February 26, 2015 - Seadrill Limited ("Seadrill" or "the Company"), announces its fourth quarter results for the three months ended December 31, 2014.
Commenting today, Per Wullf, CEO and President of Seadrill Management Ltd., said: "Together with the rest of the industry, we are facing challenging times. Seadrill operates in a market that is, and will continue to be cyclical. We have taken prudent and positive action during 2014, and will continue to do so in 2015, to position ourselves to have the flexibility, from an operational and financial perspective, to manage through this downturn. I personally thank all employees, offshore and onshore, for their efforts in driving performance and efficiencies in this difficult environment.
We are optimistic that the drilling industry will benefit from the rebalancing that is occurring as older rigs are retired, and believe that this will ultimately result in a more healthy industry in the long run. We have built Seadrill's business with an eye towards generating returns through the cycle and we believe that we are well positioned to take advantage of this downturn and come out stronger."
Financial Highlights
· The Seadrill Group* on a combined basis reports EBITDA of US$897 million, a year over year increase of 17%
· Seadrill Limited reports fourth quarter 2014 EBITDA* of US$672 million
· Seadrill Limited reports fourth quarter 2014 net income of US$150 million and earnings per share of US$0.32
· Seadrill Group on a combined basis reports orderbacklog of approximately US$17.2 billion
· Seadrill Limited sells the ultra-deepwater drillship West Vela to Seadrill Partners for US$900 million on a 100% basis. Seadrill Limited sold a 51% stake in the unit.
· Seadrill receives commitments for a US$750 million credit facility for SeaMex to refinance the West Oberon, West Intrepid, West Defender, West Courageous, and West Titania.
· Seadrill receives commitments for a US$950 million credit facility for the financing of the West Carina and West Eclipse.
· Seadrill exercises a purchase option for the West Polaris, a 6th generation Ultra-Deepwater drillship, from Ship Finance International Ltd. The purchase option price is US$456 million and total consideration payable to Ship Finance is US$111 million after accounting for existing debt on the unit.
* EBITDA is defined as earnings before interest, depreciation and amortization equal to operating profit plus depreciation and amortization and after adjusting for non-cash loss on impairment and gains on disposals and deconsolidations.
* Seadrill Group is defined as all companies currently consolidated into Seadrill Limited plus Seadrill Partners. The results and measures presented for the Seadrill Group are designed to aid comparability with periods prior to the deconsolidation of Seadrill Partners on January 2, 2014.
* Seadrill Group combined EBITDA is defined as EBITDA for Seadrill Limited plus EBITDA for Seadrill Partners.
Operational Highlights
· Seadrill achieves 94% economic utilization* for its floater fleet and 98% for its Jack-up fleet for the fourth quarter 2014.
· Seadrill secures executed contract awards with Petrobras for the Libra Field for the West Tellus and West Carina. The contracts are for a firm period of three years each and have a total revenue potential including mobilization of US$1.1 billion.
· Seadrill secures a 145 day contract extension with Total for the semi-submersible unit West Eclipse. The total revenue potential for the extension is approximately US$65 million.
· Seadrill secures a new contract for the jack-up unit West Leda. The total revenue potential for the new contract is approximately US$16 million.
· Seadrill secures a new contract for the jack-up unit West Telesto. This is in direct continuation from the previous contract in Australia and is for one well. The total revenue potential for the new contract is US$4 million.
· Seadrill secures a new contract for the jack-up unit West Mischief. The total revenue potential for the new contract is approximately US$112 million.
Subsequent Events
· North Atlantic Drilling receives approval from its Norwegian Bondholders to amend the Bond Agreement for its NOK1.5 billion Norwegian Bond maturing in 2018. Under the terms of the agreement, Seadrill will provide a guarantee for the Bond Issue in exchange for some amendments to the Bond Issuer's covenant package, namely replacing the Issuer's current financial covenants with Seadrill financial covenants.
· North Atlantic Drilling receives approval from lending group to amend the loan agreement for its US$2 billion credit facility. Under the terms of the agreement, Seadrill will provide a guarantee for the credit facility in exchange for some amendments to the Borrower's covenant package, namely replacing the Borrower's current financial covenants with Seadrill financial covenants.
