Shelf Drilling : Q3 2020 Results Highlights

Shelf Drilling Q3 2020 Results Highlights

13 November 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.

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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, Capital expenditures and deferred costs and Net Debt, 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.

''EBITDA'' as used herein represents revenues less: operating expenses, selling, general and administrative expenses, provision for doubtful accounts, share-based compensation expense, net of forfeitures, and other, net, and excludes interest expense and financing charges, interest income, income taxes, depreciation, amortization, loss on impairment and loss on disposal of asset. ''Adjusted EBITDA'' as used herein represents EBITDA as adjusted for the exclusion of acquired rig reactivation costs and restructuring costs. These terms, as we define them, may not be comparable to similarly titled measures employed by other companies and are not a measure of performance calculated in accordance with US GAAP. EBITDA and Adjusted EBITDA should not be considered in isolation or as a substitute for operating income, net income or other income or cash flow statement data prepared in accordance with US GAAP. We believe that EBITDA and Adjusted EBITDA are useful because they are widely used by investors in our industry to measure a company's operating performance without regard to items such as interest, income tax expense (benefit), depreciation and amortization and other non-recurring expenses (benefits), which can vary substantially from company to company. EBITDA and Adjusted EBITDA have significant limitations, such as not reflecting our cash requirements for capital expenditures and deferred costs, contractual commitments, working capital, taxes or debt service. Our management uses EBITDA and Adjusted EBITDA for the reasons stated above. In addition, our management uses Adjusted EBITDA in presentations to our Board of Directors to provide a consistent basis to measure operating performance of management; as a measure for planning and forecasting overall expectations; for evaluation of actual results against such expectations; and in communications with equity holders, lenders, note holders, rating agencies and others concerning our financial performance.

"Capital expenditures and deferred costs" as used herein include fixed asset purchases, investments associated with the construction of newbuild rigs and certain expenditures associated with regulatory inspections, major equipment overhauls, contract preparation, rig upgrades, mobilization and stacked rig reactivations. Capital expenditures are included in property and equipment. Deferred costs are included in other current assets and other long-term assets. This term, as we define it, may not be comparable to similarly titled measures employed by other companies and is not calculated in accordance with US GAAP. Capital expenditures and deferred costs should not be considered in isolation or as a substitute for capital expenditures prepared in accordance with US GAAP. We believe that Capital expenditures and deferred costs is a useful measure as it better represents the overall level of the Company's capital investments. Capital expenditures and deferred costs as used herein is a non-US GAAP measure defined and periodically reported in the Company's financial statements on a consistent basis.

"Net Debt" as used herein represents Total Debt less Cash and Cash Equivalents. This term, as we define it, may not be comparable to similarly titled measures employed by other companies and is not a measure of performance calculated in accordance with US GAAP. Net Debt should not be considered in isolation or as a substitute for total debt prepared in accordance with US GAAP. We believe that Net Debt is useful because it is widely used by investors in our industry to measure a company's financial position.

The quarterly financial information included in this Presentation has not been audited and may be subject to modifications.

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-Q equivalent for the period ended September 30, 2020, the Company's Form 10-K equivalent for the period ended December 31, 2019 and the Company's prospectus dated 7 May 2019. 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 November 13, 2020. 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.

Nov 2020 | 2

Oil Price Development

• Unprecedented intervention by OPEC+ to curb oil supply has helped lift Brent crude prices from the trough levels in April 2020
• Brent crude prices have since stabilized around the ~$40 per barrel mark, falling slightly lower in Q3 from the end of Q2 due to stalling demand recovery trends
• Demand for oil and gas is likely to remain depressed in the short to medium term as COVID-19 outbreaks resurface in many parts of the world
• Current oil price is still well below recent years' averages and the level necessary to
  support improvement in utilization and dayrates

Brent Oil Price ($/bbl)

$90
																																						Current: $44
$80
$70			2017-2019 Average: $64
$60
$50
$40
$30				2017 Average	$55
			2018 Average	$72
$20				2019 Average	$64
			Q1	2020									$51
$10				Q2	2020									$33
			Q3	2020									$43
$0				Q4	20201									$42
	Jan-17	Mar-17	May-17Jul-17Sep-17Nov-17Jan-18	Mar-18May-18Jul-18Sep-18Nov-18Jan-19Mar-19May-19Jul-19Sep-19Nov-19Jan-20Mar-20May-20Jul-20Sep-20Nov-20

Source: Bloomberg, as of 10 November 2020.

Note (1): Q4 2020 Brent oil price based on 1 October 2020 to 10 November 2020.

Nov 2020 | 3

Global Jack-up Fleet

• Sustained low oil prices continued to drive lower utilization and lower dayrates in the offshore jack-up market during Q3 2020
• In the recent months, there have been several new contract terminations and suspensions as well as dayrate negotiations while new tendering and contracting activity has been muted
• Global number of contracted jack-up rigs decreased from 386 rigs in March 2020 to 350 in October 2020
• • Marketed utilization fell from 87% to 80% during the same period
• Global jack-up rig count and marketed utilization are expected to further decline in the coming months

Source: IHS Petrodata, as of 31 October 2020

# of Contracted Jack-ups

	Previous Cycle Peak (April 2014)	457 JUs		Marketed Contracted
	Previous Cycle Trough (Jan 2017)	311 JUs		Marketed Util %
400				90%
March 2020			386 JUs
	October 2020			350 JUs
380									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	Jul-20
								Aug 2020 |	4