Value Proposition canvas- Customer needs and pains
Pareto rig slides 13 june 2013
1. Rig market overview
Jackup rates up, UDW flat – solid profitability
June 2013
Please refer to important disclosures at the end of this document
Andreas Stubsrud
Direct: +47 2413 2116
Email: andreas.stubsrud@pareto.no
Frank Harestad
Direct: +47 5183 6315
Email: frank.harestad@pareto.no
Bård Rosef
Direct: +47 2413 2156
Email: bard.rosef@paretosec.com
2. Solid economics despite earnings revisions
.Payback: UDW/JU newbuilds ~5Y
.Pricing attractive at P/E 14: 6-9x
UDW rates flat, Jackups up
.We still predict UDW rats to be USD 550-
650–/day, JU rates to increase to USD 180–/day
Top picks
.Seadrill: Strong earnings growth. Driven by
deliveries of new rigs
.Pacific Drilling from start-up phase to cash flow
machine
.Prospector Offshore and Discovery Offshore
exposed to most attractive jackup segment
.US: Ensco and Transocean
.Other (with significant positive triggers): NADL
& SEVDR
2
Solid profit and market outlook
Sector Q1–13 performance
Core names
http://www.yourindustrynews.com/upload_images/seadrill_logo_20.jpg
11%
9%
7%
5%5%4%
3%
2%
0%
0%-1%
-3%-4%
-7%
-16%
-20%
-15%
-10%
-5%
0%
5%
10%
15%Q1'13EBITDA surprise
3. 3
Dayrate assumption increased for jackups
2014Current-6 mnths.-1 yearOldEstimate$'/day$'/day$'/dayEstimateHigh Spec JU
1)180160155145170Int. older jackups110-140130125120120Harsh env. JU ex.
Norway210-230220200185185UDW harsh 2)550-650600600550550-650UDW INT 3)550-
650550550500550-6503G Norway 4)500450450390450Standard semis UK4004253752953501)
300 feet+ IC jack-ups less than 5 yrs old
2) Includes Norway, UK and Canada, limited number of units currently working in
this segment
3) High spec. 5th gen. International (USGoM, West Africa etc.)
4) Rates for 4th Gen units ~$/day 50– higher
Dayrates are based on what Pareto expects to be the current level for new
fixtures
4. 4
Still very solid economics
391249127127102995.0x2.5x4.5x5.6x5.6x3.4x2.5x.0x1.0x2.0x3.0x4.0x5.0x6.0x02040608
0100120140High Spec JUInt. olderjackupsHarsh env.
JU ex.
NorwayUDW harshUDW INT3G NorwayStandardsemis UKEBITDA/yrPayback to implied
valueUSDm
5. 5
SDRL: –The conglomorate–
.Pure floaters and jackups
.Tender rig business sold to SapuraKencana
.Growth in jackup and UDW segments continues
.Subsidiaries/investments
.North Atlantic Drilling – strategic discussion/NYSE
listing – positive trigger in our view
.Sevan Drilling – positive trigger would be another
USGoM contract (rig #4), negative would be Brazil
contract in terms of potential bid from SDRL in our
view
.SapuraKencana – share price up 31% YTD. Value of
USD ~1bn for SDRL
.Archer – downside from here marginal
.Going forward
.MLP – much easier to issue units after 1 year
(October 2013). But MLP window must be open
.Seabras – on the –shelf–
SEADRILLFloatingrigsJackupsTender RigsNADL (75%)
3x Semis2x JUs1x Drillship1x JU and 1x semi
under construction1x semitender
2x tender bargesunder
construction9x Semis
3x Drillships7 x Drillships and 1x
semi under
construction13x JUs8x JUs under constructionSevan Drilling(30% owned)
2x semis2x semis under
construction3x JUs under
constructionAsia Offshore Drilling(66.0%)
SapuraKencana(13% owned*)
Malaysian
integrated oil & gasservice providerTender rigs bought
from SDRLArcher
(40% owned)
Oil service
company North &
South America and
North Sea SDRL
stake ~USD 250m
6. Pacific Drilling: Attractively priced UDW driller
.New orders: probably 1x a year, we expect next one in 2014
.Confirms yard cost of low USD 500m (as Ensco)
.Capital not the problem in terms of growth, but people
.Dividends probably in 2015, most likely 2H–15 due to dividend
covenants
.Stock:
.Few triggers
.Very attractive valuation
.Low free float (USD 500m)
.Share price same as IPO March 2011
6
Contract status & dayrate assumptionsRigYear builtCountryPacific
BoraNigeriaChevron @ 475'$/day Pareto est. 600'$/dayest. 600'$/dayPacific
SciroccoNigeriaTotal @ 474-493'$/day Pareto est. 600'$/dayPacific
MistralBrazilPetrobras @ 458'/day Pareto est. 600'$/dayPacific Santa
AnaUSGoMChevron @ 468'$/dayPacific KhamsinS.KoreaChevron Africa 670'$/dayPacific
SharavS.KoreaChevron USGoM @555'$/day 5YPacific MeltemS.Korea Pareto est.
600'$/dayPacific TBN 8S.Korea Pareto est.
600'$/day20162017201220132014201520102014201520112011201220132013
Share price USD9.512.515.017.5P/E 15E6.38.29.911.5EV/EBITDA
155.66.47.07.7Value/rig YE15E USDm601683751818EV/EBITDA 15 adj.5.05.76.36.9
7. Share price NOK15.020.022.025.0No. of sharesmill92929292Market
capUSDm237316347394Cash Q1"125125125125Enterprise value"112191222269Remaining
capex"1270127012701270Total EV"1382146014921539Implicit value per rigAll in
priceUSDm230243249257Yard price"203216222230Last 2x SWS2102102102104x
existing177197205217Avg. all in priceUSDm225Avg. Yard price"198
7
Discovery
Source: Pareto Research
Prospector
.Prospector with significant leverage is still cheap
.Discovery also relatively cheap, but all in price dependent on extra cost
(figures above our assumptions)
Small cap jackup companies left (from 4 to 2)
Share price NOK10.012.015.020.0No. of sharesmill66666666Market
capUSDm112134168224Cash Q1"21212121Enterprise value"91114147203Remaining
capex"437437437437Total EV"528550584640Implicit value per rigAll in
priceUSDm264275292320Yard price"218229246274Avg. all in priceUSDm270Avg. Yard
price*"224* includes upgrade of USD 16m
9. Jackup fleet overview – 435 in the water, 107 arriving
.391 units currently
contracted
.Average age of 21 years
.107 units under
construction/on order
.However only 33 are
available to the open
markets
9
Jackup fleet overview
391441548173310705101520253035400100200300400500600ContractedWarmstackedCold
stackedTotalNewbuildsSupply incl.
NewbuildsAge (yrs)# of units
10. Incremental jackup supply is 9 units in 2013
.107 newbuilds, but 59 are uncompetitive
(our assumptions)
.8x owner-operated or operated by
close affiliate of operator
.15x owned by Mexican players and
destined for Pemex
.7x –local– units built/destined for India
.5x units built in India very delayed
.10x low-spec units built in China with
very uncertain delivery likely to be
picked up by Chinese players or not
built at all
.19x other (Iran, uncertain, local China)
.Of the 49 remaining newbuilds, 16 have
firm contracts at hand
.9 available in 2013
.2x DISC, 2x SDRL, 1x NE, 1x PROS, 1x KS
Drilling, 1x TS Drilling, 1x Arabian
Drillign
10
Jackup newbuild supply
10733581691311
11. Jackup tender activity at full pace - +27% over past six months
11 Source: ODS, Pareto Research
.The tender activity is very high at the moment despite many new awards:
.+27% in firm tenders, +14% in overall open demand over the past 4 month,
despite 15% more awards (rig years)
.North Sea is extremely active and ONGC with a huge tender out at 40 rig years
.Middle East is down after they have taken several long term contracts lately
Development in open demand 01.09.12 – 01.05.13
35282146191412513838180555035400102030405060708090NW EuropeMiddle EastSE
AsiaIndian OceanW AfricaOtherTenderPre-tenderProbablePossible#of rig years
+13 -3
+8
+33
+1
-4
3533181310281213200688347173460102030405060708090NW EuropeMiddle EastSE
AsiaIndian OceanW AfricaOtherTenderPre-tenderProbablePossible#of rig years
12. Market balance even tighter – Supply lagging demand
12
Available supply includes newbuilds, but excludes cold stacked and out of
service rigs
Source: ODS, Pareto Research
Demand increasingly outstripping supply
24527227230135634536230529628329129931833234132431631636135132630829526326326426
527025325682%
84%
86%
88%
90%
92%
94%
96%
050100150200250300350400Q4'09Q1'10Q2'10Q3'10Q4'10Q1'11Q2'11Q3'11Q4'11Q1'12Q2'12Q
3'12Q4'12Q1'13LatestRig yearsOpen DemandAvailable next
1.5YUtilizationUtilization
2011: Utilization
2012: Dayrates
.Steady upswing in demand since
2010
.In 2011, demand was met by old
rigs reactivated and resumed work
.Utilization increased steeply for
old assets
.In 2012, dayrates followed with
few idle and stacked rigs to be
reactivated
.Strong increase in demand
continues ion 2013
.With limited supply (despite many
newbuilds) and high utilization we
expect dayrate momentum to
continue
.Dayrates projected to increase
to USD 180–/day
13. Stacked rigs have decreased significantly to meet demand
13
.Since last fall, the number of
warm stacked have
decreased significantly from
32 to 17
.Effectively full utilization
as some units will always
undergo upgrades etc.
