Analyst Presentation - resources.inktankir.comresources.inktankir.com/ades/ADES-Analyst-Site-Visit-Presentation-vFinal.pdf · “We will spend more than half a trillion Saudi Riyals

Analyst PresentationFebruary 2019

2ADES INTERNATIONAL HOLDING | Analyst Presentation

ADES at a Glance

• ADES International Holding (“ADES” or the “Group”) is a leading oil & gas drilling and production services provider in the Middle East and North Africa (“MENA”) focused on creating value for E&P Players in the region

• Constantly evolving portfolio of services that primarily includes offshore and onshore contract drilling, workover and production services

• ADES specializes in acquiring and refurbishing legacy ‘fit for purpose’ offshore assets which (among other cost-saving measures) enable the Group to offer competitive rates to its clients

• Backed by a capable in-house refurbishment and maintenance team, the Group benefits from a highly-skilled, low-cost workforce

• The Group’s business revolves around providing tailored solutions and superior service to its clients

• ADES’s offering is characterized by its commitment to global industry standards and ever-expanding services and solutions

Leading MENA-based O&G Service Provider

Differentiated Low-Cost Business Model

Customer-Centric Approach

WHO WE ARE


Our Markets

Expanding Our Regional PresenceThe new assets under ADES’ umbrella reinforce its position in the Saudi Arabian and Algerian markets and enables the expansion of its regional footprint into Kuwait.

1

2

3

4

Algeria

Egypt

KSA

Kuwait

+6 onshore rigs(1)

3onshore rigs

1MOPU

7offshore rigs

11onshore rigs

6offshore rigs

12onshore rigs

Existing Markets

The Group currently operates in Egypt, Algeria, and the Kingdom of

Saudi Arabia, but plans to expand its operations throughout the region

New Markets

ADES executed two acquisitions, which while growing its presence

significantly in the KSA, both offshore and onshore, will also see the Group to enter the onshore drilling space in

Kuwait

New markets Existing markets

1

23

4

(1) With the Kuwait and KSA segments of the Weatherford acquisition finalised in November and December 2018 respectively, ADES continues to work towards closing the acquisition of six remaining rigs in Algeria and delivery of 2 rigs in South Iraq


Highly Experienced Management Team

Investor Relations Officer

Chief Strategy Officer

Years of Experience Year Joined ADES

34

Dr. Mohamed Farouk

Chief Executive Officer ✓ Senior Vice President, Invensys

Operations Management (Now Schneider Electric)

✓ Director, Global Engineering Excellence

Centers

27 Years

2012

Aly MakhloufInternational Markets Director

Ahmed MohyEgyptian Market GM Hussein Badawy

28 Years 2014 24 Years 2009 10 Years 2016

Mohamed KhalilVP Operations Country Manager Country Manager

Omar Saleh

12 Years 2016 44 Years 2012

Morcos WilliamLegal Counsel

Shoukry El SayedVP Projects Project Manager Project Manager

14 Years 2015 38 Years 2013

Ahmed El KhatibChief Financial Officer Country Financial Controller Country Financial Controller

21 Years 2017

Gamal Mohamed AhmedHR Director Country HR Manager Country HR Manager

12 Years 2006

Mohamed SaadMaintenance Director Maintenance Superintendent Maintenance Superintendent

18 Years 2015

Amr WafikHSE Director HSE Superintendent HSE Superintendent

22 Years 2009

Mohamed HegawySupply Chain Director Supply Chain Manager Supply Chain Manager

18 Years 2017

Mahmoud HabashiQMS Director QMS Manager QMS Manager

33 Years 2013

Ayman RagaiChief Information Officer IT Manager IT Manager

27 Years 2016

◼ Ph.D. Systems Engineering and Control,Case Western Reserve University, USA

◼ M.Sc. Electrical Engineering and

Control, Faculty of Engineering, Cairo

University, Egypt

◼ B.Sc. Electrical Engineering, Faculty of

Engineering, Cairo University, Egypt


Strategy


1019

49

75

101

134

158

127

2011 2012 2013 2014 2015 2016 2017 9M2018

Revenue (USD MN)

Brent Crude (USD/bbl)

109 USD/bbl

105 USD/bbl

91 USD/bbl

100 USD/bbl

48 USD/bbl

46 USD/bbl

51 USD/bbl

78 USD/bbl

ADES – Strategy

Activity remains higher due to lower break-even prices in the MENA region than the global average

Focus on workover drilling and maintenance, mainly constituting OPEX expenditure, which is typically less cyclical than CAPEX expenditure

ADES mainly assesses its potential acquisitions through two methods:

▪ Buy-to-Contract Model – Securing the contract first, then finalising the acquisition of the asset

▪ Contract Acquisition Model – Acquiring chartered assets with on-going contracts

Target backlog of 2x net debt – ensuring maintenance of a minimum level of liquidity to pay its contractual obligations at all times

Focus on Low Cost of Production Areas Such as MENA

Focus on Workover Drilling & Maintenance

Considered Approach to Acquisitions

Backlog Management

▼ 49%Brent Crude

▲ 110%Group Revenue

▲ 141%Group EBITDA(1)

