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Presentation

Operator: Ladies and gentlemen, thank you for standing by for the KNOT Offshore Partners’ First Quarter 2023 Earnings Results Conference Call. My name is Candice, and I will be your moderator for today’s call. . I would now like to hand the conference call over to our host, Gary Chapman, CEO and CFO to begin.

Gary Chapman: Thank you and welcome to our first quarter 2023 earnings call. The earnings release and this presentation are available on our website at knotoffshorepartners.com. Slide 2, gives guidance on the inclusion of forward-looking statements in today’s presentation that are made in good faith and reflect management’s current view, involve known and unknown risks and are based upon 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 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.

And for further information, please consult our Annual and Quarterly SEC filings. 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 3, 4 and 5 are highlights from the first quarter of 2023 and subsequent. We announced our 40th consecutive quarterly cash distribution since our IPO in respect to the first quarter of 2023, and which was paid in May 2023 under our 1099 structure. Our fleet in the first quarter operated with 100% utilization for scheduled operations, and 96.6% utilization taking into account the scheduled drydocking of the Carmen Knutsen. We secured credit approval on similar terms for the $320 million senior secured credit facility and the $55 million revolving credit facility, which mature in September 2023, and which debt finances six of the Partnership’s vessels.

We’re anticipating to close this in June 2023, subject only to execution of documentation and other customary closing conditions. It’s worth noting that the $172.5 million senior secured loan facilities maturing in September 2023 and January 2024 secured by the Dan Cisne and Dan Sabia, respectively, will be fully repaid on maturity. So there is no need for a refinance plan at this stage, and we have no immediate plans to incur additional borrowings secured by these two vessels until such time as the Partnership has better visibility on their future employment. Finally, we’re discussing with our lenders concerning the two $25 million unsecured revolving credit facilities that mature in August 2023 and November 2023, and based on conversations so far, we believe that both facilities will be refinanced on acceptable and similar terms prior to maturity.

We would expect to provide further news on these in our second quarter 2023 earnings release. And in terms of charter and contract developments, we have now signed and closed new three year time charter contracts for both the Fortaleza Knutsen and the Recife Knutsen with Transpetro. Meaning these vessels are now contracted to March and August 2026, respectively. Then following, for the recent vessel developments listed on Slide 4, I don’t plan to read through this. I’m sure you can all do that for yourself, but what I can say is that the combination of all of these charter developments has left us almost entirely covered in 2023, and for several vessels, we have now achieved charter coverage well beyond this year, and we’ll see that when we look at the charter diagram shortly.

And finally on this slide, the Carmen Knutsen successfully completed her ten-year drydock taking a total of 74 days spread across the end of the fourth quarter of 2022 and into February 2023. On Slide 5, the Partnership had $52.4 million in available liquidity at the end of the first quarter, $688 million of remaining contracted forward revenue excluding charterer’s options, but including the new charter for the Recife Knutsen, which was signed on April 11, 2023, and our fleet had an average age of 8.9 years, with each vessel having an estimated useful life of 23 years. We saw great utilization for scheduled operations in the first quarter at 100% and the trends and shuttle tanker long-term fundamentals assisted us in securing the credit approvals we needed for the refinancing.

And the encouraging trends that we have previously highlighted in Brazil, where 14 of our 18 vessels operate, are continuing to exert positive pressure on the shuttle tanker charter market. We expect that the limited global fleet orderbook of only five vessels between now and 2026, combined with significant new offshore oil production volumes coming online, will drive charters and rates both in Brazil and in the North Sea, but we do recognize that the North Sea market where currently four of our 18 vessels operate, may still take longer to rebalance, meaning it may yet take several more quarters to filter into the Partnership’s results. Nonetheless, as stated, we continue to believe that the overall supportive fundamentals of vessel supply set against the faster pace of new offshore oil production implied by continuing FPSO ordering for shuttle tanker-serviced fields, will leave the Partnership well placed over the coming years.

