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KNOT Offshore Partners LP (NYSE:KNOP)
Q2 2019 Earnings Call
Aug 29, 2019, 12:00 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good afternoon, and welcome to the Knot Offshore Partners Second Quarter 2019 Earnings Results Conference Call. [Operator Instructions]

I would now like to turn the conference over to Gary Chapman. Please go ahead.

Gary Chapman -- Chief Executive Officer and Chief Financial Officer

Thank you, and welcome everybody. If any of you have not read the earnings release or the slide presentation, they're both available on the Investors section of our website. On today's call, our review will include non-US GAAP measures such as distributable cash flow and adjusted earnings before interest, tax, depreciation and amortization, the EBITDA. The earnings release includes a reconciliation of these non-GAAP measures to the most directly comparable GAAP financial measures. A quick reminder that any forward-looking statements made during today's call are subject to risks and uncertainties, and these are discussed at length in our annual and quarterly SEC filings. As you know, actual events and results can differ materially from those forward-looking statements and the partnership does not undertake a duty to update any forward-looking statements.

I think this is my first earnings call, since taking over from John Costain. I'd like to take this opportunity to get very brief background for those of you who don't know. I joined KNOT as Chief Executive Officer and Chief Financial Officer in June 2019. I'm a fellow of the Institute of Chartered Accountants in England and Wales and I recently served as the Chief Financial Officer for Biggin Hill Airport Limited, a private business aviation airport in London. Before that, I spent around nine years as the Finance Director for NYK's energy transport business in the EMEA region and once I've been a shareholder in KNOT sponsor. Prior to this, I was NYK's European Head of Tax for around six years having worked previously in various audits and tax roles for KPMG, the global audit accounting firm, including as a member of that Oil and Gas group.

Introduction. KNOT Offshore Partners, KNOP, focuses on the Shuttle Tanker segment, whose ships transport oil from production units to shore side effectively a mobile pipeline business and form an integral part of supply chain. Each new vessel is usually built for an individual charter and on delivery its charter to them for a period of time, typically ranging from five-year to 10 years or more years. The ship charter contract does not rely or depend on the volume of oil produced by the field, nor on the underlying oil price. They always have a strong credit counter-party and therefore provides a very stable source of long-term income.

In our sector to date there has been no speculative ordering of tankers by vessel owners and we have solid growth outlook in the sector. Our sponsor Knutsen NYK, has placed all their younger assets in the MLP, all had long-term charters after construction, and all remains strategically important to their respective charterers. The MLP and sponsor combined are the largest operator of shuttle tankers with 29 vessels on the water together with two FSOs, and today three more shuttle tankers on order. Our sponsor has been involved in the design, construction and operation of shuttle tankers for well over 30 years.

Oil production is moving further offshore into new fields, particularly in Brazil and the Barents Sea, and shuttle tankers, therefore, operate in a space which is now seeing substantial oil production growth. This growth is also occurring in geographical areas, so there is a strong need to use our modern DP2 shuttle tankers to transport products and we believe this will continue in coming years. In addition to demands for new vessels, the shuttle tanker fleet is naturally aging and will need replacing in the medium term. Our sponsor, Knutsen NYK is, according to Clarkson's Plateau Research, possibly the largest shipping group in the world and NYK is a major company in the Mitsubishi family. Since the Partnership's IPO in April 2013, the fleet has grown 300% to 16 vessels with today an average age of just six years.

Now, turning to the presentation. This presentation is similar in sales [Phonetic], what you may have heard in the past, but in future we intend to gradually include more shuttle tanker market insight and analysis that this is [Phonetic] something that our investors have told us they would welcome.

So turning to Slide 3, Q2 2019 financial highlights and recent events. For the second quarter of 2019, the Partnership's results were again very solid and very stable. Total revenue of $70.9 million, operating income of $31.9 million, net income of $8.2 million and adjusted EBITDA of $54.4 million. The Partnership generated distributable cash of $26.1 million and continued to declare a cash distribution of $0.52 per unit in the quarter. This gives coverage of 1.45 times for Q2.

During the quarter, the fleet operated with 100% utilization for the scheduled operations. And since our IPO in 2013, we have operated with an average of 99.7% utilization, excluding scheduled maintenance and dockings. There are also no drydocking schedule for any of the Partnership's fleet during the remainder of 2019. Our current distribution has remained unchanged, since 2015, is around an 11% yield on sales unit price. During the quarter, we have agreed with Shell for them to take up the next one-year option on the Windsor Knutsen, meaning this shuttle [Phonetic], the first to be put into the MLP is now contracted to October 2020.

