Edc capital markets_day_presentation_nov-2012

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Edc capital markets_day_presentation_nov-2012

  1. 1. Eurasia Drilling Company Limited Eurasia Drilling Company Limited Capital Markets Day Excellence in Service - Leadership in Growth 14th November 2012
  2. 2. Eurasia Drilling Company LimitedEurasia Drilling Company Limited 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 November 2012. 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. 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 account or benefit of, US persons except pursuant to an exemption from registration and, subject to certain exceptions, may not be offered or sold within Australia, Canada or Japan. 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”) 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. DISCLAIMER 2
  3. 3. Eurasia Drilling Company Limited 3 PLAN FOR THE DAY Kim Kruschwitz, VP Marketing & IR
  4. 4. Eurasia Drilling Company LimitedEurasia Drilling Company Limited Agenda • 10.00am: Plan for the Day, Kim Kruschwitz, VP Marketing & IR • Introduction and Investment Highlights– Alexander Djaparidze, CEO • Outlook and Strategy – Kim Kruschwitz, VP Marketing & IR • Onshore and Offshore Operations – Murat Sampiev, COO • Q&A • Coffee Break • Marketing and Business Development – Kim Kruschwitz, VP Marketing & IR • Financial Performance and Target Framework – Richard Anderson, CFO • Summary and Outlook – Alexander Djaparidze, CEO • Q&A • 1.15pm: Buffet Lunch PLAN FOR THE DAY 4
  5. 5. Eurasia Drilling Company Limited 5 INTRODUCTION AND INVESTMENT HIGHLIGHTS Alexander Djaparidze, CEO
  6. 6. Eurasia Drilling Company LimitedEurasia Drilling Company Limited EDC History 6INTRODUCTION AND INVESTMENT HIGHLIGHTS OAO LUKOIL-Burenie formed, LUKOIL‟s in- house drilling division 1996–2003 LUKOIL-Burenie drilling business developed December 2004 EDC acquired LUKOIL- Burenie Acquired ASTRA jack-up rig from LUKOIL Acquired 28 W/O rigs from SLB Operations began on LUKOIL‟s Yu.Korchagin platform Acquired two West Siberia W/O businesses from LUKOIL (163 rigs) Acquired OOO Meridian (21 W/O rigs) in Komi Republic Ordered NEPTUNE jack-up from Lamprell (mid-2013 delivery) Acquired Kaliningrad drilling business from LUKOIL (4 rigs) SATURN jack-up rig acquired from Transocean Schlumberger (SLB) asset transaction and strategic alliance in Russia and CIS (19 drilling, 23 sidetrack & 34 W/O rigs) November 2007 EDC IPO on LSE Ordered MERCURY jack-up from Lamprell (late-2014 delivery) Entered Iraq acquiring 2+1 drilling rigs 2012 2011 2010 2009 2008 2007 2006 2004 1996-2003 1995
  7. 7. Eurasia Drilling Company LimitedEurasia Drilling Company Limited EDC Strategy at IPO 7INTRODUCTION AND INVESTMENT HIGHLIGHTS
  8. 8. Eurasia Drilling Company LimitedEurasia Drilling Company Limited EDC‟s 2007 IPO Agenda – The Scorecard • “Organic growth and efficiency improvement”  Metres drilled grew organically by 15% CAGR during 2007 to 2012 period  EBITDA margin grew 21% between IPO and 2012E  Metres drilled per crew per day up 40% vs. 2006 • “Continued focus on drilling services and potential selective expansion into closely related services”  Our market share is now 29% vs. 20% in 2006 (based on metres drilled)  Horizontal drilling volumes tripled since 2007 (from c. 300K to c. 900K in 2012E)  The number of sidetracking jobs quadrupled between 2007 and 2012E  In 2011 did an asset swap with SLB; other “bolt-on” acquisitions • Secure access to land rig manufacturing capacity”  Fabricated LeTourneau equipped “Yermak” at LUKOIL Kaliningrad facility  Secured alternative sources of rig supply INTRODUCTION AND INVESTMENT HIGHLIGHTS 8
  9. 9. Eurasia Drilling Company LimitedEurasia Drilling Company Limited EDC‟s 2007 IPO Agenda – Scorecard (continued) • Further growth of customer base and expansion into new markets”  Metres drilled for LUKOIL, our largest customer, grew 40% from 2007 to 2012E  Metres drilled for non-LUKOIL customers nearly quadrupled since IPO  Commenced drilling in Iraq in July 2012 • “Strategic expansion in offshore drilling”  EDC is the only Russian independent offshore drilling contractor  We now have 2 jack-up rigs plus 2 under construction compared to 1 in 2007 INTRODUCTION AND INVESTMENT HIGHLIGHTS 9
  10. 10. Eurasia Drilling Company LimitedEurasia Drilling Company Limited Leading Drilling Company Largest onshore driller and only independent Russian offshore driller EDC Investment Highlights – Key Attributes Leading Management High operational expertise and insightful strategic vision Strong Results Established track record of profitable growth and cash flow generation Quality Rig Fleet Flexible, efficient and relevant equipment Expanding Prospects Exposure to high growth domestic markets & increasing international opportunities INTRODUCTION AND INVESTMENT HIGHLIGHTS 10
  11. 11. Eurasia Drilling Company LimitedEurasia Drilling Company Limited EDC Investment Highlights - Implications 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 INTRODUCTION AND INVESTMENT HIGHLIGHTS 11 Source: Company data Source: Company data 40 80 120 160 200 240 280 1Q09 3Q09 1Q10 3Q10 1Q11 3Q11 1Q12 3Q12 $m Ave YoY growth of 38% in qtrly EBITDA 0% 5% 10% 15% 20% 25% 30% 2005 2006 2007 2008 2009 2010 2011 EDC ROCE WACC= 12.8%
  12. 12. Eurasia Drilling Company Limited 12 OUTLOOK AND STRATEGY Kim Kruschwitz, VP Marketing and IR
