Q2 2024 KNOT Offshore Partners LP Earnings Call

We've heard the new build-offs as placed in order to service the large new production volumes coming online in the years ahead. A measured amount of new shuffled anchor ordering is imperative and should not be understood as some sort of negative development for the sector. A material shortage of shuffled anchor capacity remains projected in the coming years.

Derek Lowe: A measured amount of new shuttle tank ordering is imperative and should not be understood as some sort of negative development for the sector. The material shortage of shuttle tanker capacity remains projected in the coming years. We do also remain mindful of the near-term market conditions, where we're particularly focused on marketing the Dan Stalbia and Hilda Knotson. In the meantime, the partnership remains financially resilient, with a strong contracted revenue position of $773 million at the end of Q2 on fixed contracts, which averaged 2.3 years in duration. Charles' options are additional to this, and average are further 2.3 years.

We do also remain mindful of the near-term market conditions where we're particularly focused on marketing the Dan Salvia and Hills of Connison.

Speaker Change: In the meantime, the partnership remains financially resilient with the strong contractage revenue position of $773 million at the end of Q2 on fixed contracts, which average 2.3 years in duration. The child's options are additional to this and average of further 2.3 years.

Derek Lowe: Our pattern of cash generation and liquidity balance is sufficient for our operations, and the significant pay down rate for our debt, and we've demonstrated the strength of our relationships with lending banks by several webinars that the earnings completed over the last year. Finally, the average age of our vessels at 10.2 years places as well, places as well when compared with a useful life model of 23 years. On to slide 8, you can see the consistency of our revenues over the quarters of the years. This consistently applies also to our operating income when the effect of vessel impairments is removed.

Speaker Change: Our pastime of cash generation and liquidity balance is sufficient for our operations and the significant paid down rate for our debt. I mean, demonstrated the strength of our relationships with the lending banks for several week and extra earnings completed over the last year.

Speaker Change: Finally, the average age of our vessels at 10.2 years, places as well, places as well when compared with the useful life model at 23 years.

Speaker Change: On the slide date, you can see the consistency of our venues over the course of the years, this consistently applies also to our operating income when the effective vessel impairment is removed.

Derek Lowe: Slide 9 similarly reflects the consistency of our adjusted EBITDA, and you can find the definition of this non-GAAP measure in the appendix. On slide 10, the most notable change in the balance sheet over the first half of 2024 has been a $68 million reduction in our liabilities, of which $52 million is in long-term debt over one year, and a further $10 million in long-term debt due for repayment within the coming year. This comes from our contractual debt repayment schedule, which in turn reflects our strong debt service capacity. Slide 11 sets out these long-term debts, where we provide added color around the dynamics of debt repayment.

Speaker Change: Slide 9 similarly reflects the consistency of our adjusted EBITDA and you can find the definition of this non-gap measure in the appendix.

Speaker Change: On slide 10, the most noticeable change in the balance sheet over the first half of 2024 has been a $68 million reduction in our liabilities, which 52 million is in long-term death of over one year, and the further 10 million in long-term death due for repayment within the coming year.

Speaker Change: This comes from our contractual debt repayment schedule, which in turn reflects our strong debt service capacity.

Speaker Change: Slide 11 sets out these long-term debts, where we provide added color around the dynamics of debt repayment.

Derek Lowe: The highlighted column shows how the outstanding balances of each facility have been reducing because of the repayments that we have been making in line with scheduled repayment terms. The current installments are the amounts of capital repayment due over the next year, which do not include interest, and the balloon payments of the final amounts of principle, which will be due on the maturity dates. Of notes, $91 million is due to be paid on these debt facilities over the 12 months following 30 June. The present the next balloon repayments of due over August and November 2025. Our typical pattern is for our vessels to provide security for our debt facilities, and that applies to 16 out of 18 vessels in the fleet as of 30 June.

Speaker Change: The highlights of column shows how the outstanding balances of each facility have been reducing because of the repayments that we've been making in line with scheduled repayment terms. The current instalments are the amounts of capital repayment due over the next year, which do not include interest, and the balloon payments with the final amounts of principle, which will be due on the maturity date.

Speaker Change: Of note, $91 million is due to be paid on these debt facilities over the 12 months following 30th of June. The present, the next balloon repayments, are due over August and November of 2025.

Speaker Change: A typical pattern is for our vessels to provide security for our depth facilities and that's obliged to 16 out of 18 vessels in the fleet as of 30th of June.

