writser Posted April 9, 2020 Share Posted April 9, 2020 Well, the discount to book value might be fat but the vehicle is heavily levered. If you assume BV is a relevant metric (I'm not sure it is) you are effectively paying a ~$1.4n enterprise value for $1.7b worth of ships or a <20% discount (the numbers are all ballpark just to make the point). I can see the appeal of this stock but the GP/LP structure + huge debt load + new player aggressively entering the market and Teekay being backed by Brookfield + maturing contracts and my lack of confidence in judging whether they will be renewed at favorable price is a huge wall of worry to overcome at first. Link to comment Share on other sites More sharing options...
kab60 Posted April 10, 2020 Share Posted April 10, 2020 I don't argue with that other than to say having a PE sponsor involved probably isn't a bad thing. They mark Teekay to model, easier for then to scoop up an aggressive entrant if that comes to pass. A public co would have a hard time doing that while trading below book. They also have a hurdle rate they need to clear. Either way, I think this is interesting since it has sold off with oil/covid19, which aren't the real risks to this model. A bit like Williams Co and Ship Finance Ltd, which was a smack in the face opportunity during the crazy selloff, since neither low oil nor Covid19 means much for them. KNOP has some of the same traits - and also possibly forced selling. I went long yesterday but don't plan to hang around if it gets close book. Link to comment Share on other sites More sharing options...
Libs Posted April 20, 2020 Author Share Posted April 20, 2020 http://www.knotoffshorepartners.com/investor-relations/investor-information/news/press-release-details/2020/KNOT-Offshore-Partners-LP-Announces-Extension-of-Charter-of-Torill-Knutsen-and-Change-to-Board/default.aspx Another extension, good to see. Link to comment Share on other sites More sharing options...
wabuffo Posted April 21, 2020 Share Posted April 21, 2020 The Torill Knutsen extension is good news indeed. Also in KNOP news, Nuveen is liquidating two energy-related CEFs (JMF, JMLP), : https://www.businesswire.com/news/home/20200420005028/en/Nuveen-MLP-Closed-End-Funds-Announce-Plan-Liquidate JMLP owns ~320k KNOP units and JMF owns ~640k KNOP units -- so that'll create a new, large, short-term indiscriminate seller (equal to a couple of weeks of average KNOP trading volume). wabuffo Link to comment Share on other sites More sharing options...
gfp Posted April 30, 2020 Share Posted April 30, 2020 ex-div today for those that follow this one Link to comment Share on other sites More sharing options...
wabuffo Posted May 27, 2020 Share Posted May 27, 2020 KNOP reports first quarter results. https://www.sec.gov/Archives/edgar/data/1564180/000110465920066485/a20-20777_1ex99d1.htm Steady as she goes.... wabuffo Link to comment Share on other sites More sharing options...
lnofeisone Posted May 27, 2020 Share Posted May 27, 2020 Yep - love the negative headline on SA. Either way, I'm waiting for 19sh to start unloading my latest batch. Link to comment Share on other sites More sharing options...
keerthiprasad Posted May 28, 2020 Share Posted May 28, 2020 Hoping we hear about the Windsor soon. The only things more predictable or consistent than this are likely frauds haha. Link to comment Share on other sites More sharing options...
wabuffo Posted May 28, 2020 Share Posted May 28, 2020 http://s22.q4cdn.com/485995448/files/doc_financials/2020/q1/20200528-1Q20-KNOT-Offshore-Partners-LP-Earnings-Presentation-vFinal.pdf KNOP's Q1 presentation has some very interesting charts and conference call discussion on Brazil offshore oil production (pp 10-13) - including marginal cost of production curves as well as break-even oil price level required for new offshore projects. wabuffo Link to comment Share on other sites More sharing options...
lnofeisone Posted July 16, 2020 Share Posted July 16, 2020 Looks like no news is good news. Another distribution as I wait for my 19+ to unload. http://www.knotoffshorepartners.com/investor-relations/investor-information/news/press-release-details/2020/KNOT-Offshore-Partners-LP-Announces-Second-Quarter-2020-Cash-Distribution/default.aspx Link to comment Share on other sites More sharing options...
keerthiprasad Posted July 16, 2020 Share Posted July 16, 2020 Looks like no news is good news. Another distribution as I wait for my 19+ to unload. http://www.knotoffshorepartners.com/investor-relations/investor-information/news/press-release-details/2020/KNOT-Offshore-Partners-LP-Announces-Second-Quarter-2020-Cash-Distribution/default.aspx If the windsor is renewed it will pop. If the contract isn't extended, im not sure what will happen. Until then I'm collecting the distribution and waiting. Link to comment Share on other sites More sharing options...
wabuffo Posted July 17, 2020 Share Posted July 17, 2020 If the windsor is renewed it will pop. If the contract isn't extended, im not sure what will happen. Until then I'm collecting the distribution and waiting. Yes - the two issues outstanding are: 1) the contract status of the Windsor, and (probably more important one) 2) the status of future dropdowns (ie, tanker purchases) from their sponsor and how they will be financed. Without those two resolved, KNOP is essentially a slo-mo liquidation so the real yield is lower than the indicated yield. wabuffo Link to comment Share on other sites More sharing options...
