Breaking Down KNOT Offshore Partners LP (KNOP) Financial Health: Key Insights for Investors

If you're looking at KNOT Offshore Partners LP (KNOP), the core takeaway for 2025 is a business running at near-flawless operational capacity, but with a distribution that still feels like a placeholder against a significant buyout offer. The shuttle tanker market is defintely tightening, and KNOP is capitalizing, posting Q2 2025 revenues of $87.1 million and a net income of $6.8 million, following a strong Q1 2025 with $84.0 million in revenue. This financial stability is anchored by their operational excellence, with the fleet achieving 96.8% overall utilization in Q2 2025 and management securing an impressive 100% of charter coverage for the second half of 2025 (allowing for scheduled dry dockings). But, the real action is the potential exit: the quarterly cash distribution remains at a modest $0.026 per common unit for Q3 2025, a figure that keeps the focus squarely on the recent buyout offer from Knutsen NYK Offshore Tankers AS, making this a story less about organic yield and more about a potential near-term capital event.

Revenue Analysis

You need to know where the money is actually coming from at KNOT Offshore Partners LP (KNOP) because that tells you how durable their cash flow is. The core takeaway is that KNOP's revenue is highly concentrated and stable, derived almost entirely from a single, specialized service: long-term charters of shuttle tankers (vessels that transport crude oil from offshore production facilities to onshore terminals or conventional tankers).

For the full fiscal year 2025, analysts project KNOT Offshore Partners LP's total revenue to be around $334.11 million. This is a defintely solid number, particularly when you look at the growth trajectory.

Breaking Down the Charter Revenue Engine

KNOT Offshore Partners LP is not a diversified shipping company; it's a pure-play shuttle tanker operator. This means nearly all revenue is generated through time charters-long-term contracts that provide a predictable, fixed daily rate for the vessel, regardless of the spot market price of oil. This structure is the company's biggest strength, offering high revenue visibility.

Here's the quick math on the near-term performance:

• Q1 2025 Total Revenue: $84.0 million.
• Q2 2025 Total Revenue: $87.1 million.
• Fleet Utilization: The fleet operated with a strong 96.8% utilization rate in Q2 2025, even accounting for scheduled maintenance (drydockings). High utilization is the single best indicator of revenue efficiency.

Growth and Geographic Focus

The company's year-over-year revenue growth is significant, driven by strong market fundamentals and strategic moves. The trailing twelve months (TTM) revenue as of June 30, 2025, reached $332.14 million, representing a growth of +12.14% over the prior TTM period. That's a healthy jump, and it's tied directly to where their ships operate.

The primary revenue segments are geographical, focusing on two key offshore oil production regions:

• Brazil: This is a major growth driver, with increasing demand for shuttle tankers due to new Floating Production, Storage, and Offloading (FPSO) startups and ramp-ups.
• North Sea: A mature but tightening market that continues to provide reliable, long-term charter contracts.

The stability is underpinned by long-term contracts with major energy players like Equinor and Shell, which often include contract extensions, securing revenue well into the future.

Shifts in Revenue Streams

The most important shift isn't a change in the product, but a strengthening of the market. The increase in revenue is a direct result of a tightening shuttle tanker market globally, plus strategic fleet management. For example, the acquisition of vessels like the Dakin Connexion in 2025 supports this growth and adds to the charter base, ensuring the revenue stream remains robust.

To be fair, this concentration means you are betting on the long-term health of deepwater oil production in those specific regions. You can dive deeper into the ownership structure and market sentiment by Exploring KNOT Offshore Partners LP (KNOP) Investor Profile: Who's Buying and Why?

Profitability Metrics

You need to know if KNOT Offshore Partners LP (KNOP) is actually making money, not just moving it around, and the 2025 numbers show a solid, high-margin business model at work, but the bottom line is still sensitive to non-cash items.

The core takeaway from the Trailing Twelve Months (TTM) ending June 30, 2025, is that the shuttle tanker business, with its long-term, fixed-rate contracts, generates exceptional gross profitability. However, the high depreciation and interest expenses common to a capital-intensive Master Limited Partnership (MLP) structure significantly compress the final net profit.

