Seadrill Partners LLC: SDLP - Seadrill Partners LLC - Fourth Quarter 2013 Results

  Seadrill Partners LLC: SDLP - Seadrill Partners LLC - Fourth Quarter 2013
                                   Results

Highlights

  oSeadrill Partners reports net income attributable to Seadrill Partners LLC
    Members for the fourth quarter 2013 of US$62.6 million and net operating
    income for the fourth quarter of US$134.4 million.

       oGenerated distributable cash flow of $23.2 million for the fourth
         quarter 2013.
       oDeclared an increased distribution for the fourth quarter of
         US$0.4450 per unit, an increase of 4.1% over the third quarter
         distribution and an increase of 15% for 2013.
       oCompleted the acquisition of the company that owns the tender rig
         T-16 from Seadrill Limited for US$200 million.
       oAnnounced settlement agreement and 18 month extension for the
         semi-submersible West Aquarius with a total estimated revenue
         potential of US$337 million.
       oTotal S.A. exercised their option to convert the contract extension
         for the West Capella from 5 years to 3 years due to transfer of
         operatorship. As a result of this change in contract terms the
         dayrate has increased from US$580,000 per day to US$627,500 per day
       oFiled US$800 million mixed shelf registration statement to add
         flexibility to financing future rig growth
       oCompleted the acquisition of the companies that own and operate the
         West Sirius and West Leo for US$2.3 billion on a 100% basis. The
         acquisition was financed with debt and a US$465 million unit offering
         for the Company's equity share. Management has recommended a
         quarterly distribution increase as a result to between US$0.50 and
         US$0.5125

Subsequent Events

  oSeadrill Partners completes US$1.8 billion term loan B and US$100 million
    revolving facility. Proceeds of the term loan are to be used to refinance
    existing indebtedness and increase liquidity

Financial Results Overview

Seadrill Partners LLC^1 reports:

Total contract revenues of US$282.1 million  for the fourth quarter 2013  (the 
"fourth quarter") compared to  US$262.4 million in the  third quarter of  2013 
(the "third quarter").  The increase is  primarily driven by  the $22  million 
West Aquarius write  off in the  third quarter and  the contribution from  the 
T-16 for the full  quarter after commencement of  operations. This was  partly 
offset by planned downtime  on the West  Capella for 5  year classing, and  in 
particular by  34 days  downtime  during the  quarter  for the  West  Aquarius 
related to five year classing and anchor chain repairs.

Net operating income for the quarter of US$134.4 million compared to  US$118.1 
million in the preceding  quarter. The improvement is  largely as a result  of 
the improvements in revenues noted above.

____________________

^1) All references to "Seadrill Partners" and "the Company" refer to Seadrill
Partners LLC and its subsidiaries, including the operating companies that
indirectly own interests in the drilling rigs, Seadrill Partners LLC owns:
(i) a 30% limited partner interest in Seadrill Operating LP, as well as the
non-economic general partner interest in Seadrill Operating LP through its
100% ownership of its general partner, Seadrill Operating GP LLC, (ii) a 51%
limited liability company interest in Seadrill Capricorn Holdings LLC and
(iii) a 100% limited liability company interest in Seadrill Partners Operating
LLC. Seadrill Operating LP owns: (i) a 100% interest in the entities that own
the West Aquarius, West Leo and the West Vencedor and (ii) an approximate 56%
interest in the entity that owns and operates the West Capella. Seadrill
Capricorn Holdings LLC owns 100% of the entities that own and operate the West
Capricorn and West Sirius. Seadrill Partners Operating LLC owns 100% of the
entities that own and operate the T-15 and T-16 tender barges.

Net Income for the quarter of US$113.6 million compared to US$78.4 million  in 
the previous  quarter. This  is after  the recognition  of the  gain/loss  on 
derivative instruments,  which reflected  a  gain of  US$16.1 million  in  the 
fourth quarter as compared to a loss of US$11.8 million for the third  quarter 
as a result of an increase in long term interest rates in the fourth quarter.
The unrealized non-cash element of these amounts are US$19.1 million gain  and 
US$9.2 million loss respectively.

