, is we brought over to the North Sea and are going to put the upgrades in place for North Sea work, because we think Dan Cisne is much better suited to North Sea because of the size than the Brazilian, than to the Brazilian market. So, she'll be exposed to the same dynamics in the North Sea as we have with the other vessels as well, which is why she's got probably the greatest amount of focus from the contracting team of all of our vessels. And Dan Sabia, we expect redelivery in early June, and she's subject to all the normal and energetic marketing efforts, as you might imagine, given that she's not contracted afterwards. Yes. Great. Well, thank you, Derek. Thank you. Our next question comes from Poe Fratt from AGP. Hi, Derek. Hi, Poe. How are you doing? Very well. How about you? Very good, thanks. Well, congrats on closing some of the holds. I'm especially surprised about the Torill, just because, you know, as you just mentioned, the North Sea market could be very tight as you have the two FPSOs coming on later this year. Do you—y our market intelligence, what do you understand as far as the incremental demand that could be generated from those two FPSOs? And then, you know, is there. It seems like there won't be any available capacity, ex the Hilda, at that point in time. Is that a fair statement? Well, we think there's more than enough incremental demand to come through to cover the short, I guess, underemployed or underutilized vessels that we've got, potentially that others have as well. So, this North Sea has always been a timing issue, and obviously, the longer it goes, the more frustrating it is. But it's a timing issue rather than anything worse than that. So the vessels that we would have available for that, because the Torill and Ingrid have both been contracted to Eni from Q4, they won't be in the equation for that. But, Hilda will, and, Dan Cisne, she's been set up for the North Sea, will be as well. But, if you would answer the question, what do you think the incremental demand of those two FPSOs could be? I don't have the figures at hand, I'm afraid, but certainly more than enough to soak up the capacity that we've got. Would it be fair to say that, you know, 2-4 for each FPSO or, you know, maybe 2, so that you have incremental demand developing into 2025 of 4 shuttle tankers in the North Sea? Yeah. I'm afraid I don't have that to hand, so I can look at that, and maybe we can discuss offline. Okay. My understanding is that neither of those projects have lined up any capacity. Is that what you understand? As far as I know, they, they haven't lined any up, yeah. Okay, great. And then, if you could just talk about the Dan Cisne, Cisne. How much was the upgrade, the cost of the upgrade, and then will there be any downtime on that vessel in the second quarter? Well, she's currently not contracted, so, downtime is perhaps a slightly moot point. We think it's around a month of both the work and the testing and sea trials and so on, that will go on afterwards, maybe a month to six weeks. But as I say, she's not on contract in any case, during that time. We haven't published the cost, but, it's not material in the context of the financial results we've produced, but we haven't produced a figure. Okay, maybe you could describe the upgrade that was required? Yes, it's some harsh weather facilities. Okay. And then do you think the Dan Sabia will stay in Brazil? It seems like there's strong enough demand there, and, you know, I guess, what's your, what's your sort of working assumption on the Dan Sabia, Dan Sabia, at this point in time? Well, we are very mindful that she's not the size that is ideal in Brazil, but there's enough demand that potentially a client might want to take her in any case. So we continue to market in Brazil, given that that's where she is. Okay. When you look at the impact of the Torill on the first quarter, you know, what was it? Broken motor rotor. Can you just quantify the number of days? Will it just be that the deductible, the loss, the higher deductible of 14 days that was in the first quarter? Well, we certainly will be subject to that 14 days deductible. It's not, it's not straightforward because she's able to serve some client facilities, but not others. So she's got some, some earnings. So it's not, it's not a classic loss of hire, where she's completely out and the calculation involved is actually relatively simple in those cases. This is gonna be more complicated. Got you. So was she, was she down at all in the first quarter? And then if you could quantify the any other idle days that you might have had in the first quarter to sort of get to that utilization number that you published? Sure. Something like a month in the first quarter. I need to check the exact figures, but, order of magnitude, a month. Was there any other downtime or idle days in the first quarter? It sounded like you worked the Cisne in the conventional tanker