Credit Suisse 2013 Energy Summit

Credit Suisse 2013 Energy Summit
CFO - Rune Magnus Lundetræ
February 5, 2013
Forward looking statements
The statements described in this presentation that are not historical facts are forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forwardlooking statements which could be made include, but are not limited to, statements involving prospects for the Company,
expected revenues, capital expenditures, costs and results of operations and contingencies and other factors discussed in
the Company's most recent annual report on the Form 20-F for the year ended December 31, 2011 and in the Company's
other filings with the SEC, which are available free of charge on the SEC's website at www.sec.gov. Should one or more of
these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially
from those indicated. All subsequent written and oral forward-looking statements attributable to the Company or to persons
acting on our behalf are expressly qualified in their entirety by reference to these risks and uncertainties. You should not
place undue reliance on forward-looking statements. Each forward-looking statement speaks only as of the date of the
particular statement, and we undertake no obligation to publicly update or revise any forward-looking statements. All nonGAAP financial measure reconciliations to the most comparative GAAP measure are displayed in quantitative schedules on
the company s web site at seadrill.com.
2
Contents
•  Company profile
•  Seadrill development
•  Market outlook
•  Rig economics
•  Financial profile
•  Summary
3
Company profile
•  Most modern fleet of all the offshore drillers
•  Diverse asset base of 73 units
- 26 drillships & semi-submersibles
- 26 jack-up rigs
- 21 tender rigs
•  Global reach including harsh environment
•  Current market capitalization ~ US$18.6 bn
Enterprise value
US$ Billion
40
35
30
25
20
15
•  Broad customer base with contract
backlog ~ US$21.5 bn
•  3Q/12 EBITDA annualized ~ US$2.4 bn
•  Dividend annualized ~ US$1.6 bn
10
5
0
Seadrill
Transocean
Market capitalization
Ensco Net debt
Noble
Diamond
Rowan
Newbuilding commitments
Key Steps in Developing Seadrill
*
Operational excellence….delivering growth
*Total fleet including latest newbuilds = 73 rigs
5
Global Operational Footprint
Americas
8 units
North Atlantic
Canada
-  1 Semi
7 units (+1)
Gulf of Mexico
- 4 Semis
- 2 Jack-ups
- 1 Drillship
- 3 Semis
South America
- 3 Semis
- 1 Semi-tender
London Africa-Middle
East
Asia Pacific
22 units * (-2)
-  4 Semi-tenders
-  10 Tender rigs
- 8 Jack-ups
13 units (+3)
-
3
2
2
6
Drillships
Semis
Semi-tenders
Jack-ups
Newbuilds 23 units (+2)
-  7 Drillships
-  2 HE Semis
-  1 HE jack-up
- 9 BE jack-ups
- 3 Tender Rigs
- 1 Semi-tender
Critical size in all important regions…Economies of scale developing
*Includes five tender rigs owned by Varia Perdana
6
First Class Operations
Performance and uptime
2009: 93% TU, Third quarter: 96% TU
– 
Aligned Regions, operationally and technically
– 
– 
Daily, weekly and monthly KPIs
Detailed downtime root cause analysing
– 
Enhanced subsea and well control training
Safety
2009: 2.48 LTI freq.*, Present: 0.82 LTI freq.*
– 
Daily Senior Management focus on safety
– 
– 
Advanced reporting and analysing tools
Aligned culture
Managing risks
2009: 2.77 HIPO freq.*, Present: 1.11 HIPO freq.*
– 
– 
Systems – proven designs
Structure – clear operating requirements
– 
People – operational knowledge at all managerial levels
5% uptime improvement ~ US$225m in revenue annually
Operations
2009: 30 rigs, Present: 50 rigs
– 
Transfer of learning across the fleet
– 
Standardised approach
– 
Specialised personnel
Deliver superior uptime and win repeat business
* Per million man hours
7
Second Largest Ultra-deepwater Player
Existing rigs
Ultra-Deepwater units
Units
40
35
30
25
20
9
34
15
10
16
15
14
Seadrill
Ensco
Noble
5
10
0
Transocean
Diamond
Newbuilds
Newbuilds
Deepwater units
Average Age
Seadrill
Ensco
Transocean
Noble
Diamond
0
5
10
15
20
25
3
7
14
15
23
Significant fleet growth.….Cost of ageing underestimated
Source: ODS Petrodata
8
2012…the year of frontier discoveries
Source: DNB Markets
9
The bigger finds are in deeper water
