Investor Presentation - KCA DEUTAG 2016 KCA Deu… · This presentation contains forward-looking statements concerning KCA ... 1 Q3 2016 Group revenue of $283.6m (Q3 2015: $398.5m)

www.kcadeutag.com

KCA Deutag is a leading international drilling and engineering

company working onshore and offshore with a focus on safety,

quality and operational performance

Third Quarter 2016

Investor Presentation

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.

2

1 Q3 Key Highlights

2 Business Update

3 Business Unit Financials

4 Group Results

5 Summary

Agenda

Q3 Key highlights

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 2016 Group revenue of $283.6m (Q3 2015: $398.5m)

2 Q3 2016 EBITDA of $56.4m (Q3 2015: $69.5m)

3 Contract backlog of $5.6bn (at 1 November 2016) across a blue chip

customer base

4 Cost reduction programme continues to align costs with current activity

levels

5 Positive cash generation with available liquidity of $245m at 30 September

2016

3

Market Overview

4

• Oil price fell below $30 / bbl in

January 2016

• Since our Q2 call oil prices have

fluctuated from $43 / bbl to $52 /

bbl (with an average of $48 / bbl)

• This ongoing volatility continues to

provide an uncertain backdrop

• Significant reduction in capex

spending since the peak in 2014

• Analysts are expecting a small

increase in 2017 and 2018 capex

1Source: Capital IQ as at 9 November 2016 2 Source: Wood Mackenzie November 2016

2

1

Business update

5

Bentec Platform services RDS

1 The % split of LTM EBITDA is calculated using total group EBITDA (including MODUs) of $299.6m (before corporate costs

of $17.7m). Note: MODUs LTM EBITDA of $16.5m represented 5.5% of total EBITDA.

Integrated land drilling Offshore drilling services & design

• Most of our International

operations continue to

perform relatively well

despite market

conditions

• Activity levels remain

low in the North Sea and

Angola with lower

pricing

• Recent contract wins

• Reduced capex spend by

E&P companies

continues to severely

impact activity

• A focus on continued cost

savings to preserve low

level positive EBITDA

• All activity now brownfield

with few opportunities in

greenfield

• After sales remains

stable with some

improvement in

component activity

• Highly competitive, weak

market conditions

although slight increase

in tendering activity

• Continued focus on cost

savings to preserve low

level positive EBITDA

• Utilisation remains soft in

Europe, Nigeria and

Kurdistan with stronger

activity in Oman and

Russia

• Continued market

uncertainty and pricing

pressure

$195.2m / 65.2% of total¹ $3.1m / 1.0% of total¹ $79.9m / 26.7% of total¹ $4.9m / 1.6% of total¹

Land drilling Bentec

6

Group margin performance

Houston

Baku

London Bad

Bentheim

Tyumen

Nizwa

St.

Johns

Bergen

Dubai

Land Drilling Platform Services RDS offices Bentec Regional offices

KCAD operations are diversified across global markets

Aberdeen (HQ)

Map excludes work over land rigs, defined as being below 900HP.

Map shows position at 1 November 2016.

PRESENCE IN KEY AREAS

North Sea

/Norway

26 Plat.

Europe &

Caspian

8 Rigs

Caspian

7 Plat.

Russia

16 Rigs

Middle

East

17 Rigs

Angola

3 Plat.

Africa

12 Rigs

Russia

Sakhalin

3 Plat.

Brunei

1 Rig

128

57 52 42

17

0

30

60

90

120

150

Europe NorthAfrica

MiddleEast

North Sea Russia

Ye

ars

LTM Q3 2016 EBITDA split by region

7

Canada

1 Plat.

8

1Total 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.

