Operator:

Good morning, and thank you all for attending the KNOT Offshore Partners Second Quarter 2025 Earnings Call. My name is Brika, and I will be your moderator for today [Operator Instructions] I would now like to pass this conference over to your host, our CEO, Derek Lowe. Thank you. You may proceed, Derek. Derek Lowe: Thank you, Brika, 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 second quarter of 2025. Our website is knotoffshorepartners.com, and you can find the earnings release there along with this presentation. On Slide 2, 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 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-U.S. GAAP measures, and our earnings release includes a reconciliation of these to the most directly comparable GAAP measures. On Slide 3, we have the Q2 financial and operational headlines. Revenues were $87.1 million, operating income of $22.2 million and net income $6.8 million. Adjusted EBITDA was $51.6 million. And as of June 30, 2025, we had $104 million in available liquidity, made up of $66.3 million in cash and cash equivalents, plus $38.5 million in undrawn capacity on our credit facilities. That available liquidity was $4 million higher than at March 31. We operated with full utilization, taking into account the start of 2 drydockings, which amounts to 96.8% utilization overall. Following the end of Q2, we declared a cash distribution of USD 0.026 per common unit, which was paid in August. On to Slide 4 for developments during Q2. Through a combination of new chartering, charterers' exercising options and good maneuvering by our chartering team, we made good progress in extending our charter coverage and maximizing the value of charters we already have. The Brasil Knutsen is scheduled to go on charter to Equinor next month. With that in mind, we've been able to extend the redelivery timing from Petrorio to minimize any downtime between charters. Repsol Sinopec exercised their option to extend the Raquel Knutsen through June 2028. And Windsor Knutsen commenced operations with ExxonMobil on June 4, following completion of scheduled drydocking. On Slide 5, we have developments subsequent to quarter end, some of which you will likely have seen in our early July update. On September 16, 2025, we refinanced Tove Knutsen with a sale and leaseback that netted $32 million in cash. We also purchased the Daqing Knutsen from our sponsor with a $95 million combination of cash and debt. The cash component of that was approximately $25 million, so that was $7 million less than the net proceeds released from the Tove Knutsen refinancing. The Daqing Knutsen is on time charter with PetroChina in Brazil through until July 2027, with not guaranteeing the day rate until 2032 on the same basis as if PetroChina had exercised its options through to that time. We were also pleased to have reached a point in the recovery for KNOP and the wider shuttle tanker market, where we deemed it prudent to increase our discretionary allocation of capital to include unit buybacks on the premise that the units trade at a significant discount to what we believe to be any reasonable valuation for the partnership and its prospects. We have been active under our $10 million authorization, repurchasing 226,000 common units at an aggregate cost of $1.64 million, which is an average price of $7.24 per common unit. On Slide 6, we provide an overview of the Daqing Knutsen purchase. I've covered most of the highlights here already, but the strategic and commercial implications of such a drop-down transaction include an increased pipeline of long-term contracts, fleet growth, reduced average fleet age and continued development of our fleet in the most in-demand shuttle tanker asset class. This is a high-quality vessel and contract for us to welcome into the partnership. And when taken in conjunction with the sale and leaseback of the Tove Knutsen, we're very pleased to have been able to achieve growth without any draw on the cash in hand, but instead to have obtained additional liquidity from the debt portfolio. Turning to Slide 7 for a high-level summary of developments. The shuttle tanker market is tightening in both Brazil and at long last to a degree in the North Sea as well, in either case, driven by FPSO start-ups and ramp-ups. Certain of these projects were a long time coming, and it's been encouraging to see them up and running, driving shuttle tanker demand growth. We've extended our backlog as of June 30, 2025, to $895 million of fixed contracts averaging 2.6 years and rather more if all options are exercised. At June 30, our fleet of 18 vessels had an average age of 10.1 years. With the addition of our 19th vessel just a couple of days thereafter, the average age reduced to 9.7 years. We're continuing to repay debt at $95 million or more per year, which we think is prudent with a depreciating asset base. Debt paydown also produces flexibility and optionality to take on leverage