View - KCA Deutag

Investor Presentation
Fourth Quarter 2013
KCA Deutag is a leading international drilling and engineering
company working onshore and offshore with a focus on safety,
quality and operational performance
www.kcadeutag.com
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 DEUTAG. These forwardlooking 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.
1
Agenda
2
1
Key highlights
2
Commercial developments
3
Business overview
4
Group results
5
Summary
An excellent Q4 completed a strong year of development for KCA Deutag
KCA Deutag has 125 years
of experience as one of the
world’s leading onshore
and offshore drilling and
engineering contractors,
operating safely in key
markets and new territories
1EBITDA
3
1
• 2013 revenue of $2.2bn and EBITDA1 of $304m.
EBITDA1 growth was 18%
2
• Improved operational and financial performance
from all core business units
3
• Strong market position across highly attractive
international markets and key territories
4
• Contract backlog of $7.9bn on 1 March 2014 across
a blue chip customer base
5
• Successful lender consent request extended
maturities on $325m of debt
6
• Net debt/LTM EBITDA leverage fell from 4.8x at Q3
2013 to 4x by the close of the year
excludes results from the Ben Avon jack-up which was disposed of in March 2013.
KCA Deutag is a diversified business across onshore and offshore
Onshore (c.50% of EBITDA1)
Segment description
Land Drilling
Offshore (c.50% of EBITDA1)
Bentec
 Leading international
premium drilling contractor
 High end fleet of 53 drilling
and 4 workover rigs2
 Track record of executing
complex wells in harsh
environments
Platform Services
 Leading global platform
service operator outside of
North America
 Design and refurbishment of
offshore drilling facilities and
MODUs
 Capacity for 12-16 rigs and
top drive capacity increased
during 2013 to a capability of
c.50 top drives per annum
 39 platform rigs under
management
 Engineering from concept to
commission
 Operations in UK North Sea,
Norway, Russia, Azerbaijan,
Angola and Myanmar
 Employs c.800 engineers
and support staff globally
8%
n/a
✓
Asset
light
Contract
tenor
2013
EBITDA1
45%
27%
4
• Owns and operates fleet of 2
jack-ups and 3 barge type
self erecting tender (SET)
rigs
 A sale and purchase
agreement to sell two of the
Group’s subsidiaries which
own and operate the 3
barges was signed on 4
March 2013
16%
3 - 5 years with options
n/a
✓
✓
Over 50% EBITDA1 generated in asset light businesses
1EBITDA
MODU
 Design and manufacture of
premium land rigs and key
components
 Provision of after sales
services
1 - 5 years with options
RDS
excludes results from the Ben Avon jack-up which was disposed of in March 2013 and is stated before normalisation
adjustments and excluding central overheads of $53m.
2 Compares to 54 drilling and 9 workover rigs (Q3 2013). Difference due to the retiral of 1 drilling and 5 workover rigs in Libya which
have not worked for the last 3 years and will not be restarted.
4%
1 – 3 years
Continued strong market position and balanced portfolio of assets across
highly attractive international markets
Azerbaijan
8 platforms
Norway
UK North 11
platforms
Sea
14
platforms
St.
Johns
Russia
15 rigs
Bergen
Aberdeen (HQ)
Netherlands
2 rigs
Houston
London
Ben Loyal
jack-up rig
Europe (inc North
Sea) 23%
Middle East
11%
Algeria
6 rigs
Libya
4 rigs
Glen Esk
SET rig
Ben Rinnes
jack-up rig
Africa
14%
Russia
20%
Pakistan
2 rigs
Myanmar
1 platform
Dubai
Nizwa
Oman
6 rigs
Brunei
1 rig
Glen Tanar
SET rig
Gabon
1 rig
1EBITDA
120
90
Kuala Lumpur
Angola
2 platforms
Presence in key regions
Years
Glen Affric
SET rig
60
30
Caspian
13%
Regional offices
5
Baku
Iraq /
Kurdistan
4 rigs
Nigeria
6 rigs
SE Asia
10%
Sakhalin
3 platforms
Kazakhstan
1 rig
Spain
1 rig
2013 EBITDA1 split by region
Other
9%
Bad
Bentheim
Albania
1 rig
Germany
2 rigs
France
1 rig
Tyumen
Stavanger
0
126
55
50
40
15
Europe North Middle North Russia
Africa East
Sea
Land Drilling
Platform Services
RDS offices
MODUs
Bentec
excludes results from the Ben Avon jack-up which was disposed of in March 2013 and is stated before normalisation
adjustments and excluding central overheads of $53m.
