Investor Presentation Third Quarter 2013 KCA Deutag is a leading - - PowerPoint PPT Presentation

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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 2013

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.

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Agenda

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Introduction and key highlights Health, safety and environmental performance Business overview Summary Group results and contract backlog

Key Highlights

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• Group revenue and EBITDA of $538m (Q3 2012: $405m) and $74m (Q3 2012: $55m) respectively

in Q3 2013.

• KCA Deutag continues to benefit from robust Oil and Gas industry outlook, underpinned by

forecast continued growth in global energy demand.

• Glen Esk now warm stacked in Ghana.
• Very significant contract award for Land Drilling in Middle East, contributing an estimated $340m

to our backlog.

• Decrease in Net Debt / LTM EBITDA leverage from 5.0x to 4.8x.

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Diversified business across both onshore and offshore

Onshore (c.50% of EBITDA) Offshore (c.50% of EBITDA) Over 50% of EBITDA generated in asset light businesses

EBITDA stated before normalisation adjustments and excluding central overheads.

27% 47%

YTD 2013 EBITDA

17% 9% 2%

Asset- light

n/a

Contract tenor

3 – 5 years + options 1 – 5 years + options 1 – 3 years n/a

Segment description

MODUs

Owns and operates fleet

• f 2 jack-ups and 3 barge

type self erecting tender (SET) rigs

Bentec

Design and manufacture

• f premium land rigs and

key components Capacity for 12-16 rigs and 36 top drives p.a., increasing in 2013 Provision of after sales services

Platform Services

Leading global platform service operator outside of North America 39 platform rigs under management Operations in UK North Sea, Norway, Russia, Azerbaijan and Angola

Land Drilling

Leading International premium drilling contractor High end fleet of 54 drilling and 9 workover rigs Track record of executing complex wells in harsh environments

RDS

Design and refurbishment

• f offshore drilling facilities

and MODUs Engineering from concept to commission Employs over 800 engineers and support staff across the globe

✓ ✓ ✓

8%

5

Source: Company information Note: Excludes workover rigs

Land Drilling Platform Services RDS offices MODUs Bentec

Houston

Ben Loyal Jack-up rig Russia 15 drilling rigs Pakistan 2 drilling rigs Oman 6 drilling rigs Netherlands 2 drilling rigs Germany 3 drilling rigs Albania 1 drilling rig Algeria 6 drilling rigs Kazakhstan 1 drilling rig Sakhalin 3 platforms UK North Sea 15 platforms Norway 10 platforms Azerbaijan 7 platforms

Baku London

Stavanger Bad Bentheim Tyumen Oman Ben Rinnes Jack-up rig Nigeria 6 drilling rigs Gabon 1 drilling rig Brunei 1 drilling rig Iraq / Kurdistan 4 drilling rigs Glen Tanar SET rig Glen Affric SET rig Glen Esk SET rig Spain 1 drilling rig Libya 5 drilling rigs Angola 3 platforms

St. Johns

Bergen

2012 EBITDA split by region1 Track record in key regions

125 54 49 39 14 30 60 90 120

Europe North Africa Middle East North Sea Russia

Years Caspian 17% North Sea and Europe 28% Other 8% Africa2 18% Middle East 13%

Dubai Kuala Lumpur

Regional offices

Russia 16%

Strong market position and balanced portfolio of assets across existing growth markets

Aberdeen (HQ)

Myanmar 1 platform

Health, safety and environmental performance

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• 12 month rolling Total

Recordable Incident Rate (TRIR) for Q3 2013 was 0.56 injuries per 200,000 man hours worked.

• No TRIR incidents gave

rise to significant injuries, but they do serve as a reminder that KCA Deutag cannot become complacent, despite its excellent recent HSE record.

