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KNOT Offshore Partners LPTable of ContentsUNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549FORM 20-F(Mark One)☐REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR 12(g) OF THE SECURITIES EXCHANGE ACT OF 1934OR☒ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31, 2023OR☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period from toOR☐SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934Date of event requiring this shell company report Commission file number 001-35866KNOT OFFSHORE PARTNERS LP(Exact Name of Registrant as Specified in its Charter)Republic of the Marshall Islands(Jurisdiction of Incorporation or Organization)2 Queens CrossAberdeenAB15 4YB, United Kingdom(Address of Principal Executive Offices)Derek Lowe2 Queens CrossAberdeenAB15 4YB, United KingdomE-mail: dlo@knotoffshorepartners.comTelephone: 44 (0) 1224 618420Facsimile: 44 (0) 1224 624891(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)Securities registered or to be registered pursuant to Section 12(b) of the Act:Title of Each ClassTrading Symbol(s)Name of Each Exchange on Which RegisteredCommon units representing limited partner interestsKNOPNew York Stock ExchangeSecurities registered or to be registered pursuant to Section 12(g) of the Act: NoneSecurities for which there is a reporting obligation pursuant to Section 15(d) of the Act: NoneIndicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report.34,045,081 common units representing limited partner interests3,541,666 Series A Convertible Preferred Units252,405 Class B UnitsIndicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. ☐ Yes ☒ NoIf this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. ☐ Yes ☒ NoIndicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required tofile such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes ☐ NoIndicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for suchshorter period that the registrant was required to submit such files). ☒ Yes ☐ NoIndicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer” and “emerging growth company”in Rule 12b-2 of the Exchange Act.Large accelerated filer ☐ Accelerated filer ☒ Non-accelerated filer ☐ Emerging growth company ☐If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financialaccounting standards* provided pursuant to Section 13(a) of the Exchange Act. ☐*The term “new or revised financial accounting standards” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C.7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuantto § 240.10D-1(b). ☐Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:U.S. GAAP ☒International Financial Reporting Standards as issuedby the International Accounting Standards Board ☐Other ☐If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow. ☐ Item 17 ☐ Item 18If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☒ No Table of Contents1KNOT Offshore Partners LPINDEX TO REPORT ON FORM 20-FForward-Looking Statements3Part I6Item 1.Identity of Directors, Senior Management and Advisers6Item 2.Offer Statistics and Expected Timetable6Item 3.Key Information6A.Reserved6B.Capitalization and Indebtedness6C.Reasons for the Offer and Use of Proceeds6D.Risk Factors7Item 4.Information on the Partnership41A.History and Development of the Partnership41B.Business Overview43C.Organizational Structure64D.Property, Plants and Equipment65Item 4A.Unresolved Staff Comments65Item 5.Operating and Financial Review and Prospects65A.Operating Results75B.Liquidity and Capital Resources78C.Research and Development, Patents and Licenses, Etc.86D.Trend Information86E.Critical Accounting Estimates86Item 6.Directors, Senior Management and Employees89A.Directors and Senior Management89B.Compensation91C.Board Practices92D.Employees93E.Unit Ownership94F.Disclosure of a Registrant’s Action to Recover Erroneously Awarded Compensation94Item 7.Major Unitholders and Related Party Transactions94A.Major Unitholders94B.Related Party Transactions96C.Interests of Experts and Counsel104Item 8.Financial Information104A.Consolidated Statements and Other Financial Information104B.Significant Changes106Item 9.The Offer and Listing106A.Offer and Listing Details106B.Plan of Distribution106C.Markets106D.Selling Shareholders106E.Dilution107F.Expenses of the Issue107Item 10.Additional Information107A.Share Capital107B.Memorandum and Articles of Association107C.Material Contracts107D.Exchange Controls109E.Taxation109F.Dividends and Paying Agents116G.Statement by Experts116 Table of Contents2H.Documents on Display117I.Subsidiary Information117J.Annual Report to Security Holders117Item 11.Quantitative and Qualitative Disclosures About Market Risk117Item 12.Description of Securities Other than Equity Securities118Part II118Item 13.Defaults, Dividend Arrearages and Delinquencies118Item 14.Material Modifications to the Rights of Securities Holders and Use of Proceeds118Item 15.Controls and Procedures119Item 16A.Audit Committee Financial Expert120Item 16B.Code of Ethics120Item 16C.Principal Accountant Fees and Services120Item 16D.Exemptions from the Listing Standards for Audit Committees121Item 16E.Purchases of Equity Securities by the Issuer and Affiliated Purchasers121Item 16F.Change in Registrants’ Certifying Accountant121Item 16G.Corporate Governance121Item 16H.Mine Safety Disclosure122Item 16I.Disclosure Regarding Foreign Jurisdictions that Prevent Inspections122Item 16J.Insider trading policies122Item 16K.Cybersecurity122Part III125Item 17.Financial Statements125Item 18.Financial Statements125Item 19.Exhibits126Signature129Index to Financial Statements of KNOT Offshore Partners LPF-1 Table of Contents3FORWARD-LOOKING STATEMENTSThis Annual Report on Form 20-F for the year ended December 31, 2023 (this “Annual Report”) contains certain forward-lookingstatements concerning plans and objectives of management for future operations or economic performance, or assumptions related thereto,including our financial forecast. In addition, we and our representatives may from time to time make other oral or written statements that arealso forward-looking statements. Such statements include, in particular, statements about our plans, strategies, business prospects, changes andtrends in our business, and the markets in which we operate as described in this Annual Report. In some cases, you can identify the forward-looking statements by the use of words such as “may,” “could,” “should,” “would,” “expect,” “plan,” “anticipate,” “intend,” “forecast,”“believe,” “estimate,” “predict,” “propose,” “potential,” “continue” or the negative of these terms or other comparable terminology. Theseforward-looking statements reflect management’s current views only as of the date of this Annual Report and are not intended to give anyassurance as to future results. As a result, unitholders are cautioned not to rely on any forward-looking statements.Forward-looking statements appear in a number of places in this Annual Report and include statements with respect to, among otherthings:●market trends in the shuttle tanker or general tanker industries, including hire rates, factors affecting supply and demand, andopportunities for the profitable operations of shuttle tankers and conventional tankers;●market trends in the production of oil in the North Sea, Brazil and elsewhere;●the ability of Knutsen NYK Offshore Tankers AS (“KNOT”) and KNOT Offshore Partners LP (“KNOT Offshore Partners”) tobuild shuttle tankers and the timing of the delivery and acceptance of any such vessels by their respective charterers;●KNOT Offshore Partners’ ability to purchase vessels from KNOT in the future;●KNOT Offshore Partners’ ability to enter into long-term charters, which KNOT Offshore Partners defines as charters of fiveyears or more, or shorter term charters or voyage contracts;●KNOT Offshore Partners’ ability to refinance its indebtedness on acceptable terms and on a timely basis and to make additionalborrowings and to access debt and equity markets;●KNOT Offshore Partners’ distribution policy, forecasts of KNOT Offshore Partners’ ability to make distributions on its commonunits, Class B Units representing limited partner interests (“Class B Units”) and Series A Convertible Preferred Units (“Series APreferred Units”), the amount of any such distributions and any changes in such distributions;●KNOT Offshore Partners’ ability to integrate and realize the expected benefits from acquisitions;●impacts of supply chain disruptions and the resulting inflationary environment;●KNOT Offshore Partners’ anticipated growth strategies;●the effects of a worldwide or regional economic slowdown;●turmoil in the global financial markets;●fluctuations in currencies, inflation and interest rates;●fluctuations in the price of oil;●general market conditions, including fluctuations in hire rates and vessel values; Table of Contents4●changes in KNOT Offshore Partners’ operating expenses, including drydocking and insurance costs and bunker prices;●recoveries under KNOT Offshore Partners’ insurance policies;●the length and cost of drydocking;●KNOT Offshore Partners’ future financial condition or results of operations and future revenues and expenses;●the repayment of debt and settling of any interest rate swaps;●planned capital expenditures and availability of capital resources to fund capital expenditures;●KNOT Offshore Partners’ ability to maintain long-term relationships with major users of shuttle tonnage;●KNOT Offshore Partners’ ability to leverage KNOT’s relationships and reputation in the shipping industry;●KNOT Offshore Partners’ ability to maximize the use of its vessels, including the re-deployment or disposition of vessels nolonger under charter;●the financial condition of KNOT Offshore Partners’ existing or future customers and their ability to fulfill their charterobligations;●timely purchases and deliveries of newbuilds;●future purchase prices of newbuilds and secondhand vessels;●any impairment of the value of KNOT Offshore Partners’ vessels;●KNOT Offshore Partners’ ability to compete successfully for future chartering and newbuild opportunities;●acceptance of a vessel by its charterer;●termination dates and extensions of charters;●the impacts of the Russian war with Ukraine, the conflict between Israel and Hamas and the other conflicts in the Middle East;●the expected cost of, and KNOT Offshore Partners’ ability to, comply with governmental regulations (including climate changeregulations) and maritime self-regulatory organization standards, as well as standard regulations imposed by its charterersapplicable to KNOT Offshore Partners’ business;●availability of skilled labor, vessel crews and management;●the effects of outbreaks of pandemics or contagious diseases, including the impact on KNOT Offshore Partners’ business, cashflows and operations as well as the business and operations of its customers, suppliers and lenders;●the impact of cybercrime;●KNOT Offshore Partners’ general and administrative expenses and its fees and expenses payable under the technicalmanagement agreements, the management and administration agreements and the administrative services agreement;●the anticipated taxation of KNOT Offshore Partners and distributions to its unitholders; Table of Contents5●estimated future capital expenditures;●Marshall Islands economic substance requirements;●KNOT Offshore Partners’ ability to retain key employees;●customers’ increasing emphasis on climate, environmental and safety concerns;●potential liability from any pending or future litigation;●potential disruption of shipping routes due to accidents, political events, piracy or acts by terrorists;●future sales of KNOT Offshore Partners’ securities in the public market; and●KNOT Offshore Partners’ business strategy and other plans and objectives for future operations.Forward-looking statements in this Annual Report are made based upon management’s current plans, expectations, estimates,assumptions and beliefs concerning future events impacting us and therefore involve a number of risks and uncertainties, including those risksdiscussed in “Item 3. Key Information—Risk Factors.” The risks, uncertainties and assumptions involve known and unknown risks and areinherently subject to significant uncertainties and contingencies, many of which are beyond KNOT Offshore Partners’ control. KNOTOffshore Partners cautions that forward-looking statements are not guarantees and that actual results could differ materially from thoseexpressed or implied in the forward-looking statements.KNOT Offshore Partners undertakes no obligation to update any forward-looking statement or statements to reflect events orcircumstances after the date on which such statement is made or to reflect the occurrence of unanticipated events. New factors emerge fromtime to time, and it is not possible to predict all of these factors. Further, KNOT Offshore Partners cannot assess the impact of each such factoron its business or the extent to which any factor, or combination of factors, may cause actual results to be materially different from thosecontained in any forward-looking statement. KNOT Offshore Partners makes no prediction or statement about the performance of its commonunits. The various disclosures included in this Annual Report and in KNOT Offshore Partners’ other filings made with the Securities andExchange Commission (the “SEC”) that attempt to advise interested parties of the risks and factors that may affect KNOT Offshore Partners’business, prospects and results of operations should be carefully reviewed and considered. Table of Contents6PART IUnless the context otherwise requires, references herein to “KNOT Offshore Partners,” “we,” “our,” “us” and “the Partnership” or similarterms refer to KNOT Offshore Partners LP, a Marshall Islands limited partnership, or any one or more of its subsidiaries, or to all suchentities. References to “KNOT” refer, depending on the context, to Knutsen NYK Offshore Tankers AS and to any one or more of its directand indirect subsidiaries. References to “KNOT Management” refer to KNOT Management AS, the entity that provides us with crew,technical and commercial management services. References to “KNOT Management Denmark” refer to KNOT Management Denmark AS, a100% owned subsidiary of KNOT which also provides us with management services. References to “our general partner” refer to KNOTOffshore Partners GP LLC, the general partner of the Partnership. References to “KNOT UK” refer to KNOT Offshore Partners UK LLC, awholly owned subsidiary of the Partnership. References to “TSSI” refer to TS Shipping Invest AS, and references to “NYK Europe” refer toNYK Holding (Europe) B.V, each of which holds a 50% interest in KNOT. References to “NYK” are to Nippon Yusen Kabushiki Kaisha.References to “KOAS UK” refer to Knutsen OAS (UK) Ltd., a wholly owned subsidiary of TSSI. References to “KOAS” refer to KnutsenOAS Shipping AS, a wholly owned subsidiary of TSSI.Item 1. Identity of Directors, Senior Management and AdvisersNot applicable.Item 2. Offer Statistics and Expected TimetableNot applicable.Item 3. Key InformationA.ReservedB. Capitalization and IndebtednessNot applicable.C. Reasons for the Offer and Use of ProceedsNot applicable. Table of Contents7D. Risk FactorsThe risk factors summarized and detailed below could materially and adversely affect our business, our financial condition, our operatingresults and the trading price of our common units. These material risks include, but are not limited to, those relating to:●We may not have sufficient cash from operations following the establishment of cash reserves and payment of fees and expensesto enable us to continue to pay distributions on our common units.●The reduction in our quarterly cash distribution to $0.026 per common unit may impact our ability to raise capital.●Our cash distribution policy may adversely affect our ability to grow and to meet our financial needs.●We must make substantial capital expenditures to maintain the operating capacity of our fleet, which may result in less cashavailable to unitholders.●The required drydocking of our vessels could be more expensive and time consuming than we anticipate.●We may be unable to re-charter our vessels upon termination or expiration of their existing charters.●If capital expenditures are financed through cash from operations, our ability to make cash distributions may be diminished, orour financial leverage could increase.●If capital expenditures or debt repayments are financed by issuing securities, our unitholders may be diluted.●Our debt levels may limit our flexibility in obtaining additional financing, refinancing our credit facilities upon maturity,pursuing other business opportunities or paying distributions.●Our financing agreements contain operating and financial restrictions.●Restrictions in our debt agreements may prevent us or our subsidiaries from paying distributions.●We may fail to consummate or integrate acquisitions in a timely and cost-effective manner.●Our charters are subject to early termination under certain circumstances.●We may experience operational problems with vessels that reduce revenue and increase costs.●We currently derive all of our time charter and bareboat revenues from eleven customers.●We depend on subsidiaries of KNOT to assist us in operating our businesses and chartering certain of our vessels.●Our growth depends on continued growth in demand for shuttle tanker transportation services.●Persistent low oil prices may adversely affect our growth prospects and results of operations.●Our business is affected by macroeconomic conditions, including rising inflation, interest rates, market volatility, economicuncertainty and supply chain constraints.●Adverse conditions in the global economy or financial markets may impair our customers’ and suppliers’ ability to pay for ourservices.●Our growth depends on our ability to expand relationships with existing customers and obtain new customers, for which we facesubstantial competition.●An increase in the global supply of shuttle tanker capacity without a commensurate increase in demand may have an adverseeffect on hire rates and the values of our vessels.●Compliance with safety and other vessel requirements imposed by classification societies may be very costly and may adverselyaffect our business.●The value of our vessels may decline, which could adversely affect our operating results.●Climate change concerns and greenhouse gas restrictions may adversely impact our operations and markets.●Increased scrutiny from stakeholders and others regarding climate change, as well as our ESG practices and reportingresponsibilities, could result in additional costs or risks and adversely impact our business and reputation.●Our international operations expose us to political, governmental and economic instability.●Marine transportation is inherently risky, particularly in the extreme conditions in which our vessels operate. We couldexperience an incident involving loss of product or environmental contamination.●Our insurance may not be sufficient to cover losses.●Acts of piracy on ocean-going vessels may affect us.●Vessels transporting oil are subject to substantial environmental and other regulations.●We are exposed to currency exchange rate fluctuations.●Many seafaring employees are covered by collective bargaining agreements.●KNOT may on our behalf be unable to attract and retain qualified, skilled employees or crew necessary to operate our businessor may have to pay substantially increased costs for its employees and crew.●Outbreaks of epidemics and pandemics may adversely affect our business. Table of Contents8●Maritime claimants could arrest our vessels, which could interrupt our cash flow.●Lack of diversification and adverse developments in the shuttle tanker market or the conventional oil tanker market wouldnegatively impact our results.●If in the future our business activities involve countries, entities and individuals that are subject to restrictions imposed by theU.S. or other governments, we could be subject to enforcement action.●We could fail to comply with the U.S. Foreign Corrupt Practices Act, the U.K. Bribery Act, the anti-corruption provisions in theNorwegian Criminal Code and other anti-bribery legislation.●A cyber-attack could materially disrupt our business.●Our business is subject to complex and evolving laws, directives and regulations regarding privacy and data protection.●KNOT and its affiliates may compete with us.●Unitholders have limited voting rights, and our partnership agreement restricts the voting rights of Norwegian Resident Holdersand unitholders owning more than 4.9% of our common units or Class B Units.●KNOT and its affiliates own a substantial interest in us and have conflicts of interest and limited fiduciary and contractual dutiesto us and our common unitholders.●Our partnership agreement limits our general partner’s and our directors’ fiduciary duties to our unitholders and restricts theremedies available to unitholders for actions taken by them.●Fees and cost reimbursements, which affiliates of KNOT determine for services provided to us and our subsidiaries, aresubstantial and payable regardless of our profitability.●Our partnership agreement contains provisions that may have the effect of discouraging a person or group from attempting toremove our management or our general partner without KNOT’s consent.●The control of our general partner may be transferred to a third party without unitholder consent.●Substantial future sales of our common units or the issuance of additional preferred units could cause the price of our commonunits to fall.●Our common units are subordinated to our existing and future indebtedness and Series A Preferred Units.●We may issue additional equity securities without the approval of our unitholders.●A substantial number of our common units may be issued upon conversion of our Series A Preferred Units or Class B Units oras redemption payments in respect of our Series A Preferred Units.●Our Series A Preferred Units have rights, preferences and privileges not held by common unitholders.●Our general partner’s limited call right may require our unitholders to sell their common units.●Our unitholders may not have limited liability if a court finds that unitholder action constitutes control of our business.●We can borrow money to pay distributions.●Increases in interest rates may cause the market price of our common units to decline.●We rely on the master limited partnership (“MLP”) structure and its appeal to investors for accessing debt and equity markets tofinance our growth and repay or refinance our debt.●Unitholders may have liability to repay distributions.●The Marshall Islands does not have a well-developed body of partnership law.●Our operations are subject to economic substance requirements.●It may be difficult to serve us with legal process or enforce judgments against us.●Our partnership agreement designates the Court of Chancery of the State of Delaware as the exclusive forum for certain types ofactions and proceedings unless otherwise provided for under the laws of the Marshall Islands.●We are subject to taxes, which reduces our cash available for distribution to our unitholders.●A change in tax laws in any country in which we operate could adversely affect us.●U.S. tax authorities could treat us as a “passive foreign investment company.”●We may have to pay tax on U.S. source income, which would reduce our cash flow.●Our unitholders may be subject to income tax in one or more non-U.S. jurisdictions if, under the laws of any such jurisdiction,we are considered to be carrying on business there.In addition, risks not presently known to us or risks that we currently deem immaterial could materially and adversely affect our business,financial condition, results of operations and the trading price of our common units. Table of Contents9Risks Inherent in Our BusinessWe may not have sufficient cash from operations following the establishment of cash reserves and payment of fees and expenses to enableus to continue to pay distributions on our common units or Series A Preferred Units.We may not have sufficient cash from operations to continue to pay distributions on our common units. Furthermore, distributions to theholders of our common units are subject to the prior distribution rights of any holders of our preferred units outstanding. As of April 11, 2024,there were 3,541,666 Series A Preferred Units issued and outstanding. Under the terms of our partnership agreement, we are prohibited fromdeclaring and paying distributions on our common units until we declare and pay (or set aside for payment) full distributions on the Series APreferred Units. The amount of cash we can distribute on our units principally depends upon the amount of cash we generate from ouroperations. On January 11, 2023, we reduced our quarterly common unit distribution to $0.026 per unit for the fourth quarter of 2022. Cashflows from operations may fluctuate from quarter to quarter based on the risks described in this section, including, among other things:●the charter rates we obtain from our customers and the utilization of our fleet;●the number of off-hire days for our fleet and the timing of, and number of days required for, drydocking of vessels;●the level of our operating costs, such as the cost of crews and insurance;●currency exchange rate fluctuations and inflationary pressure;●the supply of shuttle tankers;●the demand for shuttle tankers;●the price and level of production of, and demand for, crude oil;●prevailing global and regional economic and political conditions;●changes in local income tax rates; and●the effect of governmental regulations and maritime self-regulatory organization standards on the conduct of our business.In addition, the actual amount of cash we have available for distribution depends on other factors, including:●the level of capital expenditures we make, including for maintaining vessels, building new vessels, acquiring existing vesselsand complying with regulations;●the level of debt we will incur to maintain existing vessels or fund future acquisitions and the interest rate we will pay on thatdebt;●fluctuations in our working capital needs;●our ability to make, and the level of, working capital borrowings; and●the amount of any cash reserves, including reserves for future capital expenditures, working capital and other matters,established by our board of directors.The amount of cash we generate from our operations may differ materially from our profit or loss for the period, which is affected bynon-cash items. As a result of this and the other factors mentioned above, we may make cash distributions during periods when we recordlosses and may not make cash distributions during periods when we record net income. Table of Contents10On January 11, 2023, we reduced our quarterly common unit distribution rate to $0.026 per unit. Future distributions may remain at thislevel for an indefinite period or be eliminated entirely, which could impact our ability to raise capital.Starting with the fourth quarter of 2022, we reduced our quarterly cash distribution to our common units to $0.026 per unit. We expect tocontinue to use our internally generated cash flow to provide for working capital, reduce our debt levels and strengthen our balance sheet. Thisreduction had, and could continue to have, a negative impact on our unit price. Any negative impact on our unit price could ultimately impactour ability to raise capital.Our ability to grow and to meet our financial needs may be adversely affected by our cash distribution policy.Our cash distribution policy, which is consistent with our partnership agreement, requires us to pay the distribution on our Series APreferred Units, which rank senior to our common units, and then to distribute all of our available cash (as defined in our partnershipagreement) each quarter. Accordingly, our growth may not be as fast as businesses that reinvest their available cash to expand ongoingoperations.In determining the amount of cash available for distribution, our board of directors approves the amount of cash reserves to set aside,including reserves for future capital expenditures, working capital and other matters. We also rely upon external financing sources, includingcommercial borrowings, to fund our capital expenditures. Accordingly, to the extent we do not have sufficient cash reserves or are unable toobtain financing, our cash distribution policy may significantly impair our ability to meet our financial needs or to grow.We must make substantial capital expenditures to maintain the operating capacity of our fleet, which reduces cash available fordistribution.We must make substantial capital expenditures to maintain, over the long-term, the operating capacity of our fleet. Capital expendituresinclude expenditures associated with the removal of a vessel from the water for inspection, maintenance and/or repair of submerged parts (ordrydocking) and modifying an existing vessel or acquiring a new comparable vessel to the extent these expenditures are incurred to maintainor replace the operating capacity of our fleet. These expenditures could vary significantly from quarter to quarter and could increase as a resultof changes in:●the cost of labor and materials;●customer requirements;●the size of our fleet;●the cost of replacement vessels;●length of charters;●governmental regulations and maritime self-regulatory organization standards relating to safety, security or the environment; and●competitive standards. Table of Contents11The required drydocking of our vessels could be more expensive and time consuming than we anticipate, which could adversely affect ourcash available for distribution to unitholders.We must periodically drydock each of our vessels for inspection, repairs and maintenance and any modifications required to comply withindustry certification or governmental requirements. Generally, we drydock each vessel every 60 months until the vessel is 15 years old andevery 30 months thereafter. The required drydocking of our vessels could be more expensive and time consuming than we anticipate, whichcould adversely affect our cash available for distribution. The drydocking of our vessels requires significant capital expenditures and results inloss of revenue while our vessels are off-hire. Any significant increase in the number of days of off-hire due to such drydocking or in the costsof any repairs could have a material adverse effect on our ability to pay distributions to our unitholders. If more than one of our vessels isrequired to be out of service at the same time, if a vessel is drydocked longer than expected or if the cost of repairs during drydocking isgreater than budgeted, our cash available for distribution to unitholders could be adversely affected. In 2023, we experienced a total ofapproximately 192 offhire days due to the scheduled drydocking of five of our vessels. Although no drydockings in relation to industrycertification or governmental requirements have been scheduled in 2024, no assurance can be given that our vessels will not experienceunscheduled drydockings.We may be unable to charter our vessels or re-charter our vessels upon termination or expiration of their existing charters.We are dependent upon charters for our vessels to generate revenues and we may be adversely affected if we fail to charter our vessels,fail to renew or are unsuccessful in winning new charters, or if our existing charters are terminated. Our ability to charter our vessels and therates payable under our charters depends upon, among other things, the state of the shuttle tanker market. For example, an oversupply ofshuttle tankers can reduce the charter rates that we can receive. On January 11, 2023, we reduced our quarterly common unit distribution to$0.026 per unit due in part to our inability to secure additional charter coverage for certain of our vessels at an acceptable rate. As of April 11,2024, our vessels Hilda Knutsen and Torill Knutsen are currently on hire to an affiliate of KNOT and three vessels (including Hilda Knutsen,Torill Knutsen and the Dan Sabia) have charters that expire in or at the end of 2024 and currently have no firm charters beyond that time. Afailure to charter our vessels, a termination or renegotiation of our existing charters or a failure to secure new employment at the expiration ofour current charters may have a negative effect on our business, financial condition, results of operations and ability to make cash distributionsto our unitholders. As of April 11, 2024, Dan Cisne is being deployed on conventional tanker work following expiration in December 2023 ofits most recent shuttle tanker charter. Similarly, Dan Sabia is due to conclude its current shuttle tanker charter in June 2024. As of April 11, 2024, neither Dan Cisne nor Dan Sabia has future contracted shuttle tanker work, and both vessels are being marketed for both shuttle andconventional tanker charters.If capital expenditures are financed through cash from operations or by issuing securities, our ability to make cash distributions may bediminished, our financial leverage could increase, or our unitholders may be diluted.Use of cash from operations to expand or maintain our fleet reduces cash available for distribution to unitholders. Our ability to obtainbank financing or to access the capital markets for future offerings may be limited by our financial condition at the time of any such financingor offering as well as by adverse market conditions resulting from, among other things, general economic conditions and contingencies anduncertainties that are beyond our control. Our failure to obtain the funds for future capital expenditures could have a material adverse effect onour business, financial condition, results of operations and ability to make cash distributions to our unitholders. Even if we are successful inobtaining necessary funds, the terms of such financings could limit our ability to pay cash distributions to unitholders. In addition, incurringadditional debt may significantly increase our interest expense and financial leverage, and issuing additional equity securities may result insignificant unitholder dilution and would increase the aggregate amount of cash required to maintain our current per-unit level of quarterlydistributions to unitholders, both of which could have a material adverse effect on our ability to make cash distributions. Table of Contents12Our debt levels may limit our flexibility in obtaining additional financing, refinancing credit facilities upon maturity, pursuing otherbusiness opportunities or paying distributions.As of December 31, 2023, we had consolidated debt of approximately $963.0 million, all of our revolving credit facilities had been fullydrawn and on that date we had no ability to incur additional debt under our credit facilities. If we acquire additional vessels or businesses, ourconsolidated debt may significantly increase. We may incur additional debt under future credit facilities. On April 5, 2024 Partnership’ssubsidiary, Knutsen Shuttle Tankers 14 AS, which owns the vessel Hilda Knutsen, entered into a new $60 million senior secured term loanwith DNB, which is due to replace the $100 Million Hilda Facility with Mitsubushi UFJ Lease & Finance (Hong Kong) Limited. However,the new facility is subject to the execution of definitive documentation and other closing conditions. Please read “Item 5. Operating andFinancial Review and Prospects—Liquidity and Capital Resources.” Our level of debt could have important consequences to us, including thefollowing:●our ability to obtain additional financing, if necessary, for working capital, capital expenditures, acquisitions or other purposesmay be impaired, or such financing may not be available on favorable terms;●we will need a substantial portion of our cash flows to make principal and interest payments on our debt, reducing the funds thatwould otherwise be available for operations, future business opportunities and distributions to unitholders;●our debt level may make us more vulnerable than competitors with less debt to competitive pressures or a downturn in ourindustry or the economy generally;●our debt level may limit our flexibility in responding to changing business and economic conditions; and●if we are unable to satisfy the restrictions included in any of our financing agreements or are otherwise in default under any ofthose agreements, as a result of our debt levels or otherwise, we will not be able to make cash distributions to our unitholders,notwithstanding our stated cash distribution policy.Our ability to service or refinance our debt depends upon, among other things, our current and future financial and operatingperformance, which is affected by prevailing economic conditions and financial, business, regulatory and other factors, some of which arebeyond our control. If our operating results are not sufficient to service or refinance our current or future indebtedness, we will be forced totake actions such as reducing distributions, reducing or delaying our business activities, acquisitions, investments or capital expenditures,selling assets, restructuring or refinancing our debt, or seeking additional equity capital or bankruptcy protection. We may not be able to effectany of these remedies on satisfactory terms, or at all.Financing agreements containing operating and financial restrictions may restrict our business and financing activities.The operating and financial restrictions and covenants in our financing agreements and any future financing agreements could adverselyaffect our ability to finance future operations or capital needs or to engage, expand or pursue our business activities. For example, thefinancing agreements may restrict the ability of us and our subsidiaries to:●incur or guarantee indebtedness;●change ownership or structure, including mergers, consolidations, liquidations and dissolutions;●make dividends or distributions;●make certain negative pledges and grant certain liens;●sell, transfer, assign or convey assets;●make certain investments; and●enter into a new line of business. Table of Contents13In addition, our financing agreements require us to comply with certain financial ratios and tests, including, among others, maintaining aminimum liquidity, maintaining positive working capital, ensuring that our earnings before interest, taxes, depreciation and amortization(“EBITDA”) exceeds interest payable, maintaining a minimum collateral value, and maintaining a minimum book equity ratio. Our ability tocomply with the restrictions and covenants, including financial ratios and tests, contained in our financing agreements is dependent on futureperformance and may be affected by events beyond our control, including prevailing economic, financial and industry conditions. If market orother economic conditions deteriorate, our ability to comply with these covenants may be impaired.If we are unable to comply with the restrictions and covenants in the agreements governing our indebtedness or in current or future debtfinancing agreements, there could be a default under the terms of those agreements. If a default occurs under these agreements, lenders couldterminate their commitments to lend and/or accelerate the outstanding loans and declare all amounts borrowed due and payable. This couldlead to cross-defaults under other financing agreements and result in obligations becoming due and commitments being terminated under suchagreements. We have pledged our vessels as security for our outstanding indebtedness. If our lenders were to foreclose on our vessels in theevent of a default, this may adversely affect our ability to finance future operations or capital needs or to engage in, expand or pursue ourbusiness activities. If any of these events occur, we cannot guarantee that our assets will be sufficient to repay in full all of our outstandingindebtedness, and we may be unable to find alternative financing. Even if we could obtain alternative financing, that financing might not be onterms that are favorable or acceptable. Any of these events would adversely affect our ability to make cash distributions to our unitholders andcause a decline in the market price of our common units. Please read “Item 5. Operating and Financial Review and Prospects—Liquidity andCapital Resources.”Restrictions in our debt agreements may prevent us or our subsidiaries from paying distributions.The payment of principal and interest on our debt reduces cash available for distribution to us and on our units. In addition, our and oursubsidiaries’ financing agreements prohibit the payment of distributions upon the occurrence of the following events, among others:●failure to pay any principal, interest, fees, expenses or other amounts when due;●failure to notify the lenders of any material oil spill or discharge of hazardous material, or of any action or claim related thereto;●breach or lapse of any insurance with respect to vessels securing the facilities;●breach of certain financial covenants;●failure to observe any other agreement, security instrument, obligation or covenant beyond specified cure periods in certaincases;●default under other indebtedness;●bankruptcy or insolvency events;●failure of any representation or warranty to be correct;●a change of ownership, as defined in the applicable agreement; and●a material adverse change, as defined in the applicable agreement.For more information regarding our financing agreements, please read “Item 5. Operating and Financial Review and Prospects—Liquidity and Capital Resources.” Table of Contents14The failure to consummate or integrate acquisitions in a timely and cost-effective manner could have an adverse effect on our financialcondition and results of operations.Acquisitions that expand our fleet are an important component of our strategy. We believe that acquisition opportunities may arise fromtime to time, and any such acquisition could be significant. Any acquisition of a vessel or business may not be profitable after the time ofacquisition and may not generate cash flows sufficient to justify the investment. In addition, our acquisition growth strategy exposes us torisks that may harm our business, financial condition, results of operations and ability to make cash distributions to our unitholders, includingrisks that we may:●fail to realize anticipated benefits, such as new customer relationships, cost-savings or cash flow enhancements;●be unable to attract, hire, train or retain qualified shore and seafaring personnel to manage and operate our growing business andfleet;●decrease our liquidity by using a significant portion of available cash or borrowing capacity to finance acquisitions;●significantly increase our interest expense or financial leverage if we incur additional debt to finance acquisitions;●incur or assume unanticipated liabilities, losses or costs associated with the business or vessels acquired; or●incur other significant charges, such as impairment of goodwill or other intangible assets, asset devaluation or restructuringcharges.In addition, unlike newbuilds, existing vessels typically do not carry warranties as to their condition. While we generally inspect existingvessels prior to purchase, such an inspection would normally not provide us with as much knowledge of a vessel’s condition as we wouldpossess if it had been built for us and operated by us during its life. Repairs and maintenance costs for existing vessels are difficult to predictand may be substantially higher than for vessels we have operated since they were built. These costs could decrease our cash flows and reduceour liquidity.Certain acquisition and investment opportunities may not result in the consummation of a transaction. In addition, we may not be able toobtain acceptable terms for the required financing for any such acquisition or investment that arises. We cannot predict the effect, if any, thatany announcement or consummation of an acquisition would have on the trading price of our common units. Our future acquisitions couldpresent a number of risks, including the risk of incorrect assumptions regarding the future results of acquired vessels or businesses or expectedcost reductions or other synergies expected to be realized as a result of acquiring vessels or businesses, the risk of failing to successfully andtimely integrate the operations or management of any acquired vessels or businesses and the risk of diverting management’s attention fromexisting operations or other priorities. We may also be subject to additional costs related to compliance with various international laws inconnection with such acquisition. If we fail to consummate and integrate our acquisitions in a timely and cost-effective manner, our business,financial condition, results of operations and cash available for distribution could be adversely affected.Our charters are subject to early termination under certain circumstances and any such termination could have a material adverse effecton our results of operations and cash available for distribution to unitholders.As of April 11, 2024, our fleet consists of eighteen shuttle tankers. If our vessels are unable to generate revenues as a result of theexpiration or termination of their charters or sustained periods of off-hire time, our results of operations and financial condition could bematerially adversely affected. Each of our charters terminates automatically if the applicable vessel is lost or missing or damage to the vesselresults in a constructive total loss. The customer, under certain circumstances, may also have an option to terminate a time charter if the vesselis requisitioned by any government for a period of time in excess of the time period specified in the time charter or if at any time we are indefault under the time charter. In addition, either party may usually terminate a charter in the event of the outbreak of war between specifiedcountries. Under our bareboat charters, the charter is deemed terminated as of the date of any compulsory acquisition of the vessel orrequisition for title by any governmental or other competent authority. For more information regarding the termination of our charters, pleaseread “Item 4. Information on the Partnership—Business Overview—Charters—Termination.” Table of Contents15We may experience operational problems with vessels that reduce revenue and increase costs.Shuttle tankers are complex and their operation is technically challenging. Marine transportation operations are subject to mechanicalrisks and problems. Operational problems may lead to loss of revenue or higher than anticipated operating expenses or require additionalcapital expenditures. Any of these results could harm our business, financial condition, results of operations and ability to make cashdistributions to our unitholders.We currently derive all of our time charter and bareboat revenues from eleven customers, and the loss of any such customers could resultin a significant loss of revenues and cash flow.We currently derive all of our time charter and bareboat revenues from eleven customers. For the year ended December 31, 2023,Knutsen Shuttle Tankers Pool AS, a subsidiary of KNOT, Brazil Shipping I Limited, a subsidiary of Royal Dutch Shell (“Shell”), EquinorASA (“Equinor”), Repsol Sinopec Brasil B.V. (“Repsol”), Chartering and Shipping Service S.A., a subsidiary of Total Energies (“TotalEnergies”), and Fronape International Company, a subsidiary of Petrobras Transporte S.A. (“Transpetro”), accounted for approximately 10%,12%, 13%, 13%, 14% and 18%, respectively, of our revenues.If we lose a key customer, we may be unable to obtain replacement long-term charters and may become subject to the volatile spotmarket, which is highly competitive and subject to significant price fluctuations. In addition, if a customer exercises its right to terminate acharter, we may be unable to re-charter such vessel on terms as favorable to us as those of the terminated charter. The loss of any of our keycustomers could have a material adverse effect on our business, financial condition, results of operations and ability to make cash distributionsto our unitholders.Oil prices can be volatile, and this could affect the equity value of many of our customers. The combination of a reduction of cash flowresulting from lower prices, a reduction in borrowing under related credit facilities and the limited or lack of availability of debt or equityfinancing could potentially reduce the ability of our customers to make charter payments, which in turn could harm our business, results ofoperations and financial condition. Additionally, at the end of a contractual term we could lose one or more of our customers due to a varietyof causes unrelated to our performance, including changes in customers’ management or strategic exits from the offshore oil space or fromregions in which we operate.We depend on subsidiaries of KNOT and its affiliates to assist us in operating our businesses and competing in our markets and charteringcertain of our vessels.We and our operating subsidiaries have entered into various services agreements with certain subsidiaries and affiliates of KNOT,including KNOT Management, KNOT Management Denmark, KOAS and KOAS UK. Under these agreements these entities provide us withcertain administrative, financial and other services. Our operating subsidiaries are provided with substantially all of their crew, technical andcommercial management services (including vessel maintenance, periodic drydocking, cleaning and painting, performing work required byregulations and human resources and financial services) and other advisory and technical services, including the sourcing of new contracts andrenewals of existing contracts. Our operational success and ability to execute our growth strategy depends significantly upon the satisfactoryperformance of these services by affiliates of KNOT. Our business will be harmed if such entities fail to perform these services satisfactorilyor if they stop providing these services to us or our operating subsidiaries.Our ability to compete to enter into new charters and expand our customer relationships depends largely on our ability to leverage ourrelationship with KNOT and its reputation and relationships in the shipping industry. If KNOT suffers material damage to its reputation orrelationships, it may harm the ability of us or our subsidiaries to:●renew existing charters upon their expiration;●obtain new charters;●successfully contract with shipyards;●obtain financing on commercially acceptable terms; or Table of Contents16●maintain satisfactory relationships with suppliers and other third parties.If our ability to do any of the things described above is impaired, it could have a material adverse effect on our business, financialcondition, results of operations and ability to make cash distributions to our unitholders.Furthermore, subsidiaries of KNOT currently charter two of our vessels. In 2023, subsidiaries of KNOT accounted for $28.7 million ofour time charter revenues. If KNOT is unable to satisfy its obligations to us under such charters, it could have a material adverse effect on ourbusiness, financial condition, results of operations and ability to make cash distributions to our unitholders.Our growth will primarily depend on continued growth in demand for shuttle tanker transportation services.Our growth will primarily depend on continued growth in the demand for shuttle tanker transportation services. Factors beyond ourcontrol that affect the offshore oil transportation industry may have a significant impact on our business, financial condition, results ofoperations and ability to make cash distributions to our unitholders. Fluctuations in the hire rate we can charge our customers result fromchanges in the supply of carrying capacity, production volumes of oil in the areas in which we operate and demand for the crude oil carried. Ifa sustained period of reduced demand for oil transportation services were to occur it would have a material adverse effect on our future growthand could harm our business, results of operations and financial condition. The factors affecting supply and demand for shuttle tankers andsupply and demand for crude oil transported by shuttle tankers are largely outside of our control, and the nature, timing and degree of changesin industry conditions are unpredictable.The factors that influence the demand for shuttle tanker capacity include, but are not limited to:●changes in the actual or projected price of oil, which could impact the exploration for or development of new offshore oil fieldsor the production of oil at certain fields we service;●delayed production start on offshore fields under development or unscheduled maintenance of existing fields;●levels of demand for and production of oil, which, among other things, is affected by competition from alternative sources ofenergy, climate change regulations and policies, other factors making consumption of oil more or less attractive or energyconservation measures;●changes in the production of oil in areas linked by pipelines to consuming areas, the extension of existing, or the development ofnew pipeline or other transfer systems in markets we may serve, or the conversion of existing non-oil pipelines to oil pipelinesin those markets;●changes in laws and regulations affecting the shuttle tanker industry;●global and regional economic and political conditions, particularly in oil-consuming regions, as well as environmental concernsand regulations, which could impact the supply of oil and gas as well as the demand for various types of vessels; and●changes in trading patterns, including changes in the distances that cargoes are transported and charter rates in the general tankermarket.The factors that influence the supply of shuttle tanker capacity include, but are not limited to:●the number of deliveries of new vessels under construction or on order and the price of those new vessels;●the scrapping rate of older vessels;●the availability of qualified and suitably experienced crew to operate vessels;●oil and gas company policy with respect to technical vessel requirements; and Table of Contents17●the number of vessels that are off-hire.Persistent low oil prices may adversely affect our growth prospects and results of operations.If there is a significant decline in oil prices that persists for a long period it may adversely affect our business, results of operations andfinancial condition and our ability to make cash distributions, as a result of, among other things:●a reduction in exploration for or development of new offshore oil fields, or the delay or cancelation of existing offshore projectsas energy companies lower their capital expenditures budgets, which may reduce our growth opportunities;●lower demand for shuttle tankers, which may reduce available charter rates and revenue to us upon redeployment of our vesselsfollowing expiration or termination of existing contracts or upon the initial chartering of vessels;●customers potentially seeking to renegotiate or terminate existing vessel contracts, or failing to extend or renew contracts uponexpiration;●the inability or refusal of customers to make charter payments to us due to financial constraints or otherwise; or●declines in vessel values, which may result in losses to us upon vessel sales or impairment charges against our earnings.Our business is affected by macroeconomic conditions, including rising inflation, interest rates, market volatility, economic uncertaintyand supply chain constraints.Various macroeconomic factors could adversely affect our business and the results of our operations and financial condition, includingchanges in inflation, interest rates and overall economic conditions and uncertainties such as those resulting from the current and futureconditions in the global financial markets. For instance, inflation has negatively impacted us by increasing crew and crew-related costs andthrough higher interest rates. Supply chain constraints have led to higher inflation, which if sustained could have a negative impact on ouroperations. If inflation or other factors were to significantly increase, our operations may be negatively affected. Interest rates, the liquidity ofthe credit markets and the volatility of the capital markets could also affect the operation of our business and our ability to raise capital onfavorable terms, or at all, in order to fund our operations.Increased inflation, including rising prices for items, such as raw materials, fuel, parts and components, freight, packaging, supplies, laborand energy increases the Partnership’s costs to provide services. The Partnership does not currently use financial derivatives to hedge againstvolatility in commodity prices. The Partnership uses market prices for materials, fuel, parts and components. Results of operations have beenand, in the future, may be negatively affected if the Partnership is unable to mitigate the impact of these cost increases through contractualmeans and is unable to increase prices to sufficiently offset the effect of these cost increases.Materials, components, and equipment essential to the Partnership’s operations are normally readily available, and shortages as a result ofsupply chain disruptions can adversely impact the Partnership’s operations, particularly where the Partnership has a limited number ofsuppliers. Many of the items essential to the Partnership’s business require the use of shipping services to transport them to the Partnership’svessels or the applicable drydocking locations. Shipping delays or disruptions may result in operational slowdowns. These constraints couldhave a material adverse effect on the Partnership. In addition, price increases imposed by the Partnership’s vendors for materials and shippingservices used in its business, and the inability to pass these increases through to its customers, could have a material adverse effect on thePartnership. Table of Contents18Throughout 2023, we experienced significant increases in the costs of fuel, logistics and crewing as a result of availability constraints,supply chain disruption, increased demand, labor shortages, inflation and other factors. Though we incorporated inflationary factors into our2023 business plan, inflation outpaced those original assumptions and, while we have incorporated inflationary factors into our 2024 businessplan, inflation may outpace those assumptions. These challenges are due in part to increased demand for oil and gas production driven by thecontinued economic recovery from the COVID-19 pandemic and more broadly, systemic underinvestment in global oil and gas development,together with general labor shortages. These supply and demand fundamentals have been further aggravated by disruptions in global energysupply caused by multiple geopolitical events, including the ongoing conflicts in the Middle East and between Russia and Ukraine. Wecontinue to undertake actions and implement plans to strengthen our supply chain to address these pressures and protect the requisite access tocommodities and services. Nevertheless, we expect for the foreseeable future to experience supply chain pressures and inflationary pressureon our cost structure. If we are unable to manage our global supply chain, it may impact our ability to hire and retain crew and procurematerials and equipment in a timely and cost-effective manner, if at all, and, as a result, have a material adverse effect on our business, resultsof operations, cash flows, financial condition and ability to pay distributions to our unitholders.Adverse conditions in the global economy or financial markets may impair our customers’ ability to pay for our services and/or oursuppliers’ ability to fulfil their obligations to us and could have a material adverse effect on our revenue, profitability and financialposition.We depend on our customers’ willingness and ability to fund operating and capital expenditures to provide crude oil shuttle tankers fornew or expanding offshore projects. Existing and future adverse economic conditions, including low oil prices, may lead to a decline in ourcustomers’ operations or ability to pay for our services, which could result in decreased demand for our vessels. There has historically been astrong link between the development of the world economy and demand for energy, including oil and natural gas. Particularly, an extendedperiod of adverse development in the outlook for the North Sea or Brazil could reduce the overall demand for our vessels and have a negativeimpact on our customers. Potential developments, or market perceptions concerning these and related issues, could affect our business,financial position, results of operations and ability to make cash distributions to our unitholders.Any regional or global financial or credit crisis or disruption may reduce the availability of liquidity and credit to fund the continuationand expansion of industrial business operations worldwide. Such deterioration could result in reduced demand for oil and natural gas,exploration and production activity and transportation of oil and natural gas that could lead to a decrease in the hire rate earned by our vesselsand a decrease in new charter activity. In addition, any adverse development in the global financial markets or deterioration in economicconditions might adversely impact our ability to issue additional equity at prices that will not be dilutive to our existing unitholders orpreclude us from issuing equity at all.We also cannot be certain that additional financing will be available if needed and to the extent required, on acceptable terms or at all.Furthermore, certain banks that have historically been significant lenders to the shipping industry have reduced or ceased lending activities inthe shipping industry. If additional financing is not available when needed, or is available only on unfavorable terms, we may be unable tomeet our obligations as they come due or we may be unable to expand our existing business, complete shuttle tanker acquisitions or otherwisetake advantage of business opportunities as they arise.Furthermore, any uncertainty in the financial markets could have an impact on our customers and/or suppliers including, among otherthings, causing them to fail to meet their obligations to us. Similarly, any shortage of credit could affect lenders participating in our financingagreements, making them unable to fulfill their commitments and obligations to us. Any reductions in activity owing to such conditions orfailure by our customers, suppliers or lenders to meet their contractual obligations to us could adversely affect our business, financial position,results of operation and ability to make cash distributions to our unitholders.Our growth depends on our ability to expand relationships with existing customers and obtain new customers, for which we facesubstantial competition.One of our principal objectives is to enter into additional long-term, fixed-rate charters. The process of obtaining new long-term chartersis highly competitive, usually involving an intensive screening process and competitive bids. Shuttle tanker charters are awarded based upon avariety of factors relating to the vessel operator, including:●industry relationships and reputation for customer service and safety; Table of Contents19●experience and quality of ship operations;●quality, experience and technical capability of the crew;●relationships with shipyards and the ability to get suitable berths;●construction management experience, including the ability to obtain on-time delivery of new vessels according to customerspecifications;●willingness to accept operational risks pursuant to the charter, among other things such as allowing termination of the charter forforce majeure events; and●competitiveness of the bid in terms of overall price.Our ability to win new charters depends upon a number of factors, including our ability to:●leverage our relationship with KNOT and its reputation and relationships in the shipping industry;●successfully manage our liquidity and obtain the necessary financing to fund our growth;●attract, hire, train and retain qualified personnel and ship management companies to manage and operate our fleet;●identify and consummate desirable acquisitions, joint ventures or strategic alliances; and●identify and capitalize on opportunities in new markets.We expect substantial competition for providing services for potential shuttle tanker projects from a number of experienced companies.This increased competition may cause greater price competition for charters. As a result of these factors, we may be unable to expand ourrelationships with existing customers or to obtain new customers on a profitable basis, if at all, which would have a material adverse effect onour business, financial condition, results of operations and ability to make cash distributions to our unitholders.An increase in the global supply of shuttle tanker capacity without a commensurate increase in demand may have an adverse effect onhire rates and the values of our vessels, which could have a material adverse effect on our business, financial condition, results ofoperations and ability to make cash distributions to our unitholders.The supply of shuttle tankers in the industry is affected by, among other things, assessments of the demand for these vessels. Any over-estimation of demand for vessels may result in an excess supply of shuttle tankers. Pandemic and other related delays to the start-up ofoffshore oil production, particularly in the North Sea and in the Norwegian sector, created an oversupply of shuttle tanker capacity at a timewhen we have multiple vessels coming back into the market, and which situation has also restricted the rates that are achievable for charteropportunities. This situation may also, in the long term, result in lower hire rates and depress the values of our vessels. Under suchcircumstances, our business, financial condition, results of operations and ability to make cash distributions to our unitholders may beadversely affected.During periods of high utilization and high hire rates, industry participants may increase the supply of shuttle tankers by ordering theconstruction of new vessels. This may result in an over-supply of shuttle tankers and may cause a subsequent decline in utilization and hirerates when the vessels enter the market. Lower utilization and hire rates could adversely affect revenues and profitability. Prolonged periods oflow utilization and hire rates could also result in the recognition of impairment charges on shuttle tankers if future cash flow estimates, basedupon information available at the time, indicate that the carrying value of these shuttle tankers may not be recoverable. Such impairmentcharges may cause lenders to accelerate loan payments under our financing agreements, which could adversely affect our business, financialcondition, results of operations and ability to make cash distributions to our unitholders. Table of Contents20Compliance with safety and other vessel requirements imposed by classification societies may be very costly and may adversely affect ourbusiness.The hull and machinery of every large, oceangoing commercial vessel must be classed by a classification society authorized by itscountry of registry. The classification society certifies that a vessel is safe and seaworthy in accordance with the applicable rules andregulations of the country of registry of the vessel and the International Convention for Safety of Life at Sea (“SOLAS”). All our vessels arecertified either by DNV GL Group AS (“DNV GL”) or by the American Bureau of Shipping (“ABS”).As part of the certification process, a vessel must undergo annual surveys, intermediate surveys and special surveys. In lieu of a specialsurvey, a vessel’s machinery may be on a continuous survey cycle, under which the machinery would be surveyed periodically over a five-year period. Each of the vessels in our existing fleet is on a planned maintenance system approval, and as such the classification societyattends onboard once every year to verify that the maintenance of the equipment onboard is done correctly. Each of the vessels in our existingfleet is required to be qualified within its respective classification society for drydocking once every five years subject to an intermediateunderwater survey done using an approved diving company in the presence of a surveyor from the classification society.If any vessel does not maintain its class or fails any annual survey, intermediate survey or special survey, the vessel will be unable to tradebetween certain ports and will be unemployable. We would lose revenue while the vessel was off-hire and incur costs of compliance. Thiswould negatively impact our revenues and reduce our cash available for distribution to unitholders.The value of our vessels may decline, which could adversely affect our operating results.Vessel values for shuttle tankers can fluctuate substantially over time due to a number of different factors, including:●the cost of newbuildings;●prevailing economic conditions in oil, energy and conventional tanker shipping markets;●a substantial or extended decline in demand for oil;●increases in the supply of vessel capacity;●the cost of retrofitting or modifying existing vessels, as a result of technological advances in vessel design or equipment,changes in applicable environmental or other regulations or standards, or otherwise; and●a decrease in oil reserves in the fields and other fields in which our shuttle tankers might otherwise be deployed.If operation of a vessel is not profitable, or if we cannot redeploy a vessel at attractive rates upon termination of its charter, rather thancontinue to incur costs to maintain and finance the vessel, we may seek to dispose of it. Our inability to dispose of the vessel at a reasonablevalue could result in a loss on its sale and adversely affect our business, financial condition, results of operations and ability to make cashdistributions to our unitholders. Additionally, lenders may accelerate loan repayments should there be a loss in the market value of our vessels.Such repayment could adversely affect our business, financial condition, results of operations and ability to make cash distributions to ourunitholders.Further, if we determine at any time that a vessel’s future useful life and earnings require us to impair its value in our financial statements,we may need to recognize a significant charge against our earnings. We review vessels and equipment for impairment whenever events orchanges in circumstances indicate the carrying value of an asset may not be recoverable, which occurs when the asset’s carrying value isgreater than the future undiscounted cash flows the asset is expected to generate over its remaining useful life. Table of Contents21Climate change concerns and greenhouse gas restrictions may adversely impact our operations and markets.Due to concern over the risk of climate change, a number of countries and the International Maritime Organization (the “IMO”), theUnited Nations agency that regulates international shipping, have adopted, or are considering the adoption of, regulatory frameworks toreduce greenhouse gas emissions from vessels. These regulatory measures include, among others, adoption of cap and trade regimes, carbontaxes, increased efficiency standards and incentives or mandates for renewable energy. The Paris Agreement, which was announced by theParties to the United Nations Framework Convention on Climate Change in December 2015, does not cover international shipping. However,in 2018, the IMO adopted an initial strategy designed to reduce the emission of greenhouse gases from vessels, including short-term, mid-termand long-term candidate measures with a vision of reducing and phasing out greenhouse gas emissions from vessels as soon as possible in the21st century (“Initial IMO GHG Strategy”). Consistent with the Initial IMO GHG Strategy target of a 40% carbon intensity reduction forinternational shipping by 2030, as compared to 2008, at its June 2021 MEPC session, the Marine Environment Protection Committee(“MEPC”) of the IMO adopted amendments to Annex VI of the 1973 International Convention for the Prevention of Pollution from Ships(“MARPOL”) that establish as short-term GHG reduction measures an enforceable regulatory framework to reduce greenhouse gas emissionsfrom international shipping, consisting of technical and operational carbon reduction measures. These measures include use of an EnergyEfficiency Existing Ship Index, an operational Carbon Intensity Indicator and an enhanced Ship Energy Efficiency Management Plan to drivereductions in the carbon intensity. The Energy Efficiency Existing Ship Index and Carbon Intensity Indicator measures entered into force onJanuary 1, 2023 and are referred to as IMO 2023. The Initial IMO GHG Strategy contemplated the adoption of a revised strategy in 2023. Thisrevised strategy, the 2023 IMO Strategy on Reduction of GHG Emissions from Ships (“2023 IMO GHG Strategy”), was adopted by theMEPC on July 7, 2023. The 2023 IMO GHG Strategy includes as a goal attaining net-zero GHG emissions from international shipping by oraround 2050, promotes the uptake of alternative zero and near-zero GHG emissions technologies, fuels and/or energy sources by 2030, andidentifies as indicative checkpoints a level of ambition at least a 20% reduction, compared to 2008, in total annual GHG emissions frominternational shipping by 2030 and at least a 70% reduction by 2040, striving for reductions of 30% by 2030 and 80% by 2040. The 2023 IMOGHG Strategy contemplates adoption of an updated strategy in 2028 and calls for the adoption of mid-term GHG reduction measures by 2025and the development, finalization and agreement on possible long-term GHG reduction measures as part of the 2028 strategy review. Further,effective January 1, 2024, the EU extended the EU-Emissions Trading System (“EU-ETS”) to the shipping sector and includes carbon dioxideemissions from vessels of 5,000 gross tonnage and above that depart from, arrive at or pass through EU ports or EEA ports in Iceland andNorway. Beginning in 2026, in addition to carbon dioxide emissions, the EU-ETS for shipping will cover methane and nitrous oxideemissions. The EU-ETS sets a limit on the carbon dioxide emissions shipping companies are permitted to emit on the covered routes, which isexpressed in terms of emission allowances. One allowance gives the right to emit one ton of carbon dioxide equivalent. Each yearcommencing in 2025 for emissions reported in 2024, allowances will be required to be purchased and surrendered, with the share of emissionsrequired to be covered by allowances increasing from 40% of 2024 reported emissions, to 70% of 2025 reported emissions and thereafter to100% of reported emissions. If we do not purchase and surrender the required allowances, we will be subject to fines.Compliance with these and other changes in laws, regulations and obligations relating to climate change could increase our costs relatedto operating and maintaining our vessels and require us to install new emission controls, acquire allowances or pay taxes related to ourgreenhouse gas emissions or administer and manage a greenhouse gas emissions program. Revenue generation and strategic growthopportunities may also be adversely affected.We cannot predict whether or to what extent damage that may be caused by natural events, suchas hurricanes, monsoons and other severe or catastrophic storms, will cause damage to our vessels and disruption to our operations and causeother adverse financial and operational impacts, including impacts on our customers. In particular, if one of the regions in which our vesselsare operating is impacted by such a natural catastrophe in the future, it could have a material adverse effect on our business.Adverse effects upon the oil industry relating to climate change, including growing public concern about the environmental and otherimpacts of climate change, may also adversely affect demand for our shuttle tanker services. Although we do not expect that demand for oilwill lessen dramatically over the short or mid-term, in the long-term climate change mitigation considerations may reduce the demand for oiland increased regulation of greenhouse gases may create greater incentives for use of alternative energy sources. Any long-term materialadverse effect on the oil industry could have a significant financial and operational adverse impact on our business that we cannot predict withcertainty at this time. Table of Contents22Increased scrutiny from stakeholders and others regarding climate change, as well as our ESG practices and reporting responsibilities,could result in additional costs or risks and adversely impact our business and reputationCompanies across all industries have been subject to increasing scrutiny relating to their Environmental, Social and Governance (“ESG”)policies. The investment community, including investment advisors and certain sovereign wealth, pension and endowment funds areincreasingly focused on ESG practices and in recent years have placed growing importance on the implications and social cost of theirinvestments. The increased focus and activism related to ESG and similar matters may hinder access to capital, as investors and lenders maydecide to reallocate capital or not to commit capital as a result of their assessment of a company’s ESG practices. Companies that do not adaptto or comply with investor, lender or other industry shareholder expectations and standards, which are evolving, or which are perceived tohave not responded appropriately to the growing concern for ESG issues, regardless of whether there is a legal requirement to do so, maysuffer from reputational damage and the business, financial condition or share price of such a company could be materially and adverselyaffected. Further, in recent years some in the investment community have promoted the divestment of fossil fuel equities and pressuredlenders to cease or limit funding to companies engaged in the fossil fuel industry. Such initiatives aimed at limiting climate change anddecarbonization could ultimately interfere with our business activities and operations and our access to capital. In addition to such initiatives,ESG matters more generally have been the subject of increased focus by investors, investment funds and other market and industryparticipants, as well as certain regulators, including in the U.S. and the EU.In February 2021, the Acting Chair of the SEC issued a statement directing the Division of Corporation Finance to enhance its focus onclimate-related disclosure in public company filings and in March 2021 the SEC announced the creation of a Climate and ESG Task Force inthe Division of Enforcement (the “Task Force”). The Task Force’s goal is to develop initiatives to proactively identify ESG-relatedmisconduct consistent with increased investor reliance on climate and ESG-related disclosure and investment. To implement the Task Force’spurpose, the SEC has taken several enforcement actions, with the first enforcement action taking place in May 2022, and has proposed newrules. On March 21, 2022, the SEC proposed rules that will require all public companies to include extensive climate-related information intheir SEC filings. On May 25, 2022, the SEC proposed a second set of rules aiming to curb the practice of “greenwashing” (i.e., making falseor misleading claims about one’s ESG efforts) and other deceptive or misleading marketing practices by U.S. investment funds, which wassubsequently adopted in September 2023. On March 6, 2024, the SEC adopted final rules to require registrants to disclose certain climate-related information in SEC filings of all public companies. The final rules require companies to disclose, among other things: materialclimate-related risks; activities to mitigate or adapt to such risks; information about the registrant’s board of directors’ oversight of climate-related risks and management’s role in managing material climate-related risks; and information on any climate-related targets or goals thatare material to the registrant’s business, results of operations, or financial condition. Further, to facilitate investors’ assessment of certainclimate-related risks, the final rules require disclosure of certain greenhouse gas (GHG) emissions on a phased-in basis when those emissionsare material; the filing of an attestation report covering the required disclosure of such emissions, also on a phased-in basis; and disclosure ofthe financial statement effects of severe weather events and other natural conditions including, for example, costs and losses. The final rulesrequire accelerated filers such as us to incorporate the applicable disclosures into their filings beginning in fiscal year 2026, with additionalrequirements relating to the disclosure of certain GHG emissions, if material, and attestation reports for certain accelerated filers subsequentlyphasing in. While we are still assessing our obligations under the rules, complying with such obligations may result in increased costs. TheSEC rules are being challenged in federal court by several U.S. states, industry groups and environmental non-governmental organizations.On April 4, 2024, the SEC voluntarily stayed its final rules pending completion of judicial review of the challenges.Regulatory initiatives to impose climate and ESG-reporting requirements are also occurring at the state and international levels. Table of Contents23We publish an annual Environment, Social and Governance Report (“ESG Report”) compiled in accordance with the NorwegianShipowners’ Association’s ESG reporting guidelines. Our disclosures on ESG matters, a failure to meet the goals we establish or evolvingstakeholder expectations for ESG practices and reporting may potentially harm our reputation and impact access to capital, customer orinvestor relationships, and employee retention. For example, some investors may use third-party benchmarks or scores to measure our ESGpractices in making investment decisions and customers and suppliers may evaluate our ESG practices or require that we adopt certain ESGpolicies as a condition of awarding contracts. By electing to set and share publicly our corporate ESG standards, our business may also faceincreased scrutiny related to ESG activities. As ESG best-practices and reporting standards continue to develop, our costs related to ESGmonitoring and reporting and complying with ESG initiatives may increase. In addition, it may be difficult or expensive for us to comply withany ESG-linked contracting policies adopted by customers and suppliers. Increased scrutiny from stakeholders and others regarding our ESGpractices and reporting responsibilities (including our ESG Report) could result in additional costs or risks and adversely impact our businessand reputation.In addition, commitments made by us, or our customers, to reduce emissions, or decarbonize, may require us to upgrade or retrofit ourvessels or operate them in a certain way. As a result, we may be required to take our vessels out of service for extended periods of time, withcorresponding losses of revenues. Market conditions may not justify these expenditures or enable us to operate our vessels profitably.Our international operations expose us to political, governmental and economic instability, which could harm our operations.Our operations are conducted in various countries, and they may be affected by economic, political and governmental conditions in thecountries where we engage in business or where our vessels are registered. Any disruption caused by these factors could harm our business,including by reducing the levels of oil exploration, development and production activities in these areas. We may derive some of our revenuesfrom shipping oil from politically unstable regions. Conflicts in these regions have included attacks on ships and other efforts to disruptshipping. Hostilities or other political instability in regions where we operate or where we may operate could have a material adverse effect onthe growth of our business, financial condition, results of operations and ability to make cash distributions to our unitholders. In addition,tariffs, trade embargoes and other economic sanctions by the United States or other countries as a result of terrorist attacks, hostilities orotherwise may limit trading activities with those countries, which could also harm our business, financial condition, results of operations andability to make cash distributions to our unitholders. The Russian war with Ukraine and the conflicts in the Middle East, in addition tosanctions announced by President Biden and several European leaders against Russia and any forthcoming sanctions, may adversely impactour business. Finally, a government could requisition one or more of our vessels, which is more likely during war or national emergency. Anysuch requisition would cause a loss of the vessel and/or a termination of the charter and could harm our business, financial condition, resultsof operations and ability to make cash distributions to our unitholders.Marine transportation is inherently risky, particularly in the extreme conditions in which our vessels operate. An incident involvingsignificant loss of product or environmental contamination by any of our vessels could harm our reputation and business.Vessels and their cargoes and the oil production facilities we service are at risk of being damaged or lost because of events such as:●marine disasters;●bad weather;●mechanical failures;●grounding, capsizing, fire, explosions and collisions;●piracy;●human error; and Table of Contents24●war and terrorism.Harsh weather conditions in the North Sea and other regions in which our vessels operate may increase the risk of collisions, oil spills ormechanical failures.An accident involving any of our vessels could result in any of the following:●death or injury to persons, loss of property or damage to the environment and natural resources;●delays in the delivery of cargo;●loss of revenues from charters;●liabilities or costs to recover any spilled oil or other petroleum products and to restore the ecosystem affected by the spill;●governmental fines, penalties or restrictions on conducting business;●higher insurance rates; and●damage to our reputation and customer relationships generally.Any of these results could have a material adverse effect on our business, financial condition, results of operations and ability to makecash distributions to our unitholders. In addition, any damage to, or environmental contamination involving, oil production facilities servicedcould suspend that service and result in loss of revenues.Our insurance may not be sufficient to cover losses that may occur to our property