Investor Presentation FOURTH QUARTER 2017 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

FOURTH QUARTER 2017

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.

Fourth Quarter Investor Presentation

Agenda

2

1

Q4 and Full Year Key Highlights

2

Business Update

3

Business Unit Financials

4

Group Results

5

Dalma Acquisition

6

Summary Fourth Quarter Investor Presentation

Q4 and Full Year Key Highlights

3

KCA Deutag is a leading international drilling and engineering company working

• nshore and offshore with a focus on safety, quality and operational performance

1

Q4 2017 EBITDA of $65.8m (Q4 2016: $60.1m) giving full year EBITDA of $221.5m (2016: $262.9m)

2

Good tendering activity for Land, with a number of significant contract awards for Bentec, and increased activity on the new Cat J and Hebron contracts for Offshore

3

Contract backlog of $5.2bn (at 1 February 2018) across a blue chip customer base

4

Available liquidity of $230m at 31 December 2017

5

Announcement of acquisition of the Omani and Saudi Arabian businesses

• f Dalma Energy LLC

Fourth Quarter Investor Presentation

Business Update

4 RDS Offshore Services Integrated land drilling Offshore drilling services & design

• First CAT J has

commenced operations in Norway

• Reactivation work

continues in the UK

• Efficient start to Hebron

platform operations

• Increased activity due to

new greenfield contract

• Brownfield work remains

relatively steady

• Developing diversification
• pportunities into non-oil

and gas sectors

• Strong activity in Oman

and Russia

• Improved performance in

Algeria and Europe

• Improving outlook in

Nigeria

• Two new rig build

contracts for a total of 6 rigs secured

• Component sales

revenue remain steady

• After Sales remains

stable $164.4m / 68.6% of total¹ $0.0m / 0.0% of total¹ $73.2m / 30.5% of total¹ $2.1m / 0.9% of total¹

Land Drilling Bentec

corporate costs of $18.2m)

Fourth Quarter Investor Presentation

KCAD Operations Are Diversified Across Global Markets

5

PRESENCE IN KEY AREAS

Houston Baku London Bad Bentheim Tyumen Nizwa

• St. Johns

Bergen Dubai

Land Drilling Offshore Services RDS offices Bentec Regional offices

Aberdeen (HQ)

LTM Q4 2017 EBITDA split by region

Map excludes 1 workover land rig in Nigeria, defined as being below 900HP Map shows position at 1 February 2018

Fourth Quarter Investor Presentation

Health, Safety and Environmental Performance

6

• Sustaining low TRIR levels in a range which are the best in the company’s history
• KCAD achieved the lowest ever TRIR of 0.18 in October and November 2017

Note: IADC stands for International Association of Drilling Contractors

IADC industry average 0.542 for 2017 KCAD TRIR at end of Q4 2017 was 0.191 injuries per 200,000 man hours worked

Fourth Quarter Investor Presentation

Backlog Status

7 Total contract backlog as at 1 November 2017 Contract backlog by BU as at 1 November 2017 Total contract backlog as at 1 February 2018 Contract backlog by BU as at 1 February 2018

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 our estimates as of Feb-2018

Fourth Quarter Investor Presentation

Robust platform services contract backlog @ 1 February 2018

8

Fourth Quarter Investor Presentation

Contract Platform Client Country Assets

end date status # Exxon Canada Hebron Mar-46 Operating 1 Statoil Norway CAT J (2) May-36 Operating 2 Exxon Angola Kizom ba (2) Jan-28 Stacked 2 AIOC Azerbaijan Azeris, SD, DWG, Cop & Chirag Dec-24 Operating 7 Nexen UK Scott Feb-23 Operating 1 COP UK Britannia Nov-22 Stacked 1 Statoil Norway Oseberg's (4) & Gulfaks (3) & Kvitebjorn Oct-22 Operating / Stacked 7/1 Statoil Norway Pipe pool m anagem ent Oct-22 Active m gm

