Q2 2015 Presentation Contents Highlights and material events - - PowerPoint PPT Presentation

Q2 2015 Presentation

Contents

• Highlights and material events
• Segment reporting
• Financial information
• Summary

Page 2

Group – Financial performance

Page 3

Q2 2015 highlights:

• Operating revenue of USD 286 million
• *EBITDA adjusted of USD 89 million
• EBITDA of negative USD 156 million
• *EBITDA margin adjusted of 31 %
• EBITDA-margin of negative 54 %
• Net loss of USD 224 million

* EBITDA and EBITDA margin adjusted for impairment write-down on the two drillships, Deepsea Metro I and Deepsea Metro II, of which USD 210 million represents the Group’s 40% share and USD 35 million represents impairment write-down of the Group’s remaining investment in Deep Sea Metro Ltd. In total USD 245 million.

Highlights and material events in Q2 2015

Page 4

Lenders’ consent to reduce equity ratio financial covenant

• The Group has received consent from its lenders to reduce the equity ratio financial covenant of the

Odfjell Drilling Group from 35 % to 28 % for all of the Odfjell Drilling Group’s debt facilities for a period until and including the financial quarter ending on 31 December 2016. As a condition, the Group shall not declare, make or pay any dividend or buy back any shares in this period.

Impairment write-down of investment in Deep Sea Metro Ltd.

• Impairment write-downs have been made in Q2 2015 on Deepsea Metro I and Deepsea Metro II, owned

by Deep Sea Metro Ltd., of which the Odfjell Drilling Group owns 40%. The book value on each of the drillships are written-down to USD 400 million to reflect what is assessed to be the recoverable amount.

• In addition, Odfjell Drilling has made an impairment write-down on its remaining investment in Deep

Sea Metro Ltd with the result the Odfjell Drilling Group’s book value of the investment in Deep Sea Metro Ltd is zero at 30 June 2015.

Page 5

Highlights and material events in Q2 2015 (cont.)

MODU

• Deepsea Aberdeen commenced on its 7-year drilling contract with BP on 21 April 2015.
• Deepsea Metro II ended its contract with Petrobras in Brazil in mid May and has since June been

stacked in Curacao. Chloe Marine Corporation Ltd., the owner of Deepsea Metro II, is in default under its debt facilities and has initiated a sales process of the vessel.

• Deepsea Metro I secured new employment with VietGazprom in Vietnam with a contract duration
• f approximately 20 weeks and an estimated contract value of USD 40 million. The contract also

includes options for two well testing periods of an estimated duration of 90 days each. The vessel commenced drilling operations on 9 August.

• Deepsea Atlantic secured a contract with Statoil on the Johan Sverdrup field for a period of three

years plus 6x6 months options. Expected start-up of drilling operations is March 2016. The contract value over the firm period is estimated at USD 330 million. Estimated contract value of the optional periods is in the range of USD 370 million to USD 470 million.

• Deepsea Atlantic ended its contract with Statoil in the Gullfaks field on the Norwegian Continental

Shelf on 19 August. The rig will be hot-stacked, on a temporary basis, as the company continues to market the rig in the short-term, while preparing to be mobilised for the new Johan Sverdrup contract with Statoil scheduled for March 2016.

• Deepsea Bergen is expected to start on its 5 year SPS in the first half of September 2015. The rig

will undertake the SPS at Aibel Haugesund situated on the West coast of Norway. The SPS project budget is USD 53 million in addition to a 6 week expected off-hire period.

Page 6

Highlights and material events in Q2 2015 (cont.)

Drilling & Technology

– In Q2, Odfjell Drilling secured a contract with Statoil for the platform drilling services on the Johan Sverdrup platform, including assistance during the engineering, construction and commissioning phase of the Johan Sverdrup field development project. The firm contact period is 4 years plus 3 x 2 year options. Drilling commencement is expected during the fourth quarter of 2018 and the estimated contract value is USD 240 million including the pre-drilling assistance and the optional periods. – Approximately 60 employees in the Technology business area were made redundant as a result of reduced activity level on the NCS. – In August Odfjell Drilling and Island Drilling Company ASA made an out-of-court settlement of NOK 85 million for the unpaid receivables of NOK 111 million. As per 30 June 2015 Odfjell Drilling has recorded NOK 26 million (equivalent to USD 3.4 million) as loss on trade receivables.

