Q1 2025 KNOT Offshore Partners LP Earnings Call

Maxine: Hello and welcome everyone to the Knot First Quarter 2025 Earnings Call. My name is Maxine and I'll be coordinating the call today. If you would like to ask a question, you may do so by pressing star flow by one on your telephone keypad.

Hello, and welcome everyone to the basketball attachments 25 earnings call.

Maxine: My name is Maxine and I'll be coordinating the call today, if you would like to ask a question you may do so by pressing star one.

Pat: Thank you Pat.

Maxine: I will now hand you over to Derek Lowe, Chief Executive Officer. Please go ahead.

Maxine: Now how does if she Douglas Chief Executive Officer. Please go ahead.

Derek Lowe: Thank you, Maxine, and good morning, ladies and gentlemen.

Speaker Change: Thank you Maxine and good morning, ladies and gentlemen, my name is Derek Lowe and I'm, the chief executives and Chief Financial Officer cannot offshore partners welcome to the Partnership's earnings call for the first quarter of 2025.

Derek Lowe: 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 first quarter of 2025. 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 the 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.

Speaker Change: Web-sites cannot offshore partners Dot com and you can find the earnings release that along with this presentation.

Speaker Change: On slide two you will find guidance on the inclusion of forward looking statements in today's presentation.

Speaker Change: These amazing 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.

Derek Lowe: 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.

Speaker Change: Partnership does not have or undertake a duty to update any such forward looking statements made as of the date of this presentation.

Speaker Change: Further information please consult our SEC filings, especially in relation to our annual and quarterly results.

Speaker Change: Today's presentation also includes certain non U S GAAP measures.

Speaker Change: Our earnings release includes a reconciliation of these to the most directly comparable GAAP measures.

Derek Lowe: On slide three, we have the financial and operational headlines for Q1. Revenues were $84 million, operating income $23.4 million and net income $7.6 million. Adjusted EBITDA was $52.2 million. We closed Q1 with $101 million in available liquidity, made up of $67 million in cash and cash equivalents, plus $34 million in underwrought capacity on our credit facility. We operated with 99.5% utilisation, taking into account the start of two dry dockings, which amounts to 96.9% utilisation overall.

Speaker Change: On slide three we have the financial and operational headlines for Q1.

Speaker Change: Revenues were $84 million.

Speaker Change: Pricing income $23 4 million and net income $7 6 million adjusted EBITDA was $52 2 million, we closed Q1 with $101 million in available liquidity.

Speaker Change: Made up of $67 million in cash and cash equivalents plus $34 million in undrawn capacity on our credit facilities.

Speaker Change: We operated with 99% utilization taking into account the status of two dry dockings.

Speaker Change: At which amounts to 96 non utilization overall.

Derek Lowe: Following the end of Q1, we declared a cash distribution of US$0.02 per common unit, which was paid in early May. On to slide four, our outlook remains positive on both industry dynamics and the partnerships positioning to participate fruitfully in our market. 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 Casberg FPSO started production following shortly after the Penguins FPSO back in February. 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.

Speaker Change: Following the end of Q1, we declared a cash distribution of $2 six U S cents per common unit, which was paid in early may.

Speaker Change: Okay.

Speaker Change: On to slide four our outlook remains positive on both industry dynamics and the partnerships positioning to participate frequently in all markets.

Speaker Change: Significant growth as anticipated in production and sales, which Rhode Island service box shuttle tankers in particular, we've seen Brazilian fps's delivering and starting up ahead of schedule across a few still to come in the north sea the longer way to John Cashback, Fpss, who starts production following shortly after the Penguins FPA side back in February.

Speaker Change: On the vessel supply front.

Speaker Change: We're seeing continued new build orders placed in order to service the large new production volumes coming online in the years ahead.

Derek Lowe: This includes for our sponsor, Connexion MYK, whose most recent order was placed in March. A massive amount of new shuttle tank ordering is unavoidable and in fact necessary as a shortage of shuttle tank 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 minimises or even eliminates a 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 $854 million at the end of Q1 on fixed contracts, which averaged 2.3 years in duration.

Mike Hey: This concludes for our sponsor and then Mike Hey, These most recent order was placed in March.

Mike Hey: Mentioned amounts of new shuttle tanker ordering is unavoidable and in fact necessary as a shortage of Chuck.

Mike Hey: Truck capacity remains projected in the coming years.

Mike Hey: As usual for the shelf market. We believe the all night Newbuild orders are backed by firm client charters, which minimises weeden eliminates that dynamic of speculation around anticipated supply into the global fleets in two to three years' time.

Mike Hey: The partnership remains financially resilience with a strong contracted revenue position of $854 million.

Mike Hey: At the end of Q1 on fixed contracts, which averaged two three years in duration.

Derek Lowe: Transfers options are additional to this and average a further 4.7 years. With the markets 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. And our hassle of cash generation and liquidity balance is sufficient for our operations and the significant pay-down rate for our debt, which is in the region of $90 million per year for instalment payments. The debt from the lever acquisition fits in with this repayment price profile also.

Mike Hey: Charles with options of additional todays and averaged $4 seven news.

Mike Hey: With the market's having strengthened and given expectations for tightness in the years ahead.

Mike Hey: Economic rationale for exercising these options has been strengthening and we increasingly expect these options to be taken up.

Mike Hey: And our cash generation and liquidity balance distribution for our operations and the significant Paydown right project, which is in the region of $90 million for installment payments.

Mike Hey: The debt from the lever acquisition fits into this repayment thoughtful site.

Derek Lowe: On slide 5, a number of developments in Q1 were announced already on the previous earnings call. Most notably, our near-term chartering exposure was addressed by a swap of the Downs Arbia for the Leverknut. Slide six contains additional details on that vessel swap, which is explained further in our form 20-F filing as a subsequent event in our 2024 annual report.

Mike Hey: On slide five a number of developments in Q1 Burnouts already on the previous earnings call.

Mike Hey: Notably our near term chartering exposure was addressed sponsored work with Dan Sabia for the <unk> Knutsen.

Mike Hey: Slide six contains additional details on that vessel swap, which is explained further in our form 20-F filing as a subsequent event in our 2024 annual report.

Derek Lowe: On slide 7, our most recent developments include the Hilda Knutson going on-hire with Shell in late March on the one-year fixed charter.

Mike Hey: On slide seven our most recent developments include the Hilda Knutsen going on however, Charlotte late March on the one year fixed charter.

Derek Lowe: The addition of one vessel to our potential drop down inventory, which is the new build order I mentioned earlier. And the current charter for Brazil Clipson has also been extended to September when she'll be redelivered from Petro Rio and then delivered out to Equinor.

Mike Hey: One vessel draw potential dropdown inventory, which is the Newbuild order I mentioned earlier.

Mike Hey: And the current charter for Brazil, because it's in has also been extended to September when she'll be redelivered from Petrobras and then delivered out to economics.

Derek Lowe: On to slide 8. You can see consistent and growing revenues over the quarters and years, along with improving profitability. Slide 9 similarly reflects consistent and growing adjusted EBITDA, and you can find the definition of this non-gap measure in the appendix.

Mike Hey: On slide eight you can see consistently growing revenues over the quarters and years, along with improving profitability.

Mike Hey: Slide nine similarly reflects consistent and growing adjusted EBITDA and you can find the definition of this non-GAAP measure in the appendix.

Derek Lowe: On slide 10, we show the change in our balance sheet from the end of 2024 to the 31st of March 2025. The main point to note there is that even after the assumption of $73 million of debt from the lever acquisition. Our long-term debt balance rose by the much lower figure of $47 million in that period, which reflects the contractual debt repayments we make in the area of $90 million per year.

Mike Hey: On Slide 10, we said the change in our balance sheet from the end of 2024 to.

Mike Hey: Touching first of March 2025.

Mike Hey: The main point Tonight, there is that even after the assumption of $73 million of debt from the <unk> acquisition.

Mike Hey: Our long term debt balance rose by the much larger figure of $47 million in that period, which reflects the contractual debt repayments, we make in the area of $19 million per year.

Derek Lowe: 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 Tover Knutsen and Sinova 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 favourable 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 instalments are the amounts of capital repayment due over the next year, which do not include interest or the final balloon payments due on maturity date.

Mike Hey: The debt facilities can be seen on slide 11, which sets out the maturity profile.

Mike Hey: On line one the first of our revolving credit facilities is due to mature in August 2025, and online to the loan secured by Teva and <unk>.

Mike Hey: That matures over September and October 2025.

Mike Hey: The second revolver matures in November 2035.

Mike Hey: We typically seek to refinance such facilities very comparable tons I may have a good track record of refinancing success, even in less favorable market environment.

Mike Hey: Carlos you column shows how the outstanding balances of each facility being reduced because of the repayments we've been making in diamond's scheduled repayment terms.

Mike Hey: The current installments the amounts of capital repayment to you over the next year, which do not include interest or the final balloon payments due on maturity dates.

Derek Lowe: Of note, 96 million dollars in current installments is due to be paid over the 12 months following 31st of March 2025. Our typical pattern is for our vessels to provide security for our deck facilities and that now applies to the whole fleet of 18 vessels. In addition to the $932 million of secured debt, the two revolving credit facilities totalling $50 million of capacity are unsecured.

Mike Hey: Of $90 million to $96 million in currency installment is due to be paid over the 12 months. Following 30 <unk> March 2025.

Mike Hey: Our typical pattern is for our vessels to provide security for our debt facilities and that applies to the whole fleet of 18 vessels.

Mike Hey: In addition to the $932 million of secured debt the two revolving credit facilities totaling $50 million of capacity unsecured.

Derek Lowe: 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, which include material balloons in each of 2025 and 2026.

Mike Hey: The maturity profile up these data suggest that graphically on slide 12, as you can see repayments are spread out over the coming years, particularly material balloons in each of 2025 and 2026.

Mike Hey: Slide 13 shows the contracted pipeline in chart format affecting the development success outside here as well as the fact that the coconut since option period is the only material outstanding periods until Q2 of 2026.

