Investor Presentation

Transcription

1 Investor Presentation Third Quarter 204 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 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 Group revenue and EBITDA of $520.0m (Q3 203: $537.7m) and $73.5m (Q3 203: $73.7m) respectively, driving improved YTD EBITDA of $243.3m (YTD EBITDA Q3 203: $92.5m) 2 LTM EBITDA of $352m, a 30% year over year improvement 3 Major contract win for our land business 4 5 Contract backlog of $8.8bn (as at October 204) across a blue chip customer base Significant year-on-year reduction in Net debt/ltm EBITDA leverage from 4.75x at Q3 203 to 3.6x by Q

5 Market-leading international drilling & engineering company Integrated Land Drilling Offshore Drilling Services & Design $9m LTM EBITDA (54% of total)¹ $59m LTM EBITDA (46% of total)¹ Land Drilling Bentec Platform Services Rig Design Services (RDS) Leading international premium drilling rig owner and operator Operations: Russia, Africa, Middle East, Europe and SE Asia Design and manufacture of high-end premium land rigs and components Facilities: Germany, Russia, Oman Leading global platform service operator outside North America Operations: UK North Sea, Norway, Azerbaijan, Russia, SE Asia and Africa Rig design engineering from concept to commission Offices: Aberdeen, Baku, Bergen, Houston, London Own & Operate Design & Manufacture Manage Design & Engineering Rigs: High end fleet of 53 drilling rigs, 4 workover rigs 94% of new rigs since 2007 have been built by Bentec Facilities: Capacity for 2-6 rigs and 50 top drives p.a. Staff: c.3,00 managing drilling operations on 40 platforms Approx. 60% of platforms designed or refurbished by RDS Staff: c.780 engineers and support staff 4 ¹ LTM EBITDA pre-exceptional items, excluding MODUs and after reallocation of support costs previously shown as central overheads. EBITDA by segment for 203 has been re-presented to reallocate support costs which were previously shown as central overheads (such as HR, Supply Chain and IT costs) to the operational business segments. 204 figures are presented on the same basis.

6 Lukoil T-506: the perfect spud Contract awarded for one new build, 320T,500HP cluster-slider rig to operate on the Yuzhno-Lyzhskoe field within the Komi Republic of Russia This rig was secured on a 3 year USD day rate contract with 2x year extensions The contract was received at the end of 203 and the rig was built in Bentec s Tyumen facility in Russia with some key components provided from Germany The build was completed on budget by the end of August and it was mobilised to location during September The Land Drilling team successfully spudded the rig on location on October 204: the first of a 0 day window allowed by our contract The success of this project demonstrates the excellent integration between the Bentec and Land Drilling businesses driving successful and timely delivery to our client 5

7 Continued strong market position and balanced portfolio of assets across highly attractive international markets PRESENCE IN KEY AREAS Years Europe North Africa Middle East 40 5 North Sea Russia Houston Ben Loyal jack-up rig LTM Q3 204 EBITDA split by region St. Johns Aberdeen (HQ) London North Sea /Norway 26 Plat. Bergen Stavanger Europe & Caspian 8 Rigs Bad Bentheim Africa 4 Rigs Baku Caspian 7 Plat. Dubai Middle East 4 Rigs Nizwa Tyumen Russia 6 Rigs Myanmar Plat. Brunei Rig Russia Sakhalin 3 Plat. Far Other East 7% 7% Middle East 0% Europe 24% Ben Rinnes jack-up rig Angola 3 Plat. Caspian 3% Africa 8% Russia 2% 6 Regional offices Land Drilling Platform Services RDS offices MODUs Bentec LTM 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. Map excludes work over land rigs, defined as being below 900HP.

