Maersk Drilling

EXECUTIVE BOARD • Jørn Madsen (CEO) • Jesper Ridder Olsen (CFO)

BOARD OF DIRECTORS • Claus V. Hemmingsen (Chairman) • Robert M. Uggla (Vice Chairman) • Alastair Maxwell • Ann-Christin G. Andersen • Kathleen McAllister • Kristin H. Holth • Martin N. Larsen • Caroline Alting • Glenn Gormsen

Maersk Drilling was separately listed on 4 April 2019, following a demerger from A.P. Møller - Mærsk A/S, and delivered financial results for 2019 in accordance with expectations.

The Drilling Company of 1972 A/S (Maersk Drilling) was successfully listed as a stand-alone entity in April 2019 with A.P. Moller Holding as the largest shareholder holding 41.62% of the shares.

Since its inception in 1972 as part of A.P. Moller - Maersk, Maersk Drilling has been on the forefront of developing high-end rigs and providing high-efficiency drilling services to oil and gas companies around the world.

Maersk Drilling owns and operates 22 mobile offshore drilling units specialising in harsh environment and deep-water operations.

THE YEAR IN BRIEF 2019 marks a new era for Maersk Drilling as this is the first year as a stand-alone company. The company was demerged from A.P. Moller - Maersk in the beginning of April 2019 and subsequently listed on Nasdaq Copenhagen.

Significant resources have been spent on preparing and successfully executing the demerger and listing of Maersk Drilling. The work has focused on establishing the governance model to reflect the new corporate structure, stand-alone financing and further build on the strong capabilities and heritage which have been developed over decades.

The separation process has not impacted the operational performance, and in 2019 Maersk Drilling continued delivering on the commercial and operational parameters, increasing utilisation to 77% (69%) and maintaining a high financial uptime of 98.9% (99.1%).

In connection with the Annual General Meeting 2019 in A.P. Moller - Maersk, Maersk Drilling’s Board of Directors was elected. We believe the capabilities and relevant experience added to the Board of Directors in connection with the demerger will support Maersk Drilling going forward.

STRATEGY REVIEW Maersk Drilling is fully focused on safe operations. It is a pivotal cornerstone embedded in the corporate values both on- and

offshore and is Maersk Drilling’s ‘license to operate’ , as well as a determinant factor in attracting new business.

Maersk Drilling is well positioned in the more attractive segments of the offshore drilling industry with its modern and high spec drilling units. At the end of 2019, Maersk Drilling owned and operated 22 units.

‘Smarter Drilling for Better Value’ has since 2018 defined Maersk Drilling’s strategy. The company intends to continue its proven operational efficiency combined with customer centricity and smarter IT solutions increasing value for its customers. Furthermore, it aims to increase the collaboration across the industry which eliminates inefficiencies and creates joint value through new service- and business models.

One example is the alliance with Aker BP, which aims to lower the cost per barrel and increase profitability for all alliance partners through the implementation of digital solutions, increased collaboration efficiency and standardisation and simplification of processes.

FINANCIALS The result for 2019 was a loss of USD 113m (profit of USD 941m including an impairment reversal of USD 810m). Maersk Drilling continued its historically strong operational performance (financial uptime 98.9% vs. 99.1% in 2018) despite challenging market conditions.

Maersk Drilling saw an increase in activity levels leading to the number of contracted days increasing with 5% to 6,310 days (6,024 days), which leads to a utilisation of the assets of 77% (69%).

Maersk Drilling benefited from a solid contract backlog and delivered an EBITDA before special items of USD 415m (USD 611m) –an industry leading margin of 34% (43%) based on a revenue of USD 1.2bn (USD 1.4bn).

Maersk Drilling delivered a free cash flow of USD 109m (USD 457m) after cash flow from investments (excluding sales proceeds) of USD 311m (USD 136m). The company’s balance sheet remained strong with a net interest-bearing debt of USD 1.1bn (leverage of 2.6x (NIBD/EBITDA)) and a liquidity reserve of USD 710m (USD 772m), comprising of USD 310m cash and USD 400m in committed long-term credit lines.

Maersk Drilling left 2019 with a committed contract backlog of USD 2.1bn (excluding value of options) (USD 2.5bn), which includes USD 828m (USD 503m) of new contracts added to the contract backlog during 2019. This implies a book-to-bill ratio of 75% (39%). The company enters 2020 with a contract coverage of 66%, slightly higher than last year (63%).

In connection with its Annual Report 2019, Maersk Drilling announced a capital allocation policy reflecting its robust capital structure and solid cash flow generation with the aspiration of creating long-term shareholder value while enabling the company to manage the cyclicality of the industry. Maersk Drilling will generally work towards a leverage target of around 2.5x (NIBD/EBITDA).

Maersk Drilling did not pay out a dividend for 2019.

Maersk Drilling continues to deliver a strong operational and industry leading financial performance in the year of the demerger and separate listing on Nasdaq Copenhagen.

REVENUE (USDm)

2,518 2,297

1,439 1,429 1,222

2015 2016 2017 2018 2019

EBITDA (USDm)

1,403 1,397

685 595

399

2015 2016 2017 2018 2019

ADJUSTED FREE CASH FLOW* (USDm)

1,186 1,267

593 457

109

2015 2016 2017 2018 2019

REVENUE BACKLOG (USDbn)

5.4

3.7 3.3

2.5 2.1

2015 2016 2017 2018 2019

*) Adjusted free cash flow defined as cash flow from operating activities less cash flow used for investing activities, adjusted for newbuild cash flow and proceeds from the divestment of assets or activities