.Meanwhile, the number of
cold stacked rigs have been
fairly stable
.Very low spec assets,
expected to be scrapped
Number of stacked jackups rigs
Source: Pareto Research, ODS
77622921203232161517566864595635353435331331309380766767505050020406080100120140
Jan-10Oct-10Jul-11Oct-11Jan-12Jul-12Sep-12Jan-13Apr-13Jun-13Cold stackedWarm
stacked
14. 14
Source: Pareto Research, ODS
Middle East
West Africa
NW Europe
Jackups no longer migrating from USA to Mexico and Asia
Note: All figures including all jackups in the region
USGoM activity is down more than 50% last 10yrs – this trend is over
Mexico/Asia have absorbed this supply – and demand will continue to rise
South East Asia
India
Med. & Black Sea 1498960050100150200200020072013
9314201020304050200020072013
2625280102030200020072013
35354301020304050200020072013
13118051015200020072013
11181805101520200020072013
5892137050100150200020072013
223333010203040200020072013
233769020406080200020072013
15. 01020304050607080196519671969197119731975197719791981198319851987198919911993199
51997199920012003200520072009201120132015ContractedWarm StackedCold
StackedNewbuilds# of rigs
15
Age development contracted jackup fleet
Source: ODS-Petrodata, Pareto Research
Age profile global jackup fleet
.Almost no jackups were built from mid-1980s until 2006, and as such jackups are
either very old or new
.During the next decade the 1970-80s built jackups, which is more than 50% of
the current fleet, will be phased out
.By 2015, 222 of the currently contracted units are aged more than 30 years,
which, assuming no scrapping, is more than
50% of the demand/working fleet
.90 of the units will be more than 35 years–.
Long-term profitability supported by fleet replacement need
1017259051679022021021522023205010015020025020132014E2015E2020E40 years or
more35 years or more30 years or more# of rigs
16. 12368710612211983421114111141121502468101214161980198219841986198819901992199419
9619982000200220042006200820102012# of rigs
The scrapping wave has started
16
.Despite improved market
conditions scrapping started in
2011-12
.Stacked rigs that are highly
uncompetitive
.Driven by large caps divesting non-
core old assets to smaller
companies targeting fleet
optimization
.30 rigs were removed in 2011-
2012, which is higher than the sum
of the 15 preceding years–
Jackups removed from the market (excl. accidents) per year 1980-2012
Source: Pareto Research, ODS
2011-2012: 27x
Average age 31Y
1995-2010: 22x
Average age 28Y
18. Pemex ramping up demand: 2x fleet growth from 2012-15
18
Pemex jackup break-through
Source: Pareto Research, ODS
.After growing rapidly at the beginning of
the decade, the number of jackups
operating in Mexico has remained fairly
stable around 30 units
.The fleet has started to increase and the
Mexican drillers have ordered/acquired
multiple new rigs
.19 newbuilds: 9 in 2013 (2 in operation),
3 in 2014 and 7 in 2015
.All controlled by Mexican players
.In addition, 4x jackups have/will start
operating in Mexico in 2013
.Three old units acquired by Goimar (1x)
and AMS/Ezion (2x cold stacked) moved
from other regions and upgraded for
operations in Mexico
.Deep Driller 7 coming from in UAE in
mid-2013
96213130272834322923313659419010203040506070
19. Mexican players with 19 units in the orderbooks
–17 ordered/acquired during the past year!
19
13 units destined for Mexico/Pemex
Source: Pareto Research, ODS
.All owned by Mexican players. First three units have been delivered and
contracted
DeliveryRig NameOwnerTypeYardOrdered/acquiredCommentsJan-13Independencia
1Operadora Cicsa400F ICTuxpan, MexicoJul-07Feb-13PrimusOro Negro400F ICKeppel
FELSAug-12Acquired from Jasper @ 216mMar-13PapaloapanPerforadora Central375F
ICKeppel AmFELSFeb-11May-13LaurusOro Negro400F ICKeppel FELSNov-12Acquired from
Jasper @ 216mMay-13PROSPECTOR 2Perforadora Mexico400F ICDalianOct-12Acquired
from Prospector @ 230mJul-13Standard IntegrityCP Latina400F ICKeppel FELSNov-
12Acquired from Standard Drilling @ 223mSep-13PROSPECTOR 4Perforadora Mexico400F
ICDalianNov-12Acquired from Prospector @ 228mNov-13Standard VisionCP Latina400F
ICKeppel FELSJan-13Acquired from Standard Drilling @ 215mDec-13FortiusOro
Negro400F ICPPL ShipyardDec-12Feb-14DecusOro Negro400F ICPPL ShipyardDec-12Mar-
14CoatzacoalcosPerforadora Central375F ICKeppel AmFELSMar-12Dec-14ImpetusOro
Negro400F ICPPL ShipyardMar-13Feb-15YunuenPEMEX400F ICKeppel FELSDec-12Feb-
15PEMEX JU Tbn2PEMEX400F ICKeppel FELSDec-12Mar-15VastusOro Negro400F ICKeppel
FELSMar-13Apr-15Grupo R Tbn1Grupo R400F ICKeppel FELSMar-13Jun-15Grupo R
Tbn2Grupo R400F ICKeppel FELSMar-13Aug-15Grupo R Tbn3Grupo R400F ICKeppel
FELSMar-13Oct-15Grupo R Tbn4Grupo R400F ICKeppel FELSMar-13
20. 05001,0001,5002,0002,5003,0003,5004,00020012002200320042005200620072008200920102
01120122013Crude production (mbd)
Crude production
-25%
05,00010,00015,00020,00025,00020012002200320042005200620072008200920102011201220
13Reserves (mbd)
More drilling required to reverse declining production and reserves
20
.2012 marked Pemex– 8th consecutive year of decline in
oil production
.Last 10 years at annual average rate of 11%
.Yearly production declines have been lower since 2009
as Cantarell (production decline of ~20% p.a.) is reduced
in importance and due to new energy laws
.2013YTD production flat compared to 2012
Proved (–1P–) reserves
Source: Pemex, Pareto Research
-33%
.Also to limited exploration, resulting decreasing proven
(–1P–) reserves and RRR well below 100%
.Reserves have stabilized in later years with increased
investments and drilling, but also due to lower
production
21. Pemex targets 3,000 mbd crude production by 2018
21
.Current production ~75%
offshore (shallow water)
and ~25% onshore
.Pemex targets to reverse
decline and increase
crude production to
3,000 mbd by 2018
.Deepwater not projected
to come onstream until
2020
Pemex oil production – Historic and targets (mbd)
Source: Pemex, Pareto Research
05001,0001,5002,0002,5003,0003,5002001200220032004200520062007200820092010201120
122013e2014e2015e2016e2017e2018e2019e2020e2021e
2022e2023e2024e2025e2026eCantrarellKu-Maloob-ZaapSouthwest offshore
regionOnshoreProducing fieldsFuture development offshoreFuture development
onshoreDeepwaterOil Production (mbd)
2,7003,000HistoricTargets
22. Mexico–s dependence on Pemex oil production
22
.Mexico takes a share of Pemex profits
.Around on third of Mexico–s Government
income comes from taxes and duties paid
by Pemex
.Mexico for years treated Pemex as a cash
cow, squeezing most revenue from Cantarell
in taxes and investing little in exploration
.A new reform in 2008 opened up for Pemex
to use international players (Pemex still
owner of all fields)
.President Enrique Peña Nieto (elected in
2012) has included more liberal energy
reform as one of the planks of his campaign
platform, with overhaul plan expected by
late this summer
.With Pemex declining production distribution
has been maintained by increasing oil prices
Pemex taxes and duties and % of Government income
Source: Pemex, Pareto Research
5662574253636938.0%
35.4%36.9%
31.0%
32.9%33.7%33.7%
0%
10%
20%
30%
40%
50%
