Interim Financial Statements

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[Type text]

Interim Financial

Statements

KCA Deutag Alpha Limited

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Consolidated income statement Q4 2015 YTD Q4 2014 YTD Q4 2015 Q4 2014 Note $m $m $m $m Sales 2 1,668.8 2,110.9 396.0 536.2 Operating costs (1,379.0) (1,796.2) (316.9) (464.8) EBITDA 2 289.8 314.7 79.1 71.4 Depreciation/Amortisation (196.3) (200.4) (52.2) (49.1)

Operating profit (loss) (pre-exceptional) 93.5 114.3 26.9 22.3

Exceptional items (including impairment) 4, 6 (69.4) (102.7) (65.4) (62.3)

Operating profit (loss) (post-exceptional) 24.1 11.6 (38.5) (40.0)

Net finance costs 3 (132.8) (148.5) (39.3) (28.6)

(Loss) before tax (108.7) (136.9) (77.8) (68.6)

Taxation (35.7) (36.7) (3.3) (5.8)

(Loss) after tax (144.4) (173.6) (81.1) (74.4)

Consolidated statement of changes in shareholder’s equity

Share capital Share premium Retained earnings Other reserves Total $m $m $m $m $m At 1 January 2015 - 14.2 (1,856.0) 1,987.9 146.1 Comprehensive expense

Loss for the period - - (144.4) - (144.4)

Other comprehensive income (expense)

Exchange differences on foreign operations - - - (17.7) (17.7)

Non-controlling interest - - - (25.0) (25.0)

Actuarial gains on defined benefit plans - - 7.8 - 7.8

Total other comprehensive income (expense) - - 7.8 (42.7) (34.9) Total comprehensive expense - - (136.6) (42.7) (179.3) Transactions with owners

Capital contribution - - - 216.8 216.8

At 31 December 2015 - 14.2 (1,992.6) 2,162.0 183.6

At 31 December 2014 - 14.2 (1,856.0) 1,987.9 146.1

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Consolidated balance sheet Q4 2015 Q4 2014 Note $m $m Assets Non-current assets

Property, plant and equipment 6 927.9 1,049.7

Goodwill 550.9 550.9

Intangible assets 7 118.4 129.8

Investments 3.1 5.9

Deferred tax assets 30.6 39.3

1,630.9 1,775.6 Current assets

Inventories and work-in-progress 118.9 145.6

Trade and other receivables 8 329.0 444.9

Amounts owed by parent company 8.6 -

Financial assets - derivative financial instruments - 0.3

Cash, cash equivalents and other deposits 52.3 62.2

508.8 653.0 Total assets 2,139.7 2,428.6 Liabilities

Current liabilities

Bank overdraft (54.4) (34.2)

Trade and other payables 9 (279.4) (370.8)

Tax liabilities (37.9) (46.9)

Financial liabilities - derivative financial instruments (0.5) (0.1)

Financial liabilities - borrowings (5.3) (21.9)

Provisions and other payables (1.8) (1.1)

(379.3) (475.0) Non-current liabilities

Deferred income (36.9) (46.8)

Financial liabilities - borrowings (1,208.3) (1,202.2)

Amounts owed to parent company (150.7) (342.1)

Deferred tax liabilities (49.3) (61.4)

Retirement benefit obligations (128.2) (150.9)

Provisions and other non-current liabilities (3.4) (4.1)

(1,576.8) (1,807.5) Total liabilities (1,956.1) (2,282.5) Net assets 183.6 146.1 Capital and reserves

Share capital - -

Share premium reserve 14.2 14.2

Other reserves 2,162.0 1,987.9

Retained earnings (deficit) (1,992.6) (1,856.0)

Total shareholder’s funds 183.6 146.1

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Consolidated cash flow statement Q4 2015 YTD Q4 2014 YTD Q4 2015 Q4 2014 Note $m $m $m $m