or as a result of our operations.The operation of shuttle tankers is inherently risky. All risks may not be adequately insured against, and any particular claim may not bepaid by insurance. Any claims relating to our operations covered by insurance would be subject to deductibles, and since it is possible that alarge number of claims may be brought, the aggregate amount of these deductibles could be material. Certain insurance is maintained throughmutual protection and indemnity associations (“P&I clubs”), and as a member of such associations we may be required to make additionalpayments over and above budgeted premiums if member claims exceed association reserves.We may be unable to procure adequate insurance at commercially reasonable rates in the future. For example, more stringentenvironmental regulations have led in the past to increased costs for, and in the future may result in the lack of availability of, insuranceagainst risks of environmental damage or pollution. In addition, we cannot predict the impact that the recent maritime incident involving theFrancis Scott Key Bridge in Baltimore will have on our insurance. A catastrophic oil spill or marine disaster could exceed the insurance, andany uninsured or underinsured loss could harm our business, financial condition, results of operations and ability to make cash distributions toour unitholders. In addition, the insurance may be voidable by the insurers as a result of certain actions, such as vessels failing to maintaincertification with applicable maritime self-regulatory organizations.Changes in the insurance markets attributable to terrorist attacks may also make certain types of insurance more difficult to obtain. Inaddition, the insurance that may be available may be significantly more expensive than existing coverage.Terrorist attacks, piracy, increased hostilities or war could lead to further economic instability, increased costs and disruption of business.Terrorist attacks, piracy and the current conflicts in Ukraine and the Middle East, and other current and future conflicts, may adverselyaffect our business, financial condition, results of operations and ability to raise capital and future growth. Table of Contents25The Russian war with Ukraine and the current conflicts in the Middle East may lead to further regional and international conflicts orarmed action. It is possible that such conflict could further disrupt supply chains and cause instability in the global economy. Additionally, theRussian war could result in the imposition of further economic sanctions by the United States, the European Union and other nations againstRussia. While much uncertainty remains regarding the global impact of these conflicts, it is possible that an expansion of the conflicts to otherareas could adversely affect our business, financial condition, results of operation and cash flows. Furthermore, it is possible that third partieswith whom we contract may be impacted by any such expansion of events, which could then adversely affect our operations.Continuing hostilities in the Middle East may lead to additional armed conflicts or to further acts of terrorism and civil disturbance in theUnited States or elsewhere, which may contribute further to economic instability and disruption of oil production and distribution, whichcould result in reduced demand for our services.In addition, oil production facilities, shipyards, vessels, pipelines, oil fields or other infrastructure could be targets of future terroristattacks and our vessels could be targets of pirates or hijackers. Any such attacks could lead to, among other things, bodily injury or loss of life,vessel or other property damage, increased vessel operational costs, including insurance costs, and the inability to transport oil to or fromcertain locations. Terrorist attacks, war, piracy, hijacking or other events beyond our control that adversely affect the distribution, productionor transportation of oil to be shipped by us could entitle customers to terminate their charters, which would harm our business, financialcondition, results of operations and ability to make cash distributions to our unitholders.Acts of piracy on ocean-going vessels could adversely affect our business, financial condition, results of operations and ability to makecash distributions to our unitholders.Acts of piracy have historically affected ocean-going vessels trading in regions of the world such as the South China Sea and the Gulf ofAden and, more recently, the Red Sea. If such piracy attacks result in regions in which our vessels are deployed being named on the Joint WarCommittee Listed Areas, war-risk insurance premiums payable for such coverage could increase significantly and such insurance coveragemight become more difficult to obtain. In addition, crew costs, including costs that may be incurred to the extent we employ onboard securityguards, could increase in such circumstances. We may not be adequately insured to cover losses from these incidents, which could have amaterial adverse effect on us. In addition, hijacking as a result of an act of piracy against our vessels, or an increase in cost or unavailability ofinsurance for our vessels, could have a material adverse impact on our business, financial condition, results of operations and ability to makecash distributions to our unitholders.Vessels transporting oil are subject to substantial environmental and other regulations, which may significantly limit operations orincrease expenses.Our operations are affected by extensive and changing international, national and local environmental protection laws, regulations,treaties and conventions in force in international waters and the jurisdictional waters of the countries in which our vessels operate, as well asthe countries of our vessels’ registration, including those governing oil spills, air emissions, discharges to water and the handling and disposalof hazardous substances and wastes. Many of these requirements are designed to reduce the risk of oil spills and other pollution. Additionalrequirements may take effect or be adopted in the future that could limit operations or further increase expenses. For example, under IMO’sMARPOL Annex VI, effective January 1, 2020, absent the installation of expensive sulfur scrubbers to meet reduced emission requirementsfor sulfur, the maximum sulfur content in fuels used by the marine sector in all seas, including our vessels, was lowered from 3.5% to 0.5%sulfur. These low sulfur fuel requirements are generally referred to as IMO 2020.In addition, we believe that the heightened environmental, safety and security concerns of insurance underwriters, regulators andcharterers will generally lead to additional regulatory requirements, including enhanced risk assessment and security requirements and greaterinspection and safety requirements on vessels. These requirements are likely to add incremental costs to our operations and the failure tocomply with these requirements may affect the ability of our vessels to obtain the required certificates for entry into the different ports wherewe operate and could also impact our ability to obtain insurance. We may incur substantial expenses in complying with these laws andregulations, including expenses for vessel modifications and changes in operating procedures.These requirements can affect the resale value or useful lives of our vessels, require a reduction in cargo capacity, ship modifications oroperational changes or restrictions, lead to decreased availability of insurance coverage for environmental matters or result in the denial ofaccess to certain jurisdictional waters or ports or detention in certain ports. Table of Contents26Under local, national and foreign laws, as well as international treaties and conventions, we could incur material liabilities, includingcleanup obligations, natural resource damage claims and fines and penalties in the event that there is a release of petroleum or hazardoussubstances from our vessels or otherwise in connection with our operations. We could also become subject to personal injury or propertydamage claims relating to the release of petroleum or hazardous substances associated with our operations. In addition, oil spills and failure tocomply with applicable laws and regulations may result in administrative and civil penalties, criminal sanctions or the suspension ortermination of our operations, including, in certain instances, seizure or detention of our vessels. Please read “Item 4. Information on thePartnership—Business Overview—Environmental and Other Regulation.”Exposure to currency exchange rate fluctuations results in fluctuations in cash flows and operating results.Our reporting currency and the functional currency of our operating subsidiaries is the U.S. Dollar. Certain of our operating subsidiariesare party to technical management agreements with KNOT Management, which govern the crew, technical and commercial management ofthe vessels in our fleet. Under the technical management agreements, KNOT Management is paid for reasonable direct and indirect expensesincurred in providing the services, including operating expenses relating to our fleet. A majority of the operating expenses are in currenciesother than the U.S. Dollar. Fluctuating exchange rates may result in increased payments by us under the services agreements if the strength ofthe U.S. Dollar declines relative to such other currencies.Many seafaring employees are covered by collective bargaining agreements and the failure to renew those agreements or any future laboragreements may disrupt operations and adversely affect our business, financial condition, results of operations and ability to make cashdistributions to our unitholders.A significant portion of seafarers that crew certain of our vessels are employed under collective bargaining agreements. We and ouroperating subsidiaries may become subject to additional labor agreements in the future. We and our operating subsidiaries may suffer labordisruptions if relationships deteriorate with the seafarers or the unions that represent them. The collective bargaining agreements may notprevent labor disruptions, particularly when the agreements are being renegotiated. Salaries for seafarers are typically renegotiated annually orbi-annually, and higher compensation levels will increase our costs of operations. Although these negotiations have not caused labordisruptions in the past, any future labor disruptions could harm our operations and could have a material adverse effect on our business,financial condition, results of operations and ability to make cash distributions to our unitholders.KNOT may on our behalf be unable to attract and retain qualified, skilled employees or crew necessary to operate our business or mayhave to pay substantially increased costs for its employees and crew, including due to disruptions caused by a pandemic or othertransmissible disease.Our success depends in large part on KNOT’s ability to attract, hire, train and retain highly skilled and qualified personnel. In crewing ourvessels, we require technically skilled employees with specialized training who can perform physically demanding work. Competition toattract, hire, train and retain qualified crew members is intense, and crew manning costs continue to increase. If we are not able to increase ourhire rates to compensate for any crew cost increases, our business, financial condition, results of operations and ability to make cashdistributions to our unitholders may be adversely affected. Furthermore, should there be a pandemic or an outbreak of a transmissible diseaseon board, adequate crewing my not be available to fulfill the obligations under our contracts. In such a situation we could face (i) difficulty infinding healthy qualified replacement officers and crew; (ii) local or international transport or quarantine restrictions limiting the ability totransfer infected crew members off the vessel or bring new crew on board; or (iii) restrictions in availability of supplies needed on board dueto disruptions to third-party suppliers or transportation alternatives. Any inability we experience in the future to attract, hire, train and retain asufficient number of qualified employees could impair our ability to manage, maintain and grow our business.Outbreaks of epidemics and pandemics may adversely affect our business.Our operations are subject to risks related to outbreaks of infectious diseases. Epidemics, pandemics or other health crises may, similar tothe prior outbreak of COVID-19, materially impact the Partnership’s operations and the operations of its customers and suppliers. Table of Contents27The closure of, or restricted access to, ports and terminals and passenger air travel in regions affected by any outbreak of any infectiousdisease could lead to operational impacts that could result in higher costs. It is possible that an outbreak onboard a time-chartered vessel couldprevent the Partnership from meeting its obligations under a charter, resulting in an off-hire claim and loss of revenue. Any outbreak on boardone of the Partnership’s time-chartered vessels or that affects any of the Partnership’s main suppliers could cause an inability to replace criticalsupplies or parts, maintain adequate crewing or fulfill the Partnership’s obligations under its time charter contracts, which in turn could resultin off-hire or claims for the impacted period.Announced delays in new capital expenditure by many oil majors in 2020 and 2021 had a negative impact on the demand for shuttletankers. This affected the timing and number of new, offshore projects and overall oil production profiles in the short-term, which impactedthe demand and pricing for shuttle tankers. If this situation persists, the Partnership may be unable to re-charter its vessels at attractive rates inthe future, particularly for vessels that are coming off charter in the next one to two years.The Partnership is exposed to the credit risk associated with individual charterers. Any extended period of idle time between charters ornon-payment caused by issues related to any outbreak of an infectious disease or otherwise could adversely affect the Partnership’s futureliquidity, results of operations and cash flows. No assurance can be given that customers will meet their obligations and will not requestconcessions or changes to payment terms in the event of any outbreak.COVID-19 has also had a sustained impact on global capital markets. In these current market conditions, issuing new common equityremains a less viable and more expensive option for accessing liquidity. Approximately $63.4 million of the Partnership’s debt is due to berepaid or refinanced during 2024 Although the Partnership expects to refinance its debt as it matures, it may be unable to do so on satisfactoryterms or on a timely basis. In such event, the Partnership may not have sufficient funds or other assets to satisfy all of its obligations, whichwould have a material adverse effect on its business, results of operations and financial condition.Maritime claimants could arrest our vessels, which could interrupt our cash flow.If we are in default on some kinds of obligations, such as those to our lenders, crew members, suppliers of goods and services to ourvessels or shippers of cargo, these parties may be entitled to a maritime lien against one or more of our vessels. In many jurisdictions, amaritime lien holder may enforce its lien by arresting a vessel through foreclosure proceedings. In a few jurisdictions, claimants could try toassert “sister ship” liability against one vessel in our fleet for claims relating to another of our vessels. The arrest or attachment of one or moreof our vessels could interrupt our cash flows and require us to pay to have the arrest lifted. Under some of our present charters, if the vessel isarrested or detained as a result of a claim against us, we may be in default of our charter and the charterer may terminate the charter. Thiswould negatively impact our revenues and reduce our cash available for distribution to unitholders.Lack of diversification and adverse developments in the shuttle tanker market or the conventional oil tanker market would negativelyimpact our results.Although our vessels are also able to operate as conventional oil tankers, we are focused on using them as dynamic positioning shuttletankers. Due to challenges in the North Sea shuttle tanker market, we have recently considered opportunities for our North Sea-based vesselsin the conventional tanker market as a potential alternate source of income and employment. However, in practice, the all-in returns fromconventional tanker employment may be insufficient once utilization and fuel costs are considered. Due to our lack of diversification, adversedevelopments in the shuttle tanker market and/or the conventional oil tanker market would have a material adverse effect on our business,financial condition, results of operations and ability to make cash distributions to our unitholders. Table of Contents28If in the future our business activities involve countries, entities and individuals that are subject to restrictions imposed by the U.S. orother governments, we could be subject to enforcement action and our reputation and the market for our common units could be adverselyaffected.The tightening of U.S. sanctions in recent years has affected non-U.S. companies. In particular, sanctions against Iran have beensignificantly expanded. In 2012, for example, the U.S. signed into law the Iran Threat Reduction and Syria Human Rights Act of 2012(“TRA”), which placed further restrictions on the ability of non-U.S. companies to do business or trade with Iran and Syria. A major provisionin the TRA is that issuers of securities must disclose to the SEC in their annual and quarterly reports filed after February 6, 2013 if the issueror “any affiliate” has “knowingly” engaged in certain activities involving Iran during the timeframe covered by the report. This disclosureobligation is broad in scope in that it requires the reporting of activity that would not be considered a violation of U.S. sanctions as well asviolative conduct and is not subject to a materiality threshold. The SEC publishes these disclosures on its website and the President of theUnited States must initiate an investigation in response to all disclosures.In addition to the sanctions against Iran, the U.S. also has sanctions that target other countries, entities and individuals. For example,sanctions announced by President Biden and several European nations against Russia and any forthcoming sanctions may adversely impactour business. Many of these sanctions have certain extraterritorial effects that need to be considered by non-U.S. companies. It should also benoted that other governments have implemented similar sanctions. For example, Norway, the EU and the United Kingdom have expandedrestrictive measures against Russia and certain Russian businesses and individuals. We believe that we are in compliance with all applicablesanctions and embargo laws and regulations imposed by the U.S., Norway, the United Kingdom, the United Nations and EU countries andintend to maintain such compliance. However, there can be no assurance that we will be in compliance in the future, particularly as the scopeof certain laws may be unclear and may be subject to changing interpretations. Any such violation could result in fines or other penalties andcould result in some investors deciding, or being required, to divest their interest, or not to invest, in our common units. Additionally, someinvestors may decide to divest their interest, or not to invest, in our common units simply because we may do business with companies that dobusiness in sanctioned countries. Investor perception of the value of our common units may also be adversely affected by the consequences ofwar, the effects of terrorism, civil unrest and governmental actions in these and surrounding countries.Failure to comply with the U.S. Foreign Corrupt Practices Act, the U.K. Bribery Act, the anti-corruption provisions in the NorwegianCriminal Code and other anti-bribery legislation in other jurisdictions could result in fines, criminal penalties, contract termination andan adverse effect on our business.We may operate in a number of countries throughout the world, including countries known to have a high risk of corruption. We arecommitted to doing business in accordance with applicable anti-corruption laws and have adopted a code of business conduct and ethics. Weare subject, however, to the risk that we, our affiliated entities or our or their respective officers, directors, employees and agents may takeactions determined to be in violation of anti-corruption laws, including the U.S. Foreign Corrupt Practices Act of 1977, the Bribery Act 2010of the Parliament of the United Kingdom and the anti-corruption provisions of the Norwegian Criminal Code of 1902. Any such violationcould result in substantial fines, sanctions, civil and/or criminal penalties, curtailment of operations in certain jurisdictions, and mightadversely affect our business, results of operations or financial condition. In addition, actual or alleged violations could damage our reputationand ability to do business. Furthermore, detecting, investigating, and resolving actual or alleged violations is expensive and could consumesignificant time and attention of our senior management.A cyber-attack could materially disrupt our business.We rely on information technology systems and networks in our operations, the majority of which are provided by KNOT Management,as well as those of our third party vendors, suppliers and other business partners in the administration of our business. Our operations could betargeted by individuals or groups seeking to sabotage or disrupt our information technology systems and networks, or to steal data. Asuccessful cyber-attack could materially disrupt our operations, including the safety of our operations, or lead to unauthorized release ofinformation or alteration of information on our systems or the systems of our service providers, vendors or customers. Any such attack orother breach of our information technology systems or those of our third party service providers, vendors, suppliers or customers could have amaterial adverse effect on our business, results of operations, financial condition, our reputation, or cash flows. We may be required to incuradditional costs to modify or enhance our information technology systems or to prevent or remediate any such attacks. Table of Contents29The Russian war with Ukraine has been accompanied by cyber-attacks against the Ukrainian government and other countries in theregion. It is possible that these attacks could have collateral effects on additional critical infrastructure and financial institutions globally,which could adversely affect the Partnership’s operations. It is difficult to assess the likelihood of such threat and any potential impact at thistime.Finally, certain cyber incidents, such as surveillance or reconnaissance, may remain undetected for an extended period. Our systems forprotecting against cybersecurity risks may not be sufficient. As cyberattacks continue to evolve, including those leveraging artificialintelligence, we may be required to expend significant additional resources to continue to modify or enhance our protective measures or toinvestigate and remediate any vulnerabilities to cyberattacks. In addition, new laws and regulations governing data privacy, cybersecurity, andthe unauthorized disclosure of confidential information pose increasingly complex compliance challenges and potentially elevate costs, andany failure to comply with these laws and regulations could result in significant penalties and legal liability.Our business is subject to complex and evolving laws, directives and regulations regarding privacy and data protection.We are subject to laws, directives, and regulations relating to the collection, use, retention, disclosure, security and transfer of personaldata (“data protection laws”). These data protection laws, and their interpretation and enforcement, continue to evolve and may be inconsistentfrom jurisdiction to jurisdiction. For example, the General Data Protection Regulation (“GDPR”), which regulates the use of personallyidentifiable information, went into effect in the EU (“EU”) on May 25, 2018, applies globally to all of our activities conducted from anestablishment in the EU, to related products and services that we offer to EU customers and to non-EU customers which offer services in theEU. Complying with the GDPR and similar emerging and changing data protection laws may cause us to incur substantial costs or require usto change our business practices. Noncompliance, or perceived noncompliance, with our legal obligations relating to data protection lawscould result in penalties, fines, legal proceedings by governmental entities or others, loss of reputation, legal claims by individuals andcustomers and significant legal and financial exposure and could affect our ability to retain and attract customers. As noted above, we are alsosubject to the possibility of cyber-attacks, which themselves may result in obligations under these laws. . In addition, laws and regulationsgoverning cybersecurity, data privacy, and the unauthorized disclosure of confidential or protected information pose increasingly complexcompliance challenges, and failure to comply with these laws could result in penalties and legal liability.Risks Inherent in an Investment in UsKNOT and its affiliates may compete with us.Pursuant to the omnibus agreement we entered into with KNOT at the time of our IPO (the “Omnibus Agreement”), KNOT and itscontrolled affiliates (other than us, our general partner and our subsidiaries) generally have agreed not to acquire, own, operate or chartercertain shuttle tankers operating under charters of five years or more. The Omnibus Agreement, however, contains significant exceptions thatmay allow KNOT or any of its controlled affiliates to compete with us, which could harm our business. Please read “Item 7. MajorUnitholders and Related Party Transactions—Related Party Transactions—Omnibus Agreement—Noncompetition.”Unitholders have limited voting rights, and our partnership agreement restricts the voting rights of Norwegian Resident Holders andunitholders owning more than 4.9% of our common units or Class B Units.Unlike the holders of common stock in a corporation, holders of common units have only limited voting rights on matters affecting ourbusiness. The Class B Units generally vote together with the common units as a single class. We hold a meeting of the limited partnersevery year to elect one or more members of our board of directors and to vote on any other matters that are properly brought before themeeting. Common unitholders and holders of Class B Units (“Class B Unitholders”) are entitled to elect only four of the seven members ofour board of directors. The elected directors are elected on a staggered basis and serve for four-year terms. Our general partner in its solediscretion appoints the remaining three directors and sets the terms for which those directors serve. Our partnership agreement also containsprovisions limiting the ability of unitholders to call meetings or to acquire information about our operations, as well as other provisionslimiting our unitholders’ ability to influence the manner or direction of management. Unitholders have no right to elect our general partner,and our general partner may not be removed except by a vote of the holders of at least 66⅔% of the outstanding common units and Class BUnits, including any common units and Class B Units owned by our general partner and its affiliates, voting together as a single class. Table of Contents30Our partnership agreement further restricts unitholders’ voting rights by providing that Norwegian Resident Holders are not eligible tovote in the election of elected directors. Further, if any person or group owns beneficially more than 4.9% of any class of units thenoutstanding (excluding Norwegian Resident Holders in the election of elected directors), any such units owned by that person or group inexcess of 4.9% may not be voted on any matter and are not considered to be outstanding when sending notices of a meeting of unitholders,calculating required votes (except for purposes of nominating a person for election to our board of directors), determining the presence of aquorum or for other similar purposes, unless required by law. The voting rights of any unitholders not entitled to vote on a specific matter areeffectively redistributed pro rata among the other unitholders. Our general partner, its affiliates and persons who acquire common units orClass B Units with the prior approval of our board of directors are not subject to the 4.9% limitation except with respect to voting theircommon units or Class B Units in the election of the elected directors. The common units and the Class B Units will be treated as two separateclasses of partnership interests for purposes of the 4.9% limitation, which will apply separately to the holders of common units and to theholders of Class B Units.KNOT and its affiliates own a substantial interest in us and have conflicts of interest and limited fiduciary and contractual duties to us andour common unitholders, which may permit them to favor their own interests to the detriment of our unitholders.As of April 11, 2024, KNOT owned 28.4% of our common units and all of our Class B Units, and owned and controlled our generalpartner, which owns a 1.83% general partner interest in us and 0.3% of our common units. Certain of our directors are directors of KNOT orits affiliates, and, as such, they have fiduciary duties to KNOT or its affiliates that may cause them to pursue business strategies thatdisproportionately benefit KNOT or its affiliates or which otherwise are not in the best interests of us or our unitholders. Conflicts of interestmay arise between KNOT and its affiliates (including our general partner), on the one hand, and us and our unitholders, on the other hand. Asa result of these conflicts, our general partner and its affiliates may favor their own interests over the interests of our unitholders. Please read“—Our partnership agreement limits our general partner’s and our directors’ fiduciary duties to our unitholders and restricts the remediesavailable to unitholders for actions taken by our general partner or our directors.” These conflicts include, among others, the followingsituations:●neither our partnership agreement nor any other agreement requires our general partner or KNOT or its affiliates to pursue abusiness strategy that favors us or utilizes our assets, and KNOT’s officers and directors have a fiduciary duty to make decisionsin the best interests of the shareholders of KNOT, which may be contrary to our interests;●our partnership agreement permits our general partner to make a number of decisions in its individual capacity, as opposed to inits capacity as our general partner. Specifically, our general partner is considered to be acting in its individual capacity if itexercises its call right, pre-emptive rights or registration rights, consents or withholds consent to any merger or consolidation ofthe Partnership, appoints any directors or votes for the election of any director, votes or refrains from voting on amendments toour partnership agreement that require a vote of the outstanding units, voluntarily withdraws from the Partnership, transfers (tothe extent permitted under our partnership agreement) or refrains from transferring its units or general partner interest or votesupon the dissolution of the Partnership;●our general partner and our directors have limited their liabilities and reduced their fiduciary duties under the laws of theMarshall Islands, while also restricting the remedies available to our unitholders, and, as a result of purchasing common units,unitholders are treated as having agreed to the modified standard of fiduciary duties and to certain actions that may be taken byour general partner and our directors, all as set forth in our partnership agreement;●our general partner is entitled to reimbursement of all reasonable costs incurred by it and its affiliates for our benefit;●our partnership agreement does not restrict us from paying our general partner or its affiliates for any services rendered to us onterms that are fair and reasonable or entering into additional contractual arrangements with any of these entities on our behalf;●our general partner may exercise its right to call and purchase our common units if it and its affiliates own more than 80.0% ofour common units and Class B Units; and●our general partner is not obligated to obtain a fairness opinion regarding the value of the common units to be repurchased by itupon the exercise of its limited call right. Table of Contents31Although a majority of our directors have been elected by common unitholders, our general partner has substantial influence on decisionsmade by our board of directors. Please read “Item 7. Major Unitholders and Related Party Transactions.”Our partnership agreement limits our general partner’s and our directors’ fiduciary duties to our unitholders and restricts the remediesavailable to unitholders for actions taken by our general partner or our directors.Our partnership agreement provides that our general partner irrevocably delegates to our board of directors the authority to oversee anddirect our operations, management and policies on an exclusive basis, and such delegation is binding on any successor general partner of thePartnership. Our partnership agreement also contains provisions that reduce the standards to which our general partner and directors wouldotherwise be held by Marshall Islands law. For example, our partnership agreement:●permits our general partner to make a number of decisions in its individual capacity, as opposed to in its capacity as our generalpartner. Where our partnership agreement permits, our general partner may consider only the interests and factors that it desires,and in such cases it has no fiduciary duty or obligation to give any consideration to any interest of, or factors affecting us, ouraffiliates or our unitholders. Decisions made by our general partner in its individual capacity are made by its board of directors,which is appointed by KNOT. Specifically, pursuant to our partnership agreement, our general partner is considered to be actingin its individual capacity if it exercises its call right, pre-emptive rights or registration rights, consents or withholds consent toany merger or consolidation of the Partnership, appoints any directors or votes for the election of any director, votes or refrainsfrom voting on amendments to our partnership agreement that require a vote of the outstanding units, voluntarily withdrawsfrom the Partnership, transfers (to the extent permitted under our partnership agreement) or refrains from transferring its units orgeneral partner interest or votes upon the dissolution of the Partnership;●provides that our general partner and our directors are entitled to make other decisions in “good faith” if they reasonably believethat the decision is in our best interests;●generally provides that affiliated transactions and resolutions of conflicts of interest not approved by the conflicts committee ofour board of directors and not involving a vote of unitholders must be on terms no less favorable to us than those generallybeing provided to or available from unrelated third parties or be “fair and reasonable” to us and that, in determining whether atransaction or resolution is “fair and reasonable,” our board of directors may consider the totality of the relationships betweenthe parties involved, including other transactions that may be particularly advantageous or beneficial to us; and●provides that neither our general partner nor our officers or our directors is liable for monetary damages to us, our limitedpartners or assignees for any acts or omissions unless there has been a final and non-appealable judgment entered by a court ofcompetent jurisdiction determining that our general partner or our officers or directors or those other persons engaged in actualfraud or willful misconduct.In order to become a limited partner of our partnership, a common unitholder is required to agree to be bound by the provisions in ourpartnership agreement, including the provisions discussed above.Our partnership agreement provides that our general partner delegates all its management activities in relation to us to our board ofdirectors, and arrangements are in place such that any activities that would otherwise constitute regulated activities under the FinancialServices and Markets Act 2000 (Regulated Activities Order) 2001 were they to be performed in the United Kingdom (and that would not fallwithin a suitable exemption) are performed outside of the United Kingdom.However, there can be no assurance that this will not change (deliberately or otherwise) over time, and there is no current intention forour general partner, us or any of our subsidiaries to seek authorization from the Financial Conduct Authority in the United Kingdom, whichwould be required for any person to lawfully carry out such regulated activities in the United Kingdom. Table of Contents32Fees and cost reimbursements, which affiliates of KNOT determine for services provided to us and our subsidiaries, are substantial,payable regardless of our profitability and reduce our cash available for distribution to our unitholders.Pursuant to technical management agreements, our subsidiaries that own vessels operating under time charters pay fees for servicesprovided to them by KNOT Management and reimburse KNOT Management for all expenses incurred on their behalf. These fees andexpenses include all costs and expenses incurred in providing the crew, technical and commercial management of the vessels in our fleet toour subsidiaries. Additionally, our subsidiaries that own vessels operating under bareboat charters have entered into management andadministration agreements with either KNOT Management or KNOT Management Denmark pursuant to which these companies providegeneral monitoring services for the vessels in exchange for an annual fee.In addition, pursuant to an administrative services agreement, KNOT UK provides us with certain administrative services. KNOT UK ispermitted to subcontract certain of the administrative services provided to us under this agreement to KOAS UK, KOAS and KNOTManagement. We reimburse KNOT UK, and KNOT UK reimburses KOAS UK, KOAS and KNOT Management, as applicable, for theirreasonable costs and expenses incurred in connection with the provision of the services subcontracted to KOAS UK, KOAS and KNOTManagement under the administrative services agreement. In addition, KNOT UK pays to KOAS UK, KOAS and KNOT Management, asapplicable, a service fee in U.S. Dollars equal to 5% of the costs and expenses incurred in connection with providing services.For a description of the technical management agreements, management and administration agreements and the administrative servicesagreement, please read “Item 7. Major Unitholders and Related Party Transactions.” The fees and expenses payable pursuant to the technicalmanagement agreements, management and administration agreements and the administrative services agreement are payable without regard toour business, results of operation and financial condition. The payment of fees to and the reimbursement of expenses of affiliates of KNOTcould adversely affect our ability to pay cash distributions to our unitholders.Our partnership agreement contains provisions that may have the effect of discouraging a person or group from attempting to remove ourcurrent management or our general partner, and even if public unitholders are dissatisfied, they are unable to remove our general partnerwithout KNOT’s consent, unless KNOT’s ownership interest in us is decreased, all of which could diminish the trading price of ourcommon units.Our partnership agreement contains provisions that may have the effect of discouraging a person or group from attempting to remove ourcurrent management or our general partner.●If our general partner is removed without “cause” and units held by our general partner and KNOT are not voted in favor of thatremoval, our general partner has the right to convert its general partner interest into common units or to receive cash inexchange for such interest based on the fair market value of such interest at the time. Any conversion of the general partnerinterest would be dilutive to existing unitholders. Furthermore, any cash payment in lieu of such conversion could beprohibitively expensive. “Cause” is narrowly defined to mean that a court of competent jurisdiction has entered a final, non-appealable judgment finding our general partner liable for actual fraud or willful or wanton misconduct in its capacity as ourgeneral partner. Cause does not include most cases of charges of poor business decisions, such as charges of poor managementof our business by the directors appointed by our general partner.●Common unitholders are entitled to elect only four of the seven members of our board of directors. Our general partner in itssole discretion appoints the remaining three directors.●Election of the four directors elected by common unitholders is staggered, meaning that the members of only one of four classesof our elected directors are selected each year. In addition, the directors appointed by our general partner serve for termsdetermined by our general partner.●Our partnership agreement contains provisions limiting the ability of unitholders to call meetings of unitholders, to nominatedirectors and to acquire information about our operations as well as other provisions limiting our unitholders’ ability toinfluence the manner or direction of management. Table of Contents33Unitholders’ voting rights are further restricted by our partnership agreement provision providing that if any person or group ownsbeneficially more than 4.9% of any class of units then outstanding, any such units owned by that person or group in excess of 4.9% may notbe voted on any matter and are not considered to be outstanding when sending notices of a meeting of unitholders, calculating required votes(except for purposes of nominating a person for election to our board of directors), determining the presence of a quorum or for other similarpurposes, unless required by law. The voting rights of any such unitholders in excess of 4.9% effectively are redistributed pro rata among theother unitholders holding less than 4.9% of the voting power of all classes of units entitled to vote. Our general partner, its affiliates andpersons who acquire common units or Class B Units with the prior approval of our board of directors are not subject to this 4.9% limitationexcept with respect to voting their common units or Class B Units in the election of the elected directors.●There are no restrictions in our partnership agreement on our ability to issue equity securities.The effect of these provisions may be to diminish the price at which the common units trade.The control of our general partner may be transferred to a third party without unitholder consent.Our general partner may transfer its general partner interest to a third party in a merger or in a sale of all or substantially all of its assetswithout the consent of our unitholders. In addition, our partnership agreement does not restrict the ability of the members of our generalpartner from transferring their respective membership interests in our general partner to a third party.Substantial future sales of our common units or the issuance of additional preferred units could cause the price of our common units tofall.The market price of our common units could decline due to sales of a large number of units, or the issuance of debt securities or warrants,in the market, or the perception that these sales could occur. These sales could also make it more difficult for us to sell equity securities in thefuture at a time and price that we deem appropriate to raise funds through future offerings of common units.We have granted registration rights to KNOT and certain of its affiliates. These unitholders have the right, subject to some conditions, torequire us to file registration statements covering any of our common or other equity securities owned by them or to include those securities inregistration statements that we may file for ourselves or other unitholders. As of April 11, 2024, KNOT and our general partner owned 28.6%of the common units and all of the Class B Units. We have also entered into a registration rights agreement with the holders of the Series APreferred Units, pursuant to which we filed a registration statement to register resales of the common units underlying the Series A PreferredUnits. Following their sale, these securities will become freely tradable. By exercising their registration rights and selling a large number ofcommon units or other securities, our securityholders with registration rights could cause the price of our common units to decline.Our common units are subordinated to our existing and future indebtedness and our Series A Preferred Units.Our common units are equity interests in us and do not constitute indebtedness. The common units rank junior to all indebtedness andother non-equity claims on us with respect to the assets available to satisfy claims, including a liquidation of the Partnership. Additionally,holders of the common units are subject to the prior distribution and liquidation rights of the holders of the Series A Preferred Units and anyother preferred units we may issue in the future.As long as our outstanding Series A Preferred Units remain outstanding, distribution payments relating to our common units areprohibited under our partnership agreement until all accrued and unpaid distributions are paid on the Series A Preferred Units. Table of Contents34We may issue additional equity securities, including a limited amount of securities senior to the common units, without the approval of ourunitholders, which would dilute their ownership interests.We may, without the approval of our unitholders, issue an unlimited number of additional common units. In addition, we may issue unitsthat are senior to the common units in right of distribution, liquidation and voting, provided that the aggregate amount of our Series APreferred Units and any other securities on parity with the Series A Preferred Units, pro forma for such issuance, does not exceed 33.33% ofthe book value of the sum of our then outstanding aggregate amount of parity securities and junior securities (including the common units).The consent of the holders of the Series A Preferred Units will be necessary for us to issue any parity securities (or securities senior to ourSeries A Preferred Units) in excess of such pro forma book value.The issuance by us of additional common units or other equity securities of equal or senior rank will have the following effects:●our unitholders’ proportionate ownership interest in us will decrease;●the amount of cash available for distribution on each unit may decrease;●the relative voting strength of each previously outstanding unit may be diminished; and●the market price of the common units may decline.A substantial number of our common units may be issued upon conversion of our Series A Preferred Units or Class B Units or asredemption payments in respect of our Series A Preferred Units, which issuances could reduce the value of our common units.Our Series A Preferred Units are convertible, under certain circumstances, at the applicable conversion rate, which is subject toadjustment under certain circumstances. The conversion rate will be redetermined on a quarterly basis, such that the conversion rate will beequal to $24.00 (the “Issue Price”) divided by the product of (x) the book value per common unit at the end of the immediately precedingquarter (pro-forma for per unit cash distributions payable with respect to such quarter) multiplied by (y) the quotient of (i) the Issue Pricedivided by (ii) the book value per common unit on the initial issuance date of the Series A Preferred Units.The Series A Preferred Units are generally convertible, at the option of the holders of the Series A Preferred Units, into common units atthe then applicable conversion rate. In addition, we may redeem the Series A Preferred Units at any time before February 2, 2027 at theredemption price applicable on any such redemption date, provided, however, that upon notice from us to the holders of Series A PreferredUnits of our intention to redeem, such holders may elect, instead, to convert their Series A Preferred Units into common units at the thenapplicable conversion rate. In addition, subject to certain conditions, we may convert the Series A Preferred Units into common units at thethen applicable conversion rate. Upon a change of control of the Partnership, the holders of Series A Preferred Units may require us to redeemthe Series A Preferred Units, in cash, at 100% of the Issue Price. Further, the holders of Series A Preferred Units may cause us to redeem theSeries A Preferred Units on February 2, 2027 in, at our option, (i) cash at a price equal to 70% of the Issue Price or (ii) common units suchthat each Series A Preferred Unit receives common units worth 80% of the Issue Price. The value (and, therefore, the number) of the commonunits to be delivered pursuant thereto will be determined based on the volume-weighted average trading price, as adjusted for splits,combinations and other similar transactions, of our common units as reported on the NYSE for the 30-trading day period ending on the fifthtrading day immediately prior to the redemption date.The Class B Units are a class of limited partner interests which are not entitled to receive cash distributions in any quarter unless commonunitholders receive a distribution of at least $0.52 for such quarter (the “Distribution Threshold”). When common unitholders receive aquarterly distribution at least equal to the Distribution Threshold, then Class B unitholders will be entitled to receive the same distribution ascommon unitholders. For each quarter (starting with the quarter ended September 30, 2021) that the Partnership pays distributions on thecommon units that are at or above the Distribution Threshold, one-eighth of the Class B Units originally issued will be converted to commonunits on a one-for-one basis until such time as no further Class B Units exist. As of April 11, 2024 a total of 420,675 of the Class B Units hadconverted to common units on a one-to-one basis, and 252,405 Class B Units remain outstanding. Table of Contents35If a substantial portion of the Series A Preferred Units or the Class B Units are converted into common units, or the Series A PreferredUnits are redeemed under certain circumstances, common unitholders could experience significant dilution. Furthermore, if holders of suchSeries A Preferred Units or Class B Units were to dispose of a substantial portion of these common units in the public market following such aconversion, whether in a single transaction or series of transactions, it could adversely affect the market price for our common units. Thesesales, or the possibility that these sales may occur, could make it more difficult for us to sell our common units in the future.The number of our common units issuable upon conversion or redemption under certain circumstances of the Series A Preferred Unitswill be impacted by, among other things, the level of our quarterly cash distributions, as the conversion rate is redetermined each quarter,based on the pro forma per unit cash distributions we make on our common units (as described above) and the market price of our commonunits. Accordingly, the number of common units issuable upon conversion or redemption under certain circumstances could be substantial,especially during periods of significant declines in market prices of our common units or if we experience certain events, such as, among otherthings, a decline in the value of our vessels that results in an impairment or write-down of the value of our vessels or a write-off of anygoodwill, decline in the fair value of our derivative instruments, change in accounting principle that results in a decline in our book value, orother event that results in a decline in our book value.The issuance of common units upon conversion of our Series A Preferred Units or Class B Units or redemption under certaincircumstances of our Series A Preferred Units may have the following effects:●an existing unitholder’s proportionate ownership interest in us will decrease;●the amount of cash available for distribution on each common unit may decrease;●the relative voting strength of each previously outstanding common unit may be diminished; and●the market price of our common units may decline.The market price of our common units is likely to be influenced by the Series A Preferred Units and Class B Units. For example, themarket price of our common units could become more volatile and could be depressed by:●investors’ anticipation of the potential resale in the market of a substantial number of additional common units received uponconversion of the Series A Preferred Units or Class B Units;●possible sales of our common units by investors who view the Series A Preferred Units as a more attractive means of equityparticipation in us than owning our common units; and●hedging or arbitrage trading activity that may develop involving the Series A Preferred Units and our common units.Our Series A Preferred Units have rights, preferences and privileges that are not held by, and are preferential to the rights of, holders ofour common units.Our Series A Preferred Units rank senior to all our common units with respect to distribution rights and liquidation preference. Thesepreferences could adversely affect the market price for our common units or could make it more difficult for us to sell our common units inthe future.In addition, distributions on the Series A Preferred Units accrue and are cumulative. Our obligation to pay distributions on our Series APreferred Units, or on the common units issued following conversion of such Series A Preferred Units, could impact our liquidity and reducethe amount of cash flow available for working capital, capital expenditures, growth opportunities, acquisitions, and other general partnershippurposes. Our obligations to the holders of Series A Preferred Units could also limit our ability to obtain additional financing or increase ourborrowing costs, which could have an adverse effect on our financial condition. Table of Contents36Our general partner has a limited call right that may require our unitholders to sell their common units at an undesirable time or price.If at any time our general partner and its affiliates own more than 80.0% of the common units and Class B Units, our general partner hasthe right, which it may assign to any of its affiliates or to us, but not the obligation, to acquire all, but not less than all, of the common unitsheld by unaffiliated persons at a price not less than the then-current market price of our common units. Our general partner is not obligated toobtain a fairness opinion regarding the value of the common units to be repurchased by it upon the exercise of this limited call right. As aresult, our unitholders may be required to sell their common units at an undesirable time or price and may not receive any return on theirinvestment. Our unitholders may also incur a tax liability upon a sale of their units.As of April 11, 2024, KNOT and our general partner owned 29.2% of the combined total of our common units and Class B Units.Our unitholders may not have limited liability if a court finds that unitholder action constitutes control of our business.As a limited partner in a partnership organized under the laws of the Marshall Islands, our unitholders could be held liable for ourobligations to the same extent as a general partner if our unitholders participate in the “control” of our business. Our general partner generallyhas unlimited liability for the obligations of the Partnership, such as its debts and environmental liabilities. In addition, the limitations on theliability of holders of limited partner interests for the obligations of a limited partnership have not been clearly established in somejurisdictions in which we do business.We can borrow money to pay distributions, which would reduce the amount of credit available to operate our business.Our partnership agreement allows us to make working capital borrowings to pay distributions. Accordingly, if we have availableborrowing capacity, we can make distributions on all our units even though cash generated by our operations may not be sufficient to pay suchdistributions. Any working capital borrowings by us to make distributions reduces the amount of working capital borrowings we can make foroperating our business. For more information, please read “Item 5. Operating and Financial Review and Prospects—Liquidity and CapitalResources.”Increases in interest rates may cause the market price of our common units to decline.An increase in interest rates may cause a corresponding decline in demand for equity investments in general, and in particular for yield-based equity investments such as our common units. Any such increase in interest rates or reduction in demand for our common unitsresulting from other relatively more attractive investment opportunities may cause the trading price of our common units to decline.We rely on the master limited partnership (“MLP”) structure and its appeal to investors for accessing debt and equity markets to financeour growth and repay or refinance our debt. The volatility in energy prices over the past few years has, among other factors, causedincreased volatility and contributed to a dislocation in pricing for MLPs.The volatility in energy prices and, in particular, the price of oil, among other factors, has contributed to increased volatility in the pricingof MLPs and the energy debt markets. A number of MLPs, including us and certain other maritime MLPs, have reduced or eliminated theirdistributions to unitholders.We rely on our ability to obtain financing and to raise capital in the equity and debt markets to fund our capital replacement, growth andinvestment expenditures, and to refinance our debt. A protracted deterioration in the valuation of our common units would increase our cost ofcapital, make any equity issuance significantly dilutive and may affect our ability to access capital markets and, as a result, our capacity to paydistributions to our unitholders and service or refinance our debt. Table of Contents37Unitholders may have liability to repay distributions.Under some circumstances, unitholders may have to repay amounts wrongfully returned or distributed to them. Under the MarshallIslands Limited Partnership Act (the “Marshall Islands Act”), we may not make a distribution to our unitholders if the distribution wouldcause our liabilities, other than liabilities to partners on account of their partnership interest and liabilities for which the recourse of creditors islimited to specified property of ours, to exceed the fair value of our assets, except that the fair value of property that is subject to a liability forwhich the recourse of creditors is limited will be included in our assets only to the extent that the fair value of that property exceeds thatliability. Marshall Islands law provides that for a period of three years from the date of the impermissible distribution, limited partners whoreceived the distribution and who knew at the time of the distribution that it violated Marshall Islands law will be liable to the limitedpartnership for the distribution amount. Assignees who become substituted limited partners are liable for the obligations of the assignor tomake contributions to the limited partnership that are known to the assignee at the time it became a limited partner and for unknownobligations if the liabilities could be determined from our partnership agreement.We have been organized as a limited partnership under the laws of the Marshall Islands, which does not have a well-developed body ofpartnership law.Our partnership affairs are governed by our partnership agreement and by the Marshall Islands Act. The provisions of the MarshallIslands Act resemble provisions of the limited partnership laws of a number of states in the United States, most notably Delaware. For non-resident limited partnerships such as ours, the Marshall Islands Act also provides that it is to be applied and construed to make it, with respectto the subject matter thereof, uniform with the laws of the State of Delaware and, so long as it does not conflict with the Marshall Islands Actor decisions of the High and Supreme Courts of the Marshall Islands, the non-statutory law (or case law) of the State of Delaware is adoptedas the law of the Marshall Islands. There have been, however, few, if any, court cases in the Marshall Islands interpreting the Marshall IslandsAct, in contrast to Delaware, which has a fairly well-developed body of case law interpreting its limited partnership statute. Accordingly, wecannot predict whether Marshall Islands courts would reach the same conclusions as the courts in Delaware. For example, the rights of ourunitholders and the fiduciary responsibilities of our general partner under Marshall Islands law are not as clearly established as under judicialprecedent in existence in Delaware. As a result, unitholders may have more difficulty in protecting their interests in the face of actions by ourgeneral partner and its officers and directors than would unitholders of a similarly organized limited partnership in the United States.Because we and KNOT UK are Marshall Islands entities, our operations are subject to economic substance requirements, which couldharm our business.The Council of the European Union, or the Council, routinely publishes a list of “non-cooperative jurisdictions” for tax purposes, whichincludes countries that the Council believes need to improve their legal framework and to work towards compliance with internationalstandards in taxation. On February 14, 2023, the Republic of the Marshall Islands, among others, was placed by the EU on the list of non-cooperative jurisdictions for lacking in the enforcement of economic substance requirements and was removed from the list in October 2023.EU member states have agreed upon a set of measures, which they can choose to apply against the listed countries, including increasedmonitoring and audits, withholding taxes, and non-deductibility of costs, and although we are not currently aware of any such measures beingadopted, they can be adopted by one or more EU members states in the future. The European Commission has stated it will continue tosupport member states’ efforts to develop a more coordinated approach to sanctions for the listed countries. EU legislation prohibits certainEU funds from being channeled or transited through entities in non-cooperative jurisdictions.We are a Marshall Islands limited partnership and KNOT UK is a Marshall Islands limited liability company. The Marshall Islands hasenacted economic substance regulations with which we are obligated to comply. The Marshall Islands economic substance regulations requirecertain entities that are not otherwise tax resident outside of the Marshall Islands that carry out particular activities to comply with aneconomic substance test whereby the entity must show that it (i) is directed and managed in the Marshall Islands in relation to that relevantactivity, (ii) carries out core income-generating activity in relation to that relevant activity in the Marshall Islands (although it is beingunderstood and acknowledged by the regulators that income-generated activities for shipping companies will generally occur in internationalwaters) and (iii) having regard to the level of relevant activity carried out in the Marshall Islands has (a) an adequate amount of expendituresin the Marshall Islands, (b) adequate physical presence in the Marshall Islands and (c) an adequate number of qualified employees in theMarshall Islands. Based on our current business activities, we believe that we and KNOT UK are not required to comply with this economicsubstance test. Table of Contents38In addition, certain jurisdictions have enacted or may enact economic substance laws and regulations with which we may be obligated tocomply. If we fail to comply with our obligations under any such laws and regulations, including the Marshall Islands regulations, we could besubject to financial penalties and disclosure of information to foreign tax officials, or could be struck from the register of companies. Any ofthe foregoing could be disruptive to our business and could have a material adverse effect on our business, financial conditions and operatingresults.We do not know whether the Marshall Islands will be placed back on the non-cooperative list; what actions the Marshall Islands maytake, if any, to remove itself from the list; how quickly the EU would react to any changes in legislation of the Marshall Islands; or how EUbanks or other counterparties will react while we or KNOT UK remain as entities organized and existing under the laws of the MarshallIslands. The effect of the EU list of non-cooperative jurisdictions, and any noncompliance by us with legislation adopted by the MarshallIslands to achieve removal from the list, could have a material adverse effect on our business, financial conditions and operating results.Because we are organized under the laws of the Marshall Islands, it may be difficult to serve us with legal process or enforce judgmentsagainst us, our directors or our management.We are organized under the laws of the Marshall Islands, and substantially all of our assets are located outside of the United States. Inaddition, our general partner is a Marshall Islands limited liability company, and the substantial majority of our directors and officers generallyare or will be non-residents of the United States, and all or a substantial portion of the assets of these non-residents are located outside theUnited States. As a result, it may be difficult or impossible for our unitholders to bring an action against us or against these individuals in theUnited States if our unitholders believe that their rights have been infringed under securities laws or otherwise. Even if our unitholders aresuccessful in bringing an action of this kind, the laws of the Marshall Islands and of other jurisdictions may prevent or restrict our unitholdersfrom enforcing a judgment against our assets or the assets of our general partner or our directors or officers.Our partnership agreement designates the Court of Chancery of the State of Delaware as the exclusive forum for certain types of actionsand proceedings that may be initiated by our unitholders unless otherwise provided for under the laws of the Marshall Islands. This limitsour unitholders’ ability to choose the judicial forum for disputes with us or our directors, officers or other employees.Our partnership agreement provides that, with certain limited exceptions, the Court of Chancery of the State of Delaware is the exclusiveforum for any claims, suits, actions or proceedings (1) arising out of or relating in any way to our partnership agreement (including anyclaims, suits or actions to interpret, apply or enforce the provisions of our partnership agreement or the duties, obligations or liabilities amonglimited partners or of limited partners to us, or the rights or powers of, or restrictions on, our limited partners or us); (2) brought in a derivativemanner on our behalf; (3) asserting a claim of breach of a fiduciary duty owed by any director, officer or other employee of us or our generalpartner, or owed by our general partner, to us or our limited partners; (4) asserting a claim arising pursuant to any provision of the MarshallIslands Act; and (5) asserting a claim governed by the internal affairs doctrine. This exclusive forum provision does not apply to actionsarising under the U.S. Securities Act of 1933, as amended (the “Securities Act”) or the U.S. Securities and Exchange Act of 1934, as amended(the “Exchange Act”). Any person or entity purchasing or otherwise acquiring any interest in our units is deemed to have received notice ofand consented to the foregoing provisions.Although we believe these provisions will benefit us by providing increased consistency in the application of Delaware law for thespecified types of actions and proceedings, the provisions may have the effect of discouraging lawsuits against our directors, officers,employees and agents. The enforceability of similar forum selection provisions in other companies’ certificates of incorporation or similargoverning documents have been challenged in legal proceedings, and it is possible that, in connection with one or more actions or proceedingsdescribed above, a court could find that the forum selection provision contained in our partnership agreement is inapplicable or unenforceablein such action or actions. Limited partners will not be deemed, by operation of the forum selection provision alone, to have waived claimsarising under the federal securities laws and the rules and regulations thereunder. If a court were to find this choice of forum provisioninapplicable to, or unenforceable in respect of, one or more of the specified types of actions or proceedings, we may incur additional costsassociated with resolving such matters in other jurisdictions, which could adversely affect our financial position, results of operations andability to make cash distributions to our unitholders. Table of Contents39Tax RisksIn addition to the following risk factors, you should read “Item 4. Information on the Partnership—Business Overview—Taxation of thePartnership” and “Item 10. Additional Information—Taxation” for a more complete discussion of the expected material U.S. federal and non-U.S. income tax considerations relating to us and the ownership and disposition of our common units.We are subject to taxes, which reduces our cash available for distribution to our unitholders.We and our subsidiaries may be subject to tax in the jurisdictions in which we are organized or operate, reducing the amount of cashavailable for distribution. In computing our tax obligations in these jurisdictions, we are required to take various tax accounting and reportingpositions on matters that are not entirely free from doubt and for which we have not received rulings from the governing authorities. Wecannot assure you that, upon review of these positions, the applicable authorities will agree with our positions. A successful challenge by a taxauthority could result in additional tax imposed on us or our subsidiaries, as well as possibly interest and penalties, further reducing the cashavailable for distribution. In addition, changes in our operations or ownership could result in additional tax being imposed on us or oursubsidiaries in jurisdictions in which operations are conducted.A change in tax laws in any country in which we operate could adversely affect us.Tax laws and regulations are highly complex and subject to interpretation. Consequently, we and our subsidiaries are subject to changingtax laws, treaties and regulations in and between countries in which we operate. Our income tax expense is based on our interpretation of thetax laws in effect at the time the expense was incurred. A change in tax laws, treaties or regulations, or in the interpretation thereof, couldresult in a materially higher tax expense or a higher effective tax rate on our earnings. Such changes may include measures enacted inresponse to the ongoing initiatives in relation to fiscal legislation at an international level, such as the Action Plan on Base Erosion and ProfitShifting of the Organization for Economic Co-operation and Development.U.S. tax authorities could treat us as a “passive foreign investment company,” which would have adverse U.S. federal income taxconsequences to U.S. unitholders.A non-U.S. entity treated as a corporation for U.S. federal income tax purposes will be treated as a “passive foreign investment company”(a “PFIC”) for U.S. federal income tax purposes if at least 75% of its gross income for any taxable year consists of “passive income” or atleast 50% of the average value of its assets produce, or are held for the production of, “passive income.” For purposes of these tests, “passiveincome” includes dividends, interest, gains from the sale or exchange of investment property, and rents and royalties other than rents androyalties that are received from unrelated parties in connection with the active conduct of a trade or business. For purposes of these tests,income derived from the performance of services does not constitute “passive income.” U.S. unitholders of a PFIC are subject to adisadvantageous U.S. federal income tax regime with respect to the income derived by the PFIC, certain distributions they receive from thePFIC, and the gain, if any, they derive from the sale or other disposition of their interests in the PFIC, unless the U.S. unitholders make certainelections.Based on our current and projected method of operation, we believe that we were not a PFIC for any prior taxable year, and we expectthat we will not be treated as a PFIC for the current or any future taxable year. We believe that more than 25% of our gross income for eachtaxable year was or will be non-passive income, and more than 50% of the average value of our assets for each such year was or will be heldfor the production of non-passive income. This belief is based on certain valuations and projections regarding our income and assets, and itsvalidity is based on the accuracy of such valuations and projections. While we believe these valuations and projections to be accurate, theshipping market is volatile, and no assurance can be given that they will continue to be accurate at any time in the future. Table of Contents40Moreover, there are legal uncertainties involved in determining whether the income derived from time-chartering activities constitutesrental income or income derived from the performance of services. In Tidewater Inc. v. United States, 565 F.3d 299 (5th Cir. 2009), theUnited States Court of Appeals for the Fifth Circuit (the “Fifth Circuit”) held that income derived from certain time-chartering activitiesshould be treated as rental income rather than services income for purposes of a provision of the Internal Revenue Code of 1986, as amended(the “Code”), relating to foreign sales corporations. In that case, the Fifth Circuit did not address the definition of passive income or the PFICrules; however, the reasoning of the case could have implications as to how the income from a time charter would be classified under suchrules. If the reasoning of this case were extended to the PFIC context, the gross income we derive or are deemed to derive from our time-chartering activities may be treated as rental income, and we would likely be treated as a PFIC. In published guidance, the Internal RevenueService (the “IRS”) stated that it disagreed with the holding in Tidewater and specified that time charters similar to those at issue in the caseshould be treated as service contracts. We have not sought, and we do not expect to seek, an IRS ruling on the treatment of income generatedfrom our time-chartering activities. As a result, the IRS or a court could disagree with our position. No assurance can be given that this resultwill not occur. In addition, although we intend to conduct our affairs in a manner to avoid, to the extent possible, being classified as a PFICwith respect to any taxable year, we cannot assure you that the nature of our operations will not change in the future, or that we will not be aPFIC in the future. If the IRS were to find that we are or have been a PFIC for any taxable year (and regardless of whether we remain a PFICfor any subsequent taxable year), our U.S. unitholders would face adverse U.S. federal income tax consequences. Please read “Item 10.Additional Information—Taxation—U.S. Federal Income Taxation of U.S. Holders—PFIC Status and Significant Tax Consequences” for amore detailed discussion of the U.S. federal income tax consequences to U.S. unitholders if we are treated as a PFIC.We may have to pay tax on U.S. source income, which would reduce our cash flow.Under the Code, U.S. source gross transportation income generally is subject to a 4% U.S. federal income tax without allowance fordeduction of expenses, unless an exemption from tax applies under a tax treaty or Section 883 of the Code and the Treasury Regulationspromulgated thereunder. U.S. source gross transportation income consists of 50% of the gross shipping income that is attributable totransportation that begins or ends, but that does not both begin and end, in the United States.We expect that our vessel-owning subsidiaries will qualify for an exemption from U.S. tax on any U.S. source gross transportationincome under the Convention Between the United States of America and the Kingdom of Norway with Respect to Taxes on Income andProperty (the “U.S.-Norway Tax Treaty”), and we intend to take this position for U.S. federal income tax purposes. However, if we acquireinterests in vessel-owning subsidiaries in the future that are not Norwegian residents for purposes of the U.S.-Norway Tax Treaty, U.S. sourcegross transportation income earned by those subsidiaries would generally be subject to a 4% U.S. federal income tax unless the exemptionunder Section 883 of the Code applied. In general, the Section 883 exemption provides that if a non-U.S. corporation satisfies therequirements of Section 883 of the Code and the Treasury Regulations thereunder, it will not be subject to the 4% U.S. federal income taxreferenced above on its U.S. source gross transportation income. The Section 883 exemption does not apply to income attributable totransportation that begins and ends in the United States.The vessels in our fleet do not currently engage in transportation that begins and ends in the United States, and we do not expect that oursubsidiaries will in the future earn income from such transportation. If, notwithstanding this expectation, our subsidiaries earn income in thefuture from transportation that begins and ends in the United States, that income may not be exempt from U.S. federal income tax underSection 883 of the Code and may not be exempt from U.S. federal income tax under the U.S.-Norway Tax Treaty and therefore may be subjectto net income tax in the United States (currently at a 21% rate, plus branch profits tax at a rate of 30% (unless reduced or eliminated under anincome tax treaty)).The imposition of U.S. federal income tax on our income could have a negative effect on our business and would result in decreasedearnings available for distribution to our unitholders. Table of Contents41Our unitholders may be subject to income tax in one or more non-U.S. jurisdictions as a result of owning our common units if, under thelaws of any such jurisdiction, we are considered to be carrying on business there. Such laws may require our unitholders to file a taxreturn with, and pay taxes to, those jurisdictions.We conduct our affairs and cause each of our subsidiaries to operate its business in a manner that minimizes income taxes imposed uponus and our subsidiaries. Furthermore, we conduct our affairs and cause each of our subsidiaries to operate its business in a manner thatminimizes the risk that unitholders may be treated as having a permanent establishment or taxable presence in a jurisdiction where we or oursubsidiaries conduct activities simply by virtue of their ownership of our common units. However, because we are organized as a partnership,there is a risk in some jurisdictions, including Norway and the United Kingdom, that our activities or the activities of our subsidiaries may riseto the level of a taxable presence that is attributed to our unitholders for tax purposes. We obtained confirmation from the United KingdomHM Revenue & Customs that unitholders should not be treated as trading in the United Kingdom merely by virtue of their ownership of ourcommon units. If our unitholders are attributed such a taxable presence in a jurisdiction, our unitholders may be required to file a tax returnwith, and to pay tax in, that jurisdiction based on our unitholders’ allocable share of any identifiable taxable income. In addition, we may berequired to obtain information from our unitholders in the event a tax authority (including in the United Kingdom) requires such informationto submit a tax return. We may be required to reduce distributions to our unitholders on account of any tax withholding obligations imposedupon us by that jurisdiction in respect of such allocation to our unitholders. The United States generally will not allow a tax credit for anyforeign income taxes that our unitholders directly or indirectly incur by virtue of an investment in us.Item 4. Information on the PartnershipA. History and Development of the PartnershipGeneralKNOT Offshore Partners LP is a publicly traded limited partnership formed on February 21, 2013 to own, operate and acquire shuttletankers under long-term charters, which we define as charters of five years or more. On April 18, 2013, we completed our initial publicoffering (“IPO”) of 8,567,500 common units. In connection with our IPO, through KNOT UK, a 100% owned limited liability companyformed under the laws of the Marshall Islands, the Partnership acquired a 100% ownership interest in KNOT Shuttle Tankers AS, whichowned (1) 100% of Knutsen Shuttle Tankers XII KS, the then owner of the Recife Knutsen and the Fortaleza Knutsen, (2) 100% of KnutsenShuttle Tankers XII AS, the general partner of Knutsen Shuttle Tankers XII KS, and (3) the Windsor Knutsen and the Bodil Knutsen and all oftheir related charters, inventory and long-term debt. In establishing the new KNOT Shuttle Tankers AS structure, KNOT formed three newNorwegian subsidiaries, which acquired 90% of Knutsen Shuttle Tankers XII KS, 100% of the Windsor Knutsen and 100% of the BodilKnutsen, respectively.On August 1, 2013, we acquired Knutsen Shuttle Tankers 13 AS, the company that owns and operates the shuttle tanker, the CarmenKnutsen, from KNOT.In June and July 2014, we sold an aggregate of 5,240,000 common units in an underwritten public offering and used a portion of theproceeds to fund the acquisition from KNOT of Knutsen Shuttle Tankers 14 AS and Knutsen Shuttle Tankers 15 AS, the companies that ownthe Hilda Knutsen and the Torill Knutsen, respectively, which closed on June 30, 2014.On December 15, 2014, we acquired KNOT Shuttle Tankers 20 AS, the company that owns the shuttle tanker, the Dan Cisne, fromKNOT.On June 2, 2015, we sold 5,000,000 common units in an underwritten public offering and used a portion of the net proceeds to fund theacquisition from KNOT of KNOT Shuttle Tankers 21 AS, the company that owns the shuttle tanker, the Dan Sabia, which closed on June 15,2015.On October 15, 2015, we acquired Knutsen NYK Shuttle Tankers 16 AS, the company that owns the shuttle tanker, the Ingrid Knutsen,from KNOT.On December 1, 2016, we acquired Knutsen Shuttle Tankers 19 AS, the company that owns the shuttle tanker, the Raquel Knutsen, fromKNOT. Table of Contents42On January 10, 2017, we sold 2,500,000 common units in an underwritten public offering, raising approximately $54.9 million in netproceeds.On February 2, 2017, we issued and sold in a private placement 2,083,333 Series A Preferred Units at a price of $24.00 per unit, raisingapproximately $48.6 million in net proceeds.On March 1, 2017, we acquired KNOT Shuttle Tankers 24 AS, the company that owns the shuttle tanker, the Tordis Knutsen, fromKNOT.On June 1, 2017, we acquired KNOT Shuttle Tankers 25 AS, the company that owns the shuttle tanker, the Vigdis Knutsen, from KNOT.On June 30, 2017, we issued and sold in a second private placement 1,666,667 additional Series A Preferred Units at a price of $24.00 perunit, raising approximately $38.9 million in net proceeds.On September 30, 2017, we acquired KNOT Shuttle Tankers 26 AS, the company that owns the shuttle tanker, the Lena Knutsen, fromKNOT.On November 9, 2017, we sold 3,000,000 common units in an underwritten public offering. In connection with the offering, our generalpartner contributed $1.2 million to us to maintain its 1.85% general partner interest. The total net proceeds from the offering and the generalpartner contribution were $66.0 million.On December 15, 2017, we acquired KNOT Shuttle Tankers 32 AS, the company that owns the shuttle tanker, the Brasil Knutsen, fromKNOT.On March 1, 2018, we acquired KNOT Shuttle Tankers 30 AS, the company that owns the shuttle tanker, the Anna Knutsen, from KNOT.On December 31, 2020, we acquired KNOT Shuttle Tankers 34 AS, the company that owns the shuttle tanker, the Tove Knutsen, fromKNOT.On September 10, 2021, KNOT contributed to the Partnership all of KNOT’s incentive distribution rights in exchange for the issuance bythe Partnership to KNOT of 673,080 common units and 673,080 Class B Units, whereupon the incentive distribution rights were cancelled.On July 1, 2022, we acquired KNOT Shuttle Tankers 35 AS, the company that owns the shuttle tanker, the Synnøve Knutsen, fromKNOT.For more information regarding recent developments, please see “Item 5. Operating and Financial Review and Prospects—SignificantDevelopments in 2023 and Early 2024.”As of April 11, 2024, we had a fleet of eighteen shuttle tankers.We were formed under the law of the Marshall Islands and maintain our principal place of business at 2 Queen’s Cross, Aberdeen,AB15 4YB, United Kingdom. Our telephone number at that address is +44 (0) 1224 618420. Our agent for service of process in theUnited States is Puglisi & Associates, and its address is 850 Library Avenue, Suite 204, Newark, Delaware 19711.Capital ExpendituresWe reserve cash from operations for future maintenance capital expenditures, working capital and other matters. Table of Contents43We have incurred capital expenditures, primarily on drydocks for our vessels, in the years ended December 31, 2021, 2022 and 2023 of$4.2 million, $17.6 million and $19.4 million, respectively. As of April 11, 2024, there are no principal capital expenditures currently inprogress, however there is the potential for the expenditure of approximately $1.2 million on upgrades to the Dan Cisne to fulfill requirementsto operate as shuttle tanker in the North Sea.Access to InformationThe SEC maintains a website on the Internet that contains reports, proxy, information statements and other information electronicallyfiled via the SEC’s Electronic Data Gathering, Analysis, and Retrieval system, which may be accessed at the SEC’s website at www.sec.gov.We maintain a website at www.knotoffshorepartners.com. The information on our website is not part of this Annual Report.B. Business OverviewGeneralWe were formed to own and operate shuttle tankers, initially and wherever possible, under long-term charters. Our primary businessobjective is to generate stable cash flows and provide a sustainable quarterly distribution per unit to our unitholders. Where possible, ourfurther objective is to grow our business through accretive acquisitions of shuttle tankers and by chartering those vessels pursuant to profitablecharters with high quality customers. The vessels in our current fleet are chartered to Equinor, Transpetro, Repsol, Shell, TotalEnergies,Petrorio Luxembourg Holding S.A.R.L. (“Petrorio”), Eni Trading and Shipping S.p.A. (“Eni”) and KNOT, and our charters have an averageremaining term excluding options of 2.0 years as of December 31, 2023, with the charterers of the Partnership’s vessels having options toextend their charters by an additional 2.1 years on average.We intend to leverage the relationships, expertise and reputation of KNOT, a leading independent owner and operator of shuttle tankers,to pursue potential growth opportunities and to attract and retain high-quality, creditworthy customers. As of April 11, 2024, KNOT and ourgeneral partner owned our general partner interest, all our Class B Units and 28.6% of our common units. KNOT intends to utilize us as itsprimary growth vehicle to pursue the acquisition of long-term, stable cash-flow-generating shuttle tankers. Table of Contents44Business StrategiesOur primary business objective is to generate stable cash flows and provide a sustainable quarterly distribution per unit to our unitholdersby executing the following strategies:●Manage our fleet and deepen our customer relationships to continue to provide a stable base of cash flows. We target stablecash flows by focusing on strong customer relationships and actively seeking the extension and renewal of existing charters inaddition to new opportunities to serve our customers. KNOT charters its current fleet to a number of the world’s leading energycompanies. We believe the close relationships that KNOT has with these companies will provide attractive opportunities for us.We continue to incorporate safety, health, security and environmental stewardship into all aspects of vessel design and operationin order to satisfy our customers and comply with national and international rules and regulations.