DEA Group. Q Results Presentation

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DEA Group Q3 2018 Results Presentation Maria Moræus

L1E Finance GP GmbH Dmitry Avdeev CFO of DEA Deutsche

1 DEA Group Q Results Presentation Maria Moræus Hanssen CEO of DEA Deutsche Erdoel AG, Managing Director L1E Finance GP GmbH Dmitry Avdeev CFO of DEA Deutsche Erdoel AG, Managing Director L1E Finance GP GmbH November 15 th, 2018

2 Disclaimer Forward-Looking Statements This communication may include projections and other forward-looking: statements within the meaning of applicable securities laws, which are based on current expectations and projections about future events and financial performance. Statements herein, other than statements of historical fact, regarding future events or prospects, are forward-looking statements. The words may, will, should, expect, anticipate, believe, estimate, plan, predict, intend or variations of these words, as well as other statements regarding matters that are not historical fact or regarding future events or prospects, constitute forward-looking statements. L1E Finance GmbH & Co KG (the Company ) has based these forward-looking statements on its current views with respect to future events and financial performance in addition to certain assumptions about the future, some of which are beyond the Company s control. These forward-looking statements involve a number of risks, uncertainties, and assumptions about the Company and its subsidiaries and its investments, including, among other things, the development of its business, trends in its operating industry, and future capital expenditures and acquisitions. In light of these risks, uncertainties and assumptions, actual results may not occur or may differ materially from those predicted in the forward-looking statements and from the past performance of the Company. As a result, you should not rely on these forward-looking statements. Neither the Company nor any other person make any warranties or representations about accuracy, sequence, timeliness or completeness of the content of the presentation or the achievement or reasonableness of future projections, management targets, estimates, prospects or returns, if any. Non-GAAP and Non-IFRS Financial Measures This communication may contain certain non-gaap and non-ifrs measures and ratios, including for example EBITDAX, net debt, net working capital, coverage ratios and EBITDAX per boe that are not required by, or presented in accordance with, any GAAP or IFRS. The non-gaap and non-ifrs measures and ratios may not be comparable to other similarly titled measures of other companies and have limitations as analytical tools and should not be considered in isolation or as a substitute for analysis of our operating results as reported under IFRS or any GAAP. Our management uses these measures to measure operating performance and liquidity, in presentations to our Management Board and as a basis for strategic planning and forecasting, as well as monitoring certain aspects of our operating cash flow and liquidity. We present non-gaap and non-ifrs measures and ratios because we believe that they and similar measures are widely used by certain investors, securities analysts and other interested parties as supplemental measures of performance and liquidity. Non-GAAP and non-ifrs measures and ratios such as EBITDAX, coverage ratios and EBITDAX per boe are not measurements of our performance or liquidity under IFRS and should not be considered as alternatives to operating profit, profit for the year, capital expenditure or any other performance measures derived in accordance with IFRS or any GAAP or as alternatives to cash flow from operating, investing or financing activities. We present in this communication a reconciliation of each of the non-gaap and non-ifrs measures to the most directly comparable measure calculated and presented in accordance with IFRS and discuss its limitations See note above. Some of the limitations of EBITDAX are: they do not reflect our cash expenditures or future requirements for contractual commitments; they do not reflect changes in, or cash requirements for, our working capital needs; they do not reflect the significant interest expense, or the cash requirements necessary, to service interest or principal payments on our debt; although depreciation and amortization are non cash charges, the assets being depreciated and amortized will often need to be replaced in the future and EBITDAX does not reflect any cash requirements that would be required to make such replacements; they do not reflect the impact of certain cash charges resulting from matters we consider not to be indicative of our ongoing operations; and other companies in our industry may calculate these measures differently from the way we do, limiting their usefulness as comparative measures. Because of these limitations, EBITDAX should not be considered as measures of discretionary cash available to us to invest in the growth of our business or as measures of cash that will be available to us to meet our obligations. You should compensate for these limitations by relying primarily on our IFRS results and using these non-gaap and non-ifrs measures only to supplement your evaluation of our performance. Page 2

