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Odebrecht Oil & Gas I L L U S T R AT I V E C O U N T E R P R O P O S AL F R O M B O N D H O L D E R S
M A R C H 2 4 , 2 0 1 6 | P R I V I L E G E D & C O N F I D E N T I A L | D R A F T | S U B J E C T T O F R E 4 0 8 | F O R S E T T L E M E N T D I S C U S S I O N P U R P O S E S O N L Y | P R E P A R E D A T T H E R E Q U E S T O F C O U N S E L P R E S E N T A T I O N O R I G I N A L L Y M A D E O N T H E D A T E I N D I C A T E D A N D H A S N O T B E E N U P D A T E D T O R E F L E C T R E C E N T D E V E L O P M E N T S O R O N G O I N G D I S C U S S I O N S . M O R E O V E R , I N L I G H T O F O N G O I N G N E G O T I A T I O N S W I T H P E T R O B R A S T H A T I N V O L V E T H E C H A R T E R A N D S E R V I C E S A G R E E M E N T S S U P P O R T I N G T H E S E B O N D S , T H E C O N T E N T O F T H I S P R E S E N T A T I O N I S N O L O N G E R R E L E V A N T .
PRIVILEGED & CONFIDENTIAL | DRAFT | SUBJECT TO FRE 408 | FOR SETTLEMENT DISCUSSION PURPOSES ONLY | PREPARED AT THE REQUEST OF COUNSEL
Summary Illustrative Counterproposal from Bondholders
2
2021 Notes 2022 Notes
Transaction Structure
Exchange of both classes of notes for new notes with amended terms (as described below) All revenues (charter + services) to flow through the respective project structures Modify but do not collapse current structures, and enhance collateral package as described below Eliminate exchange rate caps and modify OpEx caps to allow structures to fund all expenses (i.e., OpEx +
CapEx) up to levels TBD based on the Company’s business plan and industry standards(1)
Minimum participation level: [95]%, depending on implementation structure(2)
Assumed Transaction Effective Date [April 1, 2016]
Principal Starting balance of: $1,178mm(3) (no discount) Starting balance of: $2,010mm(3) (no discount)
Amortization
Fixed $25mm per annum, paid quarterly, beginning as
of the closing date 2016: None 2017: $5mm per annum, paid quarterly 2018 until maturity: $15mm per annum, paid
quarterly
Excess Cash Flow Sweep
86% of excess cash flow after interest and fixed amortization applied to variable amortization
14% of excess cash flow after interest and fixed amortization provided to Odebrecht Oil & Gas (“ParentCo”) to allow it to remain a viable entity (the “ParentCo ECF Sweep”) in exchange for a new Relief Revolving Note
74% of excess cash flow after interest and fixed amortization applied to variable amortization
26% of excess cash flow after interest and fixed amortization provided to ParentCo in exchange for a new Relief Revolving Note
Holders reserve the right to change the relative contributions of ECF sweep between the 2021 and 2022 structures
ParentCo ECF Sweep tested quarterly; not subject to carryforward or carryback structuring
Drydock Accrual Reserve Funded with $2.0mm / quarter, starting at closing Funded with $3.0mm / quarter, starting at closing
Interest Rate 7.00% cash interest (payable quarterly) 1.00% PIK interest (payable quarterly)
7.00% cash interest (payable quarterly) 1.00% PIK interest (payable quarterly)
(1) Additional due diligence and benchmarking of company’s OpEx and CapEx will be required (2) Holders to consider possible early tender fee payable in cash or in kind (3) Starting balances as of March 31, 2016 after accounting for scheduled amortization payments made in December 2015 and March 2016
PRIVILEGED & CONFIDENTIAL | DRAFT | SUBJECT TO FRE 408 | FOR SETTLEMENT DISCUSSION PURPOSES ONLY | PREPARED AT THE REQUEST OF COUNSEL
Summary Illustrative Counterproposal from Bondholders
3
2021 Notes 2022 Notes
Maturity(1) No change (remains June 30, 2021) No change (remains October 1, 2022)
New Relief Revolving Loan Facility
In consideration for the ParentCo ECF Sweep, OOG parent to enter into a revolving loan facility (“Relief Revolving Loan Facility”) with Noteholders whereby each ParentCo ECF Sweep payment is deemed to be a draw on the Relief Revolving Loan Facility
The Relief Revolving Loan Facility will bear interest at the same rate (cash or PIK, as applicable) as the restructured Bank Debt, will have the same maturity, and will have a claim on OOG cash flows (including those from Libra, CDI, PLSVs, MSO, and any other ParentCo cash flows) that is senior to (both in terms of payment maturity and security) the Bank Debt
Expense Cap Relief
In consideration of amending the existing OpEx and CapEx caps and exchange rate limitations, any such relief shall constitute a claim in the restructuring of OOG
Subject to certain conditions including terms for the restructuring of existing OOG debt on satisfactory terms, such claim may be exchanged, in whole or in part, for a new debt instrument and / or equity or equity-linked instruments at OOG
Security
All cash outstanding at the assumed closing date shall remain within the respective structure All existing collateral remains in place. First priority lien on substantially all of the assets of the respective
project entities enforceable in Brazil and offshore, including but not limited to the drilling rigs, cash collateral, interests in the charter and services agreements and accounts receivable; lien on equity in structures
The drilling rigs include the ODN I, ODN II, ODN Tay IV, Norbe VI, Norbe VIII, and Norbe IX All LCs related to the 2021 and 2022 assets to remain outstanding Guarantee by, and first priority lien over the shares of, intermediate holding company that holds the equity
of the companies that are obligors under the 2021 and 2022 notes Contractual obligation of ParentCo (i) in favor of 2021 holders not to allow more debt to be incurred at
2022 project companies and (ii) in favor of 2022 holders not to allow more debt to be incurred at 2021 project companies, in each case in connection with refinancing or otherwise
(1) Condition precedent: ParentCo level debt facilities shall be restructured such that no ParentCo debt maturities shall occur within six months of the last maturity of new notes
PRIVILEGED & CONFIDENTIAL | DRAFT | SUBJECT TO FRE 408 | FOR SETTLEMENT DISCUSSION PURPOSES ONLY | PREPARED AT THE REQUEST OF COUNSEL
Summary Illustrative Counterproposal from Bondholders
4
2021 Notes 2022 Notes
ParentCo Capital Structure and Debt Service Relief
As a condition precedent to the restructuring of the 2021 notes and 2022 notes, the ParentCo level debt shall be restructured on terms and conditions satisfactory to the holders
The Company will renegotiate the terms of the Delba III financing such that it will not be required to make any further contributions to the Delba III structure
Petrobras Cancellations
Proposal assumes no further cancellations beyond the ODN Tay IV, no rate reductions or contractual penalties imposed by Petrobras in a manner inconsistent with normal past practice, and no material adverse developments in connection with Lava Jato
Proposal assumes that ODN I, ODN II, and any other rig in the 2021 and 2022 structures will continue to receive the contractual dayrate plus bonus (i.e. 100% of the contracted dayrate) if and when on idle at the direction of Petrobras
Require any amounts recovered (whether sale
proceeds or from Petrobras) with respect to the ODN Tay IV or any other vessel to amortize the notes secured by such vessel
ODN Tay IV
[ODN Tay IV to be scrapped](1)
Limit ODN Tay IV expenses to the aggregate amount requested through [May 2016] (inclusive of those expenses necessary to move the rig from Brazilian waters to [TBD], as approved by the 2022 Noteholders)
(1) Alternative options may be discussed
Confidential
Project Orion JV AND OTHER PROJECTS MODEL CASH FLOWS
March 6, 2016*
*Presentation originally made on the date indicated and, except as specifically noted, has not been updated to reflect recent developments or ongoing discussions.
Confidential
1
JV and Other Projects Model Cash Flows
Note: Subject to assumptions; actual results may differ. (1) Cash flows after financing include costs incurred by OOG.
Consolidated: JV and Other Projects
($USD in 000s) 2016 2017 2018 2019 2020 2021 2022
Charter and service revenue received $469,723 $613,712 $552,958 $522,253 $571,562 $579,263 $556,854
Opex (243,795) (214,942) (210,185) (192,781) (197,644) (200,502) (199,203)
Capex (588,694) (34,972) (9,109) (19,712) (5,348) (49,858) (13,054)
Operating cash flow ($362,766) $363,798 $333,664 $309,760 $368,570 $328,904 $344,596
Debt issuance 450,912 142,766 315,000 – – – –Debt amortization (119,547) (263,058) (505,731) (133,752) (203,822) (190,298) (189,534)
Interest paid (82,817) (95,655) (83,855) (77,357) (73,139) (61,306) (50,318)
Cash Flows after Financing (1) ($114,218) $147,850 $59,078 $98,652 $91,609 $77,300 $104,744
Cash Flows to OOG $37,438 $35,581 $29,372 $41,786 $32,801 $72,659 $48,659
Confidential
2
JV and Other Projects OOG Consolidated Model Cash Flows
Note: Subject to assumptions; actual results may differ.
Consolidated: JV and Other Projects
($USD in 000s) 2016 2017 2018 2019 2020 2021 2022
Cash Flow from A $15,412 $7,821 $3,874 $11,081 $2,806 $12,302 $3,442
Cash Flow from B 1,491 18,310 21,600 22,576 22,057 52,596 37,628
Cash Flow from C 20,536 9,450 3,898 8,130 7,939 7,761 7,589
Cash Flow from D – – – – – – –
Unallocated Project Costs (12,715) (11,672) (11,406) (11,405) (11,406) (11,406) (11,406)
Total JV and Other Projects Cash Flows $24,723 $23,909 $17,966 $30,381 $21,395 $61,253 $37,253
Confidential
This document contains highly confidential information and is solely for informational purposes. You should not rely upon or use it to form the definitive basis for any decision or action whatsoever, with respect to any proposed transaction or otherwise. You and your affiliates and agents must hold this document and any oral information provided in connection with this document, as well as any information derived by you from the information contained herein, in strict confidence and may not communicate, reproduce or disclose it to any other person, or refer to it publicly, in whole or in part at any time except with our prior written consent. If you are not the intended recipient of this document, please delete and destroy all copies immediately.
This document is “as is” and is based, in part, on information obtained from other sources. Our use of such information does not imply that we have independently verified or necessarily agree with any of such information, and we have assumed and relied upon the accuracy and completeness of such information for purposes of this document. Neither we nor any of our affiliates or agents, make any representation or warranty, express or implied, in relation to the accuracy or completeness of the information contained in this document or any oral information provided in connection herewith, or any data it generates and expressly disclaim any and all liability (whether direct or indirect, in contract, tort or otherwise) in relation to any of such information or any errors or omissions therein. Any views or terms contained herein are preliminary, and are based on financial, economic, market and other conditions prevailing as of the date of this document and are subject to change. We undertake no obligations or responsibility to update any of the information contained in this document. Past performance does not guarantee or predict future performance.
This document does not constitute an offer to sell or the solicitation of an offer to buy any security, nor does it constitute an offer or commitment to lend, syndicate or arrange a financing, underwrite or purchase or act as an agent or advisor or in any other capacity with respect to any transaction, or commit capital, or to participate in any trading strategies, and does not constitute legal, regulatory, accounting or tax advice to the recipient. This document does not constitute and should not be considered as any form of financial opinion or recommendation by us or any of our affiliates. This document is not a research report nor should it be construed as such.
This document may include information from the S&P Capital IQ Platform Service. Such information is subject to the following: “Copyright © 2015, S&P Capital IQ (and its affiliates, as applicable). This may contain information obtained from third parties, including ratings from credit ratings agencies such as Standard & Poor’s. Reproduction and distribution of third party content in any form is prohibited except with the prior written permission of the related third party. Third party content providers do not guarantee the accuracy, completeness, timeliness or availability of any information, including ratings, and are not responsible for any errors or omissions (negligent or otherwise), regardless of the cause, or for the results obtained from the use of such content. THIRD PARTY CONTENT PROVIDERS GIVE NO EXPRESS OR IMPLIED WARRANTIES, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE. THIRD PARTY CONTENT PROVIDERS SHALL NOT BE LIABLE FOR ANY DIRECT, INDIRECT, INCIDENTAL, EXEMPLARY, COMPENSATORY, PUNITIVE, SPECIAL OR CONSEQUENTIAL DAMAGES, COSTS, EXPENSES, LEGAL FEES, OR LOSSES (INCLUDING LOST INCOME OR PROFITS AND OPPORTUNITY COSTS OR LOSSES CAUSED BY NEGLIGENCE) IN CONNECTION WITH ANY USE OF THEIR CONTENT, INCLUDING RATINGS. Credit ratings are statements of opinions and are not statements of fact or recommendations to purchase, hold or sell securities. They do not address the suitability of securities or the suitability of securities for investment purposes, and should not be relied on as investment advice.”
Copyright © 2016, PJT Partners LP (and its affiliates, as applicable). 3
Confidential
Project Orion TAY IV UPDATE
March 2016*
*Presentation originally made on the date indicated and, except as specifically noted, has not been updated to reflect recent developments or ongoing discussions.
Confidential
Tay IV Update
> The Company is currently asking for an extension for ODN Tay IV to remain in Brazil
‒ Therefore, the Company is continuing to perform analyses to determine the best path forward
> However, if Tay IV leaves Açu Port in Brazil at the end of April, the cost to keep the vessel in Acu Port is projected to be ~$56k / day (not including the payments for previously incurred expenses)
> The cost to transfer Tay IV to Tenerife is projected to be $4 million (cost projected to be paid partially in April and partially in May), and the cost to cold stack at Tenerife is projected to be $4 million (cost projected to be paid partially in September and partially in October)
> From May until October 2016, it is projected to cost ~$44k / day of OPEX to maintain the vessel
> Once cold-stacked, the maintenance cost is projected to be $17k / day
> Additional detail is provided below
1
Warm Stack Tenerife Cold stack Tenerife
Labor Payroll 10.500
20.391
2.298
4.605
Crew Change / Training / Other 1.184 679
Catering 833 120
Repairs & Maintenance 4.600 574
Material Logistics 1.014 150
Other Costs 2.260 784
SHIPYARD COSTS 9.132
9.132
1.919
1.919 Energy 7.940 -
Logistics 1.192 1.919
Rig Insurance 14.894 14.894 10.476 10.476
Insurance Excluding Payroll 10.476 10.476
Deferred Rig Insurance Payment 4.418 0.000
TOTAL COSTS WITH
OVERHEAD 44.418 44.418 17.000 17.000
Confidential
Tay IV Update (Cont’d)
> Tay IV’s annual insurance costs total $3,734,006 and breaks down as follows:
2
Hull & Machinery Increased Value Loss of Hire Protection &
Indemnity Comprehensive General Liability
TOTAL
ODN TAY IV $2,404,081 $189,121 $854,404 $257,000 $29,400 $3,734,006
Confidential
Tay IV Update (Cont’d)
> The cost of demobilizing Tay IV is projected to cost $14.123 million in 2016
> The breakdown of these expenses is provided below:
3
Demobilization costs - ODN IV US$ 000k Description
Debit Notes (Discounted Jan-Feb) $2,578 These are payments that Petrobras will discount (relates to past performance)
Services measured but not paid 1,617 Maintenance performed on a rig
PO open - measurement 667 Outstanding invoice for payment
Material ordered and not paid 8,046 Material/supplies that have been contracted (some already delivered)
Estimated expenses related to employees' dismissals 214 Layoffs (estimate)
Estimated fines to terminate contracts before the maturity 1,000 Early termination penalties (estimate)
TOTAL $14,123
Confidential
This document contains highly confidential information and is solely for informational purposes. You should not rely upon or use it to form the definitive basis for any decision or action whatsoever, with respect to any proposed transaction or otherwise. You and your affiliates and agents must hold this document and any oral information provided in connection with this document, as well as any information derived by you from the information contained herein, in strict confidence and may not communicate, reproduce or disclose it to any other person, or refer to it publicly, in whole or in part at any time except with our prior written consent. If you are not the intended recipient of this document, please delete and destroy all copies immediately.
This document is “as is” and is based, in part, on information obtained from other sources. Our use of such information does not imply that we have independently verified or necessarily agree with any of such information, and we have assumed and relied upon the accuracy and completeness of such information for purposes of this document. Neither we nor any of our affiliates or agents, make any representation or warranty, express or implied, in relation to the accuracy or completeness of the information contained in this document or any oral information provided in connection herewith, or any data it generates and expressly disclaim any and all liability (whether direct or indirect, in contract, tort or otherwise) in relation to any of such information or any errors or omissions therein. Any views or terms contained herein are preliminary, and are based on financial, economic, market and other conditions prevailing as of the date of this document and are subject to change. We undertake no obligations or responsibility to update any of the information contained in this document. Past performance does not guarantee or predict future performance.
This document does not constitute an offer to sell or the solicitation of an offer to buy any security, nor does it constitute an offer or commitment to lend, syndicate or arrange a financing, underwrite or purchase or act as an agent or advisor or in any other capacity with respect to any transaction, or commit capital, or to participate in any trading strategies, and does not constitute legal, regulatory, accounting or tax advice to the recipient. This document does not constitute and should not be considered as any form of financial opinion or recommendation by us or any of our affiliates. This document is not a research report nor should it be construed as such.
This document may include information from the S&P Capital IQ Platform Service. Such information is subject to the following: “Copyright © 2015, S&P Capital IQ (and its affiliates, as applicable). This may contain information obtained from third parties, including ratings from credit ratings agencies such as Standard & Poor’s. Reproduction and distribution of third party content in any form is prohibited except with the prior written permission of the related third party. Third party content providers do not guarantee the accuracy, completeness, timeliness or availability of any information, including ratings, and are not responsible for any errors or omissions (negligent or otherwise), regardless of the cause, or for the results obtained from the use of such content. THIRD PARTY CONTENT PROVIDERS GIVE NO EXPRESS OR IMPLIED WARRANTIES, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE. THIRD PARTY CONTENT PROVIDERS SHALL NOT BE LIABLE FOR ANY DIRECT, INDIRECT, INCIDENTAL, EXEMPLARY, COMPENSATORY, PUNITIVE, SPECIAL OR CONSEQUENTIAL DAMAGES, COSTS, EXPENSES, LEGAL FEES, OR LOSSES (INCLUDING LOST INCOME OR PROFITS AND OPPORTUNITY COSTS OR LOSSES CAUSED BY NEGLIGENCE) IN CONNECTION WITH ANY USE OF THEIR CONTENT, INCLUDING RATINGS. Credit ratings are statements of opinions and are not statements of fact or recommendations to purchase, hold or sell securities. They do not address the suitability of securities or the suitability of securities for investment purposes, and should not be relied on as investment advice.”
Copyright © 2016, PJT Partners LP (and its affiliates, as applicable). 4
Confidential Settlement Communication Subject to FRE 408
Project Orion DISCUSSION MATERIALS
February 29, 2016*
The cap relief requested in connection with this presentation was granted by holders only with respect to the months of March and April. Please see the Notice to the Market issued by the Company on March 31, 2016. *Presentation originally made on the date indicated and, except as specifically noted, has not been updated to reflect recent developments or ongoing discussions.
Confidential Settlement Communication Subject to FRE 408
1
Agenda
> Market Update
> Amendment to Caps
> Libra Update
Confidential Settlement Communication Subject to FRE 408
I. Market Update
2
Confidential Settlement Communication Subject to FRE 408
$0
$100,000
$200,000
$300,000
$400,000
$500,000
$600,000
mai-15 jun-15 ago-15 out-15 nov-15 jan-16 mar-16
Historical Dayrate (DW e UDW) | US$k/d
Estimated UDW cash breakeven | US$k/d
Source: Rigzone database
Source: DNB
Source: Reports from banks and webcasts from drillers for the full year 2015 results
Messages from FY 2015 Earnings Season > Analysts are reviewing their forecasts - all increasingly pessimistic:
‒ DNB: “While we currently have less visibility for 2018 and incremental demand could materialize, our forecast oversupply of 89 UDW rigs by end-2017 supports our view that 2018 could also prove very challenging for the industry.”
