Odfjell Technology Ltd. · OSL:OTL
Odfjell Technology — Debt Investor Presentation (January 2022)
75 slides from Odfjell Technology's debt investor presentation, Jan 31, 2022
Slide 1: Odfjell Technology Credit Investor Presentation
Odfjell Technology Credit Investor Presentation NOK ~1,100m Senior Secured Bond Issue 31 January 2022 Page 1
Slide 2: Important information
Important information This presentation (the "Presentation") has been prepared by Odfjell Technology Ltd. (“Odfjell Technology” or the “Issuer” and, together with its subsidiaries following completion of the contemplated reorganisation and listing of the Issuers shares, the "Group") with assistance
Slide 3: Important information (cont'd)
Important information (cont'd) AN INVESTMENT IN THE ISSUER INVOLVES RISK, AND SEVERAL FACTORS COULD CAUSE THE ACTUAL RESULTS, PERFORMANCE OR ACHIEVEMENTS OF THE ISSUER TO BE MATERIALLY DIFFERENT FROM ANY FUTURE RESULTS, PERFORMANCE OR ACHIEVEMENTS THAT MAY BE EXPRESSED OR IMPLIED BY STATEMENTS AND I
Slide 4: Summary of risk factors
Summary of risk factors • Market conditions contracts - The Group's business, results of operations and financial condition depend on the level of exploration, development and - Unforeseen or unanticipated risks, costs or timing when bidding on or managing contracts could adversely affect the produc
Slide 5: Summary of risk factors (cont'd)
Summary of risk factors (cont'd) • Risks related to financing and market risk - The Group's existing or future debt arrangements could limit the Group's liquidity and flexibility in obtaining additional financing or in pursuing other business opportunities - Interest rate fluctuations could affect t
Slide 6: Issuer characteristics
Issuer characteristics Issuer characteristics Confirmatory / verification work conducted in connection with the bond issue ▪ Odfjell Technology Ltd. ("OTL" or the "Issuer") group is a leading offshore and ▪ The Issuer has signed a Declaration of Completeness and concluded a bring energy service and
Slide 7: Presenting team
Presenting team Simen Lieungh Jone Torstensen Eirik Knudsen CEO CFO VP Corporate Finance & IR Odfjell Technology Odfjell Technology Odfjell Drilling Page 7
Slide 8: Agenda
Agenda Transaction summary Company overview Financial highlights Market fundamentals Risk factors Appendix Page 8
Slide 9: Odfjell Drilling intends to spin off and list Odfjell Technology Ltd. on the Oslo Stock Exchange
Odfjell Drilling intends to spin off and list Odfjell Technology Ltd. on the Oslo Stock Exchange Simplified business structure Overview of the Spin Off ▪ Odfjell Drilling Ltd. intends to spin off the Well Services and Energy (Drilling Operations and Odfjell Partners Ltd. Other Shareholders Engineeri
Slide 10: Transaction summary
Transaction summary Summary Pro-forma capitalisation ▪ OTL is contemplating to issue NOK ~1,100m of senior secured bonds and a USD 25m super- senior RCF1 (“SSRCF”) USDm Pro-forma 30 Sep’21 ▪ Net proceeds from the bond issue and SSRCF will be used to carry out internal transactions, Super-senior RCF
Slide 11: Summary of key terms and conditions
Summary of key terms and conditions Issuer: Odfjell Technology Ltd. Interim Parent Guarantor: Odfjell Drilling Ltd. (to lapse and be released in full as the shares in the Issuer are admitted to trading on Oslo Stock Exchange) Guarantors: Odfjell Partners Invest Ltd., Odfjell Platform Drilling AS and
Slide 12: Corporate and security structure
Corporate and security structure Group structure1 – post Spin Off Comments ▪ The contemplated senior secured bonds and SSRCF will be issued by Odfjell Odfjell Partners Ltd. Technology Ltd. Other Shareholders (Helene Odfjell) ▪ Transaction security includes (on first priority basis): ‒ Guarantees by
Slide 13: Key credit highlights
Key credit highlights Long-lasting and industry-leading offshore and energy service and equipment provider ▪ Integrated contractor delivering specialist services, equipment and competence across the offshore energy value chain Specialist provider of mission-critical life ▪ Large international footpr
Slide 14: Odfjell Technology has delivered stable through-the-cycle performance