010203040506070802006200720082009201020112012Taxes and duties (USDbn)% of the
Government income (rhs)
USDbn%
23. Shallow water has been, is and will continue to be in focus
23
.Shallow water oil the cheapest and most easily
available
.69% of proven crude reserves in shallow waters
.Pemex– has low finding and development cost
USD ~14/bbl and (2012, ~75% shallow water)
.Pemex has drilled onhore shale and tight oil wells
that produce oil and targets ramp up in medium-
term
.High potential, but much more expensive and
difficult than shallow water production
.Pemex has spent more than USD 5bn on the
promising Chicontepec field which has resulted in
less than 60,000 bbl/d despite ~17.7bn boe
possible reserves
.Large hydrocarbon potential in in deepwater,
however production is more expensive and further
into future
.58% of prospective resources in deepwater,
however first oil projected in 2020 (slide X)
Proven crude reserves (million barrels)
Source: Pemex, Pareto Reseach
Marine,
6,795
mbblOnshore, 3,230
mbbl
24. Large long-term demand from reducing production decline
24
.To increase production, step one is stabilizing
production with several fields in decline
.Particularly Cantarell, but by 2015-16 also
KMZ complex (~50% of current Pemex crude
production combined)
.Pemex targets Increased Recovery of mature
offshore fields to reduce depletion
.Gives large base demand for completions and
new production and injection wells
.Production facilities not running at full
capacity makes the commercial hurdle for tie-
in fields lower
.In addition, further developments are necessary
to maintain production
.On top of that comes exploration and
accompanying appraisal and development
drilling…
Source: Pemex, Pareto Research
25. Number of wells drilled offshore Mexico
Large exploration potential remaining in Mexican shallow waters
25
.Pemex has drilled an average ~50-60 wells per year since
ramping up in 2004
.Most drilling related to boosting production at existing
fields
.Very limited exploration despite success rate of ~50%
(onshore and offshore)
Total # of wells drilled 2001-2011
Source: Pemex, BOEM, Pareto Research
.Very limited drilling activity compared to the U.S. side of
the border
.9.5x as many wells drilled in shallow water USGoM as
offshore Mexico from 2001-2011
.US shallow water drilling on a decline (despitre recent
tightening of the market) while Mexican on the rise
28142435445754614038433472813117131468010203040506070802001200220032004200520062
0072008200920102011DevelopmentExploration#wells
MexicoUSGoM (<250ft.)
4,653wells552 wells
27. Summary
.Very limited UDW availability in 2013 … only three available newbuilds
.Order activity has slowed down and is expected to remain constrained to large
players
.Orderbook to be absorbed by replacement of old mid- and deepwater fleet
.Demand expected to grow significantly in West Africa with large drilling
capaigns ahead
.USGoM to continue rebound post Macondo … development of deepwater discoveries
driving demand
.Brazil expected to have limited incremental demand
.New regions Mexico and East Africa to grow in importance
27
28. Floaters fleet profile … UDWs replacing conventional floaters
28
Jackups by delivery year
Source: Pareto Research, ODS
05101520253035197019721974197619781980198219841986198819901992199419961998200020
022004200620082010201220142016Ultra-deepwaterDeepwaterMidwater# units
29. The UDW market is soon sold out through 2013
Source: ODS-Petrodata, Pareto Research 29
UDW availability before YE…2013
.Only three newbuilds available before YE…2013
.Two 2013 newbuilds contracted in February (Tungsten Explorer and Ensco DS-7)
RigOwnerBuiltDepthOperator/YardDayrateFreeCommentsGSF
ExplorerTransocean19987800Dec-12Tungsten ExplorerVantage201310000Daewoo / W
AfricaJun-13Has contract from mid-2014 @ USD 600'/dayDalian
DeveloperDalian201310000COSCO DalianJul-13Delivery time uncertainStena
DrillMAXStena20077500OphirJul-13Expected to be the rig for Tullow 3Y
contractDeepwater DiscoveryTransocean200010000BP463Aug-13Deepsea
StavangerOdfjell201010000BP415Sep-13Option likely calledWest
TellusSeadrill201310000SamsungSep-13Sedco EnergyTransocean20017500Tullow
Oil440Oct-13Ocean Rig SkyrosOcean Rig201310000SamsungNov-13GSF Development
Driller IITransocean20057500BP580Nov-13Q1Q2Q3Q4
30. The UDW fleet has grown rapidly, there are 51 units in the orderbooks
.The UDW fleet have increased ~118% over the
past three years and will increase another ~42%
over the next three
.Excluding Sete Brasil units, 31 rigs were ordered
from Q4…10 until Q3…11, leading to a high number
of deliveries in 2013-14
.Of the remaining 15 newbuilds scheduled for
delivery in 2013, three have not yet been awarded
contracts
.In 2014, 10 out of 25 newbuilds have been
awarded contracts
UDW fleet development
Newbuild delivery schedule
Source: Pareto Research, ODS 30
Note: Excludes 29 units to be built in Brazil with delivery 2016-2020
29365681106122126111921125383020406080100120140160180200200720082009201020112012
2013e2014e2015eContractedUncontracted
15663312363012345678910Q1'13Q2'13Q3'13Q4'13Q1'14Q2'14Q3'14Q4'14ContractedUncontr
acted
31. UDW orders per quarter
31
.A wave of newbuild
orders from November
2010 until June 2011
.Since then, the difficult
financial climate has
limited the number of
orders
.Eight units ordered in Q3
this year, but four of these
are against long-term
contracts
.Only three orders in 2013
Source: ODS-Petrodata, Pareto Research
However: Capital restraints and barriers to entry limit further orders
510133346823135040045050055060065002468101214Q4'10Q1'11Q2'11Q3'11Q4'11Q1'12Q2'12
Q3'12Q4'12Q1'13Q2'13# or ordersDayrate (rhs)
32. Seadrill with most available UDW newbuilds
32
Source: ODS, Pareto Research
Available UDW newbuilds
1123221113111113SDRL (&
NADL)
RDCESVNEDOPACDATWRIGORIGOther201320142015-16
33. .Almost all newbuilds are built with water depth
capacity above 7,500ft
.UDW fleet will go from ~41% today to ~53% of total
floater fleet upon delivery of current orderbook
(assuming no scrapping)
Less than 10% of the UDW fleet is actually drilling UDW
Floater newbuilds by water depth
UDW rigs… current water depth operations
Source: Pareto Research, ODS Petrodata, Company reports
33
39%
51%
9%
< 4,500 ft4,500-7,500 ft> 7,500 ft
9%
2%
89%
< 4,500 ft4,500-7,500 ft> 7,500 ft
.Today, only 10 out of 109 UDW units, or 9%,
actually drills wells above 7,500ft
.This figure has actually decreased since Q3…11,
when around 12% were drilling in UDW
.Hence, newbuilds are also replacing an ageing mid-
and deepwater fleet
34. Age of global floater fleet (incl newbuilds and stacked)
34
.The average age for the mid- and
deepwater units are ~30 and 28 years
respectively
.In 2013, there are 67 mid- and
deepwater rigs more than 35 years
old
.15 of 56 operating deepwater units
and 25 of 89 operating midwater rigs
have contracts expiring before
YE…2013
.Fleet removals may thus be imminent
Source: ODS-Petrodata, Pareto Research
Including mid- and deepwater rigs, the floater fleet is old…
192117358254720020406080100120140160180200MidwaterDeepwaterUDW# of rigs35Y+20-
35YLess than 20
35. 35
Brazil
37x rigs
.
