KCA Deutag is a leading international
drilling and engineering company
working onshore and offshore with
a focus on safety, quality and
operational performance
Investor Presentation
THIRD QUARTER 2017
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.
Third Quarter Investor Presentation
Agenda
2
1 Q3 Key Highlights
2 Business Update
3 Business Unit Financials
4 Group Results
5 Summary
Third Quarter Investor Presentation
Q3 Key Highlights
3
KCA Deutag is a leading international drilling and engineering company working
onshore and offshore with a focus on safety, quality and operational performance
1 Q3 2017 Group revenue of $309.4m (Q3 2016: $283.6m) and Q3 2017
EBITDA of $54.8m (Q3 2016: $56.4m) respectively
2 Steady tendering activity for Land with a number of contract awards, and
increased activity on the new Cat J and Hebron contracts for Offshore
3 Contract backlog of $5.0bn (at 1 November 2017) across a blue chip
customer base
4 Available liquidity of $230m at 30 September 2017
5 Excellent HSE and operational performance
Third Quarter Investor Presentation
Market Overview
4
Oil Price movement from January 2016
KCAD operates in low breakeven oil price environments
15
32
41 42 42 43
48
55 56
0
10
20
30
40
50
60
70
80
Source Rystad Energy (May-16)
KCAD core markets
0 10 20 30 40 50 60 70 80 90 100
Onshore Middle East
Shelf
Russia
Onshore
Row
Onshore
Deepwater
Extra
Heavy Oil
Ultra
Deepwater
North
American
Shale
Weighted Average Breakeven Oil Price
($/bbl)
Cumulative Liquids Production in 2020 (MMbpd)
Oil Sands
Current Brent price
Third Quarter Investor Presentation
Business Update
5
RDS Offshore Services
Integrated land drilling Offshore drilling services & design
• Performance in Norway
has improved in Q3
• First CAT J has arrived
in Norway
• Long term stable
backlog continues to be
maintained
• Activity levels remain
lower in the UK and
Angola
• Hebron platform has
started drilling
• New greenfield contract
win
• Brownfield work remains
relatively steady
• Developing diversification
opportunities into non-oil
and gas sectors
• 5 new recent contract wins
• Strong activity in Oman
and Russia
• Utilisation in Nigeria and
Kurdistan remains weak
• Algeria activity weaker
however increased
tendering activity
• Europe continues to show
signs of recovery
• New rig build contract
secured
• Component sales
revenue improved in Q3
• After Sales remains
steady with stable outlook
$168.8m / 72.3% of total¹ $(1.5)m / (0.6)% of total¹ $65.7m / 28.1% of total¹ $0.2m / 0.1% of total¹
Land Drilling Bentec
1 The % split of LTM EBITDA is calculated using total group EBITDA of $233.3m (before
corporate costs of $17.5m)
Third Quarter Investor Presentation
Group Margin Performance
6
Third Quarter Investor Presentation
KCAD Operations Are Diversified Across Global Markets
7
PRESENCE IN KEY AREAS
129
58 53 43
18
0
30
60
90
120
150
Europe North Africa Middle East North Sea Russia
Ye
ars
Houston
Baku
London Bad Bentheim
Tyumen
Nizwa
St. Johns
Bergen
Dubai
Land Drilling Offshore Services RDS offices Bentec Regional offices
Aberdeen (HQ)
North Sea
/Norway
21 Plat.
Europe &
Caspian
8 Rigs
Caspian
7 Plat.
Russia
16 Rigs
Middle
East
17 Rigs
Angola
2 Plat.
Africa
11 Rigs
Brunei
1 Rig
LTM Q3 2017 EBITDA split by region
Canada 1 Plat.