‒ Wells Fargo: “With another UDW contract cancellation this week on the Development Driller I, ESV highlighting the likelihood of cancellation by PBR on the ENSCO 6001, and ORIG apparently bidding at or below cash break even costs for a 3-well job in Norway with the Leiv Eiriksson, offshore fundamentals seem to be deteriorating at a faster pace than our recently revised (and already quite negative) outlook.”
‒ DNB: “(…) we believe there may be more ‘blend and extend’ deals, pure renegotiations, and we could see some rigs released early. We would expect such events primarily in West Africa and other countries with NOC exposure (Brazil, Mexico, and Saudi Arabia).”
> With challenges mounting, commercial aggressiveness, refinancing, cash costs reduction are in the spotlight.
‒ Wells Fargo: “With discussions over blend and extend and/or cancellations picking up and more data points suggesting bid activity at or below break-even levels, our sense is that “panic mode” is starting to set in for some drillers, and some are adopting the mind-set that losing a little money near term (on a less than cash break even rate) is better than losing even more money long term on cold stacking a floater and potentially losing the rig forever.”
‒ Seadrill: “In the face of the severe downturn in our industry our priorities for 2016 are to conserve cash and address our financing needs.”
‒ Ensco: “(…) uncertainty regarding the timing and degree rebalancing in the oil markets has caused our customers to announce further reductions in capital expenditures, the results of which is to push out the likely duration of the down cycle for the offshore drilling sector.”
3
Confidential Settlement Communication Subject to FRE 408
II. Amendment to Caps
4
Confidential Settlement Communication Subject to FRE 408
Situation Overview
The Company has completed a revised near-term forecast and determine the amount of relief needed under the existing expense caps to extend the runway necessary to complete restructuring negotiations by June 2016.
> At the February 3rd meeting in New York, it was agreed by both the Company and ad hoc group that parties would negotiate relief under the expense caps of the 2021 Senior Notes and 2022 Senior Notes (‘21 and ‘22 Notes) documents
‒ Goal to improve ability of assets to self-fund while a comprehensive transaction is negotiated and executed for the ‘21 and ‘22 Notes as well as OOG parent-level debt
> OOG has finalized revisions to its near-term forecast at the ‘21 and ‘22 Assets as well as OOG
‒ Includes detailed input from treasury department to refine near-term cash needs
> Based on current expense caps, OOG would be required to fund significant cash shortfalls through June 2016
‒ Funding of approximately $30 million and $26 million for the ‘21 and ‘22 Assets, respectively
> Without relief, OOG will not be able to negotiate a restructuring of its liabilities and all creditors and stakeholders will be put at significant risk of a judicial recovery
> OOG has prepared an analysis of the existing caps and the relief required to allow OOG to continue as a going concern in the near-term period
5
Confidential Settlement Communication Subject to FRE 408
Cash Flows of ‘21 and ‘22 Assets (Under Existing Expense Caps) > Existing indentures only allow for a fixed amount of expenses to be funded monthly from revenues at
the ‘21 and ‘22 Assets
> Based on these existing caps, approximately $56 million of operating expenses incremental to the cap as well as capex are required to be funded by OOG
> Detail to the calculations can be found on page 16 and page 25 of the appendix
6
$56 million Total shortfall to be funded by OOG over four-month period
2022 Asset Cash Flow($ in US 000s) March April May June 4 Month Total
Forecast Opex + Capex $16,142 $16,722 $34,106 $21,465 $88,434
Current Capped Expense 14,629 16,066 15,641 16,047 62,383
Surplus / (Shortfall) ($1,512) ($656) ($18,465) ($5,418) ($26,051)
2021 Asset Cash Flow($ in US 000s) March April May June 4 Month Total
Forecast Opex + Capex $10,407 $9,995 $15,699 $15,016 $51,117
Current Capped Expense 4,685 5,725 5,389 5,431 21,230
Surplus / (Shortfall) ($5,722) ($4,270) ($10,310) ($9,585) ($29,887)
Confidential Settlement Communication Subject to FRE 408
2022 - Revised Caps
7
> Below is a summary of proposed increases in caps to allow for full funding with a level of cushion
> Detail to the calculations can be found on pages 15-23 of the appendix
($ in US 000s)
ODN I & II Mar-16 Apr-16 May-16 Jun-16
Total Opex $7,866 $8,095 $12,134 $11,145
Forecast Capex 94 400 1,058 1,058
Total Forecast Opex and Capex $7,959 $8,496 $13,192 $12,203
Plus: Cushion (10%) 796 850 1,319 1,220
Revised Opex and Capex Cap (To be Transferred in Prior Period) $8,755 $9,345 $14,511 $13,423
Difference Between Revised and Existing Cap $1,529 $1,012 $6,324 $5,028
Day Transferred 2/29/16 3/31/16 4/30/16 5/31/16
Memo: Implied Dayrate
Operating Days 29 31 30 31
Forecasted Dayrate (Opex Only + 10% Cushion) (in $USD) $298 $287 $445 $395
Tay IV Mar-16 Apr-16 May-16 Jun-16
Total Opex(1) $2,920 $2,796 $13,174 $2,024
Forecast Capex 63 139 531 531
Total Forecast Opex and Capex $2,984 $2,935 $13,705 $2,555
Plus: Cushion (10%) 298 293 1,371 256
Revised Opex and Capex Cap (To be Transferred in Prior Period) $3,282 $3,228 $15,076 $2,811
Difference Between Revised and Existing Cap ($836) ($1,525) $10,428 ($2,030)
Day Transferred 2/29/16 3/31/16 4/30/16 5/31/16
Memo: Implied Dayrate
Operating Days 29 31 30 31
Forecasted Dayrate (Opex Only + 10% Cushion) (in $USD) $111 $99 $483 $72
(1) The May opex figure for Tay IV assumes that the vessel is mobilized and towed for a cost of $11 million. After that, it is assumed that the vessel is cold-stacked.
Confidential Settlement Communication Subject to FRE 408
2022 - Revised Caps (Cont’d)
8
($ in US 000s)
Norbe VI Mar-16 Apr-16 May-16 Jun-16
Total Opex $5,199 $5,291 $5,731 $5,230
Forecast Capex – – 1,477 1,477
Total Forecast Opex and Capex $5,199 $5,291 $7,208 $6,707
Plus: Cushion (10%) 520 529 721 671
Revised Opex and Capex Cap (To be Transferred in Prior Period) $5,719 $5,820 $7,929 $7,378
Difference Between Revised and Existing Cap $2,433 $2,841 $5,124 $4,566
Day Transferred 2/29/16 3/31/16 4/30/16 5/31/16
Memo: Implied Dayrate
Operating Days 29 31 30 31
Forecasted Dayrate (Opex Only + 10% Cushion) (in $USD) $197 $188 $210 $186
> Below is a summary of proposed increases in caps to allow for full funding with a level of cushion
> Detail to the calculations can be found on pages 15-23 of the appendix
Confidential Settlement Communication Subject to FRE 408
2021 - Revised Caps
9
> Below is a summary of proposed increases in caps to allow for full funding with a level of cushion
> Detail to the calculations can be found on pages 24-29 of the appendix
($ in US 000s)
Norbe VIII Mar-16 Apr-16 May-16 Jun-16
Total Opex $5,092 $5,102 $6,491 $6,093
Forecast Capex – – 468 468
Total Forecast Opex and Capex $5,092 $5,102 $6,959 $6,561
Plus: Cushion (10%) 509 510 696 656
Revised Opex and Capex Cap (To be Transferred in Prior Period) $5,601 $5,613 $7,655 $7,217
Difference Between Revised and Existing Cap $3,093 $2,675 $4,979 $4,556
Day Transferred 2/29/16 3/31/16 4/30/16 5/31/16
Memo: Implied Dayrate
Operating Days 29 31 30 31
Forecasted Dayrate (Opex Only + 10% Cushion) (in $USD) $193 $181 $238 $216
Norbe IX Mar-16 Apr-16 May-16 Jun-16
Total Opex $5,315 $4,893 $6,299 $6,014
Forecast Capex – – 2,441 2,441
Total Forecast Opex and Capex $5,315 $4,893 $8,740 $8,455
Plus: Cushion (10%) 532 489 874 846
Revised Opex and Capex Cap (To be Transferred in Prior Period) $5,847 $5,382 $9,614 $9,301
Difference Between Revised and Existing Cap $3,670 $2,595 $6,900 $6,530
Day Transferred 2/29/16 3/31/16 4/30/16 5/31/16
Memo: Implied Dayrate
Operating Days 29 31 30 31
Forecasted Dayrate (Opex Only + 10% Cushion) (in $USD) $202 $174 $231 $213
Confidential Settlement Communication Subject to FRE 408
Pro Forma OOG Net Cash Flows (with Amended Caps)
10
Note: Actual operating results and cash positions differ from those forecasted in February. Note: the O&M transfers for 2021 and 2022 assets occur at the end of the month, so there is a brief timing mismatch between when the funds are transferred and when the expenses are paid.
> Below is a summary of pro forma OOG cash flows assuming the caps are changed in February
Summary OOG Holding - US$ millions Feb-16 Mar-16 Apr-16 May-16 Jun-16
Cash Flow from 2022 Assets $(2.1) $0.6 $17.4 $(12.6) $(5.1)
Cash Flow from 2021 Assets 2.7 (0.4) 5.7 (0.7) (2.5)
Cash Flow from A (0.0) (0.3) (0.5) (0.2) (0.2)
Cash Flow from B (0.7) (0.9) 1.8 (0.4) (0.4)
Cash Flow from C (1.6) 0.2 (0.1) 4.0 0.5
Cash Flow from D (0.7) (1.2) (1.0) 2.8 -
Unallocated Project Costs (0.7) (0.1) (0.2) (2.7) 3.5
Subtotal Cash Flow from Projects $(3.1) $(2.2) $23.2 $(9.9) $(4.2)
Interest / Swap Payments (0.2) (18.0) (0.2) (2.5) (12.0)
Amortization (0.0) (0.0) (0.0) (0.0) (3.3)
LCs (2021s, 2022s, Other) (11.5) (0.0) (0.0) (1.6) (0.1)
Equity Issuance / Dividends to Shareholders - - - - -
Total Net Cash Flows $(14.8) $(20.2) $22.9 $(14.0) $(19.7)
Beginning Cash Balance $67.3 $52.5 $32.3 $55.2 $41.2
Ending Cash Balance 52.5 32.3 55.2 41.2 21.6
Memo (Assuming Funding Continues Under Existing Caps from OOG):
Ending Cash Balance Assuming Existing Caps $40.5 $15.2 $9.1 ($19.5) ($31.5)
Confidential Settlement Communication Subject to FRE 408
III. Libra Update
11
Confidential Settlement Communication Subject to FRE 408
Libra Update
> Libra project costs total approximately US$1 billion, and as of Jan 31st, 2016, we have invested 28% of the total costs
> The Libra put option deadline was originally on February 12th, 2016, and the Company and Teekay agreed to extend the notice date to March 11th, if the put option is exercised then payment shall occur on April 11th, 2016
> The put option is for up to 25% of Libra (50% of OOG’s 50% stake in Libra) as detailed below:
‒ On the Put Option Notice Exercise Date, the Parties shall calculate the Put Option Consideration as defined below:
o The Put Option Consideration equals:
(a) = USD 24,111,354 minus Released Cash Collateral in consideration for 15% Put Option Shares (as the number of Shares may be varied by the operation of Clause 7.4) purchased by the Buyer;
(b) = USD 32,148,471 minus Released Cash Collateral in consideration for 20% Put Option Shares (as the number of Shares may be varied by the operation of Clause 7.4) purchased by the Buyer; or
(c) = USD 40,185,589 minus Released Cash Collateral in consideration for 25% Put Option Shares (as the number of Shares may be varied by the operation of Clause 7.4) purchased by the Buyer.
> Net cash to OOG in exercise would be approximately US$40.2 million in a 25% Put Option Shares scenario, payable in April
> If exercised, dividends to OOG from the Libra project would be reduced accordingly
Note: The option expired on April 25, 2016. 12
Confidential Settlement Communication Subject to FRE 408
Libra Update (Cont’d)
Call Option
> If exercised, OOG has a call option to purchase back the stake sold to Teekay, whose deadline is late August 2017, but payable in early January 2018
> On the Call Option Notice Exercise Date, the Parties shall calculate the Call Option Consideration as defined below:
‒ (a) = USD 24,111,354 adjusted at 20% per annum from the Put Option Date until the Call Option Date plus US$7,500,000 in consideration for 15% Call Option Shares (as the number of Shares may have been varied by the operation of Clause 7.4) purchased by the Seller;
‒ (b) = USD 32,148,471 adjusted at 20% per annum from the Put Option Date until the Call Option Date plus US$7,500,000 in consideration for 20% Call Option Shares (as the number of Shares may have been varied by the operation of Clause 7.4) purchased by the Seller; or
‒ (c) = USD 40,185,589 adjusted at 20% per annum from the Put Option Date until the Call Option Date plus US$7,500,000 in consideration for 25% Call Option Shares (as the number of Shares may have been varied by the operation of Clause 7.4) purchased by the Seller.
13
Confidential Settlement Communication Subject to FRE 408
IV.Appendix
14
Confidential Settlement Communication Subject to FRE 408
A. 2022 Structure Caps
15
Confidential Settlement Communication Subject to FRE 408
Current Cap Structure (2022 Structure) > The current cap structure requires substantial cash outlay from the Parent in the coming months
(1) The May opex figure for Tay IV assumes that the vessel is mobilized and towed for a cost of $11 million. After that, it is assumed that the vessel is cold-stacked. 16
($ in USD 000s)
ODN I & II Mar-16 Apr-16 May-16 Jun-16
Forecast Opex $7,866 $8,095 $12,134 $11,145
Forecast Capex 94 400 1,058 1,058
Total Forecast Opex + Capex $7,959 $8,496 $13,192 $12,203
Current Cap for Prior Month (USD per day) $318 $318 $318 $318
Forecasted Current Cap for Prior Month (USD per day) (Adjusted for 2:1) 249 269 273 271
Days in Prior Month (funds transferred on last day of prior month) 29 31 30 31
Current Cap (USD amount) $7,226 $8,333 $8,188 $8,395
Surplus / (Shortfall to be borne by Parent) ($733) ($163) ($5,005) ($3,808)
Tay IV Mar-16 Apr-16 May-16 Jun-16
Forecast Opex(1) $2,920 $2,796 $13,174 $2,024
Forecast Capex 63 139 531 531
Total Forecast Opex + Capex $2,984 $2,935 $13,705 $2,555
Current Cap for Prior Month (USD per day) $159 $159 $159 $159
Forecasted Current Cap for Prior Month (USD per day) (Adjusted for 2:1) 142 153 155 156
Days in Prior Month (funds transferred on last day of prior month) 29 31 30 31
Current Cap (USD amount) $4,118 $4,753 $4,648 $4,841
Surplus / (Shortfall to be borne by Parent) $1,134 $1,819 ($9,057) $2,286
Norbe VI Mar-16 Apr-16 May-16 Jun-16
Forecast Opex $5,199 $5,291 $5,731 $5,230
Forecast Capex – – 1,477 1,477
Total Forecast Opex + Capex $5,199 $5,291 $7,208 $6,707
Current Cap for Prior Month (USD per day) $159 $159 $159 $159
Forecasted Current Cap for Prior Month (USD per day) (Adjusted for 2:1) 113 96 94 91
Days in Prior Month (funds transferred on last day of prior month) 29 31 30 31
Current Cap (USD amount) $3,286 $2,980 $2,805 $2,811
Surplus / (Shortfall to be borne by Parent) ($1,913) ($2,312) ($4,403) ($3,896)
Cumulative 2022s Mar-16 Apr-16 May-16 Jun-16
Forecast Opex $15,985 $16,182 $31,039 $18,399
Forecast Capex 157 540 3,066 3,066
Total Forecast Opex + Capex $16,142 $16,722 $34,106 $21,465
Current Cap for Prior Month (USD per day) $636 $636 $636 $636
Forecasted Current Cap for Prior Month (USD per day) (Adjusted for 2:1) 504 518 521 518
Days in Prior Month (funds transferred on last day of prior month) 29 31 30 31
Current Cap (USD amount) $14,629 $16,066 $15,641 $16,047
Surplus / (Shortfall to be borne by Parent) ($1,512) ($656) ($18,465) ($5,418)
Cumulative ($1,512) ($2,168) ($20,633) ($26,051)
Confidential Settlement Communication Subject to FRE 408
Projected Opex (2022 Structure)
(1) “Suppliers / Other” includes insurance costs. 17
($ in US 000s)
ODN I & II Mar-16 Apr-16 May-16 Jun-16
Payroll $1,843 $1,822 $2,852 $2,760
Suppliers / Other(1) 5,125 5,424 5,100 6,301
Restructuring Costs 409 443 3,772 1,687
TAC 489 406 410 397
Total Opex $7,866 $8,095 $12,134 $11,145
Tay IV
Payroll $554 $551 – –
Suppliers / Other(1) 2,162 2,023 288 1,181
Demobilization + Tow Costs – – 11,000 –Restructuring Costs 204 222 1,886 843
TAC – – – –Total Opex $2,920 $2,796 $13,174 $2,024
Norbe VI
Payroll $1,046 $1,032 $1,371 $1,326
Suppliers / Other(1) 3,704 3,834 2,269 2,861
Restructuring Costs 204 222 1,886 843
TAC 244 203 205 198
Total Opex $5,199 $5,291 $5,731 $5,230
Confidential Settlement Communication Subject to FRE 408
B. 2022 Structure Cash Flows
18
Confidential Settlement Communication Subject to FRE 408
2022 Consolidated Cash Flows (with Amended Caps)
19
Consolidated
($ in USD 000s) 02/2016 03/2016 04/2016 05/2016 06/2016
Offshore Proceeds Acct
Beginning Cash 8,270 46,185 10,275 13,217 21,525
Cash Inflows
Net Charter $27,644 $27,063 $25,381 $26,225 $26,854
Services (Net of Taxes) 3,820 3,636 3,381 3,547 3,649
Insurance Proceeds 22,593 – – – –Transfer from Offshore Debt Service Reserve Account – 4,550 – – –Total Cash Inflows $54,057 $35,249 $28,762 $29,773 $30,504
Cash Outflows
Debt Service
Principal $– ($31,878) $– $– ($29,560)
Interest – (34,283) – – (33,748)
Total Debt Service $– ($66,161) $– $– ($63,308)
Opex + Capex (16,142) (16,722) (34,106) (21,465) (16,339)
Other – (2,232) – – –Total Cash Outflows ($16,142) ($85,115) ($34,106) ($21,465) ($79,647)
