UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form 6-K
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16
UNDER THE SECURITIES EXCHANGE ACT OF 1934
For the six month period ended June 30, 2013
Commission File Number 001-35704
Seadrill
Partners LLC
(Exact name of Registrant as specified in its Charter)
2
nd
Floor, Building 11
Chiswick Business Park
566 Chiswick High Road
London, W4 5YS
United
Kingdom
(Address of principal executive office)
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F. Form
20-F
x
Form 40-F
¨
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101
(b)(1). Yes
¨
No
x
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101
(b)(7). Yes
¨
No
x
SEADRILL PARTNERS LLC
REPORT ON FORM 6-K FOR THE SIX MONTH PERIOD ENDED JUNE 30, 2013
INDEX
Managements Discussion and Analysis of Financial Condition and
Results of Operations
On May 17, 2013, Seadrill Partners Operating LLC, a wholly owned subsidiary of Seadrill Partners LLC
(Seadrill Partners, the Company, our, we, us) 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. This transaction was deemed to be a reorganization of entities under common control. As a result, Seadrill Partners financial statements have been retroactively adjusted in accordance with United States
Generally Accepted Accounting Principles (U.S. GAAP) as if Seadrill Partners had acquired the entities that own and operate the
T-15
for the entire period that the entities have been under the common control of Seadrill Limited.
The retroactively adjusted Consolidated and Combined Carve-Out Financial Statements of Seadrill Partners as of and for the years ended December 31, 2011 and 2012 are attached as Exhibit 99.1 to the Current Report on Form 6-K filed with the
Securities and Exchange Commission (the SEC) on September 30, 2013 (the Restatement 6-K). The related Managements Discussion and Analysis of Financial Condition and Results of Operations is attached as
Exhibit 99.2 to the Restatement 6-K.
You should read the following discussion of our financial condition and results of operations in
conjunction with the interim Financial Statements presented in this report, as well as the historical Consolidated and Combined Carve-Out Financial Statements and related notes of Seadrill Partners included in the Restatement 6-K. Among other
things, those financial statements include more detailed information regarding the basis of presentation for the following information. The Consolidated and Combined Carve-out Financial Statements of Seadrill Partners have been prepared in
accordance with U.S. GAAP and are presented in U.S. Dollars.
Overview
Seadrill Partners is a growth-oriented limited liability company formed by Seadrill to own, operate and acquire offshore drilling rigs.
On October 24, 2012, we completed our initial public offering (the IPO) and in connection with the IPO, we issued 10,062,500
common units to the public at a price of $22.00 per common unit and issued to Seadrill 14,752,525 common units and 16,543,350 subordinated units. Seadrill Member LLC, a wholly-owned subsidiary of Seadrill that has a non-economic limited liability
company interest in the Company, received all of our incentive distribution rights.
In connection with our IPO, we acquired (i) a
30% limited partner interest in Seadrill Operating LP, as well as the non-economic general partner interest in Seadrill Operating LP through our 100% ownership of its general partner, Seadrill Operating GP LLC, and (ii) a 51% limited liability
company interest in Seadrill Capricorn Holdings LLC. We control Seadrill Operating LP through our ownership of its general partner and Seadrill Capricorn Holdings LLC through our ownership of the majority of the limited liability company interests.
Seadrill Operating LP owns a 100% interest in the entities that own and operate the
West Aquarius
and the
West Vencedor
and an approximate 56% interest in the entity that owns and operates the
West Capella
. Seadrill Capricorn
Holdings LLC, a 100% interest in the entities that own and operate the
West Capricorn
.
On May 17, 2013, our wholly owned
subsidiary, Seadrill Partners Operating LLC, acquired from Seadrill 100% of the ownership interests in the entities that own and operate the tender rig
T-15
. The T-15 is a barge-type, self-erecting tender rig built in 2013 by Cosco Nantong
Shipyard Co. Limited. The T-15 was delivered under its current contract to its current customer, Chevron Thailand Exploration and Production Limited, a subsidiary of Chevron, in May 2013 and commenced operations in July 2013. The T-15 is contracted
for a five-year period with Chevron in Thailand at a initial contract dayrate of $115,500. Management of operations for the T-15 will be subcontracted to Seadrill Asia Limited (Seadrill Asia), a wholly owned subsidiary of SapuraKencana
Petroleum Berhad. Seadrill International is responsible for all costs of operating the T-15, which includes a management fee of $9,200 per day payable to Seadrill Asia.
We refer to Seadrill Operating LP, Seadrill Capricorn Holdings LLC and Seadrill Partners Operating LLC collectively, as OPCO.
1
Our drilling rigs are under long-term contracts with major oil companies such as Chevron, Total,
BP and ExxonMobil with an average remaining term of 3.8 years as of June 30, 2013.
Factors Affecting the Comparability of Future Results
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|
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We do not own all of the interests in OPCO. As a result, our cash flow does not include distributions on Seadrills interest in OPCO. The operating agreements of OPCO require it to distribute all of its available
cash each quarter. In determining the amount of cash available for distribution to us by OPCO and by us to our unitholders, our board of directors must approve the amount of cash reserves to be set aside, including reserves for future maintenance
and replacement capital expenditures, working capital and other matters. Distributions by OPCO to Seadrill in respect of its ownership interest in OPCO are not included in our cash flow.
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The size of OPCOs fleet continues to change. Our Consolidated and Combined Carve-Out Financial Statements reflect changes in the size and composition of OPCOs fleet due to certain rig deliveries and contract
commencement dates. For instance
West Capricorn
was delivered from the shipyard at the end of 2011, and the contract commencement date occurred in July 2012. Furthermore, we acquired the tender rig
T-15
from Seadrill on May 17,
2013 and the T-15 contract commencement occurred in July 2013. Also, we or OPCO may grow in the future through the acquisition of additional drilling rigs as part of our growth strategy.
|
Six Months Ended June 30, 2013 Compared to Six Months Ended
June 30, 2012
The following table summarizes our operating results for the six months ended June 31, 2013 and 2012:
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Six Months Ended June 30,
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Increase/Decrease
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|
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2013
|
|
|
2012
|
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$
|
|
|
%
|
|
|
|
($ in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
Contract revenues
|
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320.1
|
|
|
|
262.0
|
|
|
|
58.1
|
|
|
|
22.2
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%
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Reimbursable revenues
|
|
|
7.7
|
|
|
|
4.5
|
|
|
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3.2
|
|
|
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71.1
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%
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Other revenues
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5.2
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|
|
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8.5
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|
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(3.3
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)
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(38.8
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%)
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Total operating revenues
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333.0
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|
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275.0
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|
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58.0
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|
|
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21.1
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%
|
|
|
|
|
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Vessel and Rig operating expenses
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123.5
|
|
|
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88.7
|
|
|
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34.8
|
|
|
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39.2
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%
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Reimbursable expenses
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|
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7.3
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|
|
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4.1
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|
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3.2
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78.0
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%
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Depreciation and amortization
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43.9
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30.9
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|
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13.0
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|
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42.1
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%
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General and administrative expenses
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12.0
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13.8
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(1.8
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)
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(13.0
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%)
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Total operating expenses
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186.7
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137.5
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(49.2
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)
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35.8
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%
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Net operating income
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146.3
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137.5
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8.8
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6.4
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%
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|
|
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Interest income
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1.4
|
|
|
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1.2
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|
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0.1
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|
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8.3
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%
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Interest expense
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(24.8
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)
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(17.9
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)
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(6.9
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)
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(38.5
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%)
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Gain/(Loss) on derivative financial instruments
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28.6
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(10.5
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)
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39.1
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|
|
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372.4
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%
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Currency exchange (loss) / gain
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(1.0
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)
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(1.4
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)
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0.4
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28.6
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%
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Total financial items
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4.2
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(28.6
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)
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32.8
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|
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114.7
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%
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Income before income taxes
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150.5
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108.9
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41.6
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38.2
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%
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|
|
|
|
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Income taxes
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|
(12.0
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)
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|
|
(15.8
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)
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3.8
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|
|
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24.0
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%
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Net Income
|
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138.5
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|
|
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93.1
|
|
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45.4
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48.8
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%
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Contract Revenues
Contract revenue increased by $58.1 million, or 22.2%, to $320.1 million, for the six months ended June 30, 2013, from $262.0 million for the six months
ended June 30, 2012. The increase was primarily due to the
West Capricorn
commencing operations during July 2012, with a contribution of $72.7 million for the six months ended June 30, 2013. This was partly offset by a decrease of
$14.8 million due to the
West Aquarius
mobilizing from Southeast Asia to Canada and commencing operations at a reduced dayrate in the first half of 2013. As the
West Aquarius
is on
2
a global contract with Exxon Mobil, dayrates are adjusted according to the level of operating expenses in each location and Canada has lower operating expenses than the locations the drilling rig
was operating in during the first half of 2012.
The following table summarizes average daily revenues and economic utilization percentage by drilling rig
type of OPCOs fleet for the periods presented:
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Six Month Ended June 30,
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2013
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2012
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Average Daily
Revenues (USD)
(1)
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Economic
Utilization
(2)
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Average Daily
Revenues (USD)
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Economic
Utilization
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Semi-submersible
rigs
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$
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466,850
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91.3
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%
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|
$
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564,800
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94.6
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%
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Drillship
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$
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536,300
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|
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96.4
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%
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$
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535,600
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|
|
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98.1
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%
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Tender rig
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$
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209,200
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|
|
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99.9
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%
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$
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213,500
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|
|
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103.5
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%
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(1)
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Average daily revenues are the average revenues for each type of rig, based on the actual days available for each rig of that type.
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(2)
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Economic utilization is calculated as the total revenue received divided by the full operating dayrate multiplied by the number of days in the period, excluding bonuses.
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Reimbursable Revenues
Reimbursable revenue
increased by $3.2 million, or 71.1%, to $7.7 million for the six months ended June 30, 2013, from $4.5 million in the six months ended June 30, 2012. The increase was mainly due to the
West Aquarius
mobilizing to Canada, as well as
certain client-requested upgrades to the
West Aquarius
.
Other revenues
Other revenue decreased by $3.3 million, or 38.8% to $5.2 million, for the six months ended June 30, 2013, from $8.5 million for the six months
ended June 30, 2012. We earned other revenues within our Nigerian service company of $5.2 million billed to Seadrill for certain services, including the provision of onshore and offshore personnel, which we provided to Seadrills
West
Polaris
drilling rig that was operating in Nigeria during that period. The decrease was due to the
West Polaris
rig which operated in Nigeria for only 59 days during the six months ended June 30, 2013 compared to six months of
operations in the same period in 2012.
Rig Operating Expenses
Rig operating expenses increased by $34.8 million, or 39.2%, to $123.5 million in the six months ended June 30 2013, from $88.7 million in the six
months ended June 30, 2012. This increase was primarily due to the
West Capricorn
and the
West Aquarius
each commencing operations in 2012, which accounted for an increase of $24.7 million and $11.3 million, respectively. This was
partly offset by a decrease in operating expenses related to the
West Polaris
(See Other Revenues and Related Parties note).
Reimbursable Expenses
Reimbursable
expenses increased by $3.2 million, or 78%, to $7.3 million for the six months ended June 30, 2013 from $4.1 million in the six months ended June 30, 2012. The increase was mainly due to the
West Aquarius
mobilizing to Canada and
expenses incurred as part of a client-requested upgrade to the
West Aquarius
.
Depreciation and Amortization
Depreciation and amortization expenses increased by $13.0 million, or 42.1%, to $43.9 million for the six months ended June 30, 2013, from $30.9
million for the six months ended June 30, 2012. The increase was primarily due to the
West Capricorn
commencing operations in July 2012 and therefore there was no depreciation expense included in the comparable 2012 period.
3
General and Administrative Expenses
General and administrative expenses decreased by $1.8 million, or 13.0%, to $12.0 million for the six months ended June 30, 2013, from $13.8
million for the six months ended June 30, 2012. The decrease was primarily due to higher spending as part of the
West Capricorn
commencing operation in 2012, and setting up a new office in Canada for the
West Aquarius
in 2012
which did not occur in 2013.
Interest Expense
Interest expense increased by $6.9 million, or 38.5%, to $24.8 million for the six months ended June 30, 2013 from $17.9 million for the six months ended
June 30, 2012. The increase is primarily due to interest on the $550 million secured credit facility not being capitalized in the first half of 2013, as the
West Capricorn
entered into operation in July 2012. Additionally, the increase
can also be attributed to the commitment fee expense for the undrawn balance of the revolving credit facility with Seadrill. This facility was entered into at the time of our IPO in October 2012.
Other Financial Items
Other financial items
reported in the income statement include the following items:
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Six months ended June 30,
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(US$ millions)
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2013
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2012
|
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Interest income
|
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1.3
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|
|
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1.2
|
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Gain/(Loss) on derivative financial instruments
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28.6
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(10.5
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)
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Foreign exchange loss
|
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(1.0
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)
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(1.4
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)
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Total other financial items
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28.9
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(10.7
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)
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Other financial items improved by $39.6 million to a gain of $28.9 million in the six months ended June 30, 2013 from a
loss of $10.7 million in the same period in 2012. The change was mainly driven by a recognized gain from derivative instruments of $28.6 million in the first half of 2013 compared to a loss of $10.5 million in the same period in 2012. The increase
relates to the change in fair value of the interest swaps held by Seadrill and attributable to the Company in proportion to the variable interest debt relating to the
West Capella
, the
West Aquarius,
the
West Capricorn
, the
West Vencedor
and the
T-15
. As of June 30, 2013, 87% of total debt obligations for the Company had associated interest rate swap agreements.