  13. 13. Eurasia Drilling Company LimitedEurasia Drilling Company Limited The Story So Far - Phase 1 Growth & Efficiency OUTLOOK AND STRATEGY 13 Phase I 2005 – Q3 2008 Growth and Efficiency Market Environment • Rapid production growth • Soaring commodity prices • Hyrdofrac effectiveness declining Strategy • Grow volumes • Grow market share • Boost margins through operating efficiency Achievements • Metres drilled +138% (2008 vs 2005) • Revenues +211% (2008 vs 2005) • Margins 11.9% to 21.5% (2005 to 2008) 0 20 40 60 80 100 120 5 6 7 8 9 10 11 Russian oil production v. Urals price mbd Crude Oil Production (lhs) US$/bbl Urals Blend (rhs) 0% 5% 10% 15% 20% 25% 30% 35% 40% 2 4 6 8 10 12 14 16 18 20 22 Russian development drilling v. EDC market share mln metres Development Drilling (lhs) % EDC Mkt Share (rhs) Source: REnergyCo 2012, Bloomberg Source: REnergyCo 2012, CDU TEK, Company data
  14. 14. Eurasia Drilling Company LimitedEurasia Drilling Company Limited The Story So Far - Phase 2 Crisis Response OUTLOOK AND STRATEGY 14 Phase II Q4 2008 – 2009 Crisis Response Market Environment • Oil price collapse • Significant cuts in upstream capex • Weakening of Ruble Strategy • Sustain volumes • Preserve margins • Reduce capex to maintain B/S strength Achievements • Metres drilled in 2009 -6.7% • Margins 21.5% to 23.1% (2008 - 2009) • 2009 capex down 67% • Share buy-back 0% 5% 10% 15% 20% 25% 30% 35% 40% 2 4 6 8 10 12 14 16 18 20 22 Russian development drilling v. EDC market share mln metres Development Drilling (lhs) % EDC Mkt Share (rhs) 0 20 40 60 80 100 120 5 6 7 8 9 10 11 Russian oil production v. Urals price mbd Crude Oil Production (lhs) US$/bbl Urals Blend (rhs) Source: REnergyCo 2012, Bloomberg Source: REnergyCo 2012, CDU TEK, Company data
  15. 15. Eurasia Drilling Company LimitedEurasia Drilling Company Limited The Story So Far - Phase 3 Re-Gearing for Growth OUTLOOK AND STRATEGY 15 Phase III 2010 – 2012 Re-gearing for Growth Market Environment • Oil price recovery • Boost in upstream capex • Govt. drive for stable oil production • Industry restructuring Strategy • Continue investment in rig fleet • Focus on core strengths • Develop offshore capability Achievements • 2010 capex rose to $284m from $107m in 2009 • Schlumberger alliance • 2 jack-up rigs ordered 0% 5% 10% 15% 20% 25% 30% 35% 40% 2 4 6 8 10 12 14 16 18 20 22 Russian development drilling v. EDC market share mln metres Development Drilling (lhs) % EDC Mkt Share (rhs) 0 20 40 60 80 100 120 5 6 7 8 9 10 11 Russian oil production v. Urals price mbd Crude Oil Production (lhs) US$/bbl Urals Blend (rhs) Source: REnergyCo 2012, Bloomberg Source: REnergyCo 2012, CDU TEK, Company data
  16. 16. Eurasia Drilling Company LimitedEurasia Drilling Company Limited Market Outlook – Structural Themes 1. Expanding prospects • Russian economy highly dependent upon oil and gas industry (ca. 50% State revenues) • Sustaining oil production requires more aggressive drilling – estimated 7-10% pa drilling growth required • Migration to more remote greenfield regions where operations, logistics and geology can be more challenging • Offshore opportunities in Caspian sea and other areas OUTLOOK AND STRATEGY Source: REnergyCO 2012 Source: REnergyCO 2012 -4 1 6 11 16 21 26 31 36 6 8 10 12 Russian oil production v. development drilling Crude Oil Production (lhs) Development Drilling (rhs) m bpd m metres -150 050 250 450 650 850 1050 1250 1450 1650 2012F 2013F 2014F 2015F 2016F 2017F Incremental oil production by region Other TyumenTomsk East Siberia Timan Pechora YamalNenets Volga-Urals KhantyMansisk 000‟s bpd 16
  17. 17. Eurasia Drilling Company LimitedEurasia Drilling Company Limited Market Outlook – Structural Themes Geography of operations OUTLOOK AND STRATEGY 17 Head Office Regional/Branch Office Support Base Operational Areas
  18. 18. Eurasia Drilling Company LimitedEurasia Drilling Company Limited Market Outlook – Structural Themes Onshore developments OUTLOOK AND STRATEGY Source: REnergyCO 2012 Source: REnergyCO 2012 18 0 5 10 15 20 25 30 2005 2006 2007 2008 2009 2010 2011 2012F2013F2014F2015F Russian onshore market by metres drilled (millions) 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 Russian OFS market (US$ billions) Exploration Development Intervention
  19. 19. Eurasia Drilling Company LimitedEurasia Drilling Company Limited Market Outlook – Structural Themes Offshore developments – Caspian Sea OUTLOOK AND STRATEGY 19 LUKOIL discoveries in Russian sector Numerous blocks in exploration in Kazakh waters and Turkmenistan in development phase 3 jack-up rigs currently in operation (2013 demand expected to be 6-7 rigs) Approx 3% of world oil reserves Barriers to entry – time and costs to deliver new jack-up rig Medium term – further exploration development and production plans
  20. 20. Eurasia Drilling Company LimitedEurasia Drilling Company Limited Market Outlook – Structural Themes 2. Ageing rig fleet ill-suited for increasing drilling complexity OUTLOOK AND STRATEGY 20 The Russian drilling fleet Average depth of Russian wells (metres) Rig additions to Russian fleet • Industry issues ‐ 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 EDC Total Russian Fleet Average age 12 16 Average drilling depth 3,500 3,100 2,010 2,140 2,380 2,380 2,410 2,610 2,650 2,730 2,690 2,850 2,930 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Source: Douglas Westwood 2012 Source: Douglas Westwood 2012, Company estimates Source: REnergyCO 2012 0 50 100 150 200 250 300 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012F No.ofrigs
  21. 21. Eurasia Drilling Company LimitedEurasia Drilling Company Limited Market Outlook – Structural Themes 3. Industry Structure • Drilling industry less cyclical than western „spot‟ markets OUTLOOK AND STRATEGY 21 0 500 1,000 1,500 2,000 2,500 Jan-02 Apr-02 Jul-02 Oct-02 Jan-03 Apr-03 Jul-03 Oct-03 Jan-04 Apr-04 Jul-04 Oct-04 Jan-05 Apr-05 Jul-05 Oct-05 Jan-06 Apr-06 Jul-06 Oct-06 Jan-07 Apr-07 Jul-07 Oct-07 Jan-08 Apr-08 Jul-08 Oct-08 Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Russia vs. North American drilling activity North America Rig Count Russia Volumes (m/mo) Source: Baker Hughes Inc./REnergyCO 2012 (km/mo)