Ending Cash (Pre I/C Transfers and Reserve Accounts) $46,185 ($3,681) $4,932 $21,525 ($27,619)
Sinking Fund Transfer $0 $13,956 $8,286 $0 $0
Ending Cash $46,185 $10,275 $13,217 $21,525 ($27,619)
Memo: Reserve Account Balances
Sinking Fund Balance $22,241 $8,286 $– $– $–Loss Proceeds Balance 25,897 25,897 25,897 25,897 25,897
Debt Service Reserve Accounts 8,346 3,796 3,796 3,796 3,796
O&M Service Reserve Accounts 3,668 5,900 5,900 5,900 5,900
Subtotal 60,153 43,879 35,593 35,593 35,593
Confidential Settlement Communication Subject to FRE 408
2022 Cash Flows – ODN I (with Amended Caps)
20
($ in USD 000s) 02/2016 03/2016 04/2016 05/2016 06/2016
Offshore Proceeds Acct (USD '000)
Beginning Cash - 6,652 1,250 2,456 6,208
Cash Inflows
Net Charter $10,125 $10,256 $9,627 $10,035 $10,245
Services (Net of Taxes) 507 582 541 621 638
Total Cash Inflows $10,631 $10,839 $10,168 $10,656 $10,883
Cash Outflows
Debt Service
Principal - (8,029) - - (7,140)
Interest - (8,489) - - (8,354)
Total Debt Service $– ($16,518) $– $– ($15,494)
Opex + Capex (3,980) (4,248) (6,596) (6,101) (4,915)
Other - (558) - - -
Total Cash Outflows (3,980) (21,324) (6,596) (6,101) (20,409)
Ending Cash (Pre I/C Transfers and Reserve Accounts) 6,652 (3,833) 4,822 7,011 (3,318)
I/C Transfers
Cash Available / (Cash Needed) 6,652 (3,833) 4,822 7,011 (3,318)
Transfers to:
Tay IV – – (2,366) (802) –ODN II – – – – –Norbe VI – – – – –
Subtotal $– $– ($2,366) ($802) $–Transfers from:
Norbe VI – – – – –ODN II – – – – –Tay IV – 5,084 – – –Sinking Fund – – – – –
Subtotal $– $5,084 $– $– $–(Cash Transferred) / Cash Received – 5,084 (2,366) (802) –Ending Cash (Post I/C and Sinking Fund Transfers) $6,652 $1,250 $2,456 $6,208 ($3,318)
Confidential Settlement Communication Subject to FRE 408
2022 Cash Flows – ODN II (with Amended Caps)
21
($ in USD 000s) 02/2016 03/2016 04/2016 05/2016 06/2016
Offshore Proceeds Acct (USD '000)
Beginning Cash 8,270 14,922 7,189 10,761 15,316
Cash Inflows
Net Charter $10,125 $10,256 $9,627 $10,035 $10,245
Services (Net of Taxes) 507 582 541 621 638
Total Cash Inflows $10,631 $10,839 $10,168 $10,656 $10,883
Cash Outflows
Debt Service
Principal $– ($8,029) $– $– ($7,140)
Interest – (8,489) – – (8,354)
Total Debt Service $– ($16,518) $– $– ($15,494)
Opex + Capex (3,980) (4,248) (6,596) (6,101) (4,915)
Others - (558) - - -
Total Cash Outflows ($3,980) ($21,324) ($6,596) ($6,101) ($20,409)
Ending Cash (Pre I/C Transfers and Reserve Accounts) $14,922 $4,437 $10,761 $15,316 $5,790
I/C Transfers
Cash Available / (Cash Needed) 14,922 4,437 10,761 15,316 5,790
Transfers to:
Tay IV – (2,331) – – (5,790)
ODN I – – – – –Norbe VI – – – – –
Subtotal $– ($2,331) $– $– ($5,790)
Transfers from:
Norbe VI – – – – –ODN I – – – – –Tay IV – 5,084 – – –Sinking Fund – – – – –
Subtotal $– $5,084 $– $– $–(Cash Transferred) / Cash Received – 2,752 – – (5,790)
Ending Cash (Post I/C and Sinking Fund Transfers) $14,922 $7,189 $10,761 $15,316 $–
Confidential Settlement Communication Subject to FRE 408
2022 Cash Flows – Norbe VI (with Amended Caps)
22
($ in US 000s) 02/2016 03/2016 04/2016 05/2016 06/2016
Offshore Proceeds Acct (USD '000)
Beginning Cash – 5,001 1,836 – –
Cash Inflows
Net Charter $7,395 $6,550 $6,128 $6,155 $6,365
Services (Net of Taxes) 2,806 2,472 2,298 2,306 2,373
Transfer from Offshore Debt Service Reserve Account - 4,550 - - -
Total Cash Inflows $10,201 $13,572 $8,426 $8,460 $8,738
Cash Outflows
Debt Service
Principal - (6,251) - - (6,000)
Interest - (8,478) - - (8,372)
Total Debt Service $– ($14,728) $– $– ($14,372)
Opex + Capex (5,199) (5,291) (7,208) (6,707) (5,484)
Other - (558) - - -
Total Cash Outflows ($5,199) ($20,577) ($7,208) ($6,707) ($19,856)
Ending Cash (Pre I/C Transfers) $5,001 ($2,004) $3,053 $1,753 ($11,119)
I/C Transfers
Cash Available / (Cash Needed) 5,001 (2,004) 3,053 1,753 (11,119)
Transfers to:
Tay IV – – (3,053) (1,753) –ODN I – – – – –ODN II – – – – –
Subtotal $– $– ($3,053) ($1,753) $–Transfers from:
Tay IV – 3,840 – – –ODN I – – – – –ODN II – – – – –Sinking Fund – – – – –
Subtotal $– $3,840 $– $– $–(Cash Transferred) / Cash Received – 3,840 (3,053) (1,753) –Ending Cash (Post I/C and Sinking Fund Transfers) $5,001 $1,836 $– $– ($11,119)
Confidential Settlement Communication Subject to FRE 408
2022 Cash Flows – ODN Tay IV (with Amended Caps)
23
($ in USD 000s) 02/2016 03/2016 04/2016 05/2016 06/2016
Offshore Proceeds Acct
Beginning Cash - 19,609 - - -
Cash Inflows
Net Charter $– $– $– $– $–Services (Net of Taxes) – – – – –Insurance Proceeds 22,593 – – – –Total Cash Inflows $22,593 $– $– $– $–
Cash Outflows
Debt Service
Principal $– ($9,570) $– $– ($9,280)
Interest – (8,827) – – (8,669)
Total Debt Service $– ($18,397) $– $– ($17,949)
Opex + Capex (2,984) (2,935) (13,705) (2,555) (1,024)
Other - (558) - - -
Total Cash Outflows ($2,984) ($21,890) ($13,705) ($2,555) ($18,972)
Ending Cash (Pre I/C Transfers and Reserve Accounts) $19,609 ($2,280) ($13,705) ($2,555) ($18,972)
I/C Transfers
Cash Available / (Cash Needed) 19,609 (2,280) (13,705) (2,555) (18,972)
Transfers to:
Norbe VI – (3,840) – – –ODN I – (5,084) – – –ODN II – (5,084) – – –
Subtotal $– ($14,007) $– $– $–Transfers from:
Norbe VI – – 3,053 1,753 –ODN I – – 2,366 802 –ODN II – 2,331 – – 5,790
Sinking Fund – 13,956 8,286 – –Subtotal $– $16,287 $13,705 $2,555 $5,790
(Cash Transferred) / Cash Received – 2,280 13,705 2,555 5,790
Ending Cash (Post I/C and Sinking Fund Transfers) $19,609 $– $– $– ($13,182)
Confidential Settlement Communication Subject to FRE 408
C. 2021 Structure Caps
24
Confidential Settlement Communication Subject to FRE 408
Current Cap Structure (2021 Structure) > The current cap structure requires substantial cash outlay from the Parent in the coming months
25
($ in USD 000s)
Norbe VIII Mar-16 Apr-16 May-16 Jun-16
Forecast Opex $5,092 $5,102 $6,491 $6,093
Forecast Capex – – 468 468
Total Forecast Opex + Capex $5,092 $5,102 $6,959 $6,561
Current Cap for Prior Month (USD per day) $110 $110 $110 $110
Forecasted Current Cap for Prior Month (USD per day) (Adjusted for 2:1) 86 95 89 86
Days in Prior Month (funds transferred on last day of prior month) 29 31 30 31
Current Cap (USD amount) $2,508 $2,938 $2,676 $2,661
Surplus / (Shortfall to be borne by Parent) ($2,583) ($2,164) ($4,283) ($3,900)
Norbe IX Mar-16 Apr-16 May-16 Jun-16
Forecast Opex $5,315 $4,893 $6,299 $6,014
Forecast Capex – – 2,441 2,441
Total Forecast Opex + Capex $5,315 $4,893 $8,740 $8,455
Current Cap for Prior Month (USD per day) $110 $110 $110 $110
Forecasted Current Cap for Prior Month (USD per day) (Adjusted for 2:1) 75 90 90 89
Days in Prior Month (funds transferred on last day of prior month) 29 31 30 31
Current Cap (USD amount) $2,177 $2,787 $2,714 $2,770
Surplus / (Shortfall to be borne by Parent) ($3,138) ($2,106) ($6,026) ($5,685)
Cumulative 2021s Mar-16 Apr-16 May-16 Jun-16
Forecast Opex $10,407 $9,995 $12,789 $12,107
Forecast Capex – – 2,910 2,910
Total Forecast Opex + Capex $10,407 $9,995 $15,699 $15,016
Current Cap for Prior Month (USD per day) $162 $185 $180 $175
Days in Prior Month (funds transferred on last day of prior month) 29 31 30 31
Current Cap (USD amount) $4,685 $5,725 $5,389 $5,431
Surplus / (Shortfall to be borne by Parent) ($5,722) ($4,270) ($10,310) ($9,585)
Cumulative ($5,722) ($9,992) ($20,302) ($29,887)
Confidential Settlement Communication Subject to FRE 408
Projected Opex (2021 Structure)
26
($ in US 000s)
Norbe VIII Mar-16 Apr-16 May-16 Jun-16
Payroll $955 $938 $1,420 $1,374
Suppliers / Other(1) 3,688 3,739 2,980 3,677
Restructuring Costs 204 222 1,886 843
TAC 244 203 205 198
Total Opex $5,092 $5,102 $6,491 $6,093
Norbe IX
Payroll $1,041 $1,027 $1,481 $1,433
Suppliers / Other(1) 3,825 3,442 2,727 3,539
Restructuring Costs 204 222 1,886 843
TAC 244 203 205 198
Total Opex $5,315 $4,893 $6,299 $6,014
(1) “Suppliers / Other” includes insurance costs.
Confidential Settlement Communication Subject to FRE 408
2021 Consolidated Cash Flows (with Amended Caps)
27
($ in USD 000s) 02/2016 03/2016 04/2016 05/2016 06/2016
Offshore Receipts Acct
Beginning Cash Position $15,075 $36,494 $46,843 $53,490 $61,256
Cash Inflows $31,826 $20,344 $22,346 $22,782 $24,140
Charter 30,131 19,251 21,152 21,437 22,704
Services (Net of Taxes) 1,696 1,093 1,193 1,345 1,435
Cash Outflows ($10,407) ($9,995) ($15,699) ($15,016) ($102,367)
Debt Service - - - - (89,886)
New SOISA Caps (10,407) (9,995) (15,699) (15,016) (12,481)
Other - - - - -
Ending Cash (Pre I/C Transfers and Reserve Accounts) $36,494 $46,843 $53,490 $61,256 ($16,972)
Memo: Reserve Account Balances
Mobilization Fee Accounts $11,736 $11,736 $11,736 $11,736 $11,736
Debt Service Reserve Accounts 11,193 11,193 11,193 11,193 11,193
O&M Service Reserve Accounts - - - - -
Subtotal $22,928 $22,928 $22,928 $22,928 $22,928
Confidential Settlement Communication Subject to FRE 408
2021 Cash Flows – Norbe VIII (with Amended Caps)
28
($ in USD 000s) 02/2016 03/2016 04/2016 05/2016 06/2016
Offshore Receipts Acct
Beginning Cash $7,549 $15,042 $18,709 $23,271 $28,922
Cash Inflows $12,585 $8,769 $11,521 $12,211 $12,469
Charter 11,903 8,298 10,906 11,486 11,723
Services (Net of Taxes) 682 471 615 725 746
Interest Accrued
Cash Outflows ($5,092) ($5,102) ($6,959) ($6,561) ($50,451)
Debt Service – – – – (45,172)
New SOISA Caps (5,092) (5,102) (6,959) (6,561) (5,279)
Other – – – – –
Ending Cash (Pre I/C Transfers and Reserve Accounts) $15,042 $18,709 $23,271 $28,922 ($9,060)
Confidential Settlement Communication Subject to FRE 408
2021 Cash Flows – Norbe IX (with Amended Caps)
29
($ in USD 000s) 02/2016 03/2016 04/2016 05/2016 06/2016
Offshore Receipts Acct
Beginning Cash Position $7,526 $21,452 $28,134 $30,218 $32,334
Cash Inflows $19,241 $11,575 $10,824 $10,571 $11,670
Charter 18,228 10,953 10,246 9,951 10,981
Services (Net of Taxes) 1,014 622 578 620 689
Interest Accrued
Cash Outflows ($5,315) ($4,893) ($8,740) ($8,455) ($51,916)
Debt Service - - - - (44,714)
New SOISA Caps (5,315) (4,893) (8,740) (8,455) (7,203)
Other - - - - -
Ending Cash (Pre I/C Transfers and Reserve Accounts) $21,452 $28,134 $30,218 $32,334 ($7,912)
Confidential
Project Orion AMENDED OPERATING AND CAPITAL EXPENSE CAPS
March 6, 2016
Confidential
Historical and Projected Daily Opex (2022 Structure)
Note: Historical daily opex numbers are on an accrual basis, and there are some costs incurred in 2015 that are paid in 2016. 1
($ in US 000s)
Norbe VI 2014 2015 2016
Labor Payroll $63 $56 $44
Crew Change/Training 8 6 6
Catering 5 4 4
Repairs & Maintenance 42 17 23
Opex Project – 46 19
Logistics 7 14 9
Rig Insurance 10 9 9
Other Costs 6 6 10
Onshore Support + TAC 21 14 15
Total Opex / Day $163 $173 $138
Restructuring Costs – – 9
Total Opex (Incl. Restructuring Costs) $163 $173 $148
ODN I / II 2014 2015 2016
Labor Payroll $123 $109 $92
Crew Change/Training 18 12 12
Catering 11 9 8
Repairs & Maintenance 61 47 47
Opex Project – 32 34
Logistics 24 24 19
Rig Insurance 20 19 18
Other Costs 12 9 11
Onshore Support + TAC 41 28 29
Total Opex / Day $310 $288 $269
Restructuring Costs – – 19
Total Opex (Incl. Restructuring Costs) $310 $288 $288
Confidential
Historical and Projected Daily Opex (2022 Structure) (Cont’d)
Note: Historical daily opex numbers are on an accrual basis, and there are some costs incurred in 2015 that are paid in 2016. 2
($ in US 000s)
Tay IV 2014 2015 2016
Labor Payroll $65 $53 $10
Crew Change/Training 9 8 1
Catering 6 4 1
Repairs & Maintenance 38 15 4
Opex Project – 17 0
Logistics 12 13 1
Rig Insurance 11 11 11
Other Costs 10 13 14
Onshore Support + TAC 21 14 –Demobilization cost – – 39
Transfer to Tenerife – – 11
Cold stack process – – 11
Total Opex / Day $171 $147 $101
Restructuring Costs – – 9
Total Opex (Incl. Restructuring Costs) $171 $147 $110
Confidential
Historical and Projected Daily Opex (2021 Structure)
Note: Historical daily opex numbers are on an accrual basis, and there are some costs incurred in 2015 that are paid in 2016. 3
($ in US 000s)
Norbe VIII 2014 2015 2016
Labor Payroll $69 $55 $46
Crew Change/Training 10 7 6
Catering 6 4 4
Repairs & Maintenance 69 27 19
Opex Project – 17 33
Logistics 25 11 9
Rig Insurance 12 11 10
Other Costs 19 4 6
Onshore Support + TAC 21 14 15
Total Opex / Day $230 $150 $147
Restructuring Costs – – 9
Total Opex (Incl. Restructuring Costs) $230 $150 $157
Norbe IX 2014 2015 2016
Labor Payroll $64 $57 $48
Crew Change/Training 9 7 6
Catering 6 4 4
Repairs & Maintenance 27 15 19
Opex Project – 20 31
Logistics 8 9 9
Rig Insurance 11 10 10
Other Costs 7 6 6
Onshore Support + TAC 21 14 15
Total Opex / Day $153 $143 $147
Restructuring Costs – – 9
Total Opex (Incl. Restructuring Costs) $153 $143 $156
Confidential
I. Revised Caps
4
Confidential
A. 2022 Revised Caps
5
Confidential
2022 – Revised Caps (Dollar Amount)
(1) Transfer will occur at the end of the month with the amounts established under the new caps. 6
($ in US 000s)
Norbe VI Mar-16 Apr-16 May-16 Jun-16
Salary $1,140 $1,103 $1,140 $1,103
Bonus – – 800 –
Crew Change/Training 180 174 180 174
Catering 117 114 117 114
Repairs & Maintenance 883 1,197 779 569
Opex Project 914 1,240 807 589
Logistics 426 578 376 275
Rig Insurance 86 688 – 688
Other Costs 218 211 218 211
Onshore Support + TAC 490 440 467 435
Total Opex $4,454 $5,745 $4,885 $4,159
Total Opex per Day $144 $192 $158 $139
Restructuring Costs 138 222 1,886 989
Total Opex (Incl. Restructuring Costs) $4,592 $5,967 $6,771 $5,147
Total Opex (Incl. Restructuring Costs) per Day $148 $199 $218 $172
MPD – – – –
Fleet spare – – – 163
Operational capex – – – 257
Constrction capex – – – –
5-year SPS 1,044 – 862 1,245
Forecast Capex $1,044 $– $862 $1,665
Total Forecast Opex and Capex $5,636 $5,967 $7,633 $6,813
Total Forecast Opex and Capex per Day $182 $199 $246 $227
Plus: Cushion (10%) 564 597 763 681
Revised Opex and Capex Cap (To be Transferred at end of Current Month)(1)$6,200 $6,564 $8,396 $7,494
Revised Opex and Capex Cap per Day (To be Transferred at end of Current Month) $200 $219 $271 $250
Confidential
2022 – Revised Caps (Dollar Amount) (Cont’d)
7
($ in US 000s)
ODN I / II Mar-16 Apr-16 May-16 Jun-16
Salary $2,383 $2,306 $2,383 $2,306
Bonus – – 1,600 –
Crew Change/Training 360 349 360 349
Catering 235 227 235 227
Repairs & Maintenance 1,093 507 1,643 1,138
Opex Project 975 429 1,447 997
Logistics 526 238 798 549
Rig Insurance 171 1,363 – 1,551
Other Costs 318 308 318 308
Onshore Support + TAC 979 880 933 871
Total Opex $7,041 $6,606 $9,716 $8,295
Total Opex per Day $227 $220 $313 $276
Restructuring Costs 275 443 3,772 1,978
Total Opex (Incl. Restructuring Costs) $7,317 $7,050 $13,488 $10,273
Total Opex (Incl. Restructuring Costs) per Day $236 $235 $435 $342
MPD – – – –
Fleet spare 837 418 316 543
Operational capex – – – 169
Constrction capex – – – –
5-year SPS – – – –
Forecast Capex $837 $418 $316 $712
Total Forecast Opex and Capex $8,154 $7,468 $13,804 $10,984
Total Forecast Opex and Capex per Day $263 $249 $445 $366
Plus: Cushion (10%) 815 747 1,380 1,098
Revised Opex and Capex Cap (To be Transferred at end of Current Month)(1)$8,969 $8,214 $15,184 $12,083
Revised Opex and Capex Cap per Day (To be Transferred at end of Current Month) $289 $274 $490 $403
(1) Transfer will occur at the end of the month with the amounts established under the new caps.
Confidential
2022 – Revised Caps (Dollar Amount) (Cont’d)
8
($ in US 000s)
Tay IV Mar-16 Apr-16 May-16 Jun-16
Salary $326 $315 $326 $315
Bonus – – – –
Crew Change/Training 41 40 37 36
Catering 26 25 26 25
Repairs & Maintenance 143 138 143 138
Opex Project – – – –
Logistics 31 30 31 30
Rig Insurance 86 902 – 874
Other Costs 845 818 353 342
Onshore Support + TAC – – – –
Demobilization cost 1,882 1,436 1,314 1,363
Transfer to Tenerife – 1,200 2,800 –
Cold stack process – – – –
Total Opex $3,380 $4,904 $5,029 $3,123
Total Opex per Day $109 $163 $162 $104
Restructuring Costs 138 222 1,886 989
Total Opex (Incl. Restructuring Costs) $3,517 $5,126 $6,915 $4,112
Total Opex (Incl. Restructuring Costs) $113 $171 $223 $137
MPD – – – –
Fleet spare – – – –
Operational capex – – – –
Constrction capex 838 325 208 237
5-year SPS – – – –
Forecast Capex $838 $325 $208 $237
Total Forecast Opex and Capex $4,356 $5,451 $7,123 $4,348
Total Forecast Opex and Capex per Day $141 $182 $230 $145
Plus: Cushion (10%) 436 545 712 435
Revised Opex and Capex Cap (To be Transferred at end of Current Month) (1)$4,791 $5,996 $7,836 $4,783
Revised Opex and Capex Cap per Day (To be Transferred at end of Current Month) $155 $200 $253 $159
(1) Transfer will occur at the end of the month with the amounts established under the new caps.