• KCA Deutag has continued to achieve satisfactory safety results

• The group continues to perform ahead of industry peers in the International Association of Drilling

Contractors (IADC)

• Maintaining high safety and operational standards is a key priority for the business

• North Sea Platform recently awarded the IADC’s ‘Best Safety Performance Award for a Platform’ at

the 2015 IADC Safety Awards

Health, safety and environmental performance

KCAD TRIR at

end of Q3 2016

was 0.391 injuries

per 200,000 man

hours worked

IADC industry average

0.602 for 2015

9

Backlog Status

Backlog figures exclude revenue generated in the year to date.

Total contract backlog as at 1 November 2016

Contract backlog by BU as at 1 November 2016

Total contract backlog as at 1 August 2016

Contract backlog by BU as at 1 August 2016

10

Land fleet utilisation

Historical and forecast utilisation

11

Robust platform services contract backlog @ 1 November

Contracts have been extended or renewed during quarter

12

• Despite tough market conditions the land business has delivered strong financial results

and is significantly ahead of the prior year EBITDA even though it has been down quarter

on quarter

• Russia and Oman have performed well over the quarter

• We continue to experience difficult market conditions in Europe, Nigeria and Kurdistan due

to weaker utilisation

• Utilisation for the quarter of 58%, a decrease of 9% on the prior quarter which was 67%

Financial Performance to 30 September 2016

Land Drilling

Q3 2016 Q2 2016 Q3 2015 Q3 2016 Q3 2015

Result Result Result YTD YTD

$m $m $m $m $m

Revenue 135.2 150.6 138.8 436.0 443.0

EBITDA (post support allocation) 43.8 48.3 36.4 139.8 108.8

Margin 32.4% 32.0% 26.2% 32.1% 24.6%

Bentec

13

• Revenues and EBITDA significantly lower than Q3 2015, with lower revenues and EBITDA

than the prior quarter

• Activity continued to reduce during Q3 as order backlog was completed and shipped to

customers

• Further headcount reductions have been agreed and will provide additional cost savings

• Some increase in tendering opportunities however activity remains low and the bidding

environment is a very competitive one

• During Q3 Bentec have secured new backlog in the form of 9 Top Drive sales


Q3 2016 Q2 2016 Q3 2015 Q3 2016 Q3 2015


$m $m $m $m $m

Revenue 12.4 16.8 51.6 58.9 192.1

EBITDA (post support allocation) (2.2) 0.5 3.4 1.2 18.4

Margin -17.8% 3.0% 6.6% 2.0% 9.6%

Platform Services

14


• Relatively strong performance despite challenging market conditions

• Lower activity levels continued in Angola and the North Sea

• Cat J and Hebron projects continuing on schedule to commence operations mid-2017

Q3 2016 Q2 2016 Q3 2015 Q3 2016 Q3 2015


$m $m $m $m $m

Revenue 121.2 127.4 165.2 393.1 527.2


Margin 14.4% 14.4% 13.7% 14.1% 12.4%

RDS

15


• Difficult to secure new work particularly for new Greenfield project with baseload activity

continuing in Brownfield

• We continue to manage costs in line with project activity

Q3 2016 Q2 2016 Q3 2015 Q3 2016 Q3 2015


$m $m $m $m $m

Revenue 16.9 19.5 37.6 60.8 136.8


Margin 10.9% 10.3% 9.0% 8.9% 11.9%

MODUs

16

• Strategic exit of the MODUs business now complete following the sale of the Ben Rinnes

jack-up rig in June 2016

• EBITDA in third quarter reflects certain close out activities for the Ben Rinnes and Ben

Loyal


Q3 2016 Q2 2016 Q3 2015 Q3 2016 Q3 2015


$m $m $m $m $m

Revenue 0.8 15.6 23.6 29.4 67.2


Margin 140.8% 73.8% 43.6% 57.3% 33.7%

Group Results Financial Performance to 30 September 2016

17

Revenue and EBITDA ($m)

Q3

2016

$m

Q2

2016

$m

Q3

2015

$m

2016

YTD

$m

2015

YTD

$m

Revenue from business units 286.5 330.2 416.9 978.8 1,366.7

Eliminations (2.9) (6.5) (18.4) (14.2) (93.9)