8 KCAD well positioned to benefit from current sector trends Themes KCAD relevance Supporting data Focused on production drilling with attractive economics KCAD operates in drilling environments with low breakeven oil prices Operating in regions with oil revenue critical to government budgets Operating production platforms where the majority of capex has already been invested (opex focus) Canadian Oil Sands US Shale Oil Arctic Oil Coal to Liquid Brazil Pre-Salt (Deepwater) US Shale Gas EOR Deepwater Shallow Water¹ Other Conventional Oil¹ Onshore Middle East KCAD core markets $0 $20 $40 $60 $80 $00 Breakeven Oil Price (US$/bbl) International Rig Count (Y-o-Y) North America Rig Count (Y-o-Y) Strong international land drilling environment Rig counts steadily increased over the last 2 years No exposure to US market, where rig count levels are much more volatile 6,000 6% CAGR ,500 3,000,500 % decline ,500 3% CAGR % decline 3, , Increased drilling complexity driving demand and margins High specification equipment can drill vertical and longer wells, supporting project economics by improving the recovery Increased reservoir and drilling complexity is driving the demand for high specification rigs, including top drive equipment 62% Top Drives 2% Deviated Wells KCAD target market Forecast Growth % Total Wells Source: Douglas Westwood, April 204 ¹ Majority of conventional and shallow water projects are commercial below $50/bbl. 7

9 Health, safety and environmental performance Total recordable incident rate improvement TRIR per 200,000 man hours IADC industry average for 203 KCAD TRIR at end of Q3 204 was 0.40 injuries per 200,000 man hours worked TRIR (average) Sustained progress made on improving TRIR performance The Group reaches 0.40 TRIR for the first time 8 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. IADC figures are annual and are not released until after year end, therefore no 204 information is available. Note: IADC stands for International Association of Drilling Contractors.

10 T-47: 7+ years without Lost Time Incident On 5th January 204, the crews of Rig T-47 in Kazakhstan reached the key milestone of 7 years without a Lost Time Incident. This milestone has continued through the year to this quarter end This achievement is all the more impressive when taking into consideration the difficult climatic extremes (-35 o C in winter and +45 o C in summer). Lost Time Incidents can result in penalties and non-payment of day rate which in turn lower our returns on projects Low incident rates are a key criteria that we are measured against when tendering for new work, so continued low health and safety scores are vital to the success of our business 9

11 Significant New Contracts RDS, Premier Oil s Sea Lion development Contract nature Contract length & timeframes Customer Contract to carry out front-end engineering design (FEED) contract by AMEC for Premier Oil s Sea Lion development in the North Falklands Basin. The FEED work is part of AMEC s overall FEED contract for the Sea Lion development and follows a concept study which was executed by an RDS team in Houston. The contract, which is expected to be carried out over the next 2 months, will see RDS deliver the design of drilling rig modules for a Tension Leg Platform (TLP), 200km north of the Falkland Islands. AMEC, on behalf of Premier Oil The Sea Lion field will be the first major development of oil and gas reserves in the Falklands. Due to its remote location, we need to ensure that we deliver a rig that is reliable, efficient and can be easily maintained and supported to deliver safe, effective operations. RDS and KCA Deutag have a lot of experience in designing and operating rigs in remote locations and this is a great opportunity to put that experience to good use in a new region. We look forward to continuing to work closely with Premier Oil and AMEC as we move the Sea Lion development forward. Simon Drew, President of RDS 0

12 Significant New Contracts BP Khazzan Contract nature Contract length Construction and operation of an additional two new build fast moving land rigs in Oman, to supplement the previous three rig award by the same client. The rigs will mainly be manufactured in Germany and assembled in Oman using Bentec s Nizwa facility. The contract terms will provide equivalent economics to those of the first three rigs. 5yrs + 2xyr options. Customer BP Khazzan KCA Deutag has been operating in Oman since 964 and has a long track record of successful operations in the Middle East. BP Khazzan is one of our most significant contract wins to date and we are extremely proud to play a very important role in the project. Andy Hendry, President of Land Drilling