Confidential
B. 2021 Revised Caps
9
Confidential
2021 – Revised Caps (Dollar Amount)
10
($ in US 000s)
Norbe VIII Mar-16 Apr-16 May-16 Jun-16
Salary $1,186 $1,147 $1,186 $1,147
Bonus – – 800 –
Crew Change/Training 351 223 199 174
Catering 117 114 117 114
Repairs & Maintenance 1,133 723 649 569
Opex Project 2,017 1,291 1,161 1,019
Logistics 552 350 314 275
Rig Insurance 86 802 – 878
Other Costs 167 161 167 161
Onshore Support + TAC 490 440 467 435
Total Opex $6,099 $5,252 $5,060 $4,772
Total Opex per Day $197 $175 $163 $159
Restructuring Costs 138 222 1,886 989
Total Opex (Incl. Restructuring Costs) $6,237 $5,473 $6,946 $5,761
Total Opex (Incl. Restructuring Costs) per Day $201 $182 $224 $192
MPD – – – –
Fleet spare – – – –
Operational capex – – – –
Constrction capex – – – –
5-year SPS 1,487 4,218 1,012 716
Adjustment for Capex Not Paid using Caps (1,487) (3,511) – –
Forecast Capex $– $707 $1,012 $716
Total Forecast Opex and Capex $6,237 $6,180 $7,957 $6,477
Total Forecast Opex and Capex per Day $201 $206 $257 $216
Plus: Cushion (10%) 624 618 796 648
Revised Opex and Capex Cap (To be Transferred at end of Current Month)(1)$6,860 $6,798 $8,753 $7,125
Revised Opex and Capex Cap per Day (To be Transferred at end of Current Month) $221 $227 $282 $237
(1) Transfer will occur at the end of the month with the amounts established under the new caps.
Confidential
2021 – Revised Caps (Dollar Amount) (Cont’d)
11
($ in US 000s)
Norbe IX Mar-16 Apr-16 May-16 Jun-16
Salary $1,242 $1,202 $1,242 $1,202
Bonus – – 800 –
Crew Change/Training 180 174 180 174
Catering 117 114 117 114
Repairs & Maintenance 1,212 686 743 569
Opex Project 1,982 1,126 1,219 936
Logistics 591 332 360 275
Rig Insurance 86 769 – 855
Other Costs 176 171 176 171
Onshore Support + TAC 490 440 467 435
Total Opex $6,075 $5,013 $5,305 $4,730
Total Opex per Day $196 $167 $171 $158
Restructuring Costs 138 222 1,886 989
Total Opex (Incl. Restructuring Costs) $6,213 $5,235 $7,191 $5,719
Total Opex (Incl. Restructuring Costs) per Day $200 $174 $232 $191
MPD – – – –
Fleet spare – – – 92
Operational capex – – – 185
Constrction capex – – – –
5-year SPS 1,689 634 1,043 1,819
Adjustment for Capex Not Paid using Caps (467) – – –
Forecast Capex $1,222 $634 $1,043 $2,096
Total Forecast Opex and Capex $7,435 $5,868 $8,234 $7,814
Total Forecast Opex and Capex per Day $240 $196 $266 $260
Plus: Cushion (10%) 743 587 823 781
Revised Opex and Capex Cap (To be Transferred at end of Current Month)(1)$8,178 $6,455 $9,057 $8,596
Revised Opex and Capex Cap per Day (To be Transferred at end of Current Month) $264 $215 $292 $287
(1) Transfer will occur at the end of the month with the amounts established under the new caps.
Confidential
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Copyright © 2016, PJT Partners LP (and its affiliates, as applicable). 12
Company Profile September 2015
Norbe IX
Management Presentation
February 2016*
Norbe IX Drillship
Confidential Settlement Communication Subject to FRE 408
*Presentation originally made on the date indicated and, except as specifically noted, has not been updated to reflect recent developments or ongoing discussions.
2 2
Agenda
OOG Operation
Capital Structure Considerations
Confidential Settlement Communication Subject to FRE 408
3
Operating Performance Overview
• OOG’s management team has made significant progress over the last two years in improving operating
performance
• As of January 28, 2016, OOG is ranked 4th out of 14 operators according to Petrobras
• Ranked 1st on those operating 3 rigs or more
• OOG’s performance has improved five places since December 2014
• Four of the six individual operating assets are in the top half of performance
• OOG has continued to improve its standing across several metrics:
• Punch list items (compliance items) have declined by 70+% over the last three years (January 2013 to
January 2016)
• Safety indicators (frequency rate of recordable incidents) have declined by 55+% over last three years
(December 2012 to December 2015)
• Operational uptimes have increased each year over last three years (from 80.6% in 2012 to 93.1% in 2015)
• Since December 13th, 2014, OOG has improved from 9th to 4th on the list of competitors regarding a series of
operational initiatives
Confidential Settlement Communication Subject to FRE 408
4
Performance Indicators
9.489.50
9.11
8.86
Dec/14
Dec/15
Dec/12
Dec/13
In Jan/15
9.50
9.23
Average
Maximum
Note: numbers are out of a possible score of 10 (i.e. 9.50 out of 10; the higher the better)
Confidential Settlement Communication Subject to FRE 408
5
Performance Indicators Operational Uptime – 6 rigs (12 month average)
93.1%92.7%
88.7%
80.6%
Dec/15
Dec/13
Dec/12
Dec/14
In Oct/15
Note: Performance score out of a total potential score of 100% (i.e. 80.6% out of 100%; the higher the better). For Dec/15, the Operational Uptime includes 27 days of dockage for N6.
Maximum
Average
95.0%
91.4%%
Confidential Settlement Communication Subject to FRE 408
6
Performance Indicators Downtime Events (# days) – 6 rigs
Note: Dec/15 Op. Uptime considers 27 of docking days (N6)
Unit: # days
149.7 Op. Uptime 93.1%
Op. Uptime 88.7%
Downtime Days
218.1
2015 2013
158.6 Op. Uptime 92.7%
2014
Norbe VI downtime event is under dispute
(18.9 days)
Downtime Days
Downtime Days
Note: Dec/15 Operational Uptime includes 27 of docking days (N6). Lower downtime is better.
Confidential Settlement Communication Subject to FRE 408
7
Performance Indicators Opex – 6 rigs average (annual total)
$178.7
$162.6 $168.5
$147.3
2012 2013 2014 2015
Unit: USD K/day
Confidential Settlement Communication Subject to FRE 408
8 8
Agenda
OOG Operations
Capital Structure
Considerations
Confidential Settlement Communication Subject to FRE 408
9
LCs Guarantees for the Project Bonds Maturity Schedule as of April 25, 2016
• Below is a summary of all outstanding letters of credit that support the ‘21 and ‘22 Notes
Confidential Settlement Communication Subject to FRE 408
Amount
(USD k)
Norbe VIII O&M LC Citibank 19-Dec-16 10.695
Norbe IX O&M LC Citibank 19-Dec-16 10.695
Total O&M 21.390
Norbe VIII DSRA Ins. w/ LC Swiss Re 15-May-16 40.386
Norbe IX DSRA Ins. w/ LC Swiss Re 15-May-16 39.976
Total DSRA 80.363
101.753
248.962 Total '21 + '22
Total LCs 21s
Project Account Type Issuer MaturityAmount
(USD k)
ODN Tay IV O&M LC CA-CIB 24-Jun-16 11.020
ODN I & II O&M Insurance Swiss Re 01-Aug-16 28.152
Norbe VI O&M Insurance Swiss Re 01-Aug-16 14.076
Total O&M 53.248
ODN Tay IV DSRA LC Swiss Re 06-Aug-16 93.961
Bond '22 DSRA Insurance Total DSRA 93.961
147.209 Total LCs 22s
Project Account Type Issuer Maturity
9
10
OOG Debt Overview
Since OOG began operating the 2021 Assets and 2022 Assets, OOG has made significant contributions to fund those assets’ operations
- OOG contributions have been required to continue funding for ongoing operations for the following items:
o Opex requirements above the opex cap (as set in the indentures)
o Capital expenditures
o Equity injections to fund the ramp up of the rigs
o Shortfalls to cover debt service
From bond issuance to December 2015, OOG has funded the aggregate net shortfalls of more than $705 million of operating expenses, capital expenditures, debt service and downtime/non schedule stoppages
Approximate OOG Funding to Date
(USD$ in k)
2021 Structure 2010 2011 2012 2013 2014 2015
Dividends $– $64,116 $32,135 $21,306 $31,877 $20,911
Equity Injections – (284,528) (40,368) (47,453) (76,021) (59,304)
Net Equity Investment $– ($220,411) ($8,233) ($26,147) ($44,144) ($38,393)
2022 Structure
Dividends including Reimbursements $– $– $20,486 $319,661 $179,495 $72,713
Equity Injections (40,994) (104,896) (197,949) (245,465) (131,513) (128,791)
Net Equity Investment ($40,994) ($104,896) ($177,462) $74,196 $47,982 ($56,078)
Total Net Equity Investment ($40,994) ($325,307) ($185,695) $48,049 $3,838 ($94,471)
Allocated Interest Costs – (4,251) (11,982) (27,094) (30,981) (36,389)
Corporate Funding Requirements ($40,994) ($329,558) ($197,676) $20,955 ($27,144) ($130,860)
Cumulative Net Equity Investment ($40,994) ($370,552) ($568,229) ($547,274) ($574,418) ($705,278)
Confidential Settlement Communication Subject to FRE 408
11
OOG Debt Costs & Maintenance Issues
Main Causes Main Effects
Labor Costs During 2010-2014, high oil prices (over US$100/bbl) encouraged Upstream Capex growth. As a result, global drilling companies expanded their fleet quickly. During this period, Petrobras announced the pre-salt discoveries and an aggressive expansion of its drilling fleet.
When the rigs that were awarded by Petrobras’ in 2006 and 2008 started operations, payroll began increasing considerably above global inflation and especially in Brazil – where local content rules put pressure in a small specialized workforce pool.
Suppliers Led by the Upstream growth, specialized equipment suppliers began increasing their prices throughout the period and started to subcontract equipment parts throughout the world without proper supervision.
As a result, even with increased lead-times, suppliers constantly delivered with delays and with quality problems, premature failures and many downtime and claims.
Maintenance Costs The Macondo accident has raised a new standard that now requires stricter maintenance rules regarding well control equipment. Thus, demand for subsea parts and services has inflated the costs in the market.
After disasters like the Macondo, the Chevron oil spill, the fire in Cidade de São Mateus FPSO, the ANP (a Brazilian Regulator) has increased the requirements related to technical inspections.
The maintenance plan also includes an increased budget for preventative maintenance in order to reduce downtime.
Tax Importation Regime Changes in REPETRO rules (imposed in Dec/2013) removed tax breaks for equipment with cost below US$25k, which has contributed to a cost-increased in importation
Exchange Rate The Project Exchange Rate Cap of 2:1 does not reflect the current exchange rate scenario of ~4:1
Confidential Settlement Communication Subject to FRE 408
• Below is a summary of cost and maintenance issues that have impacted funding needs
12
6
101
76
156
26 28 27 27
0
20
40
60
80
100
120
140
160
180
200
Short-Term 2016 2017 2018 2019 2020 2021 2022 ≥ 2023
US
D m
illi
on
Perpetual Bond Corporate Debt
550
OOG Debt Schedule Confidential Settlement Communication Subject to FRE 408
13
Appendix
Confidential Settlement Communication Subject to FRE 408
14
Historical Data Background
• From 2004 to 2014, Oil and Drilling companies were impacted by the growth in oil prices and upstream capex
• While revenues increased, margins declined resulting in the same level of EBITDA
Source: Companies data/Thomson Reuters. 1) Includes the majors BP, Chevron, Exxon, Shell and Total. 2) Includes drillers operating since 2004 (Diamond, Ensco, Noble, Odfjell and Transocean).
-
100,000
200,000
300,000
400,000Revenues
10.0%
12.0%
14.0%
16.0%
18.0%
20.0%EBITDA Margin
-
1,000
2,000
3,000
4,000
5,000
Revenues
0.0%
20.0%
40.0%
60.0%
EBITDA Margin
Oil Co’s¹ Drillers²
USD MM
USD MM
Confidential Settlement Communication Subject to FRE 408
15
Historical Data Background
• The below report from IHS addresses the pressure on costs as Odebrecht was ramping up its operations
Source: IHS. Press release and chart freely available on https://www.ihs.com/info/cera/ihsindexes/
Confidential Settlement Communication Subject to FRE 408
16
147
193
169
123
127
118
118
131
Opex Per Rig per Day¹ Rigs Considered
• 6 Ultra-deepwater
• 12 Ultra-deepwater • 7 Deepwater • 9 Midwater
• 18 Ultra-deepwater • 5 Deepwater • 3 Midwater
• 17 Floaters • 14 Jack-ups
• 23 Floaters • 21 Jack-ups
• 37 UDW e Deepwater • 17 Midwater • 10 Jack-ups
Location
• Brazil
• Global
• Global
• Global • No operation in Africa
• Global
• Global
Avg Opex: 141 MM
Performance Indicators Opex Benchmark
Source: Companies data/Thomson Reuters; Odebrecht analysis. 1) Odebrecht’s data is FY15. Other companies’ data is 3Q15 and calculated as follows: (Operating costs + SG&A) ÷ Active Fleet ÷ 273 days (9 months).
• 7 Ultra-deepwater
• 11 Ultra-deepwater
• Mexico and Nigeria
• Angola, Norway, Brazil and West Africa
High Spec Rigs Comparable Players
• The data available for comparison between daily opex of the rigs should be considered as only a proxy since they are not precise due to the following issues:
Geographic location of the rigs
Portfolio of rigs (Water depth, weather conditions)
Methodology/Capitalization of asset maintenance and other expenses
Confidential Settlement Communication Subject to FRE 408
17
Historical Opex of each Vessel
When the ‘21 Notes were issued (Nov ‘10), the expectation was that the synergies from operating the fleet would reduce
costs over time. After operations began, OOG faced constantly increasing costs. This assumption was addressed when the
22’s Notes were issued (Aug ‘13)
(USD$ 000s per Day) 2011 2012 2013 2014 Dec15 Dec15 YTD
2022 Assets
ODN I
Personnel Costs N/A N/A $84 $77 $67 $68
Repairs, Maintenance, Logistics N/A N/A 26 31 23 26
Other Costs N/A N/A 49 52 44 58
Total N/A N/A $159 $161 $134 $152
ODN II
Personnel Costs N/A N/A $78 $74 $53 $62
Repairs, Maintenance, Logistics N/A N/A 25 29 18 21
Other Costs N/A N/A 43 46 43 53
Total N/A N/A $145 $150 $114 $136
Norbe VI
Personnel Costs N/A N/A $78 $77 $76 $66
Repairs, Maintenance, Logistics N/A N/A 37 42 7 17
Other Costs N/A N/A 46 45 106 90
Total N/A N/A $161 $163 $189 $173
Tay IV
Personnel Costs N/A N/A $77 $80 $17 $66
Repairs, Maintenance, Logistics N/A N/A 109 50 (6) 44
Other Costs N/A N/A 42 41 81 38
Total N/A N/A $228 $171 $92 $148
2021 Assets
Norbe VIII
Personnel Costs $81 $87 $86 $85 $58 $67
Repairs, Maintenance, Logistics 39 39 41 94 69 54
Other Costs 28 52 53 52 36 29
Total $148 $179 $179 $231 $163 $150
Norbe IX
Personnel Costs $82 $85 $83 $79 $66 $69
Repairs, Maintenance, Logistics 13 38 27 35 46 44
Other Costs 29 50 50 39 37 30
Total $124 $173 $160 $153 $149 $143
Confidential Settlement Communication Subject to FRE 408
18
Historical Capex of each Vessel
Historical Capex to Date
(USD$ in k)
2022 Assets 2011 2012 2013 2014 2015
ODN I & II $– $16,314 $19,940 $17,718 $30,914
Norbe VI 2,626 5,454 1,621 8,788 29,937
Tay IV – – 20,255 31,431 35,160
Total $2,626 $21,768 $41,816 $57,937 $96,012
2021 Assets
Norbe VIII $– $– $328 $2,814 $3,879
Norbe IX – 0 1,628 7,153 5,848
Total $– $0 $1,956 $9,967 $9,727
Important capex information:
2014: ODN I&II – 70% came from the Managed Pressure Drilling (“MPD”) Norbe VI – 75% came from the MPD ODN Tay IV – 70% came from (unscheduled) stoppage
2015: ODN I&II – 70% came from the MPD Norbe VI – 40% came from the MPD, 32% from (scheduled) stoppage ODN Tay IV – 80% came from (unscheduled) stoppage,
Notes: Construction costs: overall, these are acceptance costs disbursed after the rig started operations Fleet spare: main equipments such as riser, top drive, BOP and etc Operational capex: specific costs such as pendency with Petrobras
Confidential Settlement Communication Subject to FRE 408
19
Historical Financial and Cash Flow of each Vessel
Onshore Revenue Acct (BRL '000) 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15
Initial Balance - - - - - - - -
Project Revenues 23.787 23.399 23.749 26.411 24.079 19.850 28.857 15.132
Net Service 23.787 23.399 23.749 26.411 24.079 19.850 28.857 15.132
Outflow (23.787) (23.399) (23.749) (26.411) (24.079) (19.850) (28.857) (15.132)
O&M Expenses under opex allowance (23.787) (23.399) (23.749) (26.411) (24.079) (19.850) (28.857) (15.132)
Final Balance - - - - - - - -
Offshore Proceeds Acct (USD '000) 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15
Initial Balance 6.564 6.206 4.684 4.498 6.524 1 6.541 6.590
Project Revenues 19.352 17.415 16.876 21.887 13.289 22.665 26.275 12.775
Charter 19.352 17.415 16.876 20.295 13.288 20.285 19.275 12.314
I/L ODN Tay IV - - - - - 2.380 - -
I/L ODN I GmbH - - - - - - - 461
Outflow (19.709) (18.937) (17.063) (19.860) (19.812) (16.125) (26.226) (19.365)
Debt Service (13.923) (12.730) (14.307) (14.610) (14.840) (14.125) (14.747) (14.737)
Amounts Transferred to O&M Service Accounts (1.500) (1.500) (1.500) (1.500) (1.000) (2.000) (1.500) (1.500)
I/L ODN Tay IV - - - (3.750) - - (9.979) (2.974)
Transfers to other Accounts (371) - - - - - - -
Transfer to Offshore Distribution Holding Acct (3.915) (4.708) (1.256) - (3.972) - - -
Final Balance 6.206 4.684 4.498 6.524 1 6.541 6.590 (0)
Offshore Distribution Holding Acct (USD '000) 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15
Initial Balance - - - 1.256 1.256 5.228 5.228 -
Project Revenues 3.915 4.708 1.256 - 3.972 - - -
Transfer from Offshore Proceeds Acct 3.915 4.708 1.256 - 3.972 - - -
Outflow (3.915) (4.708) - - - - (5.228) -
Transfer to Offshore Distribution Acct (3.915) (4.708) - - - - (5.228) -
Final Balance - - 1.256 1.256 5.228 5.228 - -
Norbe VI
Confidential Settlement Communication Subject to FRE 408
20
Historical Financial and Cash Flow of each Vessel
ODN I GmbH Onshore Revenue Acct (BRL '000) 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15
Initial Balance 0 - - - - - - - -
Project Revenues 15.072 9.895 7.229 9.023 12.358 11.953 12.331 10.993 12.121
Net Service 15.051 9.827 7.229 9.023 12.358 11.953 12.331 10.993 12.121
Payment adjustment from Petrobras 21 67 - - - - - - -
