Filed 10 Apr 19

Document and Entity Information

Document and Entity Information12 Months Ended
Dec. 31, 2018shares
Document And Entity Information
Document Type20-F
Amendment Flagfalse
Document Period End DateDec. 31,
2018
Document Fiscal Year Focus2018
Document Fiscal Period FocusFY
Trading SymbolKNOP
Entity Registrant NameKNOT Offshore Partners LP
Entity Central Index Key0001564180
Current Fiscal Year End Date--12-31
Entity Common Stock, Shares Outstanding32,694,094
Entity Well-known Seasoned IssuerNo
Entity Voluntary FilersNo
Entity Current Reporting StatusYes
Entity Filer CategoryAccelerated Filer
Entity Emerging Growth Companyfalse
Entity Shell Companyfalse

Consolidated Statements of Oper

Consolidated Statements of Operations - USD ($) $ in Thousands12 Months Ended
Dec. 31, 2018Dec. 31, 2017Dec. 31, 2016
Operating revenues: (Notes 2(e), 5 and 18)
Time charter and bareboat revenues $ 278,191 $ 212,501 $ 172,878
Loss of hire insurance recoveries (Notes 2(t) and 8)450 5,176
Other income815 1,526 793
Total revenues (Notes 2(e), 5, 6, 7 and 18)279,456 219,203 173,671
Operating expenses: (Note 18)
Vessel operating expenses (Note 2(e))56,730 46,709 30,903
Depreciation (Note 13)88,756 71,583 56,230
General and administrative expenses5,290 5,555 4,371
Total operating expenses150,776 123,847 91,504
Operating income128,680 95,356 82,167
Finance income (expense): (Notes 2(f) and 18)
Interest income739 248 24
Interest expense (Note 9(a))(49,956)(30,714)(20,867)
Other finance expense (Note 9(b))(1,260)(1,406)(1,311)
Realized and unrealized gain (loss) on derivative instruments (Note 10)4,039 4,831 1,213
Net gain (loss) on foreign currency transactions(79)(267)(139)
Total finance expense(46,517)(27,308)(21,080)
Income before income taxes82,163 68,048 61,087
Income tax benefit (Notes 2(r) and 17)2 16 15
Net income82,165 68,064 61,102
Series A Preferred unitholders' interest in net income7,200 5,253
General Partner's interest in net income1,384 1,160 1,256
Limited Partners' interest in net income $ 73,581 $ 61,651 $ 59,846
Earnings per unit (Basic): (Note 20)
General Partner unit (basic and diluted) $ 2.251 $ 2.046 $ 2.248
Earnings per unit (Diluted): (Note 20)
General Partner unit (basic and diluted)2.251 2.046 2.248
Common Units
Earnings per unit (Basic): (Note 20)
Common and subordinated units (basic)2.251 2.050 2.291
Earnings per unit (Diluted): (Note 20)
Common and subordinated units (diluted) $ 2.217 $ 2.037 2.291
Subordinated Units
Earnings per unit (Basic): (Note 20)
Common and subordinated units (basic)1.542
Earnings per unit (Diluted): (Note 20)
Common and subordinated units (diluted) $ 1.542

Consolidated Statements of Comp

Consolidated Statements of Comprehensive Income - USD ($) $ in Thousands12 Months Ended
Dec. 31, 2018Dec. 31, 2017Dec. 31, 2016
Consolidated Statements of Comprehensive Income
Net income $ 82,165 $ 68,064 $ 61,102
Comprehensive income $ 82,165 $ 68,064 $ 61,102

Consolidated Balance Sheets

Consolidated Balance Sheets - USD ($) $ in ThousandsDec. 31, 2018Dec. 31, 2017
Current assets:
Cash and cash equivalents (Notes 2(g) and 11) $ 41,712 $ 46,104
Trade accounts receivable, less allowance for doubtful accounts of $0 in 2018 and $0 in 2017 (Notes 2(i) and 12(a))
Amounts due from related parties (Note 18(d)))1,141 571
Inventories (Note 2(j))2,443 2,241
Derivative assets (Notes 2(q), 10 and 11)4,621 1,579
Other current assets (Notes 2(k) and 12(b))2,462 5,610
Total current assets52,379 56,105
Long-term assets:
Vessels, net of accumulated depreciation (Notes 2(l), 2(m), 2(n), 13 and 18(f))1,767,080 1,723,023
Intangible assets, net (Notes 2(o) and 14(a))1,891 2,497
Derivative assets (Notes 2(q), 10 and 11)11,667 9,850
Accrued income3,807 1,693
Total long term assets1,784,445 1,737,063
Total assets1,836,824 1,793,168
Current liabilities:
Trade accounts payable (Note 18(e))4,800 5,224
Accrued expenses (Note 15)6,464 6,504
Current portion of long-term debt (Notes 11 and 16)106,926 92,985
Current portion of derivative liabilities (Notes 2(q), 10 and 11)1,740 978
Income taxes payable (Notes 2(r) and 17)130 175
Current portion of contract liabilities (Notes 2(o) and 14(b))1,518 1,518
Prepaid charter (Note 2(s))5,771 9,980
Amount due to related parties (Note 18(d))1,070 5,450
Total current liabilities128,419 122,814
Long-term liabilities:
Long-term debt (Notes 2(p), 11 and 16)970,365 933,630
Derivative liabilities (Notes 2(q), 10 and 11)345 164
Contract liabilities (Notes 2(o) and 14(b))5,203 6,722
Deferred tax liabilities (Notes 2(r) and 17)453 624
Total long-term liabilities976,366 941,140
Total liabilities1,104,785 1,063,954
Commitments and contingencies (Notes 2(t) and 19)
Series A Convertible Preferred Units (Notes 22 and 23)89,264 89,264
Partners' capital:
Common unitholders: 32,694,094 units issued and outstanding at December 31, 2018 and 2017.631,244 628,471
General partner interest: 615,117 units issued and outstanding at December 31, 2018 and 2017.11,531 11,479
Total partners' capital642,775 639,950
Total liabilities and equity $ 1,836,824 $ 1,793,168

Consolidated Balance Sheets (Pa

Consolidated Balance Sheets (Parenthetical) - USD ($) $ in ThousandsDec. 31, 2018Dec. 31, 2017Dec. 31, 2016
Allowance for doubtful accounts $ 0 $ 0
General partners' capital account, units issued615,117 615,117 558,674
General partners' capital account, units outstanding615,117 615,117
Common Units
Limited partners' capital account, units issued32,694,094 32,694,094 27,194,094
Limited partners' capital account, units outstanding32,694,094 32,694,094

Consolidated Statements of Chan

Consolidated Statements of Changes in Partners' Capital - USD ($) $ in ThousandsLimited PartnerCommon UnitsLimited PartnerSubordinated UnitsGeneral PartnerTotal
Beginning balance at Dec. 31, 2015 $ 411,317 $ 99,158 $ 10,295 $ 520,770
Net income54,794 5,052 1,256 61,102
Cash distributions(48,820)(10,088)(1,253)(60,161)
Conversion of subordinated units to common units94,123 $ (94,123)
Ending balance at Dec. 31, 2016511,413 10,297 521,710
Net income61,651 1,160 62,811
Cash distributions(64,307)(1,210)(65,517)
Net proceeds from issuance of common units119,714 1,232 120,946
Ending balance at Dec. 31, 2017628,471 11,479 639,950
Net income5,253
Cash distributions(3,453)
Net proceeds from sale of Series A Convertible Preferred Units87,464
Convertible preferred units, ending balance at Dec. 31, 201789,264
Net income73,581 1,384 74,965
Cash distributions(70,804)(1,332)(72,136)
Net proceeds from issuance of common units(4)(4)
Ending balance at Dec. 31, 2018 $ 631,244 $ 11,531 642,775
Net income7,200
Cash distributions(7,200)
Convertible preferred units, ending balance at Dec. 31, 2018 $ 89,264

Consolidated Statements of Cash

Consolidated Statements of Cash Flows - USD ($) $ in Thousands12 Months Ended
Dec. 31, 2018Dec. 31, 2017Dec. 31, 2016
OPERATING ACTIVITIES
Net income $ 82,165 $ 68,064 $ 61,102
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation88,756 71,583 56,230
Amortization of contract intangibles / liabilities(912)(1,089)(1,518)
Amortization of deferred revenue(1,056)(1,487)(1,629)
Amortization of deferred debt issuance cost3,188 1,737 1,198
Drydocking expenditure(12,421)(6,885)(2,595)
Income tax expense(2)(16)(15)
Income taxes paid(190)(219)(255)
Unrealized (gain) loss on derivative instruments(2,076)(7,391)(5,033)
Unrealized (gain) loss on foreign currency transactions45 45 93
Changes in operating assets and liabilities
Decrease (increase) in amounts due from related parties(49)62,391 (33)
Decrease (increase) in inventories55 (358)(20)
Decrease (increase) in other current assets3,256 (1,724)(110)
Decrease (increase) in accrued revenue(2,114)(540)(1,153)
Increase (decrease) in trade accounts payable(1,297)2,195 45
Increase (decrease) in accrued expenses(1,052)142 (1,699)
Increase (decrease) prepaid charter(3,154)1,435 3,995
Increase (decrease) in amounts due to related parties(4,496)(33,298)(159)
Net cash provided by operating activities148,646 154,585 108,445
INVESTING ACTIVITIES
Net cash provided by (used in) investing activities(15,493)(94,857)(13,952)
FINANCING ACTIVITIES
Proceeds from long-term debt (Note 16)497,779 211,500 30,000
Repayment of long-term debt (Note 16)(527,979)(297,708)(60,992)
Proceeds from issuance of long-term debt from related parties (Notes 16 and 18)25,000
Repayment of long-term debt from related parties (Notes 16 and 18)(22,535)(93,369)(24,018)
Payment of debt issuance cost(5,301)(1,241)(174)
Cash distribution(79,336)(68,970)(60,161)
Net proceeds from issuance of common units (Note 22)(4)120,946
Net proceeds from sale of Convertible Preferred Units (Note 22)87,464
Net cash used in financing activities(137,376)(41,378)(90,345)
Effect of exchange rate changes on cash(169)90 (57)
Net increase (decrease) in cash and cash equivalents(4,392)18,440 4,091
Cash and cash equivalents at the beginning of the period46,104 27,664 23,573
Cash and cash equivalents at the end of the period41,712 46,104 27,664
Brasil Knutsen
INVESTING ACTIVITIES
Payments for acquisition, net of cash acquired(547)
Lena Knutsen
INVESTING ACTIVITIES
Payments for acquisition, net of cash acquired(32,766)
Vigdis Knutsen
INVESTING ACTIVITIES
Payments for acquisition, net of cash acquired(28,321)
Tordis Knutsen
INVESTING ACTIVITIES
Payments for acquisition, net of cash acquired(32,374)
Raquel Knutsen
INVESTING ACTIVITIES
Payments for acquisition, net of cash acquired(13,106)
Property, Plant and Equipment, Excluding Acquired Vessels
INVESTING ACTIVITIES
Disposals (additions) to vessel and equipment(117) $ (849) $ (846)
Anna Knutsen
INVESTING ACTIVITIES
Disposals (additions) to vessel and equipment $ (15,376)

Description of Business

Description of Business12 Months Ended
Dec. 31, 2018
Description of Business
Description of Business1) Description of Business
KNOT Offshore Partners LP (the “Partnership”) was formed as a limited partnership under the laws of the Republic of the Marshall Islands. The Partnership was formed for the purpose of acquiring 100% ownership interests in four shuttle tankers owned by Knutsen NYK Offshore Tankers AS (“KNOT”) in connection with the Partnership’s initial public offering of its common units (the “IPO”), which was completed on April 15, 2013.
Pursuant to the Partnership’s Amended and Restated Agreement of Limited Partnership (the “Partnership Agreement”), KNOT Offshore Partners GP LLC, a wholly owned subsidiary of KNOT, and the general partner of the Partnership (the “General Partner”), has irrevocably delegated to the Partnership’s board of directors the power to oversee and direct the operations of, manage and determine the strategies and policies of the Partnership. During the period from the Partnership’s IPO until the time of the Partnership’s first annual general meeting (“AGM”) on June 25, 2013, the General Partner retained the sole power to appoint, remove and replace all members of the Partnership’s board of directors. From the first AGM, four of the seven board members became electable by the common unitholders and accordingly, from this date, KNOT, as the owner of the General Partner, no longer retained the power to control the Partnership’s board of directors and, hence, the Partnership. As a result, the Partnership is no longer considered to be under common control with KNOT and as a consequence, the Partnership accounts for acquisitions of businesses and assets under the purchase method of accounting and not as transfers of equity interests between entities under common control. All acquisitions have been consolidated into the Partnership’s results as of the date of acquisition. Please read Note 2—Summary of Significant Accounting Policies and Note 21—Acquisitions.
As of December 31, 2018, the Partnership had a fleet of sixteen shuttle tankers, the Windsor Knutsen , the Bodil Knutsen , the Recife Knutsen , the Fortaleza Knutsen , the Carmen Knutsen, the Hilda Knutsen, the Torill Knutsen , the Dan Cisne , the Dan Sabia, the Ingrid Knutsen , the Raquel Knutsen, the Tordis Knutsen, the Vigdis Knutsen, the Lena Knutsen , the Brasil Knutsen and the Anna Knutsen , each referred to as a “Vessel” and, collectively, as the “Vessels”. The Vessels operate under fixed long-term charter contracts to charterers, with expiration dates between 2019 and 2025. Please see Note 6—Operating Leases.
The consolidated financial statements have been prepared assuming that the Partnership will continue as a going concern.
On March 1, 2018, the Partnership’s wholly owned subsidiary, KNOT Shuttle Tankers AS, acquired KNOT Shuttle Tankers 30 AS, the company that owns the Anna Knutsen , from KNOT. The acquisition of the Anna Knutsen was accounted for as an acquisition of an asset. As a result, the Partnership has recorded the results of operations of the Anna Knutsen in its consolidated statement of operations from March 1, 2018. See Note 21—Acquisitions.
The Partnership expects that its primary future sources of funds will be available cash, cash from operations, borrowings under any new loan agreements and the proceeds of any equity financings. The Partnership believes that these sources of funds (assuming the current rates earned from existing charters) will be sufficient to cover operational cash outflows and ongoing obligations under the Partnership’s financing commitments to pay loan interest and make scheduled loan repayments and to make distributions on its outstanding units. Accordingly, as of April 10, 2019, the Partnership believes that its current resources, including the undrawn portion of its revolving credit facilities of $28.7 million, are sufficient to meet working capital requirements for its current business for at least the next twelve months.

Summary of Significant Accounti

Summary of Significant Accounting Policies12 Months Ended
Dec. 31, 2018
Summary of Significant Accounting Policies
Summary of Significant Accounting Policies2) Summary of Significant Accounting Policies
(a) Basis of Preparation
The consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”). All intercompany balances and transactions are eliminated.
The consolidated financial statements include the financial statements of the entities listed in Note 4—Subsidiaries.
(b) Business Combinations and Asset Acquisitions
Business combinations are accounted for under the purchase method of accounting. On acquisition, the identifiable assets, liabilities and contingent liabilities are measured at their fair values at the date of acquisition. Any excess of the cost of acquisition over the fair values of the identifiable net assets acquired is recognized as goodwill. The consideration transferred for an acquisition is measured at fair value of the consideration given. Acquisition related costs are expensed as incurred. The results of operations of the acquired businesses are included in the consolidated results as of the date of the applicable acquisition.
Dependent on the facts and circumstances, the assessment of a transaction may be considered the acquisition of an asset, when substantially all of the fair value of assets acquired is concentrated in a single identifiable asset, rather than a business combination. Asset acquisitions are accounted for by allocating the cost of the acquisition to the individual assets acquired and liabilities assumed on a relative fair value basis. Acquisition related costs are capitalized as a component of the assets acquired.
(c) Reporting Currency
The consolidated financial statements are prepared in the reporting currency of U.S. Dollars. The functional currency of the vessel-owning Partnership subsidiaries is the U.S. Dollar, because the subsidiaries operate in the international shipping market, in which all revenues are U.S. Dollar-denominated and the majority of expenditures are made in U.S. Dollars. Transactions involving other currencies during the year are converted into U.S. Dollars using the exchange rates in effect at the time of the transactions. As of the balance sheet dates, monetary assets and liabilities that are denominated in currencies other than the U.S. Dollar are translated to reflect the year-end exchange rates. Resulting gains or losses are reflected separately in the accompanying consolidated statements of operations.
(d) Use of Estimates
The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements, and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. Significant items subject to such estimates and assumptions include the useful lives and impairment of Vessels, drydocking, purchase price allocation and income taxes.
(e) Revenues and Operating Expenses
The Partnership recognizes revenues from time charters and bareboat charters as operating leases on a straight-line basis over the term of the charter, net of any commissions. Under time charters, revenue is not recognized during days the Vessel is off-hire. Revenue is recognized from delivery of the Vessel to the charterer, until the end of the contract period. Under time charters, the Partnership is responsible for providing the crewing and other services related to the Vessel's operations, the cost of which is included in the daily hire rate, except when off-hire. Under bareboat charters, the Partnership provides a specified Vessel for a fixed period of time at a specified day rate. Where the term of the contract is based on the duration of a single voyage, the partnership evaluates whether the voyage contain leases and if so recognize lease revenue as described above, and when not, recognizes revenue ASC 606 over time on a load-to-discharge basis.
Voyage expenses are all expenses unique to a particular voyage, including bunker fuel expenses, port fees, cargo loading and unloading expenses, canal tolls and agency fees. Voyage expenses are paid by the customer under time charter and bareboat charters. Voyage expenses are paid by the Partnership for spot contracts and during periods of off-hire and are recognized when incurred.
Vessel operating expenses include crewing, repairs and maintenance, insurance, stores, lube oils and communication expenses. Vessel operating expenses are paid by the Partnership for time charters, spot contracts and during off-hire and are recognized when incurred.
As further discussed in Note 18—Related Party Transactions, related parties have provided the management services for the Vessels and employ the crews that work on the Vessels. The Partnership has no direct employees and, accordingly, is not liable for any pension or post-retirement benefits.
(f) Financial Income (Expense)
Other finance expense includes external bank fees, commitment fees paid on undrawn revolving credit facility, financing service fees paid to related parties and guarantee commissions paid to external and related parties in connection with the Partnership’s debt and other bank services.
(g) Cash and Cash Equivalents
The Partnership considers all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents.
(h) Restricted Cash
Restricted cash consists of bank deposits, which may only be used to settle principal payments under the Partnership’s Vessel financing arrangements.
(i) Trade Accounts Receivable
Accounts receivable are recorded at the invoiced amount and do not bear interest. Under terms of the current time charters and bareboat charters, the customers are committed to pay for the full month’s charter the first day of each month. See Note 2(s)—Prepaid Charter. The allowance for doubtful accounts is the Partnership’s best estimate of the amount of probable credit losses in existing accounts receivable. The Partnership establishes provisions for doubtful accounts on a case-by-case basis when it is unlikely that required payments of specific amounts will occur. In establishing these provisions, the Partnership considers the financial condition of the customer as well as specific circumstances related to the receivable. Receivable amounts determined to be unrecoverable are written-off. There were no allowances for doubtful accounts or amounts written off against the allowance for doubtful accounts as of December 31, 2018 and 2017. The Partnership does not have any off-balance-sheet credit exposure related to its customers.
(j) Inventories
Inventories, which are comprised principally of lubricating oils, are stated at the lower of cost or net realizable value. For vessels on time charters or bareboat charters, there are no bunkers, as the charterer supplies the bunkers, which principally consist of fuel oil. Cost is determined using the first-in, first-out method for all inventories.
(k) Other Current Assets
Other current assets principally consist of prepaid expenses and other receivables.
(l) Vessels and Equipment
Vessels and equipment are stated at the historical acquisition or construction cost, including capitalized interest, supervision and technical and delivery cost, net of accumulated depreciation and impairment loss, if any. Expenditures for subsequent conversions and major improvements are capitalized, provided that such costs increase the earnings capacity or improve the efficiency or safety of the vessels.
Generally, the Partnership drydocks each vessel every 60 months until the vessel is 15 years old and every 30 months thereafter, as required for the renewal of certifications issued by classification societies. For vessels operating on time charters, the Partnership capitalizes the costs directly associated with the classification and regulatory requirements for inspection of the vessels and improvements incurred during drydocking. Drydock cost is depreciated on a straight-line basis over the period until the next planned drydocking takes place. The Partnership expenses costs related to routine repairs and maintenance performed during drydocking or as otherwise incurred. For vessels that are newly built or acquired, an element of the cost of the vessel is initially allocated to a drydock component and depreciated on a straight-line basis over the period until the next planned drydocking. When significant drydocking expenditures occur prior to the expiration of this period, the Partnership expenses the remaining balance of the original drydocking cost in the month of the subsequent drydocking. For vessels operating on bareboat charters, the charterparty bears the cost of any drydocking.
Depreciation on vessels and equipment is calculated on a straight-line basis over the asset’s estimated useful life, less an estimated residual value, as follows:
Useful Life
Hull
25 years
Anchor-handling, loading and unloading equipment
25 years
Main/auxiliary engine
25 years
Thruster, dynamic positioning systems, cranes and other equipment
25 years
Drydock costs
2.5 – 5 years
A Vessel is depreciated to its estimated residual value, which is calculated based on the weight of the ship and estimated steel price. Any cost related to the disposal is deducted from the residual value.
(m) Capitalized Interest
Interest expense incurred on the Partnership’s debt during the construction of the Vessels exceeding one year is capitalized during the construction period.
(n) Impairment of Long-Lived Assets
Vessels and equipment, vessels under construction and intangible assets subject to amortization are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If circumstances require a long-lived asset or asset group to be tested for possible impairment, the Partnership first compares undiscounted cash flows expected to be generated by that asset or asset group to its carrying value. If the carrying value of the long-lived asset or asset group is not recoverable on an undiscounted cash flow basis, impairment is recognized to the extent that the carrying value exceeds its fair value. Fair value is determined through various valuation techniques including discounted cash flow models, quoted market values and third-party independent appraisals, as considered necessary.
(o) Goodwill and Intangibles
The Partnership allocates the cost of acquired companies to the identifiable tangible and intangible assets and liabilities acquired, with the remaining amount being classified as goodwill. Goodwill is not amortized but is reviewed for impairment annually or more frequently if impairment indicators are identified.
The Partnership tests goodwill for impairment using a two-step analysis, with the option of performing a qualitative assessment before performing the first step of the two-step analysis, whereby the carrying value of the reporting unit is compared to its fair value in the first step. If the carrying value of the reporting unit is greater than its fair value, the second step is performed, where the implied fair value of goodwill is compared to its carrying value. An impairment charge is recognized for the amount by which the carrying amount of goodwill exceeds its fair value. The fair value is estimated using the net present value of discounted cash flows of the reporting unit. The Partnership has only one reporting unit.
Intangible assets represent contractual rights for charters obtained in connection with business and asset acquisitions that have favorable contractual terms relative to market as of the acquisition dates. Contract liabilities represent contractual rights obtained in connection with business acquisitions that have unfavorable contractual terms relative to market as of the acquisition dates. The favorable and unfavorable contract rights have definite lives and are amortized to revenues over the period of the related contracts. Intangible assets with a definite life are tested for impairment whenever events or circumstances indicate that their carrying amount may not be recoverable. An impairment loss is recognized if the carrying amount exceeds the estimated fair value of the asset.
The contract related intangible assets and liabilities and their amortization periods at acquisition dates are as follows:
Intangible category
Amortization Period
Above market time charter-Tordis Knutsen
4.8 years
Above market time charter-Vigdis Knutsen
4.9 years
Unfavorable contractual rights-Fortaleza Knutsen
12 years
Unfavorable contractual rights-Recife Knutsen
12 years
The intangible for the above market value of the time charter contract associated with the Tordis Knutsen is amortized to time charter revenue on a straight line basis over the remaining term of the contract of approximately 4.8 years as of the acquisition date. The intangible for the above market value of the time charter contract associated with the Vigdis Knutsen is amortized to time charter revenue on a straight line basis over the remaining term of the contract of approximately 4.9 years as of the acquisition date.
The unfavorable contractual rights for charters associated with Foraleza Knutsen and Recife Knutsen were obtained in connection with a step acquisition in 2008 that had unfavorable contractual terms relative to market as of acquisition date. The Fortaleza Knutsen and the Recife Knutsen commenced on their 12 years’ fixed bareboat charters in March 2011 and August 2011, respectively. The unfavorable contract rights related to Fortaleza Knutsen and Recife Knutsen are amortized to bareboat revenues on a straight line basis over the 12 years’ contract period that expires in March 2023 and August 2023, respectively.
(p) Debt Issuance Costs
Debt issuance costs, including fees, commissions and legal expenses, are deferred and presented net of debt. Debt issuance costs of term loans are amortized over the term of the relevant loan. Amortization of debt issuance costs is included in interest expense. These costs are presented as a deduction from the corresponding liability, consistent with debt discount.
(q) Derivative Instruments
The Partnership uses derivatives to reduce market risks associated with its operations. The Partnership uses interest rate swaps for the management of interest risk exposure. The interest rate swaps effectively convert a portion of the Partnership’s debt from a floating to a fixed rate over the life of the transactions without an exchange of underlying principal.
The Partnership seeks to reduce its exposure to fluctuations in foreign exchange rates through the use of foreign currency forward contracts.
All derivative instruments are initially recorded at fair value as either assets or liabilities in the accompanying consolidated balance sheets and subsequently measured to fair value. The Partnership does not apply hedge accounting to its derivative instruments. Changes in the fair value of the derivative instruments are recognized in earnings. Gains and losses from the interest rate swap contracts of the Partnership related to long-term mortgage debt and foreign exchange forward contracts are recorded in realized and unrealized gain (loss) on derivative instruments in the consolidated statements of operations. Cash flows related to interest rate swap contracts are presented as cash flows provided by operating activities. Cash flows related to foreign exchange forward contracts entered into to economically hedge operating expenses in currencies other than U.S. Dollars are presented as cash flows provided by operating activities in the consolidated statements of cash flows, while cash flows related to foreign exchange forward contracts entered into to hedge contractual obligations to pay the shipyard in currencies other than functional currency of U.S. Dollars are presented as cash flows used in investing activities in the consolidated statements of cash flows.
(r) Income Taxes
Historically, part of the Partnership’s activities were subject to ordinary taxation and taxes were paid on taxable income (including operating income and net financial income and expense), while part of the activities were subject to the Norwegian Tonnage Tax Regime (the “tonnage tax regime”). Under the tonnage tax regime, the tax is based on the tonnage of the vessel, and operating income is tax free. The net financial income and expense remains taxable as ordinary income tax for entities subject to the tonnage tax regime. Income taxes arising from the part of activities subject to ordinary taxation are included in income tax expense in the consolidated statements of operations. For the portion of activities subject to the tonnage tax regime, tonnage taxes are classified as vessel operating expenses while the current and deferred taxes arising on net financial income and expense are reflected as income tax expense in the consolidated statements of operations. The amounts of tonnage tax included in operating expenses for the years ended December 31, 2018, 2017 and 2016 were $0.3 million, $0.2 million and $0.2 million, respectively.
The Partnership accounts for deferred income taxes using the liability method. Under the liability method, deferred tax assets and liabilities are recognized for the anticipated future tax effects of temporary differences between the financial statement basis and the tax basis of the Partnership’s assets and liabilities using enacted tax rates expected to apply to taxable income in the years in which these temporary differences are expected to be recovered or settled. A valuation allowance for deferred tax assets is recorded when it is more likely than not that some or all of the benefit from the deferred tax asset will not be realized.
Recognition of uncertain tax positions is dependent upon whether it is more-likely-than-not that a tax position taken or expected to be taken in a tax return will be sustained upon examination, including resolution of any related appeals or litigation processes, based on the technical merits of the position. If a tax position meets the more-likely-than-not recognition threshold, it is measured to determine the amount of benefit to recognize in the financial statements based on U.S. GAAP guidance. The Partnership recognizes interest and penalties related to uncertain tax positions in income tax expense.
(s) Prepaid Charter
Under terms of the time charters and bareboat charters, the customer pays for the month’s charter the first day of each month that is recorded as prepaid charter revenues.
(t) Commitments, Contingencies and Insurance Proceeds
Liabilities for loss contingencies arising from claims, assessments, litigation, fines and penalties and other sources are recorded when it is probable that a liability has been incurred and the amount can be reasonably estimated. Legal costs incurred in connection with loss contingencies are expensed as incurred. See Note 19—Commitments and Contingencies.
Insurance claims for property damage for recoveries up to the amount of loss recognized are recorded when the claims submitted to insurance carriers are probable of recovery. Claims for property damage in excess of the loss recognized and for loss of hire are considered gain contingencies, which are generally recognized when the proceeds are received.
(u) Fair Value Measurements
The Partnership utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible. The Partnership determines fair value based on assumptions that market participants would use in pricing an asset or liability in the principal or most advantageous market. When considering market participant assumptions in fair value measurements, the following fair value hierarchy distinguishes between observable and unobservable inputs, which are categorized in one of the following levels:
·
Level 1 Inputs: Unadjusted quoted prices in active markets for identical assets or liabilities accessible to the reporting entity at the measurement date.
·
Level 2 Inputs: Other than quoted prices included in Level 1 inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the asset or liability.
·
Level 3 Inputs: Unobservable inputs for the asset or liability used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at the measurement date.
(v) Recently Adopted Accounting Standards
In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (ASC 606) , as subsequently updated by the FASB, which provides new authoritative guidance on the methods of revenue recognition and related disclosure requirements. This new standard supersedes existing revenue recognition requirements, including most industry-specific guidance. The new standard requires a company to recognize revenue when it transfers goods or services to customers in an amount that reflects the consideration that the company expects to receive for those goods or services. This update creates a five-step model and requires a company to exercise judgment when considering the terms of the contract(s) which include (i) identifying the contract(s) with the customer, (ii) identifying the separate performance obligation in the contract, (iii) determining the transaction price, (iv) allocating the transaction price to the separate performance obligations, and (v) recognizing revenue as each performance obligation is satisfied. Under the new standard, additional qualitative and quantitative disclosures are required. Effective January 1, 2018, the Partnership adopted the requirements of ASC 606 to new and existing contracts not yet completed as of January 1, 2018, using the modified retrospective approach where the cumulative effect of initially applying the standard is recorded as an adjustment to the opening balance of equity. The Partnership made an assessment on the various implementation aspects of ASU 2014-09 and its amendments, and since there are no changes to the timing or amount of revenue recognized, the Partnership has concluded that the effect of the implementation of this new standard will cause no material cumulative effect to the Partnership’s historical or future financial position, results of operations or cash flows.
In January 2017, the FASB issued ASU 2017-01, Business Combinations: Clarifying the Definition of a Business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The Partnership adopted this ASU prospectively from January 1, 2018. As a result, this increases the likelihood that future dropdowns of Vessels may be considered the acquisition of an asset rather than a business combination.
On March 1, 2018, the partnership’s wholly owned subsidiary, KNOT Shuttle tankers AS, acquired KNOT’s 100% interest in KNOT Shuttle Tankers 30 AS (“KNOT 30”), the company that owns and operates the Anna Knutsen. Following the adoption of ASU 2017-01, Business Combinations: Clarifying the Definition of a Business, the Partnership accounted for this acquisition as an acquisition of an asset. The cost of the group of assets acquired in the asset acquisition has been allocated to the individual assets acquired or liabilities assumed based on their relative fair values. See the Note 21—Acquisitions.
In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows: Classification of Certain Cash Receipts and Cash Payments . The new guidance clarifies how the predominance principle should be applied when cash receipts and cash payments have aspects of more than one class of cash flows. The Partnership adopted this ASU on January 1, 2018. The Partnership's adoption of this standard did not have a material impact on the Partnership's consolidated statement of cash flows or related disclosures.
In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows: Restricted Cash , which requires that restricted cash be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts presented on the statement of cash flows. The standard eliminates the presentation of transfers between cash and cash equivalents and restricted cash and restricted cash equivalents in the statement of cash flows. Additional disclosures are required for the nature of the restricted cash and restricted cash equivalents. The Partnership adopted this ASU on January 1, 2018 under a retrospective approach. The Partnership's adoption of this standard did not have a material impact on the Partnership's consolidated statement of cash flows or related disclosures.
There are no other recent accounting pronouncements, whose adoption had a material impact on the consolidated financial statements in the current year.
(w) New Accounting Standards Not Yet Adopted
In February 2016, the FASB issued ASU 2016-02, Leases (ASC 842) . The objective is to establish the principles that lessors and lessees shall apply to report useful information to users of financial statements about the amount, timing and uncertainty of cash flows arising from a lease. The Partnership is the lessor for its Vessels that operate on time charters and bareboat charters. Accounting by a lessor is largely unchanged from the previous standard. The Partnership does not have any material leased assets. A lessee will be required to recognize in its balance sheet a lease liability to make lease payments and a right-of-use asset. The standard requires a modified retrospective transition method for all entities and the standard provides for optional practical expedients in implementing the standard under the modified retrospective approach.
In July 2018, the FASB issued targeted improvements to the leasing guidance allowing for an additional optional transition method that allow entities to initially apply the new lease standard and its disclosures at the transition date and recognize a cumulative-effect adjustment to the opening balance of retained earnings. The Partnership has elected to use this optional transition approach. The standard is effective for annual periods beginning after December 15, 2018, including interim periods within those annual periods. The Partnership will adopt ASC 842 and implement the revised guidance as of January 1, 2019. The Partnership will apply the package of practical expedients, but not the hindsight practical expedients since the use of hindsight practical expedient only impacts lease classification if the package of practical expedients is not elected. The Partnership will not reassess whether any expired or existing contracts are, or contain leases, will not reassess lease classification, and will not reassess initial direct costs for any existing leases. Additionally, the practical expedient of disregarding short-term leases for agreements with lease terms of 12 months or less as a lessee and the expedient of not separating lease components from non-lease components will be used for all classes of underlying assets in the Partnership. Based upon assessments performed to date, the Partnership does not expect material effects on the accounting for existing leases applied in the consolidated financial statements where the Partnership is the lessor. Under ASU 2016-02, the Partnership will recognize a right-of-use asset and a lease liability on the balance sheet for certain leases where the Partnership is the lessee based on the present value of future minimum lease payments, whereas currently no right-of-use asset or lease liability is recognized. Based on the analysis performed by the Partnership to date, the right of use asset and lease liability to be recognized on January 1, 2019 is expected not to be material.

