Knot Offshore Partners LP (KNOP) 2016 Q2 法說會逐字稿

Good afternoon and welcome to the KNOT Offshore Partners LP second-quarter earnings conference call.

(Operator Instructions)

I would now like to turn the conference over to John Costain. Please go ahead.

Thank you. If any of you have not seen the earnings release or slide presentation, they are both available on the investors section of our website. On today's call, our review will include non-US GAAP measures such as DCF and adjusted EBITDA. The earnings release includes a reconciliation of these non-US GAAP measures to the most directly comparable GAAP financial measures.

A quick reminder that any forward-looking financial 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, on to the presentation. KNOT Offshore Partners', KNOP's focus is on the shuttle tanker segment. The shuttle tanker provides a vital service transporting oil from the offshore oil production unit to shore side, in effect a midstream mobile pipeline business with fully contracted stable, non volume-based revenue streams.

KNOP trades at significant yield premium to the Alerian Index which represents around 80% of MLPs by market cap. Unlike most of these MLPs however we are operating in a space of substantial oil production growth prospects.

In a recent press release about Brazilian pre-salt, Petrobras have highlighted oil production operated in the pre-salt areas having exceeded1 million barrels per day less than two years after reaching a production level of 0.5 million barrels a day. The average cost of extraction of pre-salt wells totaled less than $8 per barrel of oil equivalent and has gradually been decreasing. The average time to build a well reached 89 days, a reduction of 71% between 2010 and 2016.

The Brazilian government is cautiously loosening the Petrobras pre- salt operator monopoly and Statoil recently became the first international oil company to acquire operational control of a project within the giant pre-salt fields. Our sponsor Knutsen NYK is, according to Clarkson Platou, the number one brokerage in the world, part of the largest shipping group in the world. And NYK is a major company in the Mitsubishi family.

We have young fleet and today for the second quarter of 2016, we report our highest ever revenues and operating income, together with our highest ever EBITDA and distributable cash flow, a very solid financial situation. Our sector is unique amongst Marine MLPs in that there has been no speculative ordering of shuttle tankers. So the Partnership should yield both stable and sustainable revenues. Before ordering a new vessel, our sponsor Knutsen NYK will always agree a long-term employment contract with a charterer.

Now turning to the presentation, slide 3, the financial highlights. For the second quarter of 2016, the Partnership generated record revenues and operating income of $43.1 million and $20.2 million, respectively. Also, our highest ever adjusted EBITDA and distributable cash flow of $34.1 million and $18.5 million.

We declared a stable distribution of $0.52 for this quarter with a coverage ratio of 1.23. We have again an excellent operational performance 99.9% utilization this quarter. The Partnership elected not to repurchase any common units under its purchase program during the quarter.

On June 30, 2016, the Partnership entered into an amended and restated senior secured credit facility which includes a new revolver facility tranche of $15 million. This further strengthens the balance sheet and increases financial flexibility.

Slide 4. KNOT has very good access to banker financing. We have managed to utilize the good banking relationship of KNOT Offshore Partners and our sponsor Knutsen NYK, which has an active banking group of about 30 banks worldwide, to add an incremental non-amortizing revolving credit facility of $15 million which we can utilize as we see fit for general corporate purposes. This new facility has a margin of 250 basis points compared to 212.5 basis points for our existing loan facility but will only cost 1%, i.e. $150,000 per annum as long as it remains unused which we think is a low price to pay for the additional financial flexibility it gives the Partnership.

We utilized existing loan and security documentation as well as our existing banks. It was very straightforward to put in place with marginal cost and it highlights what we have previously messaged, namely that we have very good banking relationships. We have a capacity to optimise our balance sheet if we have the requirement and desire to do so.

We believe we can raise additional debt as required but with this new facility, we certainly do not see any need for doing so at the moment. We have a very large liquidity cushion given the stable nature of our contracts.

