EARNINGS RELEASE - FOURTH
QUARTER RESULTS FOR THE PERIOD ENDED DECEMBER 31, 2012
Highlights
·
Seadrill Partners LLC ("Seadrill Partners" or the "Company")
reports 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 the
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 semi-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 party
transactions.
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
options)
|
|
|
|
|
|
Semi-submersible rigs: |
|
|
|
|
|
West
Aquarius.......................... |
ExxonMobil |
Canada |
Jan 2013 |
Jun 2015 |
US$530,000 |
West
Capricorn.......................... |
BP |
USA |
Jul 2012 |
Aug 2017 |
US$487,000 |
|
|
|
|
|
|
Drillships: |
|
|
|
|
|
West
Capella............................. |
Total |
Nigeria |
Apr 2009 |
Apr 2014 |
US$552,000 |
|
Total |
Nigeria |
Apr 2014 |
Apr 2017 |
US$627,500 |
Tender
rigs: |
|
|
|
|
|
West
Vencedor.......................... |
Chevron |
Angola |
Mar 2010 |
Mar 2015 |
US$206,500 |
Outlook
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 options.
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
London, UK.
Questions should be directed
to:
Graham Robjohns: Chief Executive Officer
Rune Magnus Lundetrae: Chief Financial Officer
2012 Fourth Quarter
Report
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announcement is distributed by Thomson Reuters on behalf of Thomson
Reuters clients.
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(i) the releases contained herein are protected by copyright and
other applicable laws; and
(ii) they are solely responsible for the content, accuracy and
originality of the
information contained therein.
Source: Seadrill Partners LLC via Thomson Reuters ONE
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