Income Taxes
Income taxes decreased $3.8
million, or 24%, to $12.0 million for the six months ended June 30, 2013 from $15.8 million for the six months ended June 30, 2012. The decrease was primarily caused by the
West Aquarius
moving from South-East Asia to Canada during
2012, and the resulting change in taxable income and tax rates.
B. Liquidity and Capital Resources
Liquidity and Cash Needs
We operate in a
capital-intensive
industry, and our primary liquidity needs are to finance the purchase of additional drilling rigs and other capital expenditures, service our significant debt, fund investments (including the
equity portion of investments in drilling rigs), fund working capital, maintain cash reserves against fluctuations in operating cash flows and pay distributions. We expect to fund our
short-term
liquidity
needs through a combination of cash generated from operations and debt and equity financings.
As of June 30, 2013, our cash and cash equivalents
were $50.0 million, compared to $19.5 million as of December 31, 2012. In connection with the closing of our IPO, OPCO entered into a
five-year
$300 million revolving credit facility with
Seadrill as the lender, which we refer to as the sponsor credit facility. As of June 30, 2013, we have drawn down $69.6 million from this facility. We believe our current resources, including the potential borrowings under the sponsor credit
facility, are sufficient to meet our working capital requirements for our current business for at least the next twelve months. Generally, our
long-term
sources of funds will be a combination of cash generated
from operations, debt, equity financing and borrowings from and leasing arrangements with commercial banks. Because we distribute all of our available cash, we expect that we will rely upon external financing sources, including bank borrowings and
the issuance of debt and equity securities, to fund acquisitions and other expansion capital expenditures.
4
Our funding and treasury activities are intended to maintain appropriate liquidity. Cash and cash equivalents are
held primarily in U.S. Dollars with some balances held in Euros and Nigerian Naira. We have not entered into any foreign currency derivatives related to the Euro or Naira in the periods presented.
As OPCOs fleet matures and expands,
long-term
maintenance expenses will likely increase. We are not aware of any
regulatory changes or environmental liabilities that would have a material impact on our or OPCOs current or future operations.
As of June 30,
2013 and December 31, 2012, our current liabilities exceeded current assets by $510.3 million and $192.0 million, respectively. This is primarily due to one of our debt facilities maturing in June 2014, and therefore being presented
as part of our Current liabilities in the amount of $490.8 million. We intend to refinance these loans in due course, and have received indicative offers from commercial banks. We expect the facility to be refinanced before maturity in June 2014.
For the periods prior and subsequent to our IPO, the historic financial positions of OPCO, historic interaction between OPCO and the Seadrill group, and
that amounts due to and due from OPCO to other Seadrill entities are recognized within owners equity in the Consolidated and Combined Carve-Out Financial Statements. Because Seadrill used a centralized cash management system, whereby cash held
at a subsidiary level was swept on a daily basis into a centralized treasury function at Seadrill, intercompany payables and receivables outstanding for the periods presented prior to our IPO have been deemed to have been treated as equity by OPCO.
OPCOs participation in the Seadrill groups centralized cash management system was discontinued at the completion of our IPO.
In order to conform our working capital to that reflected in our balance sheet as of June 30, 2012, we agreed with Seadrill to amend the Contribution and
Sale Agreement that we entered into with Seadrill at the time of our IPO in October 2012 to convert certain intercompany payables to equity. Pursuant to that amendment, as of June 30, 2013, our accounts and those of Seadrill were adjusted to
reflect a net capital contribution in the amount of $20.0 million by Seadrill to Seadrill Operating LP and a net capital contribution in the amount of $20.5 million by Seadrill to Seadrill Capricorn Holdings LLC. No additional units were issued to
Seadrill in connection with either of these contributions.
Cash Flows
Net Cash Provided by Operating Activities
Net cash
provided by operating activities was $121.1 million and $96.2 million for the six months ended June 30, 2013 and 2012, respectively. The main drivers for the cash flow in the first half of 2013 were net income of $138.5 million and working
capital changes of $26.0 million. For the first half of 2012, the cash flow from operations was mainly driven by net income of $93.1 million.
Net Cash
Used in Investing Activities
Net cash used in investing activities was $35.0 million and $68.0 million for the six months ended June 30
2013 and 2012, respectively. In the first half of 2013, $19.4 million relates to costs of construction related to the
T-15
rig and $15.6 million relates to additions to the
West Capricorn
and
West Aquarius
rigs. The $68 million
in the first half of 2012 relates to additional costs of construction and mobilization of the
West Capricorn
.
Net Cash (Used in) / Provided by
Financing Activities
Prior to the date of our IPO,
long-term
debt as presented in the Consolidated and
Combined Carve-Out Financial Statements had been allocated from Seadrill, as Seadrill managed the treasury activities with the purpose of maximizing returns while maintaining appropriate liquidity for the Seadrill groups requirements. As a
result of this and the principles applied to allocate debt, the movements in debt may not be indicative of actual debt movements if OPCO had been operating as a standalone entity.
5
Net cash used in financing activities was $55.6 million and $42.3 million during the six months ended
June 30, 2013 and 2012, respectively. In the first half of 2013, net cash used in financing activities of $55.6 million relates to repayments of debt of $170.1 million, cash distributions of $50.0 million and a distribution to Seadrill of $76.1
million as part of the
T-15
acquisition, which was partly offset by receipt of owners funding of $31.8 million, proceeds from related party loans of $99.6 million and proceeds from
T-15
vendor financing of $109.5 million. Net
cash used in financing activities in the first half of 2012 of $42.3 million, relates to repayments of rig facilities of $90.4 million and receipt of owners funding of $48.1 million.
Net Increase/(Decrease) in Cash and Cash Equivalents
As
a result of the foregoing, cash and cash equivalents increased in the six months ended June 30, 2013 by $48.8 million to $50.0 million, compared to $1.2 million as of June 30, 2012.
Borrowing Activities
Rig Financing Agreements
Seadrill financed the acquisitions of the drilling rigs in OPCOs fleet with borrowings under credit agreements.
We refer to the
West Capricorn
Facility, the
West Vencedor
Facility and the
West Capella
&
West Aquarius
Facility
and
T-15
Facility collectively as the Rig Facilities. In September 2012, each of OPCOs subsidiaries that own the
West Capricorn
, the
West Vencedor
, the
West Aquarius
and the
West Capella
, or the rig
owning subsidiaries, entered into related party loan agreements with Seadrill in the amount of approximately $522.5 million, $115.2 million, $304.6 million and $295.3 million corresponding to the aggregate principal amount
outstanding under the Rig Facilities allocable to the
West Capricorn
, the
West Vencedor
, the
West Aquarius
and the
West Capella
, respectively. On May 17, 2013, the entities that own and operate the
T-15
entered into a loan agreement with Seadrill in the amount of $100.5 million corresponding with the aggregate principal amount outstanding under the T-15 Facility. Pursuant to the related party loan agreements, each rig owning subsidiary makes
payments of principal and interest directly to Seadrill under each Rig Facility, at Seadrills direction and on its behalf, corresponding to payments of principal and interest due under such Rig Facility that are allocable to the
West
Capricorn
, the
West Vencedor
, the
West Aquarius,
the
West Capella
and the
T-15
, as applicable.
In
December 2011, Seadrill entered into a $550 million senior secured term loan and revolving credit facility, in part to fund the delivery of the
West Capricorn
. We refer to this secured term loan and revolving credit facility as the
West Capricorn
Facility. The
West Capricorn
was pledged to secure Seadrills obligations under the
West Capricorn
Facility. Seadrills obligations under such facility could exceed the indebtedness of OPCO and its
subsidiary that owns the
West Capricorn
under such facility. The revolving credit facility portion of the
West Capricorn
Facility and the commercial term loan portion of the
West Capricorn
Facility bears interest at a rate of
LIBOR plus a margin ranging between 1.5% and 2.25% and will mature in December 2017. In connection with our IPO, Seadrill amended and restated the
West Capricorn
Facility to allow for the transfer of the
West Capricorn
to OPCO and
to provide for Seadrill Capricorn Holdings and its subsidiaries that, directly or indirectly, own the
West Capricorn
and Seadrill US Gulf LLC to guarantee the obligations under the
West Capricorn
Facility. The outstanding
balance as of June 30, 2013, was $467.5 million.
In June 2010, Seadrill entered into a $1.2 billion senior secured term loan
in part to fund the delivery of the
West Vencedor
. We refer to this secured term loan as the
West Vencedor
Facility. The
West Vencedor
was pledged to secure Seadrills obligations under the
West Vencedor
Facility.
Seadrills obligations under such facility could exceed the indebtedness of OPCO and its subsidiary that owns the
West Vencedor
under such facility. The
West Vencedor
Facility bears interest at a rate of LIBOR plus 2.25% and will
mature in July 2015. In connection with our IPO, Seadrill amended and restated the
West Vencedor
Facility to allow for the transfer of the
West Vencedor
to OPCO and to provide for Seadrill Operating LP and its subsidiaries
that, directly or indirectly, own the
West Vencedor
to guarantee the obligations under the
West Vencedor
Facility. The outstanding balance as of June 30, 2013 allocable to the
West Vencedor
, was $98.8 million.
6
In June 2009, Seadrill entered into a $1.5 billion senior secured credit facility in part to
fund the acquisition of the
West Capella
and the
West Aquarius
. We refer to this secured credit facility as the
West Capella
&
West Aquarius
Facility. The
West Capella
and the
West Aquarius
were
pledged to secure Seadrills obligations under the
West Capella
&
West Aquarius
Facility. Seadrills obligations under such facility could exceed the indebtedness of OPCO and its subsidiaries that own the
West
Capella
and the
West Aquarius
under such facility. The
West Capella
&
West Aquarius
Facility bears interest at a rate of LIBOR plus 3.25% and will mature in June 2014, and the outstanding balance has therefore
been classified as current on our balance sheet as of June 30, 2013. In connection with our IPO, Seadrill amended and restated the
West Capella
&
West Aquarius
Facility to allow for the transfer of the
West Capella
and the
West Aquarius
to OPCO and to provide for Seadrill Operating LP and its subsidiaries that, directly or indirectly, own the
West Capella
and the
West Aquarius
and Seadrill Canada Ltd. to guarantee the obligations
under the
West Capella
&
West Aquarius
Facility. The outstanding balance as of June 30, 2013 allocable to the
West Capella
and
West Aquarius
, was $490.8 million.
In December 2012, Seadrill entered into a $440 million secured term loan facility in part to fund the acquisition of the tender barge
T-15
. We
refer to this loan facility as the
T-15
Facility. The
T-15
was pledged to secure Seadrills obligations under the
T-15
Facility. Seadrills obligations under such facility could exceed the indebtedness of OPCO and its
subsidiaries that own the
T-15
under such facility. The
T-15
Facility bears interest at a rate of LIBOR plus 3.25% and will mature in December 2017. Seadrill amended and restated the
T-15
Facility to allow for the transfer of
the
T-15
and for Seadrill Partners Operating LLC and its subsidiaries that, directly or indirectly, own the
T-15
to guarantee the obligations under the
T-15
Facility. The outstanding balance as of June 30, 2013
allocable to the
T-15
, was $95.5 million.
On May 17, 2013, Seadrill Partners Operating entered into a $109.5 million loan agreement
with Seadrill as the lender to finance the acquisition of the T-15 (the T-15 loan agreement). The T-15 loan agreement bears interest at a rate of LIBOR plus 5% and matures in May 2016.
Interest Rates, Fees and Payments.
The Rig Facilities bear interest at LIBOR plus an applicable margin (as defined in the applicable Rig
Facility) and mandatory costs (if any), both of which accrue and are payable every three months. In addition, a commitment fee of 40% of the applicable margin is payable quarterly in arrears and on the final maturity date or termination date for
each of the Rig Facilities. As all of the Rig Facilities are fully drawn, we do not expect to pay a commitment fee on these facilities.
Each of the Rig Facilities amortizes the outstanding borrowed amounts over the term of such facility. At maturity, each of the Rig Facilities will
terminate and all outstanding amounts there under will be due and payable, including balloon payments of $275.0 million for the
West Capricorn
Facility in February 2017, $71.5 million for the
West Vencedor
Facility in
July 2015 and $409.0 million for the
West Capella
&
West Aquarius
Facility in June 2014 and $55.3 million for the
T-15
facility in December 2017.
Restrictive Covenants.
The Rig Facilities contain various customary covenants that may limit, among other things, the ability of the borrower
to:
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sell the applicable drilling rig;
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|
incur additional indebtedness or guarantee other indebtedness;
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make investments or acquisitions;
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|
pay dividends or make any other distributions if an event of default occurs; or
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enter into
inter-company
charter arrangements for the drilling rigs not contemplated by the applicable Rig Facility.
|
The Rig Facilities also contain financial covenants requiring Seadrill Limited to:
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maintain a minimum liquidity of at least $155 million within the group;
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|
ensure that the consolidated ratio of net debt to EBITDA for Seadrill and its subsidiaries does not exceed 4.5 to 1.0;
|
7
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|
ensure that the consolidated ratio of EBITDA to interest expenses for Seadrill and its subsidiaries be a minimum of 2.5 to 1.0;
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|
ensure that the consolidated ratio of current assets to current liabilities for Seadrill and its subsidiaries be a minimum of 1.0 to 1.0; and
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|
ensure that the consolidated ratio of equity to total assets for Seadrill and its subsidiaries be a minimum of 30%.
