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www.kcadeutag.com
Deutsche Bank high yield conference
September 2015
KCA Deutag
Private & Confidential – Not for Onward Distribution
Disclaimer
2
This presentation has been prepared by KCA Deutag Alpha Limited (the “Company”). No reliance may be placed for any purposes whatsoever on the
information contained in this presentation or on its completeness. Although care has been taken to ensure that the facts stated in this presentation are
accurate, and that the opinions expressed are fair and reasonable, the contents of this presentation have not been subject to any independent audit or review
or been verified by the Company or its advisers. Accordingly, neither the Company, nor affiliated partnerships or bodies corporate, nor any of the Company's
advisers, nor the directors, shareholders, managers, partners, employees or agents of any of them, makes any representation or warranty, express or implied,
as to the accuracy, reasonableness or completeness of the information contained herein. All such parties and entities expressly disclaim any and all liability for,
or based on or relating to any such information contained in, or errors in or omissions from, this presentation or based on or relating to the use of the
presentation or otherwise arising in connection with it.
This presentation does not constitute or form part of and should not be construed as, an offer to sell or issue or the solicitation of an offer to buy or acquire any
securities or an inducement to enter into investment activity. No part of this document, nor the fact of its distribution, should form the basis of, or be relied on in
connection with, any contract or commitment or investment decision whatsoever.
This presentation may include certain forward-looking statements, estimates, predictions, influences and projections with respect to anticipated future
performance and as to the market for products or services which may reflect various assumptions made by the management of the Company. These
assumptions may or may not prove to be correct and no representation is made as to the accuracy of such statements, estimates, predictions, influences and
projections. These statements and forecasts involve risk and uncertainty because they relate to events and depend on circumstances that will occur in the
future. Accordingly, forward-looking statements are not guarantees of future performance and actual results of operations, financial condition and liquidity and
the development of the industry in which it operates which may differ materially from those made in or suggested by the forward-looking statements in this
presentation. Furthermore, the information and opinions contained in this presentation are subject to change without notice and the Company and its adviser
assumes no responsibility or obligation to update this presentation or any of the forward-looking statements contained herein.
The information contained within the accompanying presentation is confidential and must not be disclosed to any third party without the prior written consent of
the Company. The unauthorised disclosure of this presentation or any information contained in or relating to it could damage the interests of the Company
and/or its affiliates and advisers and have serious consequences.
The information contained in this document is provided as at the date of this document and is subject to change without notice.
This presentation contains non-IFRS measures and ratios that are not required by, or presented in accordance with, IFRS. The Company presents non-IFRS
measures because it believes that they and similar measures are widely used by certain investors, analysts and other interested parties as supplemental
measures of performance and liquidity. The non-IFRS measures may not be comparable to other similarly titled measures of other companies and have
limitations as analytical tools and should not be considered in isolation or as a substitute for analysis of the operating result as reported under IFRS. Non-IFRS
measures and ratios are not measurements of the Company's performance or liquidity under IFRS and should not be considered as alternatives to profit for the
year or any other performance measures derived in accordance with IFRS or any other generally accepted accounting principles or as alternatives to cash flow
from operating, investing or financing activities.
Private & Confidential – Not for Onward Distribution
www.kcadeutag.com
Company Overview 1
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Private & Confidential – Not for Onward Distribution
Integrated Land Drilling Offshore Drilling Services & Design
US$181m EBITDA (56% of total)¹ US$122m EBITDA (37% of total)¹
Land Drilling Bentec Platform Services Rig Design Services (RDS)
• Leading international
premium drilling rig owner
and operator
• Design and manufacture of
high-end premium land rigs and
components
• Leading global platform drilling
service operator outside North
America
• Rig design engineering from
concept to commission
• Operations: Russia, Africa,
Middle East, Europe and SE
Asia
• Facilities: Germany, Russia,
Oman
• Operations: UK North Sea,
Norway, Azerbaijan, Russia, SE
Asia and Africa
• Offices: Aberdeen, Baku,
Bergen, Houston, London, St.
Johns
Market-leading international drilling & engineering company
4
Design &
Engineering
Design &
Manufacture Own & Operate Manage
• Rigs: High end fleet of
53 drilling rigs, 2
workover rigs
• 96% of new rigs since
2007 have been built by
Bentec
• Facilities: Capacity for
12-16 rigs and 50 top
drives2 p.a.
• Staff: c.3,000 managing
drilling operations on 41
platforms
• Approx. 60% of
platforms designed or
refurbished by RDS
• Staff: c.400 engineers
and support staff
¹ LTM EBITDA, % split of total including MODUs, before corporate costs/ other of $38.4m. Note: MODUs LTM EBITDA $22.1m represented 6.8% of total EBITDA before corporate costs 2 High-specification mechanical equipment turning the drill string
Houston
Ben Loyal jack-up rig
Baku
London
Stavanger
Bad
Bentheim
Tyumen
Nizwa
Ben Rinnes jack-up rig
St.
