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Interim FinancialStatements

KCA Deutag Alpha Limited

For the three months ended 31 March 2020 .

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Table of contents

Consolidated income statement 3

Consolidated statement of changes in shareholder's equity 3

Consolidated balance sheet 4

Consolidated cash flow statement 5

Notes to the quarterly financial statements 6

1. Significant accounting policies 6

1.1 Compliance with IAS 34 6

1.2 Basis of preparation 6

2. Segment reporting 7

3. Net finance costs 7

4. Exceptional items 8

5. Reconciliation of net debt 8

6. Tangible fixed assets 9

7. Intangible assets 10

8. Trade and other receivables 10

9. Trade and other payables 10

10. Cash generated from operating activities 11

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Consolidated income statement

Q1 2020 Q1 2019Note $m $m

Sales 2 338.0 321.3Operating costs (267.9) (253.6)EBITDA 2 70.1 67.7Depreciation/Amortisation (51.2) (53.2)Operating profit (pre-exceptional) 18.9 14.5Exceptional items, net operating costs 4 0.1 (9.2)Operating profit (post-exceptional) 19.0 5.3Net finance costs 3 (65.8) (47.3)Loss before tax (46.8) (42.0)Taxation (4.2) (7.1)Loss after tax (51.0) (49.1)Attributable to the owners of the KCAD Group (52.0) (49.1)Attributable to non-controlling interests 1.0 -

(51.0) (49.1)

Consolidated statement of changes in shareholder’s equitySharecapital

Sharepremium

Retainedearnings

Otherreserves

Non-controllinginterests

Total

$m $m $m $m $m $mAt 1 January 2020 - 227.8 (2,748.2) 2,177.0 8.8 (334.6)Comprehensive (expense) incomeLoss for the period - - (52.0) - 1.0 (51.0)Other comprehensive (expense) incomeFair value movement on cash flow hedges - - - (2.9) - (2.9)

Exchange differences on foreign operations - - - (15.1) - (15.1)

Total other comprehensive (expense)income - - - (18.0) - (18.0)

Total comprehensive (expense) income - - (52.0) (18.0) 1.0 (69.0)Transactions with ownersDividend to minority shareholder - - (0.4) - - (0.4)At 31 March 2020 - 227.8 (2,800.6) 2,159.0 9.8 (404.0)

At 31 December 2019 - 227.8 (2,748.2) 2,177.0 8.8 (334.6)

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Consolidated balance sheet

Q1 2020 Q1 2019 Audited Q42019

Note $m $m $mASSETSNon-current assetsProperty, plant and equipment 6 881.1 981.6 910.2Right of use leased asset 6 61.4 45.1 56.7Goodwill 698.1 773.7 698.1Intangible assets 7 118.8 132.1 122.4Deferred tax assets 46.4 58.4 48.5

1,805.8 1,990.9 1,835.9Current assetsInventories and work-in-progress 153.0 174.2 145.2Trade and other receivables 8 305.1 259.4 299.3Amounts owed by parent company - - 7.6Financial assets - derivative financial instruments - 0.3 0.9Cash at bank 158.1 145.9 176.6

616.2 579.8 629.6Total assets 2,422.0 2,570.7 2,465.5LiabilitiesCurrent liabilitiesBank overdraft (113.1) (54.8) (98.0)Trade and other payables 9 (331.8) (278.7) (316.7)Tax liabilities (22.7) (33.6) (26.7)Financial liabilities - derivative financial instruments (3.3) - -Financial liabilities - borrowings (113.0) (139.2) (115.8)Lease liabilities - current (25.0) (15.1) (20.7)Provisions and other payables (1.4) (1.2) (1.7)

(610.3) (522.6) (579.6)Non-current liabilitiesDeferred income (4.8) (11.8) (7.0)Financial liabilities - borrowings (1,690.9) (1,684.0) (1,687.1)Amounts owed to parent company (291.0) (259.1) (289.9)Deferred tax liabilities (48.0) (62.3) (52.1)Retirement benefit obligations (135.1) (119.5) (138.6)Lease liabilities - non current (42.7) (33.7) (42.4)Provisions and other non-current liabilities (3.2) (3.6) (3.4)

