Investor Presentation

Transcription

1 Investor Presentation Second Quarter 205 KCA Deutag is a leading international drilling and engineering company working onshore and offshore with a focus on safety, quality and operational performance

2 Disclaimer 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 forwardlooking 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.

3 Agenda Q2 Key Highlights 2 Business Update 3 Business Unit Financials 4 Group Results 5 Summary 2

4 Q2 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 YTD Group revenue and of $874.3m (Q2 204 YTD: $,054.7m) and $4.3m (Q2 204 YTD: $69.8m) respectively. Q2 205 Group revenue of $408.m (Q2 204: $540.9m) and Q2 205 of $65.2m (Q2 204: $89.0m) respectively Contract backlog of $7.6bn (at August 205) across a blue chip customer base A further new build rig spudded ahead of schedule in Russia on 6 April. Three remaining new build rigs in Oman and Brunei remain on track for delivery in 205 completing our new rig delivery programme $50m of committed funding from KCAD Holdings I limited shareholders still available for draw down if required Cost reduction programme continues to deliver an ongoing benefit to with further initiatives to improve efficiency and reduce costs being implemented 3

5 Business update Integrated land drilling Offshore drilling services & design $40.7m / 43.3% of total¹ $40.0m / 2.3% of total¹ $94.0m / 28.9% of total¹ $27.8m / 8.6% of total¹ Land drilling Bentec Bentec Platform services RDS International markets much less volatile than US, however certain markets have been more heavily impacted Continuing strong activity in Middle East, Russia and Algeria Lower activity in Nigeria and Europe where utilisation is very soft Strong H backlog continues from previous orders Good capacity usage for 205 Tendering activity continuing to secure 206 capacity No further change to Platforms portfolio activity since Q A slight increase in activity in Norway equipment rental business, but still below previous results Reduced capex spend by oil majors continues to impact activity Significant reductions in headcount implemented to counteract the reduced revenue levels 4 LTM, % split of total including MODUs, before corporate costs/ other of $38.4m. Note: MODUs LTM $22.m represented 6.8% of total before corporate costs.

6 Cost saving initiatives continue. A drive to reduce staff costs and discretionary spending which has delivered significant savings a) Salary reduction and salary freezes across the business b) c.250 redundancies worldwide in overhead positions c) Significant reduction in discretionary spending 2. Reducing costs in supply chain delivered through a companywide initiative across all operations and business units 3. Significant senior management focus on working capital and the full delivery of the various cost reduction initiatives a) Bi-weekly 3 week cash forecasting process b) Monthly BU review meetings with KPI & forecasting updates 5

7 A diversified portfolio of assets PRESENCE IN KEY AREAS Years Europe 56 5 North Africa Middle East 4 6 North Sea Russia Houston Ben Loyal jack-up rig LTM Q2 205 split by region St. Johns Aberdeen (HQ) London North Sea /Norway 27 Plat. Bergen Stavanger Europe & Caspian 7 Rigs Bad Bentheim Africa 4 Rigs Baku 7 Caspian Plat. Dubai Middle East 4 Rigs Nizwa Tyumen Russia 7 Rigs Myanmar Plat. Brunei Rig Russia Sakhalin 3 Plat. Angola 3 Plat. Ben Rinnes jack-up rig Regional offices Land Drilling Platform Services RDS offices MODUs Bentec 6 Map excludes work over land rigs, defined as being below 900HP.

8 Health, safety and environmental performance IADC industry average for 204 Sustained progress made on improving TRIR performance, which is well below IADC industry average Maintaining good annual safety performance KCAD TRIR at end of Q2 205 was 0.32 injuries per 200,000 man hours worked 7 Total Recordable Incident Rate per 200,000 man hours. This is a rolling 2 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.

9 Despite market environment, backlog remains strong Total contract backlog as at May 205 Total contract backlog as at August 205 Contract backlog by BU as at May 205 Contract backlog by BU as at August 205 $M $M 8 NB: Backlog figures exclude revenue generated in the year to date.