USGoM
33x rigs
W Africa
23x rigs
North Sea
10x rigs
.
E Africa
5x rigs
Mexico
4x rigs
Other:
1x in Canada
1x in Egypt
1x in Israel
1x in French Guiana
1x in Saudi Arabia
.
.
.
.
Source: ODS-Petrodata, Pareto Research
.
Asia/Australia
9x rigs
.
.
.
.
The Golden Triangle
~80% of UDW floaters located in …the Golden Triangle…
36. Incremental UDW demand to outstrip supply next 3 years
36
Source: Pareto Research, ODS
RegionShare (mid-range)
LowHighWest Africa121441%
USGoM6924%
Harsh Env.237%
East Africa136%
Brazil-123%
Other4819%
Total incremental demand2439100%
Available newbuilds2222Surplus/Deficit-2-17Incremental Demand
37. West Africa is the growth region for deepwater oil production
*Definition of deepwater: > 400m = 1300 feet
Source: Wood Mackenzie, Pareto Research
Global deepwater oil production estimates
37
.Angola and Nigeria are
experiencing a sharp growth
in deepwater activity
.From near zero production in
2006, Wood Mac estimates
around 3m barrels of daily
production before 2020
.This is clearly driving demand
for deepwater rigs, and our
analyses show sharp increase
in drilling activity over the
next few years
.Several large discoveries are
going to be developed, and
new areas are going to be
explored
012345678910112000200220042006200820102012e2014e2016e2018e2020eGlobal deepwater*
oil production (mbd)
OthersUS GoMNigeriaAngolaBrazil
39. 39
USGoM: Development drilling yet to kick in
Source: ODS, Companies, Pareto Research
USGoM: UDW by well type
.We expect a few additional rigs
to be added for exploration
.Statoil to replace Deepwater
Americas
.Chevron with multi-year
exploration Ccampaign
.Eni and COP in Walker Ridge
blocks
.Very few rigs are drilling
development at current and
with multiple large discoveries,
more rigs are needed for
development work
.USGoM deepwater still in
early phase due to Macondo
incident
23 rigs70%
10 rigs30%
ExplorationDevelopment
40. 40
Huge potential in deepwater Mexico
Source: National Geographic, Wood Mackenzie, Pareto Research
GoM: Mexico vs. USA deepwater drilling
.While one large DW discovery after
the other has been made in the
USGoM, the first two ones were
announced in Mexico not long ago
.As can be seen from the map to the
left, the infrastructure and
exploration activities in the vast
Mexican acreage is completely
absent
.Consequently we see a huge
potential for further work, as Pemex
recently has highlighted
.The company estimates that it could
have 29bn boe in the Gulf of Mexico
42. 2011-2012 … Renewed exploration optimism in Norway
Average annual discoveries (oil and gas)
Source: NPD, Pareto Research
42
.51.5% hit rate in 2011
.Two great new discoveries
.Johan Sverdrup
.Skrugard
.2012: Further success
.Havis
.King Lear
.Geitungen
.Skarfjell
.2013 already seen more than
50% of the cumulative
discoveries in the ten years
before 2011
1,6781,7012,1563,8816146318221723623,37597428405001,0001,5002,0002,5003,0003,500
4,0004,5001967-
19701971-
19751976-
19801981-
19851986-
19901991-
19951996-
20002001-
20052006-
2010201120122013YTDMill boeMill boe
43. .Excluding the 4x Songa
newbuilds, NCS floaters are on
average contracted until March
2016
.Consequently, we believe the
earliest available rigs will secure
record high dayrates
.Note that only a limited number
of these rigs are able to operate
in Arctic conditions (Barents
Sea)
Floater market «sold out» for the next couple of years
43
Source: IHS, Pareto Research
RigOwnerBuiltDepthOperator*DayratePolar PioneerTransocean19851640Statoil
(BP)490/516Transocean BarentsTransocean200910000Detnor (Repsol)564Deepsea
AtlanticOdfjell200910000Statoil490West
NavigatorSeadrill/NADL20008200Shell610COSLPioneerCOSL20101640StatoilTransocean
WinnerTransocean19831500Marathon461Ocean
VanguardDiamond19821500Statoil349/450Transocean
LeaderTransocean19874500Statoil400Trans. SearcherTransocean19831500BG
(Statoil)386Island InnovatorMaracc20132300Lundin470Trans.
SpitsbergenTransocean201010000Statoil491/533Bredford DolphinFred. Olsen
Energy19801500Lundin365/355West VentureSeadrill/NADL20005906Statoil435Trans.
ArcticTransocean19861640Rig mgmt.414/390Leiv EirikssonOcean Rig20017500Rig mgmt.
(Total)530Songa TrymSonga19761200Statoil355Songa
DeltaSonga19801500Statoil374Songa DeeSonga19841800Statoil340West
AlphaSeadrill/NADL19861968ExxonMobil476Stena DonStena
Drilling20011640Statoil399/496Bideford DolphinFred. Olsen
Energy19751750Statoil385/475West
HerculesSeadrill/NADL200810000Statoil490Scarabeo 8Saipem20129843Eni575Deepsea
BergenOdfjell19831475Statoil349Borgland DolphinFred. Olsen Energy19991475Rig
mgmt.531Scarabeo
5Saipem19906233Statoil400/495COSLInnovatorCOSL20111640Statoil335COSLPromoterCOSL
20121640Statoil335Songa EquinoxSonga20141640Statoil422Songa
EnduranceSonga20141640Statoil422Songa EncourageSonga20151640Statoil438Songa
EnablerSonga20151640Statoil438*Sublet in
bracketsContractedOptionYard201320142015Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4
44. 44
.Average age of operating
fleet ~20 years
.Average age in the UK is even
older ~32 years
.With limited newbuilds
arriving, and all capable units
expected to go to the Barents
Sea the older units are
needed
Age profile - Norwegian floater fleet
Mature NCS rig fleet … multiple rigs nearing end of useful life
Source: IHS, Pareto Research
38373333313030302928272726231413131212544332110510152025303540Avg. age operating
fleet = ~20 years
45. 45
Barents Sea: Set for record drilling activity in 2013-2014
Source: NPD, Pareto Research
Barents Sea exploration wells per year
02468101214161981-
19851986-
19901991-
19951996-
20002001-
20052006-
2010201120122013E2014EDrilledPlanned# wells per year
.Three rigs now
located in the Barents
Sea
.Scarabeo 8
.West Hercules
.Leiv Eiriksson
.All arrived recently
with initial Barents
campaigns (finally)
kicked off
46. 46
Leiv Eiriksson (Ocean Rig) … Nordvarg appraisal for Total
Source: North Energy, Pareto research
.Leiv Eiriksson started drilling Nordvarg
appraisal well on April 30th 2013
.Large gas discovery in the Barents Sea
.1,250ft. water depth
.Increased expectations to volume
estimates upon apprasal campaign
.At present volume is estimated to
~250 mboe
.Additional discoveries in the area could
support new trunk line to the North Sea
gas grid
.Skrugard/Havis 400-600 mill boe
(mainly oil)
.Snøhvit upgraded by 125 mill boe in
Jan…12
http://en.mercopress.com/data/cache/noticias/34871/0x0/leiv-eiriksson.jpg
47. 47
West Hercules (Seadrill) – Statoil exploration campaign
Source: Statoil, Pareto Research
.West Hercules arrived the Barents Sea on
May 20th 2013
.This year the rig will drill a 4-well
exploration campaign for Statoil in the
Skrugard/Havis area (now Johan Carlsberg)
.Expected to take ~8 months
.We expect additional discoveries in this
area in coming years
.Similar hydrocarbon indicators (as at
Skrugard) observed at several nearby
prospects
.High interest in license transaction
market and in upcoming license round
indicates the high exploration activity will
continue in the years thereafter
http://static.offshoreenergytoday.com/wp-content/uploads/2012/10/West-Hercules-
Still-Not-Ready-for-AoC.jpg
48. 48
Source: Eni, Pareto Research
.Arrived in August 2012
.The Goliat PDO was submitted in
February 2009, and approved in June
the same year.
.A total of 22 development wells (11 oil
producers, 9 water injectors and 2 gas
injectors) are planned.