Derek Lowe: We had completed the repayments of the most recent loans secured by Dan Cisner and Ansarbia, and of course now Dan Cisner has left the fleet. New arrival to the Connitson has brought $69 million of debt with a maturity in January 2027. The present Dan Cisner is the only vessel free of debt, and we do not have any plans to incur additional borrowing secured by Dan Cisner until we have better visibility on her future employment. $861 million has some $900 million in debt facilities secured by vessels, while the two revolving credit facilities, totaling $50 million of capacity, are unsecured.

Speaker Change: We did completed the brief payments of the most recent loan secured by Dan Sysner and Dan Sarbier and of course now Dan Sysner is left to please.

Speaker Change: New ARIPAL 2 for Connection has brought 69 million of debt with a maturity in January 2027.

Speaker Change: A present stands out here is the only vessel free of debt, and we do not have any plans to incur additional borrowing secure by Dan Sarbier until we have better visibility on her future employment.

Speaker Change: 861 million out of 900 more million in debt facilities, a secure by vessels, while the two revolving credit facilities, saving $50 million of capacity are uns secured.

Derek Lowe: Slide 12 shows the contracted pipeline in child format, reflecting the developments I set out earlier, including from the tuber cuts and acquisition. Similarly, slide 13 highlights the focus of our commercial efforts on adding near-term contracts for Dan Cisner and Hilda Connitson. We've made good progress in increasing our fixed traffic coverage, and we intend to remain active in that regard. On slide 14, we see our sponsor's infantry vessels, which are eligible for purchase by the partnership. This applies to any vessel owned by or on order four, our sponsor, where the vessel has a firm contract period of at least five years in length.

Speaker Change: Slide 12 shows the contracted pipeline in chart format reflecting the developments I set out earlier, including from the tuber cuts and acquisition.

Speaker Change: Similarly, slide 13 highlights the focus of our commercial efforts on adding near-term contracts for Dan Sarbier and Hilder-Knowzon.

Speaker Change: We've made good progress in increasing our fixed traffic average, we intend to remain active in that regard.

Speaker Change: On slide 14, we see our sponsor's infantry vessels which are eligible for purchase by the partnership. This applies to any vessel owned by or on all the four are sponsor, where the vessel has a firm contract period at least five years in length.

Derek Lowe: At present, four existing vessels and five under construction fall into this category.

Derek Lowe: There is no assurance that any further acquisitions will be made by the partnership, and any transaction will be subject to the border approval of both parties, which includes the partnership's independent conflicts committee. As we have said, our top priorities remain securing additional contract coverage for existing fleet and fostering our liquidity position. On slide 15 to 17, we have provided some useful illustrations of the strong demand dynamics in the Brazilian markets as published by Petrobrás. We encourage you to view Petrobras's materials directly at the web pages shown there. Primary takeaway from each of these slides is consistent.

Speaker Change: A present for existing vessels and five under construction fall into this category.

Speaker Change: There is no assurance that any further acquisitions will be made by the partnership and then you turn back and be subject to the board approval of both parties, which includes the partnerships independent conflicts committee.

Speaker Change: As we have said, our top priorities remain securing additional contract coverage for existing plates and fostering our liquidity position.

Speaker Change: On site 15 to 17, we have provided some useful illustrations of the strong demand and amics in the Brazilian markets as published by TetraBash.

Speaker Change: We encourage you to view Petra Rush's materials directly at the web page as shown there. Primary take away from each of these sizes contestants. There is very significant, committed, demand growth coming in the Brazilian market in the form of new FBSOs that will require regular service and shop at anchors.

Derek Lowe: There is very significant committed demand growth coming in the Brazilian market in the form of new FBSOs that will require regular service from Charlotte bankers. Two particular items that I would flag as indicative of the progress here. In recent days, Equinoe announced that the Long Away to Johan Casberg FBSO sets sail for the Barren Sea, where it's scheduled to bring operations to begin operations later this year. And in Brazil, the FBSO, Maria Criteria, scheduled as per the graphic care to begin in 2025. That's in fact already arrived in Brazil and has now guided to start up during 2024.

Speaker Change: Two particular items that I would flag is indicative of the progress here.

Speaker Change: In recent days, Equino announced that the longer weight of your hand castberg FPSO set sail for the balance sea.

Speaker Change: wrote scheduled to bring operations to begin operations later this year and in Brazil the FPSO Maria Criteria, scheduled as per the graphic care to begin in 2025, as in fact already arrived in Brazil and has now guided to start up during 2024.

Derek Lowe: There's a great deal of production growth on development, and it's certainly encouraging to see these projects moving decisively forward. We believe that reports earlier this year of additional vessel construction contracts are an endorsement of the strong anticipated market conditions in the medium and longer term. As I mentioned earlier, three of those recent new builds, new build contracts are for our sponsor, Nicholas and MIK, and are due for delivery over 2026 and 27. We would expect to see further new build orders placed in order to service the large new production volumes coming online in the years ahead, and the material shortage of Charlotte banker capacity remains projected in the coming years.

