Investor Presentation

Transcription

1 Investor Presentation Fourth Quarter 203 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 Key highlights 2 Commercial developments 3 Business overview 4 Group results 5 Summary 2

4 An excellent Q4 completed a strong year of development for KCA Deutag 203 revenue of $2.2bn and EBITDA of $304m. EBITDA growth was 8% 2 Improved operational and financial performance from all core business units KCA Deutag has 25 years of experience as one of the world s leading onshore and offshore drilling and engineering contractors, operating safely in key markets and new territories Strong market position across highly attractive international markets and key territories Contract backlog of $7.9bn on March 204 across a blue chip customer base Successful lender consent request extended maturities on $325m of debt 6 Net debt/ltm EBITDA leverage fell from 4.8x at Q3 203 to 4x by the close of the year 3 EBITDA excludes results from the Ben Avon jack-up which was disposed of in March 203.

5 203 Asset light Contract tenor Segment description KCA Deutag is a diversified business across onshore and offshore Onshore (c.50% of EBITDA ) Offshore (c.50% of EBITDA ) Land Drilling Bentec Platform Services RDS MODU Leading international premium drilling contractor High end fleet of 53 drilling and 4 workover rigs 2 Track record of executing complex wells in harsh environments Design and manufacture of premium land rigs and key components Capacity for 2-6 rigs and top drive capacity increased during 203 to a capability of c.50 top drives per annum Provision of after sales services Leading global platform service operator outside of North America 39 platform rigs under management Operations in UK North Sea, Norway, Russia, Azerbaijan, Angola and Myanmar Design and refurbishment of offshore drilling facilities and MODUs Engineering from concept to commission Employs c.800 engineers and support staff globally Owns and operates fleet of 2 jack-ups and 3 barge type self erecting tender (SET) rigs A sale and purchase agreement to sell two of the Group s subsidiaries which own and operate the 3 barges was signed on 4 March 203 EBITDA 45% 8% 27% 6% 4% - 5 years with options n/a 3-5 years with options n/a 3 years Over 50% EBITDA generated in asset light businesses 4 EBITDA excludes results from the Ben Avon jack-up which was disposed of in March 203 and is stated before normalisation adjustments and excluding central overheads of $53m. 2 Compares to 54 drilling and 9 workover rigs (Q3 203). Difference due to the retiral of drilling and 5 workover rigs in Libya which have not worked for the last 3 years and will not be restarted.

6 Continued strong market position and balanced portfolio of assets across highly attractive international markets Azerbaijan 8 platforms St. Johns Norway UK North Sea platforms 4 platforms Bergen Russia 5 rigs Houston Ben Loyal jack-up rig 203 EBITDA split by region SE Asia 0% Middle East % Russia 20% Other 9% Europe (inc North Sea) 23% Africa 4% Caspian 3% Aberdeen (HQ) Netherlands 2 rigs France rig Germany 2 rigs Spain rig London Algeria 6 rigs Nigeria 6 rigs Glen Esk SET rig Ben Rinnes jack-up rig Stavanger Bad Bentheim Albania rig Libya 4 rigs Baku Iraq / Kurdistan 4 rigs Gabon rig Angola 2 platforms Dubai Nizwa Oman 6 rigs Tyumen Kazakhstan rig Pakistan 2 rigs Glen Affric SET rig Glen Tanar SET rig Kuala Lumpur Brunei rig Sakhalin 3 platforms Myanmar platform Presence in key regions Years Europe North Africa Middle East North Sea 5 Russia Regional offices Land Drilling Platform Services RDS offices MODUs Bentec 5 EBITDA excludes results from the Ben Avon jack-up which was disposed of in March 203 and is stated before normalisation adjustments and excluding central overheads of $53m. Map excludes work over land rigs, defined as being below 900HP.

7 Consistently strong health, safety and environmental performance is a key differentiator Total Recordable Incident Rate 2.00 KCA Deutag IADC Average Consistently below the industry average TRIR confirms our dedication and commitment to safe, effective and trouble-free operations History of over 25 years of complex drilling operations under harsh operating conditions Reputation and track record critical to supporting our leading market position and ensuring repeat business TRIR ² 6 Total Recordable Incident Rate is directly comparable with IADC s Total Recordables (RCRD) statistic IADC and KCAD statistic available to Q Note: TRIR stands for Total Recordable Incident Rate (per 200,000 man hours); IADC stands for International Association of Drilling Contractors.