Formation Transactions and Init

Formation Transactions and Initial Public Offering12 Months Ended
Dec. 31, 2018
Formation Transactions and Initial Public Offering
Formation Transactions and Initial Public Offering3) Formation Transactions and Initial Public Offering
During April 2013, the following transactions occurred in connection with KNOT’s transfer of the interests in KNOT Shuttle Tankers AS and the subsequent IPO:
Capital Contribution
(i)
KNOT contributed to the Partnership’s subsidiary KNOT Offshore Partners UK LLC (“KNOT UK”) its 100% interest in KNOT Shuttle Tankers AS, which directly or indirectly owned (1) Knutsen Shuttle Tankers XII KS, the owner of the Recife Knutsen and the Fortaleza Knutsen , (2) Knutsen Shuttle Tankers XII AS, the general partner of Knutsen Shuttle Tankers XII KS, and (3) the Windsor Knutsen and the Bodil Knutsen and all of their related charters, inventory and long-term debt. This was accounted for as a capital contribution by KNOT to the Partnership.
Recapitalization of the Partnership
(ii)
The Partnership issued to KNOT 8,567,500 subordinated units, representing a 49.0% limited partner interest in the Partnership, and 100% of the incentive distribution rights (“IDRs”), which entitle KNOT to increasing percentages of the cash the Partnership distributes in excess of $0.43125 per unit per quarter.
(iii)
The Partnership issued 349,694 general partner units to the General Partner representing a 2.0% general partner interest in the Partnership.
Initial Public Offering
(iv)
In connection with the IPO, the Partnership issued and sold to the public, through the underwriters, 8,567,500 common units (including 1,117,500 common units sold pursuant to the full exercise of the underwriters’ option to purchase additional units), representing a 49.0% limited partner interest in the Partnership. The price per common unit in the IPO was $21.00. The Partnership received gross proceeds of approximately $179.9 million in connection with the IPO. Expenses relating to the IPO, including, among other things, incremental costs directly attributable to the IPO, were deferred and charged against the gross proceeds of the IPO, whereas other costs were expensed as incurred. The net proceeds of the IPO (approximately $160.7 million, after deducting underwriting discounts, commissions and structuring fees and offering expenses payable by the Partnership) were used by the Partnership to make a cash distribution to KNOT of approximately $21.95 million (which equals net proceeds from the underwriters’ option exercised in full after deducting the underwriting discounts and commissions), to repay approximately $118.9 million of outstanding debt and pre-fund approximately $3.0 million of the Partnership’s one-time entrance tax into the Norwegian tonnage tax regime. The remainder of the net proceeds was made available for general partnership purposes.
Agreements
In connection with the IPO, at or prior to the closing of the IPO, the Partnership entered into several agreements, including:
·
An Administrative Services Agreement with KNOT UK, pursuant to which:
·
KNOT UK agreed to provide to the Partnership administrative services; and
·
KNOT UK is permitted to subcontract certain of the administrative services provided under the administrative services agreement to Knutsen OAS (UK) Ltd. (“KOAS UK”) and Knutsen OAS Shipping AS (“KOAS”), both wholly owned subsidiaries of TS Shipping Invest AS (“TSSI”);
·
Amended Technical Management Agreements with KNOT Management AS (“KNOT Management”), a wholly owned subsidiary of KNOT, that govern the crew, technical and commercial management of the vessels in the fleet;
·
A Contribution and Sale Agreement with KNOT pursuant to which the Partnership acquired the entities that comprised its initial fleet;
·
Amendments to certain of the Partnership’s existing vessel financing agreements to permit the transactions pursuant to which the Partnership acquired its initial fleet in connection with the IPO and to include a $20.0 million revolving credit facility; and
·
An Omnibus Agreement with KNOT, the General Partner and the other parties thereto governing, among other things:
·
To what extent the Partnership and KNOT may compete with each other;
·
The Partnership’s option to purchase the Carmen Knutsen, the Hilda Knutsen , the Torill Knutsen , the Ingrid Knutsen and the Raquel Knutsen from KNOT;
·
Certain rights of first offer on shuttle tankers operating under charters of five or more years;
·
The provision of certain indemnities to the Partnership by KNOT; and
·
KNOT’s guarantee of the payment of the hire rate under the existing Bodil Knutsen and Windsor Knutsen charters for a period of five years following the closing date of the IPO.

Subsidiaries

Subsidiaries12 Months Ended
Dec. 31, 2018
Subsidiaries
Subsidiaries4) Subsidiaries
The following table lists the Partnership’s subsidiaries and their purpose as of December 31, 2018.
Company Name
Jurisdiction of Formation
Purpose
KNOT Offshore Partners UK LLC
Marshall Islands
Holding Company
KNOT Shuttle Tankers AS
Norway
Holding Company
KNOT Shuttle Tankers 12 AS
Norway
Majority owner of Knutsen Shuttle Tankers XII KS
KNOT Shuttle Tankers 17 AS
Norway
Owner of the Bodil Knutsen
KNOT Shuttle Tankers 18 AS
Norway
Owner of the Windsor Knutsen
Knutsen Shuttle Tankers XII KS
Norway
Owner of the Fortaleza Knutsen and the Recife Knutsen
Knutsen Shuttle Tankers XII AS
Norway
General partner of Knutsen Shuttle Tankers XII KS
Knutsen Shuttle Tankers 13 AS
Norway
Owner of the Carmen Knutsen
Knutsen Shuttle Tankers 14 AS
Norway
Owner of the Hilda Knutsen
Knutsen Shuttle Tankers 15 AS
Norway
Owner of the Torill Knutsen
KNOT Shuttle Tankers 20 AS
Norway
Owner of the Dan Cisne
KNOT Shuttle Tankers 21 AS
Norway
Owner of the Dan Sabia
Knutsen NYK Shuttle Tankers 16 AS
Norway
Owner of the Ingrid Knutsen
Knutsen Shuttle Tankers 19 AS
Norway
Owner of the Raquel Knutsen
KNOT Shuttle Tankers 24 AS
Norway
Owner of the Tordis Knutsen
KNOT Shuttle Tankers 25 AS
Norway
Owner of the Vigdis Knutsen
KNOT Shuttle Tankers 26 AS
Norway
Owner of the Lena Knutsen
KNOT Shuttle Tankers 32 AS
Norway
Owner of the Brasil Knutsen
KNOT Shuttle Tankers 30 AS
Norway
Owner of the Anna Knutsen

Significant Risks and Uncertain

Significant Risks and Uncertainties Including Business and Credit Concentrations12 Months Ended
Dec. 31, 2018
Significant Risks and Uncertainties Including Business and Credit Concentrations
Significant Risks and Uncertainties Including Business and Credit Concentrations5) Significant Risks and Uncertainties Including Business and Credit Concentrations
Each of the Vessels is employed under long-term fixed rate charters, which mitigates earnings risk. The Partnership’s operational results are dependent on the worldwide market for shuttle tankers and timing of entrance into long-term charters. Market conditions for shipping activities are typically volatile, and, as a consequence, the hire rates may vary from year to year. The market is mainly dependent upon two factors: the supply of vessels and the overall growth in the world economy. The general supply of vessels is impacted by the combination of newbuilds, demolition activity of older vessels and legislation that limits the use of older vessels or new standards for vessels used in specific trades.
As of December 31, 2018, all of the Partnership’s Vessel crews, which are employed through KOAS were represented by collective bargaining agreements that are renegotiated annually, or bi-annually.
The Partnership did not incur any loss relating to its customers during the years ended December 31, 2018, 2017 and 2016.
The following table presents time charter and bareboat revenues and percentage of revenues for customers that accounted for more than 10% of the Partnership’s revenues during the years ended December 31, 2018, 2017 and 2016. All of these customers are subsidiaries of major international oil companies.
Year Ended December 31,
(U.S. Dollars in thousands)
2018
2017
2016
Eni Trading and Shipping S.p.A.
$
43,955
16
%
$
46,441
22
%
$
47,001
27
%
Fronape International Company, a subsidiary of Petrobras Transporte S.A.
45,115
17
%
45,115
21
%
45,236
26
%
Equinor ASA
23,426
8
%
23,189
11
%
21,760
13
%
Repsol Sinopec Brasil, B.V., a subsidiary of Repsol Sinopec Brasil, S.A.
36,978
13
%
28,129
13
%
20,904
12
%
Brazil Shipping I Limited, a subsidiary of Royal Dutch Shell
81,816
29
%
51,259
24
%
20,496
12
%
Standard Marine Tønsberg AS, a Norwegian subsidiary of ExxonMobil
16,872
6
%
17,634
8
%
17,482
10
%
Galp Sinopec Brasil Services BV
30,029
11
%
734
1
%


%
The Partnership has financial assets that expose it to credit risk arising from possible default by a counterparty. The Partnership considers its counterparties to be creditworthy banking and financial institutions and does not expect any significant loss to result from non-performance by such counterparties. The maximum loss due to credit risk that the Partnership would incur if counterparties failed completely to perform would be the carrying value of cash and cash equivalents, and derivative assets. The Partnership, in the normal course of business, does not demand collateral from its counterparties.

Operating Leases

Operating Leases12 Months Ended
Dec. 31, 2018
Operating Leases
Operating Leases6) Operating Leases
The time charters and bareboat charters of the Vessels with third parties are accounted for as operating leases. The minimum contractual future revenues to be received from time charters and bareboat charters as of December 31, 2018, were as follows:
(U.S. Dollars in thousands)
2019
$
274,754
2020
240,849
2021
219,841
2022
152,078
2023
63,918
2024 and therafter
28,674
Total
$
980,114
The minimum contractual future revenues should not be construed to reflect total charter hire revenues for any of the years. Minimum contractual future revenues are calculated based on certain assumptions such as operating days per year. In addition, minimum contractual future revenues presented in the table above have not been reduced by estimated off-hire time for periodic maintenance. The amounts may vary given unscheduled future events such as vessel maintenance.
The Partnership’s fleet as of December 31, 2018 consisted of:
·
the Fortaleza Knutsen , a shuttle tanker built in 2011 that is currently operating under a bareboat charter that expires in March 2023 with Fronape International Company, a subsidiary of Petrobras Transporte S.A. (“Transpetro”);
·
the Recife Knutsen , a shuttle tanker built in 2011 that is currently operating under a bareboat charter that expires in August 2023 with Transpetro;
·
the Bodil Knutsen , a shuttle tanker built in 2011 that is currently operating under a time charter that expires in May 2020 with Statoil ASA (now Equinor), with options to extend until May 2024;
·
the Windsor Knutsen , a conventional oil tanker built in 2007 and retrofitted to a shuttle tanker in 2011. The vessel operated under a time charter with Brazil Shipping I Limited, a subsidiary of Shell, until July 2014. From July 2014 until October 2015, the vessel was employed under a time charter with KNOT. Beginning in October 2015, the vessel commenced operations under a two year time charter with Brazil Shipping I Limited, with options to extend until 2023. In March 2019, the time charter contract was suspend for a minimum of 10 months and a maximum of 12 months. During the suspension period, the Windsor Knutsen will operate under a time charter contract Knutsen Shuttle Tankers Pool AS on the same terms as the existing contract with Shell. Shell has options to extend the time charter until October 2023;
·
the Carmen Knutsen , a shuttle tanker built in 2013 that is currently operating under a time charter that expires in January 2023, with Repsol Sinopec Brasil, B.V. a subsidiary of Repsol Sinopec Brasil, S.A. (“Repsol”), with options to extend until January 2026;
·
the Hilda Knutsen , a shuttle tanker built in 2013 that is currently operating under a time charter that expires in August 2022 with Eni Trading and Shipping S.p.A. (“ENI”), with options to extend until August 2025;
·
the Torill Knutsen , a shuttle tanker built in 2013 that is currently operating under a time charter that expires in November 2019 with ENI, with options to extend until November 2023;
·
the Dan Cisne , a shuttle tanker built in 2011 that is currently operating under a bareboat charter that expires in September 2023 with Transpetro;
·
the Dan Sabia , a shuttle tanker built in 2012 that is currently operating under a bareboat charter that expires in January 2024 with Transpetro;
·
the Ingrid Knutsen , a shuttle tanker built in 2013 that is currently operating under a time charter that expires in February 2024 with Standard Marine Tønsberg AS, a Norwegian subsidiary of ExxonMobil (“ExxonMobil”), with options to extend until February 2029;
·
the Raquel Knutsen , a shuttle tanker built in 2015 that is currently operating under a time charter that expires in June 2025 with Repsol, with options to extend until June 2030;
·
the Tordis Knutsen , a shuttle tanker built in 2016 that is currently operating under a time charter that expires in January 2022 with a subsidiary of Shell, with options to extend until January 2032;
·
the Vigdis Knutsen , a shuttle tanker built in 2017 that is currently operating under a time charter that expires in the second quarter of 2022 with a subsidiary of Shell, with options to extend until the second quarter of 2032;
·
the Lena Knutsen , a shuttle tanker built in 2017 that is currently operating under a time charter that expires in the third quarter of 2022 with a subsidiary of Shell, with options to extend until the third quarter of 2032;
·
the Brasil Knutsen , a shuttle tanker built in 2013 that is currently operating under a time charter that expires in the third quarter of 2022 with Galp Sinopec Brazil Services B.V. (“Galp”), with options to extend until the third quarter of 2028; and
·
The Anna Knutsen , a shuttle tanker built in 2017 that is currently operating under a time charter that expires in the second quarter of 2022 with Galp, with options to extend until the second quarter of 2028.

Segment Information

Segment Information12 Months Ended
Dec. 31, 2018
Segment Information
Segment Information7) Segment Information
The Partnership has not presented segment information as it considers its operations to occur in one reportable segment, the shuttle tanker market. At December 31, 2018, the Partnership’s fleet operated under twelve time charters and four bareboat charters. At December 31, 2017, the Partnership’s fleet operated under eleven time charters and four bareboat charters and at December 31, 2016, the Partnership’s fleet operated under seven time charters and four bareboat charters. See Note 5—Significant Risks and Uncertainties Including Business and Credit Concentrations for revenues from customers accounting for over 10% of the Partnership’s consolidated revenue. In both time charters and bareboat charters, the charterer, not the Partnership, controls the choice of which trading areas the Vessels will serve. Accordingly, the Partnership’s management, including the chief operating decision makers, does not evaluate performance according to geographical region.

Insurance Proceeds

Insurance Proceeds12 Months Ended
Dec. 31, 2018
Insurance Proceeds
Insurance Proceeds8) Insurance Proceeds
Raquel Knutsen
In February 2017, the Raquel Knutsen damaged its propeller hub. As a result, the Vessel was off-hire from February 22, 2017 to May 15, 2017 for repairs. Under the Partnership’s loss of hire policies, its insurer will pay the Partnership the hire rate agreed in respect of each vessel for each day, in excess of 14 deductible days, for the time that the Vessel is out of service as a result of damage, for a maximum of 180 days. For the year ended December 31, 2017, the Partnership received payments for loss of hire insurance of $3.4 million which was recorded as a component of total revenues since day rates are recovered under terms of the policy.
In addition, for the year ended December 31, 2017, the Partnership recorded $3.9 million for recoveries up to the amount of loss under hull and machinery insurance for the repairs as a result of the propeller hub damage to the Raquel Knutsen. This is classified under vessel operating expense along with cost of the repairs of $4.2 million for the period, resulting in a net expense of $0.3 million. See Note 19—Commitments and Contingencies.
Carmen Knutsen
During the fourth quarter of 2017, the Carmen Knutsen undertook her 5‑year special drydocking survey. During dismantling for overhaul, a technical default with her controllable pitch propeller was found. As a result, the Vessel went to a different yard to complete the repair. Repairs were completed and the Vessel was back on hire on January 1, 2018. The additional off-hire and technical costs were subject to an insurance claim. Under its loss of hire insurance policies, the Partnership’s insurer is expected to pay the hire rate agreed in respect of the Carmen Knutsen for each day in excess of 14 deductible days while the Vessel was off-hire as a result of the repairs of the controllable pitch propeller. For the years ended December 31, 2018 and 2017, the Partnership recorded $0.45 million and $1.75 million, respectively, for loss of hire which were recorded as a component of total revenues since day rates are recovered under the terms of the policy.
For the year ended December 31, 2017, the Partnership recorded $2.40 million to vessel operating expense as an estimate of the cost of repairs of the controllable pitch propeller. During 2018, an additional repair cost of $0.15 million was recorded to vessel operating expenses. As of December 31, 2018, the Partnership has received payments and recorded $2.25 million for hull and machinery repairs, resulting in a net expense of $0.30 million. See Note 19— Commitments and Contingencies.

Other Finance Expenses

Other Finance Expenses12 Months Ended
Dec. 31, 2018
Other Finance Expenses
Other Finance Expenses9) Other Finance Expenses
(a) Interest Expense
The following table presents the components of interest cost as reported in the consolidated statements of operations for the years ended December 31, 2018, 2017 and 2016:
Year Ended December 31,
(U.S. Dollars in thousands)
2018
2017
2016
Interest expense
$
46,768
$
28,977
$
19,669
Amortization of debt issuance cost and fair value of debt assumed
3,188
1,737
1,198
Total interest cost
$
49,956
$
30,714
$
20,867
(b) Other Finance Expense
The following table presents the components of other finance expense for the years ended December 31, 2018, 2017 and 2016:
Year Ended December 31,
(U.S. Dollars in thousands)
2018
2017
2016
Bank fees, charges
$
551
$
516
$
342
Guarantee costs
403
621
696
Commitment fees
306
269
273
Total other finance expense
$
1,260
$
1,406
$
1,311

Derivative Instruments

Derivative Instruments12 Months Ended
Dec. 31, 2018
Derivative Instruments
Derivative Instruments10) Derivative Instruments
Interest Rate Risk Management
The consolidated financial statements include the results of interest rate swap contracts to manage the Partnership’s exposure related to changes in interest rates on its variable rate debt instruments and the results of foreign exchange forward contracts to manage its exposure related to changes in currency exchange rates on its operating expenses, mainly crew expenses, in currency other than the U.S. Dollar and on its contract obligations. The Partnership does not apply hedge accounting for derivative instruments. The Partnership does not speculate using derivative instruments.
By using derivative financial instruments to economically hedge exposures to changes in interest rates, the Partnership exposes itself to credit risk and market risk. Derivative instruments that economically hedge exposures are used for risk management purposes, but these instruments are not designated as hedges for accounting purposes. Credit risk is the failure of the counterparty to perform under the terms of the derivative instrument. When the fair value of a derivative instrument is positive, the counterparty owes the Partnership, which creates credit risk for the Partnership. When the fair value of a derivative instrument is negative, the Partnership owes the counterparty, and, therefore, the Partnership is not exposed to the counterparty’s credit risk in those circumstances. The Partnership minimizes counterparty credit risk in derivative instruments by entering into transactions with major banking and financial institutions. The derivative instruments entered into by the Partnership do not contain credit risk-related contingent features. The Partnership has not entered into master netting agreements with the counterparties to its derivative financial instrument contracts.
Market risk is the adverse effect on the value of a derivative instrument that results from a change in interest rates, currency exchange rates or commodity prices. The market risk associated with interest rate contracts is managed by establishing and monitoring parameters that limit the types and degree of market risk that may be undertaken.
The Partnership assesses interest rate risk by monitoring changes in interest rate exposures that may adversely impact expected future cash flows and by evaluating economical hedging opportunities.
The Partnership has historically used variable interest rate mortgage debt to finance its vessels. The variable interest rate mortgage debt obligations expose the Partnership to variability in interest payments due to changes in interest rates. The Partnership believes that it is prudent to limit the variability of a portion of its interest payments. To meet this objective, the Partnership entered into London Interbank Offered Rate (“LIBOR”) based interest rate swap contracts to manage fluctuations in cash flows resulting from changes in the benchmark interest rate of LIBOR. These swaps change the variable rate cash flow exposure on the mortgage debt obligations to fixed cash flows. Under the terms of the interest rate swap contracts, the Partnership receives LIBOR-based variable interest rate payments and makes fixed interest rate payments, thereby creating the equivalent of fixed rate debt for the notional amount of its debt hedged.
As of December 31, 2018 and 2017, the total notional amount of the Partnership’s outstanding interest rate swap contracts that were entered into in order to hedge outstanding or forecasted debt obligations were $555.5 million and $650.5 million, respectively. As of December 31, 2018 and 2017 the carrying amount of the interest rate swaps contracts were net assets of $15.9 million and $9.7 million, respectively. See Note 11—Fair Value Measurements.
Changes in the fair value of interest rate swap contracts are reported in realized and unrealized gain (loss) on derivative instruments in the same period in which the related interest affects earnings.
The Partnership and its subsidiaries utilize the U.S. Dollar as their functional and reporting currency, because all of their revenues and the majority of their expenditures, including the majority of their investments in vessels and their financing transactions, are denominated in U.S. Dollars. Payment obligations in currencies other than the U.S. Dollar, and in particular operating expenses in NOK, expose the Partnership to variability in currency exchange rates. The Partnership believes that it is prudent to limit the variability of a portion of its currency exchange exposure. To meet this objective, the Partnership entered into foreign exchange forward contracts to manage fluctuations in cash flows resulting from changes in the exchange rates towards the U.S. Dollar. The agreements change the variable exchange rate to fixed exchange rates at agreed dates.
As of December 31, 2018 and 2017, the total contract amount in foreign currency of the Partnership’s outstanding foreign exchange forward contracts that were entered into to economically hedge outstanding future payments in currencies other than the U.S. Dollar were NOK 244.2 million and NOK 249.9 million, respectively. As of December 31, 2018 and 2017, the carrying amount of the Partnership’s foreign exchange forward contracts was a net liability of $1.7 million and a net assets of $0.6 million, respectively. See Note 11—Fair Value Measurements.
The following table presents the realized and unrealized gains and losses that are recognized in earnings as net gain (loss) on derivative instruments for the years ended December 31, 2018, 2017 and 2016:
Year Ended December 31,
(U.S. Dollars in thousands)
2018
2017
2016
Realized gain (loss):
Interest rate swap contracts
$
1,180
$
(2,840)
$
(3,886)
Foreign exchange forward contracts
1,084
280
66
Total realized gain (loss):
2,264
(2,560)
(3,820)
Unrealized gain (loss):
Interest rate swap contracts
4,429
5,514
4,254
Foreign exchange forward contracts
(2,654)
1,877
779
Total unrealized gain (loss):
1,775
7,391
5,033
Total realized and unrealized gain (loss) on derivative instruments:
$
4,039
$
4,831
$
1,213

Fair Value Measurements

Fair Value Measurements12 Months Ended
Dec. 31, 2018
Fair Value Measurements
Fair Value Measurements11) Fair Value Measurements
(a) Fair Value of Financial Instruments
The following table presents the carrying amounts and estimated fair values of the Partnership’s financial instruments as of December 31, 2018 and 2017. Fair value is defined as the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
December 31, 2018
December 31, 2017
Carrying
Fair
Carrying
Fair
(U.S. Dollars in thousands)
Amount
Value
Amount
Value
Financial assets:
Cash and cash equivalents
$
41,712
$
41,712
$
46,104
$
46,104
Current derivative assets:
Interest rate swap contracts
4,621
4,621
950
950
Foreign exchange forward contracts


629
629
Non-current derivative assets:
Interest rate swap contracts
11,667
11,667
9,850
9,850
Financial liabilities:
Current derivative liabilities:
Interest rate swap contracts


961
961
Foreign exchange forward contracts
1,740
1,740
17
17
Non-current derivative liabilities:
Interest rate swap contracts
345
345
164
164
Long-term debt, current and non-current
1,087,347
1,087,347
1,033,330
1,032,484
The carrying amounts shown in the table above are included in the consolidated balance sheets under the indicated captions. Carrying amount of long-term debt, current and non-current, above excludes capitalized debt issuance cost of $10.1 million and $6.7 million as of December 31, 2018 and 2017, respectively. The carrying value of trade accounts receivable, trade accounts payable and receivables/payables to owners and affiliates approximate their fair value.
The fair values of the financial instruments shown in the above table as of December 31, 2018 and 2017 represent the amounts that would be received to sell those assets or that would be paid to transfer those liabilities in an orderly transaction between market participants at that date. Those fair value measurements maximize the use of observable inputs. However, in situations where there is little, if any, market activity for the asset or liability at the measurement date, the fair value measurement reflects the Partnership’s own judgment about the assumptions that market participants would use in pricing the asset or liability. Those judgments are developed by the Partnership based on the best information available in the circumstances, including expected cash flows, appropriately risk-adjusted discount rates and available observable and unobservable inputs.
The following methods and assumptions were used to estimate the fair value of each class of financial instruments:
·
Cash and cash equivalents and restricted cash : The fair value of the Partnership’s cash balances approximates the carrying amounts due to the current nature of the amounts. As of December 31, 2018 and 2017 there is no restricted cash.
·
Foreign exchange forward contracts: The fair value is calculated using mid-rates (excluding margins) as determined by counterparties based on available market rates as of the balance sheet date. The fair value is discounted from the value at expiration to the current value of the contracts.
·
Interest rate swap contracts: The fair value of interest rate swap contracts is determined using an income approach using the following significant inputs: (1) the term of the swap contract (weighted average of 4.9 years and 4.5 years, as of December 31, 2018 and 2017, respectively), (2) the notional amount of the swap contract (ranging from $10,037 to $50,000), discount rates interpolated based on relevant LIBOR swap curves; and (3) the rate on the fixed leg of the swap contract (rates ranging from 1.38% to 2.89% for the contracts as of December 31, 2018 and rates ranging from 1.25% to 2.49% for the contracts as of December 31, 2017).
·
Long-term debt: With respect to long-term debt measurements, the Partnership uses market interest rates and adjusts for risks such as its own credit risk. In determining an appropriate spread to reflect its credit standing, the Partnership considered interest rates currently offered to KNOT for similar debt instruments of comparable maturities by KNOT’s and the Partnership’s bankers as well as other banks that regularly compete to provide financing to the Partnership.
(b) Fair Value Hierarchy
The following table presents the placement in the fair value hierarchy of assets and liabilities that are measured at fair value on a recurring basis (including items that are required to be measured at fair value or for which fair value is required to be disclosed) as of December 31, 2018 and 2017:
Fair Value Measurements
at Reporting Date Using
Quoted Price
in Active
Significant
Carrying
Markets for
Other
Significant
Value
Identical
Observable
Unobservable
December 31,
Assets
Inputs
Inputs
(U.S. Dollars in thousands)
2018
(Level 1)
(Level 2)
(Level 3)
Financial assets:
Cash and cash equivalents
$
41,712
$
41,712
$

$

Current derivative assets:
Interest rate swap contracts
4,621

4,621

Foreign exchange forward contracts




Non-current derivative assets:
Interest rate swap contracts
11,667

11,667

Foreign exchange forward contracts




Financial liabilities:
Current derivative liabilities:
Interest rate swap contracts




Foreign exchange forward contracts
1,740

1,740

Non-current derivative liabilities:
Interest rate swap contracts
345

345

Foreign exchange forward contracts




Long-term debt, current and non-current
1,087,347

1,087,347

Fair Value Measurements
at Reporting Date Using
Quoted Price
in Active
Significant
Carrying
Markets for
Other
Significant
Value
Identical
Observable
Unobservable
December 31,
Assets
Inputs
Inputs
(U.S. Dollars in thousands)
2017
(Level 1)
(Level 2)
(Level 3)
Financial assets:
Cash and cash equivalents
$
46,104
$
46,104
$

$

Current derivative assets:
Interest rate swap contracts
950

950

Foreign exchange forward contracts
629

629

Non-current derivative assets:
Interest rate swap contracts
9,850

9,850

Foreign exchange forward contracts




Financial liabilities:
Current derivative liabilities:
Interest rate swap contracts
961

961

Foreign exchange forward contracts
17

17

Non-current derivative liabilities:
Interest rate swap contracts
164

164

Foreign exchange forward contracts




Long-term debt, current and non-current
1,033,330

1,032,484

The Partnership’s accounting policy is to recognize transfers between levels of the fair value hierarchy on the date of the event or change in circumstances that caused the transfer. There were no transfers into or out of Level 1, Level 2 or Level 3 as of December 31, 2018 and 2017.

