Q2 2025 KNOT Offshore Partners LP Earnings Call

Speaker #1: Good morning, and thank you all for attending the KNOT Offshore Partners second quarter 2025 earnings call. My name is Brieca, and I will be your moderator for today.

Moderator: Good morning and thank you all for attending the KNOT Offshore Partners LP Q1 2025 earnings call. My name is Brita and I will be your moderator for today. All lines will be muted during the presentation portion of the call, with an opportunity for questions and answers at the end. I would now like to pass this conference over to your host, our CEO, Derek Lowe. Thank you. You may proceed, Derek.

Speaker #1: All lines will be muted during the presentation portion of the call, with an opportunity for questions and answers at the end. I would now like to pass this conference over to your host, our CEO, Derek Lowe.

Speaker #1: Thank you. You may proceed, Derek.

Speaker #2: Thank you, Brieca, and good morning, ladies and gentlemen. My name is Derek Lowe, and I'm the Chief Executive and Chief Financial Officer of KNOT Offshore Partners.

Derek Lowe: Thank you, Brita, and good morning, ladies and gentlemen. My name is Derek Lowe and I'm the Chief Executive and Chief Financial Officer of KNOT Offshore Partners LP. Welcome to the partnership's earnings call for the second 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 management's current views, known and unknown risks, and are based on assumptions and estimates that are inherently subject to significant uncertainty and contingencies, many of which are beyond our control. Actual results may differ materially from those expressed or implied in forward-looking statements, and the partnership does not have or undertake a duty to update such forward-looking statements made as of the date of this presentation.

Speaker #2: Welcome to the partnership's earnings call for the second quarter of 2025. Our website is knotoffshorepartners.com, and you can find the earnings release there along with this presentation.

Speaker #2: On slide two, you will find guidance on the inclusion of forward-looking statements in today's presentation. These are made in good faith and reflect management's current views, known and unknown risks, and are based on assumptions and estimates that are inherently subject to significant uncertainty as a contingency, many of which are beyond our control.

Speaker #2: Actual results may differ materially from those expressed or implied in forward-looking statements. The partnership does not have or undertake a duty to update such forward-looking statements made as of the date of this presentation.

Speaker #2: 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.

Derek Lowe: For further information, please consult our SEC filings, especially in relation to our annual and quarterly results. Today's presentation also includes certain non-U.S. GAAP measures, and our earnings release includes a reconciliation of these to the most directly comparable GAAP measures. On slide three, we have the Q2 financial and operational headlines. Revenues were $87.1 million, operating income $22.2 million, and net income $6.8 million. Adjusted EBITDA was $51.6 million, and as of June 30, 2025, we had $104 million in available liquidity, made up of $66.3 million in cash and cash equivalents, plus $38.5 million in undrawn capacity on our credit facilities. That available liquidity was $4 million higher than at March 31. We operated with full utilization, taking into account the start of two dry dockings, which amounts to 96.8% utilization overall.

Speaker #2: On slide three, we have the Q2 financial and operational headlines. Revenues were $87.1 million, operating income was $22.2 million, and net income was $6.8 million.

Speaker #2: Adjusted EBITDA was $51.6 million, and as of June 30, 2025, we had $104 million in available liquidity, made up of $66.3 million in cash and cash equivalents, plus $38.5 million in undrawn capacity on our credit facilities.

Speaker #2: That available liquidity was $4 million higher than at March 31. We operated with full utilization, taking into account the start of two dry dockings, which amounts to 96.8% utilization overall.

Speaker #2: Following the end of Q2, we declared a cash distribution of 2.6 US cents per common unit, which was paid in August. On to slide four for developments during Q2.

Derek Lowe: Following the end of Q2, we declared a cash distribution of $0.026 per common unit, which was paid in August. On to slide four for developments during Q2. Through a combination of new chartering, charterers exercising options, and good maneuvering by our chartering team, we made good progress in extending our charter coverage and maximizing the value of charters we already had. The Brazil unit is scheduled to go on charter direct in our next month. With that in mind, we've been able to extend the redelivery timing from PetroRio to minimize any downtime between charters. Repsol Sinopec exercised their option to extend the Raca Knutsen through June 2028, and Windsor Knutsen commenced operations with ExxonMobil on June 4, following completion of scheduled dry docking. On slide five, we have developments subsequent to quarter end, some of which you will likely have seen in our early July update.