• t. contract

CNR UK Ninian's (3) Tiffany Nov-21 Operating / Stacked 1 /3 SEIC Russia LA, PA & PB May-21 Operating 3 Total UK Alwyn / Dunbar Dec-20 Operating / Stacked 1 /1 Enquest UK Thistle & Heather May-20 Operating / Stacked 1 /1 Exxon Norway Ringhorne Dec-1 8 Stacked 1 2017 2018 2019

Land Drilling

9

Financial Performance to 31 December 2017

• Higher EBITDA compared to the prior quarter, largely due to improved performance in

Russia

• Activity levels remain strong in Russia and Oman
• Improving prospects in Europe and Algeria
• Signs
• f

improvement in Nigeria where we are pursuing several tendering

• pportunities
• Utilisation for the quarter of 61%1

Q4 2017 Q3 2017 Q4 2016 Q4 2017 Q4 2016 Result Result Result YTD YTD $m $m $m $m $m Revenue 126.8 122.8 133.6 499.7 569.6 EBITDA (post support allocation) 42.3 35.5 46.7 164.4 186.5 Margin 33.4% 28.9% 35.0% 32.9% 32.7%

Bentec

10

Financial Performance to 31 December 2017

• EBITDA has remained around breakeven
• Two new contracts awarded for a total of 6 new build rigs
• Active tendering market across after sales, components and new build rigs
• Continued pursuit of diversification opportunities outside the oil and gas sector

Q4 2017 Q3 2017 Q4 2016 Q4 2017 Q4 2016 Result Result Result YTD YTD $m $m $m $m $m Revenue 19.2 22.1 16.5 73.3 75.4 EBITDA (post support allocation) (0.5) (0.0) (2.0) 0.0 (0.8) Margin

• 2.4%
• 0.1%
• 12.2%

0.0%

• 1.1%

Offshore Services

11

Financial Performance to 31 December 2017

• Significantly higher EBITDA compared to Q3, primarily due to strong performance in

Norway

• Both of the Cat J jack up rigs have now arrived in Norway and the first has commenced
• perations
• Post-year end settlement reached with a client in Angola resulting in cash payment of

$41.9m in February 2018

As detailed above EBITDA relating to MODUs in 2017 was $0.6m and $16.6m in 2016. The equivalent figure in 2015 was $22.3m

Q4 2017 Q3 2017 Q4 2016 Q4 2017 Q4 2016 Result Result Result YTD YTD $m $m $m $m $m Platform Services Revenue 145.2 153.1 131.0 549.2 524.2 EBITDA (post support allocation) 26.4 22.1 19.2 72.6 74.8 Margin 18.2% 14.4% 14.6% 13.2% 14.3% MODUs Revenue 0.0 0.0 0.0 0.0 29.4 EBITDA (post support allocation) 0.1 0.5 (0.2) 0.6 16.6 Margin n/a n/a n/a n/a 56.5% Offshore Services Revenue 145.2 153.1 131.0 549.2 553.5 EBITDA (post support allocation) 26.6 22.6 19.0 73.2 91.4 Margin 18.3% 14.7% 14.5% 13.3% 16.5%

RDS

12

Financial Performance to 31 December 2017

• Higher EBITDA than the prior quarter due to new Greenfield project
• Continuing to pursue diversification opportunities outside of the oil and gas sector
• Strengthened leadership team with appointment of new business unit leader

Q4 2017 Q3 2017 Q4 2016 Q4 2017 Q4 2016 Result Result Result YTD YTD $m $m $m $m $m Revenue 15.3 13.8 14.5 57.5 75.3 EBITDA (post support allocation) 1.7 (0.0) (0.3) 2.1 5.1 Margin 11.0%

