Investor Presentation - kcadeutag.com 2017 KCA Deutag... · working onshore and offshore with a focus on safety, ... statistic Note: IADC stands ... Robust platform services contract

KCA Deutag is a leading international

drilling and engineering company

working onshore and offshore with

a focus on safety, quality and

operational performance

Investor Presentation

THIRD QUARTER 2017

Disclaimer

1

The distribution of this presentation in certain jurisdictions may be restricted by law. Persons into whose possession this presentation comes are required to inform themselves about and to observe any such restrictions.

This presentation contains forward-looking statements concerning KCA Deutag. These forward-looking statements are based on management’s current expectations, estimates and projections. They are subject to a number of assumptions and involve known and unknown risks, uncertainties and other factors that may cause actual results and developments to differ materially from any future results and developments expressed or implied by such forward-looking statements. KCA Deutag has no obligation to periodically update or release any revisions to the forward-looking statements contained in this presentation to reflect events or circumstances after the date of this presentation.

Third Quarter Investor Presentation

Agenda

2

1 Q3 Key Highlights

2 Business Update

3 Business Unit Financials

4 Group Results

5 Summary


Q3 Key Highlights

3

KCA Deutag is a leading international drilling and engineering company working

onshore and offshore with a focus on safety, quality and operational performance

1 Q3 2017 Group revenue of $309.4m (Q3 2016: $283.6m) and Q3 2017

EBITDA of $54.8m (Q3 2016: $56.4m) respectively

2 Steady tendering activity for Land with a number of contract awards, and

increased activity on the new Cat J and Hebron contracts for Offshore

3 Contract backlog of $5.0bn (at 1 November 2017) across a blue chip

customer base

4 Available liquidity of $230m at 30 September 2017

5 Excellent HSE and operational performance


Market Overview

4

Oil Price movement from January 2016

KCAD operates in low breakeven oil price environments

15

32

41 42 42 43

48

55 56

0

10

20

30

40

50

60

70

80

Source Rystad Energy (May-16)

KCAD core markets

0 10 20 30 40 50 60 70 80 90 100

Onshore Middle East

Shelf

Russia

Onshore

Row

Onshore

Deepwater

Extra

Heavy Oil

Ultra

Deepwater

North

American

Shale

Weighted Average Breakeven Oil Price

($/bbl)

Cumulative Liquids Production in 2020 (MMbpd)

Oil Sands

Current Brent price


Business Update

5

RDS Offshore Services

Integrated land drilling Offshore drilling services & design

• Performance in Norway

has improved in Q3

• First CAT J has arrived

in Norway

• Long term stable

backlog continues to be

maintained

• Activity levels remain

lower in the UK and

Angola

• Hebron platform has

started drilling

• New greenfield contract

win

• Brownfield work remains

relatively steady

• Developing diversification

opportunities into non-oil

and gas sectors

• 5 new recent contract wins

• Strong activity in Oman

and Russia

• Utilisation in Nigeria and

Kurdistan remains weak

• Algeria activity weaker

however increased

tendering activity

• Europe continues to show

signs of recovery

• New rig build contract

secured

• Component sales

revenue improved in Q3

• After Sales remains

steady with stable outlook

$168.8m / 72.3% of total¹ $(1.5)m / (0.6)% of total¹ $65.7m / 28.1% of total¹ $0.2m / 0.1% of total¹

Land Drilling Bentec

1 The % split of LTM EBITDA is calculated using total group EBITDA of $233.3m (before

corporate costs of $17.5m)


Group Margin Performance

6


KCAD Operations Are Diversified Across Global Markets

7

PRESENCE IN KEY AREAS

129

58 53 43

18

0

30

60

90

120

150

Europe North Africa Middle East North Sea Russia

Ye

ars

Houston

Baku

London Bad Bentheim

Tyumen

Nizwa

St. Johns

Bergen

Dubai

Land Drilling Offshore Services RDS offices Bentec Regional offices

Aberdeen (HQ)

North Sea

/Norway

21 Plat.

Europe &

Caspian

8 Rigs

Caspian

7 Plat.

Russia

16 Rigs

Middle

East

17 Rigs

Angola

2 Plat.

Africa

11 Rigs

Brunei

1 Rig

LTM Q3 2017 EBITDA split by region

Canada 1 Plat.

