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EURASIA DRILLING COMPANY LTD
January 23-25, 2013
Deutsche Bank CEEMEA 1-1 Conference London
Disclaimer
The materials contained herein (the “Materials”) have been prepared by Eurasia Drilling Company Limited (the “Company”) and its subsidiaries and associates (the
“Group”) solely for use at presentations in January 2013. By accepting the Materials or attending such presentation, you are agreeing to maintain absolute
confidentiality regarding the information disclosed in the Materials and further agree to the following limitations and notifications.
The information contained in the Materials does not purport to be comprehensive and has not been independently verified. The information set out herein is subject to
updating, completion, revision, verification and amendment and such information may change materially. The Company is under no obligation to update or keep
current the information contained in the Materials or in the presentation to which it relates and any opinions expressed in them are subject to change without notice.
The Company and its affiliates, advisors and representatives shall have no liability whatsoever (in negligence or otherwise) for any loss whatsoever arising from any use
of the Materials.
The Materials are strictly confidential and do not constitute or form part of, and should not be construed as, an offer, solicitation or invitation to subscribe for, underwrite
or otherwise acquire, any securities of the Company or any member of the Group nor should they or any part of them form the basis of, or be relied on in connection
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The Materials are directed only at (i) investment professionals falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order
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persons together being referred to as “relevant persons”). Any investment activity to which the materials relate is available only to, and will be engaged in only with
relevant persons. Any person who is not a relevant person should not act or rely on the Materials or any of their contents.
Neither the Company’s share nor global depositary receipts representing the same have been, nor will they be, registered under the U.S. Securities Act of 1933, as
amended, or under the applicable securities laws of Australia, Canada or Japan. Any such securities may not be offered or sold in the United States or to, or for the
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No representation or warranty, expressed or implied, is made by the Company and any of its affiliates as to the fairness, accuracy, reasonableness or completeness of
the information contained herein and no reliance should be placed on it. Neither the Company nor any other person accepts any liability for any loss howsoever arising,
directly or indirectly, from reliance on the Materials.
The Materials include forward-looking statements which are based on current expectations and projections about future events. These forward-looking statements are
subject to risks, uncertainties and assumptions about the Company and its subsidiaries and investments, including, among other things, the Group’s results of
operations, the development of its business, trends in the oil field services industry, and future capital expenditures and acquisitions. In light of these risks, uncertainties
and assumptions, the events in the forward-looking statements may not occur. Neither the Company nor any other member of the Group undertakes to publish any
revisions to any forward-looking statements to reflect events that occur or circumstances that arise after the date of the Materials. In particular, we note that, unless
indicated otherwise, the market and competitive data in these Materials have been prepared by REnergy CO (“REnergy”). REnergy compiled the historical data
presented in these Materials from a variety of published and in-house sources, including interviews and discussions with market participants, market research, web-
based research and competitor annual accounts. REnergy compiled their projections for the market and competitive data beyond 2009 in part on the basis of such
historical data and in part on the basis of their assumptions and methodology. In light of the absence of publicly available information on a significant proportion of
participants in the industry, many of whom are small and/or privately owned operators, the data on market sizes and projected growth rates should be viewed with
caution.
The Materials are not directed to, or intended for distribution to or use by, any person or entity that is a citizen or resident or located in any locality, state, country or
other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation or which would require any registration or licensing within
such jurisdiction. The Materials are not for publication, release or distribution in Australia, Canada, Japan or the United States.
2
Investment Case
Outlook
Fin. Highlights
EDC Overview
Positioning
Summary
Agenda
3
Overview
Outlook
Investment case
Performance and positioning
Financial Highlights
Summary
Investment Case
Outlook
Fin. Highlights
EDC Overview
Positioning
Summary
4
Revenues
EBITDA margin
Market Share
Production Assets
Operating Statistics
Strategic highlights
Key customers
*-unaudited
US$ 3.2 billion*
24.3%*
29% by meters drilled
256 Drilling & sidetracking rigs
413 Workover Rigs
2 J/U rigs +2 J/U rigs under construction
6,050,811 meters drilled
862,309 th. horizontal meters drilled
+16%
+2.6 pp
+4 pp
-0.7% (v. end-2011)
+25% (v. end-2011)
+27%
-2%
Ex-SLB assets are consolidated from the beginning of the year
Contracted Lamprell to build 4th jack-up rig, MERCURY, for the
Caspian Sea with a delivery late 2014
Acquired three drilling rigs in Iraq in July 2012
THE LARGEST DRILLING COMPANY IN RUSSIA AND THE CIS
2012 Change
EDC at a glance
Investment Case
Outlook
Fin. Highlights
EDC Overview
Positioning
Summary
Geographic presence
5
Investment Case
Outlook
Fin. Highlights
EDC Overview
Positioning
Summary
2013 Outlook
6
Summary 2013 financial guidance
Total revenues for 2013 are expected to be in excess of US$ 3.6 billion.
