KNOT Offshore Partners LP (NYSE:KNOP) Q3 2022 Earnings Call Transcript

KNOT Offshore Partners LP (NYSE:KNOP) Q3 2022 Earnings Call Transcript November 30, 2022

KNOT Offshore Partners LP beats earnings expectations. Reported EPS is $0.47, expectations were $0.18.

Operator: Hello, everyone. And welcome to the KNOT Third Quarter 2022 Earnings Results Conference Call. My name is Charlie, and I’ll be coordinating the call today . I would now hand over to your host, Gary Chapman, Chief Executive Officer and CFO to begin. Gary, please go ahead.

Gary Chapman: Thank you, Charlie. Thank you, and welcome everybody to our third quarter 2022 earnings call. The earnings release and this presentation are also available on our Web site at knotoffshorepartners.com if you want to view them. Straight on Slide 2 which concerns the nature of today’s presentation. In particular, the inclusion of forward-looking statements, which are made in good faith, but which contain risks and uncertainties, meaning, that actual results may be materially different. The Partnership does not have or undertake a duty to update such forward-looking statements. And for further information, please consult our annual and quarterly SEC filings. Today’s presentation also includes certain non-US GAAP measures and our earnings release includes a reconciliation of these to the most directly comparable GAAP measures.

On to Slide 3, highlights of the third quarter and subsequent. We announced a cash distribution of $0.52 for the quarter for the 29th consecutive time at this level under our 1099 structure, and which was the 38th consecutive distribution made since the Partnership first listed. We run at 99.7% utilization for scheduled operations during the second quarter and 92.8% taking into account the scheduled drydockings of the Lena and Windsor Knutsen vessels. We completed the acquisition of the Synnøve Knutsen on July 1, 2022 to bring our fleet up to 18 vessels and at the same time adding a block of forward revenue and charter coverage as a result. And all five of our vessel drydocking scheduled in 2022 have been completed. In terms of charter developments, Knutsen NYK have taken each of their one month options on the Bodil Knutsen to date and have options to keep the vessel until June 2023.

Photo by Shaah Shahidh on Unsplash

We signed the time charter for the Windsor Knutsen with Shell to commence in or around January 2023 for a one year fixed period, plus a one year option. The Lena Knutsen commenced on its charter with TotalEnergies for six months, plus a further six month option. And although in the second quarter we announced the redelivery of the Hilda Knutsen, we can confirm that the partnership sponsored Knutsen NYK in similar fashion to the Bodil Knutsen arrangement, have agreed to time charter the vessel for a 90 day period plus three further 30 day option periods, albeit at a reduced charter rate but to help support the Partnership’s cash flow in the short term. This arrangement commenced on September 3, 2022. And if all options are taken by Knutsen NYK would currently expire on or around the beginning of March 2023.

The time charter for the Tordis Knutsen with TotalEnergies commenced on September 10, 2022 for a fixed period of three months with charter’s options to extend the charter by up to two further three month periods, and TotalEnergies has already exercised the first every of its two three month option periods. On Slide 4, the current time charter for the Brasil Knutsen with Galp Sinopec expired in November 2022. However, the Partnership has entered into a new time charter contract also with Gulp in direct continuation for a period of one year, extending the vessel’s firm employment to November 2023. Regarding the Partnership’s time charter contract with Equinor for the Bodil Knutsen that is to commence around the end of 2023, this charter was either one year firm plus two one year options or two years firm with two one year options.

In November 2022, Equinor confirmed their intention to fix the initial charter period at two years. Meaning that if all options are taken by Equinor, the charter will be for four years and will expire around the end of 2027. We received news that Eni would redeliver the Torill Knutsen to us and we expect this to occur on or around December 17, 2022. We’re now marketing the vessel for new employment. In accordance with the previously announced time charter agreement with Eni for the Ingrid Knutsen, the Partnership is expecting redelivery of the vessel on or around December 7, 2022. The Partnership is continuing to market the vessel for new employment during 2023 in anticipation of the commencement of the new three year Eni time charter contract commencing in January 2024.

In terms of the wider market, we have continued to see good levels of activity in Brazil, but the North Sea remains a significant concern as we consider that this could take several further quarters to rebalance. As we said before, we’re also in this time looking at the conventional tanker market where headline spot rates have risen substantially in recent weeks. And although this is a positive development, the reality is that it is not that easy to secure those high rates. And as part of this type of employment, it is necessary to consider utilization where the vessel may not earn revenue every day when it’s between cargoes as it does under a time charter and also fuel costs, which would normally be a cost for our customers under a time charter contract.

