investor presentationresources.inktankir.com/ades/ades-irp-1h2017-final.pdf · ades international...

Investor PresentationSeptember 2017

2ADES INTERNATIONAL HOLDING | Investor Presentation

Investment Case

Cycle-Proof Business Model

Highly Experienced

Management Team

Favourable Industry

Fundamentals

Solid Growth Plans

Lean Cost Structure

Impeccable HSE Record

Strong O&G Competitor in

the Region


25 Years 2012

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42 Years 2012 20 Years 2017 10 Years 2016

Highly Experienced Management Team

• Senior Vice President, Invensys Operations Management (Now Schneider Electric)• Senior Vice President, Global Delivery• Director, Global Engineering Excellence Centers• Ph.D. Systems Engineering and Control, Case Western Reserve University, USA • M.Sc. Electrical Engineering and Control, Faculty of Engineering, Cairo University,

Egypt• B.Sc. Electrical Engineering, Faculty of Engineering, Cairo University, Egypt

Years of Experience Year Joined ADES

Mohamed KhalilVP Operations

Ahmed El-KhatibChief Financial Officer

Omar SalehChief Strategy Officer

Dr. Mohamed FaroukChief Executive Officer

• CEO, Power Bridge Resources Group LTD

• Senior Commercial Manager Africa, Dow Chemical Company

• Commissioning Lead Projects Engineer, BG Group plc

• MBA from Stanford University, USA

• Business Development Director for Middle East, BP

• Head of Global Projects Organisation, BP

• MSc in Computer Science, Howard University, USA

• MBA from the American University in Cairo, Egypt

• Branch Manager, Northern Offshore Drilling Company

• Middle Manpower & Workforce Planning Manager, Transocean

• B.Sc. in Mechanical Engineering from Cairo University, Egypt


ADES at a Glance

Group Overview Geographical Footprint

USD 88 MNH1 2017 Revenues▲46% YoY

USD45 MNH1 2017 EBITDA(1)

▲43% YoY

51%H1 2017 EBITDA (1) Margin

90%+Av. Fleet Utilization

Since 2012

0.45Incident Rate

Since Inception

>1,200Workforce

Note (1): Adjusted EBITDA - operating profit for the year before depreciation and amortization, foreign exchange (gain)/loss, provision for impairment of accounts receivable, provisions and impairment of assets under constructionNote(2): Pre-qualifications in Kuwait and UAE are currently in progress

Leading MENA-based O&G Service Provider

ADES International Holding (“ADES” or the “Group”) is a leading oil & gasdrilling and production services provider in the Middle East and North Africa(“MENA”) that focuses on creating value for E&P players in the region

The Group’s constantly evolving portfolio of services primarily includesoffshore and onshore contract drilling or workover and production services

Differentiated Low-Cost Business Model

ADES specializes in acquiring and refurbishing legacy ‘fit for purpose’ offshoreassets which (among other cost-saving measures) enable the Group to offercompetitive rates to its clients

Backed by a highly capable in-house refurbishment and maintenance team,the Group benefits from a highly-skilled, low-cost, largely Egyptian workforce

Customer-Centric Approach

As a service company, the Group’s business revolves around providing tailoredsolutions and superior service to its clients characterised by its commitment toglobal industry standards and ever-expanding services & solutions

Algeria2 onshore drilling rigs

Egypt7 offshore drilling rigs1 MOPU

KSA3 offshore drilling rigs

AlgeriaEgypt

KSA

KSA EgyptUAE AlgeriaMexico Kuwait India

Pre-qualifications (2)

The Group operates in largely pre-selected markets with natural barriers to entry with a focus on low risk, non-harsh shallow water environments

Iraq

Group Highlights (H1 2017)


Offshore jack-up barge used to provide offshore support

services to GUPCO

Accommodation, catering and equipment rental to its

offshore rig clients

Mobile offshore platform equipped with production

and process facilities in conjunction with an FSO (used as a storage unit)

Offshore & onshore drilling & workover services leased

at operating day ratesDescription

Location

Onshore Offshore

KSA EgyptAlgeria Egypt Egypt KSA Egypt

ADES Services

Drilling & Workover MOPU Jack-up Barge & Projects

Other Services

Note(1): Excludes Headquarters employees

877 120 50 n/aEmployees(1)

Revenue Contribution in 1H2017

77.2% 14.6% 6.2% 2.0%


Ramped up asset base, expanded geographically

Perfected business model of securing legacy assets and operating with low cost structure

Offshore penetration

Early formation

Corporate Strategy Evolution

1997 - 2003 2004 - 2010 2011 2012 2013 2014 2015 2016 2017+

Scale up operations and introduce new offerings in existing markets, expand geographically