Odfjell Technology1 has delivered stable through-the-cycle performance Quarterly revenues (USDm) Annual EBITDA (USDm) Revenues Brent EBITDA NIBD2/ (USDm) (USD) (USDm) EBITDA 100 90 100 2021 negative 3.5x covid impact 90 80 90 of USD ~7.5m 3.0x 80 80 70 70 2.5x 70 60 60 60 50 50 2.0x 50 40 40 1.5x 40
Slide 15: Favourable underlying drivers and market outlook
Favourable underlying drivers and market outlook Key market trends Current OTL position Strong OTL commitment to ESG High oil price environment and expected Attractively positioned in key regions and markets increased E&P spending ESG score of A- by the Maximising well potential, increased oil Lead
Slide 16: Agenda
Agenda Transaction summary Company overview Financial highlights Market fundamentals Risk factors Appendix Page 16
Slide 17: At a glance
At a glance Key financials Q3 20211 USD 324m USD 49m LTM revenue Cash International technology and engineering company delivering USD 42m 2.7x specialist services, equipment and competence across the offshore LTM EBITDA NIBD / LTM EBITDA energy value chain USD 1.3bn 1.6x Revenue backlog2 EBITDA back
Slide 18: Utilising heritage and specialist competence to service the changing energy market
Utilising heritage and specialist competence to service the changing energy market Serving major energy Green ventures: Project management, engineering and part ownership in Odfjell Oceanwind Engineering and administration clients globally hubs in key selected regions Well services: World-class supp
Slide 19: Provider of mission-critical services, equipment and competence since 1973
Provider of mission-critical services, equipment and competence since 1973 Global expansion and The beginning Building capacity Energy transition acceleration diversification 1973 – 1990 1990 – 2010 2010 – 2020 2020 – ▪ Engineering cooperation with Aker ▪ UK operations and office ▪ Expanded offering
Slide 20: Offering specialist services, equipment and competences within three main segments
Offering specialist services, equipment and competences within three main segments… Well Services Drilling Operations Engineering Green Ventures ▪ Provides a wide range of market- ▪ Provision of crew for drilling and ▪ Specialist competence in: ▪ Strong strategic commitment to leading products and s
Slide 21: Covering key client focus areas across the oil & gas life of field
…covering key client focus areas across the oil & gas life of field Oil & gas - life of field New markets High relevance Exploration & Late life production & Greenhouse gas Asset integrity Future service areas production abandonment reduction ▪ Production and infield ▪ Fully integrated service ▪ Pro
Slide 22: Odfjell Technology – Well Services
Odfjell Technology – Well Services World-class supplier of technologically advanced and integrated services and equipment Overview Service offerings ▪ Started with drill tool rental in the mid-70s and tubular Revenue per region LTM Sep ‘21 running services in 1982 ▪ A significant global player 3% No
Slide 23: Odfjell Technology – Drilling Operations
Odfjell Technology – Drilling Operations Leading platform drilling contractor with significant backlog in the North Sea Overview Breakdown of operations No. of platforms with operations Client Location Platform Duration ▪ Provider of integrated drilling and maintenance services for 16 16 15 Norway H
Slide 24: Odfjell Technology – Engineering
Odfjell Technology – Engineering Recognised specialist engineering competence with 50+ years of experience Overview Service offerings ▪ First engineering job on Aker H-3 semi submersible drilling rig in 1969/1970 ▪ Offices in Norway and UK – close to the majority of the customer base ▪ Approximately
Slide 25: Odfjell Technology – Green Ventures
Odfjell Technology – Green Ventures Enabling the energy transition with complementary competences and strong commitment Market developments Odfjell Technology competence and commitment Offshore wind moving deeper into Oil companies, and long-term clients, In-house project management and Solid track
Slide 26: Significant long-term business opportunities from emerging energy markets