Slide 6, 7 and 8 are our summary of financial results and as usual, I will just mention a few points. Combined with voyage revenues, our total revenues were strong in the first quarter and this was further boosted by over $900,000 in loss of higher insurance claims, related to issues that occurred in prior quarters. Operating expenses were broadly in-line with both our expectations and the fourth quarter of 2022, and voyage expenses being the other side of voyage revenues also remained consistent. As we had mentioned before with a wide and geographically spread, crew and supplier base to draw upon, we believe we have some protection against the inflationary pressures that are occurring in many places, however, this is something that we like all companies are keeping under close review.

Higher LIBOR and higher utilization of our revolving credit facilities have all increased interest expenses in recent quarters, and this first quarter of 2023 is no different. However this has not had any impact on our operations or on our continuing and scheduled debt repayments. On Slide 7, you can see our cash and cash equivalents balance at the end of the quarter of $52.4 million and the current portion of long-term debt is naturally elevated as this relates to the ongoing refinancing that we have already spoken about. On Slide 8, you can see the overall adjusted EBITDA for the first quarter was again solid consistent. Slide 9, shows how significant portion of our total debt is hedged through to the end of 2024 and into 2025, meaning that the majority of our debt during that period is not affected by changes in interest rates as we have swapped a portion of our variable interest rate debt for fixed interest payments, therefore providing greater certainty of interest expense and cash flow.

At March 31, 2023, the Partnership’s net exposure to floating interest rate debt was approximately $353 million, or around 34% of our total interest-bearing debt. In other words, 66% was fixed via our interest rate swaps or effectively fixed via our two sale and leaseback financings. You will see that we anticipate that more than 50% of our debt will remain fixed or effectively fixed for the next few years, and we’re always monitoring the situation to look for new opportunities that could allow us to benefit. Then onto Slide 10, as we have seen many of the contractual updates already and they are also set out in the earnings release, I won’t repeat them here. But as of March 31, 2023, excluding charterer’s options, but including the new charter for the Recife Knutsen signed on April 11, 2023, we had $688 million of forward contracted revenue, and of our firm charters, these had 2.2 years remaining on average, and charterers had options to extend these charters by a further 2.2 years on average.

On Slide 11, you will see that we have now contract coverage for almost the entirety of 2023, and several vessels are now under contract for much longer periods as you could see on Slide 10. As a result, most of our focus has moved onto the vessels that are yet to be fixed in 2024 and this is where our efforts are being directed. We believe it helps that only five new shuttle tankers are expected to come into the market between now and 2026. Therefore, the total supply of shuttle tanker is likely to become tight and with new build shuttle tanker prices remaining elevated, this all helps the competitiveness of our existing fleet. Just before we move on, please do be reminded that this slide does not talk to vessel utilization, it refers to future charter contract coverage.

Then on Slide 12, we list the potential dropdown vessels currently owned by our sponsor KNOT. As stated, the acquisition by the Partnership of any such vessel in the future would be subject to approval of the Partnership’s independent Conflicts Committee, as well as the Board of Directors of each of KNOP and KNOT and there can be no assurance that any potential acquisitions will actually occur. As we have said, our top priorities are securing additional contract coverage, forward visibility of our existing fleet and rebuilding our liquidity position. Slide 13, we have kept this slide in our presentation from previous quarters, given we have a lot of new investors and as we continue to believe this remains a very value source of independent information that speaks to the future growth of shuttle tanker demand in Brazil.

The number of new FPSOs to be deployed in Brazil through to 2027 equates to approximately 50% of the world’s total FPSOs, and with a low carbon score and low marginal cost of oil production, we remain very positive with respect to the mid-to-long-term outlook here. We have also retained a further slide in the appendix to this presentation that gives some more detail. So, in summary for this quarter on slide 14, we had excellent utilization of a 100% for scheduled operations. We paid a quarterly distribution for the 40th consecutive quarter albeit at a reduced level. We have secured credit approval for $375 million of refinancing due later this year, and we concluded two new three-year time charters for two of our vessels. In terms of going forward, we continue our absolute focus on safe operations, both onboard and onshore, and to taking care of our crew while us maintaining our high standard and utilization statistics.