Cash flows from operating activities

Cash generated from operations 10 293.6 334.1 68.6 115.4

Tax paid (49.6) (55.4) (13.7) (15.8)

Net cash inflow from operating activities 244.0 278.7 54.9 99.6 Cash flows from investing activities

Capital expenditure (119.9) (201.8) (22.2) (53.9)

Proceeds from sale of property, plant and equipment 13.9 30.7 9.7 18.2

Purchase of intangible assets (8.1) (5.7) (2.7) (1.9)

Acquisition of non-controlling interest in subsidiary (25.0) - - -

Other investments - - (1.9) 0.9

Interest received 19.5 2.8 5.8 2.3

Net cash outflow from investing activities (119.6) (174.0) (11.3) (34.4) Cash flows from financing activities

Bank loan drawdowns (repayments) (18.8) (712.0) (1.0) 15.0

New Senior Secured notes (net of original issue discount) - 761.2 - -

Arrangement fees paid - (20.8) - -

Interest paid, including capitalised interest (125.7) (108.6) (50.7) (47.3)

Finance lease payments (3.4) (4.1) (0.9) 0.2

Net cash (used in) financing activities (147.9) (84.3) (52.6) (32.1) Effect of foreign exchange rate changes on cash and

bank overdrafts (6.6) 0.1 (3.3) (0.3) Net cash in (out) flow (30.1) 20.5 (12.3) 32.8

Cash and bank overdrafts at start of period 28.0 7.5 10.2 (4.8)

Cash and bank overdrafts at end of period (2.1) 28.0 (2.1) 28.0

The presentation of exchange in current and prior quarters has been updated to reflect the treatment as shown in the Group’s audited financial statements.

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Notes to the Quarterly Financial Statements 1. Significant Accounting Policies

1.1 COMPLIANCE WITH IAS 34

These condensed quarterly consolidated financial statements have been prepared in accordance with IAS 34, Interim Financial Reporting. They do not contain all the disclosures required for annual financial statements and should therefore be read in conjunction with the Group’s annual financial statements for the year ended 31 December 2015, prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union.

1.2 BASIS OF PREPARATION 1.2.1 General principle

The preparation of these condensed quarterly financial statements requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group’s accounting policies. The areas involving a higher degree of judgement, complexity or areas where assumptions and estimates are significant to the condensed quarterly consolidated financial statements are disclosed in Note 1.2.2.

1.2.2 Accounting estimates and judgements

Accounting estimates and underlying assumptions are based on past experience and other factors considered reasonable under the circumstances.

They serve as the basis for any judgement required for determining the carrying amounts of assets and liabilities when such amounts cannot be obtained directly from other sources.

Actual amounts may differ from these estimates.

The main sources of uncertainty relating to estimates used to prepare the interim consolidated financial statements were the same as those described in the full year 2015 consolidated financial statements.

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2. Segment reporting Q4 2015 YTD Q4 2014 YTD Q4 2015 Q4 2014 $m $m $m $m Revenues Platform services 686.8 808.9 159.6 211.3 RDS 168.1 317.9 31.3 66.0 Land Drilling 600.7 680.6 157.7 167.6 MODUs 85.3 131.3 18.2 26.4 Bentec 235.4 293.1 43.3 101.8 Corporate costs/other 0.6 0.6 0.1 0.1 Elimination on consolidation (108.1) (121.5) (14.2) (37.0) GROUP TOTAL 1,668.8 2,110.9 396.0 536.2 Q4 2015 YTD Q4 2014 YTD Q4 2015 Q4 2014 $m $m $m $m EBITDA (pre-exceptional) Platform services 89.5 98.4 24.3 28.0 RDS 15.9 46.2 (0.5) 6.0 Land Drilling 164.2 149.5 55.4 31.2 MODUs 22.3 26.8 (0.3) 8.8 Bentec 20.6 35.3 2.3 16.1 Corporate costs/other (21.1) (37.8) (2.0) (17.7) Elimination on consolidation1 (1.6) (3.7) (0.1) (1.0) GROUP TOTAL 289.8 314.7 79.1 71.4 1

Eliminations on consolidation principally relate to profits generated by Bentec on sales to Land Drilling and to support the

Group’s capital expenditure programme.