EBITDA margin should be approximately 24.8% for the full year of 2013.
Onshore Drilling and Workover Services
Onshore drilling volumes to be slightly up from 2012. This estimate assumes an increase
in horizontal drilling of up to 50% as we continue to see increased demand from our
customers for more complex drilling.
In 2013, we will continue to work with existing customers and expects to add several new
customers in Russia:
• We expect Lukoil’s share in our total meters drilled to be approximately 55% in 2013.
• Rosneft’s share is expected to account for a quarter of our total drilling volumes.
Workover and sidetracking activities are expected to be strong contributors to revenue in
2013 as we continue to expand our operations on a solid platform built through a series of
successful acquisitions in prior years.
Investment Case
Outlook
Fin. Highlights
EDC Overview
Positioning
Summary
2013 Outlook continued
7
Offshore Drilling
The SATURN j/u continues drilling for Petronas under a new 3-year contract effective
January 9, 2013 in Turkmen waters of the Caspian Sea.
The ASTRA j/u is committed to a full 12 month program in 2013 in the Russian and Kazakh
sectors of the Caspian Sea at attractive day-rates.
We will continue to provide our services on Lukoil’s Yu. Korchagin field ice-resistant platform
throughout the year with Lukoil, drilling complex extended reach wells.
Our third jack-up rig, new-build NEPTUNE, is currently being assembled in a shipyard in the
Caspian Sea, with the rig expected to begin operations in the third quarter of 2013.
Construction of our fourth jack-up drilling rig, new-build MERCURY, is proceeding as planned
with expected completion near the end of 2014. First rig component shipments are expected
to start at the end of 2013.
Onshore Drilling Services 2013 Outlook in Iraq
Following the acquisition of two rigs in Iraq in July 2012, in late 2012 EDC added a third
onshore drilling rig and purchased a new fourth rig from an international vendor in Houston.
In 2013 the Company will have four rigs under contract working for large independent oil
companies.
Investment Case
Outlook
Fin. Highlights
EDC Overview
Positioning
Summary
EDC– Consistent Profitable Growth
8
Leadership - market leading position in innovation and growth
Secure fundamentals – stable core market environment – less volatile than other major
drilling markets
Growth - multiple growth opportunities in both core markets and developing markets
Higher value for our customers – investment & partnerships enhancing the customer
proposition
Efficiency – long experience of driving operational efficiencies with more benefits to accrue
Commitment to strong shareholder returns – leadership position and prudent financial
management will continue to deliver strong free cash flow; focus on shareholder returns
EDC ROCE Ave YoY growth of 38% in qtrly EBITDA
0%
5%
10%
15%
20%
25%
30%
2005 2006 2007 2008 2009 2010 2011
WACC
12.8%
40
80
120
160
200
240
280
1Q09 3Q09 1Q10 3Q10 1Q11 3Q11 1Q12 3Q12
$m
Source: Company data Source: Company data
Investment Case
Outlook
Fin. Highlights
EDC Overview
Positioning
Summary
Russian oil industry
9
Expanding prospects
Russian economy highly dependent upon oil and gas industry (ca. 50% State revenues)
Sustaining oil production requires more aggressive drilling
Migration to more remote greenfield regions where operations, logistics and geology can be more
challenging
Offshore opportunities in Caspian sea and other areas
Source: REnergy Co, April 2012
Russian oil production v. development drilling Incremental oil production by region
-4
1
6
11
16
21
26
31
36
6
8
10
12Crude Oil Production (lhs)
Development Drilling (rhs)
-150
050
250
450
650
850
1050