1 2 3 4 6 11

USD 10 MN

USD 134 MN13.4x Revenue Growth

Onshore Drilling & Workover

Jack-up Barge

ROV

Offshore Drilling & Workover

Projects

MOPU

Denotes continuing services Denotes discontinued services

Denotes number of Chartered Rigs


Lean Cost Structure

Optimized Cost Structure Across all Operating Environments

Allowing the Group to operate its fleet within some of the lowest production cost offshore oil fields

Onshore Shallow Water Deep Water Ultra Deep Water

Onshore Rigs Jack-up Rigs(Up to 400ft)

Comprehensive Market IntelligenceGained from the Group’s robust relationships with multiple stakeholders including rig owners, brokers, regulators and banks, consistently seeking opportunities for assets

Streamlined Decision-making ProcessAbility to swiftly act on opportunities allowing the Group to outpace competition in any auction process and achieve attractive pricing for legacy rigs in good condition

In-house Technical CapabilitiesThe Group manages the refurbishment and maintenance jobs in-house as opposed to appointing third party service providers to perform a standard turn-key project

1 2 3

Semi-submersible Rigs(<10,000ft) Drill ships

(>10,000ft)

Admarine II Asset Acquired 2004 34%

Admarine III Asset Acquired 2012 22%

Admarine IV Asset Acquired 2013 16%

Admarine V Asset Acquired 2013 22%

Admarine I Asset Acquired 2014 52%

Admarine VI Asset Acquired 2015 29%

Admarine 8 Asset Acquired 2015 23%

Admarine 88 Asset Acquired 2016 18%

Admarine 261, 262, 266 Asset Acquired 2016 29%

Acquisition of Legacy Offshore AssetsAcquisitions & associated refurbishment cost c. 20-50% of the price of similar new rigs

% of Ref. Price(1)

Note(1): Reference prices for Admarine I,II,III,IV,V and VI as of July 2015, Admarine 8 as of November 2015, Admarine 88 as of December 2015 and Admarine 261,262 and 266 as of August 2016

CORE NON-CORE


Health, Safety and Environmental Responsibilities

HSE Overview HSE Incident Statistics

2016 - Date

Total Working hours (‘000) 2,307

Recordable injury rate (200,000 man-hours) 0.45

IADC worldwide RECRD incident rate up to date 0.58

• As an oil and gas service provider, ADES is committed to complying with occupational health, safety and environmental care standards as a sign of its commitment to excellent quality service

• The HSE Management System provides ongoing identification, prioritization and control of any risk that may arise. This system establishes a continuous improvement process for the implementation of the HSE policy, leadership expectations and core values

• The system has five distinctive interrelated elements:

Improve Plan

Perform

Measure

Act

Environmental Responsibilities

Consistent internal

policies and procedures review to

ensure effectiveness

Elimination of potential incidents through

management controls and

risk assessments

Reduction of materials

consumption to limit waste

generation

Procedure and input

adjustments with the aim of

minimizing environmental

impact

Developed and implemented

an Environmental Management System to be

followed by all employees

1 2 3 4 5

The Waste Management program ensures that ADES complies with international and local regulations and that standard waste management practices are implemented. Periodical internal audits are performed to monitor the correct implementation of waste management procedures


IOCs

NOCs

Independents

ABS

ISO Certification

Company Pre-Qualifications

Memberships

Strong O&G Competitor in the Region

ADES’s diverse client relationships have been forged by seeking pre-qualification status to

provide drilling and workover services well before a contract is secure, thereby creating a significant

barrier to entry.

Solid Track RecordRanked #3 Offshore Jack-Up Driller in MENA (1)

High Profile Client BaseComprising a diverse range oil companies

World Class QualificationsAdhering to Global best practice

Note (1): By number of rigs; Note / Source: Clarkson's Research

4

4

4

5

6

6

7

9

10

11

11

11

15

18

43Wells Drilled

ABS Class Certificate

The Group’s operational drilling

offshore fleet is either ABS certified or

currently pending recertification [2]

ISO 9001:2008 Certification

ISO 29001:2012 Certification

>90%Fleet utilization vs. market average of 67%

Note (2): Only three rigs are pending recertification


The region is characterized by low extraction costs, non harsh environments and the pre-dominance of drilling intensive legacy fields

