Q2 2016 Presentation Contents Highlights and material events - - PowerPoint PPT Presentation

Q2 2016 Presentation

Contents

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

Page 2

Group – Financial performance

Page 3

Q2 2016 highlights:

• Operating revenue of USD 183 million
• EBITDA of USD 73 million
• EBITDA margin of 40%
• EBIT of USD 31 million
• Net profit of USD 9 million

Page 4

Highlights and material events in/after Q2 2016

Refinancing of Deepsea Atlantic and Deepsea Stavanger

• Odfjell Drilling received on 24 August 2016 a firm offer from its bank syndicate to refinance the senior

secured term loan facility secured by the rigs Deepsea Atlantic and Deepsea Stavanger maturing in November 2016.

• The new loan facility will be USD 525 million, the same amount as was outstanding under the existing

facility as at 30 June 2016, and will be repaid by quarterly installments of USD 12.5 million, first time in Q1 2017: – No repayment in H2 2016 – Quarterly installment reduction of USD 12.5 million compared to the current facility – Margin of 415 basis points above LIBOR – 3 year tenor from drawdown scheduled for September 2016

• Odfjell Drilling has also agreed with its lenders to amend the following financial covenants across all its

credit facilities: – Leverage ratio (net debt to ebitda) of maximum 6.0x through 2016, maximum 5.5x through 2017 and maximum 5.0x thereafter – Equity ratio (book equity to total assets) of minimum 30%

• In addition, Odfjell Drilling Services Ltd. has agreed with its lenders to amend its financial covenants by

replacing the leverage ratio covenant applicable to the Odfjell Drilling Services group with a debt service coverage ratio (ebitda to debt service) of minimum 1.1x.

Page 5

Highlights and material events in/after Q2 2016 (cont.)

Impairment write-down of Deepsea Atlantic and Deepsea Stavanger as at 30 September 2015

• Following the enforcement decision by the Financial Supervisory Authority of Norway received on 24 May

2016, the mobile drilling units “Deepsea Atlantic” and “Deepsea Stavanger” have been written-down as at 30 September 2015 in the total amount of USD 158.5 million. All relevant figures have been restated from 30 September 2015 and in subsequent quarters.

MODU

• Deepsea Stavanger

− Deepsea Stavanger commenced on the one well contract with JX Nippon west of Shetland (UK) on 10 May 2016 and it was completed on 8 July 2016. − The rig is currently awaiting commencement on the Wintershall contract on the Maria field in Q1 2017.

• Deepsea Metro I

− Deepsea Metro I commenced the one firm well plus four optional wells contract with Petronas offshore Malaysia on 17 July 2016.

Page 6

Highlights and material events in/after Q2 2016 (cont.)

Drilling & Technology

• Odfjell Drilling’s platform portfolio for Statoil will be reduced from 1 October 2016 following Statoil’s

decision not to declare optional contract periods for five of the platforms.

• Odfjell Drilling will transfer approximately 300 employees (the majority being offshore crews) to the

contractor taking over the operations on the five platforms.

• Statoil has declared the 2 years option for the Heidrun and Grane platforms.
• Odfjell Drilling will commence operations on the Johan Sverdrup platform in Norway and the Mariner

platform in UK for Statoil when these come into drilling operation during 2018.

Well Services

• Odfjell Drilling’s Well Services division re-entered the Iranian market with its first operations commenced

in early July 2016.

Mobile Offshore drilling Units (MODU)

• Strong operations with high utilization

Q2 2016 Financial Utilization

2) Deepsea Stavanger commenced its contract with JX Nippon west of Shetland on 10 May 2016 after being idle since November 2015. 3) Deepsea Atlantic commenced its Statoil contract on the Johan Sverdrup field 1 March 2016 after being idle since August 2015. 4) Deepsea Bergen was operating for Statoil on the NCS for the first half of 2016. 5) Deepsea Aberdeen was operating for BP West of Shetland for the first half of 2016.

Page 7 MODU

• Modern fleet of harsh

environment drilling / UDW units

• Extensive drilling experience
• Provision of integrated

management services for drilling units

1) Financial Utilisation is measured on a monthly basis and comprises the actual recognised revenue 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.

Financial Utilization1 Q2 16 Q2 15 YTD 16 YTD 15 FY 15 Deepsea Stavanger 99,7 % 99,7 % 99,7 % 99,4 % 98.8% Deepsea Atlantic 99,9 % 98,8 % 99,7 % 98,9 % 99.0% Deepsea Bergen 98,7 % 94,3 % 96,8 % 92,2 % 83.9% Deepsea Aberdeen 99,7 % 96,7 % 98,2 % 96,7 % 97.2%

1) Rates may include mix of currencies and fluctuate based on exchange rates.

