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PROSPECTUS
SEADRILL LIMITED (Organisation number: 36832)
Listing on Oslo Børs
FRN Seadrill Limited Senior Unsecured Bond Issue 2012/2014
ISIN NO 001 063 611.1 ________________________________________________________
THIS PROSPECTUS SERVES AS A LISTING PROSPECTUS ONLY AS REQUIRED BY NORWEGIAN LAW AND REGULATIONS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO BUY, SUBSCRIBE OR SELL ANY OF THE SECURITIES DESCRIBED HEREIN, AND NO SECURITIES ARE BEING OFFERED OR SOLD PURSUANT TO IT. THIS PROSPECTUS HAS NOT BEEN APPROVED BY THE U.S. SECURITIES AND EXCHANGE COMMISSION.
________________________________________________________
Managers:
Nordea Markets Pareto Securities RS Platou Markets AS Swedbank
First Securities
16 January 2013
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Important information
This Prospectus has been prepared by Seadrill Limited (the “Company” and taken together with its
subsidiaries “Seadrill”) in order to provide information about the Company and its business in connection with
the listing on the Oslo Stock Exchange of bonds FRN Seadrill Limited Senior Unsecured Bond Issue 2012/ 2014 (the “Bond Issue”).
For the definitions of terms used throughout this Prospectus, see Section 11 “Definitions and Glossary of Terms”.
_______________________
The Company has furnished the information in this Prospectus and accepts responsibility for the information contained herein. The Managers make no representation or warranty, expressed or implied, as to the accuracy
or completeness of such information, and nothing contained in this Prospectus is, nor shall be relied upon as, a promise or representation by the Managers. This Prospectus does not contain any offer to subscribe and/or
purchase the Bonds. The Norwegian Financial Supervisory Authority has reviewed and approved this Prospectus in accordance with Sections 7-7 and 7-8 of the Norwegian Securities Trading Act. The Norwegian
Financial Supervisory Authority's control and approval in this respect is limited to whether the issuer has included descriptions according to a pre-defined list of content requirements. The Norwegian Financial
Supervisory Authority has not verified or approved the accuracy or completeness of the information provided in
this Prospectus. It is the Company's responsibility to ensure that the information in the prospectus is accurate
and complete. Furthermore, the Norwegian Financial Supervisory Authority has not made any sort of control or approval of the corporate matters described in or otherwise included in the prospectus.
All inquiries relating to this Prospectus should be directed to the Company or the Managers. No other person has been authorized to give any information about, or make any representation on behalf of, the Company in
connection with the Bond Issue, and, if given or made, such other information or representation must not be relied upon as having been authorized by the Company or the Managers.
The information contained herein is as of the date hereof and subject to change, completion or amendment without notice. There may have been changes affecting the Company or its subsidiaries subsequent to the date
of this Prospectus. The delivery of this Prospectus at any time after the date hereof will not, under any circumstances, create any implication that there has been no change in the Company’s affairs since the date
hereof or that the information set forth in this Prospectus is correct as of any time since its date. However, in accordance with Section 7-15 of the Norwegian Securities Trading Act, every new factor, material mistake or
inaccuracy which may have significance for the assessment of the Bonds and which is brought to light between the publication of this Prospectus and the listing of the Bonds, respectively, on Oslo Børs, will to the extent
required be included in a supplement to this Prospectus.
The distribution of this Prospectus in certain jurisdictions may be restricted by law. The Company
and the Managers require persons in possession of the Prospectus to inform themselves about and to observe any such restrictions. The Prospectus serves as a listing Prospectus as required by
applicable laws and regulations. The Prospectus does not constitute an offer to buy, subscribe or sell any of the securities described herein, and no securities are being offered or sold pursuant to it.
The Bonds have not been and will not be registered under the United States Securities Act of 1933,
as amended (the “U.S. Securities Act”) and may not be offered or sold within the United States except pursuant to an exemption from, or in a transaction not subject to, the registration
requirements of the U.S. Securities Act and applicable state securities laws.
The contents of this Prospectus shall not be construed as legal, business or tax advice. Each reader of this
Prospectus should consult its own legal, business or tax advisor as to legal, business or tax advice. If investors are in any doubt about the contents of this Prospectus, they should consult their stockbroker, bank manager,
lawyer, accountant or other professional adviser.
In the ordinary course of its business, the Managers and certain of its affiliates have engaged, and may
continue to engage, in investment and commercial banking transactions with the Issuer and its subsidiaries.
Investing in the Bonds involves certain inherent risks. See Section 1 “Risk Factors” of this
Prospectus.
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TABLE OF CONTENTS
1 RISK FACTORS ................................................................................................................................ 4 1.1 Risks relating to the industry ................................................................................................ 4 1.2 Risks relating to Seadrill ..................................................................................................... 13 1.3 Risks Relating to the Bonds and Seadrill’s other indebtedness ................................................. 20
2 RESPONSIBILITY FOR THE PROSPECTUS .......................................................................................... 25
3 CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS .................................................... 26
4 THE BOND ISSUE........................................................................................................................... 27 4.1 Use of proceeds ................................................................................................................. 27 4.2 Terms of the Bonds............................................................................................................ 27
5 COMPANY OVERVIEW ..................................................................................................................... 30 5.1 Incorporation, registered office and registration number ......................................................... 30 5.2 Business overview ............................................................................................................. 30 5.3 The Fleet .......................................................................................................................... 31 5.4 Management of the Company .............................................................................................. 33 5.5 Contract Status ................................................................................................................. 33 5.6 Organizational structure ..................................................................................................... 36 5.7 Competitive position .......................................................................................................... 38
6 BOARD OF DIRECTORS AND MANAGEMENT ....................................................................................... 40 6.1 Board of Directors ............................................................................................................. 40 6.2 Executive Management team .............................................................................................. 41 6.3 Conflict of interests ............................................................................................................ 43
7 MAJOR SHAREHOLDERS ................................................................................................................. 44
8 FINANCIAL INFORMATION .............................................................................................................. 45 8.1 Introduction ...................................................................................................................... 45 8.2 Consolidated statements of income ...................................................................................... 46 8.3 Consolidated balance sheet ................................................................................................. 48 8.4 Consolidated statement of cash flows ................................................................................... 49 8.5 Consolidated statement of invested equity ............................................................................ 52 8.6 Legal and arbitration proceedings ........................................................................................ 53 8.7 Significant change in the Company’s financial or trading position ............................................. 53
9 TREND INFORMATION .................................................................................................................... 54 9.1 Material factors affecting Seadrill’s prospects ........................................................................ 54 9.2 Material contracts .............................................................................................................. 56
10 ADDITIONAL INFORMATION ............................................................................................................ 57 10.1 Third party information ...................................................................................................... 57 10.2 Documents on Display ........................................................................................................ 57 10.3 Statutory auditors ............................................................................................................. 57 10.4 Advisors ........................................................................................................................... 57 10.5 Expenses .......................................................................................................................... 57 10.6 Documents incorporated by references ................................................................................. 57
11 DEFINITIONS AND GLOSSARY OF TERMS.......................................................................................... 59
APPENDICES:
1 Bond Agreement
2 By-laws
3 Third Quarter Report for 2012
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1 RISK FACTORS
Investing in the Bonds involves inherent risks. This Section 1 “Risk factors” contains an overview of the risk
factors that are known to the Company and considered material by it. If any of the events or circumstances
discussed below occurs, Seadrill’s business, financial condition, results of operations and cash flow could be
materially and adversely affected, and this may have a material adverse effect on the Company’s ability to meet its obligations (including the payment of principal and interest) under the Bonds.
Prospective investors should carefully consider all the information set out in this Prospectus and particularly the risk factors set forth below before making an investment decision, and should consult his or her own expert
advisors as to the suitability of an investment in the Bonds. An investment in the Bonds is suitable only for investors who understand the risk factors associated with this type of investment and who can afford a loss of
all or part of the investment.
The order in which the risks are presented below is not intended to provide an indication of the likelihood of
their occurrence nor of their severity or significance.
1.1 Risks relating to the industry
1.1.1 Seadrill’s business in the offshore drilling sector depends on the level of activity in the offshore oil
and gas industry, which is significantly affected by, among other things, volatile oil and gas prices,
and may be materially and adversely affected by a decline in the offshore oil and gas industry.
The offshore contract drilling industry is cyclical and volatile. Seadrill’s business in the offshore drilling sector
depends on the level of activity in oil and gas exploration, development and production in offshore areas worldwide. The availability of quality drilling prospects, exploration success, relative production costs, the stage
of reservoir development and political and regulatory environments affect customers' drilling programs. Oil and gas prices and market expectations of potential changes in these prices also significantly affect this level of
activity and demand for drilling units.
Oil and gas prices are extremely volatile and are affected by numerous factors beyond Seadrill’s control,
including the following:
worldwide production and demand for oil and gas;
the cost of exploring for, developing, producing and delivering oil and gas;
expectations regarding future energy prices;
advances in exploration, development and production technology;
the ability of OPEC to set and maintain levels and pricing;
the level of production in non-OPEC countries;
government regulations;
local and international political, economic and weather conditions;
domestic and foreign tax policies;
development and exploitation of alternative fuels;
the policies of various governments regarding exploration and development of their oil and gas
reserves; and
the worldwide political and military environment, including uncertainty or instability resulting
from an escalation or additional outbreak of armed hostilities, insurrection or other crises in the Middle East or other geographic areas or further acts of terrorism in the United States, or
elsewhere.
Declines in oil and gas prices for an extended period of time, or market expectations of potential decreases in
these prices, could negatively affect Seadrill’s business in the offshore drilling sector. Sustained periods of low oil prices typically result in reduced exploration and drilling because oil and gas companies' capital expenditure
budgets are subject to cash flow from such activities and are therefore sensitive to changes in energy prices. These changes in commodity prices can have a dramatic effect on rig demand, and periods of low demand can
cause excess rig supply and intensify the competition in the industry which often results in drilling units,
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particularly older and lower technical specification drilling units, being idle for long periods of time. The Issuer cannot predict the future level of demand for Seadrill’s services or future conditions of the oil and gas industry.
Any decrease in exploration, development or production expenditures by oil and gas companies could reduce Seadrill’s revenues and materially harm Seadrill’s business and results of operations.
In addition to oil and gas prices, the offshore drilling industry is influenced by additional factors, including:
the availability of competing offshore drilling units;
the level of costs for associated offshore oilfield and construction services;
oil and gas transportation costs;
the discovery of new oil and gas reserves;
the cost of non-conventional hydrocarbons;
the political and military environment of oil and gas reserve jurisdictions; and
regulatory restrictions on offshore drilling.
Any of these factors could reduce demand for the Seadrill’s services and adversely affect its business and results of operations.
1.1.2 Seadrill’s business and operations involve numerous operating hazards.
Seadrill`s operations are subject to hazards inherent in the drilling industry, such as blowouts, reservoir
damage, loss of production, loss of well control, lost or stuck drill strings, equipment defects, punch-throughs,
craterings, fires, explosions and pollution. Contract drilling and well servicing require the use of heavy equipment and exposure to hazardous conditions, which may subject Seadrill to liability claims by employees,
customers and third parties. These hazards can cause personal injury or loss of life, severe damage to or destruction of property and equipment, pollution or environmental damage, claims by third parties or
customers and suspension of operations. Seadrill`s offshore fleet is also subject to hazards inherent in marine operations, either while on-site or during mobilization, such as capsizing, sinking, grounding, collision, damage
from severe weather and marine life infestations. Operations may also be suspended because of machinery breakdowns, abnormal drilling conditions, failure of subcontractors to perform or supply goods or services or
personnel shortages. Seadrill customarily provide contract indemnity to Seadrill’s customers for claims that could be asserted by Seadrill relating to damage to or loss of its equipment, including rigs and claims that
could be asserted by Seadrill or its employees relating to personal injury or loss of life.
Damage to the environment could also result from Seadrill`s operations, particularly through spillage of fuel,
lubricants or other chemicals and substances used in drilling operations, or extensive uncontrolled fires. Seadrill may also be subject to property, environmental and other damage claims by oil and gas companies.
Seadrill`s insurance policies and contractual rights to indemnity may not adequately cover losses, and Seadrill
do not have insurance coverage or rights to indemnity for all risks. Consistent with standard industry practice,
Seadrill`s clients generally assume, and indemnify Seadrill against, well control and subsurface risks under daily rates contracts. These are risks associated with the loss of control of a well, such as blowout or cratering,
the cost to regain control of or re-drill the well and associated pollution. However, there can be no assurances that these clients will be willing or financially able to indemnify Seadrill against all these risks. Seadrill
maintains insurance coverage for property damage, occupational injury and illness, and general and marine third-party liabilities (except as described below with respect to drilling units and equipment in the U.S. GOM).
However, pollution and environmental risks generally are not totally insurable.
Seadrill maintains a portion of deductibles for damage to Seadrill`s offshore drilling equipment and third-party
liabilities. With respect to hull and machinery Seadrill currently maintain a deductible per occurrence of $5 million for all of its fleet, except for tender barges, for which it is $1 million. However, in the event of a total
loss or a constructive total loss of a drilling unit, such loss is fully covered by Seadrill`s insurance with no deductible. For general and marine third-party liabilities Seadrill generally maintain up to $25,000 deductible
per occurrence on personal injury liability for crew claims as well as non-crew claims and per occurrence on third-party property damage, except for Seadrill`s drilling units operating in the U.S. GOM where the
deductible is $500,000 per occurrence.
If a significant accident or other event occurs that is not fully covered by Seadrill`s insurance or an enforceable
or recoverable indemnity from a client, the occurrence could adversely affect Seadrill`s consolidated statement of financial position, results of operations or cash flows. The amount of Seadrill`s insurance may also be less
than the related impact on enterprise value after a loss. Seadrill`s insurance coverage will not in all situations provide sufficient funds to protect Seadrill from all liabilities that could result from its drilling operations.
Seadrill`s coverage includes annual aggregate policy limits. As a result, Seadrill retains the risk through self-insurance for any losses in excess of these limits. Any such lack of reimbursement may cause Seadrill to incur
substantial costs. In addition, Seadrill could decide to retain more risk through self-insurance in the future. This
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self-insurance results in a higher risk of losses, which could be material, that are not covered by third party insurance contracts. Specifically, Seadrill have elected to self-insure for physical damage to rigs and equipment
caused by named windstorms in the U.S. GOM due to the substantial costs associated with such coverage. If such windstorms cause significant damage to any rig and equipment Seadrill has in the U.S. GOM, it could
have a material adverse effect on Seadrill`s financial position, results of operations or cash flows. Moreover, no assurance can be made that Seadrill will be able to maintain adequate insurance in the future at rates that
Seadrill consider reasonable, or obtain insurance against certain risks.
1.1.3 An over-supply of drilling units may lead to a reduction in daily rates and therefore may materially
impact Seadrill’s profitability in Seadrill’s offshore drilling segment.
During the recent period of high utilization and high daily rates, industry participants have increased the supply of drilling units by ordering construction of new drilling units. Historically, this has resulted in an over-supply of
drilling units and has caused a subsequent decline in utilization and daily rates when the drilling units have entered the market, sometimes for extended periods of time until the new units have been absorbed into the
active fleet. According to industry sources, the worldwide fleet of ultra-deepwater drilling units as of November 30, 2012 consisted of 127 units, comprised of 65 semi-submersible rigs and 62 drillships. An additional 12
semi-submersible rigs and 70 drillships are under construction or on order, which would bring the total fleet to 209 units. A relatively large number of the drilling units currently under construction have not been contracted
for future work, which may intensify price competition as scheduled delivery dates occur and lead to a
reduction in daily rates as the active fleet grows. Lower utilization and daily rates could adversely affect
Seadrill’s revenues and profitability. Prolonged periods of low utilization and daily rates could also result in the recognition of impairment charges on Seadrill’s drilling units if future cash flow estimates, based upon
information available to management at the time, indicate that the carrying value of these drilling units may not be recoverable.
1.1.4 There may be limits to Seadrill’s ability to mobilize drillships between geographic areas, and the time
and costs of such mobilizations may be material to Seadrill’s business.
The offshore contract drilling market is generally a global market as drilling units may be mobilized from one area to another. However, the ability to mobilize drilling units can be impacted by several factors including, but
not limited to, governmental regulation and customs practices, the significant costs of moving a drilling unit, weather, political instability, civil unrest, military actions and the technical capability of the drilling units to
relocate and operate in various environments. Additionally, while a drillship is being mobilized from one geographic market to another, Seadrill may not be paid by the customer for the time that the drillship is out of
service. In addition, Seadrill may mobilize a drillship to another geographic market without a customer contract, which will result in costs not reimbursable by future customers. Any such impacts of mobilization
could have a material adverse effect on Seadrill’s business, results of operations, cash flows and financial condition.
1.1.5 The market value of Seadrill’s current drilling units and those it acquire in the future may decrease,
which could cause Seadrill to incur losses if it decides to sell them following a decline in their market
values.
If the offshore contract drilling industry suffers adverse developments in the future, the fair market value of Seadrill’s drilling units may decline. The fair market value of the drilling units that Seadrill currently own, or
may acquire in the future, may increase or decrease depending on a number of factors, including:
general economic and market conditions affecting the offshore contract drilling industry,
including competition from other offshore contract drilling companies;
types, sizes and ages of drilling units;
supply and demand for drilling units;
costs of newbuildings;
prevailing level of drilling services contract daily rates;
governmental or other regulations; and
technological advances.
If Seadrill sells any drilling unit at a time when prices for drilling units have fallen, such a sale may result in a
loss. Such a loss could materially and adversely affect Seadrill`s business prospects, financial condition,
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liquidity, results of operations and ability to pay dividends to Seadrill`s shareholders.
1.1.6 Consolidation of suppliers may increase the cost of obtaining supplies, which may have a material
adverse effect on Seadrill’s results of operations and financial condition.
Seadrill rely on certain third parties to provide supplies and services necessary for its offshore drilling
operations, including but not limited to drilling equipment suppliers, catering and machinery suppliers. Recent mergers have reduced the number of available suppliers, resulting in fewer alternatives for sourcing key
supplies. Such consolidation, combined with a high volume of drilling units under construction, may result in a
shortage of supplies and services thereby increasing the cost of supplies and/or potentially inhibiting the ability of suppliers to deliver on time. These cost increases or delays could have a material adverse effect on the
Issuer’s results of operations and result in rig downtime, and delays in the repair and maintenance of its drilling rigs.
1.1.7 Seadrill’s international operations in the offshore drilling sector involve additional risks, which could
adversely affect Seadrill’s business.
Seadrill operates in various regions throughout the world. As a result of its international operations, Seadrill may be exposed to political and other uncertainties, including risks of:
terrorist acts, armed hostilities, war and civil disturbances;
acts of piracy, which have historically affected ocean-going vessels trading in regions of the
world such as the South China Sea and in the Gulf of Aden off the coast of Somalia and which have increased significantly in frequency since 2008, particularly in the Gulf of Aden and off the
west coast of Africa;
significant governmental influence over many aspects of local economies;
seizure, nationalization or expropriation of property or equipment;
repudiation, nullification, modification or renegotiation of contracts;
limitations on insurance coverage, such as war risk coverage, in certain areas;
political unrest;
foreign and U.S. monetary policy and foreign currency fluctuations and devaluations;
the inability to repatriate income or capital;
complications associated with repairing and replacing equipment in remote locations;
import-export quotas, wage and price controls, imposition of trade barriers;
regulatory or financial requirements to comply with foreign bureaucratic actions;
changing taxation policies, including confiscatory taxation;
other forms of government regulation and economic conditions that are beyond Seadrill’s control; and
governmental corruption.
In addition, international contract drilling operations are subject to various laws and regulations of the
countries in which Seadrill operates including laws and regulations relating to:
the equipping and operation of drilling units;
repatriation of foreign earnings;
oil and gas exploration and development;
taxation of offshore earnings and the earnings of expatriate personnel; and
8
use and compensation of local employees and suppliers by foreign contractors.
Some foreign governments favor or effectively require (i) the awarding of drilling contracts to local contractors
or to drilling rigs owned by their own citizens, (ii) the use of a local agent or (iii) foreign contractors to employ
citizens of, or purchase supplies from, a particular jurisdiction. These practices may adversely affect Seadrill’s
ability to compete in those regions. It is difficult to predict what governmental regulations may be enacted in the future that could adversely affect the international drilling industry. The actions of foreign governments,
including initiatives by OPEC, may adversely affect Seadrill’s ability to compete. Failure to comply with applicable laws and regulations, including those relating to sanctions and export restrictions, may subject
Seadrill to criminal sanctions or civil remedies, including fines, denial of export privileges, injunctions or seizures of assets.
1.1.8 If Seadrill enters into drilling contracts or engage in certain other activities with countries or
government-controlled entities that are subject to restrictions imposed by the U.S. or other
governments, or engage in certain other activities, Seadrill’s reputation and the market for Seadrill’s
securities could adversely be affected.
From time to time, Seadrill may operate in countries that are subject to sanctions and embargoes imposed by
the U.S. government and/or identified by the U.S. government as state sponsors of terrorism, such as Cuba,
Iran, Sudan and Syria. The U.S. sanctions and embargo laws and regulations vary in their application, as they
do not all apply to the same covered persons or proscribe the same activities, and such sanctions and embargo laws and regulations may be amended or strengthened over time. In 2010, the U.S. enacted the
Comprehensive Iran Sanctions Accountability and Divestment Act, or CISADA, which expanded the scope of the Iran Sanctions Act. Among other things, CISADA expanded the application of the prohibitions to additional
activities of companies such as Seadrill, and introduced limits on the ability of companies and persons to do business or trade with Iran when such activities relate to the investment, supply or export of refined petroleum
or petroleum products. In 2012, President Obama signed Executive Order 13608 which prohibits foreign persons from violating or attempting to violate, or causing a violation of any sanctions in effect against Iran or
facilitating any deceptive transactions for or on behalf of any person subject to U.S. sanctions. Any persons found to be in violation of Executive Order 13608 will be deemed a foreign sanctions evader and will be banned
from all contacts with the U.S., including conducting business in U.S. dollars. Also in 2012, President Obama
signed into law the Iran Threat Reduction and Syria Human Rights Act of 2012 which created new sanctions and strengthened existing sanctions. Among other things, this act intensifies existing sanctions regarding the
provision of goods, services, infrastructure or technology to Iran’s petroleum or petrochemical sector. Th is act also includes a provision that states in part that, if a person is found transporting crude oil from Iran or
transporting refined petroleum products to Iran, that persons vessels could be barred from landing at U.S. ports for up to two years.