2014-17

Cycle-Proof Business Model

(1) Adjusted EBITDA - Operating profit for the year before depreciation and amortisation, employee benefit provision and other provisions and impairment of assets under construction under construction

Backlog (USD)

7 MNBacklog (USD)

67 MNBacklog (USD)

78 MNBacklog (USD)

117 MNBacklog (USD)

225 MNBacklog (USD)

501 MNBacklog (USD)

427 MNBacklog (USD)

437 MN


Strong Competitor in the Region

IOCs

NOCs

Independents

ABS

ISO Certification

Company Pre-Qualifications

Memberships

ADES’ diverse client relationships have been forged by seeking pre-qualification status to provide drilling and workover services well before a

contract is secure, thereby creating a significant barrier to entry

Solid Track RecordRanked #2 Offshore Jack-Up Driller in MENA (1)

High Profile Client BaseComprising a diverse range of leading oil companies

World Class QualificationsAdhering to Global best practice

ABS Class Certificate

The Group’s operational drilling

offshore fleet is either ABS certified or

currently pending recertification

ISO 9001:2008 Certification

ISO 29001:2012 Certification

20

14

12

11

8

8

6

6

4

4

4

3

Note (1): By number of rigs in November 2018; Note / Source: Clarkson's Research

>90%Fleet utilisation since 2012

- No. of Rigs


38%

22%

19%

10%

5%4%2%

Middle East

North America

CIS

Africa

Asia Pacific

S. & Cent. America

Europe

Middle East Continues to be the Region with the Leading Oil Production and Proven Reserves

Key Market Characteristics

The Middle East is the

leading oil-producing

region globally with

almost 40% of the world’s

proven reserves. The

sector constitutes a

significant share of GDP

and is a major source of

FDI

Distribution of Proven Reserves(1)Distribution of Oil Production(1)

(1) Source: Wood Mackenzie Production as of 2018, Reserves remaining as of Jan-19 ; (2) Source: Factset as of January 9, 2018; (3) Source: JPMorgan 2019 Oil Service Field Outlook

20

40

60

80

100

120

140

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023

Average Monthly Historic Price Current Forward Forward 1 Month Ago Forward 3 Months Ago Forward 6 Months Ago Forward 1 Year Ago

Oil Price Outlook(2)

US$/bbl

While it is expected some degree of capital risk aversion in NOC / IOC budget decisions in response to recent commodity retrenchment, historically there is a budget growth correlation to prior year oil price(3) ( which

averaged US$70+/bbl, 22% 2018 YTD increase)

22%

34%

20%14%

11%

9%

8%4%

Middle East

North America

CIS

Asia Pacific

Africa

S. & Cent. America

Europe

After recent volatility, oil price curve has moved back into Contango which would support continued investments in upstream sector


Robust Outlook for Investment in Upstream in Middle East

(1) Source: IHS Markit; (2) JPMorgan 2019 Oil Service Field Outlook; (3) Source: Wood Mackenzie; (4) Source: Wood Mackenzie, Jack-ups operators for wells spud from 2010 to 2018 in Middle East.

Middle East Upstream Investment

▪ Commitment to investing in upstream by the 3 largest contributors to OPEC production remains strong despite OPEC volumes being squeezed to protect price

▪ Upstream investment in the ME showed remarkable resilience during the downturn

▪ Spend has fallen 19% from US$ 83bn in 2014 to US$ 67bn in 2018 whereas global spend is down 40%

▪ Most of the drop has been in Iraq on the back of government finances been affected by lower prices and Iran owing to geopolitical uncertainty

▪ The dominant theme in the region is the expansion of oil production capacity

▪ Saudi Arabia, Kuwait and the UAE are focusing on brownfield projects with large-scale reserves around core fields already in production(3)

▪ ME is expected to grow at a record ~15% in 2019 driven by KSA, Algeria and Abu Dhabi with the spend being levered to drilling(2)

Production Forecast to 2030(1)Bn bbl

-

2

4

6

8

10

12

14

2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030

Middle East North America

CIS Latin America

Africa Asia Pacific

Key Market Characteristics

Energy Holding

Energy Investment Companies

Independents

Holding's subsidiaries

Jack-Ups Operators in the Region(4)

57%37%

4%2%

NOC Others Large Caps International Majors

“We will spend more than half a trillion Saudi Riyals (US$ 133bn) on drilling activities over the next decade, in compliance with the goals and objectives of the ambitious Saudi Vision 2030.”

Mohammed Al-Qahtani, Saudi Aramco’s Sr. VP for upstream

“With the blessing of HH Sheikh Khalifa, the Supreme Petroleum Council approved AED 486bn (US$ 132bn) in capex to support ADNOC’s 5-year growth plans... ADNOC will increase oil production capacity to 5mpbd by 2030.”

