KNOT Offshore Partners - Earnings Call - Q4 2024

Transcript

Moderator (participant)

Good morning, and thank you all for attending The KNOT Offshore Partners' Fourth Quarter 2024 Earnings Call. My name is Brika, and I will be your moderator for today. All lines will be muted during the presentation portion of the call, with an opportunity for questions and answers at the end. I would now like to pass the call over to your host, Derek Lowe, Chief Executive Officer and Chief Financial Officer of KNOT Offshore Partners. Thank you. You may proceed, Derek.

Derek Lowe (CEO and CFO)

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 fourth 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-U.S. 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 Q4. Revenues were $91.3 million, operating income $34.7 million, net income $23.3 million, Adjusted EBITDA was $63.1 million. We closed Q4 with $90 million in available liquidity, made up of $67 million in cash and cash equivalents, plus $23 million in undrawn capacity on our credit facilities. We operated with 98.3% utilization, and the vessel time available for scheduled operations was not impacted by any planned dry docking. Following the end of Q4, we declared a cash distribution of $2.60 per common unit, which was paid in early February. Onto slide four.

Our outlook remains positive on both industry dynamics and the partnership's positioning to participate fruitfully in our markets. Significant growth is anticipated in production in fields which rely on service by shuttle tankers. In particular, we've seen Brazilian FPSOs delivering and starting up ahead of schedule, with quite a few still to come. In the North Sea, the long-awaited Johan Castberg FPSO is expected to start production shortly, while the Penguins FPSO began production recently. Penguins is Shell's first new operated platform in the North Sea in over 20 years, bringing production back to a field that has been offline since the decommissioning of the prior generation platform in 2021. On Johan Castberg, we were aware of some media speculation that a KNOP vessel has already offloaded cargoes, but I can clarify that this operation was our vessel coming alongside still as part of the commissioning process.

Nonetheless, the picture at Johan Castberg is positive, and we look forward to operations there. On the vessel supply front, we are seeing continued new build orders placed in order to service the large new production volumes coming online in the years ahead, including for our sponsor, Knutsen NYK. A measured amount of new shuttle tanker ordering is unavoidable and, in fact, necessary as a shortage of shuttle tanker capacity remains projected in the coming years. As usual for the shuttle market, we believe that all known new build orders are backed by firm client charters, which minimizes or even eliminates the dynamic of speculation around anticipated supply into the global fleet in two to three years' time. The partnership remains financially resilient, with a strong contracted revenue position of $870 million at the end of Q4 on fixed contracts, which averaged 2.4 years in duration.

Charter extensions are additional to this and average a further 4.8 years. With the market having strengthened and given expectations for tightness in the years ahead, the economic rationale for exercising these options has been strengthening, and we increasingly expect these options to be taken up. Our near-term chartering exposure has been addressed by a vessel swap of the Dan Sabia for the Lena Knutsen, which we announced on the 27th of February. Our pattern of cash generation and liquidity balance is sufficient for our operations and the significant paydown rate for our debt, which is in the region of $90 million per year for installment payments. The debt on the Lena acquisition fits in with this repayment profile also.

On slide five, a number of developments in Q4 were announced already on the previous earnings call, including a new charter for Hilda Knutsen, which is about to begin. On slide six, our most recent developments include closeout of the insurance claim for Torill Knutsen dating back to January 2024, totaling a bit less than $6 million. A brief option exercise for Brasil Knutsen and for Vigdis Knutsen has switched to bareboat and extension of fixed duration by three years out to 2030, along with an option for a further two years. The most important recent development is on slide seven, showing a swap of the Dan Sabia for Lena Knutsen. Lena has brought nearly five years of fixed or guaranteed future charter revenue, and this swap was a significant step in fleet and pipeline growth without the need for new funding.