elsewhere to enable an accretive allocation of capital as with the recent sale leaseback and drop-down, which was accompanied by the initiation of the $10 million buyback program. We appreciate that ours is a business where the time lines and contract durations are long, and thus, the financial impact of chartering typically arrives quite some time later, materially behind an upturn in sentiment or spot market activity. That being said, it's clear that after a lengthy period defined by the COVID era cutbacks at energy majors, we're increasingly building positive momentum and taking actions on multiple fronts for the benefit of unitholders now and well into the future. Over Slides 9 to 12, we provide the financials for Q2, for which the headlines are revenues of $87.1 million; operating income $22.2 million; net income $6.8 million; adjusted EBITDA of $51.6 million; and availability at quarter end of $104.8 million, made up of $66.3 million in cash and cash equivalents, plus $38.5 million in undrawn capacity on our credit facilities. That's $4 million higher available liquidity than at the end of Q1. On Slide 13 is our debt maturity profile, which has been updated to reflect the Tove Knutsen sale leaseback, the NTT revolver refinancing and the July 2 backing acquisition. Notably, the average margin on our debt was 2.23% over SOFR. And while nothing can be taken for granted, the positive momentum for both KNOP and the wider sector mean that we feel quite confident about these maturities in the years ahead, particularly after seamlessly addressing similar maturities in recent years amid materially less rosy market conditions. Moreover, we may have select opportunities to raise liquidity as we did with the Tove Knutsen, though any such action will be contingent on conditions at the time. Moving on to Slide 15 and our charter portfolio. I've covered most of the updates here, but I believe it's a useful resource for investors looking to track the primary movements where change can occur in a highly stable portfolio of cash flows. That is when charters turn over and when there are drydocks that will cause off-hire and incurrence of CapEx costs. Based on current charter rates, we believe charterers' options are likely to be taken up given the strength of the charter market. As such, upcoming points of particular relevance are the Fortaleza and Recife, which operate in Brazil and are coming open in early and mid-2026, respectively. On Slide 16, you can see our strong coverage through the coming quarters, some charterers' options that market conditions suggest have a good likelihood of being exercised and a small amount of open time. In all, we have 89% of vessel time in 2026 covered by fixed contracts. On Slide 17, you can see the drop-down inventory held at the sponsor. As we have said, we believe that growth on attractive terms that benefit the partnership is a central plank of our strategy alongside sustainable payments to unitholders. We operate a fleet of depreciating assets where replenishment with younger vessels over time and on the right terms is an imperative for the business, not to mention the basis for returns to unitholders. On Slides 18 to 20, we include again some commentary from Petrobras to continue their strong offshore production growth, particularly in the shuttle tanker service fields and doing so rapidly ahead of schedule and through the deployment of assets with a decades-long use profile. From the shuttle tanker owners' perspective, there is lots of like about what Petrobras is saying and importantly, in what they're putting into action. Crucially, it's this trackable and measurable activity, including numerous additional FPSOs that have already been funded, but are expecting to come online in the years ahead that gives us comfort that the shuttle tanker demand should readily absorb the current order book. Further, we believe that the current order book still trends towards medium-term shortage of shuttle tankers and set against the forthcoming production. To summarize on Slide 21, we had strong utilization and financial results for the quarter while securing additional charter cover and paying a quarterly distribution. We subsequently purchased a vessel with 7 years of charter cover. We refinanced the vessel to release liquidity in excess of the cash we paid for the acquisition. We refinanced the first of our 2 $25 million revolvers, and we initiated our $10 million unit buyback program. And looking at our near-term priorities on Slide 22, we're focused as ever on safe operation and maintaining high scheduled operational utilization. We aim to continue growth in earnings visibility and liquidity through vessel chartering out into the medium term. And we aim to deploy incremental capital opportunistically towards a combination of accretive growth and returns of capital to unitholders. With that, I'll hand the call back to Brika for any questions. Thank you. Operator: [Operator Instructions] The