1

Seadrill Partners LLC (SDLP)Ari Lazar, Jessica Kan, Sai Poddutur , Gongsheng Wang

New Company Presentation 3/17/15

2

Introduction

Oil drilling company that rents rigs to large oil companies in exchange for daily payments. jack-up rigs, tender rigs, semi-submersible rigs, and drill ships Long term contracts with average duration of 3.3 years

Customers: BP, Exon Mobile, Chevron, Tullow Oil Locations: 10 Oil Rigs in Canada, the US Gulf of

Mexico, southeast Asia and West Africa Major Competitors: Atwood Oceanics, Teekay Offshore

Partners, Ocean Rig UDW, Hercules Offshore Inc Business Phase: Growth Price: $11.70 P/E Ratio: 7.77 52 Week Range: $11.52 - $36.07

Sources: SDLP 2014 Investor Presentation and Yahoo Finance on 3/15/15

Source: trading economic website,3

Macroeconomic Review

Price of oil decreasing drastically in the past few months Decline in price that Seadrill can charge on new contracts Close relationship between oil price, rig count, and revenue

Historic Oil Price

1/7/2000 4/26/2002 8/13/2004 12/1/2006 3/20/2009 7/8/2011 10/25/20130

500

1000

1500

2000

2500Historic Rig Count

Source: SDLP Q4 2014 earnings call transcript

4

Relevant Stock Market Prospects

Long Term Contracts Average duration of 3.3 years

Seadrill plans to extend existing contracts at slightly lower prices All contracts are legally enforceable

Unlike Diamond Offshore (DO) who is losing contracts 9 out of 10 contracts are locked in at pre oil crash prices until at least

2017 If price of oil rises, SDLP will likely increase as well

Acquisitions and Expansion Recently purchased new rig in November for $900 Million Management is committed to future expansion New, advanced floaters compared to the aging old floaters

17.30% Dividend Yield Based on current price Management has promised to maintain or raise dividends throughout

2015 Operating agreement forces them to distribute all excess cash

Sources: SDLP 2014 Investor Presentation

5

Business Overview- Portfolio

Source: SDLP Q4 2014 earnings call transcript

6

Business Overview – Portfolio Changes West Vela

Recently purchased West Vela rig on November 6th for $900 Million $525,000 day rate from BP with contract locked until November 2020

West Vencedor Contract expires at the end of Q1 2015 with a day rate of $218,000 Future contracts for this rig are still being explored Only contract that expires before 2017

7

Business Overview - Management

CEO: Graham Robjohns In office since June 2012 Previous experience: CEO and CFO Golar LNG Partners Nov 2009-July

2011 Under his management stock saw over 200% returns

Management Goals and Outlook See themselves to be in a challenging macroeconomic environment Committed to expansion and future acquisitions Maintaining excellent customer service Sustaining or raising dividends

47% of stock held by Seadrill Limited (SDRL) High incentive for highest possible dividends

Source : Capital IQ and SDLP 2014 Q4 earnings call transcript

Source: SDLP Q4 2014 earnings call transcript

8

Business Overview - Risks

Price of Oil If Oil prices do not increase new contracts will see a decrease in price West Vencedor rig is a “tender situation” because new contract expires at the end

of this quarter and no agreement has been reached yet on a new contract

One time Expenses Had 36.4 million dollar investing expense for hedging floating rate interest but

remains as a fully non cash movement unless swap is terminated 10 year swap and will directly increase net income if interest rates rise

Natural Disasters Hurricanes or other storms could potentially cause damage to equipment

Alternative Energy Alternative energy may decrease demand for oil in the future

Debt Obligations Very high debt levels which have lead to recent negative outlooks from Moody’s No long term debt due until the end of 2016 98% of debit is locked in at 2.5% + Libor and fully hedged with an interest rate

swap

9

Porter 5 Analysis

Threat of Substitutes - Moderate Threat of New Entrants - Low Supplier Bargaining Power – Low Customer Bargaining Power – Moderate/High Rivalry Within Industry - Moderate

10

SWOT Analysis

Strengths Long-term, legally enforceable contracts Attractive rates paid daily in cash High dividend pay out rates

Weaknesses Tender situation with West Vencedor rig

Opportunities Contract length extensions with current customers at slightly lower day

rates Acquisitions of new rigs

Threats Challenging macroeconomic environment especially with oil prices

Source: SDLP Q4 2014 earnings call transcript

11

Recent Earnings (Q4 2014)

Revenue of $380.6 Million 34.8% Increase year over year Beat Analyst Expectations by $27.04 Million

Net Income of $70.1 Million Before minority interest Slightly lower than Q4 2013

EPS of $0.86 Outperformed analysts expectations of $0.76

Source: Google Finance12

Recent Returns

Source: SDLP Q4 2014 earnings call transcript

13

Capital Structure

Cash $243 million in cash $200 million in undrawn revolvers Used to Finance Dividends

Debt No debt due until 2016 $4,302 million Used to finance expansion

Equity $2,044 million 47% of company held by Seadrill ltd (SDRL)

Capital Structure

CashDebtEquity

14

Technical Analysis

Source: bigcharts.marketwatch.com

Current Price Below 20 day and 200 day moving averages Strong bearish signal

Source: Capital IQ15

Financial Analysis

16

Financial Projections - Revenue

17

Financial Projections

18

Discount Rate

19

DCF

20

Price Target Sensitivity Analysis

Discount Rate

Change in O

il Pri

ce

Source: Capital IQ21

Comparable Analysis

22

Comparable Analysis

Source: Capital IQ

Large difference in comparable implied price and market price Levered ratios vs. Unlevered ratios Seadrill has more debt than competitors

23

Comparable Stats

-1

0

1

2

3

4

5

Seadrill Partners LLCComparables Average

24

Recommendation

Current Price: $11.70 DCF Implied Price: $30.83 Comparable Analysis Implied Price: $32.98

Average Projected Price of $31.90

Technical Analysis Conclusion: Sell

We recommend adding SDLP to watch list Should be reconsidered if macroeconomic conditions improve