Sheikh Mohamed, Abu Dhabi Crown Prince, Nov 2018

Other Qatar Iran Iraq Oman Kuwait UAE KSA

0

10

20

30

40

50

60

70

80

90

2014 2015 2016 2017 2018 2019 2020 2021

ME Spend – Breakdown per Country(3)US$ bn

Strong commitment by Middle East NOCs to investing in upstream sector driven by a long-term view on growth in demandand a desire to maintain or increase market share


Middle East has the Lowest Extraction Cost Globally

Overview per Region

0

10

20

30

40

50

60

70

80

90

100

110

120

Canada TarSands

Barents Sea AngolaDeepwater

Australia US Tight Oil NigeriaDeepwater

North Sea Brazil Pre-Salt UAE Egypt Egypt Saudi Arabia UAE Kuwait Saudi Arabia

Onshore

Offshore

US$/bbl Range

NB: Breakeven prices can vary widely within areas, countries and even basins depending on factors of geology, geography and industry regulations

2018 Average Brent Price: US$ 71.1/bbl

CORE MARKETS

ADES operates in countries characterized by low extraction costs, non harsh environments and the pre-dominance of drilling intensive legacy fields

✓

✓

✓ ✓

✓ADES’ current presence


ADES’s Core Focus is on “Non-Harsh” Environments

Onshore Shallow Water Deep Water Ultra Deep Water

Onshore RigsJack-up Rigs(Up to 400ft)

Semi-submersible Rigs(<10,000ft)

Drill ships(>10,000ft)

Jack-Up Fleet Locations(1)

(1) Source: Clarkson Dec-18, data as of Dec-18(2) Source: Daleel Oil & Gas Supply Portal & Baker Hughes

Onshore Fleet Locations(2)

(1)

22%

18%

16%

13%

12%

11%

8%

North America

NW Europe

S&C America

Asia Pacific

Med / Casp./ BI.SeaWest Africa

Middle East/ISC

44%

22%

11%

10%

8%4% 1%

Middle East/ISC

Asia Pacific

North America

NW Europe

Med / Casp./ BI.SeaWest Africa

S&C America

Floater Fleet Locations(1)

53%

22%

5%

9%

3%4%4%2%

Russia and CIS

USA

Canada

Middle East

Africa

Asia-Pacific

Latin-America

Europe


Focus on Stable and Resilient Jack-up, Legacy Rigs Segment

Shallow Drilling is an Attractive Segment(1)

Legacy Rigs vs New-builds(1)

Shallow water basins are dominated by lower-risk brownfield projects (development drilling) with attractive economics resulting in lower volatility and quicker recovery during downturns (shorter cycle)

50%

60%

70%

80%

90%

100%

'09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19

Utilization

Floaters Utilization

Jack-up Utilization

Reflected in more resilient utilisation rates More resilient day rates … And more stable backlog days

(1): Source: Clarkson Dec-18 report

▪ Given their high G&A cost structure and reliance on outsourced (costly) maintenance approach, big global offshore drillers opt to scrap their legacy assets

▪ Low cost, legacy assets offshore drillers have the requisite cost structure and internal refurbishment capabilities to profitably deploy old legacy assets in the appropriate markets

▪ Legacy assets are a norm in the Middle East market

▪ During the most recent downturn, legacy assets have outperformed new-build assets (as measured by % utilization)

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

0

50

100

150

200

250

300

350

400

450

500

Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 Jan-18

<=1978 utilization1979-1985 utilization1986-2005 utilization2006+ utilization

Utilization by Build Cycle# of active Rigs

Jack-up Fleet Age Profile of Shallow Water Rigs

23%

49%

4%

7%

18%

1976-1980 1981-1985 1986-1997 1998-2008 2009+

120,000

100,000

80,000

40,000

20,000

0

60,000

Jan

-09

Jul-

09

Total Days

Jan

-10

Jul-

10

Jan

-11

Jul-

11

Jan

-12

Jul-

12

Jan

-13

Jul-

13

Jan

-14

Jul-

14

Jan

-15

Jul-

15

Jan

-16

Jul-

16

Jan

-17

Jul-

17

Jan

-18

Jul-

18

Jack-Ups <=300ftJack-Ups >300ft

Jack-Up Backlog

Total number of contracted days for jack-up fleet and vessels under construction. Excludes

undeclared optional contract periods.

600

500

400

200

100

0

300

300

250

150

100

50

200

Jan

-05

Jan

-06

Jan

-07

Jan

-08

Jan

-09

Jan

-10

Jan

-11

Jan

-12

Jan

-13

Jan

-14

Jan

-15

Jan

-16

Jan

-17

Jan

-18

350

Floater & Jack-Up DayratesFloatersUS$’000/day

Jack-UpsUS$’000/day


Middle East Drilling Industry Has Exhibited Strong Growth While Keeping Utilizations High

(1): Source: Clarkson Dec-18; (2) Source: Drilling Contractor - Official Magazine of the International Association of Drilling Contractors; note: Utilization rate of all regions shown were sourced from this report. Utilization rate of Europe refers to Europe / FSU / Russia as per magazine. (3): Source: International Drilling Activity by Region - Spears - Dec 2018; note: Only growth of North America and Asia / China; Asia and China refers to Far East and China as per report. (4): Source: Baker Hughes Rig Count (except North America and Asia / China). (5): Source: Drilling Contractor - Overall refers to average of international Land Rig utilization excluding US & Canada