Additionally, this transaction leaves our fleet wholly concentrated in the most in-demand shuttle tanker classes. Onto slide eight, you can see consistent and growing revenues over the quarters and years, along with improving profitability. Slide nine similarly reflects consistent and growing Adjusted EBITDA, and you can find the definition of this non-GAAP measure in the appendix. On slide ten, there are two notable points in the balance sheet over 2024. The first is that four of our debt facilities have moved up from long-term to current liabilities because of their upcoming maturities. The second is that even after the assumption of debt involved in the Tuva acquisition in September, our overall liabilities decreased by $29 million in 2024 as we continue to make contractual debt repayments in the area of $90 million per year. The debt facilities can be seen on slide 11, which sets out the maturity profile.

On line one, the first of our revolving credit facilities is due to mature in August 2025, and on line two, the loan secured by Tove Knutsen and Synnøve Knutsen matures over September and October 2025. The second revolver matures in November 2025. We typically seek to refinance such facilities on very comparable terms, and we have a good track record of refinancing success even in less favorable market environments. 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 amount of capital repayment due over the next year, which do not include interest or the final balloon payments due on the maturity date. Of note, $93 million in current installments is due to be paid during 2025.

Our typical pattern is for our vessels to provide security for our debt facilities, and that applies to 17 out of the 18 vessels in the fleet as of the 31st of December, with the one exception being Dan Sabia, which is the vessel we sold earlier this month. $883 million out of $910 million in debt facilities at 31st of December are secured by vessels, while the two revolving credit facilities totaling $50 million of capacity are unsecured. The Lena Knutsen, which we acquired earlier this month, has $73 million of secured debt attached maturing in October 2026 and on very similar terms and conditions to the other secured loans shown here. The maturity profile of these debts is set out graphically on slide 12. As you can see, repayments are spread out over the coming years, but include material balloons in each of 2025 and 2026.

Slide 13 shows the contracted pipeline in chart format, reflecting the developments I set out earlier, as well as the fact that Raquel Knutsen's option period is the only material outstanding period for the year, as well as the possibility of brief off-hire as the Brasil Knutsen transitions between charters. While nothing is certain until it's formally in place, we are cautiously optimistic about securing that additional coverage in the current tight market, either as an extension or under a new charter. Similarly, slide 14 highlights an encouraging 94% of fixed charter coverage for 2025. We currently have 75% of 2026 fixed as well, although the open percentage does rise materially over the course of the year, which demonstrates the need for our continuing commercial efforts. On slide 15, 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 secured a firm contract period at least five years in length. At present, four 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. We continue to believe that key components of KNOP's strategy and value proposition are accretive investment in the fleet and a long-term sustainable distribution. As such, we intend to pursue long-term charter visibility and accretive dropdowns supportive of long-term cash flow generation. On slides 16 to 18, 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 at the web page as shown there. The primary takeaway from each of these slides is consistent. There is 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 that recent reports of additional vessel construction contracts are an endorsement of the strong anticipated market conditions in the medium and longer term. Five outstanding newbuild contracts are for our sponsor, Knutsen NYK, and are due for delivery by the end of 2027. We would not be surprised to see further newbuild orders placed in order to service the large new production volumes coming online in the years ahead.

In the trend that also applies to oil production globally, you'll see that even in the years ahead where aggregate production growth slows, deep offshore production, in this case the Brazilian pre-salt, continues to outpace the overall market and take market share. On slide 19, we provide information relevant to our U.S. unit holders, and particularly 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 20, 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'll finish with slide 21, recapping our financial and operational performance in Q4 2024 and the subsequent time, and our current outlook.

We are glad to have delivered high and safe utilization, which have generated consistent financial performance. We're delighted to have taken the further growth step by swapping Dan Sabia for Lena Knutsen. Our continued commercial focus remains on adding to our longer-term charter visibility and the cash flows that provide us with the capacity for both accretive investment in the fleet and a long-term sustainable distribution. In the coming months, we will also be addressing the four refinancings which are coming due this year. In total, though, we are making good progress and are pleased to have established positive momentum against an improving market backdrop. Thank you for listening, and with that, I'll hand the call back to Brika for any questions.