Derek Lowe: 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 until Q2 of 2026. While nothing is certain until it's formally in place, we are cautiously optimistic about securing vast additional coverage in the current tight market, either as an extension or under a new charter. Similarly, slide 14 highlights an encouraging 96% of fixed charter coverage for the last three quarters of 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.

Mike Hey: So 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 the new charter.

Mike Hey: Okay.

Mike Hey: Similarly, slide 14 highlights an encouraging 96% of fixed charter coverage for the last three quarters of 2025, we currently have 75% of 2036 fixed as well, although the eight percentage does rise materially over the course of the year, which demonstrates the need for our continuing commercial efforts.

Derek Lowe: 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 of at least five years in length. At present, four existing vessels and six under construction fall into this category.

Mike Hey: On slide 15, we see our sponsors inventory of vessels, which are eligible for purchase by the partnership.

Mike Hey: Any vessel owned by on order for our sponsor by the vessel has secured a firm contract periods at least five years in length.

Mike Hey: For existing vessels and six under construction fall into this category.

Derek Lowe: There is no insurance 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 KNRP's strategy and value proposition are a creative investment in the fleet and a long-term sustainable distribution. At present, we see a compelling opportunity to increase our revenue backlog and long-term cash flow while lowering our average fleet age by drop-downs from KNO2. As such, we intend to pursue long-term charter visibility and increases drop-down supportive of long-term cash flow generation.

Mike Hey: There is no insurance and.

Mike Hey: Any further acquisitions will be made by the partnership with any transaction would be subject to board approval device policies.

Mike Hey: Which includes the partnership's independent complex committee.

Mike Hey: To believe that key components of kind of base strategy and value proposition are accretive investments in the fleet and a long term sustainable distribution.

Mike Hey: At present, we see a compelling opportunity to increase our revenue backlog and long term cash flow, while lowering our average fleet age prior dropdowns from KNOC.

Mike Hey: As such we intend to pursue long term charter visibility and accretive dropdown supportive of long term cash flow generation.

Derek Lowe: On slide 16 to 18, we provided some useful illustrations of the strong demand dynamics in the Brazilian market, as published by Petrobras. We encourage you to review Petrobras' materials directly at the web pages 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. Six outstanding new build contracts are for our sponsor, because it's an MYK, and are due for delivery over late 2025 to early 2028.

Mike Hey: On slide 16 to 18, we have provided some useful illustration of the strong demand dynamics in the Brazilian market as published by Petrobras.

Mike Hey: Or would you to review your vessels materials directly at the web pages China.

Mike Hey: The primary takeaway from each of these slides is consistent it's very significant committed demand growth coming in the Brazilian market in the form of new <unk> that will require a regular service from shuttle tankers.

Mike Hey: We believe that recent reports of additional vessel construction contracts, an endorsement of the strong anticipated market conditions in the medium and longer term.

Mike Hey: Six outstanding Newbuild contracts for our sponsor <unk>.

Mike Hey: <unk> delivery over late 2025 to early 2028.

Derek Lowe: We would not be surprised to see further new build orders placed in order to service the large new production volumes coming online in the years ahead. In a trend that also applies to oil production globally, you'll see that even in the years ahead, when aggregate production growth slows down, deep offshore production, in this case in the Brazilian pre-salt, continues to outpace the overall market and take market share.

Mike Hey: We would not be surprised to see further newbuild orders placed in order to service the large production volumes coming online in the years ahead.

Mike Hey: And the trend that also advice to oil production globally, you'll see that even in the year as a headwind.

Mike Hey: Can we get production growth slows down deep offshore production in this case in presenting pre salt continues to outpace the overall market and take market share.

Derek Lowe: On slide 19, 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. Those with directly registered holdings should contact our Transfer Agent, the Quinnity Trust Company, whose details are shown there.

Mike Hey: On slide 19, we provide information relevant to our U S unit holders in particular, those seeking a form 10 99.

Mike Hey: Those holding units probably that custodians or brokers should approach those policies directly.

Mike Hey: Those with directly registered holdings should contract to our transfer agent Equiniti Trust company as details are shown there.

Derek Lowe: 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.

Mike Hey: 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 visiting and finances.

Derek Lowe: I'll finish with slide 21, recapping our financial and operational performance in Q1 2025 and the subsequent time and our current outlook. We're glad to have delivered high and safe utilisation, which have generated consistent financial performance. We're particularly pleased to have filled the contracting schedule and taken a further growth step by swapping Dan Sarbia for Lieberknecht. Our continued commercial focus remains on adding to our longer-term charts visibility and the cash flows that provide us with the capacity for both accretive investment in the fleet and a long-term sustainable distribution.

Mike Hey: Ill finish with slide 20, recapping, our financial and operational performance in Q1, 2025, and the subsequent time and our current outlook, we glad to have delivered high and safety utilization, which would generate a consistent financial performance.

Mike Hey: We're particularly pleased to have filled the contract schedule and taken a further growth step by swapping done software for Libre commitment.

Mike Hey: Our continued commercial focus remains on adding to our longer term charter visibility and the cash flows that provide us with a capacity for both accretive investments in the fleet and a long term sustainable distribution.

Derek Lowe: and in the coming months we will also be addressing the full refinancings which are coming due this year. In total, though, we're making good progress. I'm pleased to have established positive momentum against an improving market backdrop.

Mike Hey: And in the coming months, we will also be addressing the full refinancings, which should come coming to this year.

Mike Hey: In total they were making good progress and pleased to have established positive momentum against an improving market backdrop.

Derek Lowe: Thank you for listening.

Mike Hey: Thank you for listening and with that I'll hand, the call back to vaccine for any questions.

Maxine: And with that, I'll hand the call back to Maxine for any questions. Thank you. If you would like to ask a question, you may do so by pressing star followed by one on your telephone keypad. If you do change your mind, please press star followed by two. When preparing to ask your question, please ensure that your line is unmuted locally.

Mike Hey: Thank you. Thank you would like to ask a question you may decide that that can still followed by one on your testing keypad. If you do change your mind. Please press star followed by one.

Mike Hey: Glenn Thanks Ross. Your question. Please ensure that your line is I mean, you could likely.

Liam Burke: Our first question today comes from Liam Burke from B Riley Securities. Please go ahead Liam, your line is now open. Thank you. Hi, Derek. How are you today? Okay, good, thank you. Derek, the drop-downs, there are 11 potential drop-downs from the sponsor. Any sense of timing? You have growing liquidity and financial flexibility. Surely, each of those potential transactions is reviewed one by one on its own merits, although there's no guarantee that any of them will come through. Clearly, it's something that we would seek to invest in on the right terms. It's a function of when those vessels are offered to us and the board's decision at the time around the terms on which the vessels are offered.

Liam Burke: Our first question today comes from Liam Burke with B Riley Cherokee. Please go ahead ma'am your line is now open.

Speaker Change: Thank you Hi, Derik how are you today.

Liam Burke: Okay. Good thank you.

Liam Burke: Derek.

Liam Burke: The dropdowns.

Liam Burke: Potential dropdowns from our sponsor.

Liam Burke: Any sense of timing.

Liam Burke: You have growing liquidity and financial flexibility.

Speaker Change: Surely H P.

Liam Burke: Potential transactions is reviewed.

Liam Burke: One by one on its own merits. So although there's no guarantee that any of them will come through clearly, it's something that we would seek to invest in normal times.

Liam Burke: As a function of when those vessels are offered to us and the board's decision at the time around.

Liam Burke: Sure.

Liam Burke: <unk> so much the vessels are offered so.

Derek Lowe: So we don't have any clear timing for you, and obviously a number of the vessels are on the water and some are still new built, and so that would guide the timing on those as well. And then you've had a pretty strong history of successful refinancings of your balloon payments. Do you anticipate being able to refinance at similar or better terms? That's what we're working towards. We've got the same pattern of refinancing as we've had in the past in that we tend to start those conversations with our lenders quite early, and so the negotiations go on a fairly slow pace because there's so much time in which to do that, and there's no real urgency as we go through from either side.

Liam Burke: So we don't have any clear timing for you and obviously.

Liam Burke: The vessels.

Liam Burke: On the water and some are still need built inside that would guide the timing on those as well.

Liam Burke: Okay, and then you had a pretty strong history of successful refinancings.

Liam Burke: Do you anticipate being able to refinance at.

Liam Burke: Similar or better terms.

Liam Burke: That's what we're working towards.

Liam Burke: We felt the same pattern of refinancing as we got in the past.

Liam Burke: We tend to see.

Liam Burke: Stock based compensations with all lenders quite early.

Liam Burke: The.

Liam Burke: The negotiations go on a fairly.

Liam Burke: Slide pace, because that's how much time image to do that.

Liam Burke: There's no real urgency as we go through from either side those conversations are underway.

Maxine: Those conversations are underway. We don't have any negative indications so far, but until they're signed, of course, then they're not set. Thank you, Derek. Thank you. As a reminder, to ask a question, please press Star 0x1 on the telephone keypad.

Liam Burke: And have any negative indication so far but until until assigned calls then and then all of that.

Derrick: Sure. Thank you Derrick.

Dan Sabia: Thanks, Dan.

Speaker Change: Thank you as a reminder to ask a question. Please press star followed by one thank you.

Dan Sabia: Pat.

Jim Altschul: Our next question comes from Jim Altschul from Aviation Advisors. Please go ahead, Jim. Your line is now open. Good afternoon. Thanks for taking my call, my question rather.

Speaker Change: And our next question comes from Tim Chiang from Avi Asian Advisors. Please go ahead, Jim Your line is now open.

Tim Chiang: Good afternoon, Thanks for taking my call my question rather.

Speaker Change: The question I had looking at.

Derek Lowe: The question I have is just looking at the news release, it appears that the various interest rate hedges you currently have in place will all run off by sometime next year. What will be the impact on the bottom line of the end of these interest rate hedges? Thanks Jim for your question. The average maturity is one and a half years, and so some of them will come off earlier than that, and some will roll out later, but you're right to highlight that they do all expire. We put in new interest rate hedges on a rolling basis when we see terms that we think are suitable or attractive, so it's not as if the portfolio of interest rate swaps is static and will just expire.

Speaker Change: News release.

Speaker Change: Fears that.

