KNOT Offshore Partners LP (KNOP): SWOT Analysis [Nov-2025 Updated]

You're tracking KNOT Offshore Partners LP (KNOP) because their specialized shuttle tanker fleet is a critical, high-demand asset, but you need to know if the operational strength can outrun the debt clock. The good news: they have a massive $895 million fixed contract backlog and fleet utilization hit 96.8% in Q2 2025, showing exceptional market execution. The bad news: that operational success is shackled by a looming $918.6 million total debt obligation with critical maturities hitting this year and next, creating a serious refinancing risk. It's a classic case of strong revenue growth meeting a capital structure challenge-let's dig into the defintely needed SWOT analysis to find the path forward.

KNOT Offshore Partners LP (KNOP) - SWOT Analysis: Strengths

Fixed contract backlog provides $895 million in revenue visibility.

The most powerful strength KNOT Offshore Partners LP has is its substantial contract backlog, which acts like a financial shock absorber. As of June 30, 2025, the remaining contracted forward revenue, excluding charterers' options, stood at a robust $895 million. This money is already locked in, providing exceptional revenue visibility and stability that is rare in the broader shipping industry. The average remaining fixed charter duration for the fleet is 2.6 years, which gives you a clear runway for cash flow generation.

Here's the quick math: this fixed revenue backlog is a predictable stream that underpins KNOT Offshore Partners LP's ability to service its debt and maintain its distribution. This is defintely the kind of insulation you want in a capital-intensive sector like offshore shuttle tankers.

High operational efficiency with 96.8% fleet utilization in Q2 2025.

Operational efficiency is where KNOT Offshore Partners LP truly shines, and the numbers from the second quarter of 2025 (Q2 2025) prove it. The fleet utilization rate was 96.8% when accounting for scheduled drydockings. But here's the key detail: utilization for scheduled operations-meaning when the vessels were expected to be in service-was a perfect 100%. That near-perfect figure shows a tightly managed operation with minimal unplanned downtime, which is crucial for maximizing returns on high-value assets like shuttle tankers.

A 100% scheduled utilization rate tells me the market is tight, and KNOT Offshore Partners LP is executing flawlessly. It's hard to beat perfect.

Fleet average age of 10.1 years is relatively young for the niche sector.

In the specialized shuttle tanker market, asset quality matters immensely, and KNOT Offshore Partners LP's fleet is in a strong position. As of June 30, 2025, the average age of the eighteen-vessel fleet was 10.1 years. This is a competitive advantage because it positions the company's vessels as modern compared to much of the global fleet, which is often older than 15 years. Newer vessels typically mean lower maintenance costs, better fuel efficiency, and compliance with increasingly strict environmental regulations.

Plus, the recent acquisition of the Daqing Knutsen in July 2025 further improved this metric, dropping the average age of the now 19-vessel fleet to 9.7 years. This commitment to modernization through accretive acquisitions is a clear sign of strategic health.

100% charter coverage secured for the second half of 2025.

Near-term risk is virtually eliminated by the company's forward-looking charter strategy. As of the September 2025 earnings release, KNOT Offshore Partners LP had secured 100% of its charter coverage for the second half of 2025, even after factoring in scheduled dry dockings. This level of certainty is a massive operational and financial strength.

This forward coverage is a direct result of strong market demand, particularly in the Brazilian pre-salt fields where fourteen of the vessels operate, and it provides management with the breathing room to focus on longer-term strategic goals, like securing coverage for 2026, which already stands at approximately 89%.

• Eliminates re-chartering risk for H2 2025.
• Secures predictable cash flow for the remainder of the fiscal year.
• Allows focus on 89% fixed coverage for 2026.

Finance: draft 13-week cash view by Friday.

KNOT Offshore Partners LP (KNOP) - SWOT Analysis: Weaknesses

You're looking at KNOT Offshore Partners LP and seeing the high utilization rates, but the financial structure presents some clear, near-term headwinds. The core weakness here is a heavy debt load coupled with low net income, which compresses the distributable cash flow (DCF) and keeps the common unit payout minimal. This is a classic Master Limited Partnership (MLP) challenge: the need to service debt while trying to reward unitholders.

Significant Debt Obligations Totaling $918.6 Million as of Q2 2025

KNOT Offshore Partners LP carries a substantial amount of financial leverage (debt used to finance assets), with total interest-bearing contractual obligations standing at $918.585 million as of June 30, 2025. This is a big number that requires significant yearly servicing, especially in a rising-rate environment. The Partnership's net exposure to floating interest rate fluctuations was approximately $273.8 million at the end of Q2 2025, which means a portion of that debt is sensitive to interest rate hikes, even with interest rate swap agreements in place. They are committed to repaying $95 million or more per year, which is a constant drain on cash flow. Here's the quick math on their total obligations:

Low Net Income of Only $6.8 Million in Q2 2025, Despite Strong Revenue

For the three months ended June 30, 2025, KNOT Offshore Partners LP reported total revenues of $87.1 million, which is a solid top-line performance driven by high fleet utilization (96.8% overall). But the net income (the profit after all expenses, including interest and depreciation) was only $6.8 million. This disparity is a red flag. It shows that the high operating costs, depreciation on a fleet of aging assets (average age of 9.7 years), and, critically, the substantial interest expense from that $918.6 million debt load are eating up most of the operating profit. Low net income limits the ability to build retained earnings or significantly increase distributions.

