Investor Presentation THIRD QUARTER 2019 KCA Deutag is a - - PowerPoint PPT Presentation

KCA Deutag is a leadinginternational drilling, engineering and technology company working onshore and

• ffshore with a focus on safety,

quality and operational performance

Investor Presentation

THIRD QUARTER 2019

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

• r

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.

Agenda

2

Third Quarter Investor Presentation

1

Q3 Key Highlights

2

Operational Highlights

3

Business Update

4

Business Unit Financials

5

Group Results

6

Summary

Q3 Key Highlights

3 Q3 2019 revenue of $318.2m (Q3 2018: $345.9m) and EBITDA of $74.5m (Q3 2018: $75.7m) Land Drilling secures $460m of new contracts in the Middle East, Africa and Europe Bentec awarded a multi-million dollar contract for seven cluster slider drilling rigs in Russia 4 Offshore services awarded contract extensions on two of their existing contracts Contract backlog increased by 7% to $5.8bn (at 1 November 2019) across a blue chip customer base Launched #enhancethebrand Well of Innovation campaign and several operating improvement initiatives

Financial results noted above include results from the Dalma business which was acquired 30 April 2018 2018 results restated in compliance with IFRS 16

1 2 3 4 5 6

KCA Deutag Operations are Diversified Across Global Markets

London Bad Bentheim Tyumen Nizwa

• St. Johns

Bergen Dubai

Land Drilling Offshore Services RDS offices Bentec Regional offices

Aberdeen (HQ)

Map shows position at 1 November 2019 (1) The % split of LTM EBITDA is calculated using total KCAD group Q3 2019 LTM Proforma EBITDA of $316m (after corporate costs of $16m)

PRESENCE IN KEY AREAS

4

Geographical EBITDA Split(1)

Baku

Market Outlook By Business Unit

5 Business Units Outlook Land Drilling New contract awards and extensions in Middle East, Africa and Europe Utilisation levels steadily increasing despite the competitive pricing environment Bentec New seven cluster slider rig contract award Tendering activity continues in a difficult market Offshore Services Market remain stable with increased activity coming from reactivation Continue to explore ways to expand into adjacent services RDS New tendering opportunities but very slow conversion rates Targeting diversification in existing markets and the energy transition space

• Continued lower oil price and volatility driven by concerns around a global slowdown
• Customers continue to challenge suppliers for lower pricing
• Despite the competitive pricing environment we continue to improve utilisation and backlog

HSSE Performance Continues To Out Perform Industry Average

6

(1) Total Recordable Incident Rate per 200,000 man hours. This is a rolling 12 month average (2) Dalma business has been incorporated from May 2018 (3) KCAD Total Recordable Incident Rate is directly comparable with IADC’s Total Recordables (RCRD) statistic Note: IADC stands for International Association of Drilling Contractors

Q3 2019 0.271,2 IADC industry average 0.683 for 2018

KCA Deutag Nigeria Wins Best HSE Performance Award at the IADC Nigeria Chapter’s 2018 Safety Awards Promoting increased awareness through safety campaigns to drive to zero incidents

#enhancethebrand ‘Well Of Innovation’ Initiative

7

+veDRILLTM Maintain +veDRILLTM Insight +veDRILLTM Design +veDRILLTM TurnRight +veDRILLTM Future +veDRILLTM Enhance

Go to www.wellofinnovation.com for more information, including case studies

Software products to significantly improve drilling efficiency, reduce downhole problems and help drive towards full remote rig operations. A digital approach to address human factors, enhance procedural compliance and support rig personnel in making the right choices with the right information. Innovations in maintenance, such as remote and condition based monitoring to improve performance, equipment overhaul and repair replacement schedules. Advanced data analytics tools to evaluate and analyse performance using a library of years of historical drilling data to create continuous improvement cycles. State of the art technology to design and upgrade rigs, and lead the drilling digital transformation to reduce the man-hours required to complete projects. Leadership in drilling innovation driven by the combination of our KCAD operational expertise and Bentec rig and equipment manufacturing experience.