When it comes to maturities in 2018, which we are sometimes asked about, the balloons primarily relate to the two vessels serving the Goliat Field and we do not intend to refinance these loans anytime soon as we are happy with the loans and the terms attached. Refinancing the loans will only add unnecessary cost since we are very comfortable with the employment prospects for these two vessels and if you have employment for the offshore oil tankers with a first class charterer refinancing is not really any worry based on our rather extensive experience as a shipping company.

Slide 5. Income statements. Total revenues were $43.1 million for the first three months-- the three months ended June 30, 2016, compared to $42 million for the three months ended March 31, 2016, Q1, an increase of $1.1 million. The increase was mainly due to revenues from the BODIL Knutsen in Q2 as a vessel was dry docked during the first quarter and incurred 21 days off-hire. There are no scheduled off-hires for the remainder of 2016.

Operating expenses for Q2 were $22.8 million, in line with Q1. Operating income for Q2 was $20.2 million compared to $19.2 million for Q1.

Net income was significantly impacted by the recognition of realized and unrealized losses on derivative instruments of $3.2 million in both Q2 and Q1, due to lowering long-term interest rates. Net income for Q2 was $11.6 million, compared to $10.7 million for Q1. This equates to an earnings per unit of $0.42. If we adjust for the non-unrealized non-cash elements of the derivatives, $1.6 million loss, earnings per unit became $0.47.

Slide 6. Adjusted EBITDA. In Q2 the Partnership generated our best ever interest EBITDA of $34.1 million, this compares to $33.1 million to Q1. Adjusted EBITDA refers to earnings before interest, taxation, depreciation and amortization. It provides a proxy for cash flow. Adjusted EBITDA is a non-US GAAP measure used by our investors to measure financial performance.

With a wasting asset like a vessel, younger fleets in theory should produce lower EBITDAs. For every dollar invested the annuity effect reduces the value loss in the early years and younger fleets or assets also have longer to enjoy the anticipated improvement in these markets. KNOP's fleet we has an average age of 4 1/2 years, about, compared to the rest of the industry average shuttle tanker age of over 11 years.

Slide 7. Distributable cash flow. Our highest ever distributable cash flow of $18.5 million was reported in Q2, and this compares to $17.9 million for Q1. We maintained our highest distribution level, which for the quarter was $0.52 per unit equivalent to an annual distribution of $2.08. This distribution had a coverage ratio of 1.23 in Q2.

At the end of June, we had a best -- sorry, slide 8. At the end of June we had our best available liquidity position to date with cash and cash equivalents of $25.7 million and an ongoing undrawn credit facility of $30 million. The credit facilities are available until June, 2019.

We believe the treasury position is very comfortable given our predictable cash flows. Total interest-bearing debt outstanding is $649 million, annually we currently have scheduled repayments of $53.8 million. This compares to replacement CapEx charge of $28 million when computing distributable cash flow.

We do not have any loan maturities before the second half of 2018, and our cash flows indicate we'll maintain our current distribution until that time. At the end of June, total Partners equity was $513 million, with $27.7 million units issued this equates to $18.52 a unit.

Slide 9. Financial guidance for existing fleet for the current year. We are in line to deliver on our financial guidance given at the early part of the year.

Slide 10. Stable operation performance results in stable financial performance. Since the formation of KNOP, we have had very strong levels of vessel utilization which means continually finding increasing predictable revenue, adjusted EBITDA and discounted cash flow as more vessels are added to the fleet. In Q2, we had record distributable cash flow of $18.5 million and we will make a $15 million distribution.

Since our initial public offering three years ago, we have declared distributions of $6.11 and $0.14 so our initial investors have received a total payout of nearly 30% including the Q2 distribution. Our current unit yield is around 11%.

Slide 11. Long-term contracts backed by leading energy companies. The Windsor Knutsen has been on a two year contract from October 13, 2015 with Brazil Shipping, a subsidiary of Royal Dutch Shell, with options to extend for a further six years. Hilda Knutsen and sister ship Torill Knutsen have both commenced employments on the Goliat field and of the original five-year contracts on the two vessels, on average 2 1/4 years of the firm charter period remains.

