Shelf Drilling : Investor Presentation (January 2020)

Shelf Drilling Investor Presentation

January 2020

Disclaimer

This presentation (the "Presentation") has been prepared by Shelf Drilling, Ltd. ("Shelf Drilling" or the "Company") exclusively for information purposes and may not be reproduced or redistributed, in whole or in part, to any other person.

The Presentation is being made only to, and is only directed at, persons to whom such presentation may lawfully be communicated ('relevant persons'). Any person who is not a relevant person should not act or rely on the Presentation or any of its contents.

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The Presentation contains certain forward-looking statements relating to the business, financial performance and results of the Company and/or the industry in which it operates. Forward-looking statements concern future circumstances and results and other statements that are not historical facts, sometimes identified by the words "believes", expects", "predicts", "intends", "projects", "plans", "estimates", "aims", "foresees", "anticipates", "targets", and similar expressions. The forward-looking statements contained in the Presentation, including assumptions, opinions and views of the Company or cited from third party sources are solely opinions and forecasts which are subject to risks, uncertainties and other factors that may cause actual events to differ materially from any anticipated development. None of the Company or any of its shareholders or subsidiary undertakings or any such person's officers or employees provides any assurance that the assumptions underlying such forward-looking statements are free from errors nor does any of them accept any responsibility for the future accuracy of the opinions expressed in the Presentation or the actual occurrence of the forecasted developments. The Company assumes no obligation, except as required by law, to update any forward-looking statements or to conform these forward-looking statements to its actual results.

The Company uses certain financial information calculated on a basis other than in accordance with accounting principles generally accepted in the United States ("GAAP"), including EBITDA, Adjusted EBITDA and Adjusted EBITDA margin, as supplemental financial measures in this presentation. These non-GAAP financial measures are provided as additional insight into the Company's ongoing financial performance and to enhance the user's overall understanding of the Company's financial results and the potential impact of any corporate development activities.

The Presentation contains information obtained from third parties. You are advised that such third party information has not been prepared specifically for inclusion in the Presentation and the Company has not undertaken any independent investigation to confirm the accuracy or completeness of such information.

An investment in the Company involves risk, and several factors could cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements that may be expressed or implied by statements and information in the Presentation, including, among others, the risk factors described in the Company's Form 10-k equivalent for the period ended 31 December 2018 and the Company's prospectus dated 12 June 2018. Should any risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those described in the Presentation.

No representation or warranty (express or implied) is made as to, and no reliance should be placed on, any information, including projections, estimates, targets and opinions, contained herein, and no liability whatsoever is accepted as to any errors, omissions or misstatements contained herein, and, accordingly, none of the Company or any of its shareholders or subsidiary undertakings or any such person's officers or employees accepts any liability whatsoever arising directly or indirectly from the use of the Presentation.

By attending or receiving the Presentation you acknowledge that you will be solely responsible for your own assessment of the market and the market position of the Company and that you will conduct your own analysis and be solely responsible for forming your own view of the potential future performance of the Company's business.

The Presentation speaks as of January 14, 2019. Neither the delivery of this Presentation nor any further discussions of the Company with any of the recipients shall, under any circumstances, create any implication that there has been no change in the affairs of the Company since such date.

Jan 2020 | 2

Shelf Drilling is Market Leader in Core Jack-up Regions

COMPANY OVERVIEW

International "pure-play"jack-up drilling company with 35(1) ILC jack-up rigs

Fit-for-purpose operations with solefocus on shallow water

Headquarters centrally located in Dubai

Top tier safety and operational performance

Industry leading cost structure

Robust full cycle financial results

Shelf'sfleet increased from 4

in 2012 to 11 in 2019 in the

Arabian Gulf2

#2 #1

Significant recent increase in activity

Shelf's fleet

increased from 6 in

2012 to 9 in 2017

#1 position in

Thailand

#1 #4

Operating with scale in the most attractive shallow water markets

Number (#) represents Shelf Drilling's operating position

Note (1): Excludes 2x stacked jack-ups (held for sale) and 2x newbuild rigs under bareboat charter with China Merchants