1250
1450
1650
2012F 2013F 2014F 2015F 2016F 2017F
Other TyumenTomsk
East Siberia Timan Pechora
YamalNenets Volga-Urals
KhantyMansisk
m bpd m metres 000’s bpd
Investment Case
Outlook
Fin. Highlights
EDC Overview
Positioning
Summary
0
5
10
15
20
25
30
2005 2006 2007 2008 2009 2010 2011 2012F 2013F 2014F 2015F
Western Siberia
Volga-Urals
Eastern Siberia
Timan-Pechora
Others
0
5
10
15
20
25
30
35
2005 2006 2007 2008 2009 2010 2011 2012F 2013F 2014F 2015F
Exploration
Development
Intervention
Russian market
10
Russia’s onshore market by meters drilled (mln)
Russian OFS market (US$ billions)
Drilling volumes in Russia
grew at more than 8%
between 2006-2011
As per REnergyCo, demand
for drilling is expected to grow
approx. 9.2% per year, to
over 25 million meters in 2014
Based on current drilling
rates, and including certain
efficiency improvements, the
onshore rig fleet in Russia
may be nearing 1,100 active
rigs by 2013
Rig demand and E&P capex
growth rates will be faster in
Greenfield areas, where
drilling is more complex and
penetration rates are lower
In US$ terms, the onshore
drilling market is expected to
grow over 15% p.a. through
2014
Source: REnergyCo 2012
Investment Case
Outlook
Fin. Highlights
EDC Overview
Positioning
Summary
Russian drilling rig market
11
Industry Issues
Average depth of Russian wells (metres)
Many existing onshore rigs approaching end of 25
year useful life
Fewer rigs capable of drilling deeper and more
complex wells
Industry facing massive investment requirement in
next 5 years
The Russian Drilling Fleet
EDC Total Russian Fleet
Average age 12 16
Average drilling depth 3,500 3,100
Source: Douglas Westwood 2012, Company estimates
Rig additions to Russian fleet
2,0
10
2,1
40
2,3
80
2,3
80
2,4
10
2,6
10
2,6
50
2,7
30
2,6
90
2,8
50
2,9
30
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Source: REnergyCO 2012 Source: REnergyCO 2012
0
50
100
150
200
250
300
198
7
198
8
198
9
199
0
199
1
199
2
199
3
199
4
199
5
199
6
199
7
199
8
199
9
200
0
200
1
200
2
2003
2004
2005
200
6
200
7
200
8
200
9
201
0
201
1
201
2F
No.
of ri
gs
Investment Case
Outlook
Fin. Highlights
EDC Overview
Positioning
Summary
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
16.0
18.0
20.0
2007 2008 2009 2010 2011
Brownfield Greenfield
$/boe
2,600
2,650
2,700
2,750
2,800
2,850
2,900
2,950
3,000
3,050
3,100
3,150
Ave
rag
e M
ea
su
red
We
ll D
ep
th (
me
ters
)
Russia Land
W.Siberia
Drilling complexity is increasing
12
Upstream capex per boe
Average Depth (MD) of Wells Drilled by EDC
Well depth trend in Russia
Deeper/longer well trend
Average well depths exceeding 3,000 metres
Drilling contractors & OFS companies need to respond
Capex drivers in greenfield
regions:
Lack of infrastructure
More complex geology, deeper
reservoirs and slower ROP
Remote location logistics
Typically heavier, more modern rigs required
Source: REnergyCO 2012
Investment Case
Outlook
Fin. Highlights
EDC Overview
Positioning
Summary
8,600
8,700
8,800
8,900
9,000
9,100
9,200
9,300
9,400
1Q
200
7
2Q
200
7
3Q
200
7
4Q
200
7
1Q
200
8
2Q
200
8
3Q
200
8
4Q
200
8
1Q
200
9
2Q
200
9
3Q
200
9
4Q
200
9
1Q
201
0
2Q
201
0
3Q
201
0
4Q
201
0
1Q
201
1
2Q
201
1
3Q
201
1
4Q
201
1
1Q
201
2
2Q
201
2
3Q
201
2
4Q
201
2
1.184
1.475 1.5491.649
1.387
1.792
2.235
2.756
0
1
1
2
2
3
3
2005 2006 2007 2008 2009 2010 2011 2012
+23%
10.117
12.305
14.62715.454
14.554
17.23318.742
20.538
0
5
10
15
20
25
2005 2006 2007 2008 2009 2010 2011 2012
+10%
Drilling impact
13
Russian Brownfield production, kbpd
Drilling volumes in Russia (mln. meters)
Source: Troika Dialog, CDU TEK
Horizontal drilling in Russia (mln. meters)
Russian Brownfield production
Russian brownfield production has virtually stopped declining since 1Q10.
