MLPA Conference, Orlando June, 2016 Notice to Recipients This - - PowerPoint PPT Presentation

MLPA Conference, Orlando

June, 2016

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Notice to Recipients

This presentation is not a prospectus and is not an offer to sell, nor a solicitation of an offer to buy, securities. Except for the historical information contained herein, the matters discussed in this presentation include forward-looking statements that involve risks and uncertainties. These risks and uncertainties include, among

• ther things, market conditions and other factors that are described in KNOT Offshore Partners LP’s (“KNOP”)

filings with the U.S Securities and Exchange Commission (“SEC”), which are available on the SEC’s website at http://www.sec.gov. Nevertheless, new factors emerge from time to time, and it is not possible for KNOP to predict all of these

• factors. Further, KNOP cannot assess the impact of each such factor on its business or the extent to which any

factor, or combination of factors, may cause actual results to be materially different from those contained in any forward-looking statement. KNOP expressly disclaims any intention or obligation to revise or publicly update any forward-looking statements whether as a result of new information, future events or otherwise. The forward- looking statements contained herein are expressly qualified by this cautionary notice to recipients.

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Company overview

IPO April 2013, owing 4 vessels Fleet of ten state of the art shuttle tankers All vessels secured under long term fixed-fee

revenue contracts with leading oil majors

Visible growth potential with five dropdown

candidates from Knutsen NYK

Annual distribution currently $2.08, yielding

11.3%(2) with share price $18.41

Attractive 1099 structure not K-1

(1) Clarkson Research Spring 2016 (2) As of May 25, 2016

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Business Strategy

Pursue strategic & accretive acquisitions of shuttle tankers on long- term, fixed- rate charters Expand global operations in high-growth regions Manage fleet and deepen customer relationships to provide a stable cash flow base  Right to purchase any existing or any new-build tankers that are under long-term

charters (5 years or more) from Knutsen NYK – 5 identified candidates; one vessel, Raquel Knutsen delivered in 2015, on 10- years contract with Repsol Sinopec Brazil and four new-builds; delivery between 4Q16 and 2Q17

 Assess other attractive acquisitions from Knutsen NYK and 3rd parties on

• pportunistic basis

 Expand operations alongside the growth of global offshore oil production in

proven areas such as the North Sea and Brazil as well as other new markets as they develop

 Focus on strong customer relationships and maintain track record of

consistency, safety and reliability

 Actively seek extension and renewal of existing charters for new opportunities

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Investment highlights

Pure-play shuttle tanker



Modern ( average age 4.3 years1) fleet, equipped with latest technology



Long term contract (remaining duration 5.3 years1) with oil majors



Operational and technical expertise



Solid contract base – Revenue backlog of $ 790 million1



99.7 % utilization of the fleet since IPO

1

Sponsor



Knutsen NYK is a market leading shuttle tanker operator with 29 years of experience



Knutsen NYK is backed by two leading sponsor in the industry, TSSI and NYK



KNOT + KNOP has delivered 40 per cent fleet growth since IPO resulting in KNOP beeing able to grow its fleet from four to ten vessel at the same time increasing dowry from four to five

2

Distribution Growth



Distribution growth of 38% since IPO



Annual distribution of $2.08, yielding 11%(2)



Guided cover ratio of ≈1.25 for year 2016



Visible dowry of 5 drop-down vessels with a minimum average fixed contract period of 5.9 years and 11.2 years including charterers extension options

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Favorable market fundamentals with high barriers to entry



Shuttle tankers’s integated nature in the offshore oil logistics chain creates low threat of substitution



High technical and managerial requirements by customers and regulators creates economies of scale and scope



Well established operators preferred given technical expertise required and the cost /impact of downtime

4

Strong Balance sheet



$48.8 million in available liquidity (28.8 million in cash and $20 million available undrawn revolver credit(1)



62% of total outstanding debt with fixed interest rate



Interest cover ratio of 5.6 and only $ 49.7m of current portion of long-term debt due to long profiles



No capex commitments and no debt maturities before Q2-2018

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(1) As of 31 March, 2016 (2( As of 26 May, 2016