●Pursue strategic and accretive acquisitions of shuttle tankers on long-term, fixed-rate charters. We seek to leverage ourrelationship with KNOT to make strategic and accretive acquisitions. During the term of the Omnibus Agreement, we have theopportunity to purchase from KNOT any newbuild under a long-term charter or existing shuttle tanker in the KNOT fleet thatenters into a long-term charter.●Expand global operations in high-growth regions. We seek to expand in proven areas of offshore production, such as the NorthSea and Brazil, and in new production areas as they are developed. We believe that KNOT’s leading market position,operational expertise and strong customer relationships will enable us to have early access to new production projectsworldwide.We can provide no assurance, however, that we will be able to implement our business strategies described above. For further discussionof the risks that we face, please read “Item 3. Key Information—Risk Factors.” Table of Contents45Shuttle Tanker MarketA shuttle tanker is a specialized vessel designed to transport crude oil and condensates from offshore oil field installations to onshoreterminals and refineries. Shuttle tankers are equipped with sophisticated loading systems and dynamic positioning systems that allow thevessels to load cargo safely and reliably from oil field installations, even in harsh weather conditions.Shuttle tankers are often described as “floating pipelines,” because these vessels typically shuttle oil from offshore installations to onshorefacilities in much the same way a pipeline would transport oil along the ocean floor. Shuttle tankers are typically purpose-built but can beconverted from existing conventional oil tankers after a substantial upgrade and investment in equipment.The advantages of shuttle tankers as compared to pipelines include:●the use of shuttle tankers is a more flexible option than pipelines for the transportation of oil from the oil field to onshoreterminals and provides destination flexibility for customers;●shuttle tankers provide a more flexible solution to changing production profiles and abandonment as a pipeline has a fixedcapacity, whereas shuttle tanker capacity may be adjusted through frequency of calls or number of vessels serving a field;●shuttle tanker operators may provide back-up capacity during times when existing transportation infrastructure is closed formaintenance or otherwise unavailable, which would enable uninterrupted production;●shuttle tankers typically require less significant up-front investment than pipelines; and●shuttle tankers provide customers the benefit of purchasing unblended crude qualities, whereas pipelines usually provide a blendof different crude qualities as several oilfields may be connected to the same pipeline. A shuttle tanker may load at several fieldsduring one single voyage, but oil from different fields may be kept separated in different compartments onboard.Shuttle tankers primarily differ from conventional oil tankers based on two significant features. First, shuttle tankers are fitted withdynamic position-keeping equipment enabling them to remain in a position without the assistance of tugs or mooring to installations. Second,shuttle tankers are equipped with bow-loading equipment and, in some cases, also fitted with equipment for submerged turret loading.Conventional oil tankers load from an offshore field installation usually through a taut hawser (mooring line onboard the discharging unit)operation and/or with tug assistance. In certain cases, dedicated shuttle tanker newbuilds are required to service the specific requirements ofoil fields and installations. Table of Contents46Our FleetThe following table provides information about the eighteen shuttle tankers in our fleet as of April 11, 2024:Current CapacityOperatingCharter Shuttle Tanker (dwt) Built Region Type Charterer Term Fortaleza Knutsen 106,316 2011 Brazil Time charter Transpetro 2026(1)Recife Knutsen 105,928 2011 Brazil Time charter Transpetro 2026(2)Bodil Knutsen 157,644 2011 Brazil Time Charter Equinor 2026(3)Windsor Knutsen 162,362 2007 Brazil Time Charter Shell 2025(4)Carmen Knutsen 157,000 2013 Brazil Time Charter Repsol 2025(5)Hilda Knutsen 123,000 2013 North Sea Time Charter Knutsen Shuttle Tankers Pool AS 2025(6)Torill Knutsen 123,000 2013 North Sea Time Charter Knutsen Shuttle Tankers Pool AS 2025(7)Dan Cisne 59,000 2011 Brazil Spot market (8)Dan Sabia 59,000 2012 Brazil Bareboat charter Transpetro 2024(9)Ingrid Knutsen 112,000 2013 North Sea Time Charter Eni 2027(10)Raquel Knutsen 152,000 2015 Brazil Time Charter Repsol 2025(11)Tordis Knutsen 156,000 2016 Brazil Time Charter Shell 2027(12)Vigdis Knutsen 156,000 2017 Brazil Time Charter Shell 2027(12)Lena Knutsen 156,000 2017 Brazil Time Charter Shell 2027(12)Brasil Knutsen 154,000 2013 Brazil Time Charter Petrorio 2025(13)Anna Knutsen 152,000 2017 Brazil Time Charter TotalEnergies 2026(14)Tove Knutsen 153,0002020BrazilTime CharterEquinor2027(15)Synnøve Knutsen 153,0002020BrazilTime CharterEquinor2027(16)(1)The Fortaleza Knutsen is operating under a time charter contract with Transpetro that expires in March 2026. There is no charterer’soption to extend this charter.(2)The Recife Knutsen is operating under time charter contract with Transpetro that expires in August 2026. There is no charterer’s option toextend this charter.(3)The Bodil Knutsen is currently operating under a time charter contract with Equinor that expires in March 2026, with options for thecharterer to extend the charter by two further one-year periods.(4)The Windsor Knutsen is currently operating under a time charter contract with Shell which expires in March 2025. The vessel willcommence on a new time charter contract with an oil major in the first half of 2025 for a fixed period of two years.(5)Customer has the option to extend the current charter of the Carmen Knutsen for up to one year.(6)The Hilda Knutsen is currently operating under a 30-days rolling time charter contract with Knutsen Shuttle Tankers Pool AS, whichexpires in January 2025 unless terminated by either party on giving not less than 30 days’ notice.(7)The Torill Knutsen is currently operating under a 30-days rolling time charter contract with Knutsen Shuttle Tankers Pool AS, whichexpires in January 2025 unless terminated by either party on giving not less than 30 days notice.(8)The Dan Cisne is being assessed for shuttle tanker operation in the North Sea and has also been deployed on short-term conventionaltanker contracts.(9)The Dan Sabia is currently operating on a bareboat contract with a Transpetro, which expires in June 2024.(10)On March 28, 2024 the Ingrid Knutsen was redelivered from Altera, following which she has worked in the conventional tanker market.While she is due for delivery to Eni during April 2024 on three-year time charter contract, it is possible that commercial terms no lessfavourable to the Partnership may be agreed for an alternative delivery later in 2024. Table of Contents47(11)Customer has the option to extend the charter for the Raquel Knutsen for up to one three-year period and one two-year period.(12)The Tordis Knutsen, Lena Knutsen and Vigdis Knutsen are currently operating under time charters with Shell that expire in July 2027,September 2027 and March 2027, respectively.(13)The Brasil Knutsen is operating under a time charter contract with Petrorio that expires on or around May 2025, with two one-monthoptions. The vessel will commence on a new time charter contract with Equinor in the third quarter of 2025 for a fixed period of twoyears, with options for the charterer to extend the charter by two further one-year periods.(14)The Anna Knutsen is operating under a time charter contract with TotalEnergies that expires in April 2026, with TotalEnergies having anoption to extend the charter for one one-year period.(15)The Tove Knutsen is operating under a time charter contract with Equinor that expires in November 2027, with Equinor having options toextend the charter by up to thirteen further years.(16)The Synnøve Knutsen is operating under a time charter contract with Equinor that expires in February 2027, with Equinor having optionsto extend the charter by up to fifteen further years.CustomersFor the year ended December 31, 2023, subsidiaries of KNOT, Shell, Equinor, Repsol, TotalEnergies and Transpetro accounted forapproximately 10%, 12%, 13%, 13%, 14% and 18%, respectively, of our revenues. Altera, China Offshore Oil, Petrogal, Petrorio and Galpaccounted for our remaining revenues.ChartersWe generate revenues by charging customers for the hire of our vessels and for services related to the loading, transportation anddischarge of their crude oil using the vessels in our fleet. We mainly provide all of these services under time charters and bareboat charters,however, some of our vessels operated on spot voyages in 2023 and 2022.As of April 11, 2024, sixteen of our shuttle tankers are chartered under time charters, one of our shuttle tankers is chartered under abareboat charter and one is available to the spot market.A time charter is a contract for the use of a specified vessel for a fixed period of time at a specified daily rate. Under time charters, theshipowner is responsible for providing crewing and other vessel operating services, the cost of which is included in the daily rate, while thecustomer is responsible for substantially all of the voyage expenses. A bareboat charter is a contract for the use of a specified vessel for afixed period of time at a specified daily or annual rate. Under bareboat charters, the shipowner is not responsible for providing crewing orother operational services, while the customer is responsible for all vessel operating expenses and voyage expenses. In addition, bareboatcharters also provide that the shipowner is responsible for repairs or renewals occasioned by latent defects in the vessel existing at the time ofdelivery, provided such defects have manifested themselves within 18 months after delivery. However, under bareboat charters, the customeris responsible for ordinary repair and maintenance, including drydocking. A spot charter or single voyage charter is a contract whereby thecharterer is entitled to use the vessel to perform transportation services between specific geographical locations, typically at a pre-agreedfreight rate. Table of Contents48Initial Term; ExtensionsThe initial term for a time charter or bareboat charter commences upon the vessel’s delivery to the customer. Our time charters ofteninclude options, exercisable by the customer, to extend the charter’s initial term. Under the time charters, the customer may also extend theterm for periods in which the vessel is off-hire, as described below. Customers under each of our time charters and bareboat charters haverights to terminate the charter prior to expiration of the original or any extended term in specified circumstances (see also “—Termination”below).Hire RateHire rate refers to the basic payment from the customer for the use of the vessel. Under our time charters, the majority of hire rate ispayable monthly in advance, in U.S. Dollars. The hire rate payable under our time charters is either a fixed amount for the firm period of thetime charter with escalations to be made in case of option periods or increases annually based on a fixed percentage increase or fixedschedule, in order to enable us to offset expected increases in operating costs. Under our time charters, hire rate payments may be reduced ifthe vessel does not perform to certain of its specifications, such as if the average vessel speed falls below a guaranteed speed or the amount offuel consumed to power the vessel under normal circumstances exceeds a guaranteed amount.The hire rate payable under our bareboat charters is fixed and payable monthly in advance, in U.S. Dollars. The customer is also requiredto maintain minimum levels of insurance to protect the interests of the customer, the shipowner and mortgagees, if any.The hire rate payable under spot charters is fixed in advance at a specified freight rate per ton, in U.S. Dollars. Under a spot charteragreement, voyage expenses are paid by the Partnership as owner of the vessel.Off-hireUnder our time charters, when the vessel is off-hire, or not available for service, the customer generally is not required to pay the hirerate, and the shipowner is responsible for all costs. Prolonged off-hire may lead to a termination of the time charter. A vessel generally will bedeemed off-hire if there is a loss of time due to, among other things:●operational deficiencies; drydocking for repairs, maintenance or inspection; equipment breakdowns; or delays due to accidents,crewing strikes, certain vessel detentions or similar problems; or●the shipowner’s failure to maintain the vessel in compliance with its specifications and contractual standards or to provide therequired crew.Our bareboat charters do not contain provisions for off-hire.Ship Management and MaintenanceUnder our time charters, the shipowner is responsible for the technical management of the vessel and for maintaining the vessel, periodicdrydocking, cleaning and painting and performing work required by regulations. KNOT Management and KNOT Management Denmarkprovide these services to our subsidiaries for all our vessels under time charters. Please read “Item 7. Major Unitholders and Related PartyTransactions—Related Party Transactions.” Under our bareboat charters, the shipowner is not responsible for providing crewing or otheroperational services and the customer is responsible for all vessel operating expenses and voyage expenses. However, as at December 31,2023, Transpetro had elected to subcontract the technical operation and management of the Dan Sabia to an affiliate of KNOT. Table of Contents49TerminationEach of our time charters and bareboat charters terminates automatically if the applicable vessel is lost or missing. In addition, undercertain circumstances, the customer may have an option to terminate the time charter if the vessel is requisitioned by any government for aperiod of time in excess of the time period specified in the time charter or if at any time the shipowner is in default under the time charter.Under the bareboat charters, the charter is deemed terminated as of the date of any compulsory acquisition of the vessel or requisition for titleby any governmental or other competent authority. In addition, the shipowner is generally entitled to suspend performance (but with thecontinuing accrual to its benefit of hire rate payments and default interest) and terminate the charter if the customer defaults in its paymentobligations. Under the time charters and bareboat charters, either party may also terminate the charter in the event of war in specifiedcountries.However, under the bareboat charters, in the event of war, hire shall continue to be paid in accordance with the charter until redelivery. Inaddition, under the bareboat charters, the shipowner has the right to terminate the charter if the customer (1) does not take immediate steps tohave the necessary repairs done within a reasonable time or (2) does not arrange and keep certain insurance.CompetitionThe shuttle tanker industry is capital intensive and operational expertise is critical, which create high barriers to entry. The shuttle tankerindustry is viewed as an integral part of offshore oil production creating a market with few alternative suppliers and therefore a low risk ofsubstitution. A company with a solid track record, knowledge of the market and an experienced, well-trained crew is preferred to a newentrant since the cost and impact of vessel downtime is significant for the customer. Furthermore, the systems in place for operationalprocedures, such as offshore loading and vetting, have significant value when negotiating contracts with new and existing customers.According to Fearnresearch, as of March 1, 2024, there were 74 vessels in the global shuttle tanker fleet plus 11 newbuilds on order.Together KNOT and KNOP are the largest owners of shuttle tankers with 27 shuttle tankers plus 2 newbuilds on order. Altera Shuttle TankersL.L.C. (formerly Teekay Offshore Partners L.P.) is the second largest owner in the shuttle tanker market with 18 shuttle tankers and no newvessels on order. American Eagle Tankers (AET) is the third largest owner of shuttle tankers with 17 vessels and no new vessels on order.Petrobras, which does not own vessels, employs a total of 21 shuttle tankers through long-term bareboat and time charters (and hasagreements to charter 5 newbuilds on order). There are other shuttle tanker owners in the industry, but such owners have a limited fleet sizeand their vessels do not participate or compete in our markets.Classification, Inspection and MaintenanceEvery large, commercial seagoing vessel must be “classed” by a classification society. The classification society certifies that the vessel is“in class,” signifying that the vessel has been built and maintained in accordance with the rules of the classification society. In most cases, theclassification society is authorized by the flag state to certify that the vessels also comply with applicable rules and regulations of the vessel’scountry of registry and the international conventions of which that country is a member. In addition, where surveys are required byinternational conventions and corresponding laws and ordinances of a flag state, the classification society may undertake them on applicationor by official order, acting on behalf of the authorities concerned. The classification society also undertakes on request other surveys andchecks that are required by regulations and requirements of the flag state. These surveys are subject to agreements made in each individualcase and/or to the regulations of the country concerned. For maintenance of the class, regular and extraordinary surveys of hull, machinery,including the electrical plant, and any special equipment classed are required to be performed by the classification society as follows:●Annual Surveys. For seagoing vessels, annual surveys are conducted for the hull and the machinery, including the electrical plantand where applicable for special equipment classed, at intervals of 12 months from the date of commencement of the classperiod indicated in the certificate.●Intermediate Surveys. Extended annual surveys are referred to as intermediate surveys and typically are conducted two and one-half years after commissioning and each class renewal. Intermediate surveys may be carried out on the occasion of the second orthird annual survey. Table of Contents50●Class Renewal Surveys. Class renewal surveys, also known as special surveys, are carried out for the ship’s hull, machinery,including the electrical plant and for any special equipment classed, at the intervals indicated by the character of classificationfor the hull. At the special survey, the vessel is thoroughly examined, including ultrasonic gauging, in order to determine thethickness of the steel structures. Should the thickness be found to be less than class requirements, the classification societywould require steel renewals. Substantial amounts of money may have to be spent for steel renewals to pass a special survey ifthe vessel experiences excessive wear and tear. In lieu of the special survey every five years, a shipowner has the option ofarranging with the classification society for the vessel’s hull or machinery to be on a continuous survey cycle, in which everypart of the vessel would be surveyed within a five-year cycle. At an owner’s application, the surveys required for class renewalmay be split according to an agreed schedule to extend over the entire period of class. This process is referred to as continuousclass renewal and, though we have not exercised this option for our existing vessels, we may do so in the future.All of the vessel’s areas subject to survey as defined by the classification society are required to be surveyed at least once per class period,unless shorter intervals between surveys are prescribed elsewhere. The period between two subsequent surveys of each area must not exceedfive years.A vessel’s underwater parts are required to be inspected every 24 to 36 months by the classification society. Drydocking of vessels isdone, at the minimum, every 60 months until the vessel is 15 years old and every 30 months thereafter. If any defects are found, theclassification surveyor will issue a condition of class that must be rectified by the shipowner.Most insurance underwriters make it a condition for insurance coverage that a vessel be certified as “in class” by a classification societythat is a member of the International Association of Classification Societies. All of our vessels have been awarded International SafetyManagement certification and are certified as being “in class” by DNV GL or ABS, the Norwegian and American classification societies,respectively. All new and secondhand vessels that we purchase must be certified prior to their delivery under the standard purchase contractsand memoranda of agreement. If the vessel is not certified on the date of closing, we will have no obligation to take delivery of the vessel.KNOT, through certain of its subsidiaries, operates as our ship manager, and carries out inspections of the ships on a regular basis, both atsea and while the vessels are in port, as well as carrying out inspections and ship audits to verify conformity with managers’ reports. Theresults of these inspections result in a report containing recommendations for improvements to the overall condition of the vessel,maintenance, safety and crew welfare. Based in part on these evaluations, we create and implement a program of continual maintenance andimprovement for our vessels and their systems.Safety, Management of Ship Operations and AdministrationSafety and environmental compliance is our top operational priority. Our vessels are operated in a manner intended to protect the safetyand health of our employees, the general public and the environment. We actively manage the risks inherent in our business and are committedto eliminating incidents that threaten the safety and integrity of our vessels, such as groundings, fires, collisions and petroleum spills. We arealso committed to reducing emissions, carbon intensity and waste generation. We have established key performance indicators to facilitateregular monitoring of our operational performance. We set targets on an annual basis to drive continuous improvement, and we reviewperformance indicators monthly to determine if remedial action is necessary to reach our targets. KNOT’s shore staff performs a full range oftechnical, commercial and business development services for us. This staff also provides administrative support to our operations in finance,accounting and human resources.KNOT, through certain of its subsidiaries, assists us and our operating subsidiaries in managing our ship operations. DNV GL, aNorwegian classification society, has approved KNOT’s safety management system, which has been implemented on all our ships, ascomplying with the IMO’s International Management Code for the Safe Operation of Ships and Pollution Prevention (the “ISM Code”),International Standards Organization (“ISO”) 9001 for Quality Assurance, ISO 14001 for Environment Management Systems and OHSAS18001, for Occupational Health and Safety Management System. As part of KNOT’s ISM Code compliance, all the vessels’ safetymanagement certificates are being maintained through ongoing internal audits performed by KNOT’s certified internal auditors and externalaudits performed by DNV GL or the respective flag state. Subject to satisfactory completion of these internal and external audits, certificationis valid for five years. Table of Contents51KNOT provides, through certain of its subsidiaries, expertise in various functions critical to the operations of our operating subsidiaries.We believe this arrangement affords a safe, efficient and cost-effective operation. KNOT’s subsidiaries also provide to us access to humanresources, financial and other administrative functions pursuant to technical management agreements. Please read “Item 7. Major Unitholdersand Related Party Transactions—Related Party Transactions—Technical Management Agreements.”Critical ship management functions that are provided by KNOT or its subsidiaries through various of its offices around the world include:●technical management, maintenance and dockings;●crew management;●procurement, purchasing and forwarding logistics;●marine operations;●vetting, oil major and terminal approvals;●shipyard supervision;●insurance; and●financial services.These functions are supported by onboard and onshore systems for maintenance, inventory, purchasing and budget management. Inaddition, KNOT’s day-to-day focus on cost control is applied to our operations. We believe that the adoption of common standards results inoperational efficiencies, including with respect to crew training and vessel management, equipment operation and repair, and spare partsordering.Risk of Loss, Insurance and Risk ManagementThe operation of any vessel, including shuttle tankers, has inherent risks. These risks include mechanical failure, personal injury,collision, property loss, vessel or cargo loss or damage and business interruption due to political circumstances in foreign countries orhostilities. In addition, there is always an inherent possibility of marine disaster, including explosion, spills and other environmental mishaps,and the liabilities arising from owning and operating vessels in international trade. We believe that our present insurance coverage is adequateto protect us against the accident-related risks involved in the conduct of our business and that we maintain appropriate levels ofenvironmental damage and pollution insurance coverage consistent with standard industry practice. However, not all risks can be insured, andthere can be no guarantee that any specific claim will be paid, or that we will always be able to obtain adequate insurance coverage atreasonable rates.We have obtained hull and machinery insurance on all our vessels to insure against marine and war risks, which include the risks ofdamage to our vessels, salvage or towing costs, and also insure against actual or constructive total loss of any of our vessels. However, ourinsurance policies contain deductible amounts for which we are responsible. We have also arranged additional total loss coverage for eachvessel. This coverage, which is called hull interest and freight interest coverage, provides us additional coverage in the event of the total lossor the constructive total loss of a vessel.We have also obtained loss of hire insurance to protect us against loss of income in the event one of our vessels cannot be employed dueto damage that is covered under the terms of our hull and machinery insurance. Under our loss of hire policies, our insurer will pay us the hirerate agreed in respect of each vessel for each day, in excess of a certain number of deductible days, for the time that the vessel is out of serviceas a result of damage, for a maximum of 180 days. The number of deductible days for the vessels in our fleet is 14 days per vessel. Table of Contents52All of our hull and machinery, hull interest and freight interest and loss of hire insurance policies are written on the Norwegian MarineInsurance Plan (“NMIP”), which through the hull and maintenance coverage also offers comprehensive collision liability coverage of up to theinsured hull and maintenance value of the vessel. NMIP is based on an “all risk principle” and offers what is considered to be the mostcomprehensive insurance obtainable in any of the world’s marine markets today. The agreed deductible on each vessel averages $150,000 forthe shuttle tankers in our fleet.Protection and indemnity insurance, which covers our third-party legal liabilities in connection with our shipping activities, is provided bya P&I club. This includes third-party liability and other expenses related to the injury or death of crew members, passengers and other third-party persons, loss or damage to cargo, claims arising from collisions with other vessels or from contact with jetties or wharves and otherdamage to other third-party property, including pollution arising from oil or other substances, and other related costs, including wreckremoval. Subject to the capping discussed below, our coverage, except for pollution, is unlimited.Our current protection and indemnity insurance coverage for pollution is $1 billion per vessel per incident. The 13 P&I clubs thatcomprise the International Group of Protection and Indemnity Clubs insure approximately 90% of the world’s commercial tonnage and haveentered into a pooling agreement to reinsure each association’s liabilities. Each P&I club has capped its exposure in this pooling agreement sothat the maximum claim covered by the pool and its reinsurance would be approximately $1 billion per accident or occurrence. We are amember of Norwegian P&I club Skuld.As a member of these P&I clubs, we are subject to a call for additional premiums based on the clubs’ claims record, as well as the claimsrecord of all other members of the P&I clubs comprising the International Group. However, our P&I clubs have reinsured the risk ofadditional premium calls to limit our additional exposure. This reinsurance is subject to a cap, and there is the risk that the full amount of theadditional call would not be covered by this reinsurance.The insurers providing the covers for hull and machinery, hull interest and freight interest, protection and indemnity and loss of hireinsurances have confirmed that they will consider the shuttle tankers as vessels for the purpose of providing insurance.We use in our operations KNOT’s risk management program that includes, among other things, risk analysis tools, maintenance andassessment programs, a seafarers competence training program, seafarers workshops and membership in emergency response organizations.We benefit from KNOT’s commitment to safety and environmental protection as certain of its subsidiaries assist us in managing our vesseloperations.KNOT has achieved certification under the standards reflected in ISO 9001 for quality assurance, ISO 14001 for environmentmanagement systems and the ISM Code on a fully integrated basis.Environmental and Other RegulationGeneralOur business and the operation of our vessels are significantly affected by international conventions and national, state and local laws andregulations in the jurisdictions in which our vessels operate, as well as in the country or countries of their registration. Because theseconventions, laws and regulations change frequently, we cannot predict the ultimate cost of compliance or their impact on the resale price oruseful life of our vessels. While we believe that we are in substantial compliance with the current environmental laws and regulations thatapply to our operations, there is no assurance that such compliance or compliance with amended or newly adopted laws and regulations can bemaintained in the future. Additional conventions, laws, and regulations may be adopted that could limit our ability to do business or increasethe cost of our doing business and that may materially adversely affect our operations. We are required by various governmental and quasi-governmental agencies to obtain permits, licenses and certificates with respect to our operations. Subject to the discussion below and to thefact that the kinds of permits, licenses and certificates required for the operations of the vessels we own depend on a number of factors, webelieve that we will be able to continue to obtain all permits, licenses and certificates material to the conduct of our operations. Table of Contents53International Maritime OrganizationThe IMO is the United Nations’ agency responsible for developing measures to improve the safety and security of international shippingand to prevent marine pollution from ships. IMO regulations relating to pollution prevention for oil tankers have been adopted by many of thejurisdictions in which our tanker fleet operates. Under IMO regulations and subject to limited exceptions, a tanker must be of double-hullconstruction, a mid-deck design with double-side construction or another approved design ensuring the same level of protection against oilpollution. All of our tankers are of double-hull construction.Many countries, but not the United States, have ratified and follow the liability regime adopted by the IMO and set out in theInternational Convention on Civil Liability for Oil Pollution Damage, 1969, as updated by the 1992 Protocol (the “CLC”). Under thisconvention, a vessel’s registered owner is strictly liable for pollution damage caused in the territorial waters of a contracting state by dischargeof persistent oil (e.g. crude oil, fuel oil, heavy diesel oil or lubricating oil), subject to certain defenses. The right to limit liability to specifiedamounts that are periodically revised is forfeited under the CLC when the spill is caused by the owner’s actual fault or when the spill is causedby the owner’s intentional or reckless conduct. Vessels trading to contracting states must provide evidence of insurance covering the limitedliability of the owner. In jurisdictions where the CLC has not been adopted, various legislative regimes or common law govern, and liability isimposed either on the basis of fault or in a manner similar to the CLC. IMO regulations also include SOLAS, including amendments toSOLAS implementing the International Security Code for Ports and Ships (the “ISPS”), the ISM Code and the International Convention onLoad Lines of 1966. The IMO Maritime Safety Committee (“MSC”) has also published guidelines for vessels with dynamic positioningsystems, which apply to shuttle tankers. SOLAS provides rules for the construction of, and equipment required for, commercial vessels andincludes regulations for safe operation. Flag states that have ratified the CLC generally utilize the classification societies, which haveincorporated SOLAS requirements into their class rules, to undertake surveys to confirm compliance.SOLAS and other IMO regulations concerning safety, including those relating to treaties on training of shipboard personnel, lifesavingappliances, radio equipment and the global maritime distress and safety system, are applicable to our operations. Non-compliance with IMOregulations, including SOLAS, the ISM Code, and the ISPS, or the requirements for shuttle tankers under their flag regulations, may subjectus to increased liability or penalties, may lead to decreases in available insurance coverage for affected vessels and may result in the denial ofaccess to or detention in some ports. For example, the U.S. Coast Guard, the United Kingdom Maritime and Coastguard Agency and EUauthorities have indicated that vessels not in compliance with the ISM Code will be prohibited from trading in U.S., the United Kingdom andEU ports.The requirements contained in the ISM Code govern our operations. Among other requirements, the ISM Code requires vessel operatorsto obtain a safety management certification for each vessel they manage, evidencing the shipowner’s development and maintenance of anextensive safety management system. In 2017, the MSC adopted Resolution MSC.428(98), Maritime Cyber Risk Management in SafetyManagement Systems, embracing guidelines on maritime cyber risk management approved by the MSC in 2017, affirming its view that theISM Code requires mitigation of cyber risk as part of the safety management system, and effectively providing that that a vessel’s safetymanagement system must account for cyber risks in compliance with the ISM Code no later than the vessel’s first annual complianceverification after January 1, 2021. Each of the existing vessels in our fleet is currently ISM Code-certified, and we expect to obtain safetymanagement certificates for each newbuild upon delivery.The International Labour Organization (the “ILO”) is a specialized agency of the United Nations with headquarters in Geneva,Switzerland. The ILO has adopted the Maritime Labor Convention 2006 (the “MLC 2006”) to improve safety onboard merchant vessels,which came into force of August 20, 2013. A Maritime Labor Certificate and a Declaration of Maritime Labor Compliance is required toensure compliance with the MLC 2006 for all ships above 500 gross tons in international trade. Each of the existing vessels in our fleet iscurrently MLC 2006-certified, and we expect to obtain MLC 2006 certificates for each newbuild upon delivery. Table of Contents54The IMO has adopted the International Convention for the Prevention of Pollution from Ships (“MARPOL”), including Annex VI toMARPOL that sets limits on sulfur dioxide and nitrogen oxide emissions from ship exhausts and prohibits deliberate emissions of ozonedepleting substances. Annex VI applies to all ships and, among other things, imposes a global cap on the sulfur content of fuel oil and allowsfor specialized areas to be established internationally with even more stringent controls on sulfur emissions. For vessels 400 gross tons andgreater, platforms and drilling rigs, Annex VI imposes various survey and air pollution prevention certification requirements. Moreover,Annex VI regulations impose progressively stricter limitations on sulfur emissions from ships. As of January 2, 2015, these limitationsrequired that fuels of vessels in covered Emission Control Areas (“ECAs”), including the North Sea ECA and the Baltic Sea ECA, contain nomore than 0.1% sulfur. For non-ECA areas, the capped sulfur limitations decreased progressively until they reached the global limit of 0.5%applicable on and after January 1, 2020 (generally referred to as IMO 2020). In December 2022, the MEPC adopted amendments toMARPOL Annex VI establishing a Mediterranean ECA for sulfur that enters into force on May 1, 2024, with a 12-month grace period. As aresult, effective May 1, 2025, fuels of vessels in the Mediterranean ECA will need to meet the more stringent 0.1% sulfur limit. MARPOLAnnex VI also establishes three tiers of stringent nitrogen oxide emissions standards for new marine engines, depending on their date ofinstallation. All of our vessels are in compliance with these requirements.In addition, there are several other regulatory requirements to use low sulfur fuel or restrict or regulate emissions from vessels. The EUDirective 33/2005 requiring the use of low sulfur fuel came into force on January 1, 2010. Under this legislation, vessels are required to burnfuel with sulfur content below 0.1% while berthed or anchored in an EU port. As of January 1, 2014, the California Air Resources Board’sOcean-Going Vessel Fuel (“OGV”) Regulation requires vessels to burn fuel with 0.1% sulfur content or less within 24 nautical miles ofCalifornia. Currently, the only grade of fuel meeting 0.1% sulfur content requirement is low sulfur marine gas oil. All of our vessels are ableto comply with applicable low sulfur fuel requirements.The IMO has negotiated international conventions that impose liability for oil pollution and other environmental harms in internationalwaters and the territorial waters of the signatory to such conventions such as the International Convention for the Control and Management ofShips’ Ballast Water and Sediments (the “BWM Convention”). The BWM Convention’s implementing regulations call for a phasedintroduction of mandatory ballast water exchange requirements (which began in 2009), to be replaced in time with a requirement formandatory ballast water treatment. The BWM Convention entered into force on September 8, 2017. Brazil and Norway ratified the BWMConvention prior to its entry into force. The United Kingdom ratified the BWM Convention on May 26, 2022 and it entered into force in theUnited Kingdom on August 26, 2022. Although United States has not ratified the BWM Convention, it is implementing ballast watermanagement requirements. As referenced below, the U.S. Coast Guard issued ballast water management rules on March 23, 2012. Under therequirements of the BWM Convention for units with ballast water capacity more than 5,000 cubic meters that were constructed in 2011 orbefore, ballast water management exchange or treatment were accepted until 2016. From 2016 (or not later than the first intermediate orrenewal survey after 2016), only ballast water treatment will be accepted by the BWM Convention. We have installed ballast water treatmentsystems on all our vessels to comply with the requirements of the BWM Convention.The International Convention on Civil Liability for Bunker Oil Pollution 2001 (the “Bunker Convention”) provides a liability,compensation and compulsory insurance system to protect and reimburse the victims of oil pollution damage in jurisdictional waters ofratifying states caused by discharges of bunker fuel. The Bunker Convention became effective in 2008 and imposes strict liability onshipowners for certain pollution damage. Registered owners of any seagoing vessel and seaborne craft over 1,000 gross tonnage, of any typewhatsoever, and registered in a signatory state (a “State Party”), or entering or leaving a port in the territory of a State Party, will be requiredto maintain insurance that meets the requirements of the Bunker Convention and to obtain a certificate issued by a State Party attesting thatsuch insurance is in force. The state-issued certificate must be carried onboard at all times. P&I clubs in the International Group issue therequired Bunkers Convention “Blue Cards” to enable signatory states to issue certificates. All of our vessels have received “Blue Cards” fromtheir P&I club and are in possession of a CLC State-issued certificate attesting that the required insurance coverage is in force.The IMO continues to review and introduce new regulations. It is impossible to predict what additional regulations, if any, may be passedby the IMO and what effect, if any, such regulation may have on our operations. Table of Contents55European Union and United Kingdom Environmental Regulation of VesselsIn waters of the EU, our vessels are subject to EU-level directives implemented by the various nations through laws and regulationsadopting these requirements. These laws and regulations prescribe measures to prevent pollution, protect the environment, support maritimesafety and set out civil and criminal penalties that are being progressively incorporated into domestic legislation. For instance, the EU hasadopted legislation (EU Directive 2009/16/EC) that: bans from EU waters manifestly sub-standard vessels (defined as vessels that have beendetained twice by EU port authorities, in the preceding two years); creates obligations on the part of EU member port states to inspect at least24% of vessels using these ports annually; provides for increased surveillance of vessels posing a high risk to maritime safety or the marineenvironment; and provides the EU with greater authority and control over classification societies, including the ability to seek to suspend orrevoke the authority of negligent societies. If deficiencies are found that are clearly hazardous to safety, health or the environment, the state isrequired to detain the vessel until the deficiencies are addressed. Member states are also required to implement a system of penalties forbreaches of these standards. EU Directive 2009/16/EC introduced a harmonized and coordinated regime for port state control inspections andan on-line register to make public both the poorly performing shipping companies (who will attract more intensive and coordinatedinspections) and those with good records. Like the IMO, the EU adopted regulations that phased out single-hull tankers. All of our tankers aredouble-hulled.Several regulatory requirements to use low sulfur fuel are in force. See discussion of “low sulfur fuel” regulations above.The EU is currently considering other proposals to further regulate vessel operations. We cannot predict what additional legislation orregulations, if any, may be promulgated by the EU or any other country or authority. The trend, however, is towards increasing regulation andour expectation is that requirements will become more extensive and more stringent over time.Although the EU regulations no longer directly apply in the United Kingdom as a consequence of Brexit, the “level playing field”provisions in the United Kingdom/EU Trade and Cooperation Agreement (“TCA”) cover require “non regression” in the level ofenvironmental protection by the United Kingdom from the harmonized standards that were in effect in the EU on December 31, 2020. Thismeans that the United Kingdom should not attempt to undo these standards, but under the TCA harmonization of standards is not required ona going forward basis. The TCA also includes a commitment for the EU and the United Kingdom to cooperate on trade-related aspects ofclimate change and to work with the IMO to achieve greenhouse gas emission reductions and promote low carbon technologies andsustainable transport. The United Kingdom has taken measures to put environmental regulations in place that would affect the shippingindustry. In July 2019, the Department of Transport and the Maritime and Coast Guard Agency published Maritime 2050, a plan for thetransition to zero emissions from shipping by 2050. On September 30, 2021, the Department of Transport adopted regulations amending theMerchant Shipping (Prevention of Air Pollution from Ships) Regulations 2008 to implement air quality measures to control sulfur andnitrogen oxide (SOx and NOx) emissions from ships, including setting the maximum sulfur content of marine fuels used by ships at 0.5% andapplying stricter NOx Tier III limit for new ships operating in the North Sea and English Channel. On February 7, 2022, the United KingdomDepartment for Transport issued a call for feedback on the priorities to be addressed in its development of a long-term low carbon fuelsstrategy for the transport sector and is considering responses received in the drafting of a low carbon fuels strategy. Effective January 1, 2024,UK’s Merchant Shipping (Special Measures to Enhance Maritime Safety) Regulations 2024 took effect, consistent with obligations containedin SOLAS.If more stringent requirements are put in effect in the future in the EU or the United Kingdom, they may require, individually or in theaggregate, significant expenditures and could increase our operating costs, potentially affecting financial performance.North Sea Environmental Regulation of VesselsOur shuttle tanker operations are currently located in the North Sea and Brazil.In addition to the regulations imposed by the IMO those countries having jurisdiction over North Sea areas impose further regulatoryrequirements on operations in those areas, including Maritime and Coastguard Agency regulations in the United Kingdom and NorwegianMaritime Directorate regulations in Norway. These regulatory requirements, together with additional requirements imposed by operators inNorth Sea oil fields, require that we make further expenditures for sophisticated equipment, reporting and redundancy systems on the shuttletankers and for the training of seagoing staff. Additional regulations and requirements may be adopted or imposed that could limit our abilityto do business or further increase the cost of doing business in the North Sea. Table of Contents56In Norway, the Norwegian Pollution Control Authority requires the installation of volatile organic compound emissions (“VOC”) controlequipment, on most shuttle tankers serving the Norwegian continental shelf. The license holders of the oil field are responsible for the costs toensure that shuttle tankers operating in the field are using appropriate VOC control equipment. In recent contracts, the charterers haverequested owners to install such equipment against an increase in the hire rate. We have installed the VOC control equipment required tooperate on the Norwegian continental shelf on each of the Fortaleza Knutsen, the Recife Knutsen, the Windsor Knutsen, the Hilda Knutsen,the Torill Knutsen and the Ingrid Knutsen. We have installed an advanced VOC recovery system on the Bodil Knutsen.Brazilian Environmental Regulation of VesselsIn Brazil, the field operator and in most cases Petrobras where it is involved are required to establish internal procedures to managepollution risks, which must be approved by the competent environmental authority. Brazilian environmental law includes international treatiesand conventions to which Brazil is a party, including MARPOL and the CLC, as well as federal, state and local laws, regulations and permitrequirements related to the protection of health and the environment. The petroleum industry in Brazil is subject to extensive regulations byseveral governmental agencies, including the National Agency of Petroleum, the Brazilian Navy and the Brazilian Institute of theEnvironment and Renewable Natural Resources. Legal obligations also include immediately notifying the competent authorities about anyincident occurring in our vessels that may cause pollution in waters under the national jurisdiction of Brazil, in addition to the adoption ofother required response actions. Failure to comply may subject us to administrative, criminal and civil liability, with strict and joint liability incivil cases. In Brazil, civil liability for environmental pollution aims for the complete recovery of the damage caused to the ecosystem andaffected third parties, regardless of the cost involved.United States Environmental Regulation of VesselsIn the United States, federal and state laws and regulations that require vessel owners and operators to obtain and maintain specifiedpermits or governmental approvals; control the discharge of materials into the environment; remove and cleanup materials that may harm theenvironment; and otherwise comply with regulations intended to protect the environment. Vessel operations are subject to the jurisdiction ofthe U.S. Coast Guard, the National Transportation Safety Board, the U.S. Customs and Border Protection, the Department of Interior, theBureau of Ocean Energy Management, and the Bureau of Safety and Environmental Enforcement, as well as classification societies such asthe American Bureau of Shipping. The United States has enacted an extensive regulatory and liability regime for the protection and cleanup ofthe environment from oil spills, including discharges of oil cargoes, bunker fuels or lubricants, primarily through the Oil Pollution Act of 1990(“OPA 90”) and the Comprehensive Environmental Response, Compensation, and Liability Act (“CERCLA”).OPA 90 and CERCLA. CERCLA applies to the discharge of “hazardous substances” rather than “oil” and imposes strict joint and severalliability upon the owners, operators or bareboat charterers of vessels for cleanup costs and damages arising from discharges of hazardoussubstances. We believe that petroleum products should not be considered hazardous substances under CERCLA, but additives to oil orlubricants used on vessels might fall within its scope.OPA 90 affects all owners, bareboat charterers and operators whose vessels trade to the United States or its territories or possessions orwhose vessels operate in U.S. waters, which include the U.S. territorial sea and 200-mile exclusive economic zone around the United States.Under OPA 90, vessel owners, operators and bareboat charterers are “responsible parties” and are jointly, severally and strictly liable(unless the oil spill results solely from the act or omission of a third party, an act of God or an act of war and the responsible party reports theincident and reasonably cooperates with the appropriate authorities) for all containment and cleanup costs and other damages arising fromdischarges or threatened discharges of oil from their vessels. These other damages are defined broadly to include:●natural resources damages and the related assessment costs;●real and personal property damages;●net loss of taxes, royalties, rents, fees and other lost revenues; Table of Contents57●lost profits or impairment of earning capacity due to property or natural resources damage;●net cost of public services necessitated by a spill response, such as protection from fire, safety or health hazards; and●loss of subsistence use of natural resources.OPA 90 limits the liability of responsible parties in an amount it periodically updates. The liability limits do not apply if the incident wasproximately caused by violation of applicable U.S. federal safety, construction or operating regulations, including IMO conventions to whichthe United States is a signatory, or by the responsible party’s gross negligence or willful misconduct, or if the responsible party fails or refusesto report the incident or to cooperate and assist in connection with the oil removal activities. Liability under CERCLA is also subject to limitsunless the incident is caused by gross negligence, willful misconduct or a violation of certain regulations. We currently maintain for each ofour vessel’s pollution liability coverage in the maximum coverage amount of $1 billion per incident. A catastrophic spill could exceed thecoverage available, which could harm our business, financial condition and results of operations.Under OPA 90, with limited exceptions, all newly built or converted tankers delivered after January 1, 1994 and operating in U.S. watersmust be double-hulled. All of our tankers are double-hulled. OPA 90 also requires owners and operators of vessels to establish and maintainwith the U.S. Coast Guard evidence of financial responsibility in an amount at least equal to the relevant limitation amount for such vesselsunder the statute. The U.S. Coast Guard has implemented regulations requiring that an owner or operator of a fleet of vessels mustdemonstrate evidence of financial responsibility in an amount sufficient to cover the vessel in the fleet having the greatest maximum limitedliability under OPA 90 and CERCLA. Evidence of financial responsibility may be demonstrated by insurance, surety bond, self-insurance,guaranty or an alternate method subject to approval by the U.S. Coast Guard. Under the self-insurance provisions, the shipowner or operatormust have a net worth and working capital, measured in assets located in the United States against liabilities located anywhere in the world,that exceeds the applicable amount of financial responsibility. We have complied with the U.S. Coast Guard regulations by using self-insurance for certain vessels and obtaining financial guaranties from a third party for the remaining vessels. If vessels in our fleet trade to theUnited States in the future, we expect to provide guaranties through self-insurance or obtain guaranties from third-party insurers.OPA 90 and CERCLA permit individual U.S. states to impose their own liability regimes with regard to oil or hazardous substancepollution incidents occurring within their boundaries, and some states have enacted legislation providing for unlimited strict liability for spills.Several coastal states, such as California, Washington and Alaska require state-specific evidence of financial responsibility and vesselresponse plans. We intend to comply with all applicable regulations in the ports where our vessels call.Owners or operators of vessels, including tankers operating in U.S. waters are required to file vessel response plans with the U.S. CoastGuard, and their tankers are required to operate in compliance with their U.S. Coast Guard approved plans. Such response plans must, amongother things:●address a “worst case” scenario and identify and ensure, through contract or other approved means, the availability of necessaryprivate response resources to respond to a “worst case discharge;”●describe crew training and drills; and●identify a qualified individual with full authority to implement removal actions.In addition, we conduct regular oil spill response drills in accordance with the guidelines set out in OPA 90. The U.S. Coast Guard hasannounced it intends to propose similar regulations requiring certain vessels to prepare response plans for the release of hazardous substances.OPA 90 and CERCLA do not preclude claimants from seeking damages resulting from the discharge of oil and hazardous substances underother applicable law, including maritime tort law. The application of this doctrine varies by jurisdiction. Table of Contents58Clean Water Act. The United States Clean Water Act (“CWA”) prohibits the discharge of oil or hazardous substances in United Statesnavigable waters unless authorized by a permit or exemption, and imposes strict liability in the form of penalties for unauthorized discharges.The CWA also imposes substantial liability for the costs of removal, remediation and damages and complements the remedies available underOPA 90 and CERCLA. The U.S. Environmental Protection Agency (the “EPA”) has enacted rules governing the regulation of ballast waterdischarges and other discharges incidental to the normal operation of vessels within U.S. waters. The EPA authorized these incidentaldischarges pursuant to a permit the EPA designated as the Vessel General Permit for Discharges Incidental to the Normal Operation of Vessels(the “VGP”), which incorporated the current U.S. Coast Guard requirements for ballast water management as well as supplemental ballastwater requirements, and includes limits applicable to 26 specific discharge streams, such as deck runoff, bilge water and gray water.The EPA updated the VGP in 2013 to incorporate numeric effluent limits for ballast water expressed as the maximum concentration ofliving organisms in ballast water, as opposed to the prior non-numeric requirements. These requirements correspond with the IMO’srequirements under the BWM Convention, as discussed above. The permit also contains maximum discharge limitations for biocides andresiduals. The numeric effluent limits took effect under a staggered implementation schedule and do not apply to all vessels. Vessels withdeferred deadlines for meeting the numeric standards are required to meet Best Management Practices, which are substantially similar to therequirements under the previous VGP.The VGP includes a tiered requirement for obtaining coverage based on the size of the vessel and the amount of ballast water carried.Vessels that are 300 gross tons or larger and have the capacity to carry more than eight cubic meters of ballast water must submit notices ofintent (“NOIs”) to receive permit coverage between six and nine months after the permit’s issuance date. Vessels that do not need to submitNOIs are automatically authorized under the permit. In December 2018, the Vessel Incidental Discharge Act (“VIDA”) was signed into lawand restructured the EPA and the U.S. Coast Guard programs for regulating incidental discharges from vessels. Rather than requiring CWApermits, the discharges will be regulated under a new CWA Section 312(p) establishing Uniform National Standards for Discharges Incidentalto Normal Operation of Vessels. Under VIDA, VGP provisions and existing U.S. Coast Guard regulations will be phased out over a period ofapproximately four years and replaced with National Standards of Performance (“NSPs”) to be developed by EPA and implemented andenforced by the U.S. Coast Guard. VIDA requires EPA to develop NSPs for approximately 30 discharges by December 2020. The dischargesto be covered are similar to those in 2013 VGP and the NSPs are generally required to be at least as stringent as the requirements of the 2013VGP. On October 26, 2020, EPA issued proposed regulations to establish NSPs, including general discharge standards of performance,covering general operation and maintenance, biofouling management, and oil management, and specific discharge standards applicable tospecified pieces of equipment and systems. On October 18, 2023, EPA issued a supplemental notice of proposed rulemaking that sharedballast water information EPA received from the U.S. Coast Guard after the original rule proposal, supplemented the 2020 rule proposal withregulatory options being considered by EPA for discharges from ballast tanks, hulls and associated niche areas, and graywater systems, andsolicited comments on the additional information presented in the notice for consideration during the rule development. Final regulations areexpected in 2024. The scheduled expiration date of the 2013 VGP was December 18, 2018, but under VIDA the provisions of the VGP willremain in place until the new EPA NSPs and the corresponding U.S. Coast Guard implementation, compliance and enforcement regulationsare in place. VIDA requires the corresponding U.S. Coast Guard regulations to be developed within two years following the adoption of theEPA NSPs.In addition to the requirements in the VGP (to be replaced by the NSPs established under VIDA), vessel owners and operators must meet25 sets of state-specific requirements under the CWA’s § 401 certification process. Because the CWA § 401 process allows tribes and states toimpose their own requirements for vessels operating within their waters, vessels operating in multiple jurisdictions could face potentiallyconflicting conditions specific to each jurisdiction that they travel through.While we do not believe that the costs associated with complying with the existing VGP permits and the NSPs that will be promulgated,including meeting related treatment requirements, will be material, it is difficult to predict the overall impact of CWA requirements on ourbusiness at this stage. In addition, state-specific requirements under the CWA’s § 401 and any similar restrictions enacted in the future couldincrease our costs of operating in the relevant waters. Table of Contents59National Invasive Species Act (“NISA”). In March 2012, the U.S. Coast Guard issued a final rule establishing standards for the allowableconcentration of living organisms in ballast water discharged in U.S. waters and requiring the phase-in of U.S. Coast Guard approved ballastwater management systems. The rule went into effect in June 2012 and set ballast water discharge standards for vessels calling on U.S. portsand intending to discharge ballast water equivalent to those set in IMO’s BWM Convention. The final rule requires that ballast waterdischarge have no more than ten living organisms per milliliter for organisms between ten and 50 micrometers in size. For organisms largerthan 50 micrometers, the discharge can have no more than ten living organisms per cubic meter of discharge. New ships constructed on orafter December 1, 2013 were required to comply with these ballast water treatment standards, with existing ships required to comply by theirfirst drydock after January 1, 2014 or January 1, 2016, depending on size.Clean Air Act. The United States Clean Air Act requires the EPA to promulgate standards applicable to emissions of volatile organiccompounds and other air contaminants. Our vessels are subject to vapor control and recovery requirements for certain cargoes in regulatedport areas and emission standards for so-called “Category 3” marine diesel engines operating in U.S. waters. The marine diesel engineemission standards are equivalent to those adopted set forth in Annex VI to MARPOL. Compliance with these standards may cause us to incurcosts to install control equipment on our vessels in the future.Trends in Environmental Regulation in the United States. Numerous governmental agencies issue regulations to implement and enforcethe laws of the applicable jurisdiction, which often involve lengthy permitting procedures, impose difficult and costly compliance measures,particularly in ecologically sensitive areas, and subject operators to substantial administrative, civil and criminal penalties or may result ininjunctive relief for failure to comply. Some of these laws contain criminal sanctions in addition to civil penalties. Changes in environmentallaws and regulations occur frequently, and any changes that result in more stringent and costly compliance or limit contract drillingopportunities, including changes in response to a serious marine incident that results in significant oil pollution or otherwise causes significantadverse environmental impact, such as the April 2010 Macondo well blowout incident, could adversely affect our financial results. Althoughsignificant capital expenditures may be required to comply with these governmental laws and regulations, such compliance has not materiallyadversely affected our earnings or competitive position. We believe that we are currently in compliance in all material respects with theenvironmental regulations to which we are subject.We may also be affected by or subject to permitting and other requirements under a variety of other environmental laws not discussedabove, such as the Endangered Species Act, Marine Mammal Protection Act and National Environmental Policy Act.Greenhouse Gas RegulationIn February 2005, the Kyoto Protocol to the United Nations Framework Convention on Climate Change (the “Kyoto Protocol”) enteredinto force. Pursuant to the Kyoto Protocol, adopting countries were required to implement national programs to reduce emissions ofgreenhouse gases (“GHGs”). The Kyoto Protocol was effectively replaced by the Paris Agreement. Emissions of greenhouse gases frominternational shipping were not subject to the Kyoto Protocol and currently are not subject to the Paris Agreement.On July 15, 2011, the IMO approved mandatory measures to reduce emissions of greenhouse gases from international shipping. Theamendments to Annex VI to MARPOL for the prevention of air pollution from ships add a new Chapter 4 to Annex VI on energy efficiencyrequiring the Energy Efficiency Design Index (“EEDI”) for new ships, and the Ship Energy Efficiency Management Plan (“SEEMP”) for allships. The regulations apply to all ships of 400 gross tonnage and above and entered into force on January 1, 2013. These rules will likelyaffect the operations of vessels that are registered in countries that are signatories to Annex VI to MARPOL or vessels that call upon portslocated within such countries. The IMO also adopted a mandatory data collection system requirement in October 2016 (“IMO DCS”) thatrequires ships of 5000 gross tonnage and above to record and report their fuel oil consumption, indirectly addressing carbon dioxide emissionsdata. The requirement was entered into force on March 1, 2018. Table of Contents60The IMO is also taking steps toward the development of a market-based mechanism for greenhouse gas emissions from ships. At theOctober 2016 Marine Environmental Protection Committee (“MEPC”) session, the IMO adopted a roadmap for developing a comprehensiveIMO strategy on reduction of GHG emissions. In April 2018, the MEPC adopted an initial strategy designed to reduce GHG emissions fromvessels, including short-term, mid-term and long-term candidate measures with a vision of reducing and phasing out GHG emissions fromvessels as soon as possible in the 21st Century. In June 2021, the MEPC adopted amendments to MARPOL Annex VI that enter into force onNovember 1, 2022 and establish as short-term GHG reduction measures an enforceable regulatory framework to reduce GHG emissions frominternational shipping, consisting of technical and operational carbon reduction measures. These measures include use of an Energy EfficiencyExisting Ship Index (“EEXI”), an operational Carbon Intensity Indicator “CII”) and an enhanced SEEMP to drive reductions in the carbonintensity. A vessel’s attained EEXI will be calculated in accordance with values established based on type and size category, which comparesthe vessels’ energy efficiency to a baseline. A vessel is then required to meet a specific EEXI based on a required reduction factor expressedas a percentage relative to the EEDI baseline. Under the MARPOL VI amendments, vessels with a gross tonnage of 5,000 or greater mustdetermine their required annual operational CII and their annual carbon intensity reduction factor needed to ensure continuous improvementof the vessel’s CII. On an annual basis, the actual annual operational CII achieved would be documented and verified against the vessel’srequired annual operational CII to determine the vessel’s operational carbon intensity rating on a performance level scale of A (majorsuperior) to E (inferior). The performance level would be required to be recorded in the vessel’s SEEMP. A vessel with an E rating, or threeconsecutive years of a D (minor inferior) rating, would be required to submit a corrective action plan showing how the vessel would achieve aC (moderate) rating. The requirements for EEXI and CII certification included in the MARPOL Annex VI amendments took effect January 1,2023, which means the first annual reporting was completed in 2023 and the first rating will be given in 2024. The MEPC regulatory approachis consistent with the IMO’s initial GHG strategy target of a 40% carbon intensity reduction for international shipping by 2030, as comparedto 2008. The initial GHG strategy contemplated the adoption of a revised strategy in 2023. This revised strategy, the 2023 IMO Strategy onReduction of GHG Emissions from Ships (“2023 IMO GHG Strategy”), was adopted by the MEPC on July 7, 2023. The 2023 IMO GHGStrategy includes as a goal attaining net-zero GHG emissions from international shipping by or around 2050, promotes the uptake ofalternative zero and near-zero GHG emissions technologies, fuels and/or energy sources by 2030, and identifies as indicative checkpoints alevel of ambition at least a 20% reduction, compared to 2008, in total annual GHG emissions from international shipping by 2030 and at leasta 70% reduction by 2040, striving for reductions of 30% by 2030 and 80% by 2040. The 2023 IMO GHG Strategy contemplates adoption ofan updated strategy in 2028 and calls for the adoption of mid-term GHG reduction measures by 2025 and the development, finalization andagreement on possible long-term GHG reduction measures as part of the 2028 strategy review.In the United States, the EPA issued an “endangerment finding” regarding greenhouse gases under the Clean Air Act. While this findingin itself does not impose any requirements on our industry, it authorizes the EPA to regulate directly greenhouse gas emissions through a rule-making process. In addition, from time to time climate change initiatives have been or are considered in the United States Congress and byindividual states and may be considered in the future. In June 2013, the European Commission developed a strategy to integrate maritimeemissions into the overall EU strategy to reduce greenhouse gas emissions. In accordance with this strategy, in April 2015 the EuropeanParliament and Council adopted regulations (EU Directive 2015/757 or EU MRV Regulation) requiring vessels exceeding 5,000 gross tonsusing EU ports to monitor, report and verify their carbon dioxide emissions beginning in January 2018, with the first reports due in June 2019.In February 2019, the European Commission adopted a proposal to amend the EU MRV Regulation to harmonize the requirements of the EUMRV Regulation and the IMO DCS. On September 15, 2020, the European Parliament adopted measures to include maritime transport in theEU’s Emissions Trading System (“ETS”) as of 2022 and to set binding requirements for at least a 40% reduction (compared to 1990) in GHGemissions by shipping companies by 2030. On May 10, 2023, the EU extended the EU-ETS to the shipping sector commencing January 1,2024. Beginning in 2026, in addition to carbon dioxide emissions, the EU MRV and the EU-ETS for shipping will cover methane and nitrousoxide emissions.Although it is no longer a part of the EU MRV regime, the United Kingdom retained in domestic law the EU regulation establishing theEU MRV, and amended the law to make the regulation applicable in a United Kingdom-only context. Operators of ships over 5,000 gross tonsusing ports in the United Kingdom were required to begin collecting emissions data for their ships commencing January 1, 2022 for the 2022reporting period. The requirement to report the data required to be collected to the UK Maritime and Coastguard Agency has been delayedpending the agency’s development of a digital reporting system. Table of Contents61Any passage of climate control legislation or other regulatory initiatives by the IMO, the United States, the United Kingdom, the EU,Norway, Brazil or other countries where we operate, that restrict GHG emissions could have a significant financial and operational impact onour business, including requiring us to make significant financial expenditures that we cannot predict with certainty at this time. For example,the Paris Agreement could lead to increased regulation of greenhouse gases or other concerns relating to climate change. In addition, evenwithout such regulation, our business may be indirectly affected to the extent that climate change results in sea level changes or more intenseweather events.Vessel Security RegulationSince the terrorist attacks of September 11, 2001, there have been a variety of initiatives intended to enhance vessel security. OnNovember 25, 2002, the Maritime Transportation Security Act of 2002 (the “MTSA”), came into effect in the United States. To implementcertain portions of the MTSA, in July 2003, the U.S. Coast Guard issued regulations requiring the implementation of certain securityrequirements aboard vessels operating in waters subject to the jurisdiction of the United States. Similarly, in December 2002, amendments toSOLAS created a new chapter of the convention dealing specifically with maritime security. The maritime security chapter came into effect inJuly 2004 and imposes various detailed security obligations on vessels and port authorities, most of which are contained in the ISPS. The ISPSis designed to protect ports and international shipping against terrorism. After July 1, 2004, to trade internationally, a vessel must maintain anInternational Ship Security Certificate (“ISSC”) from a recognized security organization approved by the vessel’s flag state.Among the various requirements are:●onboard installation of automatic identification systems to provide a means for the automatic transmission of safety-relatedinformation from among similarly equipped ships and shore stations, including information on a ship’s identity, position, course,speed and navigational status;●onboard installation of ship security alert systems, which do not sound on the vessel but only alert the authorities on shore;●the development of vessel security plans;●a ship identification number to be permanently marked on a vessel’s hull;●a continuous synopsis record kept onboard showing a vessel’s history, including the name of the ship and of the state whose flagthe ship is entitled to fly, the date on which the ship was registered with that state, the ship’s identification number, the port atwhich the ship is registered and the name of the registered owner(s) and their registered address; and●compliance with flag state security certification requirements.The U.S. Coast Guard regulations, intended to align with international maritime security standards, exempt non-U.S. vessels from theMTSA vessel security measures provided such vessels have onboard a valid ISSC that attests to the vessel’s compliance with SOLAS securityrequirements and the ISPS. KNOT has implemented the various security measures addressed by the MTSA, SOLAS and the ISPS.Legal ProceedingsFrom time to time we have been, and expect to continue to be, subject to legal proceedings and claims in the ordinary course of ourbusiness, principally personal injury and property casualty claims. These claims, even if lacking merit, could result in the expenditure ofsignificant financial and managerial resources. We are not aware of any legal proceedings or claims that we believe will have, individually orin the aggregate, a material adverse effect on us. Table of Contents62Taxation of the PartnershipCertain of our subsidiaries are subject to taxation in the jurisdictions in which they are organized, conduct business or own assets. Weintend that our business and the business of our subsidiaries will be conducted and operated in a manner designed to minimize the tax imposedon us and our subsidiaries. However, we cannot assure this result as tax laws in these or other jurisdictions may change or we may enter intonew business transactions relating to such jurisdictions, which could affect our tax liability.Marshall IslandsBecause we and our subsidiaries do not, and assuming we and our subsidiaries continue not to, carry on business or conduct transactionsor operations in the Republic of the Marshall Islands, neither we nor our subsidiaries are subject to income, capital gains, profits or othertaxation under current Marshall Islands law, other than taxes, fines or fees due to (i) the incorporation, dissolution, continued existence,merger, domestication (or similar concepts) of legal entities registered in the Republic of the Marshall Islands, (ii) filing certificates (such ascertificates of incumbency, merger, or re-domiciliation) with the Marshall Islands registrar, (iii) obtaining certificates of good standing from,or certified copies of documents filed with, the Marshall Islands registrar, (iv) compliance with Marshall Islands law concerning recordkeeping and vessel ownership, such as tonnage tax, or (v) non-compliance with economic substance regulations or requests made by theMarshall Islands Registrar of Corporations relating to our books and records and the books and records of our subsidiaries. As a result,distributions KNOT UK receives from its subsidiary, distributions that such subsidiary receives from the operating subsidiaries, anddistributions we receive from KNOT UK, are not expected to be subject to Marshall Islands taxation.United StatesWe have elected to be treated as a corporation for U.S. federal income tax purposes. As a result, we are subject to U.S. federal income taxto the extent we earn income from U.S. sources or income that is treated as effectively connected with the conduct of a trade or business in theUnited States unless such income is exempt from tax under an applicable treaty or Section 883 of the Code. Because our fleet is owned bysubsidiaries resident in Norway, we expect that we qualify for an exemption from U.S. federal income tax on any U.S. source grosstransportation income we earn by virtue of the application of the U.S.-Norway Tax Treaty, and we intend to take this position for U.S. federalincome tax purposes. Moreover, we do not expect to earn any income that is effectively connected with the conduct of a trade or business inthe United States.NorwayWe are treated as fiscally transparent for Norwegian tax purposes and expect to organize our affairs and conduct our business in a mannersuch that we, and our remaining subsidiaries that are not organized under the laws of the Kingdom of Norway, are not subject to a materialamount of Norwegian taxes.Our vessel-owning subsidiaries have been organized under the laws of the Kingdom of Norway and are subject to the tonnage tax regimein Norway. Pursuant to this regime, our vessel-owning subsidiaries will be subject to Norwegian tax based predominantly upon the nettonnage of their owned vessels rather than income generated from operating the vessels (i.e., operating income). Based upon the net tonnageof our current vessels and the applicable rate of taxation, our Norwegian subsidiaries are liable for approximately $211,700 of Norwegiantonnage tax for the year ended December 31, 2023. In addition, under the tonnage tax regime, net financial income (i.e. income not generatedfrom operating vessels) is subject to the regular Norwegian corporate income tax rate.On December 14, 2017, the Norwegian government concluded negotiations with the EFTA Surveillance Authority regarding theNorwegian tonnage tax regime, which has been approved for another ten years until 2027. Pursuant to the approval, Norway has introducedrestrictions that eliminate the ability of companies that operate vessels under certain bareboat charters to qualify for the Norwegian tonnagetax regime. Companies that no longer qualify for the Norwegian tonnage tax regime will instead be subject to regular Norwegian corporateincome tax. However, there are no limitations on intra-group bareboat chartering, as well as bareboat charters where crewing services arecarried out by a related party. In order to constitute a related party, a minimum of 25% joint ownership/control is required according to theNorwegian General Taxation Act Section 8-13, paragraph 6. Because KNOT owns more than 25% of our partnership interests and owns 100%of KNOT Management and KNOT Management Denmark (which provide these crewing services to us), our bareboat charters are effectivelyseen as time charter services to the customer. If this related party situation is ended, other alternatives and possibly mitigating measures wouldneed to be evaluated by the Partnership. Table of Contents63The United Kingdom’s withdrawal and exit from EU, commonly referred to as “Brexit”, took place on January 31, 2020. In order to meetany future national flag requirements pursuant to the Norwegian tonnage tax regime, we reflagged some of our previously U.K.-flaggedvessels to an EU/European Economic Area (“EEA”) flag. Whether there will be a flag requirement for any year is announced inSeptember/October of that year. On September 22, 2023, it was announced that the flag requirement was applicable for the year endedDecember 31, 2023. Our Norwegian vessel-owning subsidiaries were compliant with the flag requirement in 2023.Further, as from January 1, 2021, as the Brexit transition period has ended, the domestic Norwegian legislation providing exemption ofwithholding tax on outbound dividends from KNOT Shuttle Tankers AS to KNOT UK is no longer applicable, as this exemption rule onlyincludes dividend distributions to corporate shareholders within the EU/EAA. However, we expect that dividends from KNOT Shuttle TankersAS to KNOT UK are still exempt from withholding tax pursuant to the double tax treaty between Norway and the U.K.United KingdomAlthough we are managed and controlled in the United Kingdom, we have obtained confirmation from HM Revenue & Customs that weare treated as a transparent partnership for United Kingdom tax purposes. Accordingly, we are not subject to U.K. tax in our own name, butrather any partners subject to U.K. tax will be taxed on their share of our profits.Our general partner and KNOT UK expect to be a resident of the United Kingdom for taxation purposes subject to tax on ordinaryincome. Nonetheless, these companies are primarily expected to earn dividend income from our controlled affiliates, which should generallybe exempt from United Kingdom taxation under applicable exemptions for distributions from subsidiaries.EmployeesWe directly employ one onshore employee and no seagoing employees. As of December 31, 2023, KNOT employed (directly andthrough ship managers) approximately 837 seagoing staff to serve on our vessels. KNOT and its affiliates may employ additional seagoingstaff to assist us as we grow. KNOT, through certain of its subsidiaries, provides onshore advisory, commercial, technical and operationalsupport to our operating subsidiaries pursuant to the technical management agreements and management and administration agreements.Please read “Item 7. Major Unitholders and Related Party Transactions—Related Party Transactions.”We and KNOT regard attracting and retaining motivated seagoing personnel as a top priority. KNOT offers seafarers competitiveemployment packages and opportunities for personal and career development, which relates to a philosophy of promoting internally. Theofficers operating our vessels are engaged on individual employment contracts, and we have entered into collective bargaining agreementsthat cover substantially all of the sailing personnel that operate the vessels in our current fleet, which are flagged in Norway, the Isle of Man,Malta, Denmark, United Kingdom or the Bahamas. We believe our relationships with these labor unions are good. Our commitment totraining is fundamental to the development of the highest caliber of seafarers for our marine operations. KNOT’s cadet training approach isdesigned to balance academic learning with hands-on training at sea. KNOT trains personnel mainly in Norway and the Philippines and atinstitutions that utilize ship handling, dynamic positioning and cargo handling simulators. After receiving formal instruction at one of theseinstitutions, our seafarers’ training continues onboard one of KNOT’s vessels. Additional vessel and equipment training and courses arearranged in accordance with our training policies and the training requirements of our charterers. We believe that high-quality crewing andtraining policies will play an increasingly important role in distinguishing the larger, independent shipping companies with shuttle tankerexperience from those that are newcomers and lack experienced, in-house staff and established expertise on which to base their customerservice and safety operations. Table of Contents64C. Organizational StructureWe are a publicly traded limited partnership formed on February 21, 2013.The diagram below depicts our simplified organizational and ownership structure as of April 11, 2024.