Investor Presentation Fourth 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

Fourth 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

• bserve 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.

Agenda

2

1 Key highlights 2 Commercial developments 3 Business overview 4 Group results 5 Summary

An excellent Q4 completed a strong year of development for KCA Deutag

3

KCA Deutag has 125 years

• f experience as one of the

world’s leading onshore and offshore drilling and engineering contractors,

• perating safely in key

markets and new territories

1

• 2013 revenue of $2.2bn and EBITDA1 of $304m.

EBITDA1 growth was 18%

2

• Improved operational and financial performance

from all core business units

3

• Strong market position across highly attractive

international markets and key territories

4

• Contract backlog of $7.9bn on 1 March 2014 across

a blue chip customer base

5

• Successful lender consent request extended

maturities on $325m of debt

6

• Net debt/LTM EBITDA leverage fell from 4.8x at Q3

2013 to 4x by the close of the year

Onshore (c.50% of EBITDA1) Offshore (c.50% of EBITDA1) Segment description

Land Drilling

• Leading international

premium drilling contractor

• High end fleet of 53 drilling

and 4 workover rigs2

• Track record of executing

complex wells in harsh environments

Bentec

• Design and manufacture of

premium land rigs and key components

• Capacity for 12-16 rigs and

top drive capacity increased during 2013 to a capability of c.50 top drives per annum

• 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, Angola and Myanmar

RDS

• Design and refurbishment of
• ffshore drilling facilities and

MODUs

• Engineering from concept to

commission

• Employs c.800 engineers

and support staff globally

MODU

• Owns and operates fleet of 2

jack-ups and 3 barge type self erecting tender (SET) rigs

• A sale and purchase

agreement to sell two of the Group’s subsidiaries which

• wn and operate the 3

barges was signed on 4 March 2013

2013 EBITDA1 45% 8% 27% 16% 4% Contract tenor 1 - 5 years with options n/a 3 - 5 years with options n/a 1 – 3 years Asset light

Over 50% EBITDA1 generated in asset light businesses

4

KCA Deutag is a diversified business across onshore and offshore

adjustments and excluding central overheads of $53m.

have not worked for the last 3 years and will not be restarted.

✓ ✓ ✓

Land Drilling Platform Services RDS offices MODUs Bentec

Houston

Ben Loyal jack-up rig Russia 15 rigs Pakistan 2 rigs Oman 6 rigs Netherlands 2 rigs Germany 2 rigs Albania 1 rig Algeria 6 rigs Kazakhstan 1 rig Sakhalin 3 platforms UK North Sea 14 platforms Norway 11 platforms Azerbaijan 8 platforms

Baku London

Stavanger Bad Bentheim Tyumen Nizwa Ben Rinnes jack-up rig Nigeria 6 rigs Gabon 1 rig Brunei 1 rig Iraq / Kurdistan 4 rigs Spain 1 rig Libya 4 rigs Angola 2 platforms

St. Johns

Bergen

2013 EBITDA1 split by region

Russia 20% Europe (inc North Sea) 23% Other 9% Africa 14% SE Asia 10%

Dubai

Regional offices

Middle East 11%

Continued strong market position and balanced portfolio of assets across highly attractive international markets

Aberdeen (HQ)

Myanmar 1 platform

Presence in key regions

126 55 50 40 15 30 60 90 120

Europe North Africa Middle East North Sea Russia

Years Caspian 13%

France 1 rig

5

adjustments and excluding central overheads of $53m. Map excludes work over land rigs, defined as being below 900HP.

Glen Tanar SET rig Glen Affric SET rig Glen Esk SET rig Kuala Lumpur

Consistently strong health, safety and environmental performance is a key differentiator

6

Total Recordable Incident Rate

Note: TRIR stands for Total Recordable Incident Rate (per 200,000 man hours); IADC stands for International Association of Drilling Contractors.