We’re working to close out the refinancings as set out, planning for the remaining drydocks this year, three of which are for vessels that are European based, so mobilization costs will be lower than for the recent Brazil based vessels. And of course, we’re working towards securing charter coverage for all of our fleet in 2024 and beyond. Finally, (ph) it is not written on the slide, I do want to point out our press releases of April 5 and April 10, which give details of the changes and upcoming changes to our Board of Directors and also to my own position within the Partnership. The same details are also contained within the earnings release issued after closing yesterday. Then finally, Slide 15, we again want to promote our newly refreshed website where you can find more information on the shuttle tanker market, our fleet and of course investor related information, including a frequently asked questions section.

Hopefully, people will find this a useful resource. Thank you very much for listening. And following this, I’ll be happy to answer any questions.

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Operator: Thank you, Gary. . So, our first question comes from the line of Liam Burke of B. Riley. Your line is now open. Please go ahead.

Liam Burke: Thank you. Hi, Gary, how are you?

Gary Chapman: Hello, Liam. I’m very well. Thanks. How are you?

Liam Burke: I’m fine. Thank you. You successfully re-chartered the Cisne and the — I am sorry the Fortaleza and the Recife with Transpetro. You have two more vessels that are up for re-charter. Do you anticipate the re-charter timeline to be similar as the first two vessels? Or do you anticipate any problems on the re-charter?

Gary Chapman: Yes. You’re talking about the Cisne and Sabia, I guess.

Liam Burke: Right. Yes.

Gary Chapman: Yes. Yes. I mean, it’s difficult for us to predict, obviously to come to a contractual agreement requires both parties to work towards that. And we’re not in control of Transpetro and Petrobras’ timeframe there. Obviously, the first vessel runs through to September, so we’ve got some time. I guess history may suggest that they perhaps leave it down to the wire a little bit. So, that is also possible. But we are trying to talk to them, as we always do to move it on and do this as early as we can, but it’s a distinct possibility that those conversations may go right down to the wire. In terms of where we finish up with them, at this stage, I can’t say anything really. We don’t have anything to report, but given perhaps the history that we saw on the Fortaleza and the Recife, at this stage, we believe we’ve still got plenty of time.

Liam Burke: Okay. Fair enough. I mean, yes, they did push the other ones down to the wire. And then you talked about the $172.5 million that’s up for – that’s due, Cisne and Sabia. Where is the source of the debt pay down there? I know you have $54 million plus in cash, but where would the rest of the capital come from to repay that loan?

Gary Chapman: Yes, the balloons on those are only $8 million. So, that’s pretty small and we factored those into our cash flow forecast. So, yes, those are kind of naturally maturing if you like rather than being a significant balloon, if that answers your question.

Liam Burke: Yes, it does. Thank you, Gary.

Operator: Thank you. Our next question comes from the line of Poe Fratt of Alliance Global Partners. Your line is now open. Please, go ahead.

Poe Fratt: Good morning or good afternoon, Gary.

Gary Chapman: Hi, Poe.

Poe Fratt: Hi. I was wondering if you could help us understand that you’ve chosen to move on and there’s a search underway. Do — would we anticipate the dual roles of the CEO and CFO staying remaining sort of under the current structure?

Gary Chapman: I’ll be totally honest. I’m not being kept in fully in the loop, in terms of the recruitment process. I think that’s natural. But yes, I’m not aware of any move to sort of restructure my role, as things stand. But as I said, I’m not fully in the loop with all of the discussions, but I do know that the Board has already started a process. So — and there is progress being made in that respect already. So, it’s probably as much as I actually know, and am I able to tell you, Poe, sorry.

Poe Fratt: No, that’s alright. I’ll miss working with you. When you look at this first quarter revenue number, it’s a 100% utilization with the exception of the — I guess the 55 days of downtime on the survey. Can you just talk about sort of direction of revenue for the second quarter, the potential impact time charters. And then also if you could give us any color on the cost level of what we should anticipate for the costs. I’ve been looking at and trying to forecast costs using not only the — Okay. But there will be a little bit of a change because the previously bareboat rate charters —

Gary Chapman: I think —

Poe Fratt: The Transpetro will change a little bit.