Speaker #2: Through a combination of new chartering, charterers exercising options, and good maneuvering by our chartering team, we made good progress in extending our charter coverage and maximizing the value of charters we already had.

Speaker #2: The Brazil-Connexon is scheduled to go on charter to Ecuador next month. With that in mind, we've been able to extend the redelivery timing from Petroreo to minimize any downtime between charters.

Speaker #2: Reps will sign a PEC to exercise their option to extend the Raquel-Connexon through June 2028. Windsor-Connexon commenced operations with ExxonMobil on June 4, following the completion of scheduled dry docking.

Speaker #2: On slide five, we have developments subsequent to quarter end, some of which you will likely have seen in our early July update. On September 16th, 2025, we refinanced Toba-Connexon with a sale and leaseback that netted $32 million in cash.

Derek Lowe: On September 16, 2025, we refinanced Toba Knutsen with a sale and leaseback that netted $32 million in cash. We also purchased the Daqing Knutsen from our sponsor with a $95 million combination of cash and debt. The cash component of that was approximately $25 million, so that was $7 million less than the net proceeds released from the Toba Knutsen refinancing. The Daqing Knutsen is on time charter with PetroChina in Brazil through until July 2027, with KNOT guaranteeing the day rate until 2032 on the same basis as if PetroChina had exercised its options through to that time.

Speaker #2: We also purchased the Dakken-Connexon from our sponsor, with a $95 million combination of cash and debt. The cash component of that was approximately $25 million, so that was $7 million less than the net proceeds released from the Toba-Connexon refinancing.

Speaker #2: The Dakken-Connexon is on time charter with Petra China in Brazil through July 2027, not guaranteeing the day rate until 2032, on the same basis as if Petra China had exercised its options through to that time.

Speaker #2: We were also pleased to have reached a point in the recovery for KNOP and the wider shuttle tanker market, where we deemed it prudent to increase our discretionary allocation of capital to accrue unit buybacks.

Derek Lowe: We were also pleased to have reached a point in the recovery for KNOT Offshore Partners LP and the wider shuttle tanker market where we deemed it prudent to increase our discretionary allocation of capital to include unit buybacks on the premise that the units traded at a significant discount to what we believed to be any reasonable valuation for the partnership and its prospects. We had been active under our $10 million authorization, repurchasing 226,000 common units at an aggregate cost of $1.64 million, which is an average price of $7.24 per common unit. On slide six, we provide an overview of the Daqing Knutsen purchase.

Speaker #2: On the premise that the units traded at a significant discount to what we believed to be any reasonable valuation for the partnership and its prospects, we have been active under our $10 million authorization, repurchasing 226,000 common units at an aggregate cost of $1.64 million, which is an average price of $7.24 per common unit.

Speaker #2: On slide six, we provide an overview of the Dakken-Connexon purchase. I've covered most of the highlights here already, but the strategic and commercial implications of such a drop-down transaction include an increased pipeline of long-term contracts, fleet growth, reduced average fleet age, and continued development of our fleet in the most in-demand shuttle tanker asset class.

Derek Lowe: I've covered most of the highlights here already, but the strategic and commercial implications of such a dropdown transaction include an increased pipeline of long-term contracts, fleet growth, reduced average fleet age, and continued development of our fleet in the most in-demand shuttle tanker asset class. This is a high-quality vessel and contract for us to welcome into the partnership. When taken in conjunction with the sale and leaseback of the Toba Knutsen, we're very pleased to have been able to achieve growth without any draw on the cash in hand, but instead to have obtained additional liquidity from the debt portfolio. Turning to slide seven for a high-level summary of developments, the shuttle tanker market is tightening in both Brazil and at long last to a degree in the North Sea as well.

