Drilling Down into Seadrill’s

Recent Wheeling and Dealing

Photo credit:: Seadrill

Seadrill recently reported stronger than expected

first quarter results.

One of the reasons its results were so strong was

due to the company’s wheeling and dealing.

These moves, and those made after the quarter ended, have brightened the company’s outlook.

That said, these moves can be confusing on the

surface.

So, let’s take a close look at what these moves mean for investors.

No. 1: IPO of North Atlantic Drilling

• North Atlantic Drilling IPO completed Jan. 29.

• Before the IPO Seadrill owned a 74% stake in the company, which was listed in Norway.

• That stake was reduced to 70.36% after the IPO.

• More on North Atlantic Drilling later… Photo credit: North Atlantic Drilling

No. 2: Creation of SeaMex

• On Feb. 18 Seadrill announced the establishment of SeaMex, which is a 50/50 joint venture with an investment firm.

Photo credit: Seadrill

• The company will own and manage jack-up drilling units working for Pemex and pursue opportunities in Latin America.

No. 3: Drop down to Seadrill Partners

• On Mar. 11 Seadrill sold a 51% interest in the West Auriga drillship to Seadrill Partners.

Photo credit: Seadrill

• Implied sale price is $1.24 billion, however, SeadrillPartners’ net purchase price is $355.4 million.

• Seadrill Partners financed the deal with an equity offering and related party loans.

No. 4: Sold shares of SapuraKencana

• After the quarter ended Seadrill sold 230 million shares of SapuraKencana for about $300 million.

• Resulted in a realized gain of $165 million.

• Seadrill continues to hold about 490 million shares, or about 8% of SapuraKencana.

• Value of those shares is $627 million.

• Future source of liquidity for Seadrill after its lock up agreement expires at the end of 2014.

No. 5: Agreement with Rosneft

• On May 26th North Atlantic Drilling and Seadrillentered into an investment and co-operation agreement with Rosneft to partner in the Russian Market.

• Partnership will pursue growth opportunities in the Russian Market through at least 2022.

• North Atlantic Drilling will enter the onshore drilling market in Russia and enter into contracts for multiple offshore assets.

No. 5: Agreement with Rosneft

• Roseneft acquired a significant equity stake in North Atlantic Drilling as part of the agreement.

• Rosneft envisions employing up to nine offshore rigs, with a total commitment of 35 rig years.

• Seadrill will remain North Atlantic Drilling’s top shareholder and benefit from its growth in Russia.

Investor takeaway

• These transactions prove that despite the turbulent offshore drilling market Seadrill’sassets are still in demand.

• Not only that but the company was able to execute agreements to grow into new markets in Mexico and Russia.

Investor takeaway

• Further, the company’s transactions this year prove that it has substantial access to liquidity.

• The company can drop down assets to SeadrillPartners as well as monetize or leverage its ownership interests in North Atlantic Drilling, SapuraKencana, Sevan Drilling and Archer.

Because of this Seadrill remains strong, despite a weak offshore market for rigs.

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