Seadrill Partners LLC : SDLP - Seadrill Partners LLC fourth quarter 2012 results

   Seadrill Partners LLC : SDLP - Seadrill Partners LLC fourth quarter 2012
                                   results

EARNINGS RELEASE - FOURTH QUARTER RESULTS FOR THE PERIOD ENDED DECEMBER 31,
2012

Highlights

·        Seadrill Partners LLC ("Seadrill Partners" or the "Company") reports
results for its first quarter after completing its initial public offering
("IPO") on October 24, 2012 (the "IPO Closing Date").
·        Generated distributable cash flow of $14.1 million for the period
from the IPO Closing Date through December 31, 2012.
·        Net income attributable to Seadrill Partners LLC Members for the
fourth quarter of $20.9 million and net operating income for the fourth
quarter of $72.2 million, which is consistent with the forecast set forth in
the Company's IPO prospectus (the "IPO forecast").
·        Declared distribution for the period from IPO Closing Date through
December 31, 2012 of $0.2906 per unit ($0.3875 per unit on a pro-rata basis
for the fourth quarter 2012), which was paid on February 14, 2013.
·        Significant potential future growth outlook through various dropdown
opportunities from Seadrill Limited ("Seadrill"), attractive long-term
contracts with global oil majors and strong relationship with Seadrill
Limited.

Financial Results Overview

Seadrill Partners reports net income attributable to members of $20.9  million 
and net operating income of $72.2 million for the fourth quarter of 2012  (the 
"fourth quarter"), as compared to net income attributable to members of  $22.9 
million and net operating income of $59.0  million for the same period in  the 
prior year. Operating  results for the  fourth quarter improved  significantly 
from the same  period last  year, principally due  to the  West Capricorn  not 
having commenced operations in  2011. The Company's  rigs have performed  well 
following the IPO Closing Date achieving utilization rates of 97% on average.

Total revenues  of  $181.1  million  were consistent  with  the  IPO  forecast 
representing strong performance  from the IPO  Closing Date, particularly  the 
West Capella  and the  West Vencedor  operating at  100% utilization  for  the 
period after the IPO Closing Date.  Operating expenses of $108.9 million  were 
slightly higher than the IPO forecast due to one-time expenses relating to the
West Aquarius mobilizing to Canada.

For accounting purposes, in  accordance with U.S.  GAAP, Seadrill Partners  is 
required to recognize  in the  income statement market  valuations of  certain 
financial items. These include the change in the fair value of certain of  its 
derivative instruments, principally interest rate swap derivatives. These  are 
unrealized gains or  losses included  in the  income statement  and will  only 
become realized if a derivative is terminated. These non-cash gains or  losses 
are recorded in the income statement within Other financial Items, and do  not 
affect cash flow  or the  calculation of  distributable cash  flow ("DCF")  as 
described below. Other  financial items  for the fourth  quarter reflect  such 
losses. In respect of interest rate swaps, the mark-to-market fair value  loss 
was $5.1 million in the fourth quarter.

Seadrill Partners generated distributable cash flow of $14.1 million for the
period from the IPO Closing Date through December 31, 2012.  On January 24,
2013 the Company declared a distribution for the period from the IPO Closing
Date through December 31, 2012 of $0.2906 per unit ($0.3875 per unit on a
pro-rata basis for the fourth quarter 2012), which is the minimum quarterly
distribution set forth in the Company's IPO prospectus dated October 18, 2012.

Distributable cash flow is a non-GAAP financial measure used by investors to
measure the performance of the Company and its ability to pay its minimum
quarterly distribution. Please see Appendix A for a reconciliation of DCF to
net income, the most directly comparable GAAP financial measure.

Financing and Liquidity

On October 24, 2012 the Company  completed its IPO of 10,062,500 common  units 
representing limited  liability company  interests in  the Company  (including 
1,312,500  common  units  issued  in  connection  with  the  exercise  of  the 
over-allotment option). The Company is listed  on the New York stock  exchange 
("NYSE") under the symbol  "SDLP". Upon completion  of the offering,  Seadrill 
Limited owned approximately 75.7% of  the limited liability company  interests 
in Seadrill Partners. Seadrill Partners'  only cash generating assets are  its 
ownership interest in  Seadrill Operating LP  and Seadrill Capricorn  Holdings 
LLC (collectively,  "OPCO").  OPCO's  fleet consists  of  two  ultra-deepwater 
semi-submersible  rigs  (the  West  Aquarius  and  the  West  Capricorn),  one 
ultra-deepwater drillship (the  West Capella), and  one semi-tender rig.  (the 
West Vencedor), all of which operate under long-term contracts.

