UPDATE: Bank of America Initiates Coverage on KNOT Offshore Partners LP with Buy Rating, $27 PT on Shuttle Tanker Growth, Drop-Down Potential

In a report published Monday, Bank of America analyst Gabe Moreen initiated coverage on KNOT Offshore Partners LP KNOP with a Buy rating and $27.00 price target. In the report, Moreen noted, “KNOP primarily engages in crude oil transportation by providing shuttle tanker services for production fields in offshore Brazil and the North Sea. Cash flow streams are supported by long-term, fee-based contracts. We believe the market underestimates shuttle tanker growth and drop-down potential from KNOP's general partner (GP), Knutsen NYK Offshore Tankers AS (KNOT). Crude oil price levels remain favorable, and KNOP should continue to see strong tender activity driven by offshore field developments in its core markets. In our view, KNOP's attractive fleet portfolio and strong market position in Brazil and the North Sea will allow management to be competitive when tendering for new shuttle tanker projects. Also, a large component of its growth strategy is to expand the existing fleet through drop-downs from its GP. KNOT has identified five shuttle tanker newbuilds to be dropped down to KNOP over the next two years.” KNOT Offshore Partners LP closed on Friday at $22.85.