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The Rig Facilities also identify various events that may trigger mandatory reduction, prepayment, and cancellation of the facility including, among others,
the following:
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total loss or sale of a drilling rig securing a Rig Facility;
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cancellation or termination of any existing charter contract or satisfactory drilling contract (in the case of the
West Capricorn
Facility if a new contract is not entered into within 12 months after the
cancellation or termination of such contract); and
|
Seadrill was in compliance with the covenants under the Rig Facilities as of
June 30, 2013 and December 31, 2012. In addition, we and OPCO were each in compliance with the covenants contained in the related party loan agreement as of June 30, 2013 and December 31, 2012. We and Seadrill also intend to
amend these restrictive covenants in connection with any assignment or amendment of the Rig Facilities.
The Rig Facilities contain customary events of
default, such as failure to repay principal and interest, and other events of defaults, such as:
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failure to comply with the financial or insurance covenants;
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cross-default
to other indebtedness held by both Seadrill and its subsidiaries and by us;
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failure by Seadrill or by us to remain listed on a stock exchange;
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the occurrence of a material adverse change;
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revocation, termination, or modification of any authorization, license, consent, permission, or approval as necessary to conduct operations as contemplated by the applicable Rig Facility; and
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the destruction, abandonment, seizure, appropriation or forfeiture of property of the guarantors or Seadrill and its subsidiaries, or the limitation by seizure, expropriation, nationalization, intervention, restriction
or other action by or on behalf of any governmental, regulatory or other authority, of the authority or ability of Seadrill or any subsidiary thereof to conduct its business, which has or reasonably may be expected to have a material adverse effect.
|
If an event of default exists under any of the Rig Facilities, the lenders have the ability to accelerate the maturity of the applicable
Rig Facility and exercise other rights and remedies. In addition, if Seadrill were to default under one of its other financing agreements, it could cause an event of default under each of the Rig Facilities. Further, because OPCOs drilling
rigs are pledged as security for Seadrills obligations under the Rig Facilities, lenders thereunder could foreclose on OPCOs drilling rigs in the event of a default thereunder.
Credit Facility
OPCO entered into
a $300 million amended and restated revolving loan agreement with Seadrill as the lender (the sponsor credit facility). Under this sponsor credit facility, Seadrill Operating LP has a borrowing limit of $250 million,
Seadrill Capricorn Holdings LLC has a borrowing limit of $150 million and Seadrill Partners Operating LLC has a borrowing limit of $150 million; provided that the total borrowings outstanding at any time may not exceed
$300 million. The sponsor credit facility will mature on October 24, 2017 and bear interest at a rate of LIBOR plus 5% per annum, with an annual 2% commitment fee on the undrawn balance. As of June 30, 2013, $230.4 million was
undrawn under the sponsor credit facility.
8
The sponsor credit facility contains covenants that require us to, among other things:
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notify Seadrill of the occurrence of any default or event of default; and
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provide Seadrill with information in respect of our business and financial status as Seadrill may reasonably require, including, but not limited to, copies of our unaudited quarterly financial statements and our audited
annual financial statements
|
As of June 30, 2013, OPCO was in compliance with all covenants under the sponsor credit facility.
Events of default under the sponsor credit facility include, among others, the following:
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failure to pay any sum payable under the sponsor credit facility when due;
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|
breach of certain covenants and obligations of the sponsor credit facility;
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a material inaccuracy of any representation or warranty;
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|
default under other indebtedness in excess of $25.0 million;
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bankruptcy or insolvency events; and
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commencement of proceedings seeking issuance of a warrant of attachment, execution, distraint or similar process against all or any substantial part of OPCOs assets that results in an entry of an order for any
such relief that is not vacated, discharged, stayed or bonded pending appeal within 60 days of the entry thereof.
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Derivative Instruments
and Hedging Activities
We use financial instruments to reduce the risk associated with fluctuations in interest rates. These agreements do not qualify
for hedge accounting and any changes in the fair values of interest rate swap agreements are included in the Consolidated and Combined Statement of Operations within Financial Items.
Interest-rate swap agreements:
Total realized and unrealized gain on interest-rate swap agreements not qualified for hedge accounting, amounted to
$28.6 million for the six months ended June 30, 2013.
As of June 30, 2013, we and our consolidated subsidiaries had entered into interest rate
swap contracts with Seadrill with a combined outstanding principal amount of $1,158.4 million at rates between 1.38% per annum and 0.739% per annum. The overall effect of these swaps is to fix the interest rate on $1,158.4 million of
floating rate debt at a weighted average interest rate 1.16% per annum. As of June 30, 2013, our interest swaps represent approximately 87% of debt obligations. The swaps were entered into by Seadrill, with back to back agreements entered
into with Seadrill Partners.
We receive part of our revenue in both Nigerian Naira and Euros. Because we incur operating costs related to the
West Capella
in Nigerian Naira, we are able to offset a portion of our foreign currency exposure with respect to revenues earned in Nigerian Naira. Depending on the level of our currency exposure, we may in the future enter into derivative
instruments to manage currency risk.
Critical Accounting Estimates
The preparation of our condensed consolidated and combined carve-out interim financial statements in accordance with U.S. GAAP requires that management make
estimates and assumptions affecting the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting
period.
9
For a description of our other material accounting policies that involve a higher degree of judgement, please
read Note 2 (Summary of Significant Accounting Policies) of our Consolidated and Combined Financial Statements included in our Restatement 6-K filed with the SEC.
Contractual Obligations
The following table sets forth
our contractual obligations for the periods indicated as of June 30, 2013:
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($ in millions)
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Payments Due by Period
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Total
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Less than
1 Year
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1-3 Years
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4-5 Years
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More than
5 Years
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Long-term debt obligations
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|
|
1,262.2
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|
|
|
572.3
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|
|
|
634.5
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|
|
|
55.4
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Interest expense commitments on long-term debt obligations
(1)
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72.8
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|
|
33.8
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|
38.6
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|
0.5
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|
|
|
|
|
|
|
|
|
|
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|
|
|
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Commitment fee on undrawn facility
(2)
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19.9
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|
4.6
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|
13.8
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|
|
1.5
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Sponsor Credit Facility
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|
|
|
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69.6
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|
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Management and administrative services provided by Seadrill Management
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10.0
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|
|
2.0
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|
|
|
4.0
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|
|
|
4.0
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|
|
|
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|
|
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|
|
|
|
|
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Total
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1,434.5
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|
|
|
612.7
|
|
|
|
690.9
|
|
|
|
131.0
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
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|
|
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(1)
|
Our interest commitment on our long-term debt is calculated based on an assumed average U.S. Dollar 3 month LIBOR of 0.28% and taking into account the various applicable margin rates associated with each facility.
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(2)
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The $300 million revolving credit facility with Seadrill incurs a commitment fee on the undrawn balance of 2% per annum.
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Quantitative and Qualitative Disclosures About Market Risk
We are exposed to various market risks, including interest rate, foreign currency exchange, retained risk and concentration of credit risks. We may enter into
a variety of derivative instruments and contracts to maintain the desired level of exposure arising from these risks.
Interest Rate Risks
The Companys exposure to interest rate risk relates mainly to its floating interest rate debt and balances of surplus funds placed with financial
institutions. This exposure is managed through the use of interest rate swaps and other derivative arrangements. The Companys objective is to obtain the most favorable interest rate borrowings available without increasing its foreign currency
exposure. Surplus funds are generally placed in fixed deposits with reputable financial institutions, yielding higher returns than are available on overnight deposits in banks. Such deposits generally have short-term maturities, in order to provide
the Company with flexibility to meet all requirements for working capital and capital investments. The extent to which the Company utilizes interest rate swaps derivatives to manage its interest rate risk is determined by the net debt exposure and
its views on future interest rates.
As of June 30, 2013, we and our consolidated subsidiaries had entered into interest rate swap agreements with
Seadrill for a combined outstanding principal amount of approximately $1,158.4 million at rates between 1.38% per annum and 0.739% per annum. The swap agreements mature between November 2017 and December 2022. The gain recognized on our
interest rate swaps for the six months ended June 30, 2013, was $28.6 million. The interest rate swap agreements were entered in to by Seadrill Limited as Borrower.
As of June 30, 2013, our net exposure to floating interest rate fluctuations on our outstanding debt was $1,331.8 million, compared with $1,240.1 million
as of June 30, 2012. An increase or decrease in short-term interest rates of 100 bps would thus increase or decrease, respectively, our interest expense by approximately $13.3 million on an annual basis as of June 30, 2013, as compared to
$12.4 million in 2012.
10
The fair values of our interest rate swaps as of June 30, 2013 and 2012 were as follows:
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June 30, 2013
|
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June 30, 2012
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(In millions of US dollars)
|
|
Outstanding
principal
|
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Fair Value
|
|
|
Outstanding
Principal
|
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Fair Value
|
|
Other current assets (liabilities)
|
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|
1,158.4
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27.3
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For disclosure of the fair value of the derivatives and debt obligations outstanding as of June 30, 2013, please read
Note 9 of the Consolidated and Combined Carve-Out Financial Statements included elsewhere in this Form 6-K.
Credit Risk
The Company has financial assets which expose the Company to credit risk arising from possible default by a counterparty. The Company considers the
counterparties to be creditworthy and does not expect any significant loss to result from non-performance by such counterparties. The Company in the normal course of business does not demand collateral from its counterparties.
Foreign Currency Fluctuation Risks
OPCO and all of its
subsidiaries use the U.S. Dollar as their functional currency because the majority of their revenues and expenses are denominated in U.S. Dollars. Accordingly, our reporting currency is also U.S. Dollars. We do, however, earn revenue and incur
expenses in other currencies and there is a risk that currency fluctuations could have an adverse effect on the value of our cash flows. We are exposed to some extent in respect of the
West Vencedor
, which receives approximately 28% of its
dayrate in Euros. In addition, we receive 10% of the
West Capella
s revenues in Nigerian Naira. There is a natural hedge of our exposure to Nigerian Naira as a portion of our operating costs are denominated in Nigerian Naira. A 10%
appreciation or depreciation in the exchange rate of Euros against the U.S. Dollar would increase or decrease OPCOs revenue by $2.2 million. Our foreign currency risk arises from:
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the measurement of monetary assets and liabilities denominated in foreign currencies converted to US Dollars, with the resulting gain or loss recorded as Foreign exchange gain/(loss) ; and
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the impact of fluctuations in exchange rates on the reported amounts of our revenues and expenses which are denominated in foreign currencies
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We do not use foreign currency forward contracts.
Retained
Risk
Physical Damage Insurance
. Seadrill purchases hull and machinery insurance to cover for physical damage to its drilling rigs and
charges us for the cost related to OPCOs fleet.
We retain the risk for the deductibles relating to physical damage insurance on OPCOs fleet.
The deductible is currently a maximum of $5 million per occurrence.
Loss of Hire Insurance
. Seadrill purchases insurance to cover for loss
of revenue in the event of extensive downtime caused by physical damage to its drilling rigs, where such damage is covered under the Seadrills physical damage insurance, and charges us for the cost related to OPCOs fleet.
The loss of hire insurance has a deductible period of 60 days after the occurrence of physical damage. Thereafter, insurance policies according to which OPCO
is compensated for loss of revenue are limited to between 210 and 290 days. OPCO retains the risk related to loss of hire during the initial 60 day period, as well as any loss of hire exceeding the number of days permitted under insurance policy.
Based on an overall risk assessment in 2013, Seadrill Management decided not to purchase loss of hire insurance for the
T-15
. This means that if the T-15 is wholly or partially deprived of income as a consequence of damage, the loss of income
will not be compensated by insurance.
11
Protection and Indemnity Insurance.
Seadrill purchases protection and indemnity insurance and
excess liability insurance for personal injury liability for crew claims, non-crew claims and third-party property damage including oil pollution from the drilling rigs to cover claims of up to $250 million per event and in the aggregate for the
West Vencedor
and
T-15
and up to $500 million per event and in the aggregate for each of the
West Aquarius
, the
West Capricorn
and the
West Capella
.
OPCO retains the risk for the deductible of up to $0.5 million per occurrence relating to protection and indemnity insurance.
Concentration of Credit Risk
The market for OPCOs
services is the offshore oil and gas industry, and the customers consist primarily of major oil and gas companies, independent oil and gas producers and government-owned oil companies. Ongoing credit evaluations of our customers are performed and
generally we do not require collateral in our business agreements. Reserves for potential credit losses are maintained when necessary.
12
IMPORTANT INFORMATION REGARDING FORWARD-LOOKING STATEMENTS
This Report on Form 6-K for the six months ended June 30, 2013 contains certain forward-looking statements concerning future events and our operations,
performance and financial condition. Forward-looking statements include, without limitation, any statement that may predict, forecast, indicate or imply future results, performance or achievements, and may contain the words believe,
anticipate, expect, estimate, project, will be, will continue, will likely result, plan, intend or words or phrases of similar meanings.