(1)Each of our vessels are owned by certain vessel-owning subsidiaries.We listed our common units on the New York Stock Exchange (“NYSE”) in April 2013 under the ticker symbol “KNOP.” Table of Contents65We were formed under the law of the Marshall Islands and maintain our principal executive headquarters at 2 Queen’s Cross, Aberdeen,AB15 4YB, United Kingdom. Our telephone number at that address is +44 (0) 1224 618420. Our principal administrative offices are locatedat 2 Queen’s Cross, Aberdeen, AB15 4YB, United Kingdom.A full list of our significant operating and vessel-owning subsidiaries is included in Exhibit 8.1.D. Property, Plants and EquipmentOther than the vessels in our current fleet, we do not have any material property.Item 4A. Unresolved Staff CommentsNot applicable.Item 5. Operating and Financial Review and ProspectsThe following should be read in conjunction with “Item 4. Information on the Partnership,” “Forward-Looking Statements” and theconsolidated financial statements and accompanying notes included in this Annual Report. Among other things, those financial statementsinclude more detailed information regarding the basis of presentation for the following information. Our financial statements have beenprepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) and are presented in U.S. Dollars.OverviewWe were formed in February 2013 as a limited partnership under the laws of the Republic of the Marshall Islands to own and operateshuttle tankers under long-term charters. Our initial fleet of shuttle tankers was contributed to us by KNOT, a leading independent owner andoperator of shuttle tankers. Our current fleet consists of eighteen shuttle tankers. Under the Omnibus Agreement, we have the right topurchase from KNOT any shuttle tankers operating under charters of five or more years.On April 18, 2013, we completed our IPO. In connection with our IPO, we sold 8,567,500 common units to the public, through theunderwriters, at a price of $21.00 per unit, and issued to KNOT 8,567,500 subordinated units and all of our incentive distribution rights. OnMay 18, 2016, all of the subordinated units converted into common units on a one for one basis. On September 10, 2021, KNOT contributedto the Partnership all of KNOT’s incentive distribution rights in exchange for the issuance by the Partnership to KNOT of 673,080 commonunits and 673,080 Class B Units, whereupon the incentive distribution rights were cancelled. As of April 11, 2024, KNOT owned 28.4% ofour common units, 208,333 Series A Preferred Units, 252,405 Class B Units and our general partner, and our general partner owned a 1.83%general partner interest in us and 0.3% of our common units.Significant Developments in 2023 and Early 2024$240 Million Loan FacilityOn June 2, 2023, the Partnership closed its new five-year $240 million senior secured term loan facility with DNB. The new facility, likethe previous facility which was scheduled to mature in September 2023, is secured by the Windsor Knutsen, the Bodil Knutsen, the FortalezaKnutsen, the Recife Knutsen, the Carmen Knutsen and the Ingrid Knutsen. The $240 million term loan bears interest at a rate per annum equalto the Secured Overnight Financing Rate (“SOFR”) plus a margin of 2.4% and is repayable in 20 consecutive quarterly installments, with afinal payment at maturity in May 2028 of $85.4 million, which amount includes the balloon payment and last quarterly installment. The loanis guaranteed by the Partnership and secured by mortgages on the related vessels. Table of Contents66Refinancing of Revolving Credit FacilitiesOn August 16, 2023, the Partnership closed the refinancing of the first of its two $25 million revolving credit facilities, with the facilitybeing rolled over with NTT Finance Corporation. The new facility will mature in August 2025, bears interest at a rate per annum equal toSOFR plus a margin of 2.23% and has a commitment fee of 0.5% on the undrawn portion of the facility. The commercial terms of the facilityare substantially unchanged from the facility entered into in June 2021 with NTT Finance Corporation.On November 15, 2023, the Partnership closed the refinancing of the second of its two $25 million revolving credit facilities, with thefacility being rolled over with SBI Shinsei Bank, Limited. The new facility will mature in November 2025, bears interest at a rate per annumequal to SOFR plus a margin of 2.0% and has a commitment fee of 0.8% on the undrawn portion of the facility. The commercial terms of thefacility are substantially unchanged from the facility entered into in November 2020 with SBI Shinsei Bank, Limited.Repayment of $172.5 million Loan FacilityOn September 15, 2023, the loan facility secured by the Dan Cisne was repaid in full with a $10.2 million payment. On January 9, 2024,the loan facility secured by the Dan Sabia was repaid in full with a $10.4 million payment. The Dan Sabia and the Dan Cisne are now debt-free and there are no plans to incur additional borrowings secured by these vessels until such time as the Partnership has better visibility on thevessels’ future employment.Hilda Loan FacilityOn April 5, 2024, the Partnership’s subsidiary, Knutsen Shuttle Tankers 14 AS, which owns the vessel Hilda Knutsen, entered into a new$60 million senior secured term loan facility with DNB (the “$60 Million Hilda Facility”). The $60 Million Hilda Facility will refinance andreplace the $100 Million facility with Mitsubishi UFJ Lease & Finance (Hong Kong) Limited, which is also secured by the Hilda Knutsen andis due to be repaid in full in May 2024 with a ballon payment of $58.5 million. This refinancing is anticipated to close prior to the maturitydate of the expiring facility, and remains subject to execution of definitive documentation and other customary closing conditions.ATM programOn November 2, 2023, the Partnership entered into an at-the-market sales agreement with B. Riley Securities, Inc. (the “Agent”) for anew ATM program pursuant to which the Partnership may offer and sell up to $100 million of common units from time to time, through theAgent. This new sales agreement replaces and supersedes the prior sales agreement with the Agent entered into on August 26, 2021, whichhad provided for a $100 million at-the-market offering program for our common units. The Partnership intends to use the net proceeds of anysales of offered units for general partnership purposes, which may include, among other things, the repayment of indebtedness or the fundingof acquisitions or other capital expenditures.Vessel ImpairmentsImpairments in respect of the Dan Cisne and the Dan Sabia of $24.5 million and $25.2 million respectively were recognized in thesecond quarter of 2023. In accordance with US GAAP, the Partnership’s fleet is regularly assessed for impairment as events or changes incircumstances may indicate that a vessel’s net carrying value exceeds the net undiscounted cash flows expected to be generated over itsremaining useful life, and in such situation the carrying amount of the vessel is reduced to its estimated fair value. This exercise in the secondquarter resulted in an impairment in respect of these vessels due to their current charter contracts moving closer to expiry, their high carryingvalue, and their smaller size not being optimal for the Brazilian market, therefore affecting the outlook for their future employment. Table of Contents67Management TransitionAs previously announced on August 4, 2023, Mr. Derek Lowe became the Partnership’s new Chief Executive Officer and Chief FinancialOfficer, taking office on September 13, 2023. Mr. Lowe joined the Partnership from Telford Offshore, a provider of accommodation,construction and pipelay in the global offshore energy services industry. He served as the Group Company Secretary of Telford Offshore sinceits formation in 2018, having provided consultancy services to its predecessor since 2015. He worked from 2011 to 2015 for the debt capitalmarkets group of Pareto Securities, and from 1994 to 2010 for the equity capital markets group of UBS.Time Charters with KNOT for the Hilda Knutsen, Torill Knutsen and Bodil KnutsenThe Hilda Knutsen, Torill Knutsen and Bodil Knutsen each continued to operate on separate time charter contracts with a subsidiary ofKNOT, at a reduced charter rate. On January 2, 2024, these rolling monthly contracts were extended to January 2025 for the Hilda Knutsenand the Torill Knutsen. The Bodil Knutsen’s contract was extended until she was delivered to Equinor on March 27, 2024 to commence on anew fixed two-year time charter. The Partnership is continuing to market the Hilda Knutsen and the Torill Knutsen for new, third-party charteremployment.The Hilda Knutsen successfully completed her drydock on July 13, 2023. The Torill Knutsen successfully completed her drydock onDecember 3, 2023.Anna KnutsenThe vessel operates under a time charter contract with a subsidiary of TotalEnergies that expires in April 2024. On March 22, 2024,TotalEnergies exercised its option to extend the charter to April 2026.Windsor KnutsenOn January 11, 2023, the Windsor Knutsen began operating under a time charter contract with Shell for a fixed period of one year with acharterer’s option to extend the charter by one further year. On October 30, 2023, Shell exercised its option to continue the charter to the firstquarter of 2025. In September 2023, the Partnership signed a new time charter contract for the Windsor Knutsen with an oil major tocommence within the window from February 1, 2025 to May 1, 2025. The new time charter contract is for a fixed period of two years.Dan Cisne and Dan SabiaOn December 15, 2023, the Partnership received the Dan Cisne back via redelivery, following expiry of its bareboat charter party toTranspetro. The Dan Cisne is being assessed for shuttle tanker operations in the North Sea and has also been deployed on short-termconventional tanker contracts.On January 9, 2024, an extension to the existing bareboat charter party for the Dan Sabia was signed with Transpetro, extending thevessel’s fixed employment to early June 2024.Fortaleza Knutsen and Recife KnutsenThe bareboat charters of the Fortaleza Knutsen and the Recife Knutsen with Transpetro expired in March 2023 and August 2023,respectively. The Partnership entered into a new three-year time charter contract for each of these two vessels with the existing charterer tocommence directly upon expiration of the existing bareboat charters. The new charter for the Fortaleza Knutsen commenced on March 30,2023, and the contract for the Recife Knutsen commenced on August 3, 2023. Table of Contents68Carmen KnutsenThe Carmen Knutsen successfully completed her planned 10-year special survey drydocking on February 24, 2023 and recommenced onher charter with Repsol. On December 15, 2023 Repsol exercised its extension option to the existing time charter for the Carmen Knutsen,extending the vessel’s fixed employment to mid-January 2025. A further one year extension option remains available to Repsol.Ingrid KnutsenIn accordance with the time charter agreement with Eni for the Ingrid Knutsen, the vessel was returned to the Partnership on January 2,2023, and the vessel subsequently performed a number of spot voyages, including in the conventional tanker market. On March 2, 2023, thevessel began operating under a time charter contract with Altera. On March 28, 2024 the Ingrid Knutsen was redelivered from Altera,following which she has worked in the conventional tanker market. While she is due for delivery to Eni during April 2024 on three-year timecharter contract, it is possible that commercial terms no less favourable to the Partnership may be agreed for an alternative delivery later in2024. The Ingrid Knutsen successfully completed her drydock on December 19, 2023.Tordis KnutsenThe vessel operated under a time charter with a subsidiary of TotalEnergies which expired on July 1, 2023. On the same day, the vesselwas delivered to Shell to commence on a three-year time charter contract. On October 2, 2023, the Partnership signed an agreement with Shellto extend the current time charter for the Tordis Knutsen to July 2027.Lena KnutsenThe vessel operated under a time charter agreement with a subsidiary of TotalEnergies until August 31, 2023. In September 2023, theLena Knutsen commenced operating under a three-year time charter contract with Shell. On October 2, 2023, the Partnership signed anagreement with Shell to extend the time charter for one more year to September 2027.Brasil KnutsenThe Brasil Knutsen successfully completed her drydock on July 14, 2023, and continued her time charter with Petrogal, a subsidiary ofGalp, until November 24, 2023 when she was delivered to Petrorio Luxembourg Holding S.A.R.L. for a new time charter contract which willexpire in May 2025 with the option to extend by two further months. The vessel will commence on a new 3 year time charter with Equinor inthe third quarter of 2025.Vigdis KnutsenThe Vigdis Knutsen operated under a time charter with China Offshore Oil (Singapore), International Pte. Ltd., a company within thesame group as PetroChina, which originally expired in September 2023. This charter was extended until the vessel was delivered to Shell onMarch 16, 2024 to commence a three-year time charter contract.Cash DistributionOn January 11, 2023, the Partnership reduced its quarterly common unit distribution to $0.026 per common unit. The quarterly commonunit distribution has remained at $0.026 since that time. We expect to continue to use our internally generated cash flow to provide forworking capital, reduce our debt levels and strengthen our balance sheet. Table of Contents69Our ChartersWe generate revenues by charging customers for the hire of our vessels and for services related to the transportation of their crude oilusing our vessels. These services are provided under the following basic types of contractual relationships:●Time charters, whereby the vessels that we operate and are responsible for the crewing of are chartered to customers for a fixedperiod of time at hire rates that are either fixed for the firm period of the time charter with escalations to be made in case ofoption periods or that increase annually based on a fixed percentage increase or fixed schedule in order to enable us to offsetexpected increases in operating costs. Under our time charters, hire rate payments may be reduced if the vessel does not performto certain of its specifications, such as if the average vessel speed falls below a guaranteed speed or the amount of fuelconsumed to power the vessel under normal circumstances exceeds a guaranteed amount, and the customer is generallyresponsible for any voyage expenses incurred; and●Bareboat charters, whereby customers charter our vessels for a fixed period of time at hire rates that are generally fixed, but thecustomers are responsible for the vessel operation and bear the operating and voyage expenses, including crewing and otheroperational services.●Single voyage charters or spot charters is a contract entered into by the Partnership or the owner of the vessels and a chartererwhereby the charterer is entitled to use the vessel to perform transportation services between specified geographical locations ata specified freight rate per ton. Under single voyage charter or spot charter agreements, voyage expenses are paid by thePartnership or the owner of the vessels.The table below compares the primary features of a time charter, a bareboat charter and a single voyage charter: Time Charter Bareboat Charter Single Voyage Charter Typical charter lengthOne year or moreOne year or moreOne month or lessHire rate basis(1)DailyDailyFreight rate per tonVoyage expenses(2)Customer paysCustomer paysOwner paysVessel operating expenses(2)Owner paysCustomer paysOwner paysOff-hire(3)VariesCustomer typically paysNot applicable(1)“Hire rate” refers to the basic payment from the charterer for the use of the vessel.(2)Defined below under “—Important Financial and Operational Terms and Concepts.”(3)“Off-hire” refers to the time a vessel is not available for service. Our time charters contain provisions whereby the customer is generallynot required to pay the hire rate during off-hire. Our bareboat charters do not contain such provisions.Market Overview and TrendsAs of March 1, 2024, the shuttle tanker market consisted of approximately 74 vessels plus 11 newbuilds on order, characterized by mid tolong-term charters with offshore oil producers. Most shuttle tankers operate in the North Sea or offshore Brazil.Demand for shuttle tankers is based on offshore oilfield development and prior to mid-2014, higher oil prices and a positive long-termoffshore oil outlook led to increased activity. During 2015-2018, oil companies delayed certain oil production start-ups in both the North Seaand Brazil. In 2019, there were increased project startups.Then, following announcements made during the COVID-19 crisis in 2020 by many of the large oil exploration and productioncompanies, near-term capital expenditure cuts were again seen, delaying many new developments in Brazil and the North Sea by an expected12 - 24 months. These announcements also indicated to the Partnership that these projects would not be cancelled. This assumption issupported by the relatively low costs of oil production in the North Sea and especially Brazil, the rebound in both oil prices and, to a degree,current global oil demand and FPSO activity, particularly in Brazil where market activity has already strengthened as oil production hasincreased. Table of Contents70Brazil has continued on a path to higher offshore deepwater oil production and on November 30, 2022, Petrobras signaled that itsinvestments had returned to pre-COVID levels as it approved its Strategic Plan for 2023-2027. In the plan, Petrobras is committing around$42 billion of capex to Pre-salt exploration and production, all related to projects that on average remain viable at a long-term Brent oil priceof $35 per barrel, and while keeping on-track with its 2030 low-carbon intensity goals (Brazil’s pre-salt region is known for its highlyproductive wells and has some of the lowest carbon intensity levels seen globally).With several new platforms expected to commence operations, we believe that demand for shuttle tankers in Brazil, where fourteen of ourvessels have typically operated, will strengthen, and continue into the mid and long term.The dampened demand in the North Sea shuttle tanker market as a result of production and project delays, as well as maintenance andupgrades in the Balder and Njord fields, persisted throughout 2023. However, we continue to expect the market to rebalance as customersmove forward with offshore projects that were postponed or delayed, as countries increasingly prioritize oil production due to high oil pricesand energy security concerns, and as some older vessels also naturally exit the shuttle tanker market. Such macro variables make forecastingthe specific timing of this rebalancing more difficult.We also face risks and trends that could adversely affect our industry and business. Energy rebalancing trends have accelerated in recentyears as evidenced by promulgated or proposed government policies and commitments by many of our customers to further invest insustainable energy sources. Our industry could be further challenged as our customers rebalance their capital investments to includealternative energy sources, as well as respond to the normal cycles that have historically existed in our industry. It is also possible that theinflationary pressures experienced in 2023 may persist in 2024.We believe that demand for existing and for newbuild shuttle tankers will continue to be driven over the long term, based on therequirement to replace older tonnage in the North Sea and from further expansion of deep and ultra-deep water offshore oil production in areassuch as Pre-salt Brazil and the Barents Sea. We therefore remain positive with respect to the mid-to-long-term outlook for the growth indemand for shuttle tankers and the opportunities that this will present.The statements in this “Market Overview and Trends” section are forward-looking statements based on management’s currentexpectations and certain material assumptions and, accordingly, involve risks and uncertainties that could cause actual results, performanceand outcomes to differ materially from those expressed herein. See “Item 3. Key Information—Risk Factors.”Items You Should Consider When Evaluating Our Historical Financial Performance and Assessing Our Future ProspectsYou should consider the following facts when evaluating our historical results of operations and assessing our future prospects:●The size of our fleet continues to change. Our historical results of operations reflect changes in the size and composition of ourfleet due to our acquisitions of the Carmen Knutsen, the Hilda Knutsen, the Torill Knutsen, the Dan Cisne , the Dan Sabia, theIngrid Knutsen, the Raquel Knutsen, the Tordis Knutsen, the Vigdis Knutsen, the Lena Knutsen, the Brasil Knutsen, the AnnaKnutsen, the Tove Knutsen and the Synnøve Knutsen.●We may enter into different financing agreements. Our financing agreements currently in place may not be representative ofthe agreements we will enter into in the future. A number of our credit facilities mature in the next twelve months. We mayamend our existing credit facilities or enter into new financing agreements. For descriptions of our current financingagreements, please read “Item 5. Operating and Financial Review and Prospects—Liquidity and Capital Resources—BorrowingActivities.”●Our results are affected by fluctuations in the fair value of our derivative instruments. The change in fair value of ourderivative instruments is included in our net income as our derivative instruments are not designated as hedges for accountingpurposes. These changes may fluctuate significantly as interest rates fluctuate. Please read Note 10—Derivative Instruments inthe consolidated financial statements included in this Annual Report. The unrealized gain or losses related to the change in fairvalue of our derivatives do not impact our cash flows. Table of Contents71●Our historical results of operations are affected by fluctuations in currency exchange rates. All of the vessels in our fleet areon time charters and bareboat charters with hire rates payable in U.S. Dollars, and some of our vessels operate from time to timeon spot or voyage charters with hire rates payable in U.S. dollars. Approximately 60%, 61% and 56% of the vessel operatingexpenses related to our vessels operating under time charters are denominated in U.S. Dollars and approximately 19%, 21% and23% of such vessel operating expenses are denominated in Norwegian Kroner (“NOK”), for the years ended December 31,2023, 2022 and 2021, respectively. The composition of our vessel operating expenses may vary over time depending upon thelocation of future charters and/or the composition of our crews. All of our financing and interest expenses are also denominatedin U.S. Dollars. We anticipate that all of our future financing agreements will also be denominated in U.S. Dollars.●We are subject to a one-time entrance tax into the Norwegian tonnage tax regime. Our Norwegian subsidiaries were subject toa one-time entrance tax into the tonnage tax regime due to our acquisition in 2013 of the shares in the subsidiary that owns theFortaleza Knutsen and the Recife Knutsen and likewise our acquisition in 2017 of the shares in the subsidiary that owns theLena Knutsen. The entrance tax arises when the related party seller is taxed under the ordinary tax regime, and the buyer is taxedunder the tonnage tax regime. The tax is based on the difference between the market value of the shares and the seller’s taxvalue of the shares as of the date of contribution. The entrance tax on this gain is payable over several years and is calculated bymultiplying the Norwegian tax rate by the declining balance of the gain, which will decline by 20% each year. The Norwegiancorporate income tax rate has been 22% in 2021, 2022 and 2023.●Our historical results of operations reflect income taxes for part of the activities under the ordinary tax regime in Norway.Our Norwegian subsidiaries are subject to Norwegian tonnage tax rather than ordinary corporate taxation and tonnage taxationis reflected in the consolidated financial statements and accompanying notes included in this Annual Report. Under the tonnagetax regime, tax is calculated based on the vessel’s net tonnage (in thousands) according to its certificate, not on operatingincome, then multiplied by the days in operation and the applicable dayrate. Net financial income and expense remain taxable atthe regular corporate income tax rate of 22%.Factors Affecting Our Results of OperationsWe believe the principal factors that will affect our future results of operations include:●our ability to successfully employ our vessels at economically attractive hire rates;●the level of distributions on our common units;●our ability to maintain good relationships with our existing customers and to increase the number of customer relationships;●whether our customers exercise their options to extend their time charters;●our ability to refinance our indebtedness as it becomes due;●the number and availability of our vessels;●the level of demand for shuttle tanker services;●the hire rate earned by our vessels, unscheduled off-hire days and the level of our vessel operating expenses;●the length and cost of drydocking;●the effective and efficient technical management of our vessels;●our ability to obtain and maintain major oil and gas company approvals and acceptances, and to satisfy their technical, health,safety and compliance standards; Table of Contents72●economic, regulatory, political and governmental conditions that affect the offshore marine transportation industry;●fluctuations in the price of oil;●interest rate changes;●mark-to-market changes in interest rate swap contracts and foreign currency derivatives, if any;●foreign currency exchange gains and losses;●our access to capital required to acquire additional vessels and/or to implement our business strategy;●future levels of inflation;●increases in crewing and insurance costs; and●the level of debt and the related interest expense.Please read “Item 3. Key Information—Risk Factors” for a discussion of certain risks inherent in our business. Table of Contents73Important Financial and Operational Terms and ConceptsWe use a variety of financial and operational terms and concepts when analyzing our performance. These include the following:Time Charter and Bareboat Revenues. The Partnership’s time charter contracts include both a lease component, consisting of the lease ofthe vessel, and non-lease component, consisting of operation of the vessel for the customers. The lease element is accounted for as anoperating lease on a straight-line basis over the term of the charter, while the service element consisting of the operation of the vessel isrecognized over time as the services are delivered. Revenue from time charters is not recognized during days a vessel is off-hire. Revenue isrecognized from delivery of a vessel to the charterer, until the end of the contract period. Under bareboat charters, the Partnership provides aspecified vessel for a fixed period of time at a specified day rate and the Partnership recognizes revenues from bareboat charters as operatingleases on a straight-line basis over the term of the charter. Revenues are affected by hire rates and the number of days a vessel operates as wellas the mix of business between time charters and bareboat charters.Voyage Revenues. Voyage revenues are all revenues unique to a particular spot voyage.Voyage Expenses. Voyage expenses are all expenses unique to a particular voyage, including any bunker fuel expenses, port fees, cargoloading and unloading expenses, canal tolls and agency fees. Voyage expenses are typically paid by the customer under time charters andbareboat charters. Voyage expenses are paid by the shipowner during spot contracts and periods of off-hire and are recognized when incurred.Vessel Operating Expenses. Vessel operating expenses include crewing, repairs and maintenance, insurance, stores, lube oil andcommunication expenses. Vessel operating expenses are generally paid by the shipowner under time charters and spot contracts and arerecognized when incurred. Vessel operating expenses are paid by the customer under bareboat charters.Off-hire. Under our time charters, when the vessel is off-hire, or not available for service, the customer generally is not required to paythe hire rate, and the shipowner is responsible for all costs. Prolonged off-hire may lead to a termination of the time charter. A vessel generallywill be deemed off-hire if there is a loss of time due to, among other things, operational deficiencies, drydocking for repairs, maintenance orinspection, equipment breakdowns, delays due to accidents, crewing strikes, certain vessel detentions or similar problems or the shipowner’sfailure to maintain the vessel in compliance with its specifications and contractual standards or to provide the required crew. Our bareboatcharters do not contain provisions for off-hire. We have obtained loss of hire insurance to protect us against loss of income in the event one ofour vessels cannot be employed due to damage that is covered under the terms of our hull and machinery insurance. Under our loss of hirepolicies, our insurer generally will pay us the hire rate agreed in respect of each vessel for each day in excess of 14 days and with a maximumperiod of 180 days.Drydocking. We must periodically drydock each of our vessels for inspection, repairs and maintenance and any modifications required tocomply with industry certification or governmental requirements. In accordance with industry certification requirements, we drydock ourvessels at least every 60 months until the vessel is 15 years old, after which drydocking takes place at least every 30 months thereafter asrequired for the renewal of certifications required by classification societies. For vessels operating on time charters, we capitalize the costsdirectly associated with the classification and regulatory requirements for inspection of the vessels and improvements incurred duringdrydocking that increase the earnings capacity or improve the efficiency or safety of the vessels. We expense costs related to routine repairsand maintenance performed during drydocking or as otherwise incurred. For vessels operating on bareboat charters, the customer bears thecost of any drydocking. The number of drydockings undertaken in a given period and the nature of the work performed determine the level ofdrydocking expenditures.Depreciation. Depreciation on vessels and equipment is calculated on a straight-line basis over the asset’s estimated useful life of23 years for the hull and equipment, less an estimated residual value. Drydocking cost is depreciated on a straight-line basis over the perioduntil the next planned drydocking takes place. For vessels that are newly built or acquired, an element of the cost of the vessel is allocatedinitially to a drydock component and depreciated on a straight-line basis over the period until the next planned drydocking. When significantdrydocking expenditures occur prior to the expiration of this period, we expense the remaining balance of the original drydocking cost inthe month of the subsequent drydocking. Table of Contents74Impairment of Long-Lived Assets. Vessels and equipment, vessels under construction and intangible assets subject to amortization arereviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Ifcircumstances require a long-lived asset or asset group to be tested for possible impairment, we first compare the undiscounted cash flowsexpected to be generated by that asset or asset group to its carrying value. If the carrying value of the long-lived asset is not recoverable on anundiscounted cash flow basis, an impairment is recognized to the extent that the carrying value exceeds its fair value. Fair value is determinedthrough various valuation techniques including discounted cash flow models, quoted market values and third-party independent appraisals, asconsidered necessary.Other Finance Expense. Other finance expense includes external bank fees, financing service fees paid to related parties and guaranteecommissions paid to external parties in connection with our debt and other bank services.InsuranceHull and Machinery Insurance. We have obtained hull and machinery insurance on all our vessels to insure against marine and warrisks, which include the risks of damage to our vessels, salvage and towing costs, and also insures against actual or constructive total loss ofany of our vessels. However, our insurance policies contain deductible amounts for which we are responsible. We have also arrangedadditional total loss coverage for each vessel. This coverage, which is called hull interest and freight interest coverage, provides us additionalcoverage in the event of the total loss or the constructive total loss of a vessel.Loss of Hire Insurance. We have obtained loss of hire insurance to protect us against loss of income in the event one of our vesselscannot be employed due to damage that is covered under the terms of our hull and machinery insurance. Under our loss of hire policies, ourinsurer will pay us the hire rate agreed in respect of each vessel for each day, in excess of a certain number of deductible days, for the timethat the vessel is out of service as a result of damage, for a maximum of 180 days. The number of deductible days for the vessels in our fleet is14 days per vessel.All of our hull and machinery, hull interest and freight interest and loss of hire insurance policies are written on the NMIP, which throughthe hull and maintenance coverage also offers comprehensive collision liability coverage of up to the insured hull and maintenance value ofthe vessel. NMIP is based on an “all risk principle” and offers what is considered to be the most comprehensive insurance obtainable in any ofthe world’s marine markets today. The agreed deductible on each vessel averages $150,000.Protection and Indemnity Insurance. Protection and indemnity insurance, which covers our third-party legal liabilities in connectionwith our shipping activities, is provided by a P&I club. This includes third-party liability and other expenses related to the injury or death ofcrew members, passengers and other third-party persons, loss or damage to cargo, claims arising from collisions with other vessels or fromcontact with jetties or wharves and other damage to other third-party property, including pollution arising from oil or other substances, andother related costs, including wreck removal. Our current protection and indemnity insurance coverage is unlimited, except for pollution,which is limited to $1 billion per vessel per incident. Table of Contents75CustomersIn the years ended December 31, 2023, 2022 and 2021, revenues from the following customers accounted for over 10% of our revenues:Year Ended December 31, (U.S. Dollars in thousands) 2023 2022 2021 Eni Trading and Shipping S.p.A.$ — 0% $ 36,256 14% $ 43,823 16%Fronape International Company, a subsidiary of PetrobrasTransporte S.A. 51,743 18% 45,975 17% 45,115 17%Equinor ASA 36,563 13% 24,828 9% 17,897 7%Repsol Sinopec Brasil, B.V., a subsidiary of Repsol SinopecBrasil, S.A. 36,946 13% 37,571 14% 37,030 14%Brazil Shipping I Limited, a subsidiary of Royal Dutch Shell 33,019 12% 12,546 5% 59,825 22%Galp Sinopec Brasil Services BV 464 0% 16,621 6% 35,622 13%KNOT 28,682 10% 19,220 7% 6,566 2%Chartering and Shipping Service S.A., a subsidiary of TotalEnergi$ 41,030 14% $ 25,352 9% $ — 0%A. Operating ResultsYear Ended December 31, 2023 Compared with the Year Ended December 31, 2022Year Ended December 31, (U.S. Dollars in thousands) 2023 2022 Change % Change Time charter and bareboat revenues$ 277,084$ 262,797$ 14,287 5%Voyage revenues 8,849 4,689 4,160 89%Loss of hire insurance recoveries 2,840 758 2,082 275%Other income 1,943 341 1,602 470%Vessel operating expenses 93,351 86,032 7,319 9%Voyage expenses and commission 5,536 2,814 2,722 97%Depreciation 110,902 107,419 3,483 3%Impairment 49,649 — 49,649 100%General and administrative expenses 6,142 6,098 44 1%Interest income 3,468 822 2,646 322%Interest expense (72,070) (42,604) (29,466) 69%Other finance expense (589) (628) 39 (6)%Realized and unrealized gain (loss) on derivative instruments 5,369 35,510 (30,141) (85)%Net gain (loss) on foreign currency transactions (237) 220 (457) (208)%Income tax benefit (expense) 4,595 (875) 5,470 (625)%Net income (loss)$ (34,328)$58,667$ (92,995) (159)% Table of Contents76Time charter and bareboat revenues: Time charter and bareboat revenues for the year ended December 31, 2023 were $277.1 million,an increase of $14.3 million compared to $262.8 million for the year ended December 31, 2022. The increase was principally due to (i) higherfleet utilization in 2023 compared to 2022; (ii) the Synnøve Knutsen being included in results of operations as of July 1, 2022; and (iii)increased hire rates.Voyage revenues: Voyage revenues for the year ended December 31, 2023, were $8.8 million compared to $4.7 million for the yearended December 31, 2022. The voyage revenues for the year ended December 31, 2023 relate to spot voyages performed by the IngridKnutsen and the Torill Knutsen which operated in the spot market for most of the first quarter of 2023. The voyage revenues for the yearended December 31, 2022 relate to spot voyages performed by the Windsor Knutsen and the Torill Knutsen.Loss of hire insurance recoveries: Loss of hire insurance recoveries for the year ended December 31, 2023, were $2.8 million comparedto $0.8 million for the year ended December 31, 2022. For the year ended December 31, 2023 the Partnership recorded $0.8 million in loss ofhire insurance recoveries related to the Windsor Knutsen in connection with repairs of a leakage from a tunnel thruster reported in the thirdquarter of 2022. The Windsor Knutsen was off hire from September 29, 2022, to October 31, 2022 for repairs. The Lena Knutsen reportedexcessive and abnormal wear found on the steering gear rotor in relation with her scheduled drydocking in the second quarter of 2022. For theyear ended December 31, 2023, the Partnership recorded $0.6 million in loss of hire recoveries with respect to the Lena Knutsen. The SynnøveKnutsen reported an oil leakage from the controllable pitch propellers system in the third quarter of 2022. As a result, the vessel was placedoff hire from October 14, 2022 to November 1, 2022 for repairs. For the year ended December 31, 2023 the Partnership recorded $0.9 millionin loss of hire recoveries with respect to the Synnøve Knutsen. The Tove Knutsen reported an oil leakage from the controllable pitch propellerssystem in the first quarter of 2021. As a result, the vessel was placed off hire from March 1, 2021 to April 15, 2021, for repairs. For the yearended December 31, 2023 the Partnership recorded $0.5 million in loss of hire recoveries with respect to the Tove Knutsen. The loss of hireinsurance recoveries for the year ended December 31, 2022 were related to the Vigdis Knutsen. In April 2022, during scheduled drydock,excessive and abnormal wear was found on the steering gear rotor. The Vigdis Knutsen was in drydock and off-hire from March 3, 2022 toJune 14, 2022 for its scheduled drydock.Other income: Other income for the year ended December 31, 2023 was $1.9 million compared to $0.3 million for the year endedDecember 31, 2022. The increase is mainly due to the Bodil Knutsen generating income related to the volatile organic compound emission(“VOC”) control equipment installation.Vessel operating expenses: Vessel operating expenses for the year ended December 31, 2023 were $93.4 million, an increase of $7.4million from $86.0 million for the year ended December 31, 2022. The increase is mainly related to higher cost for supplies, equipment andrepairs. The increase is also related to the Synnøve Knutsen being included in the results of operation as from July 1, 2022.Voyage expenses and commission: Voyage expenses and commission for the year ended December 31, 2023, were $5.5 million. Thevoyage expenses and commission relate to bunker cost, commission and port cost for spot voyages performed by the Ingrid Knutsen and theTorill Knutsen. Voyage expenses and commission for the year ended December 31, 2022, were $2.8 million. The voyage expenses andcommission relate to bunker cost, commission and port cost for spot voyages performed by the Windsor Knutsen and the Torill Knutsen.Depreciation: Depreciation expense for the year ended December 31, 2023 was $110.9 million, an increase of $3.5 million from $107.4million for the year ended December 31, 2022. The increase is mainly related to the Synnøve Knutsen being included in the results ofoperations from July 1, 2022.Impairment: Impairment charge for the year ended December 31, 2023 was $49.6 compared to $nil million for year ended December 31,2022. The impairment charge for the year ended December 31, 2023, was related to the Dan Cisne and the Dan Sabia. The carrying values ofthe Dan Cisne and the Dan Sabia were written down to their estimated fair values, using a discounted cash flow valuation.General and administrative expenses: General and administrative expenses for the year ended December 31, 2023 were $6.1 millioncompared to $6.1 million for the year ended December 31, 2022. Table of Contents77Interest income: Interest income for the year ended December 31, 2023 was $3.5 million compared to $0.8 million for the year endedDecember 31, 2022. The increase is mainly due to increased interest rates on our bank deposits.Interest expense: Interest expense for the year ended December 31, 2023 was $72.1 million, an increase of $29.5 million from $42.6million for the year ended December 31, 2022. The increase was mainly due to an increase in the US dollar LIBOR rate or SOFR rate,increased interest expense for the credit facility related to the acquisition of the Synnøve Knutsen on July 1, 2022, increased interest expenseon the revolving credit facilities and increased interest expense for the Torill Knutsen in connection with the sale and leaseback transaction inwhich both the financial obligation and interest rate increased.Other finance expense: Other finance expense was $0.6 million for the year ended December 31, 2023 compared to $0.6 million for theyear ended December 31, 2022. Other finance expense is primarily related to bank fees and guarantee commissions.Realized and unrealized gain (loss) on derivative instruments: Realized and unrealized gain on derivative instruments for the yearended December 31, 2023 was $5.4 million, compared to a gain of $35.5 million for the year ended December 31, 2022, as set forth in thetable below:Year Ended December 31, (U.S. Dollars in thousands) 2023 2022 $ ChangeRealized gain (loss):Interest rate swap contracts$ 14,648$ (2,478)$ 17,126Foreign exchange forward contracts (79) (502) 423Total realized gain (loss): 14,569 (2,980) 17,549Unrealized gain (loss): Interest rate swap contracts (9,200) 38,490 (47,690)Foreign exchange forward contracts — — —Total unrealized gain (loss): (9,200) 38,490 (47,690)Total realized and unrealized gain (loss) on derivative instruments:$ 5,369$ 35,510$ (30,141)As of December 31, 2023, the total notional amount of the Partnership’s outstanding interest rate swap contracts that were entered into inorder to hedge outstanding or forecasted debt obligations was $426.5 million. All of the unrealized gain in the year ended December 31, 2023is related to a mark-to-market gain on interest rate swaps.Net gain (loss) on foreign currency transactions: Net loss on foreign currency transactions for the year ended December 31, 2023 was$0.2 million compared to a gain of $0.2 million for the year ended December 31, 2022Income tax benefit (expense): Income tax benefit for the year ended December 31, 2023 was $4.6 million compared to a tax expense of$0.9 million for the year ended December 31, 2022. The increase is a result of the merger between KNOT Shuttle Tankers 12 AS and KNOTShuttle Tankers AS. After the merger, the financial loss carry forwards in KNOT Shuttle Tankers 12 AS were transferred to the acquiringentity, KNOT Shuttle Tankers AS. KNOT Shuttle Tankers AS has taxable income, and the Partnership has determined it is more likely thannot that some of the benefit from the deferred tax assets would be realized based on the weight of available evidence.Net income (loss): As a result of the foregoing, the Partnership recorded net loss of $34.3 million for the year ended December 31, 2023,compared to net income of $58.7 million for the year ended December 31, 2022.Year Ended December 31, 2022 Compared with Year Ended December 31, 2021See “Item 5. Operating and Financial Review and Prospects—Operating Results—Year Ended December 31, 2022 Compared with theYear Ended December 31, 2021” in our Annual Report on Form 20-F for the year ended December 31, 2022 (our “2022 20-F”) for adiscussion of our results of operations for the year ended December 31, 2022 compared to the year ended December 31, 2021 and otherfinancial information related to the year ended December 31, 2021. Table of Contents78B. Liquidity and Capital ResourcesLiquidity and Cash NeedsWe operate in a capital-intensive industry, and we expect to finance the purchase of additional vessels and other capital expendituresthrough a combination of borrowings from commercial banks, cash generated from operations and debt and equity financings, including netproceeds from sales under the ATM program. In addition to paying distributions, our other liquidity requirements relate to payment ofoperating costs, servicing our debt, payment of lease obligations, funding investments (including the equity portion of investments in vessels),funding working capital, including drydocking, and maintaining cash reserves against fluctuations in operating cash flows. As of April 11,2024, we believe our sources of funds (assuming the current contracted rates are earned from our existing charters) are sufficient to meet ourworking capital and other cash requirements for our current business for at least the next twelve months assuming that we are able to timelyclose the Hilda Facility refinancing. Generally, our long-term sources of funds are cash from operations, long-term bank borrowings and otherdebt and equity financings. We expect to rely upon external financing sources, including bank borrowings and the issuance of debt and equitysecurities, to fund acquisitions and other expansion capital expenditures.We expect to continue to use our internally generated cash flow to provide for working capital, reduce our debt levels and strengthen ourbalance sheet. Our funding and treasury activities are intended to maximize investment returns while maintaining appropriate liquidity. Cashand cash equivalents are held primarily in U.S. Dollars with some balances held in NOK, British Pounds and Euros. We have not made use ofderivative instruments other than for interest rate and currency risk management purposes, and we expect to continue to economically hedgepart of our exposure to interest rate fluctuations in the future by entering into new interest rate swap contracts when suitable opportunitiesarise.We estimate that we will spend in total approximately $63.1 million for drydocking and classification surveys for the vessels under timecharters in our fleet as of December 31, 2023, between 2024 and 2028, with approximately $3.7 million of this amount to be spent in thetwelve months ending December 31, 2024. As our fleet matures and expands, our drydocking expenses will likely increase. Ongoing costs forcompliance with environmental regulations are primarily included as part of our drydocking and society classification survey costs or are acomponent of our vessel operating expenses. We are not aware of any regulatory changes or environmental liabilities that we anticipate willhave a material impact on our current or future operations. There will be further costs related to voyages to and from the drydocking yard thatwill depend on the distance from the vessel’s ordinary trading area to the drydocking yard.As of December 31, 2023, the Partnership had available liquidity of $63.9 million, which consisted of cash and cash equivalents of $63.9million. As of December 31, 2023, both of our revolving credit facilities had been fully drawn and we have no ability to incur additional debtunder our existing credit facilities. The Partnership’s total interest-bearing obligations outstanding as of December 31, 2023 were $963.0million ($956.8 million net of debt issuance costs). The average margin paid on the Partnership’s outstanding debt during 2023 wasapproximately 2.28% over LIBOR or SOFR, as applicable.As of December 31, 2023, the Partnership had total $1,074.6 million in outstanding obligations, which include installments and intereston long-term debt, sale and leaseback commitments in respect of the Raquel Knutsen and the Torill Knutsen, interest commitments on interestrate swaps and operating lease commitments. Of the total outstanding obligations, $140.6 million is due for payment during the year endingDecember 31, 2024 and $934.0 million is due for payment after such date.In particular, our loan facility secured by the Dan Sabia was repaid in full in January 2024 with a $10.4 million payment. In May 2024,the loan facility secured by the Hilda Knutsen is due for repayment for which the balloon repayment is $58.5 million. On April 5, 2024, thePartnership’s subsidiary, Knutsen Shuttle Tankers 14 AS, which owns the vessel Hilda Knutsen, entered into a new $60 million senior securedterm loan facility with DNB which will refinance and replace the existing facility secured by the Hilda Knutsen. This refinancing isanticipated to close prior to the maturity date of the expiring facility, and remains subject to execution of definitive documentation and othercustomary closing conditions.The consolidated financial statements have been prepared assuming that the Partnership will continue as a going concern. As ofDecember 31, 2023, the Partnership’s net current liabilities were $37.8 million. Included in current liabilities are $99.0 million of short-termloan obligations that mature before December 31, 2024 and are therefore presented as current debt. Table of Contents79Currently, we do not have any off-balance sheet arrangements.Capital ExpendituresWe reserve cash from operations for future maintenance capital expenditures, working capital and other matters.The Partnership’s future capital expenditure requirements principally relate to vessel drydocks. The Partnership expects to incur $3.7million in 2024 on intermediate drydocks but without the off-hire days associated with drydocks carried out for certification purposes, $0.7million in 2024 on the upgrade of a ballast water treatment system (“BWTS”) on the Hilda Knutsen and, potentially, $1.2 million on upgradesto the Dan Cisne to fulfill requirements to operate as shuttle tanker in the North Sea, all funded by cash from operations. Other than futuredrydocks and ballast water treatment system installation, as at December 31, 2023, the Partnership has no other material capital expenditurecommitments.Cash FlowsThe following table summarizes our net cash flows from operating, investing and financing activities and our cash and cash equivalentsfor the years presented:Year Ended December 31, 2023 Compared with the Year Ended December 31, 2022Year Ended December 31, (U.S. Dollars in thousands) 2023 2022 2021Net cash provided by operating activities$ 131,641$ 100,942$ 166,411Net cash used in investing activities (2,779) (35,514) (11,536)Net cash used in financing activities (112,510) (79,968) (145,147)Effect of exchange rate changes on cash (10) (174) (18)Net (decrease) increase in cash and cash equivalents 16,342 (14,714) 9,710Cash and cash equivalents at the beginning of the period 47,579 62,293 52,583Cash and cash equivalents at the end of the period$ 63,921$ 47,579$ 62,293Net cash provided by operating activitiesNet cash provided by operating activities increased by $30.7 million to $131.6 million for the year ended December 31, 2023, comparedto $100.9 million for the year ended December 31, 2022. The increase was primarily due to higher utilization and increased hire rates resultingin increased time charter revenue and an increase in working capital elements. In addition, the increase was due to the contribution of theSynnøve Knutsen which was included in the results of operations from July 1, 2022.Net cash used in investing activitiesNet cash used in investing activities was $2.8 million for the year ended December 31, 2023, compared to $35.5 million for the yearended December 31, 2022. Net cash used in investing activities for the year ended December 31, 2023 is mainly due to installation of a BWTSon the Carmen Knutsen and the Brasil Knutsen. Net cash used in investing activities for the year ended December 31, 2022 is mainly relatedto the acquisition of the Synnøve Knutsen for which we paid a net cash amount equal to the difference between the purchase consideration of$119.0 million, less $87.7 million of outstanding indebtedness related to the Synnøve Knutsen, plus approximately $0.6 million for certaincapitalized fees related to the financing of the vessel and plus customary working capital purchase price adjustments of $5.9 million. Net cashused in investing activities is net of cash acquired from the acquisition of the Synnøve Knutsen of $5.7 million. Table of Contents80Net cash used in financing activitiesNet cash used in financing activities during the year ended December 31, 2023 of $112.5 million was mainly related to the following:●Proceeds of $240 million from the refinancing of a new five-year loan facility secured by the Windsor Knutsen, the BodilKnutsen, the Fortaleza Knutsen, the Recife Knutsen, the Carmen Knutsen and the Ingrid Knutsen; and●Proceeds from drawdowns under both of our revolving credit facilities of $5 million each ($10 million total).This was offset by the following:●Repayment of long-term debt of $349.6 million, of which (i) $184.5 million was repaid in connection with the refinancing of thenew loan facility secured by the Windsor Knutsen, the Bodil Knutsen, the Fortaleza Knutsen, the Recife Knutsen, the CarmenKnutsen and the Ingrid Knutsen, (ii) $55 million was repaid in connection with the DNB revolver credit facility and (iii) $10.2million was repaid in connection with the loan facility secured by the Dan Cisne; and●Payment of debt issuance costs of $2.5 million in connection with the refinancing of the $240 Million Loan Facility; and●Payment of cash distributions to unitholders of $10.4 million, of which $6.8 million was distributed to the Series A PreferredUnits.Net cash used in financing activities during the year ended December 31, 2022 of $80.0 million was mainly related to the following:●Proceeds of $112.0 million from the sale and leaseback transaction of the Torill Knutsen; and●Proceeds from drawdowns under one of our revolving credit facilities of $55 million.This was offset by the following:●Repayment of long-term debt of $166.6 million, of which $71.7 million was repaid in connection with the refinancing of theTorill Knutsen;●Payment of debt issuance costs of $0.9 million in connection with the Torill Knutsen sale and leaseback; and●Payment of cash distributions to unitholders of $79.5 million, of which $6.8 million was distributed to the Series A PreferredUnits.Year Ended December 31, 2022 Compared with the Year Ended December 31, 2021See “Item 5. Operating and Financial Review and Prospects—Liquidity and Capital Resources—Cash Flows” in our 2022 20-F for adiscussion of changes in our cash flows from 2022 to 2021 and other financial information related to 2021. Table of Contents81Borrowing ActivitiesLong-Term DebtAs of December 31, 2023, and December 31, 2022, the Partnership had the following debt amounts outstanding: December 31, December 31, (U.S. Dollars in thousands)Vessel20232022$345 million loan facility Anna Knutsen, Tordis Knutsen,Vigdis Knutsen, Brasil Knutsen,Lena Knutsen $288,534$313,630$320 million loan facility Windsor Knutsen, Bodil Knutsen,Carmen Knutsen, FortalezaKnutsen, Recife Knutsen, IngridKnutsen—192,021$240 million loan facility Windsor Knutsen, Bodil Knutsen,Carmen Knutsen, FortalezaKnutsen, Recife Knutsen, IngridKnutsen 222,264 —$55 million revolving credit facility with DNB— 55,000Hilda loan facility Hilda Knutsen 60,000 66,154$172.5 million loan facility Dan Cisne, Dan Sabia 10,370 31,739$192.1 million loan facility Tove Knutsen, Synnøve Knutsen 153,702 162,808$25 million revolving credit facility with NTT 25,000 25,000$25 million revolving credit facility with Shinsei 25,000 25,000Raquel Sale & LeasebackRaquel Knutsen 79,070 84,247Torill Sale & LeasebackTorill Knutsen 99,065 107,048Total long-term debt $ 963,005 $ 1,062,647Less: current installments 101,010 371,906Less: unamortized deferred loan issuance costs 2,050 2,119Current portion of long-term debt 98,960 369,787Amounts due after one year 861,995 690,741Less: unamortized deferred loan issuance costs 4,166 4,140Long-term debt, less current installments, andunamortized deferred loan issuance costs $ 857,829$ 686,601The Partnership’s outstanding debt of $963.0 million as of December 31, 2023 is repayable as follows:Sale &Period(U.S. Dollars in thousands) Leaseback repayment Balloon repayment Total2024 13,804 80,736 6,470 101,0102025 14,399 76,081 186,583 277,0632026 15,060 59,096 219,521 293,6772027 15,751 26,818 37,500 80,0692028 and thereafter 119,121 13,241 78,824 211,186Total$ 178,135$ 255,972$ 528,898$ 963,005As of December 31, 2023, the interest rates on our loan agreements were SOFR plus a fixed margin ranging from 2.0% to 2.5%, exceptfor the Dan Sabia Facility that bore interest based on LIBOR until it was repaid in January 2024. Table of Contents82$345 Million Term Loan FacilityIn September 2021, the Partnership’s subsidiaries which own the Tordis Knutsen, the Vigdis Knutsen, the Lena Knutsen, the Anna Knutsenand the Brasil Knutsen, entered into a new $345 million senior secured credit facility in order to refinance their existing term loans (the “$345Million Loan Facility”). The $345 Million Loan Facility consists of a term loan repayable in 20 consecutive quarterly installments, with aballoon payment of $220 million due at maturity in September 2026. The facility bears interest at a rate per annum equal to SOFR plus aCredit Adjustment Spread (“CAS”) of 0.26161% and a margin of 2.05%. The facility is guaranteed by the Partnership and secured bymortgages on the five vessels.The $345 Million Loan Facility contains the following financial covenants:●Each borrower shall at all times maintain Liquidity equal to or greater than $250,000;●Positive working capital of the Partnership;●Minimum liquidity of the Partnership of $15 million plus increments of $1.5 million for each owned vessel with less than 12months remaining tenor on its employment contract up to 8 vessels and $1 million for each owned vessel with less than 12months 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 $345 Million Loan Facility also identifies various events that may trigger mandatory reduction, prepayment, and cancellation of thefacility, including if the aggregate market value of the vessels is less than 125% of the outstanding balance under the facility, upon a total lossor sale of a vessel and customary events of default. As of December 31, 2023, the borrowers and the guarantors were in compliance with allcovenants under this facility.$320 Million Term Loan Facility and $55 Million Revolving Credit Facility with DNBIn September 2018, the Partnership’s subsidiaries which own the Windsor Knutsen, the Bodil Knutsen, the Fortaleza Knutsen, the RecifeKnutsen, the Carmen Knutsen and the Ingrid Knutsen (the “Vessels”), entered into senior secured credit facilities (the “Multi-VesselsFacility”) in order to refinance their existing long term bank debt. The Multi-Vessels Facility consisted of a term loan of $320 million and a$55 million revolving credit facility.On June 2, 2023, the Partnership closed its new five-year $240 million senior secured term loan facility with DNB (the “$240 MillionLoan Facility”) and repaid the Multi-Vessels Facility.$240 Million Senior Secured Term Loan FacilityOn June 2, 2023, the Partnership’s subsidiaries which own the Vessels entered into the $240 Million Loan Facility, which consists of afive-year term loan. The $240 Million Loan Facility bears interest at a rate per annum equal to SOFR plus a margin of 2.4% and is repayablein 20 consecutive quarterly installments, with a final payment at maturity in May 2028 of $85.4 million, which amount includes the balloonpayment and last quarterly installment. The loan is guaranteed by the Partnership and KNOT Shuttle Tankers AS and secured by mortgages onthe Vessels. The Vessels, assignments of earnings, charterparty contracts and insurance proceeds are pledged as collateral for the $240 MillionLoan Facility.The $240 Million Loan Facility contains the following financial covenants:●Each borrower shall at all times maintain liquidity equal to or greater than $500,000;●Positive working capital of the Partnership; Table of Contents83●Minimum liquidity of the Partnership of $15 million plus increments of $1.5 million for each owned vessel with less than 12months remaining tenor on its employment contract up to 8 vessels and $1 million for each owned vessel with less than 12months remaining tenor on its employment contract up to 12 additional vessels in excess of 8 vessels (of which a minimum of$10 million must be cash);●Minimum book equity ratio for the Partnership of 30%; and●Minimum EBITDA to interest ratio for the Partnership of 2.50.The $240 Million Loan Facility also identifies various events that may trigger mandatory reduction, prepayment and cancellation of thefacility, including if the aggregate market value of the vessels is less than 130% of the outstanding balance under the $240 Million LoanFacility (or less than 166% after June 2, 2027), upon a total loss or sale of a vessel and customary events of default. The borrowers and theguarantors are in compliance with all covenants under this facility.$100 Million Hilda Loan FacilityIn 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 “$100 Million HildaFacility”). The $100 Million Hilda Facility is repayable in 28 consecutive quarterly installments with a final payment at maturity of $58.5million, which includes the balloon payment and last quarterly installment. The facility bears interest at a rate per annum equal to SOFR plus aCredit Adjustment Spread (“CAS”) of 0.26161% and a margin of 2.2%. The Partnership and KNOT Shuttle Tankers AS are the soleguarantors. The facility matures in May 2024.The $100 Million Hilda Facility contains the following primary financial covenants:●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 thePartnership in excess of eight vessels and $1.5 million for each owned vessel with less than 12 months remaining tenor on itsemployment contract;●Minimum book equity ratio for the Partnership of 30%; and●Minimum EBITDA to interest ratio for the Partnership of 2.50.The $100 Million Hilda Facility also identifies various events that may trigger mandatory reduction, prepayment and cancellation of thefacility, including if the market value of the vessels is less than 110% of the outstanding loan under the $100 Million Hilda Facility for the firsttwo years, 120% for the third and fourth year and 125% thereafter, upon a total loss or sale of the vessel and customary events of default. Asof December 31, 2023, the borrower and the guarantors were in compliance with all covenants under this facility.On April 5, 2024, the Partnership entered into a new three-year $60 million senior secured term loan facility with DNB (the “$60 MillionHilda Loan Facility”) as described below. The $100 Million Hilda Loan Facility is expected to be repaid in May 2024. Table of Contents84$60 Million Hilda Loan FacilityOn April 5, 2024, the Partnership’s subsidiary, Knutsen Shuttle Tankers 14 AS, which owns the vessel Hilda Knutsen, entered into a new$60 million senior secured term loan facility with DNB which will refinance and replace the $100 Million Hilda Facility. This refinancing isanticipated to close prior to the maturity date of the expiring facility, and remains subject to execution of definitive documentation and othercustomary closing conditions. The $60 Million Hilda Facility will be repayable in 12 consecutive quarterly installments with a final paymentat maturity of $39.4 million, which includes the balloon payment and last quarterly installment. The facility bears interest at a rate per annumequal to SOFR plus a margin of 2.25%. The Partnership and KNOT Shuttle Tankers AS are the sole guarantors. The facility matures in March2027.The $60 Million Hilda Facility contains the following primary financial covenants:●The borrower shall at all times maintain liquidity equal or greater than $500,000;●Positive working capital of the Partnership;●Minimum liquidity of the Partnership of $15 million plus increments of $1.5 million for each owned vessel with less than12 months remaining tenor on its employment contract up to 8 vessels and $1 million for each owned vessel with less than 12months remaining tenor on its employment contract up to 12 additional vessels in excess of 8 vessels (of which a minimum of$10 million must be cash);●Minimum book equity ratio for the Partnership of 30%; and●Minimum EBITDA to interest ratio for the Partnership of 2.50.The $60 Million Hilda Facility also identifies various events that may trigger mandatory reduction, prepayment and cancellation of thefacility, including if the market value of the vessels is less than 135% of the outstanding loan under the $60 Million Hilda Facility, upon a totalloss or sale of the vessel and customary events of default.$172.5 Million Secured Loan FacilityIn 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 were repaid in full at their respective maturity dates in September 2023 and January2024, with a $10.2 million and a $10.4 million payment, respectively.$192.1 Million Secured Loan FacilityIn July 2019, KNOT Shuttle Tankers 34 AS and KNOT Shuttle Tankers 35 AS, the subsidiary owning the Tove Knutsen and the SynnøveKnutsen, as the borrowers, entered into a $192.1 million secured loan facility. The loan facility is split into a tranche related to the ToveKnutsen (the “Tove Facility”) and a tranche related to the Synnøve Knutsen (the “Synnøve Facility”). The Tove Facility is repayable inquarterly installments with a final balloon payment of $66.6 million due at maturity in September 2025, which includes the balloon paymentand last quarterly installment. The Synnøve Facility is repayable in quarterly installments with a final payment of $72.3 million due atmaturity in October 2025, which includes the balloon payment and last quarterly installment. The facility bears interest at an annual rate equalto SOFR plus a Credit Adjustment Spread (“CAS”) of 0.26161% and a margin of 1.75%. The facility is secured by a standard securitypackage for a vessel financing, including a vessel mortgage on the Tove Knutsen and the Synnøve Knutsen, assignments of earnings,charterparty contracts and insurance proceeds. The Partnership and KNOT Shuttle Tankers AS guarantee the facility. Table of Contents85The $192.1 Million Secured Loan Facility contains the following financial covenants:●Positive working capital of the Partnership;●Minimum liquidity of the Partnership of $15 million plus increments of $1.5 million for each owned vessel with less than 12months remaining tenor on its employment contract up to 8 vessels and $1 million for each owned vessel with less than 12months 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 $192.1 Million Secured Loan Facility also identifies various events that may trigger mandatory reduction, prepayment andcancellation of the facility, including if the market value of either of the vessels falls below 110% of the outstanding loan, upon total loss orsale of the vessels and customary events of default. As of December 31, 2023, the borrower and the guarantors were in compliance with allcovenants under this facility.Revolving Credit FacilitiesOn August 16, 2023, the Partnership closed the refinancing of the first of its two $25 million revolving credit facilities, with the facilitybeing rolled over with NTT Finance Corporation. The new facility will mature in August 2025, bears interest at a rate per annum equal toSOFR plus a margin of 2.23% and has a commitment fee of 0.5% on any undrawn portion of the facility. The commercial terms of the facilityare substantially unchanged from the facility entered into in June 2021 with NTT Finance Corporation.On November 15, 2023, the Partnership closed the refinancing of the second of its two $25 million revolving credit facilities, with thefacility being rolled over with SBI Shinsei Bank, Limited. The new facility will mature in November 2025, bears interest at a rate per annumequal to SOFR plus a margin of 2.0% and has a commitment fee of 0.8% on the undrawn portion of the facility. The commercial terms of thefacility are substantially unchanged from the facility entered into in November 2020 with SBI Shinsei Bank, Limited.Raquel Sale and LeasebackOn December 30, 2020, the Partnership through its wholly owned subsidiary, Knutsen Shuttle Tankers 19 AS, which owned the RaquelKnutsen, agreed to enter into a sale and leaseback agreement with a Japanese-based lessor for a lease period of ten years. The closing of thetransaction occurred on January 19, 2021. The gross sales price was $94.3 million, and a portion of the proceeds was used to repay theoutstanding loan and cancelation of the interest rate swap agreements related to the vessel. The bareboat rate under the lease consists of afixed element per day and there is a fixed-price purchase obligation at maturity. After repayment of the loan and related interest rate swaps,the Partnership realized net proceeds of $38 million after fees and expenses.Torill Sale and LeasebackOn June 30, 2022, the Partnership through its wholly owned subsidiary, Knutsen Shuttle Tankers 15 AS, which owned the Torill Knutsen,closed a sale and leaseback agreement with a Japanese-based lessor for a lease period of ten years. The gross sales price was $112.0 million,and a portion of the proceeds was used to repay the outstanding loan related to the vessel. The bareboat rate under the lease consists of a fixedelement per day and there is a fixed-price purchase obligation at maturity. After repayment of the previously existing loan the Partnershiprealized net proceeds of $39 million after fees and expenses. Table of Contents86Derivative Instruments and Hedging ActivitiesWe use derivative instruments to reduce the risks associated with fluctuations in interest rates. We have a portfolio of interest rate swapcontracts that exchange or swap floating rate interest to fixed rates, which, from a financial perspective, hedges our obligations to makepayments based on floating interest rates. As of December 31, 2023, the Partnership’s net exposure to floating interest rate fluctuations on itsoutstanding debt was $294.5 million based on total interest-bearing debt outstanding of $963.0 million, less the Raquel Knutsen and the TorillKnutsen sale and leaseback facilities of $178.1 million, less interest rate swaps with a notional amount of $426.5 million and less cash andcash equivalents of $63.9 million. Our interest rate swap contracts mature between January 2024 and February 2032 and have an averagematurity of approximately 2.0 years. Under the terms of the interest rate swap agreements, we will receive from the counterparty interest onthe notional amount based on three-month and six-month LIBOR or SOFR and will pay to the counterparty a fixed rate. For the interest rateswap agreements above, we will pay to the counterparty a weighted average interest rate of 1.9%. The Partnership does not apply hedgeaccounting for derivative instruments, and its financial results are impaired by changes in the market value of such financial instruments.C. Research and Development, Patents and Licenses, Etc.Not applicable.D. Trend InformationPlease read “Item 5. Operating and Financial Review and Prospects—Market Overview and Trends.”E. Critical Accounting EstimatesThe preparation of the Partnership’s consolidated financial statements requires us to make estimates and assumptions that affect thereported amounts of assets, liabilities, revenues and expenses and related disclosures about contingent assets and liabilities. We base theseestimates and assumptions on historical experience and on various other information and assumptions that we believe to be reasonable. Ourcritical accounting estimates are important to the portrayal of both our financial condition and results of operations and require us to makesubjective or complex assumptions or estimates about matters that are uncertain. Significant accounting policies are discussed in Note 2—Summary of Significant Accounting Policies in the consolidated financial statements included in this Annual Report. We believe that thefollowing are the critical accounting estimates used in the preparation of our Partnership’s consolidated financial statements. In addition, thereare other items within the Partnership’s consolidated financial statements that require estimation.Vessel Lives and ImpairmentDescription. The carrying value of vessels and equipment represent its historical acquisition or construction cost, including capitalizedinterest, supervision and technical and delivery cost, net of accumulated depreciation and impairment loss, if any. Expenditures for subsequentconversions and major improvements are capitalized, provided that such costs increase the earnings capacity or improve the efficiency orsafety of the vessels. We depreciate the original cost, less an estimated residual value, of our vessels on a straight-line basis over each vessel’sestimated useful life. Depreciation on our shuttle tankers is calculated using an estimated useful life of 23 years, commencing at the date thevessel was originally delivered from the shipyard. However, the actual life of a vessel may be different than the estimated useful life, with ashorter actual useful life resulting in an increase in the depreciation and potentially resulting in an impairment loss. The estimated useful lifeof our vessels takes into account design life, commercial considerations and regulatory restrictions. The carrying value of our vessels may notrepresent their market value at any point in time, because the market prices of second-hand vessels tend to fluctuate with changes in hire ratesand the cost of newbuilds. Table of Contents87We review vessels and equipment for impairment whenever events or changes in circumstances indicate the carrying value of an assetmay not be recoverable, which occurs when the asset’s carrying value is greater than the future undiscounted cash flows the asset is expectedto generate over its remaining useful life. For a vessel under charter, the discounted cash flows from that vessel may exceed its market value,as market values may assume the vessel is not employed on an existing charter. If the estimated future undiscounted cash flows of an assetexceed the asset’s carrying value, no impairment is recognized even though the fair value of the asset may be lower than its carrying value. Ifthe estimated future undiscounted cash flows of an asset are less than the asset’s carrying value and the fair value of the asset is less than itscarrying value, the asset is written down to its fair value. Fair value may be determined through various valuation techniques but is generallycalculated as the net present value of estimated future cash flows.Our business model is to employ our vessels on fixed-rate charters with major energy companies. These charters typically have originalterms between five to ten years in length. Consequently, while the market value of a vessel may decline below its carrying value, the carryingvalue of a vessel may still be recoverable based on the future undiscounted cash flows the vessel is expected to obtain from servicing itsexisting and future charters.Judgments and Uncertainties. Our evaluation of whether impairment indicators exist when assessing any potential impairment requires usto use significant judgement. Our estimates of future cash flows involve assumptions about future hire rates, vessel utilization, operatingexpenses, drydocking expenditures, vessel residual values, the remaining estimated life of our vessels and discount rates. Our estimated hirerates are based on rates under existing vessel charters and market rates at which we expect we can re-charter our vessels. Our estimates ofvessel utilization, including estimated off-hire time and the estimated amount of time our shuttle tankers may spend operating in the spotmarket when not being used in their capacity as shuttle tankers, are based on historical experience of KNOT and our projections of futureshuttle tanker voyages. Our estimates of operating expenses and drydocking expenditures are based on historical operating and drydockingcosts of KNOT and our expectations of future cost and operating requirements. Vessel residual values are a product of a vessel’s lightweighttonnage and an estimated scrap rate. The remaining estimated lives of our vessels used in our estimates of future cash flows are consistentwith those used in the calculation of depreciation. Certain assumptions relating to our estimates of future cash flows are more predictable bytheir nature in our experience, including estimated revenue under existing charter terms, ongoing operating costs and remaining vessel lives.Certain assumptions relating to our estimates of future cash flows require more discretion and are inherently less predictable, such as futurehire rates beyond the firm period of existing charters and vessel residual values, due to factors such as the volatility in hire rates and vesselresidual values. We believe that the assumptions used to estimate future cash flows of our vessels are reasonable at the time they are made. Wecan make no assurances, however, as to whether our estimates of future cash flows, particularly future hire rates or vessel residual values, willbe accurate.Effect If Actual Results Differ from Assumptions. If we conclude that a vessel or equipment is impaired, we recognize a loss in an amountequal to the excess of the carrying value of the asset over its fair value at the date of impairment. The fair value at the date of the impairmentbecomes the new cost basis and will result in a lower depreciation expense than for periods before the vessel or equipment impairment.Vessel Market ValuesIn “Vessel Lives and Impairment” above, we discuss our policy for assessing impairment of the carrying value of our vessels. There is afuture risk that the sale value of certain of our vessels could decline below those vessels’ carrying value, even though we would not impairthose vessels’ carrying value under our accounting impairment policy, due to our belief that future undiscounted cash flows expected to beearned by such vessels over their operating lives would exceed such vessels’ carrying value.In connection with monitoring compliance with our credit facilities and as a general business matter, we periodically monitor the marketvalue of our vessels, including obtaining various broker valuations as of specific dates. We generally do not include the impact of marketfluctuations in vessel prices in our financial statements. We do, however, monitor our business and assets on a regular basis for potential assetimpairment as described above. The total carrying value of our vessels was $1,493 million as of December 31, 2023. Table of Contents88DrydockingDescription. We drydock each of our vessels periodically for inspection, repairs and maintenance and for any modifications to complywith industry certification or governmental requirements. For vessels operating on time charters, we capitalize the costs directly associatedwith the classification and regulatory requirements for inspection of the vessels, major repairs and improvements incurred during drydockingthat increase the earnings capacity or improve the efficiency or safety of the vessels. Drydocking cost is amortized on a straight-line basis overthe period until the next planned drydocking. We expense costs related to routine repairs and maintenance performed during drydocking or asotherwise incurred. For vessels that are newly built or acquired, an element of the cost of the vessel is allocated initially to a drydockcomponent and amortized on a straight-line basis over the period until the next planned drydocking. When significant drydockingexpenditures occur prior to the expiration of this period, we expense the remaining unamortized balance of the original drydocking cost inthe month of the subsequent drydocking. For vessels operating on bareboat charters, the charterer bears the cost of any drydocking.Judgments and Uncertainties. Amortization of capitalized drydock expenditures requires us to estimate the period of the next drydockingor estimated useful life of drydock expenditures. While we typically drydock our vessels every 60 months until the vessel is 15 years old andevery 30 months thereafter, we may drydock the vessels at an earlier date. In addition, certain repair and maintenance items performed duringa drydock may be expensed where we judge the cost to be routine in nature.Effect if Actual Results Differ from Assumptions. A change in our estimate of the useful life of a drydock will have a direct effect on ouramortization of drydocking expenditures.Purchase Price Allocation, Including Goodwill and Intangible AssetsDescription. We allocate the cost of acquired companies to the identifiable tangible and intangible assets and liabilities acquired, with theremaining amount being classified as goodwill, if the purchase is a business acquisition. Certain intangible assets, such as above-marketcontracts, are being amortized over time. Our future operating performance will be affected by the amortization of intangible assets andpotential impairment charges related to goodwill or intangible assets. Accordingly, the allocation of purchase price to intangible assets andgoodwill may significantly affect our future operating results.Judgments and Uncertainties. The allocation of the purchase price of acquired companies requires management to make significantestimates and assumptions, including estimates of future cash flows expected to be generated by the acquired assets and the appropriatediscount rate to value these cash flows. In addition, the process of evaluating the potential impairment of goodwill and intangible assets ishighly subjective and requires significant judgment at many points during the analysis.TaxesDescription. We record a valuation allowance to reduce our deferred tax assets to the amount that is more likely than not to be realized.Judgments and Uncertainties. We record a valuation allowance for deferred tax assets when it is more likely than not that some or all ofthe benefit from the deferred tax asset will not be realized. The future realization of deferred tax assets depends on the existence of sufficienttaxable income of the appropriate character in the carry forward period. This analysis requires, among other things, the use of estimates andprojections in determining future reversals of temporary differences and forecasts of future profitability and evaluating potential tax-planningstrategies. The valuation allowances as of December 31, 2023 were related to the financial loss carry forwards and other net deferred taxassets for Norwegian tonnage tax. In assessing the realizability of deferred tax assets, we considered all the positive and negative evidenceavailable. Given our cumulative loss position for tonnage tax, we determined it was more likely than not that some of the benefit from thedeferred tax assets would be realized based on the weight of available evidence. As of December 31, 2023, we determined that $4.4 million ofthe deferred tax assets are likely to be realized.Effect If Actual Results Differ from Assumptions. If we determined that we were able to realize a net deferred tax asset in the future, inexcess of the net recorded amount, an adjustment to decrease the valuation allowance related to the deferred tax assets would typicallyincrease our net income (or decrease our loss) in the period such determination was made. As of December 31, 2023 and 2022 we had avaluation allowance for deferred tax assets of $20.3 million and $25.7 million, respectively. Table of Contents89Recently Adopted Accounting StandardsIn March 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) 2020-04 ReferenceRate Reform (Topic 848), Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The update provides temporaryoptional expedients and exceptions to the guidance in US GAAP on contract modifications and hedge accounting, to ease the financialreporting burdens related to the expected market transition from the London Interbank Offered Rate (LIBOR) and other interbank offeredrates to alternative reference rates. For all types of hedging relationships, the guidance allows an entity to change the reference rate and othercritical terms