investor presentation 2016 kca deu… · 2 business update 3 business unit financials 4 group...

www.kcadeutag.com

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 2016

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

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 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.

2

1 Q4 Key Highlights

2 Business Update

3 Business Unit Financials

4 Group Results

5 Summary

Agenda

Q4 and Full Year Key Highlights

KCA Deutag is a leading international drilling and engineering company working

onshore and offshore with a focus on safety, quality and operational performance

1 2016 full year revenue and EBITDA of $1,252.2m (2015: $1,668.8) and

$262.9m (2015: $289.8m) respectively

2 Q4 2016 Group revenue of $287.6m (Q4 2015: $396.0m) and Q4 2016

EBITDA of $60.1m (Q4 2015: $79.1m) respectively

3 Contract backlog of $5.3bn (at 1 February 2017) across a blue chip

customer base

4 Positive cash generation of over $100m with available liquidity of $262m at

31 December 2016

3

Market Overview

4

KCAD operates in low breakeven oil price environments

International vs. North American drilling markets

International markets North America

Commodity price • Less dependency on commodity prices • High dependency on commodity prices

• Gas heavy market with depressed/volatile Henry Hub

prices

Volatility • Low operating cost base

• Rig count largely inelastic to price downturns

• High operating cost base

• High sensitivity to price downturns

Supply growth

drivers

• Supply critical to national economy and often driven by

NOCs

• Supply of less significance to government revenue

Contract duration • Customers willing to ensure rig availability through long

term contracts

• Contract durations and terms more favourable to

customers

15

32

41 42 42 43

48

55

56

0

10

20

30

40

50

60

70

80

Source Rystad Energy (May-16)

KCAD core markets

0 10 20 30 40 50 60 70 80 90 100

Onshore Middle East

Shelf

Russia

Onshore

Row

Onshore

Deepwater

Extra

Heavy Oil

Ultra

Deepwater

North

American

Shale

Weighted Average Breakeven Oil Price

($/bbl)

Cumulative Liquids Production in 2020 (MMbpd)

Oil Sands

Current Brent price

Business update

5

Bentec Offshore services RDS

1 The % split of LTM EBITDA is calculated using total group EBITDA (including MODUs) of $281.4m (before corporate costs

of $18.5m). Note: MODUs LTM EBITDA of $16.6m represented 5.9% of total EBITDA.

Integrated land drilling Offshore drilling services & design

• Most of our International

operations continue to

perform well despite

market conditions

• Activity levels remain

lower in the North Sea

and Angola

• Recent contract wins

provides for long term

stable backlog

• Reduced capex spend by

E&P companies

continues to impact

activity

• A focus on continued cost

savings to preserve low

level positive EBITDA

• All activity now brownfield

with few opportunities in

greenfield

• After sales remains

stable with a large

increase in component

activity

• 21 Top Drives now

secured for 2017 backlog

• Continued focus on cost

savings

• Strong activity in Oman

and Russia

• Utilisation in Nigeria,

Kurdistan and Algeria

remains weaker

• Utilisation now picking up

in Europe

$186.1m / 66.1% of total¹ $(1.2)m / (0.4)% of total¹ $74.8m / 26.6% of total¹ $5.1m / 1.8% of total¹

Land drilling Bentec

6

Group margin performance

Houston

Baku

London Bad

Bentheim

Tyumen

Nizwa

St.

Johns

Bergen

Dubai

Land Drilling Offshore Services RDS offices Bentec Regional offices

KCAD operations are diversified across global markets

Aberdeen (HQ)

Map excludes work over land rigs, defined as being below 900HP.

Map shows position at 1 February 2017.

PRESENCE IN KEY AREAS

North Sea

/Norway

26 Plat.

Europe &

Caspian

8 Rigs

Caspian

7 Plat.

Russia

16 Rigs

Middle

East

17 Rigs

Angola

2 Plat.

Africa

11 Rigs

Russia

Sakhalin

3 Plat.

Brunei

1 Rig

129

58 53 43

18

0

30

60

90

120

150

Europe NorthAfrica

MiddleEast

North Sea Russia

Ye

ars

LTM Q4 2016 EBITDA split by region

7

Canada

1 Plat.

8

1Total Recordable Incident Rate per 200,000 man hours. This is a rolling 12 month average. 2 KCAD Total Recordable Incident Rate is directly comparable with IADC’s Total Recordables (RCRD) statistic.

Note: IADC stands for International Association of Drilling Contractors.