· North Atlantic Drilling receives approval from Ship Finance International Ltd. to amend its US$600 million sale leaseback facility. Under the terms of the agreement, Seadrill will provide a guarantee for the facility in exchange for some amendments to the Borrower's covenant package, namely replacing the Borrower's current financial covenants with Seadrill financial covenants.
· Seadrill and Petrobras unable to finalize extensions for the West Taurus and West Eminence.
· Seadrill receives notification of early termination from Talisman for the West Vigilant and removes US$81 million from contract backlog. Seadrill and Talisman continue to work on a commercial solution for the unit.
· Rune Magnus Lundetræ will step down as Chief Financial Officer of Seadrill Management Limited with effect from 30 June 2015 at which time he will leave the Seadrill Group. Mr Lundetræ has been with the Seadrill Group for over seven years the last 3 of which have been as Chief Financial Officer of Seadrill Management Limited. The Board wishes to thank Mr Lundetrae for his contribution to the development of the Seadrill Group and wishes him well in his future activities.
Financial information
Fourth quarter 2014 results
Revenues for the fourth quarter of 2014 were US$1,261 million compared to US$1,293 million in the third quarter of 2014.
Operating profit for the quarter was US$452 million compared to US$461 million in the preceding quarter. The decrease was primarily due to downtime on the West Phoenix and West Venture, removal of the West Vela following the sale to Seadrill Partners and loss on impairment of goodwill, offset by commencement of operations on the West Saturn, West Jupiter, and West Neptune and gain on disposals.
Net financial and other items for the quarter showed a loss of US$251 million compared to a loss of US$232 million in the previous quarter. The loss was primarily related to interest expense and losses on the mark to market of derivative financial instruments, offset by interest income and foreign exchange gains.
Income taxes for the fourth quarter were US$51 million, an increase of US$12 million from the previous quarter. The increase was primarily due to an increase in provisions for uncertain tax positions.
Net income for the quarter was US$150 million representing basic and diluted earnings per share of $0.32. Net income was negatively impacted by a non-cash impairment of goodwill of US$232 million relating to the Jack-up segment.
* Economic utilization is calculated as total revenue for the period as a proportion of the full operating dayrate multiplied by the number of days in the period, excluding bonuses.
Balance sheet
As of December 31, 2014, total assets were US$26,506 million, a decrease of US$881 million compared to the previous quarter.
Total current assets decreased to US$3,415 million from US$3,422 million over the course of the quarter, primarily driven by a decrease in the value of marketable securities, offset by an increase in cash and accounts receivable.
Total non-current assets decreased to US$23,091 million from US$23,965 million primarily due to the sale of the West Vela to Seadrill Partners, a decrease in the value of marketable securities, and impairment of Goodwill, offset by an increase in investments in associated companies.
Total current liabilities increased to US$4,574 million from US$3,609 million primarily due an increase in the current portion of long term debt and unrealized losses on derivatives, offset by normal quarterly debt instalments.
Long-term external interest bearing debt decreased to US$10,311 million from US$11,422 million over the course of the quarter and total net interest bearing debt decreased to US$11,755 million from US$12,735 million. The decrease was primarily due to the derecognition of the West Vela facility following the sale to Seadrill Partners, decrease in related party debt as a result of the West Polaris acquisition, and increase of cash balance.
Total equity decreased to US$10,390 million from US$10,944 million as of December 31, 2014, primarily driven by losses related to unrealized mark to market loss on marketable securities, offset by net income for the quarter.
Cash flow
As of December 31, 2014, cash and cash equivalents were US$831 million, an increase of US$193 million compared to the previous quarter.
Net cash provided by operating activities for the twelve month period ended December 31, 2014 was US$1,574 million and net cash provided by investing activities for the same period was US$66 million. Net cash used in financing activities was US$1,521 million.
Forward-Looking Statements
This news release 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 drilling 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 filings with the SEC, including its Annual Report on Form 20-F.