Well Services

– Due to the current market situation and a reduction of rigs in operation in Norway, Well Services has downsized with approximately 30 offshore and onshore personnel year to date 2015. – Despite fierce competition also outside Norway, Well Services has maintained its activity level and margins in this quarter. Our equipment pool of remote operated tools and increased focus on well intervention services has strengthened our competitive advantage in a market with reduced

• verall activity.

Segment reporting

• Mobile Offshore Drilling Units (MODU)

MODU

• Firm MODU contract backlog at 30 June 2015 of USD 1.8 billion

with additional priced options valued at USD 0.5 billion.

• Financial utilisation:

1) Financial Utilisation is measured on a monthly basis and comprises the actual recognised revenue (encompassing different hourly day rates) for all hours in a month, expressed as a percentage of the full day rate for all hours in a month. Financial Utilization, by definition, does not take into account periods of non-utilisation when the units are not under contract. 2) Deepsea Aberdeen commenced its 7-year contract with BP in UK on 21 April 2015. 3) Deepsea Metro I was idle Q2 2015. 4) Deepsea Metro II ended its contract with Petrobras in Brazil on 16 May 2015 and has since been idle.

Page 7 MODU

• Modern fleet of UDW and

harsh environment drilling units

• Extensive drilling experience
• Provision of integrated

management services for drilling units

Financial Utilisation1 Q2 15 Q2 14 YTD 15 YTD 14 Deepsea Stavanger 99.7% 98.7% 99.4% 96.9% Deepsea Atlantic 98.8% 77.9% 98.9% 84.8% Deepsea Bergen 94.3% 99.7% 92.2% 98.9% Deepsea Aberdeen2 96.7% n/a 96.7% n/a Deepsea Metro I3 n/a 98.5% n/a 97.6% Deepsea Metro II4 82.8% 82.7% 90.4% 73.4%

Drilling unit Location /operator day rate (USDk/day)1 Contract status

Deepsea Stavanger Angola BP Angola 545 Deepsea Atlantic Norway Statoil 566/300 Deepsea Aberdeen UK BP Exploration 450 Deepsea Bergen Norway Statoil 350 Deepsea Metro I Anchored in South Africa 255 Deepsea Metro II Anchored in Brazil n/a Deepsea Guarapari Brazil Petrobras 518 Deepsea Itaoca Brazil Petrobras 525 Deepsea Siri Brazil Petrobras 529

Contract Option Construction

2014 2015 2016 2017 2018 2020 2021 2019 3 3 3

1) Rates may include mix of currencies and fluctuate based on exchange rates. 2) Day rate net of taxes 3) In addition to the day rate there is a bonus element of up to 15% linearly from 93% to 98% utilization. Contract length for each of the units is 15 years from commencement of operations. The outcome of the ongoing restructuring of Sete and the Brazilian newbuild program is uncertain at present. This could potentially lead to this program being fundamentally restructured or cancelled,

MODU - Dayrates, contract status and options

Page 8

2022 2 6 X 6 months

Segment reporting

• Platform Drilling and Technology

Platform Drilling and Technology

• Firm contract backlog of USD 0.5 billion at 30 June 2015

– Value of priced optional periods of USD 1.4 billion

• Platform Drilling contracts:

Page 9 Drilling & Technology

• One of the leading

contractors in the North Sea platform drilling market

• Drilling engineering services
• Established competence for

the latest generation technology

1) Grane, Heidrun, Njord, Sleipner A, Visund, Snorre A, Snorre B 2) Claymore, Clyde, Saltire, Piper, Tartan, Fulmar 3) Clair, Andrew, Bruce, Magnus, Clair Ridge