Map excludes work over land rigs, defined as being below 900HP.
Consistently strong health, safety and environmental performance is a
key differentiator
Total Recordable Incident Rate
KCA Deutag
2.00
IADC Average
1.80

History of over 125 years of complex
drilling operations under harsh
operating conditions

Reputation and track record critical to
supporting our leading market position
and ensuring repeat business

1.60
1.40
1.20
TRIR1
Consistently below the industry
average TRIR1 – confirms our
dedication and commitment to safe,
effective and trouble-free operations
1.00
0.80
0.60
0.40
0.20
0.00
2008
Total Recordable Incident Rate is directly comparable with IADC’s Total Recordables (RCRD) statistic.
2013 IADC and KCAD statistic available to Q4 2013.
Note:
TRIR stands for Total Recordable Incident Rate (per 200,000 man hours);
IADC stands for International Association of Drilling Contractors.
1
6
2
2009
2010
2011
2012
2013²
Healthy backlog providing high level earnings visibility for the future
Contract backlog2 as at 1 March 2014
Contract backlog1 as at 30 September 2013
$462m
8,000
$1,033m
$6,182m
$7,677m
6,000
$3,976
$3,841
4,000
0
$m
Contract
$21
$442
$919
2013
2014
$1,310m
$3,702
Total backlog
2,000
$m
Contract
Contract backlog1 by BU
$4,015
$51
$141
$1,258
$839
2014
2015
$3,692
$1,595
2016 and thereafter
$103m
Option
$12m
$173m
$1,176m
$71m
Land Drilling
Bentec
Bentec
Platforms
Platforms
RDS
RDS
$6,154m
MODUs
$1,726m
$251m
$5,737m
Updated Methodology
•
Methodology per the OM issued in May 2013 dictated that revenue generated during the financial year be included for the purposes of the backlog
calculation. We have employed new methodology which ensures that the calculation is strictly forward looking.
1
7
2
Total backlog
Contract backlog2 by BU
$175m
MODUs
$7,899m
$4,207
0
2015 and thereafter
$5,610m
6,000
$2,341
Option
Land Drilling
$980m
4,000
2,000
$114
8,000
Q3 2013 backlog has been restated for the updated methodology.
Backlog excludes revenue secured for the barges.
Significant new contracts – Bentec, Algeria
Contract nature
Construction of seven onshore desert drilling rigs, all fully equipped with
Bentec equipment, including top drives, pumps, drawworks, power control
rooms and electrical controls
Contract length &
timeframes
Rigs to be delivered within the next 17 months
Customer
Enafor
Contract value
Largest single contract in Bentec’s history
“We are extremely proud to have secured our largest deal since the company was
established in 1994. We work hard to maintain the highest quality standards across our
drilling rig systems and this success is testament to that, the services we provide and our
continued commitment to developing additional business in Algeria.”