Note (2): Arabian Gulf defined as Bahrain, Qatar, Saudi Arabia and UAE

Jan 2020 | 3

Our Operating Platform Creates Differentiation

		Average Fleet Uptime Track Record			Operational excellence made possible through
					Best year since inception	99.2%
100%		98.9%	98.5%	98.6%	98.7%	98.8%	98.7%
		1
98%								High national content - 84% across fleet
96%
94%								2	Centralized organization and oversight
92%
90%
	2013	2014	2015	2016	2017	2018	2019

Safety Track Record (TRIR1)

1.0		Shelf Drilling	Global IADC Average
0.81	0.75
0.8				0.68	0.68
	0.6
			0.54
0.6			0.46
0.69
0.4	0.48				Best year since inception
0.2			0.25	0.25
		0.22	0.23	0.19
0.0
2013	2014	2015	2016	2017	2018	2019

3	Fit-for-purpose processes and systems

4	Lean and flat management structure

Customers are increasingly prioritizing

consistent performance

Source: International Association of Drilling Contractors (IADC) as of 30 September 2019, SHLF data as of 31 December 2019

Note (1): Total recordable incident rate (incidents per 200,000 man-hours)

Jan 2020 | 4

Capitalizing on Opportunities in the Downturn

• From 2017 to 2019, Shelf Drilling acquired 6	Illustrative Acquisition Economics ($100MM Per Rig Investment)
premium jack-up rigs at historically low prices
		Illustrative Annual EBITDA				Implied Purchase Multiple

• • All-ininvestment of ~$100 million per rig
  • ~50% of replacement cost (~$1.2 billion of assets added for ~$600 million)
  • Average age of 6 years
  • Proven, reputable rig designs
  • First 5 contracted with top tier NOCs and IOCs - advanced discussions on Shelf Drilling Journey
• Reasonable estimated cash on cash return at trough of the cycle
• Significant upside potential in improving dayrate environment
• Latest transaction most compelling to date
• • Shelf Drilling Enterprise (7th acquired rig)
  • Purchased for specific contract with key customer

$48				12.0x

10.0x$40

$32				8.0x

$22

$16			4.6x			4.0x
	$10	2.5x

$0				0.0x
	2017/2018 Spot	Consensus for	Market Dayrates
	Dayrate Market	Normalized Pricing1	2012 to 2014

Note (1): Assumes $60k/d of EBITDA margin

Jan 2020 | 5

Strategic Evolution and Positioning of Jack-Up Fleet

91% Marketed Utilization Across Fleet

9 x Premium(1)

89% Utilization

Demonstrated ability to invest and deploy

• Newbuilds: 2 (2014)(4)
• Acquired Rigs: 5 (2017-2020)
• Newbuilds CJ46 : 2 (2019)

3 x Major Upgrades

100% Utilization

"Smart upgrades" to premium specification at fraction of cost

• Baltic (2015)
• Key Singapore (2015)
• Adriatic I (2014)

6 x Shallow Draft

100% Utilization

Uniquely positioned to meet niche demand

• Arabian Gulf: 5
• Nigeria: 1

17 x Standard(2)

88% Utilization

Cost efficient and well suited for brownfield activity

• India & Egypt: 10
• Other Areas: 7

2012

Total Active = 30

Shallow Draft

4

	2020
	Total Active = 35(3)
Standard	Premium
17	9

"Right Assets in Right Locations"

Blend of premium & standard jack-ups

Standard

Shallow Draft

Major Upgrades

provides ideal match to customer requirements across our regions

26

6

3

Note (1): Excludes 2x newbuild rigs under bareboat charter with China Merchants

Note (2): Excludes 2x stacked jack-ups (held for sale)

Note (3): Excludes 2x stacked jack-ups (held for sale) and 2x newbuild rigs under bareboat charter with China Merchants

Note (4): Delivered in 2016 and 2017

Jan 2020 | 6

Oil Price Development

Brent Oil Price ($/bbl)