Speaker Change: There's a great deal of production growth on development and it's certainly encouraging to see these projects moving decisively forward.

Speaker Change: We believe that reports earlier this year of the digital vessel construction contracts are an endorsement of the strong anticipated market conditions in the medium and longer term. As I mentioned earlier, three of those recent new builds, new build contracts are for our sponsor, let's know my K, and I'll do for delivery over 2026 and 27.

Speaker Change: We would expect to see further new builders placed in order to service the large new production volumes coming online in the years ahead. And a material shortage of travel tanker capacity remains projected in the coming years.

Derek Lowe: On slide 18, we provide information relevant to our US unit elders, in particular those seeking your Form 1099. Those holding units by their custodians or brokers should approach those parties directly. Those with directly registered holdings should contact our transfer agent, a Cleanity Trust Company whose details are shown there. On slide 19, we include some reminders of strong fundamentals of our business. In the market, we serve our assets, competitive landscape, robust contractual footprint, and resilient finances.

Speaker Change: On slide 18, we provide information relevant to our U.S. unit elders, in particular those seeking a form 1099. Those holding units via their custodians or brokers should approach those parties directly.

Speaker Change: Those with directly registered holdings should contact our transfer agent, the Quincy Trust's company whose details are shown there.

Speaker Change: On slide 19, we include some reminders of strong fundamentals of our business. In the market we serve, our assets, competitive landscape, robust contractual footprint, and resilient finances.

Derek Lowe: I'll finish with slide 20, recapping our financial and operational performance in Q2, 2024, and subsequent time, and our outlook for the remainder of 2024. We're glad to have delivered high and safe utilization, which have generated consistent financial performance. We are pleased with the new contracts and extensions we've secured during the quarter and since, along with our abilities to navigate our refinancing needs and periodic capital expenditure. We're particularly delighted to have taken the growth step of swapping the dam system after Tuva Connection, and our continued commercial focus remains on filling up third party utilization for the next 12 months while looking further forward to longer-term charter visibility and liquidity generation.

Speaker Change: I'll finish this slide 20, recapping off financial and operational performance in Q2 2020-24 on the subsequent time and our outlet for the remainder of 2024. We're glad to have delivered high and safe utilization which have generated consistent financial performance.

Speaker Change: We are pleased with a new contract and extensions we've secured during the quarter-and-since, along with our abilities and navigators, we'll refinancing needs and periodic capital expenditure. We'll particularly delighted to take in the growth step of swapping the Dancisna for two for connection.

Speaker Change: and our continued commercial focus remains on filling up the third-party utilisation for the next 12 months, while looking further forward to longer-term chart of visibility and the Kurdish generation.

Derek Lowe: In total, though, we are making good progress and pleased with established positive momentum against an improving market backdrop.

Speaker Change: We are making good progress and please do the established positive momentum against an improving market backdrop.

Derek Lowe: Thank you for listening, and with that, I'll hand the call back to the operator for any questions.

Speaker Change: Thank you for listening and with that I'll hand the call back to the operator for any questions.

Operator: Thank you, Derek. If you would like to ask a question, please press staff followed by one on your telephone. Keep it now. If you change your mind, please press staff followed by two.

Speaker Change: Thank you for watching!

Speaker Change: Thank you, Derek. If you would like to ask a question, please press star followed by one on your telephone keypad now. If you change your mic, please press star followed by two. When preparing to ask your question, please ensure your devices are muted, low-key.

Operator: When preparing to ask your question, please ensure your devices are muted locally.

Operator: The first question we received is from Lion Park from Be Rally. The line is now open; please go ahead.

Speaker Change: The first question we receive it from Lionbox from B. Rally. The line is now open, please go ahead.

Liam Burke: Thank you. Derek, how are you today?

Derek Lowe: Thanks, Liam. How are you?

Speaker Change: Thank you. Derek, how are you today?

Liam Burke: I'm fine. Thank you.

Derek: Thank you very much.

Liam Burke: On the Dan Sabia, is that potentially an asset that can be redeployed at a favorable long-term contract based on the end market?

Speaker Change: Come on, fine, thank you. On the dance subia, is that potentially an asset that can be redeployed at a favorable long-term contract based on the end-market, or do you see possibly an alternative way to, you know?

Derek Lowe: Or do you see possibly an alternative way to essentially divest the asset?