Speaker Change: The interest in various interest rate hedges.

Speaker Change: I currently have in place will all one off.

Speaker Change: Sometime next year.

Speaker Change: What will be the impact on the <unk>.

Speaker Change: Bottom line.

Speaker Change: The end of these interest rate hedges.

Speaker Change: Thanks, Jim for your question.

Speaker Change: <unk>.

Speaker Change: The average maturities, one and a half years and so some of them will come off earlier than that and some of them will rollout later.

Speaker Change: But you are right to highlight that they do will expire.

Speaker Change: <unk> posted a new interest rate hedges on a rolling basis.

Speaker Change: When we see terms that we think.

Speaker Change: Surgical or attractive.

Speaker Change: It's not as if the portfolio interest rate swaps.

Speaker Change: It's static and we will just expire.

Derek Lowe: I don't have a direct comment on bottom line impact. Obviously, you can see with each quarter's results, disclosures around what we receive as realized income from those derivatives and also mark to market on the unrealized portion. Well, but if you're putting new ones in place, you're certainly not going to be at 2.5 or 2.8% the way you have now. That's right. If you reference... The swap rate versus SOFR over anywhere between two and five years, that will give you an indication of the type of fixings that are currently available in the market. Obviously, that's a market level that moves around fairly quickly, but we're in a position to put new swaps in place when we see a rate that we like.

Speaker Change: Have a direct comment on bottom line impacts obviously you can see.

Speaker Change: With each quarters results disclosures around what.

Speaker Change: We received.

Speaker Change: Realized income from those derivatives and also mark to markets on the unrealized portions.

Speaker Change: Well, but if you're putting new ones in place its certainly not going to be a Q&A.

Speaker Change: Two and a half of two 8%.

Speaker Change: No.

Speaker Change: That's right.

Speaker Change: You reference.

Speaker Change: The swap rate versus sector.

Speaker Change: Over anywhere between two and five years that will give you an indication of the type of fixed things that are currently available in the market, obviously that that's a market level that that moves around.

Speaker Change: Fairly quickly and but we're in a position to put new swaps in place, let me say you're right that we like.

Speaker Change: Good but.

Derek Lowe: Good, but a related question. of the I don't I don't have a balance sheet in front of me but you have $600,000 or $600,000 million in long-term debt for the $900,000 But how much of the long term debt is covered by these different interest rates swaps? Sure, that's described in, I think it's about page 4 of the release, directly under the debt maturity profile. So, you asked how much long-term debt, I mean, the total debt burden we've got is $948 million as of the end of March. 932 of that is in the secure debt facilities and then the remainder is what we've drawn down on our RCS.

Speaker Change: Related question, though.

Speaker Change: <unk>.

Speaker Change: I don't have the balance sheet in front of me, but.

Speaker Change: You have $600 900, 600 odd million in long term debt with a $900 million.

Speaker Change: But.

Speaker Change: Uh huh.

Speaker Change: How much of the long term that is covered by some of these different interest rate swaps.

Speaker Change: So and that's described in I think it's about page four of the release directly under the debt maturity profile.

Speaker Change: <unk> also.

Speaker Change: Long term debt.

Speaker Change: Total debt burden with golf is $948 million as of the end of March.

Speaker Change: 932, if that is in the secured debt facilities and then the remainder is what we've drawn down on.

Speaker Change: Rcs and then in the paragraph below I won't read through that but you can see how.

Derek Lowe: And then in the paragraph below, I won't read through that, but you can see how, or two paragraphs below, you can see how our interest rate swap portfolio covers that in various portions. I would also say that the sale and lease back facilities we've got are on fixed rate, so we treat those as being part of our effectively fixed cost portfolio.

Speaker Change: Over to power cost below you can see how our.

Speaker Change: Interest rate swap portfolio covers.

Speaker Change: Is that in various portions.

Speaker Change: I would also say that.

Speaker Change: The sale and leaseback facilities, we've got.

Fixed rate right. So we treat those as being cost.

Speaker Change: Effectively fixed cost profile there.

Speaker Change: Okay.

Jim Altschul: Okay, well, thank you very much. Thank you, Jim. Thank you.

Speaker Change: Okay.

Speaker Change: Thank you very much.

Speaker Change: Great. Thank you chip.

Speaker Change: Yes.

Speaker Change: Thank you.

Pavel Oliva: Our next question comes from Pavel Oliva from Rock Hill Global. Please go ahead, your line is now open. Hi, good morning. Thank you very much for another great quarter and sounds like that you guys are doing for $40 million pre-debt repayment in free cash flow. sort of mid to high 20s, 80s, and 90s. free cash flow afterwards.

Speaker Change: Our next question comes from Pedro Oliveira from <unk> Global. Please go ahead. Your line is now open.

Speaker Change: Hi, Good morning, guys. Thank you very much for another.

Speaker Change: Great quarter and it sounds like.

Speaker Change: You guys are doing.

Speaker Change: Yes, so for $40 million.

Speaker Change: Yes.

Speaker Change: Debt repayment and in free cash flow.

Speaker Change: Sort of mid to high 28.

Free cash flow afterwards, but Mike My question is on the refinancing that you're doing this summer.

Derek Lowe: But my question is on the refinancing that you're doing this summer. You have several packages that are potentially to be refinanced. I think it's the $345 million facility for ANA, Tordes, Vigdes, Brazil, and Leonard Knudsen. Is that correct? Is that the one that's getting refinanced? And no, that's September next year, 2026. So on slide 11, that... So it's the Windsor, Bozell, Carmen, Fortaleza, Recife, and Ingrid, right? No, that's 2028. So if you look at slide 11 in the presentation, you've got them in time order. So we've got two revolving credit facilities unsecured that are due over the course of August to November, and that's 50 million at capacity in total.

Speaker Change: You have.

Speaker Change: Several packages.

Speaker Change: Our.

Speaker Change: Potentially to be refine it I think it's $345 million facility for.

Speaker Change: 48.

Speaker Change: <unk> is for sale at Atlanta, seven is that correct is that the one that's getting refinanced.

Speaker Change: No Thats September next year 2036.

Speaker Change: On slide 11.

Speaker Change: So it's the Windsor.

Speaker Change: Sure.

Speaker Change: Carmen are delays.

Speaker Change: Ive been in great right.

Speaker Change: No. That's 2028, so if you look at slide 11 in the presentation.

Speaker Change: You've got the mean time order.

Speaker Change: So we've got two revolving credit facilities unsecured that you over the course of August two.

Speaker Change: November.

Speaker Change: And that $50 million of capacity in total and then the secured loans off of TOBA and Sanofi.

Derek Lowe: And then the secured loans are for Toba and Sanova, and that's over September and October, and they total at that point 139 million. I see, I see. Okay.

Speaker Change: And that so for September and October and a total at that point $139 million.

Speaker Change: I see I see okay.

Derek Lowe: Um, and those, um, how old are those ships? I'm trying to figure out. Those are one of the new ones, right? Yeah, I'm just thinking off the top of my head. They were delivered around 20 and 22. You need to refer to our filings just to get that exactly right. 21, and Yeah, beginning of 21 and over, middle of 22. And so.

Speaker Change: And does.

Speaker Change: How old are those shifts and trying to figure it out.

Speaker Change: There was not one of the new ones right.

Speaker Change: Yes, I'm just thinking of.

Speaker Change: Top of my head.

Speaker Change: And deliberate around 2020, two you need to refer to our filings just to get that right.

Speaker Change: Yes.

Speaker Change: Yes.

Speaker Change: 101 and.

Speaker Change: Yeah.

Speaker Change: So beginning of 'twenty one.

Speaker Change: Middle of 'twenty two.

Speaker Change: And so.

Derek Lowe: Can I ask you in terms of what kind of loan to value RDs at this point, because you have been making, you know, pretty aggressive repayments. Yeah, I don't have that figure off the top of my head. I'm not sure if we disclose the... Vessel Valuation, Vessel by Vessel, which would help get through that calculation. But yes, you're right that we've been playing down pretty heavily over that.

Speaker Change: Can I ask you in terms of what kind of loan to value R&D at this point, because we have been making.

Speaker Change: Pretty aggressive repayment.

Speaker Change: Yes.

Speaker Change: That figure off the top of my head I'm not sure if we disclose.

Speaker Change: The.

Speaker Change: Okay.

Speaker Change: Vessel valuation.

Speaker Change: Vessel by vessel.

Speaker Change: Which would help get through that calculation, but yes, you are right that we've been trying to MRC I'm pretty heavily at that time.

Derek Lowe: Can I ask you, you know, when when you're doing a loan to values and, you know, trying to determine how much you can borrow against the different assets, do you do mark to market or is it the accounting value? or the bank. Sorry. Over. I'm not sure I follow the exact lines of the question. Well, if if I am the bank, and I'm trying to determine the loan to value, do I use the mark to market what I think the market value of the ship is? Or do I use the accounting value of the ship?

Speaker Change: Okay can I ask it in a way.

Speaker Change: When you're doing the loan to values and trying to determine how much you can borrow against them.

Speaker Change: Different asset due to mark to market or is it the accounting value.

Speaker Change: On the bank.

Speaker Change: Sorry.

Speaker Change: Okay.

Speaker Change: And so yes.

Speaker Change: Sure.

Speaker Change: Question.

Speaker Change: Well, if if I am.

Speaker Change: The bank.

Speaker Change: And I'm trying to determine the loan to value do I use the mark to market, what I think the market value of the shipments or do I use the accounting value of the ship.

Derek Lowe: I generally use the mark-to-market values, so it's a broker valuation. And in fact, the covenants in these loans...

Speaker Change: Generally use the mark.

Speaker Change: Mark to market value, so the broker valuation.

Speaker Change: I think that the company.

Speaker Change: Loans.

Speaker Change: Yes.

Derek Lowe: Is it fair to say that given the tight market in Brazil, the value of the ships has gone up? They've held pretty level over the last time we did it. I wouldn't say it's necessarily gone up, but obviously we've got a range of... Special Ages and Specifications and so on, but they held pretty well over the last time we did that, which was for the year-end 24. And you'll see that in the disclosure in the book.