Although Seadrill believes that it is in compliance with all applicable sanctions and embargo laws and regulations, and intends to maintain such compliance, there can be no assurance that Seadrill will be in
compliance in the future, particularly as the scope of certain laws may be unclear and may be subject to changing interpretations. Any such violation could result in fines or other penalties and could result in some
investors deciding, or being required, to divest their interest, or not to invest, in the Company. In addition, certain institutional investors may have investment policies or restrictions that prevent them from holding
securities of companies that have contracts with countries identified by the U.S. government as state sponsors of terrorism. The determination by these investors not to invest in, or to divest from, Seadrill’s securities may
adversely affect the price at which Seadrill’s securities trade. In addition, Seadrill’s reputation and the market for Seadrill’s securities may be adversely affected if Seadrill engage in certain other activities, such as entering
into drilling contracts with individuals or entities in countries subject to U.S. sanctions and embargo laws that are not controlled by the governments of those countries, or engaging in operations associated with those
countries pursuant to contracts with third parties that are unrelated to those countries or entities controlled by their governments. Investor perception of the value of Seadrill’s securities may also be adversely affected by
the consequences of war, the effects of terrorism, civil unrest and governmental actions in these and surrounding countries.
1.1.9 Seadrill’s ability to operate drilling units in the U.S. Gulf of Mexico could be restricted by
governmental regulation.
Hurricanes Ivan, Katrina, Rita, Gustav and Ike caused damage to a number of drilling units unaffiliated to
Seadrill in the Gulf of Mexico (the “GOM”). The Bureau of Ocean Energy Management, Regulation and
Enforcement, BOEMRE, formerly the Minerals Management Service of the U.S. Department of the Interior,
effective October 1, 2011, reorganized into two new organizations, the Bureau of Ocean Energy Management (“BOEM”) and the Bureau of Safety and Environmental Enforcement (“BSEE”) and issued guidelines for tie-
downs on drilling units and permanent equipment and facilities attached to outer continental shelf production platforms, and moored drilling unit fitness that apply through the 2013 hurricane season. These guidelines
effectively impose new requirements on the offshore oil and natural gas industry in an attempt to increase the likelihood of survival of offshore drilling units during a hurricane. The guidelines also provide for enhanced
information and data requirements from oil and natural gas companies that operate properties in the U.S. GOM
9
region of the Outer Continental Shelf. BOEM and BSEE may issue similar guidelines for future hurricane seasons and may take other steps that could increase the cost of operations or reduce the area of operations
for Seadrill’s ultra-deepwater drilling units, thereby reducing their marketability. Implementation of new guidelines or regulations that may apply to ultra-deepwater drilling units may subject Seadrill to increased
costs and limit the operational capabilities of its drilling units, although such risks to the extent possible should rest with Seadrill’s clients.
Seadrill currently does not have any jack-up rigs or moored drilling units operating in the U.S. GOM. However, Seadrill has two ultra-deepwater semi-submersible drilling rigs operating in the U.S. GOM, and two ultra-
deepwater drillships contracted for operations in the U.S. GOM that are self-propelled and equipped with thrusters and other machinery, which enable the rig to move between drilling locations and remain in position
while drilling without the need for anchors, Seadrill also has an ultra-deepwater semi-submersible rig operating in the Mexican part of the GOM.
1.1.10 Public health threats could have an adverse effect on Seadrill’s operations and financial results.
Public health threats, such as swine flu, bird flu, Severe Acute Respiratory Syndrome and other highly
communicable diseases, outbreaks of which have already occurred in various parts of the world in which Seadrill operates, could adversely impact Seadrill’s operations, the operations of Seadrill’s customers and the
global economy, including the worldwide demand for oil and gas and, ultimately, the level of demand for
Seadrill’s services. Any of these public health threats could adversely affect Seadrill’s financial results.
1.1.11 Fluctuations in exchange rates and non-convertibility of currencies could result in losses to Seadrill.
As a result of Seadrill’s international operations, Seadrill is exposed to fluctuations in foreign exchange rates due to revenues being received and operating expenses paid in currencies other than U.S. Dollars. Accordingly,
Seadrill may experience currency exchange losses if Seadrill has not fully hedged its exposure to a foreign currency, or if revenues are received in currencies that are not readily convertible. Seadrill may also be unable
to collect revenues because of a shortage of convertible currency available to the country of operation, controls over currency exchange or controls over the repatriation of income or capital.
1.1.12 Governmental laws and regulations, including environmental laws and regulations, may add to
Seadrill’s costs or limit, Seadrill’s drilling activity.
Seadrill’s business in the offshore drilling industry is affected by laws and regulations relating to the energy
industry and the environment in the geographic areas where Seadrill operate. The offshore drilling industry is dependent on demand for services from the oil and gas exploration and production industry, and, accordingly,
Seadrill directly affected by the adoption of laws and regulations that, for economic, environmental or other policy reasons, curtail exploration and development drilling for oil and gas. Seadrill may be required to make
significant capital expenditures to comply with governmental laws and regulations. It is also possible that these laws and regulations may, in the future, add significantly to Seadrill’s operating costs or significantly limit
drilling activity. Seadrill’s ability to compete in international contract drilling markets may be limited by foreign
governmental regulations that favor or require the awarding of contracts to local contractors or by regulations
requiring foreign contractors to employ citizens of, or purchase supplies from, a particular jurisdiction. Governments in some countries are increasingly active in regulating and controlling the ownership of
concessions, the exploration for oil and gas, and other aspects of the oil and gas industries. Offshore drilling in certain areas has been curtailed and, in certain cases, prohibited because of concerns over protection of the
environment. Operations in less developed countries can be subject to legal systems that are not as mature or predictable as those in more developed countries, which can lead to greater uncertainty in legal matters and
proceedings.
To the extent new laws are enacted or other governmental actions are taken that prohibit or restrict offshore
drilling or impose additional environmental protection requirements that result in increased costs to the oil and gas industry, in general, or the offshore drilling industry, in particular, Seadrill’s business or prospects could be
materially adversely affected. The operation of Seadrill’s drilling units will require certain governmental approvals, the number and prerequisites of which cannot be determined until Seadrill identify the jurisdictions
in which Seadrill will operate on securing contracts for the drilling units. Depending on the jurisdiction, these governmental approvals may involve public hearings and costly undertakings on Seadrill’s part. Seadrill may
not obtain such approvals or such approvals may not be obtained in a timely manner. If Seadrill fails to timely
secure the necessary approvals or permits, Seadrill’s customers may have the right to terminate or seek to
renegotiate their drilling contracts to Seadrill’s detriment. The amendment or modification of existing laws and regulations or the adoption of new laws and regulations curtailing or further regulating exploratory or
development drilling and production of oil and gas could have a material adverse effect on Seadril l’s business, operating results or financial condition. Future earnings may be negatively affected by compliance with any
such new legislation or regulations.
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1.1.13 Seadrill is subject to complex laws and regulations, including environmental laws and regulations
that can adversely affect the cost, manner or feasibility of doing business.
Seadrill’s operations are subject to numerous laws and regulations in the form of international conventions and
treaties, national, state and local laws and national and international regulations in force in the jurisdictions in which Seadrill’s drilling units operate or are registered, which can significantly affect the ownership and
operation of Seadrill’s drilling units. These requirements include, but are not limited to, the International Convention for the Prevention of Pollution from Ships, or MARPOL, the International Convention on Civil
Liability for Oil Pollution Damage of 1969, generally referred to as CLC, the International Convention on Civil
Liability for Bunker Oil Pollution Damage, or Bunker Convention, the U.S. Oil Pollution Act of 1990, or OPA, the Comprehensive Environmental Response, Compensation and Liability Act, or CERCLA, the U.S. Outer
Continental Shelf Lands Act, and Brazil's National Environmental Policy Law (6938/81), Environmental Crimes Law (9605/98) and Law 9966/2000 relating to pollution in Brazilian waters. Compliance with such laws,
regulations and standards, where applicable, may require installation of costly equipment or operational changes and may affect the resale value or useful lifetime of Seadrill’s drilling units. Seadrill may also incur
additional costs in order to comply with other existing and future regulatory obligations, including, but not limited to, costs relating to air emissions, including greenhouse gases, the management of ballast waters,
maintenance and inspection, development and implementation of emergency procedures and insurance coverage or other financial assurance of Seadrill’s ability to address pollution incidents. These costs could have
a material adverse effect on Seadrill’s business, results of operations, cash flows and financial condition. A failure to comply with applicable laws and regulations may result in administrative and civil penalties, criminal
sanctions or the suspension or termination of Seadrill’s operations. Environmental laws often impose strict liability for remediation of spills and releases of oil and hazardous substances, which could subject Seadrill to
liability without regard to whether Seadrill was negligent or at fault. Under OPA, for example, owners, operators and bareboat charterers are, with limited exceptions, jointly and severally strictly liable for the
discharge of oil in U.S. waters, including the 200-nautical mile exclusive economic zone around the United States. An oil spill could result in significant liability, including fines, penalties and criminal liability and
remediation costs for natural resource damages under other international and U.S. federal, state and local laws, as well as third-party damages. Seadrill is required to satisfy insurance and financial responsibility
requirements for potential oil (including marine fuel) spills and other pollution incidents and Seadrill’s insurance may not be sufficient to cover all such risks. As a result, claims against Seadrill could result in a material
adverse effect on Seadrill’s business, results of operations, cash flows and financial condition.
Although Seadrill’s drilling units are separately owned by the Company’s subsidiaries, under certain
circumstances a parent company and all of the unit-owning affiliates in a group under common control engaged in a joint venture could be held liable for damages or debts owed by one of the affiliates, including liabilities for
oil spills under OPA or other environmental laws. Therefore, it is possible that Seadrill could be subject to liability upon a judgment against Seadrill or any one of the Company’s subsidiaries.
Seadrill’s drilling units could cause the release of oil or hazardous substances, especially as Seadrill’s drilling units age. Any releases may be large in quantity, above Seadrill’s permitted limits or occur in protected or
sensitive areas where public interest groups or governmental authorities have special interests. Any releases of oil or hazardous substances could result in fines and other costs to Seadrill, such as costs to upgrade Seadrill’s
drilling rigs, clean up the releases, and comply with more stringent requirements in Seadrill’s discharge permits. Moreover, these releases may result in Seadrill’s customers or governmental authorities suspending or
terminating Seadrill’s operations in the affected area, which could have a material adverse effect on Seadrill’s business, results of operation and financial condition.
If Seadrill is able to obtain from its customers some degree of contractual indemnification against pollution and environmental damages in Seadrill’s contracts, such indemnification may not be enforceable in all instances or
the customer may not be financially able to comply with its indemnity obligations in all cases, and Seadrill may not be able to obtain such indemnification agreements in the future.
Seadrill’s insurance coverage may not be available in the future, or Seadrill may not obtain certain insurance coverage. Even if insurance is available and Seadrill has obtained the coverage, it may not be adequate to
cover Seadrill’s liabilities or Seadrill’s insurance underwriters may be unable to pay compensation if a significant claim should occur. Any of these scenarios could have a material adverse effect on Seadrill’s
business, operating results and financial condition.
1.1.14 Climate change and regulation of greenhouse gases could have a negative impact Seadrill`s
business.
Due to concern over the risk of climate change, a number of countries and the United Nations' International
Maritime Organization, or IMO, have adopted, or are considering the adoption of, regulatory frameworks to
reduce greenhouse gas emissions. Currently, the emissions of greenhouse gases from international shipping are not subject to the Kyoto Protocol to the United Nations Framework Convention on Climate Change, which
entered into force in 2005 and pursuant to which adopting countries have been required to implement national programs to reduce greenhouse gas emissions. However, in July 2011 the IMO's Maritime Environment
Protection Committee, or MEPC, adopted two new sets of mandatory requirements to address greenhouse gas emissions from ships that will enter into force in January 2013. Currently operating ships will be required to
develop Ship Energy Efficiency Management Plans, and minimum energy efficiency levels per capacity mile will
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apply to new ships. These requirements could cause Seadrill to incur additional compliance costs. The IMO is also considering the development of market-based mechanisms to reduce greenhouse gas emissions from
ships. The European Union has indicated that it intends to propose an expansion of the existing European Union emissions trading scheme to include emissions of greenhouse gases from marine vessels, including
drilling units, and in January 2012, the European Commission launched a public consultation on possible measures to reduce greenhouse gas emissions from ships. In the United States, the EPA has issued a finding
that greenhouse gases endanger the public health and safety and has adopted regulations to limit greenhouse gas emissions from certain mobile sources and large stationary sources. Although the mobile source emissions
regulations do not apply to greenhouse gas emissions from drilling units, such regulation of drilling units is foreseeable, and the EPA has in recent years received petitions from the California Attorney General and
various environmental groups seeking such regulation.
Compliance with changes in laws, regulations and obligations relating to climate change could increase
Seadrill`s costs related to operating and maintaining its assets, and might also require Seadrill to install new emission controls, acquire allowances or pay taxes related to its greenhouse gas emissions, or administer and
manage a greenhouse gas emissions program.
Additionally, adverse effects upon the oil and gas industry relating to climate change, including growing public
concern about the environmental impact of climate change, may also adversely affect demand for Seadrill`s services. For example, increased regulation of greenhouse gases or other concerns relating to climate change
may reduce the demand for oil and gas in the future or create greater incentives for use of alternative energy sources. Any long-term material adverse effect on the oil and gas industry could have a significant financial
and operational adverse impact on Seadrill`s business.
1.1.15 The aftermath of the moratorium on offshore drilling in the U.S. Gulf of Mexico, and new regulations
adopted as a result of the investigation into the Macondo well blowout could negatively impact
Seadrill.
In the near-term aftermath of the Deepwater Horizon Incident, in which Seadrill was not involved, that led to
the Macondo well blow out situation, the U.S. government on May 30, 2010 imposed a six-month moratorium on certain drilling activities in water deeper than 500 feet in the U.S. GOM and subsequently implemented
Notices to Lessees 2010-N05 and 2010 N-06, providing enhanced safety requirements applicable to all drilling activity in the U.S. GOM, including drilling activities in water shallower than 500 feet. On October 12, 2010, the
U.S. government lifted the moratorium subject to compliance with the requirements set forth in Notices to Lessees 2010-N05 and 2010-N06. Additionally, all drilling in the U.S. GOM must comply with the Interim Final
Rule to Enhance Safety Measures for Energy Development on the Outer Continental Shelf (Drilling Safety Rule) and the Workplace Safety Rule on Safety and Environmental Management Systems, both of which were issued
on September 30, 2010, once they become final. Seadrill continue to evaluate these new measures to ensure that Seadrill’s rigs and equipment are in full compliance, where applicable. Additional requirements could be
forthcoming based on further recommendations by regulatory agencies investigating the Macondo incident. Seadrill is not able to predict the likelihood, nature or extent of additional rulemaking or when the interim
rules, or any future rules, could become final. Nor is Seadrill able to predict when the BSEE will issue drilling permits to Seadrill’s customers. Seadrill is not able to predict the future impact of these events on Seadrill’s
operations. Even with the drilling ban lifted, certain deepwater drilling activities remain suspended until the
BSEE resumes its regular permitting of those activities. The current and future regulatory environment in the
U.S. GOM could impact the demand for drilling units in the U.S. GOM in terms of overall number of rigs in
operations and the technical specification required for offshore rigs to operate in the U.S. GOM. It is possible that short-term potential migration of rigs from the U.S. GOM could adversely impact dayrates levels and fleet
utilization in other regions. Additional governmental regulations concerning licensing, taxation, equipment specifications, training requirements or other matters could increase the costs of Seadrill’s operations, and
escalating costs borne by Seadrill’s customers, along with permitting delays, could reduce exploration and development activity in the U.S. GOM and, therefore, reduce demand for Seadrill’s services. In addition,
insurance costs across the industry are expected to increase as a result of the Macondo incident and, in the future, certain insurance coverage is likely to become more costly, and may become less available or not
available at all. Seadrill cannot predict if the U.S. government will issue new drilling permits in a timely manner, nor can Seadrill predict the potential impact of new regulations that may be forthcoming as the
investigation into the Macondo well incident continues. Nor can Seadrill predict if implementation of additional regulations might subject Seadrill to increased costs of operating and/or a reduction in the area of operation in
the U.S. GOM. As such, Seadrill’s cash flow and financial position could be adversely affected if Seadrill’s two ultra-deepwater drilling rigs in the U.S. GOM were subject to the risks mentioned above.
1.1.16 Seadrill cannot guarantee that the use of Seadrill’s drilling units will not infringe the intellectual
property rights of others.
The majority of the intellectual property rights relating to Seadrill’s drilling units and related equ ipment are owned by Seadrill’s suppliers. In the event that one of Seadrill’s suppliers becomes involved in a dispute over
infringement of intellectual property rights relating to equipment owned by Seadrill, Seadrill’s may lose access
to repair services, replacement parts, or could be required to cease use of some equipment. In addition,
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Seadrill competitors may assert claims for infringement of intellectual property rights related to certain equipment on Seadrill’s drilling units and Seadrill may be required to stop using such equipment and/or pay
damages and royalties for the use of such equipment. The consequences of technology disputes involving Seadrill’s suppliers or competitors could adversely affect Seadrill’s financial results and operations. Seadrill
cannot be assured that these suppliers or competitors will be willing or financially able to honor their indemnity obligations for intellectual property lawsuits, or guarantee that the indemnities will fully protect Seadrill from
the adverse consequences of such technology disputes. Seadrill also have provisions in some of its client contracts to require the client to share some of these risks on a limited basis, but Seadrill cannot provide
assurance that these provisions will fully protect Seadrill from the adverse consequences of such technology disputes.
1.1.17 Seadrill may not be able to keep pace with the continual and rapid technological developments that
characterize the market for its services, and Seadrill’s failure to do so may result in Seadrill’s loss of
market share.
The market for Seadrill’s services is characterized by continual and rapid technological developments that have
resulted in, and will likely continue to result in, substantial improvements in equipment functions and performance. As a result, Seadrill’s future success and profitability will be dependent in part upon its ability to
keep pace with technological developments. If Seadrill is not successful in acquiring new equipment or upgrading its existing equipment in a timely and cost-effective manner in response to technological
developments or changes in standards in its industry, Seadrill could lose business and profits. In addition, current competitors or new market entrants may develop new technologies, services or standards that could
render some of Seadrill’s services or equipment obsolete, which could have a material adverse effect on Seadrill’s operations.
1.1.18 Failure to comply with the U.S. Foreign Corrupt Practices Act could result in fines, criminal penalties,
drilling contract terminations and an adverse effect on Seadrill’s business.
Seadrill currently operates, and historically have operated, its drilling units in a number of countries throughout
the world, including some with developing economies. Also, the existence of state or government-owned shipbuilding enterprises puts Seadrill in contact with persons who may be considered "foreign officials" under
the U.S. Foreign Corrupt Practices Act of 1977. Seadrill is committed to doing business in accordance with applicable anti-corruption laws and have adopted a code of business conduct and ethics that is consistent and
in full compliance with the U.S. Foreign Corrupt Practices Act. Seadrill is subject, however, to the risk that it, its affiliated entities or its or their respective officers, directors, employees and agents may take actions
determined to be in violation of such anti-corruption laws, including the U.S. Foreign Corrupt Practices Act. Any such violation could result in substantial fines, sanctions, civil and/or criminal penalties, curtailment of
operations in certain jurisdictions, and might adversely affect Seadrill’s business, results of operations or financial condition. In addition, actual or alleged violations could damage Seadrill’s reputation and ability to do
business. Furthermore, detecting, investigating and resolving actual or alleged violations are expensive and can consume significant time and attention of Seadrill’s senior management.
1.1.19 Acts of terrorism, piracy and political and social unrest could affect the markets for drilling services,
which may have a material adverse effect on Seadrill’s results of operations.
Acts of terrorism, piracy and political and social unrest, brought about by world political events or otherwise, have caused instability in the world's financial and insurance markets in the past and may occur in the future.
Such acts could be directed against companies such as Seadrill. Seadrill’s drilling operations could also be targeted by acts of piracy. In addition, acts of terrorism and social unrest could lead to increased volatility in
prices for crude oil and natural gas and could affect the markets for drilling services and result in lower daily rates. Insurance premiums could increase and coverage may be unavailable in the future. U.S. government
regulations may effectively preclude Seadrill from actively engaging in business activities in certain countries. These regulations could be amended to cover countries where Seadrill currently operate or where Seadrill may
wish to operate in the future. Increased insurance costs or increased cost of compliance with applicable regulations may have a material adverse effect on Seadrill’s results of operations.
1.1.20 Any failure to comply with the complex laws and regulations governing international trade could
adversely affect Seadrill’s operations.
The shipment of goods, services and technology across international borders subjects Seadrill’s offshore drilling segment to extensive trade laws and regulations. Import activities are governed by unique customs laws and
regulations in each of the countries of operation. Moreover, many countries, including the United States,
control the export and re-export of certain goods, services and technology and impose related export recordkeeping and reporting obligations. Governments also may impose economic sanctions against certain
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countries, persons and other entities that may restrict or prohibit transactions involving such countries, persons and entities.
