Investor Presentation

Transcription

1 Investor Presentation Third 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 Q3 Key Highlights 2 Business Update 3 Business Unit Financials 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 YTD Group revenue and of $,272.8m (Q3 204 YTD: $,574.7m) and $20.8m (Q3 204 YTD: $243.3m) respectively. Q3 205 Group revenue of $398.5m (Q3 204: $520.0m) and Q3 205 of $69.5m (Q3 204: $73.5m) respectively Contract backlog of $7.2bn (at November 205) across a blue chip customer base Post quarter-end delivery of 2 new build rigs to customers in Oman and Brunei on schedule with remaining to deliver in the fourth quarter $29m of available liquidity at 30 September 205 with additional $50m of committed funding from shareholders still available for draw down if required Cost reduction programme continues to deliver an ongoing benefit to the bottom line with the business delivering improved margin year to date versus the prior year 3

5 Business update Integrated land drilling Offshore drilling services & design $40.m / 43.9% of total¹ $32.0m / 0.0% of total¹ $93.2m / 29.2% of total¹ $22.3m / 7.0% of total¹ Land drilling Bentec Bentec Platform services RDS Continue to see strong performance in core markets; Russia, Oman, and Algeria Activity levels remain weaker in Nigeria, Europe and Kurdistan where utilisation is very soft Completed delivery of 7 rig contract for customer in Algeria Reasonable utilisation expected through into 206 Tendering activity continuing to secure 206 capacity Our International operations continue to perform well despite market conditions Some weakness in the UK and Norway North Sea due to higher lifting costs Reduced capex spend by E&P companies continues to impact revenues Significant reductions in headcount implemented to counteract the reduced activity levels 4 LTM, % split of total including MODUs, before corporate costs/ other of $36.8m. Note: MODUs LTM $3.4m represented 9.8% of total before corporate costs.

6 Group margin evolution Cost reduction initiatives have contributed to margin maintenance through the market downturn 5

7 KCAD operations are diversified across resilient Eastern Hemisphere markets PRESENCE IN KEY AREAS Years Europe 56 5 North Africa Middle East 4 North Sea 6 Russia Houston Ben Loyal jack-up rig LTM Q3 205 split by region St. Johns Aberdeen (HQ) London North Sea /Norway 26 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 Operating in markets less impacted by the oil price reduction Themes KCAD relevance Supporting data Focused on production drilling in resilient markets KCAD operates in drilling environments with lower lifting costs Oil revenues are often critical to government budgets in these markets The Platforms business is working on production platforms where the majority of the capex has already been invested (opex focus) Strong international land drilling environment KCAD has no exposure to the US land drilling market, where rig count levels are much more volatile and the market is generally more commoditised Source: Marginal production costs: Knoema, Rig count: Baker Hughes 7

9 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 Q3 205 was 0.34 injuries per 200,000 man hours worked 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. Note: IADC stands for International Association of Drilling Contractors.

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

11 Land Drilling Financial Performance to 30 September 205 Q3 205 Q3 204 Variance Q3 205 Q3 204 Variance YTD YTD Result Result $m $m $m % $m $m $m % Revenue (70.0) -3.6% (7.3) -.% pre support allocation (.7) -9.2% (.8) -4.5% Support cost allocation (6.4) (8.7) % (.9) (3.).2-39.% post support allocation (9.5) -8.0% (0.6) -.6% margin 24.6% 23.% 26.2% 23.7% Lower revenues and compared to Q3 204, with lower revenues but higher than in Q2 205 We continue to experience difficult market conditions in Europe, Nigeria and Kurdistan due to weaker utilisation Our operations in Russia, Algeria and Oman continue to enjoy high levels of utilisation and Overall our utilisation for the quarter was 73%, in line with the prior quarter which was 74% 0 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.

12 Bentec Financial Performance to 30 September 205 Q3 205 Q3 204 Variance Q3 205 Q3 204 Variance YTD YTD Result Result $m $m $m % $m $m $m % Revenue % (49.7) -49.% pre support allocation (.4) -6.7% (9.6) -7.4% Support cost allocation (.5) (2.) % (0.5) (0.7) % post support allocation (0.7) -3.9% (9.4) -73.5% margin 9.6% 0.0% 6.6% 2.6% Revenues and lower than Q3 204, with higher revenues but lower compared to Q2 205 Bentec continues to focus on manufacturing rigs and components for customers in Russia and Azerbaijan with a good level of utilisation foreseen through into 206 Currently in final stages of completion of the last rig for KCAD in Oman Tendering activity ongoing to secure order backlog for the remainder of 206 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.