Trade Accounts Receivables and

Trade Accounts Receivables and Other Current Assets12 Months Ended
Dec. 31, 2018
Trade Accounts Receivables and Other Current Assets
Trade Accounts Receivables and Other Current Assets12) Trade Accounts Receivables and Other Current Assets
(a) Trade Accounts Receivables
Trade accounts receivable are presented net of provisions for doubtful accounts. As of December 31, 2018 and 2017, there was no provision for doubtful accounts.
(b) Other Current Assets
Other current assets consist of the following:
Year Ended
December 31,
(U.S. Dollars in thousands)
2018
2017
Insurance claims for recoveries
$

$
1,750
Refund of value added tax
899
865
Prepaid expenses
810
1,997
Other receivables
753
998
Total other current assets
$
2,462
$
5,610

Vessels and Equipment

Vessels and Equipment12 Months Ended
Dec. 31, 2018
Vessels and Equipment
Vessels and Equipment13) Vessels and Equipment
As of December 31, 2018 and 2017, Vessels with a book value of $1,767 million and $1,723 million, respectively, are pledged as security for the Partnership’s long-term debt. See Note 16—Long-Term Debt.
Vessels &
Accumulated
(U.S. Dollars in thousands)
equipment
depreciation
Net Vessels
Vessels, December 31, 2016
$
1,468,913
$
(212,024)
$
1,256,889
Additions
522,369

522,369
Drydock costs
15,348

15,348
Disposals
(3,289)
3,289

Depreciation for the year

(71,583)
(71,583)
Vessels, December 31, 2017
$
2,003,341
$
(280,318)
$
1,723,023
Additions
118,063

118,063
Drydock costs
14,750

14,750
Disposals
(5,731)
5,731

Depreciation for the period

(88,756)
(88,756)
Vessels, December 31, 2018
$
2,130,423
$
(363,343)
$
1,767,080
Drydocking activity for the years ended December 31, 2018 and 2017 is summarized as follows:
Year Ended
December 31,
(U.S. Dollars in thousands)
2018
2017
Balance at the beginning of the year
$
17,748
$
6,962
Costs incurred for dry docking
12,421
6,885
Costs allocated to drydocking as part of acquisition of business
2,329
8,463
Drydock amortization
(6,930)
(4,562)
Balance at the end of the year
$
25,568
$
17,748

Intangible Assets and Contract

Intangible Assets and Contract Liabilities12 Months Ended
Dec. 31, 2018
Intangible Assets and Contract Liabilities
Intangible Assets and Contract Liabilities14) Intangible Assets and Contract Liabilities
(a) Intangible Assets
Above market
Above market
time charter
time charter
Total
(U.S. Dollars in thousands)
Tordis Knutsen
Vigdis Knutsen
intangibles
Intangibles, December 31, 2016
$

$

$

Additions
1,468
1,458
2,926
Amortization for the year
(253)
(176)
(429)
Intangibles, December 31, 2017
$
1,215
$
1,282
$
2,497
Additions



Amortization for the year
(304)
(302)
(606)
Intangibles, December 31, 2018
$
911
$
980
$
1,891
The intangible for the above market value of time charter contract associated with the Tordis Knutsen is amortized to time charter revenue on a straight line basis over the remaining term of the contract of approximately 4.8 years as of the acquisition date. The intangible for the above market value of time charter contract associated with the Vigdis Knutsen is amortized to time charter revenue on a straight line basis over the remaining term of the contract of approximately 4.9 years as of the acquisition date. Also see Note 21—Acquisitions.
The estimated future amortization of intangible assets at December 31, 2018 is as follows:
(U.S. Dollars in thousands)
2019
606
2020
606
2021
605
2022
74
Total
$
1,891
(b) Contract Liabilities
The unfavorable contractual rights for charters associated with Fortaleza Knutsen and Recife Knutsen were obtained in connection with a step acquisition in 2008 that had unfavorable contractual terms relative to market as of acquisition date. The Fortaleza Knutsen and the Recife Knutsen commenced on their 12 years’ fixed bareboat charters in March 2011 and August 2011, respectively. The unfavorable contract rights related to Fortaleza Knutsen and Recife Knutsen are amortized to bareboat revenues on a straight line basis over the 12 years’ contract period that expires in March 2023 and August 2023, respectively.
Balance of
Amortization for
Balance of
Amortization for
Balance of
December 31,
the year ended
December 31,
the year ended
December 31,
(U.S. Dollars in thousands)
2016
December 31, 2017
2017
December 31, 2018
2018
Contract liabilities:
Unfavorable contract rights
$
(9,757)
$
1,518
$
(8,239)
$
1,518
$
(6,721)
Total amortization income
$
1,518
$
1,518
Accumulated amortization for contract liabilities was $11,494 and $9,976 as of December 31, 2018 and 2017, respectively.
The amortization of contract liabilities that is classified under time charter and bareboat revenues for the next five years is expected to be as follows:
2023
(U.S. Dollars in thousands)
2019
2020
2021
2022
and thereafter
Contract liabilities:
Unfavorable contract rights
$
(1,518)
$
(1,518)
$
(1,518)
$
(1,518)
$
(649)

Accrued Expenses

Accrued Expenses12 Months Ended
Dec. 31, 2018
Accrued Expenses
Accrued Expenses15) Accrued Expenses
The following table presents accrued expenses as of December 31, 2018 and 2017:
Year Ended
December 31,
(U.S. Dollars in thousands)
2018
2017
Operating expenses
$
832
$
979
Interest expenses
4,968
3,394
Guarantee costs

54
Other expenses
664
2,077
Total accrued expenses
$
6,464
$
6,504

Long-Term Debt

Long-Term Debt12 Months Ended
Dec. 31, 2018
Long-Term Debt.
Long-Term Debt16) Long-Term Debt
Long-term debt as of December 31, 2018 and 2017, consisted of the following:
December 31,
December 31,
(U.S. Dollars in thousands)
Vessel
2018
2017
$320 million loan facility
Windsor Knutsen, Bodil Knutsen, Carmen Knutsen, Fortaleza Knutsen, Recife Knutsen, Ingrid Knutsen
312,472

$55 million revolving credit facility
26,279

$220 million loan facility
Windsor Knutsen, Bodil Knutsen, Carmen Knutsen
$

$
165,000
Fortaleza and Recife loan facility
Fortaleza Knutsen, Recife Knutsen

109,375
Ingrid loan facility
Ingrid Knutsen

61,085
Hilda loan facility
Hilda Knutsen
90,769
96,923
$117 million loan facility
Torill Knutsen

73,177
Torill loan facility
Torill Knutsen
95,000

$172.5 million loan facility
Dan Cisne, Dan Sabia
81,839
91,339
Raquel loan facility
Raquel Knutsen
63,184
68,414
Tordis loan facility
Tordis Knutsen
85,991
91,051
Vigdis loan facility
Vigdis Knutsen
87,256
92,316
Lena loan facility
Lena Knutsen
85,750
90,650
Brasil loan facility
Brasil Knutsen
63,454
69,000
Anna loan facility
Anna Knutsen
70,353

$25 million revolving credit facility
25,000
25,000
Total long-term debt
1,087,347
1,033,330
Less: current installments
109,534
95,176
Less: unamortized deferred loan issuance costs
2,608
2,191
Current portion of long-term debt
106,926
92,985
Amounts due after one year
977,813
938,154
Less: unamortized deferred loan issuance costs
7,448
4,524
Long-term debt, less current installments, and unamortized deferred loan issuance costs
$
970,365
$
933,630
The Partnership’s outstanding debt of $1,087.3 million as of December 31, 2018 is repayable as follows :
(U.S. Dollars in thousands)
Period repayment
Balloon repayment
2019
84,534
25,000
2020
85,945

2021
86,545
70,811
2022
71,210
236,509
2023
55,535
202,185
2024 and thereafter
15,180
153,893
Total
$
398,949
$
688,398
As of December 31, 2018, the interest rates on the Partnership’s loan agreements were LIBOR plus a fixed margin ranging from 1.8% to 2.4%.
$320 Million Term Loan Facility and $55 Million Revolving Credit Facility
In September 2018, the Partnership’s subsidiaries which own the Windsor Knutsen , the Bodil Knutsen , the Fortaleza Knutsen , the Recife Knutsen , the Carmen Knutsen and the Ingrid Knutsen (“the Vessels”), entered into new senior secured credit facilities (the “Multi-vessels Facility”) in order to refinance their existing long term bank debt. The Multi-vessels Facility consists of a term loan of $320 million and a $55 million revolving credit facility. The term loan is repayable in 20 consecutive quarterly installments, with a final payment at maturity in September 2023 of $177 million, which includes the balloon payment and last quarterly installment. The term loan bears interest at a rate per annum equal to LIBOR plus a margin of 2.125%. The revolving credit facility will mature in September 2023, and bears interest at LIBOR plus a margin of 2.125%. There is a commitment fee of 0.85% payable on the undrawn portion of the revolving credit facility. The loans are guaranteed by the Partnership and secured by mortgages on the Vessels. The Multi-vessels Facility refinanced the $220 million facility, the $35 million revolving credit facility, the Fortaleza and Recife loan facility and the Ingrid loan facility.
The Vessels, assignments of earnings, charterparty contracts and insurance proceeds are pledged as collateral for the Multi-vessel facility. The Partnership and the borrowers (except for the Partnership subsidiary that owns the Recife Knutsen and the Fortaleza Knutsen ) are guarantors, and the Multi-vessels Facility is secured by vessel mortgages on the Windsor Knutsen , the Bodil Knutsen , the Fortaleza Knutsen , the Recife Knutsen , the Carmen Knutsen and the Ingrid Knutsen.
The Multi-vessels Facility contains the following financial covenants:
·
The aggregate market value of the Vessels shall not be less than 125% of the outstanding balance under the Multi-vessels Facility;
·
Positive working capital of the borrowers and the Partnership;
·
Minimum liquidity of the Partnership of $15 million plus increments of $1.5 million for each owned vessel with less than 12 months remaining tenor on its employment contract up to 8 vessels and $1 million for each owned vessel with less than 12 months remaining tenor on its employment contract up to 12 additional vessels in excess of 8 vessels;
·
Minimum book equity ratio for the Partnership of 30%; and
·
Minimum EBITDA to interest ratio for the Partnership of 2.50.
The Multi-vessels Facility also identifies various events that may trigger mandatory reduction, prepayment and cancellation of the facility, including total loss or sale of a vessel and customary events of default. As of December 31, 2018, the borrowers and the guarantors were in compliance with all covenants under this facility.
$220 Million Term Loan Facility and $35 Million Revolving Credit Facility
The $220 million Term Loan Facility and the $35 million Revolving Credit Facility were repaid in full in September 2018 with the proceeds from the Multi-vessels Facility.
In June 2014, the Partnership’s subsidiaries KNOT Shuttle Tankers 18 AS, KNOT Shuttle Tankers 17 AS and Knutsen Shuttle Tankers 13 AS entered into a senior syndicate secured loan facility in an aggregate amount of $240 million (the “Senior Secured Loan Facility”) to repay existing debt under previous credit facilities and a $10.5 million seller’s credit from KNOT. The Senior Secured Loan Facility consisted of (i) a $220 million term loan (the “Term Loan Facility”) and (ii) a $20 million revolving credit facility (the “Revolving Credit Facility”).
The Term Loan Facility was repayable in quarterly installments over five years with a final balloon payment due at maturity at June 2019. The Term Loan Facility bore interest at LIBOR plus a margin of 2.125%.
On June 30, 2016, the Partnership’s subsidiaries KNOT Shuttle Tankers 18 AS, KNOT Shuttle Tankers 17 AS and Knutsen Shuttle Tankers 13 AS, as borrowers, entered into an amended and restated senior secured credit facility (the “Amended Senior Secured Loan Facility”), which amended the Senior Secured Loan Facility. The Amended Senior Secured Loan Facility included a new revolving credit facility tranche of $15 million, bringing the total revolving credit commitments under the facility to $35 million. The new revolving credit facility was due to mature in June 2019, bore interest at LIBOR plus a fixed margin of 2.5% and had a commitment fee equal to 40% of the margin of the revolving facility tranche calculated on the daily undrawn portion of such tranche.
The Windsor Knutsen, the Bodil Knutsen and the Carmen Knutsen , assignments of earnings, charterparty contracts and insurance proceeds were pledged as collateral for the Amended Senior Secured Loan Facility. The Amended Senior Secured Loan Facility was guaranteed by the Partnership and KNOT Shuttle Tankers AS, and secured by vessel mortgages on the Windsor Knutsen, the Bodil Knutsen and the Carmen Knutsen .
Fortaleza and Recife Loan Facility
The Fortaleza and Recife Loan Facility was repaid in full in September 2018 with the proceeds from the Multi-vessels Facility.
In June 2014, the Partnership’s subsidiary Knutsen Shuttle Tankers XII KS, as the borrower, entered into a senior syndicate secured loan facility in the amount of $140 million (the “Fortaleza and Recife Facility”). The Fortaleza and Recife Facility was drawn in November 2014 and replaced a $160 million loan facility previously secured by the Fortaleza Knutsen and the Recife Knutsen . The Fortaleza and Recife Facility was repayable in quarterly installments over five years with a final balloon payment due at maturity in June 2019. The facility bore interest at LIBOR plus a margin of 2.125%. The Fortaleza Knutsen and the Recife Knutsen , assignments of earnings, charterparty contracts and insurance proceeds were pledged as collateral for the New Fortaleza and Recife Facility. The facility was guaranteed by the Partnership and KNOT Shuttle Tankers AS and was secured by vessel mortgages on the Fortaleza Knutsen and the Recife Knutsen .
Hilda Loan Facility
In May 2017, the Partnership’s subsidiary, Knutsen Shuttle Tankers 14 AS, which owns the vessel Hilda Knutsen , entered into a new $100 million senior secured term loan facility with Mitsubishi UFJ Lease & Finance (Hong Kong) Limited (the “New Hilda Facility”). The New Hilda Facility replaced the $117 million loan facility, which was due to be paid in full in August 2018. The New Hilda Facility is repayable in 28 consecutive quarterly installments with a final payment at maturity of $58.5 million, which includes the balloon payment and last quarterly installment. The New Hilda Facility bears interest at a rate per annum equal to LIBOR plus a margin of 2.2%. The Partnership and KNOT Shuttle Tankers AS are the sole guarantors. The facility matures in May 2024.
The Hilda Facility contains the following primary financial covenants:
·
Market value of the Hilda Knutsen shall not be less than 110% of the outstanding balance under the Hilda Facility for the first two years, 120% for the third and fourth year, and 125% thereafter;
·
Positive working capital of the borrower and the Partnership;
·
Minimum liquidity of the Partnership of $15 million plus increments of $1 million for each additional vessel acquired by the Partnership in excess of eight vessels and $1.5 million for each owned vessel with less than 12 months remaining tenor on its employment contract;
·
Minimum book equity ratio for the Partnership of 30%; and
·
Minimum EBITDA to interest ratio for the Partnership of 2.50.
The Hilda Facility also identifies various events that may trigger mandatory reduction, prepayment and cancellation of the facility, including total loss or sale of a vessel and customary events of default. As of December 31, 2018, the borrower and the guarantors were in compliance with all covenants under this facility.
Torill Loan Facility
In January 2018, the Partnership’s subsidiary, Knutsen Shuttle Tankers 15 AS, which owns the vessel Torill Knutsen , entered into a new $100 million senior secured term loan facility (the “Torill Facility”) with a consortium of banks, in which The Bank of Tokyo-Mitsubishi UFJ acted as agent. The Torill Facility replaced a $117 million secured loan facility, which was due to be paid in full in October 2018. The Torill Facility is repayable in 24 consecutive quarterly installments with a balloon payment of $60.0 million due at maturity. The Torill Facility bears interest at a rate per annum equal to LIBOR plus a margin of 2.1%. The facility will mature in January 2024 and is guaranteed by the Partnership. The Torill Facility contains the following primary financial covenants:
·
Market value of the Torill Knutsen shall not be less than 110% of the outstanding balance under the Torill Facility for the first two years, 120% for the third and fourth years, and 125% thereafter;
·
Positive working capital of the borrower and the Partnership;
·
Minimum liquidity of the Partnership of $15 million plus increments of $1.5 million for each owned vessel with less than 12 months remaining tenor on its employment contract up to 8 vessels and $1 million for each owned vessel with less than 12 months remaining tenor on its employment contract in excess of 8 vessels;
·
Minimum book equity ratio for the Partnership of 30%; and
·
Minimum EBITDA to interest ratio for the Partnership of 2.50.
The Torill Facility also identifies various events that may trigger mandatory reduction, prepayment and cancellation of the facility, including total loss or sale of a vessel and customary events of default. As of December 31, 2018, the borrower and the guarantor were in compliance with all covenants under this facility.
$172.5 Million Secured Loan Facility
In April 2014, KNOT Shuttle Tankers 20 AS and KNOT Shuttle Tankers 21 AS, the subsidiaries owning the Dan Cisne and Dan Sabia , as the borrowers, entered into a $172.5 million senior secured loan facility. In connection with the Partnership’s acquisition of the Dan Cisne , in December 2014, the $172.5 million senior secured loan facility was split into a tranche related to the Dan Cisne (the “Dan Cisne Facility”) and a tranche related to Dan Sabia (the “Dan Sabia Facility”).
The Dan Cisne Facility and the Dan Sabia Facility are guaranteed by the Partnership and secured by a vessel mortgage on the Dan Cisne and Dan Sabia . The Dan Cisne Facility and the Dan Sabia Facility bear interest at LIBOR plus a margin of 2.4% and are repayable in semiannual installments with a final balloon payment due at maturity in September 2023 and January 2024, respectively.
The Dan Cisne Facility and Dan Sabia Facility contain the following financial covenants:
·
Market value of each of the Dan Cisne and Dan Sabia shall not be less than 100% of the outstanding balance under the Dan Cisne Facility and Dan Sabia Facility, respectively, for the first three years, and 125% thereafter;
·
Minimum liquidity of the Partnership of $15 million plus increments of $1 million for each additional vessel acquired by the Partnership in excess of eight vessels and $1.5 million for each owned vessel with less than 12 months remaining tenor on its employment contract; and
·
Minimum book equity ratio for the Partnership of 30%.
The facility also identifies various events that may trigger mandatory reduction, prepayment and cancellation of the facility, including total loss or sale of a vessel and customary events of default. As of December 31, 2018, the borrowers and the guarantor were in compliance with all covenants under this facility.
Ingrid Loan Facility
The Ingrid Facility was repaid in full in September 2018 with the proceeds from the Multi-vessels Facility.
In June 2012, Knutsen NYK Shuttle Tankers 16 AS, the subsidiary owning the Ingrid Knutsen , as the borrower, entered into a secured loan facility in an aggregate amount of $90.0 million (the “Ingrid Facility”). The Ingrid Facility included two tranches. Tranche one was a commercial bank loan of $19.1 million, repayable in semi-annual installments with a final balloon payment due at maturity in December 2018. Tranche one bore interest at LIBOR, plus a margin of 2.25%.
Tranche two was an export credit loan of $42.0 million, repayable in semi-annual installments and which was due to mature in November 2025. Tranche two bore interest at an annual fixed rate of 3.85%, composed of a 2.5% bank facility rate plus a commission of 1.35% to the export credit guarantor. The facility was secured by a vessel mortgage on the Ingrid Knutsen . The Ingrid Knutsen , assignments of earnings, charterparty contracts and insurance proceeds were pledged as collateral for the Ingrid Facility. The Partnership and KNOT Shuttle Tankers AS were the sole guarantors.
Raquel Loan Facility
In December 2014, Knutsen Shuttle Tankers 19 AS, the subsidiary owning the Raquel Knutsen , as the borrower, entered into a secured loan facility in an aggregate amount of $90.0 million (the “Raquel Facility”). The Raquel Facility is repayable in quarterly installments with a final balloon payment of $30.5 million due at maturity in March 2025. The Raquel Facility bears interest at an annual rate equal to LIBOR plus a margin of 2.0%. The facility is secured by a vessel mortgage on the Raquel Knutsen . The Raquel Knutsen , assignments of earnings, charterparty contracts and insurance proceeds are pledged as collateral for the Raquel Facility. The Partnership and KNOT Shuttle Tankers AS are the sole guarantors.
The Raquel Facility contains the following financial covenants:
·
Market value of the Raquel Knutsen shall not be less than 100% of the of the outstanding balance under the Raquel Facility for the first three years, and 125% thereafter;
·
Minimum liquidity of the Partnership of $15 million plus increments of $1 million for each additional vessel acquired by the Partnership in excess of eight vessels and $1.5 million for each owned vessel with less than 12 months remaining tenor on its employment contract; and
·
Minimum book equity ratio for the Partnership of 30%.
The Raquel Facility also identifies various events that may trigger mandatory reduction, prepayment and cancellation of the facility, including total loss or sale of a vessel and customary events of default. As of December 31, 2018, the borrower and the guarantors were in compliance with all covenants under this facility.
Tordis Loan Facility
In April 2015, KNOT Shuttle Tankers 24 AS, the subsidiary owning the Tordis Knutsen , as the borrower, entered into a secured loan facility (the “Tordis Facility”). As of the time of the acquisition of the Tordis Knutsen on March 1, 2017, the aggregate amount outstanding under the facility was $114.4 million. The Tordis Facility is repayable in quarterly installments with a final balloon payment of $70.8 million due at maturity in November 2021. The Tordis Facility bears interest at an annual rate equal to LIBOR plus a margin of 1.9%. The facility is secured by a vessel mortgage on the Tordis Knutsen . The Tordis Knutsen , assignments of earnings, charterparty contracts and insurance proceeds are pledged as collateral for the Tordis Facility. The Partnership and KNOT Shuttle Tankers AS are the sole guarantors.
The Tordis Facility contains the following financial covenants:
·
Aggregate market value of the Tordis Knutsen, the Vigdis Knutsen and the Lena Knutsen shall not be less than 130% of the aggregate outstanding balance under the Tordis Facility, the Vigdis Facility and the Lena Facility at any time;
·
Positive working capital of the borrower and the Partnership;
·
Minimum liquidity of the Partnership of $15 million plus increments of $1.5 million for each owned vessel with less than 12 months remaining tenor on its employment contract up to 8 vessels and $1 million for each owned vessel with less than 12 months remaining tenor on its employment contract in excess of 8 vessels;
·
Minimum book equity ratio for the Partnership of 30%; and
·
Minimum EBITDA to interest ratio for the Partnership of 2.50.
The Tordis Facility also identifies various events that may trigger mandatory reduction, prepayment and cancellation of the facility, including total loss or sale of a vessel and customary events of default. As of December 31, 2018, the borrower and the guarantors were in compliance with all covenants under this facility.
Vigdis Loan Facility
In April 2015, KNOT Shuttle Tankers 25 AS, the subsidiary owning the Vigdis Knutsen, as the borrower, entered into a secured loan facility (the “Vigdis Facility”). The Vigdis Facility is repayable in quarterly installments with a final balloon payment of $70.8 million due at maturity in February 2022. The Vigdis Facility bears interest at an annual rate equal to LIBOR plus a margin of 1.9%. The facility is secured by a vessel mortgage on the Vigdis Knutsen . The Vigdis Knutsen, assignments of earnings, charterparty contracts and insurance proceeds are pledged as collateral for the Vigdis Facility. The Partnership and KNOT Shuttle Tankers AS are the sole guarantors.
The Vigdis Facility contains the following financial covenants:
·
Aggregate market value of the Tordis Knutsen, the Vigdis Knutsen and the Lena Knutsen shall not be less than 130% of the aggregate outstanding balance under the Tordis Facility, the Vigdis Facility and the Lena Facility at any time;
·
Positive working capital of the borrower and the Partnership;
·
Minimum liquidity of the Partnership of $15 million plus increments of $1.5 million for each owned vessel with less than 12 months remaining tenor on its employment contract up to 8 vessels and $1 million for each owned vessel with less than 12 months remaining tenor on its employment contract in excess of 8 vessels;
·
Minimum book equity ratio for the Partnership of 30%; and
·
Minimum EBITDA to interest ratio for the Partnership of 2.50.
The Vigdis Facility also identifies various events that may trigger mandatory reduction, prepayment and cancellation of the facility, including total loss or sale of a vessel and customary events of default. As of December 31, 2018, the borrower and the guarantors were in compliance with all covenants under this facility.
Lena Loan Facility
In April 2015, KNOT Shuttle Tankers 26 AS, the subsidiary owning the Lena Knutsen , as the borrower, entered into a secured loan facility (the “Lena Facility”). The Lena Facility is repayable in quarterly installments with a final balloon payment of $68.6 million due at maturity in June 2022. The Lena Facility bears interest at an annual rate equal to LIBOR plus a margin of 1.9%. The facility is secured by a vessel mortgage on the Lena Knutsen . The Lena Knutsen , assignments of earnings, charterparty contracts and insurance proceeds are pledged as collateral for the Lena Facility. The Partnership and KNOT Shuttle Tankers AS are the sole guarantors.
The Lena Facility contains the following financial covenants:
·
Aggregate market value of the Tordis Knutsen, the Vigdis Knutsen and the Lena Knutsen shall not be less than 130% of the aggregate outstanding balance under the Tordis Facility, the Vigdis Facility and the Lena Facility at any time;
·
Positive working capital of the borrower and the Partnership;
·
Minimum liquidity of the Partnership of $15 million plus increments of $1.5 million for each owned vessel with less than 12 months remaining tenor on its employment contract up to 8 vessels and $1 million for each owned vessel with less than 12 months remaining tenor on its employment contract in excess of 8 vessels;
·
Minimum book equity ratio for the Partnership of 30%; and
·
Minimum EBITDA to interest ratio for the Partnership of 2.50.
The Lena Facility also identifies various events that may trigger mandatory reduction, prepayment and cancellation of the facility, including total loss or sale of a vessel and customary events of default. As of December 31, 2018, the borrower and the guarantors were in compliance with all covenants under this facility.
Brasil Loan Facility
In June 2017, KNOT Shuttle Tankers 32 AS, the subsidiary owning the Brasil Knutsen , as the borrower, entered into a secured loan facility (the “Brasil Facility”). The Brasil Facility is repayable in quarterly installments with a final balloon payment of $40.0 million due at maturity in July 2022. The Brasil Facility bears interest at an annual rate equal to LIBOR plus a margin of 2.3%. The facility is secured by a vessel mortgage on the Brasil Knutsen . The Brasil Knutsen , assignments of earnings, charterparty contracts and insurance proceeds are pledged as collateral for the Brasil Facility. The Partnership and KNOT Shuttle Tankers AS are the sole guarantors.
The Brasil Facility contains the following financial covenants:
·
Market value of the Brasil Knutsen shall not be less than 125% of the of the outstanding balance under the Brasil Facility for the first four years, and 135% thereafter;
·
Positive working capital of the borrower and the Partnership;
·
Minimum liquidity of the Partnership of $15 million plus increments of $1.5 million for each owned vessel with less than 12 months remaining tenor on its employment contract up to a total of eight (8) vessels and $1 million for each owned vessel with less than 12 months remaining tenor on its employment contract up to a total of twelve (12) vessels;
·
Minimum book equity ratio for the Partnership of 30%; and
·
Minimum EBITDA to interest ratio for the Partnership of 2.50.
The Brasil Facility also identifies various events that may trigger mandatory reduction, prepayment and cancellation of the facility, including total loss or sale of a vessel and customary events of default. As of December 31, 2018, the borrower and the guarantors were in compliance with all covenants under this facility.
Anna Loan Facility
In September 2016, KNOT Shuttle Tankers 30 AS, the subsidiary owning the Anna Knutsen , as the borrower, entered into a secured loan facility (the “Anna Facility”). The Anna Facility is repayable in quarterly installments with a final balloon payment of $57.1 million due at maturity in March 2022. The Anna Facility bears interest at an annual rate equal to LIBOR plus a margin of 2.0%. The facility is secured by a vessel mortgage on the Anna Knutsen . The Anna Knutsen , assignments of earnings, charterparty contracts and insurance proceeds are pledged as collateral for the Anna Facility. The Partnership and KNOT Shuttle Tankers AS are the sole guarantors.
The Anna Facility contains the following financial covenants:
·
Market value of the Anna Knutsen shall not be less than 130% of the aggregate outstanding balance under the Anna Facility at any time;
·
Positive working capital of the borrower and the Partnership;
·
Minimum liquidity of the Partnership of $15 million plus increments of $1.5 million for each owned vessel with less than 12 months remaining tenor on its employment contract up to 8 vessels and $1 million for each owned vessel with less than 12 months remaining tenor on its employment contract in excess of 8 vessels;
·
Minimum book equity ratio for the Partnership of 30%; and
·
Minimum EBITDA to interest ratio for the Partnership of 2.50.
The Anna Facility also identifies various events that may trigger mandatory reduction, prepayment and cancellation of the facility, including total loss or sale of a vessel and customary events of default. As of December 31, 2018, the borrower and the guarantors were in compliance with all covenants under this facility.
$25 Million Revolving Credit Facility
In August 2017, KNOT Shuttle Tankers AS entered into an unsecured revolving credit facility of $25 million with NTT Finance Corporation. The facility will mature in August 2019, bears interest at LIBOR plus a margin of 1.8% and has a commitment fee of 0.5% on the undrawn portion of the facility.

Income Taxes

Income Taxes12 Months Ended
Dec. 31, 2018
Income Taxes
Income Taxes17) Income Taxes
(a) Components of Current and Deferred Tax Expense
All of the income from continuing operations before income taxes was taxable to Norway and UK for the years ended December 31, 2018, 2017 and 2016. The entities and activities taxable to Norway are subject to the Norwegian tonnage tax regime. Under the Norwegian tonnage tax regime, the tax is based on the tonnage of the vessel, and the operating income is tax free. The net financial income and expense remains taxable as ordinary income tax for entities subject to the tonnage tax regime. See Note 2(r)—Income Taxes. The activities taxable to UK relates to KNOT UK and is based on the operating income for the entity.
The significant components of current and deferred income tax expense attributable to income from continuing operations for the years ended December 31, 2018, 2017 and 2016 are as follows:
Year Ended December 31,
(U.S. Dollars in thousands)
2018
2017
2016
Current tax benefit (expense)
$
(18)
$
(12)
$
(14)
Deferred tax benefit (expense)
20
28
29
Income tax benefit (expense)
$
2
$
16
$
15
(b) Taxation
Income taxes attributable to income from continuing operations was an income tax benefit (expense) of $2, $16 and $15 for the years ended December 31, 2018, 2017 and 2016, respectively, and differed from the amounts computed by applying the Norwegian and the UK ordinary income tax rate of 23% and 20% in 2018, respectively, by applying the Norwegian and the UK ordinary income tax rate of 24% and 20% in 2017, respectively, and by applying the Norwegian and the UK ordinary income tax rate of 25% and 20% in 2016, respectively, to pretax net income as a result of the following:
Year Ended December 31,
(U.S. Dollars in thousands)
2018
2017
2016
Income tax benefit (expense) at Norwegian tonnage tax regime
$
20
$
28
$
29
Income tax benefit (expense) within UK
(18)
(12)
(14)
Income tax benefit (expense)
$
2
$
16
$
15
Effective tax rate
0
%
0
%
0
%
(c) Components of Deferred Tax Assets and Liabilities
The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities as of December 31, 2018 and 2017 are presented below:
As of December 31,
(U.S. Dollars in thousands)
2018
2017
Deferred tax assets:
Financial derivatives
$
24
$
(12)
Financial loss carry forwards for tonnage tax
16,946
15,697
Total deferred tax asset
16,970
15,685
Less valuation allowance
(16,970)
(15,685)
Net deferred tax asset


Deferred tax liabilities:
Entrance tax
453
624
Total deferred tax liabilities
453
624
$
453
$
624
The net deferred tax liability is classified in the consolidated balance sheets as follows:
As of December 31,
(U.S. Dollars in thousands)
2018
2017
Current deferred tax asset
$

$

Non-current deferred tax liabilities
453
624
Net deferred tax liabilities
$
453
$
624
Changes in the net deferred tax liabilities at December 31, 2018 and 2017 are presented below:
As of December 31,
(U.S. Dollars in thousands)
2018
2017
Net deferred tax liabilities at January 1,
$
624
$
685
Aquisition of KNOT Shuttle Tankers 26 AS

99
Change in temporary differences
(142)
(198)
Translation differences
(29)
38
Net deferred tax liabilities at December 31,
$
453
$
624
The Partnership records a valuation allowance for deferred tax assets when it is more likely than not that some or all of the benefit from the deferred tax asset will not be realized. The valuation allowances were $17.0 million and $15.7 million as of December 31, 2018 and 2017, respectively. The valuation allowances relate to the financial loss carry forwards and other deferred tax assets for tonnage tax that, in the judgment of the Partnership, are more-likely-than not to be realized reflecting the Partnership’s cumulative loss position for tonnage tax. In assessing the realizability of deferred tax assets, the Partnership considers whether it is more-likely-than-not that some portion or all of the deferred tax assets will not be realized taking into account all the positive and negative evidence available. As of December 31, 2018, the Partnership determined that the deferred tax assets are likely to not be realized, and the booked value was, therefore, zero. There is no expiration date for losses carried forward.
After the reorganization of the Partnership’s predecessor’s activities into the new group structure in February 2013, all profit from continuing operations in Norway is taxable within the tonnage tax regime. The consequence of the reorganization is a one-time entrance tax into the Norwegian tonnage tax regime due to the Partnership’s acquisition of the shares in the subsidiary that owns the Fortaleza Knutsen and the Recife Knutsen . The total amount of the entrance tax was estimated to be approximately $3.0 million, which was recognized in the three months ended March 31, 2013. The entrance tax on this gain is payable over several years and is calculated by multiplying the Norwegian tax rate by the declining balance of the gain, which will decline by 20% each year. The Norwegian corporate tax rate was reduced from 24% in 2017 to 23% in 2018 and will be 22% effective as of January 1, 2019. The entrance tax had declined to approximately $2.7 million at December 31, 2013 due to translation effects and tax rate changes and at December 31, 2014 the entrance tax had declined to approximately $1.8 million due to paid entrance tax, change in tax rate and translation effects. At December 31, 2015 the entrance tax had declined to approximately $1.1 million due to paid entrance tax, change in tax rate and translation effects. At December 31, 2016 the entrance tax had declined to approximately $0.9 million due to paid entrance tax, change in tax rate and translation effects. At December 31, 2017 the entrance tax had declined to approximately $0.7 million due to paid entrance tax, change in tax rate and translation effects. At December 31, 2018 the entrance tax had declined to approximately $0.6 million due to paid entrance tax, change in tax rate and translation effects. The taxes payable, mainly related to the entrance tax, are calculated based on a tax rate of 23% for 2018 and 24% for 2017, and the deferred tax liabilities, also mainly related to the entrance tax, are calculated based on a tax rate of 22% and 23% effective as from January 1, 2019 and January 1, 2018, respectively. Income tax expense within the UK of $18,331 and $11,563 for 2018 and 2017, respectively, was calculated by multiplying the tax basis with the UK tax rate of 20%.
As of December 31, 2018, the total income taxes payable are estimated to be $0.1 million and consist of payable entrance tax and ordinary UK corporation tax. As of December 31, 2017, the total income taxes payable were estimated to be $0.2 million and consist of payable entrance tax and ordinary UK corporation tax.
As of December 31, 2018, approximately $0.1 million of the estimated entrance tax of $0.6 million is estimated to be payable in the first and second quarter of 2019 and is presented as income taxes payable, while $0.5 million is presented as non-current deferred taxes payable. As of December 31, 2017, approximately $0.2 million of the estimated entrance tax of $0.7 million was estimated to be payable in the first and second quarter of 2018 and was presented as income taxes payable, while $0.5 million was presented as non-current deferred taxes payable. Additionally, a tax liability of approximately $0.1 million was recorded as deferred taxes payable and relates to the acquisition of KNOT Shuttle Tankers 26 AS.
The tax loss carry forward from ordinary taxation and financial loss carry forwards for tonnage tax have no expiration dates.
The Partnership’s Norwegian income tax returns are subject to examination by Norwegian tax authorities going back ten years from 2014. The Partnership had no unrecognized tax benefits as December 31, 2018 and 2017. During the years ended December 31, 2018 and 2017, the Partnership did not incur any interest or penalties on its tax return.
On December 14, 2017, the Norwegian government concluded the negotiations with the EFTA Surveillance Authority regarding the Norwegian tonnage tax regime, which has been approved for another ten years, until 2027. Pursuant to the approval, Norway has introduced restrictions that eliminates the ability of companies that own vessels under certain bareboat charters to qualify for the Norwegian tonnage tax regime. Companies that no longer qualify for the Norwegian tonnage tax regime will instead be subject to Norwegian corporate income tax. However, there are no limitations on intra-group bareboat chartering, as well as bareboat charters where crewing services are carried out by a related party. In order to constitute a related party, a minimum of 25% ownership/control is required, according to the “associated enterprise” definition in the ATAD directive (Council Directive EU 2016/1164.) Due to the fact that KNOT has an ownership interest in the Partnership that exceeds 25% as well as an ownership interest of 100% in KNOT Management and KNOT Management Denmark AS which provide services to the Vessels owned by the Partnership which operate on bareboat charters, the Vessels operating on bareboat charters are effectively seen as time charter services to the customer. The services are provided to the charterer. If this related party situation is ended, other alternatives and possibly mitigating measures must be evaluated.