During 2012 the output growth from Greenfields slightly
decelerated, which makes it more challenging to both
offset the production decline from Brownfields and to
increase Russia’s total oil and condensate output.
The output from the mature fields of Russia's four
largest oil producers largely stabilized, resulting in a
decline of only 0.4% y-o-y due to massively increased
drilling volumes during the last several years, the
movement to more horizontal drilling, as well as
supportive changes in the taxation system.
Investment Case
Outlook
Fin. Highlights
EDC Overview
Positioning
Summary
Caspian Sea jack-up market
14
Demand for jack-ups growing in all
Caspian sectors served by EDC:
In the Russian sector, Lukoil has made
a number of discoveries and has several
appraisals/prospects to drill
Numerous blocks are in exploration
phase in Kazakh waters, and some
developments are being planned
Offshore Turkmenistan is currently in
development phase using jack-ups off
small platforms. Additional exploration
blocks are being looked at by numerous
potential operators
Currently 3 jack-ups active in the
Caspian; demand by 2013 expected to
be 6-7 rigs
EDC actions to address demand:
Nov-10 contracted Lamprell Plc to build
a new 3rd j/u, NEPTUNE, with delivery
mid-2013
Feb-11 acquired the SATURN j/u rig
from Transocean
Apr-12 contracted Lamprell Plc to build
a new 4th j/u rig, MERCURY, with
delivery beg. later in 2014
Source: The Economist, Company data
Turkmen Exploration(Chevron, Conoco, Total)
STATOILExploration
NCOC (Exxon)Exploration
CMOC (Shell)Exploration & Appraisal(Significant Dev. planned 2014)
CONOCO/ MUBADALAExploration
TOTALExploration
DRAGON Production(15 year multi -rig development)
PETRONASProduction
LUKOILExploration, Appraisal & Development with jack-ups
CNPCExploration
Azerbaijan
Turkmenistan
Russia
Iran
Investment Case
Outlook
Fin. Highlights
EDC Overview
Positioning
Summary
1,235 1,2421,396
1,699
2,495
3,269
4,041
3,753
4,103
4,777
6,050
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Dri
lled
Me
ters
(th
ou
san
ds
)
LUKoil-Bureniye
EDC Actual
Operating performance
15
EDC drilling volume performance
In 2013 the total drilling volumes are expected to increase slightly from 2012
In 2013 horizontal drilling is expected to increase up to 50% from 2012 level
20% CAGR in drilling volumes during EDC’s history as an independent driller
Growth until 2011 has been organic
Starting end-Apr 2011, EDC consolidates drilling volumes of assets acquired from Schlumberger
*-YTD 2012 Data through October
Horizontal drilling volumes
305 298337
437
879862
0
100
200
300
400
500
600
700
800
900
1,000
2007 2008 2009 2010 2011 2012
Investment Case
Outlook
Fin. Highlights
EDC Overview
Positioning
Summary
SGC 4%
SurgutNG23%
All others 40%
EDC22%
SSK
8%
Market share (by meters drilled)
16
2007 (at IPO)
1H 2012
*
SurgutNG24%
All others 27%
EDC29%
SSK
7%
WFT
5%
At the time of EDC’s IPO In 2007, we were the largest independent
drilling contractor in Russia
The Company has grown significantly since then, and by 2011 EDC
became the largest drilling company in the CIS and in the Eastern
Hemisphere
In 2005, our first year of operations as an independent Company, our
market share was ≈17%, growing to 22% in 2007 by expanding work
scope for our existing customers and successfully tendering for new
clients
EDC market share for 2012 amounted to 29.5%
The Russian market grew 10% in 2012 in drilling volume terms vs. 2011
Our volumes grew at a higher pace than the market as we consolidated