Margin Analysis: High Gross, Moderate Net

When we look at the TTM figures ending in mid-2025, the margins are starkly different at each level. Here's the quick math on the $332.14 million in TTM revenue [cite: 7 in first search]:

• Gross Profit Margin: At 63.16% ($209.77 million Gross Profit [cite: 7 in first search]), this is outstanding. It reflects the value of KNOP's specialized, long-term contracted shuttle tankers (Dynamic Positioning vessels) that command premium rates.
• Operating Profit Margin: This drops to 26.78% ($88.96 million Operating Income [cite: 7 in first search]). This is where the heavy depreciation of the fleet and general administrative costs hit.
• Net Profit Margin: The final margin is 10.21% (Net Income of $33.9 million). This is the true bottom line, heavily influenced by interest expense and derivative gains/losses.

Honestly, a 63% Gross Margin is defintely a sign of a strong business moat (competitive advantage). The drop to 10% Net Margin simply highlights the capital structure risks, specifically the debt used to finance the fleet.

Profitability Trends and Operational Efficiency

The trend from 2023 through the first half of 2025 shows a healthy trajectory. Annual Revenue has climbed steadily, from $287.88 million in 2023 to $312.63 million in 2024, and now to $332.14 million TTM through Q2 2025 [cite: 7 in first search]. Operating Income followed, moving from $71.95 million in 2023 to $88.96 million TTM [cite: 7 in first search].

Operational efficiency is strong, with the fleet achieving 96.8% utilization in Q2 2025, even accounting for scheduled dry-dockings [cite: 1 in search 2]. This high utilization rate is crucial for cost management, as vessel operating expenses, a key component of Cost of Goods Sold, were well-managed.

Here's a look at the recent quarterly net income volatility, which you need to watch:

The swing from a $3.8 million net loss in Q3 2024 to a $23.3 million net income in Q4 2024 shows the impact of non-cash items like derivative instrument gains/losses and one-off insurance proceeds. This is why you must look past the quarterly Net Income and focus on the Operating Income trend for the true health of the core business.

Industry Comparison and Actionable Insight

KNOP's Gross Profit Margin of 63.16% is significantly higher than that of general offshore support vessel (OSV) operators, whose owned vessel gross margins hovered around 37.2% in Q2 2025 [cite: 11 in search 2]. This difference is the premium you pay for the specialized shuttle tanker segment, which is supported by long-term, non-cyclical contracts with major energy producers like Shell and Equinor.

Actionable Insight: Your focus should be on the Operating Profit Margin (26.78%) and the Adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization), which was $51.6 million in Q2 2025 [cite: 1 in search 2]. This is the cleanest view of the cash-generating power of the fleet before debt and non-cash charges. For a deeper dive into the company's debt profile, check out the full post on Breaking Down KNOT Offshore Partners LP (KNOP) Financial Health: Key Insights for Investors.

Debt vs. Equity Structure

You're looking at KNOT Offshore Partners LP (KNOP) and trying to figure out if their growth is built on a solid foundation or too much debt. The short answer is they lean heavily on debt financing, which is typical for capital-intensive shipping, but their ratio is notably higher than the industry average.

As of June 30, 2025, KNOT Offshore Partners LP's total interest-bearing obligations stood at a substantial $918.6 million. This high debt level is necessary for a Master Limited Partnership (MLP) that owns and operates a fleet of specialized shuttle tankers-you can't buy a vessel for pennies. This capital structure is a strategic choice, aiming to maximize returns on equity, but it also elevates risk.

Here's the quick math on their leverage:

• Total Interest-Bearing Debt (Q2 2025): $918.6 million
• Total Partners' Capital (Equity) (Q2 2025): $536.015 million

The company's Debt-to-Equity (D/E) ratio is approximately 1.48. This means for every dollar of equity, the company has about $1.48 in debt. To be fair, capital-intensive industries like Marine Shipping have a higher tolerance for debt, but the benchmark for the broader Marine Shipping industry sits closer to 0.79. KNOT Offshore Partners LP is defintely using more financial leverage than many of its peers, which is a key risk factor to monitor.