Moderator (participant)

Thank you, Derek. We will now begin the question and answer session.

If you would like to ask a question, you can do so by pressing star followed by one on your telephone keypad. If for any reason you would like to remove that question, please press star followed by two. To ask a question, please press star one. As a reminder, if you're using a speakerphone, please remember to pick up your handset before asking a question. We will pause here briefly whilst questions are registered. We have the first question on the line from Liam Burke with B. Riley Securities. You may proceed.

Liam Burke (Managing Director)

Thank you. Hi, Derek. How are you today?

Derek Lowe (CEO and CFO)

Hi, Liam. Good. Thank you. And you?

Liam Burke (Managing Director)

I'm doing just great. Thank you. Derek, you've got a long history of being able to refinance high-quality assets. Your liquidity is improving. Your cash flow is up year over year, up nicely. How do you think about allocation of capital now that you've got a fairly safe lease book here?

Derek Lowe (CEO and CFO)

We are pleased. Thank you. We are pleased with the way things are going. I mean, I would say at the moment that we do count in our freely available liquidity, $50 million worth of RCF capacity. So 90 is not 90 of cash without other considerations. That is probably the first thing to be mindful of as you look at those balances. We do not take anything for granted in our debt renegotiations, and the world is perhaps a slightly more volatile place now than it has been in the last couple of years. We are going to proceed with those debt renegotiations in good time, well ahead of the maturity dates, as we usually do.

I agree our track record on that is good, and we do not see any particular obstacles there, but nonetheless, that is a more immediate priority. Into the medium term, we are still looking to fill spaces in our charter coverage. Next year, if you saw on slide 14, I think the coverage averages 75% fixed for next year, but clearly it drops away over the course of the year. That is something that from our chartering team, we are particularly concerned to fill up. There are a number of priorities there already, but in terms of use of capital, which I think was your basic question there, the board continues to think it is in the long-term interests of the unit holders to both consider accretive acquisitions and the long-term sustainable distribution. They have both of those things in mind as they look at decisions that they make.

Liam Burke (Managing Director)

Okay. Fair enough. On the charter coverage, obviously, you mentioned 75% covered in the next year. If you're looking at the amount of FPSO or production activity coming online, either in the North Sea or in Latin America, are you comfortable that your available vessels will fit into that demand profile?

Derek Lowe (CEO and CFO)

Yeah. We don't have any signals that they won't be, and they're all of the specification that fits.

Liam Burke (Managing Director)

Okay. All right. Thank you, Derek.

Derek Lowe (CEO and CFO)

Thanks, Liam.

Moderator (participant)

Thank you. We now have Poe Fratt with Alliance Global Partners. Your line is open.

Poe Fratt (Managing Director, Equity Research, and Senior Transportation Analyst)

Derek, can you address the open windows for 2026 for the Fortaleza? And is it the Recife or Recife? Are we potentially facing the same situation we had with the Dan Sabia and the other smaller shuttle tanker that was on bareboat charter to Transpetro?

Can you just address sort of the specs of those vessels and how you're looking at rechartering at this point in time?

Derek Lowe (CEO and CFO)

Yes, for Fortaleza and Recife, and you're looking at page 13, I think, aren't you, where those charters expire either side of the middle of next year? I think the main difference is between those and the two Dans are size. I mean, the Fortaleza and Recife are approximately double the capacity that Cisne and Sabia have. We are far less concerned about the ability to continue deploying them than we were with Cisne and Sabia.

Poe Fratt (Managing Director, Equity Research, and Senior Transportation Analyst)

That's helpful. There isn't any option. Are you currently trying to line up time charters for those, or is it too early to work on those?

Derek Lowe (CEO and CFO)

We work on all open periods all the time.

Poe Fratt (Managing Director, Equity Research, and Senior Transportation Analyst)

Okay. Any interest in those, or can you give us a flavor for the?

Derek Lowe (CEO and CFO)

Yeah.