Speaker Change: Is it fair to say that given.

Speaker Change: Tight market in Brazil, the value of the ships.

Speaker Change: <unk> has gone up.

Speaker Change: Thanks Al pretty leveled at us over the last time, you did it I wouldn't say, it's necessarily gone up.

Speaker Change: Obviously got a range of.

Speaker Change: First of all ages and specifications and so but they held pretty well either.

Speaker Change: The last time, we did that which was fully yearend political youll.

Speaker Change: Youll see that in.

Speaker Change: The disclosure.

Speaker Change: Yes.

Derek Lowe: So where I'm getting at is I'm trying to understand, you know, you may be able to negotiate with the banks as you talk to them, you know, over the next few months, and my guess is you're already talking to them, obviously. if you can get, you know, further advance on these shifts. and basically get some cash. through refinancing to speed up the drop-down. Yeah, if that's enough of your curiosity on that topic, then yes, we think there is potential to, or there can be potential to increase proceeds with refinancing. And that would obviously generate liquidity, but additional debt on the balance sheets and additional amortization rates if we do that.

Speaker Change: So where I'm getting at.

Speaker Change: Is.

Speaker Change: I'm trying to understand.

Speaker Change: You may be able to negotiate with the banks as you talk to them.

Speaker Change: Over the next few months and my guess is you're already talking to them obviously.

Speaker Change: If you can get.

Speaker Change: Further in advance on these ships.

Speaker Change: And basically get some.

Speaker Change: Cash.

Speaker Change: True refinancing to speed up the Dropdowns.

Speaker Change: Yes, so if thats the number of your curiosity on the on that topic. Then yes, we think there is potential too.

Speaker Change: There can be potential to increase proceeds with refinancing.

Speaker Change: And that would obviously generate.

Speaker Change: Liquidity bps additional vessel on the balance sheets and additional.

Speaker Change: Amortization rates, if we do that.

Derek Lowe: Right, right.

Speaker Change: Right right.

Derek Lowe: And Then my other question was about the two ships that will come up for renewal early next year. They are operating in Brazil, right? And they're probably at fairly low rates. So is it Is it fair to assume that that rate that you would recharter it on would be a lot higher than of where it is now. I think I need to leave you to make your own assumptions about that, because we don't comment on individual contract rates. And the key when you're looking at that is, contracts are, the levels are set at the time they're signed, and of course that can be sometime in the past, or in the case of extensions, the time those extensions are signed.

Speaker Change: And.

Speaker Change: Then my other question was about the two ships that as well.

Speaker Change: Com.

Speaker Change: Due for renewal early next year, they are operating in Brazil right.

Speaker Change: And Dan probably a fairly low rate so is it.

Speaker Change: Is it fair to assume that that rate.

Speaker Change: Re chartered on.

Speaker Change: Would be a lot higher Dan.

Speaker Change: Where it is now.

Speaker Change: I think I need to leave you to make your own assumptions about that I mean, the because you don't comment on individual.

Speaker Change: Contract rates.

Speaker Change: Key when Youre looking at fast is.

Speaker Change: On contracts.

Speaker Change: The levels set at the time that signs and of course that can be some time in the past or.

Speaker Change: Or in the case of extensions at the time those extensions assigned and we make disclosures each quarter.

Derek Lowe: And we make disclosures each quarter on when new contracts have come through. So I'd have to leave you to make your own assumptions about the rates that those vessels may be on at the moment and what... current or future markets might be. So, if I make an assumption that the rates in the past are a lot lower than they are right now, that's probably a fair assumption. Well, as I say, I think I need to leave you to make your own assumptions on that, but if you look at the timing at which any gift contract was signed and within the next, within the subsequent quarter announced, that should give you a guide as to where you want to set those levels.

Speaker Change: When.

Speaker Change: When new contracts come through so.

Speaker Change: Leave you to make your own assumptions about the rates that those vessels might be at the moment.

Speaker Change: Parents will future markets might be.

Speaker Change: So if I make an assumption that the rates in the past are a lot lower than they are right now.

Speaker Change: That's probably a fair assumption.

Speaker Change: Would you say.

Speaker Change: Well as I say I think I need to leave you to make your own assumptions on that but if you look at the timing at which any gift contract was.

Speaker Change: Signs and within the next within the subsequent quarter or announced.

Speaker Change: That should give you a guide as to where you want to stay at those levels.

Speaker Change: Okay.

Derek Lowe: One question, you mentioned that the valuations of the ships per broker quotes have been relatively stable. Does that mean, uh, as, uh, evaluations year-on-year given the age of the fleet or even with the age of the ship, the value of the ship, state above. It's the latter, it's just the absolute numbers that came through. Okay, so basically an older ship. hasn't really depreciated in value, it has remained about the same. one-year-old. Yeah, it was the comments on page... It was a comment on the fleet overall for the vessels obviously that were in the fleet throughout the period.

Speaker Change: One question you mentioned that the.

Speaker Change: Valuations of the ships per broker quotes have been relatively stable.

Speaker Change: Does that mean.

Speaker Change: As.

Speaker Change:

Speaker Change: In terms of valuations year on year.

Speaker Change: Given the age of the fleet or even with the increasing age of the ship the value of the ship stayed about the same.

Speaker Change: It's the latter it's just the absolute numbers that came through.

Speaker Change: Okay. So basically an older ship.

Speaker Change: Hasnt really depreciating in value. It has remained about the same.

Speaker Change: One year olds, yes, it was a comment on.

Speaker Change: Thanks.

Speaker Change: It was it was a comment on the fleet overall for the vessels, obviously, but we're in.

Speaker Change: In the fleet throughout the period.

Derek Lowe: And if the rates, especially in Brazil, have... which are... and when we talk to your customers. That's. Theoretically, that should also be reflected in the value of the ships, correct? That will certainly be in the minds of the brokers as they're looking at them, along with any other circumstances they think are relevant. And, like, the other circumstance would be that the new ships are, you know, 120 or 140 million, depending Brazil or North Sea, right? That seems sort of the new. Also, given that the new ships are more expensive, that would also... Value. use ships, correct?

Speaker Change: And if.

Speaker Change: If the rates, especially in Brazil have increased which.

Speaker Change: It seems.

Speaker Change: When we talk to your customers.

Speaker Change: That's the case.

Speaker Change: Theoretically that should also be reflected in the value of the ships correct.

Speaker Change: That will certainly be in the minds of the bright because as they are looking at them along with any other circumstances I think are relevant.

Speaker Change: And the other circumstance would be that the new ships are 120 <unk> hundred.

Speaker Change: $40 million, depending versus Brazil, and North Sea right.

Speaker Change: Sort of the new quotes so also given that the new ships are more expensive debt.

Speaker Change: So increased the value of the used ships correct.

Derek Lowe: It should do and that's for the brokers themselves to comment on but those are some of the considerations they would have as they come up with each valuation.

Speaker Change: It should do and that's what the brokers themselves to comment on that.

Speaker Change: Those are some of the considerations over time as they come up with each one of these patients.

Speaker Change: Understood Okay.

Derek Lowe: Okay. Um... Okay, and how long does it take in general to drop down the ship? drop down. from start to finish of the transaction process, do you mean? and I would say that's two to four months. Can you comment if you have started or have done any of those right now, because you have $67 million on your balance. and it sounds like you will be refinancing and potentially taking some cash out of. out of these borrowings. hopefully, you know, even the revolving credit facility may etc. This may not be a bad time to drop down some of those.

Speaker Change:

Speaker Change: Yeah.

Speaker Change: Okay, and how long does it take in general to dropdown the ship dropdown a ship.

Speaker Change:

Speaker Change: From.

Speaker Change: From start to finish if the transaction process.

Speaker Change: And I would say that two two to four months.

Speaker Change: And.

Speaker Change: Can you comment if you have started at or have done any of that.

Speaker Change: Dose right now because you have $67 million on your balance sheet right and it sounds like you will be refinancing and potentially taking some cash out of the.

Speaker Change:

Speaker Change: Out of these borrowings that youre doing and hopefully even the revolving credit facility may be extended.

Speaker Change: Etc.

Speaker Change:

Speaker Change: It just may not be a bad time to drop down some of those ships right.

Derek Lowe: We, um... You may see that we announce drop-down transactions at the time that they're agreed on, and usually that's around the closing time, and that's the pattern of our announcements, and that's the point at which those transactions become material, and obviously so we need to announce them then, and prior to that we don't make any other comments. last one or two drop downs, how much cash or value? the swaps with then Sabia. But even the one before, how much cash or value did you have to provide in order to swap in order to drop down.

Speaker Change: <unk>.

Speaker Change: You may see that we announce dropdown transactions at the time that they have agreed on a new fleet that surround the closing time.

Speaker Change: The passing of our announcements and thats the points at which those transactions become material, we don't see it that we need to announce and Glenn.

Speaker Change: So that we don't make any other comment.

Speaker Change: Last one or two.

Speaker Change: Dropdowns how much cash.

Speaker Change: Our value you did.

Speaker Change: Swaps with.

Speaker Change: And then <unk> and then Susan but even the one before how much cash our value did you have to provide in order to.

Speaker Change: Swap in order to.

Speaker Change: Dropdown dose ships, you can remind us.

Derek Lowe: Sure, you've got, I think it's page six in this presentation and a similar page in the. I think it's going to be the Q2 or Q3 presentation from last year. and also in the 20s, but I. It's certainly in the filings, but if you want the headlines. Those two, obviously, as you've alluded to, they were vessel swaps rather than funded purchases of the new larger drop-down vessels. And the valuation of the two dams, Sarbio and Cisner, was order of magnitude 30 million. Clearly, you need to look at the filings for the exact numbers, and even the deal summaries have got the figure set out further.

Speaker Change: Sure.

Speaker Change: You've got.

Speaker Change: I think it's page six in this presentation and a similar page in the.

Speaker Change: I think it's going to be the Q2 Q3 presentation from last year.

Speaker Change: And also in the plan.

Speaker Change: I think certainly in the filings, but if you've got the headlines.

Speaker Change: So.

Speaker Change: Those those two obviously as you allude to see their vessels swaps rather than funded.