Although, we are also actively looking at the conventional market, it maybe that this does not provide a sufficient level of income. Notwithstanding, given the charter developments we have seen, we now have $644 million of contracted forward revenue, excluding options, up from $594 million at the end of June ’22 plus $74.6 million in available liquidity. Slides 5 through 8 are our usual summary of our financial results. And as usual, I will just mention a few points. On Slide 5, our revenues held at well this quarter given the drydockings ongoing and depreciation was higher as a result of there now being 18 vessels in the fleet from July 1st. Operating expenses are above their historic average, mainly as a result of increased bunker fuel costs related to our time charter vessels that needed to transit to and from their drydocks.

When time charted vessels are on hire fuel as a cost for our customers but these vessels are off hire during their drydocks and with fuel costs increasing this has impacted our results. The other factor affecting operating expenses are crew and crew related costs, which remain elevated since the onset of COVID and which level may become the new normal as we move forward. With a wide and geographically spread supply base to draw upon, we do believe we have some protection against certain elements of inflation that are incurring — that are occurring in many countries just now. However, this is something that we like all companies are keeping under close review. The upturn in interest expenses and realized and unrealized gains and losses on derivative instruments are driven in part by the recent increases in US dollar interest rates and forward curve and again, partly driven by having an extra vessel in the fleet.

At September 30, 2022 around 61% of our debt was actually or effectively fixed rate through either interest rate swaps or our two sale and leaseback financings. On Slide 7, you can see our cash and cash equivalents balance at the end of the quarter of $49.6 million, and the debt refinancing due in the third quarter of 2023 has moved to the current portion of our long term debt balance. This is something we have already started talking to our lenders about, and early indications are that we’ll be able to successfully refinance the six underlying vessels in good time by mid 2023 and on acceptable terms. The distribution coverage ratio on Slide 8 was slightly up at 0.6 for the third quarter of 2022. And as we have disclosed previously, although, there is a tendency to focus heavily on this figure each quarter, the partnership and the board instead takes a longer and more rounded view.

But of course, that’s not to say that a DCR of less than one is something that is sustainable. In the context of the distribution, although, we do not mechanically link that to the distribution coverage ratio in a given quarter, our board does take into account our liquidity position, the outlook for the business in our market, our strategic interests and anything else we consider to be relevant. We feel this allows us to bring a holistic view in ensuring that we operate in the best interest of our unitholders, without jeopardizing our ability to participate in the longer term shuttle tanker opportunities that are the core of our business. Slide 9 is an update on our contracted revenue and charter portfolio. We’ve covered many of the contractual updates already, so I won’t repeat them here.

Other than to say that while we have had success in filling some of the gaps we had in 2022 and in the longer term, there remains important work to be done in the near term for 2023, particularly in the North Sea. And that is what we’re expending a great deal of energy on at the moment. As noted before, at September 30, 2022, we had remaining forward contracted revenue of $644 million, excluding options with average remaining firm charters of 1.9 years and charters had options to extend these charters by further three years on average. Then on Slide 10, we have the potential dropdown vessels held by our sponsor, KNOT, that the Partnership may choose to purchase in the future. We’ve now added the two recently contracted vessels that are due for delivery in late 2024 and late 2025.

It remains the Partnership’s target to acquire these vessels from the sponsor when suitable opportunities arise. However, there is of course, no guarantee that this will be possible. Slide 11, we have seen pandemic related impacts start to recede and FPSO deployment and all production schedules have accelerated, especially in the Brazilian offshore shuttle tanker service to pre salt areas, partly this is from a belief that higher or higher — high or higher oil prices will persist compared to project breakevens at or below $35 per barrel, driving investment and additional production capacity in the deepwater offshore fields. Although the more mature North Sea market has continued to encounter delays, resulting in the current oversupply of shuttle tankers in the region, we saw the arrival into Norway during the second quarter of the delayed Johan Castberg FPSO that is to be operated by Equinor.

This is a great example of a large field that will need shuttle tankers for its proven volumes that are today estimated at between 400 million and 650 million barrels of oil equivalent and for throughout its production life, which is expected to be 30 years. On Slide 12, we’ve highlighted previously only a very small number of new shuttle tanker orders that have been placed in 2022 for deliveries in 2024 and 2025, constituting only approximately 5% of current shuttle tankers in service. Given this and the main shipyard still being effectively full with containerships and LNG carrier orders through 2025, the total order book for shuttle tankers is very muted with only six likely to deliver before the end of 2025, all of which are understood to be assigned to long term charters.