These statements involve known and unknown risks and are based upon a number of assumptions and estimates that are inherently subject to significant uncertainties and contingencies, many of which are beyond our control. Actual results may differ
materially from those expressed or implied by such forward-looking statements. Important factors that could cause actual results to differ materially include, but are not limited to:
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our distribution policy and our ability to make cash distributions on our units or any increases in distributions;
|
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our ability to integrate and realize the expected benefits from acquisitions, including the
T-15
;
|
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|
our ability to borrow under the $300 million sponsor credit facility between OPCO, as borrower, and Seadrill, as lender;
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future financial condition or results of operations and future revenues and expenses;
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expected compliance with financing agreements and the expected effect of restrictive covenants in such agreements;
|
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the failure of OPCOs drilling rigs to perform satisfactorily or to our expectations;
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fluctuations in the international price of oil;
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discoveries of new sources of oil that do not require deepwater drilling rigs;
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the development of alternative sources of fuel and energy;
|
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technological advances, including in production, refining and energy efficiency;
|
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severe weather events and natural disasters;
|
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our ability to meet any future capital expenditure requirements;
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our ability to maintain operating expenses at adequate and profitable levels;
|
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incurrence of cost overruns in the maintenance or other work performed on OPCOs drilling rigs;
|
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our ability to conduct and obtain investment for business activities involving U.S. sanctioned countries, entities and individuals;
|
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our ability to leverage Seadrills relationship and reputation in the offshore drilling industry;
|
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our ability to purchase drilling rigs, including from Seadrill in the future;
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increasing our ownership interest in OPCO;
|
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delay in payments by, or disputes with OPCOs customers under its drilling contracts;
|
13
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OPCOs ability to comply with, maintain, renew or extend its existing drilling contracts;
|
|
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OPCOs ability to re-deploy its drilling rigs upon termination of its existing drilling contracts at profitable dayrates;
|
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our ability to respond to new technological requirements in the areas in which we operate;
|
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the occurrence of any accident involving OPCOs drilling rigs or other drilling rigs in the industry;
|
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changes in governmental regulations that affect us or OPCO and the interpretations of those regulations, particularly those that relate to environmental matters, export or import and economic sanctions or trade embargo
matters, regulations applicable to the oil industry and tax and royalty legislation;
|
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|
increased competition in the offshore drilling industry and other actions of competitors, including decisions to deploy drilling rigs in the areas in which OPCO currently operates;
|
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the increased availability on a timely basis of drilling rigs, supplies, personnel and oil field services in the areas in which OPCO operates;
|
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general economic, political and business conditions globally;
|
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military operations, terrorist acts, wars or embargoes;
|
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potential disruption of operations due to accidents, political events, piracy or acts by terrorists;
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our or OPCOs ability to obtain financing in sufficient amounts and on adequate terms;
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workplace safety regulation and employee claims;
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the cost and availability of adequate insurance coverage;
|
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our incremental general and administrative expenses as a publicly traded limited liability company and our fees and expenses payable under the advisory, technical and administrative services agreements and the
management and administrative services agreements;
|
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the taxation of our company and distributions to our unitholders;
|
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future sales of our units in the public market;
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acquisitions and divestitures of assets and businesses by Seadrill; and
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our business strategy and other plans and objectives for future operations.
|
All forward-looking statements
included in this Report on Form 6-K are made only as of the date of this Report on Form 6-K. New factors emerge from time to time, and it is not possible for us to predict all of these factors. Further, we cannot assess the impact of each such
factor on our business or the extent to which any factor, or combination of factors, may cause actual results to be materially different from those contained in any forward-looking statement. We do not intend to release publicly any updates or
revisions to any forward-looking statements contained herein to reflect any change in our expectations with respect thereto or any change in events, conditions or circumstances on which any such statement is based.
14
Seadrill Partners LLC
UNAUDITED CONSOLIDATED AND COMBINED CARVE-OUT STATEMENT OF OPERATIONS
for the six months ended June 30, 2013 and 2012
(In US$ millions)
|
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|
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|
|
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Six months ended
June 30,
|
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|
2013
|
|
|
2012
|
|
|
|
|
Operating revenues
|
|
|
|
|
|
|
|
|
Contract revenues
|
|
$
|
320.1
|
|
|
$
|
262.0
|
|
Reimbursable revenues
|
|
|
7.7
|
|
|
|
4.5
|
|
Other revenues
|
|
|
5.2
|
|
|
|
8.5
|
|
|
|
|
|
|
|
|
|
|
Total operating revenues
|
|
|
333.0
|
|
|
|
275.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses
|
|
|
|
|
|
|
|
|
Vessel and rig operating expenses
|
|
|
123.5
|
|
|
|
88.7
|
|
Reimbursable expenses
|
|
|
7.3
|
|
|
|
4.1
|
|
Depreciation and amortization
|
|
|
43.9
|
|
|
|
30.9
|
|
General and administrative expenses
|
|
|
12.0
|
|
|
|
13.8
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
186.7
|
|
|
|
137.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net operating income
|
|
|
146.3
|
|
|
|
137.5
|
|
|
|
|
Financial items
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
1.4
|
|
|
|
1.2
|
|
Interest expenses
|
|
|
(24.8
|
)
|
|
|
(17.9
|
)
|
Gain/ (loss) on derivative financial instruments
|
|
|
28.6
|
|
|
|
(10.5
|
)
|
Foreign currency exchange loss
|
|
|
(1.0
|
)
|
|
|
(1.4
|
)
|
|
|
|
|
|
|
|
|
|
Total financial items
|
|
|
4.2
|
|
|
|
(28.6
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
150.5
|
|
|
|
108.9
|
|
|
|
|
Income taxes
|
|
|
(12.0
|
)
|
|
|
(15.8
|
)
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
138.5
|
|
|
$
|
93.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to Seadrill Partners LLC members
|
|
$
|
41.9
|
|
|
$
|
93.1
|
|
Net income attributable to the non-controlling interest
|
|
$
|
96.6
|
|
|
|
|
|
|
|
|
Earnings per unit (basic and diluted)
|
|
|
|
|
|
|
|
|
Common unitholders
|
|
$
|
0.99
|
|
|
|
|
|
Subordinated unitholders
|
|
$
|
0.99
|
|
|
|
|
|
A Statement of Other Comprehensive Income has not been presented as there are no items recognised in other comprehensive
income.
See accompanying notes that are an integral part of these Consolidated and Combined Carve-Out Financial Statements.
F-1
Seadrill Partners LLC
UNAUDITED CONSOLIDATED AND COMBINED CARVE-OUT BALANCE SHEET
as of June 30, 2013 and December 31, 2012
(In US$ millions)
|
|
|
|
|
|
|
|
|
|
|
June 30,
2013
|
|
|
December 31,
2012
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
Current assets
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
50.0
|
|
|
$
|
19.5
|
|
Accounts receivables, net
|
|
|
181.5
|
|
|
|
134.1
|
|
Mobilization revenue receivable short-term
|
|
|
16.3
|
|
|
|
13.6
|
|
Amount due from related party
|
|
|
31.4
|
|
|
|
39.6
|
|
Other current assets
|
|
|
11.2
|
|
|
|
34.5
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
290.4
|
|
|
|
241.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-current assets
|
|
|
|
|
|
|
|
|
Newbuildings
|
|
|
131.4
|
|
|
|
112.0
|
|
Drilling units
|
|
|
2,075.2
|
|
|
|
2,103.0
|
|
Mobilization revenue receivable long-term
|
|
|
52.3
|
|
|
|
49.4
|
|
Deferred tax assets
|
|
|
0.6
|
|
|
|
0.6
|
|
Other non-current assets
|
|
|
5.6
|
|
|
|
9.2
|
|
|
|
|
|
|
|
|
|
|
Total non-current assets
|
|
|
2,265.1
|
|
|
|
2,274.2
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
2,555.5
|
|
|
$
|
2,515.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND MEMBERS CAPITAL/OWNERS AND DROPDOWN COMPANIES EQUITY
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
|
|
|
Current portion of long-term related party payable
|
|
|
572.3
|
|
|
|
235.6
|
|
Related party revolving credit facility
|
|
|
69.6
|
|
|
|
|
|
Trade accounts payable and accruals
|
|
|
21.4
|
|
|
|
28.3
|
|
Deferred mobilization revenue short-term
|
|
|
18.8
|
|
|
|
19.9
|
|
Related party payable
|
|
|
92.4
|
|
|
|
122.2
|
|
Other current liabilities
|
|
|
26.2
|
|
|
|
27.3
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
800.7
|
|
|
|
433.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-current liabilities
|
|
|
|
|
|
|
|
|
Long-term related party payable
|
|
|
689.9
|
|
|
|
1,057.1
|
|
Deferred mobilization revenue long-term
|
|
|
37.1
|
|
|
|
41.1
|
|
Other non-current liabilities
|
|
|
|
|
|
|
0.4
|
|
|
|
|
|
|
|
|
|
|
Total non-current liabilities
|
|
|
727.0
|
|
|
|
1,098.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
|
|
Dropdown companies equity
|
|
|
|
|
|
|
8.7
|
|
Members Capital:
|
|
|
|
|
|
|
|
|
Common unitholders (24,815,025 units issued and outstanding)
|
|
|
195.1
|
|
|
|
208.2
|
|
Subordinated unitholders (16,543,350 units issued and outstanding)
|
|
|
80.9
|
|
|
|
89.6
|
|
Total Members capital/Owners and Dropdown Companies equity
|
|
|
276.0
|
|
|
|
306.5
|
|
Non-controlling interest
|
|
|
751.8
|
|
|
|
677.1
|
|
|
|
|
|
|
|
|
|
|
Total equity
|
|
|
1,027.8
|
|
|
|
983.6
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and equity
|
|
$
|
2,555.5
|
|
|
$
|
2,515.5
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes that are an integral part of these Consolidated and Combined Carve-Out Financial Statements.
F-2
Seadrill Partners LLC
UNAUDITED CONSOLIDATED AND COMBINED CARVE-OUT STATEMENT OF CASH FLOWS
for the six months ended June 30, 2013 and 2012
(In US$ millions)
|
|
|
|
|
|
|
|
|
|
|
Six months ended
June 30,
|
|
|
|
2013
|
|
|
2012
|
|
|
|
|
Cash Flows from Operating Activities
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
138.5
|
|
|
$
|
93.1
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
43.9
|
|
|
|
30.9
|
|
Amortization of deferred loan charges
|
|
|
3.2
|
|
|
|
3.1
|
|
Amortization of mobilization revenue
|
|
|
(10.0
|
)
|
|
|
(6.6
|
)
|
Unrealized (gain)/ loss related to derivative financial instruments
|
|
|
(28.6
|
)
|
|
|
10.5
|
|
Payment for long term maintenance
|
|
|
|
|
|
|
(1.0
|
)
|
Deferred income tax expense (benefit)
|
|
|
0.1
|
|
|
|
0.1
|
|
|
|
|
Changes in operating assets and liabilities, net of effect of acquisitions
|
|
|
|
|
|
|
|
|
Mobilization fees received from customers
|
|
|
4.6
|
|
|
|
41.4
|
|
Trade accounts receivable
|
|
|
(47.5
|
)
|
|
|
(52.0
|
)
|
Mobilization revenue receivable
|
|
|
(5.6
|
)
|
|
|
(41.3
|
)
|
Trade accounts payable
|
|
|
(6.8
|
)
|
|
|
(0.4
|
)
|
Related party payables
|
|
|
7.2
|
|
|
|
|
|
Other assets
|
|
|
23.7
|
|
|
|
15.0
|
|
Other liabilities
|
|
|
(1.6
|
)
|
|
|
3.4
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
$
|
121.1
|
|
|
$
|
96.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from Investing Activities
|
|
|
|
|
|
|
|
|
Additions to newbuildings and rigs
|
|
$
|
(35.0
|
)
|
|
$
|
(68.0
|
)
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities
|
|
$
|
(35.0
|
)
|
|
$
|
(68.0
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from Financing Activities
|
|
|
|
|
|
|
|
|
Proceeds from long term debt related party
|
|
|
109.5
|
|
|
|
|
|
Repayments of debt
|
|
|
(170.1
|
)
|
|
|
(90.4
|
)
|
Debt fees paid
|
|
|
(0.3
|
)
|
|
|
|
|
Proceeds from related party loans
|
|
|
99.6
|
|
|
|
|
|
Cash Distributions
|
|
|
(50.0
|
)
|
|
|
|
|
Distribution to Seadrill Limited for the acquisition of Tender rig
T-15
|
|
|
(76.1
|
)
|
|
|
|
|
Owners funding (paid)/received
|
|
|
31.8
|
|
|
|
48.1
|
|
|
|
|
|
|
|
|
|
|
Net cash used in financing activities
|
|
$
|
(55.6
|
)
|
|
$
|
(42.3
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase/(decrease) in cash and cash equivalents
|
|
|
30.5
|
|
|
|
(14.1
|
)
|
Cash and cash equivalents at beginning of the period
|
|
|
19.5
|
|
|
|
15.3
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at the end of period
|
|
$
|
50.0
|
|
|
$
|
1.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplementary disclosure of cash flow information
|
|
|
|
|
|
|
|
|
Interest paid, net of capitalized interest
|
|
$
|
28.4
|
|
|
$
|
14.7
|
|
Taxes paid
|
|
$
|
15.2
|
|
|
$
|
4.9
|
|
See accompanying notes that are an integral part of these Consolidated and Combined Carve-Out Financial Statements.