Speaker Change: Purchases of the.

Speaker Change: The new larger dropdown vessels.

Speaker Change: And the devaluation of the <unk> <unk> system that was.

Speaker Change: Order of magnitude 30 million clearly you need to look at the filings for the exact numbers.

Speaker Change: And even the deal summaries.

Speaker Change: Assess out further.

Derek Lowe: But that's The approximate valuation where the cash element of the consideration was very low by comparison. So, sort of 1 million in either direction. I think it was in one way for one of the transactions and the other way for the other. The cash element of those was negligible compared with the value of the company. Plus or minus, I think the you can see on page six that the Sabia sale price was 25 and three quarters. And for the Cisner, it was, I think above that memory. So, but the ships going forward would be probably slightly higher.

Speaker Change: The approximate valuation where the.

Speaker Change: The cash element of the consideration was.

Speaker Change: By comparison, so sort of $1 million in either direction I think it would be more like one of the transactions and the other way for the other.

Speaker Change: So the cash the cash elements of those was negligible compared with the knowledgeable about the drug.

Speaker Change: And it's about $30 million.

Speaker Change: Plus or minus I think.

Speaker Change: You can see on page six.

Speaker Change: <unk> sale price was 25 and three quarters and for the system. It was I think about that to memory.

Speaker Change: So it's sensitive but the ships going forward would be probably slightly higher right. So you put the three or four ships that are ready to be dropped down at the moment.

Derek Lowe: the three or four ships that are ready to be dropped down at the uh... you probably need thirty or thirty five Yeah, we don't have a particular comment on the exact terms of those, but being that bit newer and contracted that bit more recently, it wouldn't be a surprise to see a slightly higher number there for the equity components. You know, um, the latest drop down came. So the full impact of that, we're going to see only in the second. right. And again, that was an accretive transaction. So on the margin, the... cash flow, free cash flow.

Speaker Change: You, probably need 30% $35 million per ship correct.

Speaker Change: Yes, we don't have a particular comment on.

Speaker Change: In terms of those but being.

Speaker Change: Contracted that bit more recently.

Speaker Change: It wouldn't be a surprise to see a slightly higher number for the equity component.

Speaker Change: Understood.

Speaker Change: The latest dropdown came in March so the full impact of that we're going to see only in the second quarter right and again that was an accretive transaction. So.

Speaker Change: On the margin.

Speaker Change: Cash flow free cash flow run rate should be slightly higher in the second quarter than in the first quarter.

Derek Lowe: with that BF. Yes, as it relates to that 118th of the fleet, yep.

Speaker Change: That would be a fair statement.

Speaker Change: Yes, as it relates to that.

Speaker Change: 118 to fleet yeah.

Speaker Change: Okay understood. Okay, well, thank you very much great quarter I really appreciate it.

Pavel Oliva: Well, thank you very much. Great quarter. I really appreciate it. Thank you, Pavel. Cheers. Thank you.

Speaker Change: Thank you Pavel.

Speaker Change: Sure.

Speaker Change: Thank you. Our next question comes from Robert Silveira. Please go ahead. Your line is now open.

Robert Silvera: Our next question comes from Robert Silvera.

Derek Lowe: Please go ahead, your line is now open. Hi, good morning, and thank you for taking my call. I was a little late to the call, and I'm trying to understand The long-term debt increased significantly, about $50 million, and the lease liabilities increased by about roughly $3 million. Could you give me a wraparound as to why that took place during this last quarter?

Robert Silveira: Hi, Good morning, and thank you for taking my call I was a little late to the call and I'm trying to understand.

Robert Silveira: The long term debt.

Robert Silveira: Increased significantly about $50 million and the lease liabilities increased by Bob roughly 3 million could you give me a wrap around it.

Robert Silveira: Why that took place during this last quarter.

Robert Silveira: Yeah.

Derek Lowe: Sure. And if you listen to the replay in due course, you'll get a couple of comments on that as well, but I'm happy to repeat them here. So the vessel swap that we did in March involved us assuming $73 million of debt as part of the transaction terms. But our long-term debt balance over the quarter increased by much less than that, so increased by only $47 million. So yes, the long-term debt has gone up. It's primarily transaction related. And the fact that there is that difference of, is that $26 million, I think, demonstrates the debt pay down rate that we have in all of our facilities where we make amortization payments.

Robert Silveira: Sure.

Robert Silveira: If you listen to the replay in due course youll youll get.

Speaker Change: Yes, a couple of comments on that.

Speaker Change: Well, but I'm happy to.

Speaker Change: Repeat them here so.

Speaker Change: Vessel swap that we did in March.

Speaker Change: It involves us assuming $73 million of debt.

Speaker Change: As part of the transaction terms.

Speaker Change: But our long term debt balance over the quarter.

Speaker Change: Increased by much less than that so increased by only $47 million.

Speaker Change: So yes, the long term debt has gone up primarily transaction related and.

Speaker Change: But there is that difference of about $26 million I think.

Speaker Change: Demonstrates the debt pay down right.

Speaker Change: That we have in all of our facilities, where we make almost <unk>.

Speaker Change: <unk> payments.

Derek Lowe: And back on slide 11, I just refer you to the, I think it's the third column of figures that add up to $96 million. That's our current outlook for debt amortization in cash over the next year. and we pull out that figure deliberately to show that that's our debt service capacity as far as amortisation is concerned and our ability to pay it back.

Speaker Change: Back on.

Speaker Change: Slide 11.

Speaker Change: I'll just refer you to the I think is the third column of figures that add up to $96 million. That's our current outlook for desktop amortization in cash over the next year.

Speaker Change: And we.

Speaker Change: Deliberately to show that.

Speaker Change: So.

Speaker Change: Debt service capacity as far as amortization is concerned.

Speaker Change: Right.

Robert Silvera: Thank you.

Speaker Change: Thank you.

Derek Lowe: That involves what, one ship dropped down? The March transaction? Yes, that's right. That was one ship, a drop down one, a single ship. It was a single ship drop down, but it was a vessel swap, actually. So we we sold our Dan Sabia and we bought Lieberknutsen. Good.

Speaker Change: That involves what one ship dropdown.

Speaker Change: The March transaction, yes, that's right.

Speaker Change: That was one ship dropdown one a single chip.

Speaker Change: It was a single ship dropdown, but it was a vessel swap actually say we.

Speaker Change: We sold our.

Speaker Change: Dan Sabia, and we bought Libre connection.

Robert Silvera: Okay, well, thank you very much for taking my call. And looks good. And hopefully in the future, the dividend can go back toward the old days when it was 51 cents a share. talk to you later.

Speaker Change: Got it okay, well. Thank you very much taking my call and it looks good.

Speaker Change: Hopefully in the future.

Speaker Change: The dividend can go back towards the old days when it was 51 cents a share.

Speaker Change: Back to you later, thank you alright, thanks, Robert Thanks for your question.

Maxine: Thank you. Thanks, Robert. Thanks for your question.

Speaker Change: Okay.

Maxine: Thank you.

Speaker Change: Thank you. Our next question comes from Mario <unk> from <unk>. Please go ahead Maria Your line is now open.

Mario Epelbaum: Our next question comes from Mario Epelbaum from First New York. Please go ahead, Mario. Your line is now open. Hi. I was on mute. Sorry. Can you hear me now? Yes, I can. Thanks. Okay, thank you for the space to ask questions.

Speaker Change: I wasn't on mute sorry can you hear me now.

Speaker Change: Okay.

Speaker Change: Thanks.

Speaker Change: Okay. Thank you for the space to ask questions.

Speaker Change: Yes.

Derek Lowe: if you have a question about Raquel with Repsol. That, uh, when is that charter actually? Postal Finish, or the option to... What you could give me, I can't give you the date. And the final end of the option is in 2030. Do you mean, do you mean the current, um, yeah, yeah. Yeah, well the current fixed period finishes around the end of June and then the option runs through till the same time in 2030. Okay, so you're one and a half months. And how is your, if that gets renewed by, with Repsol, is there, does that, is there a little bit of an increase in the, in the, should we, could we expect an increase in the charter rate of the, usually at the signing the, they have the option of the same?

Speaker Change: Is it a question of about Rockdale.

Speaker Change: Repsol.

Speaker Change: One is that charter actually.

Speaker Change: Supposed to finish off the option to renew.

Speaker Change: Good evening.

Speaker Change: Right.

Speaker Change: And the final end of the option is in 2030.

Speaker Change: So do you mean.

Speaker Change: Yeah.

Speaker Change: Yes.

Speaker Change: While the current fixed period.

Speaker Change: Finishes around the end of June and then the option runs three tilley.

Speaker Change: At the same time in 2013.

Speaker Change: Okay. So your one and half months.

Speaker Change: And how is.

Speaker Change: Yes.

Speaker Change: If that gets renewed.

Speaker Change: With Repsol is there does that is there a little bit of an increasingly.

Speaker Change: So should we could we expect an increase in the charter rate of the usually at the signing the they have the option of the same.

Derek Lowe: Carter Raitt or or you can ask me about this one, but in general, what should happen at renewals? Yeah, I mean, you're right that we can't comment on individual charter rates, but it is generally the case that we have a small amount of escalation in option terms. And in general, when you remove... Does the charter tell you one month in advance or is this unusually late? It's not unusually late, which you can imagine is a little bit of a frustration I think for any vessel owner, any operator in the space, they'd prefer to have more notice.

Speaker Change: However rates or.

Speaker Change: Or you can ask me about this one but in general what's the.

Speaker Change: Competition.

Speaker Change: Renewals.

Speaker Change: Yes.

Speaker Change: You're right.

Speaker Change: Can't comment on individual charter rates, but it is generally the case that we have a small amount of.

Speaker Change: Escalation an option.

Speaker Change: Hi.

Speaker Change: In general.

Speaker Change: When you when you remove.

Speaker Change: Dusty.

Speaker Change: The charter.

Speaker Change: One month in advance or unusual or is this unusually late as I do.

Speaker Change: You have not been involved.

Speaker Change: It's yes, it's not unusually light.

Speaker Change: Which you can imagine is a little bit of a frustration I think for any for any vessel owner any operator in the space. They prefer to have more notice but that is that is common practice that the deadline is relatively close.