58%

35%

65%

69% 61%

77%

79%

(100%)

(80%)

(60%)

(40%)

(20%)

0%

20%

40%

60%

0 1 2 3 4 5 6 7 8

Regional Jack-up Rigs Growth & Utilization Rates(1)

Size of the bubbleJack-up Utilization (Avg. 2018)

Rig

Gro

wth

(’1

0-P

rese

nt)

North America

S&C America

West Africa

NW Europe

Asia Pacific

Med./Casp/Bl. Sea

Middle East/ISC

95%

87% 88%91%

93%95%

87%

74%

64%66%

71%

99%

90% 90% 91% 94%

96%

90%

85%

78% 77% 79%

50%

60%

70%

80%

90%

100%

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Global Middle East

Jack-up Rig utilization rate at start of each year

The Middle East is the only region to witness rig growth since 2009 and enjoys the highest Jack-up utilization rate

Onshore Rigs Growth & Utilization Rates

62%

72%

75%

79%

84%

78%

(80%)

(60%)

(40%)

(20%)

0%

20%

40%

60%

80%

100%

0 1 2 3 4 5 6 7

Size of the bubbleOnshore Utilization (Avg. 2018)(2)

Rig

Gro

wth

(’10

-Pre

sen

t)(4

)

North America(3)

S&C America

Europe

Africa

Middle East/ISC

Asia / China(3) 84%

88%90%

95%

85%

91%

81%

70% 71%

77%

82%

90%

97%100%

94%

100% 99%

75%77%

84%

50%

60%

70%

80%

90%

100%

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Overall Middle East

Onshore Rig utilization rate average of each year(2)


• Evaluate proposed acquisition opportunities

IPO of ADES

Smart ExecutionEvaluating Acquisitions and Backlog Renewal

Roadmap to Growth

• Signed Definitive Acquisition Agreement31 onshore drilling rigs –Weatherford (KSA, Algeria, Kuwait and Southern Iraq)

• Finalised Nabors Acquisition3 operating offshore jack-up rigs (KSA)

• Extensive integration plan - Restructure the new business for a streamlined integration with the Group’s newly acquired assets

• Incorporate newly acquired assets within governance to safeguard the interests of all our stakeholders

• Working with top-tier consultants for a seamless Integration as well as the enhancement of Group’s HSE and Governance framework

• In the medium-term ADES’ is expected to generate strong cash-flows supporting the distribution of dividends

• ADES will continue to grow organically by participating in accretive tenders and growing its backlog

• Capitalise on increased tendering capacity through strategic agreements with leading shipyards

• Secured Standby Credit Facility SAR 525 million (US$140 million) from Alinma bank

Integration & Governance Organic Growth Dividends

• Secured Syndicated Credit FacilityUS$450 million -arranged by the Bank of America Merrill Lynch and the EBRD

Market Sentiment

• Positive Market Sentiment drives management’s decision to IPO

• Participated in competitive processes for promising tenders, which led to Nabors and Weatherford acquisition) while consistently renewing Group backlog

• Acquisitions resulted in:• Almost USD 1bn of

additional backlog• USD 250mn of

additional revenue


Operational Excellence


To ensure that the Group continues to deliver exemplary safety and health standards, ADES has appointed a top tier HSE consultant to review the Group’s safety procedures and ensure its continued adherence to the highest safety standards.

Health, Safety and Environmental Responsibilities

HSE Overview HSE Incident Statistics

2016 2017 H1 18

Total Working hours (‘000) 2,792 4,343 2,263

Recordable injury rate (200,000 man-hours)

0.40 0.41 0.62

IADC worldwide RECRD incident rate up to date

0.58 0.45 0.69

• As an oil and gas service provider, ADES is committed to complying with

occupational health, safety and environmental care standards as a sign of its

commitment to excellent quality service

• The HSE Management System provides ongoing identification, prioritization

and control of any risk that may arise. This system establishes a continuous

improvement process for the implementation of the HSE policy, leadership

expectations and core values

Improve Plan

Perform

Measure

Act

Incident and Injury Free Workplace (IIF)HSE Management System

The consultants have carried out a preliminary safety culture assessment, which addresses the following topics:

I

2

3

4

A full safety culture assessment through interviews of more than 45 employees from cross section of ADES.

Plan IIF sessions in town, for the crews of three select rig sites as well as Cairo office employees in. To be rolled-out in the KSA at a later stage

Carry out IIF coaches training which shall be provided to ADES nominated IIF coaches

Post-IIF sessions, Offshore unit visits to evaluate IIF measures have been adequately employed


Human Resources Department

Human Resources in Perspective

Human Resources Department Main Objective :

Hire talented calibers, train & develop their knowledge, skills & abilities, with the aim to retain our valuable employees to match the market requirements and achieve the company’s strategic goals.