Page 8

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

Deepsea Stavanger Norway - Wintershall 275/305/365 Deepsea Atlantic Norway Statoil 300/330-425 Deepsea Aberdeen UK BP Exploration 450 Deepsea Bergen Norway Statoil 325

Contract Option

2016 2017 2018 2020 2021 2019 2022

6 X 6 months

2023 2024

Firm MODU contract backlog at 30 June 2016 of USD 1.5 billion with additional priced options valued at USD 0.6 billion

Mobile Offshore drilling Units (MODU)

• Contract status and day rates

Platform Drilling and Technology

• Portfolio secured by medium to long-term contracts

Platform Drilling and Technology

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) In addition, Njord, Sleipner A, Visund, Snorre A and Snorre B until 1 October 2016 2) Clair, Andrew, Bruce, Magnus, Clair Ridge

Firm contract backlog of USD 0.3 billion at 30 June 2016 Value of priced optional periods of USD 0.6 billion

Well Services

• Pricing pressure offset by cost efficiency measures

Page 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

• ~400 employees
• Services from 12 bases
• Operations in more than

20 countries

Service offering

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

Iran

Total revenue backlog per year1

1) Estimates at 30 June 2016

Earnings visibility through USD 3.0 billion order backlog

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

backlog above. Page 11

USD million

Firm contracts USD 1.8 billion Priced options USD 1.2 billion Total backlog USD 3.0 billion

243 481 441 222 206 233

• 73

99 239 213 600 243 554 540 461 419 833

• 200

400 600 800 1 000 2H 2016 2017 2018 2019 2020 After Firm Options

MODU

• The drilling and oil service market remains weak and we do not see any signs of improvement near term. The soft

market is due to the substantial supply of newbuilds, especially in the UDW market. At the same time, oil companies still focus on cost cutting programs and capital spending reductions which have further reduced demand for drilling capacity. The results are an increasing number of stacked units and continued downward pressure on day rates and asset values.

• Within the next few years we believe the continued scrapping of older rigs in combination with required exploration and

development drilling will bring the market back to balance and subsequent improved day rates.

• Odfjell Drilling has a fleet of 6th generation units capable of working in both ultra deep waters and harsh environments

providing operational and geographical flexibility.

• Deepsea Stavanger is currently idle after the completion of its JX Nippon contract on 8 July 2016. The rig is expected to

commence its new drilling contract for Wintershall on the Maria field in Q1 2017. We are following leads for potential work for Deepsea Stavanger prior to the Wintershall contract. Deepsea Aberdeen is contracted until 2022 for BP West of Shetland, Deepsea Atlantic is contracted to Statoil until 2019 on the Johan Sverdrup field and Deepsea Bergen has a contract for Statoil ending mid-2017. Well Services

• Well Services has faced increased competition and price pressure for its services globally but has been able to partly

compensate for the price pressure and lower volumes through cost reduction initiatives and increased efficiency. Well Services has further reduced its capital expenditures to enhance utilization of the equipment base. Well Services has continued its growth within well intervention services.

Market outlook

Page 12

Market outlook (cont.)

Platform Drilling and Technology

• The slowdown in the North Sea activity level has led to continued low activity level for development and upgrade
• projects. To meet this challenge the Group has continued its work to increase efficiency and reduce its cost base.

Group measures implemented to stay competitive

• The Group has reduced the cost level substantially throughout the organisation to be in a better position to compete in

the current market environment. 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 replacement of reserves and by continued spending on exploration and field-development in the main

• ffshore regions. The Group’s business segments are positioned for taking advantage of the future market

improvements.

Page 13

Financial information

183 286 341 526 927 1 088 Q2 16 Q2 15 YTD 16 YTD 15 FY 15* FY 14 73

• 155

117

• 82

78 272 Q2 16 Q2 15 YTD 16 YTD 15 FY 15* FY 14

Financial performance highlights

Odfjell Drilling reports for Q2 2016:

• Operating revenue of USD 183 million
• EBITDA of USD 73 million
• EBITDA margin of 40%
• EBIT of USD 31 million
• Net profit of USD 9 million

Page 15 Group Operating Revenues (USDm) Group EBITDA (USDm) * Restated 2015 figures

Restated P&L - (USD million) Q2 16 Q2 15 YTD 16 YTD 15 FY 15 Operating revenue 183 286 341 526 927 Other gains/losses 1 1 Share of profit/(loss) from Deep Sea Metro Ltd Group