Derek Lowe: But that is common practice that the deadline is relatively close and that a lot of clients leave it quite late on to choose whether to exercise or not. I would say that simply on the basis of current market rates and the need for shuttle service, I would say we're not particularly nervous about the exercise of that, but the sooner that happens clearly the happier we'll be.

Speaker Change: Lots of clients.

Speaker Change: Leave it quite later on.

Speaker Change: <unk>.

Speaker Change: <unk>.

Speaker Change: Choose whether to exercise on those I would say this.

Speaker Change: Simply on the basis of current market rates and the need for.

Speaker Change: Shuffled service.

Speaker Change: I would say, we're not particularly nervous about the exercise of that but at the same about happens clearly the hefei will be.

Derek Lowe: Okay, and then thank you for that.

Speaker Change: Okay.

Derek Lowe: Then the second question I had is... With regard to things that you can easily see, when you compare the first quarter and the second quarter, when you look at the drop down, I mean, at the, sorry, the dry dock. How would you compare first quarter dry dockings to second quarter dry dockings? Well, there are two that are relatively current, and the vast majority of their work was after the start of the second quarter. They're clearly six weeks or so, or seven weeks into the second quarter now, and much of that work fell in April rather than in March.

Speaker Change: Thank you for that my second question I had is.

Speaker Change: With regard to things that you can easily.

Speaker Change: C.

Speaker Change: When you compare the first quarter second quarter, when you look at the dropdown.

Speaker Change: Sorry.

Speaker Change: The dry dockings, how would you compare first quarter dry dockings to second quarters right.

Speaker Change: Well David.

Speaker Change: Right.

Speaker Change: The two that are in.

Speaker Change: Relatively current and <unk>.

Speaker Change: The vast majority of that work was.

Speaker Change: After the start of the second quarter. So the clearly six weeks, we'll say, we're seven weeks into the second quarter now.

Speaker Change: And that much of that work.

Speaker Change: Further in April since March all realized on page 13.

Derek Lowe: I realize on page 13, the current time red line... It's hard to see exactly when that falls, but that's designed to be now rather than the end of the course. Okay, so when you compare the second quarter to first quarter, we expect we have an additional shift, but we have some additional dry dockings. So those are the two puts and takes when you compare the cash. Yeah, that's fair enough. That'd be fair. Yeah, okay, and then...

Speaker Change: The current time.

Speaker Change: The Red line.

Speaker Change: It's hard to say exactly when that falls, that's designed to be now relative to the end of the quarter.

Speaker Change: Okay. So so when you compare the second quarter to first quarter. We expect we have an additional shapes and what we have.

Speaker Change: Some additional dry dockings. So those are the two puts and takes when you compare the cash flow.

Speaker Change: Yes, that's fair enough.

Speaker Change: Sure.

Speaker Change: Yes, Okay and then.

Derek Lowe: And then with the Fortaleza and Recife, these... these shifts that you have that are coming up in 2026. Are you engaged already with other parties in discussions of potential? Potential. Yeah, we may not be focusing on. Yeah, I mean, it may be a generic comment, but we're marketing our open contract positions all the time. And I'm glad that the next material open positions are as far out in the future as they are now. That clearly wasn't a position that we had a year ago, or even six months ago. But yes, we are marketing that all the time.

Speaker Change: And then what was the Fortaleza and Recife.

Speaker Change: Yes.

Speaker Change: At this time the shifts to do half of it are coming up in 2026.

Speaker Change: Are you engaged already with <unk>.

Speaker Change: Other parties in discussions of potential.

Speaker Change: Thanks, a lot.

Speaker Change: Mostly long thing.

Speaker Change: Yes.

Speaker Change: It may be a generic comment, but we're marketing our open contract positions with diamond.

Speaker Change: I am glad that.

Speaker Change: The next material open positions are far out in the future as they are now that clearly wasn't the position that we had.

Speaker Change: A year ago, even six months ago, but yes, we are marketing that is all the time.

Derek Lowe: And so. given your description of the market being tight. I imagine that you are enjoying this negotiation. of the open marketing positions in Brazil. Would that be fair? Wow. in the sense that you're in a stronger position than you've been in quite a while. It's I think it's fair to say we are in a strong position now than we have been previously but nonetheless until they're until they're signed they're not signed.

Speaker Change: And.

Speaker Change: So.

Speaker Change: Given the your description of the market being tight.

Speaker Change: I imagine that you are in.

Speaker Change: You are enjoying these negotiations.

Speaker Change: You open marketing efficiency, Brazil would that be fair.

Speaker Change: Okay.

Speaker Change: In the sense that during a stronger position than you've been quite a while.

Speaker Change: It's I think it's fair to say we are in a strong position now than we have been previously, but nonetheless until there until it's signed but not signed.

Speaker Change: Okay great.

Derek Lowe: And then in terms of the the North Sea. It's my understanding that the cost is going to ramp up quite quickly. that they have these wells that they have drilled in advance. It should go up to its max capacity, like 200,000 barrels a day sometime in the mid-year to third quarter. Would that be your sense? Yeah, we do expect it to be fairly quick and that's the... That's the public domain information or news discussion information as well. That should be increasing significantly the number of ships in the North Sea that are needed. Between those two, what would you think the increased demand for shuttle tankers in general in that market?

Speaker Change: And then in terms of the.

Speaker Change: The <unk>.

Speaker Change: In North Sea, it's my understanding that the consequences on our ramp up quite quickly.

Speaker Change: They have these wells they have drilled.

Speaker Change: Sure.

Speaker Change: It should go up too much capacity like 200000 barrels a day.

Speaker Change: Barrels from day.

Speaker Change: Sometime midyear to third quarter would that be your sense.

Speaker Change: Yes, we do expect it to be.

Speaker Change: To be fairly quick and that's the.

Speaker Change: That's the public domain information.

Speaker Change: These new discussion information as well.

Speaker Change: And that should be increasing significantly the number of ships that will not see that are needed.

Speaker Change: Between those two what would be.

Speaker Change: What would be you think the increased demand for shuttle.

Speaker Change: Ronald tankers in general market.

Derek Lowe: Yeah, I don't know the numbers, but... But if you help us, you know a lot better than I do. Yeah, I'm reluctant to guess, but what I would say is, as you're aware, we've got four vessels in the North Sea. They're all contracted, which means that they're not available for contracting in the immediate term to soak up that extra demand. I'd say the next vessel that will be open is the Hilda, and she gets open again late March next year. But what you describe means that we are reasonably confident with that open position and looking to contract this in due course.

Speaker Change: Yes.

Speaker Change: Sure.

Speaker Change: Number two.

Speaker Change: But if you help with Mckesson.

Speaker Change: Nigel.

Speaker Change: Yes.

Speaker Change: I would like to see.

Speaker Change: Yes.

Speaker Change: What I would say is as you are aware, we got four vessels in the North sea they.

Speaker Change: They're all contracted.

Speaker Change: Which means that they're not.

Speaker Change: Available for.

Speaker Change: Contracting in the in the immediate term to soak up that extra demand, let's say the next vessel.

Speaker Change: Q4.

Speaker Change: That will be open is the Hilda and she gets opened again late March next year.

Speaker Change: The what you describe means that we are.

Speaker Change: Im reasonably confident with that open position and looking to looking to contract. This in due course.

Derek Lowe: We run a time-charter model, as you're aware, so it's the operators in the Spas or Koa markets that will experience that change. Yeah, no, but I, the reason I, you just chartered the, you chartered, your most recent time charter was for one year in the North Sea, so do you expect the conditions when you recharter that to be significantly better? than what they were when you chartered that before. There is a good chance of that. I mean, I think the North Sea is ramping up. more slowly than the conditions we got in Brazil. But yes, those conditions ought to be ought to be better when we recontract the hilder.

Speaker Change: We run it.

Speaker Change: Tom Johnson model as you're aware.

Speaker Change: As the operator in the.

Speaker Change: It's possible.

Speaker Change: Markets that we will experience that that change.

Speaker Change: Yes.

Speaker Change: The reason why you just chartered your charter your most recent time charter was for one year on.

Speaker Change: In the North Sea.

Speaker Change: So do you expect the conditions when you re charter that to be significantly better.

Speaker Change: And then what they were when you charter had that before.

Speaker Change: There is a good chunk of that I mean, I think the north sea is ramping up.

Speaker Change: More slowly than.

Speaker Change: The conditions vehicles in Brazil.

Speaker Change: But.

Speaker Change: Yes, those conditions also be all three vessels reconstruct the Hilda.

Derek Lowe: Oh, okay, so I'm just getting at the fact that there's Whatever is open in the next two years. you are a lot more confident. about the likelihood of chartering it and the price that you've been in, let's say, the last 12 to 24 months. Yeah, that's a fair comment. So we.

Speaker Change: Oh.

Speaker Change: Okay. So I'm just getting at the fact that there is.

Speaker Change: Whenever it's open in the next two years.

Speaker Change: We're a lot more confident.

Speaker Change: About <unk>.

Speaker Change: Likelihood of chartering it and the price that you've been in let's say the last 12 to 24 months.

Speaker Change: Yes, that's correct.

Speaker Change: Yes.

Speaker Change: So we.

Derek Lowe: And today, if you analyze the first half, if you analyze first quarter, your cash flowing. Somewhere between around $1.50 to $2 a share of free cash flow after debt repayment. and that'll soon go out. is this thing between the drop downs and those additional higher rates, that will go up maybe to $2, $2.20, $2.50.

Speaker Change: And today, if you annualize the first half generally.

Speaker Change: First quarter.

Speaker Change: Cash flowing.

Speaker Change: Somewhere between around $1 50 to $2 a share of free cash flow after debt repayment.

Speaker Change: And that will soon go out.

Speaker Change: Is the strength between the dropdown symbols additional increase.

Speaker Change: Order rates, Bob will go up maybe $2 $2 12 $2 50.

