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
Third 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 Q3 Key Highlights
2 Business Update
3 Business Unit Financials
4 Group Results
5 Summary
Agenda
Q3 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 Q3 2016 Group revenue of $283.6m (Q3 2015: $398.5m)
2 Q3 2016 EBITDA of $56.4m (Q3 2015: $69.5m)
3 Contract backlog of $5.6bn (at 1 November 2016) across a blue chip
customer base
4 Cost reduction programme continues to align costs with current activity
levels
5 Positive cash generation with available liquidity of $245m at 30 September
2016
3
Market Overview
4
• Oil price fell below $30 / bbl in
January 2016
• Since our Q2 call oil prices have
fluctuated from $43 / bbl to $52 /
bbl (with an average of $48 / bbl)
• This ongoing volatility continues to
provide an uncertain backdrop
• Significant reduction in capex
spending since the peak in 2014
• Analysts are expecting a small
increase in 2017 and 2018 capex
1Source: Capital IQ as at 9 November 2016 2 Source: Wood Mackenzie November 2016
2
1
Business update
5
Bentec Platform services RDS
1 The % split of LTM EBITDA is calculated using total group EBITDA (including MODUs) of $299.6m (before corporate costs
of $17.7m). Note: MODUs LTM EBITDA of $16.5m represented 5.5% of total EBITDA.
Integrated land drilling Offshore drilling services & design
• Most of our International
operations continue to
perform relatively well
despite market
conditions
• Activity levels remain
low in the North Sea and
Angola with lower
pricing
• Recent contract wins
• Reduced capex spend by
E&P companies
continues to severely
impact activity
• A focus on continued cost
savings to preserve low
level positive EBITDA
• All activity now brownfield
with few opportunities in
greenfield
• After sales remains
stable with some
improvement in
component activity
• Highly competitive, weak
market conditions
although slight increase
in tendering activity
• Continued focus on cost
savings to preserve low
level positive EBITDA
• Utilisation remains soft in
Europe, Nigeria and
Kurdistan with stronger
activity in Oman and
Russia
• Continued market
uncertainty and pricing
pressure
$195.2m / 65.2% of total¹ $3.1m / 1.0% of total¹ $79.9m / 26.7% of total¹ $4.9m / 1.6% of total¹
Land drilling Bentec
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Group margin performance
Houston
Baku
London Bad
Bentheim
Tyumen
Nizwa
St.
Johns
Bergen
Dubai
Land Drilling Platform Services RDS offices 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 November 2016.
PRESENCE IN KEY AREAS
North Sea
/Norway
26 Plat.
Europe &
Caspian
8 Rigs
Caspian
7 Plat.
Russia
16 Rigs
Middle
East
17 Rigs
Angola
3 Plat.
Africa
12 Rigs
Russia
Sakhalin
3 Plat.
Brunei
1 Rig
128
57 52 42
17
0
30
60
90
120
150
Europe NorthAfrica
MiddleEast
North Sea Russia
Ye
ars
LTM Q3 2016 EBITDA split by region
7
Canada
1 Plat.
8
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 Q3 2016
was 0.391 injuries
per 200,000 man
hours worked
IADC industry average
0.602 for 2015
9
Backlog Status
Backlog figures exclude revenue generated in the year to date.
Total contract backlog as at 1 November 2016
Contract backlog by BU as at 1 November 2016
Total contract backlog as at 1 August 2016
Contract backlog by BU as at 1 August 2016
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Land fleet utilisation
Historical and forecast utilisation
11
Robust platform services contract backlog @ 1 November
Contracts have been extended or renewed during quarter
12
• Despite tough market conditions the land business has delivered strong financial results
and is significantly ahead of the prior year EBITDA even though it has been down quarter
on quarter
• Russia and Oman have performed well over the quarter
• We continue to experience difficult market conditions in Europe, Nigeria and Kurdistan due
to weaker utilisation
• Utilisation for the quarter of 58%, a decrease of 9% on the prior quarter which was 67%
Financial Performance to 30 September 2016
Land Drilling
Q3 2016 Q2 2016 Q3 2015 Q3 2016 Q3 2015
Result Result Result YTD YTD
$m $m $m $m $m
Revenue 135.2 150.6 138.8 436.0 443.0
EBITDA (post support allocation) 43.8 48.3 36.4 139.8 108.8
Margin 32.4% 32.0% 26.2% 32.1% 24.6%
Bentec
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• Revenues and EBITDA significantly lower than Q3 2015, with lower revenues and EBITDA
than the prior quarter
• Activity continued to reduce during Q3 as order backlog was completed and shipped to
customers
• Further headcount reductions have been agreed and will provide additional cost savings
• Some increase in tendering opportunities however activity remains low and the bidding
environment is a very competitive one
• During Q3 Bentec have secured new backlog in the form of 9 Top Drive sales
