Why Knot Offshore Partners Stock Is Plunging Today – The Motley Fool

Date:

- Advertisement -

Founded in 1993 by brothers Tom and David Gardner, The Motley Fool helps millions of people attain financial freedom through our website, podcasts, books, newspaper column, radio show, and premium investing services.
Founded in 1993 by brothers Tom and David Gardner, The Motley Fool helps millions of people attain financial freedom through our website, podcasts, books, newspaper column, radio show, and premium investing services.
Motley Fool Issues Rare “All In” Buy Alert
You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More
Units of Knot Offshore Partners (KNOP -18.32%) had sunk by more than 18% by 10:30 a.m. ET on Wednesday. Weighing on the master limited partnership (MLP) was an oversupply of shuttle tankers in the North Sea. 
Knot Offshore Partners issued its third-quarter report, and CEO Gary Chapman said in the accompanying release that its financial results, liquidity, and distributable cash flow “reflect our heavy scheduled drydocking program.” 
Chapman also said, “We remain focused on securing additional employment for our fleet for the next and coming quarters.” But the pandemic caused a delay in starting new offshore oil production in the North Sea, creating an oversupply of shuttle tanker capacity. This issue has affected rates and charter opportunities. 
Chapman said that the North Sea situation could continue in 2023, which is leading the company to consider other opportunities for its North Sea vessels in the conventional tanker market. But he warned that the returns might not be enough to boost its cash flow. Because of that, if the company can’t find work for its vessels at an acceptable rate, it will likely see a significant drop in its distributable cash flow. That could affect its ability to make distribution payments. 
But the company does expect this situation to improve after next year. Oil companies are committing to spend more money offshore in the North Sea and Brazil. Meanwhile, it expects limited growth in shuttle tanker supply in its two operating regions in the coming years.  
Knot Offshore Partners expects 2023 to be a challenge. If it can’t find work for its tankers, its cash flow could plunge. That might force it to reduce or suspend its distribution to shore up its liquidity. That could put additional downward pressure on the unit price. Because of that, income-focused investors should avoid the allure of this MLP’s double-digit yield, which it might not be able to sustain next year.  

Matthew DiLallo has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.
Market-beating stocks from our award-winning analyst team.
Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 12/01/2022.
Discounted offers are only available to new members. Stock Advisor list price is $199 per year.
Calculated by Time-Weighted Return since 2002. Volatility profiles based on trailing-three-year calculations of the standard deviation of service investment returns.
Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool’s premium services.
Making the world smarter, happier, and richer.

Market data powered by Xignite.

source

- Advertisement -

LEAVE A REPLY

Please enter your comment!
Please enter your name here

Share post:

Subscribe

ADVERTISEMENT

Popular

More like this
Related

Nigeria files tax charges against Binance after executive flees custody

Nigeria has filed tax evasion charges against cryptocurrency platform...

MTN to cut costs and hike prices at Nigeria unit after naira hit

MTN Group's (MTNJ.J), opens new tab Nigeria unit is...

Britain agrees $100 million trade finance to boost Africa food security

Development lender British International Investment said on Monday it...

Nigeria gives businesses four years to adopt eco-friendly reporting standards

 Nigeria on Friday said it will oblige companies to...