The laws and regulations concerning import activity, export recordkeeping and reporting, export control and economic sanctions are complex and constantly changing. These laws and regulations may be enacted,
amended, enforced or interpreted in a manner materially impacting Seadrill’s operations. Shipments can be delayed and denied export or entry for a variety of reasons, some of which are outside Seadrill’s control and
some of which may result from failure to comply with existing legal and regulatory regimes. Shipping delays or denials could cause unscheduled operational downtime. Any failure to comply with applicable legal and
regulatory trading obligations also could result in criminal and civil penalties and sanctions, such as fines, imprisonment, debarment from government contracts, seizure of shipments and loss of import and export
privileges.
1.2 Risks relating to Seadrill
1.2.1 The amount of Seadrill’s debt could limit Seadrill’s liquidity and flexibility in obtaining additional
financing and in pursuing other business opportunities.
As of September 30, 2012, Seadrill had $10.8 billion in principal amount of debt, representing approximately
60% of Seadrill’s total market capitalization. Seadrill’s current indebtedness and future indebtedness that
Seadrill may incur could affect Seadrill’s future operations, as a portion of Seadrill’s cash flow from operations
will be dedicated to the payment of interest and principal on such debt and will not be available for other purposes. Covenants contained in Seadrill’s debt agreements require Seadrill to meet certain financial tests,
which may affect Seadrill’s flexibility in planning for, and reacting to, changes in Seadrill’s business, may limit Seadrill’s ability to dispose of assets or place restrictions on the use of proceeds from such dispositions,
withstand current or future economic or industry downturns and compete with others in Seadrill’s industry for strategic opportunities, and may limit Seadrill’s ability to obtain additional financing for working capital, capital
expenditures, acquisitions, general corporate and other purposes. Seadrill’s ability to meet its debt service obligations and to fund planned expenditures, including construction costs for Seadrill’s newbuilding projects,
will be dependent upon Seadrill’s future performance, which will be subject to general economic conditions, industry cycles and financial, business and other factors affecting Seadrill’s operations, many of which are
beyond Seadrill’s control. Seadrill’s future cash flows may be insufficient to meet all of Seadrill’s debt obligations and contractual commitments, and any insufficiency could negatively impact Seadrill’s business. To
the extent that Seadrill is unable to repay its indebtedness as it becomes due or at maturity, Seadrill may need to refinance its debt, raise new debt, sell assets or repay the debt with the proceeds from equity offerings.
Additional indebtedness or equity financing may not be available to Seadrill in the future for the refinancing or repayment of existing indebtedness, and Seadrill may not be able to complete asset sales in a timely manner
sufficient to make such repayments.
1.2.2 Seadrill may be unable to comply with covenants in its credit facilities or any future financial
obligations that impose operating and financial restrictions on Seadrill.
Seadrill’s credit facilities impose, and future financial obligations may impose, operating and financial
restrictions on Seadrill. These restrictions may prohibit or otherwise limit Seadrill’s ability to, among other
things:
enter into other financing arrangements;
incur additional indebtedness;
create or permit liens on its assets;
sell its drilling units or the shares of its subsidiaries;
make investments;
change the general nature of its business;
pay dividends to its shareholders;
change the management and/or ownership of the drilling units;
make capital expenditures; and
compete effectively to the extent its competitors are subject to less onerous restrictions.
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Seadrill has initiated discussions with certain lenders under existing credit facilities to amend such facilities in order to conform the leverage ratio covenants therein. If Seadrill fail to obtain consent to make such
amendments, Seadrill’s ability to pay dividends may be restricted in the future.
1.2.3 If Seadrill is unable to comply with the restrictions and the financial covenants in the agreements
governing its indebtedness, there could be a default under the terms of these agreements, which
could accelerate repayment of funds that Seadrill has borrowed.
If Seadrill is unable to comply with the restrictions and covenants in the agreements governing its
indebtedness or in current or future debt financing agreements, there could be a default under the terms of those agreements. Seadrill’s ability to comply with these restrictions and covenants, including meeting financial
ratios and tests, is dependent on its future performance and may be affected by events beyond its control. If a default occurs under these agreements, lenders could terminate their commitments to lend or accelerate the
outstanding loans and declare all amounts borrowed due and payable. Seadrill pledges its drilling units as security for its indebtedness. If Seadrill’s lenders were to foreclose their liens on Seadrill’s drilling units in the
event of a default, this would likely impair Seadrill’s ability to continue its operations. As of September 30, 2012, Seadrill had $8.7 billion of indebtedness secured by, among other things, liens on its drilling units. In
addition, all of Seadrill’s loan agreements contain cross-default provisions, meaning that if Seadrill is in default under one of its loan agreements, amounts outstanding under its other loan agreements may also be
accelerated and become due and payable. If any of these events occur, Seadrill cannot guarantee that its assets will be sufficient to repay in full all of Seadrills outstanding indebtedness, and Seadrill may be unable to
find alternative financing. Even if Seadrill could obtain alternative financing, that financing might not be on terms that are favorable or acceptable.
1.2.4 Seadrill rely on a small number of customers.
Seadrill’s contract drilling business is subject to the risks associated with having a limited number of customers
for its services. As of November 30, 2012, Seadrill’s five largest customers accounted for approximately 66 % of its future contracted revenues, or order backlog. Seadrill’s results of operations could be materially
adversely affected if any of its major customers failed to compensate for its services, were to terminate Seadrill’s contracts with or without cause, failed to renew its existing contracts or refused to award new
contracts to Seadrill and Seadrill is unable to enter into contracts with new customers at comparable daily
rates.
1.2.5 Seadrill is exposed to the credit risks of its key customers, including certain affiliated companies, and
certain other third parties, and nonpayment by these customers and other parties could adversely
affect Seadrill’s financial position, results of operations and cash flows.
Seadrill is subject to risks of loss resulting from nonpayment or nonperformance by its customers, including certain companies owned by or associated with Seadrill’s affiliates. Some of these customers and other parties
may be highly leveraged and subject to their own operating and regulatory risks. Any material nonpayment or nonperformance by these entities, other key customers or certain other third parties could adversely affect
Seadrill’s financial position, results of operations and cash flows.
1.2.6 Newbuilding projects and surveys are subject to risks that could cause delays or cost overruns.
As of November 30, 2012, Seadrill had an outstanding newbuilding order book with various yards in South
Korea, Singapore and China for an additional 22 drilling units with corresponding estimated project cost totaling $8.2 billion. These estimated project costs include the contract price agreed with the yard plus certain
additional costs in connection with the delivery to Seadrill and the preparation for employment of the newbuilding drilling units. These construction projects are subject to risks of delay or cost overruns inherent in
any large construction project from numerous factors, including shortages of equipment, materials or skilled labor, unscheduled delays in the delivery of ordered materials and equipment or shipyard construction, failure
of equipment to meet quality and/or performance standards, financial or operating difficulties experienced by equipment vendors or the shipyard, unanticipated actual or purported change orders, inability to obtain
required permits or approvals, unanticipated cost increases between order and delivery, design or engineering changes and work stoppages and other labor disputes, adverse weather conditions or any other events of force
majeure. Significant cost overruns or delays could adversely affect Seadrill’s financial position, results of
operations and cash flows. Additionally, failure to complete a project on time may result in the delay of
revenue from that rig. New drilling rigs may experience start-up difficulties following delivery or other unexpected operational problems that could result in uncompensated downtime, which also could adversely
affect Seadrill’s financial position, results of operations and cash flows or the cancellation or termination of drilling contracts.
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1.2.7 Failure to secure a drilling contract prior to deployment of the newbuild drilling units could adversely
affect Seadrill’s results of operations.
Seadrill currently has entered into agreements with various shipbuilding yards in Singapore, South Korea and
China for the construction of 22 new drilling units consisting of drillships, semi-submersible rigs, tender barges and jack-up rigs. Seadrill has not yet secured drilling contracts for 8 of these newbuilding rigs. Historically, the
industry has at times experienced prolonged periods of overcapacity, during which many rigs were idle for long periods of time. Seadrill’s failure to secure a drilling contract for any of these newbuilding rigs prior to their
deployment could adversely affect its cash flows and results of operations.
1.2.8 The provisions of the majority of Seadrill’s offshore rig contracts that are term contracts at fixed
daily rates may not permit Seadrill fully to recoup its costs in the event of a rise in its expenses.
The majority of Seadrill’s drilling units have long-term contracts. The average remaining contract length as of November 30, was 37 months for Seadrill’s floaters, 30 months for Seadrill’s tender rigs and 20 months for
Seadrill’s jack-up rigs. The majority of these contracts have daily rates that are fixed over the contract term. In order to mitigate the effects of inflation on revenues from term contracts, most of Seadrill’s long-term
contracts include escalation provisions. These provisions allow Seadrill to adjust the daily rates based on stipulated cost increases including wages, insurance and maintenance cost. However, because these
escalations are normally performed on a semi-annual or annual basis, the timing and amount awarded as a
result of such adjustments may differ from Seadrill’s actual cost increases, which could adversely affect
Seadrill’s financial performance. Shorter term contracts normally do not contain escalation provisions.
1.2.9 Seadrill’s operating and maintenance costs will not necessarily fluctuate in proportion to changes in
operating revenues.
Operating revenues may fluctuate as a function of changes in supply of offshore drilling units and demand for contract drilling services, which in turn, affect daily rates, and the economic utilization and performance of
Seadrill’s fleet of drilling units. However, Seadrill’s operating costs are generally related to the number of units in operation and the cost level in each country or region where the units are located. In addition, equipment
maintenance costs fluctuate depending upon the type of activity that the unit is performing and the age and condition of the equipment. In connection with new assignments, Seadrill might incur expenses relating to
preparation for operations under a new contract. The expenses may vary based on the scope and length of such required preparations and the duration of the firm contractual period over which such expenditures are
amortized. In situations where Seadrill’s drilling units incur idle time between assignments, the opportunity to reduce the size of Seadrill’s crews on those drilling units is limited as the crews will be engaged in preparing
the unit for its next contract. When a unit faces longer idle periods, reductions in costs may not be immediate as some of the crew may be required to prepare drilling units for stacking and maintenance in the stacking
period. Should units be idle for a longer period, Seadrill will seek to redeploy crew members, who are not required to maintain the drilling units, to active rigs to the extent possible. However, there can be no
assurance that Seadrill will be successful in reducing Seadrill’s costs in such cases.
1.2.10 Seadrill may not be able to renew or obtain new and favorable contracts for drilling units whose
contracts are expiring or are terminated, which could adversely affect Seadrill’s revenues and
profitability.
As of November 30, 2012, Seadrill has three contracts that expire in 2012, nine contracts that expire in 2013
and eleven contracts that expire in 2014. In addition, Seadrill has 22 newbuilds under constructions, of which 14 are contracted and 8 remain uncontracted. Furthermore, Seadrill’s jack-up drilling contracts are generally
short-term. Seadrill’s ability to renew existing contracts or obtain new contracts will depend on the prevailing market conditions. Likewise, Sedrill’s customers may reduce their activity levels or seek to terminate or
renegotiate drilling contracts with Seadrill. If Seadrill is not able to obtain new contracts in direct continuation, or if new contracts are entered into at daily rates substantially below the existing daily rates or on terms
otherwise less favorable compared to existing contracts terms, such as contracts on a turnkey basis, Seadrill’s revenues and profitability could be adversely affected.
1.2.11 Seadrill’s future contracted revenue, or backlog, for its fleet of drilling units may not be ultimately
realized.
As of November 30, 2012, Seadrill’s backlog, was approximately $21.3 billion. Seadrill may not be able to
perform under these contracts due to events beyond its control, and its customers may seek to cancel or renegotiate its contracts for various reasons, including adverse conditions, resulting in lower daily rates.
Seadrill’s inability, or the inability of Seadrill’s customers to perform, under Seadrill’s or their contractual obligations may have a material adverse effect on Seadrill’s financial position, results of operations and cash
flows.
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1.2.12 Competition within the oilfield services industry may adversely affect Seadrill’s ability to market its
services.
The oilfield services industry is highly competitive and fragmented and includes several large companies that compete in many of the markets Seadrill serves, as well as numerous small companies that compete with
Seadrill on a local basis. Seadrill believes that the principal competitive factors in the market areas Seadrill serve are price, product and service quality, availability of crews and equipment and technical proficiency.
Seadrill’s operations may be adversely affected if Seadrill’s current competitors or new market entrants
introduce new products or services with better features, performance, prices or other characteristics in comparison to Seadrill’s products and services, or expand into service areas where Seadrill operate.
Competitive pressures or other factors may also result in significant price competition, particularly during industry downturns, which could have a material adverse effect on Seadrill’s results of operations and financial
condition. In addition, competition among oilfield services and equipment providers is affected by each provider's reputation for safety and quality.
1.2.13 An economic downturn could have a material adverse effect on Seadrill’s revenue, profitability and
financial position.
Seadrill depends on its customers' willingness and ability to fund operating and capital expenditures to explore, develop and produce oil and gas, and to purchase drilling and related equipment. There has historically been a
strong link between the development of the world economy and demand for energy, including oil and gas. The world economy is currently facing a number of challenges. This includes uncertainty related to the continuing
discussions in the United States regarding the federal debt ceiling. In addition, turmoil and hostilities in the Middle East, North Africa and other geographic areas and countries are adding to the overall risk picture. An
extended period of adverse development in the outlook for the world economy could reduce the overall demand for oil and gas and for Seadrill’s services. Such changes could adversely affect Seadrill’s results of
operations and cash flows beyond what might be offset by the simultaneous impact of possibly higher oil and gas prices. Seadrill cannot assure investors that its customers will sustain or increase their capital programs
and budgets in response to the recent increase in crude oil prices, which were approximately $110.84 per barrel (Brent Oil Price) as of November 30, 2012.
1.2.14 Failure to obtain or retain highly skilled personnel could adversely affect Seadrill’s operations.
Seadrill requires highly skilled personnel to operate and provide technical services and support for its business. Competition for skilled and other labor required for Seadrill’s drilling operations has increased in recent years
as the number of rigs activated or added to worldwide fleets has increased. The number of rigs in operation is continuing to grow as new units ordered during the period from 2005 to 2008 are being delivered.
Furthermore, additional rigs ordered from September 2010 to date, are expected to increase the future demand for offshore drilling crews. In some regions such as Brazil, limited availability of qualified personnel in
combination with local regulations focusing on crew composition, are expected to further increase demand for qualified offshore drilling crews, which may increase Seadrill’s costs. A continued expansion of the rig fleet,
improved demand for drilling services in general, coupled with shortages of qualified personnel could further
create and intensify upward pressure on wages and make it more difficult for Seadrill to staff and service its
rigs. Such developments could adversely affect Seadrill’s financial results and cash flow. Furthermore, as a result of any increased competition for people and risk for higher turnover, Seadrill may experience a reduction
in the experience level of its personnel, which could lead to higher downtime and more operating incidents. In response to these labor market conditions, Seadrill has increased its efforts related to recruitment, training,
development and retention programs as required to meet its anticipated personnel needs.
1.2.15 Seadrill’s labor costs and the operating restrictions that apply to it could increase as a result of
collective bargaining negotiations and changes in labor laws and regulations.
Some of Seadrill’s employees are represented by collective bargaining agreements. The majority of these employees work in Brazil, Nigeria, Norway and the U.K. In addition, some of Seadrill’s contracted labor works
under collective bargaining agreements. As part of the legal obligations in some of these agreements, Seadrill is required to contribute certain amounts to retirement funds and pension plans and is restricted in its ability to
dismiss employees. In addition, many of these represented individuals are working under agreements that are subject to salary negotiation. These negotiations could result in higher personnel costs, other increased costs
or increased operating restrictions that could adversely affect Seadrill’s financial performance.
1.2.16 An inability to obtain visas and work permits for Seadrill’s employees on a timely basis could hurt
Seadrill’s operations and have an adverse effect on its business.
Seadrill’s ability to operate worldwide depends on its ability to obtain the necessary visas and work permits for
its personnel to travel in and out of, and to work in, the jurisdictions in which Seadrill operate. Governmental
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actions in some of the jurisdictions in which Seadrill operates may make it difficult for Seadrill to move its personnel in and out of these jurisdictions by delaying or withholding the approval of these permits. If Seadrill
is not able to obtain visas and work permits for the employees it needs for operating its rigs on a timely basis, Seadrill might not be able to perform Seadrill’s obligations under Seadrill’s drilling contracts, which could allow
Seadrill’s customers to cancel the contracts. If Seadrill’s customers cancel some of Seadrill’s contracts, and Seadrill is unable to secure new contracts on a timely basis and on substantially similar terms, it could
adversely affect Seadrill’s financial position, results of operations or cash flows.
1.2.17 The failure to consummate or integrate acquisitions of other businesses and assets in a timely and
cost-effective manner could have an adverse effect on Seadrill’s financial condition and results of
operations.
Acquisition of assets or businesses that expand Seadrill’s drilling operations is an important component of
Seadrill’s business strategy. Seadrill believe that acquisition opportunities may arise from time to time, and any such acquisition could be significant. Any acquisition could involve the payment of a substantial amount of
cash, the incurrence of a substantial amount of debt or the issuance of a substantial amount of equity. Certain acquisition and investment opportunities may not result in the consummation of a transaction. In addition,
Seadrill may not be able to obtain acceptable terms for the required financing for any such acquisition or investment that arises. Seadrill cannot predict the effect, if any, that any announcement or consummation of
an acquisition would have on the trading price of Seadrill’s common stock. Seadrill’s future acquisitions could present a number of risks, including the risk of incorrect assumptions regarding the future results of acquired
operations or assets or expected cost reductions or other synergies expected to be realized as a result of acquiring operations or assets, the risk of failing to successfully and timely integrate the operations or
management of any acquired businesses or assets and the risk of diverting management's attention from existing operations or other priorities. If Seadrill fails to consummate and integrate its acquisitions in a timely
and cost-effective manner, Seadrill’s financial condition and results of operations could be adversely affected.
1.2.18 Seadrill may suffer losses through its investments in other companies in the offshore drilling and oil
services industry.
Seadrill currently hold investments in several other companies in its industry that own and/or operate offshore drilling units with similar characteristics to Seadrill’s fleet of rigs or deliver various other services. These
investments include equity interests in Archer Limited, Varia Perdana, AOD, Sevan, Seabras Sapura Participacoes S/A and Seabras Sapura Holdco Ltd. The market value of Seadrill’s equity interest in these
companies is likely to be volatile and could fluctuate in response to changes in oil and gas prices and activity levels in the offshore oil and gas industry. For example, Seadrill took a $463 million non-cash impairment
charge on its investment in Archer Limited in the fourth quarter of 2011 due to a greater than 50% decline in value of Archer Limited’s stock over a twelve-month period. A future loss in the value of Seadrill’s investments
may require Seadrill to take further impairment charges, which could adversely affect Seadrill’s financial condition and results of operations.
1.2.19 Seadrill may not be able to raise equity or debt financing sufficient to execute its growth strategy
and pay the cost of all of its newbuilding drilling units, which could have a material adverse effect on
Seadrill’s business, financial condition, results of operations and cash flows.
Seadrill’s business is capital intensive and, to the extent Seadrill does not generate sufficient cash from operations, it may need to raise additional funds through public or private debt or equity offerings to execute
its growth strategy and to fund its capital expenditures. Borrowings under Seadrill’s current credit facilities, which are subject to certain conditions, and available cash on hand are not sufficient to pay the remaining
installments related to Seadrill’s estimated project costs, which as of September 30, 2012, were $5.9 billion, excluding the Asia Offshore Drilling rigs. These estimated project costs include the contract price agreed with
the yard plus certain additional costs in connection with the delivery to Seadrill and the preparation for employment of the newbuilding drilling units. Because Seadrill generally secure funding for new drilling units
close to the time of their delivery, substantially all of these commitments are currently unfounded. If Seadrill is not able to borrow additional funds, raise other capital or utilize available cash on hand, Seadrill may not be
able to acquire these drilling units, which could have a material adverse effect on Seadrill’s business, financial condition, results of operations and cash flows. If for any reason Seadrill fail to make a payment when due,
which may result in a default under Seadrill’s newbuilding contracts, or otherwise fail to take delivery of Seadrill’s newbuild units, Seadrill would be prevented from realizing potential revenues from these projects,
Seadrill could also lose all or a portion of Seadrill’s yard payments that were paid by Seadrill, which as of September 30, 2012, amounted to $1.6 billion excluding the Asia Offshore Drililng rigs, and Seadrill could be
liable for penalties and damages under such contracts.
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1.2.20 Interest rate fluctuations could affect Seadrill’s earnings and cash flow.
In order to finance Seadrill’s growth Seadrill has incurred significant amounts of debt. With the exception of some of its bonds and convertible bonds, the large majority of its debt arrangements have floating interest
rates. As such, significant movements in interest rates could have an adverse effect on Seadrill’s earnings and
cash flow. In order to manage Seadrill’s exposure to interest rate fluctuations, Seadrill use interest rate swaps
to effectively fix a part of its floating rate debt obligations. The principal amount covered by interest rate swaps is evaluated continuously and determined based on Seadrill’s debt level, Seadrill’s expectations regarding
future interest rates and Seadrill’s overall financial risk exposure. As of September 30, 2012, Seadrill’s total net floating rate debt amounted to $8.6 billion of which Seadrill had entered into interest rate swap agreements
not qualifying for hedge accounting to fix the interest rate for a principal amount of $4.7 billion. Although Seadrill enter into various interest rate swap transactions to manage exposure to movements in interest rates,
there can be no assurance that Seadrill will be able to continue to do so at a reasonable cost or at all. If Seadrill is unable to effectively manage its interest rate exposure through interest rate swaps, any increase in
market interest rates would increase Seadrill’s interest rate exposure and debt service obligations, which would exacerbate the risks associated with Seadrill’s leveraged capital structure.
1.2.21 Seadrill may be subject to litigation, arbitration and other proceedings that could have an adverse
effect on Seadrill.
