Investor Presentation - KCA DEUTAG€¦ · Fourth Quarter 2015 Investor Presentation . Disclaimer 1 The distribution of this presentation in certain jurisdictions may be restricted

www.kcadeutag.com

KCA Deutag is a leading international drilling and engineering

company working onshore and offshore with a focus on safety,

quality and operational performance

Fourth Quarter 2015

Investor Presentation

Disclaimer

1

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 forward-

looking 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.

2

1 Q4 Key Highlights

2 Business Update

3 Business Unit Financials

4 Group Results

5 Summary

Agenda

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

1

2015 full year revenue and EBITDA of $1,668.8m (2014: $2,110.9m) and

$289.8m (2014: $314.7m) respectively.

Q4 2015 Group revenue of $396.0m (Q4 2014: $536.2m) and Q4 2015

EBITDA of $79.1m (Q4 2014: $71.4m) respectively

2 Contract backlog of $6.3bn (at 1 February 2016) across a blue chip

customer base

3 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 Q3 2014

4 $115m of available liquidity at 31 December 2015. 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

Market Overview

4

• 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 Operators focused on cost

cutting and capital delays

o Spending is being prioritised to

resilient markets with low cost

breakeven

• Analysts are expecting 2017

capex to decline by a further

10%2

1Source: Capital IQ as at 23 March 2016 2 Source: JPMorgan Global E&P Capex Survey March 2016

1

2

Business update

5

Bentec Platform services RDS

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.

Integrated land drilling Offshore drilling services & design

• 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

• Significant reduction in

tendering activity

throughout 2015

• Reduced component

sales activity although

stable workload in After

Sales

• Highly competitive, weak

market conditions

• Utilisation remains soft in

Nigeria, Europe and

Kurdistan

• Increased market

uncertainty with additional

pricing pressure and

indications of activity

reduction

$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

6

• Cost reduction initiatives have contributed to margin maintenance through the market downturn

Group performance

Houston

Baku

London Bad

Bentheim

Tyumen

Nizwa

Ben Rinnes jack-up rig

St.

Johns

Bergen

Dubai

Land Drilling Platform Services RDS offices MODUs Bentec Regional offices

KCAD operations are diversified across resilient Eastern Hemisphere markets

Aberdeen (HQ)

Map excludes work over land rigs, defined as being below 900HP.

Map shows position at 1 February 2016

PRESENCE IN KEY AREAS

North Sea

/Norway

28 Plat.

Europe &

Caspian

7 Rigs

Caspian

7 Plat.

Russia

16 Rigs

Middle

East

16 Rigs

Angola

3 Plat.

Africa

13 Rigs

Russia

Sakhalin

3 Plat.

Brunei

2 Rigs

128

57 52 42

17

0

30

60

90

120

150

Europe NorthAfrica

MiddleEast

North Sea Russia

Ye

ars

LTM Q4 2015 EBITDA split by region

7

Canada

1 Plat.

8

KCAD relevance Themes

Source: Marginal production costs: Knoema, Rig count: Baker Hughes

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)

Supporting data

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

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

9

1Total 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.

• 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

Health, safety and environmental performance

KCAD TRIR at

end of 2015 was

0.451 injuries per

200,000 man

hours worked

IADC industry average

0.602 for 2015

10

Despite market environment, backlog remains strong

Backlog figures exclude revenue generated in the year to date.

$M

Total contract backlog as at 1 November 2015

Contract backlog by BU as at 1 November 2015

Total contract backlog as at 1 February 2016

Contract backlog by BU as at 1 February 2016

11

• 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

• 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

Rejuvenation of the land rig fleet

Well invested land fleet supporting utilisation

Historical and forecast utilisation

Land utilisation for 2016 and 2017 shows position at 1 March 2016.

12

Robust platform services contract backlog @ 1 February

Q4 2015 Q4 2014 Q4 2015 Q4 2014

YTD YTD Result Result

$m $m $m % $m $m $m %

Revenue 600.7 680.6 (79.9) -11.7% 157.7 167.6 (9.9) -5.9%

EBITDA

pre support allocation 172.6 161.8 10.8 6.7% 57.3 34.8 22.5 64.8%

Support cost allocation (8.4) (12.3) 3.9 -31.7% (1.9) (3.6) 1.6 -45.6%

EBITDA

post support allocation 164.2 149.5 14.7 9.8% 55.4 31.2 24.2 77.4%

margin 27.3% 22.0% 35.1% 18.6%

Variance Variance

13

• Lower revenue but higher EBITDA compared to Q4 2014, with higher revenues and

EBITDA than in Q3 2015

• 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

2016

Financial Performance to 31 December 2015

Land Drilling

EBITDA is shown before and after allocation of central support costs (such as HR, Supply Chain and IT costs) to the operational

business segments. 2014 and 2015 are presented on the same basis.

Bentec

14

• Revenues and EBITDA lower than Q4 2014 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



business segments. EBITDA is also shown before eliminations. 2014 and 2015 are presented on the same basis.