Total third party revenue 283.6 323.7 398.5 964.6 1,272.8

EBITDA from business units 62.0 80.7 76.0 219.0 231.7

Eliminations (0.1) (0.1) 0.0 (0.3) (1.4)

Corporate costs/other (5.1) (4.5) (4.4) (14.5) (14.3)

Exchange (0.4) (0.9) (2.1) (1.4) (4.8)

Total EBITDA 56.4 75.2 69.5 202.8 210.8

Cash flow and working capital Financial Performance to 30 September 2016

18

Working Capital2

9

1Denotes the effect of foreign exchange rate changes on cash and bank overdrafts. 2Deltas denote current quarter working capital movement

Free Cash Flow

1

Q3 2016 Q2 2016 Q3 2015Q3 2016

YTD

Q3 2015

YTD

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

Cash generated from operations 54.0 57.8 47.3 193.9 225.1

Tax paid (9.3) (10.6) (11.4) (32.2) (35.9)

Cash flow from operating activities 44.7 47.2 35.9 161.7 189.2

Capital expenditure (15.3) (11.2) (22.7) (90.6) (103.1)

Proceeds from sale of Fixed Assets 0.8 7.2 1.0 60.6 4.2

Interest received 5.1 5.2 5.3 15.7 13.7

Other 0.2 0.7 0.4 0.6 1.9

Acquisition of non-controlling interests 0.0 0.0 0.0 0.0 (25.0)

Cash flow from investing activities (9.2) 1.9 (16.0) (13.7) (108.3)

Interest paid (13.2) (49.2) (12.6) (76.8) (75.0)

Foreign exchange (0.7) 8.6 1.1 10.4 (3.4)

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

Net Cash flow before debt

drawdown/(repayment)21.1 8.5 8.4 81.1 2.5

Drawdown/(repayment) of debt and

debt issuance costs(8.0) (7.2) (1.6) 59.5 (20.3)

Net cash flow 13.1 1.3 6.8 140.6 (17.8)

19

Capital structure Net leverage as at 30 September 2016

1 Based on Q3 2016 LTM EBITDA of $282m. 2 Revolver is split $75/$175m non cash/cash, the amount shown represents the cash element. 3Facility and Recovery ratings shown as at November 2016

Utilisation

30th September 2016 Coupon Maturity

Facility

Rating3

Recovery

Rating3 Net Leverage1

Revolver ($250m)2 7.8 L+400 May-19 Caa1/CCC+ 3/3 0.03x

Senior Secured Term Loan 366.6 L(100)+525 May-20 Caa1/CCC+ 3/3 1.30x

HSBC Oman Term Loan 68.0 L+400 Dec-20 0.24x

Total Bank Debt 442.4 1.57x

UK Finance Senior Secured Notes 375.0 7.250% May-21 Caa1/CCC+ 3/3 1.33x

Globe Luxembourg Senior Secured Notes 500.0 9.625% May-18 Caa1/CCC+ 3/3 1.77x

Total Institutional Debt 1,317.4 4.67x

Finance lease & other debt 6.3 - Aug-18 - - 0.02x

Gross Debt 1,323.7 4.70x

Cash 146.3 0.52x

Net Debt 1,177.3 4.18x

Closing remarks

20

• Third quarter EBITDA of $56m delivered in challenging market conditions

• Volatility will continue to limit activity through 2016 and into 2017

• Continued proactive approach to cost saving activities

5m

• g liquidity position at $245m

• Backlog position of $5.6bn across a blue chip company base

• Strong liquidity position at $245m

21

Q & A [email protected]

Documents

Investor Presentation - KCA DEUTAG 2016 KCA Deu… · This presentation contains forward-looking statements concerning KCA ... 1 Q3 2016 Group revenue of $283.6m (Q3 2015: $398.5m)