  22. 22. Eurasia Drilling Company LimitedEurasia Drilling Company Limited Market Outlook – Structural Themes 4. Competition • In-house operations being privatized or sold but challenges of: ‐ Ageing assets with limited capabilities ‐ Cost centre vs customer service attitude ‐ Infrastructure & mobility requirements ‐ Financial leverage constraints Russian drilling market share 2007* OUTLOOK AND STRATEGY 22 • International operators: ‐ Barriers to entry ‐ Logistical challenges ‐ Integration issues Russian drilling market share 2012 (1H)* *by metres drilled Source: CDU TEK and Company estimates Source: REnergyCO 2012 22.3% 58.4% 19.3% EDC In-house All other independents 28.5% 39.9% 31.6% EDC In-house All other independents Russian drilling market*: 2007 – 2012F +49% EDC market share*: 2007 – 2012 22% to 29%
  23. 23. Eurasia Drilling Company LimitedEurasia Drilling Company Limited EDC Strategic Response 1. Grow the business from a Leadership Position • Strategic Leadership ‐ Bought LUKOIL‟s drilling assets in late 2004 ‐ Successful IPO in 2007 ‐ Successfully diversifying customer base • Market Share Leadership ‐ 1 in 4 wells in Russia drilled by EDCL ‐ EDCL owns 2 of the 3 available jack-ups in the Caspian Sea • Efficiency Leadership ‐ Margins have more than doubled since 2005 ‐ Youngest and most versatile rig fleet in Russia OUTLOOK AND STRATEGY EDC continues to grow faster than the Market - 1,000 2,000 3,000 4,000 5,000 2005 2011 Metres drilled 18.8% CAGR '000 mtrs Mkt - 11.8% CAGR - 400 800 1,200 1,600 2,000 2,400 2,800 2005 2011 Revenues 26.3% CAGR $m Mkt - 15.7% CAGR 23 Source: REnergyCO 2012/Company data Source: REnergyCO 2012/Company data
  24. 24. Eurasia Drilling Company LimitedEurasia Drilling Company Limited EDC Strategic Response 2. Focus on the most attractive Growth Opportunities • Strong revenue growth dynamic in core markets • Other large medium-term opportunities – tight oil and Arctic • Exploring international opportunities 3. Maintain our Leadership in Innovation and Efficiency • Investing in our rig fleet • Investing in our people • Building partnerships to enhance our service OUTLOOK AND STRATEGY 24
  25. 25. Eurasia Drilling Company LimitedEurasia Drilling Company Limited EDC Strategic Response 4. Leverage the characteristics of Russia‟s market to become our customer‟s partner • Seeking to develop long-term relationships • Anticipating our customer‟s changing needs 5. Improving capability to offer more higher-value services • Investment • Strategic alliances 6. On-going focus on driving operating efficiencies • For client benefit • For EDC benefit 25OUTLOOK AND STRATEGY Re-engineering the contractual model
  26. 26. Eurasia Drilling Company LimitedEurasia Drilling Company Limited The Next Phase – Further significant opportunities Phase I 2005 – Q3 2008 Growth and Efficiency Phase II Q4 2008 – 2009 Crisis Response Phase III 2010 – 2012 Re-gearing for Growth Phase IV 2013 – 2015 + Delivering Growth Market Environment • Rapid production growth • Soaring commodity prices • Hyrdofrac effectiveness declining • Oil price collapse • Significant cuts in upstream capex • Weakening of Ruble • Oil price recovery • Boost in upstream capex • Govt. drive for stable oil production • Industry restructuring • Drive to maintain Russian oil production • Increasing complexity of drilling • Ageing & incompatible Russian rig fleet Strategy • Grow volumes • Grow market share • Boost margins through operating efficiency • Sustain volumes • Preserve margins • Reduce capex to maintain B/S strength • Continue investment in rig fleet • Focus on core strengths • Develop offshore capability • Extend leadership position • On-going investment in rigs & infrastructure • Further enhancement of productivity & expertise Achievements • Metres drilled +138% (2008 vs 2005) • Revenues +211% (2008 vs 2005) • Margins 11.9% to 21.5% (2005 to 2008) • Metres drilled in 2009 -6.7% • Margins 21.5% to 23.1% (2008 - 2009) • 2009 capex down 67% • Share buy-back • 2010 capex rose to $284m from $107m in 2009 • Schlumberger alliance • 2 jack-up rigs ordered ? OUTLOOK AND STRATEGY 26
  27. 27. Eurasia Drilling Company Limited 27 ONSHORE AND OFFSHORE OPERATIONS Murat Sampiev, COO
  28. 28. Eurasia Drilling Company LimitedEurasia Drilling Company Limited Russian Onshore – The Legacy Historic context of OFS market • Structure ‐ In-house cost-centres ‐ Geographically focused/full service lines incl. drilling ‐ Metreage/well count quotas: commerciality not considered • Strategy ‐ Priority to develop new fields and grow production as quickly as possible ‐ Limited consideration given to suitability of fleet and utilisation of rig asset base ‐ Huge underutilised rig fleet throughout Russia (Soviet era manufacture) 28ONSHORE AND OFFSHORE OPERATIONS Source: REnergyCO 2012 0 5 10 15 20 25 30 35 40 3 4 5 6 7 8 9 10 11 Russian oil production and Development drilling Crude Oil Production (lhs) Development Drilling (rhs) mbd m metres
  29. 29. Eurasia Drilling Company LimitedEurasia Drilling Company Limited Russian Onshore – Structural Dynamics Russia‟s strategic imperative to maintain oil production levels is driving higher drilling volumes as oil becomes harder to extract from maturing brownfields… ONSHORE AND OFFSHORE OPERATIONS 29 • Maturity of brownfields… ‐ Declining well productivity & reservoir pressures ‐ Increasing water-cut ‐ Requirement for infill drilling and sidetracking operations • Declining effectiveness of hydrofracs on existing wells ‐ Intensive use of technology from 2000 to 2006 ‐ Best candidates stimulated multiple times 0 20 40 60 80 100 120 2004 2005 2006 2007 2008 2009 2010 2011 Additional production from hydrofracs declining - 50 100 150 200 250 300 350 400 2001 2003 2005 2007 2009 2011 Barrels produced per metre drilledbarrels Productivity peak Productivity per metre declining at ca. 8% pa Source: REnergyCO 2012 Source: REnergyCO 2012 m barrels