Given the specialized nature of this contract we would expect the vessels operate on this field throughout its life. The BODIL Knutsen, the largest shuttle tanker operating in the North Sea, is ice class and on charter to Statoil ASA until May, 2017. There are two further years of options to extend and the sponsor may, in any event, guarantee income at the current level until April, 2018.

Statoil has recently been given permission to proceed with the developments in the Johan Castberg field in the Barents Sea at 240 kilometers north of Hammerfest. This should provide medium-term employment and security for the BODIL.

Four of our vessels are on long-term bareboat charter up to 2023 with Petrobras Transporte. These vessels are among the youngest in the Petrobras fleet, delivered between 2011 and 2012.

Dan Sabia and Dan Cisne are the unique size and Fortaleza and Recife Knutsen have shallow drafts with lots of thruster capacity. Three of these vessels will undertake their five-year special survey in 2016. Two have been completed. These vessels are heavily utilised by the charterer.

Delivered in 2013, the Carmen Knutsen is on charter direct to Repsol Sinopec until 2023. The Ingrid Knutsen was delivered in December, 2013, and is operating in the North Sea on a time charter to the Standard Marine Tonsberg, a Norwegian subsidiary of Exxon Mobil. This will expire in the first quarter of 2024. The charterers extension options on the charter for an additional five one-year periods.

Slide 12. Significant fleet growth since the IPO. At the time of the IPO, our fleet of four vessels had an average age of three years. Now, over three years later, we have a fleet of ten vessels which have an average age of 4 1/2 years. Combine this with strong sponsor support and we are very well placed to grow in the medium-term.

Slide 13. Positive news from Brazil. The Brazilian government sold a 66% share in the 1 billion barrel Carcara field to Statoil, making the Norwegian major the first international company to acquire operational control of a project within the giant pre-salt fields. In May, 2016, oil production in the pre-salt field exceeded 1 million barrels per day, less than two years after reaching the production of 0.5 million barrels per day, within ten years of discovery. The new record was obtained using just 52 production wells.

The average time to build an offshore well in the Santos basin pre- salt cluster used to be approximately 310 days. With the introduction of advanced technologies and increasing project efficiency, by 2015 that time will drop to 128 days and in the first five months of 2016, average time to build a well dropped to 89 days, a reduction of 71% between 2010 and 2016. The average cost of extraction of the pre- salt wells has been gradually decreasing and to date totals less than $8 per barrel of oil equivalent.

Slide 14. Still significant demand for new shuttle tanker projects. Today, there is no [certain -- no] shuttle tanker capacity and traditionally there has been no speculative ordering. Certainly see significant demand for new shuttle tankers going forward and they expect ten -- for in excess of 40 vessels to 2020, this includes attrition demand which represents more than half the total.

The low oil price, coupled with political uncertainty in Brazil, have led to delays in the shuttle tanker orders but no projects have been canceled so there is pent-up demand. A short note on foreign-flagged offshore service vessels, OSVs, these operate in Brazil under a license that must be renewed annually. And such licenses are not granted if local tonnage is available to fulfill the charter.

Foreign demand for OSVs has led to Brazil flag vessels being redeployed, blocking foreign vessels. When it comes to our unit, many would-be investors seem to be concerned about our connection to Brazil. They should not be as blocking has nothing to do with the shuttle tanker.

Petrobras remained the first class charter of our four vessels, dry docking two of them in the first half of the year. BarCap recently has this to say regarding concerns emerging about their ability to meet cash flow needs reviewing these fears as overdone. They stated in a report, in addition to its productive E&P assets, Petrobras benefits from a management team with a successful financial track record and liquidity levers including asset sales and new funding from diverse sources both locally and abroad. Our contracts are of a long-term range and KNOP, of course, is in a much better position as it is operating in a niche market for transportation of crude oil from offshore oil fields to the terminal, a critical component of the supply-chain and in Brazil demand for such transportation is increasing substantially.