Seadrill is currently involved in various litigation matters, including NADL's tax dispute with the Norwegian tax
authorities as further described on page F-21 the Company's annual accounts for 2011 as incorporated by reference to this Prospectus, none of which Seadrill expect to have a material adverse effect. Seadrill anticipate
that it will be involved in litigation matters from time to time in the future. The operating hazards inherent in Seadrill’s business expose Seadrill to litigation, including personal injury litigation, environmental litigation,
contractual litigation with clients, intellectual property litigation, tax or securities litigation, and maritime lawsuits, including the possible arrest of Seadrill’s drilling units. Seadrill cannot predict with certainty the
outcome or effect of any claim or other litigation matter, or a combination of these. If Seadrill is involved in any future litigation, or if Seadrill’s positions concerning current disputes are found to be incorrect, this may
have an adverse effect on Seadrill’s business, financial position, results of operations and ability to pay dividends, because of potential negative outcomes, the costs associated with asserting Seadrill’s claims or
defending such lawsuits, and the diversion of management’s attention to these matters.
1.2.22 A change in tax laws of any country in which Seadrill operates could result in a higher tax expense
or a higher effective tax rate on Seadrill’s worldwide earnings.
Seadrill conducts operations through various subsidiaries in countries throughout the world. Tax laws, regulations and treaties are highly complex and subject to interpretation. Consequently, Seadrill is subject to
changing tax laws, regulations and treaties in and between countries in which the company operates, including treaties between the United States and other nations. Seadrills`s income tax expense is based upon the
company`s interpretation of the tax laws in effect in various countries at the time that the expense was incurred. A change in these tax laws, regulations or treaties, including those in and involving the United States,
or in the interpretation thereof, or in the valuation of Seadrill`s deferred tax assets, which is beyond the
Seadrill`s control could result in a materially higher tax expense or a higher effective tax rate on the
company`s worldwide earnings.
1.2.23 A loss of a major tax dispute or a successful tax challenge to Seadrill`s operating structure,
intercompany pricing policies or the taxable presence of its subsidiaries in certain countries could
result in a higher tax rate on Seadrill`s worldwide earnings, which could result in a significant
negative impact on Seadrill`s earnings and cash flows from operations.
Seadrill`s income tax returns are subject to review and examination. Seadrill do not recognize the benefit of income tax positions it believes are more likely than not to be disallowed upon challenge by a tax authority. If
any tax authority successfully challenges Seadrill`s operational structure, intercompany pricing policies or the taxable presence of its subsidiaries in certain countries; or if the terms of certain income tax treaties are
interpreted in a manner that is adverse to Seadrill`s structure; or if Seadrill lose a material tax dispute in any country, Seadrill`s effective tax rate on its worldwide earnings could increase substantially and Seadrill`s
earnings and cash flows from operations could be materially adversely affected.
1.2.24 The Company is incorporated in Bermuda and it may not be possible for investors to enforce U.S.
judgments against the Company.
The Company is incorporated in Bermuda and substantially all its assets are located outside the U.S. In addition, all its directors and all but one of executive officers are non-residents of the U.S., and all or a
substantial portion of the assets of these non-residents are located outside the U.S. As a result, it may be
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difficult or impossible for U.S. investors to serve process within the U.S. upon the Company or its directors and executive officers, or to enforce a judgment against the Company for civil liabilities in U.S. courts.
In addition, investors should not assume that courts in the countries in which Seadrill is incorporated or where its assets are located (1) would enforce judgments of U.S. courts obtained in actions against Seadrill based
upon the civil liability provisions of applicable U.S. federal and state securities laws or (2) would enforce, in original actions, liabilities against Seadrill based on those laws.
1.2.25 Seadrill is dependent on its senior management team, and Seadrill's business could be harmed if
Seadrill is unable to attract and retain personnel necessary for its success.
Seadrill is highly dependent on its senior management, including John Fredriksen, the Company's President and
Chairman. Seadrill's success will depend on its ability to retain senior management. The loss of members of Seadrill's senior management could prevent Seadrill from achieving its objectives of continuing to grow and
could have a material adverse effect on Seadrill's ability to manage its business.
1.2.26 Seadrill depend on directors who are associated with affiliated companies, which may create conflicts
of interest.
Hemen, the Company's principal shareholder, is controlled by trusts established by John Fredriksen, the
Company's President and Chairman, for the benefit of his immediate family. Hemen also has significant shareholdings in two companies affiliated with the Company, Frontline Ltd. (NYSE: FRO) (“Frontline”) and Ship
Finance (NYSE: SFL). In addition, Hemen owns approximately 7.8% of the Company's minority-owned subsidiary Archer Limited (OSE: NO). The Company's Vice-President and director Mr. Tor Olav Trøim is also a
director of Archer Limited and Golar LNG Limited (NASDAQ GS: GLNG), a company affiliated with the Company. One of the Company's other directors, Kate Blankenship, is also a director of Frontline, NADL, Ship
Finance, Golar LNG Limited and Archer Limited. Another of the Company's directors, Kathrine Fredriksen, the daughter of Mr. John Fredriksen, is also a director of Golar LNG Limited. Mr. Fredriksen, Mr. Trøim,
Mrs. Blankenship and Ms. Fredriksen owe fiduciary duties to each of Seadrill, Frontline, Ship Finance, Archer Limited, and Golar LNG Limited, as applicable, and may have conflicts of interest in matters involving or
affecting Seadrill and Seadrill's customers. In addition, they may have conflicts of interest when faced with decisions that could have different implications for Frontline, Archer Limited, Ship Finance, or Golar LNG than
they do for Seadrill. Seadrill cannot assure investors that any of these conflicts of interest will be resolved in
Seadrill's favor.
1.2.27 The Company depend on certain of its affiliates, including Seadrill Management, to assist it in
operating and expanding its business.
Pursuant to a management and administrative services agreement between the Company and Seadrill
Management, Seadrill Management provides the Company with significant management, administrative, financial and other support services. In addition, the Company's other affiliates provide advisory, technical and
financial services and support to Seasdrill and Seadrill's fleet pursuant to various agreements. Seadrill's operational success and ability to execute its growth strategy depends significantly upon the satisfactory
performance of these services. Seadrill's business will be harmed if its affiliates fail to perform these services satisfactorily, if they cancel their agreements with Seadrill or if they stop providing these services to Seadrill.
Please read “Related Party Transactions”.
1.2.28 The Company's largest shareholder may have interests which conflict with those of the Bondholders.
Circumstances may occur in which the interests of Hemen, the Company's largest shareholder, could be in conflict with the interests of the Bondholders. For example, the interests of the Company's largest shareholder
could conflict with Bondholders' interests if the Company faced financial difficulties and were unable to comply with its obligations under the Bond Issue. In addition, Hemen and other equity investors may have an interest
in pursuing acquisitions, divestitures and other transactions that, in their judgment, could enhance their equity investment, even though such transaction might involve risks to Bondholders. Conversely, Hemen or other
minority shareholders may have an interest in not pursuing acquisitions, divestitures and other transactions that could enhance the Company's cash flow and be beneficial to the Bondholders. Further, Seadrill's
commercial loan agreements usually contain a change of control provision which provides the lenders with a right to accelerate the loan if the ownership of Hemen Holding Limited, (or a company controlled more than
50% by the John Fredriksen family and/or trusts established for their benefit), reduces its ultimate ownership in Seadrill below 20%. Hemen currently owns 115,097,583 shares in Seadrill, representing an ownership
interest of 24.6%. In addition, Hemen has Total Return Swap (“TRS”) agreements with underlying exposure to 3,900,000 shares of the Company.
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1.3 Risks Relating to the Bonds and Seadrill’s other indebtedness
1.3.1 Seadrill has a substantial amount of indebtedness, which may adversely affect its cash flow and its
ability to operate its business, remain in compliance with debt covenants of the Bonds and future
and and existing credit facilities and make payments on Seadrill’s debt, including the Bonds
As of September 30, 2012, Seadrill has a total debt of $10.8 billion. Seadrill’s level of debt could have important consequences for investors in the Bonds, including the following:
Seadrill may have difficulty borrowing money in the future for acquisitions, capital expenditures or to meet its operating expenses or other general corporate obligations;
Seadrill will need to use a substantial portion of its cash flows to pay interest on its debt, which will reduce the amount of money Seadrill has for operations, working capital, capital expenditures,
expansion, acquisitions or general corporate or other business activities;
Seadrill may have a higher level of debt than some of its competitors, which may put Seadrill at a
competitive disadvantage;
Seadrill may be more vulnerable to economic downturns and adverse developments in its industry or
the economy in general; and
Seadrill’s debt level, and the financial covenants in Seadrill’s various debt agreements, could limit its
flexibility in planning for, or reacting to, changes in its business and the industry in which it operates.
1.3.2 To service its indebtedness, Seadrill will require a significant amount of cash. Seadrill’s ability to
generate cash depends on many factors beyond its control, and any failure to meet its debt
obligations could harm Seadrillli business, financial condition and results of operations.
Seadrills, ability to make scheduled payments on and to refinance Seadrill’s indebtedness, including the Bonds,
and to fund future capital expenditures will depend on Seadrill’s ability to generate cash from operations in the future. This, to a certain extent, is subject to general economic, financial, competitive, legislative, regulatory
and other factors that are beyond Seadrill’s control. Seadrill cannot assure investors that Seadrill’s business will generate sufficient cash flow from operations in an amount sufficient to enable Seadrill to pay its
indebtedness, including the Bonds, or to fund Seadrill’s other liquidity needs. If Seadrilli’s cash flow and capital resources are insufficient to fund its debt obligations, Seadrill may be forced to sell assets, seek additional
equity or debt capital or restructure Seadrill’s debt. Seadrill cannot assure investors that any of these remedies could, if necessary, be effected on commercially reasonable terms, or at all. In addition, any failure to make
scheduled payments of interest and principal on the Bonds or any other outstanding indebtedness would likely harm Seadrill’s ability to incur additional indebtedness on acceptable terms to Seadrill or at all. Seadrill’s cash
flow and capital resources may be insufficient for payment of interest on and principal of Seadrill’s debt in the future, including payments on the Bonds, and any such alternative measures may be unsuccessful or may not
permit Seadrill to meet scheduled debt service obligations, which could cause Seadrill to default on Seadrillul
obligations and could impair Seadrill’s liquidity.
1.3.3 Despite Seadrill’s indebtedness levels, it may be able to incur substantially more indebtedness,
including secured indebtedness. This could further exacerbate the risks associated with Seadrill’s
substantial indebtedness.
To the extent not otherwise disclosed herein, the agreements governing Seadrill’s existing indebtedness, do not, and the indenture governing the Bonds offered hereby will not, prohibit the Company or its subsidiaries
from incurring additional debt. As of September 30, 2012, the Company and consolidated subsidiaries have $10.8 billion in aggregate principal amount of indebtedness outstanding, of which $8.7 billion would be
secured, which could make such secured indebtedness effectively senior to the notes to the extent of the value of the assets securing such indebtedness. The new indebtedness Seadrill incur may also be in connection with
Seadrill’s purchase of additional drilling units. If new indebtedness is added to Seadrill’s current indebtedness levels, the related risks that Seadrill now face would increase and Seadrill may not be able to meet all its
indebtedness obligations, including the repayment of the Bonds. In addition, the indenture governing Seadrill’s
other bonds does not, and the indenture governing the Bonds will not, prevent Seadrill from incurring
obligations that do not constitute indebtedness as defined therein.
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1.3.4 Seadrill cannot assure investors that Seadrill will be able to refinance its indebtedness, including
without limitation, indebtedness incurred under Seadrill’s credit facilities.
For so long as Seadrill have outstanding indebtedness, including without limitation, indebtedness under
Seadrill’s credit facilities, Seadrill will have to dedicate a portion of Seadrill’s cash flow from operations to pay the principal and interest of this indebtedness. Seadrill cannot assure investors that Seadrill will be able to
generate cash flow in amounts that are sufficient for these purposes. If Seadrill is not able to satisfy these obligations, it may have to undertake alternative financing plans or sell its assets. The actual or perceived
credit quality of Seadrill’s customers, any defaults by them, and the market value of Seadrill’s fleet, among
other things, may materially affect Seadrill’s ability to obtain alternative financing. If Seadrill is not able to find alternative sources of financing on terms that are acceptable to Seadrill or at all, Seadrill’s business, financial
condition, results of operations and cash flows may be materially adversely affected.
1.3.5 The agreements and instruments governing Seadrill’s debt, including the Bonds, contain restrictive
covenants, which may limit Seadrill’s liquidity and corporate activities and prevent proper service of
debt, which could result in the loss of Seadrillt’s drilling units.
Seadrill‘s loan agreements impose significant operating and financial restrictions on Seadrill. These restrictions may limit Seadrill’s ability to:
incur additional indebtedness;
create liens on its assets;
sell capital stock of the Companyal subsidiaries;
make investments;
engage in mergers or acquisitions;
pay dividends or redeem capital stock;
make capital expenditures;
change the registration or management of Seadrill’s drilling units or terminate or materially amend
the management agreement relating to each drilling unit; and
sell its drilling units.
In addition, Seadrill’s loan agreements require compliance with certain maintenance covenants.
The credit agreements of Seadrill’s rig-owning subsidiaries generally prohibit dividends to Seadrill during the
occurrence of an event of default thereunder.
Therefore, Seadrill may need to seek permission from Seadrill’s lenders in order to engage in some corporate
actions. Seadrill i lenders’ interests may be different from Seadrill’s and Seadrill cannot guarantee that Seadrill will be able to obtain Seadrill a lenders’ permission when needed. This may prevent Seadrill from taking actions
that Seadrill believe are in its best interest.
1.3.6 The Company is the sole obligor of the Bonds, and as none of the Company’s subsidiaries will
guarantee the Company’s obligations under the Bond Agreement; the Bonds are structurally
subordinated to all existing and future indebtedness and other liabilities (including trade payables) of
the Company’s subsidiaries.
The Company is a holding company that has no assets other than the capital stock of its subsidiaries and no
operations of its own. The Company depends on those subsidiaries for dividends and other payments to generate the funds necessary to meet the Company’s financial obligations, including the payment of principal
and interest on the Bonds. The ability of the Company’s subsidiaries to make payments to the Company may be restricted by, among other things, their credit facilities and applicable state corporation or similar statutes
and other laws and regulations Currently, there are no significant restrictions on the Company’s ability or the ability of any of the Company t subsidiaries to obtain funds from its subsidiaries by such means as a dividend
or loan. The Company’s subsidiaries are separate and distinct legal entities and have no obligation, contingent or otherwise, to pay amounts due under the Bonds or to make any funds available to pay those amounts,
whether by dividend, distribution, loan or other payments. None of the Company’s subsidiaries guarantee the Bonds. Therefore, the Bonds are structurally subordinated to all existing and future indebtedness and other
liabilities (including trade payables) of the Company’s subsidiaries. The claims of the Company’s subsidiaries’ creditors will be required to be paid before holders of the Bonds have a claim (if any) against the entities and
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their assets. In the event of a bankruptcy, liquidation or reorganization or similar proceeding relating to the Company’s subsidiaries, investors will participate with all other holders of the Company’s indebtedness in the
assets remaining after the Company’s subsidiaries have paid all of their debt and liabilities. In any of these cases, the Company’s subsidiaries may not have sufficient funds to make payments to the Company, and
investors may receive less, ratably, than the holders of debt of the Company’s subsidiaries and other liabilities.
1.3.7 Investor’s right to receive payments on the Bonds is effectively subordinated in right of payment to
all existing and future secured indebtedness of the Company up to the value of the collateral
securing such indebtedness.
The Bonds will be the Company’s unsecured obligations and will be effectively subordinated to the Company’s
secured indebtedness to the extent of the value of the collateral securing that debt. Although the indenture governing the notes will restrict the Company’s ability to create or incur liens to secure indebtedness, these
restrictions are subject to important limitations and exceptions that will permit Seadrill to secure a substantial amount of additional indebtedness. Accordingly, in the event of a bankruptcy, insolvency, liquidation,
dissolution, reorganization or similar proceeding affecting the Company, investor’s rights to receive payment will be effectively subordinated to those of secured creditors up to the value of the collateral securing such
indebtedness. Holders of the Bonds will participate ratably with all holders of the Company’s unsecured indebtedness that is deemed to be of the same class as the Bonds, and potentially with all of the Company’s
other general creditors, based upon the respective amounts owed to each holder or creditor, in Seadrill’s
remaining assets. In addition, if the secured lenders were to declare a default with respect to their loans and
enforce their rights with respect to their collateral, there can be no assurance that the Company’s remaining assets would be sufficient to satisfy its other obligations, including its obligations with respect to the Bonds. In
any of the foregoing events, the Company cannot assure investors that there will be sufficient assets to pay amounts due on the Bonds. As a result, holders of the Bonds may receive less, ratably, than holders of secured
indebtedness.
1.3.8 If Seadrill default on its obligations to pay its other indebtedness, the Company may not be able to
make payments on the Bonds.
Any default under the agreements governing Seadrill’s indebtedness, including a default under Seadrill’s existing credit facilities, that is not waived by the required lenders or holders of such indebtedness, and the
remedies sought by the holders of such indebtedness, could prevent the Company from paying principal, premium, if any, and interest on the Bonds and substantially decrease the market value of the Bonds. If
Seadrill is unable to generate sufficient cash flow or are otherwise unable to obtain funds necessary to meet required payments of principal, premium, if any, and interest on its indebtedness, or if it otherwise fail to
comply with the various covenants in any agreement governing Seadrill’s indebtedness, including the covenants contained in Seadrill’s credit facility, Seadrill would be in default under the terms of the agreements
governing such indebtedness. In the event of such default:
the lenders under Seadrill’s credit facility could elect to terminate their commitments thereunder,
declare all the funds borrowed thereunder to be due and payable and, if not promptly paid, institute foreclosure proceedings against Seadrill’s assets;
even if those lenders do not declare a default, they may be able to cause all of Seadrill t available cash to be used to repay their loans; and
such default could cause a cross-default or cross-acceleration under Seadrill’s other indebtedness, including the Bonds. Because of such default and any actions the lenders may take in response
thereto, the Company could be forced into bankruptcy or liquidation.
1.3.9 Seadrill cannot assure investors that an active trading market will develop for the Bonds.
The Bonds will be listed on the Oslo Stock Exchange, but an active trading market may not develop for the Bonds and, even if one develops, such market may not be maintained. If an active trading market for the
Bonds does not develop or is not maintained, the market price and liquidity of the Bonds is likely to be adversely affected and Bondholders may not be able to sell their Bonds at desired times and prices or at all.
The liquidity of the trading market, if any, and future trading prices of the Bonds will depend on many factors,
including, among other things, prevailing interest rates, Seadrill’s operating results, financial performance and prospects, the market for similar securities and the overall securities market, and may be adversely affected by
unfavorable changes in these factors. It is possible that the market for the Bonds will be subject to disruptions that may have a negative effect on the holders of the Bonds, regardless of Seadrill’s operating results, financial
performance or prospects.
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1.3.10 The international nature of Seadrill operations may make the outcome of any bankruptcy
proceedings difficult to predict.
The Company is incorporated under the laws of Bermuda and the Companyed subsidiaries are incorporated
under the laws of Bermuda, the Cayman Islands, Hungary, Liberia, Singapore, British Virgin Islands, Hong Kong, Norway and the United Kingdom, and Seadrill conducts operations in countries around the world.
Consequently, in the event of any bankruptcy, insolvency or similar proceedings involving the Company or one of the Company i subsidiaries, bankruptcy laws other than those of the United States could apply. Seadrill have
limited operations in the United States. If Seadrill become a debtor under the United States bankruptcy laws,
bankruptcy courts in the United States may seek to assert jurisdiction over all of Seadrilla assets, wherever located, including property situated in other countries. There can be no assurance, however, that Seadrill
would become a debtor in the United States or that a United States bankruptcy court would be entitled to, or accept, jurisdiction over such bankruptcy case or that courts in other countries that have jurisdiction over
Seadrill and Seadrillec operations would recognize a United States bankruptcy court’s jurisdiction if any other bankruptcy court would determine it had jurisdiction.
1.3.11 Seadrill is subject to certain fraudulent transfer and conveyance statutes, which may adversely
affect holders of the Bonds.
Fraudulent transfer and insolvency laws to which Seadrill may be subject may result in the Bonds being voided,
subordinated or limited.
U.S. Federal and state fraudulent transfer and conveyance statutes may apply to the issuance of the Bonds. Under U.S. federal bankruptcy law and comparable provisions of U.S. state fraudulent transfer or conveyance
laws, if any such law would be deemed to apply, which may vary from state to state, the Bonds could be voided as a fraudulent transfer or conveyance if (1) Seadrill issued the Bonds with the intent of hindering,
delaying or defrauding creditors, or (2) Seadrill received less than reasonably equivalent value or fair consideration in return for either issuing the Bonds and, in the case of (2) only, one of the following is also true
at the time thereof:
Seadrill, were insolvent or rendered insolvent by reason of the issuance of the Bonds;
the issuance of the Bonds left Seadrill with an unreasonably small amount of capital to carry on the business;
Seadrill intended to, or believed that Seadrill would incur debts beyond Seadrill’s ability to pay as they
mature; or
Seadrill were a defendant in an action for money damages, or had a judgment for money damages
docketed against Seadrill if, in either case, after final judgment, the judgment is unsatisfied.
If a court were to find that the issuance of the Bonds was a fraudulent transfer or conveyance, the court could
void the payment obligations under the Bonds or further subordinate the Bonds to Seadrill’s presently existing and future indebtedness. In the event of a finding that a fraudulent transfer or conveyance occurred, investors
may not receive any repayment on the Bonds. Further, the voidance of the Bonds could result in an event of
default with respect to the Company and the Company’s subsidiaries’ other debt that could result in
acceleration of such debt.
As a general matter, value is given for a transfer or an obligation if, in exchange for the transfer or obligation,
property is transferred or an antecedent debt is secured or satisfied. A debtor will generally not be considered to have received value in connection with a debt offering if the debtor uses the proceeds of that offering to
make a dividend payment or otherwise retire or redeem equity securities issued by the debtor.