10 Land Drilling Financial Performance to 30 June 205 Q2 205 Q2 204 Variance Q2 205 Q2 204 Variance Result Result YTD YTD $m $m $m % $m $m $m % Revenue (3.4) -6.6% (52.7) -4.8% pre support allocation (.8) -24.4% (9.9) -.4% Support cost allocation (2.0) (2.8) % (4.5) (5.6). -8.8% post support allocation (.0) -24.% (8.9) -0.9% margin 22.0% 24.% 23.8% 22.8% Lower revenues and compared to Q2 204 and Q 205 Successfully delivered and spudded a new build rig in Russia Our operations in Russia, Algeria and Oman continue to enjoy high levels of utilisation and Our European, Nigerian and Kurdistan businesses continue to see weakening utilisation, largely due to the wider market environment Overall our utilisation for the quarter was 74%, in line with the prior quarter 9 is shown before and after allocation of central support costs (such as HR, Supply Chain and IT costs) to the operational business segments. 204 and 205 are presented on the same basis.

11 Bentec Financial Performance to 30 June 205 Q2 205 Q2 204 Variance Q2 205 Q2 204 Variance Result Result YTD YTD $m $m $m % $m $m $m % Revenue (3.5) -2.2% % pre support allocation (2.3) -32.9% NM Support cost allocation (0.5) (0.7) % (.0) (.4) % post support allocation (2.0) -32.4% NM margin 8.4% 9.8% 0.7% 7.% Revenues and lower than Q2 204 Bentec maintains a reasonable backlog which will ensure that the business has a good level of utilisation through to the end of the year Currently in final stages of completion of 7 rigs for a client in Algeria and 3 rigs for KCAD in Oman and Brunei Now ramping up the work on the 3 rigs for a customer in Russia and rig for a customer in Azerbaijan Tendering activity ongoing to secure order backlog for is shown before and after allocation of central support costs (such as HR, Supply Chain and IT costs) to the operational business segments. is also shown before eliminations. 204 and 205 are presented on the same basis.

12 Platform Services Financial Performance to 30 June 205 Q2 205 Q2 204 Variance Q2 205 Q2 204 Variance Result Result YTD YTD $m $m $m % $m $m $m % Revenue (36.0) -7.3% (34.9) -8.8% pre support allocation (4.4) -7.% (5.0) -9.8% Support cost allocation (.4) (2.0) % (3.2) (3.9) % post support allocation (3.8) -6.% (4.3) -9.2% margin.6%.4%.8%.8% Continued good performance given current market conditions Our Angola, Myanmar and Canada operations experienced flat activity quarter on quarter, whereas Azerbaijan and Sakhalin saw lower due to currency devaluation and the impact of client contract adjustments Our Norway business saw a small improvement on Q 205 due to stronger equipment rental activity is shown before and after allocation of central support costs (such as HR, Supply Chain and IT costs) to the operational business segments. 204 and 205 are presented on the same basis.

13 RDS Financial Performance to 30 June 205 Q2 205 Q2 204 Variance Q2 205 Q2 204 Variance Result Result YTD YTD $m $m $m % $m $m $m % Revenue (43.2) -52.2% (79.6) -44.5% pre support allocation (0.0) -66.% (8.8) -57.3% Support cost allocation (0.5) (0.7) % (.) (.4) % post support allocation (9.8) -68.0% (8.5) -59.0% margin.6% 7.4% 3.0% 7.6% Activity levels significantly reduced, primarily due to a lack of opportunities for Greenfield projects We continue to reduce costs in this business as projects reduce in size Brownfield activity is more resilient, however projects tend to be smaller and we are seeing increased pressure on prices 2 is shown before and after allocation of central support costs (such as HR, Supply Chain and IT costs) to the operational business segments. 204 and 205 are presented on the same basis.

14 MODUs Financial Performance to 30 June 205 Q2 205 Q2 204 Variance Q2 205 Q2 204 Variance Result Result YTD YTD $m $m $m % $m $m $m % Revenue (3.2) -37.% (32.7) -42.9% pre support allocation % (4.9) -27.5% Support cost allocation (0.3) (0.5) % (0.7) (.0) % post support allocation % (4.6) -27.0% margin 32.% 3.6% 28.3% 22.2% Improved performance over Q 205 when the Ben Loyal jack up rig experienced damage to one of its legs and was therefore off day rate for a period. The rig was back to work in April and is currently working under a short-term contract extension at a reduced day rate The Ben Rinnes continues to operate offshore Angola The self-erecting tender barges, which were sold in Q4 204, contributed $7.5m of the before support allocation during H is shown before and after allocation of central support costs (such as HR, Supply Chain and IT costs) to the operational business segments. 204 and 205 are presented on the same basis.