Poe Fratt (Managing Director, Equity Research, and Senior Transportation Analyst)

You said you were confident. You said you were confident. What kind of confidence intervals should I use?

Derek Lowe (CEO and CFO)

That is a market conditions observation. I mean, we do not comment on individual negotiations until we have got something that is signed and announceable.

Poe Fratt (Managing Director, Equity Research, and Senior Transportation Analyst)

Can you just address the shift with Shell on the Vigdis? Why did they decide to flip over to bareboat chartering the shuttle tanker? Can you just give us the dynamics of that decision? Is there an impact to the net cash flow that will be generated from that shuttle tanker?

Derek Lowe (CEO and CFO)

I mean, I will answer your last point first. The bareboat terms are commercially comparable to the terms that would have applied under the previous time charter. From a financial point of view, we are obviously content with that switch. It has also been extended as well.

We have got fixed coverage for that vessel for longer as part of that negotiation process, which obviously is welcome too. In terms of Shell's intentions, there are benefits of an oil major operating their own fleet rather than putting them out on management contracts. That is what I expect Shell were looking at. I mean, they have had an option to make that switch in place since the original time charters were put in place. That option, they have contemplated that for some time.

Poe Fratt (Managing Director, Equity Research, and Senior Transportation Analyst)

It does lower your operating risk on that shuttle tanker, correct? Can you highlight whether any other time charters have the same option to shift to bareboat?

Derek Lowe (CEO and CFO)

Yeah. I do not think any come to mind at the moment. If that is incorrect, we will get back to you, but none come to mind at the moment.

Poe Fratt (Managing Director, Equity Research, and Senior Transportation Analyst)

Yeah. It's interesting too because I'm not sure if you saw the recent award of, I think it was nine shuttle tankers where Petrobras or Transpetro intends to bareboat charter the vessels, which seems I'm just trying to figure out why the shift to potentially bareboating instead of just straight time chartering.

Derek Lowe (CEO and CFO)

Yeah. That's probably a question for that vessel owner.

Poe Fratt (Managing Director, Equity Research, and Senior Transportation Analyst)

Okay. We always play a game of cat and mouse with the time charter rates and the renewals and extensions. It's always interesting, and you can never give sort of specific guidance. Can you just highlight the large jump sequentially in time charter revenue? You seem to be all of a sudden hitting a new level. Can you talk about the forward-looking time charter book?

Is $84 million in time charter revenue a reasonable expectation going forward, or was there something in the fourth quarter, maybe bonuses or other things that would have pushed that number up that will not recur in the first half of 2025?

Derek Lowe (CEO and CFO)

Yeah. I appreciate the question and the reason for it. We have the same competitive issue that we do not think it makes sense to expand on day rates too much. There were not any bonus type elements in that number. One-offs, for example, the insurance payment, you can see it was received and accounted for separately. It is not as if that is included. The biggest difference is that we had some new operations starting in the fourth quarter. If you go back to, I think it is slide five, those were developments that we discussed on the last call, actually, because they just happened already by that stage.

We've got the Ingrid and Torill operations. Yeah. Yeah. So the Ingrid and Torill, the new operational starts, and the others were news about future contracts that sort of do not count in that on that point. In terms of what will happen to that line, that 84 line in future, that comes back to what are the new operations? Question, are there new operations that come through in Q1, Q2, and so on, which would impact that? The answer to that is yes. We've got particularly the swap out of the Sabia and swap in of the Lena, which obviously was closed on the 3rd of March, and therefore will apply to a small extent to Q1 and then in full in Q2. As you're aware, we've got the Hilda due to go on hire by the end of this month.

Minimal impact from that in Q1, but the Q2 figures should reflect a full quarter of that Hilda commercial contract as well. It is down to, I'd say the more notable changes will not be particularly down to rate, which I understand is what you are looking for as well, but simply the fact of charter starting.

Poe Fratt (Managing Director, Equity Research, and Senior Transportation Analyst)

We have hit a new level. As you mentioned, the new level was driven by pretty much the Ingrid and the Hilda early in the quarter and then the Torill later in the quarter.