Seadrill cannot be certain as to the standards a court would use to determine whether Seadrill were solvent at
the relevant time. Generally, however, an entity would be considered insolvent if, at the time it incurred indebtedness:
the sum of its debts, including contingent liabilities, was greater than the fair saleable value of all of its assets; or
the present fair saleable value of its assets was less than the amount that would be required to pay its probable liability on its existing debts, including contingent liabilities, as they become absolute and
mature; or
it could not pay its debts as they become due.
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1.3.12 Seadrill may be unable to raise funds necessary to finance the change of control repurchase offer
required by the Bond Agreement.
Upon the consequence of a Change of Control event, each Bondholder shall have the right of early repayment
of its Bonds at a price equal to 100% of the principal amount of the Bonds, plus any accrued and unpaid interest. The Company may not have sufficient funds to satisfy such cash obligations and, in such
circumstances, may not be able to arrange the necessary financing on favorable terms, or at all. In addition, the Company’s ability to satisfy such cash obligation may be limited by applicable- law or the terms of the
instruments governing its indebtedness. The Company’s failure to pay such obligations would constitute an
event of default under the Bond Agreement governing the Bonds which in turn could constitute an event of default under any of the Company’s outstanding indebtedness, thereby resulting in the acceleration of such
indebtedness and requires prepayment and further restrict the Company’s ability to satisfy such cash obligations.
1.3.13 Transfer of the Bonds will be subject to certain restriction
The Bonds have not been and will not be registered under the U.S. Securities Act or any U.S. state securities
laws. Therefore, Bondholder’s may not offer or sell the bonds in the United States, except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the U.S. Securities Act and
applicable state securities laws, or pursuant to an effective registration statement. The Company has not
undertaken to register the bonds under the U.S. Securities Act or any U.S. state securities laws.
25
2 RESPONSIBILITY FOR THE PROSPECTUS
Seadrill Limited accepts responsibility for the information contained in this Prospectus. Seadrill Limited confirm
that, having taken all reasonable care to ensure that such is the case, the information contained in this
Prospectus is, to the best of our knowledge, in accordance with the facts and contains no omissions likely to
affect its import.
16 January 2013
Seadrill Limited
Kate Blankenship
Director
26
3 CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Prospectus and the documents incorporated by reference herein contain forward-looking statements. All
statements other than statements of historical facts are statements that could be deemed forward-looking
statements, including statements preceded by, followed by or that include the words “estimate,” “plan,”
project,” “forecast,” “intend,” “expect,” “anticipate,” “believe,” “think,” “view,” “seek,” “target,” “goal,” or similar expressions; any projections of earnings, revenues, expenses, synergies, margins or other financial
items; any statements of the plans, strategies and objectives of management for future operations, including integration and any potential restructuring plans; any statements concerning proposed new products, services,
developments or industry rankings; any statements regarding future economic conditions or performance; any statements of belief; and any statements of assumptions underlying any of the foregoing.
Such forward-looking statements, whether expressed or implied, are subject to risks and uncertainties which
could cause the actual results of the Issuer to differ materially from those implied by such forward-looking statements, due to a number of factors, many of which are beyond the Company’s control. If any of these risks
or uncertainties materializes or any of these assumptions proves incorrect, results of the Issuer could differ materially from the expectations in these statements. The Issuer does not undertake any obligation to update
these forward-looking statements, except as required by law.
No forward-looking statements contained in this Prospectus should be relied upon as predictions of future
events. No assurance can be given that the expectations expressed in these forward-looking statements will prove to be correct. Actual results could differ materially from expectations expressed in the forward-looking
statements if one or more of the underlying assumptions or expectations proves to be inaccurate or is unrealized. Some important factors that could cause actual results to differ materially from those in the
forward-looking statements are included in Section 1 “Risk Factors”.
Readers are cautioned not to place undue reliance on the forward-looking statements contained in this Prospectus, which represent the best judgment of the Company’s management as of the date of this
Prospectus. Except as required by applicable law, the Company’s does not undertake responsibility to update these forward-looking statements, whether as a result of new information, future events or otherwise. Readers
are advised, however, to consult any further public disclosures made by the Company, such as filings made with the Oslo Stock Exchange or press releases.
27
4 THE BOND ISSUE
4.1 Use of proceeds
The net proceeds from the Bond Issue are approximately NOK 1,250,000,000. The net proceeds have been used for the Company’s general corporate purposes.
4.2 Terms of the Bonds
The summary below describes the principal terms of the Bonds. Certain of the terms and conditions described below are subject to important limitations and exceptions. The Bond Agreement attached as appendix 1 to this
Prospectus contains the complete terms and conditions of the Bonds.
ISIN: NO 001 063611.1
Common Code: 074391761
The reference name of the Bond Issue: FRN Seadrill Limited Senior Unsecured Bond Issue 2012/ 2014
Issuer: Seadrill Limited
Security type: Bond issue with floating rate
Issue size: NOK 1,250,000,000
Denomination: Each bond has a denomination of NOK 500,000
Securities form: The Bonds are electronically registered in book-entry form with the VPS.
Issue Date: 13 February 2012
Interest bearing from and including: Issue Date
Interest bearing to: Maturity
Maturity: 13 February 2014
Interest Payment Date: 13 May, 13 August, 13 November and 13 February each year and the Maturity Date
Issue Price:
Bond Reference Rate:
Margin:
100% (par value)
3 months NIBOR
3.25% p.a.
Interest rate: Bond Reference Rate plus the Margin
Yield: Dependent on market price
Day count fraction: act/360
Business Day Convention: Modified Following Business Day Convention - If the relevant Interest Payment Date falls on a day that is not a Business Day, that date will
be the first following day that is a Business day unless that day falls in the next calendar month, in which case that date will be the first
preceding day that is a Business Day.
Amortization: The Bonds shall mature in full on the Maturity Date, and shall be
repaid at par (100%) by the Company.
Business Day: Any day on which Norwegian commercial banks are open for general
business, and when Norwegian commercial banks can settle foreign currency transactions.
Change of Control Event: Upon the occurrence of a “Change of Control Event” (which for the
purpose of the Bond Agreement shall mean an event where any person or group (other than Hemen Holding Ltd, and/or companies
controlled directly or indirectly by Mr. John Fredriksen, his direct lineal
descendants, the personal estate of any of them and any trust created
for the benefit of any of the aforementioned persons and their estates), becomes the owner, directly or indirectly, of more than 50%
of the outstanding shares of the Company, each Bondholder shall have a right of early repayment (put option) of its Bonds at a price of
100% of par value plus accrued and unpaid interest during a period of 60 days following the notice of a Change of Control Event).
28
Taxation: The Company shall pay any stamp duty and other public fees accruing in connection with the Bonds, but no in respect of trading in the
secondary market (except to the extent required by applicable laws), and shall deduct at source any applicable withholding tax payable
pursuant to law.
Payment mechanics: Interest and principal due for payment will be credited the bank
account nominated by each Bondholder in connection with its securities account in the Norwegian Central Securities Depository
(“Verdipapirsentralen” or “VPS”).
Ranking of the Bonds: The Bonds are senior debt of the Issuer. The Bonds rank at least pari
passu with all other obligations of the Issuer (save for such claims which are preferred by bankruptcy, insolvency, liquidation or other
similar mandatory laws) and rank ahead of subordinated debt. The Bonds are structurally subordinated to all existing and future debt of
the subsidiaries of the Company and effectively subordinated to all existing and future secured debt of the Company to the extent of the
assets securing such debt.
Covenants: The Company shall ensure that the Group maintains a Market
Adjusted Equity Ratio of at least 30%. Please see the Bond
Agreement, attached hereto as Appendix 1, for further details on the
Company’s covenants.
Listing and admission to trading: The Bond will be listed on the Oslo Stock Exchange.
Listing will take place as soon as possible after the prospectus has been approved by the Norwegian Financial Supervisory Authority.
Purpose: The net proceeds of the Bonds shall be employed by the Company for general corporate purposes.
Approvals: The issuance of the Bonds was made in accordance with the Company’s Board resolutions on January 27, 2012.
Limitation of claims: Claims of interest and principal shall be subject to the time-bar provisions of the Norwegian Act relating to the limitation period for
claims of 18 May 1979 No. 18, p.t. 3 years for interest rates and 10
years for principal.
Bond Agreement: The Bond Agreement, attached hereto as Appendix 1, has been
entered into between the Company and the Trustee. The Bond Agreement sets out the Bondholders’ rights and obligations in the
Bonds. The Trustee have entered into the Bond Agreement on behalf of the Bondholders and been granted authority to act on behalf of the
Bondholders to the extent provided for in section 17 of the Bond Agreement. When Bonds are purchased, the Bondholder is deemed to
have accepted the Bond Agreement and shall be bound by its terms.
Bondholders’ Meeting: The Bondholders’ Meeting represents the supreme authority of the
Bondholders community in all matters relating to the Bonds. If a resolution by the Bondholders is required, such resolution shall be
passed at a Bondholders’ Meeting. Resolutions passed at Bondholders’ Meetings shall be binding upon and prevail for all the Bonds. At the
Bondholders’ meeting each Bondholder shall have one vote for each Bond he owns as at the close of business on the day prior to the date
of the Bondholders’ Meeting in accordance with the records registered in the Verdipapirsentralen. Whoever opens the Bondholders’ Meeting
shall adjudicate any question concerning which Outstanding Bonds shall not count as Voting Bonds, and thus shall not have any voting
rights. In order to form a quorum, at least half (1/2) of the Voting Bonds must be represented at the meeting, see however Clause 16.4.
Even if less than half (1/2) of the Voting Bonds are represented, the Bondholders’ Meeting shall be held and voting completed. In the
following matters, a majority of at least 2/3 of the Voting Bonds
represented at the Bondholders’ Meeting is required: amendment of
the terms of this Bond Agreement regarding the interest rate, the tenor, redemption price and other terms and conditions affecting the
cash flow of the Bonds; transfer of rights and obligations of this Bond Agreement to another issuer, or change of Trustee. For more details,
please see the Bond Agreement Clause 16.
29
NIBOR: The rate for an interest period will be the rate for deposits in Norwegian Kroner for a period as defined under the bond reference
rate which appears on the Reuters Screen NIBR Page as of 12.00 noon, Oslo time, on the day that is two business days preceding that
interest payment date. If such rate does not appear on the Reuters Screen NIBR Page, reference to NIBOR shall be to the NIBOR
Reference Rate.
NIBOR Reference Rate: The NIBOR Reference Rate means that the rate for an interest period
will be determined on the basis of the rates at which deposits in Norwegian Kroner are offered by four large authorised exchange
banks in the Oslo market (the “Reference Banks”) at approximately 12.00 noon, Oslo time, on the day that is two Business Days
preceding that interest payment date to prime banks in the Oslo interbank market for a 3 months period commencing on that interest
payment date and in a representative amount. The Trustee will request the principal Oslo office of each Reference Bank to provide a
quotation of its rate. If at least two such quotations are provided, the rate for that Interest Payment Date shall be the arithmetic mean of
the quotations. If fewer than two quotations are provided as requested, the rate for that interest payment date will be the
arithmetic mean of the rates quoted by major banks in Oslo, selected by the Trustee, at approximately 12.00 noon, Oslo time, on that
interest payment date for loans in Norwegian Kroner to leading European banks for a period as defined under the bond reference rate
commencing on that interest payment date and in a representative amount.
Calculation agent: The Trustee
Availability of the Bond documentation: www.seadrill.com
Trustee: Norsk Tillitsmann ASA, P.O. Box 470 Vika, N-0116 Oslo, Norway
Managers: Nordea Markets, Middelthunsgt. 17, P.O. Box 1166 Sentrum, NO-0107 Oslo, Norway;
Pareto Securities AS, Dronning Mauds gt. 3, NO-0115 Oslo, Norway;
R.S Platou Markets AS, Haakon VII’s gate 10, NO-0116 Oslo, Norway;
and Swedbank First Securities, Filipstad Brygge 1, NO-0115 Oslo, Norway.
Paying Agent: Danske Bank A/S, Søndre Gate 13-15, 7466 Trondheim, Norway
Securities Depository: The Securities Depository in which the Bonds are registered is
Verdipapirsentralen, Biskop Gunnerus’ gate 14A, 0185 Oslo, Norway.
Investors with accounts in Euroclear or Clearstream, Luxembourg may
hold the Bonds in their accounts with such clearing systems and the relevant clearing system will be shown in the records of the VPS as
the holder of the relevant amount of the Bonds.
Market-making: There is no market-making arrangement entered into in connection
with the Bonds.
Legislation under which the Bonds have
been created:
Norwegian law
Transfer restrictions: None of the Bonds have been or will be registered under the U.S.
Securities Act. The Bonds may not be offered or sold in the United States, except pursuant to an exemption from, or in a transaction not
subject to, the registration requirements of the U.S. Securities Act and
applicable state securities laws.
Governing Laws: The Bonds and the Bond Agreement are governed by the laws of
Norway, with the District Court of Oslo as sole legal venue.
30
5 COMPANY OVERVIEW
5.1 Incorporation, registered office and registration number
The legal and commercial name of the Company is Seadrill Limited. The Company was incorporated under the
Bermuda Companies Act of 1981 of Bermuda on May 10, 2005 as an exempted company limited by shares with registration number 36832 and is subject to Bermuda law. The Company’s shares of common stock have been
listed under the symbol "SDRL" on the Oslo Stock Exchange since November 2005 and on the New York Stock
Exchange since April 2010. The Company’s principal executive offices are located at Par-la-Ville Place, 4th Floor, 14 Par-la-Ville Road, Hamilton, HM 08, Bermuda and the Company's telephone number is +1 (441) 295-
6935.
5.2 Business overview
Seadrill is an offshore drilling contractor providing global offshore drilling services to the oil and gas industry. The Company has a versatile fleet of drilling units that is outfitted to operate in shallow-, mid- and deep-water
areas, in benign and harsh environments. The customers are national, international and independent oil companies. The various types of drilling units in the fleet are as follows:
Jack-Up Rigs
Jack-up rigs are mobile, self-elevating drilling platforms equipped with legs that are lowered to the ocean floor.
A jack-up rig is towed to the drill site with its hull riding in the sea as a vessel and its legs raised. At the drill site, the legs are lowered until they penetrate the sea bed and the hull is elevated until it is above the surface
of the water. After completion of the drilling operations, the hull is lowered until it rests on the water, the legs are raised and the rig can be relocated to another drill site. Jack-ups are generally suitable for water depths of
450 feet or less and operate with crews of 40 to 60 people.
Tender Rigs
Self-erecting tender rigs conduct production drilling from fixed or floating platforms. During drilling operations, the tender rig is moored next to the platform. The modularized drilling package, stored on the deck during
transit, is lifted prior to commencement of operations onto the platform by the rig’s integral crane. To support the operations, the tender rig contains living quarters, helicopter deck, storage for drilling supplies, power
machinery for running the drilling equipment and well completion equipment. There are two types of tender rigs, barge type and semi-submersible (semi-tender) type. Tender barges and semi-tenders are equipped with
similar equipment but the semi-tender’s semi-submersible hull structure allows the unit to operate in rougher weather conditions. Self-erecting tender rigs allow for drilling operations to be performed from platforms
without the need for permanently installed drilling packages. Self-erecting tender rigs generally operate with crews of 60 to 85 people.
Semi-submersible drilling rigs
Semi-submersible drilling rigs consist of an upper working and living quarter’s deck resting on vertical columns
connected to lower hull pontoons. Such rigs operate in a “semi-submerged” floating position, in which the lower hull is below the waterline and the upper deck protrudes above the surface. The rig is situated over a
wellhead location and remains stable for drilling in the semi-submerged floating position, due in part to its wave transparency characteristics at the water line.
There are two types of semi-submersible rigs, moored and dynamically positioned. Moored semi-submersible
rigs are positioned over the wellhead location with anchors, while the dynamically positioned semi-submersible rigs are positioned over the wellhead location by a computer-controlled thruster system. Depending on country
of operation, semi-submersible rigs generally operate with crews of 65 to 100 people.
Drillships
The drillships are self-propelled ships equipped for drilling in deep waters, and are positioned over the well through a computer-controlled thruster system similar to that used on semi-submersible rigs.
Drillships are suitable for drilling in remote locations because of their mobility and large load-carrying capacity. Depending on country of operation, drillships operate with crews of 65 to 100 people.
Segments
Information regarding revenues, segment operating profit or loss and total assets attributable to each
operating segment for the last three fiscal years is presented in Note 3 to the attached Consolidated Financial Statements included in this prospectus. Information regarding the operating revenues and identifiable assets
attributable to each of the geographic areas of operations for the last three fiscal years is also presented in Note 3 to the attached Consolidated Financial Statements.
In response to a significant growth in operations through acquisitions of new rigs, newbuilding orders and the deconsolidation of Archer Limited (formerly Seawell Limited) in early 2011, a review of the internal structure,
31
including the operating and reporting business segments, resulted in a change to the reporting segments with effect from the first quarter of 2011.
With effect from the first quarter of 2011, the Company has reported the business in the following operating segments:
Floaters: The Company offer services encompassing drilling, completion and maintenance of offshore exploration and production wells. The drilling contracts relate to semi-submersible rigs and drillships
for harsh and benign environments in mid-, deep- and ultra-deep waters.
Jack-up rigs: The Company offer services encompassing drilling, completion and maintenance of
offshore exploration and production wells. The drilling contracts relate to jack-up rigs for operations in harsh and benign environments.
Tender Rigs: The Company operates self-erecting tender barges and semi-submersible tender rigs, which are used for production drilling and well maintenance in benign environments.
Well Services: The Company provides services using platform drilling, facility engineering, modular rig, well intervention and oilfield technologies. However, this segment is only applicable for the
period up to and including February 2011 when Archer was deconsolidated.
Business Strategy
The primary objective is to profitably grow the business to increase long-term distributable cash flow per share to the Company’s shareholders through the following principal strategies:
Continue to provide excellent service to the customers
The Company is a leading offshore deepwater drilling company and the mission is to continue to be the
preferred offshore drilling contractor and to deliver excellent performance to the clients by consistently fulfilling their expectations for performance and safety standards.
Growth through targeted alliances, purchases of newbuildings, mergers and acquisitions
The Company has grown the fleet significantly since the formation in 2005. See “Management’s Discussion and
Analysis of Financial Condition and Results of Operations—Fleet Development.” The strategy is focused on developing a fleet of new premium offshore drilling units through newbuild orders and targeted acquisitions of
modern assets. In line with this strategy, the Company has invested significantly in new rigs with enhanced technical capabilities since October 2010 by adding six ultra-deepwater units, one drillship, six jack-up rigs and
four tender rigs to the fleet, a 65.95% equity interest in AOD, a 28.50% equity interest in Sevan, and a 6.4% equity interest in Sapurakencana. These investments have been undertaken in consideration of the favorable
market view for the industry in general and the anticipated favorable development demand for new and
modern assets in particular. In addition, consistent with the goal to operate the most technologically advanced drilling unit fleet and the commitment to safety, in the future, the Company may sell certain assets from time
to time to replenish and grow the fleet.
Capitalize on favorable market developments
The Company believes the market outlook for offshore drilling remains favorable as contracting activities have increased for all types of offshore drilling units. This has been driven by increases in spending on exploration
and development activities by the customers because of the historically high levels of oil prices, the strong
demand for energy and the successful exploration and appraisal activities of oil companies in existing and new
geographical areas. The Company continues to see strong demand for new and modern units that offer superior technical capabilities, operational flexibility and reliability, and the Company believe, based on the
proven track record of operating these types of units and diverse fleet composition, the Company will be able to benefit from the growing focus on modern equipment.
The Company believes that consolidation in the offshore drilling rig industry would improve the pricing and earnings visibility for the services. Accordingly, the Company actively look for growth opportunities and intend
to take part in the future consolidation of the industry if the Company determine that potential transactions are in the best interest of the shareholders. Such opportunities may be in the form of transactions for specific
offshore drilling units or companies.
5.3 The Fleet
The Company believes that they have one of the most modern fleets in the offshore drilling industry with the majority of the units built after 2008. This results in improved utilization rates and the daily rates obtainable
for the drilling units. The following table sets forth the units that the Company owns or has contracted for
delivery as of November 30, 2012.