Significant long-term business opportunities from emerging energy markets Plug & abandonment (P&A) Carbon capture, utilisation and storage ▪ Decommissioning of oil & gas infrastructure, including P&A, expected to ▪ Solid growth outlook for carbon capture, utilisation and storage, of which the grow f
Slide 27: Long-lasting relationships with leading energy companies in key markets and regions
Long-lasting relationships with leading energy companies in key markets and regions Customer overview1 Key highlights Stable customer base provides resiliency and consistent sales 14% 3% 12% Significant degree of repeat business through long-term contracts 4% 200 17% Revenue Revenue per Strong relat
Slide 28: Increasingly integrated across segments leading to more high margin add-on sales
Increasingly integrated across segments leading to more high margin add-on sales Well Services Drilling Operations Engineering Types of sales Contracts generally consist of a fixed period followed by one or more ▪ Integrating its offering with Well extension options, which are exercised if the clien
Slide 29: Well Services stands out from the competition in terms of its reputation for quality and safety
Well Services stands out from the competition in terms of its reputation for quality and safety Well Services Main competitors Select regional dynamics Tubular Rental Company Well intervention running services North Sea Strong position from decades of experience, reputation for delivering high
Slide 30: Drilling Operations and Engineering's position protected by integration of best-in-class services
Drilling Operations and Engineering’s position protected by integration of best-in-class services Drilling Operations Engineering Platform drilling services market share1 Main competitors Competitive position Main competitors 2% 19% 50% Highly specialised engineering 29% services within maritime dri
Slide 31: Significant content requirements and logistical expertise creating high barriers to entry
Significant content requirements and logistical expertise creating high barriers to entry Key content requirements for a complete and integrated service and equipment provider Scale and logistics Business opportunities and operational efficiencies dependent on both size and excellent systems for log
Slide 32: Highly experienced and reputable management team
Highly experienced and reputable management team Selected management executives Board of directors ▪ Chair of the Board of Odfjell Drilling since 2013 ▪ Appointed CEO of Odfjell Drilling AS in 2010 Helene Odfjell ▪ Master of Business Administration from the Norwegian School of Simen Lieungh ▪ Master
Slide 33: Highly competent and diverse teams drive innovation and excellence
Highly competent and diverse teams drive innovation and excellence Constantly search for, invest in and retain people of highest quality to meet future competence and capacity needs Specialised engineers supporting all business areas 1,800 9.3 years 31 Full-time employees Average tenure with the Nat
Slide 34: Strong track record of operational excellence with consistently high QHSE performance
Strong track record of operational excellence with consistently high QHSE performance Serious about safety Excellent customer Safe and efficient ISO 9001/14001 Minimal NPT3 World-class specialist ratings operations and services Certified globally competence Consistently strong HSE Trust and relation
Slide 35: ESG initiatives at the forefront
ESG1 initiatives at the forefront Environmental Impact People and Safety Ethics and Governance Industry leader in environmental Ensure the highest safety standard, & Committed to high ethical standard, performance protect our people’s health & well-being compliance and integrity MATERIAL AND IMPORTA
Slide 36: Building on ODL's most recent ESG score of A-
Building on ODL’s most recent ESG score of A-1 ▪ The Governance Group2 issues the ESG 100 Oslo Stock Exchange report annually ▪ The report is an ESG analysis of the 100 largest companies on the Oslo Stock Exchange ▪ To achieve an A rating means that a company has: ‒ «Very good reporting in accordanc
Slide 37: Key strategic priorities going forward