related to reference rate reform without having to de-designate the relationship.The objective of the guidance in Topic 848 is to provide temporary relief during the transition period. The FASB included a sunsetprovision within Topic 848 based on expectations of when the LIBOR would cease being published. At the time that Update 2020-04 wasissued, the UK Financial Conduct Authority (“FCA”) had established its intent that it would no longer be necessary to persuade, or compel,banks to submit to LIBOR after December 31, 2021. As a result, the sunset provision was set for December 31, 2022 - 12 months after theexpected cessation date of all currencies and tenors of LIBOR. In March 2021, the FCA announced that the intended cessation date of theovernight 1-, 3-, 6-, and 12-months tenors of USD LIBOR would be June 30, 2023, which is beyond the current sunset date of Topic 848.Because of the current relief in Topic 848 may not cover a period of time during which a significant number of modifications may take place,the amendments in Update 2022-06 defer the sunset date of Topic 848 from December 31, 2022, to December 31, 2024, after which entitieswill no longer be permitted to apply the relief in Topic 848. Although the Partnership does not apply hedge accounting, the Partnership hasdebt and interest rate swaps that reference LIBOR. The Partnership has determined that reference rate reforms will primarily impact itsfloating rate debt facilities and the interest rate derivatives to which the Partnership is a party.Commencing January 1, 2023, all new contracts that the Partnership has or will enter into, are or will be based on an alternative referencerate, the SOFR. For certain existing contracts that reference LIBOR, the Partnership has entered into amendments to contracts affected byreference rate reform, and the Partnership will continue to assess remaining contracts prospectively, applying the optional expedients andexceptions where available.There are no other recent accounting pronouncements whose adoption had a material impact on the consolidated financial statements inthe current year.New Accounting Standards Not Yet AdoptedOther recently issued accounting pronouncements are not expected to materially impact the Partnership.Item 6. Directors, Senior Management and EmployeesA.Directors and Senior ManagementThe following table provides information about our directors and executive officer. The business address for each of our directors andexecutive officer is 2 Queen’s Cross, Aberdeen, AB15 4YB, United Kingdom.Name Age PositionTrygve Seglem 73 Chairman of the Board of DirectorsDerek Lowe 50 Chief Executive Officer and Chief Financial OfficerHans Petter Aas 78 Director, Chairman of the Audit Committee and Member of the Conflicts CommitteeEdward A. Waryas, Jr. 76 Director, Chairman of the Conflicts Committee and Member of the Audit CommitteeAndrew Beveridge 76 Director and Member of the Audit CommitteeRichard Beyer 54 DirectorYasuhiro Fukuda 51 DirectorSimon Bird 64 Director and Member of the Conflicts Committee Table of Contents90Trygve Seglem has served as Chairman of our board of directors since 2013. Mr. Seglem is the owner of TSSI, which is a 50% owner ofKNOT. Mr. Seglem served as president of the Norwegian Shipowners’ Association from 2006 to 2008, is a Finnish Honorary Consult andserves as a member of the board of directors of Assuranceforeningen SKULD (Gjensidig). Mr. Seglem began his career at Statoil at itsinception and has been involved in the development of offshore loading tankers since 1975. In 1984, Mr. Seglem became the project directorand a part owner, through TSSI, of the Knutsen Group. In September 2008, Mr. Seglem became the sole owner of the shuttle tanker operationsof the Knutsen Companies. Mr. Seglem has a degree from Newcastle University in the United Kingdom.Hans Petter Aas has served on our board of directors since 2013, and currently serves as the Chairman of the Audit Committee and as amember of the Conflicts Committee. Mr. Aas has had a long career as a banker in the international shipping and offshore markets and retiredfrom his position as Global Head of the Shipping, Offshore and Logistics Division of DnB NOR Bank ASA in August 2008. Mr. Aas joinedDnB NOR Bank ASA (then Bergen Bank) in 1989 and has previously worked for the Petroleum Division of the Norwegian Ministry ofIndustry and the Ministry of Energy, as well as for Vesta Insurance and Nevi Finance. Mr. Aas is currently a member of the board of directorsof Gearbulk Holding Ltd. and G2Ocean AS. Mr. Aas has a degree from the Norwegian School of Economics and Business Administration.Edward A. Waryas, Jr. has served on our board of directors and as a member of the Conflicts Committee since 2013, and as a member ofthe Audit Committee since 2015. Mr. Waryas retired from his position as Vice President—Marine Business Development for Lloyd’s RegisterNorth America, Inc. at the end of 2014 where he was responsible for marine business development, account management, marketing andproduct development in North America. Mr. Waryas is a past President of Windward Maritime LLC and during the 1990s was President of theClay Marketing and Public Relations marine division as well as Director, Business Development for Newport News Shipbuilding and VicePresident of the Tenneco Foreign Sales Corporation. Prior to this, Mr. Waryas served as a U.S. Coast Guard licensed engineer for MobilShipping & Transportation Company and at the time was also chairman of the bow-loading coordination committee that developed theoffshore loading system for the Statfjord Field off the coast of Norway. Mr. Waryas has a Bachelor of Science, Marine Engineering, from theUnited States Merchant Marine Academy and a Master of Science, Transportation Management, from the State University of New York.Andrew Beveridge has served on our board of directors and as a member of the Audit Committee since 2013. Mr. Beveridge also servesas a director and the chairman of KNOT UK, a position he has held since 2013. Mr. Beveridge is an entrepreneur with a track record ofrunning capital-intensive businesses in the offshore service and shipping industries. From 2006 to 2008, Mr. Beveridge was the DeputyManaging Director and Business Development Manager of Fugro Rovtech Ltd, a shipping and remotely operated vehicle (“ROV”) company.From 1996 to 2006, Mr. Beveridge was the Managing Director of Rovtech Ltd., a company that specializes in the operation of underwaterROVs and the ships they deploy in the oil service and underwater cable-burial industries. Prior to 1996, Mr. Beveridge held various positionsas the Managing Director, commercial director or manager of Slinsgby Engineering Ltd, HMB Subwork Ltd, Star Offshore Services Ltd,Cunard Steamship Co Ltd and Offshore Marine Ltd. Mr. Beveridge has an engineering degree from Trinity College, Cambridge.Richard Beyer has served on our board of directors since April 2017. Mr. Beyer has served as Deputy Director of KNOT since 2011 andhas been a member of the board of directors of the Partnership’s general partner and KNOT UK since 2013. Currently Mr. Beyer is ChiefOperating Officer and Executive Vice President and General Counsel of NYK Group Europe Limited and is a Director of NYK EnergyTransport (Atlantic) Limited, NYK Line’s London based energy shipping business. Mr. Beyer joined NYK Line in 2007, initially advising itsLNG and Offshore Business Groups in London and Tokyo before taking responsibility for the LNG chartering and business development teamof NYK Energy Transport (Atlantic) Limited. From 2004 to 2007, Mr. Beyer was a Senior Legal Advisor to BP Shipping Limited, and prior tothat he was a shipping finance specialist at London based international law firms Stephenson Harwood and Norton Rose. Mr. Beyer is anEnglish qualified lawyer.Yasuhiro Fukuda has served on our board of directors since April 2023. Mr. Fukuda has served as the General Manager, OffshoreBusiness Group, for NYK since April 2023 and from April 2022 until March 2023 was Deputy General Manager of NYK’s Offshore BusinessGroup. Mr. Fukuda joined NYK in 1996 and until 2004 he served in the Car Carrier division and the Corporate Planning division in Japan. In2005, Mr. Fukuda joined the LNG group and from 2015 to 2018 he acted as Manager of the Capesize Bulker Group. Mr. Fukuda graduatedfrom the University of Kyoto, Faculty of Law. Table of Contents91Simon Bird has served on our board of directors since May 2015 and currently serves as a member of the Conflicts Committee. Mr. Birdis currently Director Humber for Associated British Ports, a board role, having taken up this position in September 2015. Mr. Bird previouslyserved as the Chief Executive of Bristol Port Company from 2000 until August 2015. From 1997 to 1999, Mr. Bird served as CommercialDirector at Mersey Docks & Harbour Company plc. From 1995 to 1997 he was Joint Managing Director and Executive Director atInternational Water Ltd. Prior to 1995, Mr. Bird held senior positions at British Aerospace plc, Thorn EMI plc and Philips. Prior to hisindustrial career, Mr Bird served in the Royal Navy and Her Majesty’s Diplomatic Service. Mr. Bird is also chairman of the Humber Freeportand a director of the Greater Lincolnshire Local Enterprise Partnership, a public/private body. Mr Bird holds a Honorary Commission in theRoyal Naval Reserve in the rank of Captain.Derek Lowe became our and KNOT UK’s Chief Executive Officer and Chief Financial Officer in September 2023. Mr. Lowe joined usfrom Telford Offshore, a provider of accommodation, construction and pipelay in the global offshore energy services industry. He served asthe Group Company Secretary of Telford Offshore since its formation in 2018, having provided consultancy services to its predecessor since2015. Mr. Lowe worked from 2011 to 2015 for the debt capital markets group of Pareto Securities, and from 1994 to 2010 for the equitycapital markets group of UBS. Mr. Lowe holds a degree in Mathematics from Oxford University and is an experienced charity trustee, withinterests in national level sport and the local Church of England.B. CompensationReimbursement of Expenses of Our General PartnerOur general partner does not receive compensation from us for any services it provides on our behalf, although it is entitled toreimbursement for expenses incurred on our behalf. In addition, we pay certain fees to KNOT Management and KNOT ManagementDenmark pursuant to technical management agreements and management and administration agreements with our operating subsidiaries, andwe reimburse KOAS UK, KOAS and KNOT Management for their reasonable costs and expenses (plus a 5% service fee) incurred inconnection with provision of services pursuant to an administrative services agreement. Please read “Item 7. Major Unitholders and RelatedParty Transactions—Related Party Transactions.”Executive CompensationPursuant to the administrative services agreement, Derek Lowe, as an officer of KNOT UK, provides executive officer functions for ourbenefit. From June 2019 until September 2023, Mr. Gary Chapman provided these same administrative services under the administartiveservices agreement. Mr. Lowe is responsible for our day-to-day management subject to the direction of our board of directors. Under theadministrative services agreement, we reimburse KNOT UK for its reasonable costs and expenses in connection with the provision of anexecutive officer and other administrative services to us. In addition, we pay KNOT UK a management fee equal to 5% of its costs andexpenses incurred on our behalf. For the year ended December 31, 2023, we incurred total costs, expenses and fees under this agreement of$1,455,984 (which includes $885,954 that was paid to KOAS, KOAS UK and KNOT Management for services they provided for us assubcontractors under the administrative services agreement). Officers and employees of our subsidiaries and affiliates of KNOT and ourgeneral partner may participate in employee benefit plans and arrangements sponsored by KNOT, our general partner or their affiliates,including plans that may be established in the future.Mr. Chapman entered into an employment agreement with KNOT UK effective June 1, 2019. Pursuant to the employment agreement, Mr.Chapman served as KNOT UK’s Chief Executive Officer and Chief Financial Officer and was based in London. His annualized base salarywas 267,120 British Pounds. In addition, the employment agreement also provided for a discretionary annual bonus (as determined by theboard of directors of KNOT UK). The employment agreement includes post-termination restrictive covenants prohibiting Mr. Chapman fromcompeting or soliciting customers or employees for a period of 12 months after the termination of his employment. For the year endedDecember 31, 2023, Mr. Chapman received $249,689 in total compensation. Table of Contents92Mr. Lowe entered into an employment agreement with KNOT UK effective August, 28, 2023. Pursuant to the employment agreement,Mr. Lowe has, since September 13, 2023, served as KNOT UK’s Chief Executive Officer and Chief Financial Officer and is based in London.His annualized base salary is 252,000 British Pounds. In addition, the employment agreement also provides for a discretionary annual bonus(as determined by the board of directors of KNOT UK). Mr. Lowe’s employment may be terminated on 6 months’ prior written notice byeither Mr. Lowe or KNOT UK. In addition, Mr. Lowe’s employment agreement provides KNOT UK with the option to make a payment inlieu of notice or to place Mr. Lowe on garden leave during his notice period. KNOT UK may also terminate the employment agreement withimmediate effect upon certain specified “cause” events. The employment agreement includes post-termination restrictive covenantsprohibiting Mr. Lowe from competing or soliciting customers or employees for a period of 12 months after the termination of his employment.For the year ended December 31, 2023, Mr. Lowe received $103,943 in total compensation.Compensation of DirectorsEach director receives compensation for attending meetings of our board of directors, as well as committee meetings. During the yearended December 31, 2023, each of our directors and our Chairman received aggregate compensation of $95,000. During the year endedDecember 31, 2023, members of the audit and conflicts committees each received a committee fee of $12,000, or $15,000 for the memberserving as the Chairman of each such committee. In addition, each director is reimbursed for out-of-pocket expenses in connection withattending meetings of our board of directors or committees. Each director is fully indemnified by us for actions associated with being adirector to the extent permitted under Marshall Islands law.C. Board PracticesGeneralOur partnership agreement provides that our general partner irrevocably delegates to our board of directors the authority to oversee anddirect our operations, management and policies on an exclusive basis, and such delegation is binding on any successor general partner of thePartnership. Our general partner, KNOT Offshore Partners GP LLC, is wholly owned by KNOT. Our officers manage our day-to-day activitiesconsistent with the policies and procedures adopted by our board of directors.Our current board of directors consists of seven members, Trygve Seglem, Richard Beyer, Yasuhiro Fukuda , Hans Petter Aas, Edward A.Waryas, Jr., Andrew Beveridge and Simon Bird. Mr. Seglem, Mr. Beyer and Mr. Fukuda have been appointed by our general partner. Mr. Aas,Mr. Waryas, Mr. Beveridge and Mr. Bird were elected by our common unitholders. Directors appointed by our general partner serve asdirectors for terms determined by our general partner. Directors elected by our common unitholders are divided into four classes servingstaggered four-year terms. Mr. Waryas is designated as the Class I elected director and will serve until our annual meeting of unitholders in2026. Mr. Beveridge is designated as our Class II elected director and will serve until our annual meeting of unitholders in 2027. Mr. Bird isdesignated as our Class III elected director and will serve until our annual meeting of unitholders in 2024. Mr. Aas is designated as our ClassIV elected director and will serve until our annual meeting of unitholders in 2025. At each annual meeting of unitholders, directors will beelected to succeed the class of director whose term has expired by a plurality of the votes of the common unitholders. Directors elected by ourcommon unitholders will be nominated by our board of directors or by any limited partner or group of limited partners that holds at least 10%of the outstanding common units.Each outstanding common unit is entitled to one vote on matters subject to a vote of common unitholders. The Class B Units generallyvote together with the common units as a single class. However, if at any time, any person or group owns beneficially more than 4.9% or moreof any class of units then outstanding (excluding units held by Norwegian Resident Holders in the election of the elected directors asdiscussed below), any such units owned by that person or group in excess of 4.9% may not be voted (except for purposes of nominating aperson for election to our board of directors). The voting rights of any such unitholders in excess of 4.9% will effectively be redistributed prorata among the other unitholders holding less than 4.9% of the voting power of such class of units. Our general partner, its affiliates andpersons who acquire common units or Class B Units with the prior approval of our board of directors are not subject to this 4.9% limitationexcept with respect to voting their common units and Class B Units in the election of the elected directors. The common units and the Class BUnits will be treated as two separate classes of partnership interests for purposes of the 4.9% limitation, which will apply separately to theholders of common units and to the holders of Class B Units. Table of Contents93In addition, common unitholders and Class B Unitholders that are Norwegian Resident Holders will not be eligible to vote in the electionof the elected directors. The voting rights of any Norwegian Resident Holders will effectively be redistributed pro rata among the remainingunitholders (subject to the limitation described above for 4.9% unitholders) in these elections.The Series A Preferred Units do not have any right to nominate, appoint or elect any member of our board of directors unless distributionspayable on the Series A Preferred Units have not been declared and paid for four consecutive quarters (a “Trigger Event”). Upon a TriggerEvent, holders of Series A Preferred Units together with the holders of any other series of preferred units upon which like rights have beenconferred and are exercisable, will have the right to replace one of the board members appointed by our general partner with a personnominated by such holders, such nominee to serve until all accrued and unpaid distributions on the preferred units have been paid.CommitteesWe have an audit committee that, among other things, reviews our external financial reporting, engages our external auditors and overseesour internal audit activities and procedures and the adequacy of our internal accounting controls. Our audit committee is comprised of HansPetter Aas, Andrew Beveridge and Edward A. Waryas, Jr. Our board of directors has determined that each of Mr. Aas, Mr. Beveridge andMr. Waryas satisfies the independence standards established by the NYSE. Mr. Aas qualifies as an “audit committee financial expert” forpurposes of SEC rules and regulations.We also have a conflicts committee comprised of Mr. Waryas, Mr. Aas and Mr. Bird. The conflicts committee is available at our board ofdirectors’ discretion to review specific matters that our board of directors believes may involve conflicts of interest. The conflicts committeemay determine if the resolution of the conflict of interest is fair and reasonable to us. The members of the conflicts committee may not beofficers or employees of us or directors, officers or employees of our general partner or its affiliates and must meet the independence standardsestablished by the NYSE to serve on an audit committee of a board of directors and certain other requirements. Any matters approved by theconflicts committee will be conclusively deemed to be fair and reasonable to us, approved by all of our partners and not a breach by ourdirectors, our general partner or its affiliates of any duties any of them may owe us or our unitholders.Exemptions from NYSE Corporate Governance RulesBecause we qualify as a foreign private issuer under SEC rules, we are permitted to follow the corporate governance practices of theMarshall Islands (the jurisdiction in which we are organized) in lieu of certain of the NYSE corporate governance requirements that wouldotherwise be applicable to us. The NYSE rules do not require a listed company that is a foreign private issuer to have a board of directors thatis comprised of a majority of independent directors. Under Marshall Islands law, we are not required to have a board of directors comprised ofa majority of directors meeting the independence standards described in the NYSE rules. In addition, the NYSE rules do not require limitedpartnerships like us to have boards of directors comprised of a majority of independent directors. The NYSE rules do not require foreignprivate issuers or limited partnerships like us to establish a compensation committee or a nominating/corporate governance committee.Similarly, under Marshall Islands law, we are not required to have a compensation committee or a nominating/corporate governancecommittee. Accordingly, we do not have a compensation committee or a nominating/corporate governance committee. For a listing andfurther discussion of how our corporate governance practices differ from those required of U.S. companies listed on the NYSE, please read“Item 16G. Corporate Governance.”D. EmployeesEmployees of affiliates of KNOT provide services to our subsidiaries pursuant to the technical management agreements, the managementand administration agreements and the administrative services agreement. As of December 31, 2023, we directly employed one onshoreemployee and no seagoing employees, however through subsidiaries and affiliated companies, we employed approximately 837 seagoing staffto serve on our vessels. Certain affiliates of KNOT, including KNOT Management, provide commercial and technical management services,including all necessary crew-related services, to our subsidiaries pursuant to the technical management agreements and the management andadministration agreements. Please read “Item 7. Major Unitholders and Related Party Transactions—Related Party Transactions” and “Item 4.Information on the Partnership—Business Overview—Employees.” Table of Contents94E. Unit OwnershipOther than those common units, Class B Units and Series A Preferred Units in which Trygve Seglem may be deemed to share beneficialownership, as of April 11, 2024, there were no common units, Class B Units or Series A Preferred Units beneficially owned by our currentdirectors or executive officer. Please read “Item 7. Major Unitholders and Related Party Transactions—Major Unitholders.”F. Disclosure of a Registrant’s Action to Recover Erroneously Awarded CompensationNot applicable.Item 7. Major Unitholders and Related Party TransactionsA.Major UnitholdersThe following table sets forth the beneficial ownership of our common units as of April 11, 2024 by each person that we know to own, orbeneficially own, more than 5.0% of our common units. The number of units beneficially owned by each party is determined under SEC rulesand the information is not necessarily indicative of beneficial ownership for any other purpose:Common Units Beneficially Owned Name of Beneficial Owner Number Percent KNOT(1)10,009,53929.2%Offshore Merchant Partners Asset Yield Fund L.P.(2) 2,579,1667.0%Invesco Ltd.(3)1,776,804 5.2%(1)KNOT is a joint venture between TSSI and NYK Europe, each of which owns a 50% interest in KNOT. Excludes the general partnerinterest held by our general partner, a wholly owned subsidiary of KNOT. Includes common units held by our general partner. NYKEurope is a wholly owned subsidiary of NYK, a broadly owned Japanese public company. TSSI is a wholly owned subsidiary of SeglemHolding AS (“Seglem Holding”), of which 70% is owned by Trygve Seglem with the remainder owned by members of his immediatefamily. Accordingly, each of NYK Europe, NYK, TSSI, Seglem Holding and Trygve Seglem may be deemed to share beneficialownership of the common units, Class B Units and Series A Preferred Units of the Partnership beneficially held by KNOT and the 1.83%general partner interest held by the Partnership’s general partner. Included in the number of common units beneficially owned are 257,916common units, which represent the common units into which the 208,333 Series A Preferred Units beneficially owned were convertible atApril 11, 2024, which common units are included in both the numerator and denominator in calculating the percentage beneficiallyowned. Common units issuable upon conversion of the Class B Units are not included in the number of common units beneficiallyowned.(2)Offshore Merchant Partners Asset Yield Fund L.P. (“OMP”) has shared voting and dispositive power as to 2,579,166 common units. Thisrepresents 2,579,166 common units into which the 2,083,333 Series A Preferred Units owned by OMP AY Preferred Limited wereconvertible as of April 11, 2024, which common units are included in both the numerator and denominator in calculating the percentagebeneficially owned. This information is based on the Schedule 13G/A filed by OMP on February 20, 2024.(3)Invesco Ltd. has sole voting power and dispositive power as to 1,776,804 common units. This information is based on the Schedule 13Gfiled by Invesco Ltd. on February 12, 2021. Table of Contents95Each outstanding common unit is entitled to one vote on matters subject to a vote of common unitholders. The Class B Units generallyvote together with the common units as a single class. However, if at any time, any person or group owns beneficially more than 4.9% or moreof any class of units then outstanding (excluding units held by Norwegian Resident Holders in the election of the elected directors asdiscussed below), any such units owned by that person or group in excess of 4.9% may not be voted (except for purposes of nominating aperson for election to our board of directors). The voting rights of any such unitholders in excess of 4.9% will effectively be redistributed prorata among the other unitholders holding less than 4.9% of the voting power of such class of units. Our general partner, its affiliates andpersons who acquire common units or Class B Units with the prior approval of our board of directors are not subject to this 4.9% limitationexcept with respect to voting their common units or Class B Units in the election of the elected directors. The common units and the Class BUnits will be treated as two separate classes of partnership interests for purposes of the 4.9% limitation, which will apply separately to theholders of common units and to the holders of Class B Units.In addition, common unitholders and Class B Unitholders that are Norwegian Resident Holders will not be eligible to vote in the electionof the elected directors. The voting rights of any Norwegian Resident Holders will effectively be redistributed pro rata among the remainingunitholders (subject to the limitation described above for 4.9% unitholders) in these elections.As of April 11, 2024, we had 3,541,666 Series A Preferred Units issued and outstanding, of which 2,083,333 units, 1,250,000 units and208,333 units are held by OMP AY Preferred Limited, Pierfront Capital Mezzanine Fund Pte. Ltd. and KNOT, respectively.The Series A Preferred Units have voting rights that are identical to the voting rights of our common units, except they do not have anyright to nominate, appoint or elect any member of our board of directors, except upon a Trigger Event. Upon a Trigger Event, holders ofSeries A Preferred Units together with the holders of any other series of preferred units upon which like rights have been conferred and areexercisable, will have the right to replace one of the board members appointed by our general partner with a person nominated by suchholders, such nominee to serve until all accrued and unpaid distributions on the preferred units have been paid. The Series A Preferred Unitsare entitled to vote with our common units as a single class, so that the Series A Preferred Units are entitled to one vote for each common unitinto which the Series A Preferred Units are convertible at the time of voting. The 4.9% limitation described above applies to the holders of theSeries A Preferred Units with respect to the voting of the Series A Preferred Units on an as-converted basis with the common units. Series APreferred Units held by Norwegian Resident Holders are not entitled to vote.As of April 11, 2024, we had 252,405 Class B Units outstanding, all of which were held by KNOT.KNOT exercises influence over the Partnership through our general partner, a wholly owned subsidiary of KNOT, which in its solediscretion appoints three directors to our board of directors. Please read “Item 6. Directors, Senior Management and Employees—BoardPractices.” KNOT also exercises influence over the Partnership through its ownership of 28.4% of our common units as of April 11, 2024. Table of Contents96B. Related Party TransactionsFrom time to time we have entered into agreements and have consummated transactions with certain related parties. We may enter intorelated party transactions from time to time in the future. In connection with our IPO, we established a conflicts committee, comprised entirelyof independent directors, which must approve all proposed material related party transactions.Omnibus AgreementUpon the closing of our IPO, we entered into an Omnibus Agreement with KNOT, our general partner and certain of our othersubsidiaries. The following discussion describes certain provisions of the Omnibus Agreement.NoncompetitionPursuant to the Omnibus Agreement, KNOT agreed, and caused its controlled affiliates (other than us, our general partner and oursubsidiaries) to agree, not to acquire, own, operate or charter any shuttle tanker operating under a charter for five or more years. For purposesof this section, we refer to these vessels, together with any related charters, as “Five-Year Vessels” and to all other shuttle tankers, togetherwith any related charters, as “Non-Five-Year Vessels.” The restrictions in this paragraph do not prevent KNOT or any of its controlledaffiliates (other than us and our subsidiaries) from:(1)acquiring, owning, operating or chartering Non-Five-Year Vessels;(2)acquiring one or more Five-Year Vessels if KNOT promptly offers to sell the vessel to us for the acquisition price plus anyadministrative costs (including re-flagging and reasonable legal costs) associated with the transfer to us at the time of theacquisition;(3)putting a Non-Five-Year Vessel under charter for five or more years if KNOT offers to sell the vessel to us for fair market value(x) promptly after the time it becomes a Five-Year Vessel and (y) at each renewal or extension of that charter for five ormore years;(4)acquiring one or more Five-Year Vessels as part of the acquisition of a controlling interest in a business or package of assets andowning, operating or chartering those vessels; provided, however, that:(a)if less than a majority of the value of the business or assets acquired is attributable to Five-Year Vessels, as determined ingood faith by KNOT’s board of directors, KNOT must offer to sell such vessels to us for their fair market value plus anyadditional tax or other similar costs that KNOT incurs in connection with the acquisition and the transfer of such vessels tous separate from the acquired business; and(b)if a majority or more of the value of the business or assets acquired is attributable to Five-Year Vessels, as determined ingood faith by KNOT’s board of directors, KNOT must notify us of the proposed acquisition in advance. Not later than30 days following receipt of such notice, we will notify KNOT if we wish to acquire such vessels in cooperation andsimultaneously with KNOT acquiring the Non-Five-Year Vessels. If we do not notify KNOT of our intent to pursue theacquisition within 30 days, KNOT may proceed with the acquisition and then offer to sell such vessels to us as provided inparagraph (1)(a) above;(5)acquiring up to a 9.9% equity ownership, voting or profit participation interest in any company, business or pool of assets;(6)acquiring, owning, operating or chartering any Five-Year Vessel if we do not fulfill our obligation to purchase such vessel inaccordance with the terms of any existing or future agreement;(7)acquiring, owning, operating or chartering a Five-Year Vessel subject to the offers to us described in paragraphs (2), (3) and(4) above pending our determination whether to accept such offers and pending the closing of any offers we accept;(8)providing ship management services relating to any vessel; Table of Contents97(9)owning or operating any Five-Year Vessel that KNOT owned as of April 15, 2013 and that was not part of our initial fleet as ofsuch date; or(10)acquiring, owning, operating or chartering a Five-Year Vessel if we have previously advised KNOT that we consent to suchacquisition, ownership, operation or charter.If KNOT or any of its controlled affiliates (other than us or our subsidiaries) acquires, owns, operates or charters Five-Year Vesselspursuant to any of the exceptions described above, it may not subsequently expand that portion of its business other than pursuant to thoseexceptions. However, such Five-Year Vessels could eventually compete with our vessels upon their re-chartering.In addition, pursuant to the Omnibus Agreement, we agree, and cause our subsidiaries to agree, to acquire, own, operate or charter Five-Year Vessels only. The restrictions in this paragraph do not:(1)prevent us from owning, operating or chartering any Non-Five-Year Vessel that was previously a Five-Year Vessel while ownedby us;(2)prevent us or any of our subsidiaries from acquiring Non-Five-Year Vessels as part of the acquisition of a controlling interest ina business or package of assets and owning, operating or chartering those vessels; provided, however, that:(a)if less than a majority of the value of the business or assets acquired is attributable to Non-Five-Year Vessels, as determinedin good faith by us, we must offer to sell such vessels to KNOT for their fair market value plus any additional tax or othersimilar costs that we incur in connection with the acquisition and the transfer of such vessels to KNOT separate from theacquired business; and(b)if a majority or more of the value of the business or assets acquired is attributable to Non-Five-Year Vessels, as determinedin good faith by us, we must notify KNOT of the proposed acquisition in advance. Not later than 30 days following receiptof such notice, KNOT must notify us if it wishes to acquire the Non-Five-Year Vessels in cooperation and simultaneouslywith us acquiring the Five-Year Vessels. If KNOT does not notify us of its intent to pursue the acquisition within 30 days,we may proceed with the acquisition and then offer to sell such vessels to KNOT as provided in paragraph (2)(a) above;(3)prevent us or any of our subsidiaries from acquiring, owning, operating or chartering any Non-Five-Year Vessels subject to theoffer to KNOT described in paragraph (2) above, pending its determination whether to accept such offer and pending the closingof any offer it accepts; or(4)prevent us or any of our subsidiaries from acquiring, owning, operating or chartering Non-Five-Year Vessels if KNOT haspreviously advised us that it consents to such acquisition, ownership, operation or charter.If we or any of our subsidiaries acquires, owns, operates or charters Non-Five-Year Vessels pursuant to any of the exceptions describedabove, neither we nor such subsidiary may subsequently expand that portion of our business other than pursuant to those exceptions.Upon a change of control of us or our general partner, the noncompetition provisions of the Omnibus Agreement terminate immediately.Upon a change of control of KNOT, the noncompetition provisions of the Omnibus Agreement applicable to KNOT terminate at the time ofthe change of control. On the date on which a majority of our directors ceases to consist of directors that were (1) appointed by our generalpartner prior to our first annual meeting of unitholders and (2) recommended for election by a majority of our appointed directors, thenoncompetition provisions applicable to KNOT terminate immediately. Table of Contents98Rights of First Offer on Shuttle TankersPursuant to the Omnibus Agreement, we and our subsidiaries granted to KNOT a right of first offer on any proposed sale, transfer orother disposition of any Five-Year Vessels or Non-Five-Year Vessels owned by us. Pursuant to the Omnibus Agreement, KNOT agreed, andcaused its subsidiaries to agree, to grant a similar right of first offer to us for any Five-Year Vessels they might own. These rights of first offerdo not apply to a (1) sale, transfer or other disposition of vessels between any affiliated subsidiaries or pursuant to the terms of any current orfuture charter or other agreement with a charterparty or (2) merger with or into, or sale of substantially all of the assets to, an unaffiliated thirdparty.Prior to engaging in any negotiation regarding any vessel disposition with respect to a Five-Year Vessel with an unaffiliated third party orany Non-Five-Year Vessel, we or KNOT, as the case may be, will deliver a written notice to the other relevant party setting forth the materialterms and conditions of the proposed transaction. During the 30-day period after the delivery of such notice, we and KNOT, as the case maybe, will negotiate in good faith to reach an agreement on the transaction. If we do not reach an agreement within such 30-day period, we orKNOT, as the case may be, will be able within the next 180 calendar days to sell, transfer, dispose or re-charter the vessel to a third party (orto agree in writing to undertake such transaction with a third party) on terms generally no less favorable to us or KNOT, as the case may be,than those offered pursuant to the written notice.Upon a change of control of us or our general partner, the right-of-first-offer provisions of the Omnibus Agreement terminateimmediately. Upon a change of control of KNOT, the right-of-first-offer provisions applicable to KNOT pursuant to the Omnibus Agreementterminate at the time of the change of control. On the date on which a majority of our directors ceases to consist of directors that were(1) appointed by our general partner prior to our first annual meeting of unitholders and (2) recommended for election by a majority of ourappointed directors, the provisions related to the rights of first offer granted to us by KNOT terminate immediately. Table of Contents99IndemnificationPursuant to the Omnibus Agreement, KNOT indemnifies us for liabilities related to:●certain defects in title to the assets contributed or sold to us and any failure to obtain, prior to the time they were contributed tous, certain consents and permits necessary to conduct our business, which liabilities arose before April 15, 2018 (or, in the caseof the Hilda Knutsen, the Torill Knutsen, the Ingrid Knutsen and the Raquel Knutsen, within three years after our purchase of theHilda Knutsen, the Torill Knutsen, the Ingrid Knutsen and the Raquel Knutsen, as applicable); and●certain tax liabilities attributable to the operation of the assets contributed or sold to us prior to the time they were contributed orsold.AmendmentsThe Omnibus Agreement may not be amended without the prior approval of the conflicts committee of our board of directors if theproposed amendment will, in the reasonable discretion of our board of directors, adversely affect holders of our common units.IDR ExchangeOn September 7, 2021, the Partnership entered into an exchange agreement with its general partner and KNOT whereby KNOTcontributed to the Partnership all of KNOT’s IDRs in exchange for the issuance by the Partnership to KNOT of 673,080 common units and673,080 Class B Units, whereupon the IDRs were cancelled. The IDR Exchange closed on September 10, 2021. The Class B Units are a classof limited partner interests which are not entitled to receive cash distributions in any quarter unless common unitholders receive a distributionof at least the Distribution Threshold. When common unitholders receive a quarterly distribution at least equal to the Distribution Threshold,then Class B unitholders will be entitled to receive the same distribution as common unitholders.For each quarter (starting with the quarter ended September 30, 2021) that the Partnership pays distributions on the common units that areat or above the Distribution Threshold, one-eighth of the Class B Units will be converted to common units on a one-for-one basis until suchtime as no further Class B Units exist. The Class B Units will generally vote together with the common units as a single class. As of April 11,2024, 252,405 Class B Units remain outstanding.Bodil Knutsen Charter with Knutsen Shuttle Tankers Pool ASIn May 2021, our subsidiary that owns the Bodil Knutsen entered into a rolling one-month time charter contract with Knutsen ShuttleTankers Pool AS, a subsidiary of KNOT, at a reduced charter rate that expired on March 7, 2023, at which time it entered into a new timecharter to Knutsen Shuttle Tankers Pool AS on a fixed-term basis at the same reduced charter rate. The term of this time charter was extendedto April 2024, or such time as the vessel would be delivered to Equinor, if earlier. Bodil Knutsen was delivered to Equinor on March 27, 2024.Hilda Knutsen Charter with Knutsen Shuttle Tankers Pool ASOn September 3, 2022, our subsidiary that owns the Hilda Knutsen entered into a time charter contract with Knutsen Shuttle Tankers PoolAS at a reduced charter rate. Following an extension, this charter expires in January 2025 unless terminated by either party on giving not lessthan 30 days’ notice.Torill Knutsen Charter with Knutsen Shuttle Tankers Pool ASOn March 1, 2023, our subsidiary that owns the Torill Knutsen entered into a time charter contract with Knutsen Shuttle Tankers Pool ASat a reduced charter rate. Following an extension, this charter expires in January 2025 unless terminated by either party on giving not less than30 days’ notice. Table of Contents100Administrative Services AgreementEffective as of February 26, 2013, in connection with our IPO, we entered into an administrative services agreement with KNOT UK,pursuant to which KNOT UK provides certain management and administrative services to us. The agreement had an initial term of five years.The services provided under the administrative services agreement are provided in a diligent manner, as we may reasonably direct. KNOT UKis permitted to subcontract certain of the administrative services provided under this agreement to KOAS UK and KOAS, each of which is awholly owned subsidiary of TSSI and KNOT Management. On May 7, 2015, we entered into an amendment to the administrative servicesagreement, which allows KNOT UK to also subcontract administrative services to KNOT Management. Effective as of February 26, 2018, weentered into a second amendment to the administrative services agreement extending the term of the agreement indefinitely.The administrative services agreement may be terminated by any party upon 90 days’ notice for any reason. Under the administrativeservices agreement, Derek Lowe, as an officer of KNOT UK, provides executive officer functions for our benefit. Mr. Lowe is responsible forour day-to-day management, subject to the direction of our board of directors. Our board of directors has the ability to terminate thearrangement with KNOT UK regarding the provision of executive officer services to us with respect to Mr. Lowe at any time in its solediscretion.The administrative services provided by KNOT UK include:●commercial management services: assistance with our commercial management and the execution of our business strategies,although KNOT UK does not make any strategic decisions;●bookkeeping, audit and accounting services: assistance with the maintenance of our corporate books and records, assistancewith the preparation of our tax returns and arranging for the provision of audit and accounting services;●legal and insurance services: arranging for the provision of legal, insurance and other professional services and maintaining ourexistence and good standing in necessary jurisdictions;●administrative and clerical services: assistance with office space, arranging meetings for our common unitholders pursuant toour partnership agreement, arranging the provision of IT services, providing all administrative services required for subsequentdebt and equity financings and attending to all other administrative matters necessary to ensure the professional management ofour business;●banking and financial services: providing cash management including assistance with preparation of budgets, overseeingbanking services and bank accounts, arranging for the deposit of funds and monitoring and maintaining compliance therewith;●advisory services: assistance in complying with United States and other relevant securities laws;●client and investor relations: arranging for the provision of, advisory, clerical and investor relations services to assist andsupport us in our communications with our common unitholders; and●assistance with the integration of any acquired businesses.Each quarter, we reimburse KNOT UK, and KNOT UK reimburses KOAS UK, KOAS and KNOT Management, as applicable, for theirreasonable costs and expenses incurred in connection with the provision of the services under the administrative services agreement. Inaddition, KNOT UK, KOAS UK, KOAS and KNOT Management, as applicable, receives a service fee in U.S. Dollars equal to 5% of thecosts and expenses incurred by them in connection with providing services. Amounts payable by us under the administrative servicesagreement must be paid on a monthly basis within 30 days after receipt of an invoice for such costs and expenses, together with anysupporting detail that may be reasonably required. Table of Contents101Under the administrative services agreement, we indemnify KNOT UK’s subcontractors against all actions which may be brought againstthem as a result of their performance of the administrative services including, without limitation, all actions brought under the environmentallaws of any jurisdiction, and against and in respect of all costs and expenses they may suffer or incur due to defending or settling such actions;provided, however, that such indemnity excludes any or all losses to the extent that they are caused by or due to the fraud, gross negligence orwillful misconduct of the subcontractor or its officers, employees and agents.Technical Management AgreementsEach of the Bodil Knutsen, the Windsor Knutsen, the Carmen Knutsen, the Hilda Knutsen, the Torill Knutsen, the Ingrid Knutsen, theRaquel Knutsen, the Tordis Knutsen, the Vigdis Knutsen, the Lena Knutsen, the Brasil Knutsen, the Anna Knutsen, the Tove Knutsen, theSynnøve Knutsen, the Recife Knutsen and the Fortaleza Knutsen, which as at December 31, 2023 operate under time charters, is subject totechnical management agreements pursuant to which certain crew, technical and commercial management services are provided by KNOTManagement. Under these technical management agreements, our operating subsidiaries pay fees to and reimburse the costs and expenses ofthe managers as described below. As at December 31, 2023, the Dan Sabia operates under a bareboat charter, as also did the Recife Knutsen,the Fortaleza Knutsen and the Dan Cisne until the expiry of their relevant charters in March 2023, August 2023 and December 2023respectively. Under a bareboat charter, the customer is responsible with providing for the crew, technical and commercial management of thevessel. However, each of these vessels is (or, as the case may be during the subsistence of a bareboat charter, was) subject to management andadministration agreements with either KNOT Management or KNOT Management Denmark pursuant to which these companies providegeneral monitoring services for the vessels in exchange for an annual fee. Please read “—Management and Administration Agreements”.Management services. Each of the technical management agreements requires that KNOT Management and its subcontractors use theirbest endeavors to perform the following management services:●the provision of suitably qualified crew in accordance with International Convention on Standards of Training, Certification andWatchkeeping for Seafarers, 1978, as amended, and the attendance to all matters pertaining to discipline, labor relations, welfareand amenities of the crew;●the provision of technical management, including arranging and supervising drydockings, maintenance and repairs of the vessel,arranging for the supply of stores, spares and lubricating oil, appointing surveyors and technical consultants and developing,implementing and maintaining a Safety Management System in accordance with the ISM Code;●the provision of applicable documentation and compliance with applicable regulations;●the establishment of an accounting system that meets the requirements of the owner, provides regular accounting services andsupplies reports and records and the maintenance of records of costs and expenditures incurred, as well as data necessary for thesettlement of accounts between the parties;●the arrangement for the supply of provisions and necessary stores;●the handling and settlement of claims arising out of the management services;●the arrangement for the provision of bunker;●the arrangement of the loading and discharging and all related matters, subject to the provisions of the time charters;●the arrangement of all insurances;●the giving of instructions to the master and officers, subject to the provisions of the time charters; and●the arrangement of the lay-up of each vessel. Table of Contents102With respect to the technical management agreements, KNOT Management and its subcontractors use their best endeavors to also providethe commercial operations, including arranging payment to the owner’s account of all hire and/or freight revenues, calculating hire, freightand other money due from or to the charterer, issuing voyage instructions, appointing agents and stevedores and arranging surveys associatedwith the commercial operations.Annual management fee.Pursuant to each of the technical management agreements, each of the vessel-owning entities paid a fee of $0.74million per year for 2023 to KNOT Management, as manager, payable in equal monthly installments. This annual rate is subject to anadjustment on January 1 of each year pursuant to a procedure set forth in the agreements. The annual management fee for 2024 has been set at$0.78 million per vessel. Any dispute relating to the annual rate adjustment would be settled by dispute resolution provisions set forth in theapplicable technical management agreement.Term. Each of the technical management agreements for the Windsor Knutsen and the Bodil Knutsen continues indefinitely untilterminated by either party after giving three months’ written notice. Each of the technical management agreements for the Fortaleza Knutsen,the Recife Knutsen, the Dan Cisne, the Carmen Knutsen, the Hilda Knutsen, the Torill Knutsen, the Ingrid Knutsen, the Raquel Knutsen, theTordis Knutsen, the Vigdis Knutsen, the Lena Knutsen, the Brasil Knutsen, the Anna Knutsen, the Tove Knutsen and the Synnøve Knutsencontinues indefinitely until terminated by either party after giving six months’ notice.Automatic termination and termination by either party. Each technical management agreement terminates or is deemed to be terminatedif:●the vessel is sold, requisitioned, declared a constructive, compromised or arranged total loss or becomes a total loss; or●an order is made or a resolution is passed for the winding up, dissolution, liquidation or bankruptcy of either party (otherwisethan for the purpose of reconstruction or amalgamation), a receiver is appointed or either party suspends payment, ceases tocarry on business or makes any special arrangement or composition with its creditors.Termination by the manager. Under each technical management agreement, the manager may terminate the agreement with immediateeffect by written notice if:●any money payable to the manager pursuant to the agreement has not been paid within a specified period of days after demandby the manager for payment or the vessel is repossessed by the mortgagees; or●the owner proceeds with the employment of or continues to employ the vessel (1) in the carriage of contraband, blockaderunning or an unlawful trade or (2) on a voyage that in the reasonable opinion of the applicable manager is unduly hazardous orimproper. The manager may only terminate if the owner is given notice of such default and fails to cure within a reasonable timeto the satisfaction of the manager.KNOT Management also may terminate each technical management agreement if the applicable owner elects to provide officers and, forany reason within its control, fails to (1) procure that all officers and ratings supplied by it or on its behalf comply with the requirements of theInternational Convention on Standards of Training, Certification and Watchkeeping for Seafarers, as amended in 1995, or (2) instruct suchofficers and ratings to obey all reasonable orders of KNOT Management in connection with the operation of KNOT Management’s safetymanagement system. The manager may only terminate if the owner is given notice of such default and fails to cure within a reasonable time tothe satisfaction of the manager.Termination by the owner. Under each technical management agreement, the owner may terminate the applicable agreement withimmediate effect by written notice to the manager if the manager, for any reason, is in default and fails to cure within a reasonable time. Table of Contents103Additional fees and provisions. In addition to the fees payable under each technical management agreement, the agreement also providesthat the owner must make available to the manager each month within 60 days of a demand by the manager for payment an amount equal tothe working capital required to run the vessel for the ensuing quarter. Further, under each technical management agreement, the manager andits employees, agents and subcontractors are indemnified by the owner against all actions that may be brought against them or incurred orsuffered by them arising out of or in connection with their performance under such agreement in an amount not to exceed ten times the annualmanagement fee payable under such agreement; provided, however, that such indemnity excludes any or all losses that may be caused by ordue to the fraud, gross negligence or willful misconduct of the manager or its employees, agents and subcontractors.Management and Administration AgreementsDuring 2023, the Recife Knutsen (until August 2023), the Fortaleza Knutsen (until March 2023), the Dan Cisne (until December 2023)and the Dan Sabia, operated under bareboat charters and, as a result, the customer was responsible with providing for the crew, technical andcommercial management of the vessel. However, each of these vessels was subject to management and administration agreements, pursuant towhich the subsidiaries that own and operate these vessels paid an annual fee in 2023 of $0.08 million per vessel for the Recife Knutsen and theFortaleza Knutsen and an annual fee in 2023 of $0.04 million per vessel for the Dan Sabia and the Dan Cisne to either KNOT Management orKNOT Management Denmark, as manager, in exchange for general monitoring services. This annual fee is subject to an adjustment onJanuary 1 of each year pursuant to a procedure set forth in the agreements. The annual fee for 2024 has been set at $0.04 million for the DanSabia. Any dispute relating to the annual fee adjustment would be settled by dispute resolution provisions set forth in the agreements. Themanagement and administration agreements in respect of the Dan Sabia continue indefinitely until terminated by either party after givingthree months’ written notice. The management and administration agreements also may be terminated by the owner or manager on termssimilar to the technical management agreements.Courses for Crew and Crewing ServicesSimsea Real Operations AS, a company jointly owned by Trygve Seglem and by other shipping companies in Haugesund, providessimulation, operational training assessment and other certified maritime courses for seafarers, and as part of the seafarers competence trainingprogram the Partnership has purchased courses for seafarers on the vessels on time charter contracts. The cost is course fees for seafarers. Wepaid approximately $0.2 million in total fees with respect to this arrangement for the year ended December 31, 2023. Knutsen OAS CrewingAS, a subsidiary of TSSI, provides administrative services related to East European crew on our vessels operating on time charter contracts.The cost is a fixed fee per month per East European crew onboard the vessel. We paid approximately $0.2 million in total fees with respect tothis arrangement for the year ended December 31, 2023.Other Related Party TransactionsThe following table summarizes related party expenses charged or allocated to us for the year ended December 31, 2023 and included inthe consolidated financial statements. Please read Note 19—Related Party Transactions in the consolidated financial statements included inthis Annual Report.Year Ended December 31, (U.S. Dollars in thousands)2023Statement of Operations Data: Time charter and bareboat revenues:$ 28,682Operating expenses(1) 27,769Voyage expenses and commissions 70General and administrative expenses: 1,955Total income (expenses)$ (1,112)(1)Includes fees paid pursuant to the management and administration agreements, the technical management agreements, courses for crew,crew and crewing services. Table of Contents104Payables to KNOT and KOAS were $0.4 million and $1.7 million, respectively, for the year ended December 31, 2023. In addition,included in trade accounts payable, trading balances due to KOAS were $1.2 million and trading balances due to KNOT were $2.0 million forthe year ended December 31, 2023.During the scheduled drydocking of the Carmen Knutsen and the Torill Knutsen a ballast water treatment system was installed on thevessels. As of December 31, 2023, parts of the system had been purchased from Knutsen Ballast Water AS, a subsidiary of TSSI, for $0.58million.As a result of our relationships with KNOT and its affiliates, we, our general partner and our subsidiaries have entered into variousagreements that were not the result of arm’s length negotiations. We generally refer to these agreements and the transactions that they providefor as “affiliated transactions” or “related party transactions.”Our partnership agreement sets forth procedures by which future related party transactions may be approved or resolved by our board ofdirectors. Pursuant to our partnership agreement, our board of directors may, but is not required to, seek the approval of a related partytransaction from the conflicts committee of our board of directors or from the common unitholders. Affiliated transactions that are notapproved by the conflicts committee of our board of directors and that do not involve a vote of unitholders must be on terms no less favorableto us than those generally provided to or available from unrelated third parties or be “fair and reasonable” to us. In determining whether atransaction or resolution is “fair and reasonable,” our board of directors may consider the totality of the relationships between the partiesinvolved, including other transactions that may be particularly advantageous or beneficial to us. If the above procedures are followed, it willbe presumed that, in making its decision, our board of directors acted in good faith, and in any proceeding brought by or on behalf of anylimited partner or the Partnership, the person bringing or prosecuting such proceeding will have the burden of overcoming such presumption.When our partnership agreement requires someone to act in good faith, it requires that person to reasonably believe that he is acting in the bestinterests of the Partnership, unless the context otherwise requires.Our conflicts committee is comprised of at least two members of our board of directors. The conflicts committee is available at our boardof directors’ discretion to review specific matters that our board of directors believes may involve conflicts of interest. The conflictscommittee may determine if the resolution of the conflict of interest is fair and reasonable to us. The members of the conflicts committee maynot be officers or employees of us or directors, officers or employees of our general partner or its affiliates, and must meet the independencestandards established by the NYSE to serve on an audit committee of a board of directors and certain other requirements.Distributions to KNOTWe have declared and paid aggregate quarterly distributions of $1.1 million and $22.5 million to KNOT in respect of the years endedDecember 31, 2023 and 2022, respectively.C. Interests of Experts and CounselNot applicable.Item 8. Financial InformationA. Consolidated Statements and Other Financial InformationPlease read “Item 18. Financial Statements” for additional information required to be disclosed under this item.Legal ProceedingsFrom time to time we have been, and expect to continue to be, subject to legal proceedings and claims in the ordinary course of ourbusiness, principally personal injury and property casualty claims. These claims, even if lacking merit, could result in the expenditure ofsignificant financial and managerial resources. We are not aware of any legal proceedings or claims that we believe will have, individually orin the aggregate, a material adverse effect on us. Table of Contents105Our Cash Distribution PolicyOn January 11, 2023, we reduced our quarterly common unit distributions on our common units to $0.026 per unit. The quarterlycommon unit distribution has remained at $0.026 since that time. We expect to continue to use our internally generated cash flow to providefor working capital, reduce our debt levels and strengthen our balance sheet.Limitations on Cash Distributions and Our Ability to Change Our Cash Distribution PolicyThere is no guarantee that unitholders will receive quarterly distributions from us. Our distribution policy is subject to certain restrictionsand may be changed at any time, including:●Our unitholders have no contractual or other legal right to receive distributions other than the obligation under our partnershipagreement to distribute available cash on a quarterly basis, which is subject to the broad discretion of our board of directors toestablish reserves and other limitations.●We are subject to restrictions on distributions under our financing agreements. Our financing agreements contain materialfinancial tests and covenants that must be satisfied in order to pay distributions. If we are unable to satisfy the restrictionsincluded in any of our financing agreements or are otherwise in default under any of those agreements, as a result of our debtlevels or otherwise, we will not be able to make cash distributions to our unitholders, notwithstanding our stated cashdistribution policy. These financial tests and covenants are described in this Annual Report in “Item 5. Operating and FinancialReview and Prospects—Liquidity and Capital Resources.”●Although our partnership agreement requires us to distribute all of our available cash, our partnership agreement, includingprovisions contained therein requiring us to make cash distributions, may be amended with the approval of a majority of theoutstanding common units.●Even if our cash distribution policy is not modified or revoked, the amount of distributions we pay under our cash distributionpolicy and the decision to make any distribution is determined by our board of directors, taking into consideration the terms ofour partnership agreement.●Under Section 51 of the Marshall Islands Act, we may not make a distribution to our unitholders if the distribution would causeour liabilities, other than liabilities to partners on account of their partnership interest and liabilities for which the recourse ofcreditors is limited to specified property of ours, to exceed the fair value of our assets, except that the fair value of property thatis subject to a liability for which the recourse of creditors is limited shall be included in our assets only to the extent that the fairvalue of that property exceeds that liability.●Our common units are subject to the prior distribution rights of any holders of preferred units then outstanding. As of April 11,2024, there were 3,541,666 Series A Preferred Units issued and outstanding. Under the terms of our partnership agreement, weare prohibited from declaring and paying distributions on our common units until we declare and pay (or set aside for payment)full distributions on the Series A Preferred Units.●We may lack sufficient cash to pay distributions to our unitholders due to decreases in total operating revenues, decreases in hirerates, the loss of a vessel, increases in operating or general and administrative expenses, principal and interest payments onoutstanding debt, taxes, working capital requirements, maintenance and replacement capital expenditures or anticipated cashneeds. Please read “Item 3. Key Information—Risk Factors” for a discussion of these factors.Our ability to make cash distributions to our unitholders depends on the performance of our subsidiaries and their ability to distribute cashto us. The ability of our subsidiaries to make distributions to us may be restricted by, among other things, the provisions of existing and futureindebtedness, applicable limited partnership and limited liability company laws in the Marshall Islands and Norway and other laws andregulations. Table of Contents106During the year ended December 31, 2023, the aggregate amounts of cash distributions paid to common unitholders was $2.5 million.Class B UnitsThe Class B Units are a class of limited partner interests which are not entitled to receive cash distributions in any quarter unless commonunitholders receive a distribution of at least $0.52 for such quarter (the “Distribution Threshold”). When common unitholders receive aquarterly distribution at least equal to the Distribution Threshold, then Class B unitholders will be entitled to receive the same distribution ascommon unitholders. For each quarter (starting with the quarter ended September 30, 2021) that the Partnership pays distributions on thecommon units that are equal to or above the Distribution Threshold, one-eighth of the Class B Units will be converted to common units on aone-for-one basis until such time as no further Class B Units exist. The Class B Units will generally vote together with the common units as asingle class. As of April 11, 2024, 252,405 Class B Units remain outstanding.During the year ended December 31, 2023, the aggregate amounts of cash distributions paid to the holder of Class B Units was $nil.Series A Convertible Preferred UnitsThe 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 unpaid Series A cashdistributions, plus all accrued but unpaid distributions on such Series A Preferred Unit with respect to the quarter in which the liquidationoccurs to the date fixed for the payment of any amount upon liquidation. The Series A Preferred Units are entitled to cumulative distributionsfrom their initial issuance date, with distributions being calculated at an annual rate of 8.0% on the stated liquidation preference and payablequarterly in arrears within 45 days after the end of each quarter, when, as and if declared by the board of directors of the Partnership.During the year ended December 31, 2023, the aggregate amount of cash distributions paid to the holders of the Series A Preferred Unitswas $6.8 million.B. Significant ChangesPlease read Note 25—Subsequent Events in the consolidated financial statements included in this Annual Report.Item 9. The Offer and ListingA. Offer and Listing DetailsOur common units are traded on the NYSE under the symbol “KNOP”.B. Plan of DistributionNot applicable.C. MarketsOur common units started trading on the NYSE on April 9, 2013.D. Selling ShareholdersNot applicable. Table of Contents107E. DilutionNot applicable.F. Expenses of the IssueNot applicable.Item 10. Additional InformationA. Share CapitalNot applicable.B. Memorandum and Articles of AssociationThe information required to be disclosed under Item 10B is incorporated by reference to Exhibit 2.1 to this Annual Report.C. Material ContractsThe following is a summary of each material contract, other than material contracts entered into in the ordinary course of business, towhich we or any of our subsidiaries is a party, for the two years immediately preceding the date of this Annual Report, each of which isincluded in the list of exhibits in “Item 19. Exhibits”:(1)Omnibus Agreement, dated April 15, 2013, among Knutsen NYK Offshore Tankers AS, KNOT Offshore Partners LP, KNOTOffshore Partners GP LLC, KNOT Shuttle Tankers 17 AS and KNOT Shuttle Tankers 18 AS. Please read “Item 7. MajorUnitholders and Related Party Transactions—Related Party Transactions—Omnibus Agreement.”(2)Exchange Agreement, dated September 7, 2021, among KNOT Offshore Partners LP, KNOT Offshore Partners GP LLC andKnutsen NYK Offshore Tankers AS. Please read “Item 7. Major Unitholders and Related Party Transactions—Related PartyTransactions—IDR Exchange.”(3)Administrative Services Agreement, dated February 26, 2013, among KNOT Offshore Partners LP, KNOT Offshore PartnersUK LLC, Knutsen OAS (UK) Ltd., Knutsen OAS Shipping AS and KNOT Management AS, as amended by Amendment No. 1,dated May 7, 2015, Amendment No. 2, dated November 28, 2018, Amendment No. 3, dated March 13, 2019 and AmendmentNo. 4 dated September 13, 2023. Please read “Item 7. Major Unitholders and Related Party Transactions—Related PartyTransactions—Administrative Services Agreement.”(4)Management and Administration Agreements with respect to each of the Fortaleza Knutsen, Recife Knutsen, Dan Cisne andDan Sabia and Technical Management Agreements with respect to each of the other vessels in our fleet. Please read “Item 7.Major Unitholders and Related Party Transactions—Related Party Transactions—Management and AdministrationAgreements” and “Item 7. Major Unitholders and Related Party Transactions—Related Party Transactions—TechnicalManagement Agreements”, respectively.(5)Loan Agreement, dated March 31, 2017, among Knutsen Shuttle Tankers 14 AS, as borrower, and Mitsubishi UFJ Lease &Finance (Hong Kong) Limited, as lender. Please read “Item 5. Operating and Financial Review and Prospects—Liquidity andCapital Resources—Borrowing Activities—Long-Term Debt—$100 Million Hilda Loan Facility.”(6)Facility Agreement, dated July 2, 2019, among KNOT Shuttle Tankers 34 AS and KNOT Shuttle Tankers 35 AS, as borrowers,and the other parties thereto. Please read “Item 5. Operating and Financial Review and Prospects—Liquidity and CapitalResources—Borrowing Activities—Long-Term Debt—$192.1 million Secured Loan Facility.” Table of Contents108(7)Accession Letter, dated December 2020, among Knutsen NYK Offshore Tankers AS, KNOT Offshore Partners LP, KNOTShuttle Tankers AS, KNOT Shuttle Tankers 34 AS, KNOT Shuttle Tankers 35 AS and MUFG Bank, Ltd. Please read “Item 5.Operating and Financial Review and Prospects—Liquidity and Capital Resources—Borrowing Activities—Long-Term Debt—$192.1 million Secured Loan Facility.”(8)Accession Letter, dated July 1, 2022, among Knutsen NYK Offshore Tankers AS, KNOT Offshore Partners LP, KNOT ShuttleTankers AS, KNOT Shuttle Tankers 34 AS, KNOT Shuttle Tankers 35 AS and MUFG Bank, Ltd. Please read “Item 5.Operating and Financial Review and Prospects—Liquidity and Capital Resources—Borrowing Activities—Long-Term Debt—$192.1 million Secured Loan Facility.”(9)Memorandum of Agreement, dated December 30, 2020, between Knutsen Shuttle Tankers 19 AS and MI-DAS Line S.A., asamended by Addendum No. 1, dated January 14, 2021. Please read “Item 5. Operating and Financial Review and Prospects—Liquidity and Capital Resources—Borrowing Activities—Long-Term Debt—Raquel Sale and Leaseback.”(10)Bareboat Charter, dated December 30, 2020, between Knutsen Shuttle Tankers 19 AS and MI-DAS Line S.A. Please read “Item5. Operating and Financial Review and Prospects—Liquidity and Capital Resources—Borrowing Activities—Long-Term Debt—Raquel Sale and Leaseback.”(11)Term Loan Facility Agreement, dated August 25, 2021, among KNOT Shuttle Tankers 24 AS, KNOT Shuttle Tankers 25 AS,KNOT Shuttle Tankers 26 AS, KNOT Shuttle Tankers 30 AS and KNOT Shuttle Tankers 32 AS, as borrowers, KNOT ShuttleTankers AS and KNOT Offshore Partners LP, as guarantors, and the other parties thereto. Please read “Item 5. Operating andFinancial Review and Prospects—Liquidity and Capital Resources—Borrowing Activities—Long-Term Debt—$345 MillionTerm Loan Facility”(12)Memorandum of Agreement, dated June 20, 2022, between Knutsen Shuttle Tankers 15 AS and Four Land (Panama) S.A.Please read “Item 5. Operating and Financial Review and Prospects—Liquidity and Capital Resources—Borrowing Activities—Long-Term Debt—Torill Sale and Leaseback.”(13)Bareboat Charter, dated June 20, 2022, between Four Land (Panama) S.A. and Knutsen Shuttle Tankers 15 AS. Please read“Item 5. Operating and Financial Review and Prospects—Liquidity and Capital Resources—Borrowing Activities—Long-TermDebt—Torill Sale and Leaseback.”(14)Term Loan Facility Agreement, dated June 2, 2023, among Knutsen Shuttle Tankers XII KS, Knutsen Shuttle Tankers XII AS,Knutsen Shuttle Tankers 13 AS, Knutsen NYK Shuttle Tankers 16 AS, KNOT Shuttle Tankers 17 AS, KNOT Shuttle Tankers18 AS, as borrowers, KNOT Shuttle Tankers AS and KNOT Offshore Partners LP, as guarantors, and the other parties thereto.Please read “Item 5. Operating and Financial Review and Prospects—Liquidity and Capital Resources—Borrowing Activities—Long-Term Debt—$240 Million Loan Facility .”(15)Employment Agreement, dated March 12, 2019, between KNOT Offshore Partners UK LLC and Gary Chapman. Please read“Item 6. Directors, Senior Management and Employees—Compensation—Executive Compensation.”(16)Service Agreement, dated August 3, 2023, between KNOT Offshore Partners UK LLC and Derek Lowe. Please read “Item 6.Directors, Senior Management and Employees—Compensation—Executive Compensation.”(17)Series A Preferred Unit Purchase Agreement, dated December 6, 2016, among KNOT Offshore Partners LP and the Purchasersparty thereto, as amended pursuant to the Assignment and Novation Agreement, dated December 20, 2016, the FirstAmendment to Series A Preferred Unit Purchase Agreement, dated February 2, 2017 and the Second Amendment to Series APreferred Unit Purchase Agreement, dated May 16, 2017.(18)Registration Rights Agreement, dated February 2, 2017, among KNOT Offshore Partners LP and the Purchasers party thereto. Table of Contents109(19)Joinder Agreement, dated June 30, 2017, among KNOT Offshore Partners LP, OMP AY Preferred Limited, Pierfront CapitalMezzanine Fund Pte. Ltd. and Tortoise Direct Opportunities Fund, LP.(20)Share Purchase Agreement, dated June 28, 2022, between Knutsen NYK Offshore Tankers AS and KNOT Shuttle Tankers AS.Please read “Item 7. Major Unitholders and Related Party Transactions—Related Party Transactions—Acquisition of theSynnøve Knutsen.”