Segment reporting

• Well Services

10

A leader in remote operated drilling technologies

Norway Saudi Arabia United Arab Emirates Turkmenistan Kurdistan

BASES : EUROPE

United Kingdom Holland Romania

BASES : MIDDLE EAST OPERATIONS BASE

Thailand

BASES : ASIA

Vietnam

Key figures

• ~510 employees
• Services from 11 bases
• Operations in more than

20 countries

Service offering

• Tubular runnng services
• Drill tool rental services
• Well intervention services

MODU

• The drilling market has continued weakening during 2015 and we expect a further weakening into 2016. The soft market

is due to continued delivery of newbuilds and oil companies’ decreased E&P spending resulting in an increasing number

• f stacked units and continued downward pressure on day rates.
• Odfjell Drilling owns a modern fleet of 6G ultra deepwater (UDW) and harsh environment (HE) drilling units and a 3G

midwater semi-submersible. Two of these units are exposed to re-contracting risk in the current or near term drilling market.

• The competition for securing employment is fierce and reduction in day rates alone does not clear the market. We

believe the bifurcation between modern drilling units and older units will continue and this is in favour of our fleet. A substantial number of older units have already been scrapped and an increasing number of idle units coming up for re- classification will add to this number. Within the next few years we believe that the increased scrapping in combination with required exploration and development drilling will bring the market back to balance and subsequent improved day rates. Well Services

• Well Services has maintained its activity level on the Norwegian Continental Shelf (NCS) compared to the level entering

into 2015. Despite fierce competition also outside the NCS, Well Services has maintained its activity level and margins in this quarter. Our equipment pool of remote operated tools and increased focus on well intervention services has strengthened our competitive advantage in a market with reduced overall activity.

Market outlook

Exposed to re-contracting risk in a weak drilling market over the next few years

Page 11

Market outlook (cont.)

Platform Drilling and Technology

• The slowdown in the North Sea area has led to continued low activity level for development and upgrade projects. To

meet this challenge the Group has reorganised its engineering services to increase efficiency and reduce its cost base. General, longer-term

• In the longer term, we are of the opinion that the oil industry’s demand for drilling services will continue to be supported

by the need for reserves replacement and by continued spending on exploration and field-development in the main

• ffshore regions. The Group’s business segments will all benefit and will be well positioned for taking advantage of such

future market improvements.

Page 12

346 499 402 335 228 211 220 3 73 221 229 311 332 824 349 572 623 564 539 543 1044 200 400 600 800 1000 2H 2015 2016 2017 2018 2019 2020 After Firm Options

Total revenue backlog per year (for firm contracts and priced option periods)1

1) Estimates at 30 June 2015, includes pro-rata backlog figures in respect of Odfjell Drilling’s 40% ownership in Deep Sea Metro Ltd, but does not include any backlog for Odfjell Drilling’s share of Odfjell Galvão. Total backlog figures may not equal the sum of firm contracts and priced option periods for the year due to rounding.

Earnings visibility through USD 4.2 billion order backlog

• Revenue backlog for Well Services, Technology and MODU Management is not included in the revenue

backlog above. Page 13

USD million

Firm contracts USD 2.2 billion Priced options USD 2.0 billion Total backlog USD 4.2 billion

Financial information

• 156

91

• 82

165 270 393 331 382 88 Q2 15 Q2 14 YTD 15 YTD 14 FY 14 FY 13 FY 12 FY 11 FY 10 286 272 526 545 270 1 174 1 094 1 057 782 Q2 15 Q2 14 YTD 15 YTD 14 FY 14 FY 13 FY 12 FY 11 FY 10

Financial performance highlights

Odfjell Drilling reports for Q2 2015:

• Operating revenue of USD 286 million
• *EBITDA adjusted of USD 89 million

– EBITDA of negative USD 156 million

• *EBITDA margin adjusted of 31 %

– EBITDA-margin of negative 54 %

• Net loss of USD 224 million

Page 15 Group Operating Revenues (USDm) Note that the group includes the Deep Sea Metro figures applying the equity method

* EBITDA and EBITDA margin adjusted for impairment write- down on the two drillships, Deepsea Metro I and Deepsea Metro II, of which USD 210 million represents the Group’s 40% share and USD 35 million represents impairment write- down of the Group’s remaining investment in Deep Sea Metro

• Ltd. In total USD 245 million.