Favourable Industry Fundamentals

Project Breakeven Price Ranges

0

10

20

30

40

50

60

70

80

90

100

110

120

Canada TarSands

Barents Sea AngolaDeepwater

Australia US Tight Oil NigeriaDeepwater

North Sea Brazil Pre-Salt UAE Egypt Egypt Saudi Arabia UAE Kuwait Saudi Arabia

Onshore

Offshore

USD/bbl Range

NB: Breakeven prices can vary widely within areas, countries and even basins depending on factors of geology, geography and industry regulations

CORE MARKETS2017YTD Average Brent Price: USD 55/bbl


Pre-Qualification Program

\

Country Client

ENI

Kuwait Oil Company

Kuwait Oil Company (KOC)

Abu Dhabi National Oil Company (ADNOC)

Abu Dhabi Marine Operating Co (ADMA)

Zakum Development Company (ZADCO)

Bunduq Oil Producing Company

Benefits of Pre-qualification

Strategy

• As part of the Company’s strategy to continuously expand its operations and build relationships with potential clients, it is always seeking to pre-qualify with key operators in current and target markets

• The pre-qualification status with Saudi Aramco in June 2015 – a process that lasted nearly 18 months, was instrumental in ADES being able to effectively compete and finalize the acquisition of the 3 offshore rigs from Hercules in November 2016 that were contracted to Saudi Aramco and allowed ADES to expand into the Saudi Arabian market

Prequalification in Progress

Current Qualified Status

Ensures ADES is invited to future tenders

Enhances ability to diversify revenue

stream and reduce client concentration

Enables ADES to implement asset-light model to expand into

deep water opportunities and

potentially, high spec rigs

Country Client / Potential Client Completion Date

SONATRACH June 2014

Halliburton September 2016

Saudi Aramco June 2015

Oil & Natural Gas Co (ONGC) Feb. 2016

MDOC November 2014

Pemex Apr. 2016

Neutral Zone h Al Khafji Joint Operations (KJO) March 2017

Schlumberger July 2017


Growth Pipeline

EGYPT EGYPT ALGERIA

Drilling Rig

ADM 8 (1) ADM 88 ADES 1 Shipyards

Type • Offshore Drilling Jack-up • Offshore Drilling Jack-up • Onshore Drilling Rig• Newbuild Jack-up Drilling Rigs

(including high-specs)

Current Status • Currently owned by ADES and has a firm commitment starting H1 2018

• No major CAPEX expected prior to deployment

• Currently owned by ADES and has a firm commitment starting H12018

• No major CAPEX expected prior to deployment

• Currently owned by ADES and has a firm commitment starting H12018

• Awaiting results of ongoing tenders in Algeria

• Signed term sheets with leading South East Asian shipyards 2017

• ADES retains exclusive rights to market the drillship in Egypt

Expected Start Date • H1 2018 • H1 2018 • H1 2018 • TBD

Expected Tenor • 6 months (+3 optional) • 3 months (+3 optional) • 2 years • 3 years (purchase option)

Asset-Light Model


Key Financial Highlights

H1 2017 Financial Highlights

Revenue

USD88 MN

Net profit

USD22 MN

EBITDA

USD45 MN

▲46% YoY

▲43% YoY

Backlog

USD430 MN

EBITDA MARGIN

51%

▲19% YoY

NP MARGIN

25%

Revenue • Driven by high utilization of the Group’s employed rigs,

including the full impact of new rigs in the KSA and Algeria and the full six-month impact of introducing MOPU services

Normalised net profit • Excludes the one-time USD 4.6 million IPO expense in

1H2017

EBITDA• Growth in EBITDA related to:

− Growth of the business− Deployment of new rigs− Maintaining Group’s margins on the back of

stringent cost-saving measures− Devaluation of EGP component of administrative

costs


Key Takeaways

Maximise utilization of existing rig fleet through:• Delivery of existing backlog – though contract

extension and delivery of the backlog• Growing backlog – though participation in tenders

around the MEA Region incl (Egypt, KSA, Kuwait, Iraq, Algeria)

• Entry into new markets through Asset Light Model • Agreements with shipyards for high spec rigs

(total of eight)• Partnerships with leading rig companies for

deepwater drilling (6th Gen)

Key Success Pillars

ADES business model achieved tremendous growth and market leadership in offshore rig market over the last 10 yrs including the recent downturn in O&G sector, such success is founded on:

Strong track record of delivering safety, operational, and

financial performance

Strong Balance Sheet Lean Cost Structure Smart Acquisitions Strong and capable team

Well Positioned for Further Growth

• Access to cash through the successfully executed IPO, in addition to leveraging the balance sheet through further debt will enable the company to execute further acquisitions

• A number of transactions are being evaluated with a focus on growing shareholder value