Q4 2015 Q4 2014 Q4 2015 Q4 2014


$m $m $m % $m $m $m %

Revenue 235.4 293.1 (57.7) -19.7% 43.3 101.8 (58.5) -57.5%

EBITDA

pre support allocation 22.5 38.0 (15.4) -40.7% 2.7 16.7 (14.0) -83.9%


EBITDA

post support allocation 20.7 35.3 (14.6) -41.5% 2.3 16.2 (13.9) -86.0%

margin 8.8% 12.0% 5.2% 15.9%

Variance Variance

Platform Services

15


• Revenues lower than both Q3 2015 and Q4 2014, with EBITDA lower than Q4 2014 but

slightly higher than Q3 2015

• 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



Q4 2015 Q4 2014 Q4 2015 Q4 2014


$m $m $m % $m $m $m %

Revenue 686.8 808.9 (122.1) -15.1% 159.6 211.3 (51.6) -24.4%

EBITDA



EBITDA

post support allocation 89.5 98.3 (8.8) -9.0% 24.3 28.0 (3.7) -13.1%

margin 13.0% 12.2% 15.2% 13.2%

Variance Variance

RDS

16


• Revenues and EBITDA lower than both Q4 2014 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



Q4 2015 Q4 2014 Q4 2015 Q4 2014


$m $m $m % $m $m $m %

Revenue 168.1 317.9 (149.8) -47.1% 31.3 66.0 (34.7) -52.6%

EBITDA



EBITDA

post support allocation 15.8 46.3 (30.5) -65.8% (0.5) 6.0 (6.5) -107.5%

margin 9.4% 14.6% -1.4% 9.2%

Variance Variance

MODUs

17

• Revenues and EBITDA lower than both Q4 2014 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




Q4 2015 Q4 2014 Q4 2015 Q4 2014


$m $m $m % $m $m $m %

Revenue 85.4 131.3 (45.9) -35.0% 18.2 26.4 (8.2) -31.1%

EBITDA

pre support allocation 23.6 28.9 (5.3) -18.3% (0.0) 9.3 (9.3) -100.3%


EBITDA

post support allocation 22.3 26.7 (4.4) -16.4% (0.3) 8.8 (9.1) -103.5%

margin 26.2% 20.3% -1.7% 33.2%

Variance Variance

Group Results Financial Performance to 31 December 2015

18

Revenue and EBITDA ($m) Q4

2015

$m

Q4

2014

$m

FY

2015

$m

FY

2014

$m

Revenue from business units 410.2 573.2 1,776.9 2,232.4

Eliminations (14.2) (37.0) (108.1) (121.5)

Total revenue 396.0 536.2 1,668.8 2,110.9

EBITDA from business units 81.2 90.1 312.5 356.2

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 79.1 71.4 289.8 314.7

Cash flow and working capital Financial Performance to 31 December 2015

19

Working Capital2

9

1Denotes the effect of foreign exchange rate changes on cash and bank overdrafts. 2Deltas denote current quarter working capital movement

Free Cash Flow

1

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 Q4 2015

• 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

Q4 2015 Q4 2014 2015 2014

$'m $'m $'m $'m

Cash generated from operations 68.6 115.4 293.6 334.1

Tax paid (13.7) (15.8) (49.6) (55.4)

Cash flow from operating activities 54.9 99.6 244.0 278.7

Capital expenditure (24.9) (55.8) (128.0) (207.5)

Proceeds from sale of Fixed Assets 9.7 18.2 13.9 30.7

Interest received 5.8 2.3 19.5 2.8

Other (1.9) 0.9 0.0 0.0

Acquisition of non-controlling interests 0.0 0.0 (25.0) 0.0

Cash flow from investing activities (11.3) (34.4) (119.6) (174.0)

Interest paid (50.7) (47.3) (125.7) (108.6)

Foreign exchange (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

20

Capital structure Net leverage as at 31 December 2015

1 Based on Q4 2015 LTM EBITDA of $290 m. 2 Revolver is split $75/$175m non cash/cash, the amount shown represents the cash element. 3Facility and Recovery ratings shown as at 24 March 2016

Utilisation

31st December 2015 Coupon Maturity

Facility

Rating3

Recovery

Rating3 Net Leverage1

Revolver ($250m)2 54.4 L+400 May-19 Caa1/B 3/3 0.19x

Senior Secured Term Loan 369.4 L(100)+525 May-20 Caa1/B 3/3 1.27x

Total Bank Debt 423.8 1.46x

UK Finance Senior Secured Notes 375.0 7.250% May-21 Caa1/B 3/3 1.29x

Globe Luxembourg Senior Secured

Notes 500.0 9.625% May-18 Caa1/B 3/3 1.73x

Total Institutional Debt 1,298.8 4.48x

Finance lease & other debt 7.9 - Aug-18 - - 0.03x

Gross Debt 1,306.7 4.51x

Cash 52.5 0.18x

Net Debt 1,254.2 4.33x

Closing remarks

21

• 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

• Headwinds continue into 2016 driving further cost saving initiatives

• Backlog position of $6.3bn across a blue chip company base

22

Q & A [email protected]

Investor Presentation - KCA DEUTAG€¦ · Fourth Quarter 2015 Investor Presentation . Disclaimer 1 The distribution of this presentation in certain jurisdictions may be restricted

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