#enhancethebrand Improvement Initiatives

8

SKORE Supply Management Functional Support Digitalisation Customer Centricity Energy Transition

Encourage a bottoms up approach where all employees can contribute ideas to eliminate wasted time and spend and preserve cash. Improve supply and inventory management to drive local spend efficiencies, cost avoidance, strategic sourcing and stock optimization. Review all support structures to ensure we can deliver more effective functional support and operate at optimum performance. Evaluate digital work streams from going paperless, building operational platforms to identifying smarter technologies that allow us to deliver value to our customers. Continue to deliver safe and incident-free services and further understand tough customer challenges so we can invent innovative products and solutions. Identify and implement internal carbon reduction projects and aggressively pursue revenue generating opportunities in this space.

Improved Backlog With An Uptick In Land And Bentec

Note: Backlog is an estimate and may change over time depending on certain factors; Backlog reflects business that is considered to be firm, this calculation is based on assumptions deemed appropriate at the time and is subject to change. Backlog is not necessarily indicative of our future revenue or earnings. KCAD backlog amounts are estimates as of 1-November-2019

9

Total contract backlog as at 1 November 2019 Total contract backlog by BU as at 1 November 2019 Total contract backlog as at 1 August 2019 Total contract backlog by BU as at 1 August 2019

Contract Platform Client Country Assets

end date status # Exxon Canada Hebron M ar-46 Operating 1 Equinor (Statoil) Norway CAT J (2) M ay-36 Operating 2 Equinor (Statoil) Norway Oseberg's (4) & Kvitebjorn Oct-28 Operating / Stacked 3/2 AIOC Azerbaijan Azeris, SD, DWG, Cop & Chirag Apr-26 Operating 7 Vår Energi Norway Ringhorne Dec-25 Operating 1 Enquest UK Thistle, Heather & M agnus Dec-25 Operating / Stacked 1 /2 CNOOC UK Scott Feb-25 Operating 1 CNR UK Ninian's (2) Tiffany Nov-24 Operating / Stacked 1 /2 Exxon Angola Kizomba (2) Jan-24 Operating / Stacked 1 /1 Total UK Alwyn / Dunbar M ay-23 Operating / Stacked 1 /1 Chrysaor (COP) UK Britannia Nov-22 Stacked 1 Equinor (Statoil) Norway Pipe pool management Nov-22 Active mgmt. contract SEIC Russia LA, PA & PB M ay-21 Operating 3 2019 2020 2021

Long Term Offshore Services Contract Backlog(1)

10

(1) Contract and rig status shown as at 1 November 2019 Firm Options Denotes change since last earnings call

2018 (including 5 Dalma rigs) Historical utilisation represents actual utilisation calculated on a bi-monthly basis Forward contracted utilisation represents the current contracted position

Land Utilisation Shows Steady Increase

11

Historical and Forward Contracted Utilisation1

Utilisation in Q3 2019 was 73%

(1) 2 months of Dalma only (2) Adjusted to remove the one off Revenue increase of $14.3m relating to IFRS 15 (3) Bentec results shown before intercompany eliminations

12

Land & Bentec Financial Performance

Land Quarterly EBITDA ($m) Bentec Quarterly EBITDA ($m) (3)

= EBITDA Margin

Land YTD Revenue & EBITDA ($m) Bentec YTD Revenue & EBITDA ($m) (3)

32% 30% 0%

10%

13

Offshore & RDS Financial Performance

Offshore Services Quarterly EBITDA ($m)

(1)

RDS Quarterly EBITDA ($m)

(1) Q1 2018 EBITDA shows $12m relating to MODUs, margin for Offshore Services only

Offshore Services YTD Revenue & EBITDA ($m) RDS YTD Revenue & EBITDA ($m)

14% 18% 4% 8%

= EBITDA Margin

Q3 2019 Q2 2019 Q3 2018 2019 YTD 2018 YTD $'m $'m $'m $'m $'m Cash generated from operations 40.1 102.1 7.4 168.2 87.9 Tax paid (5.6) (6.4) (6.3) (24.5) (24.1) Cash flow from operating activities 34.5 95.7 1.1 143.7 63.8 Capital expenditure (16.2) (13.0) (13.7) (47.4) (35.5) Acquisition of Holdco rig 0.0 0.0 0.0 (25.0) 0.0 Proceeds from sale of Fixed Assets 0.2 0.0 0.1 0.3 0.8 Interest received 5.9 6.5 6.0 19.0 17.7 Dalma acquistion 0.0 0.0 0.0 0.0 (440.2) Other 0.0 (0.1) (0.5) 0.3 (0.5) Cash flow from investing activities (10.1) (6.6) (8.1) (52.8) (457.7) Interest paid (15.1) (83.8) (16.7) (117.7) (93.4) Foreign exchange (5.1) 0.6 (2.5) (4.3) (10.4) Dividend paid to minority shareholders (1.2) (0.2) 0.0 (1.7) (0.3) Lease payments (7.4) (3.6) (5.3) (16.8) (14.9) (4.4) 2.1 (31.5) (49.6) (512.9) (3.4) (19.3) (5.9) (28.1) 420.9 Increase in loan from parent company 0.0 0.0 0.0 25.0 0.0 Net cash flow (7.8) (17.2) (37.4) (52.7) (92.0) Net Cash flow before debt drawdown/(repayment) Drawdown/(repayment) of debt and debt redemption/issuance costs

