Investor Presentation - KCA DEUTAG...Q1 Key highlights KCA Deutag is a leading international drilling and engineering company working onshore and offshore with a focus on safety, quality

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

First Quarter 2016

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 Q1 Key Highlights

2 Business Update

3 Business Unit Financials

4 Group Results

5 Summary

Agenda

Q1 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 Q1 2016 Group revenue of $357.3m (Q1 2015: $466.2m) and Q1 2016

EBITDA of $71.2m (Q1 2015: $76.1m) respectively

2 Contract backlog of $5.9bn (at 1 May 2016) across a blue chip customer

base

3 $246m of available liquidity at 31 March 2016 bolstered by the Q1

completion of the $80m Oman project financing transaction

4 Cost reduction programme continues to align costs with reduced activity

levels

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

• Analysts are expecting 2017 capex

to decline by a further 10%2

• Whilst oil price has increased

recently we anticipate a lag in

recovery for our International

market

1Source: Capital IQ as at 13 May 2016 2 Source: JPMorgan Global E&P Capex Survey March 2016

2

Business update

5

Bentec Platform services RDS

1 The % split of LTM EBITDA is calculated using total group EBITDA including MODUs of $303.4m (before corporate costs of

$18.6m). Note: MODUs LTM EBITDA of $21.3m represented 7.0% of total EBITDA.

Integrated land drilling Offshore drilling services & design

• Most of our International

operations continue to

perform relatively well

despite market

conditions

• Reducing activity levels

in the North Sea and

Angola

• Reduced capex spend by

E&P companies

continues to severely

impact activity

• A focus on continued cost

savings to preserve low

level positive EBITDA

• Significant reduction in

tendering activity

• Reduced component

sales activity although

more stable workload in

After Sales

• Highly competitive, weak

market conditions

• A focus on continued cost

savings to preserve low

level positive EBITDA

• Utilisation remains soft in

Nigeria, Europe and

Kurdistan

• Increased market

uncertainty with additional

pricing pressure,

indications of activity

reduction and contract

terminations

$174.2m / 57.4% of total¹ $12.2m / 4.0% of total¹ $86.6m / 28.6% of total¹ $9.1m / 3.0% of total¹

Land drilling Bentec

6

Group margin 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 global markets

Aberdeen (HQ)

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

Map shows position at 1 May 2016.

PRESENCE IN KEY AREAS

North Sea

/Norway

28 Plat.

Europe &

Caspian

8 Rigs

Caspian

7 Plat.

Russia

16 Rigs

Middle

East

16 Rigs

Angola

3 Plat.

Africa

12 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 Q1 2016 EBITDA split by region

7

Canada

1 Plat.

8

KCAD relevance Themes

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

Stronger

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

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

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.

• KCA Deutag 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

• North Sea Platform recently awarded the IADC’s ‘Best Safety Performance Award for a Platform’ at

the 2015 IADC Safety Awards

Health, safety and environmental performance

KCAD TRIR at

end of Q1 2016

was 0.441 injuries

per 200,000 man

hours worked

IADC industry average

0.602 for 2015

10

Despite market environment, backlog remains steady

Backlog figures exclude revenue generated in the year to date.

Total contract backlog as at 1 May 2016

Contract backlog by BU as at 1 May 2016

Total contract backlog as at 1 February 2016

Contract backlog by BU as at 1 February 2016

11

Land fleet utilisation

Historical and forecast utilisation

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

12

Robust platform services contract backlog @ 1 May

13

• 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

• We have already seen increased pricing pressure and indications of reducing activity in

2016 across all markets

• Overall our utilisation for the quarter was 77%, a slight increase of 1% on the prior quarter

which was 76%

Financial Performance to 31 March 2016

Land Drilling

Q1 2016 Q4 2015 Q1 2015 Q1 2016 Q1 2015

Result Result Result YTD YTD

$m $m $m $m $m

Revenue 150.3 157.7 146.7 150.3 146.7

EBITDA (post support allocation) 47.8 55.4 37.8 47.8 37.8

Margin 31.8% 35.1% 25.8% 31.8% 25.8%

Bentec

14

• Revenues and EBITDA significantly lower than Q1 2015, with lower revenues but higher

EBITDA than the prior quarter

• Bentec activity continued to reduce during Q1 as order backlog was completed and

shipped to customers

• Market conditions are very difficult with a lack of opportunities and a lot of competition