Unit
Year of delivery
Water depth
(feet)
Drilling depth
(feet)
Customer
Jack-up rigs
West Janus(1) 1984 328 21,000 Vietsovpetro
32
Unit
Year of delivery
Water depth
(feet)
Drilling depth
(feet)
Customer
West Epsilon(2) 1993 400 30,000 Statoil
West Courageous 2007 350 30,000 Shell West Defender 2007 350 30,000 Shell
West Resolute 2007 350 30,000 KJO West Prospero 2007 400 30,000 Vietsovpetro
West Intrepid 2008 350 30,000 KJO West Vigilant 2008 350 30,000 Talisman
West Ariel 2008 400 30,000 Vietsovpetro West Triton 2008 375 30,000 KJO
West Freedom 2009 350 30,000 KJO / GDF Suez West Cressida 2009 375 30,000 PTTEP
West Mischief 2010 350 30,000 ENI West Callisto 2010 400 30,000 Saudi Aramco
West Leda 2010 375 30,000 ExxonMobil West Elara(2) 2011 450 40,000 Statoil
West Castor(3) 2013 400 30,000 Saudi Aramco West Telesto(3) 2012 400 30,000 Saudi Aramco
West Oberon(3) 2013 400 30,000 Premier West Tucana(3) 2012 400 30,000 PVEP
West Linus(2)(3) 2013 450 40,000 ConocoPhillips AOR-1 (3)(6) 2013 400 20,000 Saudi Aramco
AOR-2 (3)(6) 2013 n/a(5) AOR-3 (3)(6) 2013 n/a(5)
Tender rigs
T4 1981 410 20,000 Chevron T7 1983 410 20,000 Chevron
West Pelaut 1994 6,500 30,000 Shell West Menang 1999 6,500 30,000 Murphy
West Alliance 2001 6,500 30,000 Shell West Setia 2005 6,500 30,000 Chevron
West Berani 2006 6,500 30,000 Chevron T11 2008 6,500 30,000 Chevron
T12 2010 6,500 30,000 Chevron West Vencedor 2010 6,500 30,000 Chevron
West Jaya 2011 6,500 30,000 BP T15(3) 2012 6,500 30,000 Chevron
T16(3) 2013 6,500 30,000 Chevron T17(3) 2013 6,500 30,000 PTTEP
West Esperanza(3) 2013 6,500 30,000 Hess T18(3) 2013 6,500 30,000 Chevron
Unit
Year of delivery
Water depth (feet)
Drilling
depth (feet)
Customer
Semi-submersible
rigs West Alpha(2) 1986 2,000 23,000 ExxonMobil
West Venture(2) 2000 2,600 30,000 Statoil West Phoenix(2) 2008 10,000 30,000 Total
West Hercules(2)(4) 2008 10,000 35,000 Husky / Statoil West Sirius 2008 10,000 35,000 BP
West Taurus(4) 2008 10,000 35,000 Petrobras West Eminence 2009 10,000 30,000 Petrobras
West Aquarius 2009 10,000 35,000 ExxonMobil
West Orion 2010 10,000 35,000 Petrobras West Pegasus 2011 10,000 35,000 PEMEX
West Leo 2012 10,000 35,000 Tullow Oil West Capricorn 2011 10,000 35,000 BP
West Mira(3) 2015 10,000 40,000 Husky West Rigel(2)(3) 2015 10,000 40,000 n/a(5)
Drillships
33
Unit
Year of delivery
Water depth
(feet)
Drilling depth
(feet)
Customer
West Navigator(2) 2000 7,500 35,000 Shell
West Polaris(4) 2008 10,000 35,000 ExxonMobil West Capella 2008 10,000 35,000 Total
West Gemini 2010 10,000 35,000 Total / TBN West Auriga(3) 2013 12,000 40,000 BP
West Vela(3) 2013 12,000 40,000 BP West Tellus(3) 2013 12,000 40,000 n/a(5)
West Neptune(3) 2014 12,000 40,000 n/a(5) West Jupiter (3) 2014 12,000 40,000 n/a(5)
West Saturn(3) 2014 12,000 40,000 n/a(5) West Carina (3) 2014 12,000 40,000 n/a(5)
(1) Seadrill has entered into an agreement to sell the unit and expect to complete the transaction in the
first quarter of 2013.
(2) Owned by the Company's subsidiary, NADL, in which the Company own 73% of the outstanding
shares.
(3) Newbuilding under construction or in transit to first drilling assignment.
(4) Unit owned by a subsidiary of Ship Finance International Limited (“Ship Finance”) (see Note 33 to audited consolidated financial statements).
(5) Currently uncontracted.
(6) Owned by the Company's subsidiary, Asia Offshore Drilling, in which the Company own 66% of the
outstanding shares.
5.4 Management of the Company
Overall responsibility for the management of the Company's and its subsidiaries rests with its Board. The Board
has organized the provision of management services through a subsidiary incorporated in Norway, Seadrill Management AS. The Board has defined the scope and terms of the services to be provided by Seadrill
Management authorizing it to run day-to-day operations. The Board must be consulted on all matters of material importance and/or of an unusual nature and, for such matters, will provide specific authorization to
personnel in Seadrill Management to act on its behalf.
5.5 Contract Status
Most of Seadrill’s drilling units are contracted to customers for periods between one and seven years, and
Seadrill’s future contracted revenue, or backlog, as of November, 30, 2012, which is calculated from September 30, 2012, totaled approximately $21.3 billion, with $15.7 billion of this amount attributable to
Seadrill’s semi-submersible rigs and drillships. Seadrill expect approximately $2.3 billion of Seadrill’s backlog to be realized during the next six months. Backlog for Seadrill’s drilling fleet is calculated as the contract daily
rate multiplied by the number of days remaining on the contract, assuming full utilization (but excluding any contract extensions). Backlog excludes revenues for mobilization and demobilization, contract preparation, and
customer reimbursables. The amount of actual revenues earned and the actual periods during which revenues are earned will be different from the backlog projections due to various factors. Downtime, caused by
unscheduled repairs, maintenance, weather and other operating factors, may result in lower applicable daily rates than the full contractual operating daily rate.
The actual amounts of revenues earned and the actual periods during which revenues are earned may differ from the amounts and periods shown in the table below due to, for example, shipyard and maintenance
projects, downtime and other factors that result in lower revenues than Seadrill’s average contract backlog per day.
The firm commitments that comprise Seadrill’s contract backlog as of November 30, 2012 are as follows:
Drilling Unit
Contracted Location
Customer
Contractual
Daily Rate
Earliest
Expiration Date
Jack-up rigs West Janus(1)
Vietnam Vietsovpetro 118,500 December 2012
West Epsilon(2)
Norway Statoil 289,000 December 2014
West Courageous Malaysia Shell 134,500 January 2013
34
Drilling Unit
Contracted Location
Customer
Contractual
Daily Rate
Earliest
Expiration Date
West Defender
Brunei Shell 133,000 May 2016
West Resolute
Saudi Arabia / Kuwait KJO 140,000 October 2015
West Prospero
Vietnam Vietsovpetro 129,000 December 2012
West Intrepid Saudi Arabia / Kuwait KJO 180,000 November 2013
West Vigilant
Malaysia
Talisman
146,000
October 2013
West Ariel
Vietnam Vietsovpetro 129,000 December 2012
West Triton
Saudi Arabia / Kuwait KJO 145,000 August 2015
West Freedom
Saudi Arabia / Kuwait / Quatar KJO/ GDF Suez
185,000/ 155,000
June 2013
West Cressida
Thailand PTTEP 129,500 May 2014
West Mischief
Republic of Congo Equion ENI
172,000 175,000
October 2012/ November 2014
West Callisto
Saudi Arabia Saudi
Aramco
150,000 November 2015
West Leda Malaysia ExxonMobil 133,500/
138,000
April 2014
West Elara(2)
Norway Statoil 366,000 March 2017
West Castor(3)
Jurong Shipyard (Singapore) / Saudi
Arabia
Saudi
Aramco
198,500
August 2016
West Telesto(3)
Dalian Shipyard (China) / Saudi Arabia Saudi
Aramco
185,000 April 2016
West Oberon(3)
Dalian Shipyard (China) / Saudi Arabia Saudi
Aramco
149,500 August 2013
West Tucana(3)
Jurong Shipyard (Singapore) PVEP 160,000 April 2013
AOR-1 (3)(6) Keppel FELS Shipyard (Singapore) Saudi Aramco
180,000 June 2016
AOR-2 (3)(6) Keppel FELS Shipyard (Singapore) n/a AOR-3 (3)(6) Keppel FELS Shipyard (Singapore) n/a
West Linus(2)(3)
Jurong Shipyard (Singapore)/ Norway Conoco-
Phillips
368,000 April 2019
Tender rigs
T4
Thailand Chevron 104,500 June 2013
T7
Thailand Chevron 88,000 March 2013
West Pelaut
Brunei Shell 120,000 March 2015
West Menang
Malaysia Murphy 160,000/ 172,000
March 2013/ September 2014
West Alliance
Malaysia Shell 171,000 January 2015
West Setia
Angola Chevron 223,000 August 2014
West Berani
Indonesia Chevron 170,000 April 2013
T11 Thailand Chevron 135,000/ 127,500
May 2013/ May 2017
35
Drilling Unit
Contracted Location
Customer
Contractual Daily Rate
Earliest Expiration Date
T12
Thailand Chevron 120,000 April 2014
West Vencedor
Angola Chevron 210,000 March 2015
West Jaya Trinidad & Tobago BP 165,000/ 173,000
August 2013/ September 2014
T15(3)
COSCO Shipyard (China) Chevron 115,500 March 2018
T16(3)
COSCO Shipyard (China) Chevron 115,500 June 2018
T17(3)
COSCO Shipyard (China) PTTEP 118,000 May 2018
West Esperanza(3) Keppel FELS (Singapore) / Equatorial Guinea
Hess 235,000 December 2014
T18(3)
COSCO Shipyard (China) Chevron 127,000 March 2019
Semi-
submersible rigs
West Alpha(2) Norway ExxonMobil/
ExxonMobil
482,000/
552,000
July 2014/
July 2016 West Venture(2)
Norway Statoil 440,000 July 2015
West Phoenix(2)
UK Total 453,000 January 2015
West Hercules(4)
Norway Statoil 501,000 December 2016
West Sirius
Gulf of Mexico (USA) BP 474,000 /
535,000
July 2014/
July 2019 West Taurus(4)
Brazil Petrobras 648,000 February 2015
West Eminence
Brazil Petrobras 616,000 July 2015
West Aquarius
Canada ExxonMobil 530,000 June 2015
West Orion
Brazil Petrobras 616,000 July 2016
West Pegasus
Gulf of Mexico (Mexico) PEMEX 465,000 August 2016
West Leo Ghana Tullow Oil 525,000/ 625,000
May 2013/ May 2016
West Capricorn
Gulf of Mexico (USA) BP 487,000 August 2017
West Mira(3)
Hyundai Shipyard (South Korea) Husky 590,000 June 2020
West Rigel(2)(3)
Jurong Shipyard (Singapore) n/a(5)
Drillships
West Navigator(2) Norway Shell 620,000/ 586,000
December 2012/ June 2014
West Polaris(4) Nigeria ExxonMobil 628,000/ 642,000
January 2013/ January 2018
West Capella Nigeria Total 552,000/ 627,500
April 2014 April 2017
West Gemini Angola Total / TBN 447,000/ 640,000
September 2013 September 2017
West Auriga(3)
Samsung Shipyard (South Korea) BP 565,000 October 2020
West Vela(3)
Samsung Shipyard (South Korea) BP 565,000 January 2021
West Tellus(3)
Samsung Shipyard (South Korea) n/a(5)
West Neptune(3)
Samsung Shipyard (South Korea) n/a(5)
West Jupiter(3)
Samsung Shipyard (South Korea) n/a(5)
36
Drilling Unit
Contracted Location
Customer
Contractual Daily Rate
Earliest Expiration Date
West Saturn(3)
Samsung Shipyard (South Korea) n/a(5)
West Carina(3)
Samsung Shipyard (South Korea) n/a(5)
(1) Seadril has entered into an agreement to sell the unit and expect to complete the transaction in the
fourth quarter of 2012.
(2) Owned by the Company’s subsidiary, NADL, in which the Company own 73% of the outstanding
shares.
(3) Newbuilding under construction or in transit to its first drilling assignment.
(4) Unit owned by a subsidiary of Ship Finance (see Note 33 to audited consolidated financial statements).
(5) Currently uncontracted.
The following table shows the percentage of rig days committed by year as of June 30, 2012. The percentage
of rig days committed is calculated as the ratio of total days committed under contracts to total available days in the period. Total available days for Seadrill’s units under construction are based on their expected delivery
dates.
(6) Owned by the Company’s subsidiary, Asia Offshore Drilling, in which the Company own 66% of the
outstanding shares.
% of rig-days committed Year ending December 31,
2012
2013
2014
Jack-up rigs 90% 66% 47%
Semi-submersible rigs 100% 100% 100%
Drillships 100% 93% 59%
Tender rigs 100% 92% 82%
5.6 Organizational structure
The Company is an exempt company limited by shares organized under the laws of Bermuda.
It is a holding company and its main function is to provide financing to the other entities in the Seadrill group by way of equity or shareholder loans. The Company’s assets and operation are organized in direct and indirect
subsidiaries incorporated in jurisdictions providing the tax and legislative framework which best suits the Company’s overall needs.
The following table sets forth the Company’s significant subsidiaries as of the date of this Prospectus.
Name of company Country of Incorporation
Principal activities Percent owned
Drilling unit owning
companies
Asia Offshore Rig 1 Ltd Bermuda Owner of AOR-1 66% Asia Offshore Rig 2 Ltd Bermuda Owner of AOR-2 66%
Asia Offshore Rig 3 Ltd Bermuda Owner of AOR-3 66% North Atlantic Alpha Ltd Bermuda Owner of West Alpha 73%
North Atlantic Elara Ltd Bermuda Owner of West Elara 73% North Atlantic Epsilon Ltd Bermuda Owner of West Epsilon 73%
North Atlantic Linus Ltd Bermuda Owner of West Linus 73% North Atlantic Navigator Ltd Bermuda Owner of West Navigator 73%
North Atlantic Phoenix Ltd Bermuda Owner of West Phoenix 73% North Atlantic Rigel Ltd Bermuda Owner of West Rigel 73%
37
North Atlantic Venture Ltd Bermuda Owner of West Venture 73% Scorpion Courageous Ltd. Bermuda Owner of Offshore Courageous 100%
Scorpion Defender Ltd. Bermuda Owner of Offshore Defender 100% Scorpion Freedom Ltd. Bermuda Owner of Offshore Freedom 100%
Scorpion Intrepid Ltd. Bermuda Owner of Offshore Intrepid 100% Scorpion Resolute Ltd. Bermuda Owner of Offshore Resolute 100%
Scorpion Rigs Ltd. Bermuda Owner of Offshore Mischief 100% Scorpion Vigilant Ltd. Bermuda Owner of Offshore Vigilant 100%
Seadrill Auriga Ltd. Bermuda Owner of West Auriga 100% Seadrill Carina Ltd. Bermuda Owner of West Carina 100%
Seadrill Castor Ltd. Bermuda Owner of West Castor 100% Seadrill Cressida Ltd. Bermuda Owner of West Cressida 100%
Seadrill Eminence Ltd Bermuda Owner of West Eminence 100% Seadrill Esperanza Ltd Bermuda Owner of West Esperanza 100%
Seadrill Gemini Ltd Bermuda Owner of West Gemini 100% Seadrill Indonesia Ltd Bermuda Owner of West Callisto and West Leda 100%
Seadrill Janus Ltd. Bermuda Owner of West Janus 100% Seadrill Jaya Ltd. Bermuda Owner of West Jaya 100%
Seadrill Jupiter Ltd Bermuda Owner of West Jupiter 100% Seadrill Leo Ltd. Bermuda Owner of West Leo 100%
Seadrill Mira Ltd. Bermuda Owner of West Mira 100%
Seadrill Neptune Ltd. Bermuda Owner of West Neptune 100%
Seadrill Oberon Ltd. Bermuda Owner of West Oberon 100% Seadrill Orion Ltd. Bermuda Owner of West Orion 100%
Seadrill Telesto Ltd. Bermuda Owner of West Telesto 100% Seadrill Prospero Ltd Bermuda Owner of West Prospero 100%
Seadrill Tellus Ltd. Bermuda Owner of West Tellus 100% Seadrill Tender Rig Ltd. Bermuda Holding company and owner of West
Alliance, West Berani, West Menang, West Pelaut, T-4, T-7, T-8, T-11 and
T-12
100%
Seadrill Triton Ltd. Bermuda Owner of West Triton 100% Seadrill Tucana Ltd. Bermuda Owner of West Tucana 100%
Seadrill T15 Ltd. Bermuda Owner of T15 100% Seadrill T16 Ltd. Bermuda Owner of T16 100%
Seadrill T17 Ltd Bermuda Owner of T17 100% Seadrill T18 Ltd Bermuda Owner of T18 100%
Seadrill Saturn Ltd Bermuda Owner of West Saturn 100% Seadrill Vela Ltd. Bermuda Owner of West Vela 100%
Seadrill Vencedor Ltd. Bermuda Owner of West Vencedor 100% Seadrill Deepwater Drillship Ltd. Cayman Islands Owner of West Capella 100%
Seabras Rig Holdco Kft. Hungary Owner of West Capricorn 88% Seadrill Hungary Kft. Hungary Owner of West Sirius 100%
Seadrill Ariel Ltd. Liberia Owner of West Ariel 100% Seadrill China Operations Ltd. Luxembourg Owner of West Aquarius 100%
Seadrill Pegasus Pte Ltd. Singapore Owner of West Pegasus 100%
Seadrill Tender Rigs Pte. Ltd. Singapore Owner of West Setia 100%
Drilling units under sale leaseback
SFL Polaris Ltd. * Bermuda Owner of West Polaris 0% SFL Deepwater Ltd. * Bermuda Owner of West Hercules and West
Taurus 0%
Contracting and
management companies
North Atlantic Norway Ltd Bermuda Drilling services contracter 73% Seadrill Deepwater Contracting
Ltd
Bermuda Contracting Company 100%
Seadrill Deepwater Crewing Ltd. Bermuda Crewing company 100%
Seadrill Servicos de Petroleo Ltda.
Brazil Drilling services contractor 100%
Seadrill Management Services Ltd.
British Virgin Islands
Management company 100%
Seadrill Asia Ltd. Hong Kong Drilling services contractor, holding company
100%
North Atlantic Crew AS Norway Crewing Company 73%
38
North Atlantic Management AS Norway Management company 73% Seadrill Offshore AS Norway Drilling services contractor 100% Seadrill Management AS Norway Management company 100%
Seadrill Management (S) Pte
Ltd
Singapore Management company 100%
Seadrill Offshore Singapore Ltd. Singapore Management company 100% North Atlantic Drilling UK Ltd UK Drilling services contracter 73%
Seadrill Americas Inc. USA Drilling services contractor and technical services company
100%
Holding Companies
Asia Offshore Drilling Ltd Bermuda Holding Company of Asia Offshore vessel owning entities
66%
North Atlantic Drilling Ltd Bermuda Holding Company of North Atlantic vessel owning entities
73%
Seadrill Common Holdings Ltd Bermuda Holding Company 100% Seadrill Deepwater Holdings Ltd Bermuda Holding Company for deepwater rigs 100%
Seadrill Jack Up Holding Ltd Bermuda Holding Company for Scorpion vessel owning entities
100%
Seadrill Capricorn Holdings LLC Marshall Islands Holding Company of Seadrill Partners vessel owning entities
88%
Seadrill OPCO Sub LLC Marshall Islands Holding Company of Seadrill Partners vessel owning entities
93%
Seadrill Operating LP Marshall Islands Holding Company of Seadrill Partners
vessel owning entities
93%
Seadrill Partners LLC Marshall Islands Ultimate Holding Company of Seadrill
Partners vessel owning entities
100%
Seadrill UK Ltd United Kingdom Holding Company 100%
* Fully consolidated Variable interest entities
5.7 Competitive position
The statements in this section or in any other section in the Prospectus regarding competitive position is made by Seadrill based on won assessment of the industry and the competition.
The Company believes that its competitive strengths include:
Leader among offshore drilling contractors
Since the inception in 2005, the Company have developed into one of the world’s largest international offshore
drilling contractors. The Company own and operate a fleet of 65 offshore drilling units, which consists of 14 semi-submersible rigs, 11 drillships, 24 jack-up rigs and 16 tender rigs, including 22 units currently under
construction. In addition, (i) the Company operate five tender rigs in association with Varia Perdana; and (ii) the Company hold investments in several other companies in the industry that own and/or operate offshore
drilling units with similar characteristics to its own fleet of drilling units or deliver various oil services. The Company maintain the second largest fleet of ultra-deepwater units, the most modern fleet of jack-up rigs and
the largest fleet of tender rigs.
Technologically advanced and ultra deep water geared fleet
The drilling units are among the most technologically advanced in the world and are geared towards the fast-growing ultra deep-water segment. The majority of the rigs were built after 2008, which is among the lowest
average fleet age in the industry. The Company continue to see strong demand for new and modern units that offer superior technical capabilities, operational flexibility and reliability, and the Company believe, based on
the Company’s proven track record of operating these types of units and diverse fleet composition, the Company will be able to benefit from the growing focus on modern equipment.
Robust industry fundamentals
The Company believes the market outlook for offshore drilling remains favorable as contracting activities have
increased for all types of offshore drilling units. This has been driven by increases in spending on exploration and development activities by its customers because of the historically high levels of oil prices, the strong
demand for energy and the successful exploration and appraisal activities of oil companies in existing and new geographical areas. The customers’ increased spending on exploration and development activities has focussed
on the offshore segment and particularly deep and ultra-deep water.
Experienced management team
The management team has significant experience in operating offshore drilling units and expertise in all aspects of commercial, technical, operational and financial areas of the business, promoting a focused
marketing effort, tight quality and cost controls, and effective operations and safety monitoring. Under their
39
leadership, the Company have increased its fleet from five drilling units to 65 drilling units and the total operating revenues from $27 million to $4.2 billion from the fiscal year ended December 31, 2005, to the fiscal
year ended December 31, 2011.
Strong and diverse customer relationships
The Company have strong relationships with its customers that the Company believe are based on the operational performance, operational track record and quality of the fleet. The customers are oil and gas
exploration and production companies, including major integrated oil companies, independent oil and gas producers and government-owned oil and gas companies. Among the largest customers in terms of revenue
and contract backlog, Petròleo Brasileiro S.A. (“Petrobras”), Statoil ASA (“Statoil”), Total S.A. Group (“Total”), Royal Dutch Shell (“Shell”), Exxon Mobil Corp (“ExxonMobil”), British Petroleum (“BP”), and Chevron
Corporation (“Chevron”), including certain of their subsidiaries.
Commitment to safety and the environment
The Company believe that the combination of its quality drilling units and experienced and skilled employees allows Seadrill to provide the customers with safe and effective operations, to establish, develop and maintain
a position as a preferred provider of offshore drilling services for the customers and to facilitate the procurement of term contracts and premium daily rates.
40
6 BOARD OF DIRECTORS AND MANAGEMENT
6.1 Board of Directors
Overall responsibility for the management of the Company and its subsidiaries rests with the Company’s board of directors (the “Board”). The Board has organized the provision of management services through a
subsidiary incorporated in Norway, Seadrill Management AS, or Seadrill Management. The board has defined the scope and terms of the services to be provided by Seadrill Management authorizing it to run day-to-day
operations. The Board must be consulted on all matters of material importance and/or of an unusual nature
and, for such matters, will provide specific authorization to personnel in Seadrill Management to act on the Company's behalf.