Group EBITDA (USDm)

P&L - (USD million) Q2 15 Q2 14 YTD 15 YTD 14 FY 14 Operating revenue 286 272 526 545 1 088 Other gains/losses 1 9 1 11 11 Share of profit/(loss) from joint ventures

• 265

4

• 280

2

• 82

Personnel expenses

• 123
• 129
• 230
• 264
• 501

Other operating expenses

• 54
• 65
• 99
• 129
• 246

EBITDA

• 156

91

• 82

165 270 Depreciation

• 47
• 40
• 84
• 78
• 141

Operating profit (EBIT)

• 203

51

• 165

87 129 Net financial items

• 13
• 18
• 24
• 28
• 50

Profit/(loss) before tax

• 216

33

• 189

60 79 Income taxes

• 8
• 4
• 15
• 8
• 36

Profit/(loss) for the period

• 224

29

• 204

52 42

Group summary financials

Condensed consolidated income statement

Page 16 Note that the group includes the Deep Sea Metro figures applying the equity method

Note: “Share of profit/(loss) from joint ventures” includes the impairment write-downs of USD 245 million explained on the previous slide.

209 184 375 364 748 762 Q2 15 Q2 14 YTD 15 YTD 14 FY 14 FY 13

Revenues

MODU

1) Include drilling units, periodic maintenance and construction in progress 2) DSM = Deep Sea Metro Ltd Group 3) Before group eliminations and corporate overheads

Page 17

Key Financials (USD million)

Segment reporting

• MODU financials

Condensed P&L - (USD million) Q2 15 Q2 14 YTD 15 YTD 14 FY 14 Operating revenue 209 184 375 364 748 EBITDA 95 83 173 156 331 Depreciation and impairments

• 254
• 38
• 288
• 74
• 203

EBIT

• 159

45

• 115

81 128 Book value own rigs1 2 161 1 646 2 159 Share of DSM2 non-current assets 315 621 537 Total book value MODU units (incl 40% DSM) 2 476 2 268 2 696 EBITDA-margin 45,5 % 44,8 % 46,3 % 42,7 % 44,2 % EBIT-margin

• 75,9 %

24,2 %

• 30,7 %

22,3 % 17,1 % Share of group revenue3 70,3 % 58,5 % 67,3 % 58,2 % 59,9 % Share of group EBITDA3 85,1 % 81,3 % 85,4 % 79,0 % 79,1 % Share of group EBIT3 n/a 84,9 % n/a 79,8 % 73,9 %

95 83 173 156 331 338 Q2 15 Q2 14 YTD 15 YTD 14 FY 14 FY 13

EBITDA

Note that the MODU segment includes pro-rata 40% of Deep Sea Metro figures and includes the impairment write-down on the two drillships, Deepsea Metro I and Deepsea Metro II, with an amount of USD 210 million in Q2 2015.

51 81 105 159 302 352 Q2 15 Q2 14 YTD 15 YTD 14 FY 14 FY 13

Revenues

Condensed P&L - (USD million) Q2 15 Q2 14 YTD 15 YTD 14 FY 14 Operating revenue 51 81 105 159 302 EBITDA

• 3
• 1
• 6
• 3

2 Depreciation and impairments

• 2
• 2
• 3
• 3
• 6

EBIT

• 5
• 4
• 9
• 6
• 4

EBITDA-margin

• 5,5 %
• 1,8 %
• 5,5 %
• 1,8 %

0,7 % EBIT-margin

• 9,4 %
• 4,5 %
• 8,5 %
• 4,0 %
• 1,4 %

Share of group revenue1 17,0 % 25,7 % 18,8 % 25,4 % 24,2 % Share of group EBITDA1

