Good afternoon, and welcome to the KNOT Offshore Partners’ Fourth Quarter Earnings Conference Call. [Operator Instructions]. Please note, this event is being recorded. We ask that you please stand by. The presentation will begin in a moment.

I'm going to do the earnings call. I'm going to read from the script here because the earnings call is transcribed and it goes on our website. [Indiscernible]. Today's discussion and presentation materials include non-U.S. GAAP measures such as DCF and adjusted EBITDA. Presentation materials include reconciliations of these non-U.S. GAAP measures to their most directly comparable GAAP financial measures. Any forward-looking statements made in the presentation materials and during today's discussions 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 may differ materially from these forward-looking statements and the Partnership does not undertake the duty to update any forward-looking statements. My lawyer told me to say that. And KNOT Offshore Partners focuses on the Shuttle Tanker segment. Consequently, we have only one reporting unit. And Knutsen NYK Offshore Partners LP is in essence a midstream mobile pipeline business with fully contracted revenue streams, and the market is expanding, so supply should time irrespective of the oil price. The shuttle tanker transports oil from the offshore oil production unit to shore side. It provides a vital mobile pipeline service, and it therefore operates in a premium midstream space. The forthcoming offshore oil developments are deep sea oil fields where the traditional MLP investment in fixed pipelines are not an option. Before ordering a new vessel, KNOP will always agree a long-term employment contract with the vessel. There is no speculative ordering, so our MLP will yield both stable and sustainable revenues. The difference to large conventional tanker market was illustrated in 2013 when we did the initial public offering, which was heavily oversubscribed and the full green shoe was taken up. The LCC [ph] and Suezmax tanker earnings at that time were achieving…

[Operator Instructions] And our first question will come from Hillary Cacanando of Wells Fargo.

Hi, thanks for taking my question. I just wanted to get your thoughts on just given the tough market, what your thoughts are on counter party risk? I know you have very well-known counter parties but just given the tough market and you have four charters with Petrobras, and they've had their own set of problems recently. So, I just wanted to know how -- just wanted to get your thoughts, just given everyone is so concerned about counter party and credit risk these days.

Well, I think we being the shipper of the cargo, we are a midstream mobile pipeline company rather than we're seeing more problems in the upstream spaces of the contracts are shorter and renewals are -- yes, the asset base had dropped to lot in the upstream space. There are short time charter periods and there is scope for the charter to renegotiate in these situations. While where we're positioned is rather different, we have lump sum financial leases which run through to 2023 which are governed by U.K. law. And also we have a strategically important asset for the charter generally because we are the pipeline business for them. Typically, the Petrobras vessels take about a 16-day round voyage to deliver the cargo shore side, which effectively means the cost of delivery for each cargo is probably less than $1 million. The cargo typically is worth even at $20 a barrel worth totally about $15 million to $16 million. So, you can see that there is significant risk if anyone tries to disrupt the contracts to the oil flow and monetizing the assets. I'd also like to point out at this stage, we've had no issues with any of our charters and we've had no push back from any of them. We don't see any problems going forward. But obviously, you can never say never in this world, but I think we're in a very strong position in terms of -- more in terms of actual -- what we're actually doing here and the position the assets occupy in relation to their business of Petrobras.

Okay, great. Good to know. And just one more question. I read that KNOT has an FSO and another FSO in conversion. Is that something that's available for a dropdown or if it is, do you have any plans to diversify your fleet from just shuttle tankers to something like an FSO?

We haven't really talked about expanding the MLP right now. We have quite a lot of ships to drop in and the equity markets aren't really opened for business at the moment. I think we have to see how the MLP evolves and what the sponsor’s appetite is for dropping in assets. I'm sure the MLP will be prepared to look at any transactions, the sponsor put towards it. We tend to be a pure player on shore tankers. Those actually keep the business quite simple and relatively easy to understand as well. FPSOs they’re more complex and how you account for them and what you do about residual risk is more difficult than a tanker.

Okay, great. Well, thank you very much for taking my questions.

No problem.

[Operator Instructions] I'm showing no further questions. This will conclude the question-and-answer session. I would like to turn the conference back over to management for any closing remarks.