Related Party Transactions

Related Party Transactions12 Months Ended
Dec. 31, 2018
Related Party Transactions
Related Party Transactions18) Related Party Transactions
(a) Related Parties
Prior to the IPO, the Partnership’s predecessor operated as an integrated part of KNOT. KNOT is owned 50% by TSSI and 50% by Nippon Yusen Kaisha (“NYK”).
The Windsor Knutsen , the Bodil Knutsen , the Carmen Knutsen , the Hilda Knutsen , the Torill Knutsen , the Ingrid Knutsen , the Raquel Knutsen , the Tordis Knutsen, the Vigdis Knutsen, the Lena Knutsen , the Brasil Knutsen and the Anna Knutsen, all of which operate under time charters, are subject to technical management agreements pursuant to which certain crew, technical and commercial management services are provided by KNOT Management or KNOT Management Denmark AS (“KNOT Management Denmark”). Under these technical management agreements, the Partnership’s subsidiaries pay fees to and reimburse the costs and expenses of KNOT Management. The Fortaleza Knutsen , the Recife Knutsen , the Dan Cisne and the Dan Sabia operate under bareboat charters and, as a result, the customer is responsible for providing the crew, technical and commercial management of the vessel. However, each of these vessels are subject to management and administration agreements with either KNOT Management or KNOT Management Denmark, a 100% owned subsidiary of KNOT, pursuant to which these companies provide general monitoring services for the vessels in exchange for an annual fee.
The Partnership is a party to an administrative services agreement with KNOT UK, pursuant to which KNOT UK provides administrative services, and KNOT UK is permitted to subcontract certain of the administrative services provided under the administrative services agreement to KOAS UK and KOAS. On May 7, 2015, the Partnership entered into an amendment to the administrative services agreement, which allows KNOT UK to also subcontract administrative services to KNOT Management. Effective as of February 26, 2018, the Partnership entered into a second amendment to the administrative services agreement extending the term of the agreement indefinitely, subject to termination by any party upon 90 days’ notice for any reason.
The amounts of such costs and expenses included in the consolidated statements of operations for the years ended December 31, 2018, 2017 and 2016 are as follows:
Year Ended December 31,
(U.S. Dollars in thousands)
2018
2017
2016
Statements of operations:
Other income:
Guarantee income from KNOT (1)
$
749
$
1,499
$
770
Operating expenses:
Technical and operational management fee from KNOT to Vessels (2)
6,491
4,617
2,971
General and administrative expenses:
Administration fee from KNOT Management (3)
1,434
1,457
1,279
Administration fee from KOAS (3)
583
461
382
Administration fee from KOAS UK (3)
123
122
145
Administration and management fee from KNOT (4)
161
149
203
Finance income (expense):
Interest expense charged from KNOT (5)

(52)
(128)
Total income (expenses)
$
(8,043)
$
(5,359)
$
(4,338)
(1)
Guarantee income from KNOT : Pursuant to the Omnibus Agreement, KNOT agreed to guarantee the payments of the hire rate under the initial charter of the Bodil Knutsen and Windsor Knutsen for a period of five years from the closing date of the IPO (until April 15, 2018). In October 2015, the Windsor Knutsen commenced on a new Shell time charter with a hire rate below the hire rate in the initial charter. The difference between the new hire rate and the initial rate was paid by KNOT until April 15, 2018. The Vigdis Knutsen suffered damages to its hull in connection with a ship-to-ship loading on May 24, 2017 and the vessel went off-hire 6 days in June 2017 due to repairs of the damage. In connection with the Vigdis Knutsen acquisition, KNOT agreed to pay for the repair cost and charter hire lost in connection with the incident. The reimbursement from KNOT for lost charter hire is accounted for as guarantee income. See Note 18(b)—Related Party Transactions—Guarantees and Indemnifications.
(2)
Technical and operational management fee from KNOT Management or KNOT Management Denmark to Vessels : KNOT Management or KNOT Management Denmark provides technical and operational management of the vessels on time charter including crewing, purchasing, maintenance and other operational service. In addition, there is also a charge for 24‑hour emergency response services provided by KNOT Management for all vessels managed by KNOT Management.
(3)
Administration fee from KNOT Management and Knutsen OAS Shipping AS (“KOAS”) and Knutsen OAS (UK) Ltd. (“KOAS UK”) : Administration costs include the compensation and benefits of KNOT Management’s management and administrative staff as well as other general and administration expenses. Some benefits are also provided by KOAS and KOAS UK. Net administration costs are total administration cost plus a 5% margin, reduced for the total fees for services delivered by the administration staffs and the estimated shareholder costs for KNOT that have not been allocated. As such, the level of net administration costs as a basis for the allocation can vary from year to year based on the administration and financing services offered by KNOT to all the vessels in its fleet each year. KNOT Management also charges each subsidiary a fixed annual fee for the preparation of the statutory financial statement.
(4)
Administration and management fee from KNOT Management and KNOT Management Denmark: For bareboat charters, the shipowner is not responsible for providing crewing or other operational services and the customer is responsible for all vessel operating expenses and voyage expenses. However, each of the vessels under bareboat charters is subject to a management and administration agreement with either KNOT Management or KNOT Management Denmark, pursuant to which these companies provide general monitoring services for the vessels in exchange for an annual fee.
(5)
Interest expense charged from KNOT: KNOT invoiced interest (expense) income for any outstanding payables to (receivable from) owners and affiliates to the vessel-owning subsidiaries.
(b) Guarantees and Indemnifications
Pursuant to the Omnibus Agreement, KNOT agreed to guarantee the payments of the hire rate under the initial charters of each of the Windsor Knutsen and the Bodil Knutsen for a period of five years from the closing date of the IPO (until April 15, 2018).
In April 2014, the Partnership was notified that Shell would not exercise its option to extend the Windsor Knutsen time charter after the expiration of its initial term. The vessel was re-delivered on July 28, 2014. In order to comply with its obligations under the Omnibus Agreement, on July 29, 2014, KNOT and the Partnership entered into a time charter for the vessel at a rate of hire that would have been in effect during the option period under the previous Shell time charter. This charter was effective until the new Shell time charter commenced in October 2015. The new Shell charter has a hire rate that is lower than the hire rate in the initial charter. The difference between the new hire rate and the initial rate was paid by KNOT until April 15, 2018.
On June 1, 2017, the Partnership acquired KNOT’s 100% interest in KNOT Shuttle Tankers 25 AS, the company that owns and operate the Vigdis Knutsen. Shortly before the closing of the acquisition and on May 24, 2017, the Vigdis Knutsen suffered damages to its hull in connection with a ship-to-ship loading and the vessel went off-hire 6 days in June 2017 due to repairs of the damage. In connection with the Vigdis Knutsen acquisition, KNOT agreed to pay for the repair cost and charter hire lost in connection with the incident.
Under the Omnibus Agreement, KNOT agreed to indemnify the Partnership until April 15, 2018 (or for a period of at least three years after the purchase of the Hilda Knutsen , the Torill Knutsen , the Ingrid Knutsen and the Raquel Knutsen , as applicable), against certain environmental and toxic tort liabilities with respect to certain assets that KNOT contributed or sold to the Partnership to the extent arising prior to the time they were contributed or sold. However, claims are subject to a deductible of $0.5 million and an aggregate cap of $5 million.
(c) Transactions with Management and Directors
Trygve Seglem, the Chairman of the Partnership’s board of directors and the President and CEO of KNOT, controls Seglem Holding AS, which owns 100% of the equity interest in TSSI, which controls KOAS. TSSI owns 50% of the equity interest in KNOT. NYK, which owns 50% of the equity interest in KNOT, has management and administrative personnel on secondment to KNOT.
See the footnotes to Note 18(a)—Related Party Transactions—Related Parties for a discussion of the allocation principles for KNOT’s administrative costs, including management and administrative staff, included in the consolidated statements of operations.
Directors each receive a director fee of $50,000 per year. Members of the audit and conflicts committees each receive a committee fee of $12,000 and the Chairman of such committees receive an additional fee of $3,000 per year.
(d) Amounts Due from and Due to Related Parties
Balances with related parties consisted of the following:
At December 31,
At December 31,
(U.S. Dollars in thousands)
2018
2017
Balance Sheet:
Trading balances due from KOAS
$
466
$
24
Trading balances due from KNOT and affiliates
675
547
Amount due from related parties
$
1,141
$
571
Trading balances due to KOAS
$
629
$
898
Trading balances due to KNOT and affiliates
441
4,552
Amount due to related parties
$
1,070
$
5,450
Amounts due from and due to related parties are unsecured and intended to be settled in the ordinary course of business. The majority of these related party transactions relate to vessel management and other fees due to KNOT, KNOT Management, KOAS UK and KOAS.
(e) Trade accounts payables
Trade accounts payables to related parties are included in total trade accounts payables in the balance sheet. The balances to related parties consisted of the following:
At December 31,
At December 31,
(U.S. Dollars in thousands)
2018
2017
Balance Sheet:
Trading balances due to KOAS
$
381
$
864
Trading balances due to KNOT and affiliates
411
548
Trade accounts payables to related parties
$
792
$
1,412
(f) Acquisitions from KNOT
On December 1, 2016, the Partnership acquired KNOT’s 100% interest in Knutsen Shuttle Tankers 19 AS, the company that owns and operates the Raquel Knutsen . As part of the financing for the purchase of the Raquel Knutsen, KNOT provided the $25.0 million Seller’s Credit and Seller’s Loan. The Seller’s Credit and the Seller’s Loan, including accrued interest were repaid in full in January 2017. This acquisition was accounted for as an acquisition of a business.
On March 1, 2017, the Partnership acquired KNOT’s 100% interest in KNOT Shuttle Tankers 24 AS, the company that owns and operates the Tordis Knutsen. This acquisition was accounted for as an acquisition of a business.
On June 1, 2017, the Partnership acquired KNOT’s 100% interest in KNOT Shuttle Tankers 25 AS, the company that owns and operates the Vigdis Knutsen. This acquisition was accounted for as an acquisition of a business.
On September 30, 2017, the Partnership acquired KNOT’s 100% interest in KNOT Shuttle Tankers 26 AS, the company that owns and operates the Lena Knutsen. This acquisition was accounted for as an acquisition of a business.
On December 15, 2017, the Partnership acquired KNOT’s 100% interest in KNOT Shuttle Tankers 32 AS, the company that owns and operates the Brasil Knutsen. This acquisition was accounted for as an acquisition of a business.
On March 1, 2018, the Partnership acquired KNOT’s 100% interest in KNOT Shuttle Tankers 30 AS, the company that owns and operates the Anna Knutsen. This acquisition was accounted for as an acquisition of assets.
The board of directors of the Partnership and the Conflicts Committee of the board approved the purchase price for each transaction described above. The Conflicts Committee retained a financial advisor to assist with its evaluation of each of the transactions. See Note 21—Acquisitions.

Commitments and Contingencies

Commitments and Contingencies12 Months Ended
Dec. 31, 2018
Commitments and Contingencies
Commitments and Contingencies19) Commitments and Contingencies
Assets Pledged
As of December 31, 2018 and 2017, Vessels with a book value of $1,767 million and $1,723 million, respectively, were pledged as security held as guarantee for the Partnership’s long-term debt and interest rate swap obligations. See Note 10—Derivative Instruments, Note 13—Vessels and Equipment and Note 16—Long-Term Debt.
Claims and Legal Proceedings
Under the Partnership’s time charters, claims to reduce the hire rate payments can be made if the Vessel does not perform to certain specifications in the agreements. An accrual of $0.4 million for a probable claim was recorded for the year ended December 31, 2017. No accrual for possible claim was recorded for the years ended December 31, 2018 and 2016.
From time to time, the Partnership is involved in various claims and legal actions arising in the ordinary course of business. In the opinion of management, the ultimate disposition of these matters will not have a material adverse effect on the consolidated financial position, results of operations or cash flows.
Insurance
The Partnership maintains insurance on all the Vessels to insure against marine and war risks, which include damage to or total loss of the Vessels, subject to deductible amounts that average $0.15 million per Vessel, and loss of hire.
Under the loss of hire policies, the insurer will pay a compensation for the lost hire rate agreed in respect of each Vessel for each day, in excess of 14 deductible days, for the time that the Vessel is out of service as a result of damage, for a maximum of 180 days. In addition, the Partnership maintains protection and indemnity insurance, which covers third-party legal liabilities arising in connection with the Vessels’ activities, including, among other things, the injury or death of third-party persons, loss or damage to cargo, claims arising from collisions with other vessels and other damage to other third-party property, including pollution arising from oil or other substances. This insurance is unlimited, except for pollution, which is limited to $1 billion per vessel per incident. The protection and indemnity insurance is maintained through a protection and indemnity association, and as a member of the association, the Partnership may be required to pay amounts above budgeted premiums if the member claims exceed association reserves, subject to certain reinsured amounts. If the Partnership experiences multiple claims each with individual deductibles, losses due to risks that are not insured or claims for insured risks that are not paid, it could have a material adverse effect on the Partnership’s results of operations and financial condition.
Raquel Knutsen
In February 2017, the Raquel Knutsen damaged its propeller hub. As a result, the Vessel was off-hire from February 22, 2017 to May 15, 2017 for repairs. Under the Partnership’s loss of hire policies, its insurer will pay the Partnership the hire rate agreed in respect of each vessel for each day, in excess of 14 deductible days, for the time that the Vessel is out of service as a result of damage, for a maximum of 180 days. For the year ended December 31, 2017, the Partnership received payments for loss of hire insurance of $3.4 million which was recorded as a component of total revenues since day rates are recovered under terms of the policy.
In addition, for the year ended December 31, 2017, the Partnership recorded $3.9 million for recoveries up to the amount of loss under hull and machinery insurance for the repairs as a result of the propeller hub damage to the Raquel Knutsen. This is classified under vessel operating expense along with cost of the repairs of $4.2 million for the period, resulting in a net expense of $0.3 million. See Note 8—Insurance Proceeds.
Carmen Knutsen
During the fourth quarter of 2017, the Carmen Knutsen undertook her 5‑year special drydocking survey. During dismantling for overhaul, a technical default with her controllable pitch propeller was found. As a result, the Vessel went to a different yard to complete the repair. Repairs were completed and the Vessel was back on hire on January 1, 2018. The additional off-hire and technical costs were subject to an insurance claim. Under its loss of hire insurance policies, the Partnership’s insurer is expected to pay the hire rate agreed in respect of the Carmen Knutsen for each day in excess of 14 deductible days while the Vessel was off-hire as a result of the repairs of the controllable pitch propeller. For the years ended December 31, 2018 and 2017, the Partnership recorded $0.45 million and $1.75 million, respectively, for loss of hire which were recorded as a component of total revenues since day rates are recovered under the terms of the policy.
For the year ended December 31, 2017, the Partnership recorded $2.40 million to vessel operating expense as an estimate of the cost of repairs of the controllable pitch propeller. During 2018, an additional repair cost of $0.15 million was recorded to vessel operating expenses. As of December 31, 2018, the Partnership has received payments and recorded $2.25 million for hull and machinery repairs, resulting in a net expense of $0.30 million. See Note 8—Insurance Proceeds.

Earnings per Unit and Cash Dist

Earnings per Unit and Cash Distributions12 Months Ended
Dec. 31, 2018
Earnings per Unit and Cash Distributions
Earnings per Unit and Cash Distributions20) Earnings per Unit and Cash Distributions
The calculations of basic and diluted earnings per unit (1) are presented below:
Year Ended December 31,
(U.S. Dollars in thousands, except per unit data)
2018
2017
2016
Net income
$
82,165
$
68,064
$
61,102
Less: Series A Preferred unitholders’ interest in net income
7,200
5,253

Net income attributable to the unitholders of KNOT Offshore Partners LP
74,965
62,811
61,102
Less: Distributions (2)
72,136
67,171
61,528
Under (over) distributed earnings
2,829
(4,360)
(426)
Under (over) distributed earnings attributable to:
Common unitholders (3)
2,777
(4,280)
(417)
Subordinated unitholders (3)



General Partner
52
(80)
(9)
Weighted average units outstanding (basic) (in thousands):
Common unitholders
32,694
30,068
23,917
Subordinated unitholders


3,277
General Partner
615
567
559
Weighted average units outstanding (diluted) (in thousands):
Common unitholders
36,370
32,804
23,917
Subordinated unitholders


3,277
General Partner
615
567
559
Earnings per unit (basic)
Common unitholders (4)
$
2.251
$
2.050
$
2.291
Subordinated unitholders (4)


1.542
General Partner
2.251
2.046
2.248
Earnings per unit (diluted):
Common unitholders (4)
$
2.217
$
2.037
$
2.291
Subordinated unitholders (4)


1.542
General Partner
2.251
2.046
2.248
Cash distributions declared and paid in the period per unit (5)
$
2.080
$
2.080
$
2.080
Subsequent event: Cash distributions declared and paid per unit relating to the period (6)
$
0.520
$
0.520
$
0.520
(1)
Earnings per unit have been calculated in accordance with the cash distribution provisions set forth in the Partnership Agreement.
(2)
This refers to distributions made or to be made in relation to the period irrespective of the declaration and payment dates and based on the numbers of units outstanding at the record date. This includes cash distributions to the IDR holder (KNOT) for the years ended December 31, 2018, 2017 and 2016 of $2.8 million, $2.6 million and $2.4 million, respectively.
(3)
On May 18, 2016, all subordinated units converted into common units on a one-for-one basis.
(4)
Until May 18, 2016, the net income attributable to the IDR holder is included in calculation of earnings per unit for subordinated unitholders, basic and diluted. The IDRs generally were not transferrable by KNOT prior to March 31, 2018. The net income attributable to IDRs for the year ended December 31, 2018, 2017 and 2016 was $2.8 million, $2.6 million and $2.4 million, respectively.
(5)
Refers to cash distributions declared and paid during the period.
(6)
Refers to cash distributions declared and paid subsequent to December 31, 2018.
As of December 31, 2018, 73.5% of the Partnership’s total number of common units outstanding representing limited partner interests were held by the public (in the form of 24,036,226 common units) and 26.2% of such units were held directly by KNOT (in the form of 8,567,500 common units). In addition, KNOT, through its ownership of the General Partner, held a 1.85% general partner interest (in the form of 615,117 general partner units) and a 0.3% limited partner interest (in the form of 90,368 common units).
Earnings per unit – basic is determined by dividing net income, after deducting the amount of net income attributable to the Series A Preferred Units and the distribution paid or to be made in relation to the period by the weighted-average number of units outstanding during the applicable period.
The computation of limited partners’ interest in net income per common unit – diluted assumes the issuance of common units for all potentially dilutive securities consisting of the Series A Preferred Units. Consequently, the net income attributable to limited partners’ interest is exclusive of any distributions on the Series A Preferred Units. In addition, the weigthed average number of common units outstanding has been increased assuming the Series A Preferred Units have been converted to common units using the if-converted method. The computation of limited partners’ interest in net income per common unit – diluted does not assume the issuance of Series A Preferred Units if the effect would be anti-dilutive.
The General Partner’s, common unitholders’ and subordinated unitholders’ interest in net income was calculated as if all net income was distributed according to the terms of the Partnership Agreement, regardless of whether those earnings would or could be distributed. The Partnership Agreement does not provide for the distribution of net income. Rather, it provides for the distribution of available cash, which is a contractually defined term that generally means all cash on hand at the end of each quarter less the amount of cash reserves established by the Partnership’s board of directors (the “Board”) to provide for the proper conduct of the Partnership’s business, including reserves for maintenance and replacement capital expenditures, anticipated credit needs and capital requirements and any accumulated distributions on, or redemptions of, the Series A Preferred Units. In addition, KNOT, as the initial holder of all IDRs, has the right, at the time when there are no subordinated units outstanding and it has received incentive distributions at the highest level to which it is entitled (48.0% for each of the prior four consecutive fiscal quarters), to reset the initial cash target distribution levels at higher levels based on the distribution at the time of the exercise of the reset election. Unlike available cash, net income is affected by non-cash items, such as depreciation and amortization, unrealized gains and losses on derivative instruments and unrealized foreign currency gains and losses.
Distributions of available cash from operating surplus for any quarter are required to be made in the following manner:
·
first , 98.15% to all common unitholders, pro rata, and 1.85% to the General Partner, until each outstanding common unit has received an amount equal to $0.375 (the “MQD”) for that quarter;
·
second , 98.15% to all common unitholders, pro rata, and 1.85% to the General Partner, until each outstanding common unit has received a total of $0.43125 (the “first target distribution”) for that quarter;
·
third , 85.15% to all common unitholders, pro rata, 1.85% to the General Partner, and 13% to the IDR holders, pro rata, until each outstanding common unit has received a total of $0.46875 (the “second target distribution”) for that quarter;
·
fourth , 75.15% to all common unitholders, pro rata, 1.85% to the General Partner, and 23% to the IDR holders, pro rata, until each outstanding common unit has received a total of $0.5625 (the “third target distribution”) for that quarter; and
·
thereafter , 50.15% to all common unitholders, pro rata, 1.85% to the General Partner, and 48% to the IDR holders, pro rata.
The percentage interests set forth above assumed that the General Partner continues to own a 1.85% general partner interest and that the Partnership has not issued additional classes of equity securities.

Acquisitions

Acquisitions12 Months Ended
Dec. 31, 2018
Acquisitions
Acquisitions21) Acquisitions
During the years ended December 31, 2016 through 2018, the Partnership acquired from KNOT equity interests in certain subsidiaries which own and operate the Raquel Knutsen , the Tordis Knutsen, the Vigdis Knutsen, the Lena Knutsen , the Brasil Knutsen and the Anna Knutsen.
The board of directors of the Partnership and the Conflicts Committee approved the purchase price for each transaction. The Conflicts Committee retained a financial advisor to assist with its evaluation of the transactions. The cost of the fee paid to the financial advisor was divided equally between the Partnership and KNOT. Acquisition related costs of $0.1 million, $0.2 million and $0.1 million as of December 31, 2018, 2017 and 2016, respectively, were expensed as incurred under general and administrative expenses. The allocation of the purchase price to acquired identifiable assets was based on their estimated fair values at the date of acquisition. The purchase price of each acquisition has been allocated to the identifiable assets acquired. The details of each transaction are as follows:
Final
Final
Final
Anna Knutsen
Brasil Knutsen
Lena Knutsen
March 1,
December 15,
September 30,
(U.S. Dollars in thousands)
2018
2017
2017
Purchase consideration (1)
$
19,913
$
5,764
$
33,235
Less: Fair value of net assets acquired:
Vessels and equipment (2)
120,274
96,000
142,457
Cash
4,537
5,217
470
Inventories
257
146
243
Derivatives assets
1,839

1,729
Others current assets
111
125
193
Amounts due from related parties
520
2
23,599
Long-term debt
(84,217)
(59,000)
(111,068)
Long-term debt from related parties
(22,535)

(22,706)
Deferred debt issuance costs
1,228
618
867
Trade accounts payable
(971)
(154)
(256)
Accrued expenses
(1,013)
(1,185)
(224)
Prepaid charter and deferred revenue


(1,758)
Amounts due to related parties
(117)
(36,005)
(186)
Income tax payable


(125)
Subtotal
19,913
5,764
33,235
Difference between the purchase price and fair value of net assets acquired
$

$

$

Final
Final
Final
Vigdis Knutsen
Tordis Knutsen
Raquel Knutsen
June 1,
March 1,
December 1,
(U.S. Dollars in thousands)
2017
2017
2016
Purchase consideration (1)
$
31,759
$
32,983
$
20,252
Less: Fair value of net assets acquired:
Vessels and equipment (2)
145,772
145,754
116,751
Intangibles: Above market time charter
1,458
1,468

Cash
3,438
609
7,146
Inventories
190
129
307
Derivatives assets
226
1,377
207
Others current assets
128
1,348
183
Amounts due from related parties
18,374
20,834
59
Long-term debt
(114,411)
(114,411)
(79,950)
Long-term debt from related parties
(22,703)
(22,960)
(24,019)
Deferred debt issuance costs
928
795
1,059
Trade accounts payable
(187)
(106)
(167)
Accrued expenses
(1,082)
(503)
(1,179)
Amounts due to related parties
(372)
(1,351)
(145)
Income tax payable



Subtotal
31,759
32,983
20,252
Difference between the purchase price and fair value of net assets acquired
$

$

$

(1)
The purchase consideration comprises the following:
Final
Final
Final
Anna Knutsen
Brasil Knutsen
Lena Knutsen
March 1,
December 15,
September 30,
(U.S. Dollars in thousands)
2018
2017
2017
Cash consideration paid to KNOT (from KNOT)
$
14,637
$
2,383
$
33,343
Purchase price adjustments
5,276
3,381
(108)
Purchase price
$
19,913
$
5,764
$
33,235
Final
Final
Final
Vigdis Knutsen
Tordis Knutsen
Raquel Knutsen
June 1,
March 1,
December 1,
(U.S. Dollars in thousands)
2017
2017
2016
Cash consideration paid to KNOT (from KNOT)
$
28,109
$
31,242
$
(12,019)
Purchase price adjustments
3,650
1,741
7,271
Seller’s credit


12,981
Seller’s loan


12,019
Purchase price
$
31,759
$
32,983
$
20,252
(2)
Vessel and equipment includes allocation to drydocking for the following vessels (in thousands): Anna Knutsen of $2,329, Brasil Knutsen of $260, Lena Knutsen of $2,741, Vigdis Knutsen of $2,709, Tordis Knutsen of $2,753 and Raquel Knutsen of $1,663.
Anna Knutsen
On March 1, 2018, the Partnership’s wholly owned subsidiary, KNOT Shuttle Tankers AS, acquired KNOT’s 100% interest in KNOT Shuttle Tankers 30 AS (“KNOT 30”), the company that owns and operates the Anna Knutsen. The purchase price for the vessel was $120.0 million, less $106.8 million of outstanding indebtedness, plus approximately $1.4 million for certain capitalized fees related to the financing of the vessel and plus other purchase price adjustments of $5.3 million.
Following of adoption of ASU 2017‑01, effective from January 1, 2018, Business Combinations: Clarifying the Definition of a Business, the Partnership accounted for this acquisition as an acquisition of an asset. The cost of the group of assets acquired in the asset acquisition has been allocated to the individual assets acquired or liabilities assumed based on their relative fair values.
Brasil Knutsen
On December 15, 2017, the Partnership’s wholly owned subsidiary, KNOT Shuttle Tankers AS, acquired KNOT’s 100% interest in KNOT Shuttle Tankers 32 AS (“KNOT 32”), the company that owns and operates the Brasil Knutsen. The purchase price was $96.0 million, less $59.0 million of outstanding indebtedness, less approximately $35.2 million for a loan owed by KNOT 32 to KNOT (the “Company Liquidity Loan”), plus approximately $0.6 million for certain capitalized fees related to the financing of the Brasil Knutsen , and plus $3.4 million of post-closing adjustments for working capital. The cash portion of the purchase price was financed with the proceeds from the Partnership’s public offering of 3,000,000 common units which closed on November 9, 2017. See Note 22—Equity Offerings and Sale of Series A Preferred Units—Equity Offerings. The Partnership accounted for this acquisition as an acquisition of a business. The purchase price of the acquisition has been allocated to the identifiable assets acquired. The allocation of the purchase price to acquired identifiable assets was based on their fair values at the date of acquisition.
Revenue and profit contributions
The Brasil Knutsen business contributed revenues of $0.7 million and net income of $0.3 million to the Partnership for the period from December 15, 2017 to December 31, 2017.
Pro forma financial information
The table below shows comparative summarized consolidated pro forma financial information for the Partnership for the year ended December 31, 2017, giving effect to the Partnership’s acquisition and financing of the Brasil Knutsen as if this acquisition had taken place on January 1, 2017. KNOT acquired the Brasil Knutsen from Chevron in July 2017 and the vessel was not operating on any contract at the time KNOT bought the vessel. From July 2017, the Brasil Knutsen operated on short term contracts until it commenced its time charter contract with Galp in November 2017.
Unaudited
Year Ended
(U.S. Dollars in thousands)
December 31, 2017
Revenue
$
223,220
Net income
64,034
Included in the pro forma adjustments is depreciation related to the purchase price allocations performed on the acquired identifiable assets as if the acquisition had taken place on January 1, 2017. In addition, the pro forma adjustments reflect changes in guarantors.
Lena Knutsen
On September 30, 2017, KNOT Shuttle Tankers AS acquired KNOT’s 100% interest in KNOT Shuttle Tankers 26 AS (“KNOT 26”), the company that owns and operates the Lena Knutsen . The purchase price was $142.0 million, less approximately $133.8 million of outstanding indebtedness, plus approximately $24.1 million for a receivable owed by KNOT to KNOT 26, plus approximately $1.0 million for certain capitalized fees related to the financing of the Lena Knutsen and less $0.1 million of post-closing adjustments for working capital and interest rate swaps. The Partnership accounted for this acquisition as an acquisition of a business. The purchase price of the acquisition has been allocated to the identifiable assets acquired. The allocation of the purchase price to acquired identifiable assets was based on their fair values at the date of acquisition.
Revenue and profit contributions
The Lena Knutsen business contributed revenues of $5.2 million and net loss of $0.1 million to the Partnership for the period from September 30, 2017 to December 31, 2017.
Pro forma financial information
The table below shows comparative summarized consolidated pro forma financial information for the Partnership for the year ended December 31, 2017, giving effect to the Partnership’s acquisition and financing of the Lena Knutsen as if this acquisition had taken place on January 1, 2017.
Unaudited
Year Ended
(U.S. Dollars in thousands)
December 31, 2017
Revenue
$
220,904
Net income
62,999
Included in the pro forma adjustments is depreciation related to the purchase price allocations performed on the acquired identifiable assets as if the acquisition had taken place on January 1, 2017. In addition, the pro forma adjustments reflect changes in guarantors as if the acquisition had taken place from the date of delivery of the vessel.
Vigdis Knutsen
On June 1, 2017, KNOT Shuttle Tankers AS, acquired KNOT’s 100% interest in KNOT Shuttle Tankers 25 AS (“KNOT 25”), the company that owns and operates the Vigdis Knutsen . The purchase price was $147.0 million, less approximately $137.7 million of outstanding indebtedness, plus approximately $17.9 million for a receivable owed by KNOT to KNOT 25, plus approximately $0.9 million for certain capitalized fees related to the financing of the Vigdis Knutsen and plus $3.7 million of post-closing adjustments for working capital and interest rate swaps. The Partnership accounted for this acquisition as an acquisition of a business. The purchase price of the acquisition has been allocated to the identifiable assets acquired. The allocation of the purchase price to acquired identifiable assets was based on their fair values at the date of acquisition.
Revenue and profit contributions
The Vigdis Knutsen business contributed revenues of $11.8 million and net income of $2.6 million to the Partnership for the period from June 1, 2017 to December 31, 2017.
Pro forma financial information
The table below shows comparative summarized consolidated pro forma financial information for the Partnership for the year ended December 31, 2017, giving effect to the Partnership’s acquisition and financing of the Vigdis Knutsen as if this acquisition had taken place on January 1, 2017.
Unaudited
Year Ended
(U.S. Dollars in thousands)
December 31, 2017
Revenue
$
222,354
Net income
63,225
Included in the pro forma adjustments is depreciation related to the purchase price allocations performed on the acquired identifiable assets as if the acquisition had taken place on January 1, 2017. In addition, the pro forma adjustments reflect changes in guarantors and amortization of the above market time charter as if the acquisition had taken place from the date of delivery of the vessel.
Tordis Knutsen
On March 1, 2017, the Partnership’s wholly owned subsidiary, KNOT Shuttle Tankers AS, acquired KNOT’s 100% interest in KNOT Shuttle Tankers 24 AS (“KNOT 24”), the company that owns and operates the Tordis Knutsen . The purchase price was $147.0 million, less approximately $137.7 million of outstanding indebtedness, plus approximately $21.1 million for a receivable owed by KNOT to KNOT 24, plus approximately $0.8 million for certain capitalized fees related to the financing of the Tordis Knutsen and plus $1.7 million of post-closing adjustments for working capital and interest rate swaps. The cash portion of the purchase price was financed with the proceeds from the Partnership’s sale and issuance of 2,083,333 Series A Preferred Units which closed on February 2, 2017. See Note 23—Equity Offerings and Sale of Series A Preferred Units—Sale of Series A Preferred Units. The Partnership accounted for this acquisition as an acquisition of a business. The purchase price of the acquisition has been allocated to the identifiable assets acquired. The allocation of the purchase price to acquired identifiable assets was based on their fair values at the date of acquisition.
Revenue and profit contributions
The Tordis Knutsen business contributed revenues of $17.2 million and net income of $3.2 million to the Partnership for the period from March 1, 2017 to December 31, 2017.
Pro forma financial information
The table below shows comparative summarized consolidated pro forma financial information for the Partnership for the year ended December 31, 2017, giving effect to the Partnership’s acquisition and financing of the Tordis Knutsen as if this acquisition had taken place on January 1, 2017.
Unaudited
Year Ended
(U.S. Dollars in thousands)
December 31, 2017
Revenue
$
221,198
Net income
66,584
Included in the pro forma adjustments is depreciation related to the purchase price allocations performed on the acquired identifiable assets as if the acquisition had taken place on January 1, 2017. In addition, the pro forma adjustments reflect changes in guarantors and amortization of the above market time charter as if the acquisition had taken place from the date of delivery of the vessel.
Raquel Knutsen
On December 1, 2016, the Partnership’s wholly owned subsidiary, KNOT Shuttle Tankers AS, acquired KNOT’s 100% interest in Knutsen Shuttle Tankers 19 AS, the company that owns and operates the Raquel Knutsen . The purchase price was $116.5 million, less $103.5 million of outstanding indebtedness related to the vessel and plus other purchase price adjustments of $7.3 million. The Partnership accounted for this acquisition as an acquisition of a business. The purchase price of the acquisition has been allocated to the identifiable assets acquired. The allocation of the purchase price to acquired identifiable assets was based on their fair values at the date of acquisition.
Revenue and profit contributions
The Raquel Knutsen business contributed revenues of $1.5 million and net income of $0.2 million to the Partnership for the period from December 1, 2016 to December 31, 2016.
Pro forma financial information
The table below shows comparative summarized consolidated pro forma financial information for the Partnership for the year ended December 31, 2016, giving effect to the Partnership’s acquisition and financing of the Raquel Knutsen as if this acquisition had taken place on January 1, 2016.
Unaudited
Year Ended
(U.S. Dollars in thousands)
December 31, 2016
Revenue
$
190,229
Net income
65,101
Included in the pro forma adjustments is depreciation related to the purchase price allocations performed on the acquired identifiable assets as if the acquisition had taken place on January 1, 2016. In addition, the pro forma adjustments reflect changes in guarantors and amortization.