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Financial guidance for existing fleet for year 2016

Guidan ance ce 1Q 1Q 16 Figures es Ac Achie ieved ed Revenues $ 167-170 m $42.0 m 25% EBITDA $128-132 m $33.1 m 25% Distributable Cash Flow $75-79 m $17.9 m 23% Distribution $60 m $15.1 m 25% Coverage ratio ≈1.25 1.19

Despite docking of Bodil Knutsen in first quarter with associated costs and off-hire we are in line to deliver according to full year guidance

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Stable operational performance results in stable financial performance

17,3 20,5 22,2 21,8 22,1 34,3 34,7 36,2 37 39,3 42,5 42,0 Q2 2013 Q3 Q4 Q1 2014 Q2 Q3 Q4 Q1 2015 Q2 Q3 Q4 Q1 2016

REVENUE (USD million) ADJUSTED EBITDA (USD million)

100% 99,2%99,3%99,4%99,7% 98,9% 99,7%99,9% 100% 99,6%99,9%99,8 %

Q2 2013 Q3 Q4 Q1 2014 Q2 Q3 Q4 Q1 2015 Q2 Q3 Q4 Q1 2016

UTILIZATION (%)

7,2 9,3 9,8 8,9 8,1 14,7 15,1 16,4 16,2 16,2 18,1 17,9 Q2 2013 Q3 Q4 Q1 2014 Q2 Q3 Q4 Q1 2015 Q2 Q3 Q4 Q1 2016 12,7 15,7 16,8 16,1 16,3 25,7 26,5 28,3 28,8 32,2 33,8 33,1 Q2 2013 Q3 Q4 Q1 2014 Q2 Q3 Q4 Q1 2015 Q2 Q3 Q4 Q1 2016

DCF (USD million)

Average of 99.7 % since IPO 27% CAGR since IPO 28% CAGR since IPO 30% CAGR since IPO

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16,1 16,3 25,7 26,5 28,3 28,8 33,8 33,8 33,1 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16

Stable earnings not correlated with the oil price volatility

5 10 15 20 25 30 35 20 40 60 80 100 120 Oil Price Unit Price

Adjusted EBITDA (USD million )

Brent crude pice KNOP unit price

KNOP unit price has recovered due oil price increase, but profitability is actually independent of oil price

Hilda & Torill dropdown Dan Cisne dropdown

32,2

Dan Sabia dropdown Ingrid dropdown

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Name Area

2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029

Windsor Knutsen Brazil Bodil Knutsen

• N. Sea

Fortaleza Knutsen Brazil Recife Knutsen Brazil Carmen Knutsen Brazil Hilda Knutsen

• N. Sea

Torill Knutsen

• N. Sea

Dan Cisne Brazil Dan Sabia Brazil Ingrid Knutsen

• N. Sea

Long-term Contracts Backed by Leading Energy Companies

KNOP fleet has average remaining fixed contract duration of 5.3(2) years Additional 2.5 years on average in Charterers option

(1) KNOT has guaranteed the hire rate to April 2018 (five years from IPO date) (2) Remaining contract life is calculated as of 31/03/2016.

(1) (1)

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Significant fleet growth since IPO

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Dropdown inventory: Five potential acquisitions

Fixed contract periods for the dropdown fleet are 5.9(1)years on average Charterers also have the option to extend these charters by 11.2 years on average

(1) Remaining contract life is calculated as of 31/03/2016.

Name Area

2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030

Raquel Knutsen Brazil H2816 Brazil H2817 Brazil H686 Brazil H2818 Brazil

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Shuttle Tanker Market Overview

Shuttle Tanker Market Overview

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A Critical Component of Operator Infrastructure: Shuttle Tankers are substituting pipelines in Deep Sea oil production

 Superior, more economical alternative with lower

initial investment in certain fields based on:

– Water depth – Distance from infrastructure – Field size – Field life

 Destination flexibility  Less capital expenditures  Specially designed tankers with sophisticated

bow loading and submerged turret loading equipment

– Dynamic Positioning (DP) systems enable the vessel

to stay on location in high seas and in harsh environments

– 50% higher investment cost than conventional

tankers

 Tender-based business drives newbuilds

(versus speculative ordering)