(21)At-the-Market Issuance Sales Agreement, dated November 2, 2023, by and among KNOT Offshore Partners LP, KNOTOffshore Partners GP LLC, KNOT Offshore Partners UK LLC, KNOT Shuttle Tankers AS and B. Riley Securities, Inc. Pleaseread “Item 5. Operating and Financial Review and Prospects—Liquidity and Capital Resources.”D. Exchange ControlsWe are not aware of any governmental laws, decrees, regulations or other legislation, including foreign exchange controls, in the Republicof the Marshall Islands that may affect the import or export of capital, including the availability of cash and cash equivalents for use by thePartnership, or the remittance of distributions, interest or other payments to non-resident and non-citizen holders of our securities.E. TaxationU.S. Federal Income Tax ConsiderationsThe following is a discussion of the material U.S. federal income tax considerations that may be relevant to current and prospectiveunitholders. This discussion is based upon provisions of the Code, Treasury Regulations and current administrative rulings and courtdecisions, all as in effect or existence on the date of this Annual Report and all of which are subject to change, possibly with retroactive effect.Changes in these authorities may cause the tax consequences of unit ownership to vary substantially from the consequences described below.Unless the context otherwise requires, references in this section to “we,” “our” or “us” are references to KNOT Offshore Partners LP.The following discussion applies only to beneficial owners of common units that own the common units as “capital assets” within themeaning of Section 1221 of the Code (i.e., generally, for investment purposes) and is not intended to be applicable to all categories ofinvestors, such as unitholders subject to special tax rules (e.g., financial institutions, insurance companies, broker-dealers, tax-exemptorganizations, retirement plans, individual retirement accounts, persons who own (actually or constructively) 10% or more of the vote or valueof our equity, or former citizens or long-term residents of the United States), persons who hold the units as part of a straddle, conversion,constructive sale or other integrated transaction for U.S. federal income tax purposes, or persons that have a functional currency other than theU.S. Dollar, each of whom may be subject to tax rules that differ significantly from those summarized below. If a partnership or other entity orarrangement classified as a partnership for U.S. federal income tax purposes holds our common units, the tax treatment of its partnersgenerally will depend upon the status of the partner and the activities of the partnership. If you are a partner in a partnership holding ourcommon units, you should consult your own tax advisor regarding the tax consequences to you of the partnership’s ownership of our commonunits.No ruling has been or will be requested from the IRS regarding any matter affecting us or current or prospective unitholders. Thestatements made herein may be challenged by the IRS and, if so challenged, may not be sustained upon review in a court.This discussion does not contain information regarding any U.S. state or local, estate, gift or alternative minimum tax considerationsconcerning the ownership or disposition of common units. This discussion does not comment on all aspects of U.S. federal income taxationthat may be important to particular unitholders in light of their individual circumstances, and each unitholder is urged to consult its own taxadvisor regarding the U.S. federal, state, local and other tax consequences of the ownership or disposition of common units. Table of Contents110Election to be Treated as a CorporationWe have elected to be treated as a corporation for U.S. federal income tax purposes. As a result, U.S. Holders (as defined below) will notbe directly subject to U.S. federal income tax on our income, but rather will be subject to U.S. federal income tax on distributions receivedfrom us and dispositions of common units as described below.U.S. Federal Income Taxation of U.S. HoldersAs used herein, the term “U.S. Holder” means a beneficial owner of our common units that is:●an individual U.S. citizen or resident (as determined for U.S. federal income tax purposes),●a corporation (or other entity that is classified as a corporation for U.S. federal income tax purposes) organized under the laws ofthe United States or any of its political subdivisions,●an estate the income of which is subject to U.S. federal income taxation regardless of its source, or●a trust if (1) a court within the United States is able to exercise primary jurisdiction over the administration of the trust and oneor more U.S. persons have the authority to control all substantial decisions of the trust or (2) the trust has a valid election ineffect to be treated as a U.S. person for U.S. federal income tax purposes.DistributionsSubject to the discussion below of the rules applicable to PFICs, any distributions to a U.S. Holder made by us with respect to ourcommon units generally will constitute dividends to the extent of our current-year or accumulated earnings and profits, as determined underU.S. federal income tax principles. If we make distributions to U.S. Holders in excess of our current-year and accumulated earnings andprofits, the excess portion of those distributions will be treated first as a nontaxable return of capital to the extent of the U.S. Holder’s taxbasis in its common units and thereafter as capital gain. U.S. Holders that are corporations generally will not be entitled to claim a dividends-received deduction with respect to distributions that they receive from us. Dividends received with respect to our common units generally willbe treated as “passive category income” for purposes of computing allowable foreign tax credits for U.S. federal income tax purposes.Dividends received with respect to our common units by a U.S. Holder that is an individual, trust or estate (a “U.S. Individual Holder”)generally will be treated as “qualified dividend income,” which is taxable to such U.S. Individual Holder at preferential tax rates providedthat: (1) our common units are readily tradable on an established securities market in the United States (such as the NYSE, on which ourcommon units are traded); (2) we are not a PFIC for the taxable year during which the dividend is paid or the immediately precedingtaxable year (which we do not believe we are, have been or will be, as discussed below under “—PFIC Status and Significant TaxConsequences”); (3) the U.S. Individual Holder has owned the common units for more than 60 days during the 121-day period beginning60 days before the date on which the common units become ex-dividend (and has not entered into certain risk limiting transactions withrespect to such common units); and (4) the U.S. Individual Holder is not under an obligation to make related payments with respect topositions in substantially similar or related property. Because of the uncertainty of these matters, including whether we are or will be a PFIC,there is no assurance that any dividends paid on our common units will be eligible for these preferential rates in the hands of a U.S. IndividualHolder, and any dividends paid on our common units that are not eligible for these preferential rates will be taxed as ordinary income to a U.S.Individual Holder.Special rules may apply to any amounts received in respect of our common units that are treated as “extraordinary dividends.” In general,an extraordinary dividend is a dividend with respect to a common unit that is equal to or in excess of 10% of a unitholder’s adjusted tax basis(or fair market value upon the unitholder’s election) in such common unit. In addition, extraordinary dividends include dividends receivedwithin a one-year period that, in the aggregate, equal or exceed 20% of a unitholder’s adjusted tax basis (or fair market value). If we pay an“extraordinary dividend” on our common units that is treated as “qualified dividend income,” then any loss recognized by a U.S. IndividualHolder from the sale or exchange of such common units will be treated as long-term capital loss to the extent of the amount of such dividend. Table of Contents111Sale, Exchange or Other Disposition of Common UnitsSubject to the discussion of PFIC status below, a U.S. Holder generally will recognize capital gain or loss upon a sale, exchange or othertaxable disposition of our common units in an amount equal to the difference between the amount realized by the U.S. Holder from such sale,exchange or other taxable disposition and the U.S. Holder’s adjusted tax basis in such common units. The U.S. Holder’s initial tax basis in itscommon units generally will be the U.S. Holder’s purchase price for the common units and that tax basis will be reduced (but not below zero)by the amount of any distributions on the common units that are treated as non-taxable returns of capital (as discussed above under “—Distributions”). Such gain or loss will be treated as long-term capital gain or loss if the U.S. Holder’s holding period is greater than one yearat the time of the sale, exchange or other taxable disposition. Certain U.S. Holders (including individuals) may be eligible for preferential ratesof U.S. federal income tax in respect of long-term capital gains. A U.S. Holder’s ability to deduct capital losses is subject to limitations. Anysuch capital gain or loss generally will be treated as U.S. source income or loss, as applicable, for U.S. foreign tax credit purposes.Medicare Tax on Net Investment IncomeCertain U.S. Holders, including individuals, estates and trusts, will be subject to an additional 3.8% Medicare tax on, among other things,dividends and capital gains from the sale or other disposition of equity interests in a corporation. For individuals, the additional Medicare taxapplies to the lesser of (1) ”net investment income” or (2) the excess of “modified adjusted gross income” over $200,000 ($250,000 if marriedand filing jointly or $125,000 if married and filing separately). “Net investment income” generally equals the taxpayer’s gross investmentincome reduced by deductions that are allocable to such income. Unitholders should consult their tax advisors regarding the implications ofthe additional Medicare tax resulting from their ownership and disposition of our common units.PFIC Status and Significant Tax ConsequencesAdverse U.S. federal income tax rules apply to a U.S. Holder that owns an equity interest in a non-U.S. corporation that is classified as aPFIC for U.S. federal income tax purposes. In general, we will be treated as a PFIC with respect to a U.S. Holder if, for any taxable year inwhich the holder held our common units, either:●at least 75% of our gross income (including the gross income of our vessel-owning subsidiaries) for such taxable year consistsof passive income (e.g., dividends, interest, capital gains from the sale or exchange of investment property and rents derivedother than in the active conduct of a rental business); or●at least 50% of the average value of the assets held by us (including the assets of our vessel-owning subsidiaries) during suchtaxable year produce, or are held for the production of, passive income.Income earned, or treated as earned (for U.S. federal income tax purposes), by us in connection with the performance of services wouldnot constitute passive income. By contrast, rental income generally would constitute “passive income” unless we were treated as deriving thatrental income from third parties in the active conduct of a trade or business under the applicable rules.Based on our current and projected methods of operation, we believe that we were not a PFIC for any prior taxable year, and we expectthat we will not be treated as a PFIC for the current or any future taxable year. We believe that more than 25% of our gross income for eachtaxable year was or will be non-passive income, and more than 50% of the average value of our assets for each such year was or will be heldfor the production of non-passive income. This belief is based on certain valuations and projections regarding our income and assets, and itsvalidity is based on the accuracy of such valuations and projections. While we believe these valuations and projections to be accurate, theshipping market is volatile and no assurance can be given that they will continue to be accurate at any time in the future. Table of Contents112Moreover, there are legal uncertainties involved in determining whether the income derived from time-chartering activities constitutesrental income or income derived from the performance of services. In Tidewater Inc. v. United States, 565 F.3d 299 (5th Cir. 2009), the FifthCircuit held that income derived from certain time-chartering activities should be treated as rental income rather than services income forpurposes of a provision of the Code relating to foreign sales corporations. In that case, the Fifth Circuit did not address the definition ofpassive income or the PFIC rules; however, the reasoning of the case could have implications as to how the income from a time charter wouldbe classified under such rules. If the reasoning of the case were extended to the PFIC context, the gross income we derive from our time-chartering activities may be treated as rental income, and we would likely be treated as a PFIC. In published guidance, the IRS stated that itdisagreed with the holding in Tidewater and specified that time charters similar to those at issue in this case should be treated as servicecontracts.Distinguishing between arrangements treated as generating rental income and those treated as generating services income involvesweighing and balancing competing factual considerations, and there is no legal authority under the PFIC rules addressing our specific methodof operation. Conclusions in this area therefore remain matters of interpretation. We are not seeking a ruling from the IRS on the treatment ofincome generated from our time-chartering operations. Thus, it is possible that the IRS or a court could disagree with our position. In addition,although we intend to conduct our affairs in a manner to avoid being classified as a PFIC with respect to any taxable year, we cannot assureunitholders that the nature of our operations will not change in the future and that we will not become a PFIC in any future taxable year.As discussed more fully below, if we were to be treated as a PFIC with respect to a U.S. Holder for any taxable year (and regardless ofwhether we remain a PFIC over the subsequent taxable years), then such U.S. Holder would be subject to different taxation rules dependingon whether the U.S. Holder makes an election to treat us as a “Qualified Electing Fund,” which we refer to as a “QEF election.” As analternative to making a QEF election, a U.S. Holder should be able to make a “mark-to-market” election with respect to our common units, asdiscussed below. In addition, if a U.S. Holder owns our common units during any taxable year that we are a PFIC, such holder must file anannual report with the IRS.Taxation of U.S. Holders Making a Timely QEF ElectionIf a U.S. Holder makes a timely QEF election (an “Electing Holder”), then, for U.S. federal income tax purposes, the Electing Holdermust report as income for its taxable year its pro rata share of our ordinary earnings and net capital gain, if any, for our taxable years that endwith or within the taxable year for which the Electing Holder is reporting, regardless of whether or not the Electing Holder receiveddistributions from us in that year. The Electing Holder’s adjusted tax basis in the common units will be increased to reflect taxed butundistributed earnings and profits.Distributions of earnings and profits that were previously taxed will result in a corresponding reduction in the Electing Holder’s adjustedtax basis in common units and will not be taxed again once distributed. An Electing Holder generally will recognize capital gain or loss on thesale, exchange or other disposition of our common units. A U.S. Holder makes a QEF election with respect to any year that we are a PFIC byfiling IRS Form 8621 with its U.S. federal income tax return. If contrary to our expectations, we determine that we are treated as a PFIC forany taxable year, we will provide each U.S. Holder with the information necessary to make the QEF election described above. Although theQEF election is available with respect to subsidiaries, in the event we acquire or own a subsidiary in the future that is treated as a PFIC, noassurances can be made that we will be able to provide U.S. Holders with the necessary information to make the QEF election with respect tosuch subsidiary. Table of Contents113Taxation of U.S. Holders Making a “Mark-to-Market” ElectionIf we were to be treated as a PFIC for any taxable year in which a U.S. Holder holds our common units and, as we anticipate, our unitswere treated as “marketable stock,” then, as an alternative to making a QEF election, a U.S. Holder would be allowed to make a “mark-to-market” election with respect to our common units, provided the U.S. Holder completes and files IRS Form 8621 in accordance with therelevant instructions and related Treasury Regulations. If that election is made, the U.S. Holder generally would include as ordinary income ineach taxable year the excess, if any, of the fair market value of the U.S. Holder’s common units at the end of the taxable year over the holder’sadjusted tax basis in the common units. The U.S. Holder also would be permitted an ordinary loss in respect of the excess, if any, of the U.S.Holder’s adjusted tax basis in the common units over the fair market value thereof at the end of the taxable year, but only to the extent of thenet amount previously included in income as a result of the mark-to-market election. A U.S. Holder’s tax basis in its common units would beadjusted to reflect any such income or loss recognized. Gain recognized on the sale, exchange or other disposition of our common units wouldbe treated as ordinary income, and any loss recognized on the sale, exchange or other disposition of the common units would be treated asordinary loss to the extent that such loss does not exceed the net mark-to-market gains previously included in income by the U.S. Holder. Themark-to-market election generally will not be available with respect to subsidiaries. Accordingly, in the event we acquire or own a subsidiaryin the future that is treated as a PFIC, the mark-to-market election generally will not be available with respect to such subsidiary.Taxation of U.S. Holders Not Making a Timely QEF or Mark-to-Market ElectionIf we were to be treated as a PFIC for any taxable year in which a U.S. Holder holds our common units, a U.S. Holder that does not makeeither a QEF election or a “mark-to-market” election for that year (a “Non-Electing Holder”) would be subject to special rules resulting inincreased tax liability with respect to (1) any excess distribution (i.e., the portion of any distributions received by the Non-Electing Holder onour common units in a taxable year in excess of 125% of the average annual distributions received by the Non-Electing Holder in the threepreceding taxable years, or, if shorter, the Non-Electing Holder’s holding period for the common units) and (2) any gain realized on the sale,exchange or other disposition of the units. Under these special rules:●the excess distribution or gain would be allocated ratably over the Non-Electing Holder’s aggregate holding period for thecommon units;●the amount allocated to the current taxable year and any taxable year prior to the taxable year we were first treated as a PFICwith respect to the Non-Electing Holder would be taxed as ordinary income; and●the amount allocated to each of the other taxable years would be subject to tax at the highest rate of tax in effect for theapplicable class of taxpayers for that year, and an interest charge for the deemed deferral benefit would be imposed with respectto the resulting tax attributable to each such other taxable year.If we were treated as a PFIC for any taxable year and a Non-Electing Holder who is an individual dies while owning our common units,such holder’s successor generally would not receive a step-up in tax basis with respect to such common units.U.S. Federal Income Taxation of Non-U.S. HoldersA beneficial owner of our common units (other than a partnership or an entity or arrangement treated as a partnership for U.S. federalincome tax purposes) that is not a U.S. Holder is referred to as a “Non-U.S. Holder.” If you are a partner in a partnership (or an entity orarrangement treated as a partnership for U.S. federal income tax purposes) holding our common units, you should consult your own taxadvisor regarding the tax consequences to you of the partnership’s ownership of our common units. Table of Contents114DistributionsDistributions we pay to a Non-U.S. Holder will not be subject to U.S. federal income tax or withholding tax if the Non-U.S. Holder is notengaged in a U.S. trade or business. If the Non-U.S. Holder is engaged in a U.S. trade or business, our distributions will be subject to U.S.federal income tax to the extent such distributions constitute income effectively connected with the Non-U.S. Holder’s U.S. trade or business(provided, in the case of a Non-U.S. Holder entitled to the benefits of an income tax treaty with the United States, such distributions also areattributable to a U.S. permanent establishment). The after-tax amount of any effectively connected distributions received by a Non-U.S.Holder that is a corporation for U.S. federal income tax purposes may also be subject to an additional U.S. branch profits tax at a rate of 30%(or, if applicable, a lower treaty rate).Disposition of UnitsIn general, a Non-U.S. Holder is not subject to U.S. federal income tax or withholding tax on any gain resulting from the disposition ofour common units provided the Non-U.S. Holder is not engaged in a U.S. trade or business. A Non-U.S. Holder that is engaged in a U.S. tradeor business will be subject to U.S. federal income tax in the event the gain from the disposition of common units is effectively connected withthe conduct of such U.S. trade or business (provided, in the case of a Non-U.S. Holder entitled to the benefits of an income tax treaty with theUnited States, such gain also is attributable to a U.S. permanent establishment). The after-tax amount of any effectively connected gain of aNon-U.S. Holder that is a corporation for U.S. federal income tax purposes may also be subject to an additional U.S. branch profits tax at arate of 30% (or, if applicable, a lower treaty rate). However, even if not engaged in a U.S. trade or business, individual Non-U.S. Holders maybe subject to tax on gain resulting from the disposition of our common units if they are present in the United States for 183 days or moreduring the taxable year in which those units are disposed and they meet certain other requirements.Backup Withholding and Information ReportingIn general, payments to a non-corporate U.S. Holder of distributions or the proceeds of a disposition of common units will be subject toinformation reporting. These payments to a non-corporate U.S. Holder also may be subject to backup withholding if the non-corporate U.S.Holder:●fails to provide an accurate taxpayer identification number;●is notified by the IRS that it has failed to report all interest or corporate distributions required to be reported on its U.S. federalincome tax returns; or●in certain circumstances, fails to comply with applicable certification requirements.Non-U.S. Holders may be required to establish their exemption from information reporting and backup withholding by certifying theirstatus on a properly completed IRS Form W-8BEN, W-8BEN-E, W-8ECI or W-8IMY, as applicable.Backup withholding is not an additional tax. Rather, a unitholder generally may obtain a credit for any amount withheld against itsliability for U.S. federal income tax (and obtain a refund of any amounts withheld in excess of such liability) by timely filing a U.S. federalincome tax return with the IRS.In addition, individual citizens or residents of the United States holding certain “foreign financial assets” (which generally includes stockand other securities issued by a foreign person unless held in an account maintained by a financial institution) that exceed certain thresholds(the lowest being holding foreign financial assets with an aggregate value in excess of: (1) $50,000 on the last day of the tax year or(2) $75,000 at any time during the tax year) are required to report information relating to such assets. Significant penalties may apply forfailure to satisfy the reporting obligations described above. Unitholders should consult their tax advisors regarding their reporting obligations,if any, that would result from their purchase, ownership or disposition of our common units. Table of Contents115Non-United States Tax ConsiderationsUnless the context otherwise requires, references in this section to “we,” “our” or “us” are references to KNOT Offshore Partners LP.Marshall Islands Tax ConsequencesBecause we and our subsidiaries currently do not and assuming we and our subsidiaries continue not to carry on business or conducttransactions or operations in the Republic of the Marshall Islands, under current Marshall Islands law, unitholders that are neither citizens norresidents of the Marshall Islands and that do not maintain offices in nor carry on business or conduct transactions or operations in the Republicof the Marshall Islands will not be subject to Marshall Islands taxation or withholding on distributions, including upon distribution treated as areturn of capital, we make to them as unitholders. In addition, such unitholders will not be subject to Marshall Islands stamp, capital gains orother taxes on the purchase, ownership or disposition of common units, and they will not be required by the Republic of the Marshall Islandsto file Marshall Islands tax returns relating to their ownership of common units.Norwegian Tax ConsequencesCurrent and prospective unitholders who are resident in Norway for taxation purposes are urged to consult their own tax advisorsregarding the potential Norwegian tax consequences to them of an investment in our common units. For this purpose, a company incorporatedoutside of Norway will be treated as resident in Norway in the event its central management and control is carried out in Norway.The discussion that follows is based upon existing Norwegian legislation and current Norwegian Tax Administration practice. Changes inthese authorities may cause the tax consequences to vary substantially from the consequences of unit ownership described below. Unless thecontext otherwise requires, references in this section to “we,” “our” or “us” are references to KNOT Offshore Partners LP.Under the Norwegian General Taxation Act, persons not resident in Norway for taxation purposes (“Non-Norwegian Holders”) will notbe subject to any taxes in Norway on income or profits in respect of the acquisition, holding, disposition or redemption of the common units,provided that:●we are not treated as carrying on business in Norway; and●neither of the following conditions are met:●if such holders are resident in a country that does not have an income tax treaty with Norway, such holders are not engaged in aNorwegian trade or business to which the common units are effectively connected; or●if such holders are resident in a country that has an income tax treaty with Norway, such holders do not have a permanentestablishment in Norway to which the common units are effectively connected.A Non-Norwegian Holder that carries on a business in Norway through a partnership is subject to Norwegian tax on income derived fromthe business if managed from Norway or carried on by the Partnership in Norway. Table of Contents116While we expect to conduct our affairs in such a manner that our business will not be treated as managed from or carried on in Norway atany time in the future, this determination is dependent upon the facts existing at such time, including (but not limited to) the place where ourboard of directors meets and the place where our management makes decisions or takes certain actions affecting our business. Our Norwegiantax counsel has advised us regarding certain measures we can take to limit the risk that our business may be treated as managed from orcarried on in Norway and has concluded that, provided we adopt these measures and otherwise conduct our affairs in a manner consistent withour Norwegian tax counsel’s advice, which we intend to do, our business should not be treated as managed from or carried on in Norway fortaxation purposes, and consequently, Non-Norwegian Holders should not be subject to tax in Norway solely by reason of the acquisition,holding, disposition or redemption of their common units. Nonetheless, there is no legal authority addressing our specific circumstances, andconclusions in this area remain matters of interpretation. Thus, it is possible that the Norwegian taxation authority could challenge, or a courtcould disagree with, our position.While we do not expect it to be the case, if the arrangements we propose to enter into result in our being considered to carry on businessin Norway for the purposes of the Norwegian General Taxation Act, unitholders would be considered to be carrying on business in Norwayand would be required to file tax returns with the Norwegian Tax Administration and, subject to any relief provided in any relevant doubletaxation treaty (including, in the case of holders resident in the United States, the U.S.-Norway Tax Treaty), would be subject to taxation inNorway on any income considered to be attributable to the business carried on in Norway.United Kingdom Tax ConsequencesThe following is a discussion of the material United Kingdom tax consequences that may be relevant to prospective unitholders who arepersons not resident in the United Kingdom for taxation purposes and who do not acquire their units as part of a trade, profession or vocationcarried on in the United Kingdom, which we refer to as “Non-UK Holders.”Prospective unitholders who are resident or domiciled in the United Kingdom for taxation purposes, or who hold their units through atrade, profession or vocation in the United Kingdom are urged to consult their own tax advisors regarding the potential United Kingdom taxconsequences to them of an investment in our common units and are responsible for filing their own U.K. tax returns and paying anyapplicable U.K. taxes (which may be due on amounts received by us but not distributed). The discussion that follows is based upon currentUnited Kingdom tax law and what is understood to be the current practice of HMRC as at the date of this document, both of which are subjectto change, possibly with retrospective effect.Taxation of income and disposals. We expect to conduct our affairs so that Non-UK Holders should not be subject to United Kingdomincome tax, capital gains tax or corporation tax on income or gains arising from our partnership. Distributions may be made to Non-UKHolders without withholding or deduction for or on account of United Kingdom income tax.Stamp taxes. No liability to United Kingdom stamp duty or stamp duty reserve tax should arise in connection with the issue of units tounitholders or the transfer of units in our partnership.EACH PROSPECTIVE UNITHOLDER IS URGED TO CONSULT ITS OWN TAX COUNSEL OR OTHER ADVISOR WITHREGARD TO THE LEGAL AND TAX CONSEQUENCES OF UNIT OWNERSHIP UNDER ITS PARTICULAR CIRCUMSTANCES.F. Dividends and Paying AgentsNot applicable.G. Statement by ExpertsNot applicable. Table of Contents117H. Documents on DisplayDocuments concerning us that are referred to in this Annual Report may be inspected at our principal executive headquarters at 2 Queen’sCross, Aberdeen, AB15 4YB, United Kingdom, and may also be obtained from our website at www.knotoffshorepartners.com. Thosedocuments electronically filed via the SEC’s Electronic Data Gathering, Analysis, and Retrieval system may also be obtained from the SEC’swebsite at www.sec.gov.I. Subsidiary InformationNot applicable.J. Annual Report to Security HoldersNot applicable.Item 11. Quantitative and Qualitative Disclosures About Market RiskWe are exposed to various market risks, including interest rate, foreign currency exchange rate and concentration of credit risks.Historically, we have entered into certain derivative instruments and contracts to maintain the desired level of exposure arising from interestrate and certain foreign currency exchange rate risks.Our policy is to economically hedge part of our exposure to interest rate fluctuations by entering into new interest rate swap contractswhen suitable opportunities arise and within boundaries deemed appropriate by management.Interest Rate RiskA portion of our debt obligations and surplus funds placed with financial institutions are subject to movements in interest rates. It is ourpolicy to obtain the most favorable interest rates available without increasing our foreign currency exposure. In keeping with this, our surplusfunds may in the future be placed in fixed deposits with reputable financial institutions that yield better returns than bank deposits. Thedeposits generally have short-term maturities so as to provide us with the flexibility to meet working capital and capital investments.We have historically used interest rate swap contracts to manage our exposure to interest rate risks. Interest rate swap contracts were usedto convert floating rate debt obligations based on LIBOR or SOFR to a fixed rate in order to achieve an overall desired position of fixed andfloating rate debt. The extent to which interest rate swap contracts are used is determined by reference to our net debt exposure and our viewsregarding future interest rates. Our interest rate swap contracts do not qualify for hedge accounting, and movements in their fair values arereflected in the statements of operations under “Realized and unrealized gain (loss) on derivative instruments.” Interest rate swap contractsthat have a positive fair value are recorded as “Other current assets,” while swaps with a negative fair value are recorded as “Derivativeliabilities.”As of December 31, 2023, we were party to interest rate swap contracts with a combined notional amount of approximately $426.5million. Under the terms of the interest rate swap contracts, we receive LIBOR- or SOFR-based variable interest rate payments and makefixed interest rate payments at fixed rates between 0.71% per annum and 2.90% per annum for all periods. The interest rate swap contractsmature between January 2024 and August 2027. The notional amount and fair value of our interest rate swap contracts recognized as netderivative liabilities as of December 31, 2023 are as follows:December 31, 2023NotionalFair Value(U.S. Dollars in thousands) Amount (liability)Interest rate swap contracts$ 426,507$ 20,248 Table of Contents118As of December 31, 2023 the Partnership’s net exposure to floating interest rate fluctuations was approximately $294.5 million based ontotal interest-bearing contractual obligations of $963.0 million, less the Raquel Knutsen and Torill Knutsen sale and leaseback facilities of$178.1 million, less interest rate swaps of $426.5 million and less cash and cash equivalents of $63.9 million. A 1% change in short-terminterest rates would result in an increase or decrease to our interest expense of approximately $2.9 million on an annual basis as of December31, 2023. Please read Note 10 — Derivative Instruments—Interest Rate Risk Management in the consolidated financial statements included inthis Annual Report.Foreign Currency Exchange Rate RiskWe and our subsidiaries have the U.S. Dollar as our functional and reporting currency, because all of our revenues and the majority of ourexpenditures, including the majority of our investments in vessels and our financing transactions, are denominated in U.S. Dollars. We could,however, earn revenue in other currencies, and we currently incur a portion of our expenses in other currencies. Therefore, there is a risk thatcurrency fluctuations could have an adverse effect on the value of our cash flows.Our foreign currency risk arises from:●the measurement of monetary assets and liabilities denominated in foreign currencies converted to U.S. Dollars, with theresulting gain or loss recorded as “Net loss on foreign currency transactions;” and●the impact of fluctuations in exchange rates on the reported amounts of our revenues, if any, and expenses that are denominatedin foreign currencies.As of December 31, 2023, we had not entered into any foreign exchange forward contracts.Concentration of Credit RiskThe market for our services is the offshore oil production industry, and our customers consist primarily of major oil and gas companies,independent oil and gas producers and government-owned oil companies. As of December 31, 2023 and 2022, eleven and thirteen customers,respectively, accounted for substantially all of our revenues. Ongoing credit evaluations of our customers are performed and generally do notrequire collateral in our business agreements. Typically, under our time charters and bareboat charters, the customer pays for the month’scharter the first day of each month, which reduces our level of credit risk. Provisions for potential credit losses are maintained when necessary.We have bank deposits that expose us to credit risk arising from possible default by the counterparty. We manage the risk by using credit-worthy financial institutions.Retained RiskFor a description of our insurance coverage, including the risks retained by us related to our insurance policies, please read “Item 4.Information on the Partnership—Business Overview—Risk of Loss, Insurance and Risk Management.”Item 12. Description of Securities Other than Equity SecuritiesNot applicable.PART IIItem 13. Defaults, Dividend Arrearages and DelinquenciesAs of December 31, 2023, we were in compliance with all covenants under our debt agreements.Item 14. Material Modifications to the Rights of Securities Holders and Use of ProceedsNot applicable. Table of Contents119Item 15. Controls and ProceduresDisclosure Controls and ProceduresWe maintain disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) that are designedto ensure that (i) information required to be disclosed in our reports that are filed or submitted under the Exchange Act, are recorded,processed, summarized, and reported within the time periods specified in the U.S. Securities and Exchange Commission’s rules and forms,and (ii) information required to be disclosed by us in the reports we file or submit under the Exchange Act is accumulated and communicatedto our management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regardingrequired disclosure.We conducted an evaluation of our disclosure controls and procedures under the supervision and with the participation of the ChiefExecutive Officer and Chief Financial Officer. Based on the evaluation, the Chief Executive Officer and Chief Financial Officer concludedthat our disclosure controls and procedures are effective as of December 31, 2023.The Chief Executive Officer and Chief Financial Officer does not expect that our disclosure controls or internal controls will prevent allerrors and all fraud. Although our disclosure controls and procedures were designed to provide reasonable assurance of achieving theirobjectives, a control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that theobjectives of the system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and thebenefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation ofcontrols can provide absolute assurance that all control issues and instances of fraud, if any, within the Partnership have been detected. Theseinherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simpleerror or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or bymanagement override of the control. The design of any system of controls also is based partly on certain assumptions about the likelihood offuture events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.Management’s Annual Report on Internal Control over Financial ReportingOur management is responsible for establishing and maintaining for us adequate internal controls over financial reporting.Our internal controls were designed to provide reasonable assurance as to the reliability of our financial reporting and the preparation andpresentation of the consolidated financial statements for external purposes in accordance with accounting principles generally accepted in theUnited States. Our internal controls over financial reporting include those policies and procedures that: 1) pertain to the maintenance ofrecords that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets; 2) provide reasonable assurancethat transactions are recorded as necessary to permit preparation of the financial statements in accordance with generally accepted accountingprinciples, and that our receipts and expenditures are being made in accordance with authorizations of management and the directors; and3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets thatcould have a material effect on the financial statements.We conducted an evaluation of the effectiveness of our internal control over financial reporting based upon the framework in InternalControl—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (theCOSO criteria). This evaluation included review of the documentation of controls, evaluation of the design effectiveness of controls, testing ofthe operating effectiveness of controls and a conclusion on this evaluation.Because of its inherent limitations, internal controls over financial reporting may not prevent or detect misstatements even whendetermined to be effective and can only provide reasonable assurance with respect to financial statement preparation and presentation. Also,projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changesin conditions, or that the degree of compliance with the policies and procedures may deteriorate. However, based on the evaluation,management has concluded that our internal controls over financial reporting were effective as of December 31, 2023. Table of Contents120There were no changes in our internal controls that have materially affected, or are reasonably likely to materially affect, our internalcontrol over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) that occurred during the year ended December 31,2023.Attestation Report of the Registered Public Accounting FirmThe effectiveness of the Partnership’s internal control over financial reporting as of December 31, 2023 has been audited by Ernst &Young AS (PCAOB ID: 1572), an independent registered public accounting firm, as stated in its report which appears on page F-4 of ourconsolidated financial statements.Changes in Internal Control over Financial ReportingThere were no changes in our internal control over financial reporting that occurred during the period covered by this Annual Report thathave materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.Item 16A. Audit Committee Financial ExpertOur board of directors has determined that Hans Petter Aas qualifies as an audit committee financial expert and is independent underapplicable NYSE and SEC standards.Item 16B. Code of EthicsThe KNOT Offshore Partners LP Code of Business Conduct and Ethics applies to all of our employees, officers and directors. Thisdocument is available under the “Governance” tab in the “Investors” section of our website www.knotoffshorepartners.com . We intend todisclose, under this tab of our website, any waivers to or amendments of the KNOT Offshore Partners LP Corporate Code of Business Ethicsand Conduct for the benefit of any of our directors and executive officers.Item 16C. Principal Accountant Fees and ServicesOur principal accountant for 2023 was Ernst & Young AS (PCAOB ID: 1572) Oslo, Norway.The audit committee of our board of directors has the authority to pre-approve permissible audit-related and non-audit services notprohibited by law to be performed by our independent auditors and associated fees. Engagements for proposed services either may beseparately pre-approved by the audit committee or entered into pursuant to detailed pre-approval policies and procedures established by theaudit committee, as long as the audit committee is informed on a timely basis of any engagement entered into on that basis. The auditcommittee separately pre-approved all engagements and fees paid to our principal accountant in 2023 and 2022.Fees Incurred by the Partnership for Ernst & Young AS’ Services: 2023 2022Audit Fees$ 679,500$ 598,344Audit‑Related Fees — —Tax Fees — 3,720$ 679,500$ 602,064Audit FeesAudit fees for 2023 and 2022 are the aggregate fees billed for professional services rendered by the principal accountant for the audit ofthe Partnership’s annual financial statements and services normally provided by the principal accountant in connection with statutory andregulatory filings or engagements, including services related to comfort letters, consents and assistance with and review of documents filedwith the SEC. Table of Contents121Audit-Related FeesAudit-related fees for 2023 and 2022 are the aggregate fees billed for professional services rendered by the principal accountant relatedprimarily to assurance work in connection with accounting consultations and acquisitions.Tax FeesTax fees for 2023 and 2022 are the aggregate fees billed for professional services rendered by the principal accountant related primarily totax compliance services.Item 16D. Exemptions from the Listing Standards for Audit CommitteesNot applicable.Item 16E. Purchases of Equity Securities by the Issuer and Affiliated PurchasersNot applicable.Item 16F. Change in Registrants’ Certifying AccountantNot applicable.Item 16G. Corporate GovernanceOverviewPursuant to an exemption under the NYSE listing standards for foreign private issuers, the Partnership is not required to comply with thecorporate governance practices followed by U.S. companies under the NYSE listing standards. However, pursuant to Section 303A.11 of theNYSE Listed Company Manual, we are required to state any significant differences between our governance practices and the practicesrequired by the NYSE for U.S. companies. We believe that our established practices in the area of corporate governance are in line with thespirit of the NYSE standards and provide adequate protection to our unitholders. The significant differences between our corporategovernance practices and the NYSE standards applicable to listed U.S. companies are set forth below.Independence of DirectorsThe NYSE rules do not require a listed company that is a foreign private issuer to have a board of directors that is comprised of a majorityof independent directors. Under Marshall Islands law, we are not required to have a board of directors comprised of a majority of directorsmeeting the independence standards described in the NYSE rules. In addition, the NYSE rules do not require limited partnerships like us tohave boards of directors comprised of a majority of independent directors. However, our board of directors has determined that each of HansPetter Aas, Edward A. Waryas, Jr., Simon Bird and Andrew Beveridge satisfies the independence standards established by the NYSE asapplicable to us.Executive SessionsThe NYSE requires that non-management directors of a listed U.S. company meet regularly in executive sessions without management.The NYSE also requires that all independent directors of a listed U.S. company meet in an executive session at least once a year. As permittedunder Marshall Islands law and our partnership agreement, our non-management directors do not regularly hold executive sessions withoutmanagement, and we do not expect them to do so in the future. Table of Contents122Nominating/Corporate Governance CommitteeThe NYSE requires that a listed U.S. company have a nominating/corporate governance committee of independent directors and acommittee charter specifying the purpose, duties and evaluation procedures of the committee. As permitted under Marshall Islands law andour partnership agreement, we do not currently have a nominating or corporate governance committee.Compensation CommitteeThe NYSE requires that a listed U.S. company have a compensation committee of independent directors and a committee charterspecifying the purpose, duties and evaluation procedures of the committee. As permitted under Marshall Islands law and our partnershipagreement, we do not currently have a compensation committee.Corporate Governance GuidelinesThe NYSE requires listed U.S. companies to adopt and disclose corporate governance guidelines. The guidelines must address, amongother things: director qualification standards, director responsibilities, director access to management and independent advisers, directorcompensation, director orientation and continuing education, management succession and an annual performance evaluation. We are notrequired to adopt such guidelines under Marshall Islands law, and we have not adopted such guidelines.We believe that our established corporate governance practices satisfy the NYSE listing standards.Item 16H. Mine Safety DisclosureNot applicable.Item 16I. Disclosure Regarding Foreign Jurisdictions that Prevent InspectionsNot applicable.Item 16J. Insider trading policiesNot applicable.Item 16K. CybersecurityThe Partnership recognizes the critical importance of developing, implementing, and maintaining a robust cybersecurity riskmanagement, strategy, and governance program in order to safeguard the confidentiality, integrity, and availability of Partnership systems andinformation.Board Oversight of Cybersecurity MattersThe Partnership’s Board of Directors has established robust oversight mechanisms to ensure effective governance in managing risksassociated with cybersecurity threats.In particular, the Board oversees the Partnership’s cybersecurity threats, risk management, strategy, and governance; receives updatesfrom Partnership management regarding the same; and approves certain changes or adaptations that support the same.Management of Cybersecurity MattersThe Partnership’s management assumes executive responsibility for assessing, identifying, and managing cybersecurity threats, incidents,and risks. Table of Contents123In particular, the Partnership’s Company Cyber Security Officer (CCSO) reports via the IT Manager to the Chief Executive Officer andChairman of the Board. The CCSO plays a pivotal role in assessing and managing cybersecurity threats, incidents, and risks at the Partnership.Our CCSO holds a Bachelor degree in Information Technology and has 5 years’ experience in a cyber security role along with more than 10years’ experience with the Partnership, KNOT and its affiliates. Our CCSO’s professional development is sustained through various coursesand certifications within the IT and information security industry.The CCSO is supported by other key members of Partnership management and dedicated information technology and security personneland resources, both internally and from third parties. Collectively, these personnel and resources allow the Partnership to strategicallyintegrate cybersecurity into its broader risk management framework and decision-making process.The Partnership’s management has processes in place by which it is informed of and monitors the prevention, detection, mitigation, andremediation of cybersecurity risks and aligns its controls with industry-accepted frameworks, such as NSM Grunnprinsipper (the basicprinciples authorized by Norway’s National Security Authority), the NIST Cybersecurity Framework, the ISO/IEC 27001 standard, and theCIS Controls. These processes include, but are not limited to:●Maintaining an inventory of digital information and assets;●Maintaining a cyber incident response plan;●Employing incident prevention and detection software and safeguards (e.g., antivirus, anti-malware, firewall, endpoint detectionand response, identity and access management, multifactor authentication, virtual private network, web content filter, spamfilter, data loss protection software, security information and event management software);●Employing industry-standard encryption protocols where appropriate;●Employing backup/disaster recovery software where appropriate;●Conducting regular vulnerability scans and penetration tests of Partnership systems and networks;●Employing a patch management process;●Requiring employees to complete a Cybersecurity Awareness Program;●Conducting regular phishing simulations and tabletop exercises to test sufficiency of and adherence to Partnership cybersecuritypolicies and procedures; and●Reviewing and evaluating new developments in the cyber threat landscape.Engagement of Third Parties on Risk ManagementThe Partnership leverages the cybersecurity expertise, insight, and resources of various external third parties, including but not limited tocybersecurity service providers, assessors, consultants, auditors, and other third parties engaged on an as-needed basis. The Partnershipengages with these third parties to perform audits, threat and vulnerability assessments, incident response plan testing, Partnership monitoringof cybersecurity risks, and consultation on security enhancements.Managing Third Party RiskThe Partnership recognizes the risks associated with the use of vendors, service providers, and other third parties that provide informationsystem services to it, process information on its behalf, or has access to the Partnership’s information systems, and Partnership managementhas processes in place to oversee and identify material cybersecurity risks associated with its use of such third parties. These processesinclude, but are not limited to:●Maintaining an inventory of third-party vendors engaged by the Partnership; Table of Contents124●Maintaining a vendor management policy that addresses vendor cybersecurity standards, testing, and enforcement;●Contractually requiring third-party vendors to employ reasonable security measures when accessing Partnership systems orhandling Partnership information and to maintain appropriate cybersecurity insurance;●Implementing access controls that restrict third-party vendor access to only those Partnership systems and information which arenecessary to perform the vendor’s service; and●Conducting audits of certain third-party vendor security practices.Communicating and Reporting on Cybersecurity MattersThe IT Manager maintains ongoing dialogue with the CEO to ensure awareness of the Partnership’s cybersecurity posture anddevelopments, including but not limited to new threats, incidents, risks, risk management solutions, tools, trainings, strategy pivots, orgovernance changes.Furthermore, the IT Manager reports to the Board regarding significant developments in the above topics. This ensures the Board isequipped with information to exercise oversight on critical cybersecurity issues.Material Impact on PartnershipThus far, to the Partnership’s knowledge, the Partnership’s business strategy, operations, or financial condition have not been materiallyaffected by, and are not likely to be materially affected by, any largescale cybersecurity threats or incidents. Table of Contents125PART IIIItem 17. Financial StatementsNot applicable.Item 18. Financial StatementsThe following financial statements listed below and set forth on pages F-1 through F-46, together with the related reports of Ernst &Young AS, Independent Registered Public Accounting Firm thereon, are filed as part of this Annual Report:Consolidated Statements of Operations for the Years Ended December 31, 2023, 2022 and 2021F-5Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2023, 2022 and 2021F-6Consolidated Balance Sheets as of December 31, 2023 and 2022F-7Consolidated Statements of Changes in Partners’ Capital for the Years Ended December 31, 2023, 2022 and 2021F-8Consolidated Statements of Cash Flows for the Years Ended December 31, 2023, 2022 and 2021F-9Notes to Consolidated Financial StatementsF-10All other schedules for which provision is made in the applicable accounting regulations of the SEC are not required, are inapplicable orhave been disclosed in the notes to the consolidated financial statements and therefore have been omitted. Table of Contents126Item 19. ExhibitsThe following exhibits are filed as part of this Annual Report:Exhibit Number Description1.1Certificate of Limited Partnership of KNOT Offshore Partners LP (incorporated by reference to Exhibit 3.1 to theregistrant’s Form F-1 Registration Statement (333-186947), filed on February 28, 2013)1.2Fourth Amended and Restated Agreement of Limited Partnership of KNOT Offshore Partners LP, dated as ofSeptember 10, 2021 (incorporated by reference to Exhibit 3.2 of the registrant’s Report on Form 8-A/A filed onSeptember 10, 2021)2.1Description of Securities Registered under Section 12 of the Exchange Act (incorporated by reference to Exhibit 2.1 ofthe registrant’s Annual Report on Form 20-F for fiscal year ended December 31, 2021 filed on March 7, 2022)4.1Omnibus Agreement, dated April 15, 2013, among Knutsen NYK Offshore Tankers AS, KNOT Offshore Partners LP,KNOT Offshore Partners GP LLC, KNOT Shuttle Tankers 17 AS and KNOT Shuttle Tankers 18 AS (incorporated byreference to Exhibit 4.2 of the registrant’s Annual Report on Form 20-F for fiscal year ended December 31, 2013 filedon April 15, 2014)4.2Exchange Agreement, dated September 7, 2021, among KNOT Offshore Partners LP, KNOT Offshore Partners GPLLC and Knutsen NYK Offshore Tankers AS (incorporated by reference to Exhibit 4.1 to the registrant’s report onForm 6-K filed on September 7, 2021)4.3Administrative Services Agreement, dated February 26, 2013, among KNOT Offshore Partners LP, KNOT OffshorePartners UK LLC, Knutsen OAS (UK) Ltd. and Knutsen OAS Shipping AS (incorporated by reference to Exhibit 10.3to the registrant’s Amendment No. 1 to Form F-1 Registration Statement (333-186947), filed on March 19, 2013)4.4Amendment No. 1 to the Administrative Services Agreement, dated May 7, 2015, between KNOT OffshorePartners LP, KNOT Offshore Partners UK LLC, Knutsen OAS (UK) Ltd., Knutsen OAS Shipping AS and KNOTManagement AS (incorporated by reference to Exhibit 4.1 to the registrant’s report on Form 6-K filed on June 2, 2015)4.5Amendment No. 2 to the Administrative Services Agreement, dated November 28, 2018, between KNOT OffshorePartners LP, KNOT Offshore Partners UK LLC, Knutsen OAS (UK) Ltd., Knutsen OAS Shipping AS and KNOTManagement AS (incorporated by reference to Exhibit 4.4 of the registrant’s Annual Report on Form 20-F forfiscal year ended December 31, 2018 filed on April 10, 2019)4.6Amendment No. 3 to the Administrative Services Agreement, dated March 13, 2019, between KNOT OffshorePartners LP, KNOT Offshore Partners UK LLC, Knutsen OAS (UK) Ltd., Knutsen OAS Shipping AS and KNOTManagement AS (incorporated by reference to Exhibit 4.5 of the registrant’s Annual Report on Form 20-F forfiscal year ended December 31, 2018 filed on April 10, 2019)4.7Amendment No. 4 to the Administrative Services Agreement, dated September 6, 2023, between KNOT OffshorePartners LP, KNOT Offshore Partners UK LLC, Knutsen OAS (UK) Ltd., Knutsen OAS Shipping AS and KNOTManagement AS (incorporated by reference to Exhibit 4.3 to the registrant’s report on Form 6-K filed on September 11,2023)4.8*Form of Ship Management Agreement, dated May 13, 2014, between KNOT Shuttle Tankers 21 AS and KNOTManagement Denmark AS,4.9*Form of Ship Management Agreement, dated December 8, 2023, between KNOT Shuttle Tankers 20 AS and KNOTManagement Denmark AS, Table of Contents127Exhibit NumberDescription4.10Loan Agreement, dated March 31, 2017, among Knutsen Shuttle Tankers 14 AS, as borrower, and Mitsubishi UFJLease & Finance (Hong Kong) Limited, as lender (incorporated by reference to Exhibit 4.3 to the registrant’s report onForm 6-K filed on August 10, 2017)4.11Facility Agreement, dated July 2, 2019, among KNOT Shuttle Tankers 34 AS and KNOT Shuttle Tankers 35 AS, asborrowers, and the other parties thereto (incorporated by reference to Exhibit 4.22 of the registrant’s Annual Report on Form 20-F for fiscal year ended December 31, 2020 filed on March 18, 2021)4.12Accession Letter, dated December 2020, among Knutsen NYK Offshore Tankers AS, KNOT Offshore Partners LP,KNOT Shuttle Tankers AS, KNOT Shuttle Tankers 34 AS, KNOT Shuttle Tankers 35 AS and MUFG Bank, Ltd.(incorporated by reference to Exhibit 4.23 of the registrant’s Annual Report on Form 20-F for fiscal year ended December 31, 2020filed on March 18, 2021)4.13Accession Letter, dated July 1, 2022, among Knutsen NYK Offshore Tankers AS, KNOT Offshore Partners LP, KNOTShuttle Tankers AS, KNOT Shuttle Tankers 34 AS, KNOT Shuttle Tankers 35 AS and MUFG Bank, Ltd. (incorporatedby reference to Exhibit 4.17 to the registrant’s report in Form 20-F filed on March 30, 2023)4.14Memorandum of Agreement, dated December 30, 2020, between Knutsen Shuttle Tankers 19 AS and MI-DAS LineS.A., as amended by Addendum No. 1, dated January 14, 2021 (incorporated by reference to Exhibit 4.24 of the registrant’sAnnual Report on Form 20-F for fiscal year ended December 31, 2020 filed on March 18, 2021)4.15+Bareboat Charter, dated December 30, 2020, between Knutsen Shuttle Tankers 19 AS and MI-DAS Line S.A.(incorporated by reference to Exhibit 4.25 of the registrant’s Annual Report on Form 20-F for fiscal year endedDecember 31, 2020 filed on March 18, 2021)4.16Term Loan Facility Agreement, dated August 25, 2021, among KNOT Shuttle Tankers 24 AS, KNOT Shuttle Tankers25 AS, KNOT Shuttle Tankers 26 AS, KNOT Shuttle Tankers 30 AS and KNOT Shuttle Tankers 32 AS, as borrowers,KNOT Shuttle Tankers AS and KNOT Offshore Partners LP, as guarantors, and the other parties thereto (incorporatedby reference to Exhibit 4.1 to the registrant’s report on Form 6-K filed on December 2, 2021)4.17Memorandum of Agreement, dated June 20, 2022, between Knutsen Shuttle Tankers 15 AS and Four Land (Panama)S.A. (incorporated by reference to Exhibit 4.2 of the registrant’s report on Form 6-K filed on September 2, 2022)4.18†Bareboat Charter, dated June 20, 2022, between Four Land (Panama) S.A. and Knutsen Shuttle Tankers 15 AS(incorporated by reference to Exhibit 4.3 of the registrant’s report on Form 6-K filed on September 2, 2022)4.19Term Loan Facility Agreement, dated June 2, 2023, among Knutsen Shuttle Tankers XII KS, Knutsen Shuttle TankersXII AS, Knutsen Shuttle Tankers 13 AS, Knutsen NYK Shuttle Tankers 16 AS, KNOT Shuttle Tankers 17 AS andKNOT Shuttle Tankers 18 AS, as borrowers, KNOT Shuttle Tankers AS and KNOT Offshore Partners LP, asguarantors, and the other parties thereto (incorporated by reference to Exhibit 4.1 to the registrant’s report on Form 6-Kfiled on September 11, 2023)4.20Employment Agreement, dated March 12, 2019, between KNOT Offshore Partners UK LLC and Gary Chapman(incorporated by reference to Exhibit 4.25 of the registrant’s Annual Report on Form 20-F for fiscal year endedDecember 31, 2018 filed on April 10, 2019)4.21Service Agreement, dated August 3, 2023, between KNOT Offshore Partners UK LLC and Derek Lowe (incorporatedby reference to Exhibit 4.2 to the registrant’s report on Form 6-K filed on September 11, 2023)4.22Series A Preferred Unit Purchase Agreement, dated December 6, 2016, among KNOT Offshore Partners LP and thePurchasers party thereto (incorporated by reference to Exhibit 4.1 to the registrant’s report on Form 6-K filed onDecember 6, 2016)4.23Assignment and Novation Agreement, dated December 20, 2016, among Offshore Merchant Partners Asset YieldFund, L.P., OMP AY Preferred Limited and KNOT Offshore Partners LP (incorporated by reference to Exhibit 4.1 tothe registrant’s report on Form 6-K filed on February 2, 2017)4.24First Amendment to Series A Preferred Unit Purchase Agreement, dated February 2, 2017, among KNOT OffshorePartners LP and the Purchasers party thereto (incorporated by reference to Exhibit 4.2 to the registrant’s report on Form6-K filed on February 2, 2017)4.25Second Amendment to Series A Preferred Unit Purchase Agreement, dated May 16, 2017, between KNOT OffshorePartners LP and the Purchasers party thereto (incorporated by reference to Exhibit 4.2 to the registrant’s report on Form6-K filed on May 17, 2017) Table of Contents128Exhibit NumberDescription4.26Joinder Agreement, dated June 30, 2017, among KNOT Offshore Partners LP, OMP AY Preferred Limited, PierfrontCapital Mezzanine Fund Pte. Ltd. and Tortoise Direct Opportunities Fund, LP (incorporated by reference to Exhibit 4.1to the registrant’s report on Form 6-K filed on June 30, 2017)4.27Registration Rights Agreement, dated February 2, 2017, among KNOT Offshore Partners LP and the Purchasers partythereto (incorporated by reference to Exhibit 4.3 to the registrant’s report on Form 6-K filed on February 2, 2017)4.28Share Purchase Agreement, dated June 28, 2022, between Knutsen NYK Offshore Tankers AS and KNOT ShuttleTankers AS (incorporated by reference to Exhibit 4.1 of the registrant’s report on Form 6-K filed on September 2, 2022)4.29At-the-Market Issuance Sales Agreement, dated November 2, 2023, by and among KNOT Offshore Partners LP, KNOTOffshore Partners GP LLC, KNOT Offshore Partners UK LLC, KNOT Shuttle Tankers AS and B. Riley Securities, Inc.(incorporated by reference to Exhibit 1.1 to the registrant’s report on Form 6-K filed on November 2, 2023)8.1*Subsidiaries of KNOT Offshore Partners LP12.1*Rule 13a-14(a)/15d-14(a) Certification of the Principal Executive Officer and the Principal Financial Officer13.1*Certification under Section 906 of the Sarbanes-Oxley Act of 2002 of the Principal Executive Officer and the PrincipalFinancial Officer15.1*Consent of Independent Registered Public Accounting Firm97.1*KNOT Offshore Partners LP Policy for the Recovery of Erroneously Awarded Compensation101.INS*Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRLtags are embedded within the Inline XBRL document101.SCH*Inline XBRL Taxonomy Extension Schema101.CAL*Inline XBRL Taxonomy Extension Schema Calculation Linkbase101.DEF*Inline XBRL Taxonomy Extension Schema Definition Linkbase101.LAB*Inline XBRL Taxonomy Extension Schema Label Linkbase101.PRE*Inline XBRL Taxonomy Extension Schema Presentation Linkbase104*Cover Page Interactive Date File (formatted as Inline XBRL and contained in Exhibit 101)*Filed herewith.†Certain identified information has been excluded from the exhibit because it is both (i) not material and (ii) would be competitivelyharmful if publicly disclosed. Table of Contents129SIGNATUREThe registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized theundersigned to sign this Annual Report on its behalf.KNOT OFFSHORE PARTNERS LPBy:/s/ DEREK LOWEName:Derek LoweTitle:Chief Executive Officer and Chief Financial OfficerDate: April 11, 2024 Table of ContentsF-1INDEX TO FINANCIAL STATEMENTS OF KNOT OFFSHORE PARTNERS LPReports of Independent Registered Public Accounting FirmF-2Consolidated Statements of Operations for the Years Ended December 31, 2023, 2022 and 2021F-5Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2023, 2022 and 2021F-6Consolidated Balance Sheets as of December 31, 2023 and 2022F-7Consolidated Statements of Changes in Partners’ Capital for the Years Ended December 31, 2023, 2022 and 2021F-8Consolidated Statements of Cash Flows for the Years Ended December 31, 2023, 2022 and 2021F-9Notes to Consolidated Financial StatementsF-10 Table of ContentsF-2Report of Independent Registered Public Accounting FirmTo the Unitholders and the Board of Directors of KNOT Offshore Partners LPOpinion on the Financial StatementsWe have audited the accompanying consolidated balance sheets of KNOT Offshore Partners LP (the Partnership) as of December 31, 2023and 2022, the related consolidated statements of operations, comprehensive income, changes in partners’ capital and cash flows for each ofthe three years in the period ended December 31, 2023, and the related notes (collectively referred to as the “consolidated financialstatements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of thePartnership at December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period endedDecember 31, 2023, in conformity with U.S. generally accepted accounting principles.We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), thePartnership’s internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control-IntegratedFramework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated April11, 2024, expressed an unqualified opinion thereon.Basis for OpinionThese financial statements are the responsibility of the Partnership’s management. Our responsibility is to express an opinion on thePartnership’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to beindependent with respect to the Partnership in accordance with the U.S. federal securities laws and the applicable rules and regulations of theSecurities and Exchange Commission and the PCAOB.We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit toobtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our auditsincluded performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, andperforming procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts anddisclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made bymanagement, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basisfor our opinion. Table of ContentsF-3Critical Audit MatterThe critical audit matter communicated below is a matter arising from the current period audit of the financial statements that wascommunicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to thefinancial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical auditmatter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating thecritical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.Vessel impairmentDescription of the MatterThe carrying value of the Partnership’s vessels was $1,493 million as of December 31, 2023. Asexplained in Notes 2(n) and 21 to the consolidated financial statements, the Partnership assessesvessels for impairment at least annually or whenever events or changes in circumstances indicate thatthe carrying value of an asset may not be recoverable. If impairment indicators are identified, thePartnership compares the undiscounted cash flows expected to be generated by that vessel to thecarrying value (recoverability test). If the carrying value of the vessel is not recoverable on anundiscounted cash flow basis, impairment is recognized to the extent that the carrying value exceedsits fair value. During the year ended December 31, 2023, the Partnership recognized an impairmentloss of $49.6 million to write down two vessels’ carrying value to its estimated fair value. Auditing thePartnership’s measurement of the impairment loss was complex due to the significant estimationuncertainty and judgement in forecasting the future cash flows of the vessels. Specifically, these cashflow estimates are sensitive to significant assumptions including the discount rate, estimation of dailycharter rates, vessel utilization and the costs of future drydockings.How We Addressed the Matter inOur AuditWe obtained an understanding, evaluated the design and tested the operating effectiveness of thecontrols over the Partnership’s impairment assessment process, including controls over management’sreview of the significant assumptions described above.To audit the recoverability test, we performed audit procedures that included, among others, analyzingmanagement’s recoverability test by comparing the methodology used against accounting guidanceunder ASC 360 and practices common in the industry. We tested the reasonableness of estimated dailycharter rates by comparing them to charter rates obtained in the past, third party analyst reportsdeveloped by independent market research firms, recent shuttle tanker tender activity undertaken bythe Partnership and historical charter rate information. We tested the source information underlying thecalculation as well as the mathematical accuracy of the model. We involved our valuation specialists toassist in developing a range of independent discount rate estimates and compared those to the discountrate selected by management.We assessed whether the vessel utilization assumptions were reasonable based on historical utilizationof the Partnership’s vessels. We also reviewed market reports and analyzed how the economic factorssuch as future demand and supply for shuttle tankers have been incorporated in the charter rates. Wecompared the estimated costs of future drydocking estimates to budgets and to historical drydockingcosts adjusted for factors such as inflation and planned future installations. We also assessed theadequacy of the vessel impairment disclosures as included in Note 2(n), Note 14 and Note 21 of theconsolidated financial statements./s/ Ernst & Young ASWe have served as the Partnership’s auditor since 2013.Oslo, NorwayApril 11, 2024 Table of ContentsF-4Report of Independent Registered Public Accounting FirmTo the Unitholders and the Board of Directors of KNOT Offshore Partners LPOpinion on Internal Control Over Financial ReportingWe have audited KNOT Offshore Partners LP’s internal control over financial reporting as of December 31, 2023, based on criteriaestablished in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission(2013 framework) (the COSO criteria). In our opinion, KNOT Offshore Partners LP (the Partnership) maintained, in all material respects,effective internal control over financial reporting as of December 31, 2023, based on the COSO criteria.We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the2023 consolidated financial statements of the Partnership and our report dated April 11, 2024 expressed an unqualified opinion thereon.Basis for OpinionThe Partnership’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of theeffectiveness of internal control over financial reporting included in the accompanying Management’s Annual Report on Internal Control OverFinancial Reporting. Our responsibility is to express an opinion on the Partnership’s internal control over financial reporting based on ouraudit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Partnership inaccordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and thePCAOB.We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtainreasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists,testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such otherprocedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.Definition and Limitations of Internal Control Over Financial ReportingA company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability offinancial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accountingprinciples. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance ofrecords that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) providereasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generallyaccepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations ofmanagement and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorizedacquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of anyevaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, orthat the degree of compliance with the policies or procedures may deteriorate./s/ Ernst & Young ASOslo, NorwayApril 11, 2024 Table of ContentsF-5KNOT OFFSHORE PARTNERS LPConsolidated Statements of OperationsFor the Years Ended December 31, 2023, 2022 and 2021(U.S. Dollars in thousands, except per unit amounts)Year Ended December 31, 2023 2022 2021Operating revenues: (Notes 2(e), 5, 6 and 19)Time charter and bareboat revenues$277,084$262,797$269,306Voyage revenues8,8494,689—Loss of hire insurance recoveries (Notes 2(t) and 8) 2,840 758 11,450Other income1,943341373Total revenues (Notes 2(e), 5, 6, 8 and 19) 290,716 268,585 281,129Operating expenses: Vessel operating expenses (Notes 2(e) and 19) 93,351 86,032 72,114Voyage expenses and commission5,5362,814—Depreciation (Note 14) 110,902 107,419 99,559Impairment (Notes 2(n), 14 and 21) 49,649 — 29,421General and administrative expenses 6,142 6,098 6,461Total operating expenses 265,580 202,363 207,555Operating income (loss) 25,136 66,222 73,574Finance income (expense): (Notes 2(f) and 19)Interest income 3,468 822 2Interest expense (Note 9(a)) (72,070) (42,604) (28,065)Other finance expense (Note 9(b)) (589) (628) (1,011)Realized and unrealized gain (loss) on derivative instruments (Note 10) 5,369 35,510 9,960Net gain (loss) on foreign currency transactions (237) 220 (96)Total finance expense (64,059) (6,680) (19,210)Income (loss) before income taxes (38,923) 59,542 54,364Income tax benefit (expense) (Notes 2(r) and 18) 4,595 (875) (488)Net income (loss)$(34,328)$58,667$53,876Series A Preferred unitholders’ interest in net income (loss)$6,800$6,800$6,900General Partner’s interest in net income (loss) (760) 951 862Limited Partners’ interest in net income (loss) (40,368) 50,916 46,114Earnings per unit (Basic): (Note 22)Common unit (basic)$(1.19)$1.48$1.38Class B unit (basic)$—$1.48$2.62General Partner unit (basic)$(1.19)$1.48$1.38Earnings per unit (Diluted): (Note 22) Common unit (diluted)$(1.19)$1.48$1.38Class B unit (diluted)$—$1.48$2.62General Partner unit (diluted)$(1.19)$1.48$1.38The accompanying notes are an integral part of these financial statements. Table of ContentsF-6KNOT OFFSHORE PARTNERS LPConsolidated Statements of Comprehensive IncomeFor the Years Ended December 31, 2023, 2022 and 2021(U.S. Dollars in thousands)Year Ended December 31, 2023 2022 2021Net income (loss)$(34,328)$58,667$53,876Other comprehensive income, net of tax — — —Comprehensive income (loss)$(34,328)$58,667$53,876The accompanying notes are an integral part of these financial statements. Table of ContentsF-7KNOT OFFSHORE PARTNERS LPConsolidated Balance SheetsAs of December 31, 2023 and 2022(U.S. Dollars in thousands)At December 31,At December 31,(U.S. Dollars in thousands) 2023 2022 ASSETS Current assets: Cash and cash equivalents (Notes 2(g) and 11)$63,921$47,579Amounts due from related parties (Note 19(c)) 348 1,998Inventories (Notes 2(i) and 13) 3,696 5,759Derivative assets (Notes 2(q), 10 and 11) 13,019 15,070Other current assets (Notes 2(j), 12(a) and 12(b)) 8,795 15,528Total current assets 89,779 85,934Long-term assets: Vessels, net of accumulated depreciation (Notes 2(k), 2(l), 2(m), 14 and 19(a)) 1,492,998 1,631,380Right-of-use assets (Notes 2(l) and 6)2,1262,261Deferred tax assets (Notes 2(r) and 18) 4,358 —Derivative assets (Notes 2(q), 10 and 11) 7,229 14,378Total Long-term assets 1,506,711 1,648,019Total assets$1,596,490$1,733,953LIABILITIES AND EQUITY Current liabilities: Trade accounts payable (Note 19(d))$10,243$4,268Accrued expenses (Note 16) 14,775 10,651Current portion of long-term debt (Notes 11 and 17)98,960369,787Current lease liabilities (Note 6) 982 715Income taxes payable (Notes 2(r) and 18) 44 699Current portion of contract liabilities (Notes 2(o) and 15(b)) — 651Prepaid charter (Note 2(s)) 467 1,504Amount due to related parties (Note 19(c)) 2,106 1,717Total current liabilities 127,577 389,992Long-term liabilities: Long-term debt (Notes 2(p), 11 and 17) 857,829 686,601Lease liabilities (Note 6)1,1441,546Deferred tax liabilities (Notes 2(r) and 18) 127 424Deferred revenues (Note 2(e)) 2,336 3,178Total long-term liabilities 861,436 691,749Total liabilities 989,013 1,081,741Commitments and contingencies (Notes 2(t) and 20) Series A Convertible Preferred Units (Notes 22 and 23) 84,308 84,308Equity: Partners’ capital: Common unitholders: 34,045,081 units issued and outstanding at December 31, 2023 and 2022,respectively 510,013 553,922Class B unitholders: 252,405 units issued and outstanding at December 31, 2023 and 2022,respectively3,8713,871General partner interest: 640,278 units issued and outstanding at December 31, 2023 and 2022,respectively 9,285 10,111Total partners’ capital 523,169 567,904Total liabilities and equity$1,596,490$1,733,953The accompanying notes are an integral part of these financial statements. Table of ContentsF-8KNOT OFFSHORE PARTNERS LPConsolidated Statements of Changes in Partners’ CapitalFor the Years Ended December 31, 2023, 2022 and 2021(U.S. Dollars in thousands)Partners’ CapitalAccumulatedSeries AGeneralOtherTotalConvertibleCommonClass BPartnerComprehensivePartners’Preferred(U.S. Dollars in thousands) Units Units Units Income (Loss) Capital UnitsConsolidated balance at December 31, 2020$597,390$—$10,895$—$608,285$89,264Net income 45,466 648 862 — 46,976 6,900Conversion of preferred units to common units 4,856 — — — 4,856 (4,856)Net proceeds from issuance of General Partner units——451—451—IDR Exchange (10,079) 10,463 (384) — — —Net proceeds from ATM program 525 — — — 525 —Conversion of Class B to common units (1)1,308(1,308)————Other comprehensive income — — — — — —Cash distributions (70,704) (350) (1,332) — (72,386) (7,000)Consolidated balance at December 31, 2021$568,762$9,453$10,492$—$588,707$84,308Net income50,297619951—51,8676,800Conversion of Class B to common units (1)5,238(5,238)————Other comprehensive income——————Cash distributions(70,375)(963)(1,332)—(72,670)(6,800)Consolidated balance at December 31, 2022$553,922$3,871$10,111$—$567,904$84,308Net income (loss)(40,368)—(760)—(41,128)6,800Conversion of Class B to common units (1)——————Other comprehensive income——————Cash distributions(3,541)—(66)—(3,607)(6,800)Consolidated balance at December 31, 2023$510,013$3,871$9,285$—$523,169$84,308(1)On September 7, 2021, the Partnership entered into an exchange agreement with Knutsen NYK and the Partnership’s general partnerwhereby Knutsen NYK contributed to the Partnership all of Knutsen NYK’s IDRs, in exchange for the issuance by the Partnership toKnutsen NYK of 673,080 common units and 673,080 Class B Units, whereupon the IDRs were cancelled. As of December 31, 2021,84,135 of the Class B Units had been converted to common units. As of December 31, 2022, 420,675 of the Class B Units had beenconverted to common units. As of December 31, 2023, 420,675 of the Class B Units had been converted to common units.The accompanying notes are an integral part of these financial statements. Table of ContentsF-9KNOT OFFSHORE PARTNERS LPConsolidated Statements of Cash FlowsFor the Years Ended December 31, 2023, 2022 and 2021(U.S. Dollars in thousands) Year Ended December 31, (U.S. Dollars in thousands)2023 2022 2021OPERATING ACTIVITIES Net income (loss) (1)$(34,328)$58,667$53,876Adjustments to reconcile net income to cash provided by operating activities: Depreciation 110,902 107,419 99,559Impairment 49,649 — 29,421Amortization of contract intangibles / liabilities (651) (1,442) (912)Amortization of deferred revenue(467)——Amortization of deferred debt issuance cost 2,503 2,692 3,519Drydocking expenditure (19,375) (17,614) (4,235)Income tax expense (4,595) 875 488Income taxes paid (665) (422) (83)Unrealized (gain) loss on derivative instruments9,200(38,490)(20,054)Unrealized (gain) loss on foreign currency transactions674913Changes in operating assets and liabilities: Decrease (increase) in amounts due from related parties 1,650 723 3,058Decrease (increase) in inventories 2,139 (2,163) (653)Decrease (increase) in other current assets 6,735 (9,689) (117)Decrease (increase) in accrued revenue — 1,450 1,418Increase (decrease) in trade accounts payable 5,867 251 18Increase (decrease) in accrued expenses 4,125 3,528 1,048Increase (decrease) prepaid charter (1,504) (4,682) 763Increase (decrease) in amounts due to related parties 389 (210) (716)Net cash provided by operating activities 131,641 100,942 166,411INVESTING ACTIVITIES (additions) to vessel and equipment (2,779) (3,309) (11,536)Acquisition of Synnøve Knutsen (net of cash acquired)—(32,205)—Net cash used in investing activities (2,779) (35,514) (11,536)FINANCING ACTIVITIES Proceeds from long-term debt 250,000 167,000 444,300Repayment of long-term debt (349,642) (166,609) (505,822)Payment of debt issuance cost (2,461) (889) (5,215)Cash distributions (10,407) (79,470) (79,386)Net proceeds from issuance of General Partner units——451Net proceeds from public offering — — 525Net cash used in financing activities (112,510) (79,968) (145,147)Effect of exchange rate changes on cash (10) (174) (18)Net increase (decrease) in cash and cash equivalents 16,342 (14,714) 9,710Cash and cash equivalents at the beginning of the period 47,579 62,293 52,583Cash and cash equivalents at the end of the period$63,921$47,579$62,293(1)Included in net income is interest paid amounting to $69.3 million, $37.3 million and $25.1 million for the years ended December 31,2023, 2022 and 2021, respectively.The accompanying notes are an integral part of these financial statements. Table of ContentsKNOT OFFSHORE PARTNERS LPNotes to Consolidated Financial StatementsF-101) Description of BusinessKNOT Offshore Partners LP (the “Partnership”) was formed as a limited partnership under the laws of the Republic of the MarshallIslands. The Partnership was formed for the purpose of acquiring 100% ownership interests in four shuttle tankers owned by Knutsen NYKOffshore Tankers AS (“KNOT”) in connection with the Partnership’s initial public offering of its common units (the “IPO”), which wascompleted on April 15, 2013.As of December 31, 2023, the Partnership had a fleet of eighteen shuttle tankers, the Windsor Knutsen, the Bodil Knutsen, the RecifeKnutsen, the Fortaleza Knutsen, the Carmen Knutsen, the Hilda Knutsen, the Torill Knutsen, the Dan Cisne, the Dan Sabia, the IngridKnutsen, the Raquel Knutsen, the Tordis Knutsen, the Vigdis Knutsen, the Lena Knutsen, the Brasil Knutsen, the Anna Knutsen, the ToveKnutsen and the Synnøve Knutsen, each referred to as a “Vessel” and, collectively, as the “Vessels”. The Vessels operate under fixed chartercontracts to charterers, with expiration dates between 2024 and 2027. Please see Note 6—Operating Leases.The consolidated financial statements have been prepared assuming that the Partnership will continue as a going concern.The Partnership expects that its primary future sources of funds will be available cash, cash from operations, borrowings under any newloan agreements and the proceeds of any debt or equity financings, including net proceeds from sales under its ATM program. The Partnershipbelieves that these sources of funds (assuming the current rates earned from existing charters) will be sufficient to cover operational cashoutflows, working capital requirements and ongoing obligations under the Partnership’s lease obligations and financing commitments to payloan interest and make scheduled loan repayments and to make distributions on its outstanding units assuming the Partnership is able to timelyrefinance its maturing credit facilities on similar terms as its existing facilities. Accordingly, as of April 11, 2024, the Partnership believes thatits current resources are sufficient to meet working capital requirements and other cash requirements for its current business for at least thenext twelve months. See Note 17—Long-Term Debt.2) Summary of Significant Accounting Policies(a) Basis of PreparationThe 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 on consolidation.The consolidated financial statements include the financial statements of the entities listed in Note 4—Subsidiaries(b) Business Combinations and Asset AcquisitionsBusiness combinations are accounted for under the purchase method of accounting. On acquisition, the identifiable assets, liabilities andcontingent liabilities are measured at their fair values at the date of acquisition. Any excess of the cost of acquisition over the fair values of theidentifiable net assets acquired is recognized as goodwill. The consideration transferred for an acquisition is measured at fair value of theconsideration given. Acquisition related costs are expensed as incurred. The results of operations of the acquired businesses are included inthe 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, whensubstantially all of the fair value of assets acquired is concentrated in a single identifiable asset, rather than a business combination. Assetacquisitions are accounted for by allocating the cost of the acquisition to the individual assets acquired and liabilities assumed on a relativefair value basis. Acquisition related costs are capitalized as a component of the assets acquired. See Note 24—Acquisitions. Table of ContentsF-11(c) Reporting CurrencyThe 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 revenuesare U.S. Dollar-denominated and the majority of expenditures are made in U.S. Dollars. Transactions involving other currencies duringthe 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 exchangerates. Resulting gains or losses are reflected separately in the accompanying consolidated statements of operations.(d) Use of EstimatesThe preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates andassumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of thefinancial statements, and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from thoseestimates. 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 ExpensesThe Partnership’s time charter contracts include both a lease component, consisting of the lease of the vessel, and non-lease component,consisting of operation of the vessel for the customers. The lease element is accounted for as an operating lease on a straight-line basis overthe term of the charter, while the non-lease service element consisting of the operation of the vessel is recognized over time as the services aredelivered. Revenue from time charters is not recognized during days the Vessel is off-hire. Revenue is recognized from delivery of the Vesselto the charterer, until the end of the contract period. Under bareboat charters, the Partnership provides a specified Vessel for a fixed period oftime at a specified day rate and the Partnership recognizes revenues from bareboat charters as operating leases on a straight-line basis over theterm of the charter. Where the term of the contract is based on the duration of a single voyage, the Partnership evaluates whether the voyagecontain leases and, if so, recognizes lease revenue as described above, and if not, recognizes revenue in accordance with ASC 606 upon thesatisfaction of the performance obligations in the contract on a load-to-discharge basis.In connection with the installation of the volatile organic compound emissions (“VOC”) control equipment on the Bodil Knutsen, thePartnership is receiving a grant to compensate for expenses incurred in relation to the retrofit of the vessel, the installation of the equipmentand maintenance and operation of the unit. These grants or contributions are recorded as deferred revenue when they are received. Thedeferred revenue is recognized as other income over the useful life of the related asset.Voyage expenses are paid by the customer under time charter and bareboat charters. Voyage expenses are paid by the Partnership for spotcontracts and during periods of off-hire and are recognized when incurred.Vessel operating expenses include commissions, crewing, repairs and maintenance, insurance, stores, lube oils and communicationexpenses. Vessel operating expenses are paid by the Partnership for time charters, spot contracts and during off-hire and are recognized whenincurred.The Partnership directly employs one onshore employee and no seagoing employees. Related parties have provided the managementservices for the Vessels and employ the crews that work on the Vessels. The Partnership is not liable for any pension or post-retirementbenefits. See Note 19—Related Party Transactions.(f) Financial Income (Expense)Other finance expenses include external bank fees and commitment fees paid on undrawn revolving credit facility. Table of ContentsF-12(g) Cash and Cash EquivalentsThe Partnership considers all highly liquid investments with an original maturity of three months or less when purchased to be cashequivalents.(h) Trade Accounts ReceivableAccounts receivables are recorded at the invoiced amount and do not bear interest. Time charter and bareboat charter contracts requirecustomers to pay in advance of the period of hire.The allowance for expected credit losses is the Partnership’s best estimate of the expected credit losses over the remaining lives of theassets. Expected credit losses are estimated using historical credit loss experience, relevant available information, from internal and externalsources, relating to current conditions and reasonable and supportable forecasts of economic conditions impacting the collectability of theassets. There was no allowance for expected credit loss or amounts written off against the allowance as of December 31, 2023, 2022 and 2021.The Partnership does not have any off-balance-sheet credit exposure related to its customers.(i) InventoriesInventories, which are comprised of lubricating oils and, for vessels not operating on time charter or bareboat charter, also bunkers, arestated at the lower of cost or net realizable value. For vessels on time charters or bareboat charters, there are no bunkers, as the charterersupplies the bunkers, which principally consist of fuel oil. Cost is determined using the first-in, first-out method for all inventories.(j) Other Current AssetsOther current assets principally consist of prepaid expenses and other receivables.(k) Vessels and EquipmentVessels and equipment are stated at the historical acquisition or construction cost, including capitalized interest, supervision and technicaland delivery cost, net of accumulated depreciation and impairment loss, if any. Expenditures for subsequent conversions and majorimprovements 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, asrequired for the renewal of certifications issued by classification societies. For vessels operating on time charters, the Partnership capitalizesthe costs directly associated with the classification and regulatory requirements for inspection of the vessels and improvements incurredduring drydocking. Drydock cost is depreciated on a straight-line basis over the period until the next planned drydocking takes place. ThePartnership expenses costs related to routine repairs and maintenance performed during drydocking or as otherwise incurred. For vessels thatare newly built or acquired, an element of the cost of the vessel is initially allocated to a drydock component and depreciated on a straight-linebasis over the period until the next planned drydocking. When significant dry-docking expenditures occur prior to the expiration of thisperiod, the Partnership expenses the remaining balance of the original drydocking cost in the month of the subsequent drydocking. For vesselsoperating on bareboat charters, the charter-party bears the cost of any drydocking. Table of ContentsF-13Depreciation on vessels and equipment is calculated on a straight-line basis over the asset’s estimated useful life, less an estimatedresidual value, as follows: Useful LifeHull 23 yearsAnchor-handling, loading and unloading equipment 23 yearsMain/auxiliary engine 23 yearsThruster, dynamic positioning systems, cranes and other equipment 23 yearsDrydock costs 2.5 – 5 yearsA vessel is depreciated to its estimated residual value, which is calculated based on the weight of the ship and estimated steel price. Anycost related to the disposal is deducted from the residual value.Historically, the useful life of the Partnership’s vessels and equipment was assessed as 25 years commencing from the date the vessel andequipment were delivered from the shipyard. As of June 30, 2021, the Partnership considered factors related to the ongoing use of the vesselsand equipment, gradual shifts in market conditions and other long-term factors associated with the global oil and maritime transportationindustries and based on this has reassessed the useful life as being 23 years.(l) Right-of-use assets and lease liabilitiesThe Partnership assesses whether a contract contains a lease at inception of the contract. The assessment involves the exercise ofjudgement about whether it depends on a specified asset, whether the Partnership obtains substantially all the economic benefits from the useof that asset, and whether the Partnership has the right to direct the use of the asset. The Partnership does not separate lease components fromnon-lease components as lessee. The Partnership recognizes a right-of-use asset and a lease liability at the lease commencement date, exceptfor short-term leases of 12 months or less, which are expensed on a straight-line basis over the lease term.(m) Capitalized InterestInterest expense incurred on the Partnership’s debt during the construction of the Vessels exceeding one year is capitalized during theconstruction period.(n) Impairment of Long-Lived AssetsVessels and equipment, vessels under construction and intangible assets subject to amortization are reviewed for impairment wheneverevents or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If circumstances require a long-livedasset or asset group to be tested for possible impairment, the Partnership first compares undiscounted cash flows expected to be generated bythat 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 undiscountedcash flow basis, impairment is recognized to the extent that the carrying value exceeds its fair value. Fair value is determined through variousvaluation techniques including discounted cash flow models, quoted market values and third-party independent appraisals, as considerednecessary. See Note 21—Impairment of Long - Lived Assets.