Gary Chapman: Yes. So, you’re going to have higher revenue and higher vessel operating expenses both, as a result of us receiving a time charter rate and incurring OpEx costs, whereas obviously previously we had a bareboat rate, which was lower, but no operating expenses. So, the operating income line effect should be marginally positive, but that change from bareboat to time charter probably isn’t going to make a huge difference quarter-by-quarter, over time, yes, it’s positive. But I think Q2 isn’t going to be dramatically different from Q1 at the operating income level. From that it’s not issue.

Poe Fratt: Okay. Great. Yes, because I’ve asked you in the past about the net impact of the bareboat charters shifting to time charters. So, that’s the impact shouldn’t be should be fair with (ph) in other words to cash flow should stay recently close to the previous level.

Gary Chapman: Yes. I mean, obviously, the income that we get from the customer is CapEx plus OpEx. And obviously, our cost base is linked to that, but is independent. So, there is the opportunity for us to run our company efficiently and profit from that, and that’s what we hope to do, obviously. But I think in this case, we’ve got just two vessels moving from bareboat to time charter. So you’re not going see across the whole company’s results, you’re not going to see a sudden big jump in operating income just because those two vessels have gone from bareboats to time charters.

Poe Fratt: Okay. And then congrats on the preliminary refinancing. Can you just talk about the impact of the refinancing on your liquidity, it looks like the balance on the previous term loan that you’re refinancing was a — I’m calculating close to $177 million.

Gary Chapman: Yes. So, the $375 million was the original notional number, obviously since that we’ve paid it down. But, the simple answer to your question is that, this refinancing is almost like-for-like. It’s a continuation of the finance that it’s replacing, in terms of the profile, the tenure and even the margin. So, we said in the earnings release and I’ve said in the presentation today, that it’s on similar terms. So, you can think of it like just a continuation of the finance that is already in-place.

Poe Fratt: So, just to be clear, so the term loan from here on out will be roughly call it a $175 million, and then will you have a credit revolver of $55 million going forward.

Gary Chapman: No, we’ve put the two together into one facility. Essentially the $55 million was largely treated as historically, this goes back a few years now, but it would — I can’t recall the exact reasons off the top of my head why it was separated out, but we put them two back together and so it’s going to be one facility going forward.

Poe Fratt: And that one facility, Gary, would be in the — would it be the $175 million plus with $55 million or would it just be $175 million? I’m just trying to figure out sort of how you’re —

Gary Chapman: Yes, if you look at the 20-F which is the most recent, that we’ve put out, in terms of detail, it’s the Page F-31. That sets out the breakdown of the debt. And at December 2022, the $320 million was paid down to $192 million and the $55 million was sitting at $55 million. And obviously since then we will have done another rollover or two in terms of quarters. So it could be a little bit less than that.

Poe Fratt: Yes. I was thinking — plus the $55 million. Oh, sorry.

Gary Chapman: Yes. Yes. Yes. So, if you want to take a look at the detail, it’s on F-31 in the 20-F, which shows you all of the various facilities that we’ve got.

Poe Fratt: Okay. And then are you at the point where you can talk about the tenor meaning how far out it’s been extended? And then also the amortization and, balloon payments that are associated with the new term loan?

Gary Chapman: Yes. So, the tenor is going to stay — well, the profile I should say, is going to stay at the 19 years, which I believe is what it was to start with. And this is another five year arrangement. So, it will still be another balloon payment in five years.

Poe Fratt: And the amortization, so it’s still going to be the same amortization going forward just for another five years. So, I know your balloon payment would be just rolled out. Okay.

Gary Chapman: Correct.

Poe Fratt: Any change on the pricing of the term loan?

Gary Chapman: No. We’ve moved from LIBOR to a SOFR based interest calculation, given LIBOR is obviously being replaced. But the net impact is practically zero actually in the margin and interest rate that we’re expecting — in the margin, obviously not the total interest rate because that’s — it’s variable . Yes. We’re expecting a like-for-like continuation. We’ve been able to secure good terms here.

Poe Fratt: Okay. And then just on the two $25 million credit facilities or you’ve sort of used those as working lines. Can you help us understand whether the terms change there or it’s too soon to talk about the actual details of that re-financing?