Slide 15. Dropdown inventory: five potential acquisitions. Today we have a further potential dropdown inventory of five vessels, the same as when we did the IPO even though we've added six vessels to the fleet. The fixed contract period for the drop down fleet is a minimum of 5.9 years on average. It could be longer depending on which series of options the charterer elects to take on delivery.

Slide 16. Summary. In summary, we have a solid and highly profitable contract base with a revenue backlog of $746 million and an average contract duration of as of June 30, of 5.1 years. We have a modern shuttle tanker fleet with an average age of 4 1/2 years versus the rest of the industry average of 11 1/4 years. The Partnership is well placed and highly hopes on expanding in the medium-term as the oil markets recover and the shuttle tanker market expands substantially.

No one has more expertise and experience in operating the sophisticated shuttle tanker like Knutsen Offshore and what we operate is assets with real expertise. We have had minimum off-hire with a total of just seven hours for the quarter for ten vessels in the MLP fleet.

This is in line with our average utilization since the IPO. We have a large sponsor asset base with an ability to capture a good proportion of the expanding market.

And that is the end of the presentation. I will turn it over for now for the Q&A section.

(Operator Instructions)

Michael Webber, Wells Fargo.

Good morning, guys, how are you?

Morning, Michael. How are you?

Good. A handful of questions. I wanted to start with slide -- which slide in here? The slide in your deck where you run through the lending base, slide 4. I'd appreciate that breakdown in terms of your lending base, it's helpful. Just thinking about it, you guys are in kind of an odd scenario where 2018, 2019, is not that far away, probably too early to really get constructive on talking about renegotiating, and it's probably not an advantageous time in the market in terms of pricing to be looking to do that. But at the same time, the majority of that book is obviously European and don't believe they are in the process of extending their credit exposure in this space, usually it is going to in the other direction.

Maybe you can talk a little bit about how you think about financing, kind of future drops and/or when you think about renegotiating this leverage down the line, is there going to be a focus on diversifying that lending base into maybe Asia where there seems to be a bit of, I guess, selective pools of deeper capital?

See what happens, [just wait and it probably] gets better.

While there is a full expectation of the banking market, and of course as you are pointing out, the kind of the caveats available have been shrinking. So, but what is also happening is that you have kind of risk aversion in the bank so they are chasing in the deals which are ticking all the boxes in terms of who is the owner, do these owners have access to capital markets, how big are these owners, do they have enough the rest of the contracts with good charters? We very much tick the box on all these measures in terms of bank ability.

So for us we haven't really held any -- had this crunch such -- actually pricing as well on deals have not really changed. We just financed the last -- kind of signed the loan again on [the last docked on] which is the vessel for Petrobras. It was signed in July.

Of course we've been working on it for a longer period of time and leverage is 81% and margin is 200 basis points. So it really hasn't changed at all. It's actually a bit lower than the average margin of the [industry], so of course I do think we have a well supported banking group. I am not really concerned about our ability to raise bank financing, particularly for the two loans maturing in 2018 and for the ENI, these vessels will stay on that field, and once you go into new charter or extended charter through the option agreement which they have, we would certainly be able to refinance the vessels.

But to also when you talk about Asian financing we are of course everywhere. We have a lot of Japanese banks, we have Australian banks, North American banks, European banks. So we have 30 active banks in the Knutsen group and probably 10 banks that want to get in, and we also have the ECA finance for [Idylson], there's also one ECA provider in KNOP. We're not getting in a position where we are getting -- feeling any heavy pressure, but we certainly are aware that there is a huge credit crunch, but it mainly affects people with less contract hold, much older vessels, not the right owner, so we are not feeling that pinch to be honest.

Got you. Okay, that's helpful. Just to talk a bit about the North Sea. We have two assets on with ENI on a field that I believe in June took an $800 million write-down. I think they started production in March, just curious as to what the utilization level is like right now for those carriers? I know for you it is 100% so there's no revenue disruption, obviously, just trying to think about a read-through in terms of how that project stands and what those assets are actually doing?