During the quarter, the Sponsor was awarded a new long-term charter with a French oil for one new type of vessel [Indecipherable] charter vessels for either five years, seven years, or 10 years, which they must declare not later than six months before delivery with then auctions for up to 15 years in total. Whilst of course we cannot guarantee that the vessel will be purchased by KNOT and dropdown into MLP, so it must be offered under our agreement with our sponsor should it be dropped down this will continue the growth story of KNOT, further evidencing our assertion of steady, stable growth. In the quarter, we also saw the closing of the renewal of our unsecured revolving credit facility with NTT Finance Corporation for USD25 million, now extended for two years. KNOT has no refinancing falling June, until 2022.

On Slide 4, the income statement. You'll see total revenues of $70.9 million for the second quarter, compared to $70.6 million for the first quarter of 2019. The increase relates to having 100% utilization in Q2, compared to 99.8% in Q1, plus there was one extra operating day in Q2. Vessel operating expenses for Q2 were $15.3 million, an increase of $0.8 million from Q1. This was mainly resulting from the timing of certain expenses here over the first half of the year, plus certain extra costs incurred on the Windsor Knutsen related to crew training for new operations being performed in Ghana.

Admin and general expenses were $1.3 million for Q2, as they were in Q1 and depreciation for Q2 was also unchanged at $22.4 million. Interest expense for Q2 was $13.2 million, a decrease of $0.5 million from Q1, due slightly -- to slightly lower average LIBOR rates on a minor proportion of our debt that is not hedged. Losses on derivative instruments was $10.3 million for Q2, compared to a loss of $5.9 million in Q1. Most of this is unrealized and due to changes in the long-term interest rates. As a result of all of the above, net income for Q2, $8.2 million compared to $12.9 million for Q1.

Slide 5, adjusted EBITDA. In Q2, the Partnership generated adjusted EBITDA of $54.4 million, compared to $54.8 million for Q1. Adjusted EBITDA refers to earnings before interest, tax, depreciation and amortization and other financial items, and it provides a proxy for cash flow. Adjusted EBITDA is of course a non-US GAAP measure that can be used to measure Partnership performance. With a wasting asset like a vessel, younger fleets tend to produce slightly lower EBITDAs for every dollar invested. The annuity effect reduces the annual loss in the earlier years, which is factored into replacement capex calculation for the distributable cash flow.

On Slide 6, distributable cash flow. This is another non-US GAAP financial measure used in estimates of distribution sustainability. Distributable cash flow represents the net income adjusted for depreciation, unrealized gains, and losses on derivatives and foreign exchange; also the distributions on Series A convertible preference units, and other non-cash items. There is an estimate for maintenance and replacement capital for dry-docking and capital expenditure, which are required to maintain long-term operating capacity of the vessels and therefore the revenue generated by the Partnership's capital assets.

DCF at it's [Phonetic] close was $26.1 million in Q2, in comparison to $25.7 million in Q1, and we maintained our distribution level at $0.52 per unit, equivalent to an annual distribution of $2.08. The distribution cover ratio remains healthy at 1.45 times at the end of Q2. This is despite increasing the replacement capex charge for the fleet by $629,000. As the fleet ages, we increase this provision. By comparison, the average cover ratio was 1.5 times for the full year in 2018. The high coverage ratio gives the Partnership more flexibility regarding both capital base and distributions going forward.

On Slide 7, the balance sheet. At the end of Q2, the Partnership had $71.1 million in available liquidity, which consisted of cash and cash equivalents of $42.4 million and $28.7 million capacity under its revolving credit facilities. The revolving credit facilities now mature in August 2021 and September 2023. We have predictable cash flow, and a very healthy liquidity position. The Partnership's total interest-bearing debt outstanding at the end of Q2 was $1.045 billion, compared to $1.037 billion in the accounts net of debt issuance cost, which compares to $1.069 billion in the previous quarter. So we're seeing a continued repayment this quarter of about $23 million. The average margin paid on the Partnership's outstanding debt was approximately $2.1 million [Phonetic] (sic) 2.1% over LIBOR.

