Seadrill Partners LLC Morgan Stanley Midstream MLP & Diversified Natural Gas Corporate Access Event March 2014
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 the Company s ability to make cash distributions, the expected performance of the drilling rigs in OPCO s fleet, estimated duration of customer contracts, contract dayrate amounts and the Company s ability to purchase drilling rigs from Seadrill Limited in the future 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 the performance of the drilling rigs in the Company s fleet, delay in payment or disputes with customers, fluctuations in the international price of oil, changes in governmental regulations that affect the Company or the operations 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 obligation to update any forward looking statements to reflect events or circumstances after the date on 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. 2
Company Snapshot Number of rigs Average Contract Duration Contract Order Backlog 8 5 UDW floaters 3 tender rigs 3.7 years $4.5bn Hemen Holding (Fredriksen Group) 24.6% Seadrill Limited (NYSE: SDRL) 21.5 MM Common Units 16.5 MM Subordinated Units 62.4% Seadrill Partners LLC (NYSE: SDLP) 37.6% 100% 30.0% 51.0% Public Unit Holders 22.9 MM Common Units post transaction Annualized Distribution Per Unit Current $1.78 Guided growth to $2.00 - $2.05 Q1 2014 Seadrill Partners Operating LLC T-15 Seadrill Operating LP West Aquarius OPCO (1) Seadrill Capricorn Holdings LLC West Capricorn Attractive 1099 structure T-16 West Capella (56%) West Vencedor West Leo West Sirius (1) Remaining ownership interests in each of OPCO subsidiaries held by Seadrill Limited. 3
Seadrill Partners Key Investment Highlights Increased production growth coming from Ultra-Deepwater prospects Strong Industry Dynamics Expectation for increase in development drilling leading to longer contract duration in the medium and long term Strong demand for high-specification rigs leading to bifuracation between premium modern rigs and older commoditized units Attractive Assets & Visible Growth Profile Attractive long-term contracts with global oil majors Average remaining contract term of 3.7 years Modern, technologically-advanced fleet run by an experienced operator Significant built-in growth opportunities Strong relationship with Seadrill Limited and the Fredriksen Group 4
Seadrill Partners Long-Term Contract Coverage 4Q 2014 2015 2016 2017 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 2018 2019 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q West Vencedor US$213,931 West Aquarius US$540,000 US$615,000 West Capella US$562,120 US$627,500 (1) West Capricorn US$495,650 US$495,650 T-15 US$122,723 T-16 US$121,268 West Leo US$605,000 West Sirius US$490,173 US$535,000 Contracted Option Period Average remaining contract term: 3.7 years Order backlog: $4.5bn 5
Significant Progress Since IPO More Growth to Come $2.25 15% increase since IPO 12-15% increase recommended for Sirius / Leo Major Events to Date Tender rig T-15 acquired for US$210 million Tender rig T-16 acquired for US$200 million Annualized Distribution per Unit ($) 2.00 1.75 $1.67 $1.78 $2.05 $2.00 West Capella extension term reduced from 5 years to 3 years - Dayrate increase from US$580,000 to US$627,500 West Aquarius 18 month extension at US$75,000 increased dayrate in total adding US$337 million to backlog Completed 5 year classing on West Aquarius, West Sirius, and West Capella West Sirius and West Leo acquired for a total consideration of US$2.3 billion on a 100% basis, management recommendation to distribution to between US$2.0 and US$2.05 as a result $1.55 US$1.8 billion term loan B and US$100 million revolver executed, creating a more efficient capital structure 1.50 IPO T-15 T-16 Sirius/Leo Recommendation 6