Well the vessels are fully utilized in the North Sea. Those two shuttles, Hilda and Torill, until the Goliat Field came on were being used in the general Statoil program and Statoil have a major short of tonnage at the moment, so they're trying to get another vessel off us. So we don't -- it's not important that vessels are used fully on the Goliat Field. It's just that they are available for use on that. They can be easily moved when the channel starts on the program as well and they have been.

That's helpful. They're just trading in the general program, they're not specifically tied to the field so there's been no disruption in terms of their movement or anything like that?

No. (Multiple Speakers)

The good thing was [in Goliat] we'll probably use them on all major oil fields in the North Sea because once -- when the Goliat Field is delayed, possibly use the crew on all our fields. So I already said there has been such [a long list but I have a huge employment flexibility]. Yes of course, all this particular footage, the only fleet that can load on the Goliat in this space while the higher technical requirements, so this can also go trade on all the fields in addition to Goliat.

Okay that's helpful. Just to transition to Brazil, John, you spent some time talking about the fact that you think some the risk is priced into the market around Brazilian employment might be a bit overdone, just curious, and I know -- I think you've gotten this the last two or three quarters, but the idea of bringing down kind of breakeven levels in costs certainly still persists. I'm just curious as to whether -- have you guys been approach in terms of renegotiating any of those, I believe they are, bareboats in there? (Multiple speakers) Go ahead.

There's no needs to. The UK pack -- the UK finance base is effectively -- if you get -- you're under pressure probably the last year or two of the contract, but not seven or eight years out. There's not really anything to be done. So as Petrobras, they basically have a massive need for ships. At the moment the cost of the shuttle is very small in relation to what would actually go in carrying the oil. So they're not really in a position to negotiate with us yet. They'll be in a position to negotiate with us about a year from the end of the contracts, I would guess. We're too far down the line at the moment.

Fair enough. And it's a no approach, nothing even along those lines?

No.

Okay.

I've heard from certain investors, even our competitor has pushed back Petrobras but I don't know, honestly that's just secondhand.

Right.

The people would be talking to our competitor about the -- because they are much closer, they have much better idea than we do about the market in Brazil in terms of that area you are probably best speaking to them because we're too far off. We're not close enough to really know.

Right. Well, no. That is where the question comes from because I have heard it other places, but if you guys haven't been approached it's the end of the conversation for now.

Michael, I think you saw this on the Carmen. We had Carmen on charter to Repsol through 2018 and we had need to cut the rates, various smaller in order to get five extra year on that. So that's actually not til 2023, but it was not a reduction in the charter, it was more a reflection of, in particular we had skydive, so we took a small reduction in the rates in order to secure our contract until 2023. But the reduction in the latest was just very smaller and then also it compared to the cost savings we have due to our placing (inaudible) which is a huge part of the OpEx costs.

Fair enough. Okay. One more and I will turn it over, just transitioning through a -- I guess more of a -- to the positive side. One of your probably competitors in the Marine MLP space raised a first batch of growth equity earlier this summer after about a year. The list of Marine MLPs that could reasonably think about raising capital for growth is pretty short and you guys are on there. Just curious, when you think about where your yield is today, how close are you guys from a cost of capital perspective to be able to hit the kind of accretion you'd want to hit in terms of accessing the market and where your landscape looks today?

Well today the unit is about 11%. It's still a little bit elevated, when we're considering an equity issuance. The market's obviously showing signs of improvement as you write the points out, Michael, [I guess it] makes at least about $50 million. Much of the new capital currently being invested in MLPs tends to be of a preference or higher per capital.

This isn't our -- while this isn't our preferred as we still consider our MLP to be -- have a substantially large amount of growth in it. And therefore we would prefer to issue equity. We are obviously monitoring the market closely as it could be an avenue for raising capital at the rate, currently, we may use a hybrid instrument if we don't see a lot more improvement and maybe a little bit more. It's something we are weighing up internally. We definitely want to keep this is as a growth thing considering the outlook for the space.