Derek Lowe: We're actually looking at both in the market strengthening, so there's always the potential for a, as it were, a routine contract over the longer term. But we're open-minded as to what the best way to get value from Dan Sabia is going to be.

Speaker Change: and essentially divest the asset.

Speaker Change: We're actually looking at both in the market strengthening, so there's always a potential for a, as it were, we're rooting contract over the longer term, but we're open-minded as to what the best way to get value from Dancer, I'll be going to be.

Liam Burke: Okay.

Liam Burke: And then it looks like the Brazilian market is starting to really step up in terms of the deployment of FPSOs. North Sea is obviously lagging there, but are you satisfied enough that there'll be enough activity in the North Sea to keep your vessel utilizations up?

Speaker Change: Okay, and then...

Speaker Change: It looks like the Brazilian market is starting to really step up in terms of the deployment of FPSOs. North Sea is obviously lagging there, but are you satisfied enough that there'll be enough activity and the North Sea to keep your vessel utilization up?

Derek Lowe: We do expect so, yes. Okay.

Liam Burke: Thank you.

Speaker Change: We do expect so, yes.

Liam Burke: And then just very quickly, you have 176 million balloons next year. You've had a long history, based on the quality of your assets, of just refinancing. Is it all right to just presume that these things are already in process and you're working with your banks on these?

Speaker Change: Okay, thank you. And then just very quickly you have 176 million balloon next year. You've had a long history based on the quality of your assets of just refinancing, right?

Speaker Change: Is it all right to just presume that these things are already in process and you're working with your banks on these?

Derek Lowe: Well, I think you need to make your own assumptions based on the information available to you in particular track record. It's, I would say, it is quite a long time out until the first of those three refinancing. So 11 months, isn't it?

Speaker Change: But I think you need to make your own assumptions based on the...

Speaker Change: Information available to you, particularly our track record. I would say this quite a long time out until the first of those three refinancing, so 11 months isn't it? So it would be unusual to start that sort of negotiation at 11 months out, but we do have a practice of...

Derek Lowe: So it would be unusual to start that sort of negotiation 11 months out. But we do have a practice of negotiating those a decent amount of time ahead of the refinancing.

Liam Burke: Great. Thank you, Derek.

Speaker Change: and negotiating those additions amount of time ahead of the refinancing.

Speaker Change: Good. Thank you, Derek.

Paul Fed: The next question is from Paul Fed from AGP Linus. Now open, please do it. Yeah, hello Derek. Can you just highlight on the two of what the balloon payment. How much the balloon payment is when it's due in two that what is the January of 2027. And then how much amortization you're going to see annually? And the amortization schedule will look in line with what you're used to seeing on other bet.

Derek: Thank you.

Derek: Thank you.

Derek: The next question is from Poor Fred from AGP, Linus now open please do it.

Fred: Yeah, hello, Derek, I'm just highlighting the two of what the Bloom Payment, how much the Bloom Payment is when it's due into what is a January of 2021 and then how much you're going to see annually.

Speaker Change: The amosodation schedule will look in line with what you're used to seeing on other deaths. We expect to provide more information in our long form 6K in a few weeks time so the best place to look will be in that.

Paul Fed: We expect to provide more information in our long form 6-K in a few weeks' time. So the best place to look will be in there. If you look at sequentially, your up-ex was down, or maybe GNA was down, up-ex was up. Can you just give me some color on how up-ex and GNA looked for the rest of the year? We're not expecting material changes. There is generally an inflationary environment in much of the expenditure that we're exposed to, and similarly for our peers in the market as well, but we're not expecting significant changes.

Speaker Change: So I guess if you look at sequentially your apex was down or maybe she and A was down, apex was up. Can you just give me some color on how apex and GNA look for the rest of the year?

Speaker Change: We're not expecting the serial changes, I mean there is...

Speaker Change: Generally in inflation environments in much of the expenditure that we're exposed to and similarly for our own.

A measured amount of new shuttle tank ordering is imperative and should not be understood as some sort of negative development for the sector. The material shortage of shuttle tanker capacity remains projected in the coming years. We do also remain mindful of the near-term market conditions, where we are particularly focused on marketing the Dan Sabia and Hilda Knotson. In the meantime, the partnership remains financially resilient, with a strong contracted revenue position of $773 million at the end of Q2 on fixed contracts, which averaged 2.3 years in duration.

Speaker Change: appears in the market as well, but we're not expecting significant changes.

Paul Fed: Okay, how can we understand the dynamic of agreeing to the one-year extensions on the tortoise and the Lena and then giving three-year options or three one-year options behind those one-year extensions? Given the outlook for Brazil seemed like maybe waiting a little bit for the market to really tighten up and availability to really decline, that your leverage might have been higher doing that next year or the year after. Can you just understand the thinking behind that and whether these options are also priced at higher rates than what the extension for price that? Yeah, we don't comment on pricing of specific contracts.