Outflow (15.089) (9.895) (7.229) (9.023) (12.358) (11.953) (12.331) (10.993) (12.121)
O&M Expenses under opex allowance (15.089) (9.895) (7.229) (9.023) (12.358) (11.953) (12.331) (10.993) (12.121)
Final Balance - - - - - - - - -
ODN I GmbH Offshore Proceeds Acct (USD '000) 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15
Initial Balance - 15.207 15.219 5.774 16.192 13.916 13.041 21.517 16.312
Project Revenues 102.673 60.750 51.861 62.600 64.280 63.457 59.747 59.610 63.594
Charter 102.673 60.379 51.861 53.370 64.280 63.457 56.247 58.939 61.140
Payment adjustment from Petrobras - 371 - 326 - - - - -
DSME - - - - - - 3.500 671 -
Equity Contribution for Debt Service/SOISA - - - 8.905 - - - - -
Transfer from Debt Service Reserve Account - - - - - - - - 2.454
Outflow (87.465) (60.738) (61.306) (52.182) (66.555) (64.332) (51.271) (64.815) (77.076)
Debt Service (44.939) (35.177) (28.794) (30.936) (31.214) (33.294) (30.696) (33.435) (33.918)
Amounts Transferred to O&M Service Accounts (30.530) (19.003) (21.834) (21.247) (18.436) (19.576) (18.541) (13.287) (20.658)
I/L ODN Tay IV - - - - - - - (4.977) (21.732)
I/L Norbe VI - - - - - - - - (461)
Transfer to Debt Service Reserve Account - - - - - - (1.526) (928) -
Transfer to O&M Service Reserve Account - - - - - - - - (306)
Transfer to Offshore Distribution Holding Acct (11.997) (6.557) (10.678) - (16.905) (11.462) (508) (12.188) -
Final Balance 15.207 15.219 5.774 16.192 13.916 13.041 21.517 16.312 2.831
ODN I GmbH Offshore Distribution Holding Account - USD 000 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15
Initial Balance - - - - - 16.905 28.367 28.876 -
Project Revenues 11.997 6.557 10.678 - 16.905 11.462 508 12.188 -
Transfer from Offshore Proceeds Acct 11.997 6.557 10.678 - 16.905 11.462 508 12.188 -
Outflow (11.997) (6.557) (10.678) - - - - (41.064) -
Transfer to Offshore Distribution Acct (11.997) (6.557) (10.678) - - - - (41.064) -
Final Balance - - - - 16.905 28.367 28.876 - -
ODN I GmbH
Confidential Settlement Communication Subject to FRE 408
21
Historical Financial and Cash Flow of each Vessel
ODN Tay IV
ODN Tay IV Onshore Revenue Acct (BRL '000) 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15
Initial Balance - - - - - - -
Project Revenues - - 1.115 2.713 5.909 - -
Net Service - - 1.115 2.713 5.478 - -
Payment adjustment from Petrobras - - - - 430 - -
Outflow - - (1.115) (2.713) (5.909) - -
O&M Expenses under opex allowance - - (1.115) (2.713) (5.909) - -
Final Balance - - - - - - -
ODN Tay IV Offshore Proceeds Acct (USD '000) 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15
Initial Balance - - 0 5.781 5.031 4.380 0
Project Revenues 36.516 30.188 35.152 28.926 26.819 14.956 32.480
Charter 36.516 611 20.549 28.926 26.819 - -
I/L Norbe VI - - 3.750 - - 9.979 2.974
I/L ODN I GmbH - - - - - 4.977 21.732
Equity Contribution for Debt Service/SOISA - 25.798 10.854 - - - -
Transfer from Loss Proceeds and Compensation Account - 3.780 - - - - -
Transfer from Sinking Fund - - - - - - 7.774
Outflow (36.516) (30.188) (29.371) (29.677) (27.470) (19.335) (32.480)
Debt Service (16.791) (16.924) (17.218) (17.120) (9.653) (17.052) (17.848)
Amounts Transferred to O&M Service Accounts (15.088) (13.265) (12.152) (11.624) (9.733) (2.284) (14.563)
I/L Norbe VI - - - - (2.380) - -
Transfer to O&M Service Reserve Account - - - - - - (69)
Transfer to Offshore Distribution Holding Acct (4.636) - - (933) (5.705) - -
Final Balance - 0 5.781 5.031 4.380 0 0
ODN Tay IV Offshore Distribution Holding Account - USD '000 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15
Initial Balance - - - - 933 6.638 -
Project Revenues 4.636 - - 933 5.705 - -
Transfer from Offshore Proceeds Acct 4.636 - - 933 5.705 - -
Outflow (4.636) - - - - (6.638) -
Transfer to Offshore Distribution Acct (4.636) - - - - (6.638) -
Final Balance - - - 933 6.638 - -
Confidential Settlement Communication Subject to FRE 408
22
Historical Financial and Cash Flow of each Vessel
Norbe VIII
Dates 2S11 1S12 2S12 1S13 2S13 1S14 2S14 1S15 2S15
USD 000
Offshore Receipts Acct
Project Revenues 82.189 53.992 66.863 65.445 53.102 54.811 61.600 67.726 68.722
Outflows (92.501) (53.993) (66.862) (65.445) (53.880) (54.812) (61.599) (64.675) (68.724)
Debt Service (39.010) (30.993) (38.292) (41.583) (40.984) (40.386) (39.788) (42.959) (46.010)
SOISA (18.165) (20.559) (16.425) (16.527) (12.896) (13.194) (12.411) (10.846) (11.619)
Dividends (Distr. Holding Acc) (35.325) (2.441) (12.144) (7.334) - (1.232) (9.400) (10.871) (11.095)
Dates 2S11 1S12 2S12 1S13 2S13 1S14 2S14 1S15 2S15
BRL 000
Onshore Proceeds and Service Acct
Project Revenues 4.161 9.144 6.784 7.733 10.530 11.378 17.497 17.426 15.856
OOG O&M Service Accounts (4.161) (9.144) (6.784) (7.733) (10.530) (11.378) (17.497) (17.426) (15.856)
Dates 2S11 1S12 2S12 1S13 2S13 1S14 2S14 1S15 2S15
USD 000
Offshore Receipts Acct
Project Revenues 58.413 58.885 64.841 61.479 65.731 64.535 66.184 68.188 58.565
Outflows (74.687) (58.886) (64.839) (61.479) (56.990) (64.533) (66.184) (65.168) (61.232)
Debt Service (38.615) (30.679) (37.904) (41.161) (40.569) (39.976) (39.384) (42.523) (45.543)
SOISA (7.282) (20.122) (17.470) (15.771) (15.739) (16.171) (13.941) (12.605) (13.025)
Dividends (Distr. Holding Acc) (28.791) (8.085) (9.465) (4.547) (9.425) (8.386) (12.858) (10.040) (2.664)
Dates 2S11 1S12 2S12 1S13 2S13 1S14 2S14 1S15 2S15
BRL 000
Onshore Proceeds and Service Acct
Project Revenues - 9.993 11.840 9.537 10.922 8.778 12.631 15.091 11.959
OOG O&M Service Accounts - (9.993) (11.840) (9.537) (10.922) (8.778) (12.631) (15.091) (11.959)
Norbe IX
Confidential Settlement Communication Subject to FRE 408
23
Forecasted Opex of each Vessel (21’s)
Note: Opex data shown above is based on accrual accounting. Additionally, unlike the forecast in the business plan, the data above is not (i) adjusted for inflation nor (ii) reduced by the social security tax that results from the credit generated by Petrobras deductions of the Services Agreement. Actual results may differ from forecasts.
2016 2017 2018 2019 2020 2021
(USD$ 000s per Year)
2021 Assets
Norbe VIII
Personnel Costs $20,278 $21,144 $21,944 $22,739 $23,584 $24,318
Repairs, Maintenance, Logistics 6,943 7,215 7,460 7,704 7,961 8,189
Other Costs 26,977 21,199 19,445 22,356 27,935 28,768
Total $54,198 $49,558 $48,849 $52,798 $59,480 $61,274
Norbe IX
Personnel Costs $20,993 $21,859 $22,651 $23,439 $24,275 $25,006
Repairs, Maintenance, Logistics 6,943 7,217 7,464 7,710 7,970 8,200
Other Costs 25,979 21,424 21,498 22,069 28,768 29,644
Total $53,915 $50,501 $51,613 $53,219 $61,013 $62,850
Confidential Settlement Communication Subject to FRE 408
24
Forecasted Opex of each Vessel (22’s)
2016 2017 2018 2019 2020 2021 2022
(USD$ 000s per Year)
2022 Assets
ODN I
Personnel Costs $20,834 $21,700 $22,493 $23,282 $24,119 $24,850 $25,555
Repairs, Maintenance, Logistics 6,943 7,209 7,446 7,682 7,931 8,153 8,369
Other Costs 22,147 28,257 20,803 23,109 25,608 26,323 26,444
Total $49,924 $57,166 $50,741 $54,073 $57,658 $59,326 $60,369
ODN II
Personnel Costs $19,870 $20,732 $21,532 $22,326 $23,172 $23,903 $24,605
Repairs, Maintenance, Logistics 6,943 7,211 7,450 7,689 7,941 8,165 8,383
Other Costs 21,335 24,090 22,367 23,930 24,902 25,592 25,693
Total $48,148 $52,033 $51,348 $53,945 $56,014 $57,660 $58,681
Norbe VI
Personnel Costs $19,694 $20,556 $21,358 $22,154 $23,003 $23,735 $24,437
Repairs, Maintenance, Logistics 6,943 7,204 7,435 7,666 7,909 8,127 8,339
Other Costs 24,054 20,685 22,177 24,959 29,322 30,207 31,032
Total $50,692 $48,446 $50,971 $54,779 $60,234 $62,069 $63,808
Tay IV
Personnel Costs $13,054 $21,040 $21,854 $22,662 $23,523 $24,266 $24,979
Repairs, Maintenance, Logistics 0 6,278 6,483 6,687 6,902 7,094 7,281
Other Costs 7,006 25,653 16,161 16,714 17,288 17,794 18,285
Total $20,060 $52,972 $44,498 $46,062 $47,712 $49,154 $50,545
Confidential Settlement Communication Subject to FRE 408
Note: Opex data shown above is based on accrual accounting. Additionally, unlike the forecast in the business plan, the data above is not (i) adjusted for inflation nor (ii) reduced by the social security tax that results from the credit generated by Petrobras deductions of the Services Agreement. Actual results may differ from forecasts.
25
Forecasted Capex of each Vessel
US$ in K
Norbe VI 2015 (Sep-Dec) 2016 2017 2018 2019 2020 2021 2022
Total $20,771 $12,818 $7,150 $3,121 $52,620 $9,936 $4,688 $4,688
ODN I 2015 (Sep-Dec) 2016 2017 2018 2019 2020 2021 2022
Total $8,200 $5,539 $11,189 $11,853 $8,009 $3,931 $4,688 $36,018
ODN II 2015 (Sep-Dec) 2016 2017 2018 2019 2020 2021 2022
Total $10,170 $4,449 $16,547 $18,719 $3,804 $927 $4,688 $36,018
ODN Tay IV 2015 (Sep-Dec) 2016 2017 2018 2019 2020 2021 2022
Total $23,530 $4,567 $2,390 $1,526 $2,158 $1,411 $4,688 $22,818
Norbe VIII 2015 (Sep-Dec) 2016 2017 2018 2019 2020 2021 2022
Total $2,378 $11,822 $18,985 $4,467 $4,233 $37,055 $4,688 $4,688
Norbe IX 2015 (Sep-Dec) 2016 2017 2018 2019 2020 2021 2022
Total $1,573 $20,680 $3,943 $3,276 $2,242 $37,293 $4,688 $4,688
Confidential Settlement Communication Subject to FRE 408
Note: Actual results may differ from forecasts.
26
Performance Indicators Downtime Events Classification
Subsea: BOP and Tree Transporters, BOP Controls (Electric), BOP Controls (Hydraulic), BOP Overhead Cranes, BOP Stack, C & K Manifold & Hoses, Diverter System, Marine Riser (inc Slip Joint), Miscellaneous Subsea, Motion Compensator, Tensioners, Riser or Guideline
Drilling: Drawworks, Top Drive (DDM), Wash Pipe Swivel Packing, Saver Sub, Crown/Traveling Block, Pipe Handling VPH - LGA or BRC, Iron Roughneck, HPU, Drilling Controls, Other Drill Floor, Mud Pumps, Mud Process System, CMC
Dynamic Position: DP System/Station Keeping, Thrusters/Thruster controls, Other (If equip not listed)
Power Generation: Power, Prime Movers, Controls, SCR's
Docking Days
Others: Petrobras Dispute, Equipment Failure, Planned PM, Human Error, Instrumentation, Deck Cranes, Anchors, Wires, Chains, Mooring Winches, Riser Handling Crane, Mooring Winches
Note: Actual results may differ from forecasts.
Confidential Settlement Communication Subject to FRE 408
Confidential Settlement Communication Subject to FRE 408
Project Orion PROPOSALS COMPARISON
January 29, 2016*
*Presentation originally made on the date indicated and has not been updated to reflect recent developments or ongoing discussions. Moreover, in light of ongoing negotiations with Petrobras that involve the charter and services agreements supporting these bonds, the content of this presentation is no longer relevant.
Confidential Settlement Communication Subject to FRE 408
Proposal Comparison Summary
1
Company Proposal (January 7) Bondholder Proposal (January 22) Company Proposal (January 29)
2021 Notes 2022 Notes 2021 Notes 2022 Notes 2021 Notes 2022 Notes
Transaction Structure
> Offer to exchange both classes of notes for new notes with amended terms (as described below)
> Existing Notes will be exchanged for (i) New 2021, 2022 Secured Notes (respectively) and (ii) New Convertible Unsecured Notes (each as described below)
> Modify structure to cover opex and capex
> Eliminate LCs, reserve accounts, and exchange rate caps
> Offer to exchange both classes of notes for new notes with amended terms (as described below)
> All revenues (charter + services) to flow through the respective project structures
> Modify but do not collapse current structures, and enhance collateral package as described below
> Eliminate exchange rate caps and modify OpEx caps to allow structures to fund all expenses (i.e., OpEx + CapEx) up to levels TBD based on the Company’s business plan(1)
> Minimum participations: [95]%
> Same as Bondholder Proposal (January 22)
> Same
> Same
> Same
> Minimum participations: [TBD%]
Principal Balance of
Secured Note
> $883 million (75% of principal, remaining 25% converted to New Convertible Unsecured Notes)
> $1,327 million (65% of principal, remaining 35% converted to New Convertible Unsecured Notes)
> Starting balance of: $1,178mm(2) (no discount)
> Starting balance of: $2,041mm(2) (no discount)
> Same
> Same
Fixed Amortization
> $20 million per annum
> $25 million per annum, beginning the later of 1/1/2017 or ODN Tay IV re-charter date
> $25 million per annum
> $20 million per annum, beginning 1/1/2017
> Same > Same
(1) Additional due diligence and benchmarking of company’s OpEx and CapEx will be required. No further obligations from OOG beyond such levels. (2) Starting balances as of March 31, 2016 after accounting for scheduled amortization payments made in December 2015 and March 2016.
Confidential Settlement Communication Subject to FRE 408
Proposal Comparison Summary (Cont’d)
2
Company Proposal (January 7) Bondholder Proposal (January 22) Company Proposal (January 29)
2021 Notes 2022 Notes 2021 Notes 2022 Notes 2021 Notes 2022 Notes
Variable Amortization
and Cash Sweeps
> 60% of excess cash flow after interest and fixed amortization (“ECF”)(1) applied to variable amortization
> 40% of ECF provided to Odebrecht Oil & Gas (“ParentCo”) to allow it to remain a viable entity (the “ParentCo ECF Sweep”)
- 30% of such amount held in reserve released to OOG on pro rata basis for the amount of scheduled amortization of existing OOG debt that is reduced
- 70% of such amount is released to OOG to fund OOG debt cash interest payments
> ECF Sweep tested quarterly, subject to carryforward and carryback structuring
> 85% of ECF applied to variable amortization
> 15% of ECF provided to Odebrecht Oil & Gas (“ParentCo”) to allow it to remain a viable entity (the “ParentCo ECF Sweep”)
> ParentCo ECF Sweep tested quarterly; not subject to carryforward or carryback structuring
> 60% of ECF applied to variable amortization
> 40% of ECF provided to Odebrecht Oil & Gas (“ParentCo”) to allow it to remain a viable entity (the “ParentCo ECF Sweep”)
> Same as Bondholder Proposal (January 22)
Drydock Accrual Reserve
> $0.75 million per quarter, subject to $10 million cap
> Allow usage on drydock expenses as well as other extraordinary capex items TBN
> $1.50 million per quarter, subject to $20 million cap
> Allow usage on drydock expenses as well as other extraordinary capex items TBN
> $1.50 million per quarter
> $3.00 million per quarter
> $1.50 million per quarter with a release mechanism TBN
> Allow usage on drydock expenses as well as other extraordinary capex items TBN
> $3.00 million per quarter with a release mechanism TBN
> Allow usage on drydock expenses as well as other extraordinary capex items TBN
Interest Rate
> 7% cash interest (quarterly)
> 7% cash interest (quarterly)
> 7% cash interest (quarterly)
> 1% PIK interest (quarterly)
> 7% cash interest (quarterly)
> 1% PIK interest (quarterly)
> 7% cash interest (quarterly)
> 7% cash interest (quarterly). 100% PIK interest in Q2 – Q4 2016
(1) ECF is Unlevered Free Cash Flow less Cash Interest less Fixed Amortization less Drydock Accrual Reserve additions / (releases) less Sinking Fund Account additions / releases.
Confidential Settlement Communication Subject to FRE 408
Proposal Comparison Summary (Cont’d)
3
Company Proposal (January 7) Bondholder Proposal (January 22) Company Proposal (January 29)
2021 Notes 2022 Notes 2021 Notes 2022 Notes 2021 Notes 2022 Notes
Maturity(1)
> No change (remains June 30, 2021)
> No change (remains October 1, 2022)
> No change (remains June 30, 2021)
> No change (remains October 1, 2022)
> Same as Bondholder Proposal (January 22)
> However, maturity shall be extendable by 2 years for a structure provided that certain conditions precedent are met, including, without limitation, that there is (i) before closing, 95% participation in the exchange and (ii) after closing, no default, charter contract coverage at an agreeable rate for 2.5 years after the proposed extended maturity of a given structure, and other conditions to be agreed
> Same as Bondholder Proposal (January 22), subject to confirming exchange participation and mechanics for maturity extension
Reserve Accounts and L/Cs
> Removed / not renewed > Reserve accounts remain in place for benefit of new notes; residual cash remains in accounts at closing
> O&M L/Cs to be increased to provide 6-months of coverage. Debt service L/Cs to remain in place at current amounts (i.e. no reduction). ParentCo and Odebrecht S.A. to guarantee that L/Cs will remain in place and are renewed through full payment of new notes
> Reserve accounts and LCs removed / not renewed
> In addition to the Drydock reserve account, a new Sinking Fund Reserve Account will be funded from project level cash flow(2)
• 2022 Sinking Fund Account capped at $56.4 million
– Max annual reserve contribution capped at $18.8 million
• 2021 Sinking Fund Account capped at $21.4 million
– Max annual reserve contribution capped at $7.1 million
(1) Bondholder proposal condition precedent / Company proposal condition subsequent: ParentCo level debt facilities shall be restructured such that no ParentCo debt maturities shall occur within six months of the last maturity of new notes.
(2) Sinking Fund Reserve Account will be funded with any excess cash flow after interest expense, fixed amortization, and any additions/subtractions from the Drydock Reserve Account.
