Investor Presentation FOURTH QUARTER 2019 KCA Deutag is a - - PowerPoint PPT Presentation

KCA Deutag is a leadinginternational drilling, engineering and technology company working onshore and

• ffshore with a focus on safety,

quality and operational performance

Investor Presentation

FOURTH QUARTER 2019

Disclaimer

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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

• r

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.

Agenda

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Fourth Quarter Investor Presentation

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Q4 and Full Year Key Highlights

2

Operational Highlights

3

Business Unit Financials

4

#enhancethebrand initiatives

5

Near term economic challenges

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Summary

Q4 and Full Year 2019 Key Highlights

3 Full year revenue of $1,359.9m (2018: $1,262.6m) and EBITDA of $299.2m (2018: $272.9m) 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 contracts Contract backlog remains steady at $5.7bn (at 1 March 2020) across a blue chip customer base 4 Significant progress made with the #enhancethebrand initiatives 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

1 2 3 4 5

KCA Deutag Operations are Diversified Across Global Markets

London Bad Bentheim Tyumen Nizwa

• St. Johns

Bergen Dubai

Land Drilling Offshore Services RDS offices Bentec Regional offices

Aberdeen (HQ)

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 costs of $13m)

PRESENCE IN KEY AREAS

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Geographical EBITDA Split(1)

Baku

HSSE Performance Continues To Out Perform Industry Average

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(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 (3) KCAD Total Recordable Incident Rate is directly comparable with IADC’s Total Recordables (RCRD) statistic Note: IADC stands for International Association of Drilling Contractors

Q4 2019 0.281,2 IADC industry average 0.633 for 2019

KCA Deutag have achieved ISO 14001 and ISO 45001 certification across all KCA Deutag and Turan Drilling & Engineering locations to supplement the existing ISO 9001 certificate Promoting increased awareness through safety campaigns to drive to zero incidents – two new campaigns recently launched

#enhancethebrand Initiatives

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Introduced over the last few months

Functional Support Review support structures to deliver effective functional support and reliably improve performance Customer Centricity Deliver incident-free services and further understand customer challenges to invent solutions Supply Management Improve supply management to deliver cost avoidance, strategic sourcing and stock optimization Digitalisation Evaluate digital work streams, smarter technologies and platforms to deliver value to customers Energy Transition Implement carbon reduction projects and aggressively pursue respective revenue opportunities Travel Management Proactively manage travel expenses, plan travel in advance and monitor compliance to policy Encourage bottom-up profitability where everyone contributes to eliminate waste & preserve cash Well of Innovation Deliver technology and innovations to transform the drilling operations throughout the industry

What was achieved by December 2019

• Revenues of $2m from campaign:

− ENHANCE currently on 52 rigs − FX-Control deployed on 12 rigs − OPTI Products on 15 rigs, used on 16 wells − A dozen other POC projects with customers

• Savings of over $25m by December:

− 570 bottom up ideas, 25 closed − Hundreds of supplier letters sent − Tens of bidding campaigns ongoing − Sharing stock across many locations 7

The organization has responded well… more was delivered in first 2 months of 2020

Backlog evolution to 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 necessarily indicative of our future revenue or earnings. KCAD backlog amounts are estimates as of 1-March-2020

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Total contract backlog as at 1 March 2020 Total contract backlog by BU as at 1 March 2020 Total contract backlog as at 1 November 2019 Total contract backlog by BU as at 1 November 2019

Historical utilisation represents actual utilisation calculated on a bi-monthly basis Forward contracted utilisation represents the current contracted position

Land Utilisation

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Historical and Forward Contracted Utilisation

Utilisation in Q4 2019 was 75%

(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

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Land & Bentec Financial Performance

Land Quarterly EBITDA ($m) Bentec Quarterly EBITDA ($m) (3)

= EBITDA Margin

Land YTD Revenue & EBITDA ($m) Bentec YTD Revenue & EBITDA ($m) (3)

32% 31% 4%

9%

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Offshore & RDS Financial Performance

Offshore Services Quarterly EBITDA ($m)

(1)

RDS Quarterly EBITDA ($m)

(1) Q1 2018 EBITDA shows $12m relating to MODUs, margin and total for Offshore Services only

Offshore Services YTD Revenue & EBITDA ($m) RDS YTD Revenue & EBITDA ($m)

15% 19% 5% 10%

= EBITDA Margin

Cash Flow and Working Capital

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(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

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 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) 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) 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) 19.1 (4.4) (2.7) (5.5) (515.6) (6.6) (3.4) 105.2 (34.7) 526.1 Net cash flow 12.5 (7.8) 102.5 (40.2) 10.5 Net Cash flow before debt drawdown/(repayment) Drawdown/(repayment) of debt and debt redemption/issuance costs

