investor presentation - kca deutag · investor presentation kca deutag is a leading international...
TRANSCRIPT
Investor Presentation
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 2017
0
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.
Disclaimer
1
Agenda
2
1 Q2 Key Highlights
2 Business Update
3 Business Unit Financials
4 Group Results
5 Summary
Q2 Key Highlights
3
KCA Deutag is a leading international drilling and engineering company working onshore and offshore with a focus on safety, quality and operational performance
1 Q2 2017 Group revenue of $287.5m (Q2 2016: $323.7m) and Q2 2017 EBITDA of $50.9m (Q2 2016: $75.2m) respectively
2 Steady tendering activity for Land and Bentec, with increased activity on the new Cat J and Hebron contracts for Offshore
3 Contract backlog of $5.2bn (at 1 August 2017) across a blue chip customer base
4 Successful closing of offering of $535 million 97/8% Senior Secured Notes due 2022
5 Available liquidity of $226m at 30 June 2017
Market Overview
4
KCAD operates in low breakeven oil price environments
International vs. North American drilling markets
International markets North America
Commodity price • Less dependency on commodity prices • High dependency on commodity prices • Gas heavy market with depressed/volatile Henry Hub
prices
Volatility • Low operating cost base • Rig count largely inelastic to price downturns
• High operating cost base • High sensitivity to price downturns
Supply growth drivers
• Supply critical to national economy and often driven by NOCs
• Supply of less significance to government revenue
Contract duration • Customers willing to ensure rig availability through long term contracts
• Contract durations and terms more favourable to customers
15
32
41 42 42 43 48
55
56
0
10
20
30
40
50
60
70
80
Source Rystad Energy (May-16)
KCAD core markets
0 10 20 30 40 50 60 70 80 90 100
Onshore Middle East
Shelf
Russia Onshore
Row Onshore
Deepwater
Extra Heavy Oil
Ultra Deepwater
North American
Shale
Weighted Average Breakeven Oil Price ($/bbl)
Cumulative Liquids Production in 2020 (MMbpd)
Oil Sands
Current Brent price
Business update
5 1 The % split of LTM EBITDA is calculated using total group EBITDA of $237.1m (before corporate costs of $19.6m)
Bentec Offshore services RDS
Integrated land drilling Offshore drilling services & design
• Long term stable backlog continues to be maintained with some recent contract extensions
• Activity levels remain lower in the North Sea and Angola
• Difficult conditions continue in Norway
• CAT J and Hebron contracts continue to ramp up activity
• Workload remains weak with very limited new project activity
• Brownfield work remains relatively steady
• Developing diversification opportunities into non-oil and gas sectors
• Strong activity in Oman and Russia with continuing ongoing opportunities
• Utilisation in Nigeria, Kurdistan and Algeria remains weaker
• Europe activity continues to show signs of recovery
• Several component orders received securing reasonable workload for remainder of 2017
• After Sales remains steady with stable outlook
$177.0m / 74.7% of total¹ $(3.7)m / (1.6)% of total¹ $61.9m / 26.1% of total¹ $2.0m / 0.8% of total¹
Land drilling Bentec
Group margin performance
6
KCAD operations are diversified across global markets
7
Houston
Baku
London Bad Bentheim
Tyumen
Nizwa
St. Johns
Bergen
Dubai
Land Drilling Offshore Services RDS offices Bentec Regional offices
Aberdeen (HQ)
PRESENCE IN KEY AREAS
North Sea /Norway 21 Plat.
Europe & Caspian 8 Rigs
Caspian 7 Plat.
Russia 16 Rigs
Middle East
17 Rigs
Angola 2 Plat.
Africa 11 Rigs
Russia Sakhalin 3 Plat.
Brunei 1 Rig
129
58 53 43 18
0
30
60
90
120
150
Europe North Africa Middle East North Sea Russia
Year
s
LTM Q2 2017 EBITDA split by region
Canada 1 Plat.
