Good day and welcome to the KNOT Offshore Partners’ First Quarter 2016 Earnings Conference Call. [Operator Instructions] Please note that this event is being recorded. I would now like to turn the conference over to John Costain. Please go ahead, sir.

Thank you. If any of you have not seen the earnings release or slide presentation, they’re both available on the Investors section of our website. On today’s call, our review will include non-US non-GAAP measures such as DCF and adjusted 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. The partnership does not undertake a duty to update any forward-looking statements. And now with the presentation. KNOT Offshore Partners focuses on the Shuttle Tanker segment. Consequently, we have one reporting unit, the shuttle tanker which transports oil from the offshore oil production unit to shore side. It provides a vital service and operates in a premium midstream space. KNOT Offshore Partners is in essence a midstream mobile pipeline business with fully contracted stable non-volume based revenue streams. The market will expand significantly in the coming years. Low oil prices are beneficial to shuttle tanker demand when compared to a fixed pipeline solution as there are significant lower startup costs. Nevertheless, in 2015, we covered many volume based midstream contractor business. Our partnership unit price was strongly and -- correlated to the oil price. Recently, we have seen a start of a recovery in our unit price, although not without the expected volatility in today’s markets. Despite this, we continue to trade at a significant yield premium to the Alerian index. We have many positives, a solid coverage ratio, a young fleet, a stable financial situation, excellent sponsors and more stable to many MLPs and solid growth…

[Operator Instructions] And our first question comes from Hillary Cacanando of Wells Fargo. Please go ahead.

Hi, John, thanks for taking my question. So during last quarter, the last call you said that you won’t consider another dropdown until your unit price reaches at last $20, so now that your stock is trading above $18, it’s getting closer to $20, how should we think about a potential dropdown? Is this something that we could see sometime this year or is this something that you are kind of a wait and see approach?

Thanks for the question, Hilary. Well, first I have to we are very, very happy with the prices going up in the last quarter. I think what you got to see basically is a settle down in the volatility and then we will evaluate what to do, but I think generally we are bit optimistic about the MLP now and we do see a growth story again. I think when we traded below $10 at the end of last year, you have to say, well, this is crazy, but today the markets have really recovered. When you look at the general loan index, the loan index is below 10% yield now. Ours is still about 12% yield, so we feel that we can – this difference disappears and now we are over $20, even if that’s $22, $23 if we go to the mean rate again which you are up for the first year and a half and at that sort of level it is definitely accretive, easy to do jobs. I think today it’s pretty marginal. The problem today is the fleet market has been so volatile for so long with the sharp ratios throughout when you look at the units, however the units have been very stable and growing, the market perception is different and they are acquiring liquid small units. There were lot of volatility in the price and it has – it would make fairly heavy discount if we put on to the market and try to raise money against the company today. I mean typically if we are looking at 10%, 15% discounts of a gross possible units which just raise equity. So we are very optimistic. I mean we love the way that the unit price has come back and I do generally think that the MLP is viable again and we will look at it closely in the few months. I guess it’s have to wait till we pay the loans.

Okay, sounds good. And then just around your debt maturity due in 2018, I know it’s still early, but I think a lot of companies that are starting to kind of start discussions with the lenders already for longer term maturity. I was wondering if you could have started any discussions with the lenders yet. I know it’s still early, so it’s –

We are always talking to the banks. As far as the maturity in 2018, we are looking at how the fleet is developing and it’s basically around Hilda and Torill and obviously there is charters. We firmly believe the charter is big and there is just no way with those ships are going to continue on that field. There is no indication that there weren’t any, there is no reason why they shouldn’t and there is nobody I don’t think that could provide that level of service that we do. And genuinely when the extension comes on these two charters, we will go and talk to the banks talking about refinancing, but today because the charterers have only got - next two and a half years, I mean this renegotiation will occur before them in the charter, that’s for sure and then we will really finance system [indiscernible]. Øystein Kalleklev: Yeah, John, if I could just also add. This is Øystein, GP Chairman. We also got this question on the Investor Day. Basically what we said is that we don’t like to pay unnecessary fees to bankers and lawyers to refinance our debt. Now there is two and a half years left of the loan, it’s actually just in - running for half of its life, because it’s a five year loan. So these vessels have just started operating on the wheel, so really no rush to refinance this. No, we have plenty of cash on the balance sheet and refinancing will just incur a lot of refinancing cost then. I think it’s better to pay it out as dividends.