Set against anticipated production startups from ordered or delivered FPSOs, we expect this will meaningfully tighten the midterm charter market potentially to the point of shortage. Newbuild shuttle tanker prices also remain elevated up around 30% since the second half of 2021 as a result of tight shipyard capacity and higher input prices for steel and labor, all of which continues to help the competitiveness of our existing fleet. So in summary for this quarter, on Slide 13, we have strong utilization of 99.7% for scheduled operations. We generated distributable cash flow of $10.9 million and we paid a quarterly distribution of $0.52 for the 29th consecutive quarter. We had $644 million of remaining contracted forward revenue, excluding options at the end of the quarter and no refinance due until the third quarter of 2023.

As a reminder, the Partnership’s operations are not exposed to short term fluctuations in oil prices, volume of oil transported or global storage capacity, and our offshore loading charter rates are not as volatile as you find in other segments of shipping either upwards or downwards. In the near term, we focus very much on safe operations, both onboard and onshore, and we aim to maintain our high utilization statistics for sheduled operations. We’re talking with our customers as we always do and are proactively monitoring the wider market, including the conventional tanker market to ensure we can respond flexibly as opportunities arise. We’re planning for the scheduled drydocks that had to occur in 2023. And it maybe worth saying here that all five of the drydocks in 2022 were for vessels based in Brazil.

And with the drydocks taking place in Europe, these are our most expensive works due to longer mobilization time and fuel costs. In 2023, we have five further drydocks, however, three of these vessels are already based in Europe, resulting in significantly lower budgeted time and costs. Finally, as mentioned, the speed of recovery in all production and shuttle tanker demand in the North Sea is our biggest cause for concern at this moment. We’re working every angle to support our short term cash flows across our North Sea vessels to find opportunities to reinforce our balance sheet. But if we’re not able to do that and soon then the board will need to consider how this impacts on our distributable cash flow. At the same time, we continue to believe that the significant mid to long term expansion of offshore oil production, particularly in pre salt Brazil supported by the large number of committed FPSO orders and with low marginal cost of oil production together with the barriers to entry in our track record mean we can continue to remain positive with respect to the mid to long term outlook.

Thank you very much for listening and following this part of today’s call. I’ll be happy to answer questions.

Operator: Our first question comes from Liam Burke of B. Riley.

Liam Burke: Gary, I mean, obviously, you’ve got four vessels with limited chartering options. Your current liquidity position is what it is. Your coverage ratio is lower. And then you have to balance that against the long term charter opportunities as well as elevated asset values. How are you balancing your coverage ratio and how long do you think that you’re going to have to go before your coverage ratio improves?

Gary Chapman: I think the board is always looking at the whole picture, just as you have described there in terms of all of those things. And I think, the outlook for us hasn’t changed in terms of what we’ve been saying for several quarters now that the impact will depend on the signing of new charters at good rates, and that’s what we were doing yesterday, it’s what we’re doing today and it’s what we will be doing tomorrow. And I think, we’re working really hard to get back to a sustainable position. Like we said, the coverage ratio is not where we want it to be and we’re working really hard to get that back. And I think that’s really, as you’ve said, you’ve pointed out the North Sea vessels that we’ve got there, and that’s exactly why we’re looking at every angle, including the conventional market, to the maximum extent we can to make sure that we can not only get through this but also look after the long term interest of the unitholders and get us back to a sustainable place.

Liam Burke: So what are your options in the North Sea? I mean, I understand the truth, the conventional charter market is what it is. But if there’s over capacity in the North Sea there is over capacity in the North Sea?

Gary Chapman: That’s not to say that the vessels aren’t doing anything at all. There is business there, perhaps it’s less long term than we would like. But we’re talking to all of our customers all of the time, and their requirements change often, daily, weekly. So I think for us, we’re pushing as many buttons as we can and that’s why we broadened our horizon to the conventional market as well. There are opportunities out there. I think, we’ve been guiding towards this sort of situation for a little while. The gaps are a little bit now and we recognize that, which is perhaps what’s coming through in the earnings release that we’ve put out. But the extent to that depends on what charters we can get. And I do think there is some business in the North Sea, it’s not that there’s no business.

And with the conventional market as well and obviously, the rates in the conventional market at the moment are very positive, so that’s very helpful for us. They could go higher. So I think the extent of the impact for us is yet to be seen. And I think we’re doing all we can to get some good business for those ships that are open.