• 0.2%
• 2.4%

3.7% 6.8%

Group Results

13

Financial Performance to 31 December 2017

Revenue and EBITDA ($m) Q4 2017 $m Q3 2017 $m Q4 2016 $m 2017 YTD $m 2016 YTD $m Revenue from business units 306.4 311.9 295.7 1,180.3 1,274.4 Eliminations (2.9) (2.5) (8.0) (10.8) (22.2) Total third party revenue 303.5 309.4 287.6 1,169.5 1,252.2 EBITDA from business units 70.0 58.1 63.4 239.7 282.4 Eliminations 0.0 0.0 0.2 0.0 (0.3) Corporate costs/other (4.4) (4.8) (4.6) (18.8) (18.9) Exchange 0.2 1.5 1.1 0.6 (0.3) Total EBITDA 65.8 54.8 60.1 221.5 262.9

Q4 2017 Q3 2017 Q4 2016 2017 YTD 2016 YTD $'m $'m $'m $'m $'m Cash generated from operations 93.5 45.4 87.1 176.3 281.5 Tax paid (5.3) (5.0) (6.4) (30.0) (38.6) Cash flow from operating activities 88.2 40.4 80.7 146.3 242.9 Capital expenditure (10.9) (10.2) (15.1) (62.9) (105.6) Proceeds from sale of Fixed Assets 0.9 0.4 1.0 1.6 61.6 Interest received 5.7 5.3 5.4 22.6 21.1 Other 0.0 0.0 0.0 0.0 0.0 Cash flow from investing activities (4.3) (4.5) (8.7) (38.7) (22.9) Interest paid (53.3) (14.3) (50.5) (132.5) (127.3) Foreign exchange 2.9 (8.3) 10.0 (12.6) 20.4 Dividend paid to minority shareholders 0.0 0.0 0.0 (0.3) (0.5) Acquisition of non-controlling interests 0.0 0.0 0.0 0.0 0.0 Net Cash flow before debt drawdown/(repayment) 33.5 13.3 31.5 (37.8) 112.6 Drawdown/(repayment) of debt and debt redemption/issuance costs (5.8) (6.2) (8.1) (15.8) 51.4 Net cash flow 27.7 7.1 23.4 (53.6) 164.0

Cash Flow and Working Capital

14

Financial Performance to 31 December 2017

9

Working Capital3

9

Free Cash Flow

Capital Structure

15

Net leverage as at 31 December 2017

expires May 2019

Utilisation 31st Dec 2017 Coupon Maturity Facility Rating3 Recovery Rating3 Net Leverage1 Revolver ($275m)2 0.0 L+400 Mar-22 Caa1/CCC+ 3/3 0.00x Senior Secured Term Loan 358.7 L(100)+525 May-20 Caa1/CCC+ 3/3 1.46x HSBC Oman Term Loan 48.0 L+400 Dec-20 0.19x Total Bank Debt 406.7 1.65x UK Finance Senior Secured Notes 375.0 7.250% May-21 Caa1/CCC+ 3/3 1.52x UK Finance Senior Secured Notes 535.0 9.875% Apr-22 Caa1/CCC+ 3/3 2.17x Total Institutional Debt 1,316.7 5.34x Finance lease & other debt 2.8

• Aug-18
• 0.01x

Gross Debt 1,319.5 5.35x Cash 108.3 0.44x Net Debt 1,211.2 4.91x

Proposed Acquisition of Dalma Energy & Co. LLC’s Omani and Saudi Arabian Businesses

• KCA Deutag (“KCAD” or the “Company”), a leading global drilling and engineering onshore and offshore contractor, has

agreed to acquire the Omani and Saudi Arabian businesses of Dalma Energy & Co. LLC (“Dalma” or the “Target”)

• The transaction values Dalma at an EV of $660m, 6.0x LTM December 2017E EBITDA of c.$110m1
• Dalma is a leading provider of onshore drilling services to oil & gas companies in the Middle East
• The KCAD – Dalma combination will create a local onshore drilling services champion which combines Dalma’s regional

expertise and leading positions in Oman and the Kingdom of Saudi Arabia (KSA) with KCAD’s leading international standards through leveraging KCAD’s global network − Combined Entity will be one of the Largest International Drilling Contractors in the Middle East − Strengthens our Leading Position across the Eastern Hemisphere − Strengthens position in Resilient Markets − Enhances Diversified Blue Chip Customer Base − Increased Backlog Providing Excellent Visibility − Enhanced Utilisation Profile − Value Creation from Significant Synergies − Diversified Shareholder Base Combined With a Highly Experienced Senior Management Team