 Longer-term contracts  Stricter standards and specialized crewing

Advantages vs. Pipelines Key Differences vs. Conventional Tankers

Seismic ismic Drill illing Subsea bsea Productio

• duction

Stor

• rage

age Trans anspor

• rt

Cost for field operator Revenue for field operator

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Specialized Asset Class Standardized Asset Class Shuttle Tankers Conventional Tankers Dry Bulk Carriers Function Transport from FPSO or production unit to terminal / refinery Transports crude and products to and from terminal / refinery Specializes in break bulk dry cargoes such as coal Ordering With contract Predominantly speculative Predominantly speculative Typical Trading Long-term contracts: (5 - 15 years) Spot contracts, sometimes longer Spot contracts, sometimes longer Total Size / Capacity of Global Fleet

9mm Dead Weight Tons 440mm Dead Weight Tons 670mm Dead Weight Tons

LNG Transports to and from terminal / refinery With contract / Speculative Long-term contracts (5 - 25 years)

53mm Cubic Meters

Shuttle Tankers: Niche market where new capacity is based on long term contracts

Sources: Fearnleys and Clarksons February 2016.

Shuttle Tankers are a unique and highly specialized asset class that is integral to the offshore oil infrastructure

72 Vessels 420 Vessels 5,300 Vessels 10,500 Vessels 62 m Cubic Meters 505 m Dead Weight Tons 775m Dead Weight Tons 99 m Dead Weight Tons

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Knutsen NYK – Industry leader

28 26 5 4 2 2 2 2 1

3 4 1

5 10 15 20 25 30 35

Shuttle Tanker Fleet - ownership

Existing On order



Market leading shuttle tanker operator with experience

– 29 years of experience in offshore loading and dynamic positioning operations



Backed by two leading sponsors in the industry



Knutsen NYK is the exclusive vehicle for investment in shuttle tankers by its Sponsors

A highly Experienced Operator Knusten NYK is one of two dominating Operators in the Shuttle Tankers Sector

39% 38% Market share

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One of worlds youngest fleets with the latest technology

• Drop-down inventory would allow

KNOP fleet to continue to age gracefully assuming consummation of dropdowns

• All vessels and dropdown equipped

with modern dynamic positioning technology, DP2

• Three vessels are winterized, are

prepared for Arctic conditions (Bodil Knutsen, Hilda Knutsen and Torill Knutsen)

*2017 KNOP fleet assumes acquisition of include Raquel Knutsen **2018 KNOP fleet assumes acquisition of remaining four drop-downs *** No assurance can be given as to the timing or consummation of any dropdowns

10,8 10,6 11,5 11,8 11,9 11,9 3,0 3,7 3,3 4,1 4,8 4,5

IPO 01.01.2014 01.01.2015 01.01.2016 01.01.2017 01.01.2018

Shuttle Tanker Fleet Average Age

Rest of fleet ex KNOP KNOP Fleet

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Oil production from shuttle tanker operated fields

910 828 754 686 624 568

192 470 640 730 890

200 400 600 800 1000 1200 1400 1600 2015 2016 2017 2018 2019 2020

North Sea – output from Shuttle Tanker operated fields

Existing field New fields

2140 1969 1811 1666 1533 1410

580 1430 1730 2530

500 1000 1500 2000 2500 3000 3500 4000 4500 2015 2016 2017 2018 2019 2020

Brazil – output from Shuttle Tanker operated fields

Existing fields New fields North Sea: 

The 9% p.a. depletion rate applied to existing fields is very conservative as the average depletion rate 2000-14 is 6.0% p.a.



All 10 field developments adding about 0.5 mbd output in 2016/17 are moving forward according to schedule.



The Johan Castberg field in the Barents Sea will be developed using a floater and shuttle tankers.



Recent drilling in the Barents Sea has added significantly to reserves and prospects for development.



In the latest licensing round in Norway new acreage was

• pened up with great success.



The Barents Sea will become the new shuttle tanker frontier in the 2020s.

