Seadrill Partners LLC Second Quarter Results August 21st, 2018 - - PowerPoint PPT Presentation

Seadrill Partners LLC

Second Quarter Results August 21st, 2018

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) Second Quarter 2018 Highlights 2) Financial Performance Overview 3) Summary & Q&A

Second Quarter Highlights

• Revenue of $418 million (including $204 million recognized from the West Leo

judgment)

• Economic utilization of 96%
• Adjusted EBITDA(1) of $320 million (including $204 million recognized from the West

Leo judgment)

• $45 million of new contracts awarded
• 10 cents per unit distribution for the quarter

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(1) Adjusted EBITDA has been defined in the Appendix (2) 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.

98 95 93 96 70 75 80 85 90 95 100 Q3 17 Q4 17 Q1 18 Q2 18 Utilization %

Economic utilization(2)

100 200 300 400 500 600 2018 2019 2020 $ million

Backlog

Backlog at 1Q 2018 Backlog additions

Financial Performance

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• West Leo litigation: $204 million

increase to both Revenue and Adjusted EBITDA

• Volume: West Aquarius

commenced operations

• Dayrate: Contractual dayrate

increases on the West Vela, West Auriga and West Capricorn.

• Utilization: Higher utilization on

West Auriga due to SPS in the prior quarter.

• Idle units: West Capella and the

West Vencedor idle for a full quarter.

Revenue Adjusted EBITDA(1)

Sequential Variance Analysis

(1) Adjusted EBITDA has been defined in the Appendix

50 100 150 200 250 300 350 400 450 500 1Q18 West Leo litigation Volume Dayrate Utilization Idle units 2Q18 50 100 150 200 250 300 350 400 1Q18 West Leo litigation Volume Dayrate Utilization Idle units 2Q18

West Leo Litigation Proceeds

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• In July, we received approximately $250 million in litigation proceeds which will not be

appealed.

• This has been treated as a second quarter adjusting subsequent event
• $204 million was recognized as revenue in the second quarter
• $31 million was previously recognized in the fourth quarter of 2016
• $24 million has been recognized as interest income
• $9 million of withholding tax

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Income Statement – Net Income

Unaudited accounts in USD millions

2Q18 1Q18 Net operating income 239.2 18.2 Financial items Interest income 28.8 4.5 Interest expense (70.6) (56.3) Gain on derivative financial instruments 10.8 29.0 Foreign currency exchange gain 0.2

• Other financial items

(0.5) (3.1) Total financial items (31.3) (25.9) Income before income taxes 207.9 (7.7) Income tax credit/(expense) 9.3 (8.6) Net income/(loss) 217.2 (16.3) Net income/(loss) attributable to non-controlling interests 89.5 (13.1) Net income/(loss) attributable to Seadrill Partners LLC Members 127.7 (3.2)

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Balance Sheet Main Movements

Unaudited accounts in USD millions

2Q18 1Q18 Total current assets 1,340.4 1,153.1 Total non-current assets 5,185.0 5,249.7 Total assets 6,525.4 6,402.8 Total current liabilities 628.0 525.7 Total non-current liabilities 3,026.9 3,204.6 Total liabilities 3,654.9 3,730.3 Total equity 2,870.5 2,672.5 Total liabilities and equity 6,525.4 6,402.8

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• Third quarter 2018 adjusted EBITDA(1) expected to be around $100 million:
• The West Leo litigation being recognized in the second quarter
• The conclusion of the West Aquarius contract in August and a full

quarter of idle time on the West Capella.

• A planned SPS on the West Vela in August

Outlook

(1) Adjusted EBITDA has been defined in the Appendix

Q&A

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* Adjusted EBITDA represents earnings before interest, other financial items, taxes, non-controlling interest, depreciation and amortization and including deferred consideration payable to Seadrill Limited. Additionally, in any given period Seadrill Partners may have significant, unusual or non-recurring items which it may exclude from Adjusted EBITDA for that period. When applicable, these items are fully disclosed and incorporated into the reconciliation provided below. The table below reconciles operating income to Adjusted EBITDA. Reconciliation of Operating income to Adjusted EBITDA

Unaudited in USD millions

2Q18 Operating income 239.2 Depreciation and amortization 71.4 Amortization of favorable contracts 11.3 Mobilization fees recognized in income (6.5) Mobilization fees billed during the quarter 8.3 Deferred consideration falling due in the quarter (3.6) Adjusted EBITDA 320.1

Appendix – Non-GAAP Financial Measures

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