Equity Offerings and Sale of Se

Equity Offerings and Sale of Series A Preferred Units12 Months Ended
Dec. 31, 2018
Equity Offerings and Sale of Series A Preferred Units
Equity Offerings and Sale of Series A Preferred Units22) Equity Offerings and Sale of Series A Preferred Units
Equity Offerings
2018
January 2017
November 2017
Total 2017
2016
(U.S. Dollars in thousands)
Offering
Offering
Offering
Offering
Offering
Gross proceeds received
$

$
56,125
$
66,936
(1)
$
123,061
$

Less: Underwriters’ discount

925
660
1,585

Less: Offering expenses

300
230
530

Net proceeds received
$

$
54,900
$
66,046
$
120,946
$

(1)
Includes the General Partner’s 1.85% proportional capital contribution.
On November 9, 2017, the Partnership sold 3,000,000 common units in a public offering. In connection with the offering, the General Partner contributed a total of $1.2 million in order to maintain its 1.85% general partner interest in the Partnership. The total net proceeds from the offering and the related General Partner’s contribution were $66.0 million. The Partnership used the net proceeds from the offering to fund the cash portion of the purchase price of the Brasil Knutsen and to repay $43.5 million of borrowings under the revolving credit facility.
On January 10, 2017, the Partnership sold 2,500,000 common units, representing limited partner interests, in an underwritten public offering. The Partnership’s total net proceeds from the offering were $54.9 million. The Partnership used the net proceeds from the offering to fund the cash portion of the purchase price of the Tordis Knutsen and to repay debt and for general partnership purposes.
Sale of Series A Preferred units
February 2017
June 2017
Total
Series A
Series A
Series A
(U.S. Dollars in thousands)
Preferred Units
Preferred Units
Preferred Units
Gross proceeds received
$
50,000
$
40,000
$
90,000
Less: Fee
1,000
1,000
2,000
Less: Expenses
386
150
536
Net proceeds received
$
48,614
$
38,850
$
87,464
On February 2, 2017, the Partnership issued and sold in a private placement 2,083,333 Series A Preferred Units at a price of $24.00 per unit. After deducting fees and expenses, the net proceeds from the sale were $48.6 million. The Partnership used the net proceeds from the sale to fund the cash portion of the purchase price of the Tordis Knutsen and to repay debt and for general partnership purposes.
On June 30, 2017, the Partnership (i) issued and sold in a second private placement 1,666,667 additional Series A Preferred Units at a price of $24.00 per unit and (ii) amended and restated its Partnership Agreement to make certain amendments to the terms of the Series A Preferred Units, including the 2,083,333 Series A Preferred Units issued on February 2, 2017. After deducting estimated fees and expenses, the net proceeds of the sale were $38.9 million. The Partnership used $30.0 million of the net proceeds to repay the revolving credit facility, which was drawn in connection with acquisition of the Vigdis Knutsen.
The Series A Preferred Units rank senior to the common units as to the payment of distributions and amounts payable upon liquidation, dissolution or winding up. The Series A Preferred Units have a liquidation preference of $24.00 per unit, plus any Series A unpaid cash distributions, plus all accrued but unpaid distributions on such Series A Preferred Unit with respect to the quarter in which the liquidation occurs to the date fixed for the payment of any amount upon liquidation. The Series A Preferred Units are entitled to cumulative distributions from their initial issuance date, with distributions being calculated at an annual rate of 8.0% on the stated liquidation preference and payable quarterly in arrears within 45 days after the end of each quarter, when, as and if declared by the Board.
The Series A Preferred Units are generally convertible, at the option of the holders of the Series A Preferred Units, into common units commencing on February 2, 2019 at the then applicable conversion rate. The conversion rate will be subject to adjustment under certain circumstances. In addition, the conversion rate will be redetermined on a quarterly basis, such that the conversion rate will be equal to $24.00 (the “Issue Price”) divided by the product of (x) the book value per common unit at the end of the immediately preceding quarter (pro-forma for per unit cash distributions payable with respect to such quarter) multiplied by (y) the quotient of (i) the Issue Price divided by (ii) the book value per common unit on February 2, 2017. In addition, the Partnership may redeem the Series A Preferred Units at any time between February 2, 2019 and February 2, 2027 at the redemption price specified in the Partnership Agreement, provided, however, that upon notice from the Partnership to the holders of Series A Preferred Units of its intent to redeem, such holders may elect, instead, to convert their Series A Preferred Units into common units at the then applicable conversion rate. For the year ended December 31, 2018, the possible conversion of the Series A Preferred Units into common units are included in the calculation of the diluted earnings per unit. See Note 20—Earnings per Unit and Cash Distributions.
Upon a change of control of the Partnership, the holders of Series A Preferred Units will have the right to require cash redemption at 100% of the Issue Price. In addition, the holders of Series A Preferred Units will have the right to cause the Partnership to redeem the Series A Preferred Units on February 2, 2027 in, at the option of the Partnership, (i) cash at a price equal to 70% of the Issue Price or (ii) common units such that each Series A Preferred Unit receives common units worth 80% of the Issue Price (based on the volume-weighted average trading price, as adjusted for splits, combinations and other similar transactions, of the common units as reported on the NYSE for the 30 trading day period ending on the fifth trading day immediately prior to the redemption date) plus any accrued and unpaid distributions. In addition, at any time following February 2, 2019 and subject to certain conditions, the Partnership will have the right to convert the Series A Preferred Units into common units at the then applicable conversion rate if the aggregate market value (calculated as set forth in the partnership agreement) of the common units into which the then outstanding Series A Preferred Units are convertible, based on the then applicable conversion rate, is greater than 130% of the aggregate Issue Price of the then outstanding Series A Preferred Units.
The Series A Preferred Units have voting rights that are identical to the voting rights of the common units, except they do not have any right to nominate, appoint or elect any of the directors of the Board, except whenever distributions payable on the Series A Preferred Units have not been declared and paid for four consecutive quarters (a “Trigger Event”). Upon a Trigger Event, holders of Series A Preferred Units, together with the holders of any other series of preferred units upon which like rights have been conferred and are exercisable, may replace one of the members of the Board appointed by the General Partner with a person nominated by such holders, such nominee to serve until all accrued and unpaid distributions on the preferred units have been paid. The Series A Preferred Units are entitled to vote with the common units as a single class so that the Series A Preferred Units are entitled to one vote for each common unit into which the Series A Preferred Units are convertible at the time of voting.
For additional information about the Series A Preferred Units, please read the Partnership’s Report on Form 8‑A/A filed with the Securities and Exchange Commission on June 30, 2017.

Unit Activity

Unit Activity12 Months Ended
Dec. 31, 2018
Equity Offerings and Sale of Series A Preferred Units
Unit Activity23) Unit Activity
The following table shows the movement in the number of common units, subordinated units and general partner units during the years ended December 31, 2018, 2017 and 2016:
Common
Subordinated
General Partner
Convertible Preferred
(in units)
Units
Units
Units
Units
December 31, 2016
27,194,094

558,674

January 6, 2017: Public offering
2,500,000



February 2, 2017: Sale of Series A Preferred Units



2,083,333
June 30, 2017: Sale of Series A Preferred Units



1,666,667
November 8, 2017: Public offering
3,000,000

56,443

December 31, 2017
32,694,094

615,117
3,750,000
December 31, 2018
32,694,094

615,117
3,750,000
Originally approved on August 12, 2015, the common unit purchase program authorized the Partnership to repurchase up to 666,667 of its common units and the General Partner to purchase up to 333,333 common units of the Partnership. On August 10, 2016, the boards of directors of the Partnership and the General Partner each authorized an extension of the common unit purchase program to August 31, 2017. On August 9, 2017, the boards of directors of the Partnership and the General Partner authorized a further extension of the program to August 31, 2018. As of December 31, 2015, the Partnership and the General Partner had purchased 180,906 and 90,368 common units, respectively, pursuant to the program at an average purchase price of $12.71 per unit. No additional common units had been purchased by the Partnership or the General Partner as of the expiration date of the program on August 31, 2018.
All purchases are made pursuant to a single program and are allocated approximately two-thirds to the Partnership and one-third to the General Partner. There is no obligation to purchase any specific number of common units and the program may be modified, suspended, extended or terminated at any time. Common units repurchased by the Partnership under the program have been cancelled.
The subordination period for the 8,567,500 subordinated units ended on May 18, 2016. All of the subordinated units, which were owned by KNOT, converted to common units on a one-for-one basis.

Subsequent Events

Subsequent Events12 Months Ended
Dec. 31, 2018
Subsequent Events
Subsequent Events24) Subsequent Events
The Partnership has evaluated subsequent events from the balance sheet date through April 10, 2019, the date at which the audited consolidated financial statements were available to be issued, and determined that there are no other items to disclose, except as follows:
On February 14, 2019, the Partnership paid a quarterly cash distribution of $0.52 per common unit with respect to the quarter ended December 31, 2018. The aggregate amount of the paid distribution was was 18.0 million. On February 14, 2019, the Partnership also paid a cash distribution to holders of Series A Preferred Units with respect to the quarter ended December 31, 2018 in an aggregate amount equal to $1.8 million.
On November 29, 2018, the Partnership announced that John Costain has decided to resign as Chief Executive Officer and Chief Financial Officer of the Partnership as of May 31, 2019 in order to pursue other interests. The Partnership's Board has approved the appointment of Gary Chapman as the new Chief Executive Officer and Chief Financial Officer of the Partnership commencing June 1, 2019.
On December 17, 2018, the Partnership's subsidiary that owns the Windsor Knutsen and Shell agreed to suspend the vessel's time charter contract for a minimum of 10 months and a maximum of 12 months. The suspension period commenced March 4, 2019. During the suspension period, the Windsor Knutsen will operate under a time charter contract with Knutsen Shuttle Tankers Pool AS, on the same terms as the existing time charter contract with Shell.

Summary of Significant Accoun_2

Summary of Significant Accounting Policies (Policies)12 Months Ended
Dec. 31, 2018
Summary of Significant Accounting Policies
Basis of Preparation(a) Basis of Preparation
The consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”). All intercompany balances and transactions are eliminated.
The consolidated financial statements include the financial statements of the entities listed in Note 4—Subsidiaries.
Business Combinations and Asset Acquisitions(b) Business Combinations and Asset Acquisitions
Business combinations are accounted for under the purchase method of accounting. On acquisition, the identifiable assets, liabilities and contingent liabilities are measured at their fair values at the date of acquisition. Any excess of the cost of acquisition over the fair values of the identifiable net assets acquired is recognized as goodwill. The consideration transferred for an acquisition is measured at fair value of the consideration given. Acquisition related costs are expensed as incurred. The results of operations of the acquired businesses are included in the consolidated results as of the date of the applicable acquisition.
Dependent on the facts and circumstances, the assessment of a transaction may be considered the acquisition of an asset, when substantially all of the fair value of assets acquired is concentrated in a single identifiable asset, rather than a business combination. Asset acquisitions are accounted for by allocating the cost of the acquisition to the individual assets acquired and liabilities assumed on a relative fair value basis. Acquisition related costs are capitalized as a component of the assets acquired.
Reporting Currency(c) Reporting Currency
The consolidated financial statements are prepared in the reporting currency of U.S. Dollars. The functional currency of the vessel-owning Partnership subsidiaries is the U.S. Dollar, because the subsidiaries operate in the international shipping market, in which all revenues are U.S. Dollar-denominated and the majority of expenditures are made in U.S. Dollars. Transactions involving other currencies during the year are converted into U.S. Dollars using the exchange rates in effect at the time of the transactions. As of the balance sheet dates, monetary assets and liabilities that are denominated in currencies other than the U.S. Dollar are translated to reflect the year-end exchange rates. Resulting gains or losses are reflected separately in the accompanying consolidated statements of operations.
Use of Estimates(d) Use of Estimates
The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements, and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. Significant items subject to such estimates and assumptions include the useful lives and impairment of Vessels, drydocking, purchase price allocation and income taxes.
Revenues and Operating Expenses(e) Revenues and Operating Expenses
The Partnership recognizes revenues from time charters and bareboat charters as operating leases on a straight-line basis over the term of the charter, net of any commissions. Under time charters, revenue is not recognized during days the Vessel is off-hire. Revenue is recognized from delivery of the Vessel to the charterer, until the end of the contract period. Under time charters, the Partnership is responsible for providing the crewing and other services related to the Vessel's operations, the cost of which is included in the daily hire rate, except when off-hire. Under bareboat charters, the Partnership provides a specified Vessel for a fixed period of time at a specified day rate. Where the term of the contract is based on the duration of a single voyage, the partnership evaluates whether the voyage contain leases and if so recognize lease revenue as described above, and when not, recognizes revenue ASC 606 over time on a load-to-discharge basis.
Voyage expenses are all expenses unique to a particular voyage, including bunker fuel expenses, port fees, cargo loading and unloading expenses, canal tolls and agency fees. Voyage expenses are paid by the customer under time charter and bareboat charters. Voyage expenses are paid by the Partnership for spot contracts and during periods of off-hire and are recognized when incurred.
Vessel operating expenses include crewing, repairs and maintenance, insurance, stores, lube oils and communication expenses. Vessel operating expenses are paid by the Partnership for time charters, spot contracts and during off-hire and are recognized when incurred.
As further discussed in Note 18—Related Party Transactions, related parties have provided the management services for the Vessels and employ the crews that work on the Vessels. The Partnership has no direct employees and, accordingly, is not liable for any pension or post-retirement benefits.
Financial Income (Expense)(f) Financial Income (Expense)
Other finance expense includes external bank fees, commitment fees paid on undrawn revolving credit facility, financing service fees paid to related parties and guarantee commissions paid to external and related parties in connection with the Partnership’s debt and other bank services.
Cash and Cash Equivalents(g) Cash and Cash Equivalents
The Partnership considers all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents.
Restricted Cash(h) Restricted Cash
Restricted cash consists of bank deposits, which may only be used to settle principal payments under the Partnership’s Vessel financing arrangements.
Trade Accounts Receivable(i) Trade Accounts Receivable
Accounts receivable are recorded at the invoiced amount and do not bear interest. Under terms of the current time charters and bareboat charters, the customers are committed to pay for the full month’s charter the first day of each month. See Note 2(s)—Prepaid Charter. The allowance for doubtful accounts is the Partnership’s best estimate of the amount of probable credit losses in existing accounts receivable. The Partnership establishes provisions for doubtful accounts on a case-by-case basis when it is unlikely that required payments of specific amounts will occur. In establishing these provisions, the Partnership considers the financial condition of the customer as well as specific circumstances related to the receivable. Receivable amounts determined to be unrecoverable are written-off. There were no allowances for doubtful accounts or amounts written off against the allowance for doubtful accounts as of December 31, 2018 and 2017. The Partnership does not have any off-balance-sheet credit exposure related to its customers.
Inventories(j) Inventories
Inventories, which are comprised principally of lubricating oils, are stated at the lower of cost or net realizable value. For vessels on time charters or bareboat charters, there are no bunkers, as the charterer supplies the bunkers, which principally consist of fuel oil. Cost is determined using the first-in, first-out method for all inventories.
Other Current Assets(k) Other Current Assets
Other current assets principally consist of prepaid expenses and other receivables.
Vessels and Equipment(l) Vessels and Equipment
Vessels and equipment are stated at the historical acquisition or construction cost, including capitalized interest, supervision and technical and delivery cost, net of accumulated depreciation and impairment loss, if any. Expenditures for subsequent conversions and major improvements are capitalized, provided that such costs increase the earnings capacity or improve the efficiency or safety of the vessels.
Generally, the Partnership drydocks each vessel every 60 months until the vessel is 15 years old and every 30 months thereafter, as required for the renewal of certifications issued by classification societies. For vessels operating on time charters, the Partnership capitalizes the costs directly associated with the classification and regulatory requirements for inspection of the vessels and improvements incurred during drydocking. Drydock cost is depreciated on a straight-line basis over the period until the next planned drydocking takes place. The Partnership expenses costs related to routine repairs and maintenance performed during drydocking or as otherwise incurred. For vessels that are newly built or acquired, an element of the cost of the vessel is initially allocated to a drydock component and depreciated on a straight-line basis over the period until the next planned drydocking. When significant drydocking expenditures occur prior to the expiration of this period, the Partnership expenses the remaining balance of the original drydocking cost in the month of the subsequent drydocking. For vessels operating on bareboat charters, the charterparty bears the cost of any drydocking.
Depreciation on vessels and equipment is calculated on a straight-line basis over the asset’s estimated useful life, less an estimated residual value, as follows:
Useful Life
Hull
25 years
Anchor-handling, loading and unloading equipment
25 years
Main/auxiliary engine
25 years
Thruster, dynamic positioning systems, cranes and other equipment
25 years
Drydock costs
2.5 – 5 years
A Vessel is depreciated to its estimated residual value, which is calculated based on the weight of the ship and estimated steel price. Any cost related to the disposal is deducted from the residual value.
Capitalized Interest(m) Capitalized Interest
Interest expense incurred on the Partnership’s debt during the construction of the Vessels exceeding one year is capitalized during the construction period.
Impairment of Long-Lived Assets(n) Impairment of Long-Lived Assets
Vessels and equipment, vessels under construction and intangible assets subject to amortization are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If circumstances require a long-lived asset or asset group to be tested for possible impairment, the Partnership first compares undiscounted cash flows expected to be generated by that asset or asset group to its carrying value. If the carrying value of the long-lived asset or asset group is not recoverable on an undiscounted cash flow basis, impairment is recognized to the extent that the carrying value exceeds its fair value. Fair value is determined through various valuation techniques including discounted cash flow models, quoted market values and third-party independent appraisals, as considered necessary.
Goodwill and Intangibles(o) Goodwill and Intangibles
The Partnership allocates the cost of acquired companies to the identifiable tangible and intangible assets and liabilities acquired, with the remaining amount being classified as goodwill. Goodwill is not amortized but is reviewed for impairment annually or more frequently if impairment indicators are identified.
The Partnership tests goodwill for impairment using a two-step analysis, with the option of performing a qualitative assessment before performing the first step of the two-step analysis, whereby the carrying value of the reporting unit is compared to its fair value in the first step. If the carrying value of the reporting unit is greater than its fair value, the second step is performed, where the implied fair value of goodwill is compared to its carrying value. An impairment charge is recognized for the amount by which the carrying amount of goodwill exceeds its fair value. The fair value is estimated using the net present value of discounted cash flows of the reporting unit. The Partnership has only one reporting unit.
Intangible assets represent contractual rights for charters obtained in connection with business and asset acquisitions that have favorable contractual terms relative to market as of the acquisition dates. Contract liabilities represent contractual rights obtained in connection with business acquisitions that have unfavorable contractual terms relative to market as of the acquisition dates. The favorable and unfavorable contract rights have definite lives and are amortized to revenues over the period of the related contracts. Intangible assets with a definite life are tested for impairment whenever events or circumstances indicate that their carrying amount may not be recoverable. An impairment loss is recognized if the carrying amount exceeds the estimated fair value of the asset.
The contract related intangible assets and liabilities and their amortization periods at acquisition dates are as follows:
Intangible category
Amortization Period
Above market time charter-Tordis Knutsen
4.8 years
Above market time charter-Vigdis Knutsen
4.9 years
Unfavorable contractual rights-Fortaleza Knutsen
12 years
Unfavorable contractual rights-Recife Knutsen
12 years
The intangible for the above market value of the time charter contract associated with the Tordis Knutsen is amortized to time charter revenue on a straight line basis over the remaining term of the contract of approximately 4.8 years as of the acquisition date. The intangible for the above market value of the time charter contract associated with the Vigdis Knutsen is amortized to time charter revenue on a straight line basis over the remaining term of the contract of approximately 4.9 years as of the acquisition date.
The unfavorable contractual rights for charters associated with Foraleza Knutsen and Recife Knutsen were obtained in connection with a step acquisition in 2008 that had unfavorable contractual terms relative to market as of acquisition date. The Fortaleza Knutsen and the Recife Knutsen commenced on their 12 years’ fixed bareboat charters in March 2011 and August 2011, respectively. The unfavorable contract rights related to Fortaleza Knutsen and Recife Knutsen are amortized to bareboat revenues on a straight line basis over the 12 years’ contract period that expires in March 2023 and August 2023, respectively.
Debt Issuance Costs(p) Debt Issuance Costs
Debt issuance costs, including fees, commissions and legal expenses, are deferred and presented net of debt. Debt issuance costs of term loans are amortized over the term of the relevant loan. Amortization of debt issuance costs is included in interest expense. These costs are presented as a deduction from the corresponding liability, consistent with debt discount.
Derivative Instruments(q) Derivative Instruments
The Partnership uses derivatives to reduce market risks associated with its operations. The Partnership uses interest rate swaps for the management of interest risk exposure. The interest rate swaps effectively convert a portion of the Partnership’s debt from a floating to a fixed rate over the life of the transactions without an exchange of underlying principal.
The Partnership seeks to reduce its exposure to fluctuations in foreign exchange rates through the use of foreign currency forward contracts.
All derivative instruments are initially recorded at fair value as either assets or liabilities in the accompanying consolidated balance sheets and subsequently measured to fair value. The Partnership does not apply hedge accounting to its derivative instruments. Changes in the fair value of the derivative instruments are recognized in earnings. Gains and losses from the interest rate swap contracts of the Partnership related to long-term mortgage debt and foreign exchange forward contracts are recorded in realized and unrealized gain (loss) on derivative instruments in the consolidated statements of operations. Cash flows related to interest rate swap contracts are presented as cash flows provided by operating activities. Cash flows related to foreign exchange forward contracts entered into to economically hedge operating expenses in currencies other than U.S. Dollars are presented as cash flows provided by operating activities in the consolidated statements of cash flows, while cash flows related to foreign exchange forward contracts entered into to hedge contractual obligations to pay the shipyard in currencies other than functional currency of U.S. Dollars are presented as cash flows used in investing activities in the consolidated statements of cash flows.
Income Taxes(r) Income Taxes
Historically, part of the Partnership’s activities were subject to ordinary taxation and taxes were paid on taxable income (including operating income and net financial income and expense), while part of the activities were subject to the Norwegian Tonnage Tax Regime (the “tonnage tax regime”). Under the tonnage tax regime, the tax is based on the tonnage of the vessel, and operating income is tax free. The net financial income and expense remains taxable as ordinary income tax for entities subject to the tonnage tax regime. Income taxes arising from the part of activities subject to ordinary taxation are included in income tax expense in the consolidated statements of operations. For the portion of activities subject to the tonnage tax regime, tonnage taxes are classified as vessel operating expenses while the current and deferred taxes arising on net financial income and expense are reflected as income tax expense in the consolidated statements of operations. The amounts of tonnage tax included in operating expenses for the years ended December 31, 2018, 2017 and 2016 were $0.3 million, $0.2 million and $0.2 million, respectively.
The Partnership accounts for deferred income taxes using the liability method. Under the liability method, deferred tax assets and liabilities are recognized for the anticipated future tax effects of temporary differences between the financial statement basis and the tax basis of the Partnership’s assets and liabilities using enacted tax rates expected to apply to taxable income in the years in which these temporary differences are expected to be recovered or settled. A valuation allowance for deferred tax assets is recorded when it is more likely than not that some or all of the benefit from the deferred tax asset will not be realized.
Recognition of uncertain tax positions is dependent upon whether it is more-likely-than-not that a tax position taken or expected to be taken in a tax return will be sustained upon examination, including resolution of any related appeals or litigation processes, based on the technical merits of the position. If a tax position meets the more-likely-than-not recognition threshold, it is measured to determine the amount of benefit to recognize in the financial statements based on U.S. GAAP guidance. The Partnership recognizes interest and penalties related to uncertain tax positions in income tax expense.
Prepaid Charter(s) Prepaid Charter
Under terms of the time charters and bareboat charters, the customer pays for the month’s charter the first day of each month that is recorded as prepaid charter revenues.
Commitments, Contingencies and Insurance Proceeds(t) Commitments, Contingencies and Insurance Proceeds
Liabilities for loss contingencies arising from claims, assessments, litigation, fines and penalties and other sources are recorded when it is probable that a liability has been incurred and the amount can be reasonably estimated. Legal costs incurred in connection with loss contingencies are expensed as incurred. See Note 19—Commitments and Contingencies.
Insurance claims for property damage for recoveries up to the amount of loss recognized are recorded when the claims submitted to insurance carriers are probable of recovery. Claims for property damage in excess of the loss recognized and for loss of hire are considered gain contingencies, which are generally recognized when the proceeds are received.
Fair Value Measurements(u) Fair Value Measurements
The Partnership utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible. The Partnership determines fair value based on assumptions that market participants would use in pricing an asset or liability in the principal or most advantageous market. When considering market participant assumptions in fair value measurements, the following fair value hierarchy distinguishes between observable and unobservable inputs, which are categorized in one of the following levels:
·
Level 1 Inputs: Unadjusted quoted prices in active markets for identical assets or liabilities accessible to the reporting entity at the measurement date.
·
Level 2 Inputs: Other than quoted prices included in Level 1 inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the asset or liability.
·
Level 3 Inputs: Unobservable inputs for the asset or liability used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at the measurement date.
Recently Adopted Accounting Standards and New Accounting Standards Not Yet Adopted(v) Recently Adopted Accounting Standards
In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (ASC 606) , as subsequently updated by the FASB, which provides new authoritative guidance on the methods of revenue recognition and related disclosure requirements. This new standard supersedes existing revenue recognition requirements, including most industry-specific guidance. The new standard requires a company to recognize revenue when it transfers goods or services to customers in an amount that reflects the consideration that the company expects to receive for those goods or services. This update creates a five-step model and requires a company to exercise judgment when considering the terms of the contract(s) which include (i) identifying the contract(s) with the customer, (ii) identifying the separate performance obligation in the contract, (iii) determining the transaction price, (iv) allocating the transaction price to the separate performance obligations, and (v) recognizing revenue as each performance obligation is satisfied. Under the new standard, additional qualitative and quantitative disclosures are required. Effective January 1, 2018, the Partnership adopted the requirements of ASC 606 to new and existing contracts not yet completed as of January 1, 2018, using the modified retrospective approach where the cumulative effect of initially applying the standard is recorded as an adjustment to the opening balance of equity. The Partnership made an assessment on the various implementation aspects of ASU 2014-09 and its amendments, and since there are no changes to the timing or amount of revenue recognized, the Partnership has concluded that the effect of the implementation of this new standard will cause no material cumulative effect to the Partnership’s historical or future financial position, results of operations or cash flows.
In January 2017, the FASB issued ASU 2017-01, Business Combinations: Clarifying the Definition of a Business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The Partnership adopted this ASU prospectively from January 1, 2018. As a result, this increases the likelihood that future dropdowns of Vessels may be considered the acquisition of an asset rather than a business combination.
On March 1, 2018, the partnership’s wholly owned subsidiary, KNOT Shuttle tankers AS, acquired KNOT’s 100% interest in KNOT Shuttle Tankers 30 AS (“KNOT 30”), the company that owns and operates the Anna Knutsen. Following the adoption of ASU 2017-01, Business Combinations: Clarifying the Definition of a Business, the Partnership accounted for this acquisition as an acquisition of an asset. The cost of the group of assets acquired in the asset acquisition has been allocated to the individual assets acquired or liabilities assumed based on their relative fair values. See the Note 21—Acquisitions.
In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows: Classification of Certain Cash Receipts and Cash Payments . The new guidance clarifies how the predominance principle should be applied when cash receipts and cash payments have aspects of more than one class of cash flows. The Partnership adopted this ASU on January 1, 2018. The Partnership's adoption of this standard did not have a material impact on the Partnership's consolidated statement of cash flows or related disclosures.
In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows: Restricted Cash , which requires that restricted cash be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts presented on the statement of cash flows. The standard eliminates the presentation of transfers between cash and cash equivalents and restricted cash and restricted cash equivalents in the statement of cash flows. Additional disclosures are required for the nature of the restricted cash and restricted cash equivalents. The Partnership adopted this ASU on January 1, 2018 under a retrospective approach. The Partnership's adoption of this standard did not have a material impact on the Partnership's consolidated statement of cash flows or related disclosures.
There are no other recent accounting pronouncements, whose adoption had a material impact on the consolidated financial statements in the current year.
(w) New Accounting Standards Not Yet Adopted
In February 2016, the FASB issued ASU 2016-02, Leases (ASC 842) . The objective is to establish the principles that lessors and lessees shall apply to report useful information to users of financial statements about the amount, timing and uncertainty of cash flows arising from a lease. The Partnership is the lessor for its Vessels that operate on time charters and bareboat charters. Accounting by a lessor is largely unchanged from the previous standard. The Partnership does not have any material leased assets. A lessee will be required to recognize in its balance sheet a lease liability to make lease payments and a right-of-use asset. The standard requires a modified retrospective transition method for all entities and the standard provides for optional practical expedients in implementing the standard under the modified retrospective approach.
In July 2018, the FASB issued targeted improvements to the leasing guidance allowing for an additional optional transition method that allow entities to initially apply the new lease standard and its disclosures at the transition date and recognize a cumulative-effect adjustment to the opening balance of retained earnings. The Partnership has elected to use this optional transition approach. The standard is effective for annual periods beginning after December 15, 2018, including interim periods within those annual periods. The Partnership will adopt ASC 842 and implement the revised guidance as of January 1, 2019. The Partnership will apply the package of practical expedients, but not the hindsight practical expedients since the use of hindsight practical expedient only impacts lease classification if the package of practical expedients is not elected. The Partnership will not reassess whether any expired or existing contracts are, or contain leases, will not reassess lease classification, and will not reassess initial direct costs for any existing leases. Additionally, the practical expedient of disregarding short-term leases for agreements with lease terms of 12 months or less as a lessee and the expedient of not separating lease components from non-lease components will be used for all classes of underlying assets in the Partnership. Based upon assessments performed to date, the Partnership does not expect material effects on the accounting for existing leases applied in the consolidated financial statements where the Partnership is the lessor. Under ASU 2016-02, the Partnership will recognize a right-of-use asset and a lease liability on the balance sheet for certain leases where the Partnership is the lessee based on the present value of future minimum lease payments, whereas currently no right-of-use asset or lease liability is recognized. Based on the analysis performed by the Partnership to date, the right of use asset and lease liability to be recognized on January 1, 2019 is expected not to be material.