Brazil:



A 9% depletion rate for existing fields is an official Petrobras figure.



New production greatly impacted by the corruption scandals.



However, sanctioned projects seem to move forward.



The post 2020 Libra development (12-16 shuttle tankers) is moving forwards according to plan, limited impact by corruption scandals.

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Still significant demand for new shuttle tanker projects



As of today shuttle tanker market extremely tight, without any free capacity



Fearnleys sees a significant demand for new shuttle tankers going forward

– Expect tenders for in excess of 40 vessels up to 2020 – Including attrition demand which represent more than half of the demand



Corruption scandal in Brazil combined with lower

• il price have decreased/delayed shuttle tanker

demand

– No field development projects have been canceled – Projects likely to be developed, timing uncertain



In Brazil generally perform long haul trades

– Ton mile (vessel) demand increases in with oil production

Sources: Fearnleys Consultants February 2016.

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Summary

Solid contract base – Revenue backlog of $ 790 million and average contract duration of 5.3 years(1)

1

Modern shuttle tanker fleet, average age 4.3 years vs. industry average of 11.2 years excluding KNOP fleet(1) Excellent operating results – 99.7%(2) average utilisation since IPO Large sponser asset base – provide substantial dropdown growth potential 1 2 3 4

(1) As of March 31, 2016 (2) Of the fleet for scheduled operation, adjusted for planned off hire the average utilization rate is 99.4%

Appendix

APPENDIX

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Non-GAAP Financial Measures

Adjusted EBITDA Adjusted EBITDA refers to earnings before interest, other financial items, taxes, non-controlling interest, depreciation and

• amortization. Adjusted EBITDA is a non-GAAP financial measure used by investors to measure our performance.

The Partnership believes that Adjusted EBITDA assists its management and investors by increasing the comparability of its performance from period to period and against the performance of other companies in its industry that provide Adjusted EBITDA

• information. This increased comparability is achieved by excluding the potentially disparate effects between periods or companies
• f interest, other financial items, taxes and depreciation and amortization, which items are affected by various and possibly

changing financing methods, capital structure and historical cost basis and which items may significantly affect net income between periods. The Partnership believes that including Adjusted EBITDA as a financial measure benefits investors in (a) selecting between investing in the Partnership and other investment alternatives and (b) monitoring the Partnership’s ongoing financial and operational strength in assessing whether to continue to hold common units. Adjusted EBITDA is a non-GAAP financial measure and should not be considered as an alternative to net income or any other indicator of Partnership performance calculated in accordance with GAAP. Distributable Cash Flow Distributable cash flow represents net income adjusted for depreciation and amortization, unrealized gains and losses from derivatives, unrealized foreign exchange gains and losses, other non-cash items and estimated maintenance and replacement capital expenditures. Estimated maintenance and replacement capital expenditures, including estimated expenditures for drydocking, represent capital expenditures required to maintain over the long-term the operating capacity of, or the revenue generated by our capital assets. Distributable cash flow is a quantitative standard used by investors in publicly-traded partnerships to assist in evaluating a partnership’s ability to make quarterly cash distributions. Distributable cash flow is a non-GAAP financial measure and should not be considered as an alternative to net income or any other indicator of KNOT Offshore Partners’ performance calculated in accordance with GAAP.

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Income Statement

Unaudit ited, USD in thousands

1Q 1Q 2016 4Q 4Q 2015 1Q 2015 FY 2015 Time charter and bareboat revenues 41,826 42,417 36,071 154,750 Other income 200 120 149 274 Total tal revenues ues 42,02 ,026 42,53 ,537 36,22 ,220 155,0 ,024 Vessel operating expenses 7,647 7,636 6,807 27,543 Depreciation 13,892 13,464 11,400 48,844 General and administrative expenses 1,308 1,058 1,068 4,290 Goodwill impairment charge — — — 6,217 Total tal oper erati ating g expenses enses 22,8 ,847 22,158 19,275 86,89 ,894 Oper eratin ating g incom

• me

19,179 79 20,379 16,945 45 68,130 30 Interest income 2 5 1 8 Interest expense (5,029) (4,731) (4,186) (17,451) Realized and unrealized gain (loss)