3 Q Highlights & Recent Developments Production 116 kboe/d +1 % vs. Q M&A LetterOne and BASF signed Business Combination Agreement on September 27 th to merge their oil and gas businesses and create Wintershall DEA EBITDAX Leverage LTM 259 million +12 % vs. Q x vs. 1.98x as of Q QHSE Financial LTIF 0.00 vs as of Q million and $50 million RCFs refinanced into one $120 million working capital facility Page 3

4 DEA and Wintershall Merger Transaction Highlights Following the announcement of a letter of intent in December 2017, on September 27 th, 2018, BASF and LetterOne signed definitive transaction agreements to merge their respective oil a gas businesses in a joint venture, which will operate under the name Wintershall DEA Closing of the transaction is expected in H1 2019, subject to regulatory approvals In the medium term, BASF and LetterOne envisage to list Wintershall DEA through an Initial Public Offering (IPO) Transaction creates the leading independent European exploration and production company with international operations in core regions For the purposes of L1E Finance & Co KG financial statements, DEA is now considered to be as a discontinued operation, due to IFRS 5 requirement. Voluntarily, DEA Group elects to continue to disclose financial information without giving the effect of the merger Current shareholder structure 100% Wintershall Holding GmbH Structure of Transaction 100% DEA Deutsche Erdoel AG 5.7% Ordinary shares Post-merger shareholder structure Preference shares* 67% (72.7%) 33% (27.3%) Wintershall DEA DEA Deutsche Erdoel AG * Preference shares will be converted into ordinary shares in Wintershall DEA no later than 36 months after closing but in all cases before an IPO. Expected Timeline Letter of intent signed Transaction agreement signed Merger to be closed Integration to be finalized December 2017 September 2018 H H H Preparation and implementation of integration Preparation of IPO readiness Page 4

5 DEA and Wintershall Merger Combined pro-forma KPIs of Wintershall DEA Sales 2017 EBITDA P Reserves (2) Production 2017 (3) 31% 27% 23% 22% 4.7 billion 2.8 billion 2.2 billion boe 210 million boe 69% 73% 77% 78% Wintershall DEA Including the gas transportation business (2) As of December 31, 2017 (3) Thereof 67% gas, 33% liquids Page 5

6 DEA Group Q Highlights Q Q Production (kboe/d) Realized oil price ($/boe) Realized gas price ($/mcf) Revenue ( m) Production costs ($/boe) Exploration costs ( m) (41) (13) EBITDAX ( m) Capex ( m) Free cash flow ( m) 6 73 Net income ( m) Net debt ( m) 1,733 1,748 LTM Leverage 1.76x 1.98x All 2017 P&L and cash flow items were adjusted for discontinued operations of storage business throughout the presentation Page 6

7 Production and Pricing Commentary Production Profile (kboe/d) Q production was 1 % higher YoY but 8 % lower QoQ due to the seasonal maintenance at several fields in Norway and Germany Q realized oil price 3 % higher QoQ, broadly in line with Brent price development Q realized gas price was $7.2/mcf, 24 % higher QoQ due to strong market conditions in Europe, however, also amplified by an LNG cargo lifting in Norway % liquids: % gas: 43% 44% 38% 57% 56% 62% % 39% 39% 40% 44% 62% 61% 61% 60% 56% Q Q Q Q Q Q Q Q Norway Germany/Denmark North Africa Latin America Adjustment of DEA share for Söhlingen Pool due to unitization of shares Realized Oil Price ($/bbl) Realized Gas Price ($/mcf) Q Q Q Q Q Q Q Q Q Q Page 7

8 Revenues and Profitability Commentary Q revenues were 33 % higher YoY mainly due to significantly higher commodity prices Q EBITDAX was 64 % higher YoY due to higher revenues 1, Revenues ( million) 1, Q unit production costs increased 23 % YoY mostly due to one off effects such as an unsuccessful production well in Egypt as well as an accrual for purchased gas in Mexico EBITDAX ( million) m m 2018 Q Q Germany/Denmark Norway North Africa Latin America Average Production Costs ($/boe) % margin 60% 62% 48% 60% m m 2018 Q Q Germany/Denmark Norway North Africa Latin America Other Q Q Incl. rest of the world and central functions Page 8