Gary Chapman: It’s too soon for me to be sure, but what we’ve asked for is, again a rollover of the same. So, that’s our request to the lenders. The feedback that we’ve received so far is positive, but we still got some work to do to get them to — get that credit approved etcetera. But we obviously wanted to focus on this big one first, and get that sorted out and we’ll now turn to looking at these two $25s.

Poe Fratt: Great. That’s all I have. Thank you, Gary, and good luck in your next adventure.

Gary Chapman: Yes. Thanks, Poe. Thank you. Have a good day.

Operator: Thank you. Our next question comes from the line of Jim Altschul of Aviation Advisory Service. Your line is now open. Please go ahead.

Jim Altschul: Good afternoon. First of all, I want to express my appreciation to your service to the company, and it’s really been a pleasure working with you and you’ve always been exceptionally responsive to my questions and everyone else’s. Got a few questions relating to the financing. First of all, the financing issues, if you look at the income statement, you see a pretty substantial increase in interest expense particularly year-on-year. But you also said that, I believe it was two-thirds of the debt is fixed by means of swaps. What accounts for this interest — big increase in the interest expense and are we likely to see further increases in the next couple of quarters?

Gary Chapman: Hi, Jim. Yes. I think the interest expense is probably accounted for by two things. First of all, we purchased a vessel. So, there’s one extra vessel, 18 vessels now. If you look back previously, that obviously wasn’t there. So that accounts for a chunk of interest expense. And plus one-third approximately 34% at March, is not hedged, is not linked to swaps. So, it’s variable. And obviously LIBOR has gone from crazy low to quite high recently. So when you’re looking at — as at today, $350 million that is exposed to that LIBOR increase, yes, of course you’re going to see a significant increase in quarterly and annual interest expenses. Where that goes from here, I think that’s the jury is still out on whether the Fed will increase rates anymore.

We’ve obviously got a fair amount of debt that is fixed, and as we’re paying that down, you see on the diagram that, the proportion that swapped compared to total debt, actually increases for the next few years. So, we’re going to be slightly better off in that respect. But yes, I think to the extent that the U.S. interest rates don’t go higher, then yes, we’ve probably topped out in terms of interest expense. Perhaps the third element is as well, obviously, we’ve increasingly drawn on our revolving credit facilities and that obviously has also added to our overall interest expense. So again, that’s one of the reasons why our key focus is on our visible liquidity going forward, to allow us to perhaps use those revolvers less, and reduce that borrowing in that respect as well.

So, I think it’s a combination of things. And possibly, it’s topped out. But yes, it depends on what the U.S. Fed does going forward.

Jim Altschul: Okay. Next question, you make reference to the 172.5 million senior secured loan facilities maturing in September and next January, that are secured by the Dan Cisne and the Dan Sabia, so they’re going to be fully repaid on maturity. You don’t have a $172 million or anywhere near it in cash sitting on your balance sheet? How are you going to repay them at maturity without doing a refinancing?

Gary Chapman: Yes. Well, the $172 million is an original notional debt. Obviously, since we took it out, that has been paid down. So, the balance today is around $8 million on each, and so we factored that $8 million which is —

Jim Altschul: Oh, oh.

Gary Chapman: Yes. So we don’t need to find $172 million.

Jim Altschul: Oh, good. Okay. And I didn’t — when I saw in the in the news release, the reference to those two ships, I didn’t recognize them from the prior years, prior quarters releases. Am I just overlooking something? I mean, were they new to the fleet or?

Gary Chapman: No. No, they’ve always been there, Jim. I hope so. I’m pretty much guarantee they’ve always been there.

Jim Altschul: Okay. Which is the new ship that you took on and for which you added debt? And when did you take it on?

Gary Chapman: Sorry. Which – it’s new ship.

Jim Altschul: In response to my first question, but you said that one of the reasons the interest rate, the interest expense increase was because you added a new ship to the fleet and was financed partly with debt. So there’s interest expense. I’m looking now at Slide 10, which ship is that for which you began incurring interest expense in the book.

Gary Chapman: The last ship.

Jim Altschul: Reason of the —

Gary Chapman: We purchase was the scenario on the first of July 2022.

