Q2 2015 Investor Presentation - DRAFT 20150820 v2 2015 KCA Deutag... · This presentation contains...
Transcript of Q2 2015 Investor Presentation - DRAFT 20150820 v2 2015 KCA Deutag... · This presentation contains...
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 2015
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.
2
1 Q2 Key Highlights
2 Business Update
3 Business Unit Financials
4 Group Results
5 Summary
Agenda
Q2 Key highlights
KCA Deutag is a leading international drilling and engineering company working onshore and offshore with a focus on safety, quality and operational performance
1
2015 YTD Group revenue and EBITDA of $874.3m (Q2 2014 YTD: $1,054.7m) and $141.3m (Q2 2014 YTD: $169.8m) respectively.Q2 2015 Group revenue of $408.1m (Q2 2014: $540.9m) and Q2 2015 EBITDA of $65.2m (Q2 2014: $89.0m) respectively
2Contract backlog of $7.6bn (at 1 August 2015) across a blue chip customer base
3A further new build rig spudded ahead of schedule in Russia on 16 April.Three remaining new build rigs in Oman and Brunei remain on track for delivery in 2015 completing our new rig delivery programme
4$50m of committed funding from KCAD Holdings I limited shareholders still available for draw down if required
5
Cost reduction programme continues to deliver an ongoing benefit to EBITDA with further initiatives to improve efficiency and reduce costs being implemented
3
Business update
4
Bentec Platform services RDS
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.
Integrated land drilling Integrated land drilling Offshore drilling services & designOffshore drilling services & design
• No further change to Platforms portfolio activity since Q1
• A slight increase in activity in Norway equipment rental business, but still below previous results
• Reduced capex spend by oil majors continues to impact activity
• Significant reductions in headcount implemented to counteract the reduced revenue levels
• Strong H1 backlog continues from previous orders
• Good capacity usage for 2015
• Tendering activity continuing to secure 2016 capacity
• International markets much less volatile than US, however certain markets have been more heavily impacted
• Continuing strong activity in Middle East, Russia and Algeria
• Lower activity in Nigeria and Europe where utilisation is very soft
$140.7m / 43.3% of total¹ $40.0m / 12.3% of total¹ $94.0m / 28.9% of total¹ $27.8m / 8.6% of total¹
Land drilling Bentec
Cost saving initiatives continue
5
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
Houston
Ben Loyaljack-up rig
Baku
London
Stavanger
Bad Bentheim
Tyumen
Nizwa
Ben Rinnesjack-up rig
St. Johns
Bergen
Dubai
Land Drilling Platform Services RDS offices MODUs BentecRegional offices
A diversified portfolio of assets
Aberdeen (HQ)
Map excludes work over land rigs, defined as being below 900HP.
PRESENCE IN KEY AREAS
North Sea /Norway27 Plat.
Europe & Caspian7 Rigs
7 CaspianPlat.
Russia17 Rigs
Middle East
14 Rigs
Angola3 Plat.
Africa14 Rigs
RussiaSakhalin3 Plat.
Brunei 1 Rig
Myanmar1 Plat.
127
56 5141
16
0
30
60
90
120
150
Europe NorthAfrica
MiddleEast
North Sea Russia
Ye
ars
LTM Q2 2015 EBITDA split by region
6
7
IADC industry average 0.752 for 2014
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.
• Sustained progress made on improving TRIR performance, which is well below IADC industry average
• Maintaining good annual safety performance
Health, safety and environmental performance
KCAD TRIR at end of Q2 2015 was 0.321 injuries per 200,000 man hours worked
8
Despite market environment, backlog remains strong
NB: Backlog figures exclude revenue generated in the year to date.
Total contract backlog as at 1 May 2015
Contract backlog by BU as at 1 May 2015
$M $M
Total contract backlog as at 1 August 2015
Contract backlog by BU as at 1 August 2015
9
• Lower revenues and EBITDA compared to Q2 2014 and Q1 2015
• Successfully delivered and spudded a new build rig in Russia
• Our operations in Russia, Algeria and Oman continue to enjoy high levels of utilisation and EBITDA
• Our European, Nigerian and Kurdistan businesses continue to see weakening utilisation, largely due to the wider market environment
• Overall our utilisation for the quarter was 74%, in line with the prior quarter
Financial Performance to 30 June 2015
Land Drilling
1 EBITDA is shown before and after allocation of central support costs (such as HR, Supply Chain and IT costs) to the operational business segments. 2014 and 2015 are presented on the same basis.
