Committee Meeting June 14, 2019 IADC Tax Committee Contracts - PowerPoint PPT Presentation

IADC Contracts Committee Meeting June 14, 2019

IADC Tax Committee – Contracts Committee dialog • Background of the discussion: US Tax Reform

TYPICAL CONTRACTUAL ARRANGEMENT OPTIONS Split/Tripartite agreement Rig Owner-Operator Standard BBC arrangement Rig Owner/ Rig Owner Operator Rig Owner Operator BBC Integrated Drilling Services Operator Drilling Services BBC Integrated Drilling Services Third Party Third Party Third Party Customer Customer Customer

Base Erosion and Anti-abuse Tax (BEAT): Illustration Tax rate Scenario 1 Scenario 2 Scenario 3 Regular CIT due calculation Dayrate 150,000 300,000 450,000 Operating Costs (131,500) (131,500) (131,500) BBC expense (7,980) (157,980) (307,980) Margin/Regular taxable income * 10,520 10,520 10,520 Regular CIT due 21% 2,209 2,209 2,209 BEAT calculation Regular taxable income 10,520 10,520 10,520 Add back BBC expense 7,980 157,980 307,980 Add back Corporate management fees 0 0 0 BEAT taxable income 18,500 168,500 318,500 BEAT due 10% 1,850 16,850 31,850 Impact of BEAT Additional cost (BEAT less CIT): Per day 0 14,641 29,641 Additional cost (BEAT less CIT): Per annum 0 5,343,892 10,818,892 * 8% Margin on Operating Cost

IADC Tax Committee – Contracts Committee dialog • Q&A