Speaker #2: This is a high-quality vessel and contract for us to welcome into the partnership. And when taken in conjunction with the sale and leaseback of the Toba-Connexon, we're very pleased to have been able to achieve growth without any draw on the cash on hand, but instead to have obtained additional liquidity from the debt portfolio.

Speaker #2: Turning to slide seven for a high-level summary of developments, the shuttle tanker market is tightening in both Brazil and, at long last, to a degree in the North Sea as well.

Speaker #2: In either case, driven by FPSO startups and ramp-ups, certain of these projects were a long time coming, and it's been encouraging to see them up and running, driving shuttle tanker demand growth.

Derek Lowe: In either case, driven by FPSO startups and ramp-ups, certain of these projects were a long time coming, and it's been encouraging to see them up and running, driving shuttle tanker demand growth. We've extended our backlog as of June 30, 2025, to $895 million of fixed contracts, averaging 2.6 years, and rather more if all options are exercised. At June 30, our fleet of 18 vessels has an average age of 10.1 years. With the addition of our 19th vessel just a couple of days thereafter, the average age reduced to 9.7 years. We're continuing to repay debt at $95 million or more per year, which we think is prudent with a depreciating asset base.

Speaker #2: We've extended our backlog as of June 30, 2025, to $895 million of fixed contracts, averaging 2.6 years, and rather more if all options are exercised.

Speaker #2: At June 30th, our fleet of 18 vessels had an average age of 10.1 years. With the addition of our 19th vessel just a couple of days thereafter, the average age reduced to 9.7 years.

Speaker #2: The continuing repayment of debt at $95 million or more per year, which we think is prudent given a depreciating asset base, provides us with flexibility and optionality to take on leverage elsewhere. This enables an accretive allocation of capital, as seen in the recent sale-leaseback and drop-down, which was accompanied by the initiation of the $10 million buyback program.

Derek Lowe: Debt paydown also produces flexibility and optionality to take on leverage elsewhere to enable an accretive allocation of capital, as with the recent sale leaseback and dropdown, which was accompanied by the initiation of the $10 million buyback program. We appreciate that ours is a business where the timelines and contract durations are long, and thus the financial impact of chartering typically arrives quite some time later, materially behind an upturn in sentiment or stock market activity. That being said, it's clear that after a lengthy period defined by the COVID-era cutbacks at energy majors, we're increasingly building positive momentum and taking actions on multiple fronts for the benefit of unitholders now and well into the future.

Speaker #2: We appreciate that ours is a business where the timelines and contract durations are long; thus, the financial impact of chartering typically arrives quite some time later, materially behind an upturn in sentiment or spot market activity.

Speaker #2: That being said, it's clear that after a lengthy period defined by the COVID-era cutbacks at energy majors, we're increasingly building positive momentum and taking actions on multiple fronts for the benefit of unitholders now and well into the future.

Speaker #2: Over slides nine to twelve, we provide the financials for Q2, for which the headlines are revenues of $87.1 million, operating income of $22.2 million, net income of $6.8 million, adjusted EBITDA of $51.6 million, and availability at quarter-end of $104.8 million, made up of $66.3 million in cash and cash equivalents, plus $38.5 million in undrawn capacity on our credit facilities. That's $4 million higher available liquidity than at the end of Q1.

Derek Lowe: Over slides nine to 12, we provide the financials for Q2, for which the headlines are revenues of $87.1 million, operating income $22.2 million, net income $6.8 million, adjusted EBITDA $51.6 million, and availability at quarter end of $104.8 million, made up of $66.3 million in cash and cash equivalents, plus $38.5 million in undrawn capacity on our credit facilities. That's $4 million higher available liquidity than at the end of Q1. On slide 13 is our debt maturity profile, which has been updated to reflect the Toba Knutsen sale leaseback, the NTT Revolver refinancing, and the July 2 Daqing Knutsen acquisition. Notably, the average margin on our debt was 2.23% over SOFR.

Speaker #2: On slide 13, we have our debt maturity profile, which has been updated to reflect the Toba-Connexon sale-leaseback, the NTT revolver refinancing, and the July 2nd Dakken acquisition.

