KNOT Offshore locks in $100m tanker deal with secured revenue until 2029

KNOT Offshore Partners LP has announced a strategic fleet renewal with the acquisition of the Live Knutsen, a 2021-built DP2 Suezmax-class shuttle tanker, while divesting the Dan Sabia, a smaller and older vessel built in 2012. The transaction, structured as a vessel swap with its sponsor Knutsen NYK Offshore Tankers AS, is set to be completed on February 28, 2025. The move strengthens KNOT Offshore Partners’ position in the offshore oil transportation sector, particularly in key markets such as Brazil and the North Sea. The deal ensures continued long-term contracted revenues with a fixed charter for Live Knutsen extending through 2026, backed by a hire rate guarantee until 2029.

What Does the Vessel Swap Mean for KNOT Offshore Partners?

The transaction reflects KNOT Offshore Partners’ strategy to modernize its fleet, securing larger, more efficient shuttle tankers that align with market demand. The Live Knutsen Acquisition, valued at $100 million, is offset by outstanding debt of $73.39 million and capitalized fees of $0.35 million, bringing the effective cost in line with financial optimization goals. In return, Dan Sabia is being sold for $25.75 million, with KNOT Offshore Partners making a net payment of $1.21 million to complete the exchange. By integrating a newer, high-capacity Suezmax-class shuttle tanker, the company is improving its long-term operational efficiency, enhancing revenue predictability, and ensuring compliance with modern environmental and safety standards required for offshore oil logistics.

Why Is Live Knutsen a Key Addition to KNOT Offshore’s Fleet?

Live Knutsen, built by COSCO Shipping Heavy Industry (Zhoushan) Co., Ltd, represents the next generation of shuttle tankers optimized for long-haul offshore crude transportation. The vessel is designed to handle the complex logistics of offshore oilfields, featuring advanced dynamic positioning (DP2) technology, a bow loading system, and a high-efficiency propulsion system that enhances operational performance. Currently under a charter contract with Galp Sinopec, Live Knutsen’s fixed employment extends until November 2026, with options to extend for six additional years. As part of the agreement, KNOT Offshore Partners secures guaranteed revenue on the vessel through November 2029, even if the charter extension is not exercised. This arrangement ensures that the company benefits from stable cash flows, reducing exposure to market fluctuations in the offshore shipping sector.

How Does the Sale of Dan Sabia Benefit KNOT Offshore?

Dan Sabia, built in 2012, has served in the offshore oil transportation sector but represents an older, smaller shuttle tanker model with lower deadweight tonnage (DWT) compared to newer vessels in the fleet. By retiring Dan Sabia, KNOT Offshore Partners optimizes its asset base, reducing the average fleet age while enhancing its ability to secure long-term contracts with major oil producers. The vessel swap aligns with rising demand for Suezmax-class shuttle tankers, particularly in Brazilian offshore operations, where higher capacity and fuel efficiency are key factors in securing multi-year charters. With larger, more modern vessels, the company strengthens its ability to compete in an expanding deepwater oil production sector.

What Are the Financial and Market Implications of the Transaction?

The deal reflects a capital-efficient strategy where KNOT Offshore Partners enhances its fleet without taking on additional external financing. The $100 million valuation of Live Knutsen, balanced by the sale price of Dan Sabia, results in minimal financial impact on the company’s overall balance sheet. Market analysts suggest that the continued demand for shuttle tankers in regions such as Brazil is driving higher charter rates, making this fleet upgrade particularly strategic. With oil production expansion in offshore basins, securing larger, fuel-efficient vessels strengthens long-term earnings visibility for investors.

How Does This Move Impact KNOT Offshore’s Growth Strategy?

KNOT Offshore Partners has consistently focused on expanding and optimizing its fleet to maintain its leadership in the shuttle tanker market. This transaction underlines its commitment to securing long-term contracts with oil majors in Brazil and the North Sea, reducing fleet age to improve efficiency, maintenance costs, and charter attractiveness, maintaining stable cash flows through contracted employment and revenue guarantees, and enhancing investor confidence by ensuring predictable earnings through long-term fleet planning. The company’s common units trade on the New York Stock Exchange (NYSE) under the symbol “KNOP”, and it operates as a master limited partnership, though it is classified as a corporation for U.S. tax purposes.

What’s Next for KNOT Offshore Partners?

With the successful execution of this fleet renewal, KNOT Offshore Partners is well-positioned to explore further vessel acquisitions that support growth in offshore energy transport. The rising demand for Suezmax-class shuttle tankers provides opportunities to expand its presence in Brazil, the North Sea, and other high-activity regions. This transaction reflects a broader industry shift, where companies are transitioning to newer, more efficient vessel classes to enhance competitiveness in the offshore crude oil logistics sector. By continuing to align its fleet with market needs, KNOT Offshore Partners strengthens its strategic position in an evolving global energy landscape.