Good day and welcome to the KNOT Offshore Third Quarter Earnings Call. All participants will be in listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Gary Chapman, CEO. Please go ahead.

Thank you. Welcome, everybody. You can find our earnings release and slide presentation on our website at knotoffshorepartners.com. Partnership owns and operates shuttle tankers where our ships transport oil from offshore production units to shore side and are an essential part of the supply chain for our customers, all of whom are large names in the oil and energy market. Our call today will include the non-U.S. GAAP measures of distributable cash flow and adjusted earnings before interest, tax, depreciation amortization, EBITDA. The earnings release includes a reconciliation of these non-GAAP measures to the most directly comparable GAAP financial measures. And please remember that any forward-looking statements made during today's call are subject to risks and uncertainties that are further discussed in our annual and quarterly SEC filings. Actual events and results can differ materially from those forward-looking statements, and the Partnership does not undertake a duty to update any forward-looking statements, and I refer you to Slide 2 and our 2019 20-F for further details. Onto Slide 3, our third quarter 2020 highlights. The partnership is again proud to report one of its best ever set of quarterly results driven by 100% fleet utilization and no schedule downtime in the quarter. Total revenues were $71.3 million, operating income $30.9 million and net income $25.1 million. We declared and paid cash distribution of $0.52 per common unit now for the 21st successive quarter. Quarterly adjusted EBITDA was $53.3 million for the quarter with distributable cash flow of $28.9 million and our robust coverage ratio of 1.6. At the end of the quarter, the partnership had $585 million, the remaining firm contracted forward revenue, excluding options. We're again able to report that we've not experienced any material business interruptions or material adverse financial effects arising from COVID-19. And we continue to…

[Operator Instructions] Our first question today will come from Igor Levi with BTIG. Please go ahead.

Good day. With Shell returning the Windsor Knutsen back to the company, does this suggest that all an increased risk that Shell will not renew the other three vessels that expire in the next one to two years? And have they indicated why they didn't renew this one in particular? Is that the age of the vessel? And have they given any indication of their intent to the remaining ones?

Thank you, Igor. We don't see a link between the Windsor and the other three vessels. I think they're independent decisions. I think you know what Shell are thinking with the Windsor I think is really their consideration. We would not party to that level of detail. I think we see the Windsor as a single ship at a point in time. And we don't necessarily see it as indicative of the market as a whole. I think that's the simple answer to the question that you've asked.

Okay, and they haven't talked about the other three to earlier I assume.

So we're in contract with Shell about those vessels. Yes. But at the moment, we have nothing to report, as we're talking of all of our charters.

Great. And do you have any thoughts around long term strategy? Maybe like the five to 10 year strategy around maintaining exposure to shuttle tankers and oil production versus potentially expanding into other asset classes, and if so what have you looked at?

At this time we haven't looked at any other asset classes. We think there's plenty of growth opportunity within shuttle tankers, which is where our specialty is. So, again, the short answer is no, we haven't. We think there's enough in shuttle tankers for it to keep us busy for quite a number of years.

All right. Well, that's all for me. Thank you.

Our next question will come from Robert Silvera with R.E. Silvera & Associates. Please go ahead.

Hi, first of all, I want to thank you for a job well done, obviously, running the business in this COVID environment and running 100% virtually is a great achievement in this market. My first question comes for your long term debt, which you have reduced from $911 million roughly, at the end of last year to $827 million, almost $100 million. Can you tell me was any of that debt reduction, extra payments or was it all scheduled repayment?

Nominal scheduled repayments based on the profile agreed with the bank. But as I said in my presentation, that schedule is slightly faster than a straight line profile.

Okay. But you made no extra payments, then.

We made no extra payments beyond contracted repayment schedule.

Okay, that's good. Now, I'd like to ask you about risk. When we are at the current time yielding over 15%, obviously the market, because when there is high risk, they consider it. When there's high interest, there is high risk. What do you anticipate doing to reduce the image in the marketplace of KNOP being such a high risk security, that the mere $13 or so that we sell for now?

Yes, that's a good question. I think what we're going to do from 2021 onwards, in fact, probably from December, we're increasing our Investor Relations, activities and giving that a higher priority, then we have done in the past, I think it's a difficult situation when we're surrounded by lots of companies and many bigger companies that are also yielding very high numbers. And that, you know, we perhaps are in that same bracket as everybody else. What, we can do is keep coming back to what we think is a good story and a good investment thesis for people and pushing our story out there more. Obviously, there are risks in our business, just as there are in every other business but we keep sort of trying to get our message across. And we're going to try and do that more strongly. And all we can do is do best in that regard.