Derek Lowe (CEO and CFO)

Yeah.

Poe Fratt (Managing Director, Equity Research, and Senior Transportation Analyst)

Okay. Can you share with us the potential impact to backlog of the Lena acquisition? Because that potentially, I assume that is not in the stated backlog of $870 million. Can you give me a ballpark on how that will change the contract backlog?

Derek Lowe (CEO and CFO)

Yeah. I mean, we cannot give specific numbers on that.

What you would want to look at is when was it that that rate was set? The market really is around when you contract a rate rather than when the rate is being earned once the vessel's on hire. Of course, for a vessel that's on her first charter after delivery, that rate was set at the point when the new build order was made for her. If you backdate from the delivery date by a reasonable period to allow for construction, you're looking at market levels that were contracted around then. I can't guide you as to what those were specifically, but that will give you an idea. The fact that the vessel's newly arrived in March of 2025 doesn't make it a March 2025 sort of rate.

Poe Fratt (Managing Director, Equity Research, and Senior Transportation Analyst)

Understood. It will add, what is five and a half, six years of contract backlog or contracted revenue to that contracted backlog number. In the second quarter or when?

Derek Lowe (CEO and CFO)

Just under five November.

Poe Fratt (Managing Director, Equity Research, and Senior Transportation Analyst)

Okay. Can we talk about OpEx? There was a big drop in OpEx in the fourth quarter versus the third quarter. You highlighted the impact of, what was it, I think the return of one of the Dans, right? Can you just talk about sort of the run rate for OpEx in the first half of 2025?

Derek Lowe (CEO and CFO)

Yeah. You should see a similar impact of the other Dan coming out of the fleet. In fact, a very close equivalent because the sale of each of those vessels was just two months into the quarter, into the half year.

You should find that the further impact on OpEx of the Sabia being sold should be fairly similar.

Poe Fratt (Managing Director, Equity Research, and Senior Transportation Analyst)

Can you quantify the impact of the Dan Sabia in the third quarter? Because I do not recall that you actually talked about that on the December call.

Derek Lowe (CEO and CFO)

If you look at a fairly reasonable OpEx rate assumption and then look at the times when she was on contract versus not, that would give you a good guide.

Poe Fratt (Managing Director, Equity Research, and Senior Transportation Analyst)

Okay. Just to summarize, the first quarter will be impacted from a cost standpoint, but the second quarter of 2025 should not see a similar impact.

Derek Lowe (CEO and CFO)

Not for those reasons, no, because we will not have had any vessels off-hire that we would be paying for.

Poe Fratt (Managing Director, Equity Research, and Senior Transportation Analyst)

Okay. Is there any outstanding off-hire receivable at this point in time, or is that all cleared up and you have nothing in negotiations as far as off-hire reimbursement or anything like that, Derek?

Derek Lowe (CEO and CFO)

No, nothing significant. The biggest one was for the Torill claim, which we've discussed on a number of quarters, I think, and has that completed in January.

Poe Fratt (Managing Director, Equity Research, and Senior Transportation Analyst)

Yeah. That was a pleasant surprise. Thanks for your time.

Derek Lowe (CEO and CFO)

Great. Thanks, Poe.

Moderator (participant)

Thank you. Just as a quick reminder, if you would like to ask any further questions, you can do so by pressing star followed by one on your telephone keypad. We now have the next question from Mario Epelbaum with First New York. Please go ahead.

Mario Epelbaum (Portfolio Manager and Partner)

Hi gentlemen. Thank you very much for the opportunity to ask questions. I think my first question is to see if I'm thinking about this right.

If I take a quarter like this and a full year of a quarter like this, you would probably have cash flow before that amortization of about $160 million a year. If you have $90 million a year of amortizations, you're talking about almost $70 million of cash flow after amortizations per year. Am I wrong in my analysis?

Derek Lowe (CEO and CFO)

If you included interest in the first line you gave us, did you do that?