$100

$90

$80

$70

$60

$50

$40

$30

$20

$10

$0

FY 2018 Average: $71

FY 2019 Average: $64

FY 2017 Average: $54

FY 2016 Average: $44

Trough (Jan 2016): $26

Current: $65

Trough (Jan-16)	$26
FY 2016	$44
FY 2017	$54
FY 2018	$71
FY 2019	$64
YTD 2020	$67
Current	$65

Jan-16Apr-16

Jul-16

Oct-16

Jan-17Apr-17

Jul-17

Oct-17

Jan-18Apr-18

Jul-18

Oct-18

Jan-19Apr-19

Jul-19

Oct-19

Jan-20

Despite volatility over the last year, Brent price level

in the $60-70/bbl range provides constructive backdrop for shallow water market

Source: Bloomberg, EIA website, as of 12 January 2020

Jan 2020 | 7

Middle East NOCs Steadily Increasing Activity

Total Number of Contracted Jack-Ups Globally

															Middle East	RoW		US GOM
500	Year	Middle East	RoW	US GOM
2000	46		131		119
450	2020	135		242		9
400
350
300
250
200
150
100
50
0
2000	2001	2002	2003	2004	2005	2006	2007	2008	2009	2010	2011	2012	2013	2014	2015	2016	2017	2018	2019	2020

• Middle East increased from <15% of global total in 2000 to ~35% today
• Further rig count growth expected in Saudi, UAE, Qatar and Kuwait in years ahead

Source: DNB Markets, IHS-Petrodata as of 09 January 2020

Jan 2020 | 8

Recovery in Jack-Up Utilization and Dayrates is Accelerating

# of Contracted Jack-ups

Peak (April 2014)	457	jack-ups
Average 2006-2015	381	jack-ups
Minimum since 2006 (Jan 2017)	311	jack-ups
Current (Jan 2020)	386 jack-ups

400	Marketed Contracted		Marketed Util %		90%	Hundreds
			+24%
380			(75 rigs)		85%
360						80%
340						75%
320						70%
300						65%
280						60%
Jan-17	Jul-17	Jan-18	Jul-18	Jan-19	Jul-19	Jan-20

Source: Bloomberg, IHS Petrodata, as of 09 January 2020

Indicative Spot Dayrates

Region	Mid 2018	Late 2019	% Change
Middle East	$40-70k	$65-95k	~45%
West Africa	$60-75k	$75-95k	~25%
SE Asia	$45-60k	$70-90k	~50%
India	$25-30k	$40-50k	~60%
Average	$45-60k	$65-80k	~40%

Jan 2020 | 9

Contracting Outperformance Across Regions and Asset Classes
				Jack-up Backlog Added 2019 (Rig-Years)
Company	JUs	Util.
Managed2
Shelf Drilling	35	91%			60.3	10.4	70.7
COSL	40	93%	8.8		33.0	41.8
Valaris	58	81%	9.1		23.8	32.8
Seadrill	20	65%		27.0	27.0
Borr Drilling	31	55%	3.9	15.3	19.2
Saipem	7	100%	1.1	16.0	17.1	SHLF has added ~$1.45 billion
of backlog in H2 2019
Aban Offshore	14	71%	9.4	0.7 10.1
Advanced	13	100%	7.2	7.2
Energy Systems

Noble	13	92%	0.7	5.5 6.3		Pre-20001		Post-20001

Source: IHS Petrodata as of 06 January 2020

Note (1): Original delivery year

Note (2): Source: IHS Petrodata as of 12 January 2020 and latest fleet status reports from various company websites. Jack-ups managed count excludes pre-2005 built and cold stacked/held for sale rigs

for all companies in addition to the following adjustments. Shelf Drilling excludes 2x newbuild rigs under BBC. Valaris includes 16x ARO JUs. Seadrill includes 5x SeaMex JUs; excludes 3x newbuild JUs for Qatar (GulfDrill).