Thank you very much for listening to that. I appreciate it. I'm surprised there are so few questions but I'm relieved. And I think that closes the earnings call session then. Sorry, go ahead please. [Indiscernible] That may be otherwise be used with different projects. So what you're saying in a low oil price environment, how it will impact our business? Well, as far as the existing fields that have been developed are concerned, the cost of development is already there and the cost of basically the actual monetizing of the asset, the oil is probably about $10 $15 a barrel typically. They are the main factors in setting the field up and going -- in the first place. Once the flows are in place then effectively you have to get pretty low oil price to close the field down. I think as far as future development goes, logically you would expect it to slow the pace of development down. But I don't necessarily see that as a disadvantage to the shuttle tanker market, because as I said previously, if the pace of development does slow down, and we're getting more manageable growth of the world shuttle tanker fleet, two years ago when we did the IPO, there was an expected incremental demand for shuttle tankers by 2020 of a further 60 ships. I think when Fernley's give their presentation, you'll have a better idea what they feel the impacts will be of this slowing down. But the shuttle tanker market, if you get a lower oil prize, you’ll get slower growth, but I don't see there's going to choke off demand, increasing demand for these tankers. And in the median term, the oil will be eventually be exploited. It's not like in the North Sea today, Statoil has announced…

Hi, this is Chintan Desai from UBS, just had a couple of questions. First one is on unit buybacks, if you got the cash balances to come down a bit following the acquisition, could you just talk about Management’s appetite for further unit buyback?

Well, it's oil price dependent. We have a metrics and we will stick to it. I think at this level we [brought back] it's very attractive for us. I think as you hopefully go up the pricing of the unit, when you get to about $14 or $15, we'd probably stop around that. We will put it under review, we don't really have a hard and fast view of it. But today we think the units intrinsically quite heavily undervalued. We have to measure that against actually taking units off the market, because obviously you do compress liquidity a little bit. The positive is, it does actually reduce unit price volatility a little bit I feel in the worst days when we can't buy some of the units back and we have seen our -- I think it's reduced a little bit before so we'd say -- but it's difficult to say because is Safe Harbor is quite onerous and we can't actually buy that much quantity back in any one day. We can never buy above the prevailing market price, we’ve always got to buy the price lower than the maximum achieved. So it does restrict you as well as the volume restrictions, our price restrictions on the buyback.

Thank you that was helpful. And then, one question on the North Sea, there's been a lot of talk about -- could you talk about what your outlook is there?

Well today we have four or five ships – five in the North Sea isn't it? The KNOP or KNOT – KNOPs that was the contracted long term and they’re young ships, it's highly unlikely that there will be any problems with these vessels. But they'll be able to show us like the 15 or 20 year old vessels then if supply weakens in the North Sea, they are the ones more at risk where they got COA[ph] business. But with the long term time charters on young ships which is specifically designed for the fields then, we don't see any risks for these vessels. We see them trading through today, the North Sea supplies are starting to tighten up a little bit and say, when NE contract start the proppant in the Goliat field, it’s just starting of this month that will take two shuttle tankers out of the North Sea market which have been basically relet to Statoil by NE. That should help. On a more general note about the North Sea market, the North Sea market is actually very tight. Today, there are only 69 shuttle tankers [fading], five of them are out of the market, four of them are in lay-off and one is trading as a conventional tanker. So hasn’t been that many investments and right now, oil companies are a bit hesitant about giving long-term charters which means that demand for existing vessels is pretty good. So North Sea market for us is actually quite good, and when Fernley is going to present view on the North Sea production volume, they have actually upgraded the assumed production from North Sea offshore oil field. So yes there are some issues but in general, it's fairly stable production and of course, if you have done all the investment in our offshore oilfield, you are definitely going to try to maximize production in this environment because cash cost is still way below the --

Final question. [Indiscernible] I read that one of the tankers ran aground in Brazil could you just give us any sort of guidance on sort of any off-hire associated with that?