from the beginning of the year drilling volumes of ex-SLB drilling
company (SGC), which resulted in 4pp market share increase
The Russian drilling market is still dominated by in-house drilling
companies, but the number of independents is growing as E&P
companies divest their in-house drilling capabilities (e.g.- Gazpromneft)
Investment Case
Outlook
Fin. Highlights
EDC Overview
Positioning
Summary
Customer diversification
17
Source: Company data
In 2012 Lukoil increased drilling volumes by 30% vs. 2011
Rosneft’s drilling volumes went up by 60% vs. 2011
Schlumberger deal has increased importance of Rosneft in customer mix
“Other” customers represent Tomskneft, Rusvietpetro and others
As green field becomes more important we will evolve our service offering to
meet customer requirements
1%
82%
17%
Other
8%
56%10%
25%
2%Other2006 Customer Mix
2012 Customer Mix
57%
24%
10%
7%
Investment Case
Outlook
Fin. Highlights
EDC Overview
Positioning
Summary
38
96
320 327
107
284
400
436*
0
100
200
300
400
500
600
2005 2006 2007 2008 2009 2010 2011 2012F
US
$ (
mill
ion
)
Actual
2012F
c. 600mm
EDC capital expenditures
18
CAPEX (US$ mln)
Note: Purchases of PPE as set forth in EDC’s audited consolidated statements of cash flows
for the years ended 31 December 2005, 2006, 2007, 2008, 2009, 2010 & 2011
*- 9M-12 (unaudited)
Significant CAPEX program focused on evolving fleet to meet the most
demanding and complex customer needs.
Starting from 2010 EDC’s CAPEX
includes payments to Lamprell for
the construction of two new-build
jack-up rigs:
• $235m per rig
• Neptune due for delivery mid-
2013
• On budget
• Mercury due for delivery end
2014
In 2012 offshore CAPEX was c.
US$ 152 million*
Investment Case
Outlook
Fin. Highlights
EDC Overview
Positioning
Summary
*-unaudited
4031
113
1160
3
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
100-125 T 160-175 T 200-225 T 250-270 T 320-400 T 450 T
Max
. D
ep
th in
Me
ters
34%
15%
3%
20%
28%
Up to 5 years 5-10 years 10-15 years 15-20 years >20 years
Rig fleet and CAPEX
19
EDC rig fleet (drilling & sidetrack rigs as of Dec 31, 2011) EDC rig fleet by age category
Source: Douglas Westwood, 2012
24%
10%
3%4%
59%
< 5 years 5-10 years 10-15 years 15-20 years >20 years
Russia’s rig fleet by age category
Source: Company data
EDC’s fleet modernisation programme is
focussed on:
Refurbishment of Medium Pad/Cluster rigs
‐ Workhorses of West Siberia far into the future
Replacement of Light Stationary rigs with Mobile units
‐ Sidetracks, smaller field development &
brownfield in-fill
Replacement of Heavy Stationary rigs with
predominantly Heavy Pad/Cluster rigs
‐ Deeper plays, ERD & complex wells
Investment Case
Outlook
Fin. Highlights
EDC Overview
Positioning
Summary
11.9%
15.2%
21.0% 21.5%23.1%
24.1%
21.7%
24.3%
2005 2006 2007 2008 2009 2010 2011 2012E*
2007 2008 2009 2010 2011 1H-11 1H-12
(US$ thousands) Audited Audited Audited Audited Audited Unaudited Unaudited
Revenue 1,492,189 2,101,779 1,382,203 1,812,156 2,752,417 1,265,282 1,564,185
% growth 37.2% 40.9% -34.2% 31.1% 51.9% 46.8% 23.6%
EBITDA 313,751 452,720 319,813 435,847 597,202 267,021 373,314
% margin 21.0% 21.5% 23.1% 24.1% 21.7% 21.1% 23.9%
Net income 168,544 220,933 165,490 207,353 277,237 150,601 187,267
% margin 11.3% 10.5% 12.0% 11.4% 10.1% 11.9% 12.0%
Operating cash flow 173,320 309,851 409,507 322,553 425,729 125,010 231,703
Capital Expeditures 319,740 327,015 106,815 283,777 399,954 214,736 281,783
Free Cash Flow -146,420 -17,164 302,692 38,776 25,775 -89,726 -50,080
Dividend per share (US$) n.a. 0.25$ 0.25$ 0.31$ 0.47$ n.a. n.a.