Net income attributable to Seadrill  Partners LLC Members was US$62.6  million 
for the fourth quarter compared to US$14.2 million for the previous quarter.

Distributable cash flow was US$23.2 million for Seadrill Partners' fourth
quarter as compared to US$15.9 million for the previous quarter^2 giving a
coverage ratio of 0.86x for the fourth quarter. The increase is mainly as a
result of the contribution from the T-16 for the full quarter and from the
West Leo and West Sirius for part of December in addition to the West Aquarius
improvement noted above.

The coverage ratio has been negatively impacted by the increase in units
outstanding following the December equity issuance as the fourth quarter
distribution is payable on all outstanding units at the record date. Were the
distribution to be paid pro-rata on the new units for the 19 days of the
December that the Company benefited from the West Leo and West Sirius cash
flow, coverage would have been 1.08x.

Distribution for the period of US$0.4450 per unit, equivalent to an annual
distribution of US$1.78, represents an approximate 15% increase from the
Company's minimum quarterly distribution set at its IPO. Subsequent to the
acquisition of the semi-submersible rigs the West Sirius and West Leo in
December, Management have recommended to the Board an annualized distribution
increase to between $2.00 and $2.05 per unit which would become effective for
the distribution with respect to the quarter ending March 31, 2014 and would
represent an approximate 30% increase since IPO. Any such increase would be
conditional upon, among other things, the approval of such increase by the
Board and the absence of any material adverse developments that would make
such an increase inadvisable.

____________________

^2) Please see Appendix A for a reconciliation of DCF to net income, the most
directly comparable GAAP financial measure.

Operations

Seadrill Partners has an  interest in eight rigs  in operation. The fleet  is 
comprised of four semi-submersible rigs,  one drillship and three tender  rigs 
operating in  Canada,  the US  Gulf  of  Mexico, Ghana,  Nigeria,  Angola  and 
Thailand respectively.

During the quarter, Hibernia Management  and Development Company Ltd,  (HMDC) 
agreed to  an  18  month  contract extension  for  the  ultra-deepwater  harsh 
environment semi-submersible West  Aquarius thereby  extending the  operations 
for the rig off the east coast of Canada until April 2017.

Total S.A. have exercised their option  to convert the contract extension  for 
the West Capella  from 5  years to 3  years. As  a result of  this change  in 
contract terms the dayrate has increased from US$580,000 per day to US$627,500
per day. The use of the option to convert to a shorter contract with a  higher 
dayrate reflects a transfer of operatorship  for the license and the wish  for 
the new operator to retain flexibility. The Company is confident however  that 
there will be additional requirements for the rig in Nigeria post 2017.

With the exception  of 20  days downtime linked  to the  West Aquarius  anchor 
chain event,  the Company's  fleet performed  well during  the fourth  quarter 
achieving an overall  economic utilization rate  of 91%. Average  utilization 
has been particularly impacted by the  34 days downtime on the West  Aquarius, 
14 of which  were related to  5 year classing  and the balance  due to  faulty 
anchor chains.

Total operating  expenses  for  the  fourth  quarter  were  US$148.0  million, 
compared to US$147.9 million in the third quarter. The Company has good  cost 
controls in  place and  sees little  risk  of changes  to the  operating  cost 
structure.

Acquisitions

On October 18, 2013 Seadrill Partners completed the acquisition of the company
that owns the tender rig T-16  from Seadrill Limited ("Seadrill") for a  total 
purchase price  of US$200  million. The  T-16 is  contracted with  Chevron  in 
Thailand at an  initial contract dayrate  of US$115,500, which  is subject  to 
escalation to cover cost increases and is currently US$121,268.