Cash Flow and Working Capital

14

9

9

(1) 2018 results restated in compliance with IFRS 16 (2) Denotes the effect of foreign exchange rate changes on cash and bank overdrafts (3) Deltas denote quarterly working capital movement

Free Cash Flow (1) Working Capital (3)

Capital Structure

15

Net leverage as at 30 September 2019

(1) PF LTM EBITDA adjusted for synergies of the acquired Dalma businesses of $7.2m. (2) Q1,Q2 & Q3 2019 LTM EBITDA includes the second $25m Holdco equity contribution, as defined in the Amended Credit Agreement. (3) In addition to the $215m Revolver Cash facility, we also have $115m of guarantee facilities

Net Debt Evolution

(1) (3) (2) (3)

(2)

(2)

Amount Utilised Coupon Maturity Facility Rating Leverage Revolver Cash ($215m) 150 L+400 Mar-22 Caa1/CCC+ 0.46x Senior Secured Term Loan 411 L+675 Feb-23 Caa1/CCC+ 1.27x Oman Term Loan 20 L+400 Dec-20

• 0.06x

Total Bank Debt 582 1.79x Senior Secured Notes 2021 375 7.250% May-21 Caa1/CCC+ 1.15x Senior Secured Notes 2022 535 9.875% Apr-22 Caa1/CCC+ 1.65x Senior Secured Notes 2023 400 9.625% Apr-23 Caa1/CCC+ 1.23x Total Institutional Debt 1,892 5.82x Other debt 3 Gross Debt 1,895 5.83x Cash 121 0.37x Net Debt 1,774 5.46x Finance lease liabilites 55 0.17x Net Debt per balance sheet 1,829 5.63x

Closing Remarks

16

• Bentec awarded a multi-million dollar contract for seven cluster slider drilling rigs in Russia
• Land Drilling secures $460m of new contracts in the Middle East, Africa and Europe
• Offshore services awarded contract extensions on two of their existing contracts
• Q3 2019 revenue of $318.2m and EBITDA of $74.5m
• Contract backlog of $5.8bn (at 1 November 2019) across a blue chip customer base
• Launched #enhancethebrand Well of Innovation campaign and several operating improvement initiatives

17

Q & A

investor.relations@kcadeutag.com

KCA Deutag Group LTM EBITDA and Pro Forma EBITDA(1)

18

Q3 2019 LTM EBITDA(2) LTM EBITDA $293m Q3 2019 Pro Forma LTM EBITDA LTM EBITDA $300m

(1) Q3 2019 LTM figures include restated 2018 figures in compliance with IFRS 16 (2) Business Unit proportions calculated based

• n group EBITDA, before corporate overheads, of $308m. (3) Q3 2019 LTM EBITDA includes $21.1m of actualised synergies.

(4) Q3 2019 Pro Forma LTM EBITDA includes $7.2m of additional Pro Forma synergies.

KCAD LTM 204 Ex-Dalma LTM 104 Corporate Costs (16) Total 293 Q3 2019 LTM EBITDA ($m) KCAD LTM 204 Ex-Dalma LTM 112 Corporate Costs (16) Subtotal 300 Holdco Equity Contribution 25 Total 325 Q3 2019 LTM Pro Forma EBITDA ($m)

Integration of Dalma Energy LLC

19

Target synergies ($28m EBITDA & $3m capex) EBITDA synergies by type Integration plan complete

• Expectation of run rate EBITDA synergies increased slightly

from $27.6m (Q2 2019) to $28.3m (Q3 2019)

• Monthly run rate achievement in September 2019 of $2.3m,

being 97%1 of total savings identified

• Close to full run rate synergy realisation

(1) Run rate synergy achievement based on 30 September 2019 actual achievement