(o) IntangiblesIntangible assets represent contractual rights for charters obtained in connection with business and asset acquisitions that have favorablecontractual terms relative to market as of the acquisition dates. Contract liabilities represent contractual rights obtained in connection withbusiness acquisitions that have unfavorable contractual terms relative to market as of the acquisition dates. The favorable and unfavorablecontract rights have definite lives and are amortized to revenues over the period of the related contracts. Intangible assets with a definite lifeare tested for impairment whenever events or circumstances indicate that their carrying amount may not be recoverable. An impairment loss isrecognized if the carrying amount exceeds the estimated fair value of the asset. Table of ContentsF-14The contract related intangible assets and liabilities and their amortization periods at acquisition dates are as follows:AmortizationIntangible category PeriodAbove market time charter— Tordis Knutsen 4.8 yearsAbove market time charter— Vigdis Knutsen 4.9 yearsUnfavorable contractual rights— Fortaleza Knutsen 12 yearsUnfavorable contractual rights— Recife Knutsen 12 yearsThe intangible for the above market value of the time charter contract associated with the Tordis Knutsen was amortized to time charterrevenue on a straight-line basis over the remaining term of the contract of approximately 4.8 years as of the acquisition date and whichexpired in December 2021. The intangible for the above market value of the time charter contract associated with the Vigdis Knutsen wasamortized to time charter revenue on a straight-line basis over the remaining term of the contract of approximately 4.9 years as of theacquisition date and which expired in March 2022.The unfavorable contractual rights for charters associated with Fortaleza Knutsen and Recife Knutsen were obtained in connection with astep acquisition in 2008 that had unfavorable contractual terms relative to market as of acquisition date. The Fortaleza Knutsen and the RecifeKnutsen commenced on their 12 years’ fixed bareboat charters in March 2011 and August 2011, respectively. The unfavorable contract rightsrelated to Fortaleza Knutsen and Recife Knutsen are amortized to bareboat revenues on a straight-line basis over the 12 years’ contract periodthat expired in March 2023 and August 2023, respectively.(p) Debt Issuance CostsDebt issuance costs, including fees, commissions and legal expenses, are deferred and presented net of debt. Debt issuance costs of termloans are amortized over the term of the relevant loan. Amortization of debt issuance costs is included in interest expense. These costs arepresented as a deduction from the corresponding liability, consistent with debt discount.(q) Derivative InstrumentsThe Partnership uses derivatives to reduce market risks associated with its operations. The Partnership uses interest rate swaps for themanagement of interest risk exposure. The interest rate swaps effectively convert a portion of the Partnership’s debt from a floating to a fixedrate 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 forwardcontracts.All derivative instruments are initially recorded at fair value as either assets or liabilities in the accompanying consolidated balance sheetsand subsequently measured to fair value. The Partnership does not apply hedge accounting to its derivative instruments. Changes in the fairvalue of the derivative instruments are recognized in earnings. Gains and losses from the interest rate swap contracts of the Partnership relatedto long-term mortgage debt and foreign exchange forward contracts are recorded in realized and unrealized gain (loss) on derivativeinstruments in the consolidated statements of operations. Cash flows related to interest rate swap contracts are presented as cash flowsprovided by operating activities. Cash flows related to foreign exchange forward contracts entered into to economically hedge operatingexpenses in currencies other than U.S. Dollars are presented as cash flows provided by operating activities in the consolidated statements ofcash flows, while cash flows related to foreign exchange forward contracts entered into to hedge contractual obligations to pay the shipyard incurrencies other than functional currency of U.S. Dollars are presented as cash flows used in investing activities in the consolidated statementsof cash flows. Table of ContentsF-15(r) Income TaxesHistorically, part of the Partnership’s activities were subject to ordinary taxation and taxes were paid on taxable income (includingoperating 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, tax is based on the tonnage of the vessel, and not operating income. Net financialincome and expense remain taxable as ordinary income at the regular corporate income tax rate. Income taxes arising from the part ofactivities subject to ordinary taxation are included in income tax expense in the consolidated statements of operations. For the portion ofactivities subject to the tonnage tax regime, tonnage taxes are classified as vessel operating expenses, while the current and deferred taxesarising on net financial income and expense are reflected as income tax expense in the consolidated statements of operations. See Note 18—Income Taxes.The Partnership accounts for deferred income taxes using the liability method. Under the liability method, deferred tax assets andliabilities are recognized for the anticipated future tax effects of temporary differences between the financial statement basis and the tax basisof the Partnership’s assets and liabilities using enacted tax rates expected to apply to taxable income in the years in which these temporarydifferences are expected to be recovered or settled. A valuation allowance for deferred tax assets is recorded when it is more likely than notthat 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 betaken in a tax return will be sustained upon examination, including resolution of any related appeals or litigation processes, based on thetechnical merits of the position. If a tax position meets the more-likely-than-not recognition threshold, it is measured to determine the amountof benefit to recognize in the consolidated financial statements based on U.S. GAAP guidance. The Partnership recognizes interest andpenalties related to uncertain tax positions in income tax expense.(s) Prepaid CharterUnder terms of the time charters and bareboat charters, the customer pays for the month’s charter the first day of each month that isrecorded as prepaid charter revenues.(t) Commitments, Contingencies and Insurance ProceedsLiabilities for loss contingencies arising from claims, assessments, litigation, fines and penalties and other sources are recorded when it isprobable that a liability has been incurred and the amount can be reasonably estimated. Legal costs incurred in connection with losscontingencies are expensed as incurred. See Note 20—Commitments and ContingenciesInsurance claims for property damage for recoveries up to the amount of loss recognized are recorded when the claims submitted toinsurance carriers are probable of recovery. Claims for property damage in excess of the loss recognized and for loss of hire are consideredgain contingencies, which are generally recognized when the proceeds are received.(u) Fair Value MeasurementsThe Partnership utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs tothe extent possible. The Partnership determines fair value based on assumptions that market participants would use in pricing an asset orliability in the principal or most advantageous market. When considering market participant assumptions in fair value measurements, thefollowing 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 atthe measurement date●Level 2 Inputs: Other than quoted prices included in Level 1 inputs that are observable for the asset or liability, either directly orindirectly, for substantially the full term of the asset or liability. Table of ContentsF-16●Level 3 Inputs: Unobservable inputs for the asset or liability used to measure fair value to the extent that observable inputs arenot available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at themeasurement date.(v) Recently Adopted Accounting StandardsIn March 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) 2020-04 ReferenceRate Reform (Topic 848), Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The update provides temporaryoptional expedients and exceptions to the guidance in US GAAP on contract modifications and hedge accounting, to ease the financialreporting burdens related to the expected market transition from the London Interbank Offered Rate (LIBOR) and other interbank offeredrates to alternative reference rates. For all types of hedging relationships, the guidance allows an entity to change the reference rate and othercritical terms related to reference rate reform without having to de-designate the relationship.The objective of the guidance in Topic 848 is to provide temporary relief during the transition period. The FASB included a sunsetprovision within Topic 848 based on expectations of when the LIBOR would cease being published. At the time that Update 2020-04 wasissued, the UK Financial Conduct Authority (“FCA”) had established its intent that it would no longer be necessary to persuade, or compel,banks to submit to LIBOR after December 31, 2021. As a result, the sunset provision was set for December 31, 2022 - 12 months after theexpected cessation date of all currencies and tenors of LIBOR. In March 2021, the FCA announced that the intended cessation date of theovernight 1-, 3-, 6-, and 12-months tenors of USD LIBOR would be June 30, 2023, which is beyond the current sunset date of Topic 848.Because of the current relief in Topic 848 may not cover a period of time during which a significant number of modifications may take place,the amendments in Update 2022-06 defer the sunset date of Topic 848 from December 31, 2022, to December 31, 2024, after which entitieswill no longer be permitted to apply the relief in Topic 848. Although the Partnership does not apply hedge accounting, the Partnership hasdebt and interest rate swaps that reference LIBOR. The Partnership has determined that reference rate reforms will primarily impact itsfloating rate debt facilities and the interest rate derivatives to which the Partnership is a party.Commencing January 1, 2023, all new contracts that the Partnership has or will enter into, are or will be based on an alternative referencerate, the Secured Overnight Financing Rate (“SOFR”). For certain existing contracts that reference LIBOR, the Partnership has entered intoamendments to contracts affected by reference rate reform, and the Partnership will continue to assess remaining contracts prospectively,applying the optional expedients and exceptions where available.(w) New Accounting Standards Not Yet AdoptedOther recently issued accounting pronouncements are not expected to materially impact the Partnership.3) Formation Transactions and Initial Public OfferingDuring April 2013, the following transactions occurred in connection with KNOT’s transfer of the interests in KNOT Shuttle Tankers ASand the subsequent IPO:Capital Contribution(i)KNOT contributed to the Partnership’s subsidiary KNOT Offshore Partners UK LLC (“KNOT UK”) its 100% interest inKNOT Shuttle Tankers AS, which directly or indirectly owned (1) Knutsen Shuttle Tankers XII KS, the owner of the RecifeKnutsen and the Fortaleza Knutsen, (2) Knutsen Shuttle Tankers XII AS, the general partner of Knutsen Shuttle TankersXII 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 thePartnership, and 100% of the incentive distribution rights (“IDRs”), which entitled KNOT to increasing percentages of thecash the Partnership distributed in excess of $0.43125 per unit per quarter. Table of ContentsF-17(iii)The Partnership issued 349,694 general partner units to the General Partner representing a 2.0% general partner interest inthe Partnership.Initial Public Offering(iv)In connection with the IPO, the Partnership issued and sold to the public, through the underwriters, 8,567,500 commonunits (including 1,117,500 common units sold pursuant to the full exercise of the underwriters’ option to purchaseadditional 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. Expensesrelating to the IPO, including, among other things, incremental costs directly attributable to the IPO, were deferred andcharged 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 offeringexpenses 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 underwritingdiscounts and commissions), to repay approximately $118.9 million of outstanding debt and pre-fund approximately $3.0million of the Partnership’s one-time entrance tax into the Norwegian tonnage tax regime. The remainder of the netproceeds was made available for general partnership purposes.AgreementsIn 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 servicesagreement to Knutsen OAS (UK) Ltd. (“KOAS UK”) and Knutsen OAS Shipping AS (“KOAS”), both wholly ownedsubsidiaries of TS Shipping Invest AS (“TSSI”);●Amended Technical Management Agreements with KNOT Management AS (“KNOT Management”), a wholly ownedsubsidiary 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 initialfleet;●Amendments to certain of the Partnership’s existing vessel financing agreements to permit the transactions pursuant to whichthe 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 Knutsenand 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 Table of ContentsF-18●KNOT’s guarantee of the payment of the hire rate under the original Bodil Knutsen and Windsor Knutsen charters for aperiod of five years following the closing date of the IPO.4) SubsidiariesThe following table lists the Partnership’s subsidiaries and their purpose as of December 31, 2023.Company Name Jurisdiction of Formation Purpose KNOT Offshore Partners UK LLCMarshall IslandsHolding CompanyKNOT Shuttle Tankers ASNorwayHolding CompanyKNOT Shuttle Tankers 17 ASNorwayOwner of the Bodil KnutsenKNOT Shuttle Tankers 18 ASNorwayOwner of the Windsor KnutsenKnutsen Shuttle Tankers XII ASNorwayOwner of the Fortaleza Knutsen and the Recife KnutsenKnutsen Shuttle Tankers 13 ASNorwayOwner of the Carmen KnutsenKnutsen Shuttle Tankers 14 ASNorwayOwner of the Hilda KnutsenKnutsen Shuttle Tankers 15 ASNorwayOwner of the Torill KnutsenKNOT Shuttle Tankers 20 ASNorwayOwner of the Dan CisneKNOT Shuttle Tankers 21 ASNorwayOwner of the Dan SabiaKnutsen NYK Shuttle Tankers 16 ASNorwayOwner of the Ingrid KnutsenKnutsen Shuttle Tankers 19 ASNorwayOwner of the Raquel KnutsenKNOT Shuttle Tankers 24 ASNorwayOwner of the Tordis KnutsenKNOT Shuttle Tankers 25 ASNorwayOwner of the Vigdis KnutsenKNOT Shuttle Tankers 26 ASNorwayOwner of the Lena KnutsenKNOT Shuttle Tankers 32 ASNorwayOwner of the Brasil KnutsenKNOT Shuttle Tankers 30 ASNorwayOwner of the Anna KnutsenKNOT Shuttle Tankers 34 ASNorwayOwner of the Tove KnutsenKNOT Shuttle Tankers 35 ASNorwayOwner of the Synnøve Knutsen5) Significant Risks and Uncertainties Including Business and Credit ConcentrationsThe Partnership’s operational results are dependent on the worldwide market for shuttle tankers and the ability of the Partnership totimely enter into customer charters. Market conditions for shipping activities are typically volatile, and, as a consequence, the hire rates thePartnership may be able to achieve might vary over time. The market today is mainly dependent upon four factors: the supply of vessels, thedemand for vessels and oil, the long-term oil price outlook and overall growth in the world economy. The general supply of vessels isimpacted by the number of newbuilds, the removal of older vessels from the market and legislation that may limit the use of older vessels ornew standards for vessels used in specific trades.As of December 31, 2023, all of the Partnership’s Vessel crews, which are employed through KOAS were represented by collectivebargaining agreements that are renegotiated annually, or bi-annually.The Partnership did not incur any loss relating to its trade receivables during the years ended December 31, 2023, 2022 and 2021. Table of ContentsF-19The following table presents time charter and bareboat revenues and percentage of revenues for material customers that accounted for10% and more of the Partnership’s revenues during the years ended December 31, 2023, 2022 and 2021. All of these customers aresubsidiaries of major international oil companies.Year Ended December 31, (U.S. Dollars in thousands)2023 2022 2021Eni Trading and Shipping S.p.A. $— 0% $36,256 14% $43,823 16%Fronape International Company, a subsidiary of Petrobras Transporte S.A. 51,743 18% 45,975 17% 45,115 17%Equinor ASA 36,563 13% 24,828 9% 17,897 7%Repsol Sinopec Brasil, B.V., a subsidiary of Repsol Sinopec Brasil, S.A. 36,946 13% 37,571 14% 37,030 14%Brazil Shipping I Limited, a subsidiary of Royal Dutch Shell 33,019 12% 12,546 5% 59,825 22%Galp Sinopec Brasil Services BV464 0% 16,621 6% 35,622 13%KNOT28,68210% 19,2207% 6,5662%Chartering and Shipping Service S.A., a subsidiary of TotalEnergies$41,03014% $25,3529% $—0%The Partnership has financial assets that expose it to credit risk arising from possible default by a counterparty. The Partnership considersits counterparties to be creditworthy banking and financial institutions and does not expect any significant loss to result from non-performanceby such counterparties. The maximum loss due to credit risk that the Partnership would incur if counterparties failed completely to performwould be the carrying value of cash and cash equivalents, and derivative assets. The Partnership, in the normal course of business, does notdemand collateral from its counterparties.6) Operating LeasesRevenuesThe Partnership’s primary source of revenues is chartering its shuttle tankers to its customers. The Partnership uses two types of contracts,time charter contracts and bareboat charter contracts. The Partnership’s time-charter contracts include both a lease component, consisting ofthe bareboat element of the contract, and non-lease component, consisting of operation of the vessel for the customers, which includesproviding the crewing and other services related to the Vessel’s operations, the cost of which is included in the daily hire rate, except when offhire.The following table presents the Partnership’s revenues by time charter, bareboat charters and other revenues for the years endedDecember 31, 2023, 2022 and 2021:Year Ended December 31, (U.S. Dollars in thousands) 2023 2022 2021Time charter revenues (service element included)$246,670$216,822$224,191Bareboat revenues30,41445,97545,115Total time charter and bareboat revenues277,084262,797269,306Other revenues (voyage revenues, loss of hire insurance recoveries and other income)13,6325,78811,823Total revenues$290,716$268,585$281,129See Note 2(l)—Right-of-use assets and lease liabilities. Table of ContentsF-20As of December 31, 2023, the minimum contractual future revenues to be received from time charters and bareboat charters during thenext five years and thereafter are as follows (including the service element of time charters, but excluding unexercised customer optionperiods and excluding any contracted revenues signed after December 31, 2023):(U.S. Dollars in thousands) 2024$249,2062025205,8642026173,226202771,0402028 and thereafter—Total $699,336The minimum contractual future revenues should not be construed to reflect total charter hire revenues for any of the years. Minimumcontractual future revenues are calculated based on certain assumptions such as operating days per year. In addition, minimum contractualfuture revenues presented in the table above have not been reduced by estimated off-hire time for periodic maintenance. The amounts mayvary given unscheduled future events such as vessel maintenance.The Partnership’s fleet as of December 31, 2023 consisted of:●the Fortaleza Knutsen, a shuttle tanker built in 2011 that is currently operating under a time charter contract that expires inMarch 2026 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 time charter contract that expires inAugust 2026 with Fronape International Company, a subsidiary of Transpetro;●the Bodil Knutsen, a shuttle tanker built in 2011 then operating under a time charter contract with Knutsen Shuttle TankersPool AS, a subsidiary of KNOT, which would expire on or around December 31, 2023, or at such time as the vessel is to bedelivered to Equinor. The vessel commenced on a new time charter contract with Equinor on March 27, 2024. The newcharter is for a fixed period of two years with options for the charterer to extend the charter by two further one-year periods;●the Windsor Knutsen, a conventional oil tanker built in 2007 and retrofitted to a shuttle tanker in 2011 that is currentlyoperating under a time charter contract with Brazil Shipping I Limited, a subsidiary of Royal Dutch Shell (“Shell”), thatexpires in January 2025. In November 2021, the Partnership entered into a new time charter contract for the WindsorKnutsen with Equinor to commence in the fourth quarter of 2024 or the first quarter of 2025 for a fixed period, at thecharterer’s option, of either one year or two years, with options for the charterer to extend the charter, in either case, by twofurther one-year periods. The Partnership has now agreed with Equinor to substitute the Brasil Knutsen for the WindsorKnutsen, with the time charter contract otherwise remaining unchanged. In September 2023, the Partnership signed a newtime charter contract for the Windsor Knutsen with an oil major to commence within the window from February 1, 2025 toMay 1, 2025. The new time charter contract is for a fixed period of two years;●the Carmen Knutsen, a shuttle tanker built in 2013 that is currently operating under a time charter that expires inJanuary 2025, with Repsol Sinopec Brasil, B.V. a subsidiary of Repsol Sinopec Brasil, S.A. (“Repsol”) with an option forthe charterer to extend for a further one-year period;●the Hilda Knutsen, a shuttle tanker built in 2013 that is currently operating under a rolling charter contract with KnutsenShuttle Tankers Pool AS, a subsidiary of KNOT, that expires in January 2025;●the Torill Knutsen, a shuttle tanker built in 2013 that is currently operating under a rolling charter contract with KnutsenShuttle Tankers Pool AS, a subsidiary of KNOT, that expires in January 2025; Table of ContentsF-21●the Dan Cisne, a shuttle tanker built in 2011 is being deployed on conventional tanker work while under assessment forupgrades suitable to shuttle tanker work in the North Sea;●the Dan Sabia, a shuttle tanker built in 2012 that is currently operating under a bareboat charter that expires in June 2024with Transpetro;●the Ingrid Knutsen, a shuttle tanker built in 2013 then operating under a time charter contract with Altera that expired onMarch 28, 2024. On March 28, 2024 the Ingrid Knutsen was redelivered from Altera, following which she has worked inthe conventional tanker market. While she is due for delivery to Eni during April 2024 on three-years time charter contract,it is possible that commercial terms no less favourable to the Partnership may be agreed for an alternative delivery later in2024.●the Raquel Knutsen, a shuttle tanker built in 2015 that is currently operating under a time charter that expires in June 2025with 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 with Shell that expires inJuly 2027;●the Vigdis Knutsen, a shuttle tanker built in 2017 then operating under a time charter with China Offshore Oil (Singapore)that expired on March 16, 2024, at which time the vessel was delivered to Shell to commence on a three-year time chartercontract;●the Lena Knutsen, a shuttle tanker built in 2017 that is currently operating under a time charter with Shell that expires inSeptember 2027;●the Brasil Knutsen, a shuttle tanker built in 2013 that is currently operating under a time charter with Petrorio LuxembourgHolding S.A.R.L. which expires in or around May 2025. The vessel will commence on a new time charter with Equinor inthe third quarter of 2025 for a fixed period of two years, with options for the charterer to extend the charter by two furtherone -year periods;●the Anna Knutsen, a shuttle tanker built in 2017 that is currently operating under a time charter with TotalEnergies thatexpires in April 2026 with an option for the charterer to extend for a further one-year period;●the Tove Knutsen, a shuttle tanker built in 2020 that is currently operating under a time charter that expires in November2027 with Equinor, with options to extend until November 2040; and●the Synnøve Knutsen, a shuttle tanker built in 2020 that is currently operating under a time charter that expires in February2027 with Equinor, with options to extend until February 2042.Lease obligationsThe Partnership does not have any material leased assets but has some leased equipment on operational leases on the various shipsoperating on time charter contracts. As of December 31, 2023, the right-of-use asset and lease liability for operating leases was $2.1 millionand are presented as separate line items on the balance sheets. The operating lease cost and corresponding cash flow effect for 2023 was $0.8million. As of December 31, 2023, the weighted average discount rate for the operating leases for the portfolio excluding Recife Knutsen was7.2% and was 7.6% for the Recife Knutsen alone. The rate was determined using the expected incremental borrowing rate for a loan facility ofsimilar term. As of December 31, 2023, the weighted average remaining lease terms are 2.1 years. Table of ContentsF-22A maturity analysis of the Partnership’s lease liabilities from leased-in equipment as of December 31, 2023 is as follows:(U.S. Dollars in thousands) 20241,1002025 1,1002026922027—2028 and thereafter—Total$2,292Less imputed interest 166Carrying value of operating lease liabilities$2,1267) Segment InformationThe Partnership has one reportable segment, the shuttle tanker market. At December 31, 2023 the Partnership’s fleet operated undersixteen time charters and one bareboat charter. At December 31, 2022, the Partnership’s fleet operated under twelve time charters and fourbareboat charters. See Note 5—Significant Risks and Uncertainties Including Business and Credit Concentrations for revenues fromcustomers accounting for over 10% of the Partnership’s consolidated revenue. In both time charters and bareboat charters, the charterer, notthe Partnership, controls the choice of which trading areas the Vessels will serve. Accordingly, the Partnership’s management, including thechief operating decision makers, does not evaluate performance according to geographical region.8) Insurance ProceedsInsurance claims for property damage for recoveries up to the amount of loss recognized are recorded when the claims submitted toinsurance carriers are probable of recovery. Claims for property damage in excess of the loss recognized and for loss of hire are recognizedwhen the proceeds are received. As of December 31, 2023 and 2022, the Partnership had open insurance claims for hull and machineryrecoveries of $0.1 million and $2.1 million, respectively, which were recorded as part of Other current asset. See Note 12(b)—Other CurrentAsset.As of December 31, 2021, loss of hire proceeds of $11.5 million related to the Windsor Knutsen, the Tove Knutsen and Tordis Knutsenwere recognized as a component of the total revenues, since day rates are recovered under the terms of the policy.As of December 31, 2022, loss of hire proceeds of $0.8 million related to the Vigdis Knutsen were recognized as a component of the totalrevenues, since day rates are recovered under the terms of the policy.As of December 31, 2023, loss of hire proceeds of $2.8 million related to the Synnøve Knutsen, the Windsor Knutsen, the Lena Knutsenand the Tove Knutsen were recognized as a component of total revenues, since day rates are recovered under the terms of the policy.9) Other Finance Expenses(a) Interest ExpenseThe following table presents the components of interest expense as reported in the consolidated statements of operations for the yearsended December 31, 2023, 2022 and 2021:Year Ended December 31, (U.S. Dollars in thousands) 2023 2022 2021Interest expense$69,567$39,912$24,546Amortization of debt issuance cost and fair value of debt assumed 2,503 2,692 3,519Total interest expense$72,070$42,604$28,065 Table of ContentsF-23(b) Other Finance ExpenseThe following table presents the components of other finance expense for the years ended December 31, 2023, 2022 and 2021:Year Ended December 31, (U.S. Dollars in thousands) 2023 2022 2021Bank fees, charges$554$294$463Commitment fees 35 334 548Total other finance expense$589 $628 $1,01110) Derivative InstrumentsInterest Rate Risk ManagementThe consolidated financial statements include the results of interest rate swap contracts to manage the Partnership’s exposure related tochanges in interest rates on its variable rate debt instruments and the results of foreign exchange forward contracts to manage its exposurerelated to changes in currency exchange rates on its operating expenses, mainly crew expenses, in currency other than the U.S. Dollar and onits contract obligations. The Partnership does not apply hedge accounting for derivative instruments. The Partnership does not speculate usingderivative instruments.By using derivative financial instruments to economically hedge exposures to changes in interest rates, the Partnership exposes itself tocredit risk and market risk. Derivative instruments that economically hedge exposures are used for risk management purposes, but theseinstruments are not designated as hedges for accounting purposes. Credit risk is the failure of the counterparty to perform under the terms ofthe derivative instrument. When the fair value of a derivative instrument is positive, the counterparty owes the Partnership, which createscredit 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 inderivative instruments by entering into transactions with major banking and financial institutions. The derivative instruments entered into bythe Partnership do not contain credit risk-related contingent features. The Partnership has not entered into master netting agreements with thecounterparties 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 exchangerates or commodity prices. The market risk associated with interest rate contracts is managed by establishing and monitoring parameters thatlimit 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 futurecash 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 debtobligations expose the Partnership to variability in interest payments due to changes in interest rates. The Partnership believes that it isprudent to limit the variability of a portion of its interest payments. To meet this objective, the Partnership has entered into London InterbankOffered Rate (“LIBOR”)-based and Secured Overnight Financing Rate (“SOFR”)-based interest rate swap contracts to manage fluctuations incash flows resulting from changes in the benchmark interest rate of LIBOR or SOFR. These swaps change a portion of the Partnership’s totalvariable rate cash flow exposure on the mortgage debt obligations to fixed cash flows. Under the terms of the interest rate swap contracts, thePartnership receives LIBOR or SOFR-based variable interest rate payments and makes fixed interest rate payments, thereby creating theequivalent of fixed rate debt for the notional amount of its debt hedged.As of December 31, 2023 and 2022, the total notional amount of the Partnership’s outstanding interest rate swap contracts that wereentered into in order to hedge outstanding or forecasted debt obligations were $426.5 million and $451.2 million, respectively. As ofDecember 31, 2023 and 2022, the carrying amount of the interest rate swap contracts was a net asset of $20.2 million and a net asset of $29.4million, 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 thesame period in which the related interest affects earnings. Table of ContentsF-24The Partnership and its subsidiaries utilize the U.S. Dollar as their functional and reporting currency, because all of their revenues and themajority 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 tovariability in currency exchange rates. The Partnership believes that it is prudent to limit the variability of a portion of its currency exchangeexposure where possible. To meet this objective, the Partnership at times has entered into foreign exchange forward contracts to managefluctuations in cash flows resulting from changes in the exchange rates towards the U.S. Dollar. The agreements change the variable exchangerate to fixed exchange rates at agreed dates.The following table presents the realized and unrealized gains and losses that are recognized in earnings as net gain (loss) on derivativeinstruments for the years ended December 31, 2023, 2022 and 2021:Year Ended December 31, (U.S. Dollars in thousands) 2023 2022 2021Realized gain (loss): Interest rate swap contracts$14,648$(2,478)$(10,094)Foreign exchange forward contracts (79) (502) —Total realized gain (loss): 14,569 (2,980) (10,094)Unrealized gain (loss): Interest rate swap contracts (9,200) 38,490 20,054Foreign exchange forward contracts — — —Total unrealized gain (loss): (9,200) 38,490 20,054Total realized and unrealized gain (loss) on derivative instruments:$5,369$35,510$9,96011) Fair Value Measurements(a) Fair Value of Financial InstrumentsThe following table presents the carrying amounts and estimated fair values of the Partnership’s assets and liabilities that are measured atfair value on a recurring basis as of December 31, 2023 and December 31, 2022. Fair value is defined as the amount that would be received tosell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.December 31, 2023December 31, 2022 Carrying Fair Carrying Fair (U.S. Dollars in thousands) Amount Value Amount Value Recurring:Financial assets:Cash and cash equivalents$63,921$63,921$47,579$47,579Current derivative assets: Interest rate swap contracts 13,019 13,019 15,070 15,070Non-current derivative assets: Interest rate swap contracts 7,229 7,229 14,378 14,378Financial liabilities: Non-current derivative liabilities: Long-term debt, current and non-current963,005941,6471,062,6471,035,740The carrying amounts shown in the table above are included in the consolidated balance sheets under the indicated captions. Carryingamount of long-term debt, current and non-current, above excludes capitalized debt issuance cost of $6.2 million and $6.3 million as ofDecember 31, 2023 and 2022, respectively. The carrying value of trade accounts receivable, trade accounts payable and receivables/payablesto owners and affiliates approximate their fair value. Table of ContentsF-25The fair values of the financial instruments shown in the above table as of December 31, 2023 and 2022 represent the amounts that wouldbe received to sell those assets or that would be paid to transfer those liabilities in an orderly transaction between market participants at thatdate. Those fair value measurements maximize the use of observable inputs. However, in situations where there is little, if any, market activityfor the asset or liability at the measurement date, the fair value measurement reflects the Partnership’s own judgment about the assumptionsthat market participants would use in pricing the asset or liability. Those judgments are developed by the Partnership based on the bestinformation available in the circumstances, including expected cash flows, appropriately risk-adjusted discount rates and available observableand 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 carryingamounts due to the current nature of the amounts. As of December 31, 2023 and 2022 there is no restricted cash.●Interest rate swap contracts: The fair value of interest rate swap contracts is determined using an income approach using thefollowing significant inputs: (1) the term of the swap contract (weighted average of 2.0 years and 2.7 years, as of December 31,2023 and 2022, respectively), (2) the notional amount of the swap contract (ranging from $2.6 million to $30.7 million as ofDecember 31, 2023 and ranging from $3.6 million to $33.6 million as of December 31, 2022), discount rates interpolated basedon relevant LIBOR or SOFR swap curves; and (3) the rate on the fixed leg of the swap contract (rates ranging from 0.71% to2.90% for the contracts as of December 31, 2023 and 2022).●Long-term debt: With respect to long-term debt measurements, the Partnership uses market interest rates and adjusts for riskssuch as its own credit risk. In determining an appropriate spread to reflect its credit standing, the Partnership considered interestrates currently offered to KNOT for similar debt instruments of comparable maturities by KNOT’s and the Partnership’s bankersas well as other banks that regularly compete to provide financing to the Partnership. Table of ContentsF-26(b) Fair Value HierarchyThe following table presents the placement in the fair value hierarchy of assets and liabilities that are measured at fair value on arecurring basis (including items that are required to be measured at fair value or for which fair value is required to be disclosed) as ofDecember 31, 2023 and December 31, 2022:Fair Value Measurementsat Reporting Date UsingQuoted Pricein ActiveSignificantCarryingMarkets forOtherSignificantValueIdenticalObservableUnobservableDecemberAssetsInputsInputs(U.S. Dollars in thousands) 31, 2023 (Level 1) (Level 2) (Level 3)Recurring:Financial assets: Cash and cash equivalents$63,921$63,921$—$—Current derivative assets:Interest rate swap contracts13,019—13,019—Non-current derivative assets:Interest rate swap contracts7,229—7,229—Financial liabilities: Non-current derivative liabilities: Long-term debt, current and non-current$963,005$—$941,647$—Fair Value Measurementsat Reporting Date UsingQuoted Pricein ActiveSignificantCarryingMarkets forOtherSignificantValueIdenticalObservableUnobservableDecemberAssetsInputsInputs(U.S. Dollars in thousands) 31, 2022 (Level 1) (Level 2) (Level 3)Recurring:Financial assets:Cash and cash equivalents$47,579$47,579$—$—Current derivative assets: Interest rate swap contracts 15,070 — 15,070 —Non-current derivative assets: Interest rate swap contracts 14,378 — 14,378 —Financial liabilities: Non-current derivative liabilities: Long-term debt, current and non-current$1,062,647$—$1,035,740$—The Partnership’s accounting policy is to recognize transfers between levels of the fair value hierarchy on the date of the event or changein circumstances that caused the transfer. There were no transfers into or out of Level 1 and Level 2 as of December 31, 2023 and December31, 2022.12) Trade Accounts Receivable and Other Current Assets(a) Trade Accounts ReceivableTrade accounts receivable are presented as part of Other current assets, see Note 12(b)—Other Current Assets. Trade accounts receivableare presented net of provisions for expected credit loss. As of December 31, 2023 and 2022, there was no provision for expected credit loss. Table of ContentsF-27(b) Other Current AssetsOther current assets consist of the following:At December 31,At December 31,(U.S. Dollars in thousands) 2023 2022Trade receivables$4,882$7,662Trade receivables due from KNOT and affiliates (see Note 19 (d))—1,405Insurance claims for recoveries (see Notes 8 and 20)1242,112Refund of value added tax1,2541,173Prepaid expenses 1,568 1,311Other receivables 967 1,865Total other current assets$8,795$15,52813) InventoryThe following table presents the inventory as of December 31, 2023 and December 31, 2022:At December 31,At December 31,(U.S. Dollars in thousands) 20232022 Lubricating oil$2,995$3,245Bunkers 701 2,514Total inventory$3,696$5,75914) Vessels and EquipmentVessels &AccumulatedAccumulated(U.S. Dollars in thousands) equipment depreciation Impairment Net VesselsVessels, December 31, 2021$2,265,712$(638,185)$(29,421)$1,598,106Additions (1) 120,946 —— 120,946Drydock costs 19,747 —— 19,747Disposals (17,790) 17,790— —Depreciation and impairment for the period — (107,419)— (107,419)Vessels, December 31, 2022$2,388,615$(727,814)$(29,421)$1,631,380Additions 2,794 —— 2,794Drydock costs 19,375 —— 19,375Disposals (12,350) 12,350— —Depreciation and impairment for the period (2) — (110,902)(49,649) (160,551)Vessels, December 31, 2023$2,398,434$(826,366)$(79,070)$1,492,998As of December 31, 2023 and 2022, Vessels with a book value of $1,493 million and $1,631 million, respectively, are pledged as securityfor the Partnership’s long-term debt. See Note 17—Long-Term Debt.(1)On July 1, 2022, the Partnership acquired KNOT’s 100% interest in KNOT Shuttle Tankers 35 AS, the company that owns and operatesthe Synnøve Knutsen. This acquisition was accounted for as an acquisition of assets. See Note 24—Acquisitions.(2)The carrying values of the Dan Sabia and the Dan Cisne were written down to their estimated fair values as of June 30, 2023.See Note 21—Impairment of Long - Lived Assets. Table of ContentsF-28Drydocking activity for the years ended December 31, 2023 and 2022 is summarized as follows:(U.S. Dollars in thousands) At December 31, 2023 At December 31, 2022Balance at the beginning of the year$24,595$13,458Costs incurred for dry docking 19,375 17,614Costs re-allocated to drydocking due to change of contract7,849—Costs allocated to drydocking as part of acquisition of asset — 2,133Drydock amortization (11,232) (8,610)Balance at the end of the year$40,587$24,59515) Intangible Assets and Contract Liabilities(a) Intagible Assets Above market Above market time chartertime charterTotal(U.S. Dollars in thousands)Tordis KnutsenVigdis KnutsenintangiblesIntangibles, December 31, 2021$—$75$75Additions — — —Amortization for the year — (75) (75)Intangibles, December 31, 2022$—$—$—Additions — — —Amortization for the period — — —Intangibles, December 31, 2023$—$—$—The intangible for the above market value of time charter contract associated with the Tordis Knutsen was amortized to time charterrevenue on a straight-line basis over the remaining term of the contract of approximately 4.8 years as of the acquisition date. The intangiblefor the above market value of time charter contract associated with the Vigdis Knutsen was amortized to time charter revenue on a straight-line basis over the remaining term of the contract of approximately 4.9 years as of the acquisition date.(b) Contact LiabilitiesThe unfavorable contractual rights for charters associated with Fortaleza Knutsen and Recife Knutsen were obtained in connection with astep acquisition in 2008 that had unfavorable contractual terms relative to market as of the acquisition date. The Fortaleza Knutsen and theRecife Knutsen commenced on their 12 years’ fixed bareboat charters in March 2011 and August 2011, respectively. The unfavorable contractrights related to Fortaleza Knutsen and Recife Knutsen are amortized to bareboat revenues on a straight-line basis over the 12 years’ contractperiod that expired in March 2023 and August 2023, respectively.AmortizationAmortizationfor the yearfor the year Balance of ended Balance of ended Balance of December 31, December 31,December 31, December 31,December 31, (U.S. Dollars in thousands)20212022202220232023 Contract liabilities: Unfavourable contract rights$(2,169)$1,518$(651)$651$—Total amortization income $1,518 $651Accumulated amortization for contract liabilities was $18.3 million and $17.6 million as of December 31, 2023 and 2022, respectively. Table of ContentsF-2916) Accrued expensesThe following table presents accrued expenses as of December 31, 2023 and December 31, 2022:At December 31,At December 31,(U.S. Dollars in thousands) 20232022 Operating expenses$3,025$1,125Interest expenses 5,032 4,805Other expenses 6,718 4,721Total accrued expenses$14,775$10,65117) Long-Term DebtLong-term debt as of December 31, 2023 and 2022, consisted of the following:December 31, December 31, (U.S. Dollars in thousands) Vessel 2023 2022$345 million loan facilityAnna Knutsen, Tordis Knutsen,Vigdis Knutsen, Brasil Knutsen,Lena Knutsen$288,534$313,630$320 million loan facilityWindsor Knutsen, Bodil Knutsen,Carmen Knutsen, FortalezaKnutsen, Recife Knutsen, IngridKnutsen—192,021$240 million loan facilityWindsor Knutsen, Bodil Knutsen,Carmen Knutsen, FortalezaKnutsen, Recife Knutsen, IngridKnutsen222,264—$55 million revolving credit facility with DNB — 55,000Hilda loan facility Hilda Knutsen 60,000 66,154$172.5 million loan facility Dan Cisne, Dan Sabia 10,370 31,739$192.1 million loan facilityTove Knutsen, Synnøve Knutsen153,702162,808$25 million revolving credit facility with NTT 25,000 25,000$25 million revolving credit facility with Shinsei25,00025,000Raquel Sale & LeasebackRaquel Knutsen79,07084,247Torill Sale & LeasebackTorill Knutsen99,065107,048Total long-term debt $963,005$1,062,647Less: current installments 101,010 371,906Less: unamortized deferred loan issuance costs 2,050 2,119Current portion of long-term debt 98,960 369,787Amounts due after one year 861,995 690,741Less: unamortized deferred loan issuance costs 4,166 4,140Long-term debt, less current installments, andunamortized deferred loan issuance costs $857,829$686,601 Table of ContentsF-30The Partnership’s outstanding debt of $963.0 million as of December 31, 2023 is repayable as follows :Sale &Period(U.S. Dollars in thousands) Leaseback repayment Balloon repayment Total202413,804 80,736 6,470 101,010202514,399 76,081 186,583 277,063202615,06059,096219,521293,677202715,75126,81837,50080,0692028 and thereafter119,12113,24178,824211,186Total$178,135$255,972$528,898$963,005As of December 31, 2023, the interest rates on the Partnership’s loan agreements were SOFR plus a fixed margin ranging from 2.0% to2.5%, except for the Dan Sabia Facility that bore interest based on LIBOR until it was fully repaid in January 2024.$345 Million Term Loan FacilityIn September 2021, the Partnership’s subsidiaries which own the Tordis Knutsen, the Vigdis Knutsen, the Lena Knutsen, the Anna Knutsenand the Brasil Knutsen, entered into a new $345 million senior secured credit facility in order to refinance their existing term loans (the “$345Million Loan Facility”). The $345 Million Loan Facility consists of a term loan repayable in 20 consecutive quarterly installments, with aballoon payment of $220 million due at maturity in September 2026. The facility bears interest at a rate per annum equal to SOFR plus aCredit Adjustment Spread (“CAS”) of 0.26161% and a margin of 2.05%. The facility is guaranteed by the Partnership and secured bymortgages on the five vessels.The $345 Million Loan Facility contains the following financial covenants:●Each borrower shall at all times maintain Liquidity equal to or greater than $250,000;●Positive working capital of the Partnership;●Minimum liquidity of the Partnership of $15 million plus increments of $1.5 million for each owned vessel with less than 12months remaining tenor on its employment contract up to 8 vessels and $1 million for each owned vessel with less than 12months 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 $345 Million Loan Facility also identifies various events that may trigger mandatory reduction, prepayment, and cancellation of thefacility, including if the aggregate market value of the vessels is less than 125% of the outstanding balance under the facility, upon a total lossor sale of a vessel and customary events of default. As of December 31, 2023, the borrowers and the guarantors were in compliance with allcovenants under this facility.$320 Million Term Loan Facility and $55 Million Revolving Credit Facility with DNBIn September 2018, the Partnership’s subsidiaries which own the Windsor Knutsen, the Bodil Knutsen, the Fortaleza Knutsen, the RecifeKnutsen, the Carmen Knutsen and the Ingrid Knutsen (“the Vessels”), entered into senior secured credit facilities (the “Multi-VesselsFacility”) in order to refinance their existing long term bank debt. The Multi-Vessels Facility consisted of a term loan of $320 million and a$55 million revolving credit facility.On June 2, 2023, the Partnership closed its new five-year $240 million senior secured term loan facility with DNB (the “$240 MillionLoan Facility”) and repaid the Multi-Vessels Facility. Table of ContentsF-31$240 Million Senior Secured Term Loan FacilityOn June 2, 2023, the Partnership’s subsidiaries which own the Vessels entered into the $240 Million Loan Facility, which consists of afive-year term loan. The $240 Million Loan Facility bears interest at a rate per annum equal to SOFR plus a margin of 2.4% and is repayablein 20 consecutive quarterly installments, with a final payment at maturity in May 2028 of $85.4 million, which amount includes the balloonpayment and last quarterly installment. The loan is guaranteed by the Partnership and KNOT Shuttle Tankers AS and secured by mortgages onthe Vessels. The Vessels, assignments of earnings, charterparty contracts and insurance proceeds are pledged as collateral for the $240 MillionLoan Facility.The $240 Million Loan Facility contains the following financial covenants:●Each borrower shall at all times maintain liquidity equal to or greater than $500,000;●Positive working capital of the Partnership;●Minimum liquidity of the Partnership of $15 million plus increments of $1.5 million for each owned vessel with less than12 months remaining tenor on its employment contract up to 8 vessels and $1 million for each owned vessel with less than12 months remaining tenor on its employment contract up to 12 additional vessels in excess of 8 vessels (of which a minimumof $10 million must be cash);●Minimum book equity ratio for the Partnership of 30%; and●Minimum EBITDA to interest ratio for the Partnership of 2.50.The $240 Million Loan Facility also identifies various events that may trigger mandatory reduction, prepayment and cancellation of thefacility, including if the aggregate market value of the vessels is less than 130% of the outstanding balance under the $240 Million LoanFacility (or less than 166% after June 2, 2027), upon a total loss or sale of a vessel and customary events of default. The borrowers and theguarantors are in compliance with all covenants under this facility.$100 Million Hilda Loan FacilityIn 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 “$100 Million HildaFacility”). The $100 Million Hilda Facility is repayable in 28 consecutive quarterly installments with a final payment at maturity of $58.5million, which includes the balloon payment and last quarterly installment. The facility bears interest at a rate per annum equal to SOFR plus aCredit Adjustment Spread (“CAS”) of 0.26161% and a margin of 2.2%. The Partnership and KNOT Shuttle Tankers AS are the soleguarantors. The facility matures in May 2024.The $100 Million Hilda Facility contains the following primary financial covenants:●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 thePartnership in excess of eight vessels and $1.5 million for each owned vessel with less than 12 months remaining tenor on itsemployment contract;●Minimum book equity ratio for the Partnership of 30%; and●Minimum EBITDA to interest ratio for the Partnership of 2.50. Table of ContentsF-32The $100 Million Hilda Facility also identifies various events that may trigger mandatory reduction, prepayment and cancellation of thefacility, including if the market value of the vessels is less than 110% of the outstanding loan under the $100 Million Hilda Facility for the firsttwo years, 120% for the third and fourth year and 125% thereafter, upon a total loss or sale of the vessel and customary events of default. Asof December 31, 2023, the borrower and the guarantors were in compliance with all covenants under this facility.On April 5, 2024, the Partnership entered into a new three-year $60 million senior secured term loan facility with DNB (the “$60 MillionHilda Loan Facility”) as described below. The $100 Million Hilda Loan Facility is expected to be repaid in May 2024.$60 Million Hilda Loan FacilityOn April 5, 2024, the Partnership’s subsidiary, Knutsen Shuttle Tankers 14 AS, which owns the vessel Hilda Knutsen, entered into a new$60 million senior secured term loan facility with DNB (the “$60 Million Hilda Facility”), which will refinance and replace the $100 MillionHilda Facility. This refinancing is anticipated to close prior to the maturity date of the expiring facility, and remains subject to execution ofdefinitive documentation and other customary closing conditions. The $60 Million Hilda Facility will be repayable in 12 consecutive quarterlyinstallments with a final payment at maturity of $39.4 million, which includes the balloon payment and last quarterly installment. The facilitybears interest at a rate per annum equal to SOFR plus a margin of 2.25%. The Partnership and KNOT Shuttle Tankers AS are the soleguarantors. The facility matures in March 2027.The $60 Million Hilda Facility contains the following primary financial covenants:●The borrower shall at all times maintain liquidity equal or greater than $500,000;●Positive working capital of the Partnership;●Minimum liquidity of the Partnership of $15 million plus increments of $1.5 million for each owned vessel with less than 12months remaining tenor on its employment contract up to 8 vessels and $1 million for each owned vessel with less than 12months remaining tenor on its employment contract up to 12 additional vessels in excess of 8 vessels (of which a minimum of$10 million must be cash);●Minimum book equity ratio for the Partnership of 30%; and●Minimum EBITDA to interest ratio for the Partnership of 2.50.The $60 Million Hilda Facility also identifies various events that may trigger mandatory reduction, prepayment and cancellation of thefacility, including if the market value of the vessels is less than 135% of the outstanding loan under the $60 Million Hilda Facility, upon a totalloss or sale of the vessel and customary events of default.$172.5 Million Secured Loan FacilityIn 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 were repaid in full at their respective maturity dates in September 2023 and January2024, with a $10.2 million and a $10.4 million payment, respectively. Table of ContentsF-33$192.1 Million Secured Loan FacilityIn July 2019, KNOT Shuttle Tankers 34 AS and KNOT Shuttle Tankers 35 AS, the subsidiary owning the Tove Knutsen and the SynnøveKnutsen, as the borrowers, entered into a $192.1 million secured loan facility. The loan facility is split into a tranche related to the ToveKnutsen (the “Tove Facility”) and a tranche related to the Synnøve Knutsen (the “Synnøve Facility”). The Tove Facility is repayable inquarterly installments with a final balloon payment of $66.6 million due at maturity in September 2025, which includes the balloon paymentand last quarterly installment. The Synnøve Facility is repayable in quarterly installments with a final payment of $72.3 million due atmaturity in October 2025, which includes the balloon payment and last quarterly installment. The facility bears interest at an annual rate equalto SOFR plus a Credit Adjustment Spread (“CAS”) of 0.26161% and a margin of 1.75%. The facility is secured by a standard securitypackage for a vessel financing, including a vessel mortgage on the Tove Knutsen and the Synnøve Knutsen, assignments of earnings,charterparty contracts and insurance proceeds. The Partnership and KNOT Shuttle Tankers AS guarantee the facility.The $192.1 Million Secured Loan Facility contains the following financial covenants:●Positive working capital of the Partnership;●Minimum liquidity of the Partnership of $15 million plus increments of $1.5 million for each owned vessel with less than 12months remaining tenor on its employment contract up to 8 vessels and $1 million for each owned vessel with less than 12months 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 $192.1 Million Secured Loan Facility also identifies various events that may trigger mandatory reduction, prepayment andcancellation of the facility, including if the market value of either of the vessels falls below 110% of the outstanding loan, upon total loss orsale of the vessels and customary events of default. As of December 31, 2023, the borrower and the guarantors were in compliance with allcovenants under this facility.Revolving Credit FacilitiesOn August 16, 2023, the Partnership closed the refinancing of the first of its two $25 million revolving credit facilities, with the facilitybeing rolled over with NTT Finance Corporation. The new facility will mature in August 2025, bears interest at a rate per annum equal toSOFR plus a margin of 2.23% and has a commitment fee of 0.5% on any undrawn portion of the facility. The commercial terms of the facilityare substantially unchanged from the facility entered into in June 2021 with NTT Finance Corporation.On November 15, 2023, the Partnership closed the refinancing of the second of its two $25 million revolving credit facilities, with thefacility being rolled over with SBI Shinsei Bank, Limited. The new facility will mature in November 2025, bears interest at a rate per annumequal to SOFR plus a margin of 2.0% and has a commitment fee of 0.8% on the undrawn portion of the facility. The commercial terms of thefacility are substantially unchanged from the facility entered into in November 2020 with SBI Shinsei Bank, Limited.Raquel Sale and LeasebackOn December 30, 2020, the Partnership through its wholly owned subsidiary, Knutsen Shuttle Tankers 19 AS, which owned the RaquelKnutsen, agreed to enter into a sale and leaseback agreement with a Japanese-based lessor for a lease period of ten years. The closing of thetransaction occurred on January 19, 2021. The gross sales price was $94.3 million, and a portion of the proceeds was used to repay theoutstanding loan and cancelation of the interest rate swap agreements related to the vessel. The bareboat rate under the lease consists of afixed element per day and there is a fixed-price purchase obligation at maturity. After repayment of the loan and related interest rate swaps,the Partnership realized net proceeds of $38 million after fees and expenses. Table of ContentsF-34Torill Sale and LeasebackOn June 30, 2022, the Partnership through its wholly owned subsidiary, Knutsen Shuttle Tankers 15 AS, which owned the Torill Knutsen,closed a sale and leaseback agreement with a Japanese-based lessor for a lease period of ten years. The gross sales price was $112.0 million,and a portion of the proceeds was used to repay the outstanding loan related to the vessel. The bareboat rate under the lease consists of a fixedelement per day and there is a fixed-price purchase obligation at maturity. After repayment of the previously existing loan the Partnershiprealized net proceeds of $39 million after fees and expenses.18) Income Taxes(a) Components of Current and Deferred Tax ExpenseAll of the income from continuing operations before income taxes was taxable in Norway for the years ended December 31, 2023, 2022and 2021. Our Norwegian subsidiaries are subject to Norwegian tonnage tax rather than ordinary corporate taxation. Under the tonnage taxregime, tax is payable based on the tonnage of the vessel, not on operating income, and is included within operating expenses. Net financialincome and expense remain taxable as ordinary income at the regular corporate income tax rate of 22% and is recorded as an income taxexpense. The amount of tonnage tax included in operating expenses for each of the years ended December 31, 2023, 2022 and 2021 was $0.2million, $0.2 million and $0.3 million respectively. See Note 2(r)—Income Taxes. The activities taxable in the UK relate to KNOT UK andare 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 yearsended December 31, 2023, 2022 and 2021 are as follows:Year Ended December 31, (U.S. Dollars in thousands) 2023 2022 2021Current tax benefit (expense)$4,598$(878)$(488)Deferred tax benefit (expense) (3) 3 —Income tax benefit (expense)$4,595$(875)$(488)(b) TaxationIncome taxes attributable to income from continuing operations was an income tax benefit of $4,595,000 for the year ended December31, 2023, an income tax expense of $875,000 for the year ended December 31, 2022 and an income tax expense of $488,000 for the yearended December 31, 2021. These differed from the amounts computed by applying the tax rates in Norway (22% of the tonnage tax) and theUK (19% until April 2023 and 25% thereafter, each as applied to pretax net income) for the years ended December 31, 2023, 2022 and 2021respectively, as a result of the following:Year Ended December 31, (U.S. Dollars in thousands) 2023 2022 2021 Income tax benefit (expense) at Norwegian tonnage tax regime$4,610$(866)$(479)Income tax benefit (expense) within UK (15) (9) (9)Income tax benefit (expense)$4,595$(875)$(488)Effective tax rate (12)% (1)% (1)% Table of ContentsF-35(c) 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 ofDecember 31, 2023 and 2022 are presented below:As of December 31, (U.S. Dollars in thousands) 2023 2022Deferred tax assets: Financial loss carry forwards for tonnage tax$24,671$25,657Valuation allowance (20,313) (25,657)Deferred tax liabilities: Entrance tax (127) (164)Deferred tax related to long-term debt—(260)Total net deferred tax assets (liabilities)$4,231$(424)The net deferred tax assets (liabilities) is classified in the consolidated balance sheets as follows:As of December 31, (U.S. Dollars in thousands) 2023 2022Non-current deferred tax assets4,358—Non-current deferred tax liabilities (127) (424)Total net deferred tax assets (liabilities)$4,231$(424)Changes in the net deferred tax assets (liabilities) at December 31, 2023 and 2022 are presented below:As of December 31, (U.S. Dollars in thousands) 2023 2022Total net deferred tax assets (liabilities) at January 1,$(424)$(228)Change in temporary differences 4,643 (219)Translation differences 12 23Total net deferred tax assets (liabilities) at December 31,$4,231$(424)The Partnership records a valuation allowance for deferred tax assets when it is more likely than not that some or all of the benefit fromthe deferred tax asset will not be realized. The valuation allowances were $20.3 million and $25.7 million as of December 31, 2023 and 2022,respectively. The valuation allowances relate to the financial loss carry forwards and other deferred tax assets for tonnage tax that, in thejudgment of the Partnership, are more-likely-than not to be realized reflecting the Partnership’s cumulative loss position for tonnage tax. Inassessing the realizability of deferred tax assets, the Partnership considers whether it is more-likely-than-not that some portion or all of thedeferred tax assets will not be realized taking into account all the positive and negative evidence available. In September 2023, KNOT ShuttleTankers 12 AS and KNOT Shuttle Tankers AS were merged. After the merger, the financial loss carry forwards in KNOT Shuttle Tankers 12AS were transferred to the acquiring entity, KNOT Shuttle Tankers AS. KNOT Shuttle Tankers AS has taxable income, and the Partnershiphas determined it is more likely than not that some of the benefit from the deferred tax assets would be realized based on the weight ofavailable evidence. As of December 31, 2023, the Partnership has determined that $4.4million of the deferred tax assets are more likely thannot to be realized. Table of ContentsF-36After the reorganization of the Partnership’s predecessor’s activities into the new group structure in February 2013, all profit fromcontinuing operations in Norway is taxable within the tonnage tax regime. The consequence of the reorganization is a one-time entrance taxinto the Norwegian tonnage tax regime due to the Partnership’s acquisition of the shares in the subsidiary that owns the Fortaleza Knutsen andthe Recife Knutsen. The total amount of the entrance tax was estimated to be approximately $3.0 million, which was recognized in the threemonths ended March 31, 2013. At September 30, 2017 the Partnership acquired the shares in the subsidiary that owns the Lena Knutsen, andrecognized an additional entrance tax of $0.1 million. The entrance tax on this gain is payable over several years and is calculated bymultiplying the Norwegian tax rate by the declining balance of the gain, which will decline by 20% each year. At December 31, 2022 theentrance tax had declined to approximately $0.2 million due to paid entrance tax, change in tax rate and translation effects. As of December31, 2023, the entrance tax had declined to approximately $0.16 million due to paid entrance tax and translation effects. The taxes payable arecalculated based on the Norwegian corporate tax rate of 22% for 2023 and 2022, and the deferred tax liabilities are also calculated based on atax rate of 22% effective for 2023 and 2022. Income tax expense within the UK of $14,750 and $8,722 for 2023 and 2022, respectively, wascalculated by multiplying the tax basis with the UK tax rate of 25% and 19% in 2023 and 2022, respectively.As of December 31, 2023, the total income taxes payable are estimated to be $0.04 million and consist primarily of net financial incomeand expense taxable in Norway at the normal corporate income tax rate, payable Norwegian entrance tax and ordinary UK corporation tax. Asof December 31, 2022, the total income taxes payable are estimated to be $0.7 million and consist primarily of net financial income andexpense taxable in Norway at the normal corporate income tax rate, payable Norwegian entrance tax and ordinary UK corporation tax.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. ThePartnership had no unrecognized tax benefits as of December 31, 2023 and 2022. During the years ended December 31, 2023 and 2022, thePartnership did not incur any interest or penalties on its tax returns.On December 14, 2017, the Norwegian government concluded the negotiations with the EFTA Surveillance Authority regarding theNorwegian tonnage tax regime, which has been approved for another ten years, until 2027. Pursuant to the approval, Norway has introducedrestrictions that eliminates the ability of companies that own vessels under certain bareboat charters to qualify for the Norwegian tonnage taxregime. 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 arelated 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 Partnershipthat exceeds 25% as well as an ownership interest of 100% in KNOT Management and KNOT Management Denmark AS which provideservices to the Vessels owned by the Partnership which operate on bareboat charters, the Vessels operating on bareboat charters are effectivelyseen as time charter services to the customer. The services are provided to the charterer. If this related party situation is ended, otheralternatives and possibly mitigating measures must be evaluated.19) Related Party Transactions(a) Related PartiesPrior to the IPO, the Partnership’s predecessor operated as an integrated part of KNOT. KNOT is owned 50% by TSSI and 50% by NYKEurope.The Partnership’s vessels that operate under time charters are subject to technical management agreements pursuant to which certaincrew, technical and commercial management services are provided by KNOT Management or KNOT Management Denmark, each of which isa 100% owned subsidiary of KNOT. Under these technical management agreements, the Partnership’s subsidiaries pay fees to and reimbursethe costs and expenses of KNOT Management. With respect to the Partnership’s vessels that operate under bareboat charters, the customer isresponsible for providing the crew, technical and commercial management of the vessel. However, each of the vessels operating underbareboat charters are subject to management and administration agreements with either KNOT Management or KNOT ManagementDenmark, pursuant to which these companies provide general monitoring services for the vessels in exchange for an annual fee. Table of ContentsF-37The Partnership is a party to an administrative services agreement with KNOT UK, pursuant to which KNOT UK provides administrativeservices, and KNOT UK is permitted to subcontract certain of the administrative services provided under the administrative servicesagreement 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.The amounts of such costs and expenses included in the consolidated statements of operations for the years ended December 31, 2023,2022 and 2021 are as follows:Year Ended December 31, (U.S. Dollars in thousands) 2023 2022 2021Statements of operations: Time charter and bareboat revenues:Time charter income from KNOT (1)$28,682$14,531$6,427Operating expenses: Vessel operating expenses (2)16,50715,82816,812Voyage expenses and commissions (3)7059—Technical and operational management fee from KNOT to Vessels (4) 10,461 9,265 8,429Operating expenses from other related parties (5)801799866General and administrative expenses: Administration fee from KNOT Management (6) 1,189 1,356 1,277Administration fee from KOAS (6) 631 699 780Administration fee from KOAS UK (6) 71 76 80Administration and management fee from KNOT (7) 64 59 58Total income (expenses)$(1,112)$(13,610)$(21,875)At December 31, At December 31, At December 31, (U.S. Dollars in thousands) 2023 2022 2021Balance Sheet:Vessels:Drydocking supervision fee from KNOT (8)$135$156$134Drydocking supervision fee from KOAS (8)(77)96—Equipment purchased from KOAS (9)5771,1481,840Total$635$1,400$1,974(1)Time charter income from KNOT: The Bodil Knutsen has operated under a time charter with Knutsen Shuttle Tankers Pool AS, asubsidiary of KNOT, since the second quarter of 2021. The Hilda Knutsen commenced a time charter with Knutsen Shuttle Tankers PoolAS in the third quarter of 2022. The Torill Knutsen commenced a time charter with Knutsen Shuttle Tankers Pool AS in the first quarterof 2023.(2)Vessel operating expenses: KNOT Management or KNOT Management Denmark provides technical and operational management of thevessels on time charter including crewing and crew training services.(3)Voyage expenses and commissions: As of December 31, 2023 the Ingrid Knutsen and the Torill Knutsen had completed spot voyageswhere Knutsen Shuttle Tankers Pool AS has earned a 1.25% commission. As of December 31, 2022 the Windsor Knutsen and the TorillKnutsen had completed spot voyages where Knutsen Shuttle Tankers Pool AS has earned a 1.25% commission.(4)Technical and operational management fee, from KNOT Management or KNOT Management Denmark to Vessels: KNOT Managementor 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 servicesprovided by KNOT Management for all vessels managed by KNOT Management. Table of ContentsF-38(5)Operating expenses from other related parties: Simsea Real Operations AS, a company jointly owned by the Partnership’s Chairman ofthe Board, Trygve Seglem, and by other third-party shipping companies in Haugesund, provides simulation, operational trainingassessment and other certified maritime courses for seafarers. The cost is course fees for seafarers. Knutsen OAS Crewing AS, asubsidiary of TSSI, provides administrative services related to Eastern European crew on vessels operating on time charter contracts. Thecost is a fixed fee per month per such crew member onboard a vessel. Level Power & Automation AS, a company that provides thePartnership’s vessels with equipment and inspection services, is owned by Level Group AS, where Trygve Seglem, his family andmembers of TSSI management have significant influence.(6)Administration fee from KNOT Management, Knutsen OAS Shipping AS (“KOAS”) and Knutsen OAS (UK) Ltd. (“KOAS UK”):Administration costs include compensation and benefits of KNOT Management’s management and administrative staff on a time-spentbasis as well as other general and administration expenses. Some services are also provided by KOAS and KOAS UK. Net costs are totaladministration cost plus a 5% margin. As such, the level of administration costs charged to the Partnership can vary from year to yearbased on the administration and financing services provided each year. KNOT Management also charges each subsidiary a fixed annualfee for the preparation of statutory financial statements.(7)Administration and management fee from KNOT Management and KNOT Management Denmark: For bareboat charters, the shipowner isnot responsible for providing crewing or other operational services and the customer is responsible for all vessel operating expenses andvoyage expenses. However, each of the vessels under bareboat charters is subject to a management and administration agreement witheither KNOT Management or KNOT Management Denmark, pursuant to which these companies provide general monitoring services forthe vessels in exchange for an annual fee.(8)Drydocking supervision fee from KNOT Management, KNOT Management Denmark and KOAS: KNOT Management, KNOTManagement Denmark and KOAS provide supervision and hire out service personnel during drydocking of the vessels. The fee iscalculated as a daily fixed fee.(9)Equipment purchased from Knutsen Ballast Water AS: As part of the scheduled drydocking of the Carmen Knutsen that commenced inthe fourth quarter of 2022 until the first quarter of 2023, a ballast water treatment system was installed on the vessel. As part of thescheduled drydocking of the Torill Knutsen in the fourth quarter of 2023, a ballast water treatment system was installed on the vessel. Asof December 31, 2023, parts of the system had been purchased from Knutsen Ballast Water AS, a subsidiary of TSSI, for $0.58 million.During the scheduled drydocking of the Windsor Knutsen in 2022, a ballast water treatment system was installed on the vessel. As ofDecember 31, 2022, parts of the systems installed on the Windsor Knutsen and the Carmen Knutsen had been purchased from KnutsenBallast Water AS for $1.15 million.(b) Transactions with Management and DirectorsTrygve Seglem, the Chairman of the Partnership’s board of directors and the President and CEO of KNOT, controls Seglem Holding AS,which owns 100% of the equity interest in TSSI, which controls KOAS. TSSI owns 50% of the equity interest in KNOT. NYK, which owns50% of the equity interest in KNOT, has management and administrative personnel on secondment to KNOT. Mr. Seglem, along with otherthird-party shipping companies in Haugesund, also jointly owns Simsea Real Operations AS.See the footnotes to Note 19(a)—Related Party Transactions—Related Parties for a discussion of the allocation principles for KNOT’sadministrative costs, including management and administrative staff, included in the consolidated statements of operations. Table of ContentsF-39(c) Amounts Due from and Due to Related PartiesBalances with related parties consisted of the following:At December 31, At December 31, (U.S. Dollars in thousands) 2023 2022Balance Sheet: Trading balances due from KOAS$—$118Trading balances due from KNOT and affiliates 348 1,880Amount due from related parties$348$1,998Trading balances due to KOAS$1,696$1,398Trading balances due to KNOT and affiliates 410 319Amount due to related parties$2,106$1,717Amounts due from and due to related parties are unsecured and intended to be settled in the ordinary course of business. The majority ofthese related party transactions relate to vessel management and other fees due to KNOT, KNOT Management, KOAS UK and KOAS.(d) Trade accounts payable and other current assetsTrade accounts payable to related parties are included in total trade accounts payables in the balance sheet. The balances to related partiesconsisted of the following:At December 31, At December 31, (U.S. Dollars in thousands) 2023 2022Balance Sheet: Trading balances due to KOAS$1,158$824Trading balances due to KNOT and affiliates 2,045 998Trade accounts payables to related parties$3,203$1,822Trading balances from KNOT and affiliates are included in other current assets in the balance sheet. The balances from related partiesconsisted of the following: At December 31, At December 31, (U.S. Dollars in thousands)20232022Balance Sheet: Trade receivables due from KNOT and affiliates (refer to note 12 (b))$—$1,405Other trading balances due from KOAS376645Other trading balances due from KNOT and affiliates—353Other current assets from related parties$376$2,403(e) Acquisitions from KNOTOn July 1, 2022, the Partnership acquired KNOT’s 100% interest in KNOT Shuttle Tankers 35 AS, the company that owns and operatesthe Synnøve Knutsen. This acquisition was accounted for as an acquisition of assets.The board of directors of the Partnership (the “Board”) and the Conflicts Committee of the Board approved the purchase price for thetransaction described above. The Conflicts Committee retained a financial advisor to assist with its evaluation of each of the transactions. SeeNote 24—Acquisitions. Table of ContentsF-4020) Commitments and ContingenciesAssets PledgedAs of December 31, 2023 and 2022, Vessels with a book value of $1,493 million and $1,631 million, respectively, were pledged assecurity held as guarantee for the Partnership’s long-term debt and interest rate swap obligations. See Note 10—Derivative Instruments,Note 14—Vessels and Equipment and Note 17—Long-Term Debt.Claims and Legal ProceedingsUnder the Partnership’s time charters, claims to reduce the hire rate payments can be made if the Vessel does not perform to certainspecifications in the agreements. No accrual for possible claims was recorded for the years ended December 31, 2023, 2022 and 2021.From time to time, the Partnership is involved in various claims and legal actions arising in the ordinary course of business. In the opinionof management, the ultimate disposition of these matters will not have a material adverse effect on the consolidated financial position, resultsof operations or cash flows.InsuranceThe Partnership maintains insurance on all the Vessels to insure against marine and war risks, which include damage to or total loss of theVessels, 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 compensation for the lost hire rate agreed in respect of each Vessel for each day, inexcess 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, thePartnership 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 collisionswith other vessels and other damage to other third-party property, including pollution arising from oil or other substances. This insurance isunlimited, except for pollution, which is limited to $1 billion per vessel per incident. The protection and indemnity insurance is maintainedthrough a protection and indemnity association, and as a member of the association, the Partnership may be required to pay amounts abovebudgeted premiums if the member claims exceed association reserves, subject to certain reinsured amounts. If the Partnership experiencesmultiple claims each with individual deductibles, losses due to risks that are not insured or claims for insured risks that are not paid, it couldhave a material adverse effect on the Partnership’s results of operations and financial condition. See Note 8—Insurance Proceeds.21) Impairment of Long-Lived AssetsThe carrying value of the Partnership’s fleet is regularly assessed as events or changes in circumstances may indicate that a vessel’s netcarrying value exceeds the net undiscounted cash flows expected to be generated over its remaining useful life, and in such situation thecarrying amount of the vessel is reduced to its estimated fair value. The Partnership considers factors related to vessel age, expected residualvalue, ongoing use of the vessels and equipment, shifts in market conditions and other impacting factors associated with the shuttle tankerbusiness as well as the wider global oil and maritime transportation industries.This exercise in the second quarter of 2023 resulted in impairments in respect of both the Dan Cisne and the Dan Sabia principally due totheir current charter contracts moving closer to expiration without being renewed, their high carrying value, and their smaller size not beingoptimal for the Brazilian market, therefore affecting the outlook for their future employment. The carrying values of the Dan Cisne and theDan Sabia were written down to their estimated fair value, using a discounted cash flow valuation. Our estimates of future cash flows involveassumptions about future hire rates, vessel utilization, operating expenses, drydocking expenditures, vessel residual values, the remainingestimated life of our vessels, possible sale of the two vessels and discount rates. The Partnership’s consolidated statement of operations for theyear ended December 31, 2023, includes a $24.5 million impairment charge related to the Dan Cisne and $25.2 million impairment chargerelated to the Dan Sabia. The impairment of the Dan Cisne and the Dan Sabia is included in the Partnership’s only segment, the shuttle tankersegment. Table of ContentsF-4122) Earnings per Unit and Cash DistributionsThe calculations of basic and diluted earnings per unit (1) are presented below:Year Ended December 31, (U.S. Dollars in thousands, except per unit data) 2023 2022 2021Net income (loss)$(34,328)$58,667$53,876Less: Series A Preferred unitholders’ interest in net income6,8006,8006,900Net income (loss) attributable to the unitholders of KNOT Offshore Partners LP(41,128)51,86746,976Less: Distributions (2)3,60755,40472,520Under (over) distributed earnings(44,735)(3,537)(25,544)Under (over) distributed earnings attributable to: Common unitholders(43,909)(3,430)(24,927)Class B unitholders (3)—(42)(147)General Partner(826)(65)(470)Weighted average units outstanding (basic) (in thousands): Common unitholders34,04533,88233,050Class B unitholders252416195General Partner640640623Weighted average units outstanding (diluted) (in thousands): Common unitholders38,43037,91937,064Class B unitholders252416195General Partner640640623Earnings per unit (basic) Common unitholders$(1.19)$1.48$1.38Class B unitholders (3)—1.482.62General Partner(1.19)1.481.38Earnings per unit (diluted): Common unitholders (4)$(1.19)$1.48$1.38Class B unitholders (3)—1.482.62General Partner(1.19)1.481.38Cash distributions declared and paid in the period per unit (5)$0.10$2.08$2.08Subsequent event: Cash distributions declared and paid per unit relating to the period (6)$0.03$0.03$0.52(1)Earnings per unit have been calculated in accordance with the cash distribution provisions set forth in the Partnership’s agreement oflimited partnership (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 thenumber of units outstanding at the record date.(3)When the distribution target is not met, there is no allocation of net income (loss) to Class B units.(4)Diluted weighted average units outstanding and earnings per unit diluted for the year ended December 31, 2023, 2022 and 2021 does notreflect any potential common units relating to the Series A Preferred Units since the assumed issuance of any additional units would beanti-dilutive.(5)Refers to cash distributions declared and paid during the period.