Knot Offshore Partners LP Pitch Deck Teardown

Introduction and Strategy

Knot Offshore Partners LP (KNOP) is a Master Limited Partnership focused on the ownership and operation of shuttle tankers. This investor presentation from December 2016 serves as a progress report and a growth roadmap for yield-oriented investors. The deck is characterized by its heavy reliance on technical asset data, long-term contract visibility, and the 'dropdown' mechanism that fuels its expansion.

Slide 1: Title Slide

The title slide establishes the company's branding and the specific context of the presentation: New York, December 2016. It features high-resolution imagery of their primary assets—shuttle tankers—emphasizing the industrial and capital-intensive nature of the business. The vessels shown, such as the Windsor Knutsen and Bodil Knutsen, represent the core of the fleet.

Slide 4: Investment Highlights

This slide serves as the executive summary, broken into five pillars. 1. Pure-play shuttle tanker: Highlights a modern fleet (4.7 years average age) and a $837 million revenue backlog. 2. Strong Sponsors: Notes the backing of Knutsen NYK and 29 years of experience. 3. Distribution Growth: Reports a 39% growth since IPO and a 9.4% yield. 4. Favorable Market Fundamentals: Points to high barriers to entry in the niche offshore logistics chain. 5. Strong Balance Sheet: Cites $55.7 million in liquidity and no debt maturities until 2018. This slide is effective because it immediately quantifies the value proposition for an income investor.

Slide 8: Raquel Knutsen Drop-down

This slide provides a granular look at a specific acquisition. The Raquel Knutsen, built in 2015, was acquired for $116.5 million. The slide breaks down the financing: $103.5 million in debt and a $13.0 million equity portion. Crucially, it lists the contract details: a TimeCharter with Repsol Sinopec Brasil through June 2025, with an additional 5-year option. The estimated 2017 EBITDA of $13.0 million provides a clear picture of the asset's contribution to the partnership's cash flow.

Slide 10: Dropdown Inventory

Growth in an MLP is often tied to the 'dropdown pipeline' from the sponsor. This slide visualizes four potential acquisitions: Tordis, Vigdis, Anna, and Lena Knutsen. A Gantt-style chart shows their fixed contract periods (dark blue) and option periods (grey) extending out to 2030. Charterers include major entities like Shell and Petrogal. This slide is vital for proving that the company has a 'visible dowry' of assets to fuel future distribution increases.

Slide 13: Shuttle Tankers vs. Conventional Shipping

To justify the niche focus, KNOP compares shuttle tankers to LNG, conventional tankers, and dry bulk carriers. The slide highlights that shuttle tankers are a 'Specialized Asset Class' with only 72 vessels globally. Unlike conventional tankers, which are often ordered speculatively, shuttle tankers are built 'with contract.' This distinction is meant to reassure investors that the business is less volatile than the broader shipping market.

Slide 16: Oil Production Outlook

This slide addresses the macro demand for the company's services. It provides bar charts for oil production from shuttle tanker operated fields in the North Sea and Brazil. In the North Sea, new fields are expected to add significant output through 2020. In Brazil, despite 'corruption scandals' mentioned in the text, the post-2020 Libra development is expected to require 12-16 additional shuttle tankers. This provides the external validation for the company's internal growth plans.

Slide 19: Performance vs. IPO Guidance

Transparency is a key theme here. The company compares its 'IPO Guidance' to its 'Status 2016.' It shows that it has outperformed on every metric: fleet growth (175% vs 125% potential), distribution growth (39% vs 10-15% target), and coverage ratio (1.35x vs 1.1x forecast). This slide builds significant credibility by proving that management does what it says it will do.

Slide 22: Income Statement

The unaudited income statement for Q3 2016 shows total revenues of $43.587 million, up from $39.284 million in Q3 2015. Net income for Q3 2016 is reported at $19.357 million. A bold footer emphasizes '100% utilization in Q3,' which is the gold standard for asset-heavy businesses. The slide also accounts for realized and unrealized gains on derivative instruments, reflecting the company's active management of interest rate and currency risks.

Slide 25: Balance Sheet

The final slide in this set details the financial position as of September 30, 2016. Total assets stand at $1.186 billion, dominated by 'Net vessels and equipment' at $1.154 billion. Total liabilities are $669.6 million, with the majority being long-term debt ($586.3 million). The slide concludes with a liquidity highlight: $62.4 million in available liquidity against a requirement of $18.5 million, suggesting a comfortable margin for operations and future acquisitions.

What Works in This Deck

Contractual Visibility: The deck excels at showing exactly where the money comes from. By listing specific charterers (Shell, Repsol, Petrogal) and contract end dates (2025, 2030), the company removes the 'guesswork' often associated with startup or growth equity pitches.

Niche Education: Slide 13 is a masterclass in market positioning. By comparing the tiny shuttle tanker fleet (72 vessels) to the massive dry bulk fleet (10,500 vessels), KNOP makes a compelling case for its 'moat' and specialized expertise.

Accountability: The 'Have we delivered on expectation?' slide (Slide 19) is a powerful trust-building tool. It directly addresses the promises made at the time of the IPO and shows that the company has exceeded them.

What Is Missing

Management Team Details: While the 'Strong Sponsors' are mentioned, the specific individuals running the partnership are not detailed in these slides. In an MLP, the technical and financial expertise of the management team is a key risk factor.

Risk Factors: The deck is overwhelmingly positive. While it mentions 'corruption scandals' in Brazil in passing, it does not provide a dedicated slide for risks such as oil price volatility, counterparty risk, or interest rate hikes, which are standard in most public investor presentations.

Environmental and Regulatory Impact: Given the focus on offshore oil, a modern deck would require a section on ESG (Environmental, Social, and Governance) and how the company handles potential spills or changing maritime emissions regulations.

Founder Lessons

Quantify Your Backlog: If your business relies on contracts, show the 'revenue backlog' (Slide 4). It is the most comforting metric you can provide to an investor because it represents 'guaranteed' future income.

Visualize the Pipeline: Don't just say you are going to grow; show the specific assets or customers that will drive that growth. The 'Dropdown Inventory' (Slide 10) is a perfect example of how to visualize a multi-year growth strategy.

Compare to the Standard: If you operate in a niche, don't assume investors understand why it's better than the mainstream. Use a comparison table (like Slide 13) to highlight the specific advantages of your specialized market, such as higher barriers to entry or longer contract terms.