Top-Tier Distribution Growth 0.60 40 0.50 35 30 Dividend per unit 0.40 0.30 0.20 25 20 15 Share price (US$) 10 0.10 5 0.00 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 0 Dividend Share price Management recommendation based on Leo & Sirius acquisition 7
Two Accretive Dropdowns West Leo Acquired by Seadrill Operating LP (30% owned by SDLP) West Sirius Acquired by Seadrill Capricorn Holdings LLC (51% owned by SDLP) Contract details: Dayrate: $605,000 Contract End Date: June 2018; 4.6 years Order Backlog: $1.0bn Principal Features: Maximum water depth: 10,000 feet Built: 2012 Builder: Jurong Shipyard Customer: Tullow Oil Contract details: Dayrate: $535,000 Contract End Date: July 2019 (1) ;5.8 years Order Backlog: $1.1bn Principal Features: Maximum water depth: 10,000 feet Built: 2008; 5 year SPS completed in July 2013 Builder: Jurong Shipyard Customer: BP (1) Current rate of $490,173 /day until June 2014. 8
Transaction Overview Use of Proceeds ($mm) Rigs to be Acquired West Leo West Sirius Total Implied Purchase Price $1,250 $1,035 $2,285 Bank Debt (486) (220) (706) Interco Loan to OPCO (230) (230) Equity Portion $765 $585 $1350 SDLP Share $903 (258) (117) $528 SDLP Ownership % 30% 51% SDLP Equity Share $229 $298 $528 Seller s Loan to SDLP (70) (70) SDLP Equity Issuance $229 $228 $458 Management Recommended Annualized Distribution Increase: $0.22 - $0.27 Increases Distribution per unit on an Annualized basis to: $2.00 - $2.05 9
US$1.8 Billion Term Loan B Refinancing Term Loan B Refinances existing debt facilities at Seadrill Partners Seadrill Limited (NYSE: SDRL) 21.5 MM Common Units 16.5 MM Subordinated Units 62.4% 37.6% Public Unit Holders 22.9 MM Common Units Structure creates a more efficient capital structure at Seadrill Partners with 1% annual amortization profile Frees additional funds to reinvest in fleet growth Debt maturity profile staggered against contract rollovers and extends maturity profile Priced at Libor plus 3% and swapped to fixed rate of 5.5% Seadrill Partners Operating LLC T-15 T-16 Seadrill Partners LLC (NYSE: SDLP) 100% 30.0% 51.0% Seadrill Operating LP (Borrower) West Aquarius* (Guarantor) West Capella* (56%) (Guarantor) West Vencedor West Leo* (Guarantor) * Represents pledged collateral vessels Borrower Group Seadrill Capricorn Holdings LLC (Guarantor (3) ) West Capricorn West Sirius* (Guarantor) 10
Market Outlook 11
Near Term Outlook US$ Billion 900 800 700 600 500 400 300 Global E&P Investments and Free Cash Flow Thousand boe/d Global offshore production by water depth 1960-2040 80000 70000 60000 5 mbbl/d 50000 16 mbbl/d 40000 30000 20000 30 mbbl/d 200 10000 100 0 2010 2011 2012 2013 2014 2010 2011 2012 2013 2014 0 1960 1970 1980 1990 2000 2010 2020 2030 2040 Shelf (to 400 ft) Deep water (400-5000 ft) Ultra deepwater (5000+ ft) 1 100 90 80 70 60 50 40 30 20 10 0 Onshore Middle East $27 Offshore Shelf $41 Onshore Russia $50 Heavy Oil Onshore RoW Deepwater Ultradeepwater Arctic $75 NAm Shale Oilsands 0 10 20 30 40 50 60 70 80 90 100 $47 $51 $52 $56 $65 $70 2014 Projects Pushed to 2015 Block 32 Total Angola Mad Dog 2 BP Gulf of Mexico Stampede Hess Gulf of Mexico Chevron Indonesia Chevron Indonesia Bonga 2 rigs - Nigeria 1 X-axis: total liquids production mbpd; Y-axis: avg Brent equivalent breakeven price, $/bbl Source: Morgan Stanley and Rystad Energy 12
Increased Service Intensity: More rigs working, but declining oil production 25 700 Million Barrels per Day 24 23 600 500 Number of Rigs Contracted 22 2005 2006 2007 2008 2009 2010 2011 2012 2013 400 Total Offshore Production Total Offshore Rigs Source: IEA, IHS, Wood Mackenzie, EIA, ODS Petrodata. 13