0.00 0.20 0.40 0.60 0.80 1.00 1.20 1.40 1.60 1.80 2.00 2008 2009 2010 2011 2012 2013² TRIR1 KCA Deutag IADC Average

• Consistently below the industry

average TRIR1 – confirms our dedication and commitment to safe, effective and trouble-free operations

• History of over 125 years of complex

drilling operations under harsh

• perating conditions
• Reputation and track record critical to

supporting our leading market position and ensuring repeat business

7

Healthy backlog providing high level earnings visibility for the future

Updated Methodology

• Methodology per the OM issued in May 2013 dictated that revenue generated during the financial year be included for the purposes of the backlog
• calculation. We have employed new methodology which ensures that the calculation is strictly forward looking.

$442 $919 $2,341 $3,702 $21 $114 $3,841 $3,976 2,000 4,000 6,000 8,000 2013 2014 2015 and thereafter Total backlog $m Contract Option

Contract backlog1 as at 30 September 2013

$462m $1,033m $6,182m $7,677m $1,258 $839 $1,595 $3,692 $51 $141 $4,015 $4,207 2,000 4,000 6,000 8,000 2014 2015 2016 and thereafter Total backlog $m Contract Option

Contract backlog2 as at 1 March 2014

$1,310m $980m $5,610m $7,899m $1,726m $251m $5,737m $173m $12m Land Drilling Bentec Platforms RDS MODUs

Contract backlog2 by BU

$1,176m $71m $6,154m $175m $103m Land Drilling Bentec Platforms RDS MODUs

Contract backlog1 by BU

Significant new contracts – Bentec, Algeria

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Contract nature Construction of seven onshore desert drilling rigs, all fully equipped with Bentec equipment, including top drives, pumps, drawworks, power control rooms and electrical controls Contract length & timeframes Rigs to be delivered within the next 17 months Customer Enafor Contract value Largest single contract in Bentec’s history

“We are extremely proud to have secured our largest deal since the company was established in 1994. We work hard to maintain the highest quality standards across our drilling rig systems and this success is testament to that, the services we provide and our continued commitment to developing additional business in Algeria.” Dirk Schulze, Chief Executive Officer, Bentec

9

utilisation figure is 91% for Q4 2013.

• Sustained strong Q4 performance with utilisation at 85%1 for the quarter
• Continued good results from Africa due to two new rigs that came online Q2

and Q3. Other countries in region have also experienced good utilisation and day rates in the quarter

• Europe and Russia both saw good results due to utilisation and increases in

Combined Drilling Services in the Russian business

• The Middle East saw a softening in results for the quarter as non-productive

time and rig moves reduced both utilisation and earnings Financial Performance to 31 December 2013 Q4 2013 Q4 2012 Variance 2013 YTD 2012 YTD Variance $m $m $m % $m $m $m % Revenue 185.7 146.4 39.3 26.8% 684.8 567.2 117.6 20.7% EBITDA 46.4 37.3 9.1 24.4% 160.6 141.9 18.7 13.2% Margin 25.0% 25.5% 23.5% 25.0%

Land Drilling – making a significant contribution to strong Q4 results

Land Drilling - rig utilisation is robust with opportunities for growth

10

Overview Fleet utilisation Land rig2 by region and by horsepower Key customers

76% 65% 79% 84% 0% 20% 40% 60% 80% 100% 2010 2011 2012 2013

Average Land Rig Utilisation1

• Leading international provider of onshore drilling and

workover operations

• Operates in c.15 countries across Russia/CIS,

Middle East, North Africa and Western Europe

• Track record of executing complex, deviated wells in

harsh environments and emerging markets

• Significant renewal of existing contracts as well as

new contracts resulted in utilisation outlook for the coming year better than the outlook for the same period in the prior year

15% 28% 32% 2% 23% Europe/Kazak Russia Africa Asia Middle East 25% 68% 8% 1,000 - 1,499 1,500 - 2,999

• ver 3000

Land Drilling - strong development over the last 3 years

11

2013 highlights and events Financials New contracted land rigs

• No rigs are built speculatively
• 3 new build Middle East rigs (BP Khazzan) and 1

Russian rig operational from Q4 2014

• All new build activity meets strict return criteria,

based on multi year contracts

• 1 further rig at advanced tender stage
• 1 more new build contract anticipated to be won in