In Q2, the Partnership had interest rate swap agreements totaling $572 million and that compares to $552 million in end of quarter one. The Partnership receives interest based on LIBOR and pays at an average interest rate of 1.88%. These have an average maturity of around 4.4 years. Whilst the Partnership net income is impacted by changes in the mark-to-market swap valuation, the cash flow is stabilized, mitigating the interest rate impacts from the DCF. We have recently seen lower interest rates in the US and also increasing replacement capital provisions charged on our vessels as they get older. However, our coverage ratio remains at a high level and our full-year estimates 2019 look solid.

Slide 8, our long-term contracts by leading energy companies. For the Windsor Knutsen, as disclosed previously, the partnership agreed with Shell is the charter suspend the vessel's time charter contract. The suspension period commenced March 4th, 2019 and will last between a minimum of 10 months and a maximum of 12 months. During the suspension period, the Windsor Knutsen has been operating under a time charter contract with Knutsen Shuttle Tankers Pool AS, on the same terms as the existing time charter contract with Shell meaning no financial losses have written to KNOP as a result of this arrangement.

Bodil Knutsen is our largest shuttle tanker operating in the North Sea. It is ice class and on charter to Statoil until 2020. They have four further one-year annual extension options. Torill and Hilda Knutsen operate on the Goliat, which is the first field developed in the Barents Sea. After initial five-year term on both vessels, Hilda time charterer extended it for four more years and the first of five annual extension options has been exercised on the Torill Knutsen. Dan Sabia, Dan Cisne, and Fortaleza, and Recife Knutsen are a long-term bareboat charters through to 2023 with Petrobras Transpetro. Carmen and Raquel Knutsen are on charter to Repsol Sinopec until 2023 and 2025 respectively; for Raquel there are options to extend until 2030. The Ingrid Knutsen is on time charter until 2024 to a Norwegian subsidiary of ExxonMobil, with charterer's options to extend by up to five more one-year periods. Tordis, Vigdis, and Lena Knutsen are on five-year charters to Brazil Shipping, a subsidiary of Shell. These will expire in 2022, and charterer has options to extend for a further 10 years. The Brasil and Anna Knutsen are on charter for Galp Energia until 2022 with charterer's options to extend until 2028. Overall, the KNOP fleet has an average remaining fixed contract duration of 3.2 years and an additional 4.4 years on average in charterer's options.

Slide 9. In September 2018, the sponsor Knutsen NYK entered into new build long-term charters with Equinor for two Suezmax DP2 shuttle tankers. As previously disclosed, these are constructed at Hyundai Heavy Industries and are scheduled for delivery in the second half of 2020. On this Slide, the new vessel to total is also showing the details of which I covered earlier on Slide 3.

Slide 10, KNOT Offshore Partners should be considered as a mobile pipeline business with fully contracted revenue streams. This quarter we yet again reported another very strong performance, revenues, EBITDA and distributable cash flow. KNOP is well-placed to compete in future tenders and currently has three vessels on order through sponsor. We have a solid and profitable contract base generated by our modern DP2 fleet, which by the end of June has an average age of six years.

Together with our sponsor, we operate the largest fleet of shuttle tankers in the world, and since the formation of KNOP, we've had very high levels of vessel utilization, averaging around 99.7%, and financially this translates into high and increasing predictable revenues, adjusted EBITDA, distributable cash flows, and much more vessels are added to the fleet, this will grow. No one has more expertise in operating these vessels than KNOT Offshore Partners. Today, we see tight supply in the shuttle tanker market and a growing demand into the future. And with knowledgeable and financially strong and supportive sponsor, we continue to comment KNOP.

Thank you very much. And that concludes the narrative for the Slides. If anyone has any questions, I'll be very happy to take them. Thank you.

Questions and Answers:

Operator

We will now begin the question-and-answer session. [Operator Instructions] Our first question comes from Robert Silvera with R.E. Silvera and Associates. Please go ahead.

Robert Silvera -- R.E. Silvera and Associates -- Analyst

Hi, welcome to the company, and thank you for doing a reasonable job. I noticed that on the end of last year till now, your number of common unit holders has dropped from 631,000 to 613,000 approximately. Could you tell us what the average price I assume you bought each [Phonetic] back at was?

Gary Chapman -- Chief Executive Officer and Chief Financial Officer

Robert, I'm afraid, on the top of my head, I don't know that information. Is there a way that I can get up to you in the future?