Map excludes 1 workover land rig in Nigeria, defined as being below 900HP
Map shows position at 1 November 2017
Russia
Sakhalin
3 Plat.
Third Quarter Investor Presentation
Health, Safety and Environmental Performance
8
• Sustaining low TRIR levels in a range which are the best in the company’s history
• KCAD achieved the lowest ever TRIR of 0.20 in July and August 2017
1 Total 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
IADC industry average
0.452 for 2016
KCAD TRIR at
end of Q3 2017
was 0.211 injuries
per 200,000 man
hours worked
Third Quarter Investor Presentation
Backlog Status
9
Total contract backlog as at 1 August 2017
Contract backlog by BU as at 1 August 2017
Total contract backlog as at 1 November 2017
Contract backlog by BU as at 1 November 2017
Backlog figures exclude revenue generated in the year to date
Third Quarter Investor Presentation
Land Fleet Utilisation
10
Historical and forecast utilisation
Third Quarter Investor Presentation
Robust platform services contract backlog @ 1 November
11 Contracts have been extended or renewed since last call
Third Quarter Investor Presentation
Contract Platform
Client Country Assets Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 end date status #
Exxon Canada Hebron Mar-46 Operating 1
Statoil Norway CAT J (2) May-36 Operating / Under Construction 2
Exxon Angola Kizomba (2) Oct-27 Stacked 2
AIOC Azerbaijan Azeris, SD, DWG, Cop & Chirag Dec-24 Operating 7
Nexen UK Scott Feb-23 Operating 1
Statoil Norway Oseberg's (4) & Gulfaks (3) Oct-22 Operating / Stacked 6/1
Statoil Norway Kvitebjorn Oct-22 Operating 1
Statoil Norway Pipe pool management Oct-22 Active mgmt. contract
COP UK Britannia Oct-22 Stacked 1
CNR UK Ninian's (3) Tiffany Nov-21 Operating / Stacked 1 /3
SEIC Russia LA, PA & PB May-21 Operating 3
Total UK Alwyn Dec-20 Stacked 1
Total UK Dunbar Dec-20 Stacked 1
Enquest UK Thistle & Heather May-20 Operating / Stacked 1/1
Point Resource Norway Ringhorne Dec-18 Stacked 1
2017 2018 2019
Land Drilling
12
Financial Performance to 30 September 2017
• The land business is slightly down on the prior quarter
• Activity levels remain strong in Russia and Oman
• Ongoing weaker market conditions in Nigeria, Kurdistan and Algeria although uptick
in Algeria tendering
• Improved level of tendering activity in several markets – with 5 new recent contract
wins
• Utilisation for the quarter of 63%
Q3 2017 Q2 2017 Q3 2016 Q3 2017 Q3 2016
Result Result Result YTD YTD
$m $m $m $m $m
Revenue 122.8 128.0 135.2 372.9 436.0
EBITDA (post support allocation) 35.5 43.5 43.8 122.1 139.8
Margin 28.9% 34.0% 32.4% 32.7% 32.1%
Bentec
13
Financial Performance to 30 September 2017
• EBITDA has remained around breakeven
• Active tendering market across after sales, components and new build rigs
• Contract secured for 5 new build rigs
Q3 2017 Q2 2017 Q3 2016 Q3 2017 Q3 2016
Result Result Result YTD YTD
$m $m $m $m $m
Revenue 22.1 16.5 12.4 54.1 58.9
EBITDA (post support allocation) (0.0) 0.2 (2.2) 0.5 1.2
Margin -0.1% 1.5% -17.8% 0.9% 2.0%
Offshore Services
14
Financial Performance to 30 September 2017
• Higher revenue and EBITDA compared to Q2 2017, primarily due to strong performance in
Norway
• One of the Cat J jack up rigs has now arrived in Norway, with the second due to arrive next
week
• Drilling has now commenced on the Hebron platform
Q3 2017 Q2 2017 Q3 2016 Q3 2017 Q3 2016
Result Result Result YTD YTD
$m $m $m $m $m
Platform Services
Revenue 153.1 132.0 121.2 404.1 393.1
EBITDA (post support allocation) 22.1 12.9 17.4 46.3 55.6
Margin 14.4% 9.8% 14.4% 11.4% 14.1%
MODUs
Revenue 0.0 0.0 0.8 0.0 29.4
EBITDA (post support allocation) 0.5 (0.0) 1.2 0.5 16.8
Margin n/a 0.0% 140.8% n/a 57.3%
Offshore Services
Revenue 153.1 132.0 122.0 404.1 422.5