Talent Acquisition

Head Count & Turnover Rate

532770

1241 1330

3587

0

500

1000

1500

2000

2500

3000

3500

4000

2014 2015 2016 2017 2018

HeadcountTurnover

4.8%

Includes 140 Third Party employees

340 Will be added shortly out of which 294 are 3rd

party employees

- Set the recruitment strategy in alignment with company strategic direction with the aim to position the company as an employer of choice.

- Attract and hire the best qualified candidates from within or outside the organization

- Promote the mobility of the senior leadership team across different countries.

Engagement & Communications

ADES has a new approach through the establishment of a new section –Engagement & Communications – with the aim to:• Build a solid internal communication strategy.• Design Culture transformation methodologies to empower the core

values and ADES DNA through different programs.• Measure employee satisfaction toward the company through

monitoring engagement surveys and initiate corrective actions if required.

Team Building Activity

Engagement Survey

ADES Workplace

Regular Comms.

Safety Leadership

Turbo Day

Regular Rig Visits

ADES Annual Event

To project the achievements and milestones took place, communicate future plans and reward best performers.

Satisfaction Survey

Special Events in

Different occasions


Human Resources Department Cont’d

Training & Development

ADES is committed to promote an environment of training and continuing professional development for its employees. The company provides numerous training courses that covers the training requirements of tier one clients for example: Aramco, KOC, EGPC, BP and Eni.

Develop competency management system (CMS) and On Job Training system (OJT) to measure the abilities, commitment, knowledge and skills for the job holder to ensure high level of efficiency while performing the required job.

Design different development and succession programs in alignment with the company strategic objectives.

Emergency

Operational

Lifting

Drilling

Marine

Medical

HSE

Mechanical

ElectricalCourse

Categories

Total number of courses are

123

26,202

18,888

15,237

Training Hours - 2018

HSE

Technical

Soft Skills

60,327


ADES is about to introduce its Training ARM to the Oil & Gas market under the title of “ ADES Academy “ to train and develop its human capital.

Seeking Accreditations:• IWCF “International Well control forum “• IADC “International association of drilling contractors” • LEEA “Lifting equipment Engineers Association • ASHI “American Safety & Health Institute”• NEBOSH “National Examination Board in Occupational Safety and

Health

ADES Academy

Human Resources Department Cont’d

ADES is about to introduce its new training management System or portal after acquiring the license of “ Skills VX “. This software facilitates the management of training process (TMS), Competency Management (CMS) and Learning Management System (LMS)

Advanced Training Management PlatformTalent Development Programs

Under Graduate Training Program

Graduate Training Program

Special

Program

Future Managers Program

Summer Internship Program (SIP)

Assistant Rig Manager Program (ARMP)

Graduate Training Program (GTP)

Rig Mover Program (RMP)

SADA

SPSPOIM Trainee Program (OTP)

ADES offers a diversity of development and succession programs in all levels whether undergraduates, graduates, specialists or even highly experienced in alignment with the company strategic objectives.

Competitive Packages:

ADES always seeks to provide competitive packages to its employees specially for the key positions. ADES salary scale meets and exceeds the market scale in accordance to the criticality of the positions.

Incentive Based Compensation (KPIs):

The performance of ADES employees is based on management by objective, whereby each employee has their salary split into a fixed part and a variable part which is directly linked to the performance of the employee pertaining to their specified role.

Benefits:

Employees usually receive additional upgraded benefits according to their employment grades, including medical coverage that is extended to the employee’s family, life insurance & allowances (including for certain travel, transportation, mobile expenses).

ADES World:

ADES world is a portal for discounted offers that is designed for corporate employees. These offers may vary from travel offers to discounted goods via several methods and application.

Employee Retention


Fleet Utilisation Schedule | Offshore

Contracted Good Chance for Renewal Optional Extension Contracted with Previous Owner

2017A 2018E 2019E 2020E 2021E 2022E 2023E 2024E 2025E 2026E

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

ADMARINE I Egypt

ADMARINE II Egypt

ADMARINE III Egypt

ADMARINE IV Egypt

ADMARINE V Egypt

ADMARINE VI Egypt

ADMARINE VIII Egypt

ADMARINE 88 Egypt

ADMARINE 261 KSA

ADMARINE 262 KSA

ADMARINE 266 KSA

ADMARINE 655 KSA

ADMARINE 656 KSA

ADMARINE 657 KSA


Fleet Utilisation Schedule | Onshore

Contracted Good Chance for Renewal Optional Extension Contracted with Previous Owner

2017A 2018E 2019E 2020E 2021E 2022E 2023E 2024E 2025E 2026E

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

ADES 2 Algeria

ADES 3 Algeria

Rig 155 Kuwait

Rig 776 Kuwait

Rig 870 Kuwait

Rig 871 Kuwait

Rig 180 Kuwait

Rig 878 Kuwait

Rig 808 Kuwait

Rig 809 Kuwait

Rig 144 KSA

Rig 158 KSA

Rig 798 KSA

Rig 157 KSA

Rig 173 KSA

Rig 174 KSA

Rig 040 KSA

Rig 799 KSA

Rig 889 KSA


Recent Acquisitions


Recent Acquisitions (1 of 2)

Nabors Acquisition - Overview

Nabors Acquisition (Completed in June 2018)The acquisition of 3 operational offshore jack-up rigs located in the KSA, brings the number of the Group’s

offshore rigs under contract to 14

• Admarine 656 and Admarine 657 rigs have been refurbished before the acquisition, with five-year certification. Both Rigs have started generating revenue immediately after the acquisition was completed.