3. Net finance costs

Q4 2015 YTD Q4 2014 YTD Q4 2015 Q4 2014 $m $m $m $m

Interest payable to immediate parent company (18.5) (16.1) (4.8) (4.2)

Interest payable on bank borrowings (24.2) (32.5) (5.9) (7.2)

Interest payable on Senior Secured Notes (75.3) (65.3) (18.8) (18.9)

Finance costs on finance leases (1.5) (3.0) (0.3) (1.8)

Less amounts included in the cost of property,

plant and equipment 5.0 6.2 1.2 0.9

Amortisation of arrangement fees (8.2) (10.8) (2.1) (2.1)

Amortisation of discount assets (4.4) (3.8) (1.1) (1.0)

Write off of arrangement fees - (29.6) - -

Other finance costs (6.6) (7.0) (2.9) (0.5)

Finance costs (133.7) (161.9) (34.7) (34.8)

Finance income 0.9 0.7 0.2 0.3

Exchange gains (losses) - 12.7 (4.8) 5.9

Finance costs – net (132.8) (148.5) (39.3) (28.6)

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4. Exceptional items Q4 2015 YTD Q4 2014 YTD Q4 2015 Q4 2014 $m $m $m $m Reorganisation costs1 (12.8) (5.0) (8.3) (3.4)

Impairment of Tender Barges – inventory write-down2 - (3.7) -

-Impairment of Tender Barges - disposal costs3 (1.4) (4.7) (1.4) (0.6)

Impairment of Ben Rinnes inventory4 (3.3) - (3.3) -

Ben Loyal disposal5 (12.9) - (11.2) -

Claim in respect of pre-acquisition GTB items6 - 3.5 - 2.3

Libya asset write downs7 2.1 (12.5) (0.1) 0.2

GROUP TOTAL (28.3) (22.4) (24.3) (1.5)

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Reorganisation costs primarily relate to the Group’s redundancy expenditure and various other non-recurring project items

2

During 2014, a charge of $3.7 million was recorded to write down the carrying value of the Tender Barges inventory to its actual realisable value.

3

During 2014, further disposal costs of $4.7 million were recognised in respect of the Tender Barges Disposal, with a further $1.4 million recognised in 2015.

4

An impairment charge of $3.3 million was booked in 2015 in respect of the carrying value of Ben Rinnes Jack-Up rig inventory.

5

The MODU business unit completed the sale of the Ben Loyal Jack-Up rig in December 2015 resulting in a loss on disposal of $12.9m.

6

During 2014, contractual claims relating to the Tender Barges business were re-evaluated and resulted in a release of $3.5 million which was no longer required, which included the release of the remaining $2.3 million contingent purchase consideration in relation to the original acquisition of the Tender Barges business.

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Write down of asset values in Libya as a result of ongoing political unrest and a decision to cease our operations in Libya. The write-down in 2014 included inventories of $8.0 million and trade receivables and other assets of $4.5 million, with a credit to the Income Statement of $2.1 million in 2015 for monies received from Libyan debtors provided against in earlier periods.