Yes. First of all, there is no off-hire commission because this is a financial lease. So if you lease a car and you dented the car or do it make an incident, you cannot go to your leasing company to claim some off-hire. So this is a financial lease there is no off-hire. This year is a leap year which means we will get paid 366 days rather than 365. So what happened there was that was about to – was about to answer the discharging terminal at the [indiscernible] so we get the message from the terminal that we have to cancel the discharging and we canceled the -- we hooked up to three of the four tags but due to heavy wind and – the vessel was gone but however, most importantly there was no personal injuries. There was no injuries to the boat. We have been in cooperation with charter who is responsible of course for the vessels since they have it on a financial lease and the [indiscernible]. So what we are doing today is to do a shift transfer of cargo in order to lighten the vessel and then when the tide comes we're going to take her out of the grounding and take her to terminal for some further inspection. But there is no injuries, no damage to the boat and they have absolutely zero economic consequences for KNOP given the fact that this is our lease. Any more questions? That concludes the earning call then.

I'm sorry this is the operator. We do have another question from the phone line, would you like to take it?

Yes, I'll take it.

All right. David Starkey from Morgan Stanley.

Hi guys. Thanks for doing the call. Quick question just regarding the longer term debt situation for the company, I guess there's nothing big due until 2018. And how are your relationships with your existing banks regarding the longer-term nature of the loans that you've got?

Well, as you said these loans some are maturing in second half of 2018. I don't like to pay bankers more than I have to, then why refinance. These vessels are on contract. DNI has options to extend them and if you look in our filings, you'll also see that they have some options earlier than 2018. So these vessels will start loading on the Goliat FPSO in March. The Goliat FPSO project has made an investment of NOK50 billion which is about US$7 billion. So this is a huge CapEx commitment. There's only three vessels in the vault that can load from this field because it's in the Barents Sea, where temperatures can drop to minus 30 degree centigrade. So they are going to need these vessels, this field is going to produce for more than 15 years probably. So we are fairly comfortable about this. And we are going to wait to refinance this loan until probably 2017-18 because once you refinance you have to pay a lot of fees to bankers and lawyers. So we want to keep that money for our partners.

Right. Understand. Can you compare yourself to a company like Nordic American Tankers?

You want us to compare ourselves to Nordic American Tankers? How -- to compare that

Different structures.

What do you mean by different structure?

Well the relationship to a parent company, they're like wholly owned I'm just kind of getting – trying to get an idea of what the differences are, I don't mean that.

We're quite a different company than NAT, I can promise you. First of all, we are not in commodity shipping, we are in the mobile pipeline company where we are delivering transportation of oil from the offshore field to terminal so that oil companies can monetize those products. As I mentioned there are 69 shuttle tankers in the world, there is a lot of Suezmaxes fits. If you have a Suezmax you are competing on pricing, we are competing on much other things than just pricing. If you look at NAV, a lot of people are doing that today even though possibly could be our lower bond on your share price but if you look at NAV we will look a lot more attractive as well.

Right. It seems like you have a lot more fixed oriented costs and contracts in place certainly that would reduce the volatility and improve your valuation.

It's an -- of this business it's always been in this type of business but this has always been a long term contract business. So we don't see that structure changing and fundamentally with the big tankers, they've always been on a spot basis. The good thing about oil whatever it's big tankers or shuttle tankers is there is no financial risk. You always get paid, but with the massive contract risk with the large tankers when the market turns generally like we see in the case [indiscernible] that's a different sector but you basically get paid off next when the market starts. This is just a stable long term businesses, it's late cycle, and we achieve a sensible return on investment. And that's how these deals are structured. So you would expect to renew along charters as well generally because you never price an asset that highly and it's been designed specifically for a field. Generally, the charters don't run more than about 5 to 10 years because effectively that would go into the CapEx of the oil major which is a 15 year lease. I think that's probably why we see quite short deals. Likely any contract those ships were built specifically for that field and they will operate 15 years there. But they wouldn't have brought 15 year charter on the ship because they have to include it in the CapEx of the business then and it makes them look like they have not made a good investment.

It seems to me this is just kind of an editorial but the Wall Street analyst should be giving you more of a premium for the many levels of stability you have built into your business right now. Thank you for your time. Appreciate it.

Thank you, David.

And that was our last question.

Okay. So we will wrap up the earnings call and start the Investor Day then in a few minutes. Thank you.