Confidential Settlement Communication Subject to FRE 408
Proposal Comparison Summary (Cont’d)
4
Company Proposal (January 7)
Bondholder Proposal (January 22) Company Proposal (January 29)
2021 Notes
2022 Notes
2021 Notes 2022 Notes 2021 Notes 2022 Notes
Security
> Security package on 2021 and 2022 Secured Notes remains consistent with existing collateral package except for the removal of the LCs and reserve accounts as noted above
> All cash outstanding at the assumed closing date shall remain within the respective structure
> All existing collateral remains in place. First priority lien on substantially all of the assets of the respective project entities enforceable in Brazil and offshore, including but not limited to the drilling rigs, cash collateral, interests in the charter and services agreements and accounts receivable; lien on equity in structures
> The drilling rigs include the ODN I, ODN II, ODN Tay IV, Norbe VI, Norbe VIII, and Norbe IX
> New collateral to be provided in favor of 2021 holders and 2022 holders:
> Lien on service revenues from the Maintenance and Service business (non-project)(1)
> First priority lien on 100% of the equity of OOG GmbH (or a new intermediate holdco to be determined)
> Corporate guarantee by Apicatus Holding GmbH in favor of 2021 holders and 2022 holders
> Contractual obligation of ParentCo (i) in favor of 2021 holders not to allow more debt to be incurred at 2022 project companies and (ii) in favor of 2022 holders not to allow more debt to be incurred at 2021 project companies, in each case in connection with refinancing or otherwise
> Same as Bondholder Proposal (January 22)
> Same as Bondholder Proposal (January 22), except for removal of existing reserve accounts
> No new collateral other than new reserve accounts (Drydock RA and Sinking Fund RA)
> All Cash Flows to Parent will remain in escrow until certain conditions are met (please refer to “ParentCo Capital Structure and Debt Service Relief”)
(1) New collateral is subject to further due diligence and understanding of the value of this additional collateral.
Confidential Settlement Communication Subject to FRE 408
Proposal Comparison Summary (Cont’d)
5
Company Proposal (January 7) Bondholder Proposal (January 22) Company Proposal (January 29)
2021 Notes 2022 Notes 2021 Notes 2022 Notes 2021 Notes 2022 Notes
ParentCo Capital
Structure and Debt Service Relief
> Not explicitly discussed > As a condition precedent to the restructuring of the 2021 notes and 2022 notes, the ParentCo level debt shall be restructured on terms and conditions satisfactory to the holders, which shall include, without limitation, the following:
> No ParentCo debt matures prior to 6 months after the latter to mature of the new 2021 notes or the new 2022 notes
> Acceptable and sustainable interest and other financial costs payment schedule
> Contribution of the ultimate parent company to the debt restructuring of the ParentCo, as capital contribution, guaranty of ParentCo obligations or other means satisfactory to the 2021 and 2022 holders
> Restructuring of the Corporate Debt is a Condition Subsequent
> 100% of the Cash Flow to Parent will be held in escrow and will be released on a pro rata basis, subject to ParentCo’s ability to defer scheduled amortization
> This Proposal shall not be interpreted as supported by Odebrecht S.A. (“ODB”)
• ODB‘s participation and/or support toward a restructuring of OOG, if obtained, depends on further negotiations and the overall evolution of the OOG restructuring
Confidential Settlement Communication Subject to FRE 408
Proposal Comparison Summary (Cont’d)
6
Company Proposal (January 7)
Bondholder Proposal (January 22) Company Proposal (January 29)
2021 Notes
2022 Notes
2021 Notes
2022 Notes 2021 Notes 2022 Notes
Petrobras Cancellations
> N/A > Proposal assumes no further cancellations beyond the ODN Tay IV and no material adverse developments in connection with Lava Jato
> Proposal assumes that ODN I, ODN II, and any other rig in the 2021 and 2022 structures will receive the contractual dayrate plus bonus (i.e. 100% of the contracted dayrate) if and when on idle at the direction of Petrobras
> Same as Bondholder Proposal (January 22)
> N/A > N/A > N/A > Require any amounts recovered (whether sale proceeds or from Petrobras) with respect to the ODN Tay IV or any other vessel to amortize the notes secured by such vessel
> Limit ODN Tay IV expenses (as and to the extent agreed) to an aggregate of $[TBD] million in monthly layup costs. After this limit has been reached or [TBD] months have passed from the Petrobras termination (whichever comes earlier), if ODN Tay IV has not been re-contracted on terms contemplated by the projections or acceptable by the 2022 holders, any continuing expenses will have to be funded by ParentCo or there will be a reduction in the amount of cash that can be distributed to ParentCo. During such time, ParentCo shall have the option to purchase ODN Tay IV for a minimum price and such other terms satisfactory to the 2022 holders to be included in the definitive documents. In addition, the 2022 holders have the right to force a sale process at or after such time, on terms to be included in the definitive documents
> [Tay IV alternatives to be discussed]
Company Profile September 2015
Norbe IX
Management Presentation
January 2016*
Norbe IX Drillship
*Presentation originally made on the date indicated and, except as specifically noted, has not been updated to reflect recent developments or ongoing discussions.
2
Agenda
OOG AT A GLANCE
OOG’s ASSETS
MARKET OVERVIEW
OOG SOURCES OF CAPITAL
3
Odebrecht Presence in the Oil & Gas Sector
Odebrecht’s track record in the Brazilian oil & gas services industry
Operations in the offshore segment
Growth opportunities Consolidation of the oilfield services capabilities
Increased exposure to the Oil and Gas sector
Disinvestment of all
shallow and mid water assets by the end of the
decade
1990’s 1970’s to 1980’s 2000’s 2011 - today
Start working in the offshore industry
First Brazilian company to provide offshore drilling services for
Petrobras.
Largest privately owned offshore oil
drilling and exploration fleet
in Brazil by the end of the 1980's, with 8
platforms
FPSO operations in the North Sea joint
venture with Maersk
Service operations in the Campos Basin
Incorporation of Odebrecht Oil & Gas
Contract for Norbe VI
Contracts for Norbe VIII and Norbe IX
2nd round of private placement - Partnership
with Gávea
Increasing drilling portfolio
2010
Contracts for ODN I
and ODN II
Norbe VIII / IX Project Bond
1st round of private
placement - Partnership with
Temasek
Contracts for ODN Delba III and ODN
TAY IV
Strengthening
position in
Production and
Subsea with
Cidade de Itajaí
(50%) and the 2
PLSVs together
with Technip
Contract for
operating 5
rigs to be
built in
Brazil, in
partnership
with Sete
Brasil
Operations of 3 third-party
deepwater rigs
ODN Tay
IV Project
Bond
retap and
Perpetual
Bond
EWT Libra
FPSO
contract
(OOG-TK)
ODN I&II and
Norbe VI
Project Bond
and contract to
operate the
PLSV Polar
Onyx with
Ceona
4
Drilling 80.2%
Production 11.9%
Subsea 3.9%
Maintenance 4.0%
Company Description
Odebrecht Oil & Gas (“OOG”) is the oil field services arm of the Odebrecht Group, one of the largest business conglomerates in Latin America
Created in 2006 to concentrate the oil field services activities of the group and provide integrated, customized solutions for the upstream oil industry
‒ Integrated solutions: project supervision, maintenance and offshore assets operations
‒ Operation and chartering of vessels and offshore drilling rigs ‒ Operation of production and exploration platforms
The Company already has long-term relationships with Petrobras, Conoco Phillips and is well-positioned to expand operations to deal with equally or even more attractive counterparties
1st UDW drilling player in Brazil and 6th worldwide
Shareholder Structure
13.6% 81.4% 5.0%
1 – Does not consolidate Cidade de Itajai, PLSVs and Sete Brasil Assets 2 – LTM EBITDA
Backlog Breakdown
Temasek (Aaa / AAA): Established in 1974, is a sovereign investment fund of the Government of Singapore, with US$ 167bn under management as of March 31, 2014.
Gávea Investimentos: Founded in 2003, is a Brazilian asset management firm co-owned by JP Morgan Asset Management, that manages equity, mutual and hedge funds. Currently has an equity portfolio of 18 companies in its private equity arm and R$ 17.1bn (approximately US$ 5.7bn) under management as of April 2015.
Total Backlog: US$ 10.1bn (as of June 30, 2015) *
Consolidated Financial Highlights1
US$ MM 2011 2012 2013 2014 Q2 14 Q2 15 1H 15
Income Statement
Net Revenue 371 691 988 1,187 297 296 581
Growth (%) n/a 86.48% 42.91% 20.14% n/a 0% 6%
EBITDA 80 273 475 505 116 160 307
EBITDA Margin (%) 21.6% 39.5% 48.1% 42.5% 39.1% 54.1% 52.8%
Net Income (2) (22) (34) (75) (12) 57 57
Net Margin (%) -0.5% -3.2% -3.4% -6.3% -4.0% 19.3% 9.8%
Balance Sheet
Total Assets 4,904 6,160 6,044 6,205 6,492 6,141 6,141
Total Fixed Assets 4,143 5,193 5,153 5,041 5,078 5,011 5,011
Cash 474 431 298 475 742 364 364
Cash and Equivalents 462 390 212 331 690 148 148
Short-Term Investments
12 41 86 144 52 216 216
Total Debt 3,616 4,683 4,564 4,809 5,048 4,674 4,674
Shareholders' Equity 1,173 1,269 1,211 1,121 1,164 1,169 1,169
Consolidated Net Debt/ EBITDA
39.3x 15.6x 9.0x 8.6x 8.1x² 7.4x² 7.4x²
OOG at a glance
* Excluding ODN Tay IV
5
Chartering, operation of Pipe Laying Support Vessels; Subsea, Umbilical, Riser and Flowline projects; equipment manufacture and installation.
Chartering and operation of Floating Production, Storage and Offloading units.
Integrity Management Services, Inspection, Offshore Asset Installation, Maintenance and Engineering.
Chartering and drilling operations of ultra-deepwater rigs.
Integrated solutions for the Upstream Oil and Gas industry
Odebrecht Oil & Gas provides integrated solutions for the upstream oil industry in Brazil and around the world. Our history began in the 70s through Odebrecht’s Group experience. Today we are able to serve our customers throughout their entire business cycle, from engineering and design to the operation of offshore rigs, including new challenges in ultra-deepwater and pre-salt drilling. Our business segments are:
6
Fleet
ODN II*
ODN I*
ODN Delba III* ODN Tay IV
Norbe VIII* Norbe VI* Norbe IX*
FPSO North Sea Producer*
FPSO Cidade de Itajaí*
PLSV TOP Coral do Atlântico*
PLSV TOP Estrela do Mar*
Drilling – Composed of 100% ultra-deepwater rigs (Backlog: US$8.1bn) Production (Backlog: US$1.2bn)
Subsea (Backlog: US$0.4bn)
OOG is the Largest Offshore Brazilian Company in Oil Field Services
Associated investments totaling US$6 billion1
Ondina
Pituba Boipeba Interlagos Botinas
1 – Including Sete Brasil and FPSO Pioneiro de Libra EPC contracts values
* In operation ** Commercial Operation Date
COD**: Aug/2016
COD: Jun/2017 COD: Oct/2018 COD: Jun/2019 COD: Feb/2020
FPSO Pioneiro de Libra
COD: Dec/2016
Currently evaluating redeployment alternatives
7
Agenda
OOG AT A GLANCE
OOG’s ASSETS
MARKET OVERVIEW
OOG SOURCES OF CAPITAL
Drilling Charter & Operation of Deepwater rigs with
state of the art assets
Norbe VI
9 * In operation. 1 As of Oct 2015 2 Day rate at bid date (Oct/11) 3December 11th onwards
Vessel Type
Water
Depth (ft)
Operational
in
Contract
Period
Contractor/
Day Rate 1
Shipyard
Ownership
Drilling Fleet of Latest Technology Vessels
Norbe
VI*
ODN
Tay IV*
ODN Delba
III*
Norbe
VIII*
Norbe
IX*
ODN
I*
ODN
II*
Semi-sub Semi-sub Semi-sub Drillship Drillship Drillship Drillship
7,874 7,874 7,874 10,000 10,000 10,000 10,000
3Q2011 1Q2013 3Q2012 3Q2011 4Q2011 3Q2012 3Q2012
7 years 7 years 10 years 10 years 10 years 10 years
PBR/317 PBR/336 PBR/410 PBR/385 PBR/360 PBR/360
GPC/SBM Astican /
Keppel Fels GPC/SBM DSME DSME DSME DSME
100% Owned 100%
Owned(3) 47% Owned 100% Owned 100% Owned 60% Owned 60% Owned
Ondina
Drillship
10,000
3Q2016
15 years
PBR/5402
Enseada
15% Owned
Pituba
Drillship
10,000
2Q2017
15 years
PBR/5402
Enseada
15% Owned
Boipeba
Drillship
10,000
4Q2018
15 years
PBR/5412
Enseada
15% Owned
Interlagos
Drillship
10,000
2Q2019
15 years
PBR/5412
Enseada
15% Owned
Botinas
Semi-sub
10,000
1Q2020
15 years
PBR/5342
Enseada
15% Owned
Note: Sete assets reflect the original configuration of the project, which is now being revisited
10
PB Contracts: Day Rates and Bonuses
As of Oct/15 Drilling Units
Rig Charter (US$ per
day) Services (BRL per day) Bonus
Uptime Threshold to
receive Bonus
Norbe VI 210,460 410,365 Up to 15% 90.15%
Norbe VIII 380,878 110,730 Up to 10% 93.01%
Norbe IX 357,836 104,031 Up to 10% 93.01%
ODN I 335,070 97,412 Up to 10% 93.01%
ODN II 335,070 97,412 Up to 10% 93.01%
ODN Tay IV 345,060 89,675 Up to 15% 90.15%
11
Norbe VI UDW Semi sub
Drilling capacity (water depth – m) 2,400
Year of Construction 2010
Tenor of Contract with Petrobras 7 years
Builder SBM
Operational Start up July 2011
12
Norbe VIII & IX UDW Drillships
Drilling capacity (water depth – m) 3,000
Year of Construction 2011
Tenor of Contract with Petrobras 10 years
Builder DSME
Operational Start up Aug-11/Nov-11
13
Rigs not originally awarded to OOG - ODNs
Delba Marítima, a Brazilian maritime service company, was awarded 6 rig contracts by Petrobras from 2006 to 2008. OOG acquired controlling ownership of four of these rigs. ODN I and II were acquired in 2010 and ODN Delba III and ODN Tay IV in 2011.
The rigs are operated by OOG.
OOG contributed with 100% of the equity portion for ODN I, II and IV and is in title of aprox. 100% of the economic interest on these 3 assets.
The operation fee related to the first seven-year Delba III contract was replaced for OOG’s initial participation in the project.
Delba will pay the loan related to their equity contribution with dividends.
14
ODN I & II UDW Drillships
Drilling capacity (water depth – m) 3,000
Year of Construction 2012
Tenor of Contract with Petrobras 10 years
Builder DSME
Operational Start up Sep-12 / Aug-12
15
ODN Delba III UDW Semi sub
Currently drilling at Búzios Field, Santos Basin Drilling capacity (water depth – m) 2,400
Year of Construction 2011
Tenor of Contract with Petrobras 7 years
Builder SBM
Operational Start up August 2012
16
ODN Tay IV UDW Semi sub
Drilling capacity (water depth – m) 2,400
Year of Upgrade 2012
Builder Keppel Fels
Operational Start up March 2013
17
• Failure to comply with or improper compliance with contractual clauses, specs or timeframes;
• Interruption of the Charter without cause or prior communication to Petrobras;
• Total or partial assignment or subcontracting of the Charter Agreement without prior consent, as well as partnership, merger, split-off, split-up, total, or partial takeover of the Project Company without prior notification of Petrobras;
• Repeated flawed performance, provided that the aggregate value of fines has reached 10% of the Agreement value;
• Declaration of bankruptcy, dissolution or alteration of the corporate structure or modification of the corporate purpose, which according to Petrobras, adversely affects the performance of the charter;
• Failure by the Operator to present adequate assurances to Petrobras, at Petrobras discretion, after approval of the Operator judicial or extrajudicial reorganization;
• Suspension of the Charter determined by the competent authorities to have been caused by the Project Company, which will be liable for any increase in costs resulting therefrom and for losses and damages that Petrobras incurs in consequence thereof;
• Delay in the beginning of the Charter period for more than 365 days;
• Termination of the Services Agreement;
• If the time for which Petrobras is exempt from Charter payments due to performance incidents amounts to a total of 30% of any 6-month period;
• If the Project Company remains under the repair rate for an aggregate period of 30% of any 6-month period;
• Shutdown of operations for over 60 days, for reasons imputable to the Project Company, except in the case of shutdown due to fortuitous or force majeure cases.
• Delay of payments due by Petrobras exceeding 90 days, except in the case of public calamity, serious public disturbance or war;
• Non-clearance by Petrobras of the location for the performance of the Charter; and
• Termination of the Services Agreement.
Termination by Odebrecht Oil &
Gas
PB Contracts: Termination Provisions
Termination by Petrobras
18
Key Facts:
– OOG has 15% of the charter contracts and 100%
of the service contracts for 5 rigs (which will
represent an equity contribution of approximately
US$150 million over the next 7 years) to be
delivered from 2016 to 2020
– Service contracts are Cost Plus
– Petrobras has 9,36% of SETE Brasil (4,36%
indirectly)
– More than US$80bn in backlog with 15 year
contracts
– Deliveries of the 29 vessels: from 2015 to 2020
– Local content: 55% to 65%
– Project being restructured for going concern
purposes
Source: Sete Brasil.
DRILLSHIPS
Company Operator # of
Units Yard Location
Sete Brasil
Etesco/OAS 5 Rio Grande (3) /
Enseada (2)
Rio Grande do
Sul / Bahia
Odebrecht 4 Enseada Bahia
Seadrill 3 Jurong Espírito Santo
Odfjell/Galvão
Engenharia 3 Jurong Espírito Santo
Petrobras 6 Atlântico Sul (EAS) Pernambuco
1 Jurong Espírito Santo
SEMISUBMERSIBLES
Company Operator # of
Units Yard Location
Sete Brasil
Queiroz
Galvão 3
Brasfels Rio de Janeiro Petroserv 2
Odebrecht 1
Sete Brasil
Note: Sete assets reflect the original configuration of the project, which is now being revisited
19
Ondina Drilling BV Drillship COD: Aug/2016
85%
15%
100%
Pituba Drilling BV Drillship COD: Jun/2017
Boipeba Drilling BV Drillship COD: Oct/2018
Interlagos Drilling BV Drillship COD: Jun/2019
Botinas Drilling BV Semi-sub COD: Feb/2020
Sete Brasil
Note: Sete assets reflect the original configuration of the project, which is now being revisited
Subsea Installation of subsea infrastructure
21
PLSVs TOP Coral do Atlântico & TOP Estrela do Mar
Operating capacity (water depth – m) 3,000
Laying Tower Tension Capacity 550t
Year of Construction 2014 / 2014
Tenor of Contract with Petrobras 5 + 5 years
Builder DSME
Operational Start up Oct-14 / Dec-14
TOP Coral do Atlantico: Started operations on October 19, 2014 TOP Estrela do Mar: Started operations on December 3, 2014
Production Charter & Operation of Production Vessels
FPSO Cidade de Itajai
23
Operates in the Bauna e Piracaba Field, Santos Basin
Production capacity (bpd) 80,000
Storage capacity 650,000
Year of Conversion 2012
Tenor of Contract with Petrobras 9 + 6x 1 years
Shipyard Jurong
Operational Start up Feb/13
24
Agenda
OOG AT A GLANCE
OOG’s ASSETS
MARKET OVERVIEW
OOG SOURCES OF CAPITAL
25
Petrobras 2015-2019 Business Plan
Source: Petrobras Business Plan 2015-2019.
Petrobras’ Strategic Plan for 2015-2019 comprises total investments of US$130.3 billion
Divestments of US$57.7bn (US$15.1bn in 205-2016 and US$42.6bn in 2017-2018)
Increased focus on E&P spending; 83% of the plan is E&P, versus 70% in the previous years as the largest cuts are in non-upstream areas
Of the US$108.6bn to be invested in E&P, 82% is for production development and 10% is for exploration
On Oct 5, 2015 Petrobras announced a US$11bn capex cut in 2015 (US$3bn) and 2016 (US$8bn), but it is not clear in which areas
2015 – 2019 Budget Split (US$ billion, %) Petrobras 5-year plan budgets over time (US$ billion)
CAGR 10%
Source: Petrobras Business Plan 2012/2016.