5. Reconciliation of net debt

Q4 2015 YTD Q4 2014 YTD Q4 2015 Q4 2014 $m $m $m $m

Opening net debt (1,196.1) (1,157.5) (1,200.9) (1,216.9)

Net cash in (out) flow (30.1) 20.5 (12.3) 32.8

(Drawdown) / Repayment of debt 22.2 (24.3) 1.9 (15.2)

Other non-cash movements (11.7) (34.8) (4.4) 3.2

Closing net debt per balance sheet (1,215.7) (1,196.1) (1,215.7) (1,196.1)

Capitalised arrangement fees (40.6) (53.0) (40.6) (53.0)

Closing net debt (1,256.3) (1,249.1) (1,256.3) (1,249.1)

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6. Tangible fixed assets Land and buildings – long leasehold and freehold Drilling rigs and equipment Plant, machinery

and vehicles Total $m $m $m $m Cost At 1 January 2015 26.5 1,916.3 120.8 2,063.6 Additions at cost1 1.7 119.5 3.7 124.9 Disposals (1.4) (156.1) (1.9) (159.4) Exchange adjustments (0.3) (20.9) (0.9) (22.1) At 31 December 2015 26.5 1,858.8 121.7 2,007.0 Accumulated depreciation At 1 January 2015 6.3 982.5 25.1 1,013.9

Charge for the period 2.8 167.2 6.8 176.8

Impairment charge for the period - 41.1 - 41.1

Disposals (1.3) (133.4) (1.8) (136.5)

Exchange adjustments (0.2) (15.3) (0.7) (16.2)

At 31 December 2015 7.6 1,042.1 29.4 1,079.1 Net carrying amount

At 31 December 2015 18.9 816.7 92.3 927.9 Net carrying amount

At 31 December 2014 20.2 933.8 95.7 1,049.7

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7. Intangible assets

Customer relationships and

contracts Trade name Technology Total $m $m $m $m Cost At 1 January 2015 196.0 176.3 35.5 407.8 Additions at cost - - 8.1 8.1 At 31 December 2015 196.0 176.3 43.6 415.9 Accumulated amortisation At 1 January 2015 183.4 71.9 22.7 278.0

Charge for the period 6.6 7.9 5.0 19.5

At 31 December 2015 190.0 79.8 27.7 297.5

Net carrying amount

At 31 December 2015 6.0 96.5 15.9 118.4 Net carrying amount

At 31 December 2014 12.6 104.4 12.8 129.8 8. Trade and other receivables

Q4 2015 Q4 2014 $m $m

Trade receivables 293.2 392.2

Other receivables 20.5 30.3

Prepayments and accrued income 15.3 22.4

Total 329.0 444.9

9. Trade and other payables

Q4 2015 Q4 2014 $m $m

Trade payables 46.5 107.3

Other tax and social security 16.8 24.3

Other payables 39.7 27.2

Accruals 141.6 182.5

Payments received on account 19.9 16.1

Deferred income 14.9 13.4

Total 279.4 370.8

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10. Cash generated from operating activities Q4 2015 YTD Q4 2014 YTD Q4 2015 Q4 2014 $m $m $m $m

Loss for the period (144.4) (173.6) (81.1) (74.4)

Adjustments for:

Tax charge 35.7 36.7 3.3 5.8

Depreciation 176.8 177.2 47.2 42.5

Impairment of tangible fixed assets 41.1 80.3 41.1 60.8

Amortisation of intangible assets 19.5 22.1 5.1 6.6

Amortisation of deferred costs - 1.1 - -

(Gain) loss on sale of property, plant and equipment 11.4 (0.4) 13.5 0.8

Gain on sale of investment - (1.0) - (1.0)

Net movement in provisions, other liabilities and

retirement benefit obligations (3.5) (6.0) (0.9) (3.7)

Net finance cost 132.8 148.5 39.3 28.6

Share of results of associates

(1.0) (3.2) 2.2 (3.2)

Dividend received from associate 3.2 - - -

(Increase) decrease in inventories and work in progress 24.4 (3.9) 14.5 21.7

Decrease in trade and other receivables 115.8 39.3 15.5 40.6

Increase (decrease) in trade and other payables (99.5) 25.2 (19.1) (1.9)

Exchange differences from operating activities (18.7) (8.2) (12.0) (7.8)

Cash generated from operating activities 293.6 334.1 68.6 115.4

Interim Financial Statements

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