www.kcadeutag.com
KCA Deutag is a leading international drilling and engineering
company working onshore and offshore with a focus on safety,
quality and operational performance
Second Quarter 2013
Investor Presentation
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.
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Agenda
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Introduction
Industry highlights and challenges
Health, safety and environmental performance
Business overview
Summary
Group results and contract backlog
Industry highlights and challenges The Oil & Gas industry in 2013
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Industry Highlights Industry Challenges
Robust oil price continues to support global
E&P activity, including marginal fields.
Strong demand for land rigs in international
markets.
Substantial forecast global capital
expenditure.
Fiscal policy continues to have an impact on
this sector e.g. UK.
x Fiscal policy in some territories can lead to
challenges e.g. Nigeria.
x Protests in UK and departure of oil
companies from Eastern European
operations highlight difficulty in replicating
US shale oil “revolution” in Europe.
x Sourcing the additional personnel required
for growth and replacing the aging workforce
– failure to do so could defer or limit future
capital investment.
x Civil unrest in the parts of the AFMEA region
Health, safety and environmental performance
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• Average Total Recordable Injury
Rate for Q2 2013 was 0.46 injuries
per 200,000 man hours worked.
• Overall TRIR rate decreased in
comparison with Q1 2013, driven
by an improvement in our onshore
BUs.
0
0.2
0.4
0.6
0.8
1
1.2
1.4
TR
IR p
er
20
0,0
00
ma
n h
ou
rs
TRIR (average)
Q1 2013 Q2 2013 Variance
Land 0.53 0.47 -11.3%
Bentec 0.98 0.8 -18.4%
Platforms 0.66 0.68 3.0%
MODUs 0.88 0.95 8.0%
RDS 0.21 0.3 42.9%
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Diversified business across both onshore and offshore
Onshore (c.50% of EBITDA) Offshore (c.50% of EBITDA)
Q1
20
13
Up
da
te
Over 50% of EBITDA generated in asset light businesses
EBITDA stated before normalisation adjustments and excluding central overheads.
27% 46%
H1 2
013 E
BIT
DA
18% 9% 0%
Asset-
lig
ht
n/a
Co
ntr
act
ten
or
3 – 5 years + options 1 – 5 years + options 1 – 3 years n/a
Seg
men
t
de
scri
pti
on
MODUs
Owns and operates fleet
of 2 jack-ups and 3 barge
type self erecting tender
(SET) rigs
High visibility of earnings
with all rigs majority
contracted for 2013
Bentec
Design and manufacture
of premium land rigs and
key components
Capacity for 12-16 rigs
and 36 top drives p.a.,
increasing in 2013 to meet
market demand
Provision of after sales
services
Platform Services
Leading global platform
service operator outside of
North America
36 platform rigs under
management
Operations in UK North
Sea, Norway, Russia,
Azerbaijan and Angola
Land Drilling
Leading International
premium drilling contractor
High end fleet of 54
drilling and 9 workover rigs
Track record of executing
complex wells in harsh
environments
RDS
Design and refurbishment
of offshore drilling facilities
and MODUs
Engineering from concept
to commission
Employs over 800
engineers and support
staff across the globe
EBITDA (pre-
exceptional)
Platforms 39.5 27%
RDS 25.6 18%
Land 67.1 46%
MODUs 0.2 0%
Bentec 12.7 9%
Total 145.1 100%
✓ ✓ ✓
Significant new contracts – Global Oil Major
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Offshore Angola Norway
Contract
nature
Drilling operations and maintenance of two
offshore platforms Drilling and maintenance services
Contract
length &
timeframes
Initial five year award, with mutually
agreeable extension options 30 month extension to existing contract
Customer Global oil major
Contract
value
Initial contract awards worth over $165m. Estimated backlog of $310m given evergreen
nature of offshore Angola contract
“To be awarded two contracts in these core markets is an excellent result for KCA Deutag.
We have an undeniably strong reputation working in these offshore regions, and these
contracts will only serve to enhance this even further”
Rune Lorentzen, President, Offshore
Significant new contracts – Mariner and Bressay
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Mariner Bressay
Contract
nature
Detailed design and follow-on engineering
for Statoil’s Mariner platform drilling
facilities
Front End Engineering Design (FEED) of
the Bressay platform
Contract
length &
timeframes
29 months 9 months
Customer Daewoo Shipbuilding & Marine Engineering
Contract
value $42m
“These new awards provide a great example of the on-going investment in the UK
Continental Shelf. We have a very strong presence in the North Sea and these agreements
further demonstrate that RDS is the flagship rig design engineering specialist in the region”
Simon Drew, Senior Vice President, RDS
Land Drilling Financial Performance to 30 June 2013
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Q2
2013
$m
Q2
2012
$m
Var
$m
2013
YTD
$m
2012
YTD
$m
Var
$m
Revenue 163 141 22 310 266 44
EBITDA 38 38 - 67 67 -
• Strong Q2 performance with utilisation at 94%*
• Full benefit of delivery of two new land rigs in Russia in Q1,
with third in process of being mobilised at end of Q2.
• Two rigs commenced CDS work in Russia in Q2, which
include pass through revenues at lower margins.
• Improved performance in Europe / Kazakhstan due to
higher rig utilisation.
• Performance in Middle East in line with Q2 2012.
• Higher activity in Africa but with reduced EBITDA margins.
• Two new rigs were successfully delivered into Algeria.