• Admarine 655 is currently operational after undergoing an ABS recertification process.

Rig DetailsAdmarine 655 Admarine 656 Admarine 657

Transaction Highlights

Asset • 3 ultra-shallow offshore drilling jack-up rigs

Location • KSA

Current Charterer • Aramco

Purchase Price • USD 83 million (75% Cash - 25% ADES shares)

Seller



Weatherford Acquisition - Overview

Weatherford Acquisition In July 2018, ADES announced the signing of a definitive agreement with Weatherford International plc for the acquisition of 31 onshore drilling rigs. With the Kuwait and KSA segments of the deal finalised in November and December 2018 respectively, ADES continues to

work towards closing the acquisition of the six remaining rigs in Algeria and delivery of two rigs in Southern Iraq.

• 20 of the acquired 31 rigs are

currently operational

• Remaining 11 will be used in

tendering activities and for

strategic inventory purposes

Transaction Highlights

Asset • 31 onshore rigs

Location • KSA, Algeria, Kuwait and Southern Iraq

Purchase Price • USD 287.5 million (paid by a combination of cash and secured debt instruments)

Additional Details

• The future revenue-generating ability of the 11 non-operational rigs was not factored into the transaction’s valuation

• Rigs were acquired for a minimal cash compensation, in line with ADES’ strategy of executing smart acquisitions at attractive prices that present significant upside potential

Seller

DetailsUSD 190 MN

Expected Annual Revenues

12 YRSAverage Rig Age

+ 20Operational Rigs

4.5 YRSWeighted Av. Contract Tenor

+2,300Employees

USD 750 MNExpected Additional

Backlog


Expanding Our Regional PresenceThe new assets under ADES’ umbrella reinforce its position in the Saudi Arabian and Algerian markets and enables the expansion of its

regional footprint into Kuwait and Southern Iraq.


Weatherford Acquisition – Potential

6

11

2

- New markets

- Existing markets

- Acquired onshore assets

SouthernIraq

Algeria

KSA

3 3

6

11

12

2

31

Algeria KSA Kuwait S. Iraq Total

Onshore Fleet Additions

Existing onshore fleet rigs

34

At the close of this transaction, more than 80%of ADES’ top-line will be generated outside Egypt.

12Kuwait

(No. Rigs)


Expected Combined Impact on Backlog and Top-line PerformanceThe new acquisitions will allow ADES to strengthen its onshore and offshore assets while adding to its backlog and expanding its revenue

contribution from international markets

The new strategic acquisitions have secured ADES’ position as one of the

major players in the MENA region.

The newly acquired rigs are expected to contribute an additional c.USD 250

million to ADES’ annual revenues, which alone exceeds the total annual revenues

recorded in 2017

Recent Acquisitions

Combined Acquisitions – Potential

312 15

313

34

34

15

49 (1)

Onshore Offshore Total

Existing Rigs New Acquisitions

437

600

78150

Existing Fleet backlog as of 30 Sep. 2018WDI Kuwait

WDI KSA

ADM 657 renewal

c. USD 1.26 BN

158

60

150

40

FY17 NewAcquisitions

Nabors

Weatherford

Total Fleet Addition Expected Annual Revenue

250

Expected Backlog Distribution

The newly acquired assets’ are expected to almost triple the existing backlog as at 30 September 2018

11%1%

49%

39%

Egypt Algeria KSA Kuwait

Expected Backlog Geographical Distribution

Post-acquisitions, ADES’ backlog will come from a more

diversified group of territories

(USD mn)(No. Rigs)(USD mn)

16%

7%

48%

29%

Egypt Algeria KSA Kuwait

Expected RevenueDistribution

The acquisition will gain ADES entry into new markets while

strengthening presence in existing markets

Note (1): Includes six rigs in WDI Algeria and two rigs in South Iraq which ADES is currently working on finalising


Our Markets


KSA – Market FundamentalsOur Markets

Upside potential of the Saudi Oil & Gas market

KSA is the world’s most important oil producer, possessing c.16% of the world’s proven petroleum reserves in 2017 and ranks as the largest exporter of petroleum

KSA’s oil & gas market is characterised by low extraction costs, non harsh environments and the pre-dominance of drilling intensive legacy fields

• KSA has accounted for 65% of all jack up drilling days added globally in 2018YTD(1), contributing 58 years of the 90 years of added jack-up backlog(2)

• Moving from 230 – 300 rigs collectively in coming years, giving an average of 25% growth

Top 5 Markets by Proven Oil Reserves(3)