Key strategic priorities going forward Operational focus Capital allocation ESG / Green Ventures ▪ Increase market share, order backlog ▪ Maintain strong balance sheet securing ▪ Utilise oil & gas heritage and specialist and delivery of new products and flexibility through the cycles and for compete
Slide 38: Agenda
Agenda Transaction summary Company overview Financial highlights Market fundamentals Risk factors Appendix Page 38
Slide 39: Stable financial performance with conservative leverage
Stable financial performance with conservative leverage Revenue by segment (USDm) EBITDA by segment (USDm) 14% 15% 16% 7% 3% 8% 11% 8% 6% 7% 346 324 25% 30% 31% 27% 30% 8 270 273 273 11 40 40 51 21 17 13 48 48 27 32 35 37 42 1 175 5 1 5 1 161 13 3 12 118 115 121 4 10 9 10 32 32 30 37 104 108 104 113
Slide 40: EBITDA and cash flow set to increase in the next few years
EBITDA and cash flow set to increase in the next few years Illustrative pro-forma EBITDA and cash flow bridge (USDm) Comments Mooring business: 61 ▪ Established rental agreement between 2 ODL (MODU) and OTL effective 1 October 4 2021, for the rental of chain and anchors 11 51 4 ▪ USD 24.5m invested
Slide 41: Strong balance sheet with pro-forma 2021E leverage of 2.2x
Strong balance sheet with pro-forma 2021E leverage of 2.2x Pro-forma capital structure (USDm) Comments ▪ The contemplated bond issue will together with the super-senior RCF and lease 161 liabilities be the only interest-bearing debt 11 outstanding at time of the Spin Off ▪ The SSRCF will be fully dr
Slide 42: Annual capex estimated at USD 15-18m p.a. going forward
Annual capex estimated at USD 15-18m p.a. going forward Well Service capex (USDm) Comments ▪ All capex relates to Well Services with rental tools representing the major part of capex and 35 net book value ▪ No capex requirements for the other segments 25 ▪ Actual operational lifetime of rental asset
Slide 43: Stable net working capital development
Stable net working capital development Net working capital development (USDm) Comments Key highlights: 10% 10% 14% 13% 12% 11% 12% 12% 12% 12% 14% ▪ Stable development in net working capital with limited seasonality 27 28 38 35 32 30 32 34 34 37 45 ▪ Development in net working capital highly correla
Slide 44: Pro-forma balance sheet
Pro-forma balance sheet Pro-forma balance sheet Comments Sep'21 Sep’21 Sep'21 Sep’21 ▪ As part of the Spin Off, several pro-forma Assets (USDm) (Predecessor) (Pro-forma)1 Equity and liabilities (USDm) (Predecessor) (Pro-forma) 1 adjustments to the predecessor balance Share capital -0.0 0.0 Intangibl
Slide 45: Interest and currency exposure and hedging policy
Interest and currency exposure and hedging policy Currency exposure Hedging strategy ▪ Due to the international nature of its business, OTL is booking revenues in Revenue mix (Sep’21 LTM) Debt mix (Sep’21 pro-forma)1 different currencies 100% 100% ▪ Large degree of natural hedging, as revenue and co
Slide 46: Tax and National Insurance Contributions update
Tax and National Insurance Contributions update ▪ An OTL group subsidiary, Odfjell Drilling (UK) Ltd (“OD UK”), is subject to challenges by HM Revenue and Customs (“HMRC”) on the historical National application of National Insurance Contributions (“NICs”) (Norwegian: arbeidsgiveravgift) to workers o
Slide 47: Agenda
Agenda Transaction summary Company overview Financial highlights Market fundamentals Risk factors Appendix Page 47
Slide 48: Oil & gas demand expected to remain strong with E&P spending projected to increase
Oil & gas demand expected to remain strong in the foreseeable future with E&P spending projected to continue its increase Favourable conditions Swift oil recovery expected following COVID-19 Global investments into oil & gas expected to continue Global oil demand forecast by scenario (mmboed1) Globa
Slide 49: Strong activity in all of OTL's business segments with significant long-term opportunities
Strong activity in all of OTL’s business segments with significant long-term business opportunities from emerging energy markets Well Services - Continued high activity on the NCS and UKCS Drilling Operations - Continued high spending on platform drilling services ▪ Wells become more complex and Num