(2,215.7) (2,174.0) (2,220.5)Total liabilities (2,826.0) (2,696.6) (2,800.1)Net (liabilities) assets (404.0) (125.9) (334.6)

Capital and reservesShare capital - - -Share premium reserve 227.8 227.8 227.8Other reserves 2,159.0 2,174.3 2,177.0Retained earnings (deficit) (2,800.6) (2,533.7) (2,748.2)Total shareholders' (deficit) surplus (413.8) (131.6) (343.4)Equity non- controlling interest 9.8 5.7 8.8Total equity (404.0) (125.9) (334.6) 

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Consolidated cash flow statement

Q1 2020 Q1 2019$m $m

Cash flows from operating activitiesCash generated from operations 10 19.2 26.0Tax paid (11.4) (12.5)Net cash inflow from operating activities 7.8 13.5

Cash flows from investing activitiesCapital expenditure (14.5) (43.1)Proceeds from sale of property, plant and equipment 0.7 0.1Purchase of intangible assets (0.2) (0.1)Other investments - 0.4Interest received 5.1 6.6Net cash outflow from investing activities (8.9) (36.1)

Cash flows from financing activitiesIncrease in loan from parent - 25.0Bank loan drawdowns/repayments (1.7) (5.4)Interest paid, including capitalised interest (15.7) (18.8)Lease payments (7.3) (5.8)Dividend paid to minority shareholders (0.4) (0.3)Net cash in (out) flow from financing activities (25.1) (5.3)

Effect of foreign exchange rate changes on cashand bank overdrafts (7.4) 0.2Net cash in (out) flow (33.6) (27.7)Cash and cash equivalents at start of period 78.6 118.8Cash and cash equivalents at end of period 45.0 91.1

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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, InterimFinancial Reporting. They do not contain all the disclosures required for annual financial statements and shouldtherefore be read in conjunction with the Group’s annual financial statements for the year ended 31 December 2019,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 accountingestimates. It also requires management to exercise its judgement in the process of applying the Group’s accountingpolicies. The areas involving a higher degree of judgement, complexity or areas where assumptions and estimates aresignificant 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 consideredreasonable under the circumstances.

They serve as the basis for any judgement required for determining the carrying amounts of assets and liabilities whensuch 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 werethe same as those described in the full year 2019 consolidated financial statements.

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2. Segment reporting

Q1 2020 Q1 2019$m $m

RevenuesLand Drilling 170.9 161.4Bentec 18.6 38.5Offshore Services 137.9 113.5RDS 14.2 10.0Corporate costs/other 0.1 0.1Elimination on consolidation (3.7) (2.2)GROUP TOTAL 338.0 321.3EBITDA (pre-exceptional)Land Drilling 50.2 48.5Bentec 0.8 2.3Offshore Services 21.9 19.5RDS 1.0 0.7Corporate costs/other (3.8) (3.2)Elimination on consolidation1 - (0.1)GROUP TOTAL 70.1 67.7

1 Eliminations on consolidation principally relate to profits generated by Bentec on sales to Land Drilling and to supportthe Group’s capital expenditure programme.

3. Net finance costs

Q1 2020 Q1 2019

$m $mInterest payable to immediate parent company (8.8) (7.3)Interest payable on bank borrowings (8.7) (9.8)Interest payable on Senior Secured Notes (29.7) (29.7)Finance costs on leases (1.6) (1.1)Amortisation of arrangement fees (2.2) (2.1)Amortisation of discount assets (0.5) (0.4)Other finance costs (7.5) (4.5)Finance costs (59.0) (54.9)Finance income 0.5 1.4Exchange (losses) gains (7.3) 6.2Finance costs – net (65.8) (47.3)

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4. Exceptional items

Q1 2020 Q1 2019$m $m

Libya operations1 0.1 -Reorganisation costs 2 - (3.1)Supplier dispute 3 - (6.1)GROUP TOTAL 0.1 (9.2)

1) Proceeds from recovery of income in Libya which had been written down in earlier periods as a result of ongoingpolitical unrest and a decision to cease our operations in Libya.

