Drilling industry downturn - challenges from a Contractor's perspective

IUMI Conference Genoa, 20 September 2016

Svein Bergstad, Vice President Risk & Insurance

Forward Looking Statements

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This presentation includes forward looking statements. Such statements are generally not historical in nature, and specifically include statements about the

Company’s plans, strategies, business prospects, changes and trends in its business and the markets in which it operates. These statements are made

based upon management’s current plans, expectations, assumptions and beliefs concerning future events impacting the Company and therefore involve a

number of risks, uncertainties and assumptions that could cause actual results to differ materially from those expressed or implied in the forward-looking

statements, which speak only as of the date of this news release. Important factors that could cause actual results to differ materially from those in the

forward-looking statements include, but are not limited to offshore drilling market conditions including supply and demand, day rates, customer drilling

programs and effects of new rigs on the market, contract awards and rig mobilizations, contract backlog, dry-docking and other costs of maintenance of the

drilling rigs in the Company’s fleet, the cost and timing of shipyard and other capital projects, the performance of the dri lling rigs in the Company’s fleet,

delay in payment or disputes with customers, our ability to successfully employ our drilling units, procure or have access to financing, ability to comply with

loan covenants, liquidity and adequacy of cash flow from operations, fluctuations in the international price of oil, international financial market conditions

changes in governmental regulations that affect the Company or the operations of the Company’s fleet, increased competition in the offshore drilling

industry, and general economic, political and business conditions globally. Consequently, no forward-looking statement can be guaranteed. When

considering these forward-looking statements, you should keep in mind the risks described from time to time in the Company’s fil ings with the SEC,

including its Annual Report on Form 20-F. The Company undertakes no obligation to update any forward looking statements to reflect events or

circumstances after the date on which such statement is made or to reflect the occurrence of unanticipated events. New factors emerge from time to time,

and it is not possible for us to predict all of these factors. Further, the Company cannot assess the impact of each such factors on its 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.

Agenda

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Seadrill Overview

Oil Market Fundamentals

Seadrill Focus Areas

Stacking of rigs

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Seadrill at a glance

6,500 employees operating in over 18 countries

38 rigs in operation: 19 floaters and 19 jack-ups (11 idle units)

2015 Revenue: $4.3 billion

2015 EBITDA: $2.4 billion

Seadrill Limited (includes NADL, Sevan and AOD)

Seadrill Group (Seadrill Limited, SDLP and Seamex)

54 rigs in operation: 27 floaters, 24 jack-ups and 3 tender rigs

(13 idle units)

2015 Revenue: $6.3 billion

2015 EBITDA: $3.6 billion

0

10

20

30

40

50

Ensco COSL Paragon Rowan Seadrill Noble MaerskDrilling

Transocean DiamondOffshore

Atwood VantageDrilling

Nu

mb

er

of

Un

its

Jack-up Units

0

10

20

30

40

50

60

Transocean Seadrill DiamondOffshore

Ensco Noble Ocean Rig COSL MaerskDrilling

PacificDrilling

Atwood VantageDrilling

Nu

mb

er

of

Un

its

Floater Units

5

One of the largest Offshore Drillers…

Second largest floater and fifth largest jack-up fleet

SDLP

SMX

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…with a Modern Fleet…

Youngest fleet among major drillers

0 5 10 15 20 25 30 35 40

ParagonDiamond Offshore

EnscoRowanCOSLNoble

TransoceanMaersk Drilling

Vantage DrillingSeadrill

SeamexAtwood

Average Jack-up Age

0 5 10 15 20 25 30 35 40

Diamond OffshoreCOSL

TransoceanEnscoNoble

AtwoodSeadrill

Ocean RigSeadrill Partners

Maersk DrillingPacific Drilling

Vantage Drilling

Average Floater Age

Vantage

Maersk

Noble

Ensco

Atwood

Transocean

COSL

Rowan

Paragon Offshore

Seamex

Diamond Offshore

0%

20%

40%

60%

80%

100%

120%

0 5 10 15 20 25 30 35 40 45

% >

35

0ft

. D

ep

th

Average Age of Jack-ups

Ocean Rig Pacific

Noble

Ensco

Vantage

Maersk

Atwood Transocean

Diamond Offshore

COSL

0%

20%

40%

60%

80%

100%

120%

0 5 10 15 20 25 30 35

% U

ltra

-De

ep

wa

ter

Average Age of Floaters

7

…and Exposure to Premium Segments

Note: Size of bubble

indicates number of

units

Agenda

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Seadrill Overview

Oil Market Fundamentals

Seadrill Focus Areas

Stacking of rigs

Challenging times for Seadrill and the industry

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• Difficult O&G macro-environment,

particularly upstream

• Oil price now at $49 per barrel,

down 57% from peak of $114 in

2014

• E&P spend down 23% in 2015

versus previous year; another 15%

cut forecast for 2016

• Continuing pressure on drilling sector

• Operators asking to re-negotiate

contracts and reduce day rates

• Rig over-supply

• Little tendering activity

80,2 80,9 81,7 82,6 83,3 84,2

2015 2016 2017 2018 2019 2020

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Oil demand growth projection