• 264
• 277
• 269

Personnel expenses

• 73
• 123
• 145
• 230
• 382

Other operating expenses

• 38
• 54
• 79
• 102
• 197

EBITDA 73

• 155

117

• 82

78 Depreciation

• 41
• 47
• 81
• 84
• 321

Operating profit (EBIT) 31

• 202

36

• 166
• 242

Share of profit (loss) from other joint ventures 1

• 1

1

• 3
• 28

Net financial items

• 20
• 13
• 38
• 24
• 64

Profit/(loss) before tax 13

• 216
• 1
• 193
• 335

Income taxes

• 4
• 8
• 9
• 14

16 Profit/(loss) for the period 9

• 224
• 10
• 206
• 319

Group summary financials

Condensed consolidated income statement

Page 16

Restated Condensed P&L - (USD million) Q2 16 Q2 15 YTD 16 YTD 15 FY 15 Operating revenue 122 202 220 353 621 EBITDA 65 100 103 177 300 Depreciation and impairments

• 33
• 37
• 64
• 64
• 281

EBIT 32 63 39 113 19 Book value rigs 1 949 2 161 1 949 2 161 2 159 EBITDA-margin 53,1 % 49,4 % 46,7 % 50,0 % 48,4 % EBIT-margin 26,1 % 31,0 % 17,5 % 31,9 % 3,1 % Share of group revenue1 64,7 % 69,6 % 62,4 % 66,0 % 64,9 % Share of group EBITDA1 85,4 % 88,3 % 83,6 % 87,1 % 83,5 % Share of group EBIT1 95,6 % 95,9 % 97,6 % 95,3 % 50,4 %

1) Before group eliminations and corporate overheads

MODU

Page 17

Key Financials (USD million)

Segment reporting

• MODU financials

Figures above do not include pro-rata 40% of Deep Sea Metro.

122 202 220 353 621 Q2 16 Q2 15 YTD 16 YTD 15 FY 15*

Revenues

65 100 103 177 300 Q2 16 Q2 15 YTD 16 YTD 15 FY 15*

EBITDA

* Restated 2015 figures

Condensed P&L - (USD million) Q2 16 Q2 15 YTD 16 YTD 15 FY 15 Operating revenue 37 51 75 105 197 EBITDA

• 3
• 1
• 6

4 Depreciation and impairments

• 1
• 2
• 3
• 3
• 5

EBIT

• 2
• 5
• 3
• 9
• 1

EBITDA-margin

• 0,6 %
• 5,5 %
• 1,2 %
• 5,5 %

2,2 % EBIT-margin

• 4,1 %
• 9,4 %
• 4,6 %
• 8,5 %
• 0,4 %

Share of group revenue1 19,7 % 17,4 % 21,3 % 19,5 % 20,6 % Share of group EBITDA1

• 0,3 %
• 2,4 %
• 0,8 %
• 2,9 %

1,2 % Share of group EBIT1

• 4,6 %
• 7,2 %
• 8,8 %
• 7,5 %
• 2,0 %

1) Before group eliminations and corporate overheads

Drilling and Technology

Page 18

Key Financials (USD million)

Segment reporting

• Drilling & Technology financials

37 51 75 105 197 Q2 16 Q2 15 YTD 16 YTD 15 FY 15

Revenues

• 3
• 1
• 6

4 Q2 16 Q2 15 YTD 16 YTD 15 FY 15

EBITDA

Condensed P&L - (USD million) Q2 16 Q2 15 YTD 16 YTD 15 FY 15 Operating revenue 29 38 58 78 138 EBITDA 11 16 21 32 55 Depreciation and impairments

• 8
• 9
• 17
• 18
• 35

EBIT 3 7 4 14 20 Book value of equipment 117 141 117 141 129 Cost price for equipment in use 377 388 377 388 372 EBITDA-margin 38,6 % 42,2 % 36,7 % 41,3 % 39,6 % EBIT-margin 10,2 % 19,5 % 7,7 % 18,6 % 14,3 % Share of group revenue1 15,5 % 13,1 % 16,3 % 14,5 % 14,5 % Share of group EBITDA1 14,9 % 14,2 % 17,2 % 15,8 % 15,2 % Share of group EBIT1 9,0 % 11,3 % 11,2 % 12,2 % 51,7 %

1) Before group eliminations and corporate overheads

Well Services

Page 19

Key Financials (USD million)