13 Platform Services Financial Performance to 30 September 205 Q3 205 Q3 204 Variance Q3 205 Q3 204 Variance YTD YTD Result Result $m $m $m % $m $m $m % Revenue (70.4) -.8% (35.6) -7.7% pre support allocation (6.6) -8.7% (.7) -6.5% Support cost allocation (4.6) (6.) % (.3) (2.) % post support allocation (5.2) -7.3% (0.9) -3.6% margin 2.4%.8% 3.7%.7% Revenues lower than both Q2 205 and Q3 204, but in line with Q3 204 and higher than Q2 205 Continued relatively strong performance despite difficult market conditions Our Norway and UK businesses saw a small improvement on Q2 205 due to improved profitability following cost reduction initiatives, Our International operations in Angola, Myanmar and Canada delivered a consistent performance quarter on quarter, whereas Azerbaijan saw slightly lower activity 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 RDS Financial Performance to 30 September 205 Q3 205 Q3 204 Variance Q3 205 Q3 204 Variance YTD YTD Result Result $m $m $m % $m $m $m % Revenue (5.) -45.7% (35.5) -48.6% pre support allocation (24.5) -57.7% (5.7) -59.2% Support cost allocation (.6) (2.) % (0.5) (0.7) % post support allocation (24.0) -59.6% (5.5) -6.7% margin.9% 6.0% 9.0% 2.% Continues to experience significantly reduced activity levels and extremely challenging market conditions, primarily due to a lack of opportunities for Greenfield projects We continue to reduce costs in this business in line with reduced activity levels, primarily through headcount reduction We continue to manage our costs to allow us to remain competitive 3 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 MODUs Financial Performance to 30 September 205 Q3 205 Q3 204 Variance Q3 205 Q3 204 Variance YTD YTD Result Result $m $m $m % $m $m $m % Revenue (37.7) -35.9% (5.0) -7.5% pre support allocation % NM Support cost allocation (.0) (.6) % (0.3) (0.6) % post support allocation % NM margin 33.7% 7.% 43.6% 3.6% Improved performance over Q2 205 as a result of cost reduction measures on both rigs The self-erecting tender barges, which were sold in Q4 204, contributed $2.8m of the before support allocation during the first three quarters of 204 Our MODUs business consists of our two jack-up rigs; the Ben Loyal in the Gulf of Mexico and the Ben Rinnes operating offshore Angola. Both rigs were operating during Q 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.

16 Group Results Financial Performance to 30 September 205 Revenue and ($m) Q3 205 $m Q3 204 $m 205 YTD $m 204 YTD $m Revenue from business units ,366.7,659.3 Eliminations (8.4) (40.0) (93.9) (84.5) Total revenue ,272.8,574.8 from business units Eliminations (0.) (.5) (.4) (2.6) Corporate costs/other (4.4) (4.5) (4.3) (6.3) Exchange (2.) (3.6) (4.8) (3.8) Total

17 Cash flow and working capital Financial Performance to 30 September 205 Free Cash Flow Working Capital 2 Q3 205 Q YTD 204 YTD $'m $'m $'m $'m Cash flow from operating activities Capital expenditure (22.7) (68.2) (03.) (5.7) Proceeds from sale of Fixed Assets Interest received Other Acquisition of non-controlling interests (25.0) 0.0 Cash flow from investing activities (2.6) (54.0) (03.8) (34.2) 9 Interest paid (2.6) (7.2) (75.0) (6.3) Foreign exchange.2 (8.4) (3.3) (4.3) Net Cash flow before debt drawdown/(repayment) 2.7 (3.9) 3.7 (30.3) Drawdown/(repayment) of debt and debt issuance costs (4.9) 0.7 (3.5) (82.0) Net cash flow 6.8 (3.2) (7.8) (2.3) Impact of the $50m shareholder funding being used to purchase rigs The 50 million dollars was booked as a cash in advance in Q, with 27 million dollars unwinding prior to the start of Q3. A further 9 million dollars unwound during Q3 giving $46m in total to date, leaving $4m left to unwind in Q4 Normalising the above cashflows for this impact you would see the following: The Q3 working capital cash outflow of $2m would otherwise have been a $7m inflow The YTD working capital inflow of $30m would otherwise have been an inflow of $26m Q3 capex cashflow of $23m would otherwise have been $42m YTD capex cashflow of $03m would have been $49m 6 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

18 capex program is almost complete with all 8 new rigs on long term contracts 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 Operating Rig 6 Russia c.29 3yrs Operating Rig 7 Oman c.3 5yrs + 2xyr options Operating All ongoing capex projects were initiated in 204 and are supported by long term contracts Upfront 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 expected to be below average annual spend of $80m - $85m 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.$20m Remaining capex spend in 205 c.$5m New build construction project spend c. $0m under budget for 205 All contracts remain in place without any re-negotiation of terms All new build capital expenditure is targeted at a minimum 8% IRR 7 Construction Operational Excludes cost of mobilisation given this is reimbursed by client

19 Capital structure Net leverage as at 30 September 205 Utilisation 30 th September 205 Coupon Maturity Facility Rating Recovery Rating Net Leverage Revolver ($250m) L+400 May-9 B3/B 3/3 0.4x Senior Secured Term Loan L(00)+525 May-20 B3/B 3/3.3x Total Bank Debt x UK Finance Senior Secured Notes % May-2 B3/B 3/3.33x Globe Luxembourg Senior Secured Notes % May-8 B3/B 3/3.77x Total Institutional Debt, x Finance lease & other debt Aug x Gross Debt, x Cash x Net Debt, x 8 Based on Q3 205 LTM of $282 m. 2 Revolver is split $75/$75m non cash/cash, the amount shown represents the cash element.

20 Closing remarks Stable Q3 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 7 of the 8 new build rigs, with more on track for delivery in 205 Strong backlog position at $7.2bn across a blue chip company base Cost initiatives continue to deliver bottom line savings 9

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