Executive Summary

1 2 3 4 5 6 7 17

8

1

Middle East Onshore Rig Count – International Players(1)

+

Source: Douglas Westwood. Notes: (1) Middle East includes rigs in, KSA, Oman, Iraq, UAE and Pakistan (2) Includes 32 ZP Arabia rigs (3) Includes 22 ADC rigs, a Schlumberger and Taqa Joint Venture

Combined Entity will be one of the Largest International Drilling Contractors in the Middle East

18

KCAD Dalma Combined Rigs 54 rigs/ 34 platforms 29 rigs 83 rigs/ 34 platforms Backlog(2) $5.2bn $1.1bn $6.2bn Business Segments (EBITDA Breakdown) (1) Geographic Focus (EBITDA breakdown) (1) Headquarters Aberdeen, UK Muscat, Oman Aberdeen, UK

2 Business Overview(1) Combined Operations(3)

Location Rigs Plat. Canada 1 North Sea 21 Europe and Caspian 8 Africa(4) 11 Angola 2 KSA 9 Oman 20 Middle East(5) 17 Brunei 1 Caspian 7 Russia 17 Russia Sakhalin 3 Total 83 34 Dalma Offshore Land Drilling

Middle East 100%

Notes: (1) KCAD EBITDA is 2017A. Dalma EBITDA is before exceptional items and is based on preliminary unaudited information and subject to change (2) Backlog as of 1 February 2018. (3) Position at 1 February 2018. (4) Includes 1 workover land rig in Nigeria, defined as being below 900HP. (5) Includes 8 KCAD rigs in Oman.

Strengthens our Leading Position Across the Eastern Hemisphere

19

3

Global Land Rig Count – International vs. North America (No. of rigs)

Strengthens Position in Resilient Markets

Source: Douglas Westwood; Baker Hughes.

20

Onshore E&P Capital Spend – Middle East vs. North America ($USDm)

4

Key customers by division(1) 2017E Revenue(2) Split by Top 5 Clients Integrated Land Drilling Offshore Drilling Services & Design

c.48% of revenue Notes: (1) Petroleum Development Oman (PDO) partially owned by Shell (34%). (2) Dalma Revenue is based on preliminary unaudited information and subject to change.

+

Enhances Diversified Blue Chip Customer Base

21

Dalma

5

KCAD

Increased Backlog Providing Excellent Visibility

$4,096m $1,969m $18m $156m Offshore Services Land RDS 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 and Dalma backlog amounts are estimates as of Feb-2018

$6,238m

22

Dalma

KCAD

Notes: (1) Contracted utilisation is calculated on a daily basis as of 1st of February 2018 for KCAD and Dalma.

Enhanced Utilisation Profile

6 23

7 Value Creation from Significant Synergies

KCAD – Dalma Acquisition Estimated Synergies, $m

24

33.0% 17.4% 17.2% 6.5% 4.0% 22.0%

8 Diversified Shareholder Base Combined With a Highly

Experienced Senior Management Team

Others Al Nasser Investments Gulfcap Energy LLC Al Qahtani & Sons 57% 27% 16% Target Shareholders(1)

Others Pro Forma Shareholder Overview Highly Experienced Management Team

42.3% 22.3% 22.0% 8.3% 5.1% Notes: (1) Subject to final adjustment under the terms of the acquisition

Target Shareholder Overview KCAD Shareholder Overview Name Title Industry Experience Norrie McKay CEO – KCAD 35+ Years Neil Gilchrist CFO – KCAD 20+ Years Simon Drew President – Land Drilling 20+ Years Rune Lorentzen President – Offshore 35+ Years Dirk Schulze CEO – Bentec 20+ Years Albert Allan SVP – RDS 25+ Years

25

Financial Terms of the Acquisition

Consideration

• Completion of the acquisition expected to occur before the end of Q2 2018, subject to the

fulfilment of certain conditions precedent, including finalising financing for the acquisition

• Finalisation of $425 million acquisition financing
• This may include raising new debt in the loan or bond markets and/or amendments/extensions

to existing financing.