EBITDA (post support allocation) 22.6 12.9 18.6 46.8 72.4
Margin 14.7% 9.8% 15.2% 11.6% 17.1%
RDS
15
Financial Performance to 30 September 2017
• EBITDA remains flat versus Q2
• Focus remains on maintaining breakeven levels plus the capacity for growth
• Secured greenfield front end evaluation and design project for a potential new build
platform drilling facility
Q3 2017 Q2 2017 Q3 2016 Q3 2017 Q3 2016
Result Result Result YTD YTD
$m $m $m $m $m
Revenue 13.8 14.3 16.9 42.3 60.8
EBITDA (post support allocation) (0.0) (0.1) 1.8 0.5 5.4
Margin -0.2% -0.4% 10.9% 1.1% 8.9%
Group Results
16
Financial Performance to 30 September 2017
Revenue and EBITDA ($m)
Q3
2017
$m
Q2
2017
$m
Q3
2016
$m
2017
YTD
$m
2016
YTD
$m
Revenue from business units 311.9 290.9 286.5 873.9 978.8
Eliminations (2.5) (3.4) (2.9) (7.9) (14.2)
Total third party revenue 309.4 287.5 283.6 866.0 964.6
EBITDA from business units 58.1 56.6 62.0 169.7 219.0
Eliminations 0.0 0.0 (0.1) 0.0 (0.3)
Corporate costs/other (4.8) (4.8) (5.1) (14.4) (14.5)
Exchange 1.5 (0.8) (0.4) 0.4 (1.4)
Total EBITDA 54.8 50.9 56.4 155.7 202.8
Q3 2017 Q2 2017 Q3 2016 2017 YTD 2016 YTD
$'m $'m $'m $'m $'m
Cash generated from operations 45.4 16.0 54.0 82.8 193.9
Tax paid (5.0) (11.2) (9.3) (24.7) (32.2)
Cash flow from operating activities 40.4 4.8 44.7 58.1 161.7
Capital expenditure (10.2) (35.0) (15.3) (52.0) (90.6)
Proceeds from sale of Fixed Assets 0.4 0.1 0.8 0.7 60.6
Interest received 5.3 6.2 5.1 16.9 15.7
Other 0.0 0.0 0.2 0.0 0.6
Cash flow from investing activities (4.5) (28.7) (9.2) (34.4) (13.7)
Interest paid (14.3) (50.0) (13.2) (79.2) (76.8)
Foreign exchange1 (8.3) (4.6) (0.7) (15.5) 10.4
Dividend paid to minority shareholders 0.0 0.0 (0.5) (0.3) (0.5)
Acquisition of non-controlling interests 0.0 0.0 0.0 0.0 0.0
Net Cash flow before debt
drawdown/(repayment)13.3 (78.5) 21.1 (71.3) 81.1
Drawdown/(repayment) of debt and
debt redemption/issuance costs(6.2) 2.8 (8.0) (10.0) 59.5
Net cash flow 7.1 (75.7) 13.1 (81.3) 140.6
Cash Flow and Working Capital
17
Financial Performance to 30 September 2017
9
Working Capital3
9
Free Cash Flow
2
1Denotes the effect of foreign exchange rate changes on cash and bank overdrafts 2Q2 2017 and 2017 YTD includes $25m relating to the rig acquired by Alpha Group 3Deltas denote current quarter working capital movement
2
Capital Structure
18
Net leverage as at 30 September 2017
1 Q3 2017 LTM EBITDA of $241m includes the $25m Holdco equity contribution as defined in the Amended Credit Agreement 2 Revolver is split $75/$200m non cash/cash, the amount shown represents the cash element utilised. $25m of the cash RCF
expires May 2019 3 Facility and Recovery ratings shown as at September 2017
Utilisation
30th Sept 2017 Coupon Maturity
Facility
Rating3
Recovery
Rating3
Net
Leverage1
Revolver ($275m)2 0.0 L+400 Mar-22 Caa1/CCC+ 3/3 0.00x
Senior Secured Term Loan 359.3 L(100)+575 May-20 Caa1/CCC+ 3/3 1.49x
HSBC Oman Term Loan 52.0 L+400 Dec-20 0.22x
Total Bank Debt 411.3 1.71x
UK Finance Senior Secured Notes 375.0 7.250% May-21 Caa1/CCC+ 3/3 1.56x
UK Finance Senior Secured Notes 535.0 9.875% Apr-22 Caa1/CCC+ 3/3 2.22x
Total Institutional Debt 1,321.3 5.49x
Finance lease & other debt 3.7 - Aug-18 - - 0.02x
Gross Debt 1,325.0 5.50x
Cash 80.6 0.33x
Net Debt 1,244.5 5.17x
Closing Remarks
19
Third Quarter Investor Presentation
• Backlog position of $5.0 billion across a blue chip company base
• Q3 2017 results of $54.8 million EBITDA
• Increased activity on the new Cat J and Hebron contracts for Offshore
• Strong liquidity position at $230 million
• Excellent HSE and operational performance
• Steady tendering activity for Land with a number of contract awards
20
Q & A [email protected]
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