Speaker #2: Notably, the average margin on our debt was 2.23 percent over sofa. And while nothing can be taken for granted, the positive momentum for both KNOP and the wider sector means it will feel quite confident about these maturities in the years ahead, particularly after seamlessly addressing similar maturities in recent years.

Derek Lowe: While nothing can be taken for granted, the positive momentum for both KNOP and the wider sector mean that we feel quite confident about these maturities in the years ahead, particularly after seamlessly addressing similar maturities in recent years amid materially less rosy market conditions. Moreover, we may have less opportunities to raise liquidity as we did with the Toba Knutsen, though any such action will be contingent on conditions at the time. Moving on to slide 15 and our charter portfolio, I've covered most of the updates here, but I believe it's a useful resource for investors looking to track the primary movements where change can occur in a highly stable portfolio of cash flows. That is, when charters turn over and when there are dry docks that will cause off-hire and incurrence of CapEx costs.

Speaker #2: And with materially less rosy market conditions, we may have select opportunities to raise liquidity as we did with the Toba-Connexon. However, any such action will be contingent on conditions at the time.

Speaker #2: Moving on to slide 15 and our charter portfolio, I've covered most of the updates here, but I believe it's a useful resource for investors looking to track the primary movements where change can occur in a highly stable portfolio of cash flows.

Speaker #2: That is, when charters turn over and when there are dry docks that will cause off-fire and incurrence of CapEx costs. Based on current charter rates, we believe charterers' options are likely to be taken up, given the strength of the charter market.

Derek Lowe: Based on current charter rates, we believe charterers' options are likely to be taken up given the strength of the charter market. As such, upcoming points of particular relevance are the Fortaleza and Recife, which operate in Brazil and are coming open in early and mid-2026, respectively. On slide 16, you can see our strong coverage through the coming quarters, some charterers' options that market conditions suggest have a good likelihood of being exercised, and a small amount of open time. In all, we have 89% of vessel time in 2026 covered by fixed contracts. On slide 17, you can see the dropdown inventory held at the sponsor. As we have said, we believe that growth on attractive terms that benefit the partnership is a central plank of our strategy, alongside sustainable payments to unitholders.

Speaker #2: As such, upcoming points of particular relevance are the Forza Laser and Recife, which operate in Brazil and are coming open in early and mid-2026, respectively.

Speaker #2: On slide 16, you can see our strong coverage through the coming quarters, some charterers' options that market conditions suggest have a good likelihood of being exercised, and a small amount of open time.

Speaker #2: In all, we have 89 percent of vessel time in 2026 covered by fixed contracts. On slide 17, you can see the drop-down inventory held at the sponsor.

Speaker #2: As we have said, we believe that growth on attractive terms that benefit the partnership is a central plank of our strategy, alongside sustainable payments to unitholders.

Speaker #2: We operate a fleet of depreciating assets, where replenishment with younger vessels over time and on the right terms is an imperative of the business, not to mention the basis for returns to unit holders.

Derek Lowe: We operate a fleet of depreciating assets where replenishment with younger vessels over time and on the right terms is an imperative of the business, not to mention the basis for returns to unitholders. On slides 18 to 20, we include again some commentary from Petrobras, who continue their strong offshore production growth, particularly in the shuttle tanker service fields, and doing so rapidly ahead of schedule and through the deployment of assets with a decades-long use profile. From the shuttle tanker owner's perspective, there is a lot to like about what Petrobras is saying, and importantly, in what they're putting into action. Crucially, it's this trackable and measurable activity, including numerous additional FPSOs that have already been funded but are expected to come online in the years ahead, that gives us comfort that the shuttle tanker demand should readily absorb the current order book.

Speaker #2: On slides 18 to 20, we include again some commentary from Petrobras, who continue their strong offshore production growth, particularly in the shuttle tanker service fields. They are doing so rapidly, ahead of schedule, and through the deployment of assets with a decades-long use profile.

Speaker #2: From the shuttle tanker owner's perspective, there is a lot to like about what Petrobras is saying, and importantly, in what they're putting into action.

Speaker #2: Crucially, it's this trackable and measurable activity, including numerous additional FPSOs that have already been funded but are expecting to come online in the years ahead, that gives us comfort that the shuttle tanker demand should readily absorb the current order book.