Jim Altschul: Oh, okay. And just one more thing. You’ve pretty much completed the refinancing of the $320 million facility. Was the previous facility covered by a swap? And if so, will its replacement also have a swap in place or is there going to be any impact in that area?

Gary Chapman: No. The majority of — I think it’s not all of that particular facility wasn’t matched with any swaps and to the extent that any of it was. Sorry. I don’t have that list in front of me. But the swaps would roll over onto the new debt anyway. So, it would literally be a like-for-like. And so, the answer to your question is no impact.

Jim Altschul: Okay, great. Thank you very much.

Gary Chapman: No problem, Jim. Thank you.

Operator: Thank you. Our next question comes from the line of Robert Silvera of R.E. Silvera and Associates Marine Surveyors. Your line is now open. Please go ahead.

Robert Silvera: Hi, good afternoon, Gary.

Gary Chapman: Hello, Robert.

Robert Silvera: On previous call, it was just previous call, I was just talking a lot about the tremendous climb, probably $2 million approximately in interest expense from fourth quarter 2022 to first quarter 2023. I would, as I have said many times in the past, conference calls that – that is the killer for our business. It’s a simple business. It’s a mobile pipeline, you move oil from one location to another location, take specialized equipment, etcetera, which has to be maintained properly, which you do a reasonable good job, although it seems like some of these ships are having problems lately, breakdown problems. My question is, how do you anticipate correcting the share price five years ago, when we were buying the shares, we’re paying in the 20s, low 20s for the shares.

And we’ve held them through all your trials and troubles. But its coming clear to me that as the analyst for our company, that the business model that we take these dropdowns, incur more debt and depending on variables like interest rates, we survive or suffer and now the price of the stock is down five years later, with depreciated dollars to $5 from $20, where we bought it. So we’re looking not too good. And I would like to know how you’re going to attack getting the debt down on an accelerated basis. Can you do that?

Gary Chapman: Well, we’re paying down a very significant amount of debt every year already, in the region of $80 million, $90 million a year. So, if you look at the slide that’s in the deck, you can see that, that’s happening. I think that in terms of what we’re doing is, and where the value is in this business is trying to sign new charters at good rates, and that’s what will get us the revenue, that’s what will get us the liquidity and ultimately that is what will get all of our unit holders the value. And so, we keep coming back to that same point. And I think when you look at the way in which we run the business, we paid out a very good distribution for a very long time until such point as the Board felt that they couldn’t do that anymore for the reasons that we’ve been over before around the postponements of certain projects that came about as a result of COVID from our customer’s point of view.

All of those projects are back online now. We’re expecting a strong market in the mid and long term. And we’ve said several times that we’re going through a difficult period right now, there’s a little bit of softness in the particularly the North Sea market. But the sponsors and the management team here, we’ve run this business for the long term. And we think the market was good and it will become good again. But to come back and answer your question, what are we doing? Well, it’s all about signing good charters at good rates. And that’s exactly what we’re working on.

Robert Silvera: Can I ask the new charter rates that you are employing at this point versus the ones that have faded away? Are we equal to better than or worse than?

Gary Chapman: I think over the last couple of years, we’ve seen a dip in the rates that we’ve been able to achieve, but we think that will come back. And I think we’re seeing that activity in Brazil already. But given the niche market that shuttle tanker is operating it’s a very small market. There are only 75, 76 channels in the world, etcetera. So rates don’t fluctuate wildly like they do in many other areas of shipping. So yes, our rates have dipped over this period of softness and we’ve accepted rates that perhaps normally we wouldn’t like. But that is coming back. We’re seeing the market in Brazil tightening a lot and we think that will also happen in the North Sea. But as we said the North Sea is just taking longer?

Robert Silvera: Well, we looked at the forward schedule you have of possible drop downs. And from our viewpoint with the age of our vessels being just over eight years, we don’t see that we should be taking any drop downs till at least 2027. And in the meantime, we can, if at all, possible, figure out ways to attack the debt and get debt down so significantly that we’re not really working for the bankers rather we’re working for the stockholders, which have not had a good time in the last five years, obviously. So that’s our input. We would really like to see you stay away from drop downs till at least 2027 when fleet renewal and the market has changed. So that it will be much more beneficial to run our business because the current business model, let’s face it over the last five years has not been successful.