Speaker Change: Okay, I'll only understand the dynamic of you know in green too.

Speaker Change: The one-year extensions on the tortoise and the Lena, and then giving 3-year options or you know 3-1-year options behind those 1-year extensions.

Speaker Change: Give them the outlook for Brazil seemed like maybe waiting a little bit for the market to, you know, really tighten up and available, really decline that your leverage might have been higher doing that next year or the year after.

Charles' options are additional to this, and average are further 2.3 years. Our pattern of cash generation and liquidity balance is sufficient for our operations, and the significant pay-down rate for our debt, and we've demonstrated the strength of our relationships with lending banks by several refinances that the earnings completed over the last year. Finally, the average age of our vessels at 10.2 years places as well when compared with a useful life model of 23 years.

Speaker Change: Can you just help me just understand the thinking behind that and whether these options are also priced at higher rates than what the extension for price done.

Derek Lowe: I'm afraid I can't expand on that. I would say that, of course, it's in negotiation, and when your existing client is asking for terms, it will be on for time periods which suit the production that they're expecting.

Speaker Change: Yeah, we don't, we don't comment on pricing of specific contracts on a further content, expand on that. I would say that, of course, it's in negotiation, and when your existing client is asking for terms.

On to slide 8, you can see the consistency of our revenues over the course of the years. This consistently applies also to our operating income when the effects of vessel impairments is removed. Slide 9 similarly reflects the consistency of our adjusted EBITDA, and you can find the definition of this non-gap measure in the appendix. On slide 10, the most notable change in the balance sheet over the first half of 2024, has been a $68 million reduction in our liabilities, for which 52 million is in long-term debt of over one year, and the further 10 million in long-term debt due for repayment within the coming year.

Speaker Change: will be on for time periods which suit the production that they're expecting.

Paul Fed: Yeah, and you know, it looks like, you know, obviously you have two right now, the Sabia, which you just talked about, and then the TORAL. I think the TORAL is the one that's coming up in the North Sea, right, or has availability. When do you expect to lock in something on that TORAL? It's on, I think of me in the Hilda, and the Hilda, sorry. Yeah, that's right. We are pretty active in marketing and negotiation on both those vessels all the time, so they haven't been as I was suggesting, an out-of-all transactions or an out-of-all contract, but we are working on those all the time.

Speaker Change: And you know, it looks like, you know, obviously you have two right now, the sabia, which you just talked about, and then the, the twirl.

Speaker Change: What I think the Torals up to one that's coming up in North Sea, right? Or has availability? What went you expect to lock in something on that Toral?

This comes from our contractual debt repayment schedule, which in turn reflects our strong debt service capacity. Slide 11 sets out these long-term debts, where we provide added colour around the dynamics of debt repayment. The highlighted column shows how the outstanding balances of each facility have been reducing because of the repayments that we've been making in line with scheduled repayment terms. The current instalments are the amounts of capital repayment due over the next year, which do not include interest, and the balloon payments of the final amounts of principle, which will be due on the maturity dates.

Speaker Change: It's on, I think, being the Hilder and the Hilder story are...

Speaker Change: Yeah, that's right. We are pretty active in marketing and negotiation on both those vessels all the time. So, they haven't resolved to get in, announce the pull transactions or announce the pull contracts, but we are working on those all the time.

Paul Fed: Okay, great. Thanks a lot, Joe.

Speaker Change: Okay, great. Thanks a lot, Joe.

Of notes, $91 million is due to be paid on these debt facilities over the 12 months following 30th of June. The present, the next balloon repayments of due over August to November 2025. Our typical pattern is for our vessels to provide security for our debt facilities, and that applies to 16 out of 18 vessels in the fleet as of 30th of June. We had completed the repayments of the most recent loans secured by Dan Cisner and Ansarbia, and of course now Dan Cisner has left the fleet.

Joe: Thank you.

Operator: If you would like to ask a question, please press star followed by one on your telephone keypad now.

Speaker Change: Thank you. If you would like to ask a question, please press staff followed by one on your telephone keypad now. When preparing to ask your question, please ensure your device is animated locally.

Operator: When preparing to ask your question, please ensure your device is emitted locally.

Jim Ashut: The next question is from Jim Ashut from Aviation Advisory Service. The line is now open.

Speaker Change: The next question is from Kim Ashu from Aviation Advisory Service. The line is now open, please go ahead.