Map excludes 1 workover land rig in Nigeria, defined as being below 900HP

Map shows position at 1 November 2017

Russia

Sakhalin

3 Plat.


Health, Safety and Environmental Performance

8

• Sustaining low TRIR levels in a range which are the best in the company’s history

• KCAD achieved the lowest ever TRIR of 0.20 in July and August 2017

1 Total Recordable Incident Rate per 200,000 man hours. This is a rolling 12 month average 2 KCAD Total Recordable Incident Rate is directly comparable with IADC’s Total Recordables (RCRD) statistic

Note: IADC stands for International Association of Drilling Contractors

IADC industry average

0.452 for 2016

KCAD TRIR at

end of Q3 2017

was 0.211 injuries

per 200,000 man

hours worked


Backlog Status

9

Total contract backlog as at 1 August 2017

Contract backlog by BU as at 1 August 2017

Total contract backlog as at 1 November 2017

Contract backlog by BU as at 1 November 2017

Backlog figures exclude revenue generated in the year to date


Land Fleet Utilisation

10

Historical and forecast utilisation


Robust platform services contract backlog @ 1 November

11 Contracts have been extended or renewed since last call


Contract Platform

Client Country Assets Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 end date status #

Exxon Canada Hebron Mar-46 Operating 1

Statoil Norway CAT J (2) May-36 Operating / Under Construction 2

Exxon Angola Kizomba (2) Oct-27 Stacked 2

AIOC Azerbaijan Azeris, SD, DWG, Cop & Chirag Dec-24 Operating 7

Nexen UK Scott Feb-23 Operating 1

Statoil Norway Oseberg's (4) & Gulfaks (3) Oct-22 Operating / Stacked 6/1

Statoil Norway Kvitebjorn Oct-22 Operating 1

Statoil Norway Pipe pool management Oct-22 Active mgmt. contract

COP UK Britannia Oct-22 Stacked 1

CNR UK Ninian's (3) Tiffany Nov-21 Operating / Stacked 1 /3

SEIC Russia LA, PA & PB May-21 Operating 3

Total UK Alwyn Dec-20 Stacked 1

Total UK Dunbar Dec-20 Stacked 1

Enquest UK Thistle & Heather May-20 Operating / Stacked 1/1

Point Resource Norway Ringhorne Dec-18 Stacked 1

2017 2018 2019

Land Drilling

12

Financial Performance to 30 September 2017

• The land business is slightly down on the prior quarter

• Activity levels remain strong in Russia and Oman

• Ongoing weaker market conditions in Nigeria, Kurdistan and Algeria although uptick

in Algeria tendering

• Improved level of tendering activity in several markets – with 5 new recent contract

wins

• Utilisation for the quarter of 63%

Q3 2017 Q2 2017 Q3 2016 Q3 2017 Q3 2016

Result Result Result YTD YTD

$m $m $m $m $m

Revenue 122.8 128.0 135.2 372.9 436.0

EBITDA (post support allocation) 35.5 43.5 43.8 122.1 139.8

Margin 28.9% 34.0% 32.4% 32.7% 32.1%

Bentec

13


• EBITDA has remained around breakeven

• Active tendering market across after sales, components and new build rigs

• Contract secured for 5 new build rigs

Q3 2017 Q2 2017 Q3 2016 Q3 2017 Q3 2016


$m $m $m $m $m

Revenue 22.1 16.5 12.4 54.1 58.9

EBITDA (post support allocation) (0.0) 0.2 (2.2) 0.5 1.2

Margin -0.1% 1.5% -17.8% 0.9% 2.0%

Offshore Services

14


• Higher revenue and EBITDA compared to Q2 2017, primarily due to strong performance in

Norway

• One of the Cat J jack up rigs has now arrived in Norway, with the second due to arrive next

week

• Drilling has now commenced on the Hebron platform

Q3 2017 Q2 2017 Q3 2016 Q3 2017 Q3 2016


$m $m $m $m $m

Platform Services

Revenue 153.1 132.0 121.2 404.1 393.1


Margin 14.4% 9.8% 14.4% 11.4% 14.1%

MODUs

Revenue 0.0 0.0 0.8 0.0 29.4

EBITDA (post support allocation) 0.5 (0.0) 1.2 0.5 16.8

Margin n/a 0.0% 140.8% n/a 57.3%

Offshore Services

Revenue 153.1 132.0 122.0 404.1 422.5


Margin 14.7% 9.8% 15.2% 11.6% 17.1%

RDS

15


• EBITDA remains flat versus Q2

• Focus remains on maintaining breakeven levels plus the capacity for growth

• Secured greenfield front end evaluation and design project for a potential new build

platform drilling facility

Q3 2017 Q2 2017 Q3 2016 Q3 2017 Q3 2016


$m $m $m $m $m

Revenue 13.8 14.3 16.9 42.3 60.8

EBITDA (post support allocation) (0.0) (0.1) 1.8 0.5 5.4

Margin -0.2% -0.4% 10.9% 1.1% 8.9%

Group Results

16


Revenue and EBITDA ($m)