Upcoming Debt Maturities in 2025 and 2026 Pose a Substantial Refinancing Risk

The Partnership faces significant debt refinancing risk in the near term. The debt maturity profile is front-loaded, meaning a large chunk of the total $918.6 million debt is due in the next two years. Specifically, the total contractual obligations due in 2025 are $373.724 million, and another $147.883 million is due in 2026. That's a lot of capital they have to roll over or pay down. To be fair, they have addressed some maturities recently, like the loan secured by the Tove Knutsen, which was repaid using approximately $32 million in net proceeds from a sale and leaseback transaction. Still, the upcoming schedule is aggressive.

Key near-term debt maturities include:

• A revolving credit facility maturing in November 2025.
• Secured loans totaling $139 million due in September and October 2025 (based on Q1 2025 commentary).
• Total contractual obligations of $373.724 million due in 2025.
• Total contractual obligations of $147.883 million due in 2026.

Refinancing these amounts in the current market, even with a strong contract backlog of $895 million, means they'll defintely be exposed to higher interest rates than the average margin of 2.23% over SOFR they currently enjoy. That's a real cost risk.

The Quarterly Cash Distribution Remains Low at $0.026 per Common Unit

The low net income and the heavy debt service directly translate into a meager payout for common unitholders. For Q2 2025, the Partnership declared a quarterly cash distribution of only $0.026 per common unit. This is a token distribution, a fraction of what investors in the MLP space typically expect. The priority for cash flow is clearly debt repayment and capital expenditures (CapEx) for vessel maintenance (like the expected $13.3 million in drydock CapEx for 2025). This low distribution rate makes the common units unattractive to income-focused investors and keeps the cost of capital high, which is a vicious cycle for a capital-intensive business. The preferred units, in contrast, received an aggregate distribution of $1.7 million for the same quarter, highlighting the common unit's subordinate position in the capital structure.

KNOT Offshore Partners LP (KNOP) - SWOT Analysis: Opportunities

Tightening Shuttle Tanker Market with Newbuild Supply Constrained Until 2028

You are seeing a structural shift in the shuttle tanker market, and it's a massive tailwind for KNOT Offshore Partners LP. Think of it as a classic supply-demand squeeze. New vessel construction is severely constrained because global shipyards are largely booked up through 2027 for high-value projects like LNG carriers. This means new supply won't materially hit the water until 2028 at the earliest.

At the same time, nearly 30% of the existing global shuttle tanker fleet is over 20 years old, pushing it toward retirement. This dual pressure-limited new vessels and aging retirements-means the global fleet will only expand by an estimated 1-2% annually through 2026. This supply-side squeeze gives KNOP significant pricing power when re-chartering its modern fleet.

Offshore Production Surge in Brazil and the North Sea Drives Demand and Higher Charter Rates

The demand side of the equation is equally compelling, driven by two core geographies: Brazil and the North Sea. Brazil is the key, with state-owned Petrobras aggressively ramping up production in its pre-salt fields. This offshore oil production is forecast to grow by 10% annually through 2030, a rate that far outpaces the limited shuttle tanker supply.

The North Sea is also seeing a long-awaited demand boost from new projects like the Johan Castberg field. This tightening market has already pushed spot rates higher, with analysts projecting a further rise of 20-30% over the next two years. This is a direct boost to KNOP's future top line. Honestly, high utilization rates tell the real story: KNOP's fleet utilization for scheduled operations hit 100% in Q2 2025, and 96.8% overall, even factoring in scheduled drydockings.

Dropdown Pipeline from Parent Company, Knutsen NYK, for Newer, Long-Term Chartered Vessels

The relationship with its sponsor, Knutsen NYK Offshore Tankers AS (Knutsen NYK), is a built-in growth mechanism. The omnibus agreement gives KNOP the option to acquire newer, long-term chartered vessels from Knutsen NYK, a process known as a 'dropdown.' This strategy immediately lowers KNOP's average fleet age and boosts its contracted revenue backlog.

Here's the quick math on recent dropdowns and the pipeline, which are immediately accretive (cash-flow positive):

Plus, the forward pipeline includes newbuilds already secured by Knutsen NYK with long-term charters:

• Three newbuilds chartered to Petrobras, expected delivery in 2026-2027, each with a 10-year base charter.
• One newbuild for Petrorio, delivering in early 2027, secured by a seven-year charter.

To be fair, the most recent development is Knutsen NYK's unsolicited non-binding proposal in October 2025 to acquire all publicly held common units for $10 in cash per unit. This could be an immediate opportunity for unitholders to realize value at a premium to the trading price, though it would end KNOP's public status.