2014

New builds schedule J F M A M J J A S O N D J F M A M J J A S O N D Contracted Khazzan rig 1 Khazzan rig 2 Khazzan rig 3 Russian new build Key: Construction Operational 2014 2015

• 2013 strong performance driven by:
• Russia – 3 new land rigs and strong

Combined Drilling Services activity

• Algeria – 2 new land rigs
• Europe and South Iraq - improved utilisation
• Realisation of business efficiency savings
• Strong bidding activity seen particularly in the Middle

East where we have secured several long-term contracts at attractive day rates

464 567 685 104 142 161 22% 25% 23% 2011 2012 2013 0% 5% 10% 15% 20% 25% 30% 200 400 600 800 Revenue $m EBITDA $m Margin %

Bentec – Q4 contributed 38% of their 2013 result

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• Q4 delivered a strong finish with some significant new wins in December
• Deliveries of rigs to Algeria were made as expected during Q4 2013 with

margins higher than anticipated

• Sales of top drives were strong in the final months of the year
• Overall divisional EBITDA has grown 27% year on year

Financial Performance to 31 December 2013 Q4 2013 Q4 2012 Variance 2013 YTD 2012 YTD Variance $m $m $m % $m $m $m % Revenue 57.8 65.9 (8.1) (12.3)% 225.7 178.2 47.5 26.7% EBITDA 10.7 13.9 (3.2) (23.0)% 28.3 22.2 6.1 27.5% Margin 18.5% 21.1% 12.5% 12.5%

Bentec – important contract wins point to a bright future

13

2013 highlights and events Financials New contract wins Key customers

• 2013 performance driven by:
• Completion of 6 external rigs including 4 Enafor

rigs

• Shipment of 21 top drives
• Construction of 7 onshore desert drilling rigs and top

drives, to be delivered within the next 17 months to Enafor in Algeria

• Continued focus on external rig and component
• rders as a means of driving growth

59% 25% 12% 3% 1% Rigs external Components After sales Rigs internal Other turnover

Bentec revenue by product type

64 111 199 106 67 27 22 22 28 13.3% 12.5% 12.5% 2011 2012 2013 0% 2% 4% 6% 8% 10% 12% 14% 50 100 150 200 250 Ex revenue $m Int revenue $m Ex EBITDA $m Int EBITDA $m Margin %

Platform Services – strong Q4 performance

14

• EBITDA performance improved on the same period in 2012 by over 30%
• High drilling activity and a good contribution from our rental business drove

strong Q4 results.

• Sakhalin and Angola also benefited from a good quarter, and our recently won

contract in the Far East on the Daewoo Shwe platform continues to perform well

• Year on year EBITDA has grown 9%

Financial Performance to 31 December 2013 Q4 2013 Q4 2012 Variance 2013 YTD 2012 YTD Variance $m $m $m % $m $m $m % Revenue 216.5 187.8 28.7 15.3% 755.5 617.0 138.5 22.4% EBITDA 34.5 26.2 8.3 31.7% 96.5 88.3 8.2 9.3% Margin 15.9% 14.0% 12.8% 14.3%

Firm Option Customer Platform 2014 2015 2016 2017 2018 2019+

Total Alwyn Total Dunbar EnQuest Thistle & Heather Nexen Scott CNR Murchison, Ninian's (3) and Tiffany TAQA Cormorant A&N, Tern & Elder Statoil Osebergs (4) and Gulfaks (3) Statoil Kvitebjorn ExxonMobil Ringhorne & Jotun Statoil Cat J BP Azeri (3), SD, DWG, Shah Denis, Chirag, Chirag Oil Project SEIC Lunskoye, Piltun A&B CABGOC BBLT ExxonMobil Kizomba Daewoo Shwe