Speaker #2: Further, we believe that the current order book still trends towards a medium-term shortage of shuttle tankers, set against the forthcoming production. To summarize on slide 21, we have strong utilization and financial results for the quarter, while securing additional charter cover and paying a quarterly distribution.

Derek Lowe: Further, we believe that the current order book still trends towards a medium-term shortage of shuttle tankers when set against the forthcoming production. To summarize, on slide 21, we had strong utilization and financial results for the quarter while securing additional charter cover and paying a quarterly distribution. We subsequently purchased a vessel with seven years of charter cover. We refinanced a vessel to release liquidity in excess of the cash we paid for the acquisition. We refinanced the first of our two $25 million revolvers, and we initiated our $10 million unit buyback program. Looking at our near-term priorities on slide 22, we focused, as ever, on safe operation and maintaining high scheduled operational utilization.

Speaker #2: We subsequently purchased a vessel with seven years of charter cover. We refinanced a vessel to release liquidity in excess of the cash we paid for the acquisition. We refinanced the first of our two $25 million revolvers, and we initiated our $10 million unit buyback program.

Speaker #2: And looking at our near-term priorities, on slide 22, we focused, as ever, on safe operation and maintaining high scheduled operational utilization. We aim to continue growth in earnings visibility and liquidity through vessel chartering out into the medium term, and we aim to deploy incremental capital opportunistically towards a combination of accretive growth and returns of capital to unit holders.

Derek Lowe: We aim to continue growth in earnings visibility and liquidity through vessel chartering out into the immediate term, and we aim to deploy incremental capital opportunistically towards a combination of accretive growth and returns of capital to unitholders. With that, I'll hand the call back to Brita for any questions. Thank you.

Speaker #2: With that, I'll hand the call back to Brieca for any questions. Thank you.

Speaker #1: Thank you. You will now begin the question-and-answer session. If you would like to ask a question during this time, please press star followed by the number one on your telephone keypad.

Moderator: Thank you. We will now begin the question and answer session. If you would like to ask a question during this time, please press star, followed by the number one on your telephone keypad. If you change your mind and would like to remove your question, you can do so by pressing star, followed by the number two. As a reminder, that is star, followed by one, to register for any questions. We'll pause here briefly whilst questions are registered. The first question we have on the phone lines comes from the line of Liam Burke with B. Riley Securities. Please go ahead when you're ready.

Speaker #1: If you change your mind and would like to remove your question, you can do so by pressing star followed by the number two. And as a reminder, you can press star followed by one to register for any questions.

Speaker #1: We'll pause here briefly while questions are registered. The first question we have on the phone lines comes from the line of Liam Burke with B. Riley Securities.

Speaker #1: Please go ahead when you're ready.

Speaker #3: Thank you. Derek, how are you today?

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

Speaker #2: Good, thanks, Liam. How are you?

Derek Lowe: Good, thanks, Liam. How are you?

Speaker #3: I'm just fine, thank you. On the decking, Knudsen, I know you've got customary closing events prior to taking delivery, but could you give us a sense as to when you'd expect to take delivery on that vessel?

Liam Burke: I'm just fine, thank you. On the Daqing Knutsen, I know you've got customary closing events prior to taking delivery, but could you give us a sense as to when you'd expect to take delivery on that vessel?

Speaker #2: On the on the Dakken-Connexon, we took delivery on on the day we announced it, so the, 2nd of July.

Derek Lowe: On the Daqing Knutsen, we took delivery on the day we announced it, so the 2nd of July.

Speaker #3: Oh, okay. Because you said the customary closing, so okay, great. The same question I had was on the drop-downs. There are four additional vessels. You made the closing of the decking in a very shareholder-friendly manner.

Liam Burke: Okay, because it's not a customary closing. Okay, great. The second question I had was on the dropdowns. There are four additional vessels. You made the closing of the Daqing Knutsen in a very shareholder-friendly manner. Do you anticipate to be able to continue to do that?

Speaker #3: Do you anticipate being able to continue to do that?