  30. 30. Eurasia Drilling Company LimitedEurasia Drilling Company Limited Russian Onshore – Structural Dynamics More complex drilling services and the search for oil in new and more challenging environments will grow in importance ONSHORE AND OFFSHORE OPERATIONS 30 Source: Company data - 2.00 4.00 6.00 8.00 10.00 12.00 14.00 16.00 18.00 20.00 2007 2008 2009 2010 2011 Upstream capex per boe Brownfield Greenfield $/boe • Capex drivers in greenfield regions: ‐ Lack of infrastructure ‐ More complex geology, deeper reservoirs and slower ROP ‐ Remote location logistics • Well depth trend in Russia ‐ Deeper/longer well trend ‐ Average well depths exceeding 3,000 metres ‐ Drilling contractors & OFS companies need to respond Typically heavier, more modern rigs required Source: REnergyCO 2012 2,600 2,650 2,700 2,750 2,800 2,850 2,900 2,950 3,000 3,050 3,100 3,150 AverageMeasuredWellDepth(metres) EDC well depth Russia Land W.Siberia
  31. 31. Eurasia Drilling Company LimitedEurasia Drilling Company Limited Russian Onshore – Rigs Over 60% of Russian rig fleet estimated to reach maximum operational life over next 10 years ONSHORE AND OFFSHORE OPERATIONS 31 Russian fleet age profile Ageing legacy rigs less capable of meeting new drilling challenges 24% 10% 3% 4% 59% < 5 years 5-10 years 10-15 years 15-20 years >20 years Source: Douglas Westwood 2012 Source: Company estimates 11% 16% 48% 8% 15% 2% 0 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 100 T 175 T 200 T 250 T 320 T 450 T Max.DepthinMeters Light Medium Heavy 500 hp 750 hp 1,000 hp 1,200 hp 1,500 hp 2,000 hp Russian fleet capacity profile
  32. 32. Eurasia Drilling Company LimitedEurasia Drilling Company Limited Russian Onshore – Rigs Most “traditional” Russian rigs will not meet the drilling requirements of a growing % of fields ONSHORE AND OFFSHORE OPERATIONS 32 “Typical” Russian drilling spread • Uralmash-3000 series or equivalent ‐ Domestic built rig; 15-25 years old ‐ 160-200 MT hook load ‐ 750-1,000 hp (500-750 kW) ‐ Non-variable AC electric drive ‐ No Top Drive ‐ Awkward/slow assembly and disassembly • Simple solids control (mud cleaning) system • Duplex mud pumps • Limited rotary drilling Limitations v. modern rig • Shallower wells ‐ Up to 3,000 metres • Slower drilling speeds • Less mobile • Limited horizontal well capacity • Higher maintenance cost/downtime • Energy inefficient
  33. 33. Eurasia Drilling Company LimitedEurasia Drilling Company Limited Russian Onshore – Rigs Modern rigs “fit for purpose” ONSHORE AND OFFSHORE OPERATIONS 33 “Modern” drilling spread • AC VFD “Cluster” ‐ Foreign designed & built rig; 1-8 years old ‐ 320-450 MT hook load ‐ 1,500-2,000 hp (1,000-1,500 kW) ‐ Variable Frequency Drive (VFD) controls ‐ Top Drive ‐ Automatic pipe handling • 3 stage solids control system • Large capacity triplex mud pumps • Rotary drilling ‐ Conventional or Top Drive Advantages v. older rig • Deeper wells ‐ 5,000 metres or more • Increased ROP • Very mobile between well pads • Excellent horizontal & multiple well capacity • Low maintenance costs and downtime • More energy efficient • Safe well control in high pressure areas Most capable and efficient solution for deeper and more complex drilling needs
  34. 34. Eurasia Drilling Company LimitedEurasia Drilling Company Limited Russian Onshore – EDC fleet 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 EDC fleet spread now …. And expected in the future ONSHORE AND OFFSHORE OPERATIONS 34 Source: Company data, (EDC rig fleet as of beginning 2012) Source: Company data Source: Company data Rig Type 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Tot.Rigs Statio nary 1 3 1 2 4 6 1 1 1 6 6 2 34 M o bile 2 1 1 3 6 6 2 4 5 8 38 M o bile 4 2 6 P ad/ C luster 4 9 7 20 10 5 3 1 1 2 1 1 3 5 3 6 12 1 3 6 103 Statio nary 1 3 1 3 1 1 2 2 14 Statio nary 1 3 1 8 5 3 2 3 4 2 32 P ad/ C luster 3 1 2 4 1 1 2 5 4 8 31 Totals 1 3 5 10 22 30 18 18 9 3 3 3 2 4 8 7 5 11 8 6 17 32 6 9 18 258 Weight Range Light 80-180 M T Medium 200-270 M T Heavy 320-450 M T EDC fleet age 2012 34% 15% 3% 20% 28% Up to 5 years 5-10 years 10-15 years 15-20 years >20 years 38% 27% 13% 3% 19% Up to 5 years 5-10 years 10-15 years 15-20 years >20 years EDC fleet age 2015(E)
  35. 35. Eurasia Drilling Company LimitedEurasia Drilling Company Limited Russian Onshore – Operating Efficiency EDC crew efficiency focus • Industry leading health and safety standards ‐ EDC LTI rate consistently lower than IADC global LTI rate • Ongoing crew training to enhance output ‐ 2012 hired Aberdeen Drilling School to perform in-house drilling optimisation training • Crew performance incentivisation ONSHORE AND OFFSHORE OPERATIONS 35 50.0 60.0 70.0 80.0 90.0 100.0 110.0 120.0 2005 2006 2007 2008 2009 2010 2011 2012 (E) EDC metres drilled per crew per daymetres Source: Company data EDC Crew Training Centre Expl. drilling up 65% Y-o-Y Horiz. Metres up 30% Expl. drilling up 17% Y-o-Y Horiz. Metres up 102%
  36. 36. Eurasia Drilling Company LimitedEurasia Drilling Company Limited Russian Onshore – Utilisation Efficient utilisation of assets is a key driver of EDC profitability ONSHORE AND OFFSHORE OPERATIONS 36 Support organisation optimisation • Divested transport & well services • Support base consolidation program throughout operations • Supply chain rationalisation • Current programs include: ‐ Relocation of Zhirnovsk infrastructure 600km closer to rig teams Further utilisation improvements • Faster moving rigs • 1 Rig/1 Crew strategy • Migrating from crew-based scheduling to rig- based scheduling 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 2005 2006 2007 2008 2009 2010 2011 9M-12 Drilling fleet utilisation (excludes Sidetrack rigs) Active Moving/ Rig-up/dn Total Utilised Source: Company data