Q3

2017

$m

Q2

2017

$m

Q3

2016

$m

2017

YTD

$m

2016

YTD

$m

Revenue from business units 311.9 290.9 286.5 873.9 978.8

Eliminations (2.5) (3.4) (2.9) (7.9) (14.2)

Total third party revenue 309.4 287.5 283.6 866.0 964.6

EBITDA from business units 58.1 56.6 62.0 169.7 219.0

Eliminations 0.0 0.0 (0.1) 0.0 (0.3)

Corporate costs/other (4.8) (4.8) (5.1) (14.4) (14.5)

Exchange 1.5 (0.8) (0.4) 0.4 (1.4)

Total EBITDA 54.8 50.9 56.4 155.7 202.8

Q3 2017 Q2 2017 Q3 2016 2017 YTD 2016 YTD

$'m $'m $'m $'m $'m

Cash generated from operations 45.4 16.0 54.0 82.8 193.9

Tax paid (5.0) (11.2) (9.3) (24.7) (32.2)

Cash flow from operating activities 40.4 4.8 44.7 58.1 161.7

Capital expenditure (10.2) (35.0) (15.3) (52.0) (90.6)

Proceeds from sale of Fixed Assets 0.4 0.1 0.8 0.7 60.6

Interest received 5.3 6.2 5.1 16.9 15.7

Other 0.0 0.0 0.2 0.0 0.6

Cash flow from investing activities (4.5) (28.7) (9.2) (34.4) (13.7)

Interest paid (14.3) (50.0) (13.2) (79.2) (76.8)

Foreign exchange1 (8.3) (4.6) (0.7) (15.5) 10.4

Dividend paid to minority shareholders 0.0 0.0 (0.5) (0.3) (0.5)

Acquisition of non-controlling interests 0.0 0.0 0.0 0.0 0.0

Net Cash flow before debt

drawdown/(repayment)13.3 (78.5) 21.1 (71.3) 81.1

Drawdown/(repayment) of debt and

debt redemption/issuance costs(6.2) 2.8 (8.0) (10.0) 59.5

Net cash flow 7.1 (75.7) 13.1 (81.3) 140.6

Cash Flow and Working Capital

17


9

Working Capital3

9

Free Cash Flow

2

1Denotes the effect of foreign exchange rate changes on cash and bank overdrafts 2Q2 2017 and 2017 YTD includes $25m relating to the rig acquired by Alpha Group 3Deltas denote current quarter working capital movement

2

Capital Structure

18

Net leverage as at 30 September 2017

1 Q3 2017 LTM EBITDA of $241m includes the $25m Holdco equity contribution as defined in the Amended Credit Agreement 2 Revolver is split $75/$200m non cash/cash, the amount shown represents the cash element utilised. $25m of the cash RCF

expires May 2019 3 Facility and Recovery ratings shown as at September 2017

Utilisation

30th Sept 2017 Coupon Maturity

Facility

Rating3

Recovery

Rating3

Net

Leverage1

Revolver ($275m)2 0.0 L+400 Mar-22 Caa1/CCC+ 3/3 0.00x

Senior Secured Term Loan 359.3 L(100)+575 May-20 Caa1/CCC+ 3/3 1.49x

HSBC Oman Term Loan 52.0 L+400 Dec-20 0.22x

Total Bank Debt 411.3 1.71x

UK Finance Senior Secured Notes 375.0 7.250% May-21 Caa1/CCC+ 3/3 1.56x

UK Finance Senior Secured Notes 535.0 9.875% Apr-22 Caa1/CCC+ 3/3 2.22x

Total Institutional Debt 1,321.3 5.49x

Finance lease & other debt 3.7 - Aug-18 - - 0.02x

Gross Debt 1,325.0 5.50x

Cash 80.6 0.33x

Net Debt 1,244.5 5.17x

Closing Remarks

19


• Backlog position of $5.0 billion across a blue chip company base

• Q3 2017 results of $54.8 million EBITDA

• Increased activity on the new Cat J and Hebron contracts for Offshore

• Strong liquidity position at $230 million

• Excellent HSE and operational performance

• Steady tendering activity for Land with a number of contract awards

20

Q & A [email protected]

Documents

Investor Presentation - kcadeutag.com 2017 KCA Deutag... · working onshore and offshore with a focus on safety, ... statistic Note: IADC stands ... Robust platform services contract