.Around two thirds of the wells are
anticipated to be completed prior to
production start.
Scarabeo 8 (Saipem) – Development drilling at Goliat
http://www.eninorge.com/Global/Bilder/Goliat/BarentsSea_apr_2013_w.jpg
http://hydmec.no/files/2012/05/scarabeo-8-bilde-2.jpg
49. 37%
63%
50%
63%
49%
16%
50%
37%51%
84%
5134637186010203040506070809010018th200419th200620th200921st201122nd2012# of
blocks (or parts of
blocks) awardedBarents Sea blocksNorwegian Sea BlocksNorth Sea Blocks
Going forward, exploration focus is on the Barents Sea
49
Regional distribution of blocks awarded in NCS license rounds
Source: NPD, Pareto Research
.With the recent Barents Sea
discoveries, interest in the area is
taking off
.In the 18th NCS licensing round in
2004 there where not made any
awards in blocks located in the
Barents
.The absolute number of awards has
increased gradually over the past
years
.The number of blocks awarded in
the Barents Sea has gone from 17 in
2006, to a proposed number of 72
this year
.In the 22nd round 84% of all blocks
are located in the Barents Sea and
none in the North Sea
50. 50
The Barents Sea will be key to future NCS exploration success
Source: Statoil, NPD
.The Norwegian Barents Sea has an acreage
almost as large as North Sea + Norwegian Sea
combined
.Border agreement with Russia opened area with
interesting potential
.Only 95 exploration wells drilled historically
.Compared to 1,500 wells in North Sea +
Norwegian Sea
.22nd round awards in 2013 to boost exploration
activity further
.Extremely high interest in remaining acreage
in Skrugard area where a large portion of the
awards are located
.Majors such as Shell and BP are back
51. More rigs to arrive to satisfy demand–
.Transocean Barents
.Will relocate to the Barents for Statoil in early 2014
.Transocean Arctic
.Will arrive in 2H–2013 to drill Gotha prospect for
Lundin after well in progress
.In addition, the fourth Cat-D newbuild expected to
arrive upon delivery in 2015
.In the longer term we project all capable rigs to go to
the Barents Sea to satisfy demand
.Other potential arrivals:
.Transocean Spitsbergen
.Polar Pioneer
.Deepsea Atlantic
51
Source: Companies, Pareto Research
http://www.deepwater.com/_filelib/ImageGallery/fleet/transocean_barents.834x649.
jpg
http://static.offshoreenergytoday.com/wp-content/uploads/2013/02/Wintershall-to-
Use-Transocean-Arctic-for-PL-418-Drilling-Norway.jpg
52. –.however large demand elsewhere on NCS
.Demand has increased in the North Sea
on the back off exploration successes
.Johan Sverdup
.Ivar Aasen
.In addition, development plans for Aasta
Hansteen (including gas pipeline) opens
up new plays in the Norwegian Sea
.Increased recovery at mature fields also
demanding many rigs–
52
Source: Statoil, Pareto Research
http://www.statoil.com/no/NewsAndMedia/News/2013/PublishingImages/08Jan_AastaHan
steen_468map.jpg
53. Ageing fields demanding many rigs – Increased focus on IOR
Source: IHS, Companies, Pareto Research
53
Exploration,
6Appraisal, 3Development -New
fields, 6Development -Old fields,
13
Drilling by field category (ex. Cat-D)
.Despite the exploration successes with
a large Drilling activity on NCS is
dominated by development drilling
.19 of 28 rigs
.Statoil with increased focus on
Increased Oil Recovery (IOR)
.Developed –old– fields that are past
peak production are demanding
almost half of the units
.Needed to extend the life of the fields,
which accounts for a very large share
of the overall production
.Last year Statoil matured
reserves on the NCS to an extent
equivalent to Skrugard and Havis
combined
54. Five rigs at Statoil–s Troll field alone
Source: Statoil, Pareto Research
54
.The Troll field alone is currently
occupying five rigs
.In addition, the first of the Cat-D
is intended to join for the long
term
.Statoil aims to have at least four
rigs in continuous operation for
eight years
.The field accounts for 1/3 of all
gas capacity on the NCS
.In addition we have Gullfaks,
Kvitebjørn and Åsgard (Statoil) and
Ormen Lange (Shell)
COSLPioneer
http://static.offshoreenergytoday.com/wp-content/uploads/2012/02/Norway-PSA-
Gives-Nod-for-COSLPioneer.jpg
West Venture
http://cdn2.shipspotting.com/photos/middle/7/3/6/775637.jpg
Stena Don
http://oilrig-photos.com.s3.amazonaws.com/2110.jpg
COSLInnovator http://2.bp.blogspot.com/-
bH3dpSIPjfo/T0o_khdfjDI/AAAAAAAANYU/8szj1gpAB40/s1600/012.JPG
COSLPromoter http://t0.gstatic.com/images?
q=tbn:ANd9GcQP4GXU2p9B3raiUx5QHTMBNx0bo9yTPTUWfadEF3bxT-Kb73Kw
http://www.statoil.com/en/NewsAndMedia/PressRoom/Downloads/statoil_horizontal.pn
g
Five rigs at Troll with start-up in mid-1990s
55. An attractive UK market also in demand for rigs
Source: IHS, Pareto Research
55
UK market has tightened significantly over
the past years due to:
1.The exploration successes in the mature
North Sea just across the border
.Record interest in most recent UKCS
licensing round
2.Tax breaks for increased recovery from
developed brownfields in the North Sea
as well as West of Shetlands
developments
.90% of new development activity in
2012 on projects qualifying for new tax
incentives
0.70.60.61.02.22.8Oct-10Jul-11Oct-11Jan-12Aug-12Mar-13
Average backlog per rig UKCS (in years)
56. UK floater fleet overview – Starting to look like Norway
.Only 2 (!) rigs available before YE–2014
.Starting to look like the Norwegian side of the North Sea, a totally different
than 1-2 years ago
Source: IHS, Pareto Research
RigBuiltDepthOperatorDayrateFreeJ.W. McLean19741250Apr-11Cold StackedOcean
Princess19751500EnQuest230Sep-13WilPhoenix19821200Premier315Jun-14West
Phoenix200810000Total445Jan-15Trans. John Shaw19821800TAQA/EOG205Feb-15Sedco
70419741000Chevron/Maersk335/355Apr-15GSF Arctic
III19841800Nexen/Valiant313/335Apr-15Paul B. Loyd, Jr.19872000BP344Apr-15Noble
Ton van Langeveld19791500Maersk Oil247/365May-15Trans.
Prospect19831500Nexen(COP251/405May-15Ocean Guardian19851500Shell263/355Jul-
15Ocean Nomad19751200Fairfield Energy280Jul-15Sedco 71419831600Total395Oct-
15WilHunter19831500Suncor315/385Nov-15Sedco 71119821800Talisman275/350Dec-
15Stena Spey19831500EnQuestPrivateJan-16Byford Dolphin19741500BP328/346Apr-
16Sedco 71219831600Tba380Oct-16ReactivationStena Carron20087500Chevron515Dec-
16AngolaOcean Patriot19831640ShellPrivateApr-17SE AsiaUpgradeBollsta
Dolphin201510000Chevron560May-20Deepsea Aberdeen20147500BP470Jul-
21201320142015Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4
57. But UK floaters are even older than on the NCS
Source: IHS, Pareto Research
3939393838343131313030303030302928265051015202530354045Avg. age operating fleet
= ~31 years
Age profile - UK floater fleet
.5x rigs more than
40 years in 2016
.Fleet renewal
limited to West of
Shetlands
developments
59. Rig # 1Rig # 2Rig # 3Rig # 4Rig # 5Rig # 6Rig # 7Rig #
8YardDalianDalianDalianDalianSWSSWSSWSSWSDesignF&G JU-2000EF&G JU-2000EF&G JU-
2000EF&G JU-2000EF&G JU-2000EF&G JU-2000EF&G JU-2000EF&G JU-2000ETurnkey price
(USDm)185185199199196196207207DeliveryFeb-13Mar-13Aug-13Sep-13Feb-14May-14Sep-
15Feb-16Payment terms10:9010:9010:9010:901:991:997:937:93
Prospector Offshore Drilling: The right jackup exposure at a discount
.Pure play HE/HS jackup
company
.2 units under construction at
Dalian, as well as another 4x
units from SWS
.All rigs with same design: Friede
& Goldman Enhanced JU 2000E
.Management with extensive
experience from companies like
Premium Drilling, Noble Drilling,
Seahawk, Hercules, Smedvig
and Schlumberger
.Proven design: Noble had 3 of
the same rigs delivered from
Dalian in 2007-2009, Seadrill
also has 6x rigs similar rigs
under construction
.USD 139m bank financing
secured through Chinese
banks/ECAs for rig #1
Source: Pareto Research, Prospector
Company Overview
ManagementRobert W. Rose (CEO)
Steven Manz (SVP CFO)
Michael Pope (VP, Marketing)
Anirudha Pangarkar (VP, operations)
Michael Cardigan (VP, Administration)
59
Real options – 99/93% construction
financing, no parent guaranties
Rig #1 (Dalian 1)F&G JU2000E400 ftTotal at 185'/dayRig #3 (Dalian 3)F&G
JU2000E400 ftPareto est. 185-200'$/dayRig #5 (SWS 1)F&G JU2000E400 ftPareto est.