Johns
Bergen
Dubai
Land Drilling Platform Services RDS offices MODUs Bentec Regional offices
Operating across a balanced and diverse range of countries
Aberdeen (HQ)
Map excludes work over land rigs, defined as being below 900HP
Years of operation in key markets
North Sea
/Norway
27 Plat.
Europe &
Caspian
7 Rigs
7 Caspian
Plat.
Russia
17 Rigs
Middle
East
14 Rigs
Angola
3 Plat.
Africa
14 Rigs
Russia
Sakhalin
3 Plat.
Brunei
1 Rig
Myanmar
1 Plat.
127
56 51 41
16
0
30
60
90
120
150
Europe NorthAfrica
MiddleEast
North Sea Russia
Ye
ars
5 Private & Confidential – Not for Onward Distribution
LTM Q2 2015 EBITDA split by region
6
¹ c.25% of the revenues are generated from Shell, BP & Statoil
Diversified long-term customer base predominantly with IOCs and NOCs
Key customers by division Customer diversification – LTM Q2 2015
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Integrated
Land Drilling
Offshore Drilling
Services &
Design
c.25% of revenue¹
High-quality customer base
Others
IOC
IOC
IOC
NOC
NOC
NOC
NOC
NOC
IOC
NOC
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Operating in markets less impacted by the oil price reduction
7
KCAD relevance Themes
Source: Marginal production costs: Knoema, Rig count: Baker Hughes
Focused on
production
drilling in
resilient markets
• KCAD operates in many drilling
environments with lower lifting
costs
• Oil revenues are often critical to
government budgets in these
markets
• The Platforms business is
working on production platforms
where the majority of the capex
has already been invested (opex
focus)
Supporting data
Strong
international
land drilling
environment
• KCAD has no exposure to the US
market, where rig count levels are
much more volatile and the
market is generally more
commoditised
Private & Confidential – Not for Onward Distribution 8
Historical total recordable incident rate (TRIR)
KCAD HSE statistics vs IADC (Q2 2015)
Source: International Association of Drilling Contractors (IADC) Note: TRIR stands for Total Recordable Incident Rate (per 200,000 man hours); LTIR stands for Lost Time Incident
Rate. 1 Total Recordable Incident Rate is directly comparable with IADC’s Total Recordables (RCRD) statistic
• KCAD has achieved its best ever safety results
over the last 12 months
• The group has consistently performed 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
• Even in today’s market this is still a key
differentiator for customers when selecting a
partner for operations in challenging environments
Strong industry track-record of excellent HSE performance
Company’s backlog1 ($m) including options
9
Comments
1 Backlog is our estimate of potential future revenue under undisputed contracts (including extension options) between the Company and its customers. The backlog amounts in this presentation
are our estimates as of 1-Aug-2015. Our backlog may change over time depending on any early cancellation of contracts, failure to exercise customer extension options, changes to the scope of
work and changes to the applicable day rate
• Current total backlog of $7.6bn1 including options
• Only 4 contracts terminated earlier than expected since H1
2014 across core divisions with the total lost revenue of $24m
(0.3% of total backlog)
Platform Services
• Long term contracts – typically 3-5 years and up to 10 years with
options
• High cost / inconvenience attached to switching operators on
existing platforms
• 3 platforms in the North Sea have been stacked in the last 12
months but we continue work with a reduced crew
Land Drilling
• International markets characterised by longer term contracts,
often 1-3 years and sometimes longer
• As an example the contracts for the Khazzan project in Oman
are 5 years plus options
Bentec
• Bolstered by good order intake in H1 2015
• Challenge remains to fill the pipeline for 2016 with current
tendering activity
High level of forward earnings visibility, with $7.6bn backlog
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Land Drilling 211 500 1,167 1,877
Bentec 86 25 0 111
Platform Services 204 481 4,730 5,416
RDS 35 20 0 56
MODUs 26 56 84 166
Total 562 1,082 5,981 7,625
of which options 9 305 4,311 4,625
2015 2016 2017+ Total
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Source: Company information
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Robust platform services contract backlog
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• Significant investment in the land rig fleet over
recent years
• All are high specification rigs built for the premium
land drilling market
• New build rig construction is only initiated based on
signed long term contracts
• Land business utilisation continues to hold up well in
the current environment
• Although it has decreased from a peak in H2 2013,
it has been relatively stable in recent months
• We are seeing good activity levels in Russia, Oman
and Algeria
• Nigeria and Europe are weaker areas where we are
experiencing softer utilisation than elsewhere in our
portfolio
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Rejuvenation of the land rig fleet
Well invested land fleet supporting utilisation
12
Current new build program approaching completion
Rig Country Cost ($m)1 Contract length Status
Rig 1 Oman c.31 5yrs + 3x1yr options Operating
Rig 2 Oman c.31 5yrs + 3x1yr options Operating
Rig 3 Oman c.31 5yrs + 3x1yr options Operating
Rig 4 Russia c.30 3yrs + 3x1yr options Operating