$474m $529m $531m $552m $521m $3,130m

Platform Services – contract backlog underpinning robust outlook

15

Platform Services contract backlog duration

Platform Services - important contract wins driving robust outlook

16

2013 highlights and events Financials Key contract wins Key customers

• Myanmar - 2 year O&M drilling services contract for the Shwe

Platform, based in Myanmar, with Daewoo

• Angola - 5 year O&M programme with ExxonMobil, for the

Kizomba platforms offshore Angola

• Norway – 12 year O&M project for two Cat J jack-ups, based
• ffshore Norway, for Statoil
• 2013 characterised by robust activity across all major

contracts

• Commencement of the Daewoo Shwe and

Kizomba contracts

• Particularly high activity in Sakhalin operations
• Strong results in the Norway sales & rental

business

• Decline in margin in 2013 partly due to significant

increase in low margin reimbursable revenues

561 617 756 76 88 97 14% 14% 13% 0% 4% 8% 12% 16% 200 400 600 800 1,000 1,200 2011 2012 2013 Revenue $m EBITDA $m Margin %

RDS - excellent 2013 performance

17

• RDS finished the year benefitting strongly from robust demand for premium

engineering design services to the offshore sector

• Activity in the final quarter remained high across all divisions
• Norway activity in particular drove strong Q4 results as well as higher

margin work on Hebron in Canada

• Other North Sea work for high profile customers remained strong in the final

quarter

• Overall EBITDA growth year on year was a healthy 42%

Financial Performance to 31 December 2013 Q4 2013 Q4 2012 Variance 2013 YTD 2012 YTD Variance $m $m $m % $m $m $m % Revenue 100.3 78.5 21.8 27.8% 359.5 280.1 79.4 28.3% EBITDA 17.1 15.4 1.7 11.0% 56.0 39.5 16.5 41.8% Margin 17.0% 19.6% 15.6% 14.1%

RDS - exposure to high profile projects and blue chip client base

18

2013 highlights and events Financials 2014 outlook Key customers

Very strong 2013 due mainly to high activity on major projects:

• Hebron project in Canada
• Mariner, Clair Ridge, Heather and Dunbar projects in

the UK North Sea

• Chirag Oil project in Azerbaijan
• Peregrino project in Brazil
• Shift to harsh environment/Arctic developments

requiring large integrated facilities

• North Sea, GoM, Caspian, Sakhalin mature markets

with older rigs requiring upgrade/overhaul

• Several North Sea projects will be completing during

2014, as well as elements of the Hebron contract in Canada

• The pipeline remains robust with negotiations on new

projects at an advanced stage

195 280 360 20 40 56 10% 14% 16% 0% 4% 8% 12% 16% 100 200 300 400 2011 2012 2013 Revenue $m EBITDA $m Margin %

MODUs – improved performance in Q4

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• The two jack-ups (Ben Rinnes and Ben Loyal) contributed $7.9m EBITDA2 to

the quarter

• The three barges (Glen Esk, Glen Affric and Glen Tanar) were profitable during

Q4 with EBITDA2 at $5.6m, however overall negative for the year

• The Glen Esk barge remains demobilised and warm-stacked at the year end
• Full year EBITDA1 was $15.8m, $1.7m behind the prior year

Financial Performance to 31 December 2013 Q4 2013 Q4 2012 Variance 2013 YTD 2012 YTD Variance $m $m $m % $m $m $m % Revenue 41.6 25.9 15.7 60.5% 157.2 124.7 32.6 26.1% EBITDA1 11.5 (2.2) 13.8 N/m 15.8 17.5 (1.7) (9.6)% Margin 27.7% (8.7)% 10.1% 14.0%

(barges stripped out) was $22m for 2013.

MODUs - 2013 was a mixed year for the division

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2013 highlights and events Financials 2014 outlook Key customers

• One jack-up (Ben Avon) was sold in Q1 2013 for

gross proceeds of $55m

• Ben Loyal, Ben Rinnes, Glen Tanar and Glen Affric

continued to perform largely in line with management expectations

• 2013 EBITDA negatively affected by delays in Glen

Esk rig up and subsequent contract cancellation

• The Group signed a sale and purchase agreement to

sell two subsidiary companies which own and

• perate the three SET barges (Glen Esk, Glen Tanar

and Glen Affric)