185-200'$/dayRig #6 (SWS 2)F&G JU2000E400 ftPareto est. 185-200'$/dayRig #7 (SWS
3)F&G JU2000E400 ftPareto est. 185-200'$/dayRig #8 (SWS 4)F&G JU2000E400
ftPareto est. 185-200'$/dayContractOptionYardAvailable20172013201420152016
60. Prospector Offshore: Significant upside potential
60 Source: Pareto Research, ODS
Share price NOK15.020.022.025.0No. of sharesmill92929292Market
capUSDm237316347394Cash Q1"125125125125Enterprise value"112191222269Remaining
capex"1270127012701270Total EV"1382146014921539Implicit value per rigAll in
priceUSDm230243249257Yard price"203216222230Last 2x SWS2102102102104x
existing177197205217Avg. all in priceUSDm225Avg. Yard price"198
61. Pacific Drilling: Attractively priced UDW driller
.New orders: probably 1x a year, we expect next one in 2014
.Confirms yard cost of low USD 500m (as Ensco)
.Capital not the problem in terms of growth, but people
.Dividends probably in 2015, most likely 2H–15 due to dividend
covenants
.Stock:
.Few triggers
.Very attractive valuation
.Low free float (USD 500m)
.Share price same as IPO March 2011
61
62. Pacific Drilling
62 Source: Pareto Research
CASH FLOW200820092013e2014e2015eMtMOperating cash flowUSDm--187325570592Net from
investments"--(1,246)(620)(422)-
Free Cash flow"--(1,058)(295)148592Dividend paid"------
Equity/adjustments"------
Change in debt"--646233(107)-
Other"--(22)---
Net from financing "--624233(107)-
Cash flow"--(434)(62)41592BALANCE SHEET200820092013e2014e2015eMtMTangible fixed
assetsUSDm--4,8815,2995,4495,819Intangible assets"------
Other assets"--88888888IB long-term receivables"--1007575100Other current
assets"--290310310290Cash and liquid assets"--220158198220Total assets"--
5,5785,9296,1206,516Shareholders' equity"--2,3832,5332,8622,383Minority
interests"------
IB long-term debt"--2,6812,9142,8063,619Other long-term debt"--1057343105IB
current liabilities"--219219219219Other current liabilities"--190190190190Total
liabilites & equity"--5,5785,9296,1206,516Capex
(PACD)201120122013E2014E2015ENewbuildingsUSDm(306)(1,155)(586)(352)
Rigs and equipment"(139)(71)(45)(70)
Other"(5)(44)(14)-
Total capex(1,540)(450)(1,271)(645)(422)
DEBT OVERVIEW (PACD)Collaterals201120122013E2014E2015EECA facilityUSDm4x 2010/11
drillships1,6751,457---
Term loan B (USD 750m)*"4x 2010/11 drillships--750743735USD 750m bond loan"4x
2010/11 drillships--750750750Credit facility (USD 500m)"4x 2010/11
drillships-----
USD 500m bond loan (7.25%)"Pacific Khamsin-500500500500Senior Credit Facility
(USD 1bn)"Sharav, Meltem--600840740Pacific Zonda"Pacific Zonda-----
USD 300m bond loan"Unsecured-300300300300Total loans"1,6752,2572,9003,1333,025*
assumed debt anortization
P&L PACD200820092013e2014e2015eMtMOperating revenuesUSDm--
7491,1391,4531,631Operating costs"--(402)(551)(599)(654)
EBITDA"--347588854978DD&A"--(156)(227)(271)(294)
Operating profit"--191361583684Associated companies"------
EBIT"--191361583684Net interest"--(102)(154)(181)(204)
Other financial items"------
Profit before taxes"--89207402480Taxes"--(28)(57)(73)(82)
Minority interest"------
Net profit"--60150329399EPS (reported)USD--0.30.71.51.8EPS"--
0.30.71.51.8FCFPS"--(5.0)(1.5)0.72.7BVPS"--11.011.713.211.0Dividend per
share"------
CAPITALIZATION200820092013e2014e2015eMtMShare priceUSD--9.679.679.679.67No. of
sharesmill--217217217217Market cap.USDm--2,0972,0972,0972,097Net interest
bearing debt"--2,5812,9002,7523,518Enterprise value"--
4,6784,9984,8495,616VALUATION200820092013e2014e2015eMtMP/Ex--
34.714.06.45.3EV/EBITDAx--13.58.55.75.7P/Bx--0.90.80.70.9Yield%------
ROE"--2.66.112.215.2
63. Seadrill Q1–13 review
May 2013
Please refer to important disclosures at the end of this document
Frank Harestad
Direct: +47 5183 6315
Email: frank.harestad@pareto.no
Andreas Stubsrud
Direct: +47 2413 2116
Email: andreas.stubsrud@pareto.no
Target: NOK 275
C:UserssamirAppDataLocalMicrosoftWindowsTemporary Internet
FilesContent.OutlookVE8T0EF8Buy.jpg
64. 64
SDRL: –The conglomorate–
.Pure floaters and jackups
.Tender rig business sold to SapuraKencana
.Growth in jackup and UDW segments continues
.Subsidiaries/investments
.North Atlantic Drilling – strategic discussion/NYSE
listing – positive trigger in our view
.Sevan Drilling – positive trigger would be another
USGoM contract (rig #4), negative would be Brazil
contract in terms of potential bid from SDRL in our
view
.SapuraKencana – share price up xx% YTD. Value of
USD ~1bn for SDRL
.Archer – downside from here marginal
.Going forward
.MLP – much easier to issue units after 1 year
(October 2013). But MLP window must be open
.Seabras – on the –shelf–
65. 65
SDRL: A strong quarter
.P&L better than expected
.EBITDA 713/652 adj. vs 665/610E
.EPS adj. USD 0.67 vs 0.59E
.DPS USD 0.88 vs 0.90E and previously 0.85
.Improved utilization float.: Q1:92% and Q2: to date 97%
.Seeking further growth bullish market outlook
.Closing Sapura in Q2 gain and Cash flow > USD 1bn.
Market value remaining Sapura stake ~USD 1bn
.T15 dropped down to SDRL partners. From October drop
down process and equity raises easier for SDRL partners
.Board sees opportunities to grow either organically or
through M&A within JU and UDW
.Dividends, UDW contracts and EPS growth triggers
.EPS and dividend to continue to grow
.Quarterly dividend projected at USD 1 from Q4–13 ~10%
.EPS in 2013 around NOK 15, 21 next year and 27 in 2015
.5 available UDW newbuilds up for grab
ActualActualQ4'12Q1'13ParetoCons.