$108.60bn, 83%
$12.80bn, 10%
$6.30bn, 5%
$2.60bn, 2%
E&P & Intl
Downstream & Distribution
Gas & Energy
Other Areas$54.0bn
$87.0bn
$112.0bn
$174.0bn
$224.0bn $225.0bn
$236.5bn $236.7bn
$220.6bn
$130.3bn
26 Sources: Pareto Securities Equity Research.
Older deepwater and midwater rigs are being taken out of the market
Rig count in Brazil down from 80 to 41 (in operation), from the peak in 2012
Brazil rig market is now 20% of the global demand, from above 30% in 2012
Brazil Rig Count – June 2015
Brazil Rig Count (in Operation)
27
Worldwide 2014/15 Fixtures – UDW Rigs
Contract Length (Months)*
Da
y R
ate
s (
US
D k
/d
ay)
Sources: DNB Markets, Rigzone, company data.
* For contracts determined in number of wells, it was assumed an average of 3 months per well.
Prior to the oil cycle down turn, companies would engage in backlog for day rate, exchanging higher rates and shorter contracts for lower rates and longer contracts
With the down turn, drillers seem to agree with low day rates and short contracts so as to keep the rig working until the market recovers
RIG: Transocean
SDRL: Seadrill
ESV: Ensco
ORIG: Ocean Rig
NE: Noble
DO: Diamond
ODL: Odfjell
QGOG: Queiroz Galvao
NE
RIG
RIG
ESV
ODL
NE
ODL ORIG
DO
NE
Grupo R
SDRL
DO
DO
DO
RIG
ORIG
RIG
QGOG
200
250
300
350
400
450
500
550
600
650
0 5 10 15 20 25 30 35 40 45
28
Trend line shows the trade-off between shorter contracts with higher rates vs. longer contracts with lower day rates
Water depth ranges from 6,600ft to 12,000ft (UDW rigs)
Contract start dates range from Feb/2010 to Aug/2015
Contract length ranges from 1 to 10 years
Da
y R
ate
s (
US
D k
/d
ay)
Contract Ending Dates
Petrobras UDW Day Rates in Brazil (≥6,600ft)
Excluding Victoria 10000 and Carolina drillships
0
100
200
300
400
500
600
700
2014 2016 2017 2019 2020 2021 2023
Others
OOG
Linear (Others)
Linear (OOG)
Short term / high cost
Long term / low cost
Sources: Rigzone, Seadrill / Transocean / Noble / Diamond Offshore public data.
29
Fixture date Owner Off taker
Day rate (USD 000s) Tenor Units
Water depth (k ft)
Oct 15 Noble Talos 206 2-mo Danny Adkins 12
Jun15 Transocean Exxon/ENI 395/300 3-mo
ext/45d
Deepwater Champion (‘10)/Sedco Express
(‘00) 10/6.6
Jun15 Noble Deep Gulf
Energy 317 2-mo ext
Dany Adkins (‘99/upgd. ‘09)
12
Jun15 Ensco Total 585 1-yr ext Ensco DS-7 (‘13) 10
Jun15 Odfjell Statoil 301.4 13 wells Deepsea Atlantic (‘09) 10
May15 Transocean Lukoil 315 100-day
ext GSF Development
Driller II (‘05) 7.5
May15 Odfjell VietGazprom 255 140 days Deepsea Metro I (‘11) 10
May05 Ocean Rig Vitol Energy 295 1 well Olympia (‘11) 10
May15 Diamond Apache 350 1.5yr Ocean Monarch (‘74/upgd. ‘08)
10
Apr15 Grupo R Pemex 365/365 1-yr ext/1-
yr ext Bicentenario
(‘10)/Centenario (‘10) 10/10
Fixed Contract Fixed Contract Extension at Mutually Agreed Price
Sources: DNB Markets, Rigzone, company data.
OOG Day Rates Still Below PBR Average
OOG Average Daily Rates for Drilling Units: US$ 361.2k/day
Current Day Rate
(US$ 000s)* 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032
Norbe VI $316.8
ODN Delba III $335.5
Norbe VIII $409.6
Norbe IX $384.8
ODN I $360.3
ODN II $360.3
Recent Market Tenders
* Service Contracts translated to USD at R$3.8589 (October 30, 2015)
Fixture date Owner Off taker
Day rate (USD 000s) Tenor Units
Water depth (k ft)
Feb15 Seadrill Petrobras 500/500 3yrs W. Tellus (‘13)/W.
Carina (‘14) 12/12
Jan15 Noble Shell 456 1 well Bully II (‘11) 10
Oct14 Diamond Petrobras
567/455 3yrs Ocean Courage (‘09) 10
440/445 3yrs Ocean Valor (‘09) 10
310 3yrs Ocean Baroness
(‘73/’02) 6.5
(moored)
Oct14 Ocean Rig Petrobras 505/505 3yrs Corcovado
(’11)/Mykonos(‘11) 10/10
May14 Transocean Petrobras 440 3yrs Dhirubhai Deepwater
KG 1 (‘09) 12
May14 QGOG Petrobras 530 3yrs Brava Star (‘15) 12
30
Petrobras UDW Day Rates in Brazil (≥6,600ft)
Sources: Rigzone, Seadrill / Transocean / Noble / Diamond Offshore public data.
Rig Name Operator Water Depth (ft) Day Rate (US$/d) Contract Start Tenor (yr) Status
Vitoria 10000 Schahin 10,000 n/a 3/11/2011 10 - West Orion Seadrill 10,000 586,000 7/19/2010 6 - Brava Star Queiroz Galvao 12,000 545,303 8/15/2015 3 - Ocean Rig Corcovado Ocean Rig 10,000 502,283 5/15/2015 3 Renewed for 3 years at 502k/d Ocean Rig Mykonos Ocean Rig 10,000 502,283 3/22/2015 3 Renewed for 3 years at 502k/d West Tellus Seadrill 12,000 466,000 4/23/2015 3 - Gold Star QGOG Constellation 9,000 470,776 3/20/2015 3 - West Carina Seadrill 12,000 457,000 6/22/2015 3 - Ocean Courage Diamond Offshore 10,000 455,000 2/25/2015 3 Extended for 875 days at 380k/d, to start in late Feb 2016
Ocean Valor Diamond Offshore 10,000 455,000 1/9/2011 3 3-year extension (previous contract ended in Sep/15)
Carolina Petroserv 10,000 n/a 11/28/2011 10 - Petrobras 10000 Transocean 12,000 419,000 2/1/2011 8.5 - Etesco Takatsugu J Etesco 10,000 437,000 4/28/12 10 - Laguna Star QGOG Constellation 10,000 421,431 11/20/2012 6 - SSV Victoria Petroserv 10,000 473,000 2/17/2010 7 - Alpha Star QGOG Constellation 9,000 430,348 7/11/2011 6 - Amaralina Star QGOG Constellation 10,000 421,431 9/19/2012 6 - Dhirubhai Deepwater KG1 Transocean 12,000 397,000 12/31/2014 3 - Sevan Driller Seadrill 10,000 411,000 5/21/2010 6 - Norbe VIII Odebrecht 10,000 409,600 8/02/2011 10 - Sevan Brasil Seadrill 10,000 383,000 7/24/2012 6 - Norbe IX Odebrecht 10,000 384,800 11/03/2011 10 - ODN I Odebrecht 10,000 360,300 9/13/2012 10 - ODN II Odebrecht 10,000 360,300 8/28/2012 10 - Deepwater Navigator Transocean 7,200 361,000 5/1/2011 5 - Lone Star QGOG Constellation 7,900 382,461 3/31/2011 7 - Paragon DPDS3 Paragon Offshore 7,200 347,000 12/4/2013 4 - ODN Delba III Odebrecht 8,000 335,500 8/10/2012 7 - Norbe VI Odebrecht 8,000 316,800 7/25/2011 7.7 - Aban Abraham Etesco 6,600 261,774 6/8/2011 5 - Noble Dave Beard Noble 10,000 235,000 3/18/2015 1.1 Renewed for 1.1 year at 235k/d
31 Sources: Companies’ reports
Rig Name Water Depth (ft) October 2014 October 2015
Ocean Courage 10,000
Contract extended from Feb 2015 to Feb 2018 Day rate reduced from USD 567k to USD 455k
(starting in Oct 2015)
Contract extended from Feb 2018 to Jul 2020 Day rate reduced from USD 455k to USD 380k
(starting in Feb 2018)
Ocean Alliance 5,300 No adjustments
Contract early terminated in Oct 2015 Original date: Jun 2016 Day rate: USD 367k
Ocean Clipper 8,000 No adjustments Contract early terminated in Oct 2015
Original date: Dec 2015 Day rate: USD 312.6k
Rig Name Water Depth (ft) November 2015
Sedco 706 6,500 Contract extended from Sep 2016 to Sep 2018 Day rate reduced from USD 277k to USD 275k
Deepwater Navigator 7,200
Contract to be early terminated in Dec 2015 Original date: Feb 2016 Day rate: USD 361k
Transocean Driller 3,000
Contract to be early terminated in Jun 2016 Original date: Jul 2016 Day rate: USD 256k
Diamond Offshore
Transocean
Recent renegotiations / terminations of contracts in Brazil
32
Agenda
OOG AT A GLANCE
OOG’s ASSETS
OOG SOURCES OF CAPITAL
33
Project Finance Project Bond Project Finance Restructuring
Project Bond
Amount
Average life @ issuance
Cidade de Itajaí*
ODN I & II and Norbe VI
ODN Tay IV ODN Delba III
US$1.69 bn
• Coupon: 6.75%
6.9
US$593 m
• Original:US$488 m
• Additional: US$105 m
9.8
Syndicate of 11 banks and of the Inter-American Development Bank (IDB)
6.5
B2 Moody’s B+ Fitch B+ S&P
US$300 m
6.4
Club deal of 6 banks
Maturity Oct 2022 Dec 2018 Oct 2022 Nov 2021
Structured Finance
Project Finance
PLSVs*
7.5
Mar 2020 / Mar 2027
Syndicate of 8 banks
US$546 m
• Banks: US$438 m
• ECAs: US$108 m
B2 Moody’s B+ Fitch B+ S&P
* For 100% of the project
US$580 m
• Coupon: 6.625%
Cross collateralized
Outstanding in June/15
Project Bond
Norbe VIII & Norbe IX
US$1.5 bn
• Coupon: 6.35%
8.0
B2 Moody’s BB- Fitch
Jun 2021
US$1.230 bn US$1.553 bn US$ 550 m US$494 m US$239 m US$528 m
Project Finance
Libra*
Club deal of 7 banks
US$804 m
-
Mar 2027
7.2
34
Norbe VIII & IX – Project Bond
Key Terms Contracts with Petrobras Summary
• The charter and services contracts have a 10-year tenor, with an option to be extended by another 10-years. Current contract expires in July 2021 for Norbe VIII and October 2021 for Norbe IX.
• The contract daily rate is denominated 90% in USD and 10% in BRL.
Financing Security Package
• First priority lien on drillships
• Assignment of cash flows from Charter and Service Agreements, insurance proceeds
• Pledge of receivables accounts and shares
• Insurances
• Debt Service Coverage Ratio 1.10x for two consecutive semesters or 1.20x for four consecutive semesters.
• 3-month O&M Reserve Account.
• 6-month Debt Service Reserve account
• Balloon retention account starting in June 2018
Issuer: Odebrecht Drilling Norbe VIII/IX Ltd.
Guarantors: Odebrecht Drilling Norbe VIII LLC and Odebrecht Drilling Norbe IX LLC
Ownership: 100% OOG
Original Amount:
USD 1,500 MM
Outstanding balance:
USD 1,275 MM
Maturity: June 2021
Coupon: 6.35%
Debt Service: Semi-annual (Jun, Dec)
Balloon: 30.0% Gross / 16.2% Net
35
Cash Waterfall Structure – 21s
6th
Monthly Onshore Proceeds
Account
O&M Monthly
Expense Amount
Offshore Proceeds
Account
(Charterer)
3rd
Brazil
Offshore
Opex Payment
(OOSL)
Services Reserve Account
(3-month Opex)
Debt Service Reserve Account
(6-month Debt Service)
Offshore Retention Account
Distribution Account
4th
5th
7th
1st (Priority)
Monthly
Note Debt Service Account
(Payment of Obligations)
2nd
Offshore Mobilization
Fee Account
20%
(aprox.
US$12MM)
Monthly
Semi Annual
Charter Payments
Service Payments
Monthly
Pre-completion Charter Operation Debt Amortization Structure
36
CAP OPEX 21’s
Semester Reference – NORBE VIII
Aug-11 to Jul-12 135
Aug-12 to Jan-14 120
Feb-14 to Jan-16 115
Feb-16 to Jun-21 110
Semester Reference – NORBE IX
Nov-11 to Oct-12 135
Nov-12 to Apr-14 120
May-14 to Apr-16 115
May-16 to Jun-21 110
37
ODN I & II, Norbe VI & Tay – Project Bond
Key Terms Financing Security Package
• First priority lien over the four assets of the guarantors
• Assignment of cash flows from charter and service agreements, insurance proceeds
• Pledge of receivables accounts and shares
• Insurances
• Debt Service Coverage Ratio of 1.10x for four consecutive quarters or 1.15x for eight consecutive quarters
• 3-month O&M Reserve Account
• 6-month Debt Service Reserve account (increased to 12 month under certain circumstances)
• Charter Termination Account starting in September 2016
• Balloon retention account starting in December 2018
Issuer: Odebrecht Offshore Drilling Finance Limited
Guarantors: ODN I GmbH, Odebrecht Drilling Norbe Six GmbH and ODN Tay IV GmbH
Ownership Norbe VI: ODN I&II: ODN Tay IV
100% OOG 60% OOG / 40% Delba 68,5% OOG / 31,5% Delba
Original Amount:
USD 1,690 MM issuance + US$580MM retap for ODN Tay
Outstanding balance:
USD 2,073 MM
Maturity: October 2022
Coupon: 6.75%
Debt Service: Quarterly (Mar, Jun, Sep, Dec)
Balloon: 40.0% Gross / 20.0% Net
38
Cash Waterfall Structure – 22s
Monthly
Onshore Proceeds Account
Offshore Proceeds
Account
Petrobras (Charterer)
3rd
Brazil
Offshore
O&M Service Reserve Account
(3-month Opex)
Debt Service Reserve Account
(6-month Debt Service1) (jointly held)
Offshore Distribution
Holding Account
Offshore Distribution Account
4th
6th
1st (Priority)
Monthly
Note Debt Service Account
(Payment of Obligations) 2nd
Monthly
Quarterly
Charter Payments
Service Payments
Monthly
1st (Priority)
Not Pledged
Pledged, Guarantor Individual Account
Pledged, Guarantor Joint Account Pledged, Issuer Account
O&M Dollar Transfer Amount
OOG O&M Service Account
Payment of O&M Expenses
O&M Service Account
1.15x DSCR Threshold
Additional Reserve Accounts
- Offshore Retention Account - Offshore Charter Termination Account
5th
Offshore Sinking Fund Account
(US$ 30 MM established at issuance)
1- 12-month Debt Service in case of non renewal of the Norbe VI and/or ODN Tay VI
39
CAP OPEX 22’s
40
ODN Delba III – Project Finance
Key Terms Contracts with Petrobras Summary
• The charter and services contracts have a 7-year tenor, with an option to be extended by another 7-years. Current contract expires in August 2019.
• The contract daily rate is denominated 60% in USD and 40% in BRL.
Financing Security Package
• Customary for this type of Financing
Borrower: Delba Drilling International Cooperatie UA
Ownership1: 50.419% OOG / 1.316% Delba / 1.265% Interoil / 47% MPC
Amount: Original Facility: USD 488 MM Additional Facility: USD 112 MM
Outstanding balance:
USD 479,9 MM
Tenor: 4y construction + 7y amortization
Maturity: Tranche A: Dec18 / Tranche B: Sep17
1. As of October 31, 2015
41
Working Capital
Revolving Credit Facility
Amount: US$ 200 Million
Maturity: 3 years (2017)
Financial Cost:
– Libor + 2.50% p.y. (first 18 months)
– Libor + 2.30% p.y. (last 18 months)
Obligor: OOG
Not disbursed
Participating Banks
42
2016 debt matures in the 2nd semester of 2016 (USD 25 MM-Bradesco-Aug/2016 and USD 75 MM-BB-Dec/2016).
Corporate Debt Schedule
6
101
76
156
26 28 27 27
0
20
40
60
80
100
120
140
160
180
200
Short-Term 2016 2017 2018 2019 2020 2021 2022 ≥ 2023
US
D m
illi
on
Perpetual Bond Corporate Debt
550
43
144A / Reg S Senior Unsecured Notes Offering Structure
Perpetual with call option at year 10 and every 5 years thereafter Tenor
Reset every 10 years / Step-up of +50% of the initial spread if the bond is not rated IG by 2 agencies at year 10 Coupon Reset / Step-up
USD 400 million / June 10, 2014; USD 150 million / July 01, 2014 Issuance Amount / Date
Odebrecht Oil & Gas Finance Limited Issuer
Odebrecht Oleo e Gas S.A. Guarantor
7.000%, quarterly starting on Sep 17, 2014 Coupon
Perpetual Corporate Bond
Price / Yield 100.00 price at 7.000% yield for the USD 400 million / 103.00 price at 6.586% for the USD 150 million
Spread over 10Y-UST 436.5 bps for the USD 400 million / 402.78 bps for the USD 150 million
44
1st Round 2nd Round
85,7% 14,3%
– On October 22, 2010 Temasek Holdings
acquired a 14.3% ownership interest in
Odebrecht Oil & Gas through a private
placement investment of US$400 million
81,43% 13,57%
Two rounds of private equity in order to finance its growth
Strong and committed long term shareholders with a common goal to strengthen OOG’s position as a preferred service provider for the Upstream Oil & Gas Industry in Brazil
– On October 5, 2011 Gavea Investimentos
acquired a 5% ownership interest in
Odebrecht Oil & Gas through a private
placement investment of US$175 million
5,00%
Equity
Confidential Settlement Communication Subject to FRE 408
Project Orion FINANCIAL FORECAST AND PROPOSAL MATERIALS
January 7, 2016*
*Presentation originally made on the date indicated and, except as specifically noted, has not been updated to reflect recent developments or ongoing discussions.
Confidential Settlement Communication Subject to FRE 408
I. Introduction
1
Confidential Settlement Communication Subject to FRE 408
Preliminary Observations Challenges related to the cash flow, liquidity and credit of the Drilling Assets are driven by both the existing financing structure as well as the current underlying economics of the Drilling Assets.