Average size of new discoveries by water depth
Deepwater production
Source: DNB Markets, Infield
Source: DNB Markets, WoodMac
Oil production vs. number of rigs
•  Since 2000 number of rigs in operation has increased by 40% -> While offshore oil
production has been flat
Declining offshore oil production
Increased number of rigs working
600
Number of rigs working
million barrels per day
30
25
20
15
10
5
500
400
300
200
100
0
0
200020012002200320042005200620072008200920102011
shallow (<400m)
deepwater
total offshore
Total
Floaters
High decline rate on ageing fields…..Easy oil is over
11
Source: IEA, IHS, Wood Mackenzie, EIA
Source: ODS Petrodata
Jackups
Largest Operator of Premium Jack-Ups
Existing rigs
Jack-ups < 350 feet built after 2000
Units
30
5
25
20
10
15
10
15
5
13
12
11
10
9
9
Maersk
COSL
Aban
offshore
Noble
6
6
0
Seadrill
Rowan
Ensco
Vantage Transocean
Newbuilds
Jack-ups – Total fleet
Newbuilds
Average Age
0
5
Vantage
3
Seadrill
3
Mearsk
COSL
10
15
20
25
30
10
16
Aban offshore
17
Rowan
17
Transocean
Ensco
Noble
20
26
27
New fleet to meet future drilling challenges
Source: ODS Petrodata
12
Market development - Jack-ups
Utilization for jack-­‐up rigs •  Daily rates are improving
%
Utilization for jack-up rigs
100
96%
95
•  Near term availability decreasing – improving
utilization
90
85
82%
80
75
•  Bifurcation between premium and standard jackups continuing, efficiency and safety benefits
•  Strong demand from Middle East and SE Asia,
increasing interest from Australia and West Africa
70
65
60
Jan-­‐03
Jan-­‐05
Jan-­‐07
WDR > 350ft
USDk/day Historical
Jan-­‐09
Jan-­‐11
Jan-­‐13
WDR < 350ft
Historical jack-up
dailyjack-­‐up rates daily rates
250
•  Decrease in stacked jack-ups, but not many more
to reactivate
200
164'
150
127'
100
50
Jan-­‐03
Jan-­‐05
Jan-­‐07
Jan-­‐09
WDR > 350ft
Jan-­‐11
Jan-­‐13
WDR < 350ft
Jack-up market - showing continued improvement
Source: IHS-Petrodata
13
Jack investment rationale
•  In 2015 more than 289 JUs will be more than 30 years old
•  Scrapping & Conversion of older units increased in 2011 and 2012 with trend expected
to continue
•  Current order books have close to 90 JUs under construction with majority arriving in
2013
14
Source: Pareto
US$21.5 billion contract backlog
US$ M illions
6,000
BP
24%
A
Total
12%
AA-
Exxon
11%
AAA
Statoil
10%
AA-
Petrobras
9%
BBB
Chevron
6%
AA
3,000
Tullow
6%
-
2,000
Husky
5%
BBB
1,000
Others
17%
-
5,000
4,000
6,000
5,000
3,000
4,000
2,000
1,000
0
2013
2014
2015
2016
2017
Remaining
0
Additions 2012
2013
2014
2015
2016
Remaining
Attractive backlog…..quality customers…superb visibility
15
Newbuilding program
Unit
Rig type
West Auriga
UDW Drillship
AOD I
BE Jack-­‐up
T16
Tender barge
West Tucana
BE Jack-­‐up
West Telesto
BE Jack-­‐up
West Oberon
BE Jack-­‐up
West Castor
BE Jack-­‐up
T17
Tender barge
West Esperanza
Semi-­‐tender
AOD II
BE Jack-­‐up
West Vela
UDW Drillship
West Tellus
UDW Drillship
AOD III
BE Jack-­‐up
West Linus HE Jack-­‐up
T18
Tender barge
West Neptune
UDW Drillship
West Saturn
UDW Drillship
West Jupiter
UDW Drillship
Carina
West N
eptune
UDW Drillship
West Mira
Semi-­‐submersible
West Rigel
Semi-­‐submersible
TBA
BE Jack-­‐up
TBA
BE Jack-­‐up
1Q
2013
2Q 3Q
4Q
1Q
2014
2Q 3Q
4Q
1Q
2015
2Q 3Q
4Q
23 newbuilds ordered at attractive
prices and delivery slots
2 Semi-sumbersible rigs
7 Drillships
4 Tender rigs
10 Jack-up rigs
Contracted
Uncontracted
Newbuilding program ensuring future growth
EBITDA* Potential Development
EBITDA
Second upturn cycle….US$4 billion in 2016
* EBITDA – earnings before interest, tax, depreciation and amortization ** Assumes daily rates of $550,000 for floaters, $170,000 for semi-tenders, $120,000 for tender barges and $140,000 for jack-ups
17
Rig Investment Economics I
UDW floaters
Jack-ups
Tender rigs
Dayrate
US$550,000
US$150,000
US$170,000
Opex incl. G&A
US$170,000
US$60,000
US$60,000
Tax (of revenues)
4.0%
4.0%
4.0%
5Y cash-flow
US$605 m
US$140 m
US$223 m
Investment
US$600 m
US$210 m
US$200 m
Repaid in
5.0Y
7.5Y
5.5Y
ROE*
49%
27%
39%
Yard prices….funding….cycle….all-time high equity return
* ROE calculated with 9% WACC, 4.75% cost of debt, and includes maintenance capex
18
650
600
Low capital
cost