Thousand Million Barrels

Top 5 Markets by Oil Production(3)

Thousand Barrels Daily

303266

169 157 149

Venezuela KSA Canada Iran Iraq

13,05711,951

11,257

4,982 4,831

USA KSA Russia Iran Canada

16% of Global Reserves

13% of Global Production

(1) 2018 YTD refers to Jan-October 2018 (2) Source: Bassoe Offshore (3) Source: BP Report


6 550+ USD 230mn

ADES in the KSA (Offshore)Our Markets

(1) Source: Clarksons Research (2) Source: Bassoe Offshore

Strengthening our Offshore Presence

Acquisitions in 2016

Acquisitions in 2018

Admarine 261 Admarine 262 Admarine 266

Admarine 655 Admarine 656 Admarine 657

In late 2016, ADES launched operations in the KSA with

the acquisition of three legacy offshore rigs

operating under contract

In 2018, ADES further strengthened its presence in

the Kingdom with the acquisition 3 ultra-shallow

offshore drilling jack-up rigs from a subsidiary of Nabors

Industries

These acquisitions have enabled ADES to establish itself as a key player in the

KSA oil and gas services market

Advantages of pre-qualification with Aramco

ADES’ prequalification with Aramco is expected to

facilitate the expansion of services in the Kingdom

Aramco’s renewal with the rigs acquired from Nabors with ADES is testament of

Aramco’s confidence in the Group’s business and

operations

Of all contracts awarded worldwide this year, Saudi

Aramco has offered the longest terms: nearly 1200 days on average compared to 485 days for the rest of

world average(2)

Offshore rigs Employees Backlog (3Q 18)

Presence in the KSA

ADES’ Ranking in the KSA(1)

87

6 65

4 4 43

ARO ENSCO ADES Rowan Shelf drilling Noble Corp Seadrill Others ArabianDrilling Co.

(No. offshore jack-up Rigs – October 2018)


11 Onshore rigs

9

Up to 3000

USD 78 MN

923

ADES in the KSA (Onshore)Our Markets

Entering KSA’s Onshore Space

As part of the Weatherford deal, ADES has acquired 11 onshore rigs in the KSA

This marks the entrance of ADES in the KSA natural gas drilling market – making the Group one of the few players in this lucrative industry, traditionally characterised by high utilisation rates

9 rigs are currently under contract and generate an additional $78 million in the Group’s backlog. ADES is expecting to secure new contracts extensions

ADES’ Potential Ranking in the KSA(1)

(No. onshore rigs – October 2018)

4341

35

28

98

16

SANAD Sinopec Arab Drill Sapiem ADES Dalma Others

Contracted Rigs

Horse Power

Backlog

Employees

Acquisition Highlights*

(1) Source: Internal intelligence


12 Onshore rigs

8

Up to 3000

USD 606 MN

c. 976

Contracted Rigs

Horse Power

Additional Backlog

Employees

48

32 31

8 7 5 7

Sinopec Burgan KDC ADES NDSC Greywolf Others

Acquisition Highlights

ADES in KuwaitOur Markets

Upside Potential of the Kuwaiti Market

6th in the World for proven oil reserves, behind only Venezuela, KSA, Canada, Iran and Iraq

Advantageous investment environment

Low-cost break-even point

One of the highest utilisation rates globally

ADES’ Ranking in Kuwait(1)

(No. onshore rigs – October 2018)

Advantages of pre-qualification with KOC

• Access to a privileged market with:• High barriers to entry• Limited number of bidders • Restricted registration process

• Invitation to all tenders with KOC in Kuwait

• New approach to promote the LSTK, while there has been shortage of the rigs in the previous market tender.

Kuwait’s national oil company expects to spend USD 114 billion in CAPEX over the next five years and an additional USD 394 billion

beyond that to 2040

In November 2018, ADES entered the Kuwaiti market through the acquisition of 12 onshore rigs from Weatherford Int’l plc. The transaction is set to become a stable source of additional backlog over the coming six years.

(1) Source: Internal intelligence


USD 187 MN

Employees1000+

Cumulative Backlog (3Q 2018)

7

1

Offshore rigs

MOPU

Presence in Egypt

ADES in EgyptOur Markets

Upside Potential of the Egyptian Market

Strong profitability and return on investment driven by attractive acquisition cost of rigs and long-term continuous service

Government reforms are set to boost economic growth and improve business environment

6th largest proven oil reserves in Africa(1)

Lower labor cost relative to regional and global averages

The 2015 Zohr gas field discovery is set to increase Egypt’s oil reserves by around 50%

(1) Source: Clarksons Research

62.8 62.8

30

As of 2017 With Zohr

Trill

ion

Cu

bic

Fee

t

ADES’ Ranking in Egypt(1)

(No. offshore jack-up Rigs – October 2018)

Admarine II

While headquartered in DIFC, ADES manages the Group’s high-level activities out of its base in Egypt, where the Group

has been present since 2011

Currently focuses on providing offshore drilling services in shallow non-harsh environments