On December  13,  2013 Seadrill  Partners  completed the  acquisition  of  the 
companies that  own and  operate the  West Sirius  and West  Leo for  a  total 
consideration of US$2.3 billion on a 100% basis. The West Sirius was acquired
by Seadrill  Capricorn Holdings  LLC (51%  owned  by SDLP)  and the  West  Leo 
acquired by Seadrill Operating LP (30%  owned by SDLP). Debt funding for  the 
acquisition was  US$936  million comprised  of  back-to-back bank  loans  with 
Seadrill and  a  related  party  loan from  Seadrill.  The  Company's  equity 
portion, for its share of the  rig acquisitions, of US$528 million was  funded 
with Seadrill Partner's first public equity offering and a $70 million sellers
loan. All  the  related  party  debt with  Seadrill  in  connection  with  the 
transaction will be refinanced by funds from the term loan B financing.

The West Sirius is contracted with BP in the US Gulf of Mexico at a dayrate of
US$490,173 until the third quarter of  2014, at which time the rate  increases 
to US$535,000 per  day through the  third quarter  of 2019. The  West Leo  is 
contracted with Tullow  Oil in Ghana  at a dayrate  of US$605,000 through  the 
second quarter  of  2018.  The  long term  contracted  cash  flows  of  these 
acquisitions  further  enhance  Seadrill  Partners'  cash  flow  profile   and 
visibility in  distributable  cash  flows,  as  well  as  further  diversifing 
Seadrill Partners fleet and reduces the risk operating result volatility.

Financing and Liquidity

As of  December31, 2013,  the Company  had cash  and cash  equivalents, on  a 
consolidated basis,  of US$89.7  million and  a revolving  credit facility  of 
US$300 million provided by Seadrill as the lender, which has subsequently been
reduced to US$100  million as part  of the term  loan B refinancing  described 
below. As of December31, 2013, US$125.9  million was drawn on this  facility 
to finance short-term working capital needs  and to help manage the  Company's 
debt amortization  requirements.  Total  debt excluding  the  drawn  revolver 
balance was US$2,234.6 million as of December31, 2013; US$1,825.2 million  of 
this debt was originally incurred by Seadrill, as borrower, in connection with
its acquisition  of  the  drilling rigs.  Subsidiaries  within  the  Seadrill 
Partners group that  now 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  Seadrill.  These loan  agreements  with 
Seadrill are classified as related party transactions.

As of December 31, 2013 the Company had five secured credit facilities.  The 
two facilities maturing in June 2014  and Dec 2017 have since been  refinanced 
with the term loan B described below and as a result has been reclassified  as 
long term as at December 31,  2013. The remaining three facilities expire  in 
2015, 2016, and 2017 respectively and a similar refinancing strategy should be
expected at maturity debt  levels or higher. Additionally  the Company has  a 
US$110 million vendor  loan from  Seadrill maturing  in 2016  relating to  the 
acquisition of  the T-15  and two  zero coupon  discount notes  from  Seadrill 
(US$70 million and US$230  million) that mature in  June 2015 relating to  the 
West Sirius and West  Leo acquisition. Both these  zero coupon discount  notes 
will be refinanced as part of the term loan B refinancing.

In February 2014, Seadrill Partners executed a US$1.8 billion term loan B  and 
US$100 million  revolving credit  facility. The  term loan  was upsized  from 
US$1.7 billion and priced at  Libor plus 3%, the low  end of the price  range, 
and subsequently swapped  to a fixed  rate of 5.5%.  In conjunction with  the 
formation of Seadrill  Partners in 2012  and subsequent dropdown  of the  West 
Sirius and West Leo, back-to-back and related party loans were used to finance
the debt portion  of the  transactions. As well  as being  overly reliant  on 
Seadrill Limited, this structure  had an steep  amortization profile that  was 
not optimal for  Seadrill Partners. The  1% amortization profile  of the  new 
facility will enable the  Company to more  efficiently manage its  replacement 
capital expenditure reserves by investing in new assets. In conjunction  with 
the term loan B and revolver Seadrill Partners obtained a credit rating of BB-
/ Ba3. As a  rated entity Seadrill  Partners' access to  and cost of  funding 
should be improved, thus increasing financial flexibility.

The Board  is confident  that a  similar refinancing  can be  executed on  the 
remaining back to  back loans and  related party  debt in order  to achieve  a 
capital structure  that  is  independent from  Seadrill  Limited  and  further 
facilitate Seadrill Partners growth.