• New contracts are currently under negotiation for the

two jack-ups

• The Ben Loyal is currently working with Pemex in

Mexico

• The Ben Rinnes is on contract with Vaalco in Gabon

127 125 157 46 18 16 36% 14% 10% 0% 10% 20% 30% 40% 40 80 120 160 200 2011 2012 2013 Revenue $m EBITDA $m Margin %

67 75 65 126 111 50 60 51 12 50 100 150 200 250 300 2011 2012 2013

$m

Maintenance Capex Growth Capex MODU SPS spend

Working capital and capital expenditure

21

Historical capital expenditure1 by category Working capital

$253m $237m $127m

expense for statutory account purposes. 389 440 483 542 481 136 141 147 154 138 (397) (381) (398) (418) (384) 128 200 232 278 235 (450) (250) (50) 150 350 550 750 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Trade and other receivables Inventories and work-in-progress Trade and other payables Total working capital

Capital Structure - an improving position throughout 2013

22

Net debt1/LTM EBITDA throughout 2013

Net debt at 31 December 2013 ($m)

(29) 22 500 180 530 28

• 200

200 400 600 800 1,000 1,200 1,400 Cash Liquidity Facilities Senior Secured Notes Term Loan B & Capex Facility Term Loan C LC Facilitiy Other

Q4 20131 $1,230m

1,196 1,260 1,296 1,230 255 253 273 304

4.7x 5.0x 4.8x 4.0x

0.00 0.50 1.00 1.50 2.00 2.50 3.00 3.50 4.00 4.50 5.00 200 400 600 800 1,000 1,200 1,400 Q1 2013 Q2 2013 Q3 2013 Q4 2013 $m Net Debt LTM EBITDA Net debt/LTMEBITDA ratio

Amend and extend process completed 17 February

23

• Leverage and interest cover covenant reset in Q3 and Q4

2014

• Approval to dispose of assets in a share sale
• Approval for additional issuance of Senior Secured Notes

with proceeds to repay term loans

• Consent to utilisation of the remaining $50m accordion

under current Incremental RCF

• Drop down of two additional land rigs (built with $50m of

shareholder equity) into the financing group for zero consideration, thus increasing group EBITDA by c.$7m per annum

New maturity profile ($m)

61

649 500 38

32 155 50 50 2014 Mar-15 Mar-16 Jun-16 Mar-17 2018 $50m Additional RCF approved in A&E Off B/S Guarantee Facility Liquidity Facilities Term Loans Senior Secured Notes

255 93

Previous maturity profile ($m)

180

530 500

100 75 50 50 2014 Mar-15 Mar-16 Jun-16 Mar-17 2018 Off B/S Guarantee Facility Liquidity Facilities Term Loans Senior Notes

150 305

Group Results - Q4 closed the year on a high

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$161m $28m $96m $56m $16m Land Bentec Platform Services RDS MODUs

2013 EBITDA2 by BU

212 258 304

50 100 150 200 250 300 350 2011 2012 2013 $m

EBITDA1 growth

CAGR: 20% 60 64 72 108 (20) 20 40 60 80 100 120 140 Q1 2013 Q2 2013 Q3 2013 Q4 2013

$m

Land Bentec Platform Services RDS MODUs Central overheads

2013 EBITDA1 ($304m) by quarter

258 304

19 6 8 17 (2) (2) 250 260 270 280 290 300 310 320 2012 Land Bentec Platforms RDS MODU O'head 2013

$m

2013 EBITDA1 bridge

Closing remarks

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

• Strong performance delivery in 2013 provides an excellent foundation for 2014 and beyond



• Decreasing leverage position to 4x at the year end



• Excellent backlog of $7.9bn underpins future earnings



• Successful amend and extend provides additional financial flexibility to execute on the strategy



• Headline-grabbing contract wins on high-profile projects with more in the pipeline



• Actions continue to optimise the business portfolio and increase business efficiency in 2014



• Growth opportunities are only being pursued where they provide robust capex returns driving

increased cash generation based upon long term contracts



• All of this is underpinned by a stable and experienced management team focused on further

delivery of results

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Q & A

investor.relations@kcadeutag.com