Re-chartering of Expiring Contracts at Significantly Higher Prevailing Market Rates

The market strength provides a clear opportunity to re-charter vessels coming off their initial contracts at much higher prevailing rates, directly translating market tightness into higher cash flow. As of June 30, 2025, KNOP had a total remaining contracted forward revenue of $895 million. The average remaining fixed charter duration was 2.6 years, with charterer options for an additional 4.2 years.

Management has been active, securing coverage for 100% of the second half of 2025 and approximately 89% of 2026. The fact that charterers are already exercising options shows they are worried about future vessel availability.

• Raquel Knutsen: Repsol Sinopec exercised a three-year option, extending the charter until June 2028.
• Bodil Knutsen: Charter extended with Equinor until March 2029.
• Brasil Knutsen: After an extension with Petrorio until September 2025, the vessel is due to commence a new charter with Equinor, a strong sign of demand.

The ability to lock in these higher rates for long periods-often five to ten years-is defintely the most powerful opportunity for sustainable earnings growth in the next few years.

KNOT Offshore Partners LP (KNOP) - SWOT Analysis: Threats

Refinancing Risk on Existing Debt at Potentially Much Higher Interest Rates, Eroding Net Margins

The biggest near-term financial threat for KNOT Offshore Partners LP is the need to refinance existing debt in a higher interest rate environment. As of June 30, 2025, the Partnership's total interest-bearing contractual obligations stood at a substantial $918.6 million. While KNOT Offshore Partners LP uses interest rate swaps to manage risk, the net exposure to floating interest rate fluctuations was still approximately $273.8 million at the end of Q2 2025. That's a lot of exposure.

A significant portion of the debt is tied to the Secured Overnight Financing Rate (SOFR), and new facilities are pricing in higher margins. For instance, the facility for the Daqing Knutsen acquisition bears interest at SOFR plus a margin of 1.94%. The refinancing of a revolving credit facility in August 2025 was set at SOFR plus a 2.3% margin. Compare that to the weighted average interest rate on their swap agreements, which was just 2.54% as of June 30, 2025. If SOFR remains elevated or rises further, the cost of rolling over debt, especially the revolving credit facility maturing in November 2025, will cut directly into net income.

Market Concentration in Just Two Regions: Brazil and the North Sea

KNOT Offshore Partners LP's business model is concentrated in the two premier offshore oil production regions: Brazil and the North Sea. While this focus has historically provided stability through long-term charters, it creates a significant threat from geopolitical, regulatory, or operational shifts specific to these two markets. You're essentially putting all your eggs in two high-value baskets.

A sudden change in taxation, environmental policy, or a major operational incident in either the Brazilian pre-salt fields or the mature North Sea basin could disproportionately impact the Partnership's revenue. For example, a shift in Petrobras's capital expenditure strategy in Brazil, or new decommissioning mandates in the North Sea, could quickly reduce demand for shuttle tankers, regardless of the global oil price.

Regulatory Changes, Like Decarbonization Efforts, Could Accelerate Older Vessel Obsolescence

The global push for decarbonization presents a clear, accelerating threat to the older vessels in the KNOT Offshore Partners LP fleet. International Maritime Organization (IMO) regulations, such as the Carbon Intensity Indicator (CII), are already in effect, and the pressure is mounting. The Partnership must comply with these rules, which means substantial capital expenditure for vessel upgrades or, worse, premature retirement for less efficient ships.

The industry is moving quickly: all new vessels contracted after January 1, 2025, must comply with the stringent Energy Efficiency Design Index (EEDI) Phase 3 standards. This makes the older, non-compliant vessels less competitive and increases the risk of charterers preferring newer, more fuel-efficient tonnage. The cost of compliance is an ongoing, defintely non-optional expense.

• IMO's CII: Requires continuous operational efficiency improvements.
• EEDI Phase 3: Sets a high bar for new builds, accelerating the competitive obsolescence of older ships.
• CSRD Preparation: Indicates a growing regulatory burden on reporting and environmental performance.

Vessel Off-Hire Time and High Maintenance Costs for Scheduled Drydockings

The necessary maintenance for a fleet of shuttle tankers translates directly into off-hire time and elevated operating expenses, which is a constant drag on profitability. Scheduled drydockings, essential for regulatory compliance and vessel integrity, force ships out of service, causing a temporary dip in utilization and revenue.

For Q2 2025, while the fleet operated at 100% utilization for scheduled operations, the overall utilization rate dropped to 96.8% when accounting for the scheduled drydockings of vessels like the Raquel Knutsen and the Windsor Knutsen. More critically, vessel operating expenses rose to $33.0 million in Q2 2025, up from $30.6 million in Q1 2025. Management explicitly attributed this increase primarily to higher maintenance and upgrading cost related to vessels in dry dock. This is the quick math on the threat: maintenance costs jump, and revenue drops due to off-hire.