Map excludes 1 workover land rig in Nigeria, defined as being below 900HP Map shows position at 1 August 2017
Health, safety and environmental performance
8
• Sustaining low TRIR levels in a range which are the best in the company’s history
• In Russia the T-321 was awarded the HSE Excellence Award by our client
• All KCA Deutag and RDS onshore operations in the UK have successfully achieved re-certification to the new environmental ISO 14001:2015 standard
1Total 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 Note: IADC stands for International Association of Drilling Contractors
IADC industry average 0.452 for 2016
KCAD TRIR at end of Q2 2017 was 0.231 injuries per 200,000 man hours worked
Backlog Status
9
Total contract backlog as at 1 May 2017
Contract backlog by BU as at 1 May 2017
Total contract backlog as at 1 August 2017
Contract backlog by BU as at 1 August 2017
Backlog figures exclude revenue generated in the year to date
Land fleet utilisation
10
Historical and forecast utilisation
Contract Platform
Client Country Assets Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 end date status #
Exxon Canada Hebron Mar-46 Operating 1Statoil Norway CAT J (2) May-36 Under Construction 2Exxon Angola Kizomba (2) Apr-27 Stacked 2AIOC Azerbaijan Azeris, SD, DWG, Cop & Chirag Dec-24 Operating 7Nexen UK Scott Feb-23 Operating 1Statoil Norway Oseberg's (4) & Gulfaks (3) Oct-22 Operating / Stacked 6/1Statoil Norway Pipe pool management Oct-22 Active mgmt. contractStatoil Norway Kvitebjorn Oct-22 Operating 1CNR UK Ninian's (3) Tiffany Nov-21 Operating / Stacked 1 /3SEIC Russia LA, PA & PB May-21 Operating 3Total UK Alwyn Dec-20 Stacked 1Total UK Dunbar Dec-20 Stacked 1Enquest UK Thistle & Heather May-20 Operating / Stacked 1/1Exxon Norway Ringhorne Dec-17 Stacked 1COP UK Britannia Oct-17 Stacked 1
2017 2018 2019
Robust platform services contract backlog @ 1 August
11 Contracts have been extended or renewed since last call
Land Drilling Financial Performance to 30 June 2017
12
• The land business although down on the prior year has delivered strong financial results in tough market conditions with EBITDA in line with the prior quarter
• Activity levels remain robust in Russia and Oman
• Ongoing weaker market conditions in Nigeria, Kurdistan and Algeria due to softer utilisation
• Reasonable level of tendering activity in several markets
• Utilisation for the quarter of 61%, a slight increase on the prior quarter
Q2 2017 Q1 2017 Q2 2016 Q2 2017 Q2 2016Result Result Result YTD YTD
$m $m $m $m $m
Revenue 128.0 122.2 150.6 250.1 300.9 EBITDA (post support allocation) 43.5 43.0 48.3 86.6 96.0 Margin 34.0% 35.2% 32.0% 34.6% 31.9%
Bentec Financial Performance to 30 June 2017
13
• EBITDA has decreased slightly compared to the prior quarter
• After Sales remains steady with a stable outlook
• Continued active tendering market, particularly for components
Q2 2017 Q1 2017 Q2 2016 Q2 2017 Q2 2016Result Result Result YTD YTD
$m $m $m $m $m
Revenue 16.5 15.6 16.8 32.1 46.5 EBITDA (post support allocation) 0.2 0.3 0.5 0.5 3.4Margin 1.5% 1.7% 3.0% 1.6% 7.3%
Offshore Services Financial Performance to 30 June 2017
14
• Higher revenue and EBITDA compared to Q1 2017, primarily due to strong performance in Azerbaijan and Sakhalin
• Conditions in Norway continue to prove challenging
• Cat J and Hebron projects continue to ramp up and are scheduled to commence operations in H2 2017
Q2 2017 Q1 2017 Q2 2016 Q2 2017 Q2 2016Result Result Result YTD YTD
$m $m $m $m $m
Platform ServicesRevenue 132.0 119.0 127.4 251.0 272.0 EBITDA (post support allocation) 12.9 11.3 18.4 24.2 38.2 Margin 9.8% 9.5% 14.4% 9.6% 14.0%