EPS (US$) 1.31$ 1.51$ 1.22$ 1.44$ 1.89$ 1.03$ 1.28$
Key financial highlights
20
EBITDA margin,% The increase in EBITDA margin in 2012 to 24.3%* is
mostly attributable to:
Sustained cost control efforts by the
management;
Strong performance of our offshore business;
Steady improvement in the efficiency of our
drilling processes;
No significant changes in the mix of services as
during 2011; and
No adverse impact from one-off items as during
2011.
*
*- represents year-end 2010 declared dividend per share, excludes special dividend declared in Apr. 2010 of US $1.22 per share
*-unaudited
Investment Case
Outlook
Fin. Highlights
EDC Overview
Positioning
Summary
-400
-200
0
200
400
600
800
1,000
2007 2008 2009 2010 2011 1H-12
Short-term debt Long-term debt Net cash/(net debt)
284 263182
404
753
-220
670
-350
Debt profile
21
Debt structure To finance acquisitions the
Company raised the following debt
late in 2010 and during 1H-11:
3-years ruble denominated
loan from Alfa bank at 8.4% for
c. US$ 231 mln in December
2010
5-years USD denominated loan
from Raiffeisen Bank at 5.65%
for US $220 mln in April 2011
7-years ruble bonds at 8.4% for
c. US $155 mln in June 2011
EDC raised 5-y dollar denominated
loan from UniCredit Bank at 3M
LIBOR+3.65% for US$ 227 mln in
December 2012
Net debt/EBITDA is c. 0.5* for the
full year of 2012
Debt maturity profile
0
50
100
150
200
250
2012 2013 2014 2015 2016 2017 andthereafter
US
$ (
mill
ion)
RUB denominated debt USD denominated debt
175
118
68
34
155
203
*-unaudited
Investment Case
Outlook
Fin. Highlights
EDC Overview
Positioning
Summary
3Q-12 Results
22
Top line revenue up 17% to US$ 2,402
million (9M-12: US$ 2,042 million);
EBITDA margin increased to 25.6%
(9M-12: 21.9%);
Net debt position (all debt reduced by cash)
was US$ 321 million as of September 30,
2012;
Capital expenditures were US $436 million
(9M-11: US $262 million);
The average exchange rate was 31.1
Rubles per US Dollar (9M-11: 28.8 Rubles
per US Dollar).
Drilling output for 9M-12 was 4.583 mln metres, 25%
above 9M-11 (3.669 mln metres);
Horizontal meters drilled in 9M-12 were up 2% to
660 th. meters (9M-11: 365 th. meters);
Exploration drilling volumes were up 10% y-o-y;
Our largest customer, LUKOIL accounted for 56% of
our total drilling volumes in 9M-12 (54% in 9M-11),
while ROSNEFT for 25% in 9M-12 (19% in 9M-11);
Our market share increased to 29% in 9M-12;
ASTRA j/u rig was employed in Kazakh waters of the
Caspian Sea drilling on N Block at the start of the
year and in the end of 2Q moved to Russian waters;
SATURN j/u rig continued its operations for Petronas
in Turkmen waters of the Caspian Sea;
We drilled 5 ER horizontal development wells on
Lukoil's Yu. Korchagin field platform in the Caspian;
The modules of our 3rd new-build j/u rig were in the
process of shipping to the Caspian from UAE.