Operator: Our next question comes from Richard Diamond of Castlewood Capital.

Richard Diamond: Gary, I just want to say that mid to long term outlook for KNOP is really the best it’s looked since coming public, and it’s really short term challenges. And I know you and the board will take the right course for creating long term shareholder value. Earlier this morning, I listened to the Frontline call and they shared Q4 Suezmax rates, you know, again, short term charter at $65,000 a day with a three year time charters at $35,000 a day. So it looks, if you wanted to do voyages that rates are still strong, without asking for a dollar, let’s say Suezmax rates went up to $80,000 a day. Would that be competitive for KNOP?

Gary Chapman: You’ve made some really good points there, particularly around the mid to long term, which we certainly would agree with. And it is the short term that’s the challenge for us. I think the part of the reason why we’ve been a little bit raising the caveats about the conventional market is obviously around the fact that the utilization is a little bit unpredictable. Yes, you can sign up for a TC but at a lower rate. And playing in the market really does depend on utilization and to a degree, obviously, fuel and repositioning and ballast costs. So I think it’s not so easy to come up with a rate that this would work and this one wouldn’t. But I think what we can say is that certainly where the conventional market is today, it’s really helpful for us and we are seriously looking at what we can achieve in that market.

And I think given the volatility that we’re seeing in the market, we don’t know what’s going to happen to rates, et cetera with what OPEC and Russia are going to do and the price cap beginning of December. There’s a lot of things happening at the moment that make it very difficult to think that conventional tanker rates are going to come down in the in the short term, and that’s very helpful for us. So, whilst we don’t want to necessarily use our vessels in the conventional market, we would much rather be doing offshore loading activities. It does at least give us a realistic and viable chance to earn good money. And you’re right, I can’t give you a rate. But certainly, despite the caveats we’ve put, we do feel that it’s a good opportunity for us to be able to secure some charters and some income for our vessels.

Richard Diamond: Would it change the — let’s say, you decided to charter, let’s say, two vessels short term or move them to for sell. Do you think that psychologically, the North Sea charters would start to become concerned about the availability of capacity?

Gary Chapman: Yes, and certainly we’ve seen that already starting in 2024 for sure. And I think some of our customers must already be thinking that way, I think. And we’re seeing that in Brazil even today for 2023. So I think that is very, very possible. We’ve seen a couple of vessels leaving the North Sea just recently I think. So again, the numbers are changing regularly. And I think we — things are moving in the right direction for us. We’re not seeing too many variables that are working against us at the moment, newbuild prices are high, certain vessels are leaving, the older vessels are perhaps leaving the market in ones and twos and things are being tied up. And certainly in Brazil, that is already the case. What we doing our best to do is to obviously work with the conditions that we’ve got in the North Sea and do our very best to sign new business for those vessels.

But certainly, the underlying market and the conventional market at least is — it’s supporting us in those efforts, I think.

Operator: Our next question comes from Jim Altschul of Aviation Advisory Service.

Jim Altschul: I guess, I got a couple of questions for you, please. First of all, with regard to your hedge accounting, because for the accounting that — specifically the realized and unrealized gain on the derivative instruments, because I believe in the news release, you said that you’re not using hedge accounting, and if I’m using the right word. There’s a significant — if you look on the income statement, there’s significant increase in the interest expense because of the increase in interest rates. But you also have a significant realized and unrealized gain on the derivatives, I mean the derivatives are all related to your interest rate risk, right? I mean you you’re not

Gary Chapman: interest rate

Jim Altschul: I mean, you don’t have other kinds of derivatives like Baltic tanker futures or anything like that, your derivatives are all interest rate related. Correct?

Gary Chapman: Yes, they’re all — the realized and unrealized gain — there’s a breakdown in the earnings release, and the majority of that relates to the valuation of the interest rate swap contracts that goes through the P&L each quarter, because we don’t do hedge accounting.

Jim Altschul: So of that, that figure you have in there $12.37 million, how much of that relates to — this quarter’s interest expense and how much of that can we assume can be offset against the current quarter’s interest expense, and I hope I’m phrasing this properly?

Gary Chapman: Well, they’re two different things. I mean, the interest expense is the interest expense on our debt and then separately, we have interest rate swap contracts that offset some of that. So they’re not actually legally the same thing, if you see what I mean. So I think Jim, if you want to, I’m happy to speak to you separately away from this call, if that’s helpful to you, if you wanted to drop an email to the IR email address, I’m very happy to talk to you. If you want to get into the detail at some point on that.