Slide 50: Key credit highlights
Key credit highlights Long-lasting and industry-leading offshore and energy service and equipment provider Specialist provider of mission-critical life of field services and equipment Strong and attractive market fundamentals Well positioned in markets with high entry barriers Resilient financial pe
Slide 51: Agenda
Agenda Transaction summary Company overview Financial highlights Market fundamentals Risk factors Appendix Page 51
Slide 52: Risk factors (1/11)
Risk factors (1/11) Terms used herein shall have the meaning set forth in this Investor Presentation or in the Term Sheet. Each potential investor in the bond issue and the bonds issued (the "Bond Issue" or the "Bonds") must determine the suitability of that investment in light of its own circumstan
Slide 53: Risk factors (2/11)
Risk factors (2/11) 1.2 Legal, regulatory and environmental risks 1.2.1 Governmental laws and regulations relating to the oil & gas industry could hinder or delay the Group's operations, increase the Group's operating costs, reduce demand for its services and/or restrict the Group's ability to provi
Slide 54: Risk factors (3/11)
Risk factors (3/11) 1.3 Operational risks The Group's business involves numerous operating hazards and if a significant accident or other event occurs it could materially adversely affect the Group's results of operations, cash flows and financial condition The Group's operations are subject to haza
Slide 55: Risk factors (4/11)
Risk factors (4/11) 1.3.4 The Group does business in jurisdictions with inherent risks relating to fraud, bribery and corruption Doing business in international developing markets brings with it inherent risks associated with enforcement of obligations, fraud, bribery and corruption. Fraud, bribery
Slide 56: Risk factors (5/11)
Risk factors (5/11) 2.3 The Group's backlog may not be ultimately realised As of 30 September 2021, the Group had a backlog in its Well Services, Drilling Operations and Engineering segments of approximately USD 1.3 billion inclusive of priced optional periods. The Group's backlog represents the con
Slide 57: Risk factors (6/11)
Risk factors (6/11) 3 Risks relating to operations 3.1 The Group, and in particular the Drilling Operations segment, is exposed to client concentration risk As of 30 September 2021, the Drilling Operations segment has six clients, Equinor, BP, Wintershall, ConocoPhillips, TAQA and Serica Energy whic
Slide 58: Risk factors (7/11)
Risk factors (7/11) 3.8 Labour interruptions could have a material adverse effect on the Group's operations As of 31 December 2021, the Group had approximately 900 employees in its Drilling Operations segment, 500 employees in its Well Services segment and 150 employees in its Engineering segment. I
Slide 59: Risk factors (8/11)
Risk factors (8/11) 4 Risks relating to laws, regulation and litigation 4.1 The Group may be subject to litigation that could have a material adverse effect on the Group's business, results of operations, cash flow and financial condition The operating hazards inherent in the Group's business expose
Slide 60: Risk factors (9/11)
Risk factors (9/11) 4.5 A loss of a major tax dispute or a successful tax challenge to the Group's operating structure or to the Group's tax payments, among other things, could result in a higher tax rate on the Group's earnings, which could have a material adverse effect on the Group's earnings and
Slide 61: Risk factors (10/11)
Risk factors (10/11) 5.3 Fluctuations in exchange rates and non-convertibility of expenses could result in financial losses for the Group The Group has currency exposure to both transaction risk and translation risk. Transaction risk arises when future commercial transactions or recognised assets or
Slide 62: Risk factors (11/11)
Risk factors (11/11) 7 Risks related to the bonds and the bond issue 7.1 Risks relating to super senior creditors Under the bond terms the Issuer and/or any other obligors under the Bond Issue are permitted to incur liabilities, which may be significant and that will rank senior in priority to the B