Jim Ashut: Please go ahead. Thank you for taking my question.

Derek Lowe: Good afternoon.

Jim Ashut: Two questions, if I may. First of all, this would go to the Parliament, if I'm reading the chart correctly. The term, current term, turns into the next year, and there is an option period for the first part next year. By when does the Charter need to notify you whether we're going to exercise that option? That's going to be late in this year. I mean, the typical period can be as short as 30 days. I don't have the exact figure to hand, but it can be as short as that. So that means if they don't exercise the option, then you have to make an alternate arrangement.

Kim Ashu: Thank you for taking my questions, good afternoon. Two questions to my next. First of all, do this will go to the Parliament, if I'm reading it shortly.

New arrival to the Connitson has brought $69 million of debt with the maturity in January 2027. The present Dan Cisner is the only vessel free of debt, and we do not have any plans to incur additional borrowing secured by Dan Cisner, until we have better visibility on her future employment. $861 million has some 900 one million in debt facilities secured by vessels, while the two revolving credit facilities, totaling $50 million of capacity are unsecured.

Speaker Change: The Tom Coins Tom Jones.

Speaker Change: and obviously end of the year for the next year and there is an option here for the first part of the next year. By when this the charter needs to notify you when they're going to exercise that option.

Speaker Change: So that's going to be late in this year. I mean the typical period can be as short as 30 days. I don't have the exact figure to hand, but it can be as short as that.

Slide 12 shows the contracted pipeline in child format, reflecting the developments I set out earlier, including from the Tuber cuts and acquisition. Similarly, slide 13 highlights the focus of our commercial efforts on adding near-time contracts for Dan Cisner and Hilda Connitson. We've made good progress in increasing our fixed traffic average and we intend to remain active in that regard. On slide 14, we see our sponsor's infantry vessels which are eligible for purchase by the partnership.

Speaker Change: So that means if they don't exercise the option then you have to make an alternate arrangement.

Derek Lowe: Right?

Derek Lowe: That's right, yeah.

Jim Ashut: Okay, next thing. Can you summarize your current interest rate swap arrangements, the enemy swaps that are rolling off and ending in the future? What in terms of size? Well, you summarize how many swaps you have in place and what their sizes and whether any of them are going to do the end in the near future. Okay, well, they, we actually have several of them, and they tend to come in layers, so multiple tranches for each company that will vessel that they relate to. So, at the moment, as we've disclosed, we're paying just under 2% fixed on average on the swaps that are outstanding.

Speaker Change: That's right, yeah.

Speaker Change: Okay. Next thing, can you summarize your point of interest rate slot, no interest for the having these slots that are rolling off, and then they're on the future.

This applies to any vessel owned by or on order for our sponsor, where the vessel has a firm contract period at least five years in length. Any transaction will be subject to the border approval of both parties, which includes the partnership's independent conflicts committee. As we have said, our top priorities remain securing additional contract coverage for existing fleet and fostering our liquidity position. On slide 15 to 17, we have provided some useful illustrations of the strong demand dynamics in the Brazilian markets as published by Petrobrush.

Speaker Change: in terms of terms of size.

Speaker Change: You just look, can you summarize what how many slots you have in place and what they're sizes and what they're on either way and do the end in the near future.

Speaker Change: Okay, well, I'm...

Speaker Change: Several of them and they tend to come in layers, so multiple branches and for each.

We encourage you to view Petrobrush's materials directly at the web page has shown there. Primary take away 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 provide regular service from childhood anchors. Two particular items that I would flag as indicative of the progress here. In recent days, equinox announced that the longer way to Johan Casberg, FPSO, it sets sail for the barren sea.

Speaker Change: Company, they'll vessel that they relate to.

Speaker Change: So at the moment as we disclose we're playing just under 2% fixed on average on the swaps that are outstanding.

Jim Ashut: And the maturity is average maturity of those is 1.4 years.

Derek Lowe: So if you look at what's listed as Page 5 on our filing, you'll be able to see the figures there.

Speaker Change: and the maturity is average maturity of those is 1.4 years. To be able to look at what's listed as page 5 on our filing, you'll be able to see the figures there.

Both scheduled to bring operations to begin operations later this year. And in Brazil, the FPSO, Maria Criteria, scheduled as per the graphic care to begin in 2025. That's in fact already arrived in Brazil and is now guided to start up during 2024. There's a great deal of production growth on development. And it certainly encouraging to see these projects moving decisively forward. We believe that reports earlier this year of additional vessel construction contracts are an endorsement of the strong anticipated market conditions in the medium and longer term.

Jim Ashut: Well, thank you very much. Great.

Speaker Change: Okay, okay.

