Why KNOT Offshore Partners (KNOP) Is Surging in 2025: A Deep Dive

KNOT Offshore Partners (NYSE:KNOP) has been one of the standout performers in the energy sector this year, with its stock soaring 19.81% year-to-date (YTD) through April 25, 2025—far outpacing the S&P 500’s 6.06% gain. This surge has propelled KNOP to 12th place among the top-performing energy stocks in 2025, driven by a combination of strategic advantages, operational stability, and investor anticipation of upcoming catalysts. Let’s unpack the reasons behind its meteoric rise.

The Performance Story: Outpacing the Market

KNOP’s recent performance is remarkable, especially considering its long-term charters and niche focus on shuttle tankers. Over the past year, the stock has gained 30.71%, compared to the S&P 500’s 9.44%, and has nearly doubled its three-year return to 57.11% versus the index’s 28.61% (see chart below). While its five-year performance lags behind the S&P’s 94.77% gain, the 2025 rally signals renewed investor confidence.

Key Drivers of KNOP’s Surge

1. Anticipation of Q1 Earnings and Distribution

KNOP’s first-quarter 2025 earnings are scheduled for May 21, with a conference call to follow. Investors are betting on positive results, as the company’s April 9 announcement of a $0.026 per-unit quarterly distribution—payable on May 8—already signaled financial health. This distribution aligns with KNOP’s focus on sustainable, long-term payouts, a key attractor for income-seeking investors.

The upcoming earnings report will likely highlight operational metrics such as fleet utilization and revenue from its 16 shuttle tankers, which transport crude oil in Brazil and the North Sea. These regions are critical to global energy supply chains, and KNOP’s long-term contracts there provide a stable revenue base, shielding it from short-term price swings.

2. Defensive Operational Model

KNOP’s business model is inherently resilient. Its fleet operates under long-term charters with major oil producers, insulating it from commodity price volatility. This is a major advantage in 2025, as energy markets face headwinds like declining Brent crude prices and recession fears. Midstream companies like KNOP, which earn fees for transportation services, thrive in such environments.

3. Tax Structure Simplification

As a master limited partnership (MLP) classified as a corporation for tax purposes, KNOP issues Form 1099 to unitholders instead of the more complex Form K-1. This simplifies tax reporting, making it more appealing to individual investors who might otherwise avoid MLPs due to their administrative burden.

4. Institutional Investor Interest

Hedge funds are taking notice: 7 funds held KNOP units as of Q4 2024, a sign of institutional confidence. The article notes that stocks with high hedge fund ownership often outperform, citing a strategy that achieved 373.4% returns since 2014 by mimicking top picks.

Risks and Considerations

While KNOP’s performance is strong, risks remain. The company’s five-year underperformance compared to the S&P 500 raises questions about its long-term scalability. Additionally, its narrow focus on shuttle tankers leaves it exposed to geopolitical risks in key regions like Brazil and the North Sea.

The upcoming May 21 earnings report will be critical. Analysts currently estimate Q1 EPS of $0.14, but any deviation from expectations—especially regarding fleet utilization or contract renewals—could send the stock soaring or plummeting.

Conclusion: A Stock to Watch Closely

KNOP’s YTD gains are no fluke. Its defensive operational model, stable distribution policy, and institutional backing position it as a standout in a volatile energy sector. With the May 21 earnings call around the corner, investors have a clear catalyst to watch.

However, success hinges on execution: Can KNOP maintain its charter contracts? Will its tax advantages and simplified reporting continue to attract investors? If the company delivers strong results and reaffirms its long-term strategy, its 2025 surge could be just the beginning.

In a market where energy stocks face headwinds, KNOP’s niche positioning and resilience make it a compelling play for investors willing to bet on stable, fee-based income in a turbulent sector. The coming weeks will test whether this momentum can translate into sustained outperformance.