  37. 37. Eurasia Drilling Company LimitedEurasia Drilling Company Limited Russian Onshore – Workover and Sidetracking • Enhancing recovery from existing wells • 14% of current revenues • Attractive growth segment • Complementary to existing core drilling competence • EDC proposition enhanced by high quality Schlumberger assets ONSHORE AND OFFSHORE OPERATIONS 37 2007 2012 EDC Workover rigs 88 390 Workover & completion crews 48 303 Sidetracking crews 11 30 Other Operators Workover rigs 3,240 2,950 Workover & completion crews 2,595 2,601 Source: Company data/REnergyCo 2012 Source: REnergyCo 2012 0 1000 2000 3000 4000 5000 6000 2005 2006 2007 2008 2009 2010 2011 2012E 2013E 2014E 2015E Russian Workover & Sidetracking market (US$m) Russian Workover Market Russian Sidetracking Market
  38. 38. Eurasia Drilling Company LimitedEurasia Drilling Company Limited Russia & CIS offshore – Caspian Sea Current EDC Assets • ASTRA ‐ BMC-150-H jack-up rig ‐ 150 ft. (45 m) water depth ‐ 15,000 ft. (4,570 m) drilling depth • SATURN ‐ Keppel Fells CS Mod V jack-up ‐ 350 ft. (107 m) water depth ‐ 26,000 ft. (7,925 m) drilling depth • Yuri Korchagin Platform ‐ EDC drilling contractor ‐ SLB drilling services contractor Le Tourneau Super 116E Rigs under construction • 1st new jack-up NEPTUNE due for delivery mid-2013 • 2nd new jack-up MERCURY due for delivery end-2014 • Deeper water (350 ft./107m) and drilling (30,000 ft./9,150m) capability than competing new-builds ONSHORE AND OFFSHORE OPERATIONS 38
  39. 39. Eurasia Drilling Company LimitedEurasia Drilling Company Limited Acquisitions and Partnerships Acquisitions and partnerships to extend geographic reach, expand complementary services or enable higher quality offering for customers ONSHORE AND OFFSHORE OPERATIONS 39 Schlumberger (SLB) transaction Case Study Bought: 19 drilling, 23 sidetracking and 34 workover rigs • Young, high-spec rig fleet • Significant additional sidetrack and workover capacity • Very high quality crews Sold: drilling services business (directional drilling & measurement, cementing and drilling fluids) • Non-core • High benefit from provision by SLB Other benefits realised • Closer alignment with all SLB product lines • Greater efficiencies in customer service • Enhanced offshore service capability • Strategic Alliance to capture future projects
  40. 40. Eurasia Drilling Company Limited 40 Q&A
  41. 41. Eurasia Drilling Company Limited 41 MARKETING AND BUSINESS DEVELOPMENT Kim Kruschwitz, VP IR and Marketing
  42. 42. Eurasia Drilling Company LimitedEurasia Drilling Company Limited Market Context – significant changes in just 8 years MARKETING AND BUSINESS DEVELOPMENT 42 • Primarily in-house operators pre-2005, cost centre focus ‐ Initial transformation – shedding non-core activities ‐ Improving utilisation and efficiency • Competitor privatisations/spin-offs 2004 2012 Source: US EIASource: REnergyCO 2012 0 5 10 15 20 25 30 35 40 3 4 5 6 7 8 9 10 11 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012F Russian oil production and development drilling Crude Oil Production (lhs) Development Drilling (rhs) mbd m metres 0 10 20 30 40 50 60 70 3 4 5 6 7 8 9 10 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 US oil production and development drilling Crude Oil Production (lhs) Crude Oil Development Drilling (rhs) mbd m metres
  43. 43. Eurasia Drilling Company LimitedEurasia Drilling Company Limited “Surprisingly similar, but also very different” Russian onshore drilling models have key differences to RoW that play to EDC‟s strengths 43MARKETING AND BUSINESS DEVELOPMENT Russia Rest of World • L-T contract model ‐ Lower volatility of pricing and margins • Spot market ‐ Higher pricing & demand volatility • Turnkey ‐ Optimal for simple drilling solutions • Dayrate ‐ Optimal for more complex solutions • Static, basic and ageing rig fleet ‐ Low efficiency and low utilisation • Versatile, mobile rigs ‐ Transition will increase utilisation • Mostly small independent players, c40% of market are in-house ‐ EDC can sustain leadership for longer • All independent, for-profit ‐ More competitive market • Full service ‐ Integrated project management model • Discrete service providers ‐ Specialisation
  44. 44. Eurasia Drilling Company LimitedEurasia Drilling Company Limited 2008/09 Case Study – Russian market and RoW Russian drilling market characteristics result in less volatility MARKETING AND BUSINESS DEVELOPMENT 44 EDC Experience North America Experience Volumes 2009 metres drilled decreased 7% 2009 average rig count decreased 42% Pricing Essentially flat Day rates declined Customers Oil companies in Russia broadly able to maintain capex; sheltered from oil price fall by decline in Rbl/US$ fx rate Significant capex cuts; major impact on rig counts Costs EDC cut costs and preserved margins Margin collapsed 50 70 90 110 130 150 170 190 210 230 250 2007 2008 2009 2010 2011 EDC v. North American peers: active rigs Active Rigs US Peers Active Rigs EDC 0% 2% 4% 6% 8% 10% 12% 14% 16% 18% 20% 2007 2008 2009 2010 2011 EDC v. North American peers: net income margin Net Income Margin US Peers Net Income Margin EDC Sources: Company data, published annual reports for PTEN, HP, ESI & PD (NBR does not publish rig utilization) Sources: Company audited results; published annual reports for PTEN, HP, ESI, PD & NBR