Capital Structure

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Net leverage as at 31 December 2019

(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 Amended Credit Agreement. (3) In addition to the $215m Revolver Cash facility, we also have $115m of guarantee facilities

Net Debt Evolution

(1) (3) (2) (3)

(2)

(2)

(2)

Amount Utilised Coupon Maturity Facility Rating Leverage 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

COVID-19 and OPEC+ Updates

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• The combination has led to unprecedented market challenges.
• We expect the near term economic disruption to be significant and last for months.
• Our ability to operate has become very complex as the supply chain is stretched.
• We are monitoring this fluid situation daily and working closely with customers.
• We stayed focused on what we can control to develop our Response Framework:

− Established Response teams − Making data driven decisions − Providing a safe workplace − Collaborating with customers

• Bottom up Response plans are agile to flex with escalating situations in each country.

Our current views and situation − Defining ‘new’ ways of working − Securing extended supply chain − Trying to mitigate financial impact − Ran drills to learn quickly

COVID-19 and OPEC+ Response and Mitigation plans

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• We are holding daily Executive team briefings to review ongoing and new risks.
• We decided early to put Health first and provide a safe workplace to employees.
• We will continue to deliver safe and trouble-free services for as long as we can.
• We are running weekly business unit sensitivities and staying close to customers.
• We are now focusing on managing Liquidity as we take defensive actions:

− Our intention is to use grace periods for the next bond interest payments. − Our intention is to initiate engagement with our creditors via their advisors.

• We want to boost Liquidity through Operational levers:

− We are identifying opportunities and initiatives to preserve cash. − Each business unit is running weekly sensitivities to monitor impact to EBITDA and Cash. − We are evaluating mission-critical projects and non-essential activities to map resources. What we are doing and plan to do next

Closing Remarks

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• Contract backlog remains steady at $5.7bn (at 1 March 2020) across a blue chip customer base
• A number of contract awards and extensions in Land drilling and acquisition of 2 rigs in Iraq with ongoing

contracts

• Significant progress made with the #enhancethebrand initiatives
• Full year 2019 EBITDA $299.2m and Q4 2019 EBITDA of $82.6m
• Proactively managing what we can control during the near term economic disruption

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Appendix

KCA Deutag Group LTM EBITDA and Pro Forma EBITDA

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Q4 2019 LTM EBITDA(1) LTM EBITDA $299m Q4 2019 Pro Forma LTM EBITDA LTM EBITDA $309m

(1) Business Unit proportions calculated based on group EBITDA, before corporate overheads, of $313m. (2) Q4 2019 LTM EBITDA includes $25m of actualised synergies. (3) Q4 2019 Pro Forma LTM EBITDA includes $3m of additional Pro Forma synergies.

KCAD LTM 208 Ex-Dalma LTM 105 Corporate Costs (13) Total 299 Q4 2019 LTM EBITDA ($m) KCAD LTM 208 Ex-Dalma LTM 108 Pro Forma 2 rig acquisition 5 Other compliance certificate adjustments 2 Corporate Costs (13) Subtotal 309 Holdco Equity Contribution 25 Total 334 Q4 2019 LTM Pro Forma EBITDA ($m)

No change to Offshore BU Contract Backlog Since Q3 call(1)

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(1) Contract and rig status shown as at 1 March 2020 Firm Options

Contract Platform Client Country Assets

end date status # Exxon Canada Hebron M ar-46 Operating 1 Equinor (Statoil) Norway CAT J (2) M ar-38 Operating 2 Equinor (Statoil) Norway Oseberg's (4) & Kvitebjorn Oct-28 Operating / Stacked 4/1 AIOC Azerbaijan Azeris, SD, DWG, Cop & Chirag Apr-26 Operating / Stacked 6/1 Vår Energi Norway Ringhorne Dec-25 Operating 1 Enquest UK Thistle, Heather & M agnus Dec-25 Operating / Stacked 1 /2 CNOOC UK Scott Feb-25 Operating 1 CNR UK Ninian's (2) Tiffany Nov-24 Operating / Stacked 1 /2 Exxon Angola Kizomba (2) Jan-24 Operating / Stacked 1 /1 Total UK Alwyn / Dunbar M ay-23 Operating / Stacked 1 /1 Chrysaor (COP) UK Britannia Nov-22 Stacked 1 Equinor (Statoil) Norway Pipe pool management Nov-22 Active mgmt. contract SEIC Russia LA, PA & PB M ay-21 Operating 3 2020 2021 2022