Speaker Change: Okay, well thank you very much.

Speaker Change: Thank you for watching!

Derek Lowe: As we currently have no further questions, I will now hand back the direct for closing remarks. Thank you again for joining us earnings call for Knoff's off your partner's second quarter in 2024.

Speaker Change: Thank you.

Speaker Change: As we currently have no further questions, I will now hand back to Derek for closing remarks.

Derek Lowe: And I look forward to speaking with you again following the third couple of results.

Derek: Thank you again for joining us Learning School for Knoss Offer your partner's second quarter in 2024. And I look forward to speaking with you again following the third couple of results.

Operator: I'm sorry, Derek. We just received another question, Lyon from corporate. Okay, that's fine.

As I mentioned earlier, three of those recent new builds, new build contracts are for our sponsor, Nicholas and MIK, and are due for delivery over 2026 and 27. We would expect to see further new build orders placed in order to service the large new production volumes coming online in the years ahead. And the material shortage of shuttle tanker capacity remains projected in the coming years. On slide 18, we provide information relevant to our US unit holders, in particular those seeking a form 1099.

Operator: I'd like to take the question. Thank you. So the next question is from corporate from ATP.

Speaker Change: I'm sorry Derek, you just received another question, Lion, from the course that I'd like to take the question.

Speaker Change: Thank you. So the next question is from CoFREATS from A to P.

Operator: Oh, he just dismisses question. I'm afraid.

Operator: Sorry. No problem.

Speaker Change: Oh, he just dismisses a question on the freight for me.

Operator: Okay. And are there any further questions?

Speaker Change: That's a problem.

Operator: No further questions. Great.

Speaker Change: Okay, and are there any further questions?

Derek Lowe: Thank you.

Derek Lowe: Well, thank you everybody for joining us. Forward to speaking with you again in about three months' time. Thank you.

Speaker Change: Nogara Kashi Nde.

Those holding units via their custodians or brokers should approach those parties directly. Those with directly registered holdings should contact our transfer agent, the Cleaner Sea Trust's company, whose details are shown there. On slide 19, we include some reminders of strong fundamentals of our business. In the market, we serve our assets, competitive landscape, robust contractual footprint and resilient finances.

Speaker Change: Thank you everybody for joining us forward to speaking with you again in about three months time. Thank you.

Operator: Thank you so much.

Operator: This concludes today's conference call. You may now disconnect your lines.

Speaker Change: Thank you so much, this concludes today's conference call, you may now disconnect your lines.

Derek Lowe: I'll finish with slide 20, recapping our financial and operational performance in Q2 2024 and subsequent time and our outlook for the remainder of 2024. We're glad to have delivered high and safe utilization, which have generated consistent financial performance. We are pleased with the new contracts and extensions we've secured during the quarter and since, along with our abilities to navigate our refinancing needs and periodic capital expenditure. We're particularly delighted to have taken a growth step of swapping the Dan Sistner for Tuva Knesson.

Speaker Change: Thank you for watching.

Derek Lowe: And our continued commercial focus remains on filling up third party utilization for the next 12 months, while looking further forward to longer term charter visibility and liquidity generation. In total, Lowe, we are making good progress and pleased with established positive momentum against an improving market backdrop.

Derek Lowe: Thank you for listening and with that I'll hand the call back to the operator for any questions.

Operator: Thank you, Derek.

Operator: If you would like to ask a question, please press staff followed by one on your telephone keep it now. If you change your mind, please press staff followed by two. When preparing to ask your question, please ensure your device is unmuted locally.

Speaker Change: Thank you for watching.

Liam Burke: The first question we received is from Lion Burke from B. Riley. The line is now open please go ahead. Thank you. Derek, how are you today? Thanks Liam, how are you? I'm fine, thank you.

Derek Lowe: On the dance tabia, is that potentially an asset that can be redeployed at a favorable long term contract based on the end market, or do you see possibly an alternative way to essentially divest the asset? We're actually looking at both of them in the market strengthening, so there's always the potential for a, as it were, a routine contract over the longer term, but we're open minded as what the best way to get value from the dance tabia is going to be.

Liam Burke: Okay, and then it looks like the Brazilian market is starting to really step up in terms of the deployment of FPSOs.

Derek Lowe: North Sea is obviously lagging there, but are you satisfied enough that there'll be enough activity in the North Sea to keep your vessel utilization up? We do expect so, yes.

Liam Burke: Okay, thank you.