8 Healthy backlog providing high level earnings visibility for the future Contract backlog as at 30 September 203 Contract backlog 2 as at March 204 8,000 $462m $,033m $6,82m $7,677m 8,000 $,30m $980m $5,60m $7,899m 6,000 $3,976 6,000 $4,207 4,000 $3,84 4,000 $4,05 2,000 0 $m Contract $3,702 $4 $2,34 $2 $442 $ and thereafter Total backlog Option 2,000 0 $m Contract $5 $4 $3,692 $,258 $839 $, and thereafter Total backlog Option Contract backlog by BU Contract backlog 2 by BU Land Drilling Bentec Platforms $03m $75m $,76m $7m Land Drilling Bentec Platforms $2m $73m $,726m $25m RDS MODUs $6,54m RDS MODUs $5,737m Updated Methodology Methodology per the OM issued in May 203 dictated that revenue generated during the financial year be included for the purposes of the backlog calculation. We have employed new methodology which ensures that the calculation is strictly forward looking. 7 Q3 203 backlog has been restated for the updated methodology. 2 Backlog excludes revenue secured for the barges.

9 Significant new contracts Bentec, Algeria Contract nature Contract length & timeframes Customer Construction of seven onshore desert drilling rigs, all fully equipped with Bentec equipment, including top drives, pumps, drawworks, power control rooms and electrical controls Rigs to be delivered within the next 7 months Enafor Contract value Largest single contract in Bentec s history We are extremely proud to have secured our largest deal since the company was established in 994. We work hard to maintain the highest quality standards across our drilling rig systems and this success is testament to that, the services we provide and our continued commitment to developing additional business in Algeria. Dirk Schulze, Chief Executive Officer, Bentec 8

10 Land Drilling making a significant contribution to strong Q4 results Financial Performance to 3 December 203 Q4 Q Variance Variance YTD YTD $m $m $m % $m $m $m % Revenue % % EBITDA % % Margin 25.0% 25.5% 23.5% 25.0% Sustained strong Q4 performance with utilisation at 85% for the quarter Continued good results from Africa due to two new rigs that came online Q2 and Q3. Other countries in region have also experienced good utilisation and day rates in the quarter Europe and Russia both saw good results due to utilisation and increases in Combined Drilling Services in the Russian business The Middle East saw a softening in results for the quarter as non-productive time and rig moves reduced both utilisation and earnings 9 85% utilisation includes the 6 Libyan rigs (re-entry to the Libyan market is ongoing). Excluding the 6 Libyan rigs the utilisation figure is 9% for Q4 203.

11 Land Drilling - rig utilisation is robust with opportunities for growth Overview Leading international provider of onshore drilling and workover operations Operates in c.5 countries across Russia/CIS, Middle East, North Africa and Western Europe Track record of executing complex, deviated wells in harsh environments and emerging markets Significant renewal of existing contracts as well as new contracts resulted in utilisation outlook for the coming year better than the outlook for the same period in the prior year Fleet utilisation 00% Average Land Rig Utilisation 84% 76% 79% 80% 65% 60% 40% 20% 0% Land rig 2 by region and by horsepower Key customers 23% 5% 8% 25% 2% 28% 32% 68% Europe/Kazak Russia Africa Asia Middle East,000 -,499,500-2,999 over Utilisation is stated including 6 Libyan rigs across all years: 4 drilling rigs, 2 workover rigs. 2 Excludes workover rigs, defined as being below 900HP.

12 Land Drilling - strong development over the last 3 years 203 highlights and events Financials 203 strong performance driven by: Russia 3 new land rigs and strong Combined Drilling Services activity % 25% 23% 30% 25% Algeria 2 new land rigs 20% Europe and South Iraq - improved utilisation Realisation of business efficiency savings Strong bidding activity seen particularly in the Middle East where we have secured several long-term contracts at attractive day rates % 0% 5% 0% Revenue $m EBITDA $m Margin % New contracted land rigs No rigs are built speculatively 3 new build Middle East rigs (BP Khazzan) and Russian rig operational from Q4 204 All new build activity meets strict return criteria, based on multi year contracts further rig at advanced tender stage more new build contract anticipated to be won in 204 New builds schedule Contracted Khazzan rig Khazzan rig 2 Khazzan rig 3 Russian new build Key: Construction Operational J F M A M J J A S O N D J F M A M J J A S O N D

13 Bentec Q4 contributed 38% of their 203 result Financial Performance to 3 December 203 Q4 Q Variance Variance YTD YTD $m $m $m % $m $m $m % Revenue (8.) (2.3)% % EBITDA (3.2) (23.0)% % Margin 8.5% 2.% 2.5% 2.5% Q4 delivered a strong finish with some significant new wins in December Deliveries of rigs to Algeria were made as expected during Q4 203 with margins higher than anticipated Sales of top drives were strong in the final months of the year Overall divisional EBITDA has grown 27% year on year 2