Dirk Schulze, Chief Executive Officer, Bentec
8
Land Drilling – making a significant contribution to strong Q4 results
Financial Performance to 31 December 2013
Q4
2013
$m
Q4
2012
$m
$m
Revenue
185.7
146.4
EBITDA
46.4
37.3
Margin
2013
YTD
$m
2012
YTD
$m
$m
%
39.3
26.8% 684.8
567.2
117.6
20.7%
9.1
24.4% 160.6
141.9
18.7
13.2%
Variance
%
25.0% 25.5%
Variance
23.5% 25.0%
• Sustained strong Q4 performance with utilisation at 85%1 for the quarter
• Continued good results from Africa due to two new rigs that came online Q2
and Q3. Other countries in region have also experienced good utilisation
and day rates in the quarter
• Europe and Russia both saw good results due to utilisation and increases in
Combined Drilling Services in the Russian business
• The Middle East saw a softening in results for the quarter as non-productive
time and rig moves reduced both utilisation and earnings
185%
9
utilisation includes the 6 Libyan rigs (re-entry to the Libyan market is ongoing). Excluding the 6 Libyan rigs the
utilisation figure is 91% for Q4 2013.
Land Drilling - rig utilisation is robust with opportunities for growth
Overview
Fleet utilisation
• Leading international provider of onshore drilling and
workover operations
100%
84%
• Operates in c.15 countries across Russia/CIS,
Middle East, North Africa and Western Europe
80%
60%
40%
• Significant renewal of existing contracts as well as
new contracts resulted in utilisation outlook for the
coming year better than the outlook for the same
period in the prior year
Land rig2 by region and by horsepower
20%
0%
2010
Key customers
15%
8%
25%
2%
28%
68%
32%
Europe/Kazak
Africa
Middle East
1
10
2
Russia
Asia
1,000 - 1,499
1,500 - 2,999
79%
76%
65%
• Track record of executing complex, deviated wells in
harsh environments and emerging markets
23%
Average Land Rig Utilisation1
over 3000
Utilisation is stated including 6 Libyan rigs across all years: 4 drilling rigs, 2 workover rigs.
Excludes workover rigs, defined as being below 900HP.
2011
2012
2013
Land Drilling - strong development over the last 3 years
2013 highlights and events
• 2013 strong performance driven by:
• Russia – 3 new land rigs and strong
Combined Drilling Services activity
Financials
800
30%
25%
23%
22%
25%
600
20%
• Algeria – 2 new land rigs
• Europe and South Iraq - improved utilisation
• Realisation of business efficiency savings
• Strong bidding activity seen particularly in the Middle
East where we have secured several long-term
contracts at attractive day rates
400
15%
685
567
200
10%
464
161
142
104
5%
0
0%
2011
2012
Revenue $m
EBITDA $m
2013
Margin %
New contracted land rigs
• No rigs are built speculatively
• 3 new build Middle East rigs (BP Khazzan) and 1
Russian rig operational from Q4 2014
• All new build activity meets strict return criteria,
based on multi year contracts
• 1 further rig at advanced tender stage
• 1 more new build contract anticipated to be won in
2014
11
New builds schedule
Contracted
Khazzan rig 1
Khazzan rig 2
Khazzan rig 3
Russian new build
Key:
Construction
Operational
2014
2015
J F MA MJ J A S ON D J F MA MJ J A S ON D
Bentec – Q4 contributed 38% of their 2013 result
Financial Performance to 31 December 2013
Q4
2013
$m
Q4
2012
$m
Revenue
57.8
EBITDA
10.7
Margin
2013
YTD
$m
2012
YTD
$m
$m
65.9
(8.1) (12.3)% 225.7
178.2
47.5
26.7%
13.9
(3.2) (23.0)% 28.3
22.2
6.1
27.5%
18.5% 21.1%
Variance
$m
%
Variance
12.5% 12.5%
• Q4 delivered a strong finish with some significant new wins in December
• Deliveries of rigs to Algeria were made as expected during Q4 2013 with