Speaker #2: I mean, we think it's unit holder-friendly whenever we do these transactions on accretive terms. Were you alluding to the funding for the equity components in the transaction?

Derek Lowe: We think it's unitholder-friendly whenever we do these transactions on accretive terms. Were you alluding to the funding for the equity component in the transaction?

Speaker #3: Well, that, and the fact there's four currently available, in addition to the, you know, then you have the new builds. What I was getting at is, I mean, you were able to add one more vessel quite easily in a very friendly, shareholder-friendly manner.

Liam Burke: There are four currently available in addition to the, you know, then you have the new build. What I was getting at is, I mean, you were able to add one more vessel quite easily in a very shareholder-friendly manner. I guess more or less, do you have a sense of timing based on your financial financing flexibility and your desire to grow the fleet?

Speaker #3: I guess, more or less, do you have a sense of timing based on your financial flexibility, and your desire to grow the fleet?

Speaker #2: Sure. Well, we don't have a particular sense of timing. We respond to vessels that are offered to us, when that happens, and on the basis of the terms that are offered and can be negotiated.

Derek Lowe: Sure. We don't have a particular sense of timing. We respond to vessels that are offered to us when that happens and on the basis of the terms that are offered and can be negotiated. We don't have a particular timing in mind. Part of that is obviously our financial capacity to fund any cash component that's required in a transaction. You can also see our debt schedule, what is coming up at different times and the opportunities they can present for potential re-leveraging or release of some sort. The Toba Knutsen leaseback would be a good example of how release can happen.

Speaker #2: But we don't have a particular timing in mind. I mean, part of that is obviously our financial capacity to fund any cash component that's required in a transaction.

Speaker #2: You can also see our debt schedule, what is coming up at different times, and the opportunities they can present for potential re-leveraging or release of some sort. So, the Toba sale and leaseback would be a good example of how release can happen.

Speaker #3: Great. Thank you, Derek.

Liam Burke: Great. Thank you, Derek.

Speaker #2: Thanks, Liam.

Derek Lowe: Thanks, Liam.

Speaker #1: Thank you. Just as a quick reminder, if you would like to ask any further questions, you can do so by pressing star followed by one on your telephone keypads now.

Moderator: Thank you. Just as a quick reminder, if you would like to ask any further questions, you can do so by pressing star, followed by one on your telephone keypads now. Just as a reminder, that is star, followed by one, to ask any questions. One final reminder, if you would like to ask a question, please press star, followed by one on your telephone keypads now. We have a question from Climent Molins with Value Investor’s Edge on the line. Please go ahead.

Speaker #1: Just as a reminder, to ask any questions, please press star followed by one on your telephone keypads now. And one final reminder: if you would like to ask a question, please press star followed by one.

Speaker #1: We have a question from Clement Mollins with Value Investors on the line. Please go ahead.

Speaker #4: Hi. Thank you for taking my questions. I wanted to ask about the older Winston Knudsen, the Fortaleza, and the Recife. Could you talk a bit about how contracting discussions with potential customers compare relative to your more modern tonnage?

Climent Molins: Hi. Thank you for taking my questions. I wanted to ask about the older Windsor Knutsen, the Fortaleza Knutsen, and the Recife Knutsen. Could you talk a bit about how contracting discussions with potential customers compare relative to your more modern tonnage? Is there maybe any appetite to dispose of these vessels over the coming years?

Speaker #4: And is there maybe any appetite to dispose of these vessels over the coming years?

Speaker #2: Well, our business model relates to operating vessels rather than trading them. I do appreciate we have engaged in vessel swaps in the past, but that was actually so that we could gear up our ownership, if anything, rather than dispose.

Derek Lowe: Our business model relates to operating vessels rather than trading them. I do appreciate we have engaged in vessel swaps in the past, but that was actually so that we could gear up our ownership, if anything, rather than dispose. We have active contracting discussions with our clients all the time about our vessels. I don't think I can expand on how those are going in any individual case for commercial reasons, but we certainly are actively discussing those vessels with our clients.

Speaker #2: I, when we have active contracting discussions with our clients all the time about our vessels, I don't think I can expand on how those are going in any individual case for commercial reasons.

