KCA Deutag Alpha Limited ( KCA Deutag or the Group ) Results for the year ended 31 December 2014

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1 For immediate release [19 March 2015] KCA Deutag Alpha Limited ( KCA Deutag or the Group ) Results for the year ended 31 December 2014 KCA Deutag, one of the world s leading drilling and engineering contractors, is pleased to announce its results for the year ended 31 December 2014, delivering a year of further growth in EBITDA with a number of significant contract awards which positions the Group well to meet the demands of a more challenging market environment. Highlights o Full year revenues of $2.11bn ($2.16bn 2013) o Group full year EBITDA up 4.5% to $314.7m ($301.2m 2013) with growth from 3 of our 5 business segments o Contract backlog of $8.1bln across a blue chip customer base o First 2 rigs for BP Khazzan in Oman successfully spudded in January and February The remaining 5 new build rigs remain on schedule, 3 more for BP Khazzan, 2 for customers in Russia and Brunei o Up to $100 million of committed funding to support growth capex agreed by shareholders with $50m due to be received by the Group by the end of March o 2014 positive operating cash flow of $286.9m prior to capex and interest costs compared to $134.3m in 2013 o The reduction in oil prices has resulted in a more difficult business environment but management has responded quickly. Significant efficiency and cost mitigation measures have been implemented Commenting on the results Norrie McKay, KCA Deutag s Chief Executive Officer said: We are pleased with the strong operational and financial performance achieved over the course of Major contract wins and a healthy backlog provide a strong foundation to manage our way through the more challenging environment in We will continue to focus on delivering excellent service to our customers in a safe and efficient manner, whilst prudently managing our costs and cash flows. 1

2 Business Review KCA Deutag reports that Adjusted EBITDA for the fourth quarter of 2014 was $71.4m, compared to $108.8m for Q4, 2013 and $73.5m for Q3, Full year Adjusted EBITDA increased from $301.2m in 2013 to $314.7m in Revenue and EBITDA Revenue from business units ,232 2,183 Consolidation adjustments (37) (40) (5) (121) (27) Total Revenue ,111 2,156 EBITDA from business units Corporate costs/other 18 (9) Total EBITDA In 2014 EBITDA by segment has been represented to reallocate costs which were previously shown as corporate costs (such as HR, supply chain and IT costs) to the operational business segments. The 2013 figures are reported on the same basis. Activity in our Platform Services segment remained strong with quarter on quarter growth in EBITDA from Q3, 2014 and full year on year growth of 11.1% to $98.4m. Other than in the North Sea we experienced growth in earnings from each of our key markets. Bentec delivered another strong quarter with a high level of activity both from manufacture of new rigs as well as component sales. Full year EBITDA, net of intra group eliminations, grew by 21.5% over 2013 to $31.6m. The manufacturing facilities are currently very busy with a healthy backlog for the first half of In our Land Drilling business segment we successfully spudded a new rig for Lukoil in Russia in October 2014 and a further 2 new rigs for BP Khazzan in Oman in January and February 2015 respectively. A further 5 new rigs are in the process of being manufactured, 3 further rigs for BP in Oman, 1 rig for Brunei Shell Petroleum and a rig for Bashneft in Russia. Full year EBITDA for Land Drilling was flat on the prior year impacted by reduced utilisation in Africa. During Q4, 2014 a bad debt provision of $10.3m was made against 2 aged receivable accounts in Russia and Nigeria. RDS delivered EBITDA of $46.2m which is down from $53.3m in 2013 but represents another very robust year for this business. Greenfield project activity was high but reduced in the second half of the year. The flexibility of having a large proportion of the staff being contractors has enabled RDS to quickly reduce staffing levels from around 850 to 650 as this workload decreased. Following the sale of the self-erect tender barges completed in October 2014 the MODU segment now consists of the 2 jack up rigs, Ben Rinnes and Ben Loyal. Both rigs were on contract throughout Q4, 2014 contributing $8.8m of EBITDA for the quarter. Full year EBITDA for the MODUs segment grew from $10.4m in 2013 to $26.8m in The Group continues to focus on cash management and liquidity. Positive operating cash flow for Q4, 2014 of $107.4m compares to $55.7m in Q3, 2014 and $145.3m in Q4, Full year operating cash flow was $286.9m compared to $134.3m in Due to the work on the new build rig contracts, the level of capital expenditure increased year on year from $127.1m to $201.8m. Available liquidity under undrawn facilities was $122m at 31 December