13 Disposal of the Barges Divestment of the entire issued share capital of KCA Deutag Tender Barges Pte Limited ( Barges Business ) to a single buyer. Nature of divestment The buyer will take ownership of the Barges Business operated from Kuala Lumpur including two KCA Deutag self-erecting tender barges; the Glen Affric and the Glen Tanar, and their associated equipment. Earlier this year, KCA Deutag sold the Glen Esk on an asset only basis to Energean. The sale of the Barges Business is an important step for KCA Deutag as we focus our activities on the core businesses within our portfolio. Norrie McKay, Chief Executive Officer of KCA Deutag 2

14 Healthy backlog providing high level earnings visibility for the future Total contract backlog as at August 204 Total contract backlog as at October 204 0,000 $768m $,235m $6,898m $8,900m 0,000 $487m $,26m $7,096m $8,844m 8,000 8,000 6,000 $4,80 6,000 $4,875 4,000 $4,675 4,000 $4,750 2,000 $20 $4,099 $6 $2,223 $762 $,5 $m and Total backlog thereafter Contract Option Contract backlog by BU as at August 204 2,000 $3,969 $2 $2,346 $4 $,40 0 $483 $m and Total backlog thereafter Contract Option Contract backlog by BU as at October 204 $298m $28m Land Drilling Bentec Platforms $09m $,975m $269m $04m $2,080m $203m Land Drilling Bentec Platforms RDS MODUs $6,250m $6,76m RDS MODUs 3 NB: Backlog figures exclude revenue generated in the year to date.

15 Land Drilling Financial Performance to 30 September 204 Q3 Q Variance Variance YTD YTD $m $m $m % $m $m $m % Revenue (24.0) (3.3)% % EBITDA pre support costs (4.7) (0.5)% % allocation Support costs allocation (3.) (2.9) (0.2) 7.4% (8.7) (7.9) (0.8) 0.% EBITDA post support costs (4.9) (.7)% % allocation Margin % 23.7% 23.3% 23.% 2.3% EBITDA growth of % YTD compared to the same period last year, however the business unit saw a reduction in activity levels and EBITDA compared to both Q2, 204 and Q3, 203. This was mainly driven by performance in Africa which has been negatively impacted by lower levels of utilisation Russia have continued to generate good levels of EBITDA with earnings relatively consistent compared with both Q2, 204 and Q3, 203 due to continued good utilisation levels Pakistan saw a significant improvement in performance, as a rig redeployed from Libya had a full quarter of operations Utilisation softened in the quarter to 74% down from 80% in the prior quarter 4 EBITDA by segment for 203 has been re-presented to reallocate support costs which were previously shown as central overheads (such as HR, Supply Chain and IT costs) to the operational business segments. 204 figures are presented on the same basis.

16 Bentec Financial Performance to 30 September 204 Q3 Q Variance Variance YTD YTD $m $m $m % $m $m $m % Revenue % % EBITDA pre support costs allocation % % Support costs allocation (0.7) (0.8) 0.(4.8)% (2.) (2.2) 0. (5.9)% EBITDA post support costs allocation % % Margin % 2.7% 8.3% 0.0% 9.% Bentec delivered significantly stronger results in the third quarter than both Q2, 204 and Q3, 203, showing 25% YTD EBITDA growth compared with 203 With the construction of a number of new rigs reaching an advanced stage of completion in Q3 we were to recognise significantly more revenue and EBITDA than the prior year The rig for the Land Drilling contract with Lukoil was delivered during Q3 and the first deliveries under the seven rig contract for Enafor will start in November The third quarter also saw an increased contribution from component sales which largely drove the increase in margins 5 EBITDA by segment for 203 has been re-presented to reallocate support costs which were previously shown as central overheads (such as HR, Supply Chain and IT costs) to the operational business segments. 204 figures are presented on the same basis.

