Investor Presentation

Transcription

1 Investor Presentation Fourth Quarter 2015 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. 1

3 Agenda 1 Q4 Key Highlights 2 Business Update 3 Business Unit Financials 4 Group Results 5 Summary 2

4 Q4 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 full year revenue and EBITDA of $1,668.8m (2014: $2,110.9m) and $289.8m (2014: $314.7m) respectively. Q Group revenue of $396.0m (Q4 2014: $536.2m) and Q EBITDA of $79.1m (Q4 2014: $71.4m) respectively Contract backlog of $6.3bn (at 1 February 2016) across a blue chip customer base Successful delivery and start up in Q4 of 2 new build rigs in Oman and 1 rig in Brunei, completing our rig build programme of 8 new rigs delivered since the end of Q $115m of available liquidity at 31 December Post year end completion of $80m Oman rig financing transaction provides a further boost to liquidity 5 Sale of the Ben Loyal jack up rig completed in Q4 3

5 Market Overview 1 2 Oil price fell below $30 / bbl in January 2016 resulting in increased market uncertainty Significant reduction in capex spending since the peak in 2014 o o Operators focused on cost cutting and capital delays Spending is being prioritised to resilient markets with low cost breakeven Analysts are expecting 2017 capex to decline by a further 10% Source: Capital IQ as at 23 March Source: JPMorgan Global E&P Capex Survey March 2016

6 Business update Integrated land drilling Offshore drilling services & design $164.2m / 52.8% of total¹ $19.0m / 6.1% of total¹ $89.5m / 28.8% of total¹ $15.8m / 5.1% of total¹ Land drilling Bentec Bentec Platform services RDS Utilisation remains soft in Nigeria, Europe and Kurdistan Increased market uncertainty with additional pricing pressure and indications of activity reduction Significant reduction in tendering activity throughout 2015 Reduced component sales activity although stable workload in After Sales Highly competitive, weak market conditions Most of our International operations continue to perform relatively well despite market conditions Some weakness particularly in the North Sea and Angola Reduced capex spend by E&P companies continues to severely impact activity and revenues We remain focused on preservation of positive EBITDA through cost management 5 1 LTM EBITDA, % split of total including MODUs, before corporate costs/ other of $21.2m. Note: MODUs LTM EBITDA $22.4m represented 7.2% of total EBITDA before corporate costs.

7 Group performance Cost reduction initiatives have contributed to margin maintenance through the market downturn 6

8 Years KCAD operations are diversified across resilient Eastern Hemisphere markets PRESENCE IN KEY AREAS Canada 1 Plat Europe North Africa Middle East 42 North Sea 17 Russia Houston St. Johns Aberdeen (HQ) London North Sea /Norway 28 Plat. Bergen Europe & Caspian 7 Rigs Bad Bentheim Baku Caspian 7 Plat. Middle East 16 Rigs Tyumen Russia 16 Rigs Russia Sakhalin 3 Plat. Africa 13 Rigs LTM Q EBITDA split by region Dubai Nizwa Brunei 2 Rigs Angola 3 Plat. Ben Rinnes jack-up rig Regional offices Land Drilling Platform Services RDS offices MODUs Bentec 7 Map excludes work over land rigs, defined as being below 900HP. Map shows position at 1 February 2016

9 Operating in markets less impacted by the oil price reduction in 2015 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 8

10 Health, safety and environmental performance IADC industry average for 2015 KCAD has continued to achieve satisfactory safety results The group continues to perform ahead of industry peers in the International Association of Drilling Contractors (IADC) Maintaining high safety and operational standards is a key priority for the business KCAD TRIR at end of 2015 was injuries per 200,000 man hours worked 9 1 Total Recordable Incident Rate per 200,000 man hours. This is a rolling 12 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.

11 Despite market environment, backlog remains strong Total contract backlog as at 1 November 2015 Total contract backlog as at 1 February 2016 Contract backlog by BU as at 1 November 2015 Contract backlog by BU as at 1 February 2016 $M 10 Backlog figures exclude revenue generated in the year to date.