Okay, sounds good. Okay, that’s it from me. Thanks a lot.

And our next question comes from Spiro Dounis of UBS. Please go ahead.

Hey, good morning or good afternoon. Just want to maybe go back to the potential for a dropdown and we are not going to be too presumptuous but of course the [indiscernible] I guess this one option obviously I guess really the only one at this point and just in terms of the financing, obviously capital markets needs to open up again and to your point, you are sort of waiting for that, that price to hit the right point. But just from the debt side of things, could we see I guess – is there debt currently attached to that vessel and would that simply just flow through to you? I am not sure if you can disclose how much debt is actually fixed to the vessel itself. A - Øystein Kalleklev: Jon, I can answer. This is This is Øystein. The vessel in KNOT, of course all the vessels we charter we finance and all the vessels we order in KNOT is sponsor when we do the loan agreement with the banks we pre-accept KNOT as a new owner and we also pre-accept the financial covenant of KNOP, so we can just – when you sell the vessel to KNOP, they can take over the loan after I have done with all the other dropdowns. And all the vessels in the dock or inventory, the five vessels are financed, so there is no – that’s not like we are running our own missing money, so they are all truly financed and that cost to vessel today is a bit above $80 million. So in both those situation, KNOP are free to decide whether they want to discuss with the banks to take over as a guarantor or whether they want to refinance the vessel in connection with the dropdown. Of course taking our loan means that you don’t have pay another set of arrangement fees and lawyers, so of course it’s cheaper to take over the loan, because they can do it for free.

Got it. That makes sense. A - Øystein Kalleklev: Yeah, the margin is 200 basis points and the tenure is nine years, so you get a nine year loan at 200 basis points and you get that loan for free, so that’s the benefit of course, but I repeat that all the vessels they take over are fully financed. And KNOP gets the options just to take over that or they have to do – to pursue their own financing.

Got it. Perfect. And then just want to follow up with second question here on tendering activity. And I guess trying to figure out, John, I think you kind of spoke about this little bit in your prepared remarks just around the fact that this is a less capital intensive way to move the crew at least initially. And I am just wondering more in the 2019 timeframe, if capital budgets are getting cut now presumably that’s really going to impact the production that comes online in the later years. And I guess, I am just wondering what sort of tender activity are you seeing, one of the next big win going to come in for you guys and maybe is that going to be the North Sea or Brazil?

I think both places. I mean, Brazil, Shell has started the third phase of the Parque das Conchas project, almost 20,000 barrels a day, I mean, and they are quite high percentage, where we have obviously got three ships allotted for them. I suspect for the oil majors, they will wait-and-see how the old market and the new build markets stand the next year. I think that there has been so much volatility in the markets in the last few months, but they will wait and order quite late, because they want to see some further price sentiments on the crude price really, but we don’t see any pushing back on production, I think it’s ramping I would say. If you read the Shell messages, they are very positive, and no doubt that Brazil will definitely expand. I mean, if you look at the whole Latin America in the last 10, 15 years, it’s the only part of the world where oil productions declined, and yet the Lula field in Brazil is one of the five biggest offshore oil deposits and there is further fields in Brazil. So there is no reason for Latin America to be declining in oil production. I know Brazil has ramped up a little bit, but we don’t see any reason for Brazil to go back. I mean -- and in the North Sea, as part of the low oil price, what’s happened with Statoil, Statoil switched to the Johan Castberg field from being a fixed platform solution to FPSO shuttle tanker solution, so $40, $50 and the shuttle tank, it makes a lot more sense in the fixed pipe solution. And in Brazil, it’s always been shuttle tanker regime. So generally -- Øystein Kalleklev: Yes, Spiro, just to give you an idea, how big we are talking about. The Libra field, there are nine FPSO coming for that field to operate, nine FPSO producing more than 1 million barrels a day. With the ton mileage, you probably need 12 to 15 shuttle tankers, just for that one field and then in addition you have Sanco [ph] and you have Lula, so demand of course from Brazil will be staggering. And in addition to this, you have a fleet which has an average age of around 11 years, and that means there is also quite a lot of demand for attrition. So what we said also at Investor Day, I could only say their projection is 48 new vessels within 2020, and half of this will come from attrition. So attrition demand is also fairly large.

