03 Mar, 2014 Howard Weil 42nd Annual Energy Conference

Seadrill – Howard Weil 42nd Annual Energy Conference
CFO - Rune Magnus Lundetrae
New Orleans, March 2014
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. Forward-looking 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, 2012 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 non-GAAP financial measure
reconciliations to the most comparative GAAP measure are displayed in quantitative schedules on the company’s
web site at seadrill.com.
2
Seadrill Limited Overview
$20
• Most modern fleet of all
the major offshore drillers
$16
(1)
– 34 drillships & semi-submersibles
(11 Under Construction)
– 32 jack-up rigs (9 Under Construction)
– 3 tender rigs
US$ Billions
• Diverse asset base of 69 units
$12
$8
• Global reach including harsh environment
• Current market capitalization ~ US$16 bn
$4
• Broad customer base with contract
backlog ~ US$20 bn
• Dividend annualized ~ US$1.8 bn
$0
Equity Issuance
Dividends
Current Market
Cap
Value Creation
Market Leading Track Record of Value Creation
(1) Includes rigs contributed to Seadrill Partners.
3
Establishing Vehicles to Offer Exposure to Key Themes
4
Demonstrated Access to Capital Markets
Seadrill
Partners
Dropdowns
• West Sirius and West Leo
- US$465 million in equity raised
- Cash proceeds of US$356 million to Seadrill Limited
• West Auriga
- US$400 million in equity raised
- Cash proceeds of US$350 million to Seadrill Limited
NADL
IPO and Bond
Issuance
• NADL completes listing on NYSE with US$125 million IPO
• Issues US$600 million unsecured bond
• NADL is now independently financed and in prime position to be the
premier player in harsh environment and Arctic operations
Seadrill
Partners
Debt
Restructuring
• SDLP launches US$1,800 million Term Loan B
• Creating a cleaner capital structure with lower annual amortization
• Seadrill Limited benefits by receiving proceeds of ~US$500 million
Access to Funding, High Utilization, Large Backlog Stability in Current Market
5
Key Investment Highlights
6
Key Investment Highlights
Global Operational Footprint
Modern Fleet with Exposure to Premium Segments
Significant Contracted Backlog Providing Dividend Visibility
Innovative Capital Structure and Funding Strategy
Dividend Growth a Priority… While Maintaining Earnings Growth Profile
7
Global Operational Footprint
North Atlantic
7 units
North Atlantic
Americas
12 units
- 4 HE Semis
- 2 HE Jack-ups
- 1 Drillship
London
- 2 Drillships
- 5 Semis
- 5 jack-ups
Gulf of Mexico
Middle East
Asia Pacific
Brazil
5 units
- 5 Semis
West Africa
Brazil
Africa –
Middle East
15 units
- 4 Drillships
- 2 Semis
- 1 Semi-tender
- 8 Jack-ups
Asia Pacific
10 units
- 2 Tender rigs
- 8 Jack-ups
Newbuilds 20 units
- 8 Drillships
- 3 Semis
- 9 BE jack-ups
Presence in all important oil and gas regions
8
Strategic Focus on Premium Asset Classes
One of the largest Offshore Drillers…
…with a Modern Fleet…
Average Floater Age
Jack-Up Units
Average Jack-Up Age
% Ultra-Deepwater of Total Floaters
% of Jack-Up fleet >350’ Water Depth
Number of units
% of Total Floaters
Number of units
% of Total Floaters
Ultra-Deepwater Units
…and Exposure to Premium Segments
Source: ODS Petrodata.