Derek Lowe: And I understand that getting drop-downs is interesting, but how does that compare to the return on investment of spending some of the additional cash and buying back shares? I mean, it seems to me that it's impossible for those drop-down economics to match. The Purchase of Shares. at this price, at the current market price. Yeah, I mean, I would say at the moment, the board's focus is on growth in the fleet, improving the capital value position of the partnership overall, rather than also So the board believes that it should deploy capital at a walk of seven to eight instead of buying shares at an IRR of 25, 30%.

Speaker Change: Okay.

Speaker Change: I understand that getting Dropdowns is interesting, but how does that compare to the return on investment of spending some of the additional cash and buying back shares.

Speaker Change: I mean, it seems to me that it's impossible for those dropdown economics to match.

Speaker Change: Purchase of shares.

Speaker Change: Hi.

Speaker Change: At this price at the current market price.

Speaker Change: Yes, I mean, I would say that at the moment the board focuses on.

Speaker Change: Growth in the fleet.

Speaker Change: Improving that could be.

Speaker Change: Capital value position of the.

Speaker Change: The partnership overall.

Speaker Change: Bravo.

Speaker Change:

Speaker Change: So the board believes that it should deploy capital I don't walk of seven to eight instead of buying.

Speaker Change: Yes.

Speaker Change: Yes.

Speaker Change: 25% to 30%.

Derek Lowe: hundred percent of the capital used by the firm is that that's that's what you change the boards. appropriate decision. will allocate 120% of the capital because they're going to maybe borrow more to do the drop down. at 7% to 8% WARC, which is, I believe, what you must be buying the ships, versus a 25% to 30% IRR on the shares. if you think that's... Is that what the board thinks? Is that what you're saying? The board is interested in the longer term. Well, this is a long-term oil. This maintains a longer term, if your shares appreciate, you could use the shares to do more drop downs.

Speaker Change: 100% of the capital used by the firm is that.

Speaker Change: That's what you changed the boards.

Speaker Change: Appropriate decision.

Speaker Change: Well located 120% of the capital calls.

Speaker Change: Maybe borrow more to do Dropdowns.

Speaker Change: 7% to 8% walk, which is I believe what ninja must be buying ships versus the 25% to 30% IRR on the shares.

Speaker Change: If you think thats.

Speaker Change: Is that what the <unk> is that what youre, saying.

Speaker Change: Hello.

Speaker Change: The board is.

Speaker Change: Interested in the longer term.

Speaker Change: Interest.

Speaker Change: Hello.

Speaker Change: This maintains our longer term view.

Speaker Change: So I appreciate you could use the shares to do more dropdowns. This past August correctly.

Derek Lowe: Is that correct? This is definitely in the long-term interest of the shares. What is the fiduciary duty of... of the board. Is it maximizing the shareholder value over the long term?

Speaker Change: This is definitely in the <unk>.

Speaker Change: Long term interest.

Speaker Change: Sure.

Speaker Change: What is the fiduciary duty of today.

Speaker Change: The board is it is it maximizing the shareholder value over the long term.

Speaker Change: Okay.

Derek Lowe: Thanks. It's the valuation of the partnership overall, and that, if anything, is going to be reduced if some of the units are bought in rather than spent on expanding the fleet on appropriate terms. Is it overall or is it per se? Why would they care about the hole? size of the pie rather than the pie for the shareholder. Well, they consider both in the decisions that they make, and they're aware of the ability to buy back units as well. That's one of the options that's available to them, and they judge between those.

Speaker Change: Thanks.

Speaker Change: The valuation of the partnership overall.

Speaker Change: If anything is going to be reduced if some of the units are both involved has been spent on.

Speaker Change: Expanding the fleet on appropriate terms.

Speaker Change: It's an overall or is it for sure.

Speaker Change: Why would they care about the whole <unk>.

Speaker Change: Hi, rather than the type for sure.

Speaker Change: For the shareholders.

Speaker Change: They consider based on the decisions that they make and.

Speaker Change: Well.

Speaker Change: Piracy.

Speaker Change: The ability to buy back units as well Thats one of the options that's available to them and.

Speaker Change: Jonathan.

Derek Lowe: Well, I appreciate that I'm putting you here on the spot, but the message is really to the board that they do have a fiduciary duty to everyone and the return on investment on doing the drop downs with that money. It's dramatically different to buy the unit. and is, in my opinion, not in the best interest of Altschul. I've missed some money. allocated to buy.

Speaker Change: Well.

Speaker Change: I appreciate that when he gives you on the spot, but the message is related to the board.

Speaker Change: They do have a fiduciary duty to everyone and.

Speaker Change: The return on investment.

Speaker Change: I'm doing the dropdowns with that money.

Speaker Change: It's dramatically different to buy the Juliet.

Speaker Change: And as in my opinion not in the best interest of all shareholders.

Speaker Change: At least to some money.

Speaker Change: Allocated to buybacks.

Derek Lowe: And I really appreciate you taking my questions seriously. Thank you. And I take the point you raised at the end and we'll raise it with the board. I would point also to the rather low absolute amount of trading volume in the units. So any exercise in repurchasing is likely to suffer in its effectiveness from low trading volume. Well, it might raise the value of the shares and then one can use the shares for part of the drop downs. and increase the number of shares at a better price. So that is. If there's a buyback, sometimes it increases the liquidity of the shares, actually, because people know that if they need to sell for some other reason, they can set there's a buyer out.

Speaker Change: I really appreciate you taking my questions.

Speaker Change: Thank you.

Speaker Change: Okay.

Speaker Change: I take the point you raised the guidance.

Speaker Change: Raise it with with.

Speaker Change: With the board I would point to all sites of the.

Speaker Change: Rather low absolute amount of trading volume in the units so any exercise in.

Speaker Change: Repurchasing is likely to.

Speaker Change: Software and its effectiveness from low trading volume.

Speaker Change: Hi.

Speaker Change: While it might raise the value of the shares and lung can use your shares with partners with Dropdowns.

Speaker Change: And increase the number of shares at a better price.

Speaker Change: So that is.

Speaker Change: Thanks.

Speaker Change: If theres a buyback sometimes it increases the liquidity of the shares actually because people know that if they need to sell for some other recently.

Speaker Change: There's a buyer out there.

Derek Lowe: Sure. No, I understand those issues as well. Thank you, I appreciate it.

Speaker Change: Sure.

Speaker Change: I understand that.

Speaker Change: Those issues as well.

Speaker Change: Thank you I appreciate it.

Derek Lowe: Thanks Mario, cheers. from Purchase. Thank you.

Speaker Change: Thank you Laura.

Speaker Change: Gotcha.

Speaker Change: Sure.

Speaker Change: Okay.

Speaker Change: Sure.

Speaker Change: Thank you. Our next question comes from Kevin Lynch Bond value Investor's edge. Please go ahead. Your line is now open.

Climent Molins: Our next question comes from Climent Molins, Foreign Value Investors Edge. Please go ahead, your line is now open. Hi and good afternoon. Thank you for taking my questions. Most has already been covered, but I wanted to ask a question on the modeling side. Will TOEFs dry docking take place in Q3 or Q4?

Speaker Change: Okay.

Kevin Lynch: Hi, Good afternoon. Thank you for taking my questions. Most of that's already been covered but I wanted to ask a question on the modeling side will talks drydocking take place in Q3 or Q4.

Derek Lowe: Hi Climent, thanks for your question. at the moment I'm seeing that... I think straddling the end of Q3 and the start of Q4. Perfect. Thank you. That's helpful.

Kevin: Hi, Kevin Thanks for the question.

Speaker Change: Okay.

Speaker Change: Two is.

Speaker Change: The moment, so I'm, saying, that's actually an <unk> Oh, you mean tober, sorry, we got two vessels with similar times over.

Speaker Change: All right.

Speaker Change: I think struggling.

Speaker Change: The end of Q.

Speaker Change: Q3, and the start to Q4.

Speaker Change: Perfect. Thank you that's helpful.

Derek Lowe: And over the last couple of years, we've seen a number of new build orders, including SACO's recent transactions. And I was wondering, could you talk a bit about the cost advantage of a shuttle tanker new build or modern asset relative to say a 15 year old vessel? I think that's quite hard to comment on specifically, we've obviously got a fleet with a range of ages that cover the almost new through to the good 15 plus years old and you can see our operating expenditure rates as well. I think too, we probably can't stress anything more refined than that as to the, around the differences between different vessels.

Speaker Change: Over the past couple of years, we've seen a number of newbuild orders, including psychosis recent transactions and I was wondering could you talk about the cost advantage of our shuttle tanker newbuild or modern asset.

Speaker Change: That is to say, yes, 15 year old vessel.

Speaker Change: Okay.

Speaker Change: I think that's quite hard to comment on specifically, but obviously go to fleets with a range of ages.

Speaker Change: Let's cover the almost new three two a good 15 plus years.

Speaker Change: And you can see.

Speaker Change: Operating expenditure rates as well I think two.

Speaker Change: We probably cant stress anything more refined the message to the right.

Speaker Change: And the differences between different vessels.

Derek Lowe: Right, but like, is the eco component something meaningful in the shuttle tanker market or given the shortage distances? Is it like a smaller factor? I believe it's less of a factor, but we, as I say, we prefer for commercial reasons not to comment on differences between individual vessel costs or revenue. Understand. Makes sense.

Speaker Change: Alright.

Speaker Change: Eco component something meaningful in the shuttle tanker market or given the short distances.

Speaker Change: Is it like a smaller factor.

Speaker Change: Sector.

Speaker Change: I believe it's.

Speaker Change: It's less of a factor.

Speaker Change: We prefer for commercial reasons not to comment on differences between them.

Speaker Change: <unk>.

Speaker Change: Individual.

Speaker Change: The.

Speaker Change: Vessel costal revenue.

Speaker Change: Understood makes sense alright, that's everything for me. Thank you for taking my questions. Okay.

Climent Molins: All right, that's everything from me. Thank you for taking my questions. Okay, thank you. Thank you.

Speaker Change: Thank you.

Speaker Change: Thank you. Our next question comes from Honey domains. Please go ahead. Your line is now open.

Hani Hassanain: Our next question comes from Hani Hassanain. Please go ahead, your line is now open. Hello Derek, how are you doing? All right, good. Thank you. Wonderful, thank you.

