2013-02-28 15:49:22 -
EARNINGS RELEASE - FOURTH QUARTER RESULTS FOR THE PERIOD ENDED DECEMBER 31, 2012
· Seadrill Partners LLC ("Seadrill Partners" or the
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
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
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
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
Current Area of Contract Contract
Drilling Rig client location start expiry Day rate
West ExxonMobil Canada Jan 2013 Jun 2015 US$530,000
West BP USA Jul 2012 Aug 2017 US$487,000
West Total Nigeria Apr 2009 Apr 2014 US$552,000
Total Nigeria Apr 2014 Apr 2017 US$627,500
West Chevron Angola Mar 2010 Mar 2015 US$206,500
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
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
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