Q2 2015 Q2 2014 Q2 2015 Q2 2014
Result Result YTD YTD
$m $m $m % $m $m $m %
Revenue 157.5 188.9 (31.4) -16.6% 304.2 356.9 (52.7) -14.8%
EBITDA
pre support allocation 36.6 48.4 (11.8) -24.4% 77.0 86.9 (9.9) -11.4%
Support cost allocation (2.0) (2.8) 0.8 -29.8% (4.5) (5.6) 1.1 -18.8%
EBITDA
post support allocation 34.6 45.6 (11.0) -24.1% 72.4 81.3 (8.9) -10.9%
margin 22.0% 24.1% 23.8% 22.8%
Variance Variance
Bentec
10
• Revenues and EBITDA lower than Q2 2014
• Bentec maintains a reasonable backlog which will ensure that the business has a good level of utilisation through to the end of the year
• Currently in final stages of completion of 7 rigs for a client in Algeria and 3 rigs for KCAD in Oman and Brunei
• Now ramping up the work on the 3 rigs for a customer in Russia and 1 rig for a customer in Azerbaijan
• Tendering activity ongoing to secure order backlog for 2016
Financial Performance to 30 June 2015
1 EBITDA is shown before and after allocation of central support costs (such as HR, Supply Chain and IT costs) to the operational business segments. EBITDA is also shown before eliminations. 2014 and 2015 are presented on the same basis.
Q2 2015 Q2 2014 Q2 2015 Q2 2014
Result Result YTD YTD
$m $m $m % $m $m $m %
Revenue 50.2 63.7 (13.5) -21.2% 140.5 90.0 50.5 56.1%
EBITDA
pre support allocation 4.7 6.9 (2.3) -32.9% 16.0 7.8 8.2 NM
Support cost allocation (0.5) (0.7) 0.3 -37.0% (1.0) (1.4) 0.4 -31.4%
EBITDA
post support allocation 4.2 6.2 (2.0) -32.4% 15.0 6.4 8.6 NM
margin 8.4% 9.8% 10.7% 7.1%
Variance Variance
Platform Services
11
Financial Performance to 30 June 2015
• Continued good performance given current market conditions
• Our Angola, Myanmar and Canada operations experienced flat activity quarter on quarter, whereas Azerbaijan and Sakhalin saw lower EBITDA due to currency devaluation and the impact of client contract adjustments
• Our Norway business saw a small improvement on Q1 2015 due to stronger equipment rental activity
1 EBITDA is shown before and after allocation of central support costs (such as HR, Supply Chain and IT costs) to the operational business segments. 2014 and 2015 are presented on the same basis.
Q2 2015 Q2 2014 Q2 2015 Q2 2014
Result Result YTD YTD
$m $m $m % $m $m $m %
Revenue 172.2 208.2 (36.0) -17.3% 362.0 396.9 (34.9) -8.8%
EBITDA
pre support allocation 21.3 25.7 (4.4) -17.1% 45.8 50.8 (5.0) -9.8%
Support cost allocation (1.4) (2.0) 0.6 -28.9% (3.2) (3.9) 0.7 -17.6%
EBITDA
post support allocation 19.9 23.7 (3.8) -16.1% 42.6 46.9 (4.3) -9.2%
margin 11.6% 11.4% 11.8% 11.8%
Variance Variance
RDS
12
Financial Performance to 30 June 2015
• Activity levels significantly reduced, primarily due to a lack of opportunities for Greenfield projects
• We continue to reduce costs in this business as projects reduce in size
• Brownfield activity is more resilient, however projects tend to be smaller and we are seeing increased pressure on prices
1 EBITDA is shown before and after allocation of central support costs (such as HR, Supply Chain and IT costs) to the operational business segments. 2014 and 2015 are presented on the same basis.
Q2 2015 Q2 2014 Q2 2015 Q2 2014
Result Result YTD YTD
$m $m $m % $m $m $m %
Revenue 39.6 82.8 (43.2) -52.2% 99.2 178.8 (79.6) -44.5%
EBITDA
pre support allocation 5.1 15.1 (10.0) -66.1% 14.0 32.8 (18.8) -57.3%
Support cost allocation (0.5) (0.7) 0.2 -29.3% (1.1) (1.4) 0.3 -19.4%
EBITDA
post support allocation 4.6 14.4 (9.8) -68.0% 12.9 31.4 (18.5) -59.0%
margin 11.6% 17.4% 13.0% 17.6%
Variance Variance
MODUs
13
• Improved performance over Q1 2015 when the Ben Loyal jack up rig experienced damage to one of its legs and was therefore off day rate for a period. The rig was back to work in April and is currently working under a short-term contract extension at a reduced day rate
• The Ben Rinnes continues to operate offshore Angola
• The self-erecting tender barges, which were sold in Q4 2014, contributed $7.5m of the EBITDA before support allocation during H1 2014
Financial Performance to 30 June 2015
1 EBITDA is shown before and after allocation of central support costs (such as HR, Supply Chain and IT costs) to the operational business segments. 2014 and 2015 are presented on the same basis.
