KNOT Offshore buys two shuttle tankers

KNOT Offshore Partners LP has entered into agreements to acquire from Knutsen NYK Offshore Tankers AS all of the ownership interests in the companies that own and operate the shuttle tankers Hilda Knutsen and Torill Knutsen (the “Acquisitions”).

The purchase price of the Hilda Knutsen is $166.0 million, net of $109.6 million of outstanding indebtedness related to the vessel. The purchase price of the Torill Knutsen is $169.0 million, net of $112.1 million of outstanding indebtedness related to the vessel. The Partnership expects to fund the cash portion of the purchase prices by issuing equity. The Partnership expects the Acquisitions to close within approximately 30 days, subject to customary closing conditions.

Each of the Hilda Knutsen and the Torill Knutsen is operating in the North Sea under time charters (the “Hilda Charter” and the “Torill Charter,” together, the “Hilda and Torill Charters”) with Eni Trading & Shipping S.p.A. (“Eni”). T

he Hilda and Torill Charters started upon delivery of the Hilda Knutsen and the Torill Knutsen in the third quarter of 2013 and each will terminate five years after delivery. Eni has options to extend each of the charters for up to five one-year periods. In the case of the Torill Charter, Eni has the option, at any time before May 31, 2016, to extend the charter term to ten years in exchange for a reduction in the hire rate.

The Partnership’s board of directors said it ways pleased that the Partnership has entered into these purchase agreements in connection with its second and third acquisitions since the Partnership’s initial public offering in April 2013.

The Board and the conflicts committee of the Board (the “Conflicts Committee”) have approved the purchase prices of the Acquisitions. The Conflicts Committee retained an outside financial advisor to assist with its evaluation of the Acquisitions.

As a result of the Acquisitions, the Partnership’s management has recommended to the Board an increase in the Partnership’s quarterly cash distribution of $0.035 (corresponding to an annualized increase of $0.14), which would become effective for the distribution with respect to the quarter ending September 30, 2014. Any such increase would be conditioned upon, among other things, the closing of the Acquisitions, the approval of such increase by the Board and the absence of any material adverse developments or potentially attractive opportunities that would make such an increase inadvisable.

As previously announced on June 10, 2014 and as a result of the Partnership’s entry into new senior secured credit facilities, the Partnership’s management has recommended to the Board an increase in the Partnership’s quarterly cash distribution of $0.02 (an annualized increase of $0.08), which would become effective for the distribution with respect to the quarter ending September 30, 2014. This recommended increase is in addition to the increase recommended as a result of the Acquisitions. Any such increase would be conditioned on, among other things, the closing of the senior secured credit facilities, approval of such increase by the Board and the absence of any material adverse developments or potentially attractive opportunities that would make such an increase inadvisable.

The Partnership owns, operates and acquires shuttle tankers under long-term charters in the offshore oil production regions of the North Sea and Brazil. The Partnership is structured as a master limited partnership. The Partnership’s common units trade on the New York Stock Exchange under the symbol “KNOP.”