q2 2016 presentation - safe drilling ltd - q2 2016 presentation.pdf · q2 2016 presentation ....
TRANSCRIPT
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 offshore 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 0 1 0 1 0
Share of profit/(loss) from Deep Sea Metro Ltd Group - -264 0 -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 -0 -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
-0
-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 0 -264 0 -277 -269
Accounting differences -0 0 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 of 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, [email protected] +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