14 Bentec important contract wins point to a bright future 203 highlights and events Financials 203 performance driven by: Completion of 6 external rigs including 4 Enafor rigs Shipment of 2 top drives Bentec revenue by product type Rigs external Components After sales Rigs internal Other turnover 2% 3% 25% % 59% % % 2.5% Ex revenue $m Int revenue $m Ex EBITDA $m Int EBITDA $m Margin % 28 4% 2% 0% 8% 6% 4% 2% 0% New contract wins Key customers Construction of 7 onshore desert drilling rigs and top drives, to be delivered within the next 7 months to Enafor in Algeria Continued focus on external rig and component orders as a means of driving growth 3

15 Platform Services strong Q4 performance Financial Performance to 3 December 203 Q4 Q Variance Variance YTD YTD $m $m $m % $m $m $m % Revenue % % EBITDA % % Margin 5.9% 4.0% 2.8% 4.3% EBITDA performance improved on the same period in 202 by over 30% High drilling activity and a good contribution from our rental business drove strong Q4 results. Sakhalin and Angola also benefited from a good quarter, and our recently won contract in the Far East on the Daewoo Shwe platform continues to perform well Year on year EBITDA has grown 9% 4

16 Platform Services contract backlog underpinning robust outlook Platform Services contract backlog duration Customer Platform Total Total EnQuest Nexen CNR TAQA Alwyn Dunbar Thistle & Heather Scott Murchison, Ninian's (3) and Tiffany Cormorant A&N, Tern & Elder Statoil Osebergs (4) and Gulfaks (3) Statoil ExxonMobil Statoil BP SEIC CABGOC ExxonMobil Daewoo Firm Kvitebjorn Ringhorne & Jotun Cat J Azeri (3), SD, DWG, Shah Denis, Chirag, Chirag Oil Project Lunskoye, Piltun A&B BBLT Kizomba Shwe Option $474m $529m $53m $552m $52m $3,30m 5

17 Platform Services - important contract wins driving robust outlook 203 highlights and events Financials 203 characterised by robust activity across all major contracts Commencement of the Daewoo Shwe and Kizomba contracts Particularly high activity in Sakhalin operations Strong results in the Norway sales & rental business Decline in margin in 203 partly due to significant increase in low margin reimbursable revenues,200, % % 756 3% Revenue $m EBITDA $m Margin % 6% 2% 8% 4% 0% Key contract wins Myanmar - 2 year O&M drilling services contract for the Shwe Platform, based in Myanmar, with Daewoo Angola - 5 year O&M programme with ExxonMobil, for the Kizomba platforms offshore Angola Norway 2 year O&M project for two Cat J jack-ups, based offshore Norway, for Statoil Key customers 6

18 RDS - excellent 203 performance Financial Performance to 3 December 203 Q4 Q Variance Variance YTD YTD $m $m $m % $m $m $m % Revenue % % EBITDA % % Margin 7.0% 9.6% 5.6% 4.% RDS finished the year benefitting strongly from robust demand for premium engineering design services to the offshore sector Activity in the final quarter remained high across all divisions Norway activity in particular drove strong Q4 results as well as higher margin work on Hebron in Canada Other North Sea work for high profile customers remained strong in the final quarter Overall EBITDA growth year on year was a healthy 42% 7

19 RDS - exposure to high profile projects and blue chip client base 203 highlights and events Financials Very strong 203 due mainly to high activity on major projects: 400 4% 6% 6% Hebron project in Canada Mariner, Clair Ridge, Heather and Dunbar projects in the UK North Sea Chirag Oil project in Azerbaijan Peregrino project in Brazil % % 8% 4% % Revenue $m EBITDA $m Margin % 204 outlook Key customers Shift to harsh environment/arctic developments requiring large integrated facilities North Sea, GoM, Caspian, Sakhalin mature markets with older rigs requiring upgrade/overhaul Several North Sea projects will be completing during 204, as well as elements of the Hebron contract in Canada The pipeline remains robust with negotiations on new projects at an advanced stage 8

20 MODUs improved performance in Q4 Financial Performance to 3 December 203 Q4 Q Variance Variance YTD YTD $m $m $m % $m $m $m % Revenue % % EBITDA.5 (2.2) 3.8 N/m (.7) (9.6)% Margin 27.7% (8.7)% 0.% 4.0% The two jack-ups (Ben Rinnes and Ben Loyal) contributed $7.9m EBITDA 2 to the quarter The three barges (Glen Esk, Glen Affric and Glen Tanar) were profitable during Q4 with EBITDA 2 at $5.6m, however overall negative for the year The Glen Esk barge remains demobilised and warm-stacked at the year end Full year EBITDA was $5.8m, $.7m behind the prior year 9 EBITDA excludes results from the Ben Avon jack-up which was disposed of in March 203. Pro forma EBITDA (barges stripped out) was $22m for Asset EBITDA is stated before area overheads.