*94% utilisation excludes the 6 Libyan rigs (re-entry to the Libyan market is ongoing);
Including the 6 Libyan rigs the utilisation figure is 88%
Bentec Financial Performance to 30 June 2013
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Q2
2013
$m
Q2
2012
$m
Var
$m
2013
YTD
$m
2012
YTD
$m
Var
$m
Revenue 78 43 35 119 84 35
EBITDA 9 3 6 13 7 6
• Significant progress made on manufacture and assembly of
rigs earmarked for Algeria (four), New Zealand (one) and
Russia (one).
• Growth of component business continued in line with
management’s expectations.
Platform Services Financial Performance to 30 June 2013
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Q2
2013
$m
Q2
2012
$m
Var
$m
2013
YTD
$m
2012
YTD
$m
Var
$m
Revenue 185 138 47 355 282 73
EBITDA 20 20 - 39 42 (3)
• Continued strong performance across all locations.
• Sustained strong performance in Norway, largely driven by
new Statoil contract.
• c.50% of revenue increase was attributable to lower margin
‘pass through’ items.
• Higher activity in the UK, with lower EBITDA margin due to
the loss of a high margin contract towards the end of 2012.
• Revenue and EBITDA growth achieved in Angola and
Azerbaijan, partially offset by slightly lower activity in
Sakhalin.
RDS Financial Performance to 30 June 2013
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Q2
2013
$m
Q2
2012
$m
Var
$m
2013
YTD
$m
2012
YTD
$m
Var
$m
Revenue 85 70 15 166 135 31
EBITDA 15 8 7 26 15 11
• RDS continues to benefit from strong demand for premium
engineering design services to the offshore sector.
• Performance driven by Hebron (Newfoundland Canada)
project, higher activity in Norway and other greenfield
projects run through our London office.
MODUs Financial Performance to 30 June 2013
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Q2
2013
$m
Q2
2012
$m
Var
$m
2013
YTD
$m
2012
YTD
$m
Var
$m
Revenue 45 43 2 88 95 (7)
EBITDA (4) 10 (14) 0 23 (23)
• Cancellation of Glen Esk was the primary driver for the
generation of a loss in Q2.
• In Q2 2012, Glen Esk had been warm stacked, with a lower
cost base.
• Shortfall partially offset by improved performance from Glen
Affric, which was not operating in Q2 2012.
• Ben Rinnes had lower revenue and EBITDA due to a one-
off demobilisation fee in Q2 2012.
• Ben Loyal and Glen Tanar continued to perform largely in
line with expectations.
Group Results Financial Performance to 30 June 2013
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Revenue and EBITDA
$m Q2 2013 Q2 2012 2013 YTD 2012 YTD
Revenue from business units 556 434 1,038 863
Consolidation adjustments (9) (31) (16) (53)
Total Revenue 548 403 1,022 810
EBITDA from business units 78 79 145 154
Corporate costs (16) (12) (26) (24)
Total EBITDA 63 66 119 130
Cash Flow and Working Capital Financial Performance to 30 June 2013
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Free Cash Flow Working Capital
(40.0)
(35.0)
(30.0)
(25.0)
(20.0)
(15.0)
(10.0)
(5.0)
-
Q2 2013 Delta* Q2 2012 Delta*
Cash
Im
pact
of
Delt
a (
$m
)
Working Capital Delta
Working Capital Delta
• Main driver for slightly lower operating cash flow was the increase
in working capital.
• Cash flow from investing activities is mainly capital expenditure
and cash interest payments.
- Capital expenditure was c.$3m lower than in Q2 2012.
- Interest was $25m higher as a result of a six monthly interest
payment on the term loan being paid at the end of April 2013.
Only three months of interest was paid in Q2 2012.
• Further $19m of shareholder equity injected to support the
currently approved growth capital expenditure programme.
• Increase in working capital driven by a generally higher level of
activity, as illustrated by revenue increases across the Group.
• Receivables from Bentec rig orders increased by $45m - these are
expected to unwind in the second half of the year.
(7)
(19)
*Deltas denote working capital movements from Q1 2013 and Q1 2012 respectively.
Cashflow
($m)Q2 2013 Q2 2012 2013 YTD 2012 YTD
Cashflow from operating activities 35 42 (12) 56
Cashflow from investing activities (70) (50) (70) (120)
Equity injection 19 0 59 0
Foreign Exchange (7) 9 3 5
Net cashflow before debt repayment (23) 1 (20) (59)
Drawdown of debt (net of issuance
costs) 48 0 33 0
Net cashflow 26 1 13 (59)
180.0
530.0 500.0
100.0
125.0 50.0
2013 2014 2015 2016 2017 2018
Capital Structure As at 30 June 2013
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Maturity profile –
available facilities ($m)
-27 77 180 530 500
Cash
Liquidity Facilities
Term Loan B & Capex Facility
Term Loan C
Senior Secured Notes
New Liquidity Facility
LC Facility
Net debt ($m)
Q2 2013: $1,260m
$1,221m
$6,306m
$254m $359m $187m
Contract Backlog by BU – Q1 2013
Land Platforms MODUs RDS Bentec
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*Please refer to Offering Memorandum for explanation of methodology of
backlog calculation.
$1,268m
$6,608m
$218m $420m $207m
Contract Backlog by BU – Q2 2013
Land Platforms MODUs RDS Bentec
Contract backlog* approaching $9 billion
Summary
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• Delivered on promised uptick in performance compared to Q1 2013.
• Majority of BUs are trading in line with, or ahead of, management expectations – this
partially offsets the MODU’s underperformance.
• Our business efficiency process is on track and delivering excellent results, particularly
around procurement.
• Future performance continues to be supported by strong order backlog, which was
enhanced again by the award of further new contracts in Q2.
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Q & A