MODUsRevenue 0.0 0.0 15.6 0.0 28.5EBITDA (post support allocation) (0.0) (0.0) 11.6 (0.0) 15.7Margin n/a 0.0% 73.8% n/a 54.9%
Offshore ServicesRevenue 132.0 119.0 143.0 251.0 300.5 EBITDA (post support allocation) 12.9 11.3 29.9 24.2 53.8 Margin 9.8% 9.5% 20.9% 9.6% 17.9%
RDS Financial Performance to 30 June 2017
15
• Few opportunities in greenfield however brownfield activity continues to be steady
• Continued progress in respect of diversification into non-oil and gas activities
Q2 2017 Q1 2017 Q2 2016 Q2 2017 Q2 2016Result Result Result YTD YTD
$m $m $m $m $m
Revenue 14.3 14.2 19.5 28.5 43.9 EBITDA (post support allocation) (0.1) 0.6 2.0 0.5 3.6 Margin -0.4% 4.0% 10.3% 1.8% 8.2%
Group Results Financial Performance to 30 June 2017
16
Revenue and EBITDA ($m) Q2
2017 $m
Q1 2017 $m
Q2 2016 $m
2017 YTD $m
2016 YTD $m
Revenue from business units 290.9 271.0 330.2 562.0 692.3
Eliminations (3.4) (1.9) (6.5) (5.4) (11.3)
Total third party revenue 287.5 269.1 323.7 556.6 681.0
EBITDA from business units 56.6 55.2 80.7 111.8 156.9
Eliminations 0.0 0.0 (0.1) 0.0 (0.3)
Corporate costs/other (4.8) (4.8) (4.5) (9.6) (9.3)
Exchange (0.8) (0.3) (0.9) (1.1) (0.9)
Total EBITDA 50.9 50.1 75.2 101.0 146.4
Cash flow and working capital Financial Performance to 30 June 2017
17
9
1
Working Capital2
9
Free Cash Flow
1
1Denotes the effect of foreign exchange rate changes on cash and bank overdrafts 2Deltas denote current quarter working capital movement
Q2 2017 Q1 2017 Q2 2016 2017 YTD 2016 YTD$'m $'m $'m $'m $'m
Cash generated from operations 16.0 21.4 57.8 37.4 139.9
Tax paid (11.2) (8.5) (10.6) (19.7) (22.9)
Cash flow from operating activities 4.8 12.9 47.2 17.7 117.0
Capital expenditure (35.0) (6.8) (11.2) (41.8) (75.3)
Proceeds from sale of Fixed Assets 0.1 0.2 7.2 0.3 59.8
Interest received 6.2 5.4 5.2 11.6 10.6
Other 0.0 0.0 0.7 0.0 0.4
Cash flow from investing activities (28.7) (1.2) 1.9 (29.9) (4.5)
Interest paid (50.0) (14.9) (49.2) (64.9) (63.6)
Foreign exchange1 (4.6) (2.6) 8.6 (7.2) 11.1
Dividend paid to minority shareholders 0.0 (0.3) 0.0 (0.3) 0.0
Acquisition of non-controlling interests 0.0 0.0 0.0 0.0 0.0
Net Cash flow before debt drawdown/(repayment) (78.5) (6.1) 8.5 (84.6) 60.0
Drawdown/(repayment) of debt and debt redemption/issuance costs 2.8 (6.6) (7.2) (3.8) 67.5
Net cash flow (75.7) (12.7) 1.3 (88.4) 127.5
Capital Structure Net leverage as at 30 June 2017
18
9
1
1 Q2 2017 LTM EBITDA of $242m includes the $25m Holdco equity contribution as defined in the Amended Credit Agreement 2 Revolver is split $75/$200m non cash/cash, the amount shown represents the cash element utilised 3 Facility and Recovery ratings shown as at June 2017
Utilisation 30th June 2017 Coupon Maturity Facility
Rating3 Recovery Rating3 Net Leverage1
Revolver ($275m)2 2.0 L+400 Mar-22 Caa1/CCC+ 3/3 0.00x Senior Secured Term Loan 360.6 L(100)+575 May-20 Caa1/CCC+ 3/3 1.49x HSBC Oman Term Loan 56.0 L+400 Dec-20 0.23x Total Bank Debt 418.6 1.73x UK Finance Senior Secured Notes 375.0 7.250% May-21 Caa1/CCC+ 3/3 1.55x UK Finance Senior Secured Notes 535.0 9.875% Apr-22 Caa1/CCC+ 3/3 2.21x Total Institutional Debt 1,328.6 5.49x Finance lease & other debt 4.4 - Aug-18 - - 0.02x Gross Debt 1,333.0 5.50x Cash 75.5 0.31x Net Debt 1,257.5 5.19x
19
9
1
Closing Remarks
• Strong liquidity position at $226 million
• Q2 2017 EBITDA of $51 million delivered in challenging market conditions
• Tendering activity across several regions although market still very competitive
• Successful closing of new bond providing ongoing secure financial footing
• Backlog position of $5.2 billion across a blue chip company base
• Strong HSE and operational performance sustaining low group incident rate