Global Rig Supply & Demand Imbalance Favors Contractors Significant Newbuilds Required to Bridge Expected Demand Gap 500 450 400 350 300 250 200 150 100 50 0 256 Current Floater Fleet 62 Newbuilds 2014-2016 318 Potential Supply 50 Possible Retirements 187 Additional Rig Requirements 455 2020 Demand 30 Ultra-Deep Water Deliveries 28 28 25 20 21 21 17 18 22 15 12 10 5 0 8 3 0 1 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 1 Includes Brazil rigs Source: Rystad Energy, DNB 14
Seadrill Partners Fleet & Growth Opportunities 15
Our Structure Facilitates Continued Growth Assets Larger, diversified pool of jackup and deepwater rigs Term contracts with day rate exposure Long-term contracted deepwater drilling assets Potentially long-term contracted, modern high-specification jack-up units Growth Strategy Exposure to speculative newbuild projects and opportunistic M&A Most proceeds from drop downs to be reinvested to grow the asset base Future SDLP offering participation Managed growth via drop-downs and third-party acquisitions No newbuild construction and startup risk 16
Significant Potential Growth Going Forward Unit Additional New Assets from Seadrill 2013 2014 2015 2016 2017 Customer 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q Drillships West Saturn - Newbuild West Jupiter - Newbuild West Carina - Newbuild West Draco - Newbuild West Dorado - Newbuild West Aquila - Newbuild West Libra - Newbuild US$ 565,000 West Tellus Chevron 610' US$635' West Navigator Shell / Centrica Energi NUF US$602,000 US$621' West Capella ExxonMobil US$562,120 US$627,500 West Gemini Total US$640,000 565,000 West Neptune LLOG Newbuild Transit US$570,000 West Polaris ExxonMobil US$653,121 03.2018 West Auriga BP US$565,000 10.2020 West Vela BP US$565,000 11.2020 Semi-submersibles Sevan Developer - Newbuild West Rigel - Newbuild West Taurus Petrobras US$656,662 West Phoenix Total US$454,000 West Eminence Petrobras US$624,460 West Venture Statoil US$441,000 Sevan Driller Petrobas US$419,817 West Orion Petrobras US$624,460 West Pegasus PEMEX US$555,000 Market rate West Eclipse Total US$435' US$450,000 US$455,000 Sevan Louisiana LLOG Newbuild US$505,000 West Aquarius ExxonMobil US$540,000 US$615,000 West Alpha ExxonMobil US$479 US$532,000 US$547,000 West Hercules Statoil US$497,000 US$497,000 West Capricorn BP US$495,650 US$495' West Leo Tullow Oil US$605,000 06.2018 Sevan Brasil Petrobas US$398,559 07.2018 West Sirius BP US$490,173 US$535,000 07.2019 West Mira Husky Newbuild Transit US$590,000 06.2020 Option Yard plus transit period SDLP Rigs Potential acquisitions 17
Additional Growth Opportunities 1 Acquisition of Additional OPCO Ownership Interests from Seadrill Ltd. (1) - 70% of three UDW and one tender rig - 49% of two UDW rigs 2 Long-Term Contracted Jack-ups US$ 565,000-5 Jack-ups with long-term contracts to PEMEX - 30 rig years, $1.8bn backlog 3 Distribution Upside in Existing Fleet - Recent dayrate increases - More efficient use of replacement capex reserves supported by improved financing structure (1) Figures are pro forma for OPCO s acquisition of the West Leo and West Sirius. 18
