Investor Presentation FOURTH QUARTER 2019 KCA Deutag is a leadinginternational drilling, engineering and technology company working onshore and offshore with a focus on safety, quality and operational performance 0
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 These forward-looking statements are based on management’s current Deutag. 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 Fourth Quarter Investor Presentation Q4 and Full Year Key Highlights 1 Operational Highlights 2 Business Unit Financials 3 #enhancethebrand initiatives 4 Near term economic challenges 5 Summary 6 2
Q4 and Full Year 2019 Key Highlights Full year revenue of $1,359.9m (2018: $1,262.6m) and EBITDA of $299.2m (2018: $272.9m) 1 Q4 2019 revenue of $325.3m (Q4 2018: $332.8m) and EBITDA of $82.6m (Q4 2018: $77.9m) A number of contract awards and extensions in Land drilling and acquisition of 2 rigs in Iraq with ongoing 2 contracts 3 Contract backlog remains steady at $5.7bn (at 1 March 2020) across a blue chip customer base 4 4 Significant progress made with the #enhancethebrand initiatives 5 Proactively managing what we can control during the near term economic disruption Financial results noted above include results from the Dalma business which was acquired 30 April 2018 2018 results restated in compliance with IFRS 16 3
KCA Deutag Operations are Diversified Across Global Markets Russia North Sea 17 Rigs /Norway 18 Plat Russia Canada Sakhalin 1 Plat 3 Plat Bergen Caspian Tyumen 7 Plat Aberdeen (HQ) London Bad Bentheim St. Johns Baku Middle East Europe & 44 Rigs Caspian 6 Rigs Dubai Nizwa Africa 10 Rigs Angola Geographical EBITDA Split (1) 2 Plat PRESENCE IN KEY AREAS 150 132 120 90 Years 61 56 46 60 21 30 0 Europe North Africa Middle East North Sea Russia Regional offices Land Drilling Offshore Services RDS offices Bentec Map shows position at 1 March 2020 (1) The % split of LTM EBITDA is calculated using total KCAD group Q4 2019 LTM Proforma EBITDA of $321m (after corporate 4 costs of $13m)
HSSE Performance Continues To Out Perform Industry Average IADC industry average 0.63 3 for 2019 Q4 2019 0.28 1,2 KCA Deutag have achieved ISO Promoting increased awareness 14001 and ISO 45001 certification through safety campaigns to across all KCA Deutag and Turan drive to zero incidents – two new Drilling & Engineering locations to campaigns recently launched supplement the existing ISO 9001 certificate (1) Total Recordable Incident Rate per 200,000 man hours. This is a rolling 12 month average (2) Dalma business has been incorporated from May 2018 5 KCAD Total Recordable Incident Rate is directly comparable with IADC’s Total Recordables (RCRD) statistic (3) Note: IADC stands for International Association of Drilling Contractors
#enhancethebrand Initiatives Introduced over the last few months Well of Deliver technology and innovations to transform the drilling operations throughout the industry Innovation Encourage bottom-up profitability where everyone contributes to eliminate waste & preserve cash Travel Proactively manage travel expenses, plan travel in advance and monitor compliance to policy Management Supply Improve supply management to deliver cost avoidance, strategic sourcing and stock optimization Management Functional Review support structures to deliver effective functional support and reliably improve performance Support Digitalisation Evaluate digital work streams, smarter technologies and platforms to deliver value to customers Customer Deliver incident-free services and further understand customer challenges to invent solutions Centricity Energy Implement carbon reduction projects and aggressively pursue respective revenue opportunities Transition 6
What was achieved by December 2019 The organization has responded well… more was delivered in first 2 months of 2020 • Revenues of $2m from campaign: • Savings of over $25m by December: − − ENHANCE currently on 52 rigs 570 bottom up ideas, 25 closed − − FX-Control deployed on 12 rigs Hundreds of supplier letters sent − − OPTI Products on 15 rigs, used on 16 wells Tens of bidding campaigns ongoing − − A dozen other POC projects with customers Sharing stock across many locations 7