Segment reporting

• Well Services financials

29 38 58 78 138 Q2 16 Q2 15 YTD 16 YTD 15 FY 15

Revenues

11 16 21 32 55 Q2 16 Q2 15 YTD 16 YTD 15 FY 15

EBITDA

Restated (USD million) Q2 16 Q2 15 YTD 16 YTD 15 FY 15 Operating revenue

• 5
• 5
• 12
• 9
• 29

EBITDA

• 3
• 268
• 6
• 285
• 281

EBIT

• 2
• 267
• 4
• 284
• 281

EBIT for reportable segments 33 65 40 118 38 Corporate / eliminations

• 2
• 4
• 7
• 8
• 14

Share of profit from DSM Ltd Group

• 264
• 277
• 269

Accounting differences

3 1 2 Group EBIT 31

• 202

36

• 166
• 242

Share of profit from other joint ventures 1

• 1

1

• 3
• 28

Net financial items

• 20
• 13
• 38
• 24
• 64

Group profit before tax 13

• 216
• 1
• 193
• 335

Group – Eliminations & Reconciliation

Page 20

Group

• Eliminations & Reconciliation

Summary statement of financial position

Group statement of financial position

• Group’s gross interest bearing debt was USD 1,480 million (net
• f capitalized financing fees) at 30 June 2016.
• USD 166 million in cash and cash equivalents at 30 June 2016.
• Equity-ratio of 32% at 30 June 2016.
• The debt facility for Deepsea Atlantic and Deepsea Stavanger,

with an outstanding amount of USD 525 million at 30 June 2016, is classified as short–term debt. A firm offer to refinance this debt was received on 24 August 2016.

• Odfjell Drilling Services Ltd. was on 15 August 2016 granted a

waiver by the lenders for its non-compliance with the leverage ratio covenant as at 30 June 2016. The leverage ratio covenant will be replaced by a debt service coverage covenant hereafter. USD 326 million has in the interim been reclassified as short term debt as at 30 June 2016. Page 21

Restated Equity and liabilities (USDm) 30.06.16 30.06.15 31.12.15 Total paid-in capital 329 329 329 Other equity 454 571 463 Total equity 783 900 792 Borrowings 483 1 467 879 Post-employment benefits 37 67 43 Deferred tax liability

• 4

Other non-current liabilities 6 15 4 Total non-current liabilities 526 1 552 925 Borrowings 997 240 718 Trade payables 27 30 25 Other current liabilities 121 131 157 Total current liabilities 1 144 401 900 Total liabilities 1 670 1 952 1 825 Total equity and liabilities 2 453 2 852 2 617 Restated Assets (USDm) 30.06.16 30.06.15 31.12.15 Deferred tax asset 6 8 Intangible assets 35 38 34 Property, plant and equipment 2 069 2 307 2 131 Financial fixed assets 9 40 15 Total non-current assets 2 119 2 385 2 189 Trade receivables 144 230 178 Other current assets 25 25 48 Cash and cash equivalents 166 212 202 Total current assets 335 467 428 Total assets 2 453 2 852 2 617

Restated Cash Flow - (USDm) Q2 16 Q2 15 YTD 16 YTD 15 FY 15 Profit before income tax 13

• 216
• 1
• 193
• 335

Cash from operations 55 87 103 160 375 Interest paid

• 18
• 19
• 31
• 35
• 69

Income tax paid

• 5
• 12

21

• 23
• 34

Net cash from operations 32 56 92 102 271 Net cash used in investing activities

• 7
• 18
• 12
• 80
• 148

Net cash from financing activities

• 81
• 77
• 119
• 3
• 115

Net change in cash and cash equivalents

• 56
• 39
• 39

19 9 Cash and cash equivalents at period end 166 212 166 212 202

Summary statement of cash flow

Group statement of cash flow

Page 22

Summary Q2 2016

Page 23

• Secured long term refinancing of Deepsea Atlantic and Deepsea

Stavanger

• Earnings visibility through USD 3.0 billion order backlog
• MODU:
• Continued strong operational performance
• Fleet secured by medium- to long-term contract
• Drilling & Technology:
• Reduced engineering capacity to increase utilization and reduce cost
• Remaining platform portfolio secured by medium- to long-term

contracts

• Well Services:
• Pricing pressure offset by cost efficiency measures
• Book equity ratio of 32% and cash position of USD 166 million

at 30 June 2016

President & CEO Simen Lieungh EVP & CFO Atle Sæbø Investor relations Eirik Knudsen, eikn@odfjelldrilling.com +47 55 92 10 44/ +47 934 59 173 Next event: Q3 2016 results to be published 23 November 2016 For more information see: www.odfjelldrilling.com