2) Reorganisation costs primarily relate to the Group’s cost reduction, restructuring and redundancy expenditure alongwith professional fees associated with the Group’s strategic activities looking at potential mergers and acquisitions.

3) In 2019 the group booked an additional charge of $6.1 million in Bentec relating to a dispute with a sub-supplier in theUkraine, together with certain other related costs.

5. Reconciliation of net debt

Q1 2020 Q1 2019$m $m

Opening net debt (1,724.3) (1,756.5)Net cash in (out) flow (33.6) (27.7)Repayment / (Drawdown) of debt 1.7 11.2Other non-cash movements (2.7) (7.9)Closing net debt per balance sheet (1,758.9) (1,780.9)Capitalised arrangement fees (27.5) (38.7)Closing net debt (1,786.4) (1,819.6)

KCA Deutag Alpha Limited, their affiliates or other related parties may or may not opportunistically purchase debt in oneor more series of open-market transactions from time to time.

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6. Tangible fixed assets

Land andbuildingsfreehold

Drilling rigs andequipment

Plant, machineryand vehicles

Total Tangiblefixed

assets

$m $m $m $mCostAt 1 January 2020 39.0 1,954.2 95.5 2,088.7Additions at cost - 19.1 0.2 19.3Disposals (0.5) (1.6) - (2.1)Exchange adjustments (0.6) (11.1) (10.7) (22.4)At 31 March 2020 37.9 1,960.6 85.0 2,083.5

AccumulateddepreciationAt 1 January 2020 9.6 1,158.2 10.7 1,178.5Charge for the period 0.4 39.7 0.7 40.8Disposals (0.5) (1.4) - (1.9)Exchange adjustments (0.2) (5.2) (9.6) (15.0)At 31 March 2020 9.3 1,191.3 1.8 1,202.4

Net carrying amountAt 31 March 2020 28.6 769.3 83.2 881.1

Net carrying amountAt 31 December 2019 29.4 796.0 84.8 910.2

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7. Intangible assets

Customerrelationships and

contractsTradename Technology Total

$m $m $m $mCostAt 1 January 2020 254.4 176.3 44.6 475.3Additions - - 0.2 0.2Exchange - - (1.0) (1.0)At 31 March 2020 254.4 176.3 43.8 474.5

Accumulated amortisationAt 1 January 2020 202.8 111.4 38.7 352.9Charge for the period 1.0 2.0 0.7 3.7Exchange - - (0.9) (0.9)At 31 March 2020 203.8 113.4 38.5 355.7

Net carrying amountAt 31 March 2020 50.6 62.9 5.3 118.8

Net carrying amountAt 31 December 2019 51.6 64.9 5.9 122.4

8. Trade and other receivables

Q1 2020 Q1 2019$m $m

Trade receivables 251.5 213.4Other receivables 43.0 24.9Prepayments and accrued income 10.6 21.1Total 305.1 259.4

9. Trade and other payables

Q1 2020 Q1 2019$m $m

Trade payables 69.6 54.4Other tax and social security 10.7 11.9Other payables 19.2 80.0Accruals 177.8 115.9Payments received on account 36.0 3.5Deferred income 18.5 13.0Total 331.8 278.7

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10. Cash generated from operating activities

Q1 2020 Q1 2019$m $m

(Loss) profit for the period (51.0) (49.1)Adjustments for:Tax charge 4.2 7.1Depreciation 1 47.4 49.4Amortisation of intangible assets 3.7 3.8Loss (gain) on sale of property, plant and equipment (0.6) -Net movement in provisions, other liabilities and retirement benefit obligations (1.5) (1.0)Net finance cost 65.8 47.3(Increase)/decrease in inventories and work in progress (7.8) (8.0)(Increase)/decrease in trade and other receivables (10.6) 11.8(Decrease)/increase in trade and other payables (21.2) (38.9)Exchange differences from operating activities (9.2) 3.6Cash generated from operating activities 19.2 26.0

1) Depreciation includes $6.6m (Q1 2019: $4.8m) of depreciation for right of use assets.