Summary of Significant Accoun_3

Summary of Significant Accounting Policies (Tables)12 Months Ended
Dec. 31, 2018
Summary of Significant Accounting Policies
Schedule of estimated useful life of vessels and equipmentUseful Life
Hull
25 years
Anchor-handling, loading and unloading equipment
25 years
Main/auxiliary engine
25 years
Thruster, dynamic positioning systems, cranes and other equipment
25 years
Drydock costs
2.5 – 5 years
Summary of contract related intangible assets and liabilities and their amortization periods at acquisition datesIntangible category
Amortization Period
Above market time charter-Tordis Knutsen
4.8 years
Above market time charter-Vigdis Knutsen
4.9 years
Unfavorable contractual rights-Fortaleza Knutsen
12 years
Unfavorable contractual rights-Recife Knutsen
12 years

Significant Risks and Uncerta_2

Significant Risks and Uncertainties Including Business and Credit Concentrations (Tables)12 Months Ended
Dec. 31, 2018
Significant Risks and Uncertainties Including Business and Credit Concentrations
Schedule of revenues and percentage of revenues for customers that accounted for more than 10% of the Partnership's revenuesYear Ended December 31,
(U.S. Dollars in thousands)
2018
2017
2016
Eni Trading and Shipping S.p.A.
$
43,955
16
%
$
46,441
22
%
$
47,001
27
%
Fronape International Company, a subsidiary of Petrobras Transporte S.A.
45,115
17
%
45,115
21
%
45,236
26
%
Equinor ASA
23,426
8
%
23,189
11
%
21,760
13
%
Repsol Sinopec Brasil, B.V., a subsidiary of Repsol Sinopec Brasil, S.A.
36,978
13
%
28,129
13
%
20,904
12
%
Brazil Shipping I Limited, a subsidiary of Royal Dutch Shell
81,816
29
%
51,259
24
%
20,496
12
%
Standard Marine Tønsberg AS, a Norwegian subsidiary of ExxonMobil
16,872
6
%
17,634
8
%
17,482
10
%
Galp Sinopec Brasil Services BV
30,029
11
%
734
1
%


%

Operating Leases (Tables)

Operating Leases (Tables)12 Months Ended
Dec. 31, 2018
Operating Leases
Summary of minimum contractual future revenues from time charters and bareboat charters(U.S. Dollars in thousands)
2019
$
274,754
2020
240,849
2021
219,841
2022
152,078
2023
63,918
2024 and therafter
28,674
Total
$
980,114

Other Finance Expenses (Tables)

Other Finance Expenses (Tables)12 Months Ended
Dec. 31, 2018
Other Finance Expenses
Summary of components of interest costYear Ended December 31,
(U.S. Dollars in thousands)
2018
2017
2016
Interest expense
$
46,768
$
28,977
$
19,669
Amortization of debt issuance cost and fair value of debt assumed
3,188
1,737
1,198
Total interest cost
$
49,956
$
30,714
$
20,867
Summary of components of other finance expenseYear Ended December 31,
(U.S. Dollars in thousands)
2018
2017
2016
Bank fees, charges
$
551
$
516
$
342
Guarantee costs
403
621
696
Commitment fees
306
269
273
Total other finance expense
$
1,260
$
1,406
$
1,311

Derivative Instruments (Tables)

Derivative Instruments (Tables)12 Months Ended
Dec. 31, 2018
Derivative Instruments
Schedule of realized and unrealized gains and losses recognized in earningsYear Ended December 31,
(U.S. Dollars in thousands)
2018
2017
2016
Realized gain (loss):
Interest rate swap contracts
$
1,180
$
(2,840)
$
(3,886)
Foreign exchange forward contracts
1,084
280
66
Total realized gain (loss):
2,264
(2,560)
(3,820)
Unrealized gain (loss):
Interest rate swap contracts
4,429
5,514
4,254
Foreign exchange forward contracts
(2,654)
1,877
779
Total unrealized gain (loss):
1,775
7,391
5,033
Total realized and unrealized gain (loss) on derivative instruments:
$
4,039
$
4,831
$
1,213

Fair Value Measurements (Tables

Fair Value Measurements (Tables)12 Months Ended
Dec. 31, 2018
Fair Value Measurements
Carrying amounts and estimated fair values of financial instrumentsDecember 31, 2018
December 31, 2017
Carrying
Fair
Carrying
Fair
(U.S. Dollars in thousands)
Amount
Value
Amount
Value
Financial assets:
Cash and cash equivalents
$
41,712
$
41,712
$
46,104
$
46,104
Current derivative assets:
Interest rate swap contracts
4,621
4,621
950
950
Foreign exchange forward contracts


629
629
Non-current derivative assets:
Interest rate swap contracts
11,667
11,667
9,850
9,850
Financial liabilities:
Current derivative liabilities:
Interest rate swap contracts


961
961
Foreign exchange forward contracts
1,740
1,740
17
17
Non-current derivative liabilities:
Interest rate swap contracts
345
345
164
164
Long-term debt, current and non-current
1,087,347
1,087,347
1,033,330
1,032,484
Schedule of assets and liabilities measured at fair value on recurring basisFair Value Measurements
at Reporting Date Using
Quoted Price
in Active
Significant
Carrying
Markets for
Other
Significant
Value
Identical
Observable
Unobservable
December 31,
Assets
Inputs
Inputs
(U.S. Dollars in thousands)
2018
(Level 1)
(Level 2)
(Level 3)
Financial assets:
Cash and cash equivalents
$
41,712
$
41,712
$

$

Current derivative assets:
Interest rate swap contracts
4,621

4,621

Foreign exchange forward contracts




Non-current derivative assets:
Interest rate swap contracts
11,667

11,667

Foreign exchange forward contracts




Financial liabilities:
Current derivative liabilities:
Interest rate swap contracts




Foreign exchange forward contracts
1,740

1,740

Non-current derivative liabilities:
Interest rate swap contracts
345

345

Foreign exchange forward contracts




Long-term debt, current and non-current
1,087,347

1,087,347

Fair Value Measurements
at Reporting Date Using
Quoted Price
in Active
Significant
Carrying
Markets for
Other
Significant
Value
Identical
Observable
Unobservable
December 31,
Assets
Inputs
Inputs
(U.S. Dollars in thousands)
2017
(Level 1)
(Level 2)
(Level 3)
Financial assets:
Cash and cash equivalents
$
46,104
$
46,104
$

$

Current derivative assets:
Interest rate swap contracts
950

950

Foreign exchange forward contracts
629

629

Non-current derivative assets:
Interest rate swap contracts
9,850

9,850

Foreign exchange forward contracts




Financial liabilities:
Current derivative liabilities:
Interest rate swap contracts
961

961

Foreign exchange forward contracts
17

17

Non-current derivative liabilities:
Interest rate swap contracts
164

164

Foreign exchange forward contracts




Long-term debt, current and non-current
1,033,330

1,032,484

Trade Accounts Receivables an_2

Trade Accounts Receivables and Other Current Assets (Tables)12 Months Ended
Dec. 31, 2018
Trade Accounts Receivables and Other Current Assets
Schedule of Other Current AssetsYear Ended
December 31,
(U.S. Dollars in thousands)
2018
2017
Insurance claims for recoveries
$

$
1,750
Refund of value added tax
899
865
Prepaid expenses
810
1,997
Other receivables
753
998
Total other current assets
$
2,462
$
5,610

Vessels and Equipment (Tables)

Vessels and Equipment (Tables)12 Months Ended
Dec. 31, 2018
Vessels and Equipment
Schedule of vessels and equipmentVessels &
Accumulated
(U.S. Dollars in thousands)
equipment
depreciation
Net Vessels
Vessels, December 31, 2016
$
1,468,913
$
(212,024)
$
1,256,889
Additions
522,369

522,369
Drydock costs
15,348

15,348
Disposals
(3,289)
3,289

Depreciation for the year

(71,583)
(71,583)
Vessels, December 31, 2017
$
2,003,341
$
(280,318)
$
1,723,023
Additions
118,063

118,063
Drydock costs
14,750

14,750
Disposals
(5,731)
5,731

Depreciation for the period

(88,756)
(88,756)
Vessels, December 31, 2018
$
2,130,423
$
(363,343)
$
1,767,080
Schedule of drydocking activityYear Ended
December 31,
(U.S. Dollars in thousands)
2018
2017
Balance at the beginning of the year
$
17,748
$
6,962
Costs incurred for dry docking
12,421
6,885
Costs allocated to drydocking as part of acquisition of business
2,329
8,463
Drydock amortization
(6,930)
(4,562)
Balance at the end of the year
$
25,568
$
17,748

Intangible Assets and Contrac_2

Intangible Assets and Contract Liabilities (Tables)12 Months Ended
Dec. 31, 2018
Intangible Assets and Contract Liabilities
Schedule of intangible assetsAbove market
Above market
time charter
time charter
Total
(U.S. Dollars in thousands)
Tordis Knutsen
Vigdis Knutsen
intangibles
Intangibles, December 31, 2016
$

$

$

Additions
1,468
1,458
2,926
Amortization for the year
(253)
(176)
(429)
Intangibles, December 31, 2017
$
1,215
$
1,282
$
2,497
Additions



Amortization for the year
(304)
(302)
(606)
Intangibles, December 31, 2018
$
911
$
980
$
1,891
Summary of estimated future amortization of intangible assets(U.S. Dollars in thousands)
2019
606
2020
606
2021
605
2022
74
Total
$
1,891
Schedule of contract liabilitiesBalance of
Amortization for
Balance of
Amortization for
Balance of
December 31,
the year ended
December 31,
the year ended
December 31,
(U.S. Dollars in thousands)
2016
December 31, 2017
2017
December 31, 2018
2018
Contract liabilities:
Unfavorable contract rights
$
(9,757)
$
1,518
$
(8,239)
$
1,518
$
(6,721)
Total amortization income
$
1,518
$
1,518
Schedule of expected amortization of contract liabilities2023
(U.S. Dollars in thousands)
2019
2020
2021
2022
and thereafter
Contract liabilities:
Unfavorable contract rights
$
(1,518)
$
(1,518)
$
(1,518)
$
(1,518)
$
(649)

Accrued Expenses (Tables)

Accrued Expenses (Tables)12 Months Ended
Dec. 31, 2018
Accrued Expenses
Schedule of accrued expensesYear Ended
December 31,
(U.S. Dollars in thousands)
2018
2017
Operating expenses
$
832
$
979
Interest expenses
4,968
3,394
Guarantee costs

54
Other expenses
664
2,077
Total accrued expenses
$
6,464
$
6,504

Long-Term Debt (Tables)

Long-Term Debt (Tables)12 Months Ended
Dec. 31, 2018
Long-Term Debt.
Schedule of Long-Term DebtDecember 31,
December 31,
(U.S. Dollars in thousands)
Vessel
2018
2017
$320 million loan facility
Windsor Knutsen, Bodil Knutsen, Carmen Knutsen, Fortaleza Knutsen, Recife Knutsen, Ingrid Knutsen
312,472

$55 million revolving credit facility
26,279

$220 million loan facility
Windsor Knutsen, Bodil Knutsen, Carmen Knutsen
$

$
165,000
Fortaleza and Recife loan facility
Fortaleza Knutsen, Recife Knutsen

109,375
Ingrid loan facility
Ingrid Knutsen

61,085
Hilda loan facility
Hilda Knutsen
90,769
96,923
$117 million loan facility
Torill Knutsen

73,177
Torill loan facility
Torill Knutsen
95,000

$172.5 million loan facility
Dan Cisne, Dan Sabia
81,839
91,339
Raquel loan facility
Raquel Knutsen
63,184
68,414
Tordis loan facility
Tordis Knutsen
85,991
91,051
Vigdis loan facility
Vigdis Knutsen
87,256
92,316
Lena loan facility
Lena Knutsen
85,750
90,650
Brasil loan facility
Brasil Knutsen
63,454
69,000
Anna loan facility
Anna Knutsen
70,353

$25 million revolving credit facility
25,000
25,000
Total long-term debt
1,087,347
1,033,330
Less: current installments
109,534
95,176
Less: unamortized deferred loan issuance costs
2,608
2,191
Current portion of long-term debt
106,926
92,985
Amounts due after one year
977,813
938,154
Less: unamortized deferred loan issuance costs
7,448
4,524
Long-term debt, less current installments, and unamortized deferred loan issuance costs
$
970,365
$
933,630
Summary of Partnership's Outstanding Debt RepayableThe Partnership’s outstanding debt of $1,087.3 million as of December 31, 2018 is repayable as follows :
(U.S. Dollars in thousands)
Period repayment
Balloon repayment
2019
84,534
25,000
2020
85,945

2021
86,545
70,811
2022
71,210
236,509
2023
55,535
202,185
2024 and thereafter
15,180
153,893
Total
$
398,949
$
688,398

Income Taxes (Tables)

Income Taxes (Tables)12 Months Ended
Dec. 31, 2018
Income Taxes
Significant Components of Current and Deferred Income Tax Expense Attributable to Income from Continuing OperationsYear Ended December 31,
(U.S. Dollars in thousands)
2018
2017
2016
Current tax benefit (expense)
$
(18)
$
(12)
$
(14)
Deferred tax benefit (expense)
20
28
29
Income tax benefit (expense)
$
2
$
16
$
15
Summary of TaxationYear Ended December 31,
(U.S. Dollars in thousands)
2018
2017
2016
Income tax benefit (expense) at Norwegian tonnage tax regime
$
20
$
28
$
29
Income tax benefit (expense) within UK
(18)
(12)
(14)
Income tax benefit (expense)
$
2
$
16
$
15
Effective tax rate
0
%
0
%
0
%
Components of Deferred Tax Assets and LiabilitiesThe tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities as of December 31, 2018 and 2017 are presented below:
As of December 31,
(U.S. Dollars in thousands)
2018
2017
Deferred tax assets:
Financial derivatives
$
24
$
(12)
Financial loss carry forwards for tonnage tax
16,946
15,697
Total deferred tax asset
16,970
15,685
Less valuation allowance
(16,970)
(15,685)
Net deferred tax asset


Deferred tax liabilities:
Entrance tax
453
624
Total deferred tax liabilities
453
624
$
453
$
624
The net deferred tax liability is classified in the consolidated balance sheets as follows:
As of December 31,
(U.S. Dollars in thousands)
2018
2017
Current deferred tax asset
$

$

Non-current deferred tax liabilities
453
624
Net deferred tax liabilities
$
453
$
624
Changes in the net deferred tax liabilities at December 31, 2018 and 2017 are presented below:
As of December 31,
(U.S. Dollars in thousands)
2018
2017
Net deferred tax liabilities at January 1,
$
624
$
685
Aquisition of KNOT Shuttle Tankers 26 AS

99
Change in temporary differences
(142)
(198)
Translation differences
(29)
38
Net deferred tax liabilities at December 31,
$
453
$
624

Related Party Transactions (Tab

Related Party Transactions (Tables)12 Months Ended
Dec. 31, 2018
Related Party Transactions
Schedule of Related Party Costs and ExpensesYear Ended December 31,
(U.S. Dollars in thousands)
2018
2017
2016
Statements of operations:
Other income:
Guarantee income from KNOT (1)
$
749
$
1,499
$
770
Operating expenses:
Technical and operational management fee from KNOT to Vessels (2)
6,491
4,617
2,971
General and administrative expenses:
Administration fee from KNOT Management (3)
1,434
1,457
1,279
Administration fee from KOAS (3)
583
461
382
Administration fee from KOAS UK (3)
123
122
145
Administration and management fee from KNOT (4)
161
149
203
Finance income (expense):
Interest expense charged from KNOT (5)

(52)
(128)
Total income (expenses)
$
(8,043)
$
(5,359)
$
(4,338)
(1)
Guarantee income from KNOT : Pursuant to the Omnibus Agreement, KNOT agreed to guarantee the payments of the hire rate under the initial charter of the Bodil Knutsen and Windsor Knutsen for a period of five years from the closing date of the IPO (until April 15, 2018). In October 2015, the Windsor Knutsen commenced on a new Shell time charter with a hire rate below the hire rate in the initial charter. The difference between the new hire rate and the initial rate was paid by KNOT until April 15, 2018. The Vigdis Knutsen suffered damages to its hull in connection with a ship-to-ship loading on May 24, 2017 and the vessel went off-hire 6 days in June 2017 due to repairs of the damage. In connection with the Vigdis Knutsen acquisition, KNOT agreed to pay for the repair cost and charter hire lost in connection with the incident. The reimbursement from KNOT for lost charter hire is accounted for as guarantee income. See Note 18(b)—Related Party Transactions—Guarantees and Indemnifications.
(2)
Technical and operational management fee from KNOT Management or KNOT Management Denmark to Vessels : KNOT Management or KNOT Management Denmark provides technical and operational management of the vessels on time charter including crewing, purchasing, maintenance and other operational service. In addition, there is also a charge for 24‑hour emergency response services provided by KNOT Management for all vessels managed by KNOT Management.
(3)
Administration fee from KNOT Management and Knutsen OAS Shipping AS (“KOAS”) and Knutsen OAS (UK) Ltd. (“KOAS UK”) : Administration costs include the compensation and benefits of KNOT Management’s management and administrative staff as well as other general and administration expenses. Some benefits are also provided by KOAS and KOAS UK. Net administration costs are total administration cost plus a 5% margin, reduced for the total fees for services delivered by the administration staffs and the estimated shareholder costs for KNOT that have not been allocated. As such, the level of net administration costs as a basis for the allocation can vary from year to year based on the administration and financing services offered by KNOT to all the vessels in its fleet each year. KNOT Management also charges each subsidiary a fixed annual fee for the preparation of the statutory financial statement.
(4)
Administration and management fee from KNOT Management and KNOT Management Denmark: For bareboat charters, the shipowner is not responsible for providing crewing or other operational services and the customer is responsible for all vessel operating expenses and voyage expenses. However, each of the vessels under bareboat charters is subject to a management and administration agreement with either KNOT Management or KNOT Management Denmark, pursuant to which these companies provide general monitoring services for the vessels in exchange for an annual fee.
(5)
Interest expense charged from KNOT: KNOT invoiced interest (expense) income for any outstanding payables to (receivable from) owners and affiliates to the vessel-owning subsidiaries.
Summary of Amounts Due from (to) Related PartiesAt December 31,
At December 31,
(U.S. Dollars in thousands)
2018
2017
Balance Sheet:
Trading balances due from KOAS
$
466
$
24
Trading balances due from KNOT and affiliates
675
547
Amount due from related parties
$
1,141
$
571
Trading balances due to KOAS
$
629
$
898
Trading balances due to KNOT and affiliates
441
4,552
Amount due to related parties
$
1,070
$
5,450
Schedule of Trade Accounts Payables to Related PartiesAt December 31,
At December 31,
(U.S. Dollars in thousands)
2018
2017
Balance Sheet:
Trading balances due to KOAS
$
381
$
864
Trading balances due to KNOT and affiliates
411
548
Trade accounts payables to related parties
$
792
$
1,412

Earnings per Unit and Cash Di_2

Earnings per Unit and Cash Distributions (Tables)12 Months Ended
Dec. 31, 2018
Earnings per Unit and Cash Distributions
Schedule of calculations of basic and diluted earnings per unitYear Ended December 31,
(U.S. Dollars in thousands, except per unit data)
2018
2017
2016
Net income
$
82,165
$
68,064
$
61,102
Less: Series A Preferred unitholders’ interest in net income
7,200
5,253

Net income attributable to the unitholders of KNOT Offshore Partners LP
74,965
62,811
61,102
Less: Distributions (2)
72,136
67,171
61,528
Under (over) distributed earnings
2,829
(4,360)
(426)
Under (over) distributed earnings attributable to:
Common unitholders (3)
2,777
(4,280)
(417)
Subordinated unitholders (3)



General Partner
52
(80)
(9)
Weighted average units outstanding (basic) (in thousands):
Common unitholders
32,694
30,068
23,917
Subordinated unitholders


3,277
General Partner
615
567
559
Weighted average units outstanding (diluted) (in thousands):
Common unitholders
36,370
32,804
23,917
Subordinated unitholders


3,277
General Partner
615
567
559
Earnings per unit (basic)
Common unitholders (4)
$
2.251
$
2.050
$
2.291
Subordinated unitholders (4)


1.542
General Partner
2.251
2.046
2.248
Earnings per unit (diluted):
Common unitholders (4)
$
2.217
$
2.037
$
2.291
Subordinated unitholders (4)


1.542
General Partner
2.251
2.046
2.248
Cash distributions declared and paid in the period per unit (5)
$
2.080
$
2.080
$
2.080
Subsequent event: Cash distributions declared and paid per unit relating to the period (6)
$
0.520
$
0.520
$
0.520
(1)
Earnings per unit have been calculated in accordance with the cash distribution provisions set forth in the Partnership Agreement.
(2)
This refers to distributions made or to be made in relation to the period irrespective of the declaration and payment dates and based on the numbers of units outstanding at the record date. This includes cash distributions to the IDR holder (KNOT) for the years ended December 31, 2018, 2017 and 2016 of $2.8 million, $2.6 million and $2.4 million, respectively.
(3)
On May 18, 2016, all subordinated units converted into common units on a one-for-one basis.
(4)
Until May 18, 2016, the net income attributable to the IDR holder is included in calculation of earnings per unit for subordinated unitholders, basic and diluted. The IDRs generally were not transferrable by KNOT prior to March 31, 2018. The net income attributable to IDRs for the year ended December 31, 2018, 2017 and 2016 was $2.8 million, $2.6 million and $2.4 million, respectively.
(5)
Refers to cash distributions declared and paid during the period.
(6)
Refers to cash distributions declared and paid subsequent to December 31, 2018.

Acquisitions (Tables)

Acquisitions (Tables)12 Months Ended
Dec. 31, 2018
Acquisitions
Schedule of purchase price of each transactionFinal
Final
Final
Anna Knutsen
Brasil Knutsen
Lena Knutsen
March 1,
December 15,
September 30,
(U.S. Dollars in thousands)
2018
2017
2017
Purchase consideration (1)
$
19,913
$
5,764
$
33,235
Less: Fair value of net assets acquired:
Vessels and equipment (2)
120,274
96,000
142,457
Cash
4,537
5,217
470
Inventories
257
146
243
Derivatives assets
1,839

1,729
Others current assets
111
125
193
Amounts due from related parties
520
2
23,599
Long-term debt
(84,217)
(59,000)
(111,068)
Long-term debt from related parties
(22,535)

(22,706)
Deferred debt issuance costs
1,228
618
867
Trade accounts payable
(971)
(154)
(256)
Accrued expenses
(1,013)
(1,185)
(224)
Prepaid charter and deferred revenue


(1,758)
Amounts due to related parties
(117)
(36,005)
(186)
Income tax payable


(125)
Subtotal
19,913
5,764
33,235
Difference between the purchase price and fair value of net assets acquired
$

$

$

Final
Final
Final
Vigdis Knutsen
Tordis Knutsen
Raquel Knutsen
June 1,
March 1,
December 1,
(U.S. Dollars in thousands)
2017
2017
2016
Purchase consideration (1)
$
31,759
$
32,983
$
20,252
Less: Fair value of net assets acquired:
Vessels and equipment (2)
145,772
145,754
116,751
Intangibles: Above market time charter
1,458
1,468

Cash
3,438
609
7,146
Inventories
190
129
307
Derivatives assets
226
1,377
207
Others current assets
128
1,348
183
Amounts due from related parties
18,374
20,834
59
Long-term debt
(114,411)
(114,411)
(79,950)
Long-term debt from related parties
(22,703)
(22,960)
(24,019)
Deferred debt issuance costs
928
795
1,059
Trade accounts payable
(187)
(106)
(167)
Accrued expenses
(1,082)
(503)
(1,179)
Amounts due to related parties
(372)
(1,351)
(145)
Income tax payable



Subtotal
31,759
32,983
20,252
Difference between the purchase price and fair value of net assets acquired
$

$

$

(1)
The purchase consideration comprises the following:
Final
Final
Final
Anna Knutsen
Brasil Knutsen
Lena Knutsen
March 1,
December 15,
September 30,
(U.S. Dollars in thousands)
2018
2017
2017
Cash consideration paid to KNOT (from KNOT)
$
14,637
$
2,383
$
33,343
Purchase price adjustments
5,276
3,381
(108)
Purchase price
$
19,913
$
5,764
$
33,235
Final
Final
Final
Vigdis Knutsen
Tordis Knutsen
Raquel Knutsen
June 1,
March 1,
December 1,
(U.S. Dollars in thousands)
2017
2017
2016
Cash consideration paid to KNOT (from KNOT)
$
28,109
$
31,242
$
(12,019)
Purchase price adjustments
3,650
1,741
7,271
Seller’s credit


12,981
Seller’s loan


12,019
Purchase price
$
31,759
$
32,983
$
20,252
(2)
Vessel and equipment includes allocation to drydocking for the following vessels (in thousands): Anna Knutsen of $2,329, Brasil Knutsen of $260, Lena Knutsen of $2,741, Vigdis Knutsen of $2,709, Tordis Knutsen of $2,753 and Raquel Knutsen of $1,663.
Brasil Knutsen
Acquisitions
Schedule of summarized consolidated pro forma financial informationUnaudited
Year Ended
(U.S. Dollars in thousands)
December 31, 2017
Revenue
$
223,220
Net income
64,034
Lena Knutsen
Acquisitions
Schedule of summarized consolidated pro forma financial informationUnaudited
Year Ended
(U.S. Dollars in thousands)
December 31, 2017
Revenue
$
220,904
Net income
62,999
Vigdis Knutsen
Acquisitions
Schedule of summarized consolidated pro forma financial informationUnaudited
Year Ended
(U.S. Dollars in thousands)
December 31, 2017
Revenue
$
222,354
Net income
63,225
Tordis Knutsen
Acquisitions
Schedule of summarized consolidated pro forma financial informationUnaudited
Year Ended
(U.S. Dollars in thousands)
December 31, 2017
Revenue
$
221,198
Net income
66,584
Raquel Knutsen
Acquisitions
Schedule of summarized consolidated pro forma financial informationUnaudited
Year Ended
(U.S. Dollars in thousands)
December 31, 2016
Revenue
$
190,229
Net income
65,101

Equity Offerings and Sale of _2

Equity Offerings and Sale of Series A Preferred Units (Tables)12 Months Ended
Dec. 31, 2018
Equity Offerings and Sale of Series A Preferred Units
Schedule of Equity OfferingsEquity Offerings
2018
January 2017
November 2017
Total 2017
2016
(U.S. Dollars in thousands)
Offering
Offering
Offering
Offering
Offering
Gross proceeds received
$

$
56,125
$
66,936
(1)
$
123,061
$

Less: Underwriters’ discount

925
660
1,585

Less: Offering expenses

300
230
530

Net proceeds received
$

$
54,900
$
66,046
$
120,946
$

(1)
Includes the General Partner’s 1.85% proportional capital contribution.
Schedule of Sale of Series A Preferred UnitsSale of Series A Preferred units
February 2017
June 2017
Total
Series A
Series A
Series A
(U.S. Dollars in thousands)
Preferred Units
Preferred Units
Preferred Units
Gross proceeds received
$
50,000
$
40,000
$
90,000
Less: Fee
1,000
1,000
2,000
Less: Expenses
386
150
536
Net proceeds received
$
48,614
$
38,850
$
87,464

Unit Activity (Tables)

Unit Activity (Tables)12 Months Ended
Dec. 31, 2018
Equity Offerings and Sale of Series A Preferred Units
Schedule of Movement in Number of Common Units, Subordinated Units and General Partner UnitsCommon
Subordinated
General Partner
Convertible Preferred
(in units)
Units
Units
Units
Units
December 31, 2016
27,194,094

558,674

January 6, 2017: Public offering
2,500,000



February 2, 2017: Sale of Series A Preferred Units



2,083,333
June 30, 2017: Sale of Series A Preferred Units



1,666,667
November 8, 2017: Public offering
3,000,000

56,443

December 31, 2017
32,694,094

615,117
3,750,000
December 31, 2018
32,694,094

615,117
3,750,000

Description of Business (Detail

Description of Business (Details) $ in Millions1 Months Ended
Apr. 30, 2013itemApr. 10, 2019USD ($)Dec. 31, 2018itemdirector
Description of Business
Ownership interest in shuttle tankers acquired at formation (as a percent)100.00%
Number of shuttle tankers acquired at formation | item4
Number of operating vessels | item16
Undrawn portion of revolving credit facilities | $ $ 28.7
Number of members on board of directors electable by common unitholders | director4
Total number of board members | director7

Summary of Significant Accoun_4

Summary of Significant Accounting Policies - Trade Accounts Receivable (Details) - USD ($) $ in ThousandsDec. 31, 2018Dec. 31, 2017
Summary of Significant Accounting Policies
Allowance for doubtful accounts $ 0 $ 0

Summary of Significant Accoun_5

Summary of Significant Accounting Policies - Vessels and Equipment (Details)12 Months Ended
Dec. 31, 2018
Vessels and Equipment
Drydocking interval until a vessel is 15 years old60 months
Age of vessels to switch from 60 to 30 month drydocking interval15 years
Drydocking interval after a vessel is 15 years old30 months
Hull
Vessels and Equipment
Asset's estimated useful life25 years
Anchor-handling, loading and unloading equipment
Vessels and Equipment
Asset's estimated useful life25 years
Main/auxiliary engine
Vessels and Equipment
Asset's estimated useful life25 years
Thruster, dynamic positioning systems, cranes and other equipment
Vessels and Equipment
Asset's estimated useful life25 years
Drydock costs | Minimum
Vessels and Equipment
Asset's estimated useful life2 years 6 months
Drydock costs | Maximum
Vessels and Equipment
Asset's estimated useful life5 years

Summary of Significant Accoun_6

Summary of Significant Accounting Policies - Goodwill and Intangibles (Details) - itemJun. 01, 2017Mar. 01, 2017Jun. 30, 2017Mar. 31, 2017Aug. 31, 2011Mar. 31, 2011Dec. 31, 2018
Intangible Assets
Number of reporting units1
Fortaleza Knutsen
Intangible Assets
Amortization Period, Unfavorable contractual rights12 years
Term of bareboat charter12 years
Recife Knutsen
Intangible Assets
Amortization Period, Unfavorable contractual rights12 years
Term of bareboat charter12 years
Above market value of time charter | Tordis Knutsen
Intangible Assets
Amortization Period, Above market time charter4 years 9 months 18 days4 years 9 months 18 days
Above market value of time charter | Vigdis Knutsen
Intangible Assets
Amortization Period, Above market time charter4 years 10 months 24 days4 years 10 months 24 days

Summary of Significant Accoun_7

Summary of Significant Accounting Policies - Income Taxes (Details) - USD ($) $ in Millions12 Months Ended
Dec. 31, 2018Dec. 31, 2017Dec. 31, 2016
Summary of Significant Accounting Policies
Tonnage tax included in operating expenses $ 0.3 $ 0.2 $ 0.2

Summary of Significant Accoun_8

Summary of Significant Accounting Policies - Recently Adopted Accounting Standards (Details)Mar. 01, 2018
Anna Knutsen | Acquisitions from KNOT
Recently Adopted Accounting Standards
Percentage of interest acquired100.00%

Formation Transactions and In_2

Formation Transactions and Initial Public Offering - Additional Information (Details) - USD ($) $ / shares in Units, $ in ThousandsNov. 09, 2017Nov. 08, 2017Jan. 10, 2017Jan. 06, 2017Nov. 30, 2017Jan. 31, 2017Apr. 30, 2013Dec. 31, 2018Dec. 31, 2017Dec. 31, 2016
Formation Transactions and Initial Public Offering
Number of general partner units issued to the General Partner615,117 615,117 558,674
Gross proceeds received $ 66,936 $ 56,125 $ 123,061
Net proceeds from the offering $ 66,000 $ 54,900 $ 66,046 $ 54,900 $ (4) $ 120,946
Repayment of outstanding debt $ 118,900
One-time entrance tax into Norwegian tonnage tax regime3,000
Revolving credit facility, outstanding $ 20,000
KNOT | Bodil Knutsen
Formation Transactions and Initial Public Offering
Period of related party guarantee of payment of hire rate5 years
KNOT | Windsor Knutsen
Formation Transactions and Initial Public Offering
Period of related party guarantee of payment of hire rate5 years
IPO
Formation Transactions and Initial Public Offering
Gross proceeds received $ 179,900
Net proceeds from the offering160,700
KNOT
Formation Transactions and Initial Public Offering
Cash distribution $ 21,950
General Partner
Formation Transactions and Initial Public Offering
Number of general partner units issued to the General Partner349,694
Subordinated Units | KNOT
Formation Transactions and Initial Public Offering
Limited partners' capital account, units issued8,567,500
Common Units
Formation Transactions and Initial Public Offering
Limited partners' capital account, units issued32,694,094 32,694,094 27,194,094
Limited Partner | Common Units
Formation Transactions and Initial Public Offering
Common units sold and issued3,000,000 3,000,000 2,500,000 2,500,000
Limited Partner | Common Units | IPO
Formation Transactions and Initial Public Offering
Common units sold and issued8,567,500
Common unit, per share amount $ 21
Limited Partner | Common Units | Underwriters' option to purchase additional units
Formation Transactions and Initial Public Offering
Common units sold and issued1,117,500
General Partner
Formation Transactions and Initial Public Offering
Common units sold and issued56,443
IDR Holders
Formation Transactions and Initial Public Offering
Threshold quarterly distribution for increasing percentages allocated to the IDRs $ 0.43125
KNOT UK | KNOT Shuttle Tankers AS
Formation Transactions and Initial Public Offering
Percentage of contribution to subsidiary100.00%
KNOT | Partnership
Formation Transactions and Initial Public Offering
Percentage of limited partner interest49.00%26.20%
KNOT | Incentive Distribution Rights
Formation Transactions and Initial Public Offering
Percentage of limited partner interest100.00%
General Partner | Partnership
Formation Transactions and Initial Public Offering
Percentage of partnership interest held by General Partner1.85%2.00%1.85%
Public | Partnership
Formation Transactions and Initial Public Offering
Percentage of limited partner interest49.00%73.50%

Significant Risks and Uncerta_3

Significant Risks and Uncertainties Including Business and Credit Concentrations (Details) - USD ($) $ in Thousands12 Months Ended
Dec. 31, 2018Dec. 31, 2017Dec. 31, 2016
Significant Risks and Uncertainties Including Business and Credit Concentrations
Revenues $ 279,456 $ 219,203 $ 173,671
Customer Concentration Risk | Revenues | Eni Trading and Shipping S.p.A.
Significant Risks and Uncertainties Including Business and Credit Concentrations
Revenues $ 43,955 $ 46,441 $ 47,001
Percentage of combined revenues for customers16.00%22.00%27.00%
Customer Concentration Risk | Revenues | Fronape International Company, a subsidiary of Petrobras Transporte S.A.
Significant Risks and Uncertainties Including Business and Credit Concentrations
Revenues $ 45,115 $ 45,115 $ 45,236
Percentage of combined revenues for customers17.00%21.00%26.00%
Customer Concentration Risk | Revenues | Equinor ASA
Significant Risks and Uncertainties Including Business and Credit Concentrations
Revenues $ 23,426 $ 23,189 $ 21,760
Percentage of combined revenues for customers8.00%11.00%13.00%
Customer Concentration Risk | Revenues | Repsol Sinopec Brasil, B.V., a subsidiary of Repsol Sinopec Brasil, S.A.
Significant Risks and Uncertainties Including Business and Credit Concentrations
Revenues $ 36,978 $ 28,129 $ 20,904
Percentage of combined revenues for customers13.00%13.00%12.00%
Customer Concentration Risk | Revenues | Brazil Shipping I Limited, a subsidiary of Royal Dutch Shell
Significant Risks and Uncertainties Including Business and Credit Concentrations
Revenues $ 81,816 $ 51,259 $ 20,496
Percentage of combined revenues for customers29.00%24.00%12.00%
Customer Concentration Risk | Revenues | Standard Marine Tonsberg AS, a Norwegian subsidiary of ExxonMobil
Significant Risks and Uncertainties Including Business and Credit Concentrations
Revenues $ 16,872 $ 17,634 $ 17,482
Percentage of combined revenues for customers6.00%8.00%10.00%
Customer Concentration Risk | Revenues | Galp Sinopec Brasil Services BV
Significant Risks and Uncertainties Including Business and Credit Concentrations
Revenues $ 30,029 $ 734
Percentage of combined revenues for customers11.00%1.00%