As of December 31, 2012, the Company had cash and cash equivalents of $19.4
million and an undrawn revolving credit facility of $300 million provided by
Seadrill as the lender. Total debt obligations were $1,192 million as of
December 31, 2012. This debt was incurred by Seadrill Limited, as borrower, in
connection with its acquisition of the drilling rigs in OPCO's fleet.  In
connection with the IPO, OPCO's subsidiaries that own the drilling rigs
entered into agreements with Seadrill, pursuant to which each rig owning
subsidiary will make payments of principal and interest directly to the
lenders.  These intercompany loan agreements with Seadrill Limited are
classified as related party transactions.

As of December 31, 2012, Seadrill Partners had interest rate swaps outstanding
on principal debt of $1,127 million. All of the interest rate swap agreements
were entered into subsequent to the IPO Closing Date and represent
approximately 95% of debt obligations as of December 31, 2012. The average
fixed interest rate of these swaps is 1.16%. Average margins paid on
outstanding debt in addition to the interest charge are approximately 2.37%.
The margin payable on the $300 million revolving credit facility with Seadrill
is 5%. Whilst undrawn the commitment fee on this facility is 2%.

 

 

 

Table 1.0 Contract status as December 31, 2012 for OPCO's fleet (Table
excludes options)

                                      Current   Area of  Contract Contract
Drilling Rig                           client   location  start    expiry   Day rate
Semi-submersible rigs:
West                                 ExxonMobil Canada   Jan 2013 Jun 2015 US$530,000
Aquarius..........................
West                                 BP         USA      Jul 2012 Aug 2017 US$487,000
Capricorn..........................
Drillships:
West                                 Total      Nigeria  Apr 2009 Apr 2014 US$552,000
Capella.............................
                                     Total      Nigeria  Apr 2014 Apr 2017 US$627,500
Tender rigs:
West                                 Chevron    Angola   Mar 2010 Mar 2015 US$206,500
Vencedor..........................

Outlook

The Board is pleased with the  performance of Seadrill Partners in the  fourth 
quarter. OPCO's drilling rigs achieved an average economic utilization of  97% 
for the period from the IPO Closing Date through December 31, 2012. During the
first quarter of  2013, operations for  the rigs have  also met  expectations. 
OPCO's fleet is not impacted by the GE Vetco H4 connector issue that has  been 
subject of a safety notice that caused operational downtime for some  drilling 
rigs.  The  ultra-deepwater  market  remains  competitive,  but  the  pace  of 
contracting experienced during the last year has slowed down and dayrates  are 
stabilizing at 2012 levels  with the most  recent contracted dayrates  ranging 
from US$580,000-$620,000. OPCO's ultra-deepwater  rigs current dayrates  range 
from $487,000  per day  to $544,000  per  day. OPCO's  drilling rigs  have  an 
average remaining contract length of approximately 3.7 years.

Pursuant to the  omnibus agreement  with Seadrill, Seadrill  Partners has  the 
right to acquire  from Seadrill Limited  any drilling rig  that enters into  a 
contract with a firm  term of five  years or more.  Following the IPO  Closing 
Date, Seadrill has entered into two contracts  with a firm term of five  years 
or more for  the West Mira  and the  West Leo. The  West Mira is  not due  for 
delivery until first  quarter 2015. The  West Leo is  currently operating  and 
Seadrill have agreed  to extend the  time period that  the Partnership has  to 
accept an offer to acquire this rig for four months to allow Seadrill Partners
time to access its financing options.

In addition,  pursuant to  the omnibus  agreement, Seadrill  Partners has  the 
option to acquire the T-15 and the T-16 tender barges from Seadrill within  24 
months of acceptance by their customers. Seadrill also has a significant fleet
of existing ultra-deepwater  rigs, as  well as a  new build  program with  six 
ultra-deepwater rigs on  order that have  yet to secure  a contract. There  is 
therefore, significant potential for dropdown candidates and hence, the  Board 
is  confident  about  Seadrill  Partners  ability  to  be  able  to  grow  its 
distributions.

February 28, 2013
The Board of Directors
Seadrill Partners LLC
London, UK.

Questions should be directed to:
Graham Robjohns: Chief Executive Officer
Rune Magnus Lundetrae: Chief Financial Officer

2012 Fourth Quarter Report

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Source: Seadrill Partners LLC via Thomson Reuters ONE
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