Financial Performance to 30 September 2016
Q3 2016 Q2 2016 Q3 2015 Q3 2016 Q3 2015
Result Result Result YTD YTD
$m $m $m $m $m
Revenue 12.4 16.8 51.6 58.9 192.1
EBITDA (post support allocation) (2.2) 0.5 3.4 1.2 18.4
Margin -17.8% 3.0% 6.6% 2.0% 9.6%
Platform Services
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Financial Performance to 30 September 2016
• Relatively strong performance despite challenging market conditions
• Lower activity levels continued in Angola and the North Sea
• Cat J and Hebron projects continuing on schedule to commence operations mid-2017
Q3 2016 Q2 2016 Q3 2015 Q3 2016 Q3 2015
Result Result Result YTD YTD
$m $m $m $m $m
Revenue 121.2 127.4 165.2 393.1 527.2
EBITDA (post support allocation) 17.4 18.4 22.6 55.6 65.2
Margin 14.4% 14.4% 13.7% 14.1% 12.4%
RDS
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Financial Performance to 30 September 2016
• Difficult to secure new work particularly for new Greenfield project with baseload activity
continuing in Brownfield
• We continue to manage costs in line with project activity
Q3 2016 Q2 2016 Q3 2015 Q3 2016 Q3 2015
Result Result Result YTD YTD
$m $m $m $m $m
Revenue 16.9 19.5 37.6 60.8 136.8
EBITDA (post support allocation) 1.8 2.0 3.4 5.4 16.3
Margin 10.9% 10.3% 9.0% 8.9% 11.9%
MODUs
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• Strategic exit of the MODUs business now complete following the sale of the Ben Rinnes
jack-up rig in June 2016
• EBITDA in third quarter reflects certain close out activities for the Ben Rinnes and Ben
Loyal
Financial Performance to 30 September 2016
Q3 2016 Q2 2016 Q3 2015 Q3 2016 Q3 2015
Result Result Result YTD YTD
$m $m $m $m $m
Revenue 0.8 15.6 23.6 29.4 67.2
EBITDA (post support allocation) 1.2 11.6 10.3 16.8 22.6
Margin 140.8% 73.8% 43.6% 57.3% 33.7%
Group Results Financial Performance to 30 September 2016
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Revenue and EBITDA ($m)
Q3
2016
$m
Q2
2016
$m
Q3
2015
$m
2016
YTD
$m
2015
YTD
$m
Revenue from business units 286.5 330.2 416.9 978.8 1,366.7
Eliminations (2.9) (6.5) (18.4) (14.2) (93.9)
Total third party revenue 283.6 323.7 398.5 964.6 1,272.8
EBITDA from business units 62.0 80.7 76.0 219.0 231.7
Eliminations (0.1) (0.1) 0.0 (0.3) (1.4)
Corporate costs/other (5.1) (4.5) (4.4) (14.5) (14.3)
Exchange (0.4) (0.9) (2.1) (1.4) (4.8)
Total EBITDA 56.4 75.2 69.5 202.8 210.8
Cash flow and working capital Financial Performance to 30 September 2016
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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
Q3 2016 Q2 2016 Q3 2015Q3 2016
YTD
Q3 2015
YTD
$'m $'m $'m $'m $'m
Cash generated from operations 54.0 57.8 47.3 193.9 225.1
Tax paid (9.3) (10.6) (11.4) (32.2) (35.9)
Cash flow from operating activities 44.7 47.2 35.9 161.7 189.2
Capital expenditure (15.3) (11.2) (22.7) (90.6) (103.1)
Proceeds from sale of Fixed Assets 0.8 7.2 1.0 60.6 4.2
Interest received 5.1 5.2 5.3 15.7 13.7
Other 0.2 0.7 0.4 0.6 1.9
Acquisition of non-controlling interests 0.0 0.0 0.0 0.0 (25.0)
Cash flow from investing activities (9.2) 1.9 (16.0) (13.7) (108.3)
Interest paid (13.2) (49.2) (12.6) (76.8) (75.0)
Foreign exchange (0.7) 8.6 1.1 10.4 (3.4)
Dividend paid to minority shareholders (0.5) 0.0 0.0 (0.5) 0.0
Net Cash flow before debt
drawdown/(repayment)21.1 8.5 8.4 81.1 2.5
Drawdown/(repayment) of debt and
debt issuance costs(8.0) (7.2) (1.6) 59.5 (20.3)
Net cash flow 13.1 1.3 6.8 140.6 (17.8)
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Capital structure Net leverage as at 30 September 2016
1 Based on Q3 2016 LTM EBITDA of $282m. 2 Revolver is split $75/$175m non cash/cash, the amount shown represents the cash element. 3Facility and Recovery ratings shown as at November 2016
Utilisation
30th September 2016 Coupon Maturity
Facility
Rating3
Recovery
Rating3 Net Leverage1
Revolver ($250m)2 7.8 L+400 May-19 Caa1/CCC+ 3/3 0.03x
Senior Secured Term Loan 366.6 L(100)+525 May-20 Caa1/CCC+ 3/3 1.30x
HSBC Oman Term Loan 68.0 L+400 Dec-20 0.24x
Total Bank Debt 442.4 1.57x
UK Finance Senior Secured Notes 375.0 7.250% May-21 Caa1/CCC+ 3/3 1.33x
Globe Luxembourg Senior Secured Notes 500.0 9.625% May-18 Caa1/CCC+ 3/3 1.77x
Total Institutional Debt 1,317.4 4.67x
Finance lease & other debt 6.3 - Aug-18 - - 0.02x
Gross Debt 1,323.7 4.70x
Cash 146.3 0.52x
Net Debt 1,177.3 4.18x
Closing remarks
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• Third quarter EBITDA of $56m delivered in challenging market conditions
• Volatility will continue to limit activity through 2016 and into 2017
• Continued proactive approach to cost saving activities
5m
• g liquidity position at $245m
• Backlog position of $5.6bn across a blue chip company base
• Strong liquidity position at $245m
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Q & A [email protected]