KNOP - Knot Offshore Partners

[wabuffo]

KNOP announces another 52-cent quarterly distribution.

 

http://www.knotoffshorepartners.com/investor-relations/investor-information/news/press-release-details/2020/KNOT-Offshore-Partners-LP-Announces-Third-Quarter-2020-Cash-Distribution/default.aspx

 

wabuffo

[lnofeisone]

Good quarter. The thesis is definitely getting simpler and KNOP higher.

 

1) Windor issue is still TBD

2) The dropdown will be purchased using internal cashflow and debt. Probably mostly debt. No dilution at this level.

 

It's still a slowly melting ice cube but now it's a slower melting ice cube.

[wabuffo]

1) Windor issue is still TBD

 

The Windsor Knutsen was redelivered on 11/25.  This tracker places it right now in the pre-salt waters off Brazil. 

https://www.marinetraffic.com/en/ais/home/shipid:313028/zoom:10

 

My guess is that it will be working for Petrobras.  Mgmt on the Q3 call sounded confident that the Windsor will continue to find employment and said that they didn't expect any large revenue impacts in 2021.

 

It's still a slowly melting ice cube but now it's a slower melting ice cube.

 

Perhaps.

 

But I am always comforted by looking at the Petrobras Q3 earnings presentation and their current lifting costs for oil. 

 

 

I'm neither a bull nor a bear on oil, but when lifting costs average ~$2/bbl in the pre-salt area (ultra-deep water off the Brazilian coast where a number of KNOP's shuttles are employed -- and pipelines are not feasible), I think KNOP will be fine.  Over the longer-term, capex cuts at the majors will affect investment in new offshore fields, but no shuttle tanker gets built without being contracted to an approved capex outlay by the oil major for an offshore field. 

 

wabuffo

[wabuffo]

https://www.sec.gov/Archives/edgar/data/1564180/000110465920135794/tm2038580d1_ex99-1.htm

 

KNOT Offshore Partners LP (the “Partnership”) (NYSE:KNOP) announced today that its wholly owned subsidiary, KNOT Shuttle Tankers AS, has agreed to acquire KNOT Shuttle Tankers 34 AS, the company that owns the shuttle tanker, Tove Knutsen, from Knutsen NYK Offshore Tankers AS (“KNOT”) (the “Acquisition”). The purchase price of the Acquisition is $117.8 million, less $93.1 million of outstanding indebtedness and will be financed on a non-dilutive basis using cash on hand and borrowings under KNOP’s existing revolving credit facility.

 

wabuffo

[Libs]

With this good news, plus Brent now > $50, KNOP's stock price might elevate enough that it can take on more ships in a sensible way.

 

[wabuffo]

With this good news, plus Brent now > $50, KNOP's stock price might elevate enough that it can take on more ships in a sensible way.

 

https://www.prnewswire.com/news-releases/cushing-asset-management-and-swank-capital-announce-rebalancing-of-the-cushing-mlp-market-cap-index-301191179.html

 

KNOP is coming out of the Cushing MLP Index on Monday so there will likely be some rebalancing turbulence in its price this week and next.  But the outlook for the company is very positive now.

 

wabuffo

[lnofeisone]

Positive outlook, indeed. The deal certainly looks prudent. The revolver is at 2.1% which also speaks volumes.

 

I'm selling 25% of my position with hopes to pick it back up after Cushing sell off  ;D.

[gfp]

The Cushing index is such a joke as an "index."  They are constantly adding and removing and re-adding the same constituents.  September 21st 2020 they "added" KNOP to the index.  I don't think the Cushing index announcements are a big factor in KNOP unit price but who knows.

[wabuffo]

Good earnings report.  They financed one dropdown in December with cash and debt and said on the call that they can finance a second later this year in the same way if a secondary is too dilutive.  I still think that if the unit price goes above $20, they will do a secondary in order to complete multiple drop downs.  I believe there's a good chance they get to a $20+ price sometime in 2021. 

 

Totally misunderstood stock and business because it is associated with oil production and shipping.  Instead it's really a bank with a single CEO employee doing sale-leasebacks with its sponsor of "floating pipelines".

 

wabuffo

[lnofeisone]

Good earnings report.  They financed one dropdown in December with cash and debt and said on the call that they can finance a second later this year in the same way if a secondary is too dilutive.  I still think that if the unit price goes above $20, they will do a secondary in order to complete multiple drop downs.  I believe there's a good chance they get to a $20+ price sometime in 2021. 

 

Totally misunderstood stock and business because it is associated with oil production and shipping.  Instead it's really a bank with a single CEO employee doing sale-leasebacks with its sponsor of "floating pipelines".

 

wabuffo

 

$20 is my magic number to sell my position and wait for another sharp and unwarranted sell-off. Maybe the secondary will do just that.  :)