market, so that was more of a, you know, more on, on voyages, right? That's right. I mean, she, she had downtime between, between those as well. But I think total employment for the Cisne is... This isn't a Q1 comment, 'cause, her work has continued since then. But something like 80 days in the last 5 months. Sorry, would you clarify that? 80 days, she's worked 80 days over the last 5 months? Something like that, yeah. Okay. Got you. So 80 of the 100 and, 100 and 150, if you look at it. Okay, and then, They, they straddle three different quarters of performance as well, so it's not easy to fit into a quarterly results, but... Understood. And when I combine, you know, your or just look at your OpEx, it looks like the OpEx in the first quarter might have gone up just slightly on a daily basis. Is that accurate? And could you just comment on looking forward, you know, OpEx and G&A? Sure. Well, G&A's been pretty stable. Main difference in OpEx is voyage expenses. Bear in mind also, of course, we have voyage revenues to offset that as well, and that's a classification issue- Yeah ... relating to, I expect that's for Dan Cisne, because of the nature of her employment at that time. Got you. So that was mainly absorbing the bunker costs and the voyages and other, other potential fees? Yeah. Then just one nitpicky one. It looks like you might have layered on some interest rate hedges in the first quarter. The overall, you know, notional amount of the swap went up. Can you just talk about that? Yes, we did a small amount of additional fixing. We are at the moment, we're well within our policy range of the amount of debt that is either fixed rate or effectively fixed through hedges. And in due course, as those hedges come off, we'll need to put some more in place, and so we did a small amount of that, quite early in Q1. So we were fairly pleased with the rate that we got at that stage, even though rates have moved a little bit since then. Yeah, it looked like you still were able to fix in the low 2 range, 'cause your average, you know, interest rate costs, fixed-wise, only went up to 2 from 1.9, right? Sure, it's as low as two for the new fix, but it certainly was a rate that we were happy with. Yeah, just—y ep. Okay, and then it looks like, you know, other than the three that you talked about, the Hilda Torill- I'm sorry, the Hilda, Dan Cisne, and Dan Sabia, with open windows, and no, you know, longer term work. Can you just talk about the Carmen? It looks like Repsol has a year option at the start of next year, when would the notice period be on that, on that option before it moves to the major oil company for, what is it, four years or three years? We would generally expect that to be within something like 1-3 months of the start of the optional period. I, I don't have the exact terms for that particular one in front of me, but that, that sort of period, we'd expect to would be the latest we'd expect to know. Okay, great. Well, congratulations, Derek, on the contracting chartering during the quarter. Great. Thank you, Poe. And look forward to—y ou're welcome. Yes. Bye. Our next question comes from Pavel Oliva from Rock Hill Global. Hi, good morning. Congratulations on a great quarter. I had a few questions, if you don't mind. One is, my understanding is that the new builds, that the prices of new builds are around $160 million for the North Sea and $140 million for Brazil, and that there are really no new builds for North Sea. Does the value of the new builds impact pricing, daily pricing, of the existing fleet? I wouldn't say so. Certainly not in the North Sea. I mean, we're aware of the short- to medium-term issues around when demand for those four North Sea vessels can come in, and that's a far greater driver than anything else. I see. So, okay, so the charters that are on those new ships, for example, in Brazil, would be similar to what they are now, or they would reflect the new cost and the new cost of capital? Oh, they will, they will reflect the terms, or market conditions at the time they were entered into. So the newest ones, obviously, you'd expect to be, let's say, recognizably current, but, some of the other vessels that aren't yet delivered, obviously, were contracted some time ago and would be on different terms. Right. So, if I have a ship that's coming off hire and I have to recharter it, is it fair to say that, for example, in Brazil, the rates would be a lot higher than they were, you know, at the historical charter? We are seeing them firming up, if anything, so we clearly welcome- Yeah ... the direction that's going in. Yeah. And can I ask, in the North Sea, besides your ships, are there any other ships like, you know, Altera ships that may be available for those projects? Or, you know, are these ships sort of it? I understand there is competing capacity. I don't have figures to hand on that, and I wouldn't want to comment on another operator's contractual