F-3
Seadrill Partners LLC
UNAUDITED CONSOLIDATED AND COMBINED CARVE-OUT STATEMENT OF CHANGES MEMBERS CAPITAL/OWNERS AND DROPDOWN COMPANIES
EQUITY
for the six months ended June 30, 2013 and 2012, and the six months ended December 31, 2012
(In US$ millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dropdown
Companies
Equity
|
|
|
|
|
|
Members Capital
|
|
|
Total
before
Non-
Controlling
interest
|
|
|
Non-
Controlling
interest
|
|
|
Total
Members
Capital/
Owners
Equity
|
|
|
|
|
Owners
Equity
|
|
|
Common
Units
|
|
|
Subordinated
Unit
|
|
|
Seadrill
Member
|
|
|
|
|
Combined balance as at December 31, 2011
|
|
$
|
22.2
|
|
|
$
|
793.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
815.2
|
|
|
|
|
|
|
$
|
815.2
|
|
|
|
|
|
|
|
|
|
|
Combined carve-out net income (January 1 to June 30)
|
|
|
(0.7
|
)
|
|
|
93.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
93.2
|
|
|
|
|
|
|
|
93.2
|
|
Movement in invested equity
|
|
|
11.0
|
|
|
|
47.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
58.5
|
|
|
|
|
|
|
|
58.5
|
|
|
|
|
|
|
|
|
|
|
Combined balance as at June 30, 2012
|
|
$
|
32.5
|
|
|
$
|
934.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
966.9
|
|
|
|
|
|
|
$
|
966.9
|
|
Consolidated Balance at December 31, 2012
|
|
$
|
8.7
|
|
|
|
|
|
|
$
|
208.2
|
|
|
$
|
89.6
|
|
|
|
|
|
|
$
|
306.5
|
|
|
$
|
677.1
|
|
|
$
|
983.6
|
|
Elimination of dropdown equity
|
|
|
(8.7
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(8.7
|
)
|
|
|
|
|
|
|
(8.7
|
)
|
Allocation of (2) net assets acquired T-15
|
|
|
|
|
|
|
|
|
|
|
(45.7
|
)
|
|
|
(30.4
|
)
|
|
|
|
|
|
|
(76.1
|
)
|
|
|
|
|
|
|
(76.1
|
)
|
|
|
|
|
|
|
|
|
|
Forgiveness of related party payables
|
|
|
|
|
|
|
|
|
|
|
24.3
|
|
|
|
16.2
|
|
|
|
|
|
|
|
40.5
|
|
|
|
|
|
|
|
40.5
|
|
Net income (1)
|
|
|
|
|
|
|
|
|
|
|
25.1
|
|
|
|
16.8
|
|
|
|
|
|
|
|
41.9
|
|
|
|
96.6
|
|
|
|
138.5
|
|
|
|
|
|
|
|
|
|
|
Cash Distributions paid
|
|
|
|
|
|
|
|
|
|
|
(16.8
|
)
|
|
|
(11.3
|
)
|
|
|
|
|
|
|
(28.1
|
)
|
|
|
(21.9
|
)
|
|
|
(50.0
|
)
|
Consolidated Balance as at June 30, 2013
|
|
|
|
|
|
|
|
|
|
$
|
195.1
|
|
|
$
|
80.9
|
|
|
|
|
|
|
$
|
276.0
|
|
|
$
|
751.8
|
|
|
$
|
1,027.8
|
|
(1)
|
The Dropdown Companies net loss from January 1 to May 17, 2013 (pre-dropdown) amounted to $1.6 million. The post acquisition net profit (from May 18, 2013 to June 30, 2013) relating to the
T-15
in the quarter ended June 30, 2013 was $0.3 million.
|
(2)
|
The excess of the purchase consideration of $210.0 million over the $133.9 million book value of assets acquired has been accounted for as an equity distribution of $76.1 million to Seadrill Ltd. in accordance with the
accounting rules for reorganization of entities under common control. Refer to Note 1.
|
See accompanying notes that are an integral part of these Consolidated and Combined Carve-Out Financial Statements.
F-4
Seadrill Partners LLC
NOTES TO CONSOLIDATED AND COMBINED CARVE-OUT FINANCIAL STATEMENTS
(Unaudited)
Note 1 General information
Background and Formation
On
June 28, 2012, Seadrill Limited (Seadrill or the Parent) formed Seadrill Partners LLC (Seadrill Partners, the Company, our, we, us) under the laws of the
Republic of the Marshall Islands as part of its strategy for the Company to acquire, in connection with the Companys proposed initial public offering of its common units (the IPO), a 30% limited partner interest and non-economic
general partner interest in Seadrill Operating LP, a Marshall Islands limited partnership and a 51% limited liability company interest in Seadrill Capricorn Holdings LLC, a Marshall Islands limited liability company.
On October 24th, 2012, Seadrill and its subsidiaries transferred (i) Seadrill Operating LP, (a) a 100% interest in the entities that own and
operate the
West Aquarius
and the
West Vencedor
, and (b) an approximate 56% interest in the entity that owns and operates the
West Capella
and (ii) Seadrill Capricorn Holdings LLC, a 100% interest in the entities that
own and operate the
West Capricorn
, which we collectively refer to as OPCOs Initial Fleet.
On October 24th, 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 owned 14,752,525 common units and 16,543,350 subordinated units which represent 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). OPCOs 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.
On May 17, 2013, our wholly owned subsidiary, Seadrill Partners Operating LLC, acquired from Seadrill a 100% ownership interests
in the entities that own and operate the tender rig
T-15
. This transaction was deemed to be a reorganization of entities under common control. As a result, the Companys financial statements have been retroactively adjusted in accordance
with United States Generally Accepted Accounting Principles (US GAAP) as if Seadrill Partners had acquired the entities that own and operate the
T-15
for the entire period that the entities have been under the common control of
Seadrill Limited. The retroactively adjusted Consolidated and Combined Carve-Out Financial Statements of Seadrill Partners as of and for the years ended December 31, 2011 and 2012 are attached as Exhibit 99.1 to the Current Report on Form 6-K
filed with the Securities and Exchange Commission on September 30, 2013 (the Restatement 6-K).
Seadrill Operating LP, Seadrill
Capricorn Holdings LLC and Seadrill Partners Operating LLC are collectively referred to as OPCO.
Basis of consolidation and presentation
The unaudited interim consolidated and combined carve-out financial statements are presented in accordance with US GAAP. The amounts are presented in
United States dollar (US dollar) rounded to the nearest hundred thousand, unless stated otherwise.
The unaudited interim consolidated and combined
carve-out financial statements do not include all of the disclosures required in complete annual financial statements. These interim financial statements should be read in conjunction with our retroactively adjusted annual Consolidated and Combined
Carve-Out Financial Statements as at December 31, 2012 included in the Restatement 6-K (our audited 2012 financial statements). The year-end balance sheet data was derived from our audited 2012 financial statements, but does not
include all disclosures required by US GAAP. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair statement have been included.
F-5
As of October 24, 2012, the financial statements of Seadrill Partners LLC (the Company) as a
separate legal entity are presented on a consolidated basis. For periods prior to October 24, 2012, the results of operations and balance sheet have been carved out of the consolidated financial statements of Seadrill Limited and therefore are
presented on a combined carve-out basis. The combined entitys historical combined financial statements include assets, liabilities, revenues, expenses and cash flows directly attributable to the Companys interests in the four rigs in
OPCOs Initial Fleet. Accordingly, the unaudited historical combined carve-out interim financial statements prior to October 24, 2012 reflect allocations of certain administrative and other expenses, including share options and pension
costs, mark-to-market valuations of interest rate and foreign currency swap derivatives. The basis for the allocations are described in note 1 of the retroactively adjusted audited consolidated and combined carve-out financial statements for the
year ended December 31, 2012 filed as an exhibit to the Restatement 6-K with the U.S. Securities and Exchange Commission. These allocated costs have been accounted for as an equity contribution in the combined consolidated balance sheets.
On May 17, 2013, the Company acquired from Seadrill the ownership interests in entities that own and operate the Tender Rig
T-15
. This transaction
was considered a business combination and accounted for as a reorganization of entities under common control. As a result the Companys balance sheets, statements of operations, cash flows and changes in members capital/ owners
equity and related notes have been retroactively adjusted to include the Tender Rig
T-15
, as if the Company had owned the entities that own and operate the Tender Rig
T-15
when the vessel commenced construction. The excess of the
consideration paid by the Company over Seadrills historical cost is accounted for as a change in equity to Seadrill. The effect of adjusting the Companys financial statements to account for this common control transaction impacted the
following line items by:
|
|
|
|
|
(in US$ millions)
|
|
December 31,
2012
|
|
Newbuildings
|
|
|
112.0
|
|
Other assets
|
|
|
1.4
|
|
Total Assets
|
|
|
113.4
|
|
Long-term related party payable
|
|
|
(100.5
|
)
|
Other liabilities
|
|
|
(4.2
|
)
|
Total Liabilities
|
|
|
(104.7
|
)
|
Equity
|
|
|
(8.7
|
)
|
Net income for the six months ended June 30, 2012, decreased by $0.7 million. The effect on the consolidated and combined
carve-out statement of cash flows is as follows:
|
|
|
Decrease of $1.9 million to $96.2 million compared to $98.1 million attributable to net cash provided by operating activities,
|
|
|
|
Decrease of $10.9 million to $(68.0) million compared to $(57.1) million attributable to net cash used in investing activities.
|
|
|
|
Increase of $11.1 million to $(42.3) million compared to $(53.4) million attributable to net cash provided (used in)/by financing activities.
|
|
|
|
Overall a net increase in cash and cash equivalents of $1.7 million to $1.2 million from $2.9 million.
|
Significant accounting policies
The accounting policies
adopted in the preparation of the unaudited interim financial statements are consistent with those followed in the preparation of our annual audited consolidated financial statements for the year ended December 31, 2012, unless otherwise
included in these unaudited interim financial statements as separate disclosures.
Business combinations between entities under common control
Reorganization of entities under common control is accounted for similar to the pooling of interests method of accounting. Under this method, the carrying
amount of net assets recognized in the balance sheets of each combining entity are carried forward to the balance sheet of the combined entity, and no other assets or liabilities are recognized as a result of the combination. The excess of the
proceeds paid, if any, over the historical cost of the
F-6
combining entity is accounted for as a change in equity. In addition re-organization of entities under common control is accounted for as if the transfer occurred from the date that both the
combining entity and combined entity were both under the common control of Seadrill. Therefore, the Companys financial statements prior to the date the interests in the combining entity were actually acquired are retroactively adjusted to
include the results of the combined entities during the periods it was under common control of Seadrill.
Note 2 Recent Accounting Pronouncements
Recently Adopted Accounting Standards
Accounting Standards Update (ASU) No. 2011-11, Balance Sheet (Topic 210):
Disclosures about Offsetting Assets and Liabilities
Effective January 1, 2013, we adopted the accounting standards update that expands the disclosure requirements for the offsetting of assets and liabilities related to certain financial instruments and derivative instruments. The update
requires disclosures to present both gross information and net information for financial instruments and derivative instruments that are eligible for net presentation due to a right of offset, an enforceable master netting arrangement or similar
agreement. The update is effective for interim and annual periods beginning on or after January 1, 2013. The adoption did not have an effect on our interim consolidated financial statements.
Note 3 Segment information
Operating segments
The
Companys fleet is regarded as one single global segment, and is reviewed by the Chief Operating Decision Maker as an aggregated sum of assets, liabilities and activities generating distributable cash to meet minimum quarterly distributions.
A breakdown of the Companys revenues by customer for the six months ended June 30, 2013, and 2012 are follows:
Contract revenue split by customer
|
|
|
|
|
|
|
|
|
(In US$ millions)
|
|
Six months ended
June 30,
|
|
|
|
2013
|
|
|
2012
|
|
|
|
|
ExxonMobil
|
|
|
30
|
%
|
|
|
43
|
%
|
Total
|
|
|
32
|
%
|
|
|
39
|
%
|
Chevron
|
|
|
13
|
%
|
|
|
16
|
%
|
BP
|
|
|
25
|
%
|
|
|
2
|
%
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
100
|
%
|
|
|
100
|
%
|
|
|
|
|
|
|
|
|
|
F-7
Geographic Data
Revenues are attributed to geographical areas based on the country of operations for drilling activities, i.e. the country where the revenues are generated.
The following presents the revenues and fixed assets by geographic area:
Revenues
|
|
|
|
|
|
|
|
|
(In US$ millions)
|
|
Six months ended
June 30,
|
|
|
|
2013
|
|
|
2012
|
|
|
|
|
Nigeria
|
|
$
|
107.2
|
|
|
$
|
110.9
|
|
China
|
|
|
|
|
|
|
80.1
|
|
Angola
|
|
|
42.9
|
|
|
|
43.3
|
|
Vietnam
|
|
|
|
|
|
|
32.3
|
|
Canada
|
|
|
100.9
|
|
|
|
|
|
United States
|
|
|
82.0
|
|
|
|
7.3
|
|
Other
|
|
|
|
|
|
|
1.1
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
333.0
|
|
|
$
|
275.0
|
|
|
|
|
|
|
|
|
|
|
Asset location at the end of the period is not necessarily indicative of the geographic distribution of the revenues or
operating profits generated by such assets during the period.