Robert Silvera -- R.E. Silvera and Associates -- Analyst

Sure. My phone number is area code 865 in the United States.

Gary Chapman -- Chief Executive Officer and Chief Financial Officer

Sure.

Robert Silvera -- R.E. Silvera and Associates -- Analyst

882-1064.

Gary Chapman -- Chief Executive Officer and Chief Financial Officer

Sure. Let me call you back, if not today, then tomorrow.

Robert Silvera -- R.E. Silvera and Associates -- Analyst

Fine. Okay, thank you. If I'm not here just leave a message on the phone to answer the question. [Speech Overlap] Okay. The other thing is, I -- are you trying at all to pick up any of the convertible preferred units? [Speech Overlap]

Gary Chapman -- Chief Executive Officer and Chief Financial Officer

No. By this time, no. We're not.

Robert Silvera -- R.E. Silvera and Associates -- Analyst

No. It's not trading at any discount to 25 [Phonetic]?

Gary Chapman -- Chief Executive Officer and Chief Financial Officer

No. I don't think so.

Robert Silvera -- R.E. Silvera and Associates -- Analyst

All right. Okay. That's pretty much it for me. You're going to continue to reduce debt on schedule and you don't anticipate accelerating debt repayment?

Gary Chapman -- Chief Executive Officer and Chief Financial Officer

No. I mean, given the current yield on the shares and where we are in terms of wanting to grow the MLP and the unit price, I think, we need to look at all of our options to keep the business very stable. We want to maintain our distribution, as we have done since 2015. But equally we want to grow the business. So we've got to look at all of our options in order to make sure that if the three vessels or when the three vessels are offered to the MLP. We're in a position to take those on, if the pricing is correct and appropriate.

Robert Silvera -- R.E. Silvera and Associates -- Analyst

So your strategy for increasing the MLP is through acquisition of dropdowns?

Gary Chapman -- Chief Executive Officer and Chief Financial Officer

Yes. Yeah, and we've got to find out something in the most appropriate way we possibly can, the time given market conditions.

Robert Silvera -- R.E. Silvera and Associates -- Analyst

Okay. What would be the earliest dropdown available from NYK?

Gary Chapman -- Chief Executive Officer and Chief Financial Officer

From our sponsor, the first delivery is around the middle -- is scheduled to be around the middle of 2020. So at this stage, that's the sort of time frame. We're not expecting any dropdown before that.

Robert Silvera -- R.E. Silvera and Associates -- Analyst

Are there -- one of the question for me? Are there any other, or are there any incentive distribution rights in existence. I have noticed [Phonetic] one way or another?

Gary Chapman -- Chief Executive Officer and Chief Financial Officer

Yes. There are.

Robert Silvera -- R.E. Silvera and Associates -- Analyst

Is there any outlook for that being eliminated?

Gary Chapman -- Chief Executive Officer and Chief Financial Officer

It's -- we constantly talk about that. But at the moment, we have no plans. I think at the moment it's not, the -- sort of top of our radar, top of our list to do that or to address that, first. But yes, at some point we very well might do.

Robert Silvera -- R.E. Silvera and Associates -- Analyst

Thank you. I appreciate it. Thank you for taking my call, my questions. God bless you in the future.

Gary Chapman -- Chief Executive Officer and Chief Financial Officer

Thank you.

Operator

Our next question comes from Jim Altschul with Aviation Advisory Service. Please go ahead.

James Altschul -- Aviation Advisory Service -- Analyst

Good afternoon, and thanks for taking my call. Couple of questions. Well, I think when you sort of alluded to in passing, but -- with regard to the three dropdowns, would you -- how -- do you have any thoughts as to how you might finance them? Would you need to issue more equity, or would you be able to do it entirely with debt or...

Gary Chapman -- Chief Executive Officer and Chief Financial Officer

Well, we've got very good cash coverage at the moment, first and foremost. The model for the company has always been to find an accretive deal and finance that through new equity at the right price. I think today we -- the market's difficult for us, given the prices of units and the yield. And the general sentiment toward energy stocks, I think where we get caught up in that category. At this stage, you know, we've got luckily a few months and a couple of quarters to sort out how we're going to do it, but it may be that -- when you look at our leverage, we may be able to just increase that just slightly without going over what is comfortable. We would never do that. Plus with the cash we have, otherwise we may look to the main sponsor unit holders in NYK and Knutsen. So there are a few options for us. And at the moment we're still in the process of evaluating where we think we'll be. Clearly, there is also the possibility that in six months time the market is different.