12 Well invested land fleet supporting utilisation Rejuvenation of the land rig fleet Significant investment in the land rig fleet over recent years All are high specification rigs built for the premium land drilling market New build rig construction is initiated based on signed long term contracts Historical and forecast utilisation Land business utilisation held up well in 2015 We saw good activity levels in Russia, Oman and Algeria Nigeria and Europe were weaker areas where we experienced softer utilisation than elsewhere in our portfolio We are beginning to see some increased pressure through 2016 in areas such as Russia Land utilisation for 2016 and 2017 shows position at 1 March

13 Robust platform services contract 1 February 12

14 Land Drilling Financial Performance to 31 December 2015 Q Q Variance Q Q Variance YTD YTD Result Result $m $m $m % $m $m $m % Revenue (79.9) -11.7% (9.9) -5.9% EBITDA pre support allocation % % Support cost allocation (8.4) (12.3) % (1.9) (3.6) % EBITDA post support allocation % % margin 27.3% 22.0% 35.1% 18.6% Lower revenue but higher EBITDA compared to Q4 2014, with higher revenues and EBITDA than in Q Three new build rigs started up operations in Q4, two in Oman and one in Brunei We continue to experience difficult market conditions in Europe, Nigeria and Kurdistan due to weaker utilisation Our operations in Russia, Algeria and Oman continued to see stable levels of utilisation and EBITDA Overall our utilisation for the quarter was 76%, an increase of 3% on the prior quarter which was 73% We have already seen increased pricing pressure and indications of reducing activity in EBITDA is shown before and after allocation of central support costs (such as HR, Supply Chain and IT costs) to the operational business segments and 2015 are presented on the same basis.

15 Bentec Financial Performance to 31 December 2015 Q Q Variance Q Q Variance YTD YTD Result Result $m $m $m % $m $m $m % Revenue (57.7) -19.7% (58.5) -57.5% EBITDA pre support allocation (15.4) -40.7% (14.0) -83.9% Support cost allocation (1.9) (2.7) % (0.4) (0.6) % EBITDA post support allocation (14.6) -41.5% (13.9) -86.0% margin 8.8% 12.0% 5.2% 15.9% Revenues and EBITDA lower than Q and the prior quarter Bentec activity gradually reduced during 2015 as order backlog was completed and shipped to customers Lower levels of EBITDA from component sales in 2015 than 2014, although After Sales results were in line with the prior year Market conditions are very difficult with a lack of opportunities and a lot of competition 14 EBITDA is shown before and after allocation of central support costs (such as HR, Supply Chain and IT costs) to the operational business segments. EBITDA is also shown before eliminations and 2015 are presented on the same basis.

16 Platform Services Financial Performance to 31 December 2015 Q Q Variance Q Q Variance YTD YTD Result Result $m $m $m % $m $m $m % Revenue (122.1) -15.1% (51.6) -24.4% EBITDA pre support allocation (11.4) -10.6% (4.7) -15.5% Support cost allocation (5.9) (8.5) % (1.4) (2.4) % EBITDA post support allocation (8.8) -9.0% (3.7) -13.1% margin 13.0% 12.2% 15.2% 13.2% Revenues lower than both Q and Q4 2014, with EBITDA lower than Q but slightly higher than Q Continued relatively strong performance despite challenging market conditions Some reduction in activity levels in certain markets such as the North Sea and Angola Additional cost pressures across all of our contracts 15 EBITDA is shown before and after allocation of central support costs (such as HR, Supply Chain and IT costs) to the operational business segments and 2015 are presented on the same basis.

17 RDS Financial Performance to 31 December 2015 Q Q Variance Q Q Variance YTD YTD Result Result $m $m $m % $m $m $m % Revenue (149.8) -47.1% (34.7) -52.6% EBITDA pre support allocation (31.3) -63.5% (6.8) -98.8% Support cost allocation (2.2) (3.0) % (0.5) (0.9) % EBITDA post support allocation (30.5) -65.8% (0.5) 6.0 (6.5) % margin 9.4% 14.6% -1.4% 9.2% Revenues and EBITDA lower than both Q and the prior quarter Extremely difficult to secure new work particularly for new Greenfield projects, and we have also experienced increased challenge on costs from our clients. We continue to aggressively manage our costs with significant reductions in headcount both in terms of employees as well as contractors 16 EBITDA is shown before and after allocation of central support costs (such as HR, Supply Chain and IT costs) to the operational business segments and 2015 are presented on the same basis.