As of June 30, 2013 and June 30, 2012 the drilling rigs were located as follows:
Fixed Assets Drilling units
|
|
|
|
|
|
|
|
|
(In US$ millions)
|
|
June 30,
2013
|
|
|
December 31,
2012
|
|
|
|
|
Nigeria
|
|
$
|
544.8
|
|
|
$
|
553.9
|
|
Angola
|
|
|
186.0
|
|
|
|
194.3
|
|
Canada
|
|
|
543.0
|
|
|
|
545.7
|
|
United States
|
|
|
801.4
|
|
|
|
809.1
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
2,075.2
|
|
|
$
|
2,103.0
|
|
|
|
|
|
|
|
|
|
|
Note 4 Taxation
Income taxes consist of the following:
|
|
|
|
|
|
|
|
|
(In US$ millions)
|
|
Six months ended
June 30,
|
|
|
|
2013
|
|
|
2012
|
|
|
|
|
Current tax expense:
|
|
$
|
|
|
|
$
|
|
|
United Kingdom
|
|
|
|
|
|
|
|
|
Angola
|
|
|
2.1
|
|
|
|
2.2
|
|
Canada
|
|
|
1.7
|
|
|
|
(0.8
|
)
|
China
|
|
|
|
|
|
|
5.4
|
|
Hungary
|
|
|
0.6
|
|
|
|
|
|
Nigeria
|
|
|
6.2
|
|
|
|
6.3
|
|
Norway
|
|
|
|
|
|
|
2.6
|
|
United States of America
|
|
|
1.5
|
|
|
|
|
|
Other
|
|
|
0.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current tax expense
|
|
|
12.3
|
|
|
|
15.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred tax expense:
|
|
|
|
|
|
|
|
|
Angola
|
|
|
0.1
|
|
|
|
0.1
|
|
Canada
|
|
|
(0.1
|
)
|
|
|
|
|
Nigeria
|
|
|
|
|
|
|
|
|
United States of America
|
|
|
(0.3
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total income tax expense
|
|
$
|
12.0
|
|
|
$
|
15.8
|
|
|
|
|
|
|
|
|
|
|
F-8
Seadrill Partners is tax resident in the United Kingdom. Our controlled affiliates operate and earn income in
several countries and are subject to the laws of taxation within those countries. Currently none of our controlled affiliates operate in the United Kingdom and therefore we are not subject to U.K. tax. Subject to changes in the jurisdictions in
which our drilling rigs operate and/or owned, differences in levels of income and changes in tax laws, our effective income tax rate may vary substantially from one reporting period to another. Our effective income tax rate for each of the three and
six month periods ended June 30, 2013 and 2012 are as follows:
Effective tax rate
|
|
|
|
|
|
|
|
|
(In US$ millions)
|
|
Six months ended
June 30,
|
|
|
|
2013
|
|
|
2012
|
|
|
|
|
United Kingdom statutory income tax rate
|
|
|
23.2
|
%
|
|
|
24.5
|
%
|
Effect of other tax jurisdictions
|
|
|
(15.2
|
%)
|
|
|
(10.1
|
%)
|
|
|
|
|
|
|
|
|
|
Effective income tax rate
|
|
|
8.0
|
%
|
|
|
14.4
|
%
|
|
|
|
|
|
|
|
|
|
Deferred taxes
The net
deferred tax assets consist of the following:
|
|
|
|
|
|
|
|
|
(In US$ millions)
|
|
June 30,
2013
|
|
|
December 31,
2012
|
|
|
|
|
Deferred mobilization revenue
|
|
$
|
0.6
|
|
|
$
|
0.6
|
|
|
|
|
|
|
|
|
|
|
Total deferred tax assets
|
|
$
|
0.6
|
|
|
$
|
0.6
|
|
The net deferred tax liabilities consist of the following:
|
|
|
|
|
|
|
|
|
(In US$ millions)
|
|
June 30,
2013
|
|
|
December 31,
2012
|
|
|
|
|
Provisions
|
|
$
|
0.3
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
Total deferred tax liability
|
|
$
|
0.3
|
|
|
$
|
|
|
Note 5 Acquisition of entities under common control
On May 17, 2013 the Company acquired a 100% interest in the companies that own and operate the tender rig
T-15
from Seadrill.
The purchase consideration was US$210 million. As part of the transaction the Company entered into a new related party loan agreement with Seadrill relating to its existing $440 million credit facility, corresponding to the $100.5 million tranche
relating to the
T-15
. In addition the Company entered into a new related party loan agreement with Seadrill for $109.5 million. Refer to Note 8.
The acquisition has been accounted for as a transaction between entities under common control. The net assets acquired are recorded at the historic book value
of Seadrill. The excess of the purchase price over the book value of net assets acquired of $76.1 million has been recorded as a reduction of equity, as set forth in the table below: The details of the transaction are as follows:
|
|
|
|
|
(In US $ millions)
|
|
|
|
Purchase price
|
|
$
|
210.0
|
|
Rig historic book value
|
|
|
133.9
|
|
|
|
|
|
|
Total value of net assets acquired
|
|
|
(133.9
|
)
|
|
|
|
|
|
Excess amount recorded as a reduction of equity
|
|
|
76.1
|
|
|
|
|
|
|
F-9
Note 6 Newbuildings
|
|
|
|
|
|
|
|
|
(In US$ millions)
|
|
June 30,
2013
|
|
|
December 31,
2012
|
|
|
|
|
Opening balance at the beginning of the period
|
|
$
|
112.0
|
|
|
$
|
788.9
|
|
Additions
|
|
|
17.3
|
|
|
|
131.7
|
|
Capitalized interest and loan related costs
|
|
|
2.1
|
|
|
|
13.0
|
|
Re-classified as drilling units
|
|
|
|
|
|
|
(821.6
|
)
|
Closing balance at the end of the period
|
|
$
|
131.4
|
|
|
$
|
112.0
|
|
December 31, 2012 newbuildings has been retroactively adjusted for the impact of the acquisition of the tender rig
T-15
to include $24.4 million in the opening balance, $87.5 million of additions, and $0.1 capitalized interest.
Note 7 Drilling units
|
|
|
|
|
|
|
|
|
(In US$ millions)
|
|
June 30,
2013
|
|
|
December 31,
2012
|
|
|
|
|
Cost
|
|
$
|
2,306.7
|
|
|
$
|
2,297.0
|
|
Accumulated depreciation
|
|
|
(231.5
|
)
|
|
|
(194.0
|
)
|
|
|
|
|
|
|
|
|
|
Net book value
|
|
$
|
2,075.2
|
|
|
$
|
2,103.0
|
|
|
|
|
|
|
|
|
|
|
The depreciation expense was $43.9 million and $30.9 million for the six months, and $22.3 million and $16.6 million for the
three months ended June 30, 2013 and 2012, respectively.
Note 8 Long-term interest bearing debt and interest expenses
For each of the Rig Financing Agreements, the Company has entered into loan agreements with Seadrill, and these related party loan
agreements are classified as related party transactions, under which the Company makes principal and interest payments directly to Seadrill, corresponding to that proportion of the loan relating to the
West Capella
,
West Aquarius
,
West Vencedor
,
West Capricorn
, and the
T-15
.
As of June 30, 2013 and December 31, 2012, the Company had the following
amounts outstanding under credit facilities:
|
|
|
|
|
|
|
|
|
(In US$ millions)
|
|
June 30,
2013
|
|
|
December 31,
2012
|
|
|
|
|
Credit facilities:
|
|
|
|
|
|
|
|
|
US$1,500 facility
(June 2014)
|
|
$
|
490.8
|
|
|
$
|
572.6
|
|
US$1,200 facility
(June 2015)
|
|
|
98.8
|
|
|
|
111.1
|
|
US$109.5 vendor financing facility
(May 2016)
|
|
|
109.5
|
|
|
|
|
|
US$550 facility
(December 2016)
|
|
|
467.6
|
|
|
|
508.5
|
|
US$440 facility
(December 2017)
|
|
|
95.5
|
|
|
|
100.5
|
|
|
|
|
|
|
|
|
|
|
Total interest bearing debt
|
|
$
|
1,262.2
|
|
|
$
|
1,292.7
|
|
|
|
|
Less: current portion
|
|
|
(572.3
|
)
|
|
|
(235.6
|
)
|
|
|
|
|
|
|
|
|
|
Long-term portion of interest bearing debt
|
|
$
|
689.9
|
|
|
$
|
1,057.1
|
|
|
|
|
|
|
|
|
|
|
F-10
The December 31, 2012 balance has been retroactively adjusted for the impact of the acquisition of the
tender rig
T-15
to include the $100.5 million in the opening balance on the $440 million credit facility. As at December 31, 2012 the short term portion of this facility was $10.1 million.
The outstanding debt as of June 30, 2013 is repayable as follows:
|
|
|
|
|
(In US$ millions)
|
|
As at June 30,
|
|
|
|
Twelve months ended June 30, 2014
|
|
$
|
572.3
|
|
Twelve months ended June 30, 2015
|
|
|
147.4
|
|
Twelve months ended June 30, 2016
|
|
|
174.5
|
|
Twelve months ended June 30, 2017
|
|
|
312.6
|
|
Twelve months ended June 30, 2018 and thereafter
|
|
|
55.4
|
|
|
|
|
|
|
Total interest bearing debt
|
|
$
|
1,262.2
|
|
|
|
|
|
|
On May 17, 2013, as part of the acquisition of the
T-15
tender rig, the Company assumed the associated outstanding
debt of $100.5 million on a back to back basis with Seadrill. This is part of the existing $440 million facility that Seadrill has entered into with a syndicate of banks. The facility bears interest of 3 month LIBOR plus a margin of 3.25% and
matures in December 2017.
In addition, on May 17, 2013, a further $109.5 million was borrowed as vendor financing from Seadrill. The facility bears
interest of LIBOR plus a margin of 5.00% and matures in May 2016.
Note 9 Risk management and financial instruments
The majority of our gross earnings from rigs and vessels are receivable in US dollars and the majority of our other transactions, assets and
liabilities are denominated in US dollars, the functional currency of the Company. However, the Company has operations and assets in a number of countries worldwide and incurs expenditures in other currencies, causing its results from operations to
be affected by fluctuations in currency exchange rates, primarily relative to the US dollar. The Company is also exposed to changes in interest rates on floating interest rate debt. There is thus a risk that currency and interest rate fluctuations
will have a negative effect on the value of the Companys cash flows.
Interest rate risk management
The Companys exposure to interest rate risk relates mainly to its floating interest rate debt and balances of surplus funds placed with financial
institutions. This exposure is managed through the use of interest rate swaps and other derivative arrangements. The Companys objective is to obtain the most favorable interest rate borrowings available without increasing its foreign currency
exposure. The extent to which the Company utilizes interest rate swaps and other derivatives to manage its interest rate risk is determined by the net debt exposure and its views on future interest rates.
Interest rate swap agreements not qualified for hedge accounting
At June 30, 2013 we had interest rate swap agreements with an outstanding principal of US$1,158.4 million (December 31, 2012: US$1,128.0 million). These
agreements do not qualify for hedge accounting and accordingly any changes in the fair values of the swap agreements are included in the Consolidated and Combined Carve-out Statement of Operations under (Loss)/gain on derivative financial
instruments. The total fair value of the interest
F-11
rate swaps outstanding at June 30, 2013 amounted to an asset of US$27.3 million (December 31, 2012: a liability of US$5.9 million). The fair value of the interest rate swaps are classified
as other current assets/liabilities in the balance sheet. The gain recognized for the six months to June 30, 2013 was $28.6 million (six months to June 30, 2012: loss of $10.5 million).
The Companys interest rate swap agreements as at June 30, 2013, were as follows:
|
|
|
|
|
|
|
|
|
|
|
Outstanding principal
|
|
Receive rate
|
|
|
Pay rate
|
|
|
Length of contract
|
(In US$ millions)
|
|
|
|
|
|
|
|
|
265.9 *
|
|
|
3 month LIBOR
|
|
|
|
1.11
|
%
|
|
Oct 2012 Dec 2019
|
265.9 *
|
|
|
3 month LIBOR
|
|
|
|
1.38
|
%
|
|
Oct 2012 Dec 2022
|
100.0
|
|
|
3 month LIBOR
|
|
|
|
1.36
|
%
|
|
Oct 2012 Oct 2019
|
231.1 *
|
|
|
3 month LIBOR
|
|
|
|
0.74
|
%
|
|
Nov 2012 Nov 2017
|
200.0
|
|
|
3 month LIBOR
|
|
|
|
1.36
|
%
|
|
Oct 2012 Oct 2019
|
95.5 *
|
|
|
3 month LIBOR
|
|
|
|
1.11
|
%
|
|
May 2013 Jun 2020
|
*
|
The outstanding principal of these amortizing swaps falls with each capital repayment of the underlying loans
|
The counterparty to the above agreements is Seadrill.