Seadrill’s business address at Par-la-Ville Place, 14 Par-la-Ville Road, Hamilton HM 08, Bermuda, serves as c/o address for the members of the Board in relation to their directorships in Seadrill.
Composition of the Board: Name Position
John Fredriksen Chairman
Tor Olav Trøim Vice chairman
Kate Blankenship Board member
Kathrine Fredriksen Board member
Carl Erik Steen Board member
John Fredriksen | Chairman
John Fredriksen has served as Chairman of the Board, President and a director of the Company since its
inception in May 2005. Mr. Fredriksen has established trusts for the benefit of his immediate family which control Hemen, the largest shareholder. Mr. Fredriksen is Chairman, President, Chief Executive Officer and a
director of a related party Frontline, a Bermuda company listed on the NYSE, the Oslo Stock Exchange and the London Stock Exchange. He is also a director of a related party, Golar LNG Limited, or Golar, a Bermuda
company listed on the Nasdaq Global Market and the Oslo Stock Exchange whose principal shareholder is World Shipholding Limited, a company indirectly influenced by trusts established by Mr. John Fredriksen for the
benefit of his immediate family. He is also a director of a related party Golden Ocean Group Limited, or Golden Ocean, a Bermuda company publicly listed on the Oslo Stock Exchange and on the Singapore stock exchange,
whose principal shareholder is Hemen, and has served as a director of Frontline 2012 Ltd since December 2011,
Tor Olav Trøim | Vice Chairman
Tor Olav Trøim has served as Vice-President and a director of the Company since its inception in May 2005. Mr
Trøim graduated as M.Sc. Naval Architect from the University of Trondheim, Norway in 1985. His careers include Equity Portfolio Manager with Storebrand ASA (1987-1990) and Chief Executive Officer for
the Norwegian Oil Company DNO AS (1992-1995). Mr Trøim has also been a director of Archer Limited since its incorporation in 2007. Mr Trøim is also a director of Golar, Golar LNG Partners LP (listed on the Nasdaq Global
Market), Golden Ocean (also listed on the Singapore Stock Exchange), Aktiv Kapital ASA and Marine Harvest ASA. He served as a director of Frontline from November 1997 until February 2008 and has served as a
director of Frontline 2012 Ltd since December 2011.
Kate Blankenship | Board member
Kate Blankenship has served as a director of the Company since its inception in May 2005. Mrs Blankenship has also served as a director of Frontline since 2003. Mrs. Blankenship joined Frontline in 1994 and served as
its Chief Accounting Officer and Secretary until October 2005.
Mrs Blankenship has been a director of Ship Finance since October 2003, North Atantic Drilling Ltd., since
February 2011, Independent Tankers Corporation Limited since February 2008, Golar since July 2003, Golar
LNG Partners LP since September 2007. Golden Ocean since November 2004, Archer Limited since its incorporation in 2007 and Frontline 2012 Ltd since December 2011 and Seadrill Partners LLP since 2012. She is
a member of the Institute of Chartered Accountants of England and Wales.
41
Kathrine Fredriksen | Board member
Ms. Fredriksen has served as a director of the Company since September 2008. Ms Fredriksen has also served
as a director of Golar since February 2008. She graduated from Wang Handels Gymnas in Norway and studied
at the European Business School in London. Ms Fredriksen is the daughter of Mr John Fredriksen, the President
and Chairman.
Carl Erik Steen | Board member
Carl Erik Steen has served as a director of the Company since February 2011. Mr. Steen graduated in 1975 from ETH Zurich Switzerland with a M.Sc. in Industrial and Management Engineering. He then worked as a
consultant in various Norwegian companies before joining I.M.Skaugen as a Director in 1978. In 1983, Mr Steen moved to Christiania Bank Luxembourg and in 1987 returned to Norway to establish the international
shipping desk of Christiania Bank. In 1992, Mr Steen was appointed Executive Vice President with the responsibility of Christiania Bank's Shipping, Offshore and International activities. From January 2001 until
February 2011, Mr Steen was head of Nordea Bank's Shipping, Oil Services & International Division. Mr. Steen is also a board member of Eksportfinans (the Norwegian export credit institution for Export Financing), and
Eitzen Chemical ASA, Wilhelm Wilhelmsen Holding ASA and RS Platou ASA.
6.2 Executive Management team
The following table sets forth information regarding the officers and key employees within the Company’s operating subsidiaries, who are responsible for overseeing the management of the Company’s business:
Name Position Business address:
Fredrik Halvorsen Chief Executive Officer and President of Seadrill Management Ltd.
13th Floor, One American Square, 17 Crosswall, London EC3N 2LB, United
Kingdom
Per Wullf Chief Operating Officer and Executive
Vice President of Seadrill Management Ltd.
13th Floor, One American Square, 17
Crosswall, London EC3N 2LB, United Kingdom
Robert Hingley-Wilson Chief Accounting Officer and Senior Vice President of Seadrill Management Ltd.
13th Floor, One American Square, 17 Crosswall, London EC3N 2LB, United
Kingdom
Rune Magnus Lundetræ Chief Financial Officer and Senior Vice
President of Seadrill Management Ltd
13th Floor, One American Square, 17
Crosswall, London EC3N 2LB, United Kingdom
Svend Anton Maier Senior Vice President, Africa and Middle-East
Arenco Building, 18th Floor, Sheik Zayed Road, Media City, Dubai, U.A.E.
Alf Ragnar Løvdal Senior Vice President, Europe Finnestadveien 28, 4029 Stavanger, Norway
Raphael Siri Senior Vice President Asia Pacific 10 Hoe Chiang Road, #18-01 Keppel Towers, Singapore 089315
Iain Hope Senior Vice President Americas 11025 Equity Drive, Suite 150, Houston, Texas 77041, USA
Derek Massie Senior Vice President HR Avenida Repùblica do Chile No. 230, 21st and 22nd floors, zip code 20031-
170, Centra Rio de Janeiro – RJ, Brazil
Eduardo Antonello Senior Vice President Brazil Par-la-Ville Place, 14 Par-la-Ville Road,
Hamilton 08, Bermuda
Georgina Sousa Company Secretary 13th Floor, One American Square, 17
Crosswall, London EC3N 2LB, United Kingdom
42
Fredrik Halvorsen | Chief Executive Officer and President of Seadrill Management
Fredrik Halvorsen was appointed CEO and President in October 2012. Mr Halvorsen works for Frontline
Corporate Services Ltd and is a Director of Deep Sea Supply Plc., where he has served since October 2010. He
has been a Director of Archer since 2010, stepping in as interim CEO of Archer in January 2012. He is also a
Director of Deep Sea Supply and Aktiv Kapital. Prior to this, Mr Halvorsen held various roles including CEO of Tandberg ASA, and senior positions at Cisco Systems Inc as well as McKinsey & Company. Mr Halvorsen is a
Norwegian citizen, resident in the UK
Per Wullf | Chief Operating Officer and Executive Vice President of Seadrill Management AS
Mr. Wullf has served as the Chief Operating Officer and Executive Vice President of Seadrill Management AS since February 2009. Mr. Wullf has more than 28 years of experience in the international offshore and onshore
drilling industry with A.P. Moller - Maersk A/S, serving as Managing Director for Maersk Drilling Norge AS from 2006 to 2009.
Robert Hingley-Wilson | Chief Accounting Officer and Senior Vice President of Seadrill Management AS
Mr. Hingley-Wilson was appointed Chief Accounting Officer, and Senior Vice President of Seadrill Management
AS, in February 2012. Mr. Hingley-Wilson has served as Group Chief Accountant to a group of related
companies since 2010 as an employee of Frontline Corporate Services UK Ltd. Mr. Hingley-Wilson has an extensive background in M&A and complex accounting with both Frontline Ltd and its associated companies
and in PricewaterhouseCoopers in New York City and London, where Mr. Hingley-Wilson worked from 1996 until joining Frontline in 2010. Mr. Hingley-Wilson has a law degree and trained as a Solicitor in the United
Kingdom, and has been a member of the Institute of Chartered Accountants in England and Wales since 1998.
Rune Magnus Lundetræ | Chief Financial Officer and Senior Vice President
Mr. Lundetræ was appointed designated Chief Financial Officer and Senior Vice President of Seadrill Management in February 2012 and sole Chief Financial Officer and Senior Vice President of Seadrill
Management in May 2012. Before his current position Mr. Lundetræ was Finance Director for Seadrill Americas and Commercial Director for Seadrill Europe (now North Atlantic Drilling Limited). He also served as Chief
Financial Officer for Scorpion Offshore Ltd after Seadrill acquired a majority stake in the company in July 2010 and up to delisting the company in November 2010. Prior to joining Seadrill Mr. Lundetræ worked as an auditor
for KPMG and PricewaterhouseCoopers in Stavanger, Norway from 2001 until 2007. Mr. Lundetræ graduated as MSc in Management from the London School of Economics in 2001 and as MSc in Accounting and Auditing from
the Norwegian School of Business Administration (NHH) in 2004. He registered as a Certified Public Accountant
(CPA) in Norway in 2005.
Svend Anton Maier | Senior Vice President, Africa and Middle-East
Mr. Maier has served as Senior Vice President, Africa and Middle-East since January 2011. Mr. Maier joined the Company in February 2007 as Vice President, Deepwater Eastern Hemisphere. Mr. Maier has more than 20
years of experience in the offshore drilling industry. Prior to joining Seadrill, Mr. Maier held several senior positions in Transocean Ltd., including operations manager in Egypt, Equatorial Guinea and Gabon. Mr. Maier
graduated from the Maritime Institute of Tønsberg with a degree in marine engineering.
Alf Ragnar Løvdal | Senior Vice President, Europe
Mr. Løvdal has served as the Senior Vice President, Europe since 2013. Mr. Løvdal previously held the position as Senior Vice President Asia Pacific from January 2011. From April 2009, Mr. Løvdal held the position of
Senior Vice President, Tender Rigs. He was previously Chief Executive Officer in Seawell Management AS. Mr. Løvdal has 30 years of experience in the oil and gas industry, including two years as Chief Executive Officer in
Seawell management AS, 20 years responsibility for the well services business in the drilling contractor Smedvig and five years of offshore field experience with Schlumberger. He has a degree in mechanical
engineering from Horten Engineering Academy in Norway.
Raphael Siri | Senior Vice President Asia Pacific
Mr. Siri was appointed Senior Vice President Asia Pacific in January 2013. Mr. Siri has more than fifteen years of international experience in the drilling industry. He has served as Director of Operations Preparation for the
Asia Pacific region from September 2011 to December 2012. Prior to joining Seadrill, Mr. Siri held several senior positions in Pride International including Senior Manager, Drilling systems, and Operations Manager. He
has a masters degree in Applied Mathematics from the Science University in Nice and an Engineering degree from the Ecole Nationale Supéieure de Techniques Avancèes (ENSTA) in Paris.
43
Iain Hope | Senior Vice President Americas
Mr. Hope joined Seadrill in 2009 and has served as Senior Vice President Americas since January 2011. Mr.
Hope has 20 years of experience in the drilling industry, most recently as director of operations excellence for
Seadrill Americas. Prior to joining Seadrill, Mr. Hope held several senior positions at Transocean including
division manager South America, director of deepwater marketing, operation manager North America and rig manager in Brazil, West Africa and North Sea. He has a bachelor degree in Electrical and Electronic Engineering
from Robert Gordon's, Aberdeen and completed postgraduate studies in Drilling Engineering prior to entering the industry.
Derek Massie | Senior Vice President HR
Mr Massie was appointed Senior Vice President HR in August 2010. Prior to joining Seadrill he worked for
Acergy MS Ltd, initially as HR Director, Asia Middle East Region, and latterly as HR Director, Corporate and
Offshore, based in London. Mr Massie has also held a number of senior HR roles including European HR
Director in Aggreko, and Geo-market HR manager Scandinavia with Schlumberger, based in Stavanger. He
holds a Masters degree in Business Administration from the Aberdeen Business School, and is a Fellow of the
Chartered Institute of People Development. Mr Massie is a UK citizen and resides in Stavanger, Norway.
Eduardo Antonello | Senior Vice President Brazil
Mr Antonello was appointed Senior Vice President of Seadrill Brazil, in May 2012. Mr Antonello has served as
Latin America Area Manager since the establishment of the company in the country in 2008, with extensive
knowledge of the local industry, authorities and regulations. Mr Antonello has previous international
background in business development activities, operations management, well services and drilling engineering,
having worked for Schlumberger in the Middle East, United States, England and most recently as country
manager in Brazil. He has a degree in mechanical engineering from the Mackenzie University of São Paulo. Mr
Antonello holds dual citzenship as Brazilian and Italian, and currently resides in Rio de Janeiro, Brazil.
Georgina Sousa | Company Secretary
Georgina Sousa has served as Company Secretary of the Company since February 2006. She is currently Head
of Corporate Administration for Frontline. Until January 2007, she was Vice-President-Corporate Services of Consolidated Services Limited, a Bermuda Management Company, having joined the firm in 1993 as Manager
of Corporate Administration. From 1976 to 1982 she was employed by the Bermuda law firm of Appleby, Spurling & Kempe as a Company Secretary and from 1982 to 1993 she was employed by the Bermuda law firm
of Cox & Wilkinson as Senior Company Secretary.
6.3 Conflict of interests
Hemen, the Company’s principal shareholder, is controlled by trusts established by John Fredriksen, Seadrill’s President and Chairman, for the benefit of his immediate family. Hemen also has significant shareholdings in
two companies affiliated with Seadrill, Frontline Ltd. (NYSE: FRO) and Ship Finance (NYSE: SFL). In addition, Hemen owns approximately 7.8% of Seadrill’s minority-owned subsidiary Archer Limited (OSE: NO). Seadrill’s
Vice-President and director Mr. Tor Olav Trøim is also a director of Archer Limited and Golar LNG Limited (NASDAQ GS: GLNG), a company affiliated with Seadrill. One of Seadrill’s other directors, Kate Blankenship, is
also a director of Frontline, NADL, Ship Finance, Golar LNG Limited, Seadrill Partners LLP and Archer Limited. Another of Seadrill’s directors, Kathrine Fredriksen, the daughter of Mr. John Fredriksen, is also a director of
Golar LNG Limited. Mr. Fredriksen, Mr. Trøim, Mrs. Blankenship and Ms. Fredriksen owe fiduciary duties to each of Seadrill, Frontline, Ship Finance, Archer Limited, Seadrill Partners LLP and Golar LNG Limited, as applicable,
and may have conflicts of interest in matters involving or affecting Seadrill and Seadrill’s customers. Seadrill’s CEO, Fredrik Halvorsen, is also the CEO of Archer Limited. In addition, they may have conflicts of interest when
faced with decisions that could have different implications for Frontline, Archer Limited, Ship Finance, or Golar LNG than they do for Seadrill. Seadrill cannot assure potential investors that any of these conflicts of interest
will be resolved in Seadrill favor.
To the Company's knowledge, there are currently no other actual or pending conflicts of interest between
Seadrill and members of the Company's senior management or board members.
44
7 MAJOR SHAREHOLDERS
The following table presents certain information as at 16 January 2013, regarding ownership of common shares of the Company with respect to each shareholder whom the Company knows beneficially own more than five
percent of the Company’s outstanding common shares:
Shareholder Number of Shares %
1 Hemen Holding Ltd. 115,097,583 24.53%
The Company’s major shareholders have the same right as other shareholders. No shareholder owns more
than 50% of the Company’s outstanding common shares. The Company is not aware of any arrangements, the operation of which may at a subsequent date result in a change in control of the Company.
45
8 FINANCIAL INFORMATION
8.1 Introduction
The following tables represent Seadrill’s selected Financial Statements for the years ended December 31, 2009,
2010 and 2011 (the “Full-Year Consolidated Financial Statements”) and the Company’s Financial Statements for the three and nine months ended September 30, 2011 and 2012 (the “Interim Consolidated
Financial Statements”).
Significant accounting policies are described in Note 2 to the consolidated financial statements, as included by reference in Section 10.6. The consolidated financial statements have been prepared in accordance with
USGAAP. Please see the annual report for 2011 for the Company’s accounting policies Section 10.6.
The financial statements as of December 31, 2011 and 2010 and for each of the three years in the period
ended December 31, 2011, incorporated into this Prospectus with reference, and the effectiveness of internal control over financial reporting as of December 31, 2011 have been audited by PricewaterhouseCoopers AS, an
independent registered public accounting firm, as stated in the report incorporated hereto with reference in section 10.6. The Interim Consolidated Financial Statements and related notes thereto included in this
Prospectus as Appendix 3 have not been reviewed by the Independent Auditor. This following section is only a summary and investors should read this selected historical consolidated financial data as included by reference
in section 10.6.