Jan 2020 | 10

Proven Track Record of Securing Contracts and Building Backlog

•Backlog Quality and Diversity1

Other

IOC 1% 22%

NOC 77%

• 99% of backlog with NOCs and IOCs
• 32 contracted rigs with on average ~2.5 years of remaining contract term

•Fleet Status Summary

	Contracted		Available		Total2	% Cont.
MENAM	15		3		18	83%
India	8		0		8	100%
West Africa	5		0		5	100%
SE Asia	4		0		4	100%
Total	32		3		35	91%

•Total Backlog(3) - $2,005 million (As of 31 December 2019)

India	West Africa
9%	4%

SEA 15%

MENAM

72%

Note (1): Customer logos include current and prior customers.

Note (2): Total excludes 3 stacked rigs (2 jack-ups and 1 swamp barge).

Note (3): Backlog excludes Shelf Drilling Enterprise contract executed in January 2020.

Jan 2020 | 11

Sustained Performance Leads to Major Contract Extensions

• 35 Rig-Years

• High Island II, High Island IV, Main Pass I - 10 years each
• Main Pass IV - 5 years

~$1Bn

Backlog

• Dayrates consistent with current rates
• Annual rate adjustments based on Brent crude oil price beginning Q1 2021

"Age is Just a

Number"(1)

• All four rigs have ~15 years of operating history with Aramco
• Contract extensions testament to the quality and performance of the rigs and crews

High Island IV

High Island II

Saudi Arabia - 100% Utilization | Long-Term Relationship With World's Largest Oil & Gas Company

Pursued strategic initiative to expand Saudi footprint since inception

Saudi fleet grown from 4 to 7 JUs since 2012

Good mix of shallow draft (HI2/HI4/HI5/HI9) and standard rigs (MP1/MP4) with smart upgrades provide long-term competitive advantage in the region

Recently added premium JU SD Achiever to Saudi fleet

Year 2020

Year 2021

Rig Name

J

F

M

A

M

J

J

A

S

O

N

D

J

F

M

A

M

J

J

A

S

O

N

D

High Island IX

Aramco, Jun-21

2-year option

High Island V

Aramco, Mar-22

High Island II

Aramco, Mar-30

High Island IV

Aramco, Feb-30

Main Pass I

Aramco, Feb-30

Main Pass IV		Aramco,	Mar	-25
		Aramco,	Nov	-22
SD Achiever

Note(1): Source: Clarksons Platou Securities research report as of 1/8/20.

Jan 2020 | 12

Shelf Drilling Enterprise Acquisition & Concurrent Contract Award

$81m

Total Rig Cost

• Reactivation scope includes 5-year overhaul of all major equipment
• Contract preparation includes significant upgrades to pipe- handling system, cranes, BOPs, living quarters & lifeboat capacity plus new rapid preload system and selected tubular, handling and fishing tools

$59m

Contract Value

• 21-monthcontract + options with Chevron Thailand
• Operations expected to commence in August 2020

~4.5x

EBITDA Multiple

• Significant cash flow generation from current contract
• Well-positionedfor future area work
• Focus on disciplined approach to capital spending and generating returns for investors

	Design	Baker Pacific Class 375
Specifications	Delivery Year	2007
Water Depth	375 ft.
Hook Load	1500klbs
Cantilever Reach	70ft. x 30ft.
Rig	VDL	3,400 MT
	Operating History	10 years for Shell Brunei
	Purchase price	$38
Cost	Reactivation	$25
Contract Prep	$13
Rig
Other (Crew Ramp-Up, etc.)	$5
Total
Sub-Total	$43
	Total	$81

Contract award in 2014 covering 10 rig-years for two highly customized, fit-for-purpose newbuild jack-ups