Organic Inorganic


APPENDIX


Income Statement

Note (1) & (2) : Does not include depreciation expense; Note (3): Adjusted EBITDA means operating profit for the year before depreciation and amortization, foreign exchange (gain)/loss, provision for impairment of accounts receivable, provisions for other claims and impairment of assets under construction; Note (4): Includes provisions, impairment of trade receivables, impairment of assets under construction, loss on disposal of property and equipment, non recurring income (/expense) and other income; Note (5): Net Profit for the year before non-recurring income (H12017: USD 4.6 million IPO expense)

USD ('000) 2014 2015 2016 1H 2016 1H 2017 YoY Growth (1H '16-'17)

Revenue 75,172 101,039 134,116 60,351 87,846 46%

Cost of Revenue (1) (32,373) (41,938) (44,976) (20,597) (32,568)

Gross Profit 42,798 59,101 89,140 39,754 55,278 39%

Margin 56.9% 58.5% 66.5% 65.9% 62.9%

G&A (2) (9,539) (16,634) (18,296) (8,193) (10,244)

Adjusted EBITDA (3) 33,259 42,467 70,844 31,562 45,034 43%

Margin 44.2% 42.0% 52.8% 52.3% 51.3%

Depreciation (6,752) (10,457) (18,460) (7,888) (14,290)

EBIT 26,507 32,010 52,384 23,674 30,744 30%

Margin 35.30% 31.70% 39.10% 39.23% 35.00%

Interest (2,403) (4,414) (9,428) (3,879) (8,281)

FX Gain / (Loss) (575) (28) 3,402 1,003 136

Other (4) (300) (3,164) (5,061) (2,074) (5,955)

EBT 23,229 24,403 41,297 18,724 16,644 -11%

Margin 30.9% 24.2% 30.8% 31.0% 18.9%

Investment Income - 1,225 - - -

Taxes - - (3,284) (295) 687

Net Profit 23,229 25,628 38,013 18,429 17,331 -6%

Margin 30.9% 25.4% 28.3% 30.5% 19.7%

Normalised Net Profit(5) 23,229 25,628 37,919 18,429 21,894 19%

Margin 30.9% 25.4% 28.3% 30.5% 24.9%


USD (‘000) Dec-2014 Dec-2015 Dec-2016 Jun-2017

Cash and Cash Equivalents 13,656 25,350 5,193 163,480 Accounts Receivable 17,601 16,841 50,789 71,316Other Receivables 7,806 10,084 10,101 18,684Accrued Revenue - 713 17,587 11,135Dividend Receivable & Advance Payments - 4,140 4,464 6,425Inventory 4,844 7,167 17,777 19,079Due from Related Parties 1,736 199 277 371.83Total Current Assets 45,643 64,495 106,188 290,491

Net Fixed Assets 98,364 184,954 290,661 287,619Investments & Intangible Assets 31 1,974 1,965 1,961Total Non-Current Assets 98,396 186,928 292,627 289,579

Total Assets 144,038 251,423 398,815 580,070

Bank Overdraft 13,277 5,442 15,449 20,624CPLTD 15,846 - 30,356 35,911Account Payables 11,771 14,229 27,916 29,641Accrued Expenses & Other Credit Balances 3,591 3,370 16,092 14,816Provisions 14 1,514 2,934 1,877Due to Related Parties 141 1,885 4,082 6,862Dividend Payable 457 10,602 7,149 7,028Total Current Liabilities 45,096 37,040 103,977 116,760

Long Term Debt 25,114 130,767 189,930 172,543Total Non-Current Liabilities 25,114 130,767 189,930 172,543

Paid-up Capital - - 1,000 42,203Additional Paid in Capital - - 30,900 158,224Merger reserve (1) 32,000 32,000 (6,521) (6,521)Retained Earnings 40,100 48,617 75,048 92,379Legal Reserves 1,728 2,999 4,481 4,481Total Shareholders Equity 73,829 83,616 104,908 290,767

Total Shareholders Equity and Liabilities 144,038 251,423 398,815 580,070

Balance Sheet

Note (1): Represents the difference between consolidation paid under the reorganization plan and nominal value of acquired shares


Group Fleet

Fleet Type Date of Acquisition Year of Manufacture Max. Working Water Depth (ft)