I think not issuing equity can be seen as a little bit -- it slows of the growth of the units obviously. If you actually issue an equity the quality, the appreciation of the unit price is better. But it's something we are discussing internally, actively all the time. We have got a lot of candidates for dropping really.

There's a limit to what how far you can push your leverage to drive more accretive growth, right? So I guess the question is, given that the yield is relatively -- it's wide, but it's certainly narrower than it has been on kind of a trailing 12 or trailing18 month basis, so do you need to see that reasonably get to a single-digit level before you think about it, or are you in a scenario now where you're kind knocking on the door of an area where you think you can make the math work?

Well you know, we've got a very inflated -- as I say in the presentation, you can always consider older ships, because you can get a higher distribution on an older ship with the same up front. Effectively because the capital basis compresses on an old vessel. That's an option as well, but we haven't thought about that seriously. But there's nothing off the table for us. We're desperate to keep MLP going, so we are talking about it, we just haven't made our mind up what to do yet.

But single digit is correct, Mike.

You raised an interesting question around the older assets and if I kind of think about it just from a cost of capital perspective, the better return -- what you're basically implying is a better return on the older asset. In terms of -- are we talking 100 to 200 basis points you think you can gain in terms of acquiring an older asset versus something on the water? How much flexibility does that give you in terms of thinking about where your hurdle rate is?

It depends on what we issue as well. If we issue -- the thing is if you issue perhaps it can reduce the hurdle rates and then you can sell basically. But as I say it's not necessarily the right mix of the partnership. There was quite an intellectual discussion earlier and I don't think -- Oystein and I haven't got to the end of it yet. But we are talking actively about it, so I don't really want to say too much about it. We are not far off doing something that's for sure, but we want to do the right thing.

Fair enough. All right. I've taken enough of your time. Thank you, guys, appreciate it.

(Operator Instructions)

Nick Raza, Citi.

Thank you. Good afternoon, guys, just a couple quick questions. In terms of your two vessels that are due -- the shortest contracts, particularly the BODIL and the Windsor, what sort of conversations are you having with the current charterers? Understanding that they are guaranteed through April 2018, but existing charterers, what are they saying right now in terms of renewing their options?

Well, they like optionality and we can't with the state of the existing agreements on the BODIL, it's an escalator so we're quite happy with it. Because it was fixed quite a number of years ago. And the Windsor was part of the BG deal with the new ships so we have to give some optionality, but we're more looking at the tightness in the market and the fact that the ramping up of production in Brazil. We don't see an issue.

We're not worried about Windsor at all. But it was just part of the deal and we did the original [three]. BG -- we gave them to option two on one of the options to max and my guess is they're waiting and see what happens with the new build markets to see what they do with the ordering. But basically the Windsor, we just have to leave it as it is.

There's no problem with options the way that people list them and I think realistically you look at the outlook, they will look at the option on that each year. I think there is no way in our mind and also the price is not -- the price is cheaper on that ship than the current contracts, so it's actually a cheaper vessel for them, so why wouldn't they enlist those options rather than ordering new ships.

We don't see an issue with it, but obviously it's not -- when you look at their marketability you got to look at what the employability of these ships are.

Okay, so but that means should we assume that once the option come back, the Windsor Knutsen is probably the oldest of all your entire fleet right now, that the rate would actually be lower, I think it's like nine years from what we calculated?

No, because the options are great -- the price is great and the options, it's just a case of it's flat. It's very flat. So it would just be a renewal -- the same boat. But they don't have the option to really take the ship back. The ship is old. 7 years, 7 or 8 years old, but we're fixing ships -- a 24 year-old ship in Venezuela, but it's 48 and we've got a 13 year old ship at 51. It's not unreasonable. And it's not out of the market and it's the way the shores are today.