9 Capital Expenditure Commentary Q3 and 9m 2018 capital expenditures increased 23 % and 21 % YoY respectively Norway: 9m 2018 expenditures were 124 million higher YoY mainly due to ramp up in investment activity in the ongoing development projects Dvalin, Njord, Ærfugl as well as commencement of investments in Nova Capex Breakdown ( million) Latin America: Mexico expenditures amounted to 18 million in the first 9m 2018, which is mainly associated with the payment of signing bonus of the acquired exploration blocks in June 296 North Africa: 9m 2018 investments were slightly lower YoY. The increase in Q3 is due to high intensity works to finalize West Nile Delta project as well as the final settlement with the EPC contractor in Algeria m m 2018 Q Q Germany/Denmark Norway North Africa Latin America Other Incl. rest of the world, central functions and investment property Page 9

10 Cash Position Development YTD Cashflow Bridge ( million) 607 (644) Ogarrio acquisition payment 128 (181) 118 (37) Cash 01/01/18 Cash Flow from Operations Cash Flow from Investment Activities Free Cash Flow Cash Flow from Financing Equity Contribution for Ogarrio Acquisition Cash Flow from M&A Cash Flow from Discontinued Operations / Other Cash 30/09/18 Page 10

11 Liquidity and Net Debt Sources of Liquidity ( million) Net Debt ( million) (2) (3) 125 1,987 2,387 2,430 1,451 (4) 1,955 1,733 1, (4) Senior Unsecured Notes RBL Overdraft Facilities Cash Available Liquidity Senior Unsecured Notes RBL (drawn) Cash Net Debt 30/09/2018 Nominal value (2) Includes $50m unsecured revolving credit facility, which was subsequently increased to $120m in October (3) Available amount reduced due to drawn $100m letter of credit to cover Ogarrio final payment that is due in 2019 (4) Balance sheet amount, net of amortized fees and including accrued interest FX rate used USD/EUR Page 11

12 Hedging Overview Oil (as of September 30 th, 2018) Gas (as of September 30 th, 2018) Volume (mmbbl) Volume (bcf) Hedged Volumes Price ($/boe) Price ($/mcf) % of Target Hedging Volume 100% 100% 100% 68% 42% % of Target Hedging Volume >100% >100% 85% 14% 12% 6% Calculated at the exchange forward rates applicable on September 30 th, 2018 Page 12

13 2018 Guidance Revision Previous Guidance Revised Guidance Production kboe/d (2017 Actual: 125 kboe/d) kboe/d EBITDAX +5 % % compared to 2017 (2017 Actual: 924 million) +10 % % compared to 2017 (2) Capital Expenditure % higher than 2017 (2017 Actual: 838 million) Unchanged Assuming $70-76/bbl for Brent and UK NBP of $ /mcf for 2018 (2) Assuming average $65-75/bbl for Brent and UK NBP of $ /mcf for Q4/2018 Page 13

14 Definitions DEA Group DEA Group consists of L1E Finance GmbH & Co. KG and its subsidiaries Free cash flow EBITDAX Free cash flow comprises of cash flows from operating activities and from investing activities, but excludes cash flows from/for acquisitions and excludes cash flows from discontinued operations EBITDAX defined as income before tax, financing costs, exploration expense, DD&A and impairments, acquisitions, disposals, extraordinary items, minority interest, FX gains and losses, pensions, loss or gain in relation to disposal of fixed assets Production Working Interest Production, adjustment of DEA share for Pool Söhlingen from Q2 / 2018 onwards due to unitization of shares Production costs Production costs include G&A allocation but exclude export and processing tariffs, finance items and R&D LTIF Lost Time Incident Frequency (number of Lost Time Incident per 1 million working hours) Capital Expenditure Capex excludes financial asset capex and excludes capex from discontinued operations and acquisitions Realized oil/gas price Includes hedges and physical forward sales Note: Certain numerical figures and percentages set out in this presentation have been subject to rounding adjustments Page 14

DEA Group. Q Results Presentation

DEA Group. Q Results Presentation DEA Group Q2 2018 Results Presentation Maria Moræus Hanssen CEO of DEA Deutsche Erdoel AG, Managing Director L1E Finance GP GmbH Dmitry Avdeev CFO of DEA Deutsche Erdoel AG, Managing Director L1E Finance