Q1 2016 Q4 2015 Q1 2015 Q1 2016 Q1 2015


$m $m $m $m $m

Revenue 29.7 43.3 90.3 29.7 90.3


Margin 9.7% 5.2% 12.0% 9.7% 12.0%

Platform Services

15


• 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 with indications of further reductions in

activity in certain markets

Q1 2016 Q4 2015 Q1 2015 Q1 2016 Q1 2015


$m $m $m $m $m

Revenue 144.6 159.6 189.8 144.6 189.8


Margin 13.7% 15.2% 12.0% 13.7% 12.0%

RDS

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• 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 in line with the reduction in project

activity

Q1 2016 Q4 2015 Q1 2015 Q1 2016 Q1 2015


$m $m $m $m $m

Revenue 24.4 31.3 59.6 24.4 59.6

EBITDA (post support allocation) 1.6 (0.5) 8.3 1.6 8.3

Margin 6.5% -1.4% 13.9% 6.5% 13.9%

MODUs

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• Our MODU business consists solely of the Ben Rinnes jack up rig following the sale of the

Ben Loyal in the prior quarter

• The rig finished its contract during Q1 and has been towed to a stacking location in Gabon


Q1 2016 Q4 2015 Q1 2015 Q1 2016 Q1 2015


$m $m $m $m $m

Revenue 12.9 18.2 21.2 12.9 21.2

EBITDA (post support allocation) 4.1 (0.3) 5.2 4.1 5.2

Margin 31.8% -1.7% 24.3% 31.8% 24.3%

Group Results Financial Performance to 31 March 2016

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Revenue and EBITDA ($m)

Q1

2016

$m

Q4

2015

$m

Q1

2015

$m

2016

YTD

$m

2015

YTD

$m

Revenue from business units 362.1 410.2 507.7 362.1 507.7

Eliminations (4.8) (14.2) (41.5) (4.8) (41.5)

Total revenue 357.3 396.0 466.2 357.3 466.2

EBITDA from business units 76.2 81.2 84.7 76.2 84.7

Eliminations (0.2) (0.1) (1.3) (0.2) (1.3)

Corporate costs/other (4.8) (4.0) (5.4) (4.8) (5.4)

Exchange 0.0 2.0 (1.9) 0.0 (1.9)

Total EBITDA 71.2 79.1 76.1 71.2 76.1

Cash flow and working capital Financial Performance to 31 March 2016

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

Q1 2016 Q4 2015 Q1 2015Q1 2016

YTD

Q1 2015

YTD

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

Cash generated from operations 82.0 68.6 70.6 82.0 70.6

Tax paid (12.3) (13.7) (11.2) (12.3) (11.2)

Cash flow from operating activities 69.7 54.9 59.4 69.7 59.4

Capital expenditure (64.0) (24.9) (55.9) (64.0) (55.9)

Proceeds from sale of Fixed Assets 52.6 9.7 0.9 52.6 0.9

Interest received 5.4 5.8 3.8 5.4 3.8

Other (0.3) (1.9) 1.6 (0.3) 1.6

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

Cash flow from investing activities (6.3) (11.3) (74.6) (6.3) (74.6)

Interest paid (14.4) (50.7) (12.9) (14.4) (12.9)

Foreign exchange 2.5 (3.3) 5.5 2.5 5.5

Net Cash flow before debt

drawdown/(repayment)51.5 (10.4) (22.6) 51.5 (22.6)

Drawdown/(repayment) of debt and

debt issuance costs74.7 (1.9) (0.8) 74.7 (0.8)

Net cash flow 126.2 (12.3) (23.4) 126.2 (23.4)

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Capital structure Net leverage as at 31 March 2016

1 Based on Q1 2016 LTM EBITDA of $285 m. 2 Revolver is split $75/$175m non cash/cash, the amount shown represents the cash element. 3Facility and Recovery ratings shown as at 19 May 2016

Utilisation

31st March 2016 Coupon Maturity

Facility

Rating3

Recovery

Rating3 Net Leverage1

Revolver ($250m)2 7.4 L+400 May-19 Caa1/B 3/3 0.03x

Senior Secured Term Loan 368.4 L(100)+525 May-20 Caa1/B 3/3 1.29x

HSBC Oman Term Loan 76.0 L+400 Dec-20 0.27

Total Bank Debt 451.8 1.59x

UK Finance Senior Secured Notes 375.0 7.250% May-21 Caa1/B 3/3 1.32x

Globe Luxembourg Senior Secured

Notes 500.0 9.625% May-18 Caa1/B 3/3 1.75x

Total Institutional Debt 1,326.8 4.66x

Finance lease & other debt 6.9 - Aug-18 - - 0.02x

Gross Debt 1,333.7 4.68x

Cash 131.6 0.46x

Net Debt 1,202.1 4.22x

Closing remarks

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• First quarter EBITDA of $71m delivered in challenging market conditions

• Strong liquidity position at $246m, including an additional $80m liquidity through completion of

Oman rig financing transaction

• Backlog position of $5.9bn across a blue chip company base

• Headwinds increasing in 2016

• Continued proactive approach to cost saving activities

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Q & A [email protected]

Investor Presentation - KCA DEUTAG...Q1 Key highlights KCA Deutag is a leading international drilling and engineering company working onshore and offshore with a focus on safety, quality

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