ADES’ continued operational performance and excellent safety record have allowed it to develop excellent

relationships with the government and suppliers helping ADES mitigate the longer terms on receivables in the

Egyptian oil & gas industry

8

21 1 1 1 1

ADES ShelfDrilling

EDC EGAS Saipem SinoTharwa

Others


Upside potential of Algerian market

ADES entered the Algerian market in 2015 with the acquisition of new-build onshore rig ADES 2 and has since grown its fleet to 3 onshore rigs (with one of the rigs currently in the tendering phase)

USD 13 MN

Cumulative Backlog (3Q 2018)

3

50+

Onshore rigs

Employees

Presence in Algeria

ADES in AlgeriaOur Markets

Algerian proven crude oil reserves are estimated to be of 12.2 billion barrels1

High barriers to entry for international investors protect ADES’ position in the market

Relatively low cost of oil production

Good working capital with 75% of most contracts paid in USD and 25% in DZD

Algeria is the third largest natural gas producer in the MENA region after Qatar and Saudi Arabia

ADES II


Acquisition Integration


The Group’s extensive post-acquisition programme involves two main steps and was developed in collaboration with Boston Consulting Group, a global leader in the subject

Post-Acquisition Program

• Identify areas for development within the existing operating model (including processes, people and governance)

• Define targets and ‘transition’ initiatives• Identify integration risks and appropriate mitigation

strategies• Ultimately use internal assessments and external

benchmarking to devise integration plan for the Group as a whole

• Organise strategy workshops to support ADES Senior Executive Team in understanding rapidly changing context, determining key implications for ADES, and accordingly shaping/fine-tuning ADES' strategy

• 2 workshops held in parallel to integration programme in order to reflect on steps taken and improve the efforts going forward

In light of ADES’ recent acquisitions, the Group has already began to implement a multi-faceted post-acquisition program through dedicated integration and strategy workshops with the aim to extract the full value of its newly acquired assets, people and technology

Integration Strategy

Integration80%

Strategy20%

1

2


Phase 1 Deliverables


Integration - 80%Key Objectives

Realise "synergies" & value creation opportunities

Design and build the new organisation

Create a common culture and bind key people

Continue day-to-day business

Organisation & People

Systems & Procedures

Change Management

• Baseline organisation• Assess & identify key

talents

• Map system & processes

• Identify overlaps• Maturity & gap

assessment

• Diagnose current cultures

• Derive implication for integration

• Select optimal organisational structure• Design operating model• Select key resource for key functions

appointments• Develop retention & redundancy plans

• Select best practices, identify & calculate synergies

• Design integrated processes/system for HQ functions and business functions

• Set target culture and identify desired behaviors• Design interventions activities to reinforce desired

behaviors• Design communication & engagement activities• Design training & change management activities

• Transparent baseline of as-is• To-be organisation design, operating model and

governance• Transition plan to move from As-is to To-be

• Transparent baseline of current set-up • Synergy potential analysis• Integrated & optimised business and HQ processes

and updated policies for HQ process• Develop transition plan

• Assessment of current culture• Clearly articulated target culture supportive to overall

strategy, and required interventions to implement target culture

• Transition plan to implement new culture• Regular insight in new management engagement

• Set operational & financial synergy & targets

• Develop integrated implementation phase roadmap

• Design governance structure for implementation

Assess Design Plan

StrategyIntegration


Workshop 1

Workshop 2

Expected outcomes:

• Shared view on relevant market developments

• Confirmation of current strategy, or clarification of need for change (+direction and magnitude of change)

• Input for business plan and strategic priorities for coming years

StrategyIntegration


Strategy Workshops – 20%Objective

Format• 2 focused workshops (c.0.5-1.0 day) for ADES’ senior

executive team and BCG experts• Organised in parallel to Integration, leaving room for

reflection• Various preparatory, summarising & formalising

actions to realise optimal workshop results

ObjectiveSupport ADES Senior Executive Team in understanding rapidly changing context, determining key implications for ADES, and accordingly shaping/fine-tuning ADES' strategy

Strategy Workshop Program

Circulate pre-read in preparation for workshop 1

Status of the drilling sector, deep dive on selected markets, competitive landscape and evolving client requirements needs, key success factors, competitive models observed

Summarise outcomes workshop 1, circulate for comments, and as input for workshop 2

Detail preferred competitive models, selection and identification of implication for organisation, operating model, financials, resources and initiatives

Summarise outcomes workshop 2, circulate for comments and formalise output


Key Takeaways

• Increasing diversification during 2018 through two major acquisitions – Weatherford and

Nabors assets..

• Middle East & North Africa region remains attractive

• Cost competitive, internationalized domestic workforce

• Niche market position with high barriers to entry

• Significant and growing order book backlog – in excess of $1bn

• High asset utilization – good profitability

• Robust balance sheet

• Strong Health & Safety track record

• Experienced management team.

The Regional Champion

Documents

Analyst Presentation - resources.inktankir.comresources.inktankir.com/ades/ADES-Analyst-Site-Visit-Presentation-vFinal.pdf · “We will spend more than half a trillion Saudi Riyals