The debt is split between short-term and long-term obligations, and the near-term maturities are significant. The current portion of long-term debt, which acts as the short-term debt, was $179.030 million as of June 30, 2025, with the remaining $735.449 million classified as long-term. Managing this current portion is a constant focus for the finance team.

Recent Debt and Refinancing Activity

The company has been active in managing its debt profile throughout 2025, which is a positive sign of proactive treasury management. They are balancing debt financing for vessel acquisitions with asset-backed refinancing to generate liquidity.

In September 2025, KNOT Offshore Partners LP refinanced the Tove Knutsen via a sale and leaseback transaction, which successfully generated approximately $32 million in cash proceeds. Also, the acquisition of the Daqing Knutsen in July 2025 involved assuming $70.5 million of outstanding indebtedness, a common practice in drop-down transactions from their sponsor.

The cost of their borrowing is competitive, with the average margin paid on outstanding debt during Q2 2025 at roughly 2.23% over SOFR (Secured Overnight Financing Rate). This table breaks down the key debt components and recent actions:

The strategy is clear: use long-term charters (the company is 100% covered for the second half of 2025) as collateral to secure attractive financing, then use that capital to acquire more vessels with long-term contracts. This model works well as long as charter rates remain strong and refinancing is available. You can read more about their core business model here: Mission Statement, Vision, & Core Values of KNOT Offshore Partners LP (KNOP).

A key risk to watch is the $62.3 million balloon payment on the Daqing Knutsen facility, which is due in June 2027. That's a sizable chunk of debt that will need to be addressed through refinancing or cash flow in the near future.

Liquidity and Solvency

You need to know if KNOT Offshore Partners LP (KNOP) has the cash to cover its near-term bills. The quick takeaway is that while the Partnership's traditional liquidity ratios look weak, its strong operating cash flow and contract backlog provide a critical buffer. This is a common structure for asset-heavy master limited partnerships (MLPs).

The latest metrics, based on the most recent quarter, show a tight liquidity position. KNOT Offshore Partners LP's current ratio is only about 0.43, and its quick ratio is a very similar 0.39. A ratio below 1.0 means current liabilities (debts due within a year) are greater than current assets. This signals a reliance on cash flow, not just liquid assets, to manage short-term obligations. Don't panic yet, but this is defintely a red flag on a purely mechanical basis.

This is where the working capital trend comes into play. KNOT Offshore Partners LP is operating with a negative working capital of approximately -$124.48 million as of the latest figures. This negative balance confirms the low ratios, meaning the company must be highly efficient in converting its long-term assets (the shuttle tankers) into predictable cash flow to meet its short-term debt and operating costs. They are running lean, but their business model supports it.

Looking at the cash flow statement for the trailing twelve months (TTM) ending June 30, 2025, shows a much healthier picture of cash generation. This is the real story for a capital-intensive shipping company. Operating Cash Flow (OCF) was a strong $144.55 million. This cash generation is the engine funding the business.

• Operating Cash Flow (OCF): $144.55 million (Strong, stable core business).
• Investing Cash Flow (ICF): $0.56 million (Near-zero, reflecting low capital expenditure of only $1.08 million, plus a small positive from a vessel sale/leaseback).
• Financing Cash Flow (FCF): This is where the cash goes, funding debt repayments, distributions, and unit buybacks.

The financing activities are complex, but they show a deliberate strategy. In Q2 2025, a sale and leaseback transaction netted $32 million, while a vessel acquisition had a cash component of around $25 million. Plus, the Partnership initiated a $10 million unit buyback program, repurchasing 226,000 common units for $1.64 million. Here's the quick math on liquidity: The Partnership reported available liquidity of $104.8 million as of June 30, 2025, which included $66.3 million in cash and $38.5 million in undrawn credit facilities. That's a solid cushion.

What this estimate hides is the long-term, fixed contract backlog, which stood at $895 million as of June 30, 2025, with an average duration of 2.6 years. This backlog is the non-current asset that secures the future cash flow, mitigating the risk of the low current and quick ratios. The main liquidity concern is the constant need to refinance large, long-term debt obligations as they mature, but the strong OCF and high utilization rate of 96.8% for the fleet helps in those negotiations. For a deeper dive into the valuation, check out Breaking Down KNOT Offshore Partners LP (KNOP) Financial Health: Key Insights for Investors.