profile anyway. But yes, we understand there is capacity aside from our own. I see. Okay. And, you know, you had really good results in terms of free cash flow generation in the first quarter. You know, and that's with without a lot of the charters. Have you guys considered potentially buying some shares back at this point? You know, given, you know, what the NAV is in light of the new ships that are being built in Brazil and sort of the values, so replacement value of the fleet, as well as, you know, just the ability, you know, by lowering the number of shares to potentially increase the dividend when and if you're ready to reinstate that dividend. Yeah. Well, we certainly understand and appreciate the value of that strategy, and that's a question for the board to be addressing in due course. Their greatest priority is actually that we continue to make progress on visibility of our contracting schedule. And at the moment, clearly there are two or three vessels that remain uncontracted, which is quite a rare position for us to be in. And they're more concerned that capacity is filled first before looking at anything else. We certainly look forward to the point where that is a really good use of capital. I would also say, if you look at our liquidity position, which we are certainly content with, we had 55, I think, sorry, we had $50 million of cash equivalent. Cash Actual cash and cash and cash equivalent at the end of March, but we also had $45 million of drawn down revolving credit facility. So the net, the net liquidity, if you, if you look at the difference between those is, is rather less, and we wouldn't feel, I expect the board wouldn't feel able to invest cash in buying back units when that's the position. Understood. Understood. So, but as you, as you kind of get to that, you know, more comfortable position, and, you know, you have repaid a lot of debt, so far, you know, you would, it's something that, the board will certainly, consider, right? Yes, it's certainly one of the options. Okay, awesome. Very, very good. Congratulations on a great quarter and, you know, terrific performance. Thank you. Thanks, Pavel. Appreciate it. Our next question comes from Robert Silvera from R.E. Silvera & Associates Marine Surveyors. Hello, Derek? Robert. Yes, Derek, thank you for taking my call. And, yes, we're marine surveyors, by the way. She dropped the word surveyors. In any case, thank you for taking the call, and I'd like to congratulate you on improving the company's situation considerably versus the past. Our input is that we would love to, because we own thousands of shares, we would love to see you keep the dividend about where it is for an extended period of time and aggressively continue your move toward reducing debt. Don't take any more drop-downs for the time being because the fleet is fairly young, and, let's fill the gaps, as you've been saying, and get to the position where we have significantly continued to reduce the debt. You have some of the ships already debt-free, and that's really great. That's our position, as shareholders, and we hope you will take that into consideration. Sure. Thank you very much. I would just show you again, slide nine, if you want to go back to it. The current installments figure is basically a 12-month look forward from the balance sheet date of the debt repayments that are coming due by via amortizations. And that $91 million over the 12 months, starting first of April this year, is very recognizable on a year-by-year basis for the amount we repay in our debts in cash purely on the scheduled repayment terms. So, point very well taken, and I hope you're also pleased with the amount of debt repayment we're managing to do already. Yes, very pleased with that. And I'm saying our point is, I'm not interested in getting the dividend raised back $0.52 right away, but rather continuously, aggressively continue to pay down the debt. Don't take any drop-downs for at least a year at this point, and filling the gaps on where we are with our ships, putting us in a very, very solid position. And I think the share price, price will reflect it. And, the future with the market in Brazil looking as good as it is, given that much time that I'm talking about, a year, we will know the market a lot better by then, and we can make very judicious decisions on what to add to the fleet in the future. Yeah. Thank you, Derek. Yeah. Awesome. Thank you. Thanks, Robert. Bye-bye. Bye. As a reminder, to ask a question, please press star followed by one on your telephone keypad. We currently have no further questions, so I will hand back over to Derek for any final remarks. Well, thank you all again for joining this earnings call for KNOT Offshore Partners first quarter in 2024, and I look forward to speaking with you again following the second quarter results. This concludes today's conference call. 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