2013-08-28 15:16:04 -
· Seadrill Partners reports net income attributable to Seadrill Partners
Members for the second quarter 2013 of US$22.1 million and net operating income
for the second quarter of US$71.6 million.
· Generated distributable cash flow of US$15.8 million for the second
· Completed the acquisition of the companies that own and operate the
tender rig T-15 from Seadrill Limited for $210 million on May 17, 2013
· Declared an increased distribution for the second quarter of US$0.4175
Financial Results Overview
Seadrill Partners LLC reports:
Total contract revenues of US$158.6 million for the second quarter 2013 (the
"second quarter") compared to US$161.5 million in the first quarter of 2013 (the
"first quarter"). The decline
is primarily driven by 23 days downtime for the
West Capricorn as a result of required equipment repairs. This has partly been
offset by improvements in the West Capella's uptime relative to the first
quarter. The tender rig T-15 had little impact on operating income due to the
fact that revenues and the majority of operating expenses prior to drilling
operations commencement are capitalized and amortized over the contract period.
Net operating income for the quarter of US$71.6 million compared to US$74.7
million in the preceding quarter, the reduction as a result of the West
Net Income for the quarter of US$77.2 million compared to US$61.3 million in the
first quarter. This is after the recognition of non-cash gains on derivative
instruments. Such items reflect a gain of US$27.0 million in the second quarter
as compared to a gain of US$6.2 million for the first quarter as a result of an
increase in long term interest rates.
Net income attributable to Seadrill Partners LLC Members was US$22.1 million for
the second quarter compared to $19.8 million for the first quarter.
Distributable cash flow was US$15.8 million for Seadrill Partners' second
quarter as compared to US$18.0 for the first quarter. The reduction is a result
of the West Capricorn downtime.
Distribution for the period of US$0.4175 per unit, equivalent to an annual
distribution of US$1.67, representing an approximate 8% increase from the
Company's minimum quarterly distribution.
During the second quarter, Seadrill Partners had an interest in five rigs in
operation. The fleet is comprised of two semi-submersible rigs, one drillship
and two tender rigs operating in Canada, the US Gulf of Mexico, Nigeria, Angola
and Thailand respectively. During the quarter the T-15, which was acquired on
May 17, 2013, underwent acceptance testing, during which time it received a
slightly reduced dayrate, mobilized and then commenced operations on full rate
in July 2013.
Other than the West Capricorn, the Company's rigs performed well during the
second quarter, achieving an overall economic utilization rate of 92% on
average. The decline from the first quarter utilization of 96% is due to 23
days downtime for the West Capricorn as a result of required repairs and
Operating expenses for the second quarter were US$90.6 million, compared to
US$96.1 million in the first quarter. The decrease in operating expenses is
partly explained by lower operating costs for the West Aquarius rig after
completing the start-up phase in Canada in the first quarter.
On May 17, 2013 Seadrill Partners completed the acquisition of the companies
that own and operate the tender rig T-15 from Seadrill Limited ("Seadrill") for
a total purchase price of $210 million. The T-15 is contracted with Chevron in
Thailand at an initial contract dayrate of $115,500, which is subject to
escalation to cover cost increases.
Financing and Liquidity
As of June 30, 2013, the Company had cash and cash equivalents, on a
consolidated basis, of US$50.0 million and a revolving credit facility of US$300
million provided by Seadrill as the lender. As of June 30, 2013, US$69.6
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$1,262.2 million as of June
30, 2013; US$1,152.2 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 Limited are classified as related party
The Company has four secured credit facilities, one of which matures in June
2014. The Company expects to refinance this facility ahead of its expiration
either in the secured rig finance market or in the debt capital markets in order
to achieve the most effective capital structure. 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 Limited maturing in 2016 relating
to the acquisition of the T-15. The Board is confident that the facilities can
be refinanced at attractive terms with improved repayment profiles. The
Company's goal is to achieve a capital structure independent of Seadrill Limited
which will allow it to appropriately manage debt terms and debt amortization.
As of June 30, 2013, Seadrill Partners had interest rate swaps outstanding on
principal debt of US$1,158.4 million. All of the interest rate swap agreements
were entered into subsequent to the IPO Closing Date and represent approximately
87% of debt obligations as of June 30, 2013. The average swapped rate, excluding
bank margins, is approximately 1.16%.
The fundamental outlook for the oil and gas industry remains positive. Although
overall E&P spending trends appear to be slowing it is apparent that the
slowdown is primarily driven by onshore spending, especially in North American
shale activity. The activity offshore is expected to continue to grow at a
healthy pace with an emerging trend for deepwater development projects.
The number of deep and ultra-deepwater discoveries has increased materially
since 2010 and the Company expects this trend to continue. Importantly, as
these trends migrate from discoveries to development projects average contract
terms are expected to increase as development plans typically have longer
duration than exploration activities. Seadrill Partners' tender rig fleet is
also ideally positioned to take advantage of development spending trends as
these assets are primarily used in development activities.
The market is also experiencing a distinct bifurcation trend. Sixth generation
rigs are increasingly preferred by operators given their ability to perform dual
activity drilling, greater BOP capability, higher variable deckloads, and higher
hookload capacities. These technological developments make the rig better
suited to drill a wide range of well designs and provide greater efficiency and
safety than older generations. Seadrill Partners' current ultra-deepwater rigs
and potential dropdowns from Seadrill Limited are well positioned as premium
There is very limited ultra-deepwater availability and the Company believes the
current orderbook will to a large extent be absorbed by increasing deep water
demand and by replacement of the older mid and deepwater fleet. Utilization of
modern higher specification rigs is therefore expected to remain at current
During the third quarter leading edge dayrates continue to be in-line with first
half 2013 levels with the most recent contracted dayrates ranging from
US$550,000-US$650,000. Seadrill Partner's ultra-deepwater rigs current dayrates
range from US$487,000 per day to US$552,000 per day. As of June 30, 2013
Seadrill Partners' total fleet's average remaining contract term was 3.8 years.
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.
Having acquired the T-15 tender barge the Company is focused on completing its
second acquisition, the tender barge T-16, soon. The T-16 is contracted for a
five-year period with Chevron in Thailand at an initial contract dayrate of
US$115,500, which is subject to escalation to cover cost increases. The rig
underwent acceptance testing in Singapore prior to mobilizing to its drilling
location and recently commenced its drilling contract.
The Company is also preparing for further acquisitions from Seadrill Limited.
Pursuant to the omnibus agreement with Seadrill Limited, 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. Seadrill Limited has an
existing fleet of 11 ultra-deepwater rigs, as well as a newbuild program with
10 ultra-deepwater rigs on order. There is therefore a unique opportunity for
high growth via further asset dropdowns. The company has also entered into
discussions with customers to extend some of its existing operating agreements.
The Board is hopeful that at least one of the units can be contracted for an
extended period within the next quarter. The extended rate is likely to be
higher than current rates. The Board is confident about Seadrill Partners
ability to be able to grow its future earnings and distributions and be one of
the fastest growing MLP's in the years to come.
Average economic utilization of the Company's rigs at 92% was adversely impacted
by West Capricorn's downtime. The third quarter will be positively impacted by
the cash contribution of the T-15 tender barge. The West Aquarius has incurred
a total of 13 days downtime during the third quarter which will negatively
impact consolidated operating results. The rig is now operating well and
results for the third quarter are otherwise expected to confirm good operational
The Board is confident about the Company's ability to grow its distributions in
the future and is fully focused on the acquisition of new rigs in order to
August 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
Seadrill Partners 2Q 2013 Results:
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Source: Seadrill Partners LLC via Thomson Reuters ONE