3 Although the Group performed well in 2014 we have experienced a reduction in activity in the second half as a result of the steep decline in oil prices and the increased uncertainty across the industry. We have seen increasing pressures from our customers to reduce costs and certain projects have either been postponed or cancelled. As a result of the impact of lower oil prices we have taken steps to manage our own cost base through reductions in staffing levels, pay reductions, various supply chain initiatives together with other general efficiency measures. Whilst we expect 2015 to be a challenging year we believe that these actions will allow the Group to continue to succeed in this new environment. Land Drilling Land Drilling reported EBITDA of $31.2m compared to $43.4m in Q4, 2013 and $37.0m in Q3, Land Drilling Revenue EBITDA pre support cost allocation Support cost allocation (4) (3) (3) (12) (11) EBITDA post support cost allocation The Land drilling business unit experienced higher revenues than in Q3, 2014 but with lower EBITDA principally because of bad debt provisions of $10.3m booked against certain receivables in Nigeria and Russia. Activity and EBITDA was lower than in Q4, 2013 due to lower utilisation in Africa and contract start up activities in Algeria. As previously announced the Land Drilling segment has been very successful in 2014 at securing new rig contracts with 8 new rigs either in process or having recently commenced operation with clients. One of these rigs started up operations in Russia at the start of Q4, 2014 and 2 further rigs have now spudded for BP in Oman. The remaining 5 new rigs are being manufactured by Bentec and are on course for delivery through 2015 and into early These rigs are on secure contracts, with good contractual protection mechanisms, and will substantially refresh our Land Drilling fleet, providing a good margin and healthy levels of EBITDA into the future. Russia Despite the current difficulties in Russia and the ongoing threat of additional economic sanctions, our business there remains strong with very good levels of utilisation. Q4, 2014 had higher revenue and EBITDA than both Q3, 2014 and Q4, 2013 and also delivered year on year growth in EBITDA. This was despite booking a bad debt provision in the quarter. We successfully spudded a new rig T506 for Lukoil at the start of Q4, 2014 which was completed as scheduled We continue to experience limited impact from the economic sanctions. Our contracts in Russia are split between some local Rouble contracts and some in US Dollars. This has allowed us some protection from the significant weakening of the Rouble which occurred during the fourth quarter. We continue to monitor our currency exposure and will attempt to manage this so as to protect our overall position. 3

4 Europe/Kazakhstan In Europe/Kazakhstan we experienced a similar level of EBITDA in Q4, 2014 as we delivered in Q3, EBITDA was higher than in Q4, 2013 due to cost phasing and a bad debt provision booked in the prior year. Full year earnings were higher than in 2013 due to a higher operating rate for our rig T47 in Kazakhstan which was on a lower stand by rate for part of Middle East In the Middle East we experienced a small reduction in EBITDA compared to Q3, 2014 and a small increase over Q4, For the full year there was a year on year EBITDA increase. In Oman activity continued to be strong with similar levels of EBITDA compared to Q3, 2014 and an increase over the prior year quarter. Full year EBITDA increased due to higher activity. In early January we successfully spudded the first of 5 new build rigs for BP for the Khazzan project. The second rig also started up operation in mid February This represents a significant step in the development of our Oman business and by early 2016 we are scheduled to have all 5 of the new rigs operating for BP. In Kurdistan we had increased activity and EBITDA compared to Q3, 2014 which had been negatively impacted by the security situation. The full year earnings were in line with the prior year. Following the termination of one of our contracts we are in the process of moving one of our rigs from Kurdistan to South Iraq for a newly awarded three year contract starting in Q3, Our single rig in South Iraq had its contract terminated during Q4, 2014 resulting in lower activity. This rig has now been recontracted and is scheduled to restart operations in Q2, Africa In Africa we have experienced a very difficult 2014 with a significant reduction in year on year EBITDA, particularly in Nigeria where utilisation has been weak. During Q4, 2014 we also made a provision against an aged Nigerian receivable. Although Africa performance was negatively impacted by Nigeria we have experienced increased levels of utilisation towards the end of Q4, 2014 in Algeria with the commencement of operations of our rig T67 which had been idle for an extended period. Contract start up related costs and an accrual for personal income taxes meant there was a reduction in EBITDA from both Q3, 2014 and Q4, Full year EBITDA in Algeria was slightly lower than in 2013 due to the impact of contract mobilisation fees. We are currently in the process of moving one of our rigs out of Europe to Algeria to start a newly awarded contract in July This reflects the continued high levels of activity in the Algerian market. During 2014 we decided to exit the Libyan market. 2 of our core rigs in Libya were redeployed to the UAE and Pakistan respectively. The rig in Pakistan is already contracted and we have recently been awarded a contract for the rig moved to UAE which is due to start in August 2015 after the rig has been refurbished. A third rig, currently left in Libya 4