Financial update Operations update
Investment Case
Outlook
Fin. Highlights
EDC Overview
Positioning
Summary
Key strategic focus- Scorecard
23
Acquire in-house and/or independent drilling
contractors
Invest in fleet expansion and upgrades
Leverage capacity and efficiency leadership
to gain market share with existing customers
SLB drilling assets add 3-4% market share on
a full-year basis
By 2012, roughly one in three new wells in
Russia will be being drilled by EDC rigs and
crews
Growth of customer base
Expansion in offshore drilling
Expand & improve workover capacity
Broaden technology platform
Target acquisition of businesses with diverse
customer portfolios
Differentiate ourselves from our competitors
Evaluate other strategic opportunities outside
of Russia and the CIS
Commission new offshore drilling assets in
response to market developments
Consolidate the market through acquisition of
existing assets where possible
Develop offshore ERD drilling capability
Acquired SATURN jack-up rig from
Transocean in 2011
Contracted 2 new-build j/u rigs for the Caspian
In 1H-12 drilled four ED wells using LUKOIL’s
Yu. Korchagin field platform
Consolidate all workover assets under one
entity within EDC group to ensure brand
identity
Target selected acquisitions of additional
workover and sidetracking capacity
June 2010 acquisition of OOO Meridian added
18 workover crews in the Komi Republic,
expanding our presence in Timan-Pechora
SLB transaction added 34 workover rigs
Ongoing acquisition of KNP assets will add 57
w/o rigs to our fleet
Increase market share
Expand and improve core drilling service
offerings in advance of divestiture
Develop and promote strategic partnerships
with global technology leaders
Strategic Alliance with Schlumberger provides
us access to best in class services
In 2011 added 17 high-capacity drilling rigs for
our onshore operations, expect to add a further
10-11 rigs in 2013
SLB assets work mostly for Rosneft & TNK-BP
In 2013 LUKOIL will account for ≈55% of total
meters drilled
In July 2012 we acquired our first rigs outside
of Russia and CIS
Investment Case
Outlook
Fin. Highlights
EDC Overview
Positioning
Summary
Q&A
24
Investment Case
Outlook
Fin. Highlights
EDC Overview
Positioning
Summary
Appendix: IR contacts
25
Investor Relations key contacts
Richard Anderson Kim Kruschwitz
Chief Financial Officer Vice President, Marketing and Investor Relations
Tel: +1-281-778-0621 Tel: +44 (0) 207 717 9707
E-mail: [email protected] E-mail: [email protected]
Taleh Aleskerov Evgeniya Bitsenko
Senior Vice President, Finance Manager, Investor Relations
E-mail: [email protected] Email: [email protected]
Investment Case
Outlook
Fin. Highlights
EDC Overview
Positioning
Summary
Appendix: Income Statement
26
2007 2008 2009 2010 2011 1H 2011 1H 2012
in US$ thousands Audited Audited Audited Audited Audited Unaudited Unaudited
Av. exchange rate RUB/USD 25.6 24.9 31.7 30.4 29.4 28.6 30.6
Total Revenue 1,492,189$ 2,101,779$ 1,382,203$ 1,812,156$ 2,752,417$ 1,265,282$ 1,564,185$
Costs and Other Deductions
Operating Expenses 1,031,480 1,453,718 912,050 1,195,891 1,898,246 864,732 1,048,835
Selling, General and Admin. Expenses 90,021 122,011 94,861 106,920 144,614 63,142 70,475
Taxes Other than Income Taxes 56,574 72,571 55,061 72,547 118,850 70,536 69,453
Depreciation 58,705 101,777 106,390 142,000 215,168 93,412 108,342
(Gain)/Loss on Disposal of PP&E 610 4,722 (382) (6,344) 1,362 3,392 157
Goodwill impairement loss - - - 7,096 1,296 - -
Income/(Loss) from Operations 254,799$ 346,980$ 214,223$ 294,046$ 372,881$ 170,068$ 266,923$
Interest Expense 29,880 26,553 13,524 15,125 52,342 21,133 27,403
Interest and Dividend Income (4,546) (9,553) (10,631) (7,993) (11,485) (3,753) (6,543)
Currency Transaction Loss/(profit) (349) 33,017 4,414 7,355 11,054 (1,745) (2,206)
Net gain on acquisition of business - - (2,849) (557) - - -