As of December31, 2013, Seadrill Partners had interest rate swaps outstanding
on principal  debt  of US$2,068.0  million.  All  of the  interest  rate  swap 
agreements were entered into subsequent to the IPO Closing Date and  represent 
approximately 93% of  debt obligations  as of December31,  2013. The  average 
swapped rate, excluding bank margins, is approximately 1.64%. The Company  has 
a policy of hedging  the significant majority of  its long-term interest  rate 
exposure in order to reduce the risk of a rising interest rate environment.

Market

The short term outlook  for floaters is influenced  by the low activity  level 
caused by reduced growth in the capex  from the major oil companies. In  this 
regard,  2014  and  2015  may   show  slower  activity  levels  than   earlier 
anticipated. The oil price has remained firm and in recent weeks has shown  a 
stronger trend. The primary challenge for oil companies is the negative  real 
cash flow  situation  they  are currently  encountering.  Due  to  increasing 
depletion rates, more capex needs to be spent in order to maintain  production 
levels. Combined  with  a  relatively high  dividend  payout  and  increasing 
development cost to bring new production on stream, oil companies have limited
opportunities to fund  exploration activities. We  have encountered  numerous 
instances of oil majors  reducing spending, especially  in exploration and  in 
certain high  cost areas  of production  such as  onshore North  America.  As 
budgets are re-allocated, the entire spending complex tends to slow down.  In 
turn, demand for offshore drilling assets is being pushed into 2015-2016.

The Board is of the opinion that  this trend will lower oil production in  the 
years to come. Together with the  generally tight supply demand balance  and 
political uncertainties  in several  oil producing  countries, another  upward 
movement in oil price may occur. The funding of the approximately 10  million 
barrels per day growth in global production  level from 2003 to 2013 was to  a 
large extent financed  by an oil  price that  moved from US$30  to US$110  per 
barrel. This  created  additional  cash  flow  to  reach  current  production 
levels. It is likely that the  next production increase will be dependent  on 
another upward movement in oil price. Alternatively, oil companies will  have 
to accelerate the  time between discovery  and production, thereby  materially 
increasing the net present value  of development projects and improving  their 
cash flow situation.

As a result of the  pause in upstream spending we  have observed a decline  in 
the overall number  of fixtures, lead  times and contract  duration. We  also 
expect to  see a  number of  sublets adding  to near  term available  supply. 
Importantly, Seadrill Partners has no  exposure to re-contracting during  2014 
and only the West Vencedor available through 2015.

We are presently seeing a slight increase in inquiries for 2015 availability.
Given the amount of work required to retain licenses that expire in 2015, this
has been expected. A total  of 17 uncontracted ultra-deepwater floater  units 
will be delivered  from the  yards in 2015  and 2016.  This is  significantly 
lower than 2012 for instance when all together 17 units were delivered. Based
on the current low contracting activity level it should be expected that  this 
capacity can be absorbed in the market without leading to significant downtime
for any  ultra-deepwater capacity.  An increase  in oil  companies'  activity 
level in 2015 is likely to push rates higher.

Looking at the market  as a whole,  the acute challenges  lie with fourth  and 
fifth generation assets.  The oil companies'  new requirements after  Macando 
and the focus on increased water depth areas has significantly limited the use
of older equipment.  The owners  will face  the choice  of investing  several 
hundred million dollars into twenty or thirty year old assets in order to  try 
to meet the new  demands or simply just  lay up the unit.  It has been  shown 
from the  prior  cycles that  such  upgrades carried  out  by several  of  our 
competitors has  had  a  materially  lower return  than  Seadrill's  focus  on 
building a  modern  high  specification fleet.  Therefore,  expectations  for 
additional older assets to be stacked remain. Pricing may slip as utilization
declines  and  operators  of  these  asset  classes  will  face  a   difficult 
environment for the foreseeable future.

