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

KCA Deutag is a leadinginternational drilling and engineering company working onshore and offshore with a focus on safety, quality and

• perational performance

Investor Presentation

SECOND 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

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Second Quarter Investor Presentation

1

Q2 Key Highlights

2

Operational Highlights

3

Business Update

4

Business Unit Financials

5

Group Results

6

Summary

Q2 Key Highlights

3 Q2 2019 revenue of $395.1m (Q2 2018: $292.8m) and EBITDA of $74.4m (Q2 2018: $50.3m) Bentec successfully delivered the final 3 rigs for our customer in Ukraine Operational integration of the former Dalma business now complete with synergies of $27.6m identified and 89% of these already secured 4 Land Drilling awarded a number of new contracts in the Middle East, Russia, Europe and Africa Contract backlog of $5.4bn (at 1 August 2019) across a blue chip customer base Significant progress made on our technology initiative, Well of Innovation, with launch in September

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 August 2019 (1) The % split of LTM EBITDA is calculated using total KCAD group Q2 2019 LTM Proforma EBITDA of $306m (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, Russia, Europe and Africa Tendering has levelled out though remains steady Pricing remains competitive Utilisation levels steadily increasing Bentec Tendering activity continues in a very competitive and difficult market Offshore Services Activity remains steady with some reactivation discussions RDS New Greenfield and Brownfield tendering opportunities but very slow conversion rates Greater investment in the industry required to provide meaningful uptick Targeting diversification in the FPSO, Subsea, Wind and Decommissioning sectors

• Recent decline in oil price and continued volatility driven by concerns around a global

slowdown with continued uncertainty

• A very challenging landscape where our customers continue to maintain a low pricing

environment coupled with ongoing local cost pressures

HSSE Performance Continues To Out Perform Industry Average

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(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

Q2 2019 0.321,2 IADC industry average 0.683 for 2018

Norway’s Ringhorne Operation wins the Vår Energi – CEO 2018 Contractor Safety Award

A Well of Innovation

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• Upcoming September 2019 launch of KCA Deutag’s “Well of Innovation” marketing campaign and our

exciting new +veDRILL technology brand

• Sitting underneath this, there are six product ranges. These address the main issues and challenges

that our customers face and that our technology can help them solve.

Stable Backlog Across The Business With An Uptick In Land

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-August-2019

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

Long Term Offshore Services Contract Backlog(1)

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(1) Contract and rig status shown as at 1 August 2019 Firm Options

Contract Platform Client Country Assets

end date status # Exxon Canada Hebron Mar-46 Operating 1 Equinor (Statoil) Norway CAT J (2) May-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 & Magnus Dec-25 Operating / Stacked 1 /2 CNOOC UK Scott Feb-25 Operating 1 Exxon Angola Kizom ba (2) Jan-24 Stacked 2 Total UK Alwyn / Dunbar May-23 Operating / Stacked 1 /1 Chrysaor (COP) UK Britannia Nov-22 Stacked 1 Equinor (Statoil) Norway Pipe pool m anagem ent Nov-22 Active m gm

• t. contract

CNR UK Ninian's (2) Tiffany Nov-21 Operating / Stacked 1 /2 SEIC Russia LA, PA & PB May-21 Operating 3 2019 2020 2021

Utilisation includes 29 Dalma Rigs on a proforma basis from 2017, and is shown after the retirement of 6 rigs on 1 November 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

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Historical and Forward Contracted Utilisation

Utilisation in Q2 2019 was 71%

(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

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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)

31% 30% (9)%

11%

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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)

13% 17% 6% 10%

= EBITDA Margin

KCAD LTM 216 Ex-Dalma LTM 94 Corporate Costs (16) Total 294 Q2 2019 LTM EBITDA ($m) KCAD LTM 217 Ex-Dalma LTM 106 Corporate Costs (16) Subtotal 306 Holdco Equity Contribution 25 Total 331 Q2 2019 LTM Pro Forma EBITDA ($m)

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

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Q2 2019 LTM EBITDA(2) LTM EBITDA $294m Q2 2019 Pro Forma LTM EBITDA LTM EBITDA $306m

(1) Q2 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 $311m. (3) Q2 2019 LTM EBITDA includes $16.1m of actualised synergies.

