KCA Deutag - Sarria Daily Comments 9/11/2021

KCA DEUTAG — (Tomás) Prior to the release of their Q3 numbers on 24th November, KCA Deutag have confirmed contract extensions for their Land Drilling business in the Middle East. Limited details were released apart from the headline $185m of revenues across several rigs and tenor: 13 years of work across 3 rigs in Saudi Arabia and 2 1yr extensions in Oman, which total 15 years of work. Very crudely these equates to $12.3m of revenue per rig per annum, which is in line with FY19 and ahead of recent contract wins. We accept this calculation has limitations and that these contracts are extensions which are typically lower top line and has limited set-up costs. However, it confirms the stability of the Land Drilling business.

In relation to the results, we remain bullish on KCA’s underlying performance and expect further questions at their Q3 call in relation to bond refinancing, securing RCF facilities, and reducing the large cash balance potentially to shareholders.