Speaker Change: Hello, Derrick How're you doing.

Speaker Change: Alright, thank you.

Speaker Change: Wonderful. Thank you congratulations for an awesome.

Hani Hassanain: Congratulations for an awesome quarter. I'm looking at it right now with the increase in revenue to around like $84 million, annualized to $335 million, which is about like $50 million to $60 million in revenue above the previous years, if we annualize it further. So this is great.

Speaker Change: Quarter.

Speaker Change: Looking at it right now with the increase in revenues earned by <unk> 84.

Speaker Change: Annualized two $335 million, which is about $50 million to $60 million revenue above the previous years.

Speaker Change: Annualized it further so this is great, but looking at the operating expenses.

Derek Lowe: But looking at the operating expenses, I'm curious, I have two questions. First one on the depreciation. Currently it's at a rate of around $28.75. When will that depreciation drop? If we're looking at a depreciation table that we have, we have older vessels and newer vessels. When will we see that depreciation drop to, let's say, $20 million a year? I don't have a direct answer on when it would drop to that as quickly, down to 20. The depreciation is generally on a straight line basis, not down to zero, but down to a disposal value. So it's only when we start having vessels leave the fleet that you would start to see any impact on that.

Speaker Change: Curious I have two questions first one on the depreciation.

Speaker Change: Thank you so the rates of around 23.

Speaker Change: Three quarters.

Speaker Change: Depreciation drop I mean, if we look at depreciation table that we have we have older vessels and newer vessels.

Speaker Change: When will that will you will see that depreciation drop to let's say $20 million a year.

Speaker Change: Sure.

Speaker Change: Okay.

Speaker Change: Yeah.

Speaker Change: I don't know if its right Tom.

Speaker Change: When it would drop to that.

Speaker Change: As quickly down to 20.

Speaker Change: The depreciation is generally on a straight line basis, not down to zero, if it down to a disposal value. So.

Speaker Change: It's only when we start having vessels leave the fleet.

Speaker Change: That you would start to see any impact on that.

Derek Lowe: And in fact, you're more likely to to have the introduction of new vessels, so the lever only has one month of depreciation in there, for example, but we'll have the full quarter's worth for the second quarter. It's the introduction of new vessels if we do further drop downs that's likely to have a greater influence on that figure. So with a higher fleet value, which would come from acquisitions, you would actually expect to see that depreciation figure to go up and not down. Okay, I understand.

Speaker Change: And in fact, you are more likely to.

Speaker Change: To have the introduction of new vessels so the.

Speaker Change: The lever only has one month of depreciation in that for example, but we will have a full quarters worth for the second quarter is the introduction of new vessels. If we do further dropdowns as Mike do you have a greater influence on that figure.

Mike Hey: So with the higher fleet value, which would come from acquisitions.

Speaker Change: You would actually expect to see that depreciation figure to go up not down.

Speaker Change: Okay.

Speaker Change: Okay I understand.

Derek Lowe: So this depreciation, like, say, for example, for the vessel that we just acquired, are we putting the depreciation over a period of like 10 years, 15 years? Or do we put it to end of life, like 25 years? I mean, like, what, what, what, what numbers? What number of years do we use in our own calculations at this? We've got a useful life policy of 23 years and so we run it to that. Okay, all right.

Speaker Change: Depreciation like say for example for the vessels that we just acquired.

Speaker Change: Are we putting a good depreciation will go up here it looks like the nearly 16 years or do we put it to end of life 25 years.

Speaker Change: What numbers.

Speaker Change: Using our own calculations at this stage.

Speaker Change: We go to useful life policy of 23 years since every run it to that.

Speaker Change: Okay Alright.

Derek Lowe: So that answers my question here. Right.

Speaker Change: My question here.

Derek Lowe: So with regards to the loans that we have, especially the balloon payments, I can see that we have 150 plus this year and 280 plus next year, and I'm sure that you're working on refinancing those. Are we going to try to refinance them with a balloon payment at the end as well, like a three-year finance with a balloon payment or a five-year finance with a balloon? What are we... I mean, I'm sure you're in the middle of a negotiation. I'm not sure if you can divulge that or not, but what are you targeting? Well, it's typical to replace like-for-like.

Speaker Change: Great. So with regards to the loans that we have especially the balloon payments.

Speaker Change: I can see that we have.

Speaker Change: 150, plus this year and 280 plus next year.

Speaker Change: I'm sure that Youre working on refinancing those.

Speaker Change: Are you going to try to refinance them with a balloon payment at the end as well, we'd like to get like a three.

Speaker Change: Three year finance with a balloon payment or a five year finance with a balloon payments.

Speaker Change: What are we.

Speaker Change: I'll tell you we're in the middle of a negotiation I'm not sure if you can divulge that or not but.

Speaker Change: What are you targeting.

Speaker Change: This stage.

Speaker Change: Well, it's typical to replace like for like so if we keep the same structure of that spin it would be typical to replace a three year with another three years.

Derek Lowe: So if we keep the same structure of debt, then it would be typical to replace a three-year with another three-year. But there's no particular magic to that or no particular formula or rule about it. But we'd still expect to have a medium to long-term debt facility with debt amortizations, which you can see some of on page 11, and then a lower balloon at the end of the next period. And that's been the pattern for these facilities since the vessels were purchased.

Speaker Change: There's no particular magic to that particular formula removal of assets.

Speaker Change: But we would we'd still expect to have a medium to long term debt facility.

Speaker Change: Yes.

Speaker Change: DSI amortization.

Speaker Change: Which you can see some Muslim page 11, and then a lower balloon at the end of the next period and that's been that's been the pattern for these facilities.

Speaker Change: Since the vessels were purchased.

Derek Lowe: Okay, wonderful.

Speaker Change: Okay.

Derek Lowe: Just kind of, I think it's just a quick typo on item number three on the long-term borrowing. It says that we have an outstanding of $15 million, but there's a balloon payment, $25 million. So I think there's, I think there's just a typo here. Yes, thank you. Sorry for the revolvers. we uh yeah the outstanding amount is what's currently drawn and you're right it's 15 on in that last column. Thank you. Okay, all right.

Speaker Change: Wonderful.

Speaker Change: Just kind of I think it's just a quick take on it.

Speaker Change: Number three on the long term borrowing.

Speaker Change: We have an outstanding of $15 million, but theres, a balloon payment $25 million. So I think there is I think it's just a typo here.

Speaker Change: Yes, Thank you sorry for the.

Speaker Change: Two revolvers.

Speaker Change: The outstanding amount is what's currently drawn and Youre right its 15.

Speaker Change: And that last column. Thank you.

Speaker Change: Okay Alright, My last question is actually about.

Derek Lowe: My last question is actually about dividends. Currently, we're at 2.6 cents per share. And I can see that we have a little bit of net profits there. Is there any discussion of the board with regards to incremental increase in the dividends? I mean, like, raising it up to like, $0.15 or $0.20? Or are we waiting until we can go back to the $0.52 that we used to get? Well, they're not waiting for a particular level target, if you like, as you described at the end there. What I would refer you to is the board's thinking in the Outlook section of the earnings release.

Speaker Change: Dividends.

Speaker Change: At $2.06 per share.

Speaker Change: And I can see that we have a little bit of net profits. There is there any discussion on the board with regards to incremental increase in the dividend bringing.

Speaker Change: Bringing it up to like right.

Speaker Change: <unk> or 'twenty.

Speaker Change: 26.

Speaker Change: Or are we waiting until we can go back to the 52 cents that we used to get before.

Speaker Change: Well, they're not waiting for a particular level targets if you like.

Speaker Change: As you've just got at the end what I would refer you to is the.

Speaker Change: The board's.

Speaker Change: <unk> thinking in the outlook section of the earnings release, and so the last couple of paragraphs of that.

Derek Lowe: So the last couple of paragraphs of that cover the board's considerations around how they want to deploy capital.

Speaker Change: Cover the board's considerations.

Speaker Change: Around how they want to deploy capital.

Hani Hassanain: uh I understand that's how they want to deploy capital but also as shareholders I think we we're looking at a little bit better payout uh maybe not back to the full but I mean like if we even got like a 20 percent and uh like in the capital expenditure I guess there's something for the board to discuss if the capital expenditure just use 80 percent to what you think we need which I agree with I don't have a problem with and 20 percent gets distributed versus what we're getting at this stage that's on my point of view to be discussed I guess with the board at a later stage yeah well those are my questions appreciate it very much Derek Thanks.

Speaker Change: I understand that's how they wanted to deploy capital, but also as shareholders. I think we were looking at a little bit better payout.

Speaker Change: Maybe not back to the full but I mean, if we even got like 20%.

Speaker Change: Making the capital expenditure I guess, that's something for the board to discuss the capital expenditure you just used 80% to what you think we need which we where they don't have a problem with and 20% gets distributed versus what we're getting at this stage.

Speaker Change: The point of view to be asked US I guess with the board I don't think were stage. Okay. Those are all my questions I appreciate it very much Derek.

Annie: Alright. Thank Annie. Thank you. So much you have a great day.

Hani Hassanain: Thank you, Henny. Thank you so much. You have a great day. and you, bye-bye. Thank you.

Speaker Change: Thank you bye bye.

Speaker Change: Thank you that does conclude our Q&A session for today, So I'll hand back over to Dennis for closing remarks.

Derek Lowe: That does conclude our Q&A session for today, so I'll hand back over to Derek for closing remarks. Thanks Maxine and thank you all again for joining this earnings call for Knot Offshore Partners' first quarter in 2025 and I look forward to speaking with you again following the second quarter results and also at the Marine Money Conference in New York over the 16th to 18th of June. Thank you.

Speaker Change: Thanks, Max and thank you all again for joining this earnings call. So, let's not offshore partners first quarter in 2035.

Speaker Change: And then look forward to speaking with you again, following our second quarter results.

Speaker Change: Also at the Marine money Conference in New York over the 16th to 18th of June.

Speaker Change: Thank you. This does conclude today's call. Thank you for joining you may now disconnect your lines.

Maxine: This does conclude today's call. Thank you for joining.

Maxine: You may now disconnect your line.

Speaker Change: [music].