Summary & Outlook Significant progress made in 2013 Doubled fleet size with the acquisition of four rigs On track to grow distributions 30% since IPO in October 2012 More efficient capital structure following successful Term Loan B transaction Headwinds in the broad offshore drilling market in the short-term Seadrill Partners is protected No exposure to 2014 dayrates, only West Vencedor available in 2015 Pause in fundamentals limiting newbuild activity in 2016 Medium / Long term fundamentals intact Potential for re-contracting rigs into a rising market Visible growth opportunities via acquisitions from Seadrill provides strong distribution growth potential Acquisition of additional Rigs from Seadrill Acquisition of additional operating company ownership interests Long term contracted jack-ups Distribution upside in existing fleet 19
Appendix 20
Income Statement Operating income Unaudited accounts in USD millions 4Q13 3Q13 Contract revenues $282.1 $262.4 Reimbursable revenues 0.3 3.0 Other revenues - 0.6 Total operating revenues $282.4 $266.0 Vessel and rig operating expenses 98.8 94.1 Reimbursable expenses 0.3 2.7 Depreciation and amortization 37.5 35.7 General and administrative expenses 11.4 15.4 Total operating expenses $148.0 $147.9 Net operating income $134.4 $118.1 21
Income Statement Net Income Unaudited accounts in USD millions 4Q13 3Q13 Net operating income $134.4 $118.1 Financial items Interest income 2.2 0.8 Interest expense (28.7) (23.3) Gain / (Loss) on derivative financial instruments 16.1 (11.8) Currency exchange (Loss) / Gain (1.4) 1.3 Total financial items $(11.8) $(33.0) Income before income taxes 122.6 85.1 Income taxes (9.0) (6.7) Net income $113.6 $78.4 Net income attributable to non-controlling interests 51.0 64.2 Net income attributable to Seadrill Partners LLC Members $62.6 $14.2 22
Balance Sheet - Assets Unaudited accounts in USD millions 4Q13 3Q13 Current assets Cash and cash equivalents $89.7 $75.4 Accounts receivable, net 175.8 278.6 Mobilization revenue short term 16.6 16.6 Amount due from related party 248.3 49.2 Other current assets 38.2 28.9 Total current assets $568.6 $448.7 Non-current assets Newbuildings - - Drilling units 3,448.3 3,457.7 Mobilization revenue receivable long-term 43.7 48.0 Deferred tax assets 9.8 2.5 Other non-current assets 2.3 4.5 Total non-current assets $3,504.1 $3,512.7 Total assets $4,072.7 $3,961.4 23
Balance Sheet Liabilities & Members Capital / Owners Equity Unaudited accounts in USD millions 4Q13 3Q13 Current liabilities Current portion of long-term related party payable 108.3 816.4 Revolving credit facility 125.9 75.9 Trade accounts payable and accruals 80.0 48.2 Deferred mobilization revenue short term 20.3 24.0 Related party payable 292.1 177.6 Other current liabilities 27.5 31.9 Total current liabilities $654.1 $1,174.0 Non-current liabilities Long-term related party payable 1,826.4 1,102.2 Related party loan notes 299.9 - Deferred mobilization revenue long-term 37.6 44.9 Total non-current liabilities $2,163.9 $1,147.1 Equity Total equity $1,254.7 $1,640.3 Total liabilities and equity $4,072.7 $3,961.4 As of December 31 th, 2013 total debt excluding the revolver was US$2,234.6 million 93% of debt swapped to a fixed rate of 1.64% 24
Distributable Cash Flow Unaudited accounts in USD millions 4Q13 3Q13 EBITDA for the quarter 171.9 87.1 Less: Amortization of Mobilization Revenue and Expenses (3.3) (2.9) Adjusted EBITDA 168.6 84.2 Cash Interest Income 0.8 1.2 Cash Interest Expense (23.7) (16.6) Cash Tax Paid (6.0) (6.0) Pre acquisition balances relating to T-16, West Leo and West Sirius prior to drop down (54.0) - Pre-IPO West Aquarius Settlement - 3.1 Estimated maintenance and replacement capital expenditure (23.7) (20.4) Cash flow available for distribution 62.0 45.5 Less: Cash flow attributable to non-controlling interest (38.8) (29.6) Distributable cash flow for the third quarter 2013 23.2 15.9 Distribution Declared 27.1 19.1 Coverage Ratio 0.86x 0.83x Coverage ratio assuming Q4 distribution paid pro-rata for 19 days for new units = 1.08x 25