  45. 45. Eurasia Drilling Company LimitedEurasia Drilling Company Limited Evolution of EDC Customer Mix - Onshore • Spun out of LUKOIL in 2004 • LUKOIL now <60% of revenues • Schlumberger deal has increased importance of Rosneft in customer mix • As green field becomes more important we will evolve our service offering to meet customer requirements MARKETING AND BUSINESS DEVELOPMENT 45 1% 82% 17% 2006 Customer mix 8% 56% 10% 25% 2% 2012 Customer mix Other Other Sources: Company data Sources: Company data
  46. 46. Eurasia Drilling Company LimitedEurasia Drilling Company Limited Customers as Partners – Anticipating their needs Customers evolving needs • Maintaining brownfield production becoming an increasingly complex problem • Huge growth in horizontal drilling, underbalanced drilling, complex wells • Shift towards greenfield production, offshore and shale • Customer‟s increasing challenges require a different approach to risk sharing EDC development • Stronger, heavier and more versatile fleet • Relationship with Schlumberger • New model to proportionately share risk 46MARKETING AND BUSINESS DEVELOPMENT Conventional vertical well Complex horizontal well Flow rate (bbs/day) 291 787 IRR at Urals blend = US $100/bb 15% 28% Case Study Much higher flow rates make advanced drilling attractive for our customers Gazprom Q2 2012 results; Credit Suisse estimates
  47. 47. Eurasia Drilling Company LimitedEurasia Drilling Company Limited Re-engineering customer relationships and sharing risk intelligently • Longer-term agreements improve revenue visibility ‐ LUKOIL onshore drilling, completion and workover ‐ TNK-BP Orenburg ‐ Gazpromneft West Siberia ‐ Caspian (Korchagin LOP, Petronas, ASTRA) • Introducing greater flexibility to Framework Agreements ‐ Price to market ‐ More optimal deployment of assets • A new approach to risk sharing ‐ Shift to day-rate for complex/challenging wells ‐ Retain turnkey pricing model for routine development drilling MARKETING AND BUSINESS DEVELOPMENT 47 Anticipated changes to the architecture of LUKOIL Framework Agreement mirror evolution of EDC‟s businesses
  48. 48. Eurasia Drilling Company LimitedEurasia Drilling Company Limited Drilling Market – Medium-term outlook reinforces growing complexity of customer needs MARKETING AND BUSINESS DEVELOPMENT 48 0 2 4 6 8 10 12 14 16 18 20 2005 2006 2007 2008 2009 2010 2011 2012F 2013F 2014F 2015F Russian onshore drilling US$ billions Vertical & Deviated Horizontal Sidetracking Workover & Well Servicing 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 US drilling rig count by well type (%) Horizontal Conventional Source: Baker Hughes Inc. Source: REnergyCO 2012 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Russia horizontal and conventional drilling (%) Conventional Drilling Horizontal Drilling Source: REnergyCO 2012 US$ bn 1,184 1,475 1,549 1,649 1,387 1,792 2,235 3,000 3,600 4,000 4,400 2005 2006 2007 2008 2009 2010 2011 2012F 2013F 2014F 2015F Horizontal drilling in Russia („000 metres) Source: REnergyCO 2012
  49. 49. Eurasia Drilling Company LimitedEurasia Drilling Company Limited Why we drill horizontally and frac MARKETING AND BUSINESS DEVELOPMENT 49 30m vertical 8 ½„” wellbore = 20.3 m2 2000m of 6 1/4” OH horizontal = 1000 m2 30m radial hydraulic fracture = 2,830 m2 20 stages (30m radial hydraulic fractures ) = 56,600m2 Source: Baker Hughes Inc.
  50. 50. Eurasia Drilling Company LimitedEurasia Drilling Company Limited Russian Onshore – EDC fleet 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 EDC fleet spread now …. And expected in the future MARKETING AND BUSINESS DEVELOPMENT 50 Source: Company data, (EDC rig fleet as of beginning 2012) Source: Company data Source: Company data Rig Type 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Tot.Rigs Statio nary 1 3 1 2 4 6 1 1 1 6 6 2 34 M o bile 2 1 1 3 6 6 2 4 5 8 38 M o bile 4 2 6 P ad/ C luster 4 9 7 20 10 5 3 1 1 2 1 1 3 5 3 6 12 1 3 6 103 Statio nary 1 3 1 3 1 1 2 2 14 Statio nary 1 3 1 8 5 3 2 3 4 2 32 P ad/ C luster 3 1 2 4 1 1 2 5 4 8 31 Totals 1 3 5 10 22 30 18 18 9 3 3 3 2 4 8 7 5 11 8 6 17 32 6 9 18 258 Weight Range Light 80-180 M T Medium 200-270 M T Heavy 320-450 M T EDC fleet age 2012 34% 15% 3% 20% 28% Up to 5 years 5-10 years 10-15 years 15-20 years >20 years 38% 27% 13% 3% 19% Up to 5 years 5-10 years 10-15 years 15-20 years >20 years EDC fleet age 2015 (E)
  51. 51. Eurasia Drilling Company LimitedEurasia Drilling Company Limited Substantial Medium-term Market Opportunities • Tight oil/ Bajenov shale play ‐ Western Siberia up to 60-140bn barrels ‐ Geography aligns with EDC network infrastructure ‐ Modern rigs required to efficiently address complexities of tight oil Distribution of geological formations 51MARKETING AND BUSINESS DEVELOPMENT Self-Sourced Bazhenov Fractured Reservoirs Assessment Unit 11740102 West Siberian Basin Geologic Province 1174 Source: Bank of America Merrill Lynch Source: Rosneft
  52. 52. Eurasia Drilling Company LimitedEurasia Drilling Company Limited Substantial Medium-term Market Opportunities – the US Experience • Recent US experience in tight oil • Bakken and Eagleford plays show rapid growth potential of tight oil ‐ Bakken play in North Dakota saw rig numbers grow from 50 to 174 in only three years • US Market structure different to Russia ‐ More US independent players resulting in greater volatility • Bajenov shale play total reserves estimated at 60bn – 140bn bbs, at least size of entire US tight oil reserves 52MARKETING AND BUSINESS DEVELOPMENT 0 20 40 60 80 100 120 140 160 180 200 0 100 200 300 400 500 600 700 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012YTD Bakken tight oil dynamics North Dakota Crude Oil Production(lhs) Rig Count(rhs) 0 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000 4,500 0 50 100 150 200 250 300 2008 2009 2010 2011 2012 YTD Eagle Ford drilling dynamics Texas Crude Oil Production (lhs) Drilling Permits (rhs) Sources: BHI, US EIA Source: Railroad Commission, TX kbp kbp
