Seadrill Partners LLC Fourth quarter 2016 Results February 28, 2017 - - PowerPoint PPT Presentation

Seadrill Partners LLC

Fourth quarter 2016 Results February 28, 2017

Forward Looking Statements

This presentation includes forward looking statements. Such statements are generally not historical in nature, and specifically include statements about the Company’s plans, strategies, business prospects, changes and trends in its business and the markets in which it operates. In particular, statements regarding offshore drilling markets, the Company’s ability to make cash distributions, the expected performance of the drilling units in the Company’s fleet, estimated duration of customer contracts, contract dayrate amounts, contract backlog, forecasts of operating income and Adjusted EBITDA and the ability of the Company and Seadrill Limited to negotiate with lenders are considered forward-looking statements. These statements are made based upon management’s current plans, expectations, assumptions and beliefs concerning future events impacting the Company and therefore involve a number of risks, uncertainties and assumptions that could cause actual results to differ materially from those expressed or implied in the forward-looking statements, which speak only as of the date of this news release. Important factors that could cause actual results to differ materially from those in the forward-looking statements include, but are not limited to offshore drilling market conditions including supply and demand, dayrates, customer drilling programs and effects new rigs on the market, contract awards and rig mobilizations, contract backlog, the performance of the drilling units in the Company’s fleet, delay in payment or disputes with customers, the outcome of any pending litigation, our ability to successfully employ our drilling units, procure or have access to financing, ability to comply with loan covenants, liquidity and adequacy of cash flow from operations, fluctuations in the international price of oil, changes in governmental regulations that affect the Company or the

• perations of the Company’s fleet, increased competition in the offshore drilling industry, and general

economic, political and business conditions globally. Consequently, no forward-looking statement can be guaranteed. When considering these forward-looking statements, you should keep in mind the risks described from time to time in the Company’s filings with the SEC. The Company undertakes no

• bligation to update any forward looking statements to reflect events or circumstances after the date
• n which such statement is made or to reflect the occurrence of unanticipated events. New factors

emerge from time to time, and it is not possible for us to predict all of these factors. Further, the Company cannot assess the impact of each such factor on its business or the extent to which any factor, or combination of factors, may cause actual results to be materially different from those contained in any forward looking statement.

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Agenda

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1) Highlights 4Q 2016 2) Market Commentary & Financial Performance Overview 3) Summary & Q&A

Q4 Highlights

• Revenue of $353 million
• Adjusted EBITDA(1) of $210 million
• Economic utilization of 94%
• Distribution maintained at $0.10 per common unit
• New contract
• West Aquarius secured a two well contract
• Backlog of ~$14 million.

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(1) Adjusted EBITDA has been defined in the Appendix

Backlog & Utilization

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• 94% economic utilization*
• Current order backlog of $2.2bn
• Average contract term of 1.8

years

* Economic utilization is calculated as total contract revenue excluding bonuses for the period as a proportion of the full operating dayrate multiplied by the number of days in the period. 99 99 95 94 70 75 80 85 90 95 100 Q1 16 Q2 16 Q3 16 Q4 16 Utilization %

Economic utilization (floater fleet)

500 1000 1500 2017 2018 2019+ $ million

Current backlog

Market Commentary & Financial Performance

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West Capella

$62.8 milion

West Vencedor

$115k $115,000

West Aquarius

$615k $200,0

$200,000

West Sirius

$297,000

West Polaris

$450,000

West Leo T-15

$110,000

West Capricorn

$316,000

T-16

$110,000

West Auriga

$562,000

West Vela

$525,000

Contracted Option Period Early Termination Fee 4Q 1Q 2017 2018 1Q 2Q 3Q 4Q 1Q 2Q 3Q 2020 1Q 2019 2Q 3Q 4Q 2Q 3Q 4Q

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(1) During October a notice of Force Majeure was received from Tullow Ghana Limited. The Company has disputed Tullow's claim for Force Majeure and has commenced litigation proceedings (2) During July 2016, an agreement was reached to remain on an extended standby rate with expected recommencement of work in late 2017 at the full operating rate (2) (1)

Assets & Contracts

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• Dayrate: Force Majeure rate on

the West Leo for 2 months in the quarter

• Utilization: West Auriga

downtime, partially offset by improved uptime on the West Vela and West Polaris

• Idle units: West Leo termination

and full quarter of idle time on the West Vencedor

• Adj. EBITDA: No West Capella

termination fee received in the 3rd quarter

• Costs: Higher G&A reflecting

severance costs and IT spend, partially offset by lower opex on the West Vencedor while idle

Revenue Adjusted EBITDA(1)

200 220 240 260 280 300 320 340 360 380 400 3Q16 Volume Dayrate Utilization Idle units Other 4Q16 120 140 160 180 200 220 240 260 280 300 320 3Q16 Volume Dayrate Utilization Idle units Costs Other 4Q16

Sequential Variance Analysis

(1) Adjusted EBITDA has been defined in the Appendix

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Unaudited accounts in USD millions

4Q16 3Q16 Net operating income 164.8 204.0 Financial items Interest income 3.2 2.8 Interest expense (45.4) (44.3) Gain / (loss) on derivative financial instruments 74.3 5.7 Currency exchange gain / (loss) 2.1 (1.5) Total financial items 34.2 (37.3) Income before income taxes 199.0 166.7 Income taxes 8.5 (13.9) Net income 207.5 152.8 Net income attributable to non-controlling interests 105.6 69.6 Net income attributable to Seadrill Partners LLC Members 101.9 83.2

Income Statement – Net Income

Unaudited accounts in USD millions

4Q16 3Q16 Total current assets 1,214.2 1,217.7 Total non-current assets 5,566.5 5,646.7 Total assets 6,780.7 6,864.4 Total current liabilities 665.4 782.0 Total non-current liabilities 3,579.5 3,739.2 Total liabilities 4,244.9 4,521.2 Total equity 2,535.8 2,343.2 Total liabilities and equity 6,780.7 6,864.4

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Balance Sheet Main Movements

• Insulation
• Removal of Seadrill Limited as guarantor on SDLP credit facilities
• Separate SDLP credit facilities from Seadrill Limited
• Refinancing
• Extend maturity of bank facilities by 2.5 years
• Contingency planning

Seadrill Limited Restructuring – Considerations

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• First quarter 2017 adjusted EBITDA(1) expected to be around $245 million:
• Receipt of the final $62.8 million West Capella termination payment
• Improved operations on the West Auriga
• West Vencedor commencing operations

Outlook

(1) Adjusted EBITDA has been defined in the Appendix

Q&A

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* Adjusted EBITDA refers to earnings before interest, other financial items, taxes, non-controlling interest, depreciation and amortization and including deferred consideration payable to Seadrill Partners. Additionally, in any given period the Company may have significant, unusual or non-recurring items which it may exclude from its Non US Generally Accepted Accounting Principles ("US GAAP") earnings for that period. Reconciliation of Operating income to Adjusted EBITDA

Unaudited in USD millions

4Q16 Operating income 164.8 Depreciation and amortisation 67.2 EBITDA 232.0 Amortization of mobilization revenue (5.2) Amortization of favourable contracts 17.6 Standby revenue receivable 0.8 Mobilization revenue receivable 5.1 Termination fees recognised in income (34.6) Termination fees received

• Deferred consideration payable

(5.3) Adjusted EBITDA 210.4

Appendix – Non-GAAP Financial Measures

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