• 2,6 %
• 1,4 %
• 2,9 %
• 1,5 %

0,5 % Share of group EBIT1 3,0 %

• 6,9 %

8,1 %

• 6,2 %
• 2,5 %

Drilling and Technology

Page 18

Key Financials (USD million)

Segment reporting

• Drilling & Technology financials

1) Before group eliminations and corporate overheads

• 3
• 1
• 6
• 3

2 25 Q2 15 Q2 14 YTD 15 YTD 14 FY 14 FY 13

EBITDA

Note: Adjusted for the loss on trade receivables of USD 3.4 million following the out-of- court settlement with Island Drilling Company ASA, the EBITDA (adjusted) is USD 0.6 million in Q2 2015.

Condensed P&L - (USD million) Q2 15 Q2 14 YTD 15 YTD 14 FY 14 Operating revenue 38 50 78 103 198 EBITDA 16 20 32 44 85 Depreciation and impairments

• 9
• 9
• 18
• 17
• 36

EBIT 7 12 14 27 49 Book value of equipment 141 146 148 Cost price for equipment in use 388 383 384 EBITDA-margin 42,2 % 41,0 % 41,3 % 43,2 % 43,1 % EBIT-margin 19,5 % 23,2 % 18,6 % 26,2 % 25,0 % Share of group revenue1 12,8 % 15,8 % 13,9 % 16,4 % 15,9 % Share of group EBITDA1 14,8 % 20,1 % 16,1 % 22,5 % 20,4 % Share of group EBIT1 n/a 22,0 % n/a 26,4 % 28,6 %

Well Services

Page 19

Key Financials (USD million)

Segment reporting

• Well Services financials

1) Before group eliminations and corporate overheads

38 50 78 103 198 227 Q2 15 Q2 14 YTD 15 YTD 14 FY 14 FY 13

Revenues

16 20 32 44 85 105 Q2 15 Q2 14 YTD 15 YTD 14 FY 14 FY 13

EBITDA

(USD million) Q2 15 Q2 14 YTD 15 YTD 14 FY 14 Operating revenue

• 12
• 43
• 31
• 80
• 160

EBITDA

• 268
• 11
• 288
• 32
• 148

EBIT

• 50
• 2
• 63
• 15
• 42

EBIT for reportable segments

• 156

53

• 109

102 173 Corporate overheads

• 4
• 3
• 8
• 6
• 11

Gain from sale of JV PSW Group AS 8 8 8 40% share of EBIT DSM Ltd 222

• 11

227

• 19

36 Share of profits from JV/disposals

• 265

4

• 280

2

• 82

Accounting differences 1 1 5 Group EBIT

• 203

51

• 169

87 129 Net financial items

• 13
• 18
• 24
• 28
• 50

Group profit before tax

• 216

33

• 193

60 79

Group – Eliminations & Reconciliation

Page 20

Group

• Eliminations & Reconciliation

Deep Sea Metro financials

Interest bearing debt: At 30 June 2015 the total interest bearing debt in the Deep Sea Metro Ltd. Group was USD 833.3 million. Chloe Marine Corporation Ltd’s debt is classified as non-current liabilities at 30 June 2015.

Deep Sea Metro Ltd Group - Key financials (100% basis)

Page 21

Condensed figures - (USD million) Q2 15 Q2 14 YTD 15 YTD 14 FY 14 Total income 17 95 54 175 345 Operating expenses

• 572
• 67
• 623
• 127
• 435

Financial items

• 17
• 20
• 35
• 42
• 91

Profit/(loss) before tax

• 571

8

• 604

6

• 181

Taxes

• 1
• 1
• 4
• 14

Profit/(loss)

• 571

7

• 605

2

• 196

Non-current assets 787 1 554 1 342 Cash 132 101 172 Current assets 21 72 48 Total assets 939 1 727 1 562 Equity 88 882 692 Non-current liabilities 394 772 394 Current liabilities 458 73 476 Total equity and liabilities 939 1 727 1 562

Comments:

• At 30 June 2015, the book value of

each of Deepsea Metro I and Deepsea Metro II has been written-down to USD 400 million.