keerthiprasad Posted July 17, 2020 Share Posted July 17, 2020 If the windsor is renewed it will pop. If the contract isn't extended, im not sure what will happen. Until then I'm collecting the distribution and waiting. Yes - the two issues outstanding are: 1) the contract status of the Windsor, and (probably more important one) 2) the status of future dropdowns (ie, tanker purchases) from their sponsor and how they will be financed. Without those two resolved, KNOP is essentially a slo-mo liquidation so the real yield is lower than the indicated yield. wabuffo Yup. They are in a tough spot with the distribution. If they need to reserve cash and cut distributions...the market will kill them. If they keep paying out at these rates... very little flexibility. Link to comment Share on other sites More sharing options...
gfp Posted July 17, 2020 Share Posted July 17, 2020 A good outcome would be the yield starved investors bidding up the unit price to the point it made sense for them to issue units to finance drop down, correct? I have no idea what debt financing or other creative "owner financed" structures they could come up with if they want the drop down and need to find a creative solution for it to make sense for both parties. I would think a creative investment banker could come up with something for them that works if the unit price doesn't rise to where they think it needs to be. Link to comment Share on other sites More sharing options...
Libs Posted July 27, 2020 Author Share Posted July 27, 2020 Regarding Windsor Knutsen, I keep expecting some announcement but i doesn't come. Here's what the company said in the May CC: <For Windsor Knutsen, the partnership's previous agreement with Shell as charterer to suspend the vessel's time charter contract, ultimately at no cost to the partnership, has now ended and the vessel is back on its normal time charter. The vessel is fixed until October 2020, and we're in discussion with Shell about the vessel's next option period. And at this stage, we have no indication that the option will not be taken.> Then in the Q and A: Marc Solecitto Got it. Okay. And then with the Windsor, you mentioned that the charterer hasn't given any indication that they will not be extending. Just want -- can you remind us how many months' notice in advance they would have to give if they were not going to take up the extension option? Gary Chapman Yes. At the moment, the declaration date for the Windsor is the middle of July 2020. So it's actually quite soon. However, going back to the answer I've just given on everything around rates, every discussion with each -- every charter is also quite specific and targeted. So it may be that we allow Shell to take more time to decide that. I don't know. That's really up for our negotiation with our -- through our commercial team. But at the moment, the -- unless we allow Shell more time, then actually, the declaration option is the middle of -- middle of July, sorry.> So we're past that point, and presumably they are still negotiating with Shell. For the record, looking back on their history it looks like every extension has been taken, even during the 2014-2015 oil crash. There are also some useful comments on the drop-downs: https://seekingalpha.com/article/4350666-knot-offshore-partners-lp-knop-ceo-gary-chapman-on-q1-2020-results-earnings-call-transcript Link to comment Share on other sites More sharing options...
wabuffo Posted August 26, 2020 Share Posted August 26, 2020 KNOP quarterly report is out. Typical solid, predictable quarter. http://www.knotoffshorepartners.com/investor-relations/investor-information/news/press-release-details/2020/KNOT-Offshore-Partners-LP-Earnings-ReleaseInterim-Results-for-the-Period-Ended-June-30-2020/default.aspx the main issues are: 1) it looks like Shell took a pass on renewing the Windsor Knutsen. So that contract will expire and the Windsor will go into day charters booked by KNOP's parent. Its a Suezmax-capacity tanker so floating storage is also an option. 2) no word on the plan for how/if they are going to finance dropdowns. They have some cash and borrowing capacity, but issuing equity at a 16% yield is too expensive. I'm sure mgmt will get asked on the CC tomorrow. Without dropdowns, this becomes a slo-mo run-off with its current charter fleet. So one has to think of the dividend as part return of capital, part return of income and not get confused with the 16%+ yield. wabuffo Link to comment Share on other sites More sharing options...
lnofeisone Posted August 27, 2020 Share Posted August 27, 2020 KNOP quarterly report is out. Typical solid, predictable quarter. http://www.knotoffshorepartners.com/investor-relations/investor-information/news/press-release-details/2020/KNOT-Offshore-Partners-LP-Earnings-ReleaseInterim-Results-for-the-Period-Ended-June-30-2020/default.aspx the main issues are: 1) it looks like Shell took a pass on renewing the Windsor Knutsen. So that contract will expire and the Windsor will go into day charters booked by KNOP's parent. Its a Suezmax-capacity tanker so floating storage is also an option. 2) no word on the plan for how/if they are going to finance dropdowns. They have some cash and borrowing capacity, but issuing equity at a 16% yield is too expensive. I'm sure mgmt will get asked on the CC tomorrow. Without dropdowns, this becomes a slo-mo run-off with its current charter fleet. So one has to think of the dividend as part return of capital, part return of income and not get confused with the 16%+ yield. wabuffo Definitely a solid quarter. I do wonder what would happen if they stop paying the distribution and use it to finance dropdowns. Look forward to the call tomorrow. Link to comment Share on other sites More sharing options...