Credit risk
The Company has financial assets which
expose the Company to credit risk arising from possible default by counterparties. The Company considers the counterparties to be creditworthy and does not expect any significant loss to result from non-performance by such counterparties. The
Company in the normal course of business does not demand collateral from its counterparties.
Fair values of financial instruments
The carrying value and estimated fair value of the Companys financial instruments at June 30, 2013 and December 31, 2012 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2013
|
|
|
December 31, 2012
|
|
(In US$ millions)
|
|
Fair
value
|
|
|
Carrying
value
|
|
|
Fair
value
|
|
|
Carrying
value
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
50.0
|
|
|
$
|
50.0
|
|
|
$
|
19.5
|
|
|
$
|
19.5
|
|
Revolving credit facility
|
|
|
69.6
|
|
|
|
69.6
|
|
|
|
|
|
|
|
|
|
Current portion of long term debt to related party
|
|
|
572.2
|
|
|
|
572.2
|
|
|
|
235.6
|
|
|
|
235.6
|
|
Long-term portion of interest bearing debt to related party
|
|
|
689.9
|
|
|
|
689.9
|
|
|
|
1,057.1
|
|
|
|
1,057.1
|
|
The carrying value of cash and cash equivalents, which are highly liquid, is a reasonable estimate of fair value and
categorized at level 1 on the fair value measurement hierarchy.
The fair values of the revolving credit facility and the current and long-term portions
of floating rate debt are estimated to be equal to the carrying value since it bears variable interest rates, which are reset on a quarterly basis. This debt is not freely tradable and cannot be purchased by the Company at prices other than the
outstanding balance plus accrued interest. We have categorized at level 2 on the fair value measurement hierarchy.
F-12
Other financial instruments that are measured at fair value on a recurring basis are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value
|
|
|
Fair value measurements
at reporting date using
|
|
(In US$ millions)
|
|
June 30,
2013
|
|
|
Quoted Prices in
Active Markets
for Identical
Assets
(Level 1)
|
|
|
Significant
Other
Observable
Inputs
(Level 2)
|
|
|
Significant
Unobservable
Inputs
(Level 3)
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative instruments Interest rate swap contracts
|
|
|
27.3
|
|
|
|
|
|
|
|
27.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value
|
|
|
Fair value measurements
at reporting date using
|
|
(In US$ millions)
|
|
December 31,
2012
|
|
|
Quoted Prices in
Active Markets
for Identical
Assets
(Level 1)
|
|
|
Significant
Other
Observable
Inputs
(Level 2)
|
|
|
Significant
Unobservable
Inputs
(Level 3)
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative instruments Interest rate swap contracts
|
|
|
5.9
|
|
|
|
|
|
|
|
5.9
|
|
|
|
|
|
Accounting Standards Codification (ASC) Topic 820
Fair Value Measurement and Disclosures
emphasizes that
fair value is a market-based measurement, not an entity-specific measurement, and should be determined based on the assumptions that market participants would use in pricing the asset or liability. As a basis for considering market participant
assumptions in fair value measurements, ASC Topic 820 establishes a fair value hierarchy that distinguishes between market participant assumptions based on market data obtained from sources independent of the reporting entity (observable inputs that
are classified within levels one and two of the hierarchy) and the reporting entitys own assumptions about market participant assumptions (unobservable inputs classified within level three of the hierarchy).
Level one input utilizes unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access. Level two
inputs are inputs other than quoted prices included in level one that are observable for the asset or liability, either directly or indirectly. Level two inputs may include quoted prices for similar assets and liabilities in active markets, as well
as inputs that are observable for the asset or liability, other than quoted prices, such as interest rates, foreign exchange rates and yield curves that are observable at commonly quoted intervals. Level three inputs are unobservable inputs for the
asset or liability, which are typically based on an entitys own assumptions, as there is little, if any, related market activity. In instances where the determination of the fair value measurement is based on inputs from different levels of
the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety. The Companys assessment
of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the asset or liability.
The fair values of interest rate swaps and forward exchange contracts are calculated using well-established independent valuation techniques applied to
contracted cash flows and LIBOR interest rates as of June 30, 2013.
Retained risk
a) Physical Damage Insurance
Seadrill purchases hull and
machinery insurance to cover for physical damage to its drilling rigs and charges us for the cost related to OPCOs fleet.
We retain the risk for
the deductibles relating to physical damage insurance on OPCOs fleet. The deductible is currently a maximum of $5 million per occurrence.
F-13
b) Loss of Hire Insurance
Seadrill purchases insurance to cover for loss of revenue in the event of extensive downtime caused by physical damage to its drilling rigs, where such damage
is covered under the Seadrills physical damage insurance, and charges us for the cost related to OPCOs fleet.
The loss of hire insurance has
a deductible period of 60 days after the occurrence of physical damage. Thereafter, insurance policies according to which OPCO is compensated for loss of revenue are limited to between 210 and 290 days. OPCO retains the risk related to
loss of hire during the initial 60 day period, as well as any loss of hire exceeding the number of days permitted under insurance policy. Based on an overall risk assessment in 2011, Seadrill Management decided not to purchase loss of hire
insurance for the tender barge
T-15
. This means that if the T-15 is wholly or partially deprived of income as a consequence of damage, the loss of income will not be compensated by insurance.
(c) Protection and Indemnity Insurance
For OPCOs
fleet, Seadrill purchases protection and indemnity insurance and excess liability insurance for personal injury liability for crew claims, non-crew claims and third-party property damage including oil pollution from the drilling rigs to cover claims
of up to $250 million per event and in the aggregate for the
West Vencedor
and
T-15
and up to $500 million per event and in the aggregate for each of the
West Aquarius, the West Capricorn
and the
West Capella
.
OPCO retains the risk for the deductible of up to $0.5 million per occurrence relating to protection and indemnity insurance.
Concentration of Risk
There is a concentration of credit
risk with respect to cash and cash equivalents as most of the amounts are deposited with Nordea Bank Finland Plc and Danske Bank A/S. The Company considers these risks to be remote.
In the six months ended June 30, 2013 and 2012, 30% and 43% of the Companys contract revenues were received from ExxonMobil Corporation
(Exxon), 32% and 39% respectively, from Total S.A. (Total), and 13% and 16% respectively from Chevron Corporation (Chevron), and 25% and 2% respectively, from British Petroleum (BP). There is thus a
concentration of revenue risk towards Exxon, Total, Chevron and BP.
Note 10 Related party transactions
Seadrill has charged the Company for the provision of technical and commercial management of the drilling rigs, as well as, a share of
Seadrills general and administrative costs. Amounts charged to the Company for the six months ended June 30, 2013 and 2012 were $24.2 million and $55.5 million respectively.
Net expenses (income) from related parties:
|
|
|
|
|
|
|
|
|
(In US$ millions)
|
|
Six months ended
June 30,
|
|
|
|
2013
|
|
|
2012
|
|
|
|
|
Management and administrative fees (a) and (b)
|
|
$
|
12.7
|
|
|
$
|
12.5
|
|
Rig operating costs (c)
|
|
|
10.0
|
|
|
|
11.4
|
|
Insurance premiums (d)
|
|
|
4.0
|
|
|
|
6.7
|
|
Interest expense (e)
|
|
|
24.2
|
|
|
|
14.8
|
|
Commitment fee (f)
|
|
|
2.4
|
|
|
|
|
|
Derivative (gains) / losses (e)
|
|
|
(28.6
|
)
|
|
|
10.5
|
|
|
|
|
|
|
|
|
|
|
West Aquarius
bareboat charter (h)
|
|
|
4.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other revenues due to
West Polaris
(i)
|
|
|
(5.3
|
)
|
|
|
(8.5
|
)
|
Operating expenses for
West Polaris
(i)
|
|
|
5.0
|
|
|
|
8.1
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
24.2
|
|
|
$
|
55.5
|
|
|
|
|
|
|
|
|
|
|
F-14
Receivables (payables) from related parties:
|
|
|
|
|
|
|
|
|
(In US$ millions)
|
|
June 30,
2013
|
|
|
December 31,
2012
|
|
|
|
|
Trading balances due from Seadrill and subsidiaries (j)
|
|
$
|
31.4
|
|
|
$
|
39.6
|
|
Trading balances due to Seadrill and subsidiaries (j)
|
|
|
(92.4
|
)
|
|
|
(122.2
|
)
|
Revolving credit facility with Seadrill (f)
|
|
|
(69.6
|
)
|
|
|
|
|
Rig financing agreements with Seadrill (g)
|
|
|
(1,262.2
|
)
|
|
|
(1,292.7
|
)
|
(a)
Management and administrative service agreement
the Company entered into a management and administrative
services agreement with Seadrill Management, a wholly owned subsidiary of Seadrill, pursuant to which Seadrill Management will provide to the Company certain management and administrative services. The services provided by Seadrill Management are
charged at cost plus management fee equal to 5% of Seadrill Managements costs and expenses incurred in connection with providing these services. The agreement has an initial term for five years and can be terminated by provided 90 days written
notice.
(b)
Technical and administrative service agreement
the Company entered into certain advisory, technical and/or administrative
services agreements with subsidiaries of Seadrill. The services provided by Seadrills subsidiaries are charged at cost plus service fee equal to 5% of Seadrills costs and expenses incurred in connection with providing these services.
(c)
Rig operating costs
relates to rig operating costs charged by the Angolan service company for
West Vencedor
.
(d)
Insurance premiums
the Companys drilling rigs are insured by a Seadrill Group company and the insurance premiums incurred are
recharged to the Company.
(e)
Interest expense and loss on derivatives
prior to entering the Rig Financing agreements these costs were
allocated to the Company from Seadrill Ltd based on the Companys debt as a percentage of Seadrills overall debt. Upon entering the Rig Financing agreements with Seadrill Limited, the costs and expenses have been incurred by the Company.
(f)
$300 million revolving credit facility
The Company entered into a $300 million revolving credit facility with Seadrill. The facility is
for a term of five years and bears interest at a rate of LIBOR plus 5% per annum, with an annual 2% commitment fee on the undrawn balance.
(g)
Rig financing agreement
In September 2012, each of the rig owning subsidiaries of the Company, entered into related party loan agreements with Seadrill in the amount of approximately $522.5 million, $115.2 million, $304.6 million and
$295.3 million corresponding to the aggregate principal amount outstanding under the rig facilities allocable to the
West Capricorn
, the
West Vencedor
, the
West Aquarius
and the
West Capella
, respectively. On May 17,
2013, the Company entered into a new related party loan agreement with Seadrill relating to the
T-15
for $100.5 million tranche of Seadrills existing $440 million facility. Under the agreement each rig owning subsidiary makes payments
of principal and interest directly to Seadrill under each Rig Facility, corresponding to payments of principal and interest due under each Rig Facility that are allocable to the
West Capricorn
, the
West Vencedor
, the
West
Aquarius
, the
West Capella
and the T-15
. Refer to Note 8 for more information. The December 31, 2012 balance has been retroactively adjusted to include the impact of the
T-15
.
F-15
(h)
Other revenues and expenses
During the six months ended June 30, 2013, we earned
other revenues within our Nigerian service company of $5.3 million (six months ended June 30, 2012: $8.5 million) relating to certain services, including the provision of onshore and offshore personnel, which we provided to Seadrills
West Polaris
drilling rig that was operating in Nigeria during that period. Related operating expenses were $5.0 million (six months ended June 30, 2012: $8.1 million).
(i)
West Aquarius bareboat charter
In connection with the transfer of the
West Aquarius
operations to Canada, the West Aquarius drilling
contract was assigned to Seadrill Canada Ltd., a wholly owned subsidiary of OPCO, necessitating certain changes to the related party contractual arrangements relating to the
West Aquarius
. Seadrill China Operations Ltd, the owner of the
West Aquarius
and a wholly-owned subsidiary of OPCO, had previously entered into a bareboat charter arrangement with Seadrill Offshore AS, a wholly-owned subsidiary of Seadrill, providing Seadrill Offshore AS with the right to use the
West
Aquarius
. In October 2012, this bareboat charter arrangement was replaced with a new bareboat charter between Seadrill China Operations Ltd and Seadrill Offshore AS, and at the same time, Seadrill Offshore AS entered into a bareboat charter
arrangement providing Seadrill Canada Ltd. with the right to use the
West Aquarius
in order to perform its obligations under the drilling contract described above. For the six months ended June 30, 2013, the net effect to OPCO is an
expense of $4.0 million.
(j)
Trading balances
Receivables and payables with Seadrill and its subsidiaries are comprised primarily of unpaid
management fees, advisory and administrative services, as well as, accrued interest. In addition, certain receivables and payables arise when the Company pays an invoice on behalf of a related party and vice versa. Receivables and payables are
generally settled quarterly in arrears. Trading balances to Seadrill and its subsidiaries are unsecured, interest free and intended to be settled in the ordinary course of business.
T-15
Loan Agreement
On May 17,
2013, Seadrill Partners Operating LLC entered into a $109.5 million loan agreement with Seadrill as the lender to finance the acquisition of the T-15 (the T-15 loan agreement). The T-15 loan agreement bears interest at a rate of LIBOR
plus 5% and matures in May 2016.