(4) Q2 2019 KCAD Pro Forma LTM EBITDA includes unaudited pre-acquisition EBITDA of the acquired IDTEC business of $0.3m. (5) Q2 2019 Pro Forma LTM EBITDA includes $11.5m of additional Pro Forma synergies.

Q2 2019 Q1 2019 Q2 2018 2019 YTD 2018 YTD $'m $'m $'m $'m $'m Cash generated from operations 102.1 26.0 14.9 128.1 80.5 Tax paid (6.4) (12.5) (9.7) (18.9) (17.8) Cash flow from operating activities 95.7 13.5 5.2 109.2 62.7 Capital expenditure (13.0) (18.2) (12.4) (31.2) (21.8) Acquisition of Holdco rig 0.0 (25.0) 0.0 (25.0) 0.0 Proceeds from sale of Fixed Assets 0.0 0.1 (0.1) 0.1 0.7 Interest received 6.5 6.6 5.7 13.1 11.7 Dalma acquistion 0.0 0.0 (440.2) 0.0 (440.2) Other (0.1) 0.4 0.0 0.3 0.0 Cash flow from investing activities (6.6) (36.1) (447.0) (42.7) (449.6) Interest paid (83.8) (18.8) (62.8) (102.6) (76.7) Foreign exchange 0.6 0.2 (3.5) 0.8 (7.9) Dividend paid to minority shareholders (0.2) (0.3) 0.0 (0.5) (0.3) Lease payments (3.6) (5.8) (5.5) (9.4) (9.6) 2.1 (47.3) (513.6) (45.2) (481.4) (19.3) (5.4) 432.1 (24.7) 426.8 Increase in loan from parent company 0.0 25.0 0.0 25.0 0.0 Net cash flow (17.2) (27.7) (81.5) (44.9) (54.6) Net Cash flow before debt drawdown/(repayment) Drawdown/(repayment) of debt and debt redemption/issuance costs

Cash Flow and Working Capital

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(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)

Amount Utilised Coupon Maturity Facility Rating Leverage Revolver Cash ($215m) 168 L+400 Mar-22 Caa1/B- 0.51x Senior Secured Term Loan 411 L+675 Feb-23 Caa1/B- 1.24x Oman Term Loan 24 L+400 Dec-20

• 0.07x

Total Bank Debt 603 1.82x Senior Secured Notes 2021 375 7.250% May-21 Caa1/B- 1.13x Senior Secured Notes 2022 535 9.875% Apr-22 Caa1/B- 1.62x Senior Secured Notes 2023 400 9.625% Apr-23 Caa1/B- 1.21x Total Institutional Debt 1,913 5.78x Other debt 6 Gross Debt 1,920 5.80x Cash 147 0.44x Net Debt 1,773 5.36x Finance lease liabilites 59 0.18x Net Debt per balance sheet 1,832 5.54x

Capital Structure

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Net leverage as at 30 June 2019

(1) PF LTM EBITDA adjusted for unaudited LTM EBITDA of the acquired IDTEC business of $0.3m and synergies of the acquired Dalma businesses of $11.5m. (2) Q1 & Q2 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)

Closing Remarks

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• Bentec successfully delivered the final 3 rigs for our customer in Ukraine
• Land Drilling awarded a number of new contracts in the Middle East, Russia, Europe and Africa
• Q2 2019 revenue of $395.1m and EBITDA of $74.4m
• Contract backlog of $5.4bn (at 1 August 2019) across a blue chip customer base
• Significant progress made on our technology initiative, Well of Innovation, with launch in

September

• Operational integration of the forma Dalma business now complete with synergies of $27.6m

identified and 89% of these already secured

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Q & A

investor.relations@kcadeutag.com

Integration of Dalma Energy LLC

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

• Expectation of run rate EBITDA synergies increased slightly

from $27.4m (Q1 2019) to $27.6m (Q2 2019)

• Synergy target more than double original estimate of c.$11m
• Capex synergies increased from $2m to $3m
• Monthly run rate achievement in June 2019 of $2.0m, being

89%1 of total savings identified

• Close to full run rate synergy realisation
• Small additional supply chain synergies identified in both

Oman and Saudi Arabia

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