Rig 5 Brunei c.37 3yrs + 3x1yr options In construction
Rig 6 Russia c.29 3yrs Operating
Rig 7 Oman c.31 5yrs + 3x1yr options In construction
Rig 8 Oman c.31 5yrs + 3x1yr options In construction
New build land rigs schedule
New build land rig contracts
• All ongoing capex projects were initiated in 2014 and are
supported by long term contracts
• Up front contributions of $40m received from clients
• The 2015 growth capex plan is almost complete, with no new
growth capex commitments currently proposed
• Maintenance capex spend for 2015 $80m - $85m
Construction Operational
All new build capital expenditure is targeted at a minimum 18% IRR
• Total 2015 capex spend on ongoing new build construction
projects c.$130m
• Remaining capex spend in H2 2015 c.$54m
• All contracts remain in place without any re-negotiation of
terms
PO
Rig R'cd Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
1 2014
2 2014
3 2014
4 2014
5 2014
6 2014
7 2014
8 2014
20152014
1 Excludes cost of mobilisation given this is reimbursed by client
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Significant cost saving initiatives being implemented
13
1. A drive to reduce staff costs and discretionary spending which has
delivered significant savings
a) Salary reduction and salary freezes across the business
b) c.250 redundancies worldwide in overhead positions
c) Significant reduction in discretionary spending
2. Reducing costs in supply chain delivered through a companywide
initiative across all operations and business units
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
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Private & Confidential – Not for Onward Distribution 14
Senior management Comments
• Current consortium of investors acquired KCA Deutag in March 2011
• Shareholders have demonstrated continued support to our growth and
success, more than $650m total cash investment to date to support the
business and fund growth capex
• Of this, $50m was received in Q1 2015 as part of a $100m commitment.
$50m remains undrawn
• Management have made personal equity investments in the business
¹ Including management
Name, Title Biography
Norrie McKay
CEO
• 34 years in the Oil & Gas industry
• Joined KCAD in 2011 as Chairman, CEO in May 2012
• With Schlumberger / Smith International for 26 years
internationally
Neil Gilchrist
CFO
• 20+ years of international finance experience with
LyondellBasell
• Joined KCAD as CFO in January 2013
• Graduated with degree in Accountancy and Economics
• Qualified as Chartered Accountant with Price
Waterhouse
Name Title Division Experience
Simon Drew President Land Drilling 18 years
Rune Lorentzen President Offshore 36 years
Dirk Schulze CEO Bentec 19 years
Jack Winton SVP Operations 21 years
Shareholder structure
Others1
Experienced management team supported by committed shareholders
www.kcadeutag.com
Financials 2
Private & Confidential – Not for Onward Distribution
Business Unit Performance
16
• Land
• Strong results from markets focussed on maintaining
market share by maximising production
• Weaker results in others where margins are key
• New build start ups ramping up contribution
• Platforms
• Platform drilling has remained robust
• Worked closely with clients to introduce cost saving
and efficiency initiatives
• Sales and rental activity reduced in Norway
• RDS
• This is the business most significantly impacted due
to reduced capex spend by oil majors
• Significant reductions in headcount implemented to
counteract the reduced revenue levels
• Bentec
• Well ahead of the prior year although this is mainly
due to the timing of EBITDA recognition
• Tendering activity continues to secure 2016 capacity
• MODU’s
• Reduced to 2 Jack-Ups following the sale of the self-
erecting tender barges at the end of last year
• Ben Rinnes continues to operate offshore Angola
• Ben Loyal is currently working under a short-term
contract extension at a reduced day rate offshore
Mexico
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Group Results Financial Performance to 30 June 2015
17
Revenue and EBITDA ($m) Q2 2015
YTD
$m
Q2 2014
YTD
$m
Revenue from business units 949.8 1,099.2
Eliminations (75.5) (44.5)
Total revenue 874.3 1,054.7
EBITDA from business units 155.2 182.8
Eliminations (1.3) (1.1)
Corporate costs/other (9.9) (11.8)
Exchange (2.7) (0.1)
Total EBITDA 141.3 169.8
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Debt maturity profile ($m)
Capital Structure As at 30 June 2015
18
Net debt / LTM EBITDA Available Liquidity
19
Closing remarks: KCA Deutag summary
Private & Confidential – Not for Onward Distribution
Unique provider of end to end expertise across the drilling sector
Focused on production drilling in markets with low lifting costs
Integrated land and offshore drilling operations
All four core business units recognised by the global oil majors as leading providers in their sector
Operating across a diverse range of geographies and markets with a blue chip customer base
Significant cost reductions being quickly implemented
Total EBITDA of $141m for H1 2015 and a strong backlog position of $7.6bn
Results benefiting from completion of the shareholder backed new build programme
1. Market leading international drilling and engineering company
3. Well positioned to respond to the challenging market environment
2. Robust operational and financial performance
Experienced management team supported by committed shareholders