5 following the escalation of the unrest during 2014, was written down to Nil although we continue to try and move the rig out of the country. In Gabon our single rig continues to operate for Shell. A provision for irrecoverable VAT meant a small reduction in EBITDA against Q3, 2014 and Q4, During 2014 we received a contract extension with work secure for this rig in Gabon through most of Bentec The Bentec business segment reported EBITDA of $15.1m compared to $10.7m in Q4, 2013 and $11.3m in Q3, Bentec Revenue EBITDA pre support cost allocation Support cost allocation (1) 0 0 (3) (2) EBITDA post support cost allocation Bentec delivered a very strong quarter with a significant improvement over both Q3, 2014 and Q4, Full year earnings also grew significantly with a healthy backlog at year end which will keep the manufacturing facilities busy through the first half of As previously announced Bentec received a 7 rig contract from Algerian state owned drilling contractor Enafor early in Together with the 8 rigs for the Land Drilling business segment, this order has meant near full utilisation of the rig manufacturing capacity. 2 of the Enafor rigs were delivered in 2014 with the balance over the first half of Revenue on these rigs is recognised on a percentage of completion basis with higher EBITDA recognised in Q4, 2014 than Q3, Component activity was slightly lower in Q4, 2014 than during the prior quarter. During the fourth quarter Bentec was able to include $3.2m of equity earnings from its partner in Oman, IDTEC. This was significantly higher than in the prior year due to the higher workload in Oman related to the Khazzan project as well as other third party activity in this market. Platform Services The Platforms Services business segment reported EBITDA of $28.0m compared to $32.2m in Q4, 2013 and $23.5m in Q3, Platforms Revenue EBITDA pre support cost allocation Support cost allocation (1) (3) (3) (8) (8) EBITDA post support cost allocation Our Platforms business unit continued to deliver strong earnings in Q4, 2014 with an improvement over Q3, 2014 but a reduction from Q4, This year on year quarterly 5

6 reduction was due to the release of contractual related provisions in Azerbaijan in Q4, 2013 and lower rental activity in Norway in Q4, Full year EBITDA from Platform Services increased by 11.1%, from $88.5m in 2013 to $98.4m in This year on year improvement reflects the award of previously announced new contracts in Angola, the Far East and Canada as well as continued good execution on existing contracts and delivery of services to our customers. In Angola we saw improved EBITDA in Q4, 2014 compared with both Q3, 2014 and Q4, 2013 due to higher activity levels. Full year earnings were significantly higher than in 2013 due to the start up of the Kizomba contract during the third quarter of 2013 with a full year of operation in Our earnings in Azerbaijan were higher than in Q3, 2014 due to activity levels but behind those of Q4, 2013 due to the release of a contractual related provision in the prior year quarter. Full year EBITDA for 2014 was higher than in 2013 due to the higher activity levels. In Norway we had a reduction in EBITDA from the prior quarter and also the prior year quarter due to reduced rental activity, lower levels of reimbursables than the prior year as well as phasing of activities on the Statoil CAT J contract. For the full year there was a significant reduction in revenues largely due to reduced reimbursable activities associated with contract start up work in The lower EBITDA was driven by lower equipment rental activities. In the UK there was a small increase in EBITDA from the prior quarter on similar activity levels. Full year EBITDA in 2014 was in line with the prior year. Our operations in Sakhalin had steady earnings in the quarter in line with both Q3, 2014 and Q4, Full year performance showed a healthy increase related to activity levels and lower cost levels in part due to the weak Rouble. We continue to operate the Daewoo Shwe platform in Myanmar and have seen steadily increasing levels of activity in Canada in support of the Exxon Mobil Hebron contract. Both of these operations have contributed to the full year on year increase in EBITDA performance. RDS The RDS business segment reported EBITDA of $6.0m compared to $16.4m in Q4, 2013 and $8.9m in Q3, RDS Revenue EBITDA pre support cost allocation Support cost allocation (1) (1) (1) (3) (3) EBITDA post support cost allocation Our RDS business unit had lower revenues and EBITDA than both Q3, 2014 and Q4, 2013 largely as a result of lower activity on greenfield projects. Full year EBITDA decreased by 13.3% from $53.3m in 2013 to $46.2m in