  53. 53. Eurasia Drilling Company LimitedEurasia Drilling Company Limited Incremental Growth Opportunities MARKETING AND BUSINESS DEVELOPMENT 53 • Bolt-on acquisitions in core markets • Tight oil opportunity (Bazhenov) – MOU with LUKOIL/SLB • MENA – 3rd largest onshore market globally – Acquisition led strategy • Offshore – Caspian – Arctic Strong Balance Sheet and established Partnerships enhance our long-term optionality 0 500 1,000 1,500 2,000 2,500 3,000 0 250 500 750 1,000 1,250 1,500 2007 2008 2009 2010 2011 2012F 2013F 2014F 2015F 2016F Rig counts in Russia and other major markets Russia (lhs) MENA (lhs) N.America (rhs) No.ofRigs Source: Douglas Westwood 2012
  54. 54. Eurasia Drilling Company LimitedEurasia Drilling Company Limited Russian Oilfield Services in 2020 – Our Vision • What will the industry look like? ‐ Competitive structure ‐ Geographic profile ‐ Service mix ‐ Onshore v offshore • The big strategic issues operators and service companies will face ‐ Reservoir maturity, water cuts, maintaining pressure ‐ Logistics ‐ Asset and service quality • The contract model – will it have changed? ‐ Turnkey v dayrate ‐ L-T contract v spot market MARKETING AND BUSINESS DEVELOPMENT 54
  55. 55. Eurasia Drilling Company Limited 55 FINANCIALS Richard Anderson, CFO
  56. 56. Eurasia Drilling Company LimitedEurasia Drilling Company Limited Growing from strength… Key Messages • Strong growth 2007/2011 • Outperforming market in metres drilled, revenues and EBITDA • Preserving high ROCE returns • Record results in Q3 2012 Robust core business Record results Q3 2012 56FINANCIALS 9M 2011 9M 2012 Change (%) Metres drilled (000‟s) 3,668,942 4,582,644 +25 Revenues (US$m) 2,042 2,402 +17 EBITDA (US$m) 447 614 +37 2007 2011 CAGR (%) Metres drilled (000‟s) 3,269 4,777 +9.95 Revenues (US$m) 1,492 2,752 +16.5 EBITDA (US$m) 313.8 597.2 +17.5 EPS (US$) 1.15 1.89 +13.2 ROCE(%)* - 24.2% N/A *ROCE is calculated as Income from operations divided by capital employed (total shareholders‟ equity plus net debt)
  57. 57. Eurasia Drilling Company LimitedEurasia Drilling Company Limited Key Financial Highlights • Transformation of EDC‟s business reflected in robust operating and financial results • Resilience of core business and strong operational management seen during 2009 global financial crisis • Conservative balance sheet and strong free cash flow • Investing in further opportunities for organic growth • Strongly positioned for opportunistic acquisitions Strong track record FINANCIALS 57 2007 2008 2009 2010 2011 Metres drilled (000‟s) 3,269 4,041 3,753 4,103 4,777 Revenues (US$m) 1,492 2,102 1,382 1,812 2,752 EBITDA (US$m) 313.8 452.7 319.8 435.9 597.2 EBITDA margin (%) 21.0 21.5 23.1 24.1 21.7 EPS (US$) 1.15 1.61 1.24 1.44 1.89 Dividend per share (US$) N/A 0.25 0.25 0.31 0.47 Net Debt: EBITDA (0.2) (0.04) (0.8) (0.5) 0.4 Capex (US$m) 319.7 327.0 106.8 283.8 399.9
  58. 58. Eurasia Drilling Company LimitedEurasia Drilling Company Limited Significant Capex program focused on evolving fleet to meet the most demanding and complex customer needs • 32 new onshore rigs expected in next 3 years: ‐ 26 heavy-weight rigs ‐ 6 light-weight/mobile rigs • Up to 30 medium-weight rigs for retrofitting • Jack-up rig orders ‐ $235m per rig ‐ Neptune due for delivery mid-2013 ‐ On budget ‐ Mercury due for delivery end 2014 • Other ‐ North Iraq in 2012/13 EDC capital expenditure 58FINANCIALS $m 0 100,000 200,000 300,000 400,000 500,000 600,000 700,000 2007 2008 2009 2010 2011 2012F 2013F 2014F 2015F Onshore- Maintenance Onshore- Investment Offshore Other- onshore
  59. 59. Eurasia Drilling Company LimitedEurasia Drilling Company Limited EDC‟s Conservative Debt Profile • Substantial debt headroom • Strong FCF generation • Net debt/EBITDA stable and not to exceed approx. 1.2x if large acquisition • EDC US$ debt rated „BB/B‟ (positive outlook) by S&P and „BB‟ (stable outlook) by Fitch FINANCIALS 59 $m 2007 2008 2009 2010 2011 2012 (E) Net cash (debt) 59 17 252 226 (244) (368) Net debt/EBITDA (0.19x) (0.04x) (0.79x) (0.52x) 0.41x 0.48x Free cash flow (146) (17) 303 39 26 - Capex 320 255 177 225 417 c. 600
  60. 60. Eurasia Drilling Company LimitedEurasia Drilling Company Limited Debt Maturity Profile • May refinance part of 2013 debt as current market conditions are supportive • Broadly naturally hedged 60FINANCIALS 0 50 100 150 200 250 2012 2013 2014 2015 2016 2017 and thereafter US$(million) RUB denominated debt USD denominated debt Shareholder Debt, USD 175 118 68 34 155 203 d
  61. 61. Eurasia Drilling Company LimitedEurasia Drilling Company Limited Management Incentive Plan • Old Incentive Plan was a modified SAR plan ‐ Did not work effectively due to stock price volatility • New Plan was tied to meeting yearly EPS targets with thee years vesting ‐ EPS closely aligns management goals with shareholders ‐ Vesting provides a “Golden Handcuff” feature FINANCIALS 61
  62. 62. Eurasia Drilling Company LimitedEurasia Drilling Company Limited Disciplined M&A Methodology Financial criteria • EBITDA accretive immediately • Earnings accretive immediately • IRR high teens ‐ Unlevered ‐ After tax FINANCIALS 62 Purchase of Transocean jack-up IRR(E) +17% vs IRR(A) +20% Asset swap with Schlumberger $105m EBITDA first full year for $260m purchase price Recent acquisitions generating attractive returns
  63. 63. Eurasia Drilling Company LimitedEurasia Drilling Company Limited Steady Growth in Yearly Dividends 63FINANCIALS • Growth business • Historically progressive dividend with current payout ratio of 20-25% of earnings • Strong alignment with shareholder interests – share buyback and special dividend of $179m ($1.22 per share) in 2010 (not shown above). 25 25 31 47 0 10 20 30 40 50 2008 2009 2010 2011 Dividendpershare(UScents)