Speaker #2: But we certainly are actively discussing those vessels with our clients.

Speaker #4: Makes sense. And you've been clear that your near-term priority is to continue expanding the fleet. But could you talk a bit about how you plan to mix that with potential distribution increases in the medium term?

Climent Molins: Makes sense. You've been clear that your near-term priority is to continue expanding the fleet. Could you talk a bit on how you plan to mix that with potential distribution increases in the medium term?

Speaker #2: Sure. We view fleet growth through acquisition as partly relating to growth, and the most important elements of growth there is in the charter schedule.

Derek Lowe: Sure. Fleet growth through acquisition is partly relating to growth, and the most important element of growth there is in the charter schedule. It's only through that that we can generate income in the medium to longer term. It also helps with rejuvenating the fleet, which contributes to that as well. Return to unitholders and deployments of capital to dropdowns, we think both of those at the same time are good deployments for capital, and we don't see them as necessarily competing with each other. I mean, they both use capital. If you look at the orders of magnitude that are involved, the buyback program, for example, is planned to use rather less than even a single vessel if you look at just a year's worth of the buyback program. We think they're both necessary in the interests of unitholders in the medium to longer term.

Speaker #2: If it's only through that that we can generate income in the medium to longer term. It also helps with rejuvenating the fleet, which contributes to that as well.

Speaker #2: Returns to unitholders and deployments of capital to drop-downs, we think both of those at the same time are good deployments of capital, and we don't see them as necessarily competing with each other.

Speaker #2: I mean, they're both used capital, but if you look at the orders of magnitude that are involved, the buyback program, for example, is planned to use rather less than even a single vessel.

Speaker #2: If you look at just a year's, a year's worth of the buyback program. So we we we think they're both necessary, for, in the interests of unit holders in the in the medium to longer term.

Speaker #2: I mean, just to give you an example on fleet rejuvenation, which we think is particularly important: with 18 vessels as of the end of June, and then obviously 19 shortly after that, the average vessel age in early July was down to, I think, 9.7 years.

Derek Lowe: Just to give you an example on fleet rejuvenation, which we think is particularly important, with 18 vessels as of the end of June and then obviously 19 shortly after that, the vessel average age in early July was down to, I think, 9.7 years. That is the age that we had earlier in the year. Simply the passage of time with the fleet the size that we have means that acquisitions are required to keep the fleet rejuvenated and to keep that average age down.

Speaker #2: Well, that is the age that we had earlier in the year. And just simply the passage of time with a fleet the size that we have means that acquisitions are required to keep the fleet rejuvenated and to keep that average age down.

Speaker #4: That's helpful. That's everything from me. Thank you for taking my questions.

Climent Molins: That's helpful. That's everything from me. Thank you for taking my questions.

Speaker #2: Thank you. Thanks.

Derek Lowe: Thanks. Thanks.

Speaker #1: Thank you. Just one final reminder: if you would like to ask any further questions, you can do so now by pressing star followed by the number one on your telephone keypad.

Moderator: Thank you. Just one final reminder, if you would like to ask any further questions, you can do so now by pressing star, followed by the number one on your telephone keypad. I can confirm that does conclude the question and answer session today, and I would like to hand it back to Derek for some final closing comments.

Speaker #1: I can confirm that does conclude the question and answer session today. I would like to hand it back to Derek for some final closing comments.

Speaker #2: Well, thank you again for joining us for the earnings call for KNOT Offshore Partners' second quarter in 2025. I look forward to speaking with you again following the third quarter results.

Derek Lowe: Thank you again for joining this earnings call for KNOT Offshore Partners LP's second quarter in 2025. I look forward to speaking with you again following the third quarter results.

Speaker #1: Thank you all for joining the KNOT Offshore Partners second quarter 2025 earnings call. I can confirm today's call has now concluded. Thank you all for your participation.

Moderator: Thank you all for joining the KNOT Offshore Partners LP second quarter 2025 earnings call. I can confirm today's call has now concluded. Thank you all for your participation and you will now disconnect. Please enjoy the rest of your day.