0.0 0.2 0.4 0.6 0.8 1.0 1.2 1.4 1.6 TRIR per 200,000 man hours TRIR (average)

Total Recordable Incident Rate Improvement

Significant new contracts – Land Drilling, Middle East

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Contract nature Operation of three new build fast moving land rigs in the Middle East, which will be constructed by Bentec. Contract length & timeframes Initial five year award, with mutually agreeable extension options. Customer Global oil major Contract value Initial contract award is worth c.$220m. Estimated backlog of $340m including options.

“These rigs will support a very high profile development within the Middle East. Given the desire for best in class drilling efficiency and safety, we are extremely excited to be partnered with a Global Oil Major on this project. This is a very significant land drilling contract for KCA Deutag and I am especially proud of the many employees and functional teams that contributed to its award. Drilling will commence in quarter 4 of 2014..” Andy Hendry, President, Land Drilling

Land Drilling

Financial Performance to 30 September 2013

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Q3 2013 $m Q3 2012 $m Var $m 2013 YTD $m 2012 YTD $m Var $m Revenue 175 141 34 485 408 77 EBITDA 43 34 9 111 100 11

*92% utilisation excludes the 5 Libyan rigs (re-entry to the Libyan market is ongoing). Including the 5 Libyan rigs the utilisation figure is 86%.

• Sustained strong Q3 performance with utilisation at 92%*
• Strong results from Russia where the third and last of the 3

new rigs commenced operations on schedule in August.

• Improved performance in Europe due to higher rig utilisation.
• Higher EBITDA from Middle East driven by delivery of a new

rig in North Iraq in Q3 2012.

• Higher revenue and EBITDA in Africa due to delivery of two

new rigs in Algeria (full quarter of revenues in Q3 2013).

• Higher activity in Libya but with negative EBITDA due to start-

up and logistics costs.

Land rig utilisation

As at 30 September 2013

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72% 72% 89% 92% 0% 20% 40% 60% 80% 100% 2010 2011 2012 2013 YTD Rig Utilisation Year

Average Land Rig Utilisation1

Average utilisation

Rigs by region2 Rigs by HP2

3,000 HP 7% 1,500-2,999 HP 67% 1,000- 1,499 HP 24% 999 HP 2% Africa 33% Russia/CIS 30% Europe 13% Middle East 24%

¹Excludes rigs based in Libya.

• Leading international provider of onshore drilling and

workover operations.

• Operates in c.16 countries across Russia/CIS, Middle

East North Africa and Western Europe.

• Track record of executing complex, deviated wells in

harsh environments and emerging markets.

• Sustained focus on premium land drilling, with 98% of

current drilling rig fleet 1,000 HP and 89% fitted with top drives. Land drilling rig fleet utilisation and breakdown Overview

Bentec

Financial Performance to 30 September 2013

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Q3 2013 $m Q3 2012 $m Var $m 2013 YTD $m 2012 YTD $m Var $m Revenue 49 28 21 168 112 56 EBITDA 5 1 4 18 8 10

• Strong year on year revenue and EBITDA growth sustained.
• Good progress made on manufacture and assembly of rigs

earmarked for Algeria (one delivered in Q3, further three being delivered in Q4).

• One rig was commissioned for a third party in Russia in Q3.
• New Zealand rig is on schedule to be delivered by the year

end.

Platform Services

Financial Performance to 30 September 2013

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Q3 2013 $m Q3 2012 $m Var $m 2013 YTD $m 2012 YTD $m Var $m Revenue 184 147 37 539 429 110 EBITDA 23 20 3 62 62

• Continued strong performance across all locations.
• Commenced operations on Daewoo Shwe contract towards

the end of Q2, our first Platform contract in the Far East.

• Sustained strong performance in Norway, largely driven by

new Statoil contract, albeit at lower margins due to the higher reimbursable content.

• Increased activity in UK operations saw improved results over

the prior quarter, although similar to the prior year.

• Strong results from Sakhalin where EBITDA was improved

due to increased pricing and reduced costs.

