EURASIA DRILLING COMPANY LTD

Transcription

1 EURASIA DRILLING COMPANY LTD Cowen s Ultimate Energy Services Conference New York, USA 3-4 December,

2 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 December 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 with, any contract to purchase or subscribe for any securities of the Company or any member of the Group or global depositary receipts representing the Company s shares nor shall it or any part of it form the basis of or be relied on in connection with any contract or commitment whatsoever. This document is neither an advertisement nor a prospectus. The Materials have been provided to you solely for your information and background and are subject to amendment. The Materials (or any part of them) may not be reproduced or redistributed, passed on, or the contents otherwise divulged, directly or indirectly, to any other person or published in whole or in part for any purpose without the prior written consent of the Company. Failure to comply with this restriction may constitute a violation of applicable securities laws. 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 2005, (the Order ) or (ii) high net worth entities, and other persons to whom they may lawfully be communicated, falling within Article 49(2) of the Order (all such 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. 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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 ) and Douglas-Westwood Limited ( Douglas-Westwood ), a global consulting and services organisation focused on the energy and marine industries. REnergy and Douglas Westwood 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 2011 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

3 Agenda 1. Russian Drilling Market 2. History 3. Results 4. Outlook 3

4 Steady Market Oil & gas industry is ca. 50% Country revenues 7-10% drilling growth to sustain oil production Growth of Horizontal wells (2012: 12% 2013 YTD: 19%) Greenfield sites: complex operations, logistics and geology Offshore opportunities in Caspian Sea and Arctic Russian Oil Production versus Drilling Oil Production Growth by Region m bpd m metres s bpd 800 KhantyMansisk 600 YamalNenets TyumenTomsk 400 Volga-Urals Timan-Pechora Eastern Siberia F 2015F Crude Oil Production (lhs) Development Drilling (rhs) Source: REnergyCO F 2014F 2015F 2016F 2017F 2018F Source: REnergyCO

5 Aging Rigs Deeper Wells 60% rigs >20 years (dead at 25) EDC Avg Age Rigs for deeper complex wells EDC Total Russian Fleet Total Russian Fleet Avg drill depth 3,500 m 3,100 m Massive investment requirement in next 5 years Avg Depth of Wells in Russia, m Russian Rig Fleet by Age >20y 59% 15-20y 4% Source: Douglas Westwood 2012 Additions to Russian Rig Fleet <5y 24% 5-10y 10% 10-15y 3% No. of rigs , ,610 2,650 Source: REnergyCO ,730 2,690 2,850 2,930 3, Source: Douglas Westwood

6 What s different in Russia? Russia Long Term contract model Lower volatility of pricing and margins Historically Turnkey Optimal for simple drilling solutions Static, basic and ageing rig fleet Low efficiency and low utilisation Mostly small independent players, c40% of market are in-house EDC can sustain leadership for longer Rest of World Spot market Higher pricing & demand volatility Dayrate Optimal for more complex solutions Versatile, mobile rigs Transition will increase utilisation All independent, for-profit More competitive market Historically Full service Integrated project management model Discrete service providers Specialisation 6

7 Agenda 1. Russian Drilling Market 2. History 3. Results 4. Outlook 7

8 EDC s History Lukoil s Drilling Department Russia Lukoil s ASTRA Jackup Caspian Sea Schlumberger 28 Workover rigs Russia IPO on London Stock Exchange Lukoil s 213 Workover rigs Siberia Drilling operations on Korchagina Caspian Sea Meridian s 23 Workover rigs Komi Republic Ordered NEPTUNE Lamprell Super 116E jackup Lukoil s 4 rigs in Kaliningrad Transocean s Jackup in Caspian SATURN Schlumberger (19 rigs, 23 sidetrack & 34 W/o) Ordered MERCURY jackup for Caspian Romfor 2+2 rigs in Northern Iraq 2013 NEPTUNE starts working Turkmen Waters 2014 MERCURY deploys to Turkmen waters

9 EDC s Business 9M 2013 Russia Land Drilling & Sidetracking (255 rigs) Russia Land Workover (415 rigs) Caspian Sea (3 jackups & 1 platform) Northern Iraq (4 rigs) 9

10 Agenda 1. Russian Drilling Market 2. History 3. Results 4. Outlook 10

11 Russian Drilling Market Growth Drilling Volumes in Russia 30 mn m CAGR +11% CAGR +7% F 2015F West Siberia Volga-Urals Timan-Pechora East Siberia Others Source: REnergyCO

12 Russian Horizontal Metres Growth Horizontal Drilling in Russia mn m 4.5 CAGR +14% 4.0 CAGR +14% F 2015F Source: REnergyCO