15 Group Results Financial Performance to 30 June 205 Revenue and ($m) Q2 205 $m Q2 204 $m 205 YTD $m 204 YTD $m Revenue from business units ,099.2 Eliminations (34.0) (38.2) (75.5) (44.5) Total revenue ,054.7 from business units Eliminations (0.) (.) (.3) (.) Corporate costs/other (4.4) (5.5) (9.9) (.8) Exchange (0.8) 0.9 (2.7) (0.) Total

16 Cash flow and working capital Financial Performance to 30 June 205 Free Cash Flow Working Capital 2 Q2 205 Q YTD 204 YTD $'m $'m $'m $'m Cash flow from operating activities Capital expenditure (24.5) (6.) (80.4) (83.5) Proceeds from sale of Fixed Assets Interest received Other (3.5) (2.4) 2.7 (0.7) Acquisition of non-controlling interests (25.0) 0.0 Cash flow from investing activities (2.2) (62.6) (9.2) (80.) Interest paid (49.6) (50.) (62.5) (54.) Foreign exchange (0.2) (4.9) (4.5) (5.9) Net Cash flow before debt drawdown/(repayment) 3.4 (75.5) (8.) (6.3) Drawdown/(repayment) of debt and debt issuance costs (4.6) (8.2) (6.5) (82.8) Net cash flow (.2) (56.7) (24.6) (99.) Cashflow from working capital improved due to collections by Bentec for the rigs delivered to Algeria since the year end In addition there is a favourable working capital impact of lower levels of activity and lower cash taxes Excluding the rights issue accounting between Holdings and Alpha: The working capital cashflow of $34m inflow would have been a $58m inflow The capital expenditure of $24.5m would have been $48.5m Denotes the effect of foreign exchange rate changes on cash and bank overdrafts. 2 Deltas denote current quarter working capital movement compared to the same period in the prior year

17 205 committed and contracted growth capex New build land rig contracts Rig Country Cost ($m) Contract length Status Rig Oman c.3 5yrs + 2xyr options Operating Rig 2 Oman c.3 5yrs + 2xyr options Operating Rig 3 Oman c.3 5yrs + 2xyr options Operating Rig 4 Russia c.30 3yrs + 3xyr options Operating Rig 5 Brunei c.37 3yrs + 3xyr options In construction Rig 6 Russia c.29 3yrs Operating All ongoing capex projects were initiated in 204 and are supported by long term contracts Up front contributions of $40m received from clients The 205 growth capex plan is almost complete, with no new growth capex commitments currently proposed Maintenance capex spend for 205 $80m - $85m Rig 7 Oman c.3 5yrs + 2xyr options In construction Rig 8 Oman c.3 5yrs + 2xyr options In construction New build land rigs schedule PO Rig R'cd Q Q2 Q3 Q4 Q Q2 Q3 Q Total 205 capex spend on ongoing new build construction projects c.$30m Remaining capex spend in 205 c.$54m All contracts remain in place without any re-negotiation of terms All new build capital expenditure is targeted at a minimum 8% IRR 6 Construction Operational Excludes cost of mobilisation given this is reimbursed by client

18 Capital structure Net leverage as at 30 June 205 Utilisation 30 th June 205 Coupon Maturity Facility Rating Recovery Rating Net Leverage 2 Revolver ($250m) L+400 May-9 B3/B 3/3 0.5x Senior Secured Term Loan 37.3 L(00)+525 May-20 B3/B 3/3.30x Total Bank Debt x UK Finance Senior Secured Notes % May-2 B3/B 3/3.3x Globe Luxembourg Senior Secured Notes % May-8 B3/B 3/3.75x Total Institutional Debt, x Finance lease & other debt Aug x Gross Debt, x Cash x Net Debt, x 7 All facilities have ratings outlooks of positive / stable. 2 Based on Q2 205 LTM of $286 m. 3 Revolver is split $75/$75m non cash/cash, the amount shown represents the cash element.

19 Closing remarks Stable Q2 performance in the current challenging market conditions $50m of committed funding from our shareholders still available for draw down if required Successful start up of 5 of the 8 new build rigs, with 3 more on track for delivery in 205 Strong backlog position at $7.6bn across a blue chip company base Cost initiatives delivering bottom line savings 8

20 9 Q & A investor.relations@kcadeutag.com