Valuation Analysis

You need to know if KNOT Offshore Partners LP (KNOP) is a bargain or a risk, especially after its significant run-up this year. The quick takeaway is that, based on current multiples and analyst targets, KNOT Offshore Partners LP is leaning toward being fairly valued, but its low Price-to-Book (P/B) ratio suggests a potential undervaluation relative to its physical assets.

The stock has seen a major recovery, which is defintely a key factor in its current valuation. Over the last 12 months, the stock price has surged by an impressive 57.42%, with a year-to-date return of 79.08% as of mid-November 2025. The stock closed recently around $9.99, sitting near its 52-week high of $10.23, a big jump from the 52-week low of $5.28.

Here is the quick math on the core valuation multiples, which paint a mixed picture:

• Price-to-Earnings (P/E): The trailing twelve months (TTM) P/E ratio is 14.71, which is reasonable for a shipping company, but the forward P/E drops to 8.44, signaling analysts expect strong earnings growth into 2026.
• Price-to-Book (P/B): This ratio sits at a low 0.64. This is the most compelling number, suggesting the market values the company at only 64 cents for every dollar of book value, which is often a sign of undervaluation in asset-heavy businesses like shipping.
• Enterprise Value-to-EBITDA (EV/EBITDA): The TTM EV/EBITDA is 5.79 as of November 2025. This is a healthy multiple, especially considering the enterprise value is approximately $1.1955 billion against TTM EBITDA of $206.5 million.

The dividend story is less about high yield and more about sustainability right now. KNOT Offshore Partners LP pays an annual dividend of $0.10 per share, resulting in a modest dividend yield of about 1.02%. The payout ratio, however, is very conservative at 15.06% of TTM earnings, which gives the company ample room to reinvest in its fleet or potentially increase distributions down the road, if the board chooses. What this estimate hides is the context of a recent dividend cut, so don't expect a quick return to prior high yields.

Analyst consensus leans toward a neutral stance. The overall analyst rating is a Hold, suggesting the stock is currently seen as fairly valued after its recent price appreciation. The price targets reflect this tight range, with a minimum estimate of $10.00 and a maximum estimate of $12.00. Given the current price of around $9.99, the market is essentially pricing in the low end of the target range. This valuation breakdown is part of a larger discussion available at Breaking Down KNOT Offshore Partners LP (KNOP) Financial Health: Key Insights for Investors.

Next step: Check the fleet utilization rates for the shuttle tankers-that's the real driver for the forward P/E expectation.

Risk Factors

You're looking at KNOT Offshore Partners LP (KNOP) because you see the stability in their shuttle tanker business-long-term charters in the North Sea and Brazil are defintely appealing. But even with a strong Q2 2025 revenue of $87.1 million, the near-term risk landscape is dominated by a single, critical strategic event, plus the usual operational headwinds for a maritime Master Limited Partnership (MLP).

The biggest risk right now isn't a drop in oil demand; it's the potential for a corporate restructuring or delisting. In early November 2025, Knutsen NYK Offshore Tankers AS, the Partnership's sponsor, submitted an unsolicited, non-binding proposal to acquire the remaining 70.80% of common units it doesn't already own. The offer was approximately $240 million, or $10 per common unit. This creates massive uncertainty for unitholders. If the deal goes through, you lose the public trading vehicle and the associated liquidity. If it fails, the stock price could drop back to its pre-offer level, and the partnership still has to address its long-term strategy.