Gain on business exchange transaction - - - - (32,284) (32,861) -
Other Expenses 363 759 418 951 (6,495) (149) 2,108
Income/(Loss) Before Taxes 229,451$ 296,204$ 209,347$ 279,165$ 359,749$ 187,443$ 246,161$
Income Tax Expense 60,907 75,271 43,857 71,812 82,512 36,842 58,894
Net Income/(Loss) $168,544 $220,933 $165,490 $207,353 $277,237 $150,601 $187,267
Pat Margin 11.3% 10.5% 12.0% 11.4% 10.1% 11.9% 12.0%
EBITDA $313,751 $452,720 $319,813 $435,847 $597,202 $267,021 $373,314
EBITDA Margin, % 21.0% 21.5% 23.1% 24.1% 21.7% 21.1% 23.9%
EPS (US$ per share) $1.15 $1.61 $1.24 $1.44 $1.89 $1.03 $1.28
Investment Case
Outlook
Fin. Highlights
EDC Overview
Positioning
Summary
Appendix: Balance Sheet
27
31-Dec-07 31-Dec-08 31-Dec-09 31-Dec-10 31-Dec-11 30-Jun-12
in US$ thousands Audited Audited Audited Audited Audited Unaudited
ASSETS
Current Assets
Cash 343,089 279,430 433,724 629,466 509,781 320,766
Accounts Receivable,net 230,888 230,147 191,054 235,360 348,082 440,040
Inventories 132,822 183,448 116,801 145,633 214,434 252,205
Other Current Assets 62,792 61,359 53,270 66,608 80,922 62,641
Total Current Assets 769,591$ 754,384$ 794,849$ 1,077,067$ 1,153,219$ 1,075,652$
Property, plant and equipment 572,132 608,684 684,188 765,184 1,286,125 1,465,268
Other non-current assets 18,080 82,467 44,371 111,817 159,085 156,825
Total Assets 1,359,803$ 1,445,535$ 1,523,408$ 1,954,068$ 2,598,429$ 2,697,745$
LIABILITIES AND SHAREHOLDERS EQUITY
Current Liabilities
Accounts payable & accrued liabilities 210,337 236,343 228,499 258,706 407,411 393,981
Notes Payable - Current LTD 118,911 91,721 31,796 117,550 175,217 188,831
Other Current Liabilities 35,783 53,655 90,702 75,030 78,136 90,128
Total Current Liabilities 365,031$ 381,719$ 350,997$ 451,286$ 660,764$ 672,940$
Notes Payable - Long Term 165,494 171,138 150,379 286,367 578,117 481,592
Long Term - Other 7,382 12,135 19,874 31,633 60,592 79,020
Total Liabilites 537,907$ 564,992$ 521,250$ 769,286$ 1,299,473$ 1,233,552$
SHAREHOLDERS' EQUITY
Paid-in-Capital & APIC 515,649 481,132 471,300 679,856 679,423 682,115
Retained Earnings 277,855 464,461 596,340 578,989 787,250 974,517
Accumulated other comprehensive loss 28,392 -65,050 -65,482 -74,063 -167,717 -192,439
Total Shareholders' Equity 821,896$ 880,543$ 1,002,158$ 1,184,782$ 1,298,956$ 1,464,193$
Total Liabilities & shareholders' equity 1,359,803$ 1,445,535$ 1,523,408$ 1,954,068$ 2,598,429$ 2,697,745$ 0 0 0 0 0
Investment Case
Outlook
Fin. Highlights
EDC Overview
Positioning
Summary
Appendix: Cash Flow Statement
28
2007 2008 2009 2010 2011 1H 2011 1H 2012
in US$ thousands Audited Audited Audited Audited Audited Unaudited Unaudited
Net Income 168,544$ 220,933$ 165,490$ 207,353$ 277,237$ 150,601$ $187,267
Non-cash Adjustments (Depreciation) 58,705 101,777 106,390 142,000 215,168 93,412 108,342
Changes in Working Capital excl. Cash (53,929) (12,859) 137,627 (26,800) (66,676) (119,003) (63,906)
Cash from Operations 173,320$ 309,851$ 409,507$ 322,553$ 425,729$ 125,010$ 231,703$
Capex (319,740) (327,015) (106,815) (283,777) (399,954) (214,736) (281,783)
Acquisition of subsidiary, net of cash acquired - - (23,374) (43,132) (559,340) (557,750) -
Disposal of subsidiary, net of cash disposed - - - - 95,374 95,009 -
Other Investing Cash Flow 13,589 3,125 4,349 1,719 15,055 14,878 1,928
Net Change in Loans (20,386) 11,872 (84,500) 214,618 397,841 469,290 (71,163)
Dividends Accrued or Paid (10,000) - (34,327) (212,786) (45,387) (45,387) (68,976)
Sale/(purchase) of Treasury/common shares 480,139 (40,100) (18,621) 204,356 (5,114) (2,869) -
Refund of offering costs from JP Morgan - 5,583 - - - - -
Effect of exchange rate fluctuations (3,129) (26,975) 8,075 (7,809) (43,889) 20,696 (723)
Net increase/(decrease) in cash 313,793$ (63,659)$ 154,294$ 195,742$ (119,685)$ (95,859)$ (189,014)$
Investment Case
Outlook
Fin. Highlights
EDC Overview
Positioning
Summary