RDS

Financial Performance to 30 September 2013

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Q3 2013 $m Q3 2012 $m Var $m 2013 YTD $m 2012 YTD $m Var $m Revenue 93 66 27 259 202 57 EBITDA 13 9 4 39 24 15

• RDS continues to benefit from robust demand for premium

engineering design services to the offshore sector.

• Very strong performance on a number of high profile

projects, including the Hebron project in Canada, BP Clair, the Chirag Oil Project in Azerbaijan and projects for Statoil in Norway as well as the Mariner field platform in the UKNS.

• Significant increase in the level of activity in North America,

particularly on the Hebron contract.

MODUs

Financial Performance to 30 September 2013

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Q3 2013 $m Q3 2012 $m Var $m 2013 YTD $m 2012 YTD $m Var $m Revenue 41 39 2 129 134 (5) EBITDA 5 5

• 5

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• Cancellation of Glen Esk contract in Q2 means that results

continue to fall below expectations.

• Glen Esk now demobilised and warm stacked in Ghana.
• Ben Loyal, Ben Rinnes and Glen Tanar continued to perform

largely in line with expectations.

• Glen Affric had some non productive time in Q3, but was back

in full operation during August.

Revenue and EBITDA ($m)

Q3 2013 Q3 2012 2013 YTD 2012 YTD

Revenue from business units

542 422 1,580 1,285

Consolidation adjustments

(5) (17) (20) (70)

Total Revenue

538 405 1,560 1,215

EBITDA from business units

89 69 234 223

Corporate costs

(16) (14) (42) (39)

Total EBITDA

74 55 193 185

Group Results

Financial Performance to 30 September 2013

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Significant new contracts – Sale and lease back of Russian rigs

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Contract nature Sale and lease back agreements for two of the new rigs in our Russian fleet. Contract length & timeframes Five year finance leases, with monthly instalments and an option to buy rigs back in the interim period. Finance provider VTB Capital Contract value Net proceeds of c.$29m.

“We were pleased to complete this additional piece of financing, which was one of the first sale and leaseback transactions for a Russian bank with an International client. This demonstrates the increased range of long term financing options now available to the company to fund growth projects.” Neil Gilchrist, Chief Financial Officer

Cash Flow and Working Capital

Financial Performance to 30 September 2013

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Working Capital

(60.0) (50.0) (40.0) (30.0) (20.0) (10.0)

• 10.0

Q3 2013 Delta* Q3 2012 Delta* Cash Impact of Delta ($m)

Working Capital Delta

Working Capital Delta

• Main driver for lower operating cash flow was the increase in

working capital and in particular, trade receivables.

• Cash flow from investing activities includes capital expenditure and

cash interest payments:

• Capital expenditure was significantly lower than in Q3 2012 as

spend on new rigs for Russia and Algeria has now been completed;

• $101m YTD capex is split between growth $39m and

maintenance $62m;

• Cash interest has reduced from $69m to $52m due to phasing
• f six monthly interest payments.
• Net cash flow boosted by c.$29m for the sale and lease back of

the Russian rigs with VTB.

• Increase in working capital particularly driven by an increase in

trade receivables:

• Overdues increased over quarter end, majority of which have

now been collected;

• Build up of amounts due on Bentec rig orders, which we expect

to significantly unwind in Q4 2013.

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*Deltas denote working capital movements from Q2 2013 and Q2 2012 respectively.