• Chloe Marine Corporation Ltd., the
• wner of Deepsea Metro II, is in

default under its debt facilities following a breach of the minimum liquidity financial covenant. The board of Chloe Marine Corporation

• Ltd. has initiated a sales process of

Deepsea Metro II.

Summary statement of financial position

Group statement of financial position

• Group gross interest bearing debt was USD 1,706

million (net of capitalized financing fees) at 30 June 2015

• USD 212 million in cash and cash equivalents at 30

June 2015

• Equity-ratio of 32 %
• The Group’s lenders has consented to reduce the equity

ratio financial covenant of the Group from 35 % to 28 % for all of the Group’s debt facilities for a period until and including the financial quarter ending 31 December 2016.

Page 22

Assets (USDm) 30.06.15 30.06.14 31.12.14 Intangible assets 38 38 37 Property, plant and equipment 2 307 1 798 2 312 Financial fixed assets 40 408 308 Total non-current assets 2 385 2 243 2 657 Trade receivables 230 232 213 Other current assets 25 46 31 Cash and cash equivalents 212 195 191 Total current assets 467 473 435 Total assets 2 852 2 717 3 093 Equity and liabilities (USDm) 30.06.15 30.06.14 31.12.14 Total paid-in capital 329 332 332 Other equity 571 840 784 Total equity 900 1 172 1 116 Borrowings 1 467 1 049 1 471 Post-employment benefits 67 69 77 Deferred tax liability 4 18 3 Other non-current liabilities 15 14 11 Total non-current liabilities 1 552 1 150 1 562 Borrowings 240 187 234 Trade payables 30 35 29 Other current liabilities 131 174 152 Total current liabilities 401 395 415 Total liabilities 1 952 1 545 1 977 Total equity and liabilities 2 852 2 717 3 093

Cash Flow - (USDm) Q2 15 Q2 14 YTD 15 YTD 14 FY 14 Profit before income tax

• 216

33

• 189

60 79 Cash from operations 84 85 154 173 358 Interest paid

• 17
• 12
• 29
• 25
• 51

Income tax paid

• 12
• 12
• 23
• 32
• 68

Net cash from operations 56 60 102 116 240 Net cash used in investing activities

• 18
• 74
• 80
• 75
• 680

Net cash from financing activities

• 77
• 12
• 3
• 47

431 Net change in cash and cash equivalents

• 39
• 26

19

• 6
• 9

Cash and cash equivalents at period end 212 195 212 195 191

Summary statement of cash flow

Group statement of cash flow

Page 23

Summary Q2 2015

Page 24

• Earnings visibility through USD 4.2 billion order backlog
• MODU:
• Deepsea Aberdeen commenced its long-term drilling contract
• Deepsea Atlantic awarded long-term contract on Johan Sverdrup
• Deepsea Metro I commenced contract in Vietnam
• Deepsea Metro II sales process initiated
• Exposed to current and near term re-contracting risk for

Deepsea Stavanger and Deepsea Metro I

• Platform Drilling secured by medium-to long term contracts
• Engineering capacity further adjusted to meet the reduced

demand for engineering services in the North Sea basin

• Well Services has maintained its overall activity level and margins

in this quarter compared to the level entering into 2015

• Book equity ratio of 32% and cash and cash equivalents of

USD 212 million at end of Q2 2015.

President & CEO Simen Lieungh EVP & CFO Atle Sæbø Investor relations Lasse H. Johannesen, laj@odfjelldrilling.com, +47 55 92 11 01 / +47 995 06 908 Press contact Gisle Johanson, gijo@odfjelldrilling.com, +47 414 40 050 Next event: Q3 2015 results to be announced on 25 November 2015 For more information see: www.odfjelldrilling.com