Jim Altschul: Okay, I will understand it better. Next question. In the press release, you indicated that I guess a couple of the vessels which were redelivered, if that’s the right word. They are currently on short term charter to I believe your sponsor, but at a somewhat lower rate. Can you give us an estimate of what the quarterly revenue impact of these lower rates will be on those particular vessels, how much have we should be

Gary Chapman: Yes, we’ve traditionally not broken down our fleet by vessel for a number of different reasons, and I’m not going to do that here. And in particular, because that is a rate that is somewhat private between the company and its sponsor. However, those rates have been reviewed and checked by our independent conflicts committee as being appropriate rates, given the circumstances. And actually, we believe that it’s positive for the business to have those charters in place, because the alternative, certainly, up until this period, the alternative was potentially no income at all for a period of time. So I think we don’t generally break down our fleet in that respect and we tried to steer our investors away from looking at individual vessels and instead focusing on the total revenues.

Jim Altschul: Certainly, I don’t want to press the point, but there’s more than one vessel affected. I was looking for an aggregate impact on the quarterly revenues of the transition of these — two or three vessels to the short term charters. Would you be able to give us that number?

Gary Chapman: I’m not going to give you a number on that, because I think, as I say, you’ll just be able to — there are two vessels, you’ll just be able to take the number divided by two. So it will kind of lead me in the same direction.

Jim Altschul: And the final thing is, this isn’t — this is not a question actually. And I know this is not — this is supposed to be Q&A, not pontificating. But I would put — as an investor, I would like to put in my $0.02 and no pun intended. I urge all of you to be conservative in calculating, determining your next distributions. I mean, obviously, I enjoy getting a nice quarterly distribution from you every three months. But to me the most important thing is the long term strength of the balance sheet and the company. And as you well know, there are an awful lot of companies that created some major problems for themselves by paying dividends well in excess of what they could really afford, starting with General Electric and General Motors. So again, I would encourage you to be conservative when it comes to making your next decision regarding that distribution.

Gary Chapman: Yes, I appreciate that, Jim. And I’ve said before and on previous earnings call and I’m happy to say to them, we try to run this business on a conservative basis. We’re generally not inclined to make rash decisions. We tried very hard to do the best for our unitholders and also making sure that we can access the benefits that we think are going to come in the good market that we see in the future. So I fully get your point.

Operator: Our next question comes from , who is an individual investor.

Unidentified Analyst: Just wanted to have a quick question. Realistically, what are the chances of spending some of the cash on repurchasing shares on the open market?

Gary Chapman: We’ve never ruled that out. It’s something that the board has always kept on the table. We’ve historically not done that, we’ve not gone down that route. We felt that the money has been better used and it makes more sense to keep that money in cash in the business. And obviously, that’s a decision for the board rather than myself, so I won’t sort of pontificate on what the board might or might not decide to do in the future. But we haven’t typically done that. And I think at the moment, with our outlook, I think the business probably needs the cash that it’s got, and we’re focused on getting all of the charters that we need at good rates. So that we’re in a good sustainable position. So I think to answer your question, I don’t think it’s on the cards at the moment. But as I say, I won’t speak on behalf of the board. But I think at the moment, that’s probably not our priority.

Unidentified Analyst: I only asked because the coverage ratio is below one, that’s the only reason.

Operator: Our next question comes from Rob Silvera of R.E. Silvera & Associates Marine Surveyors.

Rob Silvera: Gary, very concerned about this last report that you put out for a number of reasons, not just the financial reasons, but what it seems to point to based on your past actions. And my first question is, what was your purpose of revealing all of the new and upcoming shuttle tankers of Knutsen NYK that maybe available in the future, why did you reveal all of those?

Gary Chapman: Yes, that slide has sort of been in our presentation, certainly, as long as I’ve been performing this role. And we always like to disclose what the sponsor has, because through the omnibus agreement, we have the ability to purchase those ships from the sponsor, at a point in the future, subject to all kinds of different things. But I think it’s important that we disclose that information, so that people can understand where the future might be in terms of fleet growth for the business. So there’s nothing sinister about, it’s really just trying to be transparent.

