KNOT Offshore Charts Solo Course After Buyout Collapses

ABERDEEN, Scotland – March 25, 2026

KNOT Offshore Partners LP (NYSE:KNOP) is charting a new, independent course after its parent company, Knutsen NYK Offshore Tankers AS (KNOT), terminated a non-binding proposal to acquire all publicly held units. The collapse of the deal, announced alongside fourth-quarter results showing a net loss, injects significant uncertainty into the company's future strategy but also leaves it positioned as a pure-play investment in a rapidly tightening shuttle tanker market.

Navigating Choppy Waters: Buyout Collapse and Governance Concerns

The most significant development for investors was the March 19th announcement that discussions regarding the KNOT acquisition offer had been terminated. The unsolicited proposal, made on October 31, 2025, offered $10 in cash per common unit. Following a review by a special Conflicts Committee of independent directors and their advisors, the parties were "not able to reach an agreement."

The market reacted swiftly to the news, with the partnership's shares falling in after-hours trading, reflecting investor disappointment over the loss of a potential cash-out opportunity. The termination leaves the future ownership structure in place, with Knutsen NYK remaining a significant unitholder, but raises questions about the long-term strategic alignment between the parent and its publicly traded subsidiary.

Adding to governance concerns, the partnership disclosed it has repeatedly failed to conduct its 2025 Annual Meeting of Unitholders. Despite three attempts in December 2025 and January 2026, an insufficient number of unitholders were represented to meet the required quorum, preventing any official business from being conducted. This signals a potential disconnect with its investor base at a critical juncture for the company.

A Look Below Deck: Financials Weighed Down by Impairment

Financially, the fourth quarter of 2025 was a mixed bag. While KNOT Offshore Partners generated stable total revenues of $96.5 million, it reported a net loss of $6.2 million. This loss was almost entirely attributable to a single, non-cash event: a $20.3 million impairment charge on the vessel Bodil Knutsen.

When adjusted for this impairment, the company's performance appears more robust, with an adjusted operating income of $28.6 million and an adjusted net income of $14.0 million for the quarter. The company also generated a strong Adjusted EBITDA of $59.3 million. However, the impairment highlights the risks associated with asset valuation in the maritime sector.

Furthermore, the partnership announced a significant change to its accounting policy. Prospectively from January 1, 2026, the estimated useful life of its vessels has been shortened from 23 to 20 years. While management noted this "does not prevent vessels from being utilized beyond 20 years," the change will increase non-cash depreciation charges in all future quarters, putting downward pressure on reported net income.

Strong Currents in a Tightening Market

Despite the corporate and accounting headwinds, the underlying market for KNOT Offshore's specialized fleet is exceptionally strong. The company reported impressive fleet utilization of 99.5% for scheduled operations in the fourth quarter.

CEO and CFO Derek Lowe expressed strong optimism, stating, “We are pleased to report another strong performance in Q4 2025, marked by safe operation at 99.5% from scheduled operations, 96.4% utilization when including drydockings, consistent revenue and operating income generation, and material progress in the charter coverage outlook for our fleet.”

The core of this optimism lies in the booming offshore oil markets of Brazil and the North Sea, the company's primary operating regions. According to Lowe, Brazil's state-owned oil giant Petrobras “exceeded the upper end of its oil production targets for 2025,” driven by new floating production storage and offloading (FPSO) units in fields serviced by shuttle tankers. This has caused “the world’s biggest shuttle tanker market” to become “both growing and materially tightening.”

A similar, though less dramatic, positive trend is emerging in the North Sea. Against this backdrop, the company believes that demand growth will outpace the supply of new shuttle tankers for years to come, especially with shipyard capacity limiting new orders until at least 2028. This supply-demand imbalance increases the value and re-chartering potential of KNOP's existing fleet. The partnership has already capitalized on this, securing 98% charter coverage for the first half of 2026 and 88% for the second half.

Charting a Course for Unitholder Value

With the buyout off the table, management and the board are now “keenly focused on optimizing the Partnership’s value creation strategy.” In his statement, Lowe affirmed the board is “actively weighing the available capital allocation alternatives with the intention of maximizing unitholder value in a sustainable manner over the long term.”

One key avenue for growth could be “dropdown” acquisitions of vessels from its parent, KNOT. Knutsen NYK has eight newbuild shuttle tankers on order for delivery between 2026 and 2028, all of which are reportedly backed by long-term charters in Brazil. Under an existing agreement, KNOT Offshore Partners has the option to acquire such vessels, which could provide an accretive path to fleet growth and increased cash flow.

In the near term, the company continues to manage its fleet and finances proactively. It recently refinanced credit facilities and secured a new time charter for the Fortaleza Knutsen. It is also managing operational issues, such as a generator breakdown on the Tordis Knutsen, with the expectation that insurance will cover the majority of lost hire and repair costs, demonstrating a degree of operational resilience. For now, KNOT Offshore Partners is sailing forward alone, tasked with proving to investors it can harness powerful market tailwinds to navigate its own course toward greater value.