17 Platform Services Financial Performance to 30 September 204 Q3 Q Variance Variance YTD YTD $m $m $m % $m $m $m % Revenue % % EBITDA pre support costs allocation % % Support costs allocation (2.2) (2.) (0.) 5.0% (6.) (5.6) (0.5) 9.6% EBITDA post support costs allocation % % Margin %.7%.%.8% 0.5% Our Platforms business unit continued to deliver strong earnings in Q3, 204 with performance largely in line with Q2, 204 but showing improvement from Q3, 203 This year on year improvement reflects the award of previously announced new contracts in Angola, the Far East and Canada as well as good execution of existing contracts and delivery of services to our customers 6 EBITDA by segment for 203 has been re-presented to reallocate support costs which were previously shown as central overheads (such as HR, Supply Chain and IT costs) to the operational business segments. 204 figures are presented on the same basis.

18 RDS Financial Performance to 30 September 204 [] Q3 Q Variance Variance YTD YTD $m $m $m % $m $m $m % Revenue (9.6) (2.)% (7.2) (2.8)% EBITDA pre support costs allocation (3.7) (27.8)% % Support costs allocation (0.7) (0.8) 0. (9.4)% (2.) (2.0) (0.) 2.9% EBITDA post support costs allocation (3.6) (28.9)% % Margin % 2.2% 3.5% 6.0% 4.2% Our RDS business unit had lower revenues and EBITDA than both Q2, 204 and Q3, 203 largely as a result of lower activity on greenfield projects. YTD EBITDA growth remains positive at 9% Compared to Q3, 203 there has been a significant reduction in activity on the Hebron project in Canada with the detailed design phase now nearing completion. Activity is increasing on our new project for Premier Oil s Sea Lion development in the North Falklands basin with this work expected to be carried out over the next twelve months 7 EBITDA by segment for 203 has been re-presented to reallocate support costs which were previously shown as central overheads (such as HR, Supply Chain and IT costs) to the operational business segments. 204 figures are presented on the same basis.

19 MODUs Financial Performance to 30 September 204 Q3 Q Variance Variance YTD YTD $m $m $m % $m $m $m % Revenue (7.8) (2.5)% (0.3) (8.9)% EBITDA pre support costs allocation (2.2) (58.0)% N/M Support costs allocation (0.6) (0.6) (0.0).0% (.6) (.5) (0.) 8.8% EBITDA post support costs allocation (2.2) (68.)% N\M Margin % 3.6% 8.9% 7.2% 0.% The MODU business unit had a reduction in EBITDA compared with both Q2, 204 and Q3, 203 This was largely due to the performance of the three self-erect tender barges all of which were off contract by the end of Q3, 204 During the quarter we were able to complete the sale of the Glen Esk barge, and in October completed the sale of the Glen Tanar and Glen Affric barges EBITDA in Q3 for the two jack ups was circa $6m (pre support cost allocation) 8 EBITDA by segment for 203 has been re-presented to reallocate support costs which were previously shown as central overheads (such as HR, Supply Chain and IT costs) to the operational business segments. 204 figures are presented on the same basis. 2 Post reallocation of support costs.

20 Group Results Financial Performance to 30 September 204 Revenue and EBITDA ($m) Q3 204 Q YTD 203 YTD Revenue from business units ,659,580 Consolidation adjustments (40) (4) (84) (20) Total revenue ,575,560 EBITDA from business units Corporate costs/other (9) (8) (23) (23) Total EBITDA

21 Cash Flow and Working Capital Financial Performance to 30 September 204 Free Cash Flow Working Capital Cash flow from operating activities Capital expenditure Proceeds from sale of Fixed Assets Net interest Other Cash flow from investing activities Equity injection Q3 204 Q YTD 203 YTD (0.8) (65.8) (28.2) (48.4) (0.) (7.) (5.3) (60.9) (5.6) 2.9 (2.2).3 (0.6) (6.2) (32.8) (95.5) (99.2) Foreign exchange (8.4) (4.5) (4.3) (2.0) Net Cash flow before debt drawdown/(repayment) Drawdown/(repayment) of debt and debt issuance costs Net cash flow (3.9) (35.5) (30.3) (53.0) 0.7 (.7) (8.7) 9. (3.2) (47.2) (2.0) (33.9) Cash flow from operating activities was strengthened due to improvements in working capital partially offset by higher cash taxes Capital expenditure was slightly increased on Q2 204 as the Group continues to invest in the land drilling fleet once secure contracts have been won Cash impact of Delta ($m) (0) (20) (30) (40) (50) (60) (70) Q3 204 Delta* (60) Decrease in working capital in Q3 204 compared to Q2 204 due to: Reduced inventory and work in progress at Bentec associated with component sales, together with the write down of some inventory in Libya 9 9 Continued focus on collections and impact of activity Timing of vendor payments 8 Q3 203 Delta* (60) Q3 203 working capital was negatively impacted by certain overdue accounts mostly collected in Q Denotes the effect of foreign exchange rate changes on cash and bank overdrafts. *Deltas denote working capital movements from Q2 204 and Q2 203 respectively.