Mario Epelbaum (Portfolio Manager and Partner)

Yeah. Yeah, of course I did. I did. Yes. Yeah. I subtracted the interest and the insurance from this quarter, and you were like a $40 million of cash flow. You had a $63 million of EBITDA, something like that, take $6 million, and then the $16 million of interest. That is where you land. This is more than $2 per share of cash flow after amortizations now. It is quite a hefty number.

Now, I understand that you want to be secure with your—you want it to be recurring in order to pay the dividend or not, but there's a lot of recurring cash flow that is already there. Do you think you have to have 100% charter coverage in order to increase the distribution to match it a little bit to the $2 and change per year? This is before the increases that you just described that are likely to come. I'm just a question of how, I mean, could we see maybe a little bit more dividend because there's a big difference between paying all the cash flow and some of the cash flow? If you could give us a little bit more color in how you're thinking about it, I would appreciate it.

Derek Lowe (CEO and CFO)

Yeah. Yeah. Thank you for the question.

The board's view is that the long-term interest of unit holders are served both through accretive investment and a long-term sustainable distribution. We think those things come together. The partnership started with four vessels 12 years ago and is now at 18 vessels through that combination. We expect that balance to continue in the minds of the board as they look forward. You annualized some figures. Obviously, we've had one quarter that you've used for that basis, and that time needs to pass, and the new charters that are starting need to feed through to the results, I think, to get to the position that you were describing. That in itself is some way off. The last point you say, would there be some sort of threshold passed if we had 100% charter coverage?

The thing is that there's a continuing, there's a rolling need to renew charters. A high 90s % for a foreseeable period is not going to last simply with the passage of time. Clearly, a good level of coverage is always going to be sought and welcome. There is a lot of optionality in the charter outlook, as you can see on slides, I think 13 and 14, especially 14. You can see the fixed periods dropping away during the course of next year. That is why there's a continuing rolling commercial focus on filling up the charter schedule.

Mario Epelbaum (Portfolio Manager and Partner)

Thank you for that. I agree with that, but there is some sense of a connection between your decision to pay more dividends and the charters. As you just said, you'll always have some charters rolling off.

That would mean that you perhaps would never want to pay a dividend using that logic. I'm not suggesting that that's your point of view, but I'm just sort of extrapolating that logic. As unit holders—Yes, I appreciate that.

Derek Lowe (CEO and CFO)

Apologies. Do go ahead. Sorry.

Mario Epelbaum (Portfolio Manager and Partner)

No, no. That was it. I guess let me move on. I understand what you're saying. I wanted to sort of think that as a unit holder, there's quite a bit of room now. To pay dividends, you could pay maybe a—you could have a policy where you pay 40% or 50% of the cash after amortizations. That might be the beginning of getting remunerated. Let me ask another question in terms of when you imagine that there's four vessels now that you may purchase that are now actually out there on the water.

Two of them are in Brazil, and two of them are in the North Sea. Would you buy some in the North Sea given that the long-term outlook for that market is smaller and the growth of it is not so not as secure as in Brazil?

Derek Lowe (CEO and CFO)

Yeah. That's a question that our conflicts committee would be looking at, definitely, when we're looking at drop-land. Some listeners may not be aware, we have a committee of the independent members of our board who look at any transaction that is contemplated with our sponsor. It's called the conflicts committee. They take independent financial and legal advice when any potential transaction comes along. That's exactly the type of question that they would be considering. Is any given vessel and the associated commercial exposure of that vessel the right thing to look at. It's not simply the terms of a transaction.

Mario Epelbaum (Portfolio Manager and Partner)

Okay. The final question is, I understand that the drop-downs with the business make a lot of sense. Now, if you do drop-downs, like we're doing with cash, how would you look at the difference between the cash deployed to buying back shares versus a drop-down? I would think the cash to the shares is a lot higher return on investment right now than doing an additional drop-down. Would that be something that you would consider when you make your decision?

