Investor Presentation First Quarter 2015 KCA Deutag is a leading international drilling and engineering company working onshore and offshore with a focus on safety, quality and operational performance www.kcadeutag.com
Disclaimer 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. 1
Agenda Q1 Key Highlights 1 Business Update 2 Business Unit Financials 3 Group Results 4 Summary 5 2
Q1 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 2015 Group revenue and EBITDA of $466m (Q1 2014: $514m) and $76.1m 1 (Q1 2014: $80.8m) respectively Contract backlog of $7.9bn (at 1 May 2015) across a blue chip customer 2 base Cost saving initiatives continue with 5% salary reduction implemented 1 3 March 2015 and all other areas progressing well 4 $50m rights issue proceeds received from our shareholders during Q1 2015 Successful period of new build rig start ups with the first 3 BP Khazzan rigs 5 operational in Oman in Q1 and a further rig in Russia in April 2015 3
Business update Integrated land drilling Integrated land drilling Offshore drilling services & design Offshore drilling services & design $151.5m / 43.6% of total ¹ $41.0m / 11.8% of total ¹ $37.5m / 10.8% of total ¹ $97.6m / 28.1% of total ¹ Land drilling Bentec Platform services RDS Bentec • International markets much • Strong H1 backlog • Continue to work with • Reduced capex spend by less volatile continues from previous clients to provide oil majors continues to • Russia utilisation remains orders operational efficiencies impact activity strong, despite the weak • 3 new land rig orders, • No further changes to our • Significant reductions in Ruble and one offshore drilling contracted positions staffing levels • Utilisation continues to be package provides a since last earnings call implemented softer in Nigeria, Europe healthy H2 order book and recently Kurdistan • New builds coming online throughout 2015 1 LTM EBITDA, % split of total including MODUs, before corporate costs/ other of $38m. 4 Note: MODUs LTM EBITDA $19.9m represented 5.7% of total EBITDA before corporate costs.
Cost saving initiatives continue 1. A drive to reduce staff costs and discretionary spending which has already led to significant savings a) 5% salary reduction implemented 1 March b) Salary freezes across the businesses c) c.450 redundancies worldwide d) Significant reduction in discretionary spending 2. Reducing costs in supply chain delivered through a companywide initiative across all operations and business units a) 271 suppliers approached, negotiations closed with 175 b) Reduction in capex spending, with no new growth capex during 2015 3. Significant senior management focus on working capital and the full delivery of the various cost reduction initiatives a) Bi-weekly 13 week cash forecasting process b) Monthly BU review meetings with KPI & forecasting updates 5
Khazzan: phase 1 up and running • Contract awarded by BP for the construction and operation of three new build 2000 HP fast moving land rigs for the Khazzan field in Oman • Rigs secured on a 5 year contract plus options • Contract received at the beginning of 2014 and rigs designed and manufactured by Bentec and its joint venture in Oman, IDTec LLC • After an intensive commissioning, crew training and test phase, the rigs started operations in January, February and March of this year • A great achievement for the Land projects department, Oman Operations and both Bentec and IDTec teams 6
A diversified portfolio of assets PRESENCE IN KEY AREAS 150 127 120 90 Years 56 51 41 60 16 30 0 Europe North Middle North Sea Russia Africa East Russia North Sea St. 17 Rigs /Norway 27 Plat. Johns Russia Sakhalin Bergen 3 Plat. Tyumen Stavanger Aberdeen (HQ) Europe & 7 Caspian Caspian Houston Plat. 7 Rigs London Bad Ben Loyal Bentheim jack-up rig Middle East Baku 14 Rigs Myanmar 1 Plat. Africa 14 Rigs LTM Q1 2015 EBITDA split by region Brunei Dubai 1 Rig Nizwa Angola 3 Plat. Ben Rinnes jack-up rig Regional offices Land Drilling Platform Services RDS offices MODUs Bentec Map excludes work over land rigs, defined as being below 900HP. 7
Health, safety and environmental performance IADC industry average 0.75 2 for 2014 KCAD TRIR at end of Q1 2015 was 0.31 1 injuries per 200,000 man hours worked • Sustained progress made on improving TRIR performance, which is well below IADC industry average • Achieved the best annual safety performance in company history 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. 8 Note: IADC stands for International Association of Drilling Contractors.
Despite market environment, backlog remains strong Total contract backlog as at 1 February 2015 Total contract backlog as at 1 May 2015 Contract backlog by BU as at 1 February 2015 Contract backlog by BU as at 1 May 2015 $M $M NB: Backlog figures exclude revenue generated in the year to date. 9
Land Drilling Financial Performance to 31 March 2015 Q1 2015 Q1 2014 Variance Q1 2015 Q1 2014 Variance Result Result YTD YTD $m $m $m % $m $m $m % Revenue 146.7 168.0 146.7 168.0 (21.3) -12.7% (21.3) -12.7% EBITDA pre support allocation 40.4 38.5 1.9 5.0% 40.4 38.5 1.9 5.0% Support cost allocation (2.6) (2.8) (2.6) (2.8) 0.2 -7.7% 0.2 -7.7% EBITDA 37.8 35.7 37.8 35.7 post support allocation 2.1 6.0% 2.1 6.0% margin 25.8% 21.3% 25.8% 21.3% • Lower revenues compared to Q1 2014 but higher EBITDA and improved margins due to new build rigs coming online • Successfully delivered and spudded the first 3 Khazzan rigs for BP in Oman. These rigs should contribute very favourably to our profitability going forward • Our Russian business continues to enjoy high levels of utilisation and EBITDA • Our European and Nigerian businesses continue to face utilisation headwinds, due to the wider market environment and local content issues respectively • Overall our utilisation for the quarter was 74% 1 EBITDA is shown before and after allocation of central support costs (such as HR, Supply Chain and IT costs) to the operational 10 business segments. 2014 and 2015 are presented on the same basis.
Bentec Financial Performance to 31 March 2015 Q1 2015 Q1 2014 Variance Q1 2015 Q1 2014 Variance Result Result YTD YTD $m $m $m % $m $m $m % Revenue 90.3 26.3 90.3 26.3 64.0 NM 64.0 NM EBITDA 11.3 0.8 11.3 0.8 pre support allocation 10.5 NM 10.5 NM Support cost allocation (0.5) (0.7) 0.2 -25.5% (0.5) (0.7) 0.2 -25.5% EBITDA 10.8 0.1 10.8 0.1 post support allocation 10.7 NM 10.7 NM margin 12.0% 0.5% 12.0% 0.5% • Strong Q1 delivered as the 7-rig order for Enafor continues to make its’ way thorugh manufacturing. The business also completed internal two rigs for the BP Khazzan project • In the prior year, orders were at an early stage and thus earnings recognition could not be achieved. This compares with Q1 2015 where more mature projects allow us to record strong results • Pipeline looks sound for Bentec who received a number of new orders during Q1 for rigs and components albeit at lower margins 1 EBITDA is shown before and after allocation of central support costs (such as HR, Supply Chain and IT costs) to the operational 11 business segments. 2014 and 2015 are presented on the same basis. EBITDA is stated gross of eliminations of $1.3m.
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