Egypt

Admarine I MOPU 2014 1982 150

Admarine II Jack-up barge 2004 1983 150

Admarine III Jack-up rig 2012 1974 250

Admarine IV Jack-up rig 2013 1976 307

Admarine V Jack-up rig 2013 1981 250

Admarine VI Jack-up rig 2015 1976 250

Admarine 88 Jack-up rig 2016 1974 350

Admarine VIII Jack-up rig 2015 1981 300

Saudi Arabia

Admarine 261 Jack-up rig 2016 1979 250

Admarine 262 Jack-up rig 1982 250

Admarine 266 Jack-up rig 1979 250

Algeria

Ades 2 Onshore drilling 2015 2016 n/a

Ades 3 Onshore drilling 2016 2016 n/a

Ades 1 Onshore drilling Q1 2017 2007 n/a


20 Years 2009 33 Years 2016 12 Years 2015 25 Years 2016 16 Years 2015 31 Years 2013 8 Years 2016

42 Years 2012 36 Years 2013 20 Years 2017 10 Years 2016 22 Years 2009 26 Years 2014 10 Years 2006

Highly Experienced Management Team

Dr. Farouk has been the driving force behind ADES’s cycle-proof strategy and its regional expansion

Dr. Mohamed FaroukChief Executive Officer

25 Years

2012

• Ph.D. Systems Engineering and Control, Case Western Reserve University, USA

• M.Sc. Electrical Engineering and Control, Faculty of Engineering, Cairo University, Egypt

• B.Sc. Electrical Engineering, Faculty of Engineering, Cairo University, Egypt

• Senior Vice President, Invensys Operations Management (Now Schneider Electric)

• Senior Vice President, Global Delivery• Director, Global Engineering Excellence

Centers

Years of Experience Year Joined ADES

Mohamed KhalilVP Operations

Shoukry El SayedVP Supply Chain

Ahmed El-KhatibChief Financial Officer

Omar SalehChief Strategy Officer

Ahmed MohyClient Care Director

Aly MakhloufInternational Markets

Director

Gamal Mohamed Ahmed

HR Director

Amr WafiqHSE Director

Ahmed SaafanMOPU Director

Morcos WilliamLegal Director

Ayman RagaiChief Information Officer

Mohamed SaadMaintenance Director

Mahmoud HabashiInternal Audit & Quality

Manager

Hussein BadawyInvestor Relations Officer


Middle East O&G Industry Overview

Key Market Characteristics

Active Jack-Up Deployment & Utilization

The Middle East is the leading oil-producing region globally with almost 50% of the world’s proven reserves. The sector constitutes a significant share of GDP and is a major source of FDI

34%

20%

20%

9%

9%8% Middle East

North America

Europe & Eurasia

S. & Cent. America

Asia Pacific

Africa

48%

19%

13%

9%

8%3%Middle East

S. & Cent. America

North America

Europe & Eurasia

Africa

Asia Pacific

Distribution of Proven Reserves

Distribution of Oil Production

Source: BP Statistical Review - 2017 Source: BP Statistical Review - 2017

25%

64%

53%

55%

54%

68%

-100%

-80%

-60%

-40%

-20%

0%

20%

40%

60% – Jack-Up Utilization

Source: Clarksons Research; Wood Mackenzie

The Middle East is the only region to witness rig growth since 2008 and enjoys the highest Jack-Up utilization rate

N. America

Asia Pacific

W. Africa

N.W. Europe

S. America

Middle EastRig Growth (‘08-Present)


Environmental Responsibilities

HSE Overview

ADES Waste Management Program

The Waste Management program ensures that ADES complies with

international and local regulations and that standard waste management

practices are implemented

The Group ensures its facilities are in compliance with local and international

regulations.

Periodical internal audits are performed to monitor the correct

implementation of waste management procedures

Procedures are continuously improved upon with the aim minimizing

environmental & social impacts

Consistent internal policies and procedures review to

ensure effectiveness

Elimination of potential incidents through

management controls and risk assessments

Reduction of materials consumption to limit waste

generation

Procedure and input adjustments with the aim

of minimizing environmental impact

Developed and implemented an Environmental

Management System to be followed by all employees

1 2 3 4 5


Corporate Social Responsibility Initiatives

Medical The program provides medical equipment

& supplies to hospitals, operations funding, free monthly check-ups and tests

Program Achievements 2016

46 medical operations

65 monthly medical check-ups with treatments

Education & Entertainment This program mainly focuses on literacy

combat programs, school supplies and other educational activities and exhibitions


300 school bags with utilities

200 child school fees

Food Supply The program provides food supplies and meals for

orphans as well as monthly meat supply and distribution in impoverished areas

Ramadan food packages


5,000 Ramadan boxes delivered

275,500 people served for Iftar

350 monthly meals provided

Meat distributed to over 9,000 people per month

Social Endeavours The program aids people through different social

solidarity activities such as monthly aids, school and rent fees, clothes exhibitions and houses restorations


Thank You

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