> The current operating environment has negatively impacted the expected cash flows and long term value of the assets that secure the 2021 Notes and 2022 Notes (“Drilling Assets”)
‒ ODN Tay IV contract terminated by Petrobras and currently the asset is not producing cash flow
o Termination unexpected by OOG
o Determination of best alternative for ODN Tay IV still in process
o Petrobras aggressively targeting additional contracts in the market
‒ Re-chartering of Norbe VI in 2019 will likely result in lower day rates than originally anticipated
‒ The future value of the Drilling Assets expected to be well below what was originally anticipated at closing of bond offerings
‒ Higher opex than originally expected (specific to 2021 Notes’ assets)
‒ Currency moves have significantly impacted OOG’s funding requirements
> Projected cash flows from the Drilling Assets are expected to be lower than originally anticipated but are still forecast to cover all operating expenses, capital expenditures and interest expense on the 2021 Notes and 2022 Notes; however, cash flow is not sufficient to meet scheduled amortization payments
‒ At issuance, the structures were intended to receive little, if any, support from parent
‒ Over the last five years, OOG has invested more than $300mm in the Drilling Assets through capex and opex overage, net of all dividends received
o Such shortfalls were funded through debt at OOG
‒ Based on the Company’s business plan, operating expenses and capital expenditures will exceed the caps by ~$575 million and ~$425 million, respectively, through the respective maturities of the 2021 / 2022 Notes
‒ Based on current debt balances and estimated residual value of the Drilling Assets, OOG cannot continue funding capex and expected shortfalls in debt amortization payments
o OOG has limited obligation to provide ongoing financial support for the Drilling Assets
2
Confidential Settlement Communication Subject to FRE 408
3
Proposal Development
> Amending the existing ‘21 and ‘ 22 Notes securitization structures will significantly improve the long-term viability of the Drilling Assets
‒ Amending the current financing structure would allow all disbursement requirements, including capex and opex above the current cap, to be borne by the revenues of the Drilling Assets
‒ Viability of the operator is crucial to both the ‘21 and ‘22 Notes
> OOG and its advisors developed a proposal to address the Drilling Assets liquidity and capital structure. The proposal takes into consideration the current operating environment and the Company’s view of asset values as well as concessions based on the feedback provided by Houlihan and Cleary
> The proposal developed by OOG and its advisors seeks:
‒ A sustainable debt structure for the Drilling Assets and ability to refinance at maturity
‒ Incentive for OOG to continue operating the assets
‒ Value to Noteholders in the form of both interest and amortization
‒ Flexibility to deal with uncertainty in re-chartering ODN Tay and renewing Norbe VI in 2019
‒ A viable operating company
Confidential Settlement Communication Subject to FRE 408
II. Financial Forecast
4
Confidential Settlement Communication Subject to FRE 408
Key Assumptions to Forecast
> Key assumptions in the operating forecast for the 2021 and 2022 Notes are:
5
Forecast Approach
> Each asset forecasted on an individual basis
> Presented as two separate consolidations of 2021 Note assets and 2022 Note assets
Daily Charter Rates
> Daily charter and service rate assumptions consistent with dayrates in chartering contracts
o Dayrates increase at contracted rates
> Tay IV assumed to be re-contracted in 2017 at expected/projected market rates
> Norbe VI re-contracted in 2019 at dayrates consistent with existing contracts and with internal projected market rates
Number of Days > Assets assumed to work 365 days a year, except for scheduled maintenance and
usual downtimes already reflected in uptime assumptions
Tax Rate > Actual onshore tax rate is 11.25%, with 22.45% levied on revenue but further
compensated with opex costs
Capex
> Forecasted capex includes special survey costs
> Cash available in drydock accrual reserve account assumed to release in years with special survey costs
Debt Service > Existing debt schedule
Confidential Settlement Communication Subject to FRE 408
6
Changes in Operating Environment
Since the issuance of the 2021 and 2022 Notes, the operating environment for the Company’s assets securing the 2021 and 2022 Notes has changed. Additionally, certain targeted operating metrics have not yet been achieved.
Foreign Exchange
> Cash flow has been negatively impacted by the BRL / USD spot exchange rate moving from approximately 2:1 to 4:1
Operating Expenses and Capital Expenditures
> High demand for offshore drilling resources has impacted the following costs:
‒ Labor costs have increased above inflation from 2011-2015
o Mid 2015 was the only time that costs have started to decline given BRL devaluation
‒ Equipment suppliers have consistently increased their costs between 2011 and 2014
o Discounts being offered following the decline in the price of oil do not compensate for previous price increases
> The Macondo accident has raised a new standard API, inferring stricter maintenance rules related to well control equipment
‒ The demand for subsea parts and services has inflated the costs in the market
‒ With the new standard, Subsea now represents approximately 50% (before was 15%) of the maintenance costs of our rigs
‒ Most Subsea equipment parts are imported so Logistics costs associated with the new subsea standard also increased due to the taxes and freight associated with the imported parts
‒ Petrobras has been more strict on its requirements
> Disasters like the Macondo accident, the Chevron oil spill in Frade, and, more recently, the fire in Cidade de São Mateus FPSO have increased ANP inspections in relation to technical inspections
> Changes in REPETRO rules (imposed in December 2013) removed tax breaks for equipment with cost below US$25k, which also increased importation costs
> Change in taxation on income tax (IRRF) was not absorbed by Petrobras until now
Operational Metrics
> Operational uptimes have been less than original projected, particularly as it relates to ODN Tay IV
The projected continuation of the aforementioned factors will impact forecasted unlevered free cash flow materially
Confidential Settlement Communication Subject to FRE 408
2016 2017 2018 2019 2020 2021
Services Revenue (R$ 000)
Daily Services Rate (Prior Period) $238 $259 $266 $276 $287 $330
Number of Days (Prior Period) 366 365 365 365 341 348
Uptime + Bonus (Prior Period) 96% 97% 100% 100% 99% 99%
Tax Rate (Prior Period) 22% 22% 22% 22% 22% 22%
Services Revenue (R$ 000) (1) $64,942 $71,055 $75,154 $78,008 $75,075 $88,244
Charter Revenue (US$ 000)
Daily Charter Rate (Prior Period) $741 $744 $735 $737 $742 $760
Number of Days (Prior Period) 366 365 365 365 341 348
Uptime + Bonus (Prior Period) 96% 97% 100% 100% 99% 99%
Charter Revenue (US$ in 000) (1) $260,080 $262,885 $267,514 $268,357 $250,199 $262,276
Revenue (in $US) $275,918 $279,231 $284,183 $285,246 $266,069 $280,494
Operating Expenses (103,635) (99,955) (103,765) (112,384) (105,537) (127,425)
Operating Cash Flow $172,283 $179,276 $180,418 $172,861 $160,532 $153,070
Cap Ex (26,148) (19,553) (7,743) (6,475) (74,348) (9,377)
Unlevered Free Cash Flow $146,135 $159,723 $172,675 $166,386 $86,184 $143,693
Interest Expense (73,104) (66,199) (58,579) (50,244) (40,958) (31,194)
Cash Flow After Interest $73,031 $93,524 $114,097 $116,142 $45,227 $112,499
Fixed Amortization (105,000) (120,000) (127,500) (142,500) (150,000) (165,000)
Cash to / (Required from) Parent ($31,969) ($26,476) ($13,403) ($26,358) ($104,773) ($52,501)
Memo:
Total Debt $1,072,500 $952,500 $825,000 $682,500 $532,500 $367,500
Debt / LTM EBITDA 6.2x 5.3x 4.6x 3.9x 3.3x 2.4x
Op Ex Funding
By Service Agreement $15,838 $16,345 $16,669 $16,889 $15,871 $18,218
By Charter Agreement 47,814 46,522 43,704 42,398 36,591 61,541
Structure Cap $63,652 $62,867 $60,373 $59,287 $52,462 $79,759
Op Ex Funded by Parent $39,983 $37,088 $43,391 $53,098 $53,075 $47,665
Cap Ex Funded by Parent 26,148 19,553 7,743 6,475 74,348 9,377
Total Funding by Parent $66,131 $56,641 $51,134 $59,573 $127,423 $57,042
Cumulative Funding by Parent $66,131 $122,772 $173,907 $233,480 $360,903 $417,945
2021 Bond – Status Quo Forecast
7 Note: For illustrative purposes, the analysis assumes that the 2021 Notes are refinanced beyond maturity date with similar terms. Additionally, the analysis shown does not account for the impact of any reserve accounts (e.g. the sinking fund). (1) The consolidated revenue is reduced for days for measurement at 90% daily rate, income tax, and any additional revenue/outflows.
Confidential Settlement Communication Subject to FRE 408
2022 Bond – Status Quo Forecast
Note: For illustrative purposes, the analysis assumes that the 2022 Notes are refinanced beyond maturity date with similar terms. Additionally, the analysis shown does not account for the impact of any reserve accounts (e.g. the sinking fund). (1) The consolidated revenue is reduced for days for measurement at 90% daily rate, income tax, and any additional revenue/outflows.
8
2016 2017 2018 2019 2020 2021 2022
Services Revenue (R$ 000)
Daily Services Rate (Prior Period) $961 $997 $1,038 $1,238 $1,357 $1,411 $1,709
Number of Days (Prior Period) 366 365 363 358 365 365 343
Uptime + Bonus (Prior Period) 65% 95% 97% 97% 97% 97% 92%
Tax Rate (Prior Period) 22% 22% 22% 22% 22% 22% 22%
Services Revenue (R$ 000) (1) $178,444 $267,087 $283,645 $333,214 $372,166 $388,042 $415,799
Charter Revenue (US$ 000)
Daily Charter Rate (Prior Period) $1,290 $1,123 $1,093 $1,125 $1,131 $1,133 $1,289
Number of Days (Prior Period) 366 365 363 358 365 365 343
Uptime + Bonus (Prior Period) 65% 95% 97% 97% 97% 97% 92%
Charter Revenue (US$ in 000) (1) $308,908 $387,944 $384,971 $390,586 $399,894 $401,826 $404,391
Revenue (in $US) $352,423 $449,363 $447,885 $462,732 $478,573 $482,034 $488,372
Operating Expenses (170,991) (207,743) (196,318) (206,123) (221,743) (228,895) (211,650)
Operating Cash Flow $181,432 $241,620 $251,567 $256,608 $256,830 $253,138 $276,723
Cap Ex (27,373) (37,275) (35,219) (66,591) (16,205) (18,753) (99,543)
Unlevered Free Cash Flow $154,059 $204,345 $216,348 $190,017 $240,624 $234,385 $177,180
Interest Expense (134,047) (125,587) (116,813) (107,925) (95,884) (82,623) (57,951)
Cash Flow After Interest $20,012 $78,758 $99,535 $82,092 $144,740 $151,762 $119,229
Fixed Amortization (124,044) (130,282) (123,378) (164,639) (197,270) (206,895) (186,948)
Cash to / (Required from) Parent ($104,032) ($51,524) ($23,843) ($82,547) ($52,530) ($55,133) ($67,719)
Memo:
Total Debt $1,917,412 $1,787,130 $1,663,752 $1,499,113 $1,301,843 $1,094,948 $908,000
Debt / LTM EBITDA 10.6x 7.4x 6.6x 5.8x 5.1x 4.3x 3.3x
Op Ex Funding
By Service Agreement $43,515 $61,419 $62,914 $72,146 $78,679 $80,208 $83,981
By Charter Agreement 87,006 103,512 108,564 90,514 79,178 79,559 78,203
By Entity Transfers 18,819 4,383 – – – – 4,110
Structure Cap $149,340 $169,313 $171,478 $162,659 $157,857 $159,767 $166,294
Op Ex Funded by Parent $21,651 $38,430 $24,840 $43,464 $63,886 $69,128 $45,355
Cap Ex Funded by Parent 27,373 37,275 35,219 66,591 16,205 18,753 99,543
Total Funding by Parent $49,024 $75,705 $60,059 $110,056 $80,092 $87,882 $144,899
Cumulative Funding by Parent $49,024 $124,728 $184,787 $294,842 $374,934 $462,816 $607,714
Confidential Settlement Communication Subject to FRE 408
IV.Legal Update
9
Confidential Settlement Communication Subject to FRE 408
Overview of ODN Tay IV
> The ODN Tay IV Drilling Rig, one of the Vessels securing the Existing Notes, began operating in March 2013 under seven-year charter and services agreements with Petrobras (renewable for up to seven additional years upon mutual agreement of the parties)
> On May 16, 2015, the ODN Tay IV Drilling Rig entered into a planned maintenance dockage in order to change four thrusters
‒ At the direction of Petrobras, the Company invested ~$57 million to overhaul its engines
o Thruster repair: ~$16 million
o Engines and other costs: ~$41 million
‒ The scheduled maintenance was concluded on June 10, 2015
‒ While the rig was back in its location, Petrobras demanded that the rig be subject to a full acceptance test on the main engines
‒ After unsuccessful results on the engine tests, the rig was moved to the Brasfels shipyard in order to undergo a major overhaul of its 13 engines.
> On September 22, 2015, the Company received a letter from Petrobras exercising its alleged right to terminate both the ODN Tay IV Charter Agreement and Services Agreement effective as of such date.
10
Confidential Settlement Communication Subject to FRE 408
Overview of ODN Tay IV (cont.)
> OOG believes that Petrobras had no legal grounds for termination in particular because:
a) Planned maintenance dockage was specifically carried out to change four thrusters
b) Engine performance tests were successfully conducted in March/April 2015
c) Petrobras required new tests and changed the criteria without adequate prior notice
d) Petrobras’ demands were met before the end of the defense period
> Historical economic uptimes for the ODN Tay IV vessel are as follows:
‒ 52% in 2013, 61% in 2014, 46% in 2015 through October (91% uptime from January through May)
> Currently the ODN Tay IV vessel is at the Açu Port, in Brazilian waters, with a reduced crew
> The Company is currently evaluating a range of alternatives for the vessel, including:
‒ Options to re-charter under a short-term contract in Brazil
‒ Options to re-charter under a longer-term contract in Africa
> For forecasting purposes, the ODN Tay IV vessel is assumed to be re-chartered at a market rate
11
Confidential Settlement Communication Subject to FRE 408
Status of Lavo Jato/Petrobras Blacklist
> Mr. Marcelo Odebrecht, the former CEO of Odebrecht S.A., OOG’s parent company, and former chairman of the board of directors of OOG, as well as Mr. Marcio Faria and Mr. Rogerio Araújo, former members of the board of directors of OOG, have been arrested in June 2015 in connection with the Lava Jato investigations, and have been indicted in the Lava Jato investigation in relation to illicit payment made on behalf of other Odebrecht group entities, though not for OOG
> On December 29, 2014, OOG was provisionally blocked (bloqueio cautelar)(or blacklisted) by Petrobras, temporarily prohibiting OOG from bidding for and entering into new contracts with Petrobras
> Petrobras instituted a Committee to Analyze the Application of Sanctions (Comissão para Análise de Aplicação de Sanção), or CAASE, to assess whether certain companies mentioned in the Lava Jato investigations should remain blacklisted and assess potential sanctions
> The investigations by the CAASE were suspended as the Brazilian Federal General Comptroller (Controladoria Geral da Unidão), or CGU, commenced an administrative proceeding to investigate the allegations in order to determine whether any Odebrecht entity may have been a participant in any illicit payment scheme
> An adverse finding by CGU with respect to OOG could ultimately result in monetary fines to the government and restitution due to Petrobras (and OOG would continue on the blacklist)
> Petrobras may or may not remove OOG from the blacklist following a favorable finding by the CGU
> OOG believes that the CGU administrative proceeding will be concluded in the near term with a finding favorable to OOG, and that the CAASE investigation, once resumed, reaches the same conclusion leading to the reversion of the provisional block
Note: On March 8, 2016, Mr. Marcelo Odebrecht, Marcio Faria and Rogerio Araújo have been sentenced to prison for unlawful violations ranging from money laundering, criminal association and bribery. The sentences are subject to appeal. 12
Confidential Settlement Communication Subject to FRE 408
Overview of OOG Obligations
> In addition to ~$1 billion of indebtedness, the OOG parent provides approximately $37 million of guarantees on various letters of credit (“LCs”) at project level entities (other than those related to the 2021 structure and 2022 structure)
‒ ~$102 million and ~$187 million of LCs are outstanding for ‘21s and ‘22s, respectively
> The banks issuing the letters of credit in relation to the ODN Tay IV Operation and Maintenance Reserve Account (in the amount of $12 million) and the ODN Tay IV Debt Service Reserve Account (in the amount of $36 million) have notified the Trustee that they will not renew such letters of credit that expire at the end of February 2016
> OOG has obligations under its other projects, including the Delba III drilling rig, the PLSVs and FPSO Libra
‒ Total obligations of $213 million in aggregate, which includes amounts for funding operating expenses of certain vessels, balloon payments of certain indebtedness and amounts required as base equity contributions for certain projects
13
Confidential Settlement Communication Subject to FRE 408
V. Appendix
14
Confidential Settlement Communication Subject to FRE 408
15
Overview of Vessel Contract Rates > Below are the contract rates utilized in the forecast. Rates are consistent with existing contracts.
(1) Contracted rate until March 2019. Re-contracted rate applies from March 2019 onwards. (2) Current contracted applies through August 2021.
Vessel Contract Rates
2022 Dri l l ing Assets 2016 2017 2018 2019 2020 2021 2022
Service Dayrate (R$ 000's)
ODN I $106 $114 $119 $123 $128 $133 $137
ODN II 106 114 119 123 128 133 137
Norbe VI
Currently Contracted(1)438 478 500
Re-contracted High 530 720 810 840 860
Re-contracted Low 400 550 620 640 660
ODN Tay IV
Re-contracted High – 270 310 320 340 350 420
Re-contracted Low – 210 240 250 260 270 320
Charter Dayrate (USD$ 000s)
ODN I $333 $332 $334 $335 $338 $339 $341
ODN II 333 332 334 335 338 339 341
Norbe VI
Currently Contracted(1)210 210 216
Re-contracted High 230 250 260 260 260
Re-contracted Low 170 190 200 200 200
ODN Tay IV
Re-contracted High – 200 210 210 210 220 250
Re-contracted Low – 150 160 160 160 170 190
2021 Dri l l ing Assets ( 2 )2016 2017 2018 2019 2020 2021 2022
Service Dayrate (R$ 000's)
Norbe VIII $122 $132 $138 $143 $149 $154
Norbe IX 114 123 128 133 138 143
Charter Dayrate (USD$ 000s)
Norbe VIII $381 $381 $384 $385 $388 $389
Norbe IX 358 358 361 362 364 365
Confidential Settlement Communication Subject to FRE 408
Historical Opex by Rig
16
(USD$ 000s per Day)
2022 Assets 2011 2012 2013 2014 Nov15 Nov15 YTD
ODN I
Personnel Costs N/A N/A $84 $77 $72 $68
Repairs, Maintenance, Logistics N/A N/A 26 45 69 56
Other Costs N/A N/A 49 38 26 29
Total N/A N/A $159 $161 $167 $153
ODN II
Personnel Costs N/A N/A $78 $74 $58 $63
Repairs, Maintenance, Logistics N/A N/A 25 39 56 46
Other Costs N/A N/A 43 36 25 29
Total N/A N/A $145 $150 $139 $138
Norbe VI
Personnel Costs N/A N/A $78 $77 $65 $65
Repairs, Maintenance, Logistics N/A N/A 37 49 151 77
Other Costs N/A N/A 46 38 30 29
Total N/A N/A $161 $163 $246 $171
2021 Assets
Norbe VIII
Personnel Costs $81 $87 $86 $85 $66 $67
Repairs, Maintenance, Logistics 39 39 41 94 55 54
Other Costs 28 52 53 52 26 28
Total $148 $179 $179 $231 $147 $149
Norbe IX
Personnel Costs $82 $85 $83 $79 $61 $69
Repairs, Maintenance, Logistics 13 38 27 35 65 45
Other Costs 29 50 50 39 22 29
Total $124 $173 $160 $153 $148 $143
Confidential Settlement Communication Subject to FRE 408
Cost Reduction Initiatives > Labor Payroll
‒ Labor reduction per rig
‒ Continue the Full Time Equivalents “FTEs” control – related to double shift and resting days control
> Negotiations with the Union (ongoing measure)
> Crew Change
‒ Travel policy revision to only economic class tickets for all crew
‒ Optimize onshore logistics by using minivans and buses
> Repairs & Maintenance
‒ Reduce emergency flights per rig
> Material Logistics
‒ Optimize logistics of material supplies and equipment rentals in the Yard
> OpEx Reduction
‒ Reduce communication costs
> Onshore Base
‒ Target to reduce G&A by reducing number of employees in the onshore base
‒ Reduce price of rental equipment
‒ Unify offices in Macaé in a single building, thus further reducing rent
‒ Reduce service contracts with third parties (ex.: air cond., mobile phones, etc)
‒ Adjust Field Support structure
‒ Engagement of consulting company to analyze and propose optimization on G&A
17
Confidential Settlement Communication Subject to FRE 408
This document contains highly confidential information and is solely for informational purposes. You should not rely upon or use it to form the definitive basis for any decision or action whatsoever, with respect to any proposed transaction or otherwise. You and your affiliates and agents must hold this document and any oral information provided in connection with this document, as well as any information derived by you from the information contained herein, in strict confidence and may not communicate, reproduce or disclose it to any other person, or refer to it publicly, in whole or in part at any time except with our prior written consent. If you are not the intended recipient of this document, please delete and destroy all copies immediately.
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This document does not constitute an offer to sell or the solicitation of an offer to buy any security, nor does it constitute an offer or commitment to lend, syndicate or arrange a financing, underwrite or purchase or act as an agent or advisor or in any other capacity with respect to any transaction, or commit capital, or to participate in any trading strategies, and does not constitute legal, regulatory, accounting or tax advice to the recipient. This document does not constitute and should not be considered as any form of financial opinion or recommendation by us or any of our affiliates. This document is not a research report nor should it be construed as such.
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Copyright © 2015, PJT Partners LP (and its affiliates, as applicable). 18
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