Free Cash Flow

Cash flow ($m) Q3 2013 Q3 2012 2013 YTD 2012 YTD Cash flow from operating activities 7 47 (5) 103 Cash flow from investing activities (31) (100) (101) (220) Equity injection

• 59
• Foreign Exchange

(9) (7) (7) (2) Net cash flow before debt repayment (33) (60) (54) (119) (14)

• 20
• Net cash flow

(47) (60) (34) (119) Drawdown/(repayment) of debt (net of issuance costs)

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180.0 530.0 500.0 100.0 125.0 29.0 50.0

2013 2014 2015 2016 2017 2018

Capital Structure

As at 30 September 2013

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Maturity profile – available facilities ($m)

• 26

83 180 530 500 29

Cash Liquidity Facilities Term Loan B & Capex Facility Term Loan C Senior Secured Notes Other* LC Facility

Net debt ($m) Q3 2013: $1,296m

*Other debt mainly reflects the sale and lease back of two rigs in August and the corresponding finance lease liability. 2.00 2.50 3.00 3.50 4.00 4.50 5.00 5.50

• 200

400 600 800 1,000 1,200 1,400 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Net Debt / LTM EBITDA Net Debt and EBITDA ($m)2 Time Net Debt LTM EBITDA Net Debt / EBITDA

Net debt / LTM EBITDA1

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*Please refer to Offering Memorandum for explanation of methodology of backlog calculation. $1,268m $6,608m $218m $420m $207m

Contract Backlog by BU – Q2 2013

Land Platforms MODUs RDS Bentec $1,675m $6,626m $214m $434m $239m

Contract Backlog by BU – Q3 2013

Land Platforms MODUs RDS Bentec

Contract backlog continues to strengthen, boosted by 3 new rigs

Majority of our Business Units are delivering impressive growth

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Key Operational Highlights

Land Drilling

• Strengthening performance in Land Drilling with 92%

utilisation2. Platform Services

• Platform Services business showed continued strong

performance across all geographies. RDS

• RDS continues to benefit from strong demand for

premium engineering design services to the offshore sector. Bentec

• Significant progress made on manufacture and

assembly of rigs and components for third parties at Bentec. MODUs

• The cancellation of Glen Esk contract was the

primary driver of MODU underperformance.

EBITDA Growth %

• 90%

+83% +76% +9% +10%

• 53,838
• 54,570

132,591 145,525 80,391 87,980 30,838 54,414 17,487 31,945 51,355 5,297

Central overheads Land Drilling Platform Services RDS Bentec MODUs

Q3 2012 LTM $000s Q3 2013 LTM $000s1

Total EBITDA Growth +5% EBITDA Growth Ex- MODUs +22%

258,824 270,591

EBITDA Progression

Key Investment Highlights

20 Robust market

• utlook

Strong focus on performance and deleveraging Excellent future visibility underpinned by substantial contract backlog Experienced management team with supportive investors Market leading premium oilfield services provider

• Market characterised by a long-term increase in overall demand for oil and gas. Combined with the ongoing depletion

in existing reserves, this creates a requirement for further exploration activity.

• Robust oil price continues to support global E&P activity, including marginal fields.
• Strong demand for land rigs in international markets with substantial forecast global capital expenditure.
• The business units are focused on performance and the promised improved results are coming through.
• Business efficiency programme is delivering important savings to support those results.
• Deleveraging and liquidity management remains a key focus, as evidenced by the marked decrease in leverage in Q3

2013.

• Land Drilling and Platform Services operations typically operate under multi-year contracts, providing protection

against revenue volatility and short-term market downturns.

• Record level of contract backlog, approaching $9bn, reflecting the quality of the Group’s relationships with its high-

quality client base, while reinforcing the robust market outlook.

• Over 50% of EBITDA generated from asset light businesses.
• Senior management team has extensive experience in oilfield services, drilling and engineering, with an average of
• ver 23 years of experience.
• Shareholders have demonstrated continued support for growth and success, with more than $600m total cash

investment to support the business and fund growth capital expenditure.

• Excellent operational track record, industry reputation and well maintained fleet of premium rigs helps position KCA

Deutag as a preferred oilfield services contractor for major international and national oil companies.

• Diversified focus ranging from the front-end design stage to operations and maintenance means the Group is ideally

placed to capitalise on market demand throughout the cycle.

• Element of interdependency among business units affords considerable revenue enhancement.

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Q & A