Operating Leases - Minimum Cont

Operating Leases - Minimum Contractual Future Revenues (Details) $ in ThousandsDec. 31, 2018USD ($)
Minimum contractual future revenues
2019 $ 274,754
2020240,849
2021219,841
2022152,078
202363,918
2024 and thereafter28,674
Total $ 980,114

Operating Leases - Additional I

Operating Leases - Additional Information (Details)1 Months Ended12 Months Ended
Mar. 31, 2019Dec. 31, 2018Oct. 31, 2015Aug. 31, 2011Mar. 31, 2011
Fortaleza Knutsen
Operating Leases
Current bareboat charter expiration year2023
Term of time charter12 years
Recife Knutsen
Operating Leases
Current bareboat charter expiration year2023
Term of time charter12 years
Bodil Knutsen
Operating Leases
Current time charter expiration year2020
Time charter expiration year under options to extend2024
Windsor Knutsen
Operating Leases
Time charter expiration year under options to extend2023
Term of time charter2 years
Windsor Knutsen | Subsequent Event | Minimum
Operating Leases
Period of suspension of time charter10 months
Windsor Knutsen | Subsequent Event | Maximum
Operating Leases
Period of suspension of time charter12 months
Carmen Knutsen
Operating Leases
Current time charter expiration year2023
Time charter expiration year under options to extend2026
Hilda Knutsen
Operating Leases
Current time charter expiration year2022
Time charter expiration year under options to extend2025
Torill Knutsen
Operating Leases
Current time charter expiration year2023
Dan Cisne
Operating Leases
Current bareboat charter expiration year2023
Dan Sabia
Operating Leases
Current bareboat charter expiration year2024
Ingrid Knutsen
Operating Leases
Current time charter expiration year2024
Time charter expiration year under options to extend2029
Raquel Knutsen
Operating Leases
Current time charter expiration year2025
Time charter expiration year under options to extend2030
Tordis Knutsen
Operating Leases
Current time charter expiration year2022
Time charter expiration year under options to extend2032
Vigdis Knutsen
Operating Leases
Current time charter expiration year2022
Time charter expiration year under options to extend2032
Lena Knutsen
Operating Leases
Current time charter expiration year2022
Time charter expiration year under options to extend2032
Brasil Knutsen
Operating Leases
Current time charter expiration year2022
Time charter expiration year under options to extend2028
Anna Knutsen
Operating Leases
Current time charter expiration year2022
Time charter expiration year under options to extend2028

Segment Information (Details)

Segment Information (Details)12 Months Ended
Dec. 31, 2018segmentitemDec. 31, 2017itemDec. 31, 2016item
Segment Information
Number of reportable segments | segment1
Number of time charters12 11 7
Number of bareboat charters4 4 4

Insurance Proceeds (Details)

Insurance Proceeds (Details) - USD ($) $ in Thousands3 Months Ended12 Months Ended24 Months Ended
Dec. 31, 2017Dec. 31, 2018Dec. 31, 2017Dec. 31, 2016Dec. 31, 2018
Insurance Proceeds
Deductible period under business interruption insurance14 days
Period of coverage under business interruption insurance180 days
Loss of hire insurance payments recorded as a component of total revenues $ 450 $ 5,176
Net vessel operating expense $ 56,730 $ 46,709 $ 30,903
Raquel Knutsen
Insurance Proceeds
Deductible period under business interruption insurance14 days14 days
Period of coverage under business interruption insurance180 days180 days
Raquel Knutsen | Propeller Hub Damage
Insurance Proceeds
Loss of hire insurance payments recorded as a component of total revenues $ 3,400
Recoveries for repairs $ 3,900 3,900
Cost of repairs4,200
Net vessel operating expense300
Carmen Knutsen
Insurance Proceeds
Special survey drydocking period5 years
Deductible period under business interruption insurance14 days
Carmen Knutsen | Technical Default in Controllable Pitch Propeller
Insurance Proceeds
Loss of hire insurance payments recorded as a component of total revenues450 1,750
Recoveries for repairs $ 2,250
Cost of repairs $ 150 $ 2,400
Net vessel operating expense $ 300

Other Finance Expenses - Compon

Other Finance Expenses - Components Interest Cost (Details) - USD ($) $ in Thousands12 Months Ended
Dec. 31, 2018Dec. 31, 2017Dec. 31, 2016
Other Finance Expenses
Interest expense $ 46,768 $ 28,977 $ 19,669
Amortization of deferred debt issuance cost3,188 1,737 1,198
Total interest cost $ 49,956 $ 30,714 $ 20,867

Other Finance Expenses - Comp_2

Other Finance Expenses - Components of Other Finance Expense (Details) - USD ($) $ in Thousands12 Months Ended
Dec. 31, 2018Dec. 31, 2017Dec. 31, 2016
Other Finance Expenses
Bank fees, charges $ 551 $ 516 $ 342
Guarantee costs403 621 696
Commitment fees306 269 273
Total other finance expense $ 1,260 $ 1,406 $ 1,311

Derivative Instruments - Additi

Derivative Instruments - Additional Information (Details) kr in Millions, $ in MillionsDec. 31, 2018USD ($)Dec. 31, 2018NOK (kr)Dec. 31, 2017USD ($)Dec. 31, 2017NOK (kr)
Interest rate swap contracts
Derivative Instruments
Notional amount $ 555.5 $ 650.5
Carrying amount of derivative asset15.9 $ 9.7
Foreign exchange forward contracts
Derivative Instruments
Notional amount | kr kr 244.2 kr 249.9
Carrying amount of derivative liabilities1.7
Carrying amount of derivative asset $ 0.6

Derivative Instruments - Realiz

Derivative Instruments - Realized and Unrealized Gains and Losses Recognized in Earnings (Details) - USD ($) $ in Thousands12 Months Ended
Dec. 31, 2018Dec. 31, 2017Dec. 31, 2016
Net gain (loss) on derivative instruments
Realized gain (loss) $ 2,264 $ (2,560) $ (3,820)
Unrealized gain (loss)1,775 7,391 5,033
Total realized and unrealized gain (loss) on derivative instruments4,039 4,831 1,213
Interest rate swap contracts
Net gain (loss) on derivative instruments
Realized gain (loss)1,180 (2,840)(3,886)
Unrealized gain (loss)4,429 5,514 4,254
Foreign exchange forward contracts
Net gain (loss) on derivative instruments
Realized gain (loss)1,084 280 66
Unrealized gain (loss) $ (2,654) $ 1,877 $ 779

Fair Value Measurements - Carry

Fair Value Measurements - Carrying Amounts and Estimated Fair Values of Partnership 's Financial Instruments (Details) - USD ($) $ in ThousandsDec. 31, 2018Dec. 31, 2017
Financial assets:
Current derivative assets $ 4,621 $ 1,579
Non-current derivative assets11,667 9,850
Financial liabilities:
Current derivative liabilities1,740 978
Non-current derivative liabilities345 164
Carrying Amount
Financial assets:
Cash and cash equivalents41,712 46,104
Financial liabilities:
Long-term debt, current and non-current1,087,347 1,033,330
Carrying Amount | Interest rate swap contracts
Financial assets:
Current derivative assets4,621 950
Non-current derivative assets11,667 9,850
Financial liabilities:
Current derivative liabilities961
Non-current derivative liabilities345 164
Carrying Amount | Foreign exchange forward contracts
Financial assets:
Current derivative assets629
Financial liabilities:
Current derivative liabilities1,740 17
Fair Value
Financial assets:
Cash and cash equivalents41,712 46,104
Financial liabilities:
Long-term debt, current and non-current1,087,347 1,032,484
Fair Value | Interest rate swap contracts
Financial assets:
Current derivative assets4,621 950
Non-current derivative assets11,667 9,850
Financial liabilities:
Current derivative liabilities961
Non-current derivative liabilities345 164
Fair Value | Foreign exchange forward contracts
Financial assets:
Current derivative assets629
Financial liabilities:
Current derivative liabilities $ 1,740 $ 17

Fair Value Measurements - Addit

Fair Value Measurements - Additional Information (Details) - USD ($)12 Months Ended
Dec. 31, 2018Dec. 31, 2017
Fair Value, assets and liabilities measured on recurring and nonrecurring basis
Deferred debt issuance cost $ 10,100,000 $ 6,700,000
Restricted cash $ 0 $ 0
Interest rate swap contracts
Fair Value, assets and liabilities measured on recurring and nonrecurring basis
Weighted average remaining terms4 years 10 months 24 days4 years 6 months
Interest rate swap contracts | Minimum
Fair Value, assets and liabilities measured on recurring and nonrecurring basis
Notional amount per contract $ 10,037
Fixed interest rate1.38%1.25%
Interest rate swap contracts | Maximum
Fair Value, assets and liabilities measured on recurring and nonrecurring basis
Notional amount per contract $ 50,000
Fixed interest rate2.89%2.49%

Fair Value Measurements - Fair

Fair Value Measurements - Fair Value Hierarchy (Details) - USD ($) $ in ThousandsDec. 31, 2018Dec. 31, 2017
Financial assets:
Current derivative assets $ 4,621 $ 1,579
Non-current derivative assets11,667 9,850
Financial liabilities:
Current derivative liabilities1,740 978
Non-current derivative liabilities345 164
Carrying Amount
Financial assets:
Cash and cash equivalents41,712 46,104
Financial liabilities:
Long-term debt, current and non-current1,087,347 1,033,330
Fair Value
Financial assets:
Cash and cash equivalents41,712 46,104
Financial liabilities:
Long-term debt, current and non-current1,087,347 1,032,484
Foreign exchange forward contracts | Carrying Amount
Financial assets:
Current derivative assets629
Financial liabilities:
Current derivative liabilities1,740 17
Foreign exchange forward contracts | Fair Value
Financial assets:
Current derivative assets629
Financial liabilities:
Current derivative liabilities1,740 17
Interest rate swap contracts | Carrying Amount
Financial assets:
Current derivative assets4,621 950
Non-current derivative assets11,667 9,850
Financial liabilities:
Current derivative liabilities961
Non-current derivative liabilities345 164
Interest rate swap contracts | Fair Value
Financial assets:
Current derivative assets4,621 950
Non-current derivative assets11,667 9,850
Financial liabilities:
Current derivative liabilities961
Non-current derivative liabilities345 164
Quoted Price in Active Markets for Identical Assets (Level 1) | Fair Value
Financial assets:
Cash and cash equivalents41,712 46,104
Significant Other Observable Inputs (Level 2) | Fair Value
Financial liabilities:
Long-term debt, current and non-current1,087,347 1,032,484
Significant Other Observable Inputs (Level 2) | Foreign exchange forward contracts | Fair Value
Financial assets:
Current derivative assets629
Financial liabilities:
Current derivative liabilities1,740 17
Significant Other Observable Inputs (Level 2) | Interest rate swap contracts | Fair Value
Financial assets:
Current derivative assets4,621 950
Non-current derivative assets11,667 9,850
Financial liabilities:
Current derivative liabilities961
Non-current derivative liabilities $ 345 $ 164

Trade Accounts Receivables an_3

Trade Accounts Receivables and Other Current Assets - Trade Accounts Receivable (Details) - USD ($) $ in ThousandsDec. 31, 2018Dec. 31, 2017
Trade Accounts Receivables and Other Current Assets
Provision for doubtful accounts $ 0 $ 0

Trade Accounts Receivables an_4

Trade Accounts Receivables and Other Current Assets - Other Current Assets (Details) - USD ($) $ in ThousandsDec. 31, 2018Dec. 31, 2017
Trade Accounts Receivables and Other Current Assets
Insurance claims for recoveries $ 1,750
Refund of value added tax $ 899 865
Prepaid expenses810 1,997
Other receivables753 998
Total other current assets $ 2,462 $ 5,610

Vessels and Equipment - Pledged

Vessels and Equipment - Pledged Assets (Details) - USD ($) $ in MillionsDec. 31, 2018Dec. 31, 2017
Vessels and Equipment
Book value of assets pledged as security for long-term debt $ 1,767 $ 1,723

Vessels and Equipment - Schedul

Vessels and Equipment - Schedule of Property Plant and Equipment (Details) - USD ($) $ in Thousands12 Months Ended
Dec. 31, 2018Dec. 31, 2017Dec. 31, 2016
Vessels & equipment - Activity
Additions $ 118,063 $ 522,369
Drydock costs14,750 15,348
Accumulated depreciation - Activity
Accumulated depreciation, beginning balance(280,318)(212,024)
Accumulated depreciation, disposals5,731 3,289
Depreciation for the year(88,756)(71,583) $ (56,230)
Accumulated depreciation, ending balance(363,343)(280,318)(212,024)
Net Vessels - Activity
Net vessel, beginning balance1,723,023 1,256,889
Additions118,063 522,369
Drydock costs14,750 15,348
Depreciation for the year(88,756)(71,583)(56,230)
Net vessel, ending balance1,767,080 1,723,023 1,256,889
Vessels & Equipment
Vessels & equipment - Activity
Vessels and equipment, beginning balance2,003,341 1,468,913
Additions118,063 522,369
Drydock costs14,750 15,348
Disposals(5,731)(3,289)
Vessels and equipment, ending balance2,130,423 2,003,341 $ 1,468,913
Net Vessels - Activity
Additions118,063 522,369
Drydock costs $ 14,750 $ 15,348

Vessels and Equipment - Drydock

Vessels and Equipment - Drydocking Activity (Details) - Vessels & Equipment - USD ($) $ in Thousands12 Months Ended
Dec. 31, 2018Dec. 31, 2017
Movement in Capitalized Drydocking Costs [Roll Forward]
Balance at the beginning of the year $ 17,748 $ 6,962
Costs incurred for drydocking12,421 6,885
Costs allocated to drydocking as part of acquisition of business2,329 8,463
Drydock amortization(6,930)(4,562)
Balance at the end of the year $ 25,568 $ 17,748

Intangible Assets and Contrac_3

Intangible Assets and Contract Liabilities - Schedule of Intangible Assets (Details) - USD ($) $ in Thousands12 Months Ended
Dec. 31, 2018Dec. 31, 2017
Intangible Assets
Intangibles assets, beginning balance $ 2,497
Additions $ 2,926
Amortization for the period(606)(429)
Intangibles assets, ending balance1,891 2,497
Above market value of time charter | Tordis Knutsen
Intangible Assets
Intangibles assets, beginning balance1,215
Additions1,468
Amortization for the period(304)(253)
Intangibles assets, ending balance911 1,215
Above market value of time charter | Vigdis Knutsen
Intangible Assets
Intangibles assets, beginning balance1,282
Additions1,458
Amortization for the period(302)(176)
Intangibles assets, ending balance $ 980 $ 1,282

Intangible Assets and Contrac_4

Intangible Assets and Contract Liabilities - Additional Information (Details) - USD ($) $ in ThousandsJun. 01, 2017Mar. 01, 2017Jun. 30, 2017Mar. 31, 2017Dec. 31, 2018Dec. 31, 2017
Intangible Assets
Accumulated amortization for contract liabilities $ 11,494 $ 9,976
Tordis Knutsen | Above market value of time charter
Intangible Assets
Remaining term of the contract4 years 9 months 18 days4 years 9 months 18 days
Vigdis Knutsen | Above market value of time charter
Intangible Assets
Remaining term of the contract4 years 10 months 24 days4 years 10 months 24 days

Intangible Assets and Contrac_5

Intangible Assets and Contract Liabilities - Summary of Estimated Future Amortization of Intangible Assets (Details) - USD ($) $ in ThousandsDec. 31, 2018Dec. 31, 2017
Estimated future amortization of intangible assets
2019 $ 606
2020606
2021605
202274
Total $ 1,891 $ 2,497

Intangible Assets and Contrac_6

Intangible Assets and Contract Liabilities - Schedule of Contract Liabilities (Details) - USD ($) $ in Thousands12 Months Ended
Dec. 31, 2018Dec. 31, 2017
Contract liabilities:
Unfavorable contract rights, Beginning Balance $ (8,239) $ (9,757)
Amortization income1,518 1,518
Unfavorable contract rights, Ending Balance $ (6,721) $ (8,239)

Intangible Assets and Contrac_7

Intangible Assets and Contract Liabilities - Amortization of Contract Liabilities Classified Under Time Charter and Bareboat Revenues (Details) $ in ThousandsDec. 31, 2018USD ($)
Amortization of contract liabilities
2019 $ (1,518)
2020(1,518)
2021(1,518)
2022(1,518)
2023 and thereafter $ (649)

Accrued Expenses - Schedule of

Accrued Expenses - Schedule of Accrued Expenses (Details) - USD ($) $ in ThousandsDec. 31, 2018Dec. 31, 2017
Accrued Expenses
Operating expenses $ 832 $ 979
Interest expenses4,968 3,394
Guarantee costs54
Other expenses664 2,077
Total accrued expenses $ 6,464 $ 6,504

Long-Term Debt - Components (De

Long-Term Debt - Components (Details) - USD ($)Dec. 31, 2018Sep. 30, 2018Jan. 31, 2018Dec. 31, 2017May 31, 2017Mar. 01, 2017Dec. 31, 2014Jun. 30, 2014Apr. 01, 2014Jun. 30, 2012
Long-Term Debt
Long-term debt $ 1,087,347,000 $ 1,033,330,000
Less: current installments109,534,000 95,176,000
Less: unamortized deferred loan issuance costs2,608,000 2,191,000
Current portion of long-term debt106,926,000 92,985,000
Amounts due after one year977,813,000 938,154,000
Less: unamortized deferred loan issuance costs7,448,000 4,524,000
Long-term debt, less current installments, and unamortized deferred loan issuance costs970,365,000 933,630,000
$320 million loan facility
Long-Term Debt
Long-term debt312,472,000
Debt instrument face amount320,000,000 $ 320,000,000
$55 million revolving credit facility
Long-Term Debt
Long-term debt26,279,000
Debt instrument face amount55,000,000
$220 million loan facility
Long-Term Debt
Long-term debt165,000,000
Debt instrument face amount220,000,000 $ 220,000,000
Fortaleza and Recife loan facility
Long-Term Debt
Long-term debt109,375,000
Debt instrument face amount $ 140,000,000
Ingrid loan facility
Long-Term Debt
Long-term debt61,085,000
Debt instrument face amount $ 90,000,000
Hilda loan facility
Long-Term Debt
Long-term debt90,769,000 96,923,000
Debt instrument face amount $ 100,000,000
$117 million loan facility
Long-Term Debt
Long-term debt73,177,000
Debt instrument face amount117,000,000
Torill loan facility
Long-Term Debt
Long-term debt95,000,000
Debt instrument face amount $ 100,000,000
$172.5 million loan facility
Long-Term Debt
Long-term debt81,839,000 91,339,000
Debt instrument face amount172,500,000 172,500,000 $ 172,500,000
Raquel loan facility
Long-Term Debt
Long-term debt63,184,000 68,414,000
Debt instrument face amount $ 90,000,000
Tordis loan facility
Long-Term Debt
Long-term debt85,991,000 91,051,000 $ 114,400,000
Vigdis loan facility
Long-Term Debt
Long-term debt87,256,000 92,316,000
Lena loan facility
Long-Term Debt
Long-term debt85,750,000 90,650,000
Brasil loan facility
Long-Term Debt
Long-term debt63,454,000 69,000,000
Anna loan facility
Long-Term Debt
Long-term debt70,353,000
$25 million revolving credit facility
Long-Term Debt
Long-term debt25,000,000 25,000,000
Debt instrument face amount $ 25,000,000 $ 25,000,000

Long-Term Debt - Summary of Par

Long-Term Debt - Summary of Partnership's Outstanding Debt Repayable (Details) - USD ($) $ in ThousandsDec. 31, 2018Dec. 31, 2017
Debt Instrument, Redemption [Line Items]
Total long-term debt $ 1,087,347 $ 1,033,330
Periodic repayment
Debt Instrument, Redemption [Line Items]
201984,534
202085,945
202186,545
202271,210
202355,535
2024 and thereafter15,180
Total long-term debt398,949
Balloon repayment
Debt Instrument, Redemption [Line Items]
201925,000
202170,811
2022236,509
2023202,185
2024 and thereafter153,893
Total long-term debt $ 688,398

Long-Term Debt - Additional Inf

Long-Term Debt - Additional Information (Details) - Partnership's loan agreements - London Interbank Offered Rate (LIBOR)12 Months Ended
Dec. 31, 2018
Minimum
Long-Term Debt
Long-term debt, fixed margin percentage1.80%
Maximum
Long-Term Debt
Long-term debt, fixed margin percentage2.40%

Long-Term Debt - $320 Million T

Long-Term Debt - $320 Million Term Loan Facility and $55 Million Revolving Credit Facility (Details)Jun. 30, 2016USD ($)Sep. 30, 2018USD ($)itemJun. 30, 2014USD ($)Dec. 31, 2018USD ($)Dec. 31, 2017USD ($)Apr. 30, 2013USD ($)
Long-Term Debt
Credit facility amount $ 20,000,000
Multi-Vessels Facility
Long-Term Debt
Minimum aggregate market value of Vessels securing the loan, as percentage of outstanding balance125.00%
Minimum liquidity of Partnership $ 15,000,000
Incremental minimum liquidity, first 8 vessels with less than 12 months employment contract remaining1,500,000
Incremental minimum liquidity, next 12 vessels with less than 12 months employment contract remaining $ 1,000,000
Minimum book equity ratio for Partnership30.00%
Minimum EBITDA to interest ratio for Partnership2.50%
$320 million loan facility
Long-Term Debt
Loan facility amount $ 320,000,000 $ 320,000,000
Number of consecutive quarterly installments | item20
Balloon payment to be paid $ 177,000,000
$320 million loan facility | London Interbank Offered Rate (LIBOR)
Long-Term Debt
Interest margin percentage2.125%
$55 million revolving credit facility
Long-Term Debt
Loan facility amount $ 55,000,000
Credit facility amount $ 55,000,000
Commitment fee percentage0.85%
$55 million revolving credit facility | London Interbank Offered Rate (LIBOR)
Long-Term Debt
Interest margin percentage2.125%
$220 million loan facility
Long-Term Debt
Loan facility amount $ 220,000,000 $ 220,000,000
Amount refinanced $ 220,000,000
$220 million loan facility | London Interbank Offered Rate (LIBOR)
Long-Term Debt
Interest margin percentage2.125%
$35 million revolving credit facility
Long-Term Debt
Credit facility amount $ 35,000,000
Commitment fee percentage40.00%
Amount refinanced $ 35,000,000
$35 million revolving credit facility | London Interbank Offered Rate (LIBOR)
Long-Term Debt
Interest margin percentage2.50%

Long-Term Debt - $220 Million T

Long-Term Debt - $220 Million Term Loan Facility and $35 Million Revolving Credit Facility (Details) - USD ($)Nov. 09, 2017Jun. 30, 2017Jun. 30, 2016Sep. 30, 2018Jun. 30, 2014Dec. 31, 2017Apr. 30, 2013
Long-Term Debt
Repayment of existing credit facility $ 43,500,000 $ 30,000,000
Credit facility amount $ 20,000,000
Senior Secured Loan Facility
Long-Term Debt
Loan facility amount $ 240,000,000
$220 million loan facility
Long-Term Debt
Repayment of existing credit facility $ 220,000,000
Loan facility amount $ 220,000,000 $ 220,000,000
Term of debt instrument5 years
$220 million loan facility | London Interbank Offered Rate (LIBOR)
Long-Term Debt
Interest margin percentage2.125%
$35 million revolving credit facility
Long-Term Debt
Repayment of existing credit facility $ 35,000,000
Credit facility amount $ 35,000,000
Commitment fee percentage40.00%
$35 million revolving credit facility | London Interbank Offered Rate (LIBOR)
Long-Term Debt
Interest margin percentage2.50%
$20 million revolving credit facility
Long-Term Debt
Credit facility amount $ 20,000,000
New revolving credit facility of $15 million
Long-Term Debt
Credit facility amount $ 15,000,000
$10.5 million seller's credit
Long-Term Debt
Repayment of existing credit facility $ 10,500,000

Long-Term Debt - Fortaleza and

Long-Term Debt - Fortaleza and Recife Loan Facility (Details) - Fortaleza and Recife loan facility - USD ($) $ in Millions1 Months Ended
Jun. 30, 2014May 31, 2014
Long-Term Debt
Loan facility amount $ 140
Amount of previous loan facility, replaced by new facility $ 160
Term of debt instrument5 years
London Interbank Offered Rate (LIBOR)
Long-Term Debt
Interest margin percentage2.125%

Long-Term Debt - Hilda Loan Fac

Long-Term Debt - Hilda Loan Facility (Details) - Hilda loan facility $ in Millions1 Months Ended12 Months Ended
May 31, 2017USD ($)itemDec. 31, 2018USD ($)
Long-Term Debt
Loan facility amount $ 100
Amount of previous loan facility, replaced by new facility $ 117
Number of consecutive quarterly installments | item28
Minimum liquidity of Partnership $ 15
Incremental minimum liquidity, in excess of 8 vessels with less than 12 months employment contract remaining1
Incremental minimum liquidity, first 8 vessels with less than 12 months employment contract remaining $ 1.5
Minimum book equity ratio for Partnership30.00%
Minimum EBITDA to interest ratio for Partnership2.50%
First Two Years
Long-Term Debt
Minimum aggregate market value of Vessels securing the loan, as percentage of outstanding balance110.00%
Third and Fourth Years
Long-Term Debt
Minimum aggregate market value of Vessels securing the loan, as percentage of outstanding balance120.00%
Thereafter
Long-Term Debt
Minimum aggregate market value of Vessels securing the loan, as percentage of outstanding balance125.00%
London Interbank Offered Rate (LIBOR)
Long-Term Debt
Interest margin percentage2.20%

Long-Term Debt - Torill Loan Fa

Long-Term Debt - Torill Loan Facility (Details) - Torill loan facility $ in Millions1 Months Ended12 Months Ended
Jan. 31, 2018USD ($)itemDec. 31, 2018USD ($)
Long-Term Debt
Loan facility amount $ 100
Amount of previous loan facility, replaced by new facility $ 117
Number of consecutive quarterly installments | item24
Balloon payment to be paid $ 60
Minimum liquidity of Partnership $ 15
Incremental minimum liquidity, first 8 vessels with less than 12 months employment contract remaining1.5
Incremental minimum liquidity, in excess of 8 vessels with less than 12 months employment contract remaining $ 1
Minimum book equity ratio for Partnership30.00%
Minimum EBITDA to interest ratio for Partnership2.50%
First Two Years
Long-Term Debt
Minimum aggregate market value of Vessels securing the loan, as percentage of outstanding balance110.00%
Third and Fourth Years
Long-Term Debt
Minimum aggregate market value of Vessels securing the loan, as percentage of outstanding balance120.00%
Thereafter
Long-Term Debt
Minimum aggregate market value of Vessels securing the loan, as percentage of outstanding balance125.00%
London Interbank Offered Rate (LIBOR)
Long-Term Debt
Interest margin percentage2.10%

Long-Term Debt - $172.5 Million

Long-Term Debt - $172.5 Million Secured Loan Facility (Details) - $172.5 million loan facility - USD ($)Apr. 01, 2014Dec. 31, 2018Dec. 31, 2017
Long-Term Debt
Loan facility amount $ 172,500,000 $ 172,500,000 $ 172,500,000
Minimum liquidity of Partnership15,000,000
Incremental minimum liquidity, in excess of 8 vessels with less than 12 months employment contract remaining1,000,000
Incremental minimum liquidity, first 8 vessels with less than 12 months employment contract remaining $ 1,500,000
Minimum book equity ratio for Partnership30.00%
First Three Years
Long-Term Debt
Minimum aggregate market value of Vessels securing the loan, as percentage of outstanding balance100.00%
Thereafter
Long-Term Debt
Minimum aggregate market value of Vessels securing the loan, as percentage of outstanding balance125.00%
London Interbank Offered Rate (LIBOR)
Long-Term Debt
Interest margin percentage2.40%

Long-Term Debt - Ingrid Loan Fa

Long-Term Debt - Ingrid Loan Facility (Details) - Ingrid loan facility $ in Millions1 Months Ended
Jun. 30, 2012USD ($)tranche
Long-Term Debt
Loan facility amount $ 90
Number of tranches | tranche2
Commercial bank loan
Long-Term Debt
Loan facility amount $ 19.1
Commercial bank loan | London Interbank Offered Rate (LIBOR)
Long-Term Debt
Interest margin percentage2.25%
Export credit loan
Long-Term Debt
Loan facility amount $ 42
Annual fixed percentage interest rate3.85%
Bank facility fee percentage2.50%
Export credit guarantor commission percentage1.35%

Long-Term Debt - Raquel Loan Fa

Long-Term Debt - Raquel Loan Facility (Details) - Raquel loan facility - USD ($) $ in Millions1 Months Ended12 Months Ended
Dec. 31, 2014Dec. 31, 2018
Long-Term Debt
Loan facility amount $ 90
Final balloon payment to be paid $ 30.5
Minimum liquidity of Partnership $ 15
Incremental minimum liquidity, in excess of 8 vessels with less than 12 months employment contract remaining1
Incremental minimum liquidity, first 8 vessels with less than 12 months employment contract remaining $ 1.5
Minimum book equity ratio for Partnership30.00%
London Interbank Offered Rate (LIBOR)
Long-Term Debt
Interest margin percentage2.00%
First Three Years
Long-Term Debt
Minimum aggregate market value of Vessels securing the loan, as percentage of outstanding balance100.00%
Thereafter
Long-Term Debt
Minimum aggregate market value of Vessels securing the loan, as percentage of outstanding balance125.00%

Long-Term Debt - Tordis Loan Fa

Long-Term Debt - Tordis Loan Facility (Details) - USD ($) $ in ThousandsMar. 01, 2017Dec. 31, 2018Dec. 31, 2017
Long-Term Debt
Long-term debt, outstanding $ 1,087,347 $ 1,033,330
Tordis loan facility
Long-Term Debt
Long-term debt, outstanding $ 114,400 85,991 $ 91,051
Final balloon payment to be paid $ 70,800
Minimum liquidity of Partnership15,000
Incremental minimum liquidity, first 8 vessels with less than 12 months employment contract remaining1,500
Incremental minimum liquidity, in excess of 8 vessels with less than 12 months employment contract remaining $ 1,000
Minimum book equity ratio for Partnership30.00%
Minimum EBITDA to interest ratio for Partnership2.50%
Tordis loan facility | London Interbank Offered Rate (LIBOR)
Long-Term Debt
Interest margin percentage1.90%

Long-Term Debt - Vigdis Loan Fa

Long-Term Debt - Vigdis Loan Facility (Details) - Vigdis loan facility - USD ($) $ in Millions1 Months Ended12 Months Ended
Apr. 30, 2015Dec. 31, 2018
Long-Term Debt
Final balloon payment to be paid $ 70.8
Minimum aggregate market value of Vessels securing the loan, as percentage of outstanding balance130.00%
Minimum liquidity of Partnership $ 15
Incremental minimum liquidity, first 8 vessels with less than 12 months employment contract remaining1.5
Incremental minimum liquidity, in excess of 8 vessels with less than 12 months employment contract remaining $ 1
Minimum book equity ratio for Partnership30.00%
Minimum EBITDA to interest ratio for Partnership2.50%
London Interbank Offered Rate (LIBOR)
Long-Term Debt
Interest margin percentage1.90%

Long-Term Debt - Lena Loan Faci

Long-Term Debt - Lena Loan Facility (Details) - Lena loan facility - USD ($) $ in Millions1 Months Ended12 Months Ended
Apr. 30, 2015Dec. 31, 2018
Long-Term Debt
Final balloon payment to be paid $ 68.6
Minimum aggregate market value of Vessels securing the loan, as percentage of outstanding balance130.00%
Minimum liquidity of Partnership $ 15
Incremental minimum liquidity, first 8 vessels with less than 12 months employment contract remaining1.5
Incremental minimum liquidity, in excess of 8 vessels with less than 12 months employment contract remaining $ 1
Minimum book equity ratio for Partnership30.00%
Minimum EBITDA to interest ratio for Partnership2.50%
London Interbank Offered Rate (LIBOR)
Long-Term Debt
Interest margin percentage1.90%

Long-Term Debt - Brasil Loan Fa

Long-Term Debt - Brasil Loan Facility (Details) - Brasil loan facility - USD ($) $ in Millions1 Months Ended12 Months Ended
Jun. 30, 2017Dec. 31, 2018
Long-Term Debt
Final balloon payment to be paid $ 40
Minimum liquidity of Partnership $ 15
Incremental minimum liquidity, first 8 vessels with less than 12 months employment contract remaining1.5
Incremental minimum liquidity, next 12 vessels with less than 12 months employment contract remaining $ 1
Minimum book equity ratio for Partnership30.00%
Minimum EBITDA to interest ratio for Partnership2.50%
First Four Years
Long-Term Debt
Minimum aggregate market value of Vessels securing the loan, as percentage of outstanding balance125.00%
London Interbank Offered Rate (LIBOR)
Long-Term Debt
Interest margin percentage2.30%

Long-Term Debt - Anna Loan Faci

Long-Term Debt - Anna Loan Facility (Details) - Anna loan facility - USD ($) $ in Millions1 Months Ended12 Months Ended
Sep. 30, 2016Dec. 31, 2018
Long-Term Debt
Final balloon payment to be paid $ 57.1
Minimum aggregate market value of Vessels securing the loan, as percentage of outstanding balance130.00%
Minimum liquidity of Partnership $ 15
Incremental minimum liquidity, first 8 vessels with less than 12 months employment contract remaining1.5
Incremental minimum liquidity, in excess of 8 vessels with less than 12 months employment contract remaining $ 1
Minimum book equity ratio for Partnership30.00%
Minimum EBITDA to interest ratio for Partnership2.50%
London Interbank Offered Rate (LIBOR)
Long-Term Debt
Interest margin percentage2.00%