2 acquired premium jack-ups contracted in GOT in 2019/20

Extensive experience in factory type drilling and offline operations

Large proportion of lower-risk,short-cycle P&A work

Thailand - 100% Utilization | Long-Term Business with Leading IOC

Year 2020

Year 2021

Rig Name

J

F

M

A

M

J

J

A

S

O

N

D

J

F

M

A

M

J

J

A

S

O

N

D

SD Chaophraya

Chevron,

Nov-21

SD Krathong

Chevron,

May-22

SD Scepter

Chevron,

Apr-22

SD Enterprise

Chevron,

Apr-22

Jan 2020 | 13

Backlog Evolution in Recent Months

~140% Growth in contracted backlog from <$850MM to $2+BN during H2 2019

More than half the fleet signed for new work in H2 2019

1

2

3

Note (1): 3 rigs awarded 3-year contract each; 1 rig awarded 3-month contract

Note (2): Includes short-term and long-term extensions on 4 rigs

Note (3): Includes mobilization revenue

Jan 2020 | 14

Shelf Continues to have Peer Leading Corporate Credit Profile

EBITDA-Backlog / EV(1)

EBITDA-backlog / EV

0.80x

0.68x

0.60x

0.48x

0.40x

0.28x

0.23x

0.16x

0.20x

0.15x

0.14x

0.09x

0.05x

0.03x

0.00x

SHLF

RIG

ODL

DRLCO

NE

DO

SDRL

VAL

BDRILL

PACD

Percentage of Total Debt Maturing Within the Next 5 Years

100.0%

100.0%

100.0%

85.5%

67.0%

41.4%

44.7%

27.9%

11.3%

12.5%

SHLF

DO

NE

VAL

RIG

SDRL

DRLCO

BDRILL

PACD

ODL

Net Debt / LTM EBITDA(2)

NM

75.8x

35.0x

7.4x

10.9x

18.6x

19.8x

2.1x

4.2x

4.6x

DRLCO

ODL

SHLF

RIG

NE

SDRL

DO

VAL

PACD

BDRILL

Note: Debt maturities exclude amounts due under capital leases. SHLF reflects 12/31/2019 RCF balance of $35mm and pro forma for Maersk Completer (renamed Shelf Drilling Enterprise) acquisition and associated contemplated financing. RIG pro forma for $750mm notes offering. DRLCO pro forma for sale of Maersk Completer for $38mm. VAL pro forma for recent arbitration payment and excludes ARO.

Note (1): Chart from Clarksons Platou Securities research report as of 1/8/20; Shelf not pro forma for Maersk Completer acquisition and associated contemplated financing.

Note (2): LTM EBITDA as of 9/30/2019, for all companies other than DRLCO, which is LTM as of 6/30/19. Shelf Drilling LTM EBITDA adjusted to include $18mm of incremental expected annualized EBITDA associated with newly acquired rig and $27mm of annualized EBITDA associated with contracts for two other acquired rigs that recently commenced multi-year contracts.

Jan 2020 | 15

Positioned for Cash Flow

Industry Leading

Backlog

Well-Capitalized

Near-Term

Momentum

• ~140% growth since June 2019 to $2+ billion
• Significant revenue and free cash flow visibility in coming years
• Scepter + Achiever/Journey - activation projects substantially complete by YE 2019
• Shelf Drilling Enterprise - multiple financing options ahead of Q3 2020 start
• No debt maturities before 2023
• Guidance for Q4 2019 provided in November 2019 implies 20% sequential revenue growth
• • 7 new contracts commenced during Q4 (average length ~2 years)
  • Further step up in revenue expected in Q1 2020

Jan 2020 | 16

Investment Highlights

Fit for Purpose

Strategy

Leading Position in

Key Markets

World Class

Jack-up Contractor

Solid Financial

Run-way

Returns Focus

• Right Assets in the Right Locations | Right-Sized Organization | High National Content
• Critical mass and significant market share in all core geographic regions
• Middle East, West Africa and Southeast Asia activity poised for growth while India remains comparatively steady
• Best-in-classoperating platform and low-cost structure
• Sustained performance creates differentiation
• Minimal debt maturities until 2025 and strong current liquidity position
• Backlog provides revenue and margin visibility
• Track record of resilient margins, free cash flow generation and capital return
• Fleet transformation in recent years through creative, cost-effective transactions
• Significant cash flow potential in improving dayrate environment

Jan 2020 | 17

Appendix

Shelf Drilling Investor Presentation (January 2020)