Libs Posted August 27, 2020 Author Share Posted August 27, 2020 Well there were some cranky callers on the Q & A. Maybe the guy complaining about buying at $22 (and being even after dividends) should think harder about his entry price! But I digress. I have a question about the sponsor. What do they do with seven drop-downs if KNOP takes a pass? Operate them on their own? And how severe is the pressure on KNOP to say yes, when the sponsor has moved mountains to build them and get them contracted? It looks like in the '14-15 crash, KNOP had their stock recover enough to use equity. Seems like they are sweating bullets for a repeat of that scenario. $12.50 won't cut it. The other comments from a caller was kind of jarring: "cost of equity, 16%. Cost of debt, 1.5%" . Yikes. I still like the risk / reward here but it's no free lunch! Link to comment Share on other sites More sharing options...
wabuffo Posted August 27, 2020 Share Posted August 27, 2020 I have a question about the sponsor. What do they do with seven drop-downs if KNOP takes a pass? Operate them on their own? The sponsor has been in the business of operating charters for over 30 years. They don't just build them, they operate them too and often do the up-front contracting with an oil major before dropping them down to KNOP. The sponsor has been in this business a lot longer than KNOP. KNOP has only been operating since 2013 and was created to reduce the capital employed by the sponsors in this business by creating a vehicle that uses other people's money while providing a good return. I don't think there's any panic here. The rest of 2020 is locked in (even the Windsor for the most part). If its not economical, they won't issue equity - though, not issuing equity puts KNOP in a gentle run-off. I think I've said this before - but it bears repeating. The distribution is not a yield. It is partly a return of capital that goes towards reducing the cost base of the equity. $20 from 2015 is more like $16 today. This is always a "melting ice cube". The real economic yield is more like 10% today ($2.08*.61381/$10.55). If you don't understand that, you are going to be disappointed in the price action. Its also why KNOP needs to issue new equity (hopefully at good prices) to buy new ships and replenish the equity cost base. wabuffo Link to comment Share on other sites More sharing options...
Libs Posted September 1, 2020 Author Share Posted September 1, 2020 KNOP files F-3.KNOP_9.1.20.rtf Link to comment Share on other sites More sharing options...
wabuffo Posted September 1, 2020 Share Posted September 1, 2020 This offering covers the existing units that KNOP's sponsor owns. This is a standard shelf offering that has to be refreshed every 3 years and provides the sponsor with the ability to sell all or some units at any time. Here's last F-3 they did exactly three years ago that covered their sponsor (along with other securities at the time). https://www.sec.gov/Archives/edgar/data/1564180/000119312517263468/d392002df3a.htm But this has spooked the yield hogs in this name. In the confusion, it might have created the impression that KNOP is about to dilute their unit holders in order to do a dropdown. But mgmt was pretty adamant on the call that they are not going to do that. I bought some more right now. KNOP really needs to do a better job in their shareholder communications - they really don't help the market understand their business or their securities. Oh well. wabuffo Link to comment Share on other sites More sharing options...
Libs Posted September 1, 2020 Author Share Posted September 1, 2020 Wabuffo: Today's filing shows an offering price ( below, sorry for the formatting). I don't see that in the previous filing. Why would that be? Secondary offering(7): Common units representing limited partner interests 8,567,500 (6) $ 12.53 (7)(8) $ 107,350,775 Link to comment Share on other sites More sharing options...
wabuffo Posted September 2, 2020 Share Posted September 2, 2020 Today's filing shows an offering price I don't think that matters, do you? I think the freak-out yesterday afternoon provided another opportunity to buy a regular earnings stream that delivers a 10%+ true yield (.61381 x $2.08/$11.50) with a return of someone else's capital that lowers one's cost basis year-after-year. This is one of those examples where as Buffett says you should take advantage of Mr. Markets manic-depressive view on this stock. wabuffo Link to comment Share on other sites More sharing options...
John Hjorth Posted September 2, 2020 Share Posted September 2, 2020 Today's filing shows an offering price I don't think that matters, do you? I think the freak-out yesterday afternoon provided another opportunity to buy a regular earnings stream that delivers a 10%+ true yield (.61381 x $2.08/$11.50) with a return of someone else's capital that lowers one's cost basis year-after-year. This is one of those examples where as Buffett says you should take advantage of Mr. Markets manic-depressive view on this stock. wabuffo Please get a hold on your self. So far, no signs of what you're talking about. Link to comment Share on other sites More sharing options...
Libs Posted September 2, 2020 Author Share Posted September 2, 2020 <Please get a hold on your self. So far, no signs of what you're talking about.> I don't understand the snark (at Wabuffo) here. The stock was 50% off it's pre-covid price at yesterday's low. Sounds pretty manic-depressive to me. Link to comment Share on other sites More sharing options...
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