0001104659-26-044664
SEC filingKNOT Offshore Partners delivered double-digit revenue growth and a significant increase in net income for FY 2025, driven by higher utilization and increased hire rates. Operating margin expanded to 23.2%, supported by stronger time charter revenue.
KNOT Offshore Partners reported revenue of $364.4 million for the fiscal year ended December 31, 2025, representing a 14.4% increase from $318.6 million in the prior year. Management attributed the increase primarily to higher utilization and increased hire rates, which drove growth in time charter revenue. This improvement reflects favorable market conditions in the shuttle tanker sector, where fluctuations in hire rates result from changes in supply of carrying capacity, production volumes of oil in operational areas, and demand for crude oil transportation.
Operating income rose 16.1% to $84.6 million, compared to $72.9 million in the prior year. The operating margin of 23.2% demonstrates the Partnership's ability to convert revenue growth into operating profit efficiently. The improvement in operating performance reflects the benefits of higher fleet utilization and the pass-through nature of certain vessel operating expenses under bareboat charters, where customers bear these costs directly.
Net income increased 65.4% to $23.3 million, up from $14.1 million in the prior year. The significant improvement in net income reflects the combined impact of higher operating income and favorable financial dynamics during the period.
Net cash provided by operating activities increased to $155.7 million, compared to $137.1 million in the prior year. This improvement reflects higher earnings and favorable movements in working capital elements. The Partnership's ability to generate strong operating cash flow supports its capital-intensive business model and vessel maintenance requirements.
The Partnership's shuttle tanker operations benefit from long-term charters with major oil companies. Management estimates vessel utilization based on historical experience and projections of future shuttle tanker voyages, including estimated off-hire time and spot market operations. For vessels operating on time charters, the Partnership capitalizes costs directly associated with classification and regulatory requirements for vessel inspections and improvements incurred during drydocking that increase earnings capacity or improve efficiency and safety.
Management noted that while market values of vessels may fluctuate, carrying values may remain recoverable based on future undiscounted cash flows expected from servicing existing and future charters. The Partnership indicated it is not aware of any regulatory changes or environmental liabilities anticipated to have a material impact on current or future operations. However, management acknowledged that increases in interest rates may cause a corresponding decline in demand for yield-based equity investments such as the Partnership's common units.