Here's the quick math: The Q2 2025 net income was $6.8 million. That's a solid number, but the distribution has been held at just $0.026 per common unit for Q3 2025, a clear sign the management is prioritizing debt reduction and fleet investment over a higher payout. This leads directly to the core financial and operational risks:

• Financial Risk: Debt and Cash Flow: The company's business model is capital-intensive, relying on significant debt to finance its fleet. The primary risk, as highlighted in their filings, is not generating enough cash from operations to service this debt and maintain the distribution, which is why the payout is so low.
• Operational Risk: Re-chartering: While their fleet utilization was nearly 97% in Q2 2025 (and 99.5% when accounting for scheduled maintenance), their long-term charters eventually expire. The risk is that they must re-charter (re-lease) their vessels at lower rates, which would immediately hit their top-line revenue.
• External Risk: Geopolitical and Regulatory: Operating in regions like Brazil and the North Sea exposes them to specific regulatory shifts and geopolitical instability. For example, new environmental regulations on shipping emissions could force costly fleet upgrades, eating into the Q1 2025 Adjusted EBITDA of $52.2 million.

What this estimate hides is the mitigation strategy: their reliance on long-term, fixed-rate charters with major oil companies like Equinor and Shell provides a stable revenue floor, which is the whole point of an MLP. They are also actively managing their fleet, like the acquisition of the DP2 shuttle tanker Daqing Knutsen in Q2 2025. That's a clear action to strengthen the fleet and reduce operational risk.

To be fair, the buyout proposal is a huge distraction, but it also forces a decision. You can read more about the company's strategic foundation here: Mission Statement, Vision, & Core Values of KNOT Offshore Partners LP (KNOP).

The most important action for you now is to watch the $240 million buyout negotiation closely. That single decision will determine the future of this investment.

Growth Opportunities

You're looking at KNOT Offshore Partners LP (KNOP) and wondering where the next dollar of growth comes from, which is the right question for a Master Limited Partnership (MLP). The answer is clear: it's a disciplined fleet expansion and a tightening specialized market, especially in Brazil and the North Sea. Your near-term visibility is strong, backed by a fixed contract backlog of $895 million as of June 30, 2025. This business is defintely not a commodity play.

The core growth driver isn't a new product innovation, but rather the increased offshore oil production in the two markets KNOT Offshore Partners LP serves. We've seen Brazilian Floating Production Storage and Offloading (FPSO) units deliver ahead of schedule, which drives demand for their shuttle tankers-the specialized vessels that move crude from the offshore fields to onshore terminals. This is a critical infrastructure service with high barriers to entry, which gives them pricing power.

Here's the quick math on what analysts project for the full 2025 fiscal year, which is a solid step up from prior periods:

The company's strategic moves in 2025 are all about cementing this growth and improving the balance sheet. They're using their relationship with their sponsor, Knutsen NYK Offshore Tankers AS (KNOT), to execute accretive drop-down acquisitions (acquisitions that immediately increase earnings per share). The acquisition of the Daqing Knutsen is a perfect example: a 2022-built DP2 shuttle tanker acquired for a purchase price of $95 million in July 2025. This vessel is already on a long-term charter with PetroChina, and the hire rate is guaranteed by KNOT until 2032.

Also, the management is focused on capital efficiency. They launched a $10 million common unit buyback program in July 2025, which is a clear signal they believe the units are undervalued. Plus, the sale and leaseback of the Tove Knutsen is expected to generate approximately $32 million in proceeds, which helps manage debt maturities and provides liquidity for future investments.

Their competitive advantage is simple: long-term, fixed-rate contracts. This defensive operational model means KNOT Offshore Partners LP is paid a fixed day rate per vessel, and the charterer-not the partnership-bears the fuel costs. This insulates the company from short-term oil price volatility, making their cash flow highly predictable. It's a fee-for-service model, not a speculation model.

Key strategic initiatives driving future growth:

• Acquire newer vessels from the sponsor to lower the average fleet age of 9.7 years.
• Secure long-term charter extensions to maintain the high fleet utilization rate, which was 96.8% in Q2 2025.
• Focus on high-growth regions like Brazil, where offshore production is expanding rapidly.

If you want to dig deeper into who is buying into this stability, you should read Exploring KNOT Offshore Partners LP (KNOP) Investor Profile: Who's Buying and Why?

The bottom line is their growth isn't about chasing the spot market; it's about securing long-term, high-quality cash flows from major oil companies, and their Q3 2025 cash distribution was maintained at $0.026 per common unit, a sign of that stable cash generation.