first question we have on the phone line comes from the line of Liam Burke from B. Riley Securities. Liam Burke: On the Daqing Knutsen, I know you've got customary closing events prior to taking delivery. But could you give us a sense as to when you'd expect to take delivery on that vessel? Derek Lowe: On the Daqing Knutsen, we took delivery on the day we announced it, so the 2nd of July. Liam Burke: Okay. Because it's not the customary closings. Okay, great. Second question I had was on the drop-downs. There are 4 additional vessels. You made the closing of the Daqing in a very shareholder-friendly manner. Do you anticipate to be able to continue to do that? Derek Lowe: I mean we think it's unitholder-friendly whenever we do these transactions on accretive terms. Were you alluding to the funding for the equity component in the transaction? Liam Burke: Well, that in the fact, there's 4 currently available in addition to the -- when you have the newbuilds. What I was getting at is, I mean, you were able to add one more vessel quite easily in a very friendly -- shareholder-friendly manner. I guess, more or less, do you have a sense of timing based on your financing flexibility and your desire to grow the fleet? Derek Lowe: Sure. Well, we don't have a particular sense of timing. We respond to vessels that are offered to us when that happens and on the basis of the terms that are offered and can be negotiated. But we don't have a particular timing in mind. I mean part of that is obviously our financial capacity to fund any cash component that's required in the transaction. You can also see our debt schedule, what is coming up at different times and the opportunities they can present for potential releveraging or release of some sort. So the Tove sale and leaseback would be a good example of how release can happen. Operator: [Operator Instructions] We have a question from Climent Molins with Value Investor's. Climent Molins: I wanted to ask about the older Windsor Knutsen, the Fortaleza and Recife. Could you talk a bit about how contracting discussions with potential customers compare relative to your more modern tonnage? And is there maybe any appetite to dispose of these vessels over the coming years? Derek Lowe: Well, our business model relates to operating vessels rather than trading them. And I do appreciate we have engaged in vessel swaps in the past, but that was actually so that we could gear up our ownership, if anything, rather than dispose. I -- when we have active contracting discussions with our clients all the time about our vessels, I don't think I can expand on how those are going with -- in any individual case for commercial reasons, but we certainly are actively discussing those vessels with our clients. Climent Molins: Makes sense. And you've been clear that your near-term priority is to continue expanding the fleet. But could you talk a bit on how you plan to mix that with potential distribution increases in the medium term? Derek Lowe: Sure. We -- fleet growth through acquisition is partly relating to growth. And the most important element of growth there is in the charter schedule. It's only through that, that we can generate income in the medium to longer term. It also helps with rejuvenating the fleet, which is -- which contributes to that as well and returns to unitholders and deployment of capital to drop-downs, we think both of those at the same time are good deployments of capital, and we don't see them as necessarily competing with each other. I mean they both use capital. But if you look at the orders of magnitude that are involved, the buyback program, for example, is planned to use rather less than even a single vessel, if you look at just a year's worth of the buyback program. So we think they're both necessary for -- in the interest of unitholders in the medium to longer term. I mean just to give you an example on fleet rejuvenation, which we think is particularly important, with 18 vessels as of the end of June and then obviously 19 shortly after that. The vessel age -- average age in early July was down to, I think, 9.7 years. Well, that is the age that we had earlier in the year. And just simply the passage of time with the fleet the size that we have means that acquisitions are required to keep the fleet rejuvenated and to keep that average age down. Operator: [Operator Instructions] I can confirm that does conclude the question-and-answer session today. And I would like to hand it back to Derek for some final closing comments. Derek Lowe: Well, thank you again for joining this earnings call for KNOT Offshore Partners second quarter in 2025, and I look forward to speaking with you again following the third quarter results. Operator: Thank you all for joining the KNOT Offshore Partners Second Quarter 2025 Earnings Call. I can confirm today's call has now concluded. Thank you all for your participation, and you may now disconnect. Please enjoy the rest of your day.