Long-Term Debt - $25 Million Re

Long-Term Debt - $25 Million Revolving Credit Facility (Details) - USD ($) $ in Millions1 Months Ended
Aug. 31, 2017Apr. 30, 2013
Long-Term Debt
Credit facility amount $ 20
$25 million revolving credit facility
Long-Term Debt
Credit facility amount $ 25
Interest margin percentage1.80%
Commitment fee percentage0.50%

Income Taxes - Significant Comp

Income Taxes - Significant Components of Current and Deferred Income Tax Expense Attributable to Income from Continuing Operations (Details) - USD ($) $ in Thousands12 Months Ended
Dec. 31, 2018Dec. 31, 2017Dec. 31, 2016
Income Taxes
Current tax benefit (expense) $ (18) $ (12) $ (14)
Deferred tax benefit (expense)20 28 29
Income tax benefit (expense) $ 2 $ 16 $ 15

Income Taxes - Additional infor

Income Taxes - Additional information (Details) - USD ($)Jan. 01, 2019Jan. 01, 2018Dec. 31, 2013Dec. 31, 2018Dec. 31, 2017Dec. 31, 2016Dec. 31, 2015Dec. 31, 2014Jun. 30, 2019Mar. 31, 2013
Income Tax Rate Reconciliation
Income tax benefit (expense) $ 2,000 $ 16,000 $ 15,000
Ordinary income tax rate22.00%23.00%24.00%
Valuation allowances $ 16,970,000 $ 15,685,000
Entrance tax $ 453,000 624,000 $ 3,000,000
Entrance tax, annual decline in gain20.00%
Entrance tax payable $ 2,700,000 $ 600,000 $ 700,000 900,000 $ 1,100,000 $ 1,800,000
Income tax rate, deferred tax liabilities23.00%24.00%
Estimated income tax payable $ 100,000 $ 200,000
Entrance tax paid, current200,000
Entrance tax payable, non current500,000 700,000
Entrance tax payable related to acquisition100,000
Unrecognized tax benefits0 0
Interest or penalties on tax return $ 0 0
Period for income tax returns10 years
Minimum percentage of ownership/control required to constitute a related party25.00%
KNOT | KNOT Management
Income Tax Rate Reconciliation
Ownership percentage acquired100.00%
KNOT | KNOT Management Denmark AS
Income Tax Rate Reconciliation
Ownership percentage acquired100.00%
Scenario, Forecast
Income Tax Rate Reconciliation
Ordinary income tax rate23.00%
Income tax rate, deferred tax liabilities22.00%
Entrance tax payable, non current $ 600,000
UK tax
Income Tax Rate Reconciliation
Income tax benefit (expense) $ (18,000) $ (12,000) $ (14,000)
Ordinary income tax rate20.00%20.00%
Income tax expense $ 18,331,000 $ 11,563,000

Income Taxes - Summary of Taxat

Income Taxes - Summary of Taxation (Details) - USD ($) $ in Thousands12 Months Ended
Dec. 31, 2018Dec. 31, 2017Dec. 31, 2016
Income Tax Rate Reconciliation
Income tax benefit (expense) $ 2 $ 16 $ 15
Effective tax rate0.00%0.00%0.00%
Norwegian Tonnage Tax Regime
Income Tax Rate Reconciliation
Income tax benefit (expense) $ 20 $ 28 $ 29
Effective tax rate23.00%24.00%25.00%
UK tax
Income Tax Rate Reconciliation
Income tax benefit (expense) $ (18) $ (12) $ (14)
Effective tax rate20.00%20.00%20.00%

Income Taxes - Components of De

Income Taxes - Components of Deferred Tax Assets and Liabilities (Details) - USD ($) $ in ThousandsDec. 31, 2018Dec. 31, 2017Dec. 31, 2016Mar. 31, 2013
Deferred tax assets:
Financial derivatives $ 24 $ (12)
Financial loss carryforwards for tonnage tax16,946 15,697
Total deferred tax asset16,970 15,685
Less valuation allowance(16,970)(15,685)
Deferred tax liabilities:
Entrance tax453 624 $ 3,000
Total deferred tax liabilities453 624
Net deferred tax liabilities $ 453 $ 624 $ 685

Income Taxes - Classification o

Income Taxes - Classification of Net Deferred Tax Liabilities (Details) - USD ($) $ in ThousandsDec. 31, 2018Dec. 31, 2017Dec. 31, 2016
Income Taxes
Net deferred tax liabilities $ 453 $ 624 $ 685

Income Taxes - Changes in Net D

Income Taxes - Changes in Net Deferred Tax Liabilities (Details) - USD ($) $ in Thousands12 Months Ended
Dec. 31, 2018Dec. 31, 2017
Income Taxes
Net deferred tax liabilities at January 1, $ 624 $ 685
Acquisition of KNOT Shuttle Tankers 26 AS99
Change in temporary differences(142)(198)
Translation differences(29)38
Net deferred tax liabilities at December 31, $ 453 $ 624

Related Party Transactions - Ad

Related Party Transactions - Additional Information (Details)1 Months Ended12 Months Ended
Jun. 30, 2017DApr. 30, 2013USD ($)Dec. 31, 2018USD ($)Jun. 01, 2017
Acquisitions from KNOT | Vigdis Knutsen
Related Party Transaction
Percentage of interest acquired100.00%
Number of days vessel went off-hire due to damage | D6
KNOT UK | Administrative Services Agreement
Related Party Transaction
Period of notice for termination of agreement90 days
KNOT
Related Party Transaction
Period of indemnification for certain environmental and toxic tort liabilities3 years
Deductible for claims related to indemnified environmental and toxic tort liabilities $ 500,000
Aggregate cap on indemnification for certain environmental and toxic tort liabilities $ 5,000,000
KNOT | Bodil Knutsen
Related Party Transaction
Period of related party guarantee of payment of hire rate5 years
KNOT | Windsor Knutsen
Related Party Transaction
Period of related party guarantee of payment of hire rate5 years
Directors
Related Party Transaction
Director and committee member fees $ 50,000
Members of audit and conflicts committees
Related Party Transaction
Director and committee member fees12,000
Chairmen of audit and conflicts committees
Related Party Transaction
Director and committee member fees $ 3,000
TSSI | KNOT
Related Party Transaction
Percentage ownership in joint venture50.00%
NYK | KNOT
Related Party Transaction
Percentage ownership in joint venture50.00%
KNOT | KNOT Management
Related Party Transaction
Ownership percentage acquired100.00%
KNOT | KNOT Management Denmark AS
Related Party Transaction
Ownership percentage acquired100.00%
Seglem Holding AS | TSSI
Related Party Transaction
Ownership percentage acquired100.00%

Related Party Transactions - Re

Related Party Transactions - Related Party Costs and Expenses (Details) $ in Thousands1 Months Ended12 Months Ended
Jun. 30, 2017DApr. 30, 2013Dec. 31, 2018USD ($)Dec. 31, 2017USD ($)Dec. 31, 2016USD ($)
Related Party Transaction
Total income (expenses) $ (8,043) $ (5,359) $ (4,338)
Vigdis Knutsen | Acquisitions from KNOT
Related Party Transaction
Number of days vessel went off-hire due to damage | D6
KNOT Management
Related Party Transaction
Administration fee1,434 1,457 1,279
KOAS
Related Party Transaction
Administration fee $ 583 461 382
Margin rate on administration cost5.00%
KOAS UK
Related Party Transaction
Administration fee $ 123 122 145
Margin rate on administration cost5.00%
KNOT
Related Party Transaction
Other income $ 749 1,499 770
Operating expenses6,491 4,617 2,971
Administration fee $ 161 149 203
Interest expense charged from KNOT $ (52) $ (128)
KNOT | Bodil Knutsen
Related Party Transaction
Period of related party guarantee of payment of hire rate5 years
KNOT | Windsor Knutsen
Related Party Transaction
Period of related party guarantee of payment of hire rate5 years

Related Party Transactions - Am

Related Party Transactions - Amounts Due from (to) Related Parties (Details) - USD ($) $ in ThousandsDec. 31, 2018Dec. 31, 2017
Related Party Transaction
Amount due from related parties $ 1,141 $ 571
Amount due to related parties1,070 5,450
KOAS
Related Party Transaction
Amount due from related parties466 24
Amount due to related parties629 898
KNOT and affiliates
Related Party Transaction
Amount due from related parties675 547
Amount due to related parties $ 441 $ 4,552

Related Party Transactions - Tr

Related Party Transactions - Trade Accounts Payables (Details) - USD ($) $ in ThousandsDec. 31, 2018Dec. 31, 2017
Related Party Transaction
Trade accounts payables to related parties $ 792 $ 1,412
KOAS
Related Party Transaction
Trade accounts payables to related parties381 864
KNOT and affiliates
Related Party Transaction
Trade accounts payables to related parties $ 411 $ 548

Related Party Transactions - Ac

Related Party Transactions - Acquisitions from KNOT (Details) - Acquisitions from KNOT - USD ($) $ in MillionsMar. 01, 2018Dec. 01, 2016Dec. 15, 2017Sep. 30, 2017Jun. 01, 2017Mar. 01, 2017
Anna Knutsen
Related Party Transaction
Percentage of interest acquired100.00%
Raquel Knutsen
Related Party Transaction
Partnership, ownership interest acquired100.00%
Seller's credit and Seller's loan $ 25
Tordis Knutsen
Related Party Transaction
Partnership, ownership interest acquired100.00%
Vigdis Knutsen
Related Party Transaction
Partnership, ownership interest acquired100.00%
Lena Knutsen
Related Party Transaction
Partnership, ownership interest acquired100.00%
Brasil Knutsen
Related Party Transaction
Partnership, ownership interest acquired100.00%

Commitments and Contingencies -

Commitments and Contingencies - Assets Pledged, Claims and Legal Proceedings (Details) - USD ($) $ in MillionsDec. 31, 2018Dec. 31, 2017Dec. 31, 2016
Commitments and Contingencies
Book value of assets pledged as security for long-term debt and interest rate swap obligations $ 1,767 $ 1,723
Accrued claim $ 0 $ 0.4 $ 0

Commitments and Contingencies_2

Commitments and Contingencies - Insurance (Details) - USD ($) $ in Thousands3 Months Ended12 Months Ended24 Months Ended
Dec. 31, 2017Dec. 31, 2018Dec. 31, 2017Dec. 31, 2016Dec. 31, 2018
Insurance Proceeds
Insurance coverage deductible amount per vessel $ 150 $ 150
Deductible period under business interruption insurance14 days
Period of coverage under business interruption insurance180 days
Limit of protection and indemnity insurance for pollution, per vessel per incident $ 1,000,000 1,000,000
Loss of hire insurance payments recorded as a component of total revenues450 $ 5,176
Net vessel operating expense $ 56,730 $ 46,709 $ 30,903
Raquel Knutsen
Insurance Proceeds
Deductible period under business interruption insurance14 days14 days
Period of coverage under business interruption insurance180 days180 days
Raquel Knutsen | Propeller Hub Damage
Insurance Proceeds
Loss of hire insurance payments recorded as a component of total revenues $ 3,400
Recoveries for repairs $ 3,900 3,900
Cost of repairs4,200
Net vessel operating expense300
Carmen Knutsen
Insurance Proceeds
Special survey drydocking period5 years
Deductible period under business interruption insurance14 days
Carmen Knutsen | Technical Default in Controllable Pitch Propeller
Insurance Proceeds
Loss of hire insurance payments recorded as a component of total revenues450 1,750
Recoveries for repairs2,250
Cost of repairs $ 150 $ 2,400
Net vessel operating expense $ 300

Earnings per Unit and Cash Di_3

Earnings per Unit and Cash Distributions - Calculations of Basic and Diluted Earnings per Unit (Details) $ / shares in Units, shares in Thousands, $ in ThousandsMay 18, 2016Dec. 31, 2018USD ($)$ / sharessharesDec. 31, 2017USD ($)$ / sharessharesDec. 31, 2016USD ($)$ / sharesshares
Earnings per Unit and Cash Distributions
Net income $ 82,165 $ 68,064 $ 61,102
Less: Series A Preferred unitholders' interest in net income7,200 5,253
Net income attributable to the unitholders of KNOT Offshore Partners LP74,965 62,811 61,102
Less: Distributions72,136 67,171 61,528
Under (over) distributed earnings $ 2,829 $ (4,360) $ (426)
Weighted average units outstanding (basic):
General Partner | shares615 567 559
Weighted average units outstanding (diluted):
General Partner | shares615 567 559
Earnings per unit (basic):
General Partner | $ / shares $ 2.251 $ 2.046 $ 2.248
Earnings per unit (diluted):
General Partner | $ / shares2.251 2.046 2.248
Ratio for conversion of subordinated units into common units1
Cash distributions declared and paid in the period
Earnings per unit (diluted):
Distributions per unit | $ / shares2.080 2.080 2.080
Subsequent event: Cash distributions declared and paid relating to the period
Earnings per unit (diluted):
Distributions per unit | $ / shares $ 0.520 $ 0.520 $ 0.520
Common Units
Weighted average units outstanding (basic):
Common and subordinated unitholders | shares32,694 30,068 23,917
Weighted average units outstanding (diluted):
Common and subordinated unitholders | shares36,370 32,804 23,917
Earnings per unit (basic):
Common and subordinated unitholders | $ / shares $ 2.251 $ 2.050 $ 2.291
Earnings per unit (diluted):
Common and subordinated unitholders | $ / shares $ 2.217 $ 2.037 $ 2.291
Subordinated Units
Weighted average units outstanding (basic):
Common and subordinated unitholders | shares3,277
Weighted average units outstanding (diluted):
Common and subordinated unitholders | shares3,277
Earnings per unit (basic):
Common and subordinated unitholders | $ / shares $ 1.542
Earnings per unit (diluted):
Common and subordinated unitholders | $ / shares $ 1.542
Limited Partner | Common Units
Earnings per Unit and Cash Distributions
Net income attributable to the unitholders of KNOT Offshore Partners LP $ 73,581 $ 61,651 $ 54,794
Under (over) distributed earnings2,777 (4,280)(417)
Limited Partner | Subordinated Units
Earnings per Unit and Cash Distributions
Net income attributable to the unitholders of KNOT Offshore Partners LP5,052
General Partner
Earnings per Unit and Cash Distributions
Net income attributable to the unitholders of KNOT Offshore Partners LP1,384 1,160 1,256
Under (over) distributed earnings52 (80)(9)
IDR Holders
Earnings per Unit and Cash Distributions
Net income2,800 2,600 2,400
Less: Distributions $ 2,800 $ 2,600 $ 2,400

Earnings per Unit and Cash Di_4

Earnings per Unit and Cash Distributions - Additional Information (Details) - $ / sharesNov. 09, 2017Apr. 30, 2013Dec. 31, 2018Dec. 31, 2018Dec. 31, 2017Dec. 31, 2016
Distribution Made to Limited Partner
Number of general partner units outstanding615,117 615,117 615,117
General Partner | First Target Distribution
Distribution Made to Limited Partner
Required percentage of operating surplus distribution1.85%
General Partner | Second Target Distribution
Distribution Made to Limited Partner
Required percentage of operating surplus distribution1.85%
General Partner | Third Target Distribution
Distribution Made to Limited Partner
Required percentage of operating surplus distribution1.85%
General Partner | Fourth Target Distribution
Distribution Made to Limited Partner
Required percentage of operating surplus distribution1.85%
General Partner | Target Distribution Thereafter
Distribution Made to Limited Partner
Required percentage of operating surplus distribution1.85%
IDR Holders | Maximum
Distribution Made to Limited Partner
Required percentage of operating surplus distribution48.00%
IDR Holders | Third Target Distribution
Distribution Made to Limited Partner
Required percentage of operating surplus distribution13.00%
IDR Holders | Fourth Target Distribution
Distribution Made to Limited Partner
Required percentage of operating surplus distribution23.00%
IDR Holders | Target Distribution Thereafter
Distribution Made to Limited Partner
Required percentage of operating surplus distribution48.00%
Common Units
Distribution Made to Limited Partner
Number of common units and subordinated units outstanding32,694,094 32,694,094 32,694,094
Weighted average number of common units outstanding32,694,000 30,068,000 23,917,000
Common Units | Limited Partner | Minimum Quarterly Distribution
Distribution Made to Limited Partner
Distribution, per unit $ 0.375 $ 0.375
Common Units | Limited Partner | First Target Distribution
Distribution Made to Limited Partner
Required percentage of operating surplus distribution98.15%
Distribution, per unit0.43125 $ 0.43125
Common Units | Limited Partner | Second Target Distribution
Distribution Made to Limited Partner
Required percentage of operating surplus distribution98.15%
Distribution, per unit0.46875 $ 0.46875
Common Units | Limited Partner | Third Target Distribution
Distribution Made to Limited Partner
Required percentage of operating surplus distribution85.15%
Distribution, per unit $ 0.5625 $ 0.5625
Common Units | Limited Partner | Fourth Target Distribution
Distribution Made to Limited Partner
Required percentage of operating surplus distribution75.15%
Common Units | Limited Partner | Target Distribution Thereafter
Distribution Made to Limited Partner
Required percentage of operating surplus distribution50.15%
Common Units | Public
Distribution Made to Limited Partner
Number of common units and subordinated units outstanding24,036,226 24,036,226
Common Units | KNOT
Distribution Made to Limited Partner
Number of common units and subordinated units outstanding8,567,500 8,567,500
Public | Partnership
Distribution Made to Limited Partner
Percentage of limited partner interest49.00%73.50%
KNOT | Partnership
Distribution Made to Limited Partner
Percentage of limited partner interest49.00%26.20%
KNOT, through ownership of General Partner | KNOT
Distribution Made to Limited Partner
Number of general partner units outstanding615,117 615,117
KNOT, through ownership of General Partner | Common Units | KNOT
Distribution Made to Limited Partner
Number of common units and subordinated units outstanding90,368 90,368
KNOT, through ownership of General Partner | Partnership
Distribution Made to Limited Partner
Percentage of limited partner interest0.30%
Percentage of general partner interest1.85%
General Partner | Partnership
Distribution Made to Limited Partner
Percentage of general partner interest1.85%2.00%1.85%

Acquisitions - Anna Knutsen (De

Acquisitions - Anna Knutsen (Details) - Anna Knutsen $ in ThousandsMar. 01, 2018USD ($)
Vessels and Equipment
Purchase consideration $ 19,913
Purchase consideration
Cash consideration paid to KNOT14,637
Purchase price adjustments5,276
Purchase price19,913
Additional information
Purchase price adjustments $ 5,276
Acquisitions from KNOT
Additional information
Percentage of interest acquired100.00%
Fair value, nonrecurring measurement for asset acquisition
Vessels and Equipment
Purchase consideration $ 19,913
Less: Fair value of net assets acquired:
Vessels and equipment120,274
Cash4,537
Inventories257
Derivative assets1,839
Other current assets111
Amounts due from related parties520
Long-term debt(84,217)
Long-term debt from related parties(22,535)
Deferred debt issuance costs1,228
Trade accounts payable(971)
Accrued expenses(1,013)
Amounts due to related parties(117)
Subtotal19,913
Allocation to drydocking2,329
Purchase consideration
Purchase price adjustments5,300
Purchase price19,913
Additional information
Vessel and equipment in purchase price120,274
Outstanding indebtedness106,800
Certain capitalized financing fees1,400
Purchase price adjustments $ 5,300

Acquisitions - Additional Infor

Acquisitions - Additional Information (Details) - USD ($) $ in ThousandsDec. 15, 2017Nov. 09, 2017Nov. 08, 2017Sep. 30, 2017Jun. 30, 2017Jun. 01, 2017Mar. 01, 2017Feb. 02, 2017Jan. 10, 2017Jan. 06, 2017Dec. 01, 2016Dec. 31, 2017Dec. 31, 2016Dec. 31, 2017Dec. 31, 2017Dec. 31, 2017Dec. 31, 2018Dec. 31, 2017Dec. 31, 2016
Acquisitions
Acquisition related costs $ 100 $ 200 $ 100
Series A Preferred Unit
Acquisitions
Number of preferred units issued and sold1,666,667 2,083,333
Limited Partner | Common Units
Acquisitions
Partnership units sold3,000,000 3,000,000 2,500,000 2,500,000
Brasil Knutsen
Acquisitions
Fair value of vessel and equipment acquired $ 96,000
Outstanding indebtedness assumed59,000
Company Liquidity Loan assumed35,200
Certain capitalized financing fees600
Post-closing adjustment $ 3,381
Revenues contributed since the acquisition date $ 700
Net income contributed since the acquisition date $ 300
Brasil Knutsen | Acquisitions from KNOT
Acquisitions
Percentage of interest acquired100.00%
Lena Knutsen
Acquisitions
Fair value of vessel and equipment acquired $ 142,457
Fair value of vessel, equipment and above market time charter acquired142,000
Outstanding indebtedness assumed111,068
Outstanding debt including debt from related parties133,800
Certain capitalized financing fees1,000
Business acquisition, receivable owned24,100
Post-closing adjustment $ (108)
Revenues contributed since the acquisition date $ 5,200
Net income contributed since the acquisition date $ 100
Lena Knutsen | Acquisitions from KNOT
Acquisitions
Percentage of interest acquired100.00%
Vigdis Knutsen
Acquisitions
Fair value of vessel and equipment acquired $ 145,772
Fair value of vessel, equipment and above market time charter acquired147,000
Outstanding indebtedness assumed114,411
Outstanding debt including debt from related parties137,700
Certain capitalized financing fees900
Business acquisition, receivable owned17,900
Post-closing adjustment $ 3,650
Revenues contributed since the acquisition date $ 11,800
Net income contributed since the acquisition date $ 2,600
Vigdis Knutsen | Acquisitions from KNOT
Acquisitions
Percentage of interest acquired100.00%
Tordis Knutsen
Acquisitions
Fair value of vessel and equipment acquired $ 145,754
Fair value of vessel, equipment and above market time charter acquired147,000
Outstanding indebtedness assumed114,411
Outstanding debt including debt from related parties137,700
Certain capitalized financing fees800
Business acquisition, receivable owned21,100
Post-closing adjustment $ 1,741
Revenues contributed since the acquisition date $ 17,200
Net income contributed since the acquisition date $ 3,200
Tordis Knutsen | Acquisitions from KNOT
Acquisitions
Percentage of interest acquired100.00%
Raquel Knutsen
Acquisitions
Fair value of vessel and equipment acquired $ 116,751
Fair value of vessel, equipment and above market time charter acquired116,500
Outstanding indebtedness assumed79,950
Outstanding debt including debt from related parties103,500
Post-closing adjustment $ 7,271
Revenues contributed since the acquisition date $ 1,500
Net income contributed since the acquisition date $ 200
Raquel Knutsen | Acquisitions from KNOT
Acquisitions
Percentage of interest acquired100.00%

Acquisitions - Purchase Price A

Acquisitions - Purchase Price Allocation (Details) - USD ($) $ in ThousandsDec. 15, 2017Sep. 30, 2017Jun. 01, 2017Mar. 01, 2017Dec. 01, 2016
Brasil Knutsen
Acquisitions
Purchase consideration $ 5,764
Less: Fair value of net assets acquired:
Vessels and equipment96,000
Cash5,217
Inventories146
Others current assets125
Amounts due from related parties2
Long-term debt(59,000)
Deferred debt issuance costs618
Trade accounts payable(154)
Accrued expenses(1,185)
Amounts due to related parties(36,005)
Subtotal $ 5,764
Lena Knutsen
Acquisitions
Purchase consideration $ 33,235
Less: Fair value of net assets acquired:
Vessels and equipment142,457
Cash470
Inventories243
Derivatives assets1,729
Others current assets193
Amounts due from related parties23,599
Long-term debt(111,068)
Long-term debt from related parties(22,706)
Deferred debt issuance costs867
Trade accounts payable(256)
Accrued expenses(224)
Prepaid charter and deferred revenue(1,758)
Amounts due to related parties(186)
Income tax payable(125)
Subtotal $ 33,235
Vigdis Knutsen
Acquisitions
Purchase consideration $ 31,759
Less: Fair value of net assets acquired:
Vessels and equipment145,772
Intangibles: Above market time charter1,458
Cash3,438
Inventories190
Derivatives assets226
Others current assets128
Amounts due from related parties18,374
Long-term debt(114,411)
Long-term debt from related parties(22,703)
Deferred debt issuance costs928
Trade accounts payable(187)
Accrued expenses(1,082)
Amounts due to related parties(372)
Subtotal $ 31,759
Tordis Knutsen
Acquisitions
Purchase consideration $ 32,983
Less: Fair value of net assets acquired:
Vessels and equipment145,754
Intangibles: Above market time charter1,468
Cash609
Inventories129
Derivatives assets1,377
Others current assets1,348
Amounts due from related parties20,834
Long-term debt(114,411)
Long-term debt from related parties(22,960)
Deferred debt issuance costs795
Trade accounts payable(106)
Accrued expenses(503)
Amounts due to related parties(1,351)
Subtotal $ 32,983
Raquel Knutsen
Acquisitions
Purchase consideration $ 20,252
Less: Fair value of net assets acquired:
Vessels and equipment116,751
Cash7,146
Inventories307
Derivatives assets207
Others current assets183
Amounts due from related parties59
Long-term debt(79,950)
Long-term debt from related parties(24,019)
Deferred debt issuance costs1,059
Trade accounts payable(167)
Accrued expenses(1,179)
Amounts due to related parties(145)
Subtotal $ 20,252

Acquisitions - Purchase Conside

Acquisitions - Purchase Consideration (Details) - USD ($) $ in ThousandsDec. 15, 2017Sep. 30, 2017Jun. 01, 2017Mar. 01, 2017Dec. 01, 2016Dec. 31, 2018
Brasil Knutsen
Acquisitions
Cash consideration paid to KNOT $ 2,383
Purchase price adjustments3,381
Purchase price $ 5,764
Allocation to drydocking included in property, plant and equipment $ 260
Lena Knutsen
Acquisitions
Cash consideration paid to KNOT $ 33,343
Purchase price adjustments(108)
Purchase price $ 33,235
Allocation to drydocking included in property, plant and equipment2,741
Vigdis Knutsen
Acquisitions
Cash consideration paid to KNOT $ 28,109
Purchase price adjustments3,650
Purchase price $ 31,759
Allocation to drydocking included in property, plant and equipment2,709
Tordis Knutsen
Acquisitions
Cash consideration paid to KNOT $ 31,242
Purchase price adjustments1,741
Purchase price $ 32,983
Allocation to drydocking included in property, plant and equipment2,753
Raquel Knutsen
Acquisitions
Cash consideration paid to KNOT $ (12,019)
Purchase price adjustments7,271
Purchase price20,252
Allocation to drydocking included in property, plant and equipment $ 1,663
Raquel Knutsen | Seller's credit
Acquisitions
Seller's credit and Seller's loan12,981
Raquel Knutsen | Seller's loan
Acquisitions
Seller's credit and Seller's loan $ 12,019

Acquisitions - Pro Forma Inform

Acquisitions - Pro Forma Information (Details) - USD ($) $ in Thousands12 Months Ended
Dec. 31, 2017Dec. 31, 2016
Brasil Knutsen
Acquisitions
Revenue $ 223,220
Net income64,034
Lena Knutsen
Acquisitions
Revenue220,904
Net income62,999
Vigdis Knutsen
Acquisitions
Revenue222,354
Net income63,225
Tordis Knutsen
Acquisitions
Revenue221,198
Net income $ 66,584
Raquel Knutsen
Acquisitions
Revenue $ 190,229
Net income $ 65,101

Equity Offerings and Sale of _3

Equity Offerings and Sale of Series A Preferred Units - Schedule of Equity Offerings (Details) - USD ($) $ in ThousandsNov. 09, 2017Jan. 10, 2017Nov. 30, 2017Jan. 31, 2017Dec. 31, 2018Dec. 31, 2017
Equity Offerings
Gross proceeds received $ 66,936 $ 56,125 $ 123,061
Less: Underwriters' discount660 925 1,585
Less: Offering expenses230 300 530
Net proceeds received $ 66,000 $ 54,900 $ 66,046 $ 54,900 $ (4) $ 120,946

Equity Offerings and Sale of _4

Equity Offerings and Sale of Series A Preferred Units - Equity Offerings, Additional Information (Details) - USD ($) $ in ThousandsNov. 09, 2017Nov. 08, 2017Jun. 30, 2017Jan. 10, 2017Jan. 06, 2017Nov. 30, 2017Jan. 31, 2017Apr. 30, 2013Dec. 31, 2018Dec. 31, 2017
Equity Offerings
Repayment of credit facility $ 43,500 $ 30,000
Net proceeds from the offering $ 66,000 $ 54,900 $ 66,046 $ 54,900 $ (4) $ 120,946
Limited Partner | Common Units
Equity Offerings
Partnership units sold3,000,000 3,000,000 2,500,000 2,500,000
General Partner
Equity Offerings
Partnership units sold56,443
General partner's contribution $ 1,200
General Partner | Partnership
Equity Offerings
General partner interest in Partnership (as a percent)1.85%2.00%1.85%

Equity Offerings and Sale of _5

Equity Offerings and Sale of Series A Preferred Units - Schedule of Sale of Series A Preferred Units (Details) - USD ($) $ in Thousands1 Months Ended12 Months Ended
Jun. 30, 2017Feb. 28, 2017Dec. 31, 2018Dec. 31, 2017
Preferred Units [Line Items]
Net proceeds received $ 87,464
Series A Preferred Unit
Preferred Units [Line Items]
Gross proceeds received $ 40,000 $ 50,000 $ 90,000
Less: Fee1,000 1,000 2,000
Less: Expenses150 386 536
Net proceeds received $ 38,850 $ 48,614 $ 87,464

Equity Offerings and Sale of _6

Equity Offerings and Sale of Series A Preferred Units - Sale of Series A Preferred Units, Additional Information (Details) $ / shares in Units, $ in ThousandsJun. 30, 2017USD ($)$ / sharessharesFeb. 02, 2017USD ($)$ / sharessharesJun. 30, 2017USD ($)Feb. 28, 2017USD ($)Dec. 31, 2018USD ($)Vote$ / sharesDec. 31, 2017USD ($)
Sale of Series A Preferred Units
Net proceeds from the sale | $ $ 87,464
Series A Preferred Unit
Sale of Series A Preferred Units
Number of preferred units issued and sold | shares1,666,667 2,083,333
Net proceeds from the sale | $ $ 38,850 $ 48,614 $ 87,464
Preferred units liquidation preference | $ / shares $ 24
Annual distribution rate percentage8.00%
Period after quarter end for payment of distributions45 days
Conversion price per unit | $ / shares $ 24
Cash redemption rate as percentage of Issue Price, upon change of control100.00%
Cash redemption rate as percentage of Issue Price, upon redemption eligibility date70.00%
Common unit value redemption rate as percentage of Issue Price, upon redemption eligibility date80.00%
Period of trading days used to determine value of common units issued for redemption30 days
Threshold common unit market value as percentage of Issue Price, to trigger conversion eligibility130.00%
Votes per unit | Vote1
Private Placement | Series A Preferred Unit
Sale of Series A Preferred Units
Number of preferred units issued and sold | shares1,666,667 2,083,333
Preferred units issued and sold, price per unit | $ / shares $ 24 $ 24
Net proceeds from the sale | $ $ 38,900 $ 48,600

Unit Activity - Schedule of Mov

Unit Activity - Schedule of Movement in Number of Common Units, Subordinated Units and General Partner Units (Details) - sharesNov. 09, 2017Nov. 08, 2017Jun. 30, 2017Feb. 02, 2017Jan. 10, 2017Jan. 06, 2017Dec. 31, 2018Dec. 31, 2017Dec. 31, 2016
Unit Activity
General partners' capital account, units issued615,117 615,117 558,674
Convertible preferred units outstanding3,750,000 3,750,000
Series A Preferred Unit
Unit Activity
Sales of Series A Preferred Units1,666,667 2,083,333
Common Units
Unit Activity
Limited partners' capital account, units issued32,694,094 32,694,094 27,194,094
Limited Partner | Common Units
Unit Activity
Public offering3,000,000 3,000,000 2,500,000 2,500,000
General Partner
Unit Activity
Public offering56,443

Unit Activity - Additional Info

Unit Activity - Additional Information (Details)May 18, 2016sharesDec. 31, 2015$ / sharessharesDec. 31, 2018sharesAug. 12, 2015shares
Unit Activity
Ratio for conversion of subordinated units into common units1
Limited Partner | Common Units
Unit Activity
Units repurchased by the Partnership180,906 0
Units purchased by the General Partner90,368 0
Average purchase price (in dollars per unit) | $ / shares $ 12.71
Number of units converted8,567,500
Limited Partner | Subordinated Units
Unit Activity
Number of units converted(8,567,500)
Maximum | Common Units
Unit Activity
Common units authorized to be repurchased by the Partnership666,667
Common units authorized to be repurchased by the General Partner333,333

Subsequent Events (Details)

Subsequent Events (Details) - Subsequent Event - USD ($) $ / shares in Units, $ in MillionsFeb. 14, 2019Mar. 31, 2019
Windsor Knutsen | Minimum
Subsequent Events
Period of suspension of time charter10 months
Windsor Knutsen | Maximum
Subsequent Events
Period of suspension of time charter12 months
Series A Preferred Unit
Subsequent Events
Cash distributions $ 1.8
Common Units
Subsequent Events
Cash distributions paid in the period per unit $ 0.52
Cash distributions $ 18