• KCA Deutag has continued to achieve satisfactory safety results

• The group continues to perform ahead of industry peers in the International Association of Drilling

Contractors (IADC)

• Maintaining high safety and operational standards is a key priority for the business

Health, safety and environmental performance

KCAD TRIR at

end of Q4 2016

was 0.261 injuries

per 200,000 man

hours worked

IADC industry average

0.602 for 2015

9

Backlog Status

Backlog figures exclude revenue generated in the year to date.

Total contract backlog as at 1 February 2017

Contract backlog by BU as at 1 February 2017

Total contract backlog as at 1 November 2016

Contract backlog by BU as at 1 November 2016

10

Land fleet utilisation

Historical and forecast utilisation

Contracted utilisation as of 1st February 2017, adjusted to include additional potential contribution from 5 new Russian rig

contracts (additional 0.4%, 6.6%, 9.2% and 8.8% contracted utilisation in H1 2017, H2 2017, H1 2018 and H2 2018)

Contract Platform

Client Country Assets Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 end date status #

Exxon Canada Hebron M ar-46 Under Construction 1

Stato il Norway CAT J (2) M ay-36 Under Construction 2

Exxon Angola Kizomba (2) Jan-27 Stacked 2

AIOC Azerbaijan Azeris, SD, DWG, Cop & Chirag Nov-24 Operating 7

Nexen UK Scott Feb-23 Operating 1

Stato il Norway Oseberg's (4) & Gulfaks (3) Oct-22 Operating 7

Stato il Norway Pipe pool management Oct-22 Active mgmt. contract

Stato il Norway Kvitebjorn Oct-22 Operating 1

CNR UK Ninian's (3) Tiffany Nov-21 Operating / Stacked 1 /3

SEIC Russia LA, PA & PB M ay-21 Operating 3

Total UK Alwyn M ar-20 Stacked 1

Total UK Dunbar M ar-20 Stacked 1

Exxon Norway Ringhorne Dec-17 Stacked 1

COP UK Britannia Jul-17 Stacked 1

Taqa UK Cormorant A & N, Tern, Eider & Harding Jul-17 Stacked 5

Enquest UK Thistle & Heather Apr-17 Operating / Stacked 1 /1

2017 2018 2019

11

Robust platform services contract backlog @ 15 February

Contracts have been extended or renewed since last call

12

• Despite tough market conditions the land business has delivered strong financial results

and is significantly ahead of the prior year EBITDA

• Activity levels remain robust in Russia and Oman

• We continue to experience weaker market conditions in Nigeria, Kurdistan and Algeria due

to weaker utilisation

• Significant increase in tendering activities

• Utilisation for the quarter of 58%, which is consistent with the prior quarter

Financial Performance to 31 December 2016

Land Drilling

Q4 2016 Q3 2016 Q4 2015 Q4 2016 Q4 2015

Result Result Result YTD YTD

$m $m $m $m $m

Revenue 133.6 135.2 157.7 569.6 600.7

EBITDA (post support allocation) 46.7 43.8 55.4 186.5 164.2

Margin 34.7% 32.4% 35.1% 32.7% 27.3%

Bentec

13

• Revenues and EBITDA significantly lower than Q4 2015, but has improved revenue

compared to the prior quarter

• Improved activity during Q4 with a marked increase in tender activity

• Increase in After Sales and 21 Top Drives now secured for 2017 backlog

• Continued focus on cost savings


Q4 2016 Q3 2016 Q4 2015 Q4 2016 Q4 2015


$m $m $m $m $m

Revenue 16.5 12.4 43.3 75.4 235.4

EBITDA (post support allocation) (2.0) (2.2) 2.3 (0.8) 20.7

Margin -12.2% -17.8% 5.2% -1.1% 8.8%

Offshore Services

14


• Strong performance despite challenging market conditions

• Lower activity levels continued in Angola and the North Sea

• Cat J and Hebron projects continuing on schedule to commence operations mid-2017

• Recent contract wins provide for stable long term backlog

Q4 2016 Q3 2016 Q4 2015 Q4 2016 Q4 2015


$m $m $m $m $m

Platform Services

Revenue 131.0 121.2 159.6 524.2 686.8


Margin 14.6% 14.4% 15.2% 14.3% 13.0%

MODUs

Revenue 0.0 0.8 18.2 29.4 85.4

EBITDA (post support allocation) (0.2) 1.2 (0.3) 16.7 22.3

Margin 0.0% 140.8% -1.7% 56.5% 26.2%

Offshore Services

Revenue 131.0 122.0 177.8 553.5 772.2


Margin 14.5% 15.2% 13.5% 16.5% 14.5%

RDS

15


• All activity now brownfield with few opportunities in greenfield

• Reduced capex spend by E&P companies continues to impact activity

• We continue to manage costs in line with project activity

Q4 2016 Q3 2016 Q4 2015 Q4 2016 Q4 2015


$m $m $m $m $m

Revenue 14.4 16.9 31.3 75.3 168.1

EBITDA (post support allocation) (0.3) 1.8 (0.5) 5.1 15.8

Margin -2.4% 10.9% -1.4% 6.8% 9.4%

Group Results Financial Performance to 31 December 2016

16

Revenue and EBITDA ($m)