Slide 63: Agenda
Agenda Transaction summary Company overview Financial highlights Market fundamentals Risk factors Appendix Page 63
Slide 64: OTL predecessor consolidated financial statements
OTL predecessor consolidated financial statements LTM Income statement (USDm) LTM Q3'21 2020 2019 2018 Cash flow statement (USDm) Q3’21 2020 2019 2018 Operating revenue 324 273 273 270 Cash flows from operating activities: Other gains and losses 1 1 3 2 Profit / (loss) before tax 10 15 22 10 Personn
Slide 65: Key super-senior RCF terms
Key super-senior RCF terms Key terms SSRCF Borrower: Odfjell Technology Ltd. Type: Revolving credit facility Status: Secured, super-senior to the bonds Outstanding: Expected to be fully drawn on the date of release of the bond proceeds from the Escrow Account Borrowing limit: Currently USD 25m Inter
Slide 66: Organisational structure
Organisational structure Organisational chart Key highlights ▪ Each segment set up with dedicated management teams and highly skilled employees CEO ▪ Corporate staff to encompass leadership functions covering all segments with strategic resources within Finance and IR, Legal, Compliance and HR. QHSE
Slide 67: Engineering: Using offshore drilling as a proxy
Engineering: Using offshore drilling as a proxy Specialist services enabling significant operational and cost efficiencies Significant growth potential from wide service offering directed towards offshore drilling contractors Selected offering Offshore drilling highlights ▪ Odfjell Technology’s Engi
Slide 68: Odfjell Oceanwind
Odfjell Oceanwind The first inorganic step towards the offshore wind market Introduction to Odfjell Oceanwind Key highlights Odfjell Drilling + Sway 50 years of owning and operating floating assets + 20 years of inventing and designing floating wind Near-term pipeline of floating wind projects targe
Slide 69: Green Ventures: Offshore wind as proxy
Green Ventures: Offshore wind as proxy Increasingly vital component in the energy mix, driving high growth Key drivers Offshore wind will take a leading role2 High growth in demand both for fixed-bottom turbine installations… Number of new fixed-bottom turbines installed 1% 10% ✓ Vital component in
Slide 70: Activity level in key regions expected to remain high
Activity level in key regions expected to remain high Production to remain high in years ahead Stable outlook for capital investments on the NCS Oil production (mmboed1) Investments on the NCS (USDbn) Western Europe Middle East 25 Norway United Kingdom 7 CAGR: +2% 50 CAGR: +2% 45 6 40 5 35 0 2015 20
Slide 71: Norwegian fields are highly competitive and with low CO2 intensity
Norwegian fields are highly competitive and with low CO2 intensity Norway are highly competitive sources of new production Norway has one of the lowest CO2 intensities per barrels of oil equivalent (boe) produced Average breakeven prices (USD/bbl) and payback time for not sanctioned projects kgCO2/b
Slide 72: High activity expected in the UK decommissioning market, particularly within P&A
High activity expected in the UK decommissioning market, particularly within P&A Favourable conditions Well services is a significant part of decommissioning Continued high activity expected within decommissioning UK offshore decommissioning spending 2021-2030 by UK offshore E&P decommissioning spen
Slide 73: ESG timeline of Odfjell Drilling
ESG timeline of Odfjell Drilling OTL will continue the ESG efforts and policies of the predecessor Pre-ESG strategy project ESG strategy project kick-off First sustainability report Continued sustainability focus Prior to 2019 2019 2020 2021 – ▪ Strong focus on efficient ▪ A detailed ESG strategy wa
Slide 74: Glossary
Glossary Term Definition Casing accessories Collective terms for any additional pieces of ancillary equipment used in the process of handling the casing, screwing it together or running it into the well Casing exits / side-tracking The process of drilling out through the side of casing in an existin
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Odfjell Technology — Debt Investor Presentation (January 2022) on 6ix