KNOT Offshore Partners LP (NYSE:KNOP) Q4 2022 Earnings Call Transcript

Gary Chapman: Yes. I think the process that we go through and the Board goes through and the Conflicts Committee goes through looks at the rate. And I think it’s an appropriate rate, once that analysis is being done. And I think the process involves looking at what the market is doing, what we think is achievable. And to a degree, information from KNOT side that we are able to access, which is not actually all of it, because clearly that’s KNOT’s business. But we’re able to make an assessment on those charter rates such that the Conflicts Committee and the Board get comfortable that it’s their fair arm’s length rates under the circumstances. So I think, clearly, whilst I’m not answering your question in numbers terms, the charter rates across the vessels are similar, they’re not wildly different. One isn’t double the other for example. They are very, very similar.

Poe Fratt: And then, I should mention, congratulations on closing some of the charter windows that you had. Can you just talk about the outlook for the other two bareboat charters in Brazil? One actually is, I think the Dan Cisne is up in June. Can you just talk about the Dan Sabia and Dan Cisne sort of your outlook there in your expectations? Will they also clip to time charters versus bareboats? And then, if you could also just expand on the difference, what we’re going to see from the standpoint of your income statement impact on the change from bareboat to time charter?

Gary Chapman: Yes. Well, certainly, the Fortaleza, Recife and the Cisne, Sabia, they’re two sets of two sister vessels. So, it makes sense that Transpetro or Petrobras are talking to us in these two pairs, rather than all four vessels at once, for example. And the Fortaleza, Recife have obviously come up first, and that’s why we’re talking to them about those. I think normally we would much prefer that we have these contracts signed earlier, and the same with the Cisne, Sabia as well. But we obviously can only go at the speed of our customer, and they have a lot of internal arrangements and things to sort out themselves. I think at the moment on the Cisne, Sabia, we will start those discussions with Petrobras, Transpetro, as soon as we finished with the Fortaleza and Recife, and that’s our current expectation. So, I’m afraid I’m not giving you too much information there, but we’re essentially having to follow our customers lead.

Poe Fratt: Okay. And then, when you look at sort of the time charters you have in place that start in January of 2024, can you just maybe give us some flavor for whether on the Tordis, the Lena, the Ingrid, as you move on to time charters with either Shell or Eni, what’s the change? Is it up, down or neutral? Just directionally, if you’d give us an idea of sort of how those rates as they kick in, in early 2024, look, relative to what the current environment is?

Gary Chapman: Yes. I mean, I think the rates on vessels are very much a factor of when those agreements were reached. And I think the net situation for 2024 for the vessels that you’ve mentioned there, I haven’t done the math, so you’re going to have to, I’m afraid, just bear with me. But my expectation would be that the rates on a net basis would probably be neutral, across all of those vessels.

Poe Fratt: And again, Gary, that’s relative to what they’re currently working at?

Gary Chapman: I think that’s a level of detail that I’m going to struggle to answer on the phone here, Poe.

Poe Fratt: Okay.