RevenuesUSDm1,2141,2651,1291,140EBITDA"603713665604EBIT"224554507442Pre tax
profit"105484419358Net profit "15409334319EPS
adj.USD0.590.670.590.59DPSUSD0.000.880.900.87Net
debtUSDm11,32511,83311,72510,625FloatersUSDm413434413Jackups"90182166Tender
rigs"1009786Other"- - -
Total EBITDA"603713665Q1'13 Estimates
66. Seadrill: Siginficant fleet expansion
66
.This partly offset by sale of the majority of the tender rig fleet to Sapura
Kencana
24West Mira22West RigelWest SaturnWest NeptuneWest Jupiter18West CarinaWest
TellusWest VelaWest Auriga14West Eclipse13West LeoWest Capricorn11West
PegasusWest OrionWest GeminiWest AquariusWest EminenceWest HerculesWest
TaurusWest PhoenixWest SiriusWest CapellaWest PolarisWest
Navigator2010201120122013E2014E2015E
27Dalian Q1'15Dalian Q2'15Dalian Q3'152323Dalian Q4'15West LinusAOR 1AOR 2AOR
3West CastorWest TucanaWest Telesto1515West OberonWest Cressida13West ElaraWest
Callisto
West Leda
West Courageous
West DefenderWest ResoluteWest VigilantWest IntrepidWest FreedomWest
MischiefWest Triton
West ProsperoWest ArielWest Epsilon2010201120122013E2014E2015E
UDW rig from 14 to 24 by YE15 Jackup fleet from 15 to 27 by YE15
67. Seadrill – strong EPS growth projected
–tender rig sale negative impact 2013
67
17.415.414.815.320.827.60510152025302010201120122013e2014e2015e
NOK per share
68. 68
NADL: US listing further delayed
.P&L slightly below
.EBITDA USD 135m vs 140E
.EPS adj. USD 0.28 vs 0.30
.DPS USD 0.225 as expected
.Numbers negatively impacted yard stay Alpha.
Phoenix SPS now Q2 vs previously 2014
.US listing delayed due to strategic discussion
.Attractive mutliples
.P/E 7x and dividend yield 10%
.Struggle with continued delays US listing
.Balance sheet remains an issue
.How credible is the strategic discussion?
ActualActualQ1'13EQ4'12Q1'13ParetoRevenuesUSDm283318268EBITDA"140135140EBIT"9792
98Pre tax profit"796277Net profit "505569EPS
adj.USD0.200.280.30DPSUSD0.230.230.23Net debtUSDm2,3312,2872,056
69. 69
NADL: Key figures
P&L North Atlantic Drilling201120122013e2014e2015eMtMOperating
revenues7111,0451,1851,2391,4691,335Operating costs(286)(478)(610)(622)(686)
(556)
EBITDA425567575617783779DD&A(106)(163)(170)(195)(215)(220)
Operating profit319404406422569559Net interest(61)(83)(81)(117)(140)(198)
Other financial items(56)(30)(10)---
Profit before taxes201291315306429361Taxes(21)(55)(33)(31)(43)(36)
Net profit181237282275386325EPS
(reported)0.91.11.21.21.71.4EPS1.21.21.31.21.71.4FCFPS(0.3)0.30.2(0.6)2.01.8BVPS
2.63.64.04.35.14.0Dividend per
share0.40.90.90.90.90.9VALUATION201120122013e2014e2015eMtMP/E6.47.47.07.45.36.3E
V/EBITDA9.47.77.98.05.97.0P/B2.92.42.22.11.82.2Yield4.910.110.110.110.110.1
70. 70
NADL: Valuation
West AlphaUSDm450407380343West Venture"600542507457West Phoenix
"975881824742West Navigator"700633591533West Riegel"975881824742West
Epsilon"375339317286West Elara"650588549495West Linus"675610570514Total rig
value"5,4004,8824,5624,112CASH & LIABILITIESWest
HerculesUSDm63634323Cash"229229159156Interest bearing debt"(2,751)(2,751)(3,017)
(2,750)
Tax claim"(62)(62)(62)(62)
Remaining capex"(468)(468)--
Equity value"2,4111,8931,6861,479KEY FIGURESShares
outstandingMill.230230230230Value per shareUSD10.58.27.36.4Value per
shareNOK61.348.142.937.6Dividend"3.93.99.214.5Value per
share"65.352.152.152.1IMPLIED VALUESPareto
target
2013EImplied
value
2013EImplied
value
2014EImplied
value
2015E
71. 71
SDRL: solid back-log existing rigs, 5 of 9 UDW newbuilds uncontracted
.16 existing UDW rigs + 1x
4GSS Norway
.1 unit available 2014
.4 units available 2015
.12 units contracted to
2015 – 2019
.9x UDW newbuilds
.4 units contracted
.1 unit available 2013
.2 units available 2014
.2 units available 2015
Contract status & dayrate assumptionsFloater fleetWest Tellus(2013)SamsungWest
Navigator (Drillship 1999)*Shell @590'$
West Jupiter (2014)SamsungWest Saturn (2014)SamsungWest Phoenix (Semi built
2008)*Total @ 452'$/dayWest Carina (2014)SamsungWest Riegel (Semi built
2015)JurongWest Taurus (Semi 2009)Petrobras @ 655'$/dayWest Eminence (Semi
2009)*Petrobras @ 615'$/dayWest Venture (Semi 1999)*Statoil @ 440'$/day
West Orion (Semi 2010)Petrobras @ 615'$/dayWest Leo (Semi 2011)Tullow @ 525-
625'$/dayWest Pegasus (Semi 2011)Pemex @ 465-MtM'$/daySonga Eclipse (Semi built
2012)Total@ 435-450'$/day AngolaWest Hercules (Semi 2008)Statoil Norway
496'$/dayWest Capella (Drillship 2008)**Total @ 544-627'$/dayWest Acquarius
(Semi 2008)**Exxon @ 530'$/dayWest Gemini (Drillship 2010)Total/TBN @ 447-
640'$/dayWest Neptune (2014)SamsungLLOG @570'$/dayWest Alpha (4G Semi
1984)*BG/Exxon @480-548'$/dayWest Polaris (Drillship 2008)Exxon/TBN @617-
642'$/dayWest Capricorn (Semi 2011)BP 496'$/dayWest Sirius (Semi built 2008)**BP
@ 475-540'$
West Mira (Semi built 2015)HyundaiHusky @590'USD/dayWest Auriga (2013)SamsungBP
@565'USD/dayWest Vela(2013)SamsungBP @565'USD/day*
NADL**MLPContractOptionYardAvailable2013201420152016201720182019
72. 72
SDRL: USD 8bn projected in new financing needed by YE15
Q1'13EQ2'13EQ3'13EQ4'13E2013E2014E2015EOperating
CFUSDm5714414654921,9702,9443,151Sale assets"731,134- - 1,207- -
Capex"(963)(192)(1,524)(1,837)(4,514)(2,261)(2,084)
Other invest."(81)- - - (81)
Debt due"(495)(255)(448)(334)(1,532)(1,867)(2,116)
New debt"758- 1,0952,1504,0033,1003,000Dividend"- (423)(447)(470)(1,340)(1,880)
(1,880)
Cash flow"(137)706(858)2(287)3671Cash opening USDm5023651,071213502215251Cash
closing"3651,071213215215251322Acc. New
debtUSDm7587581,8534,0034,0037,10310,103Herof
secured"7587581,6532,6032,6032,6032,603Need"- - 2001,4001,4004,5007,500Acc.
amort."- - - - - 117492Need post amort."- - 2001,4001,4004,6177,992
73. Seadrill – significant availability unencumbered assets
73
.Financial need of USD 8.0bn (assuming dividend increased to USD 1 per quarter)
.By YE 2014 we project a need of USD 4.5bn
.Based on unencumbered assets achievable through 1.st lien bank
.By 2015 we see a capacity in new bank loans of USD 7.9bn vs need of USD 8.0bn
.In addition to bank the company has also access to other sources like: Equity,
bonds, proceeds MLP
structures, NADL/Seabras, sell Sapura Crest or Archer e.g.