9
Floaters – US$15.4 Billion Contract Backlog
Semi-submersibles
Drillships
2013
2014
2Q
3Q
2015
2Q
3Q
Unit
Customer
West Saturn
West Jupiter
West Carina
West Draco
West Dorado
West Aquila
West Libra
West Tellus
West Navigator
West Capella
West Gemini
West Neptune
West Polaris
West Auriga
West Vela
Chevron
Shell / Centrica Energi NUF
ExxonMobil
Total
LLOG
ExxonMobil
BP
BP
Newbuild
Newbuild
Newbuild
Newbuild
Newbuild
Newbuild
Newbuild
610' US$635'
US$602,000
US$621'
US$562,120
US$627,500
US$640,000
Newbuild
Transit
US$570,000
US$653,121
US$565,000
US$565,000
Sevan Developer
West Rigel
West Taurus
West Phoenix
West Eminence
West Venture
Sevan Driller
West Orion
West Pegasus
West Eclipse
Sevan Louisiana
West Aquarius
West Alpha
West Hercules
West Capricorn
West Leo
Sevan Brasil
West Sirius
West Mira
Petrobras
Total
Petrobras
Statoil
Petrobas
Petrobras
PEMEX
Total
LLOG
ExxonMobil
ExxonMobil
Statoil
BP
Tullow Oil
Petrobas
BP
Husky
Newbuild
Newbuild
US$656,662
US$454,000
US$624,460
US$441,000
US$419,817
US$624,460
US$555,000
Market rate
US$435' US$450,000
US$455,000
Newbuild
US$505,000
US$540,000
US$479
US$532,000
US$497,000
US$495,650
US$605,000
US$398,559
US$490,173
US$535,000
Newbuild
Transit
4Q
1Q
Option
Uncontracted
1Q
4Q
1Q
2016
2Q
3Q
4Q
1Q
US$615,000
US$547,000
US$497,000
US$495'
06.2018
07.2018
07.2019
06.2020
US$590,000
53%
2016
2015
96%
4Q
03.2018
10.2020
11.2020
34%
2014
2017
2Q
3Q
Yard plus transit period
4%
Contract coverage
Contracted
4Q
66%
47%
10
Jack-ups - US$4.2 Billion Contract Backlog
2014
2Q
3Q
BE Jack-ups
HE Jack-ups
2013
2015
2Q
3Q
2016
2Q
3Q
Unit
Customer
West Epsilon
Statoil
US$286,000
West Elara
Statoil
US$360,000
West Linus
ConocoPhillips
NB Transit
West Oberon
PEMEX
Transit
US$171,500
03.2020
West Intrepid
PEMEX
Transit
US$155,500
10.2020
West Defender
Shell / PEMEX
US$136
West Courageous
Hess / PEMEX
US$150'
West Titania
-
Transit
West Prospero
Vietsovpetro
US$170,000
West Ariel
Vietsovpetro
US$170,000
West Cressida
PTTEP
US$129,500
West Telesto
Premier
West Tucana
PVEP
4Q
1Q
1Q
4Q
1Q
4Q
Contracted
Uncontracted
03.2017
US$375,000
Transit
05.2019
US$155,500
04.2020
Transit US$155,500
US$149,5
US$164'
4Q
2014
20%
05.2021
US$156
80%
US$167,000
West Vigilant
Talisman
West Titan
-
Newbuild
West Leda
ExxonMobil
US$138,000
West Proteus
-
Newbuild
West Mischief
ENI
US$175,000
West Rhea
-
Newbuild
West Tethys
-
Newbuild
West Hyperion
-
Newbuild
West Umbriel
-
Newbuild
West Dione
-
Newbuild
AOD l
Saudi Aramco
US$180,000
West Castor
Shell
AOD ll
Saudi Aramco
US$180,000
West Triton
KJO
US$145,000
West Mimas
-
Newbuild
AOD lll
Saudi Aramco
US$180,000
West Resolute
KJO
US$140,000
West Callisto
Saudi Aramco
US$150,000
West Freedom
Repsol / Cardon IV
Transit
2015
US$167,000
43%
US$165,000
US$175'
57%
2016
US$155,000
33%
US$145,000
US$140,000
US$150,000
US$187'
67%
US$225,000
Option
Yard plus transit period
Note: Backlog generated by the tender rigs (T15, T16 and West Vencedor) is US$0.5 billion.
11
Financial Flexibility
Feb 2014 Actual
Term Loan B
11%
2015 Illustrative
MLP
3%
MLP
12%
Term Loan B
11%
Unsecured
22%
Secured
55%
Secured
64%
Unsecured
22%
Capex Per Year
2013-2014 Financing Summary
4,500
4,000
Secured Financing
• NOK 1,800m bond
• 8 new facilities
• NOK 1,500m bond (NADL)
• Total of US$ 5,310m
• US$ 500m bond
• US$600m Bond (NADL)
• US$125m NADL NYSE IPO
• SEK 1,500 bond
MLP
• US$356m – West Sirius
and West Leo sale to
SDLP
• US$1,800m TLB
• US$350m – West
Auriga sale to SDLP
3,500
3,000
US$ Millions
Unsecured Financing
2,500
2,000
1,500
1,000
500
0
2014
2015
Floaters
2016
Jack-ups
12
Dividend Growth Continues to be a Priority… while
maintaining a Growth Profile
• Key objective to grow quarterly
dividends
• Quarterly cash dividend raised from 95
cents to 98 cents per share in Q4
• Increase reflects improved free cash
flow and newbuilds commencing
operation in 2H 2013
• Future dividends depend on:
–
–
–
–
Contract coverage
Market outlook
Leverage capacity
Future earnings
Annual dividends
4.00
0.15
3.50
3.00
0.2
US$
2.50
2.00
1.50
0.3
2.535
1.00
0.50
1.2
1.05
2008
2009
3.06
3.36
2011
2012
3.72
0.00
2010
2013
Extraordinary dividend
The Q1 2013 dividend was paid in Q4 2012
13
Upstream Market Outlook
Market Outlook
14
25
700
24
600
23
500
22
400
2005
2006
2007
2008
2009
Total Offshore Production
2010
2011
2012
2013
Total Offshore Rigs
More Rigs Working, but Declining Oil Production
Source: IEA, IHS, Wood Mackenzie, EIA, ODS Petrodata.