margins higher than anticipated
• Sales of top drives were strong in the final months of the year
• Overall divisional EBITDA has grown 27% year on year
12
%
Bentec – important contract wins point to a bright future
2013 highlights and events
Financials
• 2013 performance driven by:
• Completion of 6 external rigs including 4 Enafor
rigs
• Shipment of 21 top drives
Bentec revenue by product type
Rigs external
Components
After sales
Rigs internal
Other turnover
12.5%
12.5%
12%
27
200
10%
150
8%
67
106
1%
100
6%
199
12% 3%
4%
111
50
64
25%
59%
New contract wins
• Construction of 7 onshore desert drilling rigs and top
drives, to be delivered within the next 17 months to
Enafor in Algeria
• Continued focus on external rig and component
orders as a means of driving growth
13
14%
13.3%
250
22
22
0
2011
Ex revenue $m
Int EBITDA $m
Key customers
2012
Int revenue $m
Margin %
28
2%
0%
2013
Ex EBITDA $m
Platform Services – strong Q4 performance
Financial Performance to 31 December 2013
Q4
2013
$m
Q4
2012
$m
$m
Revenue
216.5
187.8
EBITDA
34.5
26.2
Margin
2013
YTD
$m
2012
YTD
$m
$m
28.7
15.3% 755.5
617.0
138.5
22.4%
8.3
31.7%
88.3
8.2
9.3%
Variance
15.9% 14.0%
%
96.5
Variance
%
12.8% 14.3%
• EBITDA performance improved on the same period in 2012 by over 30%
• High drilling activity and a good contribution from our rental business drove
strong Q4 results.
• Sakhalin and Angola also benefited from a good quarter, and our recently won
contract in the Far East on the Daewoo Shwe platform continues to perform well
• Year on year EBITDA has grown 9%
14
Platform Services – contract backlog underpinning robust outlook
Platform Services contract backlog duration
Customer
Platform
Total
Alwyn
Total
Dunbar
EnQuest
Thistle & Heather
Nexen
Scott
CNR
Murchison, Ninian's (3) and Tiffany
TAQA
Cormorant A&N, Tern & Elder
Statoil
Osebergs (4) and Gulfaks (3)
Statoil
Kvitebjorn
ExxonMobil
Ringhorne & Jotun
Statoil
Cat J
BP
Azeri (3), SD, DWG, Shah Denis,
Chirag, Chirag Oil Project
SEIC
Lunskoye, Piltun A&B
CABGOC
BBLT
ExxonMobil
Kizomba
Daewoo
Shwe
Firm
15
Option
2014
2015
2016
2017
2018
2019+
$474m
$529m
$531m
$552m
$521m
$3,130m
Platform Services - important contract wins driving robust outlook
2013 highlights and events
Financials
• 2013 characterised by robust activity across all major
contracts
1,200
• Commencement of the Daewoo Shwe and
Kizomba contracts
• Particularly high activity in Sakhalin operations
• Strong results in the Norway sales & rental
business
• Decline in margin in 2013 partly due to significant
increase in low margin reimbursable revenues
13%
1,000
12%
800
600
8%
400
756
617
561
76
• Angola - 5 year O&M programme with ExxonMobil, for the
Kizomba platforms offshore Angola
• Norway – 12 year O&M project for two Cat J jack-ups, based
offshore Norway, for Statoil
16
97
88
0
0%
Revenue $m
• Myanmar - 2 year O&M drilling services contract for the Shwe
Platform, based in Myanmar, with Daewoo
4%
200
2011
Key contract wins
16%
14%
14%
Key customers
2012
EBITDA $m
2013
Margin %
RDS - excellent 2013 performance
Financial Performance to 31 December 2013
Q4
2013
$m
Q4
2012
$m
$m
Revenue
100.3
78.5
EBITDA
17.1
15.4
Margin
17
17.0% 19.6%
2013
YTD
$m
2012
YTD
$m
$m
%
21.8
27.8% 359.5
280.1
79.4
28.3%
1.7
11.0%
39.5
16.5
41.8%
Variance
%
56.0
Variance
15.6% 14.1%
•
RDS finished the year benefitting strongly from robust demand for premium
engineering design services to the offshore sector
•
Activity in the final quarter remained high across all divisions
•