  64. 64. Eurasia Drilling Company LimitedEurasia Drilling Company Limited Outlook 2012 full year guidance • October update: ‐ Revenues: US $3.175 bln ‐ EBITDA margin: at least 24.3% ‐ Metres drilled: over 5.8 mln metres 2013 and forward revenue visibility • Healthy backlog/pipeline growing strongly • 68% of 2013 tentative budgeted revenue contracted or about to be contracted • c. 60% of revenues p.a. in 2014-2015 expected under long-term contracts ‐ Negotiating Framework Agreement with LUKOIL (2013-2015) ‐ Long-term agreement with LUKOIL for workover services (2010-2015) ‐ Long-term agreement with TNK-BP for drilling (2012-2014) ‐ Long-term agreement with LUKOIL for LSP-1 platform (2012-2017) ‐ Agreement with Petronas (Turkmenistan) in the Caspian offshore (2013-2015) FINANCIALS 64
  65. 65. Eurasia Drilling Company LimitedEurasia Drilling Company Limited Base assumptions underlying EDC‟s 3 Year Target growth framework • Urals blend oil price $70-$120 pb • Ruble stable at Rbs 31.5/US$ • Rbs and US$ interest rates broadly unchanged • Russian wage and cost inflation +5%-7% pa • Onshore drilling growth broadly in line with REnergy forecasts • Stable pricing environment, but with change in drilling mix FINANCIALS 65
  66. 66. Eurasia Drilling Company Limited 66 SUMMARY AND OUTLOOK Alexander Djaparidze, CEO
  67. 67. Eurasia Drilling Company LimitedEurasia Drilling Company Limited Outlook for 2015 – 3 Year Target Growth Metrics EDC Core Business *ROCE is calculated as Income from operations divided by capital employed (total shareholders‟ equity plus net debt) EDC Upside • Bolt on acquisitions within core operating area • Strategic acquisitions in MENA area • Incremental demand from tight oil drilling • Movement into Northern Offshore Waters or further expansion into Caspian • Increase payout ratio SUMMARY AND OUTLOOK 67 2007 2012(E) 3 Year Target Range Revenues (US$ m) 1,492 3,175 4,500-5,200 EBITDA Margin (%) 21.0 24.3 26 to 28 PAT Margin (%) 11.3 12.0 13 to 15 Net Debt/EBITDA (x) (0.2) 0.4 0.1 ROCE (%) 24.6 23.0 22 to 25*
  68. 68. Eurasia Drilling Company LimitedEurasia Drilling Company Limited EDC Investment Highlights Leadership Secure fundamentals Growth Higher value for our customers Efficiency Commitment to strong Shareholder Returns 68SUMMARY AND OUTLOOK
  69. 69. Eurasia Drilling Company Limited 69 Q&A
  70. 70. Eurasia Drilling Company Limited 70 APPENDIX
  71. 71. Eurasia Drilling Company LimitedEurasia Drilling Company Limited Presentation Team • One of the founders of EDC in 2002 and its current Chief Executive Officer. • Board member of EDC since 2002. • Dr. Djaparidze served as the President of PetroAlliance Services Company Limited (which he also helped found) from 1995 to 2007 and was Executive Chairman of the Board of Directors from February 2007 until 2009. • From 1990 until 1995 he served as Managing Director of MD SEIS, a Russian-US joint venture oilfield services company. • Dr. Djaparidze holds a degree in Mining Engineering and Geophysics from Gubkin Russian State University of Oil and Gas where he obtained his Doctorate of Science. • In 2006, he was awarded the Russian Federation prize for special achievements in science and technology. APPENDIX 71 Alexander Djaparidze Chief Executive Officer
  72. 72. Eurasia Drilling Company LimitedEurasia Drilling Company Limited Presentation Team • Chief Operating Officer of EDC since January 2010. • 26 years in oilfield services sector. • From 2009 to 2010 served as Senior Vice President of the Drilling Services Group at Schlumberger Russia. • Before joining Schlumberger since 2007 Mr. Sampiev was President and a member of the Board of Directors of the PetroAlliance Company Ltd. • Holds a degree of Comprehensive Mechanization of Field Development from Groznyi Oil Institute. APPENDIX 72 Murat Sampiev Chief Operating Officer
  73. 73. Eurasia Drilling Company LimitedEurasia Drilling Company Limited Presentation Team APPENDIX 73 • Chief Financial Officer of EDC since July 2008. • Board member of EDC since 2011. • Chairman of the Board of Directors of Vanguard Natural Resources LLC. • Member of the Board of Directors of Transocean Ltd. from November 2007 until June 2011. • Member of the Board of Directors of Boots and Coots Inc. from August 1999 until September 2010. • Formerly, President and CEO of Prime Natural Resources Inc. from June 2001 until April 2007. • Certified Public Accountant and member of the Society of Exploration Geophysicists. • Bachelor of Science in Business-University of Colorado, Magna cum Laude. Masters in Taxation-University of Denver. W. Richard Anderson Chief Financial Officer of EDC
  74. 74. Eurasia Drilling Company LimitedEurasia Drilling Company Limited Presentation Team • Vice President Marketing and Investor Relations of EDC since July 2008; VP Marketing of EDC since April 2008. • Over 30 years of experience in the oilfield services sector. • Prior to joining EDC, Mr. Kruschwitz was employed by Baker Hughes Inc. and its forerunners since 1981. • Most recently Mr. Kruschwitz served as Country Director for Baker Hughes in Nigeria, followed by an assignment as Global Account Manager for ExxonMobil worldwide. • Mr. Kruschwitz has extensive management, marketing and operational experience on a global basis, including postings in the Middle East, the Far East, Central Asia, Europe, North Africa, West Africa and North America. • Bachelor of Arts, Cum Laude and Fellow in Chemistry from Jamestown College. APPENDIX 74 Kim Kruschwitz Vice President, Marketing & Investor Relations

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