Given all the different things, COVID, etcetera, the things that happen in the world, that’s all part of running a business. And the business model as we’ve run it has not been successful from a shareholder standpoint. All the nice $0.52 dividends that we’ve gotten have been wiped out in the sheer value. So I hope you will have that same kind of feelings although I know you’re leaving. I hope you’ll leave with the advice to the rest of the individuals involved in decision making like the board, etcetera, will encourage not to drop pounds.

Gary Chapman: I think that obviously the — how much somebody has gained or lost really just depend on when they bought and how long they held for, we’ve paid out a huge amount of distribution since we listed.

Robert Silvera: But our cost was $20 and now it’s $5 so all the dividend benefits have been wiped.

Gary Chapman: Yes. I’m not saying that that’s not the case, but I do think not everybody has lost, not everybody has gained. But I think the point that I’m trying to make is that this is a long term business. We’ve been — we try to be very transparent about the issues and why they’re there and what we’re doing about it importantly and where we think the business is going. And I — we’ve…

Robert Silvera: How do you feel personally on the idea of further drop downs within the next two years? Standing where you are now in this position?

Gary Chapman: I think it’s obviously being difficult because otherwise we would have done more by now. But I think it’s a question for the board to answer. And if the board think that the timing is right, then they will ask the Independent Complex Committee to assess it. But it needs to be right. We said before, we –

Robert Silvera: I know, but I’m asking what is your position on that question right now, your personal position?

Gary Chapman: Well, I think the current unit price prevents us from doing it from an equity perspective. The last two drop downs we’ve done have been internally financed through sale and leaseback. So to say that we won’t ever do a dropdown, there might be alternative methods to get value into the business and we’re always looking at those. So I think it would be wrong to make any firm judgments on what we should and shouldn’t do. And besides it’s a question that the board will look at and do look at every quarter because they’re trying to maximize the value of the business. And I think it would be wrong to rule anything in or rule anything out. But I understand what you’re saying. And certainly, it’s the board are aware of the position that we’re in.

Robert Silvera: Okay. Well, thank you very much for your efforts. I’m sure they were totally sincere over the years that I’ve talked to you. We’ve been shareholders actually longer than you’ve been the head of the business. So good luck in your future endeavors.

Gary Chapman: Yes. I may still be here for the second quarter. I’m not sure yet, but we’ll see.

Robert Silvera: Okay. Well, God bless you. Bye-bye now.

Gary Chapman: Okay. Thank you.

Operator: There has been a follow-up question from Poe Fratt of Alliance Global Partners. Your line is open. Please go ahead.

Poe Fratt: Hey, Gary. Just to confirm, did the balance on the revolver, the $55 million revolver, according to my records, it was $30 million was drawn on that at year-end. Did that change at all in the first quarter? And should we — I guess an easier way to say it is how much of the $55 million revolver will be rolled into that term loan on the six vessels going forward?

Gary Chapman: Yes. No. I mean, disclosed in our 20F at December 22. $55 million was fully drawn. So it will all be rolled.

Poe Fratt: Okay. Great. So I ate broken out into two different ones. So Thanks for your help.

Gary Chapman: Yeah. No problem.

Poe Fratt: Oh, Gary. Just to confirm that — Gary, if you wouldn’t mind, on the $55 million revolver, there was no amortization, but the amortization on the previous term loan was about $7.5 million. So essentially you’re saying that the amortization of $7.5 million will be the go forward amortization, but the loan will be essentially that much bigger than I guess is that a direct way to look at it?

Gary Chapman: Poe, can I come back to you on that detail? I don’t want to tell you the wrong thing. I need to double check which way around that is.

Poe Fratt: Okay, great. Thank you.

Gary Chapman: Thanks.

Operator: Thank you. I show no additional questions. At this time I’ll hand the conference back over to Gary for closing remarks.

Gary Chapman: Well, thank you everybody else for listening and please do have a good day. Thank you.

Operator: Ladies and gentlemen, this concludes today, KNOT Offshore Partners first quarter 2023 results conference call. Thank you for joining. You may now disconnect your lines.