• n derivative instruments

(3,184) 2,145 (5,623) (9,695) Other financial items(1) (302) (296) 52 (609) Income me before e income me taxes es 10,666 17,50 ,502 7,189 40,38 ,383 Income tax benefit (expense) (3) 65 (3) 59 Net et income me 10,663 17,56 ,567 7,186 40,4 ,442

(1) Other financial items consist of other finance expenses and net gain (loss) on derivative instruments

Net Income impacted in Q1 by derivatives loss due to lower US interest rates

23

Adjusted EBITDA

Unaudit ited, USD in thousands

1Q 2016 4Q 4Q 2015 1Q 2015 FY2015 Net et income

• me

10,66 663 17,567 ,567 7,18 186 40,4 ,443 43 Interest income (2) (5) (1) (8) Interest expense 5,029 4,731 4,186 17,451 Depreciation 13,892 13,464 11,400 48,844 Goodwill impairment charge — — — 6,217 Income tax (benefits) expense 3 (65) 3 (59) EBITDA 29,585 35,692 22,774 112,888 Other financial items (a) 3,486 (1,849) 5,571 10,304 Adjus justed ed EBITD ITDA 33,071 33,8 ,843 28,34 ,345 123,192

(a) Other financial items consist of other finance expense, realized and unrealized gain (loss) on derivative instruments and net gain (loss) on foreign currency transactions

Adjusted EBITDA in line with 4Q despite Bodil dry-docking during quarter

24

Distributable cash flow

Unaudit ited, USD in thousands

1Q 1Q 2016 4Q 4Q 2015 1Q 2015 FY2015 Net et income

• me

10,663 17,56 ,567 7,186 40,4 ,442 Add: Depreciation 13,892 13,464 11,400 48,844 Goodwill impairment charge — — — 6,217 Other non-cash items; deferred costs amortization debt 287 289 284 1,149 Unrealized losses from interest rate derivatives and forward exchange currency contracts 4,348 — 4,597 8,629 Less: Estimated maintenance and replacement capital expenditures (including drydocking reserve) (7,895) (7,516) (6,175) (26,704) Other non-cash items; deferred revenue and accrued income (1,319) (858) (858) (3,432) Unrealized gains from interest rate derivatives and forward exchange currency contracts (2,089) (4,864) — (8,239) Distr trib ibutable table cash sh flow w (A) 17,88 ,888 18,082 16,43 ,434 66,90 ,907 Total tal distr trib ibutio ions s (B) 15,095 15,0 ,012 12,05 ,053 56,92 ,922 Cover erage age ratio tio (A/B) B) 1.19X 1.20X 1.36X 1,18X Cover erage age ratio tio base sed d on weig ight hted ed aver erage e unit 1.19X 1.20X 1.36X 1,21X

Coverage ratio in line with 4Q despite Bodil dry-docking during quarter

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Balance sheet

Unaudited, USD in thousands

At March 31, 2016 At December 31, 2015 At March 31, 2016 At December 31, 2015 Current assets: Current liabilities Cash and cash equivalents 28,782 23,573 Current portion of long-term debt 48,535 48,535 Derivative assets 243 — Derivative liabilities 3,884 5,138 Other current assets 2,846 2,707 Contract liabilities 1,518 15,18 Other current liabilities 16,213 10,345 Total current assets 31,871 26,280 Total current liabilities 70,150 65,536 Long-term liabilities: Long-term debt 610,894 619,187 Derivative liabilities 4,488 1,232 Contract liabilities 9,378 9,757 Long-term assets: Deferred tax liabilities 927 877 Vessels adn equipment 1,181,903 1,192,927 Other long-term liabilities 2,171 2,543 Derivative assets 194 695 Total liabilities 698,008 699,132 Accrued income 461 — Total long-term assets 1,182,558 1,193,622 Total partners’ equity 516,421 520,770 Total assets 1,214,429 1,219,902 Total equity and liabilities 1,214,429 1,219,902

Available liquidity of USD 48.8m vs. requirement of USD 17m