• $84 million of cash consideration from balance sheet
• 22% of equity in Enlarged KCAD Group valued at $220m
• The transaction values Dalma at an EV of $660m, 6.0x LTM December 2017E EBITDA of

c.$110m(1)

• The transaction consideration for the acquisition of Dalma includes a cash payment and an

equity shareholding in KCAD − Cash component: $100m cash consideration to Dalma’s shareholders − Equity component: Following completion, the current shareholders of Dalma will own approximately 22%(2) of the enlarged share capital of KCAD

• Dalma shareholders will have board representation and customary minority protection rights

Financing Timing 26

(1) Dalma EBITDA is before exceptional items and is based on preliminary unaudited information and subject to change (2) Subject to final adjustment under the terms of the acquisition

Projected Capital Structure

Pro-Forma Capital Structure (as of 31-Dec-2017)

Pro-forma at 31 December 2017 Sources & Uses (1)

27

Notes: (1) Shares issued by KCAD to sellers based on 31 March transaction close and subject to fulfilment of certain conditions (2) Q4 2017 LTM EBITDA of $246m includes the $25m Holdco equity contribution as defined in the Amended Credit Agreement and also removes EBITDA of $0.6m relating to MODUs (3) Dalma EBITDA is before exceptional items and is based on preliminary unaudited information and subject to change (4) Combined EBITDA includes estimated synergies of >$10m on a run rate basis (5) Leverage shown based on adjusted EBITDA of $246m for KCAD and combined EBITDA of $366m

Sources $m Uses $m Debt Financing 425 Existing Debt Refinancing/Rollover 362 Cash on balance sheet 84 Consideration payable in cash 100 Transaction fees 41 Transaction VAT 6 Total Cash Sources 509 Total Cash Uses 509 Shares issued by KCAD to sellers 220 Shares issued by KCAD to sellers 220 Total Transaction Sources 729 Total Transaction Uses 729

As of 31-Dec-2017 As of 31-Dec-2017E Adjustment USD millions KCA Deutag xEBITDA5 Wave xEBITDA PF Combined xEBITDA5 Cash and Cash Equivalents (31-Dec-17) 108 0.5x 1 0.0x (84) 25 0.1x Revolver ($275m Capacity)

• Dalma Guarantee Facility ($20m Capacity)
• $375m Sr. Secured TLB due 2020

359

• 359

HSBC Oman Term Loan 48

• 48

Dalma Senior Facilities

• 357

(357)

• Total Bank Debt

407 1.8x 357 3.3x (357) 407 1.1x $375m 7.250% Sr. Secured Notes due 2021 375

• 375

$535m 9.875% Sr. Secured Notes due 2022 535

• 535

Acquisition financing $425m

• 425

425 Finance Lease & Other Debt 3

• 3

Total Debt, Gross 1,320 5.4x 357 3.3x 68 1,745 4.8x Total Debt, Net 1,212 4.9x 356 3.2x 1,720 4.7x 31 December 2017 KCAD: EBITDA before exceptional items 222 KCAD: Adjusted EBITDA2 246 Dalma: 31-Dec-2017E EBITDA before exceptional items3 110 PF Synergies and Combined EBITDA4 11 366

Capitalisation Table if Existing Dalma Facilities refinanced with New debt

Closing Remarks

28

Fourth Quarter Investor Presentation

• Backlog position of $5.2 billion across a blue chip company base
• Full year 2017 EBITDA $221.5m and Q4 2017 results of $65.8 million EBITDA
• Increased activity on the new Cat J and Hebron contracts for Offshore
• Strong liquidity position at $230 million
• Acquisition of the Omani and Saudi Arabian businesses of Dalma Energy LLC
• Good tendering activity for Land, with a number of significant contract awards for Bentec

29

Q & A

investor.relations@kcadeutag.com