James Altschul -- Aviation Advisory Service -- Analyst

Thank you. Looking at the kind of -- I guess, the first of the three potential dropdowns would be 3-1-1-4 [Phonetic]. What if 50 [Phonetic], if you would have take that upon delivery, when -- approximately when that delivery being, by when would you have to nail down some financing?

Gary Chapman -- Chief Executive Officer and Chief Financial Officer

Well [Phonetic], the delivery schedules for the middle of 2020, so whether it's Q2 or Q3, at the moment, I don't say. But I get the -- everyone is pulling in the same direction here in terms of the dropdown itself. I think typically we would want to take a dropdown after delivery because it derisks for us in the MLP and that would tend to suggest it would be in Q3. We don't have a desperate need to do it before delivery. We don't have to do it before delivery, but we are guided to some degree by the offer that is made from the KNOT sponsor. So, I think at the moment we have some time to work out what it is that we're going to do and how we're going to do, then we do have some ideas for that. And we do think it's possible having studied those ideas already.

James Altschul -- Aviation Advisory Service -- Analyst

Oh, good. [Speech Overlap]

Gary Chapman -- Chief Executive Officer and Chief Financial Officer

Yes.

James Altschul -- Aviation Advisory Service -- Analyst

No. I'm sorry to interrupt you. Please continue.

Gary Chapman -- Chief Executive Officer and Chief Financial Officer

No. I was just going to say it will be -- I've set out previously the various options that we think that, that for us at the moment. There are also banks and other financial institutions, who are offering us more complex sources of finance, let's say. But I think at this stage we want to really concentrate on keeping the structure and the transparency of the finance in this MLP as clear and simple as possible. The business that we operate is hopefully very clear and simple. We want the financing as much as possible to be the same. So we're trying very hard to keep this attractive to investors by the simplicity of what we're doing.

James Altschul -- Aviation Advisory Service -- Analyst

Appreciate that. Just two more questions and I'll shut up. The Torill Knutsen now reference -- according to the Slide 8, that charter, the fixed contract currently runs through the end of 2019 the reference -- you also made reference to a one-year like the first of several one-year extension options. Does that option take it to the end of 2019, or is it now going to go to the end of 2020?

Gary Chapman -- Chief Executive Officer and Chief Financial Officer

Very good question. I'm afraid, I don't know at the top of my head about that. Apologies. Probably by the next quarter I think, I will have all of this information on the tip of my tongue. But at the moment, the slide is showing this to the end of 2019, that's the firm period. And I suspect that option is -- has already been taken or is very close to being taken.

James Altschul -- Aviation Advisory Service -- Analyst

Well, I mean, I don't doubt that at all. What about this basic rule of investment look out for the downside and the upside will take care of itself. Let us suppose the option is not exercised. Would you have other potential operators you could contact and how long would it take to reposition that to ship, if I find a new customer and I don't know to what extent you'd have to do some work to get it ready for their preferences?

Gary Chapman -- Chief Executive Officer and Chief Financial Officer

Yeah. There's certainly some fields where you may even need modifications. Typically for those sorts of fields, we -- typically get the charters to pay for those. I think to answer your question there are -- there's a tightness of supply in the shuttle tanker market today. If a vessel were to come-off charter, I think we'd be confident that we would be able to find something else and the fallback position is that we would enter it and -- we could enter it into potentially the COA pool that we have on which is essentially a more revolving short-term pool that is operated by our sponsor KNOT. Though, but ultimately, we would be confident that we could very quickly find a place and a utilization for the vessel.

James Altschul -- Aviation Advisory Service -- Analyst

Okay. Excellent. Well, thank you very much for your detailed answer on all my questions.

Gary Chapman -- Chief Executive Officer and Chief Financial Officer

Thank you very much for your interest in KNOP. We very much appreciate it.

Operator

[Operator Instructions] We do have a follow-up question from Mr. Robert Silvera with R.E. Silvera and Associates. Please go ahead.

Robert Silvera -- R.E. Silvera and Associates -- Analyst

Hey, once again, after hearing about the three dropdowns, my question is this, if you begin to take those dropdowns, do you anticipate growing the dividend at all?