Norway activity in particular drove strong Q4 results as well as higher
margin work on Hebron in Canada
•
Other North Sea work for high profile customers remained strong in the final
quarter
•
Overall EBITDA growth year on year was a healthy 42%
RDS - exposure to high profile projects and blue chip client base
2013 highlights and events
Financials
Very strong 2013 due mainly to high activity on major
projects:
400
• Hebron project in Canada
• Mariner, Clair Ridge, Heather and Dunbar projects in
the UK North Sea
300
12%
360
10%
200
8%
195
100
56
40
20
0
Revenue $m
• Shift to harsh environment/Arctic developments
requiring large integrated facilities
• North Sea, GoM, Caspian, Sakhalin mature markets
with older rigs requiring upgrade/overhaul
• Several North Sea projects will be completing during
2014, as well as elements of the Hebron contract in
Canada
• The pipeline remains robust with negotiations on new
projects at an advanced stage
18
4%
0%
2011
2014 outlook
16%
280
• Chirag Oil project in Azerbaijan
• Peregrino project in Brazil
16%
14%
Key customers
2012
EBITDA $m
2013
Margin %
MODUs – improved performance in Q4
Financial Performance to 31 December 2013
Q4
2013
$m
Q4
2012
$m
$m
Revenue
41.6
25.9
15.7
EBITDA1
11.5
(2.2)
13.8
Margin
2013
YTD
$m
2012
YTD
$m
$m
60.5% 157.2
124.7
32.6
26.1%
17.5
(1.7)
(9.6)%
Variance
%
N/m
27.7% (8.7)%
15.8
Variance
%
10.1% 14.0%
• The two jack-ups (Ben Rinnes and Ben Loyal) contributed $7.9m EBITDA2 to
the quarter
• The three barges (Glen Esk, Glen Affric and Glen Tanar) were profitable during
Q4 with EBITDA2 at $5.6m, however overall negative for the year
• The Glen Esk barge remains demobilised and warm-stacked at the year end
• Full year EBITDA1 was $15.8m, $1.7m behind the prior year
1EBITDA
19
excludes results from the Ben Avon jack-up which was disposed of in March 2013. Pro forma EBITDA
(barges stripped out) was $22m for 2013.
2 Asset EBITDA is stated before area overheads.
MODUs - 2013 was a mixed year for the division
2013 highlights and events
Financials
• One jack-up (Ben Avon) was sold in Q1 2013 for
gross proceeds of $55m
200
• Ben Loyal, Ben Rinnes, Glen Tanar and Glen Affric
continued to perform largely in line with management
expectations
• 2013 EBITDA negatively affected by delays in Glen
Esk rig up and subsequent contract cancellation
36%
40%
160
30%
157
120
127
125
20%
14%
80
10%
46
10%
40
18
16
0
0%
2011
Revenue $m
2014 outlook
Key customers
• The Group signed a sale and purchase agreement to
sell two subsidiary companies which own and
operate the three SET barges (Glen Esk, Glen Tanar
and Glen Affric)
• New contracts are currently under negotiation for the
two jack-ups
• The Ben Loyal is currently working with Pemex in
Mexico
• The Ben Rinnes is on contract with Vaalco in Gabon
1EBITDA
20
excludes results from the Ben Avon jack-up which was disposed of in March 2013.
2012
EBITDA1 $m
2013
Margin %
Working capital and capital expenditure
Working capital
750
154
550
147
141
136
138
542
350
389
200
232
(397)
(381)
(398)
Q4 2012
Q1 2013
Q2 2013
150
481
483
440
278
235
128
(50)
(250)
(384)
(418)
(450)
Trade and other receivables
Inventories and work-in-progress
Q3 2013
Trade and other payables
Q4 2013
Total working capital
Historical capital expenditure1 by category
300
$253m
$237m
$127m
250
60
51
200
150
126
111
67
75
65
2011
2012
2013
12
50
100
50
0
$m
Maintenance Capex
1
21
Growth Capex
MODU SPS spend
$127m capex does not include sale and leaseback amount of $35.4m. This is included within both disposals and capital
expense for statutory account purposes.