7 During Q4, 2014 we experienced lower activity on the Hebron project in Canada as this project has now moved to the pre operational phase within our Platform Services business segment. On another greenfield project we agreed a revised pricing strategy with our client to secure longer term work, which reduced EBITDA on this contract in the quarter. Brownfield project activity, which is typically smaller scale in nature, remained relatively stable with a small increase in activity in Norway. MODUs The MODU business segment reported EBITDA of $8.8m compared to $10.3m in Q4, 2013 and $1.0m in Q3, MODUs Revenue EBITDA pre support cost allocation Support cost allocation (1) (1) (1) (2) (3) EBITDA post support cost allocation The MODU business unit had an increase in EBITDA compared with Q3, 2014 principally due to the negative Q3 earnings from the self-erect tender barges which were fully divested in October and which had very low revenue in the third quarter. Compared to Q4, 2013 there was a reduction in EBITDA as 2 of the drilling barges were on contract and contributed earnings during that quarter. Both the 2 remaining jack ups were on contract throughout Q4, 2014 performing well for Pemex in the Gulf of Mexico and Sonangol in Angola. For the full year EBITDA improved from $10.4m in 2013 to $26.8m in This improvement reflects the strong operating performance from our 2 jack-up rigs during 2014, together with improved performance from the barges in 2014 compared to the prior year. Corporate Costs/Other Adjusting for the impact of foreign exchange, where we experienced losses in Q4, 2014 primarily related to weakness of the Russian Rouble and the stronger US Dollar, corporate costs have increased slightly from Q3, 2014 and Q4, 2013 mainly due to the phasing of certain costs. For the full year Corporate costs excluding exchange have shown a small reduction due to business efficiency measures. The full year loss on exchange flowing through our EBITDA results in 2014 was $15.9m compared to $1.9m in The largest contributor to this was the weakness of the Russian Rouble in Q4, 2014 and the strength of the US Dollar against other currencies. Below EBITDA, through net finance costs, we benefited from exchange gains of $12.7m in 2014 associated with the revaluation of long term financing related balances. This includes revaluation of a Russian Rouble loan following the sale and lease back of 2 Russian rigs in

8 Cashflow Cash flow from operating activities Cash flow from investing activities (26) (54) (31) (160) (78) Interest paid (47) (7) (42) (109) (94) Equity injection Foreign exchange 14 (8) Net cash flow before debt repayment 48 (13) Draw down (repayment) of debt (15) 0 (13) 3 6 (net of issuance costs and exchange movement on debt) Net cash flow 33 (13) The Group continues to generate strong operating cash flows with full year cash flow from operating activities of $287m in 2014 compared to $134m in the prior year. The main driver for this year on year improvement was a significant improvement in the working capital position particularly around receivables and collections. Q4, 2014 saw $107m of cash inflow from operating activities compared with $56m in Q3, 2014 and $145m in Q4, Working capital movements and EBITDA performance drove most of these quarterly movements. Cash flow from investing activities predominantly relates to capital expenditure and asset disposals. Full year 2014 cash flow from investing activities reflects a higher level of capital expenditure associated with new build land rigs for our Land Drilling segment, and in particular the 8 new rigs that are either built or in process for BP in Oman, Brunei Shell Petroleum and 2 clients in Russia benefited from asset disposals of $53.0m, the majority of which came from the sale of the Ben Avon jack up rig. In 2014 there was $30.7m of asset sales proceeds mainly from the sale of the 3 self-erect tender barges. Overall net cash inflow before debt repayments was $18m for 2014 compared to $25m in 2013 which also included $59m of new equity paid in by the shareholders. Q4, 2014 had positive net cash flow before debt repayments of $48m compared to negative $13m in Q3, 2014 and positive $78m in Q4,