North Atlantic Drilling Ltd. Second quarter 2017 results August 24, 2017
Forward looking statements This presentation includes forward looking statements. Such statements are generally not historical in nature, and specifically include statements about the Company s plans, strategies, business prospects, changes and trends in its business, the markets in which it operates and its restructuring efforts. These statements are made based upon management s current plans, expectations, assumptions and beliefs concerning future events impacting the Company and therefore involve a number of risks, uncertainties and assumptions that could cause actual results to differ materially from those expressed or implied in the forward-looking statements, which speak only as of the date of this news release. Important factors that could cause actual results to differ materially from those in the forward-looking statements include, but are not limited to offshore drilling market conditions, including supply and demand, day rates, customer drilling programs and effects of new rigs on the market, contract awards and rig mobilizations, contract backlog, dry-docking and other costs of maintenance of the drilling rigs in the Company s fleet, the cost and timing of shipyard and other capital projects, the performance of the drilling rigs in the Company s fleet, delay in payment or disputes with customers, our ability to successfully employ our drilling units, procure or have access to financing, ability to comply with loan covenants, liquidity and adequacy of cash flow from operations, fluctuations in the international price of oil, international financial market conditions including the international financial crisis, changes in governmental regulations that affect the Company or the operations of the Company s fleet, increased competition in the offshore drilling industry, and general economic, political and business conditions globally and our ability to negotiate and complete a comprehensive restructuring, either on a consensual basis or otherwise. Consequently, no forward-looking statement can be guaranteed. When considering these forward-looking statements, you should keep in mind the risks described from time to time in the Company s filings with the SEC, including its Annual Report on Form 20-F. The Company undertakes no obligation to update any forward looking statements to reflect events or circumstances after the date on which such statement is made or to reflect the occurrence of unanticipated events. New factors emerge from time to time, and it is not possible for us to predict all of these factors. Further, the Company cannot assess the impact of each such factors on its business or the extent to which any factor, or combination of factors, may cause actual results to be materially different from those contained in any forward looking statement. 2
Agenda Highlights second quarter Fleet update Financial reporting highlights Financial results Q & A 3
Highlights Second quarter 2017 Operations Excellent operational uptime Economic utilization at 96% Commercial activities 100% 80% 60% 40% 20% 0% Economic Utilization 95% 100% 98% 99% 98% 98% 98% 96% 2Q15 3Q15 4Q15 2Q16 3Q16 4Q16 1Q17 2Q17 Economic Utilization* Financial highlights Quarterly EBITDA of US$14 million Net operating loss of US$40 million Ongoing refinancing 150 100 50 0 EBITDA and EBITDA Margin 70% 60% 50% 40% 30% 20% 10% 0% 2Q15 3Q15 4Q15 2Q16 3Q16 4Q16 1Q17 2Q17 EBITDA** EBITDA Margin*** * Economic utilization: calculated as total revenue, excluding bonuses, for the period as a proportion of the full operating dayrate multiplied by the number of days on contract in the period. ** EBITDA: earnings before interest, tax, depreciation and amortization equal to operating profit before any impairment charges, gains or losses on disposal, plus depreciation and amortization. See Appendix for reconciliation. *** EBITDA Margin: in percent of contract revenues excluding reimbursable revenue. 4
Fleet update Estimated contract backlog of $1.5 billion, as of August 24, 2017. Rig 2017 2018 2019 2020 2021 Semi-submersibles West Alpha West Venture West Phoenix 1 West Rigel West Hercules 2 Drillships West Navigator Jack-ups West Epsilon West Elara Until Oct 2027 West Linus Until Dec 2028 1 Undisclosed customer. 2 West Hercules is a Seadrill Limited semi-submersible. Firm contract Option 5
Financial reporting highlights Unaudited accounts in USD millions, except where noted 2Q17 1Q17 EBITDA US$ 14 US$ 31 Operating loss US$ (40) US$ (25) Financial items US$ (33) US$ (28) Loss per share (US$) US$ (2.59) US$ (2.34) Cash flow from operating activities US$ (32) US$ 26 6
Operating result Unaudited accounts in USD millions 2Q17 1Q17 4Q16 3Q16 Contract revenues 60 72 69 133 Reimbursable revenues 2 1 2 4 Other revenues 11 Total operating revenues 62 73 82 137 Vessel and rig operating expenses 31 33 41 44 Reimbursable expenses 2 1 2 4 Depreciation and amortization 54 55 55 55 General and administrative expenses 15 9 9 5 Total operating expenses 102 98 107 108 Net operating (loss) / income (40) (25) (25) 29 7
Net result Unaudited accounts in USD millions, except where noted 2Q17 1Q17 4Q16 3Q16 Net operating (loss) / income (40) (25) (25) 29 Financial items Interest expense (26) (26) (27) (27) Gain / (loss) on derivatives 5 3 (18) 16 Foreign exchange (loss) / gain (7) (1) 15 (6) Other financial items (5) (4) (1) (3) Total financial items (33) (28) (31) (20) Net (loss) / income before income taxes (73) (53) (56) 9 Income taxes 14 3 (19) Net loss (59) (53) (53) (10) Basic and diluted loss per share (US$) (2.59) (2.34) (2.36) (0.55) 8
Balance Sheet - Assets Unaudited accounts in USD millions June 30, 2017 March 31, 2017 December 31, 2016 September 30, 2016 Current assets Cash and cash equivalents 22 43 69 86 Restricted cash 4 3 5 4 Accounts receivables, net 37 37 76 114 Related party receivables 7 9 11 10 Other current assets 13 16 15 16 Total current assets 83 108 176 230 Non-current assets Drilling units 2,424 2,476 2,529 2,583 Non-current assets held for sale 128 128 128 128 Deferred tax assets 10 Other non-current assets 80 84 85 87 Total non-current assets 2,632 2,688 2,742 2,808 Total assets 2,715 2,796 2,918 3,038 9
Balance Sheet - Liabilities and Equity Unaudited accounts in USD millions June 30, 2017 March 31, 2017 December 31, 2016 September 30, 2016 Current liabilities Current portion of long-term debt 994 1,039 1,079 1,118 Related party liabilities 109 48 37 25 Tax payable 1 14 17 38 Other current liabilities 101 111 128 110 Total current liabilities 1,205 1,212 1,261 1,291 Non-current liabilities Long-term interest bearing debt 867 870 881 903 Related party debt 318 321 321 321 Deferred taxes 43 45 48 57 Pension liabilities 3 3 18 Other non-current liabilities 13 16 18 15 Total non-current liabilities 1,241 1,255 1,271 1,314 Equity Total shareholder s equity 269 329 386 433 Total liabilities and shareholder s equity 2,715 2,796 2,918 3,038 10
11 Q&A
Appendix - Non-GAAP Financial Measures EBITDA is defined as 'earnings before interest, tax, depreciation and amortization' and has been calculated by taking operating income plus depreciation and amortization, but excluding gains or losses on disposals and impairment charges against long-lived assets. Additionally, in any given period the Company may have significant, unusual or non-recurring gains or losses which it may exclude from its Non GAAP earnings for that period. When applicable, these items would be fully disclosed and incorporated into the required reconciliations from US GAAP to Non GAAP measures. Unaudited accounts in USD millions 2Q17 1Q17 Net loss (59) (53) Depreciation and amortization 54 55 Total financial items 33 29 Income taxes (14) EBITDA 14 31 12