Capital Structure - an improving position throughout 2013
Net debt at 31 December 2013 ($m)
Q4 20131 $1,230m
(29)
-200
22
500
0
Cash
180
200
Liquidity Facilities
400
530
600
Senior Secured Notes
800
28
1,000
Term Loan B & Capex Facility
Term Loan C
1,200
1,400
LC Facilitiy
Other
Net debt1/LTM EBITDA throughout 2013
5.0x
4.7x
1,400
4.8x
5.00
4.0x
1,200
4.50
4.00
1,000
3.50
800
3.00
2.50
600
2.00
400
1.50
1.00
200
1,196
255
1,260
253
1,296
273
1,230
304
0
0.00
$m
Q1 2013
Q2 2013
Net Debt
1Net
22
0.50
2
1
Q3 2013
LTM EBITDA
debt portrayed as a positive figure to simplify illustration
EBITDA excludes results from the Ben Avon jack-up which was disposed of in March 2013
Q4 2013
Net debt/LTMEBITDA ratio
Amend and extend process completed 17 February
Previous maturity profile ($m)
Off B/S Guarantee Facility
Liquidity Facilities
530
500
Term Loans
Senior Notes
305
50
150
50
1
180
100
2014
1
75
Mar-15
Mar-16
Jun-16
Mar-17
2018
New maturity profile ($m)
$50m Additional RCF approved in A&E
649
Off B/S Guarantee Facility
500
Liquidity Facilities
Term Loans
255
Senior Secured Notes
50
38
2014
Mar-15
32
93
50
155
61
Mar-16
Jun-16
Mar-17
2018
• Consent to utilisation of the remaining $50m accordion
under current Incremental RCF
• Leverage and interest cover covenant reset in Q3 and Q4
2014
• Drop down of two additional land rigs (built with $50m of
shareholder equity) into the financing group for zero
consideration, thus increasing group EBITDA by c.$7m
per annum
• Approval to dispose of assets in a share sale
23
• Approval for additional issuance of Senior Secured Notes
with proceeds to repay term loans
Group Results - Q4 closed the year on a high
2013 EBITDA1 bridge
2013 EBITDA2 by BU
320
304
17
310
(2)
300
$16m
(2)
$56m
8
290
6
280
$161m
19
$96m
270
258
260
$28m
250
2012
$m
Land
Bentec
Platforms
RDS
MODU
O'head
2013
Land
Bentec
Platform Services
RDS
MODUs
EBITDA1 growth
2013 EBITDA1 ($304m) by quarter
140
108
350
CAGR: 20%
120
300
304
72
100
64
250
60
80
200
60
40
150
20
100
0
258
212
50
(20)
Q1 2013
$m
Q2 2013
Q3 2013
Q4 2013
0
$m
Land
1Results
24
2
Bentec
Platform Services
RDS
MODUs
2011
Central overheads
and comparatives are shown excluding the results from the Ben Avon and EBITDA is shown before non-recurring items.
EBITDA is shown excluding the results from the Ben Avon and before central overheads of $53m.
2012
2013
Closing remarks

• Strong performance delivery in 2013 provides an excellent foundation for 2014 and beyond

• Decreasing leverage position to 4x at the year end






25
• Excellent backlog of $7.9bn underpins future earnings
• Successful amend and extend provides additional financial flexibility to execute on the strategy
• Headline-grabbing contract wins on high-profile projects with more in the pipeline
• Actions continue to optimise the business portfolio and increase business efficiency in 2014
• Growth opportunities are only being pursued where they provide robust capex returns driving
increased cash generation based upon long term contracts
• All of this is underpinned by a stable and experienced management team focused on further
delivery of results
Q&A
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