Backlog evolution to 1 March 2020 Total contract backlog as at 1 November 2019 Total contract backlog as at 1 March 2020 Total contract backlog by BU as at 1 November 2019 Total contract backlog by BU as at 1 March 2020 Note: Backlog is an estimate and may change over time depending on certain factors; Backlog reflects business that is considered to be firm, this calculation is based on assumptions deemed appropriate at the time and is subject to change. Backlog is not 8 necessarily indicative of our future revenue or earnings. KCAD backlog amounts are estimates as of 1-March-2020
Land Utilisation Historical and Forward Contracted Utilisation Utilisation in Q4 2019 was 75% Historical utilisation represents actual utilisation calculated on a bi-monthly basis Forward contracted utilisation represents the current contracted position 9
Land & Bentec Financial Performance Land Quarterly EBITDA ($m) Land YTD Revenue & EBITDA ($m) (2) (2) (2) 32% 31% (1) Bentec Quarterly EBITDA ($m) (3) Bentec YTD Revenue & EBITDA ($m) (3) 9% 4% = EBITDA Margin (1) 2 months of Dalma only (2) Adjusted to remove the one off Revenue increase in Q2 2019 of $14.3m relating to IFRS 15 (3) Bentec results shown before intercompany eliminations 10
Offshore & RDS Financial Performance (1) Offshore Services Quarterly EBITDA ($m) Offshore Services YTD Revenue & EBITDA ($m) 19% 15% RDS Quarterly EBITDA ($m) RDS YTD Revenue & EBITDA ($m) 5% 10% = EBITDA Margin (1) Q1 2018 EBITDA shows $12m relating to MODUs, margin and total for Offshore Services only 11
Cash Flow and Working Capital Free Cash Flow (1) Working Capital (3) Q4 2019 Q3 2019 Q4 2018 2019 YTD 2018 YTD $'m $'m $'m $'m $'m Cash generated from operations 135.7 40.1 91.1 303.9 179.0 Tax paid (8.4) (5.6) (3.2) (32.9) (27.3) Cash flow from operating activities 127.3 34.5 87.9 271.0 151.7 9 Capital expenditure (28.8) (16.2) (10.5) (76.2) (46.0) Proceeds from sale of Fixed Assets 0.6 0.2 1.2 0.9 2.0 Interest received 5.6 5.9 5.8 24.6 23.5 Dalma acquistion 0.0 0.0 0.0 0.0 (440.2) 9 Other 0.0 0.0 0.0 0.3 (0.5) Cash flow from investing activities (22.6) (10.1) (3.5) (50.4) (461.2) Interest paid (78.9) (15.1) (78.2) (196.6) (171.6) (2) Foreign exchange (2.3) (5.1) (2.2) (6.7) (12.6) Dividend paid to minority shareholders 0.0 (1.2) 0.0 (1.6) (0.3) Lease payments (4.4) (7.4) (6.7) (21.2) (21.6) Net Cash flow before debt 19.1 (4.4) (2.7) (5.5) (515.6) drawdown/(repayment) Drawdown/(repayment) of debt and debt (6.6) (3.4) 105.2 (34.7) 526.1 redemption/issuance costs Net cash flow 12.5 (7.8) 102.5 (40.2) 10.5 (1) 2018 results restated in compliance with IFRS 16 (2) Denotes the effect of foreign exchange rate changes on cash and bank overdrafts (3) Deltas denote quarterly working capital movement 12
Capital Structure Net leverage as at 31 December 2019 Net Debt Evolution (1) 25 25 25 25 300 309 295 306 (2) (2) (2) (2) (3) Amount Utilised Coupon Maturity Facility Rating Leverage (3) Revolver Cash ($215m) 193 L+400 Mar-22 Caa1/CCC+ 0.58x Senior Secured Term Loan 410 L+675 Feb-23 Caa1/CCC+ 1.23x Oman Term Loan 16 L+400 Dec-20 - 0.05x Total Bank Debt 619 1.85x Senior Secured Notes 2021 375 7.250% May-21 Caa1/CCC+ 1.12x Senior Secured Notes 2022 535 9.875% Apr-22 Caa1/CCC+ 1.60x Senior Secured Notes 2023 400 9.625% Apr-23 Caa1/CCC+ 1.20x Total Institutional Debt 1,929 5.77x Other debt 2 Gross Debt 1,931 5.78x Cash 177 0.53x Net Debt 1,755 5.25x Finance lease liabilities 63 0.19x Net Debt per balance sheet 1,818 5.44x (1) PF LTM EBITDA adjusted for synergies of the acquired Dalma businesses of $3m, 2 rig acquisition $5m and other compliance certificate adjustments of $2m. (2) Q1 to Q4 2019 LTM EBITDA includes the second $25m Holdco equity contribution, as defined in the 13 Amended Credit Agreement. (3) In addition to the $215m Revolver Cash facility, we also have $115m of guarantee facilities
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