Derek Lowe (CEO and CFO)

The board's looking at the long-term interest of unit holders. They look at the two together, not necessarily regarding a business in some way competing with each other. Yes, those two factors are always considered. On the distribution side, particularly, the sustainability option is very much in the board's minds.

Mario Epelbaum (Portfolio Manager and Partner)

Okay. All right. Thank you very much for the first-class questions.

Derek Lowe (CEO and CFO)

Great. Thank you.

Mario Epelbaum (Portfolio Manager and Partner)

Congratulations on some very good support.

Derek Lowe (CEO and CFO)

Thank you very much.

Moderator (participant)

Thank you. We have a follow-up from Poe Fratt from Alliance Global Partners. Please go ahead when you're ready. Poe, please ensure your line is unmuted locally before speaking.

Poe Fratt (Managing Director, Equity Research, and Senior Transportation Analyst)

I apologize. Yeah. You probably didn't think I had another question, Derek, but I do. Can you look at first-quarter utilization? And how has utilization been this quarter? And can you highlight any dry docking activity that you know about for either the first quarter or the rest of the year?

Derek Lowe (CEO and CFO)

Sure. I don't have any specific disclosures to give you on utilization during the first quarter, but we haven't had any issues that we'd like to disclose to you. Let's put it in those terms.

The dry docks, I appreciate the chart's a bit small, but on page 13, we've highlighted when in the year the dry docks are appearing and also which dry dock it is in case you want to make different assumptions about the dry docks that happen at different stages in a vessel's life. You can see those figures there. We are looking at four vessels during the course of this year.

Poe Fratt (Managing Director, Equity Research, and Senior Transportation Analyst)

Yeah. The Windsor, the Raquel, the Tove, and the Tuva, correct?

Derek Lowe (CEO and CFO)

Yeah. I think Tuva might be slightly later into 2026.

Poe Fratt (Managing Director, Equity Research, and Senior Transportation Analyst)

Okay. Great. That's helpful. Thank you.

Derek Lowe (CEO and CFO)

Right. Thank you.

Moderator (participant)

Thank you. Just a final reminder, star one, to register for a question. We now have Climent Molins with Value Investor's Edge. Please go ahead.

Climent Molins (Head of Shipping Research)

Hi. Thank you for taking my questions.

I wanted to start by asking about your debt repayment schedule pro forma for the recent swap of the Dan Sabia for the Lena Knutsen. Could you talk about how much the facility on the Lena Knutsen adds to the scheduled debt repayment for 2025?

Derek Lowe (CEO and CFO)

Yeah. We'll be disclosing more details of the debt facility on that vessel when we file our 20F. As we've not expanded on that detail in this disclosure, I think it's probably best if you wait for that. You'll find it highly recognizable by comparison with other debt facilities.

Climent Molins (Head of Shipping Research)

Makes sense. This one is more market-related. Over the past couple of years, the North Sea had lagged behind the Brazilian market. Does the Penguins and Johan Castberg startup have the potential to, let's call it, close the gap?

Derek Lowe (CEO and CFO)

I guess we're not necessarily seeing the comparison in that way.

I mean, they're clearly extremely welcome and long-awaited production starts in the North Sea. They are the key difference to pick up in the North Sea market that's been anticipated for some time. Aside from that, I mean, clearly, we welcome strengthening in both markets. It's quite hard to make a comparison as if one is catching up with the other and so on.

Climent Molins (Head of Shipping Research)

All right. Thanks for the color. Thank you for taking my questions.

Derek Lowe (CEO and CFO)

Thank you. Thanks.

Moderator (participant)

Thank you. I can confirm we have no more questions in the queue. I would now like to hand it back to Derek for some final closing comments.

Derek Lowe (CEO and CFO)

Thank you, Brika, and everyone again for joining this earnings call for KNOT Offshore Partners' fourth quarter in 2024. I look forward to speaking with you again following the first quarter results.

Moderator (participant)

Thank you all for attending today's earnings call. I can confirm today's call has now concluded. You may now disconnect. Thank you all for your participation.