Q4

2016

$m

Q3

2016

$m

Q4

2015

$m

FY

2016

$m

FY

2015

$m

Revenue from business units 295.7 286.5 410.2 1,274.4 1,776.9

Eliminations (8.0) (2.9) (14.2) (22.2) (108.1)

Total third party revenue 287.7 283.6 396.0 1,252.2 1,668.8

EBITDA from business units 63.4 62.0 81.2 282.4 312.5

Eliminations 0.2 (0.1) (0.1) (0.3) (1.5)

Corporate costs/other (4.6) (5.1) (4.0) (18.9) (18.4)

Exchange 1.1 (0.4) 2.0 (0.3) (2.8)

Total EBITDA 60.1 56.4 79.1 262.9 289.8

Cash flow and working capital Financial Performance to 31 December 2016

17

Working Capital2

9

1Denotes the effect of foreign exchange rate changes on cash and bank overdrafts. 2Deltas denote current quarter working capital movement

Free Cash Flow

1

Q4 2016 Q3 2016 Q4 2015 2016 2015

$'m $'m $'m $'m $'m

Cash generated from operations 87.1 54.0 68.6 281.5 293.6

Tax paid (6.4) (9.3) (13.7) (38.6) (49.6)

Cash flow from operating activities 80.7 44.7 54.9 242.9 244.0

Capital expenditure (15.1) (15.3) (24.9) (105.6) (128.0)

Proceeds from sale of Fixed Assets 1.0 0.8 9.7 61.6 13.9

Interest received 5.4 5.1 5.8 21.1 19.5

Other 0.0 0.2 (1.9) 0.0 0.0

Cash flow from investing activities (8.7) (9.2) (11.3) (22.9) (94.6)

Interest paid1 (50.5) (13.2) (50.7) (127.3) (125.7)

Foreign exchange 10.0 (0.7) (3.3) 20.4 (6.6)

Dividend paid to minority shareholders 0.0 (0.5) 0.0 (0.5) 0.0

Acquisition of non-controlling interests 0.0 0.0 0.0 0.0 (25.0)

Net Cash flow before debt

drawdown/(repayment)31.5 21.1 (10.4) 112.6 (7.9)

Drawdown/(repayment) of debt and

debt issuance costs(8.1) (8.0) (1.9) 51.4 (22.2)

Net cash flow 23.4 13.1 (12.3) 164.0 (30.1)

18

Capital structure Net leverage as at 31 December 2016

1 Based on Q4 2016 LTM EBITDA of $263m. 2 Revolver is split $75/$175m non cash/cash, the amount shown represents the cash element. 3Facility and Recovery ratings shown as at March 2016

Utilisation

31stDecember 2016 Coupon Maturity

Facility

Rating3

Recovery

Rating3 Net Leverage1

Revolver ($250m)2 19.4 L+400 May-19 Caa1/CCC+ 3/3 0.07x

Senior Secured Term Loan 363.3 L(100)+525 May-20 Caa1/CCC+ 3/3 1.38x

HSBC Oman Term Loan 64.0 L+400 Dec-20 0.24x

Total Bank Debt 446.8 1.70x

UK Finance Senior Secured Notes 375.0 7.250% May-21 Caa1/CCC+ 3/3 1.43x

Globe Luxembourg Senior Secured Notes 500.0 9.625% May-18 Caa1/CCC+ 3/3 1.90x

Total Institutional Debt 1,321.8 5.03x

Finance lease & other debt 5.9 - Aug-18 - - 0.02x

Gross Debt 1,327.7 5.05x

Cash 181.4 0.69x

Net Debt 1,146.3 4.36x

Closing remarks

19

• Full year EBITDA of $263m and fourth quarter EBITDA of $60m delivered in challenging market

conditions

• Backlog position of $5.3bn across a blue chip company base

• Strong HSE and operational performance recognised by customers

5m

• g liquidity position at $245m

• Increase in tendering activity across several regions providing positive outlook for 2017

• Positive cash generation of over $100m and strong liquidity position at $262m

20

Q & A [email protected]

investor presentation 2016 kca deu… · 2 business update 3 business unit financials 4 group...

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