15
Number of Rigs Contracted
Million Barrels per Day
Increased Service Intensity
Recent Discoveries to Become Produced Volumes
Discovered resources 1980 to 2013 (Billion boe)
140
120
100
80
60
40
20
1980
1985
1990
Shelf
1995
Deep Water
2000
2005
2013
Ultra deepwater
Resources discovered and produced 2000-2012 (Billion boe)
Source: Rystad Energy research and analysis; UCube
16
Ultra-Deepwater Production Growth Accelerating
Global liquids production, by
land and water depth
2012-2030
CAGR = 1.3%
Thousand boe/d
20122020
CAGR
Replacement
Ratio
Million bbl/d
Global offshore production
by water depth 1960 - 2040
19%
16.4
2%
2.5
60000
0%
0.5
50000
80000
70000
Offshore ultra deep
5 mbbl/d
40000
16 mbbl/d
30000
20000
1%
0.9
30 mbbl/d
10000
Onshore
0
1960 1970 1980 1990 2000 2010 2020 2030 2040
Shelf (to 400 ft)
17
Source: Rystad Energy.
Deep water (400-5000 ft)
Ultra deepwater (5000+ ft)
17
Near Term Outlook
1
2014 Projects Pushed to 2015
• Block 32
Total – Angola
• Mad Dog 2
BP – Gulf of Mexico
• Stampede
Hess – Gulf of Mexico
• Chevron Indonesia
Chevron – Indonesia
• Bonga
2 rigs - Nigeria
1
X-axis: total liquids production mbpd; Y-axis: avg Brent equivalent breakeven price, $/bbl
Source: Morgan Stanley and Rystad Energy
18
Drilling Market Outlook
19
Global Rig Supply & Demand Imbalance Favors Contractors
Significant Newbuilds Required to Bridge Expected Demand Gap
500
450
400
165
350
50
64
300
250
455
200
340
150
276
100
50
0
Current Floater Fleet
Newbuilds 2014-2016
Potential Supply
Possible Retirements
Additional Rig
Requirements
2020 Demand
Ultra-Deep Water Deliveries
30
28
28
25
25
21
21
20
17
18
15
11
10
5
8
3
0
1
0
2005
2006
2007
Source: Rystad Energy, ODS Petrodata
2008
2009
2010
2011
2012
2013
2014
2015
2016
20
Bifurcation in Deepwater is a Reality
Customers Demand Better Performance and Safety of New Equipment
Newbuild water depth
Less than
4500
8%
Operating water depth
Greater than
7500
12%
4500 – 7500
7%
Greater than
7500
85%
4500 – 7500
54%
Less than
4500
34%
Total floater utilization
Seadrill
100%
90%
Ensco
Noble
Diamond
80%
Transocean
70%
Jan-11
Source: ODS Petrodata
Jul-11
Jan-12
Jul-12
Jan-13
Jul-13
Jan-14
21
Robust Jack-up Fundamentals
Age Development of Contracted Jack-up Fleet
Jack-ups Removed from the Market
# of rigs
# of rigs
250
220
215
208
220
232
16
15
14
200
12
12
12
11
10
10
150
9
8
8
90
100
6
67
8
7
90
6
6
51
4
50
17
10
4
26
2
2
0
2013
3
2014E
2015E
2020E
1
4
4
3
2
2
2
1 1
1
1 1 1 1
1
0
1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012
40 years or more
35 years or more
30 years or more
• In 2015 more than 220 of the currently contracted Jack-up fleet will be more than
30 years old
• 90 of the units will be more than 35 years old
• Scrapping & Conversion of older units increased in 2011 and 2012 with trend
expected to continue
Source: Pareto
22
Conclusion
23
Well Positioned to Weather the Storm…..
Floater supply and demand
World oil demand and oil price* by scenario
Seadrill UDW Coverage 2014
Illustrative daily liquidity cushion
West Tellus
(1)
(1)
(1)
(1)
(1)
(1)
(1) Based on LTM average for the West Sirius, West Leo, West Aquarius and West Capella
(2) Assuming $1,700 million of debt @4.25%
(3) Assuming 5% amortization per year
(4) Based on average contrat dayrates for West Sirius, West Leo, West Aquarius and West Capella, assumes 95% utilization and 4.25% tax on revenues
Source: Morgan Stanley and Rystad Energy
(2)
(2)
(2)
(3)
(3)
(3)
(4)
(4)
(4)
24
Core Assets
• 32 6th generation ultra-deepwater units
• 2 Midwater harsh environment semisubmersible rigs
• 29 High-specification jack-ups
• 3 Harsh environment jack-ups
• 3 Tender rigs
Financial Investments
12% of SapuraKencana –
Market Value ~US$920mm
50.11% of Sevan Drilling –
Market Value ~US$200mm
39.9% of Archer –
Market Value ~US$280mm
25