13 Russian Drilling Market 3Q 2013 Total metres drilled 16.5 million +5.5% Horizontal metres 3 million +61.5% Rosneft (27% market): Total metres drilled 4.4 million -1.1% Horizontal Metres 0.98 million +45.2% SurgutNeft (24% market): Total metres drilled 4.0 million +7.8% Horizontal Metres 0.30 million +66.8% Lukoil (17% market): Total metres drilled 2.9 million +8.0% Horizontal Metres 0.64 million +26.1% Gazpromneft (13% market): Total metres drilled 2.2 million +14.1% Horizontal Metres 0.24 million 13.2% EDC core customers (57% market) Total metres drilled 9.5 million +4.8% Horizontal metres 1.85 million +33.4% Customer Non-customer Source: CDU TEK 13

14 EDC Results 9M 2013 The largest drilling company in Russia and the CIS 9M 2013 Change Revenues* EBITDA margin* US $ 2.6 billion 26.9% +9.5% +1.3 pp Market share c. 29% by meters drilled (Russia onshore) no change Operating 4,731,754 meters drilled 893,651 horizontal meters drilled 187 sidetracks +3.3% +35.3% +15.4% Production Assets 259 Drilling & sidetracking rigs 415 Workover Rigs 3J/U rigs +1 J/U rigs under construction +0.8% (v. 30 June 2013) -1.0% (v. 30 June 2013) Key customers *- Unaudited 14

15 Agenda 1. Russian Drilling Market 2. History 3. Results 4. Outlook 15

16 2013 Guidance Revenue US$ 3.55 billion EBITDA margin 26.9% Capital Expenditure US$ 550 million 16

17 Offshore developments - Caspian Sea LUKOIL 8 discoveries Russian Kazakh Turkmen Exploration 3% of world oil reserves Potentially 7-8 JUs ASTRA SATURN Russian Turkmen Development 4x JU rigs currently operating Source: The Economist, Company data LSP-1 Platform on Yuri Korchagin field Barriers to entry (rig builds) NEPTUNE and MERCURY new-builds Potentially 7-8 JUs 17

18 Rig Fleet EDC is to maintain a competitive drilling fleet EDC Drilling Rig Fleet EDC Rig Fleet by Type Type Draw works Total % of total Mechanical % Mobile Electric 2 0.8% All types % Mechanical % Stationary Electric % All types % Mechanical 3 1.2% Pad / Cluster Electric % All types % Mechanical % Total Electric % All types % Russian drilling rig fleet is static, low-tech and ageing, which results in low utilization and low efficiency EDC fleet average age is well below Russia s average rig flleet age Source: Company Notes: (1) source: Company, (2) source: Douglas Westwood,

19 EDC Rig Strategy EDC fleet spread now. And expected in the future EDC Rig Fleet by age (current) EDC Rig Fleet by age (by 2015) 19% 33% Up to 5 years 5-10 years years years >20 years 12% 15% 34% 3% 13% Up to 5 years 5-10 years years years >20 years 38% 6% 27% EDC s fleet modernisation programme: 1. Refurbishment of Medium Pad/Cluster rigs Workhorses of West Siberia far into the future 2. Replacement of Light Stationary rigs with Mobile units Sidetracks, smaller field development & brownfield in-fill 3. Replacement of Heavy Stationary rigs with predominantly Heavy Pad/Cluster rigs Deeper plays, ERD & complex wells 19

20 Capital Expenditures Capex program focused on evolving fleet to meet the most demanding and complex customer needs Сapex, $ mn Capex/ 21% 16% 8% 16% 14% 19% 11% revenues EDC s CAPEX programme: 1. Acquisition of new rigs both Russian and imported 2. Since 2002 the Company acquired and put into operation c. 90 rigs spreading from 200 to 450 tons * Rig manufacturers UralMash, Bentec, HongHua, Forpetro, Lewco 3. The Company has signed contracts to build 22 new rigs for 2014/2015 delivery (1) Starting from 2010 EDC s capex includes payments to Lamprell for the construction of two new-build jack-up rigs: ~$235mn per rig NEPTUNE is delivered in Q MERCURY due for delivery in Q M 2013 Source: Company Onshore incl.offshore *- Unaudited (1)- 9M 2013 offshore CAPEX was adjusted for the change in restricted cash in the amount of US $45 million. 20

21 Northern Iraq (Kurdistan) Pipeline & metering in place, 1 st oil Q Potential to double number of rigs 21

22 Bazhenov Tight Oil 1 million sq. klms 22

23 EURASIA DRILLING COMPANY LTD Thank you! 23