21 MODUs was a mixed year for the division 203 highlights and events Financials One jack-up (Ben Avon) was sold in Q 203 for gross proceeds of $55m % 40% Ben Loyal, Ben Rinnes, Glen Tanar and Glen Affric continued to perform largely in line with management expectations 203 EBITDA negatively affected by delays in Glen Esk rig up and subsequent contract cancellation % 57 0% % 20% 0% % Revenue $m EBITDA $m Margin % 204 outlook Key customers The Group signed a sale and purchase agreement to sell two subsidiary companies which own and operate the three SET barges (Glen Esk, Glen Tanar and Glen Affric) New contracts are currently under negotiation for the two jack-ups The Ben Loyal is currently working with Pemex in Mexico The Ben Rinnes is on contract with Vaalco in Gabon 20 EBITDA excludes results from the Ben Avon jack-up which was disposed of in March 203.

22 Working capital and capital expenditure Working capital (50) (250) (397) (38) (398) (48) (384) (450) Q4 202 Q 203 Q2 203 Q3 203 Q4 203 Trade and other receivables Inventories and work-in-progress Trade and other payables Total working capital Historical capital expenditure by category $m $253m $237m $27m Maintenance Capex Growth Capex MODU SPS spend 2 $27m capex does not include sale and leaseback amount of $35.4m. This is included within both disposals and capital expense for statutory account purposes.

23 Capital Structure - an improving position throughout 203 Net debt at 3 December 203 ($m) Q4 203 $,230m (29) ,000,200,400 Cash Liquidity Facilities Senior Secured Notes Term Loan B & Capex Facility Term Loan C LC Facilitiy Other Net debt /LTM EBITDA throughout 203,400,200, $m 4.7x 5.0x 4.8x,96 255, , , Q 203 Q2 203 Q3 203 Q4 203 Net Debt LTM EBITDA Net debt/ltmebitda ratio 4.0x Net debt portrayed as a positive figure to simplify illustration 2 EBITDA excludes results from the Ben Avon jack-up which was disposed of in March 203

24 Amend and extend process completed 7 February Previous maturity profile ($m) Off B/S Guarantee Facility Liquidity Facilities Term Loans Senior Notes Mar-5 Mar-6 Jun-6 Mar New maturity profile ($m) $50m Additional RCF approved in A&E Off B/S Guarantee Facility Liquidity Facilities Term Loans Senior Secured Notes Consent to utilisation of the remaining $50m accordion under current Incremental RCF Drop down of two additional land rigs (built with $50m of shareholder equity) into the financing group for zero consideration, thus increasing group EBITDA by c.$7m per annum Mar-5 Mar-6 Jun-6 Mar Leverage and interest cover covenant reset in Q3 and Q4 204 Approval to dispose of assets in a share sale Approval for additional issuance of Senior Secured Notes with proceeds to repay term loans 23

25 Group Results - Q4 closed the year on a high 203 EBITDA bridge 203 EBITDA 2 by BU $6m (2) (2) $56m $6m $96m $28m 250 $m 202 Land Bentec Platforms RDS MODU O'head 203 Land Bentec Platform Services RDS MODUs 203 EBITDA ($304m) by quarter EBITDA growth 350 CAGR: 20% (20) $m Q 203 Q2 203 Q3 203 Q4 203 Land Bentec Platform Services RDS MODUs Central overheads 50 0 $m Results and comparatives are shown excluding the results from the Ben Avon and EBITDA is shown before non-recurring items. 2 EBITDA is shown excluding the results from the Ben Avon and before central overheads of $53m.

26 Closing remarks Strong performance delivery in 203 provides an excellent foundation for 204 and beyond Decreasing leverage position to 4x at the year end Excellent backlog of $7.9bn underpins future earnings Successful amend and extend provides additional financial flexibility to execute on the strategy Headline-grabbing contract wins on high-profile projects with more in the pipeline Actions continue to optimise the business portfolio and increase business efficiency in 204 Growth opportunities are only being pursued where they provide robust capex returns driving increased cash generation based upon long term contracts All of this is underpinned by a stable and experienced management team focused on further delivery of results 25

27 26 Q & A investor.relations@kcadeutag.com