Base case demand forecast (mbbl/d)

2020 2016 2015 2017 2019 2018

+ 4

Oil demand expected to increase

Source: Morgan Stanley Research

Supply cost curve

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Source Evercore ISI Energy Research

1. Offshore barrels are required to meet demand

2. The marginal cost of extraction suggests prices must rise

3. Offshore is competitive and sustainable

Weighted Average breakeven

2020 Production

Cost Curve

Onshore Middle East

Offshore Shelf

Onshore Russia

Extra Heavy Oil

Onshore Row

Deepwater

NAM Shale

Oil Sands

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32 36

42 46

54

36

50

Arctic

Ultra Deepwater

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Source Rystad Energy, Morgan Stanley Research estimates

Offshore is a Critical Source of Future Supply

Existing production Gross additions

Nam Onshore

Deepwater

RoW Onshore

Nam Onshore

Deepwater

RoW Onshore

Ne

w P

roje

cts

(8.9

MM

bd

)

Infill D

rilling

(16

.7M

Mb

pd

)

Shallow Water

Shallow Water

Global Liquid Production (mbbl/d)

Offshore will drive future supply growth

Agenda

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Seadrill Overview

Oil Market Fundamentals

Seadrill Focus Areas

Stacking of rigs

Safe and efficient operations

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Hurts Trend – 2014, 2015, 2016 YTD

Economic utilization – 2014, 2015, 2016 YTD

…much lower today

+8 pts

2016 YTD 2015 2014

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Uptime is the single biggest contributor to EBITDA

Each 1% increase in TU on our fleet =

$ 4 million in revenues and EBITDA

every month or $50 million a year

• Delivering safe and efficient operations consistently is the

most important thing we can do for our EBITDA

• Best way to help the business

• Continue the positive trend in HSE and ensure no one

gets hurt

• Minimize downtime and boost economic productivity

of our rigs

Cost savings & cost competitiveness

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Headcount reductions of 25% in 2015

2014 savings: $250 million

2015 savings: $830 million

2016 estimate: $390 million

Seeing the impact of our cost savings program

Improvement in cost basis

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-26%

Long-term 2014

???

2016 YTD Q2 2015

OPEX per rig per day including overhead ($’000)

Floaters

2014 2016 YTD Q2 2015

-25%

???

Long-term

Jack-ups

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• Customer discussions have become more and more

difficult

• Demands to re-negotiate contracts and simply cut day rates

are increasing

• Some oil companies are willing to terminate high dayrate

contracts and pay penalties, because they:

(a) have no work, or

(b) can sign up a another rig and still pay less overall

Customers and backlog

Working to protect our backlog, but difficult discussions continue

As the downturn continues, customer discussions have become more and more difficult

• Demand to re-negotiate contracts and cut day rates

• Supply far exceeds demand

• “Blend and extend”

• “Traditional” drilling contracts being challenged and “new” solutions being introduced

Contract backlog under pressure

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Shift in liability regime?

Consequences?

Little tendering activity, but…

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Managing deliveries effectively

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Completed newbuild deferrals and cancellations

West Mira cancelled

West Rigel joint venture

Sevan Developer agreement

8 JU-2000s

Ongoing discussions

2 Samsung & 2 DSME units

Agenda

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Seadrill Overview

Oil Market Fundamentals

Seadrill Focus Areas

Stacking of rigs

Stacking – curse or provident?

23 Photo::MatthewsDaniel

Laying up rigs

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Floaters Jack-ups

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Warm Stacked:

• West Venture

•

•

•

•

•

•

•

Cold Stacked:

• West Sirius

• West Eminence

• West Taurus

Warm Stacked:

• West Leda

• West Resolute

• West Triton

• West Telesto

• West Prospero

Things to consider when you stack rigs

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When – Where – How ?

Photo: MatthewsDaniel

Cluster stacking

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Roles & responsibilities stacking

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•

•

•

•

Transit preparation Transit to stacking location

Preservation preparation

Vessel preservation

Idle/stacked period

Reactivation preparation

Vessel reactivation

Re-mobilization

Operating Region

Operating Region

Operating Region Corporate Corporate & Operating Region Operating

Region

Cold stacking

Warm stacking

Delivering on these four priorities will help us through

the challenges of 2016/17

1 Safe and

efficient

operations

2 Savings and

cost

competitiveness

3 Re-financing

plan

4 Customers and

backlog

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A stronger set up for long-term success

West Atlas, 1 November 2009

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What can insurers do?

“WHATEVER IT TAKES”

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