Rob Silvera: Well, currently, with our current situations with expiring contracts and the need to employ the ships, the report is obviously very troubling to the market, because we’ve lost over year’s worth of dividends in the price of the stock for today. As we speak, it’s down at $11.66 down , so that’s very discouraging. And I think based on your past, pardon my horsey throat, your past conference calls. On the last one, you had said that there were no new dropdowns coming that you contemplated and then this latest drop down, which came in July, comes as a surprise based on what you’re telling people that is going to happen in the future. And that’s also happened a few quarters back when you mentioned nothing about drop downs. And then right after the conference call within a week, there was a dropdown and you didn’t tell us that that was coming or even contemplated at that point in time. And I think that kind of communication hurts.

Gary Chapman: Rob, the previous earnings call in August, the dropdown had already happened. It was effective 1st of July and the previous earnings call was in August

Rob Silvera: I missed that one, it was the one before that you said it. So it was the call so forgive me

Gary Chapman: But the dropdowns that we’ve done, certainly, recently have been using cash and debt and it basically internally financed. So we haven’t had to dilute any of unitholders to in order to do that and in order to bring in those new revenue streams

Rob Silvera: That I understand

Gary Chapman: And we put out the KNOT vessels, which was your original point. So that people can see what those vessels might be. And we always are looking to drop vessels down at an appropriate time when we think we benefit from doing that. So certainly something that we want to do.

Rob Silvera: Yes. But at this point in time, when you’re struggling to get new contracts to fill the ships we have, I think it does not serve a good purpose to imply that there maybe future dropdowns with the raising of interest rates and raising of the debt levels that we have, because this last one you paid cash and you assume the debt. And altogether, we paid $119 million for a ship that turned out that it was actually defective and had to be repaired, which is not something that looks good

Gary Chapman: I think that’s a little bit harsh, because all of vessels have troubles and they get fixed. And that’s the same as your car, it’s the same as anything else. I mean, it wasn’t a little bit of

Rob Silvera: I know. But it troubles me to see a used vessel go for $119 million in total cost, that was troubling. Anyhow, I’m happy as a shareholders for many, many years now that we’re going to in the near future do some more dropdowns with conditions as they are until we get good contracts for our vessels, because it’s obvious you do not want to operate in the spot market even though rates are high. And I can understand why you don’t want to, because you’re really not designed to compete against the VLCCs or the Suezmaxs that are doing that every day. And so that’s my feeling that

Gary Chapman: Well, we do and we are happy to go into the conventional market. I mean, all of these things are not so simple as looking at a headline rates and saying, yes, we can get that. But there’s no reticence from us about putting our vessels in the conventional tanker market if we think that’s the best thing to do. And certainly

Rob Silvera: What size do we come in at, what size are we classified as Suezmax

Gary Chapman: Most of the North Sea are Aframax and then we’ve got the Bodil Knutsen, which is Suezmax.

Rob Silvera: I see. Okay. Well, that’s my concern. I know you want to be conservative and I just, I really don’t want to see us increase our debt and increase our dropdowns at this point in time until we have solidified our existing fleet. Because next year, like you say, we face another five dry dockings, which are very tough on earnings. So that’s my input. Okay. Thank you, Gary.

Gary Chapman: We won’t be doing any dropdowns unless it makes sense. So it’s not that we grow, it’s not a grow at all cost MLP

Rob Silvera: How does it make sense? Can you explain to me how it makes sense in a time when interest rates have risen and will probably rise some more, and we have ships that are not contracted for that maybe open to having to go in the spot market? How is it contemplating a dropdown beneficial?

Gary Chapman: Well, because — and I’m not saying we’re going to do a dropdown. But the way that we think about the dropdown is whether or not by itself as a standalone ship does it make the MLP stronger, is it in the interest of everybody for us to take that when you look at the cash flows associated with that vessel. So if we pay X dollars for it, is it creating free cash flow for us by buying that vessel at that price with the debt that it has in the charter that it has. And also considering the fact that we will have to pay a certain amount of equity for it and that maybe generated through internal funds or debt. But as a project, as a vessel, it has to stand alone and be a good piece of business and that’s accretive as to the Partnership, otherwise, obviously, we won’t do it.

Rob Silvera: Well, that’s good to hear. The thing that’s really discouraging is the market’s reaction to the current report, which is quite discouraging. Because see a whole year’s of dividends wiped out in the price of the stock. Okay, thank you. That’s my input, Gary. Please consider that and have a nice holiday. And God bless you.

Gary Chapman: Thank you.

Operator: At this time, we currently have no further questions. So I’ll hand back over to Gary for any closing remarks.

Gary Chapman: Thank you everybody. And I wish everybody well for the holiday season if we don’t speak to you, and thank you again for listening.

Operator: Ladies and gentlemen, this concludes today’s call. You may now disconnect your lines.