Amendment to Contribution and Sale Agreement
As of June 30, 2013, the Company and certain of its subsidiaries entered into an agreement with Seadrill and certain of its subsidiaries to amend the
Contribution and Sale Agreement that was entered into with Seadrill at the time of the IPO in October 2012 to convert certain intercompany payables to equity. Pursuant to that amendment, as of June 30, 2013, our accounts and those of Seadrill
were adjusted to reflect a net capital contribution in the amount of $20.0 million by Seadrill to Seadrill Operating LP and a net capital contribution in the amount of $20.5 million by Seadrill to Seadrill Capricorn Holdings LLC. No additional units
were issued to Seadrill in connection with either of these contributions.
Purchase options
Under the omnibus agreement signed on October 24, 2012, the Company has the right to purchase the T-16 tender rig from Seadrill at the purchase price to
be agreed between Seadrill and the Company, at any time within 24 months after the acceptance by its charterers. If the Company and Seadrill are unable to agree upon the purchase price of
T-16,
its respective fair market value will be
determined by a mutually acceptable third party.
Indemnifications and guarantees
Tax indemnifications
Under the Omnibus Agreement,
Seadrill has agreed to indemnify the Company against any tax liabilities arising from the operation of the assets contributed or sold to the Company prior to the time they were contributed or sold.
F-16
Environmental and other indemnifications
Under the Omnibus Agreement, Seadrill has agreed to indemnify the Company for a period of five years against certain environmental and toxic tort liabilities
with respect to the assets that Seadrill contributed or sold to the Company to the extent arising prior to the time they were contributed or sold. However, claims are subject to a deductible of $0.5 million and an aggregate cap of $10 million.
In addition, pursuant to the Omnibus Agreement, Seadrill agreed to indemnify the Company for any defects in title to the assets contributed or sold to the
Company and any failure to obtain, prior to October 14, 2012, certain consents and permits necessary to conduct the Companys business, which liabilities arise within three years after the closing of the IPO on October 24, 2012.
Note 11 Commitments and contingencies
Legal Proceedings
At
June 30, 2013, the Company was not party to any litigation.
Pledged Assets
The book value of assets pledged under mortgage and overdraft facilities at June 30, 2013 was $2,200.2 million (December 31, 2012: $2,098.1 million)
Purchase Commitments
At June 30, 2013, the
Company had no contractual purchase commitments.
Guarantees
At June 30, 2013, the Company had issued the following guarantees in favor of third parties:
|
|
|
Guarantees issued in favor of banks in relation to customs in Nigeria (
West Capella
) for $157.4 million
|
|
|
|
Guarantees to Exxon (
West Aquarius
) for $180 million and Total (
West Capella
) for $250 million in relation to Seadrills formal contract holders performance under the respective drilling
contracts
|
F-17
Note 12 Earnings per unit and cash distributions
The calculations of basic and diluted earnings per unit are presented below
|
|
|
|
|
(In US$ millions)
|
|
Six months ended
June 30,
2013
|
|
|
|
Net income attributable to Seadrill Partners LLC
|
|
$
|
41.9
|
|
Less: distributions paid (1)
|
|
|
33.3
|
|
|
|
|
|
|
Undistributed earnings
|
|
|
8.6
|
|
|
|
|
|
|
|
|
Net income attributable to:
|
|
|
|
|
Common unitholders
|
|
|
24.6
|
|
Subordinated unitholders
|
|
|
16.4
|
|
Incentive distribution rights
|
|
|
0.9
|
|
|
|
|
|
|
|
|
|
41.9
|
|
|
|
|
|
|
|
|
Weighted average units outstanding (basic and diluted) (in thousands):
|
|
|
|
|
Common unitholders
|
|
|
24,815
|
|
Subordinated unitholders
|
|
|
16,543
|
|
|
|
Earnings per unit (basic and diluted):
|
|
|
|
|
Common unitholders
|
|
$
|
0.99
|
|
Subordinated unitholders
|
|
$
|
0.99
|
|
|
|
Cash distributions declared and paid in the period per unit (2):
|
|
|
0.3875
|
|
Subsequent event: Cash distributions declared and paid per unit relating to the period (3):
|
|
|
0.4175
|
|
(1)
|
For the purpose of calculation of the earnings per unit the cash distributions paid in May and August 2013, (relating to the three and six month period ended June 30, 2013, respectively), are based on the number of
units outstanding at June 30, 2013. The units outstanding as at June 30, 2013 are also used as a denominator for the earnings per unit calculation.
|
(2)
|
Refers to cash distribution declared and paid during the period.
|
(3)
|
Refers to cash distribution declared and paid subsequent to the period end.
|
Earnings per unit information has
not been presented for any period prior to the Companys IPO as the information is not comparable due to the change in the Companys structure and the basis of preparation of the financial statements as described in Note 1.
As of June 30, 2013 and December 31, 2012, of the Companys total number of units outstanding, 24.3% were held by the public and the remaining
units were held by Seadrill.
Earnings per unit are determined by adjusting net income for the period by distributions made or to be made in relation to
the period. The resulting earnings figure is divided by the weighted-average number of units outstanding during the period.
The common unitholders
and subordinated unitholders interests in net income are calculated as if all net income was distributed according to the terms of the Operating agreement, regardless of whether those earnings would or could be distributed. The Operating
Agreement does not provide for the distribution of net income; rather, it provides for the distribution of available cash, which is a contractually defined term that generally means all cash on hand at the end of the quarter after establishment of
cash reserves determined by the Companys board of directors to provide for the proper conduct of the Companys business including reserves for maintenance and replacement
F-18
capital expenditure and anticipated credit needs. Therefore the earnings per unit is not indicative of potential cash distributions that may be made based on historic or future earnings. Unlike
available cash, net income is affected by non-cash items, such as depreciation and amortization, unrealized gains (losses) on non-designated derivative instruments and foreign currency translation gains (losses).
Under the Company Agreement, during the subordination period, the common units will have the right to receive distributions of available cash from operating
surplus in an amount equal to the minimum quarterly distribution of $0.3875 per unit per quarter, plus any arrearages in the payment of minimum quarterly distribution on the common units from prior quarters, before any distributions of available
cash from operating surplus may be made on the subordinated units.
The amount of the minimum quarterly distribution is $0.3875 per unit or $1.55 per unit
on an annualized basis and is made in the following manner, during the subordination period:
First, to the common unitholders, pro rata, until the
Company distributes for each outstanding common unit an amount equal to the minimum quarterly distribution for that quarter;
Second, to the common
unitholders, pro rata, until each common unit has received an amount equal to any arrearages in payment of the minimum quarterly distribution on the common units for prior quarters during the subordination period; and
Third, to the holders of subordinated units, pro rata, until each subordinated unit has received a minimum quarterly distribution for that quarter;
The Company has distributed available cash from operating surplus to the common and subordinated unitholders in an amount equal to the minimum quarterly
distribution; and
The Company has distributed available cash from operating surplus on outstanding common units in an amount necessary to eliminate any
cumulative arrearages in payment of the minimum quarterly distribution;
Then, the Company will distribute any additional available cash from operating
surplus for that quarter among the unitholders in the following manner:
|
|
|
first, 100% to all unitholders, until each unitholder receives a total of $0.4456 per unit for that quarter (the first target distribution);
|
|
|
|
second, 85.0% to all unitholders, pro rata, and 15.0% to the holders of the incentive distribution rights, pro rata, until each unitholder receives a total of $0.4844 per unit for that quarter (the second target
distribution);
|
|
|
|
third, 75.0% to all unitholders, pro rata, and 25.0% to the holders of the incentive distribution rights, pro rata, until each unitholder receives a total of $0.5813 per unit for that quarter (the third target
distribution); and
|
|
|
|
thereafter, 50.0% to all unitholders, and 50.0% to the holders of the incentive distribution rights, pro rata.
|
In each case, the amount of the target distribution set forth above is exclusive of any distributions to common unitholders to eliminate any cumulative
arrearages in payment of the minimum quarterly distribution. The percentage interests set forth above assumes that the Company does not issue additional classes of equity securities.
Note 13 Subsequent Events
On July 26, 2013, our Board of Directors declared a quarterly cash distribution with respect to the quarter ended June 30, 2013 of
$0.4175 per unit, equivalent to $1.67 per unit on an annualized basis.
On August 14, 2013, the Company paid a distribution with respect to the
quarter ended June 30, 2013 of US$0.4175 per unit, equivalent to the minimum quarterly distribution.
F-19
EXHIBITS
The following exhibits are filed as part of this report:
|
|
|
|
|
Exhibit
No.
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Description
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10.1
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Amendment No. 1 to Contribution and Sale Agreement among Seadrill Partners LLC, Seadrill Member LLC, Seadrill Operating GP LLC, Seadrill Operating LP, Seadrill Capricorn Holdings LLC, Seadrill Opco Sub LLC, Seadrill
Americas Inc., Seadrill Offshore AS, and Seadrill UK Ltd., dated as of June 30, 2013
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10.2
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US$440,000,000 Secured Credit Facility Agreement dated December 4, 2012 between Seadrill Limited, as borrower, the subsidiaries of Seadrill Limited named therein as guarantors, and the banks and financial institutions
named therein as lenders
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10.3
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Loan Agreement, dated May 16, 2013, between Seadrill Limited, Seadrill T-15 Ltd., Seadrill Partners Operating LLC and Seadrill International Limited
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10.4
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Intercompany Loan Agreement, dated May 16, 2013, between Seadrill Limited, as lender and Seadrill Partners Operating LLC, as borrower
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10.5
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Purchase and Sale Agreement, dated May 7, 2013, between Seadrill Limited and Seadrill Partners Operating LLC
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10.6
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Amended and Restated Revolving Loan Agreement, dated August 31, 2013, among Seadrill Operating LP, Seadrill Capricorn Holdings LLC and Seadrill Partners Operating LLC, as borrowers, and Seadrill Limited, as
lender
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101
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The following financial information from Seadrill Partners LLCs Report on Form 6-K for the six months ended June 30, 2013 formatted in XBRL (eXtensible Business Reporting Language):
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(i)
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Unaudited Condensed Consolidated and Combined Carve-Out Statements of Operations for the six months ended June 30, 2013 and 2012;
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(ii)
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Unaudited Condensed Consolidated and Combined Carve-Out Balance Sheets as of June 30, 2013 and December 31, 2012;
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(iii)
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Unaudited Condensed Consolidated and Combined Carve-Out Statements of Cash Flows for the six months ended June 30, 2013 and 2012;
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(iv)
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Unaudited Condensed Consolidated and Combined Carve-Out Statements of Changes in Members Capital/Owners Equity for the six months ended June 30, 2013 and 2012; and
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(v)
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Notes to the Unaudited Condensed Consolidated and Combined Carve-Out Financial Statements.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
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SEADRILL PARTNERS LLC
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Date: September 30, 2013
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By:
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/s/ Graham Robjohns
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Name:
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Graham Robjohns
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Title:
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Chief Executive Officer
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EXHIBITS INDEX
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Exhibit
No.
|
|
Description
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|
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10.1
|
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Amendment No. 1 to Contribution and Sale Agreement among Seadrill Partners LLC, Seadrill Member LLC, Seadrill Operating GP LLC, Seadrill Operating LP, Seadrill Capricorn Holdings LLC, Seadrill Opco Sub LLC, Seadrill
Americas Inc., Seadrill Offshore AS, and Seadrill UK Ltd., dated as of June 30, 2013
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10.2
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US$440,000,000 Secured Credit Facility Agreement dated December 4, 2012 between Seadrill Limited, as borrower, the subsidiaries of Seadrill Limited named therein as guarantors, and the banks and financial institutions
named therein as lenders
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10.3
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Loan Agreement, dated May 16, 2013, between Seadrill Limited, Seadrill T-15 Ltd., Seadrill Partners Operating LLC and Seadrill International Limited
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10.4
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Intercompany Loan Agreement, dated May 16, 2013, between Seadrill Limited, as lender and Seadrill Partners Operating LLC, as borrower
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10.5
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Purchase and Sale Agreement, dated May 7, 2013, between Seadrill Limited and Seadrill Partners Operating LLC
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10.6
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Amended and Restated Revolving Loan Agreement, dated August 31, 2013, among Seadrill Operating LP, Seadrill Capricorn Holdings LLC and Seadrill Partners Operating LLC, as borrowers, and Seadrill Limited, as
lender
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|
|
101
|
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The following financial information from Seadrill Partners LLCs Report on Form 6-K for the six months ended June 30, 2013 formatted in XBRL (eXtensible Business Reporting Language):
|
|
|
|
|
|
(i)
|
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Unaudited Condensed Consolidated and Combined Carve-Out Statements of Operations for the six months ended June 30, 2013 and 2012;
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(ii)
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Unaudited Condensed Consolidated and Combined Carve-Out Balance Sheets as of June 30, 2013 and December 31, 2012;
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(iii)
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Unaudited Condensed Consolidated and Combined Carve-Out Statements of Cash Flows for the six months ended June 30, 2013 and 2012;
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(iv)
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Unaudited Condensed Consolidated and Combined Carve-Out Statements of Changes in Members Capital/Owners Equity for the six months ended June 30, 2013 and 2012; and
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(v)
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Notes to the Unaudited Condensed Consolidated and Combined Carve-Out Financial Statements.
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