18 MODUs Financial Performance to 31 December 2015 Q Q Variance Q Q Variance YTD YTD Result Result $m $m $m % $m $m $m % Revenue (45.9) -35.0% (8.2) -31.1% EBITDA pre support allocation (5.3) -18.3% (0.0) 9.3 (9.3) % Support cost allocation (1.2) (2.1) % (0.3) (0.5) % EBITDA post support allocation (4.4) -16.4% (0.3) 8.8 (9.1) % margin 26.2% 20.3% -1.7% 33.2% Revenues and EBITDA lower than both Q and the prior quarter At the end of 2015 our MODU business consisted solely of the Ben Rinnes jack up rig after completing the sale of the Ben Loyal in the fourth quarter The Ben Rinnes operated under its contract offshore Angola throughout the fourth quarter Since the year end the rig has finished the contract and has been towed to a stacking location in Gabon Due to collection delays we booked a bad debt provision against our MODU business unit during the fourth quarter 17 EBITDA is shown before and after allocation of central support costs (such as HR, Supply Chain and IT costs) to the operational business segments and 2015 are presented on the same basis.

19 Group Results Financial Performance to 31 December 2015 Revenue and EBITDA ($m) Q $m Q $m FY 2015 $m FY 2014 $m Revenue from business units , ,232.4 Eliminations (14.2) (37.0) (108.1) (121.5) Total revenue , ,110.9 EBITDA from business units Eliminations (0.1) (1.0) (1.5) (3.8) Corporate costs/other (4.0) (5.6) (18.4) (21.8) Exchange 2.0 (12.1) (2.8) (15.9) Total EBITDA

20 Cash flow and working capital Financial Performance to 31 December 2015 Free Cash Flow Working Capital 2 Q Q $'m $'m $'m $'m Cash generated from operations Tax paid (13.7) (15.8) (49.6) (55.4) Cash flow from operating activities Capital expenditure (24.9) (55.8) (128.0) (207.5) Proceeds from sale of Fixed Assets Interest received Other (1.9) Acquisition of non-controlling interests (25.0) 0.0 Cash flow from investing activities (11.3) (34.4) (119.6) (174.0) 9 Interest paid (50.7) (47.3) (125.7) (108.6) Foreign exchange 1 (3.3) (0.3) (6.6) 0.1 Net Cash flow before debt drawdown/(repayment) (10.4) 17.6 (7.9) (3.8) Drawdown/(repayment) of debt and debt issuance costs (1.9) 15.2 (22.2) 24.3 Net cash flow (12.3) 32.8 (30.1) 20.5 Impact of the $50m shareholder funding being used to purchase rigs Working capital impact has now fully unwound with the final $4m coming through in Q The permanent delta that will subsist is of course within capex Q4 capex cashflow of $25m would have otherwise been $29m Full year capex cashflow for 2015 (shown above as $128m) would have been $178 million, of this $119m was growth capex spend 19 1 Denotes the effect of foreign exchange rate changes on cash and bank overdrafts. 2 Deltas denote current quarter working capital movement

21 Capital structure Net leverage as at 31 December 2015 Utilisation 31 st December 2015 Coupon Maturity Facility Rating 3 Recovery Rating 3 Net Leverage 1 Revolver ($250m) L+400 May-19 Caa1/B 3/3 0.19x Senior Secured Term Loan L(100)+525 May-20 Caa1/B 3/3 1.27x Total Bank Debt x UK Finance Senior Secured Notes % May-21 Caa1/B 3/3 1.29x Globe Luxembourg Senior Secured Notes % May-18 Caa1/B 3/3 1.73x Total Institutional Debt 1, x Finance lease & other debt Aug x Gross Debt 1, x Cash x Net Debt 1, x 20 1 Based on Q LTM EBITDA of $290 m. 2 Revolver is split $75/$175m non cash/cash, the amount shown represents the cash element. 3 Facility and Recovery ratings shown as at 24 March 2016

22 Closing remarks Full year EBITDA of $290m delivered in challenging market conditions Additional $80m liquidity since year end through completion of Oman rig financing transaction Successful start up in Q4 of the final 3 rigs of our 8 new build rig programme Backlog position of $6.3bn across a blue chip company base Headwinds continue into 2016 driving further cost saving initiatives 21

23 22 Q & A investor.relations@kcadeutag.com