Gary Chapman -- Chief Executive Officer and Chief Financial Officer

Good question, Robert. And probably like to grow the dividend and the distribution. I mean, that's what the, the purpose of we're trying to do here is be successful and grow the MLP. I think at the moment, however, given where the market is, we can't make any promises on that. And we don't want to give away our equity, if you like, for fear, if not being able to then grow the MLP in the future. And today's news given where our price -- unit prices, we don't have the moment to see a growth of the distribution. Now I can't say that will stay the same forever or even in the next year, but at the moment we don't have an intention to increase the distribution and expand [Phonetic] the vessels.

Robert Silvera -- R.E. Silvera and Associates -- Analyst

Okay. So, if those new vessels come on, we can still anticipate basically the same dividend?

Gary Chapman -- Chief Executive Officer and Chief Financial Officer

I think that's the baseline position is perhaps a way of saying it, in that.

Robert Silvera -- R.E. Silvera and Associates -- Analyst

Okay.

Gary Chapman -- Chief Executive Officer and Chief Financial Officer

If we can increase it, and we think it's sensible and sustainable, and I think that's the most important point for us. And we've tried very hard for the sensible and sustainable in the way that we've run this MLP. So we won't increase the distribution, if we don't think we can achieve that.

Robert Silvera -- R.E. Silvera and Associates -- Analyst

Okay. Well, our philosophy is looking at it. As the future goes on, one of two things either share price increases or dividend increases. You know, it's just stay static. Is -- I think, what has been hurting the price. We are perceived as a static situation and not as a growing MLP, that's one of the problems. So as long as you're addressing that, with that in mind, I'm happy. So...

Gary Chapman -- Chief Executive Officer and Chief Financial Officer

Yeah. I mean, we always are. But equally given the ability of the business and the way in which we have strong operations and predictability and to a large degree a lot of transparency and we kind of feel as well that the market perhaps undervaluing where the MLP actually is today, and maybe that's perhaps a result of wider [Phonetic] sentiment across oil and shipping and the wider economy. So we would always like to grow the distribution, of course, we would, but equally we need to be very careful and sensible.

Robert Silvera -- R.E. Silvera and Associates -- Analyst

Sensibly.

Gary Chapman -- Chief Executive Officer and Chief Financial Officer

Yeah, exactly.

Robert Silvera -- R.E. Silvera and Associates -- Analyst

Sure. Okay.

Gary Chapman -- Chief Executive Officer and Chief Financial Officer

And it's actually not possible then unfortunately we have to wait some time.

Robert Silvera -- R.E. Silvera and Associates -- Analyst

All right. Because I -- the last thing I want to see is our business exists really just for the benefit of lenders. Okay.

Gary Chapman -- Chief Executive Officer and Chief Financial Officer

Yes, of course.

Robert Silvera -- R.E. Silvera and Associates -- Analyst

Thank you very much for taking my questions.

Gary Chapman -- Chief Executive Officer and Chief Financial Officer

You're welcome.

Operator

[Operator Instructions] Our next question comes from Marc Solecitto with Barclays. Please go ahead.

Marc Solecitto -- Barclays -- Analyst

Hi, good afternoon. Just a follow-up to one of your responses earlier. Just curious if you had a max leverage target in mind, you know, with respect to potential funding for future dropdowns?

Gary Chapman -- Chief Executive Officer and Chief Financial Officer

Yeah, sure. We're in the region 4.5% [Phonetic] at the moment. And I think, we feel that the business could comfortably sit between 4.5% and 5% [Phonetic]. We would never look to go over 5%. That's our final guidance, if you like as to where we feel the business is.

Marc Solecitto -- Barclays -- Analyst

Got it. Thank you.

Operator

[Operator Instructions] If there are no further questions, I would like to turn over the call back to Gary Chapman for any closing remarks.

Gary Chapman -- Chief Executive Officer and Chief Financial Officer

Well, thank you to everyone who's listened. And we genuinely believe KNOT is currently undervalued by the market given the stable nature of the business and the operational record and growth prospects. So please do support us, and I look forward to hopefully supporting you and speaking to you next time. Thank you very much.

Operator

[Operator Closing Remarks]

Duration: 33 minutes

Call participants:

Gary Chapman -- Chief Executive Officer and Chief Financial Officer

Robert Silvera -- R.E. Silvera and Associates -- Analyst

James Altschul -- Aviation Advisory Service -- Analyst

Marc Solecitto -- Barclays -- Analyst

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