Appendix

Global Jack-up Fleet Summary

Regions		Contracted Jack-ups		% of Peak	Change since
Apr-14		Jan-17	Jan-20	Trough
Middle East	129		118	135	105%	17
India
34		38	34	99%	-4
West Africa
20		7	18	90%	11
SE Asia
68		27	43	63%	16
North Sea
47		29	35	74%	6
China
30		27	51	168%	24
US GOM
33		7	9	27%	2
Mexico
53		28	32	59%	4
Sub-Total
414		281	356	86%	75
Total	457		311	386	84%	75
% of Total	91%		90%	92%		100%

Rig Status	Total
Under Contract	386
Available	68
Active Jack-ups
454
% Marketed Utilization	85%
Under Construction	51
Sub-total	505
Cold Stacked	70
Total Fleet
575

• Activity levels in the 8 largest jack-up regions globally have increased over the last year
• Middle East rig count at all-time high with recent awards in Q4 2019/H1 2020
• Increase in Mexico from 17 in early 2018 to 32 contracted rigs today
• Modest rig count recovery in India in 2019 after drop in 2018 - further rise likely in 2020
• Chinese market continues to absorb significant new rig capacity from domestic shipyards (all-time high)

Source: IHS Petrodata as of 09 January 2020

Jan 2020 | 19

Appendix

Capital Structure Summary

(In millions USD)	YE 2017	YE 2018	Jun-19	Sep-19
Cash	$84.6	$91.2	$71.3	$45.7
Total Long-lived Assets	$1,405.9	$1,354.8	$1,465.9	$1,487.5
Total Assets	1,683.0	1,645.9	1,740.2	1,730.9
Senior secured notes due	526.7	-	-	-
2018/2020
Senior unsecured notes due 2025 1	-	887.8	888.7	889.1
RCF Drawdown				20.0
Obligations under sale and	313.9	-	-	-
leaseback
Total Debt	$840.6	$887.8	$888.7	$909.1
Net Debt	$756.0	$796.6	$817.4	$863.4
Mezzanine Equity	166.0	-	-	-
Total Equity	$509.2	$591.3	$669.4	$633.3

• Total liquidity, including availability under RCF, of approximately $241.8 million as of September 30, 2019
• LTM Adjusted EBITDA of $171.3 million (Sep-19). Net Leverage of 5.0x (Sep-19)2
• Total shares outstanding of 137.7 million as of September 30, 2019

1. 285k shares repurchased in September 2019 at average price of $2.45 per share

1. Free float of 57.3 million or 41.6%

o Large shareholders with board representation: 80.3 million or 58.3%

• China Merchants: 26.8 million (19.4%)
• Lime Rock: 17.2 million (12.5%)
• Castle Harlan: 17.2 million (12.5%)
• CPE Capital (formerly CHAMP): 17.2 million (12.5%)

Note (1) Reflects carrying value. Principal value is $900.0 million

Note (2) TNLR for covenant compliance purposes under RCF of 3.9x at Sep 30, 2019

Jan 2020 | 20

Appendix

Q4 2019 Guidance Summary(1)

US$ millions	Q3 2019 (Actual)	Q4 2019 (Guidance)
Revenue		$132	$156	- 161
Capital Expenditures & Deferred Costs	$64	$45	- 55
•
Rig Acquisitions	$33	$27	- 32
•
Other	$31	$18	- 23

• We believe that Q3 2019 represents an inflection point for the business
• • Revenue and EBITDA have declined sequentially for multiple quarters
  • Following the series of contract awards during 2019 and recent investments in the fleet, we expect this trend to significantly change beginning in Q4 2019, as a total of 7 new rig contracts are scheduled to commence during the period
  • In addition, the capital projects associated with our recently acquired rigs (Scepter, Achiever, Journey) will be substantially complete by YE 2019
• Therefore, the company is providing guidance on certain financial metrics for Q4 2019, but we will not necessarily provide such guidance each subsequent quarter going forward

Note (1): Provided in Q3 2019 reporting.

Jan 2020 | 21