So, Nick, to summarize we are very positive about the extension on this. It has become [term-heavy] elapsing before they would have time to order a new vessel and we do know that they need tonnage. So, yes, we are very comfortable with the employment prospect of these two vessels. And also [in Vancouver].

Okay. Fair enough, guys. Then in the absence of a drop-down potential and I'm assuming the multiple is still about nine times which is required by the parent, do you sort of think that a distribution increase would be the next avenue to sort of make the security more attractive or the units more attractive?

We haven't made our mind up yet. It's an option. We would have to think about the -- today the way the unit sets up -- the way that MLP sets up without deleveraging, and I don't think it's a sensible time to deleverage to right now because -- I think the time to deleverage in shipping generally is when the markets settle down. There's been a lot of volatility in asset prices. This will play out within 6 to 12 months once the asset prices settle, and they seem to be settling now, then the normal financing market will come back.

What you've seen in the last two or three years, you've seen a bit of a trade war in the yards and they have all been losing quite heavily, cash-wise. But there's been quite a lot of rationalization now and we'll start to see fair enough prices on ships. There's been no real -- banks have been nervous, because the prices are all over the place and have not been prepared to finance. So we can't releverage easily with -- there's no point today so we'd have to look at other ways of raising the distribution, introducing new assets, I guess, and that is not easy,.

We haven't ruled it out. And obviously there are incentives to increase the distribution for everybody, because we would obviously improve the unit price. We certainly want to do something, because we don't want to trade this level with the level of yields we're getting growth prospects, our outlook -- I think our outlook is excellent. I don't think you'll find many MLPs with our outlook. Period.

I think the production growth in Brazil is massive and I think when you look at the general MLP sector, the Alerian Index is about 8% yield and 80% of the MLPs are costing that, and if you look at the US, generally predictions are going to stabilize maybe for the next two or three years. So MLPs are no longer growth vehicles for a lot of MLPs but just stable high-yielding instruments. And why I see the massive increase in price.

We are a growth vehicle still and we don't think we should be trading at these levels, so obviously, we need to do something. We haven't totally made up our minds yet. We will. I think that's as far as I can say at the moment. Is that helpful?

Fair enough. That's helpful. And I guess the other thing I was going to apologize I am asking about a lot of different things, but you mentioned the operator ship for the Carcara field actually switched from Petrobras. How many of your vessels actually operate there and how many of the dropdown potential vessels will operate in non-Petrobras operated fields?

Most of our ships, the four vessels that obviously -- we got four with Petrobras. We have no more with them because we haven't won anymore orders since 2012 with Petrobras for whatever reason. You can speculate. But we have four with BG Shell and we've got one with Petrofab, and so we've actually moved away from Petrobras.

We would like to get back into Petrobras, because they've been our first class charterer and I'm sure once the -- everything settles down in Brazil and everything is more open, the tendering process is more open, we can actually go out and bid contracts. We haven't been able to for quite a number of years. You can speculate on that. We had the latest additions we have had are not Petrobras.

Okay. Fair enough. And last question, guys, any additional potential for getting vessels in, in East Canada for you guys?

We didn't like the costs that we found that the logistic supply chain is very difficult in East Canada and it does create a significant uplift in the operating cost, because getting crew and equipment out to that part of the world is quite tricky. And it -- what we didn't think at the time when we tendered it, it was reflected in the tender.

We are always game to, obviously, win contracts, but I don't think East Canada at the moment is a big expansion area. Two great expansion areas are the North Sea and Brazil. Brazil being the big game changer really. So, yes, it's interesting, East Canada, and we do still have ships employed there and contracts with our competitor. We don't see it being a big area for us at the moment.

Fair enough. That's all I had. Thank you very much.

Thanks, Nick. Is that everybody? Is there anybody else out there?

I'm sorry, we show no further questions at this time. Mr. Costain, would you like to make any closing remarks?

Yes, I'd just thank everyone for attending the meeting and I hope it has been informative and I hope you go out and buy units, really. Thank you.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.