Source: IHS-Petrodata, DNB Markets
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Rig investment economics II
800
700
750
650
700
600
550
450
500
400
450
350
400
300
High
dayrates
550
500
Low newbuild prices combined with high day rates create unique
opportunities for investments
19
Asset backed financing
• 
Debt portfolio as of year-end 2012
Actively use bank syndication market to
finance our rigs
Bank Debt 65%
• 
Sale L easeback 11%
Combination of modern assets and quality
clients is attractive to bankers
Bonds 18%
Convertible Bond 6%
• 
• 
Long contracts and strong cash flow cater
for solid repayment profiles
US$8.4 billion in secured debt of a US$11.3
billion total debt portfolio
Balloon maturities by year
US$ Millions
4,000
3,500
3,000
2,500
• 
US$650 million in convertible debt due in
2017 is in the money
2,000
1,500
1,000
500
0
• 
Average remaining tenor on debt 3.1 years
2013
Bank debt
2014
Sale leaseback
2015
Bonds
2016
Convertible bonds
2017
Financial Strategy
Net debt per development *
• 
Growth funded through equity, convertible
bonds, bonds, sale leaseback arrangement
and secured bank financing
US$ M illions
18,000
16,000
14,000
12,000
Net Debt w/ 85 cent dividend 10,000
8,000
• 
Secured bank financing favored due to its
attractive pricing and flexibility
6,000
Net Debt without dividend
4,000
2,000
-­‐
4Q
• 
• 
• 
Combination of new premium assets and
term contracts with quality customers seen
as attractive security
Bank credit market remains open for good
projects and existing clients
Newbuild program provides opportunities
for Export Credit Financing (ECA)
1Q
2012
2Q
3Q
4Q
1Q
2Q
2013
3Q
4Q
2Q
3Q
4Q
2015
1Q
2Q
3Q
4Q
2016
Net debt per UDW equivalent unit *
500
500
450
450
400
400
350
350
300
300
250
250
200
200
4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
2012
2013
2014
2015
Premium assets and term contracts are key to financing
* Assumes daily rates of $550,000 for floaters, $170,000 for semi-tenders, $120,000 for tender barges and $140,000 for jack-ups
1Q
2014
2016
2017
Seadrill Partners: Investor Positioning
If investors prefer…
…they should consider
•  Long-term, contracted ultradeepwater drilling assets
•  Yield-oriented returns
•  Managed growth via drop-downs
and third party acquisitions
•  Shorter-term contracts with day rate
exposure
•  Larger, diversified pool of jack-up,
tender and ultra-deepwater rigs
•  Exposure to spec newbuild projects
•  Large-scale, corporate M&A potential
22
Sale of Tender Rigs – Realising US$1.2 billion in cash
•  Sapura Kencana acquires 15 tender rigs and
Seadrill’s tender rig organisation
–  West Vencedor, T-15 and T-16, are owned or
planned to be owned by Seadrill Partners LLC and
not included in the transaction
•  Total Enterprise Value of US$ 2.9 billion
–  US$363 million in remaining capex and US$ 800
million in debt
–  Equity value of US$ 1.74 billion
•  Seadrill proceeds:
–  Shares in Sapura Kencana: US$ 350 million
–  Sellers note: US$ 187 million
–  Cash: US$ 1.2 billion
•  Seadrill will use the proceeds to grow
the ultra-deepwater and jack-up fleet
23
Dividend Policy and Track-record
Dividend distribution per share
•  Quarterly cash dividend is a key objective
•  Strong operational performance, record-high
orderbacklog, and positive market outlook
have supported higher dividend
•  Last quarters regular dividend is set as a
guideline dividend floor for the foreseeable
future
•  Maintaining our ambition to further grow our
dividend capacity
•  Since 2005, raised and converted US$4.8
billion, distributed US$5.3 billion
Share price
Jan-­‐13
Share price
increase 24m*
Dividend Yield
Seadrill
38.7
40.5%
8.8%
Ensco
61.8
24.1%
2.4%
Diamond
73.4
9.5%
4.8%
Noble
39.9
8.9%
1.4%
Rowan
34.2
2.1%
-­‐
Transocean
55.8
-­‐24.9%
-­‐
Superior value ….$3.40 annualized dividend
24
Seadrill – Summary
• 
Sound operational performance
• 
Record high revenue backlog and earnings visibility
• 
US$7 billion investment program in a historic strong cycle
• 
US$4 billion EBITDA target
• 
Funding through the newbuilding program, ECA financing, bonds, strong support from
commercial banks
• 
Long-term dividend backed by orderbacklog
Frontrunner in a continuing strong cycle
25