Okay, you talked about the possible drop down in December of 2020 from the parent that's great. If it has a positive effect, might this means since you have a 1.6 coverage ratio now, that with a drop down, we could see an increase in the dividend?

At the moment, the decision we've taken is that we feel the distribution is in the right place regardless of this drop down. We're still committed to growth of the distribution in the long term, but right now, we don't want to jeopardize stability in the longevity and the prudence that we've shown so far. So I think for this particular drop down, we don't feel the timing is right to increase the distribution.

But given the current conditions with the business with the ships that are employed, would not drop down, then increase our distributable cash flow, which could then apply to faster reduction of debt, which would change the image of risk in the marketplace. I mean, I'd love to see that rather than the increase in the dividend stay with the $0.52, that's fine. But perhaps address debt more aggressively, and get the image changed that way that the company is of such a high risk that it yields over 15%?

Yes, and that's a good point. I think -- the yield, as I've said before, is a difficult thing for us to manage when we're surrounded by other companies that also yield double digits. And I think the drop down for us, it brings many benefits, it strengthens our coverage and distribution capacity, it lengthens the contract term period, diversifies our income across more assets, it improves liquidity, we have no equity dilution from this particular transaction if it goes ahead. And you know, while this will modestly increase our debt, but nonetheless, we're repaying on a slightly accelerated profile. So it's only a temporary increase for a transaction that we think adds a lot of value. And therefore it speaks for itself as a self-funded transaction. So I think the deal by itself stands very well, actually, by itself and by not increasing the distribution. If that's the decision that we take, then I think the transaction as a whole will be well received.

Good. Well, I look forward to that. Last conference call we had virtually the next day, there was a surprise and so much as one of our large shareholders dispersed a large number of shares, a large percentage of I believe BMW [ph] did that. Are there any more surprises coming like that, that you anticipate?

Robert, I obviously can't speak for our unitholders and what they do, and the actions that they take. But certainly I'm not aware of anything that's like that but as I say, I can't possibly answer that question. I don't know what our unitholders are thinking.

Did they give you any indication the last time that they were going to sell those shares? That large block of shares?

No, they didn't give us an indication, and I wouldn't have expected them to be honest.

Okay, so they did it literally the next day after our conference call, and it hit us as a surprise.

Yes, well, our unit holder, they're free to buy and sell whenever.

I understand that, but I thought they might have alerted you to the fact that they were going to do that. But apparently, they did not do that. So it came as a surprise to you as well as to the rest of the shareholders. And of course, a move like that is discouraging to the marketplace and is doing a good job on holding the prices stock down for the company as well as it's been run. This is kind of absurd that it should be yielding 15% it should be at least back to where it used to be in the 2022 range for what you're distributing. And doing it steadily and doing it with well coverage. It's hard to understand how the marketplace isn't smart enough to see what a benefit this company is the way it's run. I'm hoping that you can change that image in the marketplace, because taking down new drop downs and things and still getting the same dividend and the same stock price. It's kind of discouraging makes one think that the only ones who are really benefiting are the banks. Although if they're smart enough, new shareholders will buy in at this price and if they are assured that the risk is not as high as it appears to be, it's a great investment with a great cash flow. So I guess that's my input. I don't have any more questions other than that.

And our next question will come from Richard Diamond with Castlewood Capital. Please go ahead.

Hey, Gary, I think you're doing a great job and sometimes when you have a miss price security as we do in this case. You know, the market does come around in the meanwhile, I appreciate you're doing everything you can that's under your control. I was just asking I don't want to jump the gun. But can you give us a little bit of a preview what you may do next year in terms of IR research?

IR activities.

IR activities, sorry.

Yes. Like I said, we plan to attend more conferences; we hopefully will do a non-dual ratio MDR in the first quarter of next year. We're registering, for example, to be at the wells midstream conference on the eighth and ninth of December this year. And we've got some extra external IR resources now supporting us. So we see that as a really important part of our strategy to better get our message out there. I think, when you look at our unit holder base, it's changed a little bit over the last year or two years. And I think it's important that we get our message out as much as we possibly can and do as much as we can, and then it's really up to up to the market after that.

Well, mispricing in securities, how I make my living [ph]. So, you know, I know of confidence that a concerted effort will get us some bandwidth. Thank you very much.

Thank you, Richard.

And this will conclude our question and answer session. I'd like to turn the conference back over to Gary Chapman for any closing remarks.

Now, thank you everybody for joining. And I wish you all a very good day. Thank you for listening.

Ladies and gentlemen, the conference has now concluded. Thank you for attending today's presentation. And at this time, you may now disconnect your lines.