Derek Lowe: And then just very quickly, you have 176 million balloon next year. You've had a long history based on the quality of your assets of just refinancing. Is it all right to just presume that these things are already in process and you're working with your banks on this? Well, I think you need to make your own assumptions based on the information available to you, in particular, our track record. I would say it is quite a long time out until the first of those three refinancing, so 11 months isn't it? So it would be unusual to start that sort of negotiation 11 months out, but we do have a practice of negotiating those a decent amount of time ahead of the refinancing.

Liam Burke: Great.

Derek Lowe: Thank you, Derek.

Derek Lowe: Thank you.

Paul Fett: The next question is from Paul Fett from AGP. The line is now open. Please do it. Yeah. Hello, Derek.

Derek Lowe: Can you just highlight on the two of what the balloon payment, how much the balloon payment is when it's doing two, what is the January of 2027? And then how much amortization you're going to see annually? The amortization schedule will look in line with what you're used to seeing on other bets.

Derek Lowe: We expect to provide more information in our long form 6K in a few weeks time, so the best place to look will be in there. If you look at sequentially, your up-ex was down, or maybe GNA was down, up-ex was up. Can you just give me some color on how up-ex and GNA look for the rest of the year? We're not expecting material changes. I mean, there is generally an inflationary environment in much of the expenditure that we're exposed to and similarly for our peers in the market as well, but we're not expecting significant changes.

Paul Fett: Okay, help me understand the dynamic of agreeing to the one-year extensions on the tortoise and the Lena, and then giving three-year options, or three-one-year options behind those one-year extensions. Given the outlook for Brazil seemed like maybe waiting a little bit for the market to really tighten up and availability could really decline that your leverage might have been higher doing that next year or the year after. Can you just help me just understand the thinking behind that and whether these options are also priced at higher rates than what the extension for price that?

Derek Lowe: Yeah, we don't comment on pricing of specific contracts. I'm afraid I can't expand on that. I would say that, of course, it's in negotiation and when your existing client is asking for terms, it will be on for time periods which suit the production that they're expecting.

Paul Fett: Yeah, and, you know, it looks like, you know, obviously you have two right now, the Sabia, which you just talked about, and then the, the TORAL, what I think the TORAL is the one that's coming up in North Sea, right, or has availability, when do you expect to, you know, lock in something on that TORAL? It's on, I think you mean the hill there, and, yeah, that's right. We are pretty active in marketing and negotiation on both those vessels all the time. So they haven't been as I was suggesting, an out support transactions or an out support contract, but we are working on those all the time.

Derek Lowe: Okay, great. Thanks a lot, Joe. Thank you.

Operator: If you would like to ask a question, please press star followed by one on your telephone, keep it now. When preparing to ask your question, please ensure your devices are muted locally.

Jim: The next question is from Jim, a shoot from Aviation Advisory Service. The line is now open. Please go ahead.

Jim: Thank you for taking my question. Two questions, if I may. First of all, if you would like to be in Parliament, if I'm reading the chart correctly, the term, current term turns, and I guess the end of the year giving a next year. And there is an option period for the first part of next year, by when does the Charter would need to notify you whether we're going to exercise that option?

Jim: That's going to be late in this year. I mean, the typical period can be as short as 30 days. I don't have the exact figure to hand, but it can be as short as that. So that means if they don't exercise the option, then you have to make an alternate arrangement. Right. That's right. Yeah. Okay.

Jim: Next thing. Can you summarize your current interest rate swap arrangements, the enemy swaps that are rolling off and ending in the future? What in terms of in terms of size?

Derek Lowe: Well, you summarize how many swaps you have in place and what their sizes and whether any of them are going to do that in the future? Okay. Well, we actually have several of them and they tend to come in layers, so multiple tranches for each company that will vessel that they relate to. So at the moment, as we've disclosed, we're paying just under 2% fixed on average on the swaps that are outstanding. And the maturity is average maturity of those is 1.4 years. So if you look at what's listed as page 5 on our filing, you'll be able to see the figures there. Okay.

Jim: Well, thank you very much. Great.

Operator: Thank you.

Operator: As we currently have no further questions, I will now hand back the direct for closing remarks. Thank you again for joining us earnings call for Knoff's off your partner's second quarter in 2024 and I look forward to speaking with you again following the third cup of results.

Derek Lowe: I'm sorry, Derek.

Operator: We just received another question, Lyon from corporate.

Corporate: I'd like to take the question. Thank you.

Operator: So the next question is from corporate from ATP. Oh, he just dismisses question. I'm afraid. No problem. Okay. And are there any further questions? No further questions. Great. Thank you.

Operator: Well, thank you everybody for joining us forward to speaking with you again in about three months time. Thank you. Thank you so much.

Operator: This concludes today's conference call. You may now disconnect your lines. Thank you very much.