(6)Refers to cash distributions declared and paid subsequent to the period end.On May 27, 2021, Tortoise Direct Opportunities Fund LP, the holder of 416,677 of the Partnership’s Series A Convertible Preferred Units(“Series A Preferred Units”), sold 208,333 of its Series A Preferred Units to KNOT and converted 208,334 Series A Preferred Units to215,292 common units based on a conversion rate of 1.0334. Table of ContentsF-42The Series A Preferred Units rank senior to the common units and Class B Units as to the payment of distributions and amounts payableupon liquidation, dissolution or winding up. The Series A Preferred Units have a liquidation preference of $24.00 per unit, plus any Series Aunpaid cash distributions, plus all accrued but unpaid distributions on such Series A Preferred Unit with respect to the quarter in which theliquidation occurs to the date fixed for the payment of any amount upon liquidation. The Series A Preferred Units are entitled to cumulativedistributions from their initial issuance date, with distributions being calculated at an annual rate of 8.0% on the stated liquidation preferenceand 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 atthe applicable conversion rate. The conversion rate will be subject to adjustment under certain circumstances. In addition, the conversion ratewill 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 withrespect 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 until February 2, 2027 at the redemption pricespecified in the Partnership Agreement, provided, however, that upon notice from the Partnership to the holders of Series A Preferred Units ofits intent to redeem, such holders may elect, instead, to convert their Series A Preferred Units into common units at the applicable conversionrate.Upon a change of control of the Partnership, the holders of Series A Preferred Units will have the right to require cash redemption at100% 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 APreferred 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 unitssuch that each Series A Preferred Unit receives common units worth 80% of the Issue Price (based on the volume-weighted average tradingprice, as adjusted for splits, combinations and other similar transactions, of the common units as reported on the NYSE for the 30 trading dayperiod ending on the fifth trading day immediately prior to the redemption date) plus any accrued and unpaid distributions. In addition, subjectto certain conditions, the Partnership has the right to convert the Series A Preferred Units into common units at the applicable conversion rateif the aggregate market value (calculated as set forth in the partnership agreement) of the common units into which the outstanding Series APreferred Units are convertible, based on the applicable conversion rate, is greater than 130% of the aggregate Issue Price of the outstandingSeries A Preferred Units.The Series A Preferred Units have voting rights that are identical to the voting rights of the common units and Class B Units, except theydo not have any right to nominate, appoint or elect any of the directors of the Board, except whenever distributions payable on the Series APreferred Units have not been declared and paid for four consecutive quarters (a “Trigger Event”). Upon a Trigger Event, holders of Series APreferred Units, together with the holders of any other series of preferred units upon which like rights have been conferred and areexercisable, may replace one of the members of the Board appointed by the General Partner with a person nominated by such holders, suchnominee to serve until all accrued and unpaid distributions on the preferred units have been paid. The Series A Preferred Units are entitled tovote with the common units and Class B Units as a single class so that the Series A Preferred Units are entitled to one vote for each commonunit into which the Series A Preferred Units are convertible at the time of voting.On September 7, 2021, the Partnership entered into an exchange agreement with its general partner and KNOT whereby KNOTcontributed to the Partnership all of KNOT’s IDRs in exchange for the issuance by the Partnership to KNOT of 673,080 common units and673,080 Class B Units, whereupon the IDRs were cancelled (the “IDR Exchange”). The IDR Exchange closed on September 10, 2021. TheClass B Units are a new class of limited partner interests which are not entitled to receive cash distributions in any quarter unless commonunitholders receive a distribution of at least $0.52 for such quarter (the “Distribution Threshold”). When common unitholders receive aquarterly distribution at least equal to the Distribution Threshold, then Class B unitholders will be entitled to receive the same distribution ascommon unitholders.For each quarter (starting with the quarter ended September 30, 2021) that the Partnership pays distributions on the common units that areat or above the Distribution Threshold, one-eighth of the Class B Units will be converted to common units on a one-for-one basis until suchtime as no further Class B Units exist. The Class B Units will generally vote together with the common units as a single class. Table of ContentsF-43After the payment of the Partnership’s quarterly cash distribution on February 12, 2022, with respect to the fourth quarter of 2021, 84,135of the Class B Units converted to common units on a one-to-one basis. After the payment of the Partnership’s quarterly cash distribution onMay 12, 2022, with respect to the first quarter of 2022, 84,135 of the Class B Units converted to common units on a one-to-one basis. Afterthe payment of the Partnership’s quarterly cash distribution on August 11, 2022, with respect to the second quarter of 2022, 84,135 of theClass B Units converted to common units on a one-to-one basis. After the payment of the Partnership’s quarterly cash distribution onNovember 9, 2022 with respect to the third quarter of 2022, 84,135 of the Class B Units converted to common units on a one-to-one basis.On January 11, 2023, the Partnership declared a quarterly cash distribution with respect to the fourth quarter of 2022 of $0.026 percommon unit and, after the payment of this quarterly cash distribution on February 9, 2023, no Class B Units converted to commonunits.After the payment of the Partnership’s quarterly cash distribution on May 11, 2023, with respect to the first quarter, no Class B Unitsconverted to common units. After the payment of the Partnership’s quarterly cash distribution on August 10, 2023, with respect to the secondquarter, no Class B Units converted to common units. After the payment of the Partnership’s quarterly cash distribution on November 9, 2023,with respect to the third quarter, no Class B Units converted to common units.As of December 31, 2023, 71.4% of the Partnership’s total number of common units outstanding representing limited partner interestswere held by the public (in the form of 24,293,458 common units) and 28.4% of such units were held directly by KNOT (in the form of9,661,255 common units). In addition, KNOT, through its ownership of the General Partner, held a 1.83% general partner interest (in the formof 640,278 general partner units) and a 0.3% limited partner interest (in the form of 90,368 common units). As of December 31, 2023, KNOTalso held 208,333 Series A Preferred Units and 252,405 Class B Units.Earnings per unit—basic is determined by dividing net income, after deducting the amount of net income attributable to the Series APreferred Units and the distribution paid or to be made in relation to the period, by the weighted-average number of units outstanding duringthe applicable period.The computation of limited partners’ interest in net income per common unit – diluted assumes the issuance of common units for allpotentially dilutive securities consisting of 3,541,666 Series A Preferred Units and 252,405 Class B Units as of December 31, 2023.Consequently, the net income attributable to limited partners’ interest is exclusive of any distributions on the Series A Preferred Units. Inaddition, the weighted average number of common units outstanding has been increased assuming the Series A Preferred Units and Class BUnits have been converted to common units using the if-converted method. The computation of limited partners’ interest in net income percommon unit – diluted does not assume the issuance of Series A Preferred Units and Class B Units if the effect would be anti-dilutive.The General Partner’s, Class B unitholders’ and common unitholders’ interest in net income was calculated as if all net income wasdistributed according to the terms of the Partnership Agreement, regardless of whether those earnings would or could be distributed. ThePartnership Agreement does not provide for the distribution of net income. Rather, it provides for the distribution of available cash, which is acontractually defined term that generally means all cash on hand at the end of each quarter less the amount of cash reserves established by theBoard to provide for the proper conduct of the Partnership’s business, including reserves for future capital expenditures, anticipated creditneeds and capital requirements and any accumulated distributions on, or redemptions of, the Series A Preferred Units. Unlike available cash,net income is affected by non-cash items, such as depreciation and amortization, unrealized gains and losses on derivative instruments andunrealized foreign currency gains and losses. Table of ContentsF-4423) Unit ActivityThe following table shows the movement in number of common units, Class B Units, general partner units and Series A Preferred Unitsfrom December 31, 2021 until December 31, 2023:ConvertibleGeneral PartnerPreferred (in units) Common Units Class B Units Units UnitsDecember 31, 2021 33,708,541 588,945 640,278 3,541,666February 10, 2022: Quarterly conversion of Class B Units84,135(84,135)——May 12, 2022: Quarterly conversion of Class B Units84,135(84,135)——August 11, 2022: Quarterly conversion of Class B Units84,135(84,135)——November 9, 2022: Quarterly conversion of Class B Units84,135(84,135)——December 31, 2022 34,045,081 252,405 640,278 3,541,666February 9, 2023: Quarterly conversion of Class B Units————May 11, 2023: Quarterly conversion of Class B Units————August 10, 2023: Quarterly conversion of Class B Units————November 9, 2023: Quarterly conversion of Class B Units————December 31, 202334,045,081252,405640,2783,541,666On February 10, 2022, 84,135 Class B units were converted to common units on a one-to-one basis pursuant to the PartnershipAgreement.On May 12, 2022, 84,135 Class B units were converted to common units on a one-to-one basis pursuant to the Partnership Agreement.On August 11, 2022, 84,135 Class B units were converted to common units on a one-to-one basis pursuant to the Partnership Agreement.On November 9, 2022, 84,135 Class B units were converted to common units on a one-to-one basis pursuant to the PartnershipAgreement.24) AcquisitionsOn July 1, 2022, the Partnership’s wholly owned subsidiary, KNOT Shuttle Tankers AS, acquired KNOT Shuttle Tankers 35 AS (“KNOT35”), the company that owns and operates the Synnøve Knutsen. The purchase price for the vessel was $119.0 million, less $87.7 million ofoutstanding indebtedness related to the Synnøve Knutsen plus approximately $0.6 million for certain capitalized fees related to the financingof the Vessel and plus customary working capital purchase price adjustments of $5.9 million. Table of ContentsF-45The board of directors of the Partnership and the Conflicts Committee approved the purchase price for the transaction. The ConflictsCommittee retained a financial advisor to assist with its evaluation of the transaction. The cost of the fee paid to the financial advisor wasdivided equally between the Partnership and KNOT. Acquisition related costs of $0.04 million as of December 31, 2022, were capitalized as acomponent of the assets acquired. The allocation of the purchase price to acquired identifiable assets was based on their estimated fair valuesat the date of acquisition. The purchase price of the acquisition has been allocated to the identifiable assets acquired. The details of thetransaction are as follows:FinalSynnøve KnutsenJuly 1,(U.S. Dollars in thousands) 2022Purchase consideration (1)$37,907Less: Fair value of net assets acquired:Vessels and equipment (2)119,119Cash5,702Inventories291Derivatives assets (liabilities)958Others current assets211Amounts due from related parties53Long-term debt(87,661)Deferred debt issuance592Trade accounts payable(160)Accrued expenses(694)Amounts due to related parties(503)Income tax payable(1)Subtotal37,907Difference between the purchase price and fair value of net assets acquired$—(1)The purchase consideration comprises the following:FinalSynnøve KnutsenJuly 1,(U.S. Dollars in thousands) 2022Cash consideration paid to KNOT (from KNOP)$31,931Purchase price adjustments5,937Acquisition-related costs39Purchase price$37,907(2)Vessel and equipment includes allocation to drydocking (in thousands) of $2,133.25) Subsequent EventsThe Partnership has evaluated subsequent events from the balance sheet date through April 11, 2024, the date at which the auditedconsolidated financial statements were issued, and determined that there are no other items to disclose, except as follows:On January 16, 2024, the Partnership declared a quarterly cash distribution of $0.026 per common unit with respect to the quarter endedDecember 31, 2023, which was paid on February 8, 2024, to all common unitholders of record on January 29, 2024. On the same day, thePartnership declared a quarterly cash distribution to holders of Series A Preferred Units with respect to the quarter ended December 31, 2023in an aggregate amount of $1.7 million. Table of ContentsF-46The Hilda Knutsen, Torill Knutsen and Bodil Knutsen each continued to operate on separate time charter contracts with a subsidiary ofKNOT, at a reduced charter rate. On January 2, 2024, these rolling monthly contracts were extended to January 2025 for the Hilda Knutsenand the Torill Knutsen. The Bodil Knutsen was extended until she went on her new fixed two-year time charter with Equinor on March 27,2024. The Partnership is continuing to market the Hilda Knutsen and the Torill Knutsen for new, third-party charter employment.On January 9, 2024, an extension to the existing bareboat charter party for the Dan Sabia was signed with Transpetro, extending thevessel’s fixed employment to early June 2024.On January 9, 2024, the loan facility secured by the Dan Sabia was repaid in full with a $10.4 million payment. The Dan Sabia and theDan Cinse are now debt-free and there are no plans to incur additional borrowings secured by these vessels until such time as the Partnershiphas better visibility on the vessels’ future employment.Commencing January, 2024, the Dan Cisne has been deployed in the spot market for short-term conventional tanker work, while beingassessed for the upgrades necessary to fulfil the requirements of shuttle tanker operations in North Sea.On January 28, 2024, the Torill Knutsen experienced a broken generator rotor, which limits the range of client facilities this vessel is ableto serve. Under its loss of hire insurance policies, the Partnership will be compensated by insurance for the extent to which, as a consequenceof this breakage, the Torill Knutsen’s earnings fall short of a contractual hire rate, commencing 14 days after the date of the breakage. ThePartnership expects the supply of necessary components, and thereafter completion of the repair, to be achieved late in the second quarter orearly in the third quarter of 2024. The Partnership also expects that the repair cost will be covered by insurance, in excess of a deductible of$150,000.On March 16, 2024 the Vigdis Knutsen was delivered to Shell to commence on a three-year time charter.On March 22, 2024, TotalEnegies exercised its option to extend their charter with the Anna Knutsen to April 2026.On March 28, 2024 the Ingrid Knutsen was redelivered from Altera, following which she has worked in the conventional tanker market.While she is due for delivery to Eni during April 2024 on three-year time charter contract, it is possible that commercial terms no lessfavourable to the Partnership may be agreed for an alternative delivery later in 2024.On April 5, 2024, the Partnership’s subsidiary, Knutsen Shuttle Tankers 14 AS, which owns the vessel Hilda Knutsen, entered into a new$60 million senior secured term loan facility with DNB (the “$60 Million Hilda Facility”). The $60 Million Hilda Facility is due to replace the$100 million loan facility with Mitsubishi UFJ Lease & Finance (Hong Kong) Limited, which matures in May 2024. This refinancing isanticipated to close prior to the maturity date of the expiring facility, and remains subject to execution of definitive documentation and othercustomary closing conditions. Exhibit 4.8 Exhibit 4.9 Copyright ©2009 BIMCO. Allrights reserved.Anyunauthorisedcopying,duplication,reproduction ordistribution ofthis BIMCOSmartCondocument willconstitute aninfringement ofBIMCO’scopyright.Explanatorynotes areavailable fromBIMCO atwww.bimco.org.First published1988, revised1998 and 2009.Approved by theInternationalShip Managers’Association(InterManager).1. Place anddate ofAgreementCopenhagen 8December 20232. Date ofcommencementof Agreement(Cl. 2, 12, 21and 25) 12December 20233. Owners(name, place ofregistered officeand law ofregistry) (Cl. 1)(i) Name: KNOTShuttle Tankers20 AS (ii) Placeof registeredoffice:Smedasundet40, 5529Haugesund,Norway (iii) Lawof registry:Norway 4.Managers(name, place ofregistered officeand law ofregistry) (Cl. 1)(i) Name: KNOTManagementDenmark A/S (ii)Place ofregistered office:c/o DanmarksRederiforening,Amaliegade33B, 4., 1256København K,Denmark (iii)Law of registry:Denmark 5. TheCompany (withreference to theISM/ISPSCodes) (statename and IMOUniqueCompanyIdentificationnumber. If theCompany is athird party thenalso stateregistered officeand principalplace ofbusiness) (Cl. 1and 9(c)(i)) (i)Name: KNOTManagementDenmark A/S (ii)IMO UniqueCompanyIdentificationnumber:5652631 (iii)Place ofregistered office:c/o DanmarksRederiforening,Amaliegade33B, 4., 1256København K,Denmark (iv)Principal placeof business:Denmark 6.TechnicalManagement(state “yes” or“no” as agreed)(Cl. 4) Yes 7.CrewManagement(state “yes” or“no” as agreed)(Cl. 5(a)) Yes 8.CommercialManagement(state “yes” or“no” as agreed)(Cl. 6) Yes 9.CharteringServices period(only to be filledin if “yes” statedin Box 8)(Cl.6(a)) Yes 10.Crew Insurancearrangements(state “yes” or“no” as agreed)(i) CrewInsurances* (Cl.5(b)): Yes (ii)Insurance forpersonsproceeding tosea onboard (Cl.5(b)(i)): Yes*only to apply ifCrewManagement(Cl. 5(a)) agreed(see Box 7) 11.Insurancearrangements(state “yes” or“no” as agreed)(Cl. 7) Yes 12.Optionalinsurances(state optionalinsurance(s) asagreed, such aspiracy, kidnapand ransom,loss of hire andFD&D) (Cl. 10(a)(iv)) 13. Interest(state rate ofinterest to applyafter due date tooutstandingsums) (Cl. 9(a))SOFR + 2% 14.Annualmanagement fee(state annualamount) (Cl.12(a)) USD 618746 (to beannuallyincreased by4%, firstincrease 1January 2025).DocuSignEnvelope ID:849039D3-DB63-4B44-869C-67FAA2D5EC4A Copyright © 2009 BIMCO. Allrights reserved. Anyunauthorised copying,duplication, reproduction ordistribution of this BIMCOSmartCon document willconstitute an infringement ofBIMCO’s copyright.Explanatory notes areavailable from BIMCO atwww.bimco.org. Firstpublished 1988, revised 1998and 2009. Approved by theInternational Ship Managers’Association (InterManager).15. Manager’s nominatedaccount (Cl.12(a)) 16. Dailyrate (state rate for days inexcess of those agreed inbudget) (Cl. 12(c)) 17. Lay-upperiod / number of months(Cl.12(d)) 18. Minimumcontract period (state numberof months) (Cl. 21(a)) 19.Management fee ontermination (state number ofmonths to apply) (Cl. 22(g))20. Severance Costs (statemaximum amount) (Cl. 22(h)(ii)) 21. Dispute Resolution(state alternative Cl. 23(a),23(b) or 23(c); if Cl. 23(c) isagreed, place of arbitrationmust be stated) (Cl. 23) 22.Notices (state full style contactdetails for serving notice andcommunication to theOwners) (Cl. 24) KNOTShuttle Tankers 20 ASSmedasundet 40, Postboks2017, 5504 Haugesund,Norway ph: +47 52 70 40 00Email:operations@knutsenoas.com23. Notices (state full stylecontact details for servingnotice and communication tothe Managers) Cl. 24) KNOTManagement Denmark A/Sc/Danmarks Rederiforening,Amaliegade 33B, 4., 1256København K, Denmark ph:+45 78 77 78 44 Email:hgu@knotgroup.com It ismutually agreed between theparty stated in Box 3 and theparty stated in Box 4 that thisAgreement consisting ofPART l and PART ll as well asAnnexes “A” (Details of Vesselor Vessels), “B” (Details ofCrew), “C” (Budget), “D”(Associated Vessels) and “E”(Fee Schedule) attachedhereto, shall be performedsubject to the conditionscontained herein. In the eventof a conflict of conditions, theprovisions of PART l andAnnexes “A”, “B”, “C”, “D” and“E” shall prevail over those ofPART ll to the extent of suchconflict but no further.Signature(s) (Owners)Signature(s) (Managers)Trygve Seglem Karl GerhardBråstein Dahl DocuSignEnvelope ID: 849039D3-DB63-4B44-869C-67FAA2D5EC4A Copyright ©2009 BIMCO. Allrights reserved.Anyunauthorisedcopying,duplication,reproduction ordistribution ofthis BIMCOSmartCondocument willconstitute aninfringement ofBIMCO’scopyright.Explanatorynotes areavailable fromBIMCO atwww.bimco.org.First published1988, revised1998 and 2009.Approved by theInternationalShip Managers’Association(InterManager).SECTION 1 –Basis of theAgreement 1.Definitions Inthis Agreementsave where thecontextotherwiserequires, thefollowing wordsand expressionsshall have themeaningshereby assignedto them:“Company” (withreference to theISM Code andthe ISPS Code)means theorganizationidentified in Box5 or anyreplacementorganizationappointed by theOwners fromtime to time (seeSub-clauses9(b)(i) or 9(c)(ii),whichever isapplicable).“Crew” meansthe personnel ofthe numbers,rank andnationalityspecified inAnnex “B”hereto. “CrewInsurances”meansinsurance ofliabilities inrespect of crewrisks which shallinclude but notbe limited todeath,permanentdisability,sickness, injury,repatriation,shipwreckunemploymentindemnity andloss of personaleffects (see Sub-clause 5(b)(CrewInsurances) andClause 7(InsuranceArrangements)and Clause 10(InsurancePolicies) andBoxes 10 and11). “CrewSupport Costs”means allexpenses of ageneral naturewhich are notparticularlyreferable to anyindividual vesselfor the timebeing managedby the Managersand which areincurred by theManagers forthe purpose ofproviding anefficient andeconomicmanagementservice and,without prejudiceto the generalityof the foregoing,shall include thecost of crewstandby pay,trainingschemes forofficers andratings, cadettrainingschemes, sickpay, study pay,recruitment andinterviews. “FlagState” meansthe State whoseflag the Vessel isflying. “ISMCode” meansthe InternationalManagementCode for theSafe Operationof Ships and forPollutionPrevention andany amendmentthereto orsubstitutiontherefor. “ISPSCode” meansthe InternationalCode for theSecurity of Shipsand PortFacilities and therelevantamendments toChapter XI ofSOLAS and anyamendmentthereto orsubstitutiontherefor.“Managers”means the partyidentified in Box4. “ManagementServices” meansthe servicesspecified inSECTION 2 -Services(Clauses 4through 7) asindicatedaffirmatively inBoxes 6 through8, 10 and 11,and all otherfunctionsperformed bythe Managersunder the termsof thisAgreement.“Owners” meansthe partyidentified in Box3. “SeveranceCosts” meansthe costs whichare legallyrequired to bepaid to the Crewas a result of theearly terminationof any contractsfor service onthe Vessel.“SMS” meansthe SafetyManagementSystem (asdefined by theISM Code).“STCW 95”means theInternationalConvention onStandards ofTraining,Certification andWatchkeepingfor Seafarers,1978, asamended in1995 and anyamendmentthereto orsubstitutiontherefor.“Vessel” meansthe vessel orvessels detailsof which are setout in Annex “A”attached hereto.2.CommencementandAppointmentWith effect fromthe date statedin Box 2 for thecommencementof theManagementServices andcontinuingunless and untilterminated asprovided herein,the Ownershereby appointthe Managersand theManagershereby agree toact as theManagers of theVessel inrespect of theManagementServices. 3.Authority of theManagersSubject to theterms andconditionsherein provided,during the periodof thisAgreement theManagers shallcarry out theManagementServices inrespect of theVessel asagents for andon behalf of theOwners. TheManagers shallhave authority totake suchactions as theymay from time totime in theirabsolutediscretionconsider to benecessary toenable them toperform theManagementServices inaccordance withsound shipmanagementpractice,including but notlimited tocompliance withall relevant rulesand regulations.SECTION 2 –Services 4.TechnicalManagement(only applicableif agreedaccording to Box6). TheManagers shallprovide technicalmanagementwhich includes,but is not limitedto, the followingservices: (a)ensuring that theVessel complieswith therequirements ofthe law of theFlag State; (b)ensuringcompliance withthe ISM Code;(c) ensuringcompliance withthe ISPS Code;PART IIDocuSignEnvelope ID:849039D3-DB63-4B44-869C-67FAA2D5EC4A Copyright © 2009BIMCO. All rightsreserved. Anyunauthorisedcopying,duplication,reproduction ordistribution of thisBIMCO SmartCondocument willconstitute aninfringement ofBIMCO’scopyright.Explanatory notesare available fromBIMCO atwww.bimco.org.First published1988, revised1998 and 2009.Approved by theInternational ShipManagers’Association(InterManager).(d) providingcompetentpersonnel tosupervise themaintenance andgeneral efficiencyof the Vessel; (e)arranging andsupervising drydockings, repairs,alterations and themaintenance ofthe Vessel to thestandards agreedwith the Ownersprovided that theManagers shall beentitled to incurthe necessaryexpenditure toensure that theVessel will complywith allrequirements andrecommendationsof theclassificationsociety, and withthe law of the FlagState and of theplaces where theVessel is requiredto trade; (f)arranging thesupply ofnecessary stores,spares andlubricating oil; (g)appointingsurveyors andtechnicalconsultants as theManagers mayconsider from timeto time to benecessary; (h) inaccordance withthe Owners’instructions,supervising thesale and physicaldelivery of theVessel under thesale agreement.However servicesunder this Sub-clause 4(h) shallnot includenegotiation of thesale agreement ortransfer ofownership of theVessel; (i)arranging for thesupply ofprovisions unlessprovided by theOwners; and (j)arranging for thesampling andtesting of bunkers.5. CrewManagement andCrew Insurances(a) CrewManagement (onlyapplicable ifagreed accordingto Box 7) TheManagers shallprovide suitablyqualified Crewwho shall complywith therequirements ofSTCW 95. Theprovision of suchcrew managementservices includes,but is not limitedto, the followingservices: (i)selecting,engaging andproviding for theadministration ofthe Crew,including, asapplicable, payrollarrangements,pensionarrangements,tax, social securitycontributions andother mandatorydues related totheir employmentpayable in eachCrew member’scountry ofdomicile; (ii)ensuring that theapplicablerequirements ofthe law of the FlagState in respect ofrank, qualificationand certification ofthe Crew andemploymentregulations, suchas Crew’s tax andsocial insurance,are satisfied; (iii)ensuring that allCrew have passeda medicalexamination with aqualified doctorcertifying that theyare fit for theduties for whichthey are engagedand are inpossession ofvalid medicalcertificates issuedin accordance withappropriate FlagStaterequirements orsuch higherstandard ofmedicalexamination asmay be agreedwith the Owners.In the absence ofapplicable FlagStaterequirements themedical certificateshall be valid atthe time when therespective Crewmember arriveson board theVessel and shallbe maintained forthe duration of theservice on boardthe Vessel; (iv)ensuring that theCrew shall have acommon workinglanguage and acommand of theEnglish languageof a sufficientstandard to enablethem to performtheir duties safely;(v) arrangingtransportation ofthe Crew,includingrepatriation; (vi)training of theCrew; (vii)conducting unionnegotiations; and(viii) if theManagers are theCompany,ensuring that theCrew, on joiningthe Vessel, aregiven properfamiliarisation withtheir duties inrelation to theVessel’s SMS andthat instructionswhich areessential to theSMS areidentified,documented andgiven to the Crewprior to sailing. (ix)If the Managersare not theCompany: (1)ensuring that theCrew, beforejoining the Vessel,are given properfamiliarisation withtheir duties inrelation to the ISMCode; and (2)ensuring that inthe event that theOwners’ drug andalcohol policyrequires measuresto be taken priorto the Crew joiningthe Vessel,implementingsuch measures;(x) WhereManagers are notproviding technicalmanagementservices inaccordance withClause 4(TechnicalManagement): (1)ensuring that noperson connectedto the provisionand theperformance ofthe crewmanagementservices shallproceed to sea onboard the Vesselwithout the priorconsent of theOwners (suchconsent not to beunreasonablywithheld); and (2)ensuring that inthe event that theOwners’ drug andalcohol policyrequires measuresto be taken priorto the Crew joiningthe Vessel,implementingsuch measures;(b) CrewInsurances (onlyapplicable if Sub-clause 5(a)applies and ifagreed accordingto Box 10) PART IIDocuSignEnvelope ID:849039D3-DB63-4B44-869C-67FAA2D5EC4A Copyright ©2009 BIMCO. Allrights reserved.Anyunauthorisedcopying,duplication,reproduction ordistribution ofthis BIMCOSmartCondocument willconstitute aninfringement ofBIMCO’scopyright.Explanatorynotes areavailable fromBIMCO atwww.bimco.org.First published1988, revised1998 and 2009.Approved by theInternationalShip Managers’Association(InterManager).The Managersshall throughoutthe period of thisAgreementprovide thefollowingservices: (i)arranging CrewInsurances inaccordance withthe best practiceof prudentmanagers ofvessels of asimilar type tothe Vessel, withsound andreputableinsurancecompanies,underwriters orassociations.Insurances forany otherpersonsproceeding tosea onboard theVessel may beseparatelyagreed by theOwners and theManagers (seeBox 10); (ii)ensuring that theOwners areaware of theterms,conditions,exceptions andlimits of liabilityof theinsurances inSub-clause 5(b)(i); (iii) ensuringthat allpremiums orcalls in respectof theinsurances inSub-clause 5(b)(i) are paid bytheir due date;(iv) if obtainableat no additionalcost, ensuringthat insurancesin Sub-clause5(b)(i) name theOwners as ajoint assuredwith full coverand, unlessotherwiseagreed, onterms such thatOwners shall beunder no liabilityin respect ofpremiums orcalls arising inconnection withsuch insurances.(v) providingwritten evidence,to thereasonablesatisfaction ofthe Owners, ofthe Managers’compliance withtheir obligationsunder Sub-clauses 5(b)(ii)and 5(b)(iii)within areasonable timeof thecommencementof thisAgreement, andof each renewaldate and, ifspecificallyrequested, ofeach paymentdate of theinsurances inSub-clause 5(b)(i). 6.CommercialManagement(only applicableif agreedaccording to Box8). TheManagers shallprovide thefollowingservices for theVessel inaccordance withthe Owners’instructions,which shallinclude but notbe limited to: (a)seeking andnegotiatingemployment forthe Vessel andthe conclusion(including theexecutionthereof) ofcharter partiesor othercontractsrelating to theemployment ofthe Vessel. Ifsuch a contractexceeds theperiod stated inBox 9, consentthereto in writingshall first beobtained fromthe Owners; (b)arranging for theprovision ofbunker fuels ofthe qualityspecified by theOwners asrequired for theVessel’s trade;(c) voyageestimating andaccounting andcalculation ofhire, freights,demurrageand/or despatchmonies due fromor due to thecharterers of theVessel; assistingin the collectionof any sums dueto the Ownersrelated to thecommercialoperation of theVessel inaccordance withClause 11(IncomeCollected andExpenses Paidon Behalf ofOwners); f anyof the servicesunder Sub-clauses 6(a),6(b) and 6(c) areto be excludedfrom theManagementFee,remuneration forthese servicesmust be statedin Annex E (FeeSchedule). SeeSub-clause12(e). (d) issuingvoyageinstructions; (e)appointingagents; (f)appointingstevedores; and(g) arrangingsurveysassociated withthe commercialoperation of theVessel. 7.InsuranceArrangements(only applicableif agreedaccording to Box11). TheManagers shallarrangeinsurances inaccordance withClause 10(InsurancePolicies), onsuch terms asthe Owners shallhave instructedor agreed, inparticularregardingconditions,insured values,deductibles,franchises andlimits of liability.SECTION 3 –Obligations 8.Managers’Obligations (a)The Managersundertake to usetheir bestendeavours toprovide theManagementServices asagents for andon behalf of theOwners inaccordance withsound shipmanagementpractice and toprotect andpromote theinterests of theOwners in allmatters relatingto the provisionof serviceshereunder.Providedhowever, that inthe performanceof theirmanagementresponsibilitiesunder thisAgreement, theManagers shallbe entitled tohave regard totheir overallresponsibility inrelation to allvessels as mayfrom time to timebe entrusted totheirmanagementand in particular,but withoutprejudice to thegenerality of theforegoing, theManagers shallbe entitled toallocateavailablesupplies,manpower andservices in suchmanner as in theprevailingcircumstancesthe Managers intheir absolutediscretionconsider to befair andreasonable. (b)Where theManagers areprovidingtechnicalmanagementservices inaccordance withClause 4(TechnicalManagement),they shallprocure that therequirements ofthe Flag Stateare satisfied andthey shall agreeto be appointedas the Company,assuming thePART IIDocuSignEnvelope ID:849039D3-DB63-4B44-869C-67FAA2D5EC4A Copyright ©2009 BIMCO. Allrights reserved.Anyunauthorisedcopying,duplication,reproduction ordistribution ofthis BIMCOSmartCondocument willconstitute aninfringement ofBIMCO’scopyright.Explanatorynotes areavailable fromBIMCO atwww.bimco.org.First published1988, revised1998 and 2009.Approved by theInternationalShip Managers’Association(InterManager).responsibility forthe operation ofthe Vessel andtaking over theduties andresponsibilitiesimposed by theISM Code andthe ISPS Code,if applicable. 9.Owners’Obligations (a)The Ownersshall pay allsums due to theManagerspunctually inaccordance withthe terms of thisAgreement. Inthe event ofpayment afterthe due date ofany outstandingsums theManager shallbe entitled tocharge interestat the rate statedin Box 13. (b)Where theManagers areprovidingtechnicalmanagementservices inaccordance withClause 4(TechnicalManagement),the Ownersshall: (i) report(or where theOwners are notthe registeredowners of theVessel procurethat theregisteredowners report)to the Flag Stateadministrationthe details of theManagers as theCompany asrequired tocomply with theISM and ISPSCodes; (ii)procure that anyofficers andratings suppliedby them or ontheir behalfcomply with therequirements ofSTCW 95; and(iii) instruct suchofficers andratings to obeyall reasonableorders of theManagers (intheir capacity asthe Company) inconnection withthe operation ofthe Managers’safetymanagementsystem. (c)Where theManagers arenot providingtechnicalmanagementservices inaccordance withClause 4(TechnicalManagement),the Ownersshall: (i) procurethat therequirements ofthe Flag Stateare satisfied andnotify theManagers uponexecution of thisAgreement ofthe name andcontact details ofthe organizationthat will be theCompany bycompleting Box5; (ii) if theCompanychanges at anytime during thisAgreement,notify theManagers in atimely manner ofthe name andcontact details ofthe neworganization; (iii)procure that thedetails of theCompany,including anychange thereof,are reported tothe Flag Stateadministrationas required tocomply with theISM and ISPSCodes. TheOwners shalladvise theManagers in atimely mannerwhen the FlagStateadministrationhas approvedthe Company;and (iv) unlessotherwiseagreed, arrangefor the supply ofprovisions attheir ownexpense. (cd)Where theManagers areproviding crewmanagementservices inaccordance withSub-clause 5(a)the Ownersshall: (i) informthe Managersprior to orderingthe Vessel toany excluded oradditionalpremium areaunder any of theOwners’Insurances byreason of warrisks and/orpiracy or likeperils and paywhateveradditional costsmay properly beincurred by theManagers as aconsequence ofsuch ordersincluding, ifnecessary, thecosts ofreplacing anymember of theCrew. Anydelays resultingfrom negotiationwith orreplacement ofany member ofthe Crew as aresult of theVessel beingordered to suchan area shall befor the Owners’account. Shouldthe Vessel bewithin an areawhich becomesan excluded oradditionalpremium areathe aboveprovisionsrelating to costand delay shallapply; (ii) agreewith theManagers priorto any change offlag of theVessel and paywhateveradditional costsmay properly beincurred by theManagers as aconsequence ofsuch change. Ifagreementcannot bereached theneither party mayterminate thisAgreement inaccordance withSub-clause22(e); and (iii)provide, at nocost to theManagers, inaccordance withthe requirementsof the law of theFlag State, orhigher standard,as mutuallyagreed,adequate Crewaccommodationand livingstandards. (e)Where theManagers arenot theCompany, theOwners shallensure thatCrew areproperlyfamiliarised withtheir duties inaccordance withthe Vessel’sSMS and thatinstructionswhich areessential to theSMS areidentified,documented andgiven to theCrew prior tosailing.SECTION 4 –Insurance,Budgets,Income,Expenses andFees 10.InsurancePolicies TheOwners shallprocure, whetherby instructingthe Managersunder Clause 7(InsuranceArrangements)or otherwise,that throughoutthe period of thisAgreement: (a)at the Owners’expense, theVessel is insuredfor not less thanits sound marketvalue or enteredfor its full grosstonnage, as thecase may be for:(i) hull andmachinerymarine risks(including butnot limited tocrewnegligence) andexcess liabilities;(ii) protectionand indemnityrisks (includingbut not limited topollution risks,diversionexpenses and,except to theextent insuredseparately bythe Managers inaccordance withSub-clause 5(b)(i), CrewInsurances);NOTE: If theManagers arenot providingcrewmanagementservices underSub-clause 5(a)(CrewManagement) orhave agreed notto provide CrewInsurancesseparately inaccordance withSub-clause 5(b)(i), then suchinsurances mustbe included inthe protectionand PART IIDocuSignEnvelope ID:849039D3-DB63-4B44-869C-67FAA2D5EC4A Copyright © 2009BIMCO. All rightsreserved. Anyunauthorisedcopying,duplication,reproduction ordistribution of thisBIMCO SmartCondocument willconstitute aninfringement ofBIMCO’scopyright.Explanatory notesare available fromBIMCO atwww.bimco.org.First published1988, revised1998 and 2009.Approved by theInternational ShipManagers’Association(InterManager).indemnity riskscover for theVessel (see Sub-clause 10(a)(ii)above). (iii) warrisks (including butnot limited toblocking andtrapping,protection andindemnity,terrorism and crewrisks); and (iv)such optionalinsurances asmay be agreed(such as piracy,kidnap andransom, loss ofhire and FD & D)(see Box 12) Sub-clauses 10(a)(i)through 10(a)(iv)all in accordancewith the bestpractice of prudentowners of vesselsof a similar type tothe Vessel, withsound andreputableinsurancecompanies,underwriters orassociations (“theOwners’Insurances”); (b)all premiums andcalls on theOwners’Insurances arepaid by their duedate; (c) theOwners’Insurances namethe Managersand, subject tounderwriters’agreement, anythird partydesignated by theManagers as ajoint assured, withfull cover. It isunderstood that insome cases, suchas protection andindemnity, thenormal terms forsuch cover mayimpose on theManagers and anysuch third party aliability in respectof premiums orcalls arising inconnection withthe Owners’Insurances. Ifobtainable at noadditional cost,however, theOwners shallprocure suchinsurances onterms such thatneither theManagers nor anysuch third partyshall be under anyliability in respectof premiums orcalls arising inconnection withthe Owners’Insurances. In anyevent, ontermination of thisAgreement inaccordance withClause 21(Duration of theAgreement) andClause 22(Termination), theOwners shallprocure that theManagers and anythird partydesignated by theManagers as jointassured shallcease to be jointassured and, ifreasonablyachievable, thatthey shall bereleased from anyand all liability forpremiums andcalls that mayarise in relation tothe period of thisAgreement; and(d) writtenevidence isprovided, to thereasonablesatisfaction of theManagers, of theOwners’compliance withtheir obligationsunder this Clause10 within areasonable time ofthecommencement ofthe Agreement,and of eachrenewal date and,if specificallyrequested, of eachpayment date ofthe Owners’Insurances. 11.Income Collectedand ExpensesPaid on Behalf ofOwners (a) Exceptas provided inSub-clause 11(c)all moniescollected by theManagers underthe terms of thisAgreement (otherthan moniespayable by theOwners to theManagers) andany interestthereon shall beheld to the creditof the Owners in aseparate bankaccount. (b) Allexpenses incurredby the Managersunder the terms ofthis Agreement onbehalf of theOwners (includingexpenses asprovided in Clause12(c)) may bedebited againstthe Owners in theaccount referredto under Sub-clause 11(a) butshall in any eventremain payable bythe Owners to theManagers ondemand. (c) Allmonies collectedby the Managersunder Clause 6(CommercialManagement)shall be paid intoa bank account inthe name of theOwners or as maybe otherwiseadvised by theOwners in writing.12. ManagementFee andExpenses (a) TheOwners shall payto the Managersan annualmanagement feeas stated in Box14 for theirservices asManagers underthis Agreement,which shall bepayable in equalmonthlyinstalments inadvance, the firstinstalment (prorata if appropriate)being payable onthecommencement ofthis Agreement(see Clause 2(Commencementand Appointment)and Box 2) andsubsequentinstalments beingpayable at thebeginning of everycalendar month.The managementfee shall bepayable to theManagers’nominatedaccount stated inBox 15. (b) Themanagement feeshall be subject toan annual reviewand the proposedfee shall bepresented in theannual budget inaccordance withSub-clause 13(a).(c) The Managersshall, at no extracost to theOwners, providetheir own officeaccommodation,office staff,facilities andstationery. Withoutlimiting thegenerality of thisClause 12(Management Feeand Expenses)the Owners shallreimburse theManagers forpostage andcommunicationexpenses,travellingexpenses, andother out of pocketexpenses properlyincurred by theManagers inpursuance of theManagementServices. Anydays used by theManagers’personneltravelling to orfrom or attendingon the Vessel orotherwise used inconnection withthe ManagementServices in excessof those agreed inthe budget shallbe charged at thedaily rate stated inBox 16. (d) If theOwners decide tolayup the Vesseland such layuplasts for more thanthe number ofmonths stated inBox 17, anappropriatereduction of theManagement Feefor the periodexceeding suchperiod until onemonth before theVessel is againput into serviceshall be mutuallyagreed betweenthe parties. If theManagers areproviding crewmanagementservices inaccordance withSub-clause 5(a),consequentialcosts of reductionand reinstatementof the Crew shallbe for the Owners’account. Ifagreement cannotbe reached theneither party mayterminate thisAgreement inaccordance withSub-clause 22(e).(e) Save asotherwiseprovided in thisAgreement, alldiscounts andcommissionsobtained by theManagers in thecourse of theperformance ofthe ManagementServices shall becredited to theOwners. 13.Budgets andManagement ofFunds PART IIDocuSignEnvelope ID:849039D3-DB63-4B44-869C-67FAA2D5EC4A Copyright ©2009 BIMCO. Allrights reserved.Anyunauthorisedcopying,duplication,reproduction ordistribution ofthis BIMCOSmartCondocument willconstitute aninfringement ofBIMCO’scopyright.Explanatorynotes areavailable fromBIMCO atwww.bimco.org.First published1988, revised1998 and 2009.Approved by theInternationalShip Managers’Association(InterManager).(a) TheManagers’ initialbudget is set outin Annex “C”hereto.Subsequentbudgets shall befor twelve monthperiods andshall beprepared by theManagers andpresented to theOwners not lessthan threemonths beforethe end of thebudget year. (b)The Ownersshall state to theManagers in atimely manner,but in any eventwithin onemonth ofpresentation,whether or notthey agree toeach proposedannual budget.The parties shallnegotiate ingood faith and ifthey fail to agreeon the annualbudget,including themanagementfee, either partymay terminatethis Agreementin accordancewith Sub-clause22(e). (c)Following theagreement ofthe budget, theManagers shallprepare andpresent to theOwners theirestimate of theworking capitalrequirement forthe Vessel andshall eachmonth requestthe Owners inwriting to paythe fundsrequired to runthe Vessel forthe ensuingmonth, includingthe payment ofany occasionalor extraordinaryitem ofexpenditure,such asemergencyrepair costs,additionalinsurancepremiums,bunkers orprovisions. Suchfunds shall bereceived by theManagers withinten running daysafter the receiptby the Ownersof the Managers’written requestand shall beheld to the creditof the Owners ina separate bankaccount. (d) TheManagers shallat all timesmaintain andkeep true andcorrect accountsin respect of theManagementServices inaccordance withthe relevantInternationalFinancialReportingStandards orsuch otherstandard as theparties mayagree, includingrecords of allcosts andexpenditureincurred, andproduce acomparisonbetweenbudgeted andactual incomeand expenditureof the Vessel insuch form and atsuch intervals asshall be mutuallyagreed. TheManagers shallmake suchaccountsavailable forinspection andauditing by theOwners and/ortheirrepresentativesin the Managers’offices or byelectronicmeans, providedreasonablenotice is givenby the Owners.(e)Notwithstandinganythingcontainedherein, theManagers shallin nocircumstancesbe required touse or committheir own fundsto finance theprovision of theManagementServices.SECTION 5 –Legal, Generaland Duration ofAgreement 14.TradingRestrictions Ifthe Managersare providingcrewmanagementservices inaccordance withSub-clause 5(a)(CrewManagement),the Owners andthe Managerswill, prior to thecommencementof thisAgreement,agree on anytradingrestrictions tothe Vessel thatmay result fromthe terms andconditions of theCrew’semployment. 15.Replacement Ifthe Managersare providingcrewmanagementservices inaccordance withSub-clause 5(a)(CrewManagement),the Owners mayrequire thereplacement, attheir ownexpense, at thenext reasonableopportunity, ofany member ofthe Crew foundon reasonablegrounds to beunsuitable forservice. If theManagers havefailed to fulfiltheir obligationsin providingsuitable qualifiedCrew within themeaning of Sub-clause 5(a)(CrewManagement),then suchreplacementshall be at theManagers’expense. 16.Managers’ Rightto Sub-ContractThe Managersshall have theright tonotsubcontract anyof theirobligationshereunderwithout the priorwritten consentof the Ownerswhich shall notbe unreasonablywithheld. In theevent of such asub-contract theManagers shallremain fullyliable for the dueperformance oftheir obligationsunder thisAgreement. 17.Responsibilities(a) ForceMajeure Neitherparty shall beliable for anyloss, damage ordelay due to anyof the followingforce majeureevents and/orconditions to theextent that theparty invokingforce majeure isprevented orhindered fromperforming anyor all of theirobligationsunder thisAgreement,provided theyhave made allreasonableefforts to avoid,minimise orprevent theeffect of suchevents and/orconditions: (i)acts of God; (ii)any Governmentrequisition,control,intervention,requirement orinterference; (iii)anycircumstancesarising out ofwar, threatenedact of war orwarlikeoperations, actsof terrorism,sabotage orpiracy, or theconsequencesthereof; (iv) riots,civil commotion,blockades orembargoes; (v)epidemics; (vi)earthquakes,landslides,floods or otherextraordinaryweatherconditions; (vii)strikes, lockoutsor otherindustrial action,unless limited tothe employees(which shall notinclude theCrew) of theparty seeking toinvoke forcemajeure; (viii)fire, accident,explosion exceptwhere causedby negligence ofthe partyseeking toinvoke forcemajeure; andPART IIDocuSignEnvelope ID:849039D3-DB63-4B44-869C-67FAA2D5EC4A Copyright © 2009BIMCO. All rightsreserved. Anyunauthorisedcopying,duplication,reproduction ordistribution of thisBIMCO SmartCondocument willconstitute aninfringement ofBIMCO’scopyright.Explanatory notesare available fromBIMCO atwww.bimco.org.First published1988, revised1998 and 2009.Approved by theInternational ShipManagers’Association(InterManager).(ix) any othersimilar causebeyond thereasonable controlof either party. (b)Liability to Owners(i) Withoutprejudice to Sub-clause 17(a), theManagers shall beunder no liabilitywhatsoever to theOwners for anyloss, damage,delay or expenseof whatsoevernature, whetherdirect or indirect,(including but notlimited to loss ofprofit arising out ofor in connectionwith detention ofor delay to theVessel) andhowsoever arisingin the course ofperformance ofthe ManagementServices UNLESSsame is proved tohave resultedsolely from thenegligence, grossnegligence orwilful default of theManagers or theiremployees oragents, or sub-contractorsemployed by themin connection withthe Vessel, inwhich case (savewhere loss,damage, delay orexpense hasresulted from theManagers’personal act oromissioncommitted withthe intent to causesame or recklesslyand withknowledge thatsuch loss,damage, delay orexpense wouldprobably result)the Managers’liability for eachincident or seriesof incidents givingrise to a claim orclaims shall neverexceed a total often (10) times theannualmanagement feepayablehereunder. (ii)Acts or omissionsof the Crew -Notwithstandinganything that mayappear to thecontrary in thisAgreement, theManagers shallnot be liable forany acts oromissions of theCrew, even if suchacts or omissionsare negligent,grossly negligentor wilful, exceptonly to the extentthat they areshown to haveresulted from afailure by theManagers todischarge theirobligations underClause 5(a) (CrewManagement), inwhich case theirliability shall belimited inaccordance withthe terms of thisClause 17(Responsibilities).(c) Except to theextent and solelyfor the amounttherein set out thatthe Managerswould be liableunder Sub-clause17(b), the Ownershereby undertaketo keep theManagers andtheir employees,agents and sub-contractorsindemnified and tohold themharmless againstall actions,proceedings,claims, demandsor liabilitieswhatsoever orhowsoever arisingwhich may bebrought againstthem or incurredor suffered bythem arising out ofor in connectionwith theperformance ofthis Agreement,and against and inrespect of allcosts, loss,damages andexpenses(including legalcosts andexpenses on a fullindemnity basis)which theManagers maysuffer or incur(either directly orindirectly) in thecourse of theperformance ofthis Agreement.(d) “Himalaya” It ishereby expresslyagreed that noemployee or agentof the Managers(including everysub-contractorfrom time to timeemployed by theManagers) shall inany circumstanceswhatsoever beunder any liabilitywhatsoever to theOwners for anyloss, damage ordelay ofwhatsoever kindarising or resultingdirectly orindirectly from anyact, neglect ordefault on his partwhile acting in thecourse of or inconnection withhis employmentand, withoutprejudice to thegenerality of theforegoingprovisions in thisClause 17(Responsibilities),every exemption,limitation,condition andliberty hereincontained andevery right,exemption fromliability, defenceand immunity ofwhatsoever natureapplicable to theManagers or towhich theManagers areentitled hereundershall also beavailable and shallextend to protectevery suchemployee or agentof the Managersacting asaforesaid and forthe purpose of allthe foregoingprovisions of thisClause 17(Responsibilities)the Managers areor shall bedeemed to beacting as agent ortrustee on behalfof and for thebenefit of allpersons who areor might be theirservants or agentsfrom time to time(including sub-contractors asaforesaid) and allsuch persons shallto this extent be orbe deemed to beparties to thisAgreement. 18.GeneralAdministration (a)The Managersshall keep theOwners and, ifappropriate, theCompanyinformed in atimely manner ofany incident ofwhich theManagers becomeaware which givesor may give rise todelay to theVessel or claimsor disputesinvolving thirdparties. (b) TheManagers shallhandle and settleall claims anddisputes arisingout of theManagementServiceshereunder, unlessthe Ownersinstruct theManagersotherwise. TheManagers shallkeep the Ownersappropriatelyinformed in atimely mannerthroughout thehandling of suchclaims anddisputes. (c) TheOwners mayrequest theManagers to bringor defend otheractions, suits orproceedingsrelated to theManagementServices, on termsto be agreed. (d)The Managersshall have powerto obtainappropriate legalor technical orother outsideexpert advice inrelation to thehandling andsettlement ofclaims in relationto Sub-clauses18(a) and 18(b)and disputes andany other mattersaffecting theinterests of theOwners in respectof the Vessel,unless the Ownersinstruct theManagersotherwise. (e) Ongiving reasonablenotice, theOwners mayrequest, and theManagers shall ina timely mannermake available, alldocumentation,information andrecords in respectof the matterscovered by thisAgreement eitherrelated tomandatory rulesor regulations orother obligationsapplying to theOwners in respectof the Vessel(including but notlimited to STCW95, the ISM Codeand ISPS Code)to the extentpermitted byrelevantlegislation. Ongiving reasonablenotice, theManagers mayrequest, and theOwners shall in atimely mannermake available, alldocumentation,information andrecordsreasonablyrequired by theManagers toenable them toperform theManagementServices. (f) TheOwners shallarrange for theprovision of anynecessaryguarantee bond orother security. (g)Any costs incurredby the Managersin carrying outtheir obligationsaccording to thisClause 18(GeneralAdministration)shall bereimbursed by theOwners. 19.Inspection ofVessel PART IIDocuSignEnvelope ID:849039D3-DB63-4B44-869C-67FAA2D5EC4A Copyright ©2009 BIMCO. Allrights reserved.Anyunauthorisedcopying,duplication,reproduction ordistribution ofthis BIMCOSmartCondocument willconstitute aninfringement ofBIMCO’scopyright.Explanatorynotes areavailable fromBIMCO atwww.bimco.org.First published1988, revised1998 and 2009.Approved by theInternationalShip Managers’Association(InterManager).The Ownersmay at any timeafter givingreasonablenotice to theManagersinspect theVessel for anyreason theyconsidernecessary. 20.Compliance withLaws andRegulations Theparties will notdo or permit tobe doneanything whichmight cause anybreach orinfringement ofthe laws andregulations ofthe Flag State,or of the placeswhere theVessel trades.21. Duration ofthe Agreement(a) ThisAgreement shallcome into effectat the datestated in Box 2and shallcontinue untilterminated byeither party bygiving notice tothe other; inwhich event thisAgreement shallterminate uponthe expiration ofthe later of thenumber ofmonths stated inBox 18 or aperiod of two (2)months from thedate on whichsuch notice isreceived, unlessterminatedearlier inaccordance withClause 22(Termination).(b) Where theVessel is not ata mutuallyconvenient portor place on theexpiry of suchperiod, thisAgreement shallterminate on thesubsequentarrival of theVessel at thenext mutuallyconvenient portor place. 22.Termination (a)Owners’ orManagers’default If eitherparty fails tomeet theirobligationsunder thisAgreement, theother party maygive notice tothe party indefault requiringthem to remedyit. In the eventthat the party indefault fails toremedy it withina reasonabletime to thereasonablesatisfaction ofthe other party,that party shallbe entitled toterminate thisAgreement withimmediate effectby giving noticeto the party indefault. (b)NotwithstandingSub-clause22(a): (i) TheManagers shallbe entitled toterminate theAgreement withimmediate effectby giving noticeto the Owners ifany moniespayable by theOwners and/orthe owners ofany associatedvessel, details ofwhich are listedin Annex “D”,shall not havebeen received inthe Managers’nominatedaccount withinten (10) days ofreceipt by theOwners of theManagers’written request,or if the Vesselis repossessedby theMortgagee(s).(ii) If the Ownersproceed with theemployment ofor continue toemploy theVessel in thecarriage ofcontraband,blockaderunning, or in anunlawful trade,or on a voyagewhich in thereasonableopinion of theManagers isundulyhazardous orimproper, theManagers maygive notice ofthe default to theOwners,requiring them toremedy it assoon aspracticallypossible. In theevent that theOwners fail toremedy it withina reasonabletime to thesatisfaction ofthe Managers,the Managersshall be entitledto terminate theAgreement withimmediate effectby notice. (iii) Ifeither party failsto meet theirrespectiveobligationsunder Sub-clause 5(b)(CrewInsurances) andClause 10(InsurancePolicies), theother party maygive notice tothe party indefault requiringthem to remedyit within ten (10)days, failingwhich the otherparty mayterminate thisAgreement withimmediate effectby giving noticeto the party indefault. (c)ExtraordinaryTermination ThisAgreement shallbe deemed to beterminated in thecase of the saleof the Vessel or,if the Vesselbecomes a totalloss or isdeclared as aconstructive orcompromised orarranged totalloss or isrequisitioned orhas beendeclared missingor, if bareboatchartered,unless otherwiseagreed, whenthe bareboatcharter comes toan end. (d) Forthe purpose ofSub-clause22(c) hereof: (i)the date uponwhich the Vesselis to be treatedas having beensold orotherwisedisposed of shallbe the date onwhich theVessel’s ownerscease to be theregisteredowners of theVessel; (ii) theVessel shall bedeemed to belost either whenit has becomean actual totalloss oragreement hasbeen reachedwith the Vessel’sunderwriters inrespect of itsconstructive totalloss or if suchagreement withthe Vessel’sunderwriters isnot reached it isadjudged by acompetenttribunal that aconstructive lossof the Vesselhas occurred;and (iii) the dateupon which theVessel is to betreated asdeclared missingshall be ten (10)days after theVessel was lastreported orwhen the Vesselis recorded asmissing by theVessel’sunderwriters,whicheveroccurs first. Amissing vesselshall be deemedlost inaccordance withthe provisions ofSub-clause22(d)(ii). (e) Inthe event theparties fail toagree the annualbudget inaccordance withSub-clause13(b), or toagree a changeof flag inaccordance withSub-clause 9(d)(ii), or to agreeto a reduction inthe ManagementFee inaccordance withSub-clause12(d), eitherparty mayterminate thisAgreement bygiving the otherparty not lessthan onemonth’s notice,the result ofwhich will be theexpiry of theAgreement atthe end of thecurrent budgetperiod or onexpiry of thenotice period,whichever is thelater. (f) ThisAgreement shallterminateforthwith in theevent of anorder beingmade orresolutionpassed for thewinding up,dissolution,liquidation orbankruptcy ofeither party(otherwise thanfor the purposeof reconstructionoramalgamation)or if a receiver orPART IIDocuSignEnvelope ID:849039D3-DB63-4B44-869C-67FAA2D5EC4A Copyright ©2009 BIMCO. Allrights reserved.Anyunauthorisedcopying,duplication,reproduction ordistribution ofthis BIMCOSmartCondocument willconstitute aninfringement ofBIMCO’scopyright.Explanatorynotes areavailable fromBIMCO atwww.bimco.org.First published1988, revised1998 and 2009.Approved by theInternationalShip Managers’Association(InterManager).administrator isappointed, or if itsuspendspayment,ceases to carryon business ormakes anyspecialarrangement orcomposition withits creditors. (g)In the event ofthe terminationof thisAgreement forany reason otherthan default bythe Managersthe managementfee payable tothe Managersaccording to theprovisions ofClause 12(ManagementFee andExpenses) shallcontinue to bepayable for afurther period ofthe number ofmonths stated inBox 19 as fromthe effectivedate oftermination. IfBox 19 is leftblank thenninety (90) daysshall apply. (h) Inaddition, wherethe Managersprovide Crew forthe Vessel inaccordance withClause 5(a)(CrewManagement):(i) the Ownersshall continue topay CrewSupport Costsduring the saidfurther period ofthe number ofmonths stated inBox 19; and (ii)the Owners shallpay an equitableproportion of anySeveranceCosts whichmay be incurred,not exceedingthe amountstated in Box 20.The Managersshall use theirreasonableendeavours tominimise suchSeveranceCosts. (i) On thetermination, forwhateverreason, of thisAgreement, theManagers shallrelease to theOwners, if sorequested, theoriginals wherepossible, orotherwisecertified copies,of all accountsand alldocumentsspecificallyrelating to theVessel and itsoperation. 23.BIMCO DisputeResolutionClause (a)* ThisAgreement shallbe governed byand construed inaccordance withEnglish law andany disputearising out of orin connectionwith thisAgreement shallbe referred toarbitration inLondon inaccordance withthe ArbitrationAct 1996 or anystatutorymodification orre-enactmentthereof save tothe extentnecessary togive effect to theprovisions of thisClause. Thearbitration shallbe conducted inaccordance withthe LondonMaritimeArbitratorsAssociation(LMAA) Termscurrent at thetime when thearbitrationproceedings arecommenced.The referenceshall be to threearbitrators. Aparty wishing torefer a dispute toarbitration shallappoint itsarbitrator andsend notice ofsuchappointment inwriting to theother partyrequiring theother party toappoint its ownarbitrator within14 calendardays of thatnotice andstating that it willappoint itsarbitrator as solearbitrator unlessthe other partyappoints its ownarbitrator andgives notice thatit has done sowithin the 14days specified. Ifthe other partydoes not appointits own arbitratorand give noticethat it has doneso within the 14days specified,the partyreferring adispute toarbitration may,without therequirement ofany further priornotice to theother party,appoint itsarbitrator as solearbitrator andshall advise theother partyaccordingly. Theaward of a solearbitrator shallbe binding onboth parties as ifhe had beenappointed byagreement.Nothing hereinshall prevent theparties agreeingin writing to varythese provisionsto provide for theappointment of asole arbitrator. Incases whereneither the claimnor anycounterclaimexceeds thesum ofUSD50,000 (orsuch other sumas the partiesmay agree) thearbitration shallbe conducted inaccordance withthe LMAA SmallClaimsProcedurecurrent at thetime when thearbitrationproceedings arecommenced.(b)* ThisAgreement shallbe governed byand construed inaccordance withTitle 9 of theUnited StatesCode and theMaritime Law ofthe UnitedStates and anydispute arisingout of or inconnection withthis Agreementshall be referredto three personsat New York,one to beappointed byeach of theparties hereto,and the third bythe two sochosen; theirdecision or thatof any two ofthem shall befinal, and for thepurposes ofenforcing anyaward, judgmentmay be enteredon an award byany court ofcompetentjurisdiction. Theproceedingsshall beconducted inaccordance withthe rules of theSociety ofMaritimeArbitrators, Inc.In cases whereneither the claimnor anycounterclaimexceeds thesum ofUSD50,000 (orsuch other sumas the partiesmay agree) thearbitration shallbe conducted inaccordance withthe ShortenedArbitrationProcedure of theSociety ofMaritimeArbitrators, Inc.current at thetime when thearbitrationproceedings arecommenced.(ac)* ThisAgreement shallbe governed byand construed inaccordance withthe laws of theplace mutuallyagreed by theparties in Box 21and any disputearising out of orin connectionwith thisAgreement shallbe referred toarbitration inCopenhagen,Denmarkat amutually agreedplace, subject tothe proceduresapplicable there.(bd)NotwithstandingSub-clauses23(a), 23(b) or23(c) above, theparties mayagree at anytime to refer tomediation anydifference and/ordispute arisingout of or inconnection withthis Agreement.(i) In the case ofa dispute inrespect of whicharbitration hasbeencommencedunder Sub-clauses 23(a),23(b) or 23(c)above, thefollowing shallapply: (ii) Eitherparty may at anytime and fromtime to timeelect to refer thedispute or part ofthe dispute tomediation byservice on theother party of awritten notice(the “MediationNotice”) callingon the otherparty to agree tomediation. (iii)The other partyshall thereuponwithin 14calendar days ofreceipt of theMediation Noticeconfirm that theyagree tomediation, inwhich case theparties shallthereafter agreea mediatorwithin a further14 calendardays, failingwhich on theapplication ofeither party amediator will beappointedpromptly by theArbitrationTribunal (“theTribunal”) orsuch person asthe Tribunal maydesignate forthat purpose.The mediationshall beconducted insuch place andin accordancewith suchprocedure andon such termsas the partiesmay agree or, inthe event ofdisagreement,as may be setby the mediator.PART IIDocuSignEnvelope ID:849039D3-DB63-4B44-869C-67FAA2D5EC4A Copyright ©2009 BIMCO. Allrights reserved.Anyunauthorisedcopying,duplication,reproduction ordistribution ofthis BIMCOSmartCondocument willconstitute aninfringement ofBIMCO’scopyright.Explanatorynotes areavailable fromBIMCO atwww.bimco.org.First published1988, revised1998 and 2009.Approved by theInternationalShip Managers’Association(InterManager).(iv) If the otherparty does notagree tomediate, thatfact may bebrought to theattention of theTribunal andmay be takeninto account bythe Tribunalwhen allocatingthe costs of thearbitration asbetween theparties. (v) Themediation shallnot affect theright of eitherparty to seeksuch relief ortake such stepsas it considersnecessary toprotect itsinterest. (vi)Either party mayadvise theTribunal thatthey haveagreed tomediation. Thearbitrationprocedure shallcontinue duringthe conduct ofthe mediationbut the Tribunalmay take themediationtimetable intoaccount whensetting thetimetable forsteps in thearbitration. (vii)Unlessotherwiseagreed orspecified in themediation terms,each party shallbear its owncosts incurred inthe mediationand the partiesshall shareequally themediator’s costsand expenses.(viii) Themediationprocess shall bewithout prejudiceand confidentialand noinformation ordocumentsdisclosed duringit shall berevealed to theTribunal exceptto the extent thatthey aredisclosableunder the lawand proceduregoverning thearbitration.(Note: Theparties shouldbe aware thatthe mediationprocess may notnecessarilyinterrupt timelimits.) (ce) IfBox 21 in Part Iis notappropriatelyfilled in, Sub-clause 23(a) ofthis Clause shallapply. *Note:Sub-clauses23(a), 23(b) and23(c) arealternatives;indicatealternativeagreed in Box21. Sub-clause23(d) shall applyin all cases. 24.Notices (a) Allnotices given byeither party ortheir agents tothe other partyor their agents inaccordance withthe provisions ofthis Agreementshall be inwriting and shall,unlessspecificallyprovided in thisAgreement tothe contrary, besent to theaddress for thatother party asset out in Boxes22 and 23 or asappropriate or tosuch otheraddress as theother party maydesignate inwriting. A noticemay be sent byregistered orrecorded mail,facsimile,electronically ordelivered byhand inaccordance withthis Sub-clause24(a). (b) Anynotice givenunder thisAgreement shalltake effect onreceipt by theother party andshall be deemedto have beenreceived: (i) ifposted, on theseventh (7th)day afterposting; (ii) ifsent by facsimileor electronically,on the day oftransmission;and (iii) ifdelivered byhand, on the dayof delivery. Andin each caseproof of posting,handing in ortransmissionshall be proofthat notice hasbeen given,unless proven tothe contrary. 25.EntireAgreement ThisAgreementconstitutes theentireagreementbetween theparties and nopromise,undertaking,representation,warranty orstatement byeither party priorto the datestated in Box 2shall affect thisAgreement. Anymodification ofthis Agreementshall not be ofany effect unlessin writing signedby or on behalfof the parties.26. Third PartyRights Except tothe extentprovided in Sub-clauses 17(c)(Indemnity) and17(d)(Himalaya), nothird parties mayenforce any termof thisAgreement. 27.Partial Validity Ifany provision ofthis Agreementis or becomes oris held by anyarbitrator orother competentbody to beillegal, invalid orunenforceable inany respectunder any law orjurisdiction, theprovision shallbe deemed to beamended to theextentnecessary toavoid suchillegality,invalidity orunenforceability,or, if suchamendment isnot possible, theprovision shallbe deemed to bedeleted from thisAgreement tothe extent ofsuch illegality,invalidity orunenforceability,and theremainingprovisions shallcontinue in fullforce and effectand shall not inany way beaffected orimpairedthereby. 28.Interpretation Inthis Agreement:(a)Singular/PluralThe singularincludes theplural and viceversa as thecontext admitsor requires. (b)Headings Theindex andheadings to theclauses andappendices tothis Agreementare forconvenienceonly and shallnot affect itsconstruction orinterpretation.PART IIDocuSignEnvelope ID:849039D3-DB63-4B44-869C-67FAA2D5EC4A Copyright ©2009 BIMCO. Allrights reserved.Anyunauthorisedcopying,duplication,reproduction ordistribution ofthis BIMCOSmartCondocument willconstitute aninfringement ofBIMCO’scopyright.Explanatorynotes areavailable fromBIMCO atwww.bimco.org.First published1988, revised1998 and 2009.Approved by theInternationalShip Managers’Association(InterManager).(c) Day “Day”means acalendar dayunless expresslystated to thecontrary. PART IIDocuSignEnvelope ID:849039D3-DB63-4B44-869C-67FAA2D5EC4A Copyright © 2009BIMCO. All rightsreserved. Anyunauthorised copying,duplication,reproduction ordistribution of thisBIMCO SmartCondocument willconstitute aninfringement ofBIMCO’s copyright.Explanatory notes areavailable from BIMCOat www.bimco.org.First published 1988,revised 1998 and2009. Approved bythe International ShipManagers’Association(InterManager).ANNEX “A” (DETAILSOF VESSEL ORVESSELS) TO THEBIMCO STANDARDSHIP MANAGEMENTAGREEMENTCODENAME: SHIPMAN2009 Date ofAgreement: 8December 2023Name of Vessel(s):Dan Cisne Particularsof Vessel(s): Type:Double Hull ShuttleTanker Year of built:2011 Flag: DIS Class:DNV DWT: 59,000Cargo gear: 3x1500m3/hvertical singlestage centrifugalpump elec. drivenMain engine type: 2-stroke low speeddiesel, MAN B&W6S50MC-7 ANNEX“A” DocuSignEnvelope ID:849039D3-DB63-4B44-869C-67FAA2D5EC4A Copyright © 2009BIMCO. All rightsreserved. Anyunauthorised copying,duplication,reproduction ordistribution of thisBIMCO SmartCondocument willconstitute aninfringement ofBIMCO’s copyright.Explanatory notes areavailable from BIMCOat www.bimco.org. Firstpublished 1988,revised 1998 and 2009.Approved by theInternational ShipManagers’ Association(InterManager).ANNEX “B” (DETAILSOF CREW) TO THEBIMCO STANDARDSHIP MANAGEMENTAGREEMENTCODENAME: SHIPMAN 2009Date of Agreement: 8December 2023 Detailsof Crew: Dan CisneNumbers RankNationality 1 Master 1Ch.off/Ovstm 1Ch.off.jr/Ovstm.jr 12.off/1.stm 1 3.off/2.stm1 Deck Cadet 1Ch.eng/Mask.sj 12.eng/1.mask. 13.eng/2.mask 1Jun.Engineer (w/o cert)1 Electr/Elektriker 1Bosun/Arb.leder 2AB/Matros 2OS/Lettmatros 2Motorman/Motormann1 Fitter/Reparatør 1Wiper/Smører 1Ch.stwrd/Forpl.sj 2Messman/Messegutt23 Grandtotal ANNEX"B" DocuSign EnvelopeID: 849039D3-DB63-4B44-869C-67FAA2D5EC4A Thetext in the table belowis valid even though thetext is striketrough Copyright © 2009BIMCO. All rightsreserved. Anyunauthorised copying,duplication,reproduction ordistribution of thisBIMCO SmartCondocument willconstitute aninfringement ofBIMCO’s copyright.Explanatory notes areavailable from BIMCOat www.bimco.org.First published 1988,revised 1998 and2009. Approved bythe International ShipManagers’Association(InterManager).ANNEX “C”(BUDGET) TO THEBIMCO STANDARDSHIP MANAGEMENTAGREEMENTCODENAME: SHIPMAN2009 Date ofAgreement:Managers´ initialbudget with effectfrom thecommencement dateof this Agreement(see Box 2): TotalOPEX Budget 2024:Tech Total USD 1 436352 ManagementUSD 996 419 CrewTotal USD 2 436 992TOTAL USD 4 869863 Day Figure USD13 342Docking/mobilizationUSD 1 295 000Upgrading USD 38000 ANNEX "C"DocuSign EnvelopeID: 849039D3-DB63-4B44-869C-67FAA2D5EC4A Copyright © 2009BIMCO. All rightsreserved. Anyunauthorised copying,duplication,reproduction ordistribution of thisBIMCO SmartCondocument willconstitute aninfringement ofBIMCO’s copyright.Explanatory notes areavailable from BIMCOat www.bimco.org.First published 1988,revised 1998 and2009. Approved bythe International ShipManagers’Association(InterManager).ANNEX “D”(ASSOCIATEDVESSELS)* TO THEBIMCO STANDARDSHIP MANAGEMENTAGREEMENTCODENAME: SHIPMAN2009 *NOTE:PARTIES SHOULDBE AWARE THAT BYCOMPLETING THISANNEX “D” THEYWILL BE SUBJECTTO THEPROVISIONS OFSUB-CLAUSE 22(b)(i) OF THISAGREEMENT Dateof Agreement: Detailsof AssociatedVessels: ANNEX "D"DocuSign EnvelopeID: 849039D3-DB63-4B44-869C-67FAA2D5EC4A Copyright © 2009BIMCO. All rightsreserved. Anyunauthorised copying,duplication,reproduction ordistribution of thisBIMCO SmartCondocument willconstitute aninfringement ofBIMCO’s copyright.Explanatory notes areavailable from BIMCOat www.bimco.org.First published 1988,revised 1998 and2009. Approved bythe International ShipManagers’Association(InterManager).ANNEX “E” (FEESCHEDULE) TO THEBIMCO STANDARDSHIP MANAGEMENTAGREEMENTCODENAME: SHIPMAN2009 ANNEX "E"DocuSign EnvelopeID: 849039D3-DB63-4B44-869C-67FAA2D5EC4A Total OPEX:DocuSignEnvelope ID:849039D3-DB63-4B44-869C-67FAA2D5EC4A Exhibit 8.1SUBSIDIARIES OF KNOT OFFSHORE PARTNERS LPSubsidiaryJurisdiction of FormationKNOT Offshore Partners UK LLCMarshall IslandsKNOT Shuttle Tankers ASNorwayKNOT Shuttle Tankers 17 ASNorwayKNOT Shuttle Tankers 18 ASNorwayKNOT Shuttle Tankers 20 ASNorwayKNOT Shuttle Tankers 21 ASNorwayKNOT Shuttle Tankers 24 ASNorwayKNOT Shuttle Tankers 25 ASNorwayKNOT Shuttle Tankers 26 ASNorwayKNOT Shuttle Tankers 30 ASNorwayKNOT Shuttle Tankers 32 ASNorwayKNOT Shuttle Tankers 34 ASNorwayKNOT Shuttle Tankers 35 ASNorwayKnutsen NYK Shuttle Tankers 16 ASNorwayKnutsen Shuttle Tankers 13 ASNorwayKnutsen Shuttle Tankers 14 ASNorwayKnutsen Shuttle Tankers 15 ASNorwayKnutsen Shuttle Tankers 19 ASNorwayKnutsen Shuttle Tankers XII ASNorway Exhibit 12.1CERTIFICATION PURSUANT TO RULE 13A-14(A) OR RULE 15D-14(A)OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDEDI, Derek Lowe, certify that:1.I have reviewed this annual report on Form 20-F of KNOT Offshore Partners LP (the “registrant”);2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessaryto make the statements made, in light of the circumstances under which such statements were made, not misleading with respect tothe period covered by this report;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all materialrespects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in thisreport;4.I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e)and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for theregistrant and have:(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed undermy supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is madeknown to me by others within those entities, particularly during the period in which this report is being prepared;(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to bedesigned under my supervision, to provide reasonable assurance regarding the reliability of financial reporting and thepreparation of financial statements for external purposes in accordance with generally accepted accounting principles;(c)Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report my conclusionsabout the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based onsuch evaluation; and(d)Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the periodcovered by the annual report that has materially affected, or is reasonably likely to materially affect, the registrant's internalcontrol over financial reporting; and5.I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the registrant's auditors and theaudit committee of the registrant's board of directors (or persons performing the equivalent functions):(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reportingwhich are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financialinformation; and(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in theregistrant's internal control over financial reporting.Date: April 11, 2024KNOT OFFSHORE PARTNERS LPBy:/s/ Derek LoweName:Derek LoweTitle:Principal Executive Officer and Principal Financial Officer Exhibit 13.1CERTIFICATION PURSUANT TO 18 U.S.C. 1350Pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. 1350), as adopted pursuant to Section906 of the Sarbanes-Oxley Act of 2002, the undersigned officer of KNOT Offshore Partners LP, a Marshall Islands limited partnership(the “Partnership”), certifies, to such officer's knowledge, that:The annual report on Form 20-F for the year ended December 31, 2023 of the Partnership (the “Report”) fully complies withthe requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and the information contained in the Report fairlypresents, in all material respects, the financial condition and results of operations of the Partnership.Date: April 11, 2024KNOT OFFSHORE PARTNERS LPBy:/s/ Derek LoweName:Derek LoweTitle:Principal Executive Officer and Principal Financial Officer Exhibit 15.1Consent of Independent Registered Public Accounting FirmWe consent to the incorporation by reference in the Registration Statements (Form F-3 No. 333-274460 and Form F-3 No. 333-227942) ofKNOT Offshore Partners LP and in the related Prospectuses of our reports dated April 11, 2024, with respect to the consolidated financialstatements of KNOT Offshore Partners LP, and the effectiveness of internal control over financial reporting of KNOT Offshore Partners LP,included in this Annual Report (Form 20-F) for the year ended December 31, 2023./s/ Ernst & Young ASOslo, NorwayApril 11, 2024 1Exhibit 97.1KNOT OFFSHORE PARTNERS LPPOLICY FOR THE RECOVERY OF ERRONEOUSLY AWARDEDCOMPENSATION1. Purpose. The purpose of this Policy is to describe circumstances in which the Company will recoverErroneously Awarded Compensation and the process for such recovery. This Policy is intended to comply with (a)Section 954 of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, as codified in Section 10Dof the Exchange Act, and implemented by Rule 10D-1 thereunder adopted by the Commission and (b) Section303A.14 of the Listed Company Manual of the NYSE.2. Administration. This Policy shall be administered by the Board or, if so designated by the Board, a majority ofthe independent directors of the Board, in which case, references herein to the Board shall refer to such independentdirectors. Any determinations made by the Board shall be final and binding on all affected individuals.3. Definitions. For purposes of this Policy, the following capitalized terms shall have the meanings set forth below.a. “Audit Committee” means the Audit Committee of the Board.b. “Board” means the Board of Directors of the Company.c. “Commission” means the Securities and Exchange Commission.d. “Company” means KNOT Offshore Partners LP.e. “Compensation Eligible for Recovery” means Incentive-based Compensation received by an individual:i.after beginning service as an Executive Officer,ii.who served as an Executive Officer at any time during the performance period for the applicableIncentive-based Compensation (regardless of whether such individual is serving as an ExecutiveOfficer at the time the Erroneously Awarded Compensation is required to be repaid to theCompany),iii.while the Company had a class of securities listed on a national securities exchange or a nationalsecurities association,iv.during the applicable Recovery Period, andv.on or after the Effective Date.f. “Effective Date” means October 2, 2023. 2g. “Erroneously Awarded Compensation” means the Compensation Eligible for Recovery less the amountof such compensation as it would have been determined based on the restated amounts, computed withoutregard to any taxes paid.h. “Exchange Act” means the Securities Exchange Act of 1934, as amended.i. “Executive Officer” means the Company’s executive officers, as determined by the Board in accordancewith Section 10D of the Exchange Act and the applicable rules of the NYSE, who, for the avoidance of doubtwould include, at a minimum, executive officers identified pursuant to 17 C.F.R. 229.401(b), and such othersenior executives and officers who may from time to time be deemed subject to the Policy by the Board.j. “Financial Reporting Measure” means measures that are determined and presented in accordance withthe accounting principles used in preparing the Company’s financial statements, and any measures that arederived wholly or in part from such measures. Unit price and total unitholder return are considered FinancialReporting Measures. For the avoidance of doubt, a Financial Reporting Measure need not be presented withinthe financial statements or included in a filing with the Commission.k. “Incentive-based Compensation” means any compensation that is granted, earned, or vested basedwholly or in part upon the attainment of a Financial Reporting Measure.l. “NYSE” means the New York Stock Exchange LLC.m. “Policy” means this Policy for the Recovery of Erroneously Awarded Compensation, as the same maybe amended or amended and restated from time to time.n. “Recovery Period” means the three completed fiscal years immediately preceding the Restatement Dateand any transition period (that results from a change in the Company’s fiscal year) of less than nine monthswithin or immediately following those three completed fiscal years.o. “Restatement” means an accounting restatement:i.due to material noncompliance of the Company with any financial reporting requirement under thesecurities laws, including any required accounting restatement to correct an error in previouslyissued financial statements that is material to the previously issued financial statements, orii.that would result in a material misstatement if the error were corrected in the current period or leftuncorrected in the current period. 3p. “Restatement Date” means the earlier of:i.the date the Audit Committee concludes, or reasonably should have concluded, that the Company isrequired to prepare a Restatement, orii.the date a court, regulator, or other legally authorized body directs the Company to prepare aRestatement.4. Recovery of Erroneously Awarded Compensation.a. The Chief Financial Officer or Chief Accounting Officer of the Company shall promptly report to theAudit Committee any instance in which the Company is required to prepare a Restatement.b. Upon learning of a required Restatement, the Audit Committee shall determine the Restatement Dateand shall promptly report to the Board such determination.c. The Chief Financial Officer or Chief Accounting Officer (or another appropriate officer or third partydesignated by the Board) shall promptly (but in any event within 90 days following the Restatement) calculatethe Erroneously Awarded Compensation for each affected individual, which calculation shall be subject toBoard approval. For purposes of calculating Erroneously Awarded Compensation:i.Incentive-based Compensation shall be deemed received in the Company’s fiscal period duringwhich the Financial Reporting Measure specified in the Incentive-based Compensation award isattained, even if the payment or grant of the Incentive-based Compensation occurs after the end ofthat period.ii.Incentive-based Compensation based on (or derived from) unit price or total unitholder return,where the amount of Erroneously Awarded Compensation is not subject to mathematicalrecalculation directly from the information in a Restatement, shall be based on a reasonableestimate of the effect of the Restatement on the unit price or total unitholder return upon which theIncentive-based Compensation was received. The Company shall maintain documentation of thedetermination of such reasonable estimate and provide such documentation to the NYSE.d. Promptly following the Board’s approval of the Erroneously Awarded Compensation calculated by theChief Financial Officer or Chief Accounting Officer (or another appropriate officer or third party designated bythe Board), the Company shall notify in writing each individual who received Erroneously AwardedCompensation of the amount of Erroneously Awarded Compensation 4received by such individual and shall demand payment or return, as applicable, of such Erroneously AwardCompensation.e. The Company shall demand recovery and recover Erroneously Awarded Compensation in compliancewith this Policy except to the extent that the Board determines that (I) recovery of the Erroneously AwardedCompensation would be duplicative of compensation recovered by the Company from the individual pursuantto Section 304 of the Sarbanes-Oxley Act or pursuant to other recovery obligations (in which case, the amountof Erroneously Awarded Compensation shall be appropriately reduced to avoid such duplication), or (II)recovery would be impracticable, and one of the following conditions applies:i.the direct expense paid to a third party to assist in enforcing this Policy would exceed the amount tobe recovered. Before concluding that it would be impracticable to recover any amount ofErroneously Awarded Compensation based on expense of enforcement, the Company must make areasonable attempt to recover such Erroneously Awarded Compensation, document such reasonableattempt(s) to recover, and provide that documentation to the NYSE.ii.recovery would violate home country law where that law was adopted prior to November 28, 2022.Before concluding that it would be impracticable to recover any amount of Erroneously AwardedCompensation based on violation of home country law, the Company must obtain an opinion ofhome country counsel, acceptable to the NYSE, that recovery would result in such a violation, andmust provide such opinion to the NYSE; oriii.recovery would likely cause an otherwise tax-qualified retirement plan, under which benefits arebroadly available to employees of the Company, to fail to meet the requirements of 26 U.S.C.401(a)(13) or 26 U.S.C. 411(a) and regulations thereunder.f. Except as provided in Section 4(e), in no event may the Company accept repayment from the affectedindividual of less than the full amount of the Erroneously Awarded Compensation received by such individual.g. The Board shall determine, in its sole discretion, the method of recovering any Erroneously AwardedCompensation pursuant to this Policy, taking into account all facts and circumstances (including the time valueof money and the cost to unitholders of delayed recovery), so long as such method complies with the terms ofSection 303A.14 of the NYSE Listing Standards. If the Board determines that an appropriate method ofrecovery is one other than the prompt repayment by the affected individual in cash or property, the Companymay offer to enter into a 5repayment agreement with the affected individual (in a form and with terms reasonably acceptable to theBoard).h. If the affected individual fails to repay to the Company when due the full amount of the ErroneouslyAwarded Compensation received by such affected individual, the Company shall take all actions reasonableand appropriate to recover the full amount of the Erroneously Awarded Compensation from the affectedindividual.5. Disclosure. The Company shall file all disclosures with respect to this Policy in accordance with therequirements of the securities laws, including the disclosure required by the applicable Commission filings.6. No Indemnification. The Company shall not indemnify any current or former Executive Officer against the lossof Erroneously Awarded Compensation, and shall not pay, or reimburse any current or former Executive Officers forpremiums for any insurance policy to fund such Executive Officer’s potential recovery obligations.7. Effective Date. This Policy shall be effective as of the Effective Date.8. Amendment and Interpretation. The Board may amend this Policy from time to time in its discretion and shallamend this Policy as it deems necessary or advisable to reflect the regulations adopted by the Commission and tocomply with any rules or standards adopted by the NYSE. The Board may at any time in its sole discretion,supplement, amend or terminate any provision of this Policy in any respect as the Board determines to be necessary orappropriate. The Board shall interpret and construe this Policy and make all determinations necessary or advisable forthe administration of this Policy. It is intended that this Policy be interpreted in a manner that is consistent with therequirements of Section 10D of the Exchange Act and Rule 10D-1 thereunder and Section 303A.14 of the NYSEListed Company Manual and any other applicable rules adopted by the Commission.9. Other Recoupment Rights. The Board intends that this Policy will be applied to the fullest extent of the law. TheBoard may require that any employment agreement, equity award agreement or similar agreement entered into on orafter the Effective Date shall, as a condition to the grant of any benefit thereunder, require the party thereto to agree toabide by the terms of this Policy or implement arrangements designed to facilitate the administration hereof. Althoughnot a prerequisite to enforcement of this Policy, each Executive Officer shall be required to sign and return to theCompany the Acknowledgment Form attached hereto as Exhibit A pursuant to which such Executive Officer willagree to be bound by the terms and comply with this Policy. Any right of recovery under this Policy is in addition to,and not in lieu of, any other remedies or rights of recovery that may be available to the Company pursuant to the termsof any employment agreement, equity award agreement, or similar agreement and any other legal remedies availableto the Company. 610. Successors. This Policy shall be binding and enforceable against all current and former Executive Officers andtheir beneficiaries, heirs, executors, administrators or other legal representatives. 7EXHIBIT AKNOT OFFSHORE PARTNERS LPPOLICY FOR THE RECOVERY OF ERRONEOUSLY AWARDEDCOMPENSATIONACKNOWLEDGEMENT FORMBy signing below, the undersigned acknowledges and confirms the undersigned has received and reviewed a copy ofthe KNOT Offshore Partners LP Policy for the Recovery of Erroneously Awarded Compensation (the “Policy”).Capitalized terms used but not otherwise defined in this Acknowledgement Form shall have the meanings ascribed tosuch terms in the Policy.By signing this Acknowledgement Form, the undersigned acknowledges and agrees that the undersigned is and willcontinue to be subject to the Policy and that the Policy will apply both during and after the undersigned’s employmentwith the Company. Further, by signing below, the undersigned agrees to abide by the terms of the Policy, including,without limitation, by returning any Erroneously Awarded Compensation (as defined in the Policy) to the Company tothe extent required by, and in a manner permitted by, the Policy. For the avoidance of doubt, any recovery affectedunder the Policy shall not constitute grounds to terminate the undersigned’s employment for “Good Reason” (or anyterm of similar meaning) under any employment or compensation arrangements, agreements, plans or programs.SignedName (Printed)Date
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