Q2 2015 Q2 2014 Q2 2015 Q2 2014
Result Result YTD YTD
$m $m $m % $m $m $m %
Revenue 22.4 35.6 (13.2) -37.1% 43.6 76.3 (32.7) -42.9%
EBITDA
pre support allocation 7.5 5.4 2.1 40.1% 13.0 18.0 (4.9) -27.5%
Support cost allocation (0.3) (0.5) 0.2 -42.9% (0.7) (1.0) 0.4 -35.1%
EBITDA
post support allocation 7.2 4.8 2.4 49.1% 12.3 16.9 (4.6) -27.0%
margin 32.1% 13.6% 28.3% 22.2%
Variance Variance
Group ResultsFinancial Performance to 30 June 2015
14
Revenue and EBITDA ($m) Q2 2015$m
Q2 2014$m
2015 YTD$m
2014YTD$m
Revenue from business units 442.1 579.1 949.8 1,099.2
Eliminations (34.0) (38.2) (75.5) (44.5)
Total revenue 408.1 540.9 874.3 1,054.7
EBITDA from business units 70.5 94.7 155.2 182.8
Eliminations (0.1) (1.1) (1.3) (1.1)
Corporate costs/other (4.4) (5.5) (9.9) (11.8)
Exchange (0.8) 0.9 (2.7) (0.1)
Total EBITDA 65.2 89.0 141.3 169.8
Q2 2015 Q2 2014 2015 YTD 2014 YTD
$'m $'m $'m $'m
Cash flow from operating activities 84.4 42.1 150.1 123.8
Capital expenditure (24.5) (61.1) (80.4) (83.5)
Proceeds from sale of Fixed Assets 2.2 0.5 3.1 3.7
Interest received 4.6 0.4 8.4 0.4
Other (3.5) (2.4) 2.7 (0.7)
Acquisition of non-controlling interests 0.0 0.0 (25.0) 0.0
Cash flow from investing activities (21.2) (62.6) (91.2) (80.1)
Interest paid (49.6) (50.1) (62.5) (54.1)
Foreign exchange (10.2) (4.9) (4.5) (5.9)
Net Cash flow before debt
drawdown/(repayment)3.4 (75.5) (8.1) (16.3)
Drawdown/(repayment) of debt and debt
issuance costs(4.6) (81.2) (16.5) (82.8)
Net cash flow (1.2) (156.7) (24.6) (99.1)
Cash flow and working capitalFinancial Performance to 30 June 2015
15
Working Capital2
9
1Denotes the effect of foreign exchange rate changes on cash and bank overdrafts.2Deltas denote current quarter working capital movement compared to the same period in the prior year
Free Cash Flow
9
• Cashflow from working capital improved due to collections by Bentec for the rigs delivered to Algeria since the year end
• In addition there is a favourable working capital impact of lower levels of activity and lower cash taxes
• Excluding the rights issue accounting between Holdings and Alpha:
• The working capital cashflow of $34m inflow would have been a $58m inflow
• The capital expenditure of $24.5m would have been $48.5m
1
16
2015 committed and contracted growth capex
Rig Country Cost ($m)1 Contract length Status
Rig 1 Oman c.31 5yrs + 2x1yr options Operating
Rig 2 Oman c.31 5yrs + 2x1yr options Operating
Rig 3 Oman c.31 5yrs + 2x1yr 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 + 2x1yr options In construction
Rig 8 Oman c.31 5yrs + 2x1yr 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 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
17
Capital structureNet leverage as at 30 June 2015
1 All facilities have ratings outlooks of positive / stable.2 Based on Q2 2015 LTM EBITDA of $286 m.3 Revolver is split $75/$175m non cash/cash, the amount shown represents the cash element.
Utilisation30th June 2015
Coupon MaturityFacility Rating1
Recovery Rating
Net Leverage2
Revolver ($250m)3 41.7 L+400 May-19 B3/B 3/3 0.15x
Senior Secured Term Loan 371.3 L(100)+525 May-20 B3/B 3/3 1.30x
Total Bank Debt 413.0 1.44x
UK Finance Senior Secured Notes 375.0 7.250% May-21 B3/B 3/3 1.31x
Globe Luxembourg Senior Secured Notes
500.0 9.625% May-18 B3/B 3/3 1.75x
Total Institutional Debt 1,288.0 4.50x
Finance lease & other debt 12.2 - Aug-18 - - 0.04x
Gross Debt 1,300.2 4.55x
Cash 45.4 0.16x
Net Debt 1,254.8 4.38x
Closing remarks
18
• Stable Q2 performance in the current challenging market conditions
• $50m of committed funding from our shareholders still available for draw down if required
• Successful start up of 5 of the 8 new build rigs, with 3 more on track for delivery in 2015
• Cost initiatives delivering bottom line savings
• Strong backlog position at $7.6bn across a blue chip company base
19