Okay. So I guess basically, if oil were to stay around the $50 level, which I think is arguably conservative, I guess, but let’s say, we just sort of get stuck in this band, 2019, 2020, it sounds like you should still – your expectation would be there would still at least a few tenders every year that you would probably win, I guess at least half of them, is that the right way to think about it?

Yes, I think – okay, currently it’s at $48, but generally in Brazil and Johan Castberg can easily produce at $40, $45. So let’s say demand is positive until 2020 and half is attrition and half is new, we have a market share of around 30%. So if we have to maintain the market share, we probably need to – in terms of – probably to build at least 10, 15 new vessels.

All right. That’s good color. Appreciate it. Thanks guys.

[Operator Instructions] Our next question comes from Ben Brownlow of Raymond James. Please go ahead.

Hi, thanks for taking the question. You guys have made a number of comments around the production and outlook, you’ve pretty much, to some degree answered this. But I was wondering – I mean, when you think about -- obviously encouraging data points around the Hilda and Torill, but when you think about the Windsor and the Bodil, how are you thinking about those as being well positioned for tenders past 2018, and what do you think is the re-charter potential for those vessels?

Well, we were particularly pleased with Bodil, because it’s a nice flagship and with the Johan Castberg field, I think it’s a quite a good fit for that. We can’t obviously say what status preference would be, but the life of vessel and they have charted consistently since delivery and look at the first option on the ship. For next two years, we got two further options up to 2019 and when you think the three ships have been removed from Statoil program in the North Sea, the tonnage for them is quite tight today, so there is not really a lot of surplus and that vessel is very heavily weighted in the Statoil program, so we don’t see that being an issue. The Windsor is based in Brazil with BG, they like the ship, they have boarded three more on the back of use in the Windsor and they need – they really have – the amount of expansion that Shell are doing, they really have a massive need for these shuttle tankers, we don’t see an issue with Windsor either. Well, obviously, the [indiscernible] for the time-charters, but that doesn’t need to say that there is not an opportunity to be fully employed for the next five to seven years, very minimum [ph]. I mean, you with these charters, there is nowhere else to go and they don’t really particularly like the ships, there is no reason to not use them. So we are very confident about both ships. The market is expanding, ultimately that’s the big driver. If you’re looking at contracting business, there are too many vessels around, there is the complete opposite of that, you can expand the business and heavily utilize ships. So we are pretty comfortable with the situation on both vessels. Øystein Kalleklev: And I can also add that the market for shuttle tankers are extremely tight. If you call [indiscernible] shuttle tanker, he will tell you it’s no chance because there has been very little replacement of , I would call it, attrition demand or the new buildings, the order book now is 8 vessels where KNOT has four of them, but all of these vessels are going for new projects. So there has not been a lot of replacement of older [indiscernible] contractor for replacement in the North Sea. So basically the only – last time anybody ordered some vessel [indiscernible]. So of course, with that fact, you see that Shell have requested to get more options on the Windsor, so they have a better predictability of vessels in the fleet, and also of course Statoil also has a requirement in the North Sea. Right now, it’s impossible to get any vessel.

Great. Thanks for the color.

I am showing no further questions. I would like to turn the conference back over to John Costain for any closing remarks.

Thank you for all attending, and I hope it clarified a few things and [indiscernible]. I haven’t much else to say really. Okay. Thanks.