.In light of this we believe SDRL should be well positioned to secure the needed
funds
Unencumbered delivered assets2013E2014E2015ENew UDW rigs#4501812Harsh
environment JU's"400111New JU's"1106718Semi tender"150--1Acc. loan capacity
EUSDm1,5104,7707,930Amortization new loans"-(117)(492)
Additional need"(110)(153)62Loan capacity per rig USDm E
74. Seadrill – still valued at a premium vs peers
–however, not at a record level
74
Value per UDW rig YE15
8237016676606176015695465125115024874390100200300400500600700800900SDRLVTGATWNEN
ADLPACDFOEESVDOORIGRIGRDCSEVUSDm
75. * Other assets include: Archer, Sapura Kencana, Sevan Drilling
# of rigs per segment Valuation mix per segments
SDRL asset base – implied values YE–12
Jackups,
26.2Floaters,
23.4Tenders, 2.9Jackups26%
Floaters70%
Tenders2%
Other assets2%
76. SEADRILL
Floating rigs
Jackups
Tender Rigs
NADL (75%)
3x Semis
2x JUs
1x Drillship
1x JU and 1x semi
under construction
1x semi tender
2x tender barges under
construction
9x Semis
3x Drillships
7 x Drillships and 1x
semi under
construction
13x JUs
8x JUs under construction
Sevan Drilling
(30% owned)
2x semis
2x semis under
construction
3x JUs under
construction
Asia Offshore Drilling
(66.0%)
SapuraKencana
(13% owned*)
Malaysian
integrated oil & gas
service provider
Tender rigs bought
from SDRL
SDRL: Company overview – post tender rig sale
Archer
81. UDW implied values including new builds
.In 2012E implied values all new builds are included,
hence there are –unproductive– rigs included
.2014E implied values are comparable to new
build orders
.Most new builds are delivered and the figures
above are comparable
.Note that average fleet age differentiate
significantly: VTG, SDRL, OCR, SEVDR and PDSA
with the youngest fleet
2012E implied UDW values
2014E implied UDW values
Source: Pareto Research 80
98479879779373572169768063362659458448801002003004005006007008009001,000SDRLVTGA
TWNENADLFOEPACDESVDOORIGRDCRIGSEVUSDm
8747006836696316085805725315225214954370100200300400500600700800900SDRLVTGNEATWN
ADLPACDFOEESVDORIGORIGRDCSEVUSDm
82. 81
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84. 82
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89. 85
Disclaimers and disclosures
Column IColumn IIBuy64,0%87,0 %
Hold25,0%13,0 %
Sell11,0%0,0 %
This overview is updated quarterly (last updated 15.05.2013).
CompanyAnalyst
holdingsTotal
holdingsCompanyAnalyst
holdingsTotal
holdingsArcher-17 500Olav Thon Eiendomsselskap420920Bonheur-15 800Orkla-22 514BW
Offshore-61 686Petroleum Geo-Services-2 700Cermaq-3 000Prosafe-1 405Discovery
Offshore-12 000Protector Forsikring-499 000DNB-48 227Questerre Energy-67 000DNO
International-20 400Renewable Energy Corp-48 444DOF-100 000SalMar-2 600EOC
Limited-25 000Sandnes Sparebank-5 001Farstad Shipping-21 700Seadrill-5 500Fred
Olsen Energy100300Selvaag Bolig-50 000Gjensidige Forsikring-2 129Ship Finance
Ltd-3 184Golden Ocean Group-100 200Solstad Offshore-4 100Havila Shipping-3
150Sparebank 1 Nord-Norge-20 637Hexagon Compsites-100 000Sparebank 1 SR-Bank-112
023Höegh LNG-7 263Sparebanken Øst-23 149InterOil-130 000Statoil-8 335Itera40
00041 000Stolt-Nielsen-1 035Kongsberg Gruppen1 20059 700Storebrand-2 570Lerøy
Seafood Group-10 500Subsea 7-76 471Marine Harvest Group-20 000Telenor-7
800Morpol-55 250TGS-NOPEC-7 450Norsk Hydro-357 808The Scottish Salmon Company-
100 000Norske Skogindustrier-40 496Veidekke-42 400Northland Resources-467
000Wilh. Wilhelmsen Holding A-404Norwegian Air Shuttle-300Yara International-30
529Odfjell-7 300This overview is updated monthly (last updated 30.04.2013)
Appendix A
Disclosure requirements pursuant to the Norwegian Securities Trading Regulations
section 3-10 (2) and section 3-11 (1), letters
a-b
Pareto Securities AS does not alone or - together with affiliated companies or
persons – owns a portion of the shares exceeding
5 % of the total share capital in any company where a recommendation has been
produced or distributed by Pareto Securities
AS.
Pareto Securities AS or its affiliates own as determined in accordance with
Section 13(d) of the Exchange Act, 1 % or more of the
equity securities of Equinox Offshore Accommodation Ltd.
Pareto Securities AS may hold financial instruments in companies where a
recommendation has been produced or distributed by
Pareto Securities AS in connection with rendering investment services, including
Market Making.
Please find below an overview of material interests in shares held by employees
in Pareto Securities AS, in companies where a
recommendation has been produced or distributed by Pareto Securities AS. By
material interest is meant holdings exceeding a
value of NOK 50 000.
Appendix B
Disclosure requirements pursuant to the Norwegian Securities Trading ST
Regulation § 3-11, letters d-f, ref the Securities
Trading Act Section 3-10
Overview over issuers of financial instruments where Pareto Securities AS have
prepared or distributed investment
recommendation, where Pareto Securities AS have been lead manager/co-lead
manager or have rendered publicly known
not immaterial investment banking services over the previous 12 months:
Appendix C
Disclosure requirements pursuant to the Norwegian Securities Trading ST
90. Regulation § 3-11 (4)
Column I shows the overall ratio of –Trading Buy–, –Buy–, –Hold–, –Sell– and
–Trading Sell– in
Pareto–s Recommendations in financial instruments.
Column II shows the ratio of –Trading Buy–, –Buy–, –Hold–, –Sell– and –Trading
Sell– in Pareto–s Recommendations in financial
instruments where Pareto Have provided investment banking services to the issuer
the previous 12 months.
-AGR Group-GlobalConnect-Saga Tankers-Aker-Grieg Seafood-Scana Industrier-
Archer-Haikui-Scandinavian Insurance Group-Atlantic Offshore-Havila Shipping-Sea
Trucks Group-Austevoll Seafood-Hercules Offshore-Seadrill-BassDrill-Houston
American Energy Corp-Selvaag Bolig-Bergen Group-InterOil-Sevan Drilling-Berner
Gruppen-Kistefos-Sigma Drilling-BN Bank-KrisEnergy-SinOceanic Shipping-BOA
Offshore-Marine Harvest-Solør Bioenergi-Cecon-Mecom Group-Sparebank 1 Nord-
Norge-Clearwater-Morpol-Sparebank 1 SR Bank-Dannemora Mineral -Nordic Mining-
Sparebanken Møre-Det Norske Oljeselskap-Noreco-Sparebanken Øst-DNB-Norse Energy-
Sterling Resources-Dockwise-Northern Offshore-Teekay-DOF-Ocean Yield-Tizir-DOF
Subsea-Oceanteam Shipping-Troll-Dolphin Group-Odfjell Drilling-TTS Group-EMS
Seven Seas-Panoro Energy-Western Bulk-Fjord Line-Prospector Offshore Drilling-
Wilh. Wilhelmsen-Floatel-Remora-Xtreme Drilling and Coil Services-Global
Investment Group Finance-RocksourceThis overview is updated monthly (this
overview is for the period 30.04.2012 – 30.04.2013).
91. 86
Disclaimers and disclosures
Appendix DThis section applies to research reports prepared by Pareto Öhman AB.
Disclosure of positions in financial instruments
The beneficial holding of the Pareto Group is 1 % or more of the total share
capital of the following companies included in Pareto Öhman AB–s research
coverage universe: Isconova.
The Pareto Group has material holdings of other financial instruments than
shares issued by the following companies included in Pareto Öhman AB–s research
coverage universe:
Disclosure of assignments and mandates
Overview over issuers of financial instruments where Pareto Öhman has prepared
or distributed investment recommendation, where Pareto Öhman AB has been lead
manager or co-lead
manager or has rendered publicly known not immaterial investment banking
services over the previous twelve months:
Africa OilEndominesShaMaran PetroleumAlpcot AgroIsconovaTethys OilBlackpearl
ResourcesKlövernVostok NaftaBlack Earth FarmingLucara DiamondDannemora
MineralRusForestMembers of the Pareto Group provide market making or other
liquidity providing services to the following companies included in Pareto Öhman
AB–s research coverage universe:
Africa OilIsconovaTethys OilBlackpearl ResourcesShaMaran PetroleumTrigon
AgriLucara DiamondMembers of the Pareto Group have entered into agreements
concerning the inclusion of the company in question in Pareto Öhman AB–s
research coverage universe with the following companies:
Africa Oil, Isconova, Shamaran Petroleum.
This overview is updated monthly (last updated 15.05.2013).