22 Disciplined Growth New build contracts Rig Client Country Cost ($m) Contract length Rig BP Khazzan Oman c.34 5yrs + 2xyr options Rig 2 BP Khazzan Oman c.34 5yrs + 2xyr options Rig 3 BP Khazzan Oman c.34 5yrs + 2xyr options Rig 4 Lukoil Russia c.27 3yrs + 2xyr options Rig 5 Shell Brunei Brunei c.35 3yrs + 3xyr options Rig 6 Bashneft Russia c.27 3yrs Rig 7 BP Khazzan Oman c.34 5yrs + 2xyr options Rig 8 BP Khazzan Oman c.34 5yrs + 2xyr options EBITDA $M Pro forma Q3 LTM EBITDA c EBITDA from new rigs c.420 Pro forma with new rigs New build land rigs schedule Rig Rig 2 Rig 3 Rig 4 Rig 5 Rig 6 Rig 7 Rig Q Q2 Q3 Q4 Q Q2 Q3 Q4 Q Q2 Q3 Q4 Pre-award Under construction Operational Growth capex to target strict return criteria, with robust investment appraisal process implemented Active pursuit of long-term contracts with blue chip clients Focus on countries with existing operations, allowing the Group to benefit from operational synergies Targeting up front contributions from clients in order to optimise cash flow profile of new projects EBITDA profile of projects provides excellent scope for further deleveraging Significant uplift in EBITDA from eight new rig contracts is anticipated 2 Excludes profits/losses from the Ben Avon, which was sold.

23 Capital Structure Net leverage as at 30 September 204,400,200, x Net Debt/LTM EBITDA evolution 4.0x 3.6x 3.6x 3.6x 5.00x 4.50x 4.00x 3.50x Net Debt & LTM EBITDA $m ,296,230,69,265, Q3 203 Q4 203 Q 204 Q2 204 Q3 204 Net Debt LTM EBITDA Net Debt/EBITDA 3.00x 2.50x 2.00x.50x.00x 0.50x 0.00x Net Debt/LTM EBITDA Amount Utilised Coupon Maturity Facility Rating Recovery Rating Net Leverage 2 Revolver ($250m) L+400 May-9 B3/B 3/3 0.3x Senior Secured Term Loan 374. L(00)+525 May-20 B3/B 3/3.07x Total Bank Debt x UK Finance Senior Secured Notes % May-2 B3/B 3/3.07x Globe Luxembourg Senior Secured Notes % May-8 B3/B 3/3.42x Total Institutional Debt x Finance lease & other debt Aug x Gross Debt, x Cash x Net Debt, x 22 All facilities have ratings outlooks of positive / stable. 2 Based on Q3 204 LTM EBITDA of $352m; all LTM EBITDA figures exclude profits/losses from the Ben Avon, which was sold. 3 Revolver is split $75/$75m non cash/cash, the amount shown represents the cash element.

24 Closing remarks Excellent performance in the YTD 204 provides a robust platform for 205 Continued delivery of important contract wins Huge backlog of $8.8bn underpins future earnings Geopolitical environment has steadied; Kurdistan is operational and Libyan exit is almost complete Actions continue to optimise the group portfolio and increase business efficiency 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 23

25 24 Q & A investor.relations@kcadeutag.com