Current production in ultra-deepwater regions is a mere 1 million barrels  per 
day. There are approximately 130 rigs which can serve this market today.  It 
is expected that by 2020 production  in these regions will approach 5  million 
barrels. The approximate 20% CAGR represents one of the strongest  production 
growth profiles  globally. Although  the current  market for  ultra-deepwater 
floaters is  at  lower  activity  levels than  2012,  we  are  confident  that 
significant new rig  capacity will  need to be  added to  explore and  develop 
these reserves.

Mexico presents  a particularly  interesting opportunity  for future  work  in 
ultra-deepwater. Legislation is moving forward  at an impressive pace and  we 
expect the opening up of projects to potentially impact 2015 demand. Seadrill
has operated  the West  Pegasus  in Mexico  for the  last  2.5 years  and  has 
developed a solid operational track record and good working relationship  with 
its customer, Pemex. As capital from major oil companies enters the  country, 
demand for rigs is sure to follow.

Seadrill Partner's ultra-deepwater rigs current dayrates range from US$490,173
per day to  US$605,000 per day.  As of December  31, 2013 Seadrill  Partners' 
total fleet's  average  remaining contract  term  was 3.7  years  and  current 
backlog is  US$4.5  billion. Given  the  Company's expectation  of  continued 
strength in dayrates, it is possible that the Company's below market contracts
will be re-contracted  at higher  rates as  their contracts  expire. This  may 
create the potential for increased distribution from existing assets.

Outlook

The year 2013 has been an active one for the Company, doubling the size of the
fleet with the acquisition of four rigs and successfully completing its first
public equity offering post IPO. Distributions have grown 15% during 2013, and
taking into account the distribution increase recommended by management in
connection with the most recent acquisition, distributions will have grown
approximately 30% since IPO in October 2012.

The Board believes this demonstrates the Company's commitment to growth and is
fully focused on continuing this aggressive growth strategy. This growth will
be driven primarily by acquisitions from Seadrill's long term contracted
premium ultra-deepwater rig fleet as well as the acquisition of additional
units in Seadrill Partners operating companies.

The recently announced term loan B refinancing is Seadrill Partners first step
towards rationalizing its debt structure, in particular to lower debt
amortization so it can use replacement capital expenditure cash reserves more
efficiently and to create a debt structure independent of Seadrill. As noted
above the transaction has been successful and the Company anticipates using
this market again in the future.

The term loan B facility, compared to traditional rig financing, will result
in higher interest cost of approximately US$22 million per annum and at the
same time reduce installments by approximately US$162 million per annum. The
net effect will be an increase in free cash generation after finance of
approximately US$140 million annually for the four rigs supported by this
facility.

Economic utilization in 2013 was affected by 5 year classing on the West
Aquarius and West Capella. Seadrill's next 5 year survey will not be until
2015 when the West Vencedor is due to be classed. The Company therefore does
not expect downtime to be as severe this year and looks forward to returning
to its long term target of 95% uptime.

Distributable cash flow for the first quarter of 2014 will be positively
impacted by the cash contribution for the full quarter from West Sirius and
West Leo but negatively impacted by approximately 60 days of collective
downtime for the West Aquarius, West Capricorn, and West Leo.

The increased rates for the Capella and the Sirius of an additional $65,380
and $44,827 respectively per day will come into effect in April and July 2014
respectively will strengthen cash flow. Further improvement is expected due to
the increased rate of $75,000 in respect of the West Aquarius extension from
2015.

The Board is in discussions with Seadrill with regards to acquiring more units
in order to strengthen the fleet composition, diversify the customer base, and
lengthen backlog. Such acquisitions  should also provide further  distribution 
growth. The Company's best in  class fleet, high operational performance  and 
long term contracts protects the  Company from any short-term negative  market 
sentiment. Seadrill Partners is ideally positioned to see through the current
market environment  and  potentially  be re-contracting  rigs  into  a  rising 
dayrate environment in the future.

February 25, 2014
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

Seadrill Partners Fourth Quarter 2013 Results
Seadrill Partners Fourth Quarter 2013 Fleet Status

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The issuer of this announcement warrants that they are solely responsible for
the content, accuracy and originality of the information contained therein.
Source: Seadrill Partners LLC via Globenewswire
HUG#1764477
 
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