46
8.2 Consolidated statements of income
The table below sets out a summary of the audited Full-Year Consolidated Financial Statements of income, and
the unaudited interim Consolidated Financial Statements of income:
Income statement December 31,
December
31
December
31, 2011 2010 2009
USGAAP USGAAP USGAAP (in US$ millions, except per share data) Audited Audited Audited
Operating revenues Contract revenues 4,095 3,823 3,045
Reimbursables 96 192 166 Other revenues 1 26 43
Total operating revenues 4,192 4,041 3,254
Gain on sale of assets 22 26 71
Operating expenses Vessel and rig operating expenses 1,585 1,605 1,253
Reimbursable expenses 90 179 155 Depreciation and amortization 563 480 396
General and administrative expenses 202 178 149 Total operating expenses 2,440 2,442 1,953
Net operating income 1,774 1,625 1,372
Financial items
Interest income 21 42 78 Interest expense (295) (312) (228)
Share in results from associated companies (loss)/gain (420) 48 92 Impairment loss on marketable securities (10) (15) —
(Loss)/gain on derivative financial instruments (346) (92) 130 Gain on re-measurement of previously held equity interest — 111 —
Gain on bargain purchase — 56 — Loss on debt extinguishment — (145) —
Foreign exchange (loss) (18) (26) (25) Gain on loss of control in subsidiary 540 — —
Gain on realization of marketable securities 416 — — Other financial items 9 39 54
Total financial items (103) (294) 101
Income before income taxes 1,671 1,331 1,473
Income taxes (189) (159) (120) Net income 1,482 1,172 1,353
Net income attributable to the non-controlling interest 81 55 92
Net income attributable to the parent 1,401 1,117 1,261
Basic earnings per share (US dollar) 3.05 2.73 3.16 Diluted earnings per share (US dollar) 2.96 2.73 3.00
Declared regular dividend per share (US dollar) 3.06 2.535 1.05 Declared extraordinary dividend per share (US dollar) — 0.20 —
47
Statements of Income
Three months ended
September 30,
Three months ended
September 30,
Nine months ended
September 30,
Nine months ended
September 30,
2012 2011 2012 2011 USGAAP USGAAP USGAAP USGAAP
(in millions of US$, except per share data) Unaudited Unaudited Unaudited Unaudited
Operating revenues
Contract revenues 1,056 1,007 3,168 3,055 Reimbursables 33 24 95 74
Other revenues 2 (2) 1 4
Total operating revenues 1,092 1,029 3,264 3,133
Gain on sale of assets 0 23 0 23
Operating expenses Vessel and rig operating expenses 423 367 1,207 1,178
Reimbursable expenses 30 22 88 69 Depreciation and amortization 161 132 452 423
General and administrative expenses 65 51 166 146
Total operating expenses 679 572 1,913 1,816
Net operating income 413 480 1,351 1,340
Financial items Interest income 5 5 14 17
Interest expenses (102) (64) (249) (221) Share in results from associated companies
(38) 26 (5) 62
Gain/(loss) on derivative financial instruments 20 (330) 15 (379)
Foreign exchange (loss) (43) (4) (51) (32) Gain on loss of control in subsidiary 0 0 0 540
Gain on realization of marketable securities 0 0 85 416
Gain on decline in ownership interest 0 0 169 0 Other financial items 0 (6) 3 (6)
Total financial items (158)
(372)
(20)
397
(Loss)/income before income taxes 255 108 1,331 1,737
Income taxes (39) (50) (124) (148)
Net (loss)/income 216 58 1,207 1,589
Net (loss)/income attributable to the parent 189 35 1,129 1,529
Net income attributable to the non-controlling interest 27 23 78 60
Basic earnings per share (US$) 0.40 0.07 2.41 3.36 Diluted earnings per share (US$) 0.40 0.07 2.36 3.21
Declared regular dividend per share (US$) 0.85 0.76 2.51 2.26
Declared extraordinary dividend per share (US$) 0.85 — 1.00 —
48
8.3 Consolidated balance sheet
The table below sets out a summary of the audited Full-Year Consolidated Financial Statements balance sheets,
and the unaudited Interim Consolidated Financial Statements balance sheets:
Balance sheet
December
31,
December
31
December
31,
September
30, 2011 2010 2009 2012
USGAAP USGAAP USGAAP USGAAP (in millions of US$) Audited Audited Audited Unaudited
ASSETS
Current assets Cash and cash equivalents 483 755 460 518
Restricted cash 232 155 142 151 Marketable securities 24 598 742 246
Accounts receivables, net 720 828 452 835 Amount due from related party 185 140 138 213
Other current assets 323 407 327 335 Total current assets 1,967 2,883 2,261 2,298
Non-current assets Investment in associated companies 721 205 321 658
Newbuildings 2,531 1,247 1,431 1,629 Drilling units 11,223 10,795 7,514 12,956
Goodwill 1,320 1,676 1,596 1,320 Other intangible assets 0 57 24 0
Restricted cash 250 305 371 231 Deferred tax assets 33 30 13 31
Equipment 25 158 115 38 Other non-current assets 234 141 185 318
Total non-current assets 16,337 14,614 11,570 17,181 Total assets 18,304 17,497 13,831 19,479
LIABILITIES AND EQUITY
Current liabilities Current portion of long-term debt 1,419 981 774 1,523
Trade accounts payable 38 95 85 62 Other current liabilities 1,314 1,438 1,175 1,311
Total current liabilities 2,771 2,514 2,034 2,896 Non-current liabilities
Long-term interest bearing debt 8,574 8,176 6,622 9,296 Long-term debt due to related parties 435 435 0 435
Deferred taxes 34 181 125 19 Other non-current liabilities 188 254 238 266
Total non-current liabilities 9,231 9,046 6,984 10,016
Commitments and contingencies - - -
Equity Common shares of par value US$2.00 per share:
800,000,000 shares authorized 469,121,774
outstanding at September, 2012 (December, 31 2011: 467,772,174 December, 31 2010:
443,125,691) 935 886 798 938 Additional paid in capital 2,097 1,217 164 2,194
Contributed surplus 1,956 1,956 1,955 1,956 Accumulated other comprehensive (loss)/ income (5) 323 360 124
Accumulated earnings 994 1,016 902 905 Non-controlling interest 325 539 634 450
Total equity 6,302 5,937 4,813 6,567 Total liabilities and equity 18,304 17,497 13,831 19,479
49
8.4 Consolidated statement of cash flows
The table below sets out a summary of the Full-Year Consolidated Financial Statements cash flow for the years
ended December 31, 2009, 2010, 2011, and the unaudited interim Consolidated Financial Statements cash
flow for the nine months ended September 30, 2011 and 2012:
Cash flow statement Year Year Year
2011 2010 2009
USGAAP USGAAP USGAAP
(in million of US$) Audited Audited Audited
Cash Flows from Operating Activities
Net income 1,482 1,172 1,353 Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization 563 480 396
Amortization of deferred loan charges 31 43 23
Amortization of unfavorable contracts (24) (39) (43)
Amortization of favorable contracts 23 13 -
Amortization of mobilization revenue (96) (86) (50)
Impairment loss on marketable securities 10 15 -
Share of results from associated companies loss/ (gain) 420 (48) (92)
Share-based compensation expense 10 11 16
Gain on disposal of fixed assets (22) (26) (71)
Unrealized (gain)/loss related to derivative financial instruments 261 97 (153)
Non cash gain recognized related to realization of marketable securities (416) (43) (16)
Non cash gain recognized related to loss of control (540) - -
Dividend received from associated company 57 61 41
Deferred income tax expense (9) 110 2 Unrealized foreign exchange loss/ (gain) on long term interest bearing
debt (5) (4) 28
Non-cash loss recognized on extinguishment of convertible debt - 48 -
Non-cash gains recognized on acquisition of subsidiaries - (167) - Changes in operating assets and liabilities, net of effect of
acquisitions
Unrecognized mobilization fees received from customers 58 109 166
Trade accounts receivable (52) (163) (111)
Trade accounts payable (35) (15) (35)
Prepaid expenses/accrued revenue 79 (107) (71)
Other, net 21 (161) 69
Net cash provided by operating activities 1,816 1,300 1,452
Cash Flows from Investing Activities
Additions to newbuilding (2,381) (2,006) (1,153)
Additions to rigs and equipment (162) (362) (216)
Sale of rigs and equipment 245 55 393
Investment in subsidiaries, net of cash acquired (26) (152) -
Cash deconsolidated upon loss of control in subsidiary (127) - -
Change in margin calls and other restricted cash (43) 51 344
Investment in associated companies (287 (13) (33)
Proceed from repayment of short term loan to related parties - 90 115
Short-term loan granted to related parties - (160) (170)
Purchase of marketable securities (13) (15) (263)
Proceeds from realization of marketable securities 161 215 59
Net cash used in investing activities (2,633) (2,297 (924)
Cash Flows from Financing Activities
Proceeds from debt 5,929 3,902 2,407
Repayments of debt (4,116) (1,870) (2,491)
Debt fees paid (49) (33) (43)
Change in current liability related to share forward contracts - (12) (68)
Paid to non-controlling interests (95) (292) (68)
50
Contribution from non-controlling interests 418 289 -
Purchase of treasury shares (130) (42) -
Proceeds from sale of treasury shares 21 23 9
Dividends paid (1,440) (990) (199)
Proceeds from issuance of equity - 318 -
Net cash provided by/(used in) financing activities 538 1,293 (453)
Effect of exchange rate changes on cash and cash equivalents 7 (1) 9
Net (decrease)/ increase in cash and cash equivalents (272) 295 84
Cash and cash equivalents at beginning of the period 755 460 376
Cash and cash equivalents at the end of period 483 755 460
Supplementary disclosure of cash flow information
Interest paid 282 284 231
Taxes paid 188 134 138
Nine Month
Period Ended September 30
Nine Month
Period Ended June 30,
(in US$ millions) 2012 2011 Unaudited Unaudited
Cash Flows from Operating Activities
Net income/(loss) 1,207 1,589 Adjustments to reconcile net income to net cash provided by operating
activities: Depreciation and amortization 452 423
Amortization of deferred loan charges 22 25 Amortization of unfavorable contracts 0 (21)
Amortization of favorable contracts 9 18 Amortization of mobilization revenue (115) (68)
Share of results from associated companies 5 (62) Share-based compensation expense 4 8
Unrealized (gain)/loss related to derivative financial instruments 8 310 Dividend received from associated company 17 38
Deferred income tax expense 0 55 Unrealized foreign exchange loss (gain) on long term interest bearing debt 4 2
Gain on disposal of fixed assets 0 (23) Gain on disposal of other investments (86) 0
Non cash gain recognized related to realization of marketable securities 0 (416) Non cash gain recognized related to loss of control in subsidiary 0 (540)
Gain on decline in ownership interest (169) 0 Changes in operating assets and liabilities, net of effect of acquisitions
Unrecognized mobilization fees received from customers 203 37 Trade accounts receivable (115) (16)
Trade accounts payable 24 (39) Prepaid expenses/accrued revenue (9) 104
Other, net (112) (35)
Net cash provided by operating activities 1,349 1,389
51
Nine Month
Period Ended
September 30
Nine Month
Period Ended
September 30,
(in US$ millions) 2012 2011 Unaudited Unaudited
Cash Flows from Investing Activities Additions to newbuildings (1,091) (1,843)
Additions to rigs and equipment (243) (133) Sale of rigs and equipment 0 245
Settlement of disputes with ship yard 38 0 Change in margin calls and other restricted cash 116 (68)
Purchase of marketable securities (19) 0 Investment in subsidiaries, net of cash acquired 0 (26)
Cash deconsolidated upon loss of control in subsidiary 0 (127)
Investment in associated companies (74) 0 (221) Disposal of associated companies 65 0
Long term loan granted to related parties (20) 0 Repayment of loan granted to related parties 20 0
Proceeds from realization of marketable securities 219 141
Net cash used in investing activities (989) (2,032)
Cash Flows from Financing Activities
Proceeds from debt 3,160 4,946 Repayments of debt (2,365) (3,716)
Debt fees paid (29) (34) Proceeds from debt to related party 487 0
Repayments of debt to related party (487) 0 Contribution (to)/from non-controlling interests (36) (71)
Contribution from non-controlling interests related to private placement 147 418 Purchase of treasury shares 0 (130)
Proceeds from sale of treasury shares 15 12 Dividends paid (1,217) (1,080)
Net cash used by financing activities (325) 345
Effect of exchange rate changes on cash and cash equivalents 0 7
Net increase/(decrease) in cash and cash equivalents 35 (291) Cash and cash equivalents at beginning of the year 483 755
Cash and cash equivalents at the end of period 518 464
Supplementary disclosure of cash flow information
Interest paid, net of capitalized interest (245) (202) Taxes paid (127) (97)
52
8.5 Consolidated statement of invested equity
The table below sets out a summary of the Full-Year Consolidated Financial Statements of equity for the years
ended December 31, 2009, 2010, and 2011, and the audited interim Financial Statements of equity for the
nine months ended September 30, 2012:
(in US$ millions)
Share Capital
Additional
Paid-in Capital
Contributed
Surplus
Accumulated
Other Comprehens
ive Income
Retained
Earnings
Non-controlli
ng Interest
Total
Equity
Balance at December 31, 2008 797 35 1,956 1 (160) 593 3,222
Sale of treasury shares 1 8 9 Employee stock options issued 16 16
Convertible loan-equity portion 105 105 Unrealized gain on marketable
securities 317 317 Foreign exchange differences 29 1 30
Changes in actuarial gain relating to pension 12 1 13
Change in unrealized gain on interest rate swaps in VIEs 15 15 Net paid to non-controlling interest (68) (68)
Dividend paid (199) (199) Net income 1,261 92 1,353
Balance at December 31, 2009 798 164 1,956 359 902 634 4,813 Sale of treasury shares 3 20 23
Purchase of treasury shares (4) (38) (42) Issuance of shares 27 292 289 608
Induced conversion of convertible bonds
62 647 709
Employee stock options issued 11 11
Convertible loan-equity portion 121 121 Unrealized gain on marketable
securities 18 18 Realized gain/loss on marketable
securities (43) (43) Foreign exchange differences 16 11 27
Changes in actuarial gain/losses relating to pension (26) (6) (32) Change in unrealized gain/loss on
interest rate swaps in VIEs (11) (11) Change in unrealized gain/loss on
interest rate swaps in subsidiaries (1) (1) (2) Step-up acquisition of Scorpion (13) 13 0
Contribution by non-controlling interest 282 282
Paid to non-controlling interest in Scorpion (292) (292) Dividend paid to non-controlling
interest in VIE (435) (435) Dividend paid (990) (990)
Net income 1,117 55 1,172 Balance at December 31, 2010 886 1,217 1,956 323 1,016 539 5,937
Sale of treasury shares 1 20 21 Purchase of treasury shares (5) (120) (5) (130)
Employee stock options issued 10 10 Change in actuarial gain/losses relating to pension (3) (3)
Private placement in subsidiary 307 118 425 Costs related to capital increase in
subsidiary (7) (7) (Un)realized gain/loss on
marketable securities (291) (291) Foreign exchange differences 28 10 38
Change in unrealized loss on interest rate swaps in VIEs 20 20
Change in unrealized loss on interest rate swaps in subsidiaries 1 1 Dividend payment
(1,423
) (17)
(1,44
0) Dividend paid to Non-controlling
interest in VIE (23) (23) Shares purchased from non
controlling interests (4) (68) (72) Deconsolidation of subsidiaries (63) (330) (393)
Induced conversion of convertible 53 674 727
53
(in US$ millions)
Share Capital
Additional
Paid-in Capital
Contributed
Surplus
Accumulated
Other Comprehens
ive Income
Retained
Earnings
Non-controlli
ng Interest
Total
Equity
bonds
Net income 1,401 81 1,482 Balance at December 31, 2011 935 2,097 1,956 (5) 994 325 6,302
(in US$ millions)
Share Capit
al
Additiona
l Paid-in
Capital
Contribute
d Surpl
us
Accu
mulated
OCI
Retaine
d Earning
s
NCI
Total
Equity
Balance at December 31, 2011 935 2,097 1,956 (5) 994 325 6,302
Sale of treasury shares 3 12 15 Purchase of treasury shares 0
Employee stock options issued 4 4 Private placement in subsidiary 84 66 150
Costs related to capital increase in subsidiary (3) (3)
Other comprehensive income 129 17 146 Dividend payment (1,217) (36) (1,253)
Dividend paid to Non-controlling interests in VIE 0
Shares purchased from non controlling interests 0
Deconsolidation of subsidiaries 0
Induced conversion of convertible bonds 0
Net income 1,129 78 1,207
Balance at September 30, 2012
938 2,194 1,956 124 905 450 6,567
8.6 Legal and arbitration proceedings
The Company is not involved in any governmental, legal or arbitration proceedings which may have, or have
had in the recent past, significant adverse effects on the Company and/or the Seadrill group’s financial position
or profitability. The Issuer is not aware that any such proceedings are pending or threatened, nor has the
Issuer been involved in any such proceeding during the last 12 months.
8.7 Significant change in the Company’s financial or trading position
Seadrill is not aware of any significant change in the financial or trading position of the Seadrill Group which has occurred since the end of the last financial period for which either audited financial information or interim
financial information have been published or any trends, uncertainties, demands, commitments or events that are reasonably likely to have a material effect on Seadrill’s prospects for the current financial other than the
changes described below. In the period after the balance sheet date of September 30, 2012, Seadrill has completed the following transactions.
• On October 3, 2012, the Company announced plans to implement a new management structure, by
moving its corporate headquarters and naming a new CEO. Fredrik Halvorsen, the CEO of Archer
Limited, was appointed by the Board to succeed Alf C. Thorkildsen.
• On October 19, 2012, the Company announced Seadrill Partners LLC had priced its initial public
offering. Seadrill owns 14,752,525 common units and all of the subordinated units, representing
a 75.7% limited liability company interest in Seadrill Partners.
• On October 26, 2012, Seadrill announced that after close of trading on Oslo Børs on 25 October
2012 it acquired 12,190,858 shares of Asia Offshore Drilling Limited (the "Company", OSE:
AOD). The shares were acquired at a price of US$5.0 per share. Following this acquisition,
54
Seadrill will be the owner of 25,690,958 shares in the Company, corresponding to 64.23% of
the total number of outstanding shares in the Company. As a consequence, Seadrill will proceed
with the launch of a mandatory cash offer for the remaining shares in the Company. In the
period from October 26, 2012 to November 28, 2012, Seadrill has acquired an additional
688,572 shares of Asia Offshore Drilling. Following these transactions Seadrill is the owner of
26,379,530 shares in Asia Offshore Drilling, corresponding to 65.95 of the total number of
outstanding shares in the Company. On December 11, 2012, Seadrill announced that the result
of the mandatory offer of all outstanding shares in Asia Offshore Drilling was acceptance for a
total of 83,520 shares. This will, together with the shares already owned by Seadrill, take
Seadrill’s holding of Asia Offshore Drilling shares to 26,463,050, representing approximately
66.16% of all of the issued shares in the Company.
• On November 5, 2012, the Company announced that SapuraKencana Petroleum Berhad
("SapuraKencana") and Seadrill Limited ("Seadrill") have entered into a non-binding
memorandum of understanding ("MOU") to combine and integrate both companies' tender rig
businesses. The enlarged tender rig business under SapuraKencana will comprise, 16 tender rigs
in operation and an additional 3 units currently under construction, which are expected to be
delivered in 2013. SapuraKencana will take over the rigs including the full tender rig
organization for an enterprise value of US$ 2.9 billion. The total enterprise value includes US$
363 million in remaining capital expenditures linked to the newbuilds program and all the debt
in the tender rig business including existing bank facilities that are expected to be
approximately US$ 800 million as of December 31st 2012. Seadrill will, to support this position,
receive a minimum of US$ 350 million in new shares of SapuraKencana. This comes in addition
to the 6.4% stake that Seadrill presently owns in SapuraKencana. Seadrill will further have the
right to nominate two members to the SapuraKencana board of directors (including one
alternate). Seadrill's chairman John Fredriksen is expected to be one of those members. The
remaining consideration will be funded by SapuraKencana through a mix of external borrowings,
a seller's note of up to US$ 187 million, internally generated funds and equity.
• On November 16, 2012, the Company announced that a subsidiary of Seadrill had entered into
an agreement with Songa Offshore to acquire the ultra-deepwater semi-submersible rig Songa
Ecplipse for a consideration of $590 million. The rig was delivered from the Jurong Shipyard in
Singapore in 2011, and is currently operating for Total offshore Angola on a fixed contract
ending in December 2013. In addition Total has three one-year options to further extend the
contract. Seadrill took delivery of the rig January 3, 2013 after which it will have an immediate
impact on Seadrill’s cash flow and financial results.
• On December 12, 2012, the Company announced that North Atlantic Drilling Ltd. (NADL), a
majority owned subsidiary of Seadrill Limited, filed its registration statements with the US
Securities and Exchange Commission (SEC) on Tuesday, December 11, 2012. The initial public
offering of NADL's common shares is expected to commence after the SEC completes its review
process.
Other than this, there has been no significant change in the financial or trading position of Seadrill that has
occurred since September 30, 2012.
9 TREND INFORMATION
9.1 Material factors affecting Seadrill’s prospects
Business environment
The offshore contract drilling industry is cyclical and volatile. The business in the offshore drilling sector
depends on the level of activity in oil and gas exploration, development and production in offshore areas worldwide. The availability of quality drilling prospects, exploration success, relative production costs, the stage
of reservoir development and political and regulatory environments affect customers’ drilling programs. Oil and gas prices and market expectations of potential changes in these prices also significantly affect this level of
activity and demand for drilling units.
Oil and gas prices are extremely volatile and are affected by numerous factors beyond Seadrill’s control,
including the following:
worldwide production and demand for oil and gas;
the cost of exploring for, developing, producing and delivering oil and gas;
55
expectations regarding future energy prices;
advances in exploration, development and production technology;
the ability of the Organization of Petroleum Exporting Countries (“OPEC”), to set and maintain levels and pricing;
the level of production in non-OPEC countries;
government regulations;
local and international political, economic and weather conditions;
domestic and foreign tax policies;
development and exploitation of alternative fuels;
the policies of various governments regarding exploration and development of their oil and gas
reserves; and
the worldwide political and military environment, including uncertainty or instability resulting from an
escalation or additional outbreak of armed hostilities or other crises in the Middle East or other geographic areas or further acts of terrorism in the United States, or elsewhere.
Utilization of personnel and equipment
The majority of The Company’s contracts for the provision of drilling services are daily rate contracts, of which
the revenues depend on the utilization rate of The Company’s drilling units. The utilization rate is dependent on the type of operations the drilling units perform. If a drilling unit is not performing according to the contract it
does not earn a daily rate. The majority of The Company’s contracts have daily rates that are fixed over the contract term, most of Seadrill’s long-term contracts include escalation provisions. These provisions allow
Seadrill to adjust the daily rates based on stipulated cost increases including wages, insurance and maintenance cost. However, because these escalations are normally performed on a semi-annual or annual
basis, the timing and amount awarded as a result of such adjustments may differ from Seadrill’s actual cost increases, which could adversely affect Seadrill’s financial performance. Shorter-term contracts normally do not
contain escalation provisions.
Political, economical and other uncertainties
The Company's operations are subject to political, economic and other uncertainties. The Company’s foreign operations are often subject to uncertainties of such nature that are not encountered in domestic operations,
such as arbitrary taxation policies, onerous customs restrictions, unstable currencies, exchange rate fluctuations and the risk of asset expropriation due to foreign sovereignty over operating areas. Many aspects
of The Company’s operations are subject to governmental regulation in the areas of equipping and operating
vessels, drilling practices and methods, and taxation. In addition many of the countries in which The Company operate have regulations relating to environmental protection and pollution control. The Company could
become liable for damages resulting from pollution of offshore waters and may have to document financial responsibility in this regard.
The Company considers itself to be in compliance in all material respects with the health, safety and environmental regulations affecting its operations in the countries and jurisdictions in which The Company
operates.
Regulatory compliance has not materially affected capital expenditures, earnings or competitive position to
date, although such measures do increase costs of operations and may adversely affect operations. Further regulations may reasonably be anticipated, but any effects on The Company’s operations cannot be accurately
predicted.
In addition to the domestic and foreign regulations that directly affect The Company’s operations, regulations
associated with the production and transportation of oil and gas affect the operations of the Company’s customers and thereby could potentially impact demand for The Company’s services.
Other than this, there has been no material adverse change in the prospects of Seadrill since the date of the last published audited financial statements, December 31, 2011.
56
9.2 Material contracts
The Company has not entered into any material contracts outside the ordinary course of its business.
57
10 ADDITIONAL INFORMATION
10.1 Third party information
The information in this Prospectus that has been sourced from third parties has been accurately reproduced and, as far as the Company is aware and able to ascertain from information published by those third parties,
no facts have been omitted which would render the reproduced information inaccurate or misleading.
10.2 Documents on Display
Copies of the following documents will be available for inspection at Seadrill’s registered office during normal
business hours from Monday to Friday each week (except public holidays) for a period of 12 months from the date of this Prospectus:
a) articles of incorporation and articles of association of the Issuer;
b) By-laws;
c) all reports, letters, and other documents, historical financial information, valuations and statements prepared by any expert at the Company’s request any part of which is included or referred to in the
Prospectus;
d) the historical financial information of the Company and its subsidiary for each of the two financial
years preceding the publication of the Prospectus.
10.3 Statutory auditors
PricewaterhouseCoopers AS has been the Company’s auditor since the Company’s incorporation and up to the date of this prospectus. PricewaterhouseCoopers AS is a member of The Norwegian Institute of Public
Accountants (Den Norske Revisor Forening). The auditor’s address is Dronning Eufemiasgate 8, 0106 Oslo, Norway.
10.4 Advisors
The following Managers have acted as financial advisors to the Company in connection with the Bond Issue.
Nordea Markets, Middelthunsgate 17, P.O. Box 1166 Sentrum, N-0107 Oslo, Norway
Pareto Securities, Dronning Mauds gate 3, P.O. Box 1411 Vika, N-0115 Oslo, Norway
RS Platou Markets AS, P.O. Box 1476 Vika, N-0116 Oslo, Norway
Swedbank First Securities, P.O. Box -1441 Vika, N-0250 Oslo, Norway
Advokatfirmaet Wiersholm AS has acted as legal advisor to the Company with respect to Norwegian law.
10.5 Expenses
The Company estimates the expenses associated with the listing of the Bonds to be approximately NOK 9.5
million. In addition costs related to fees to Oslo Børs and the FSA were borne by the Company.
10.6 Documents incorporated by references
The below listed documents are incorporated by reference and are available at the Company’s website, www.seadrill.com:
Reference: Chapter in
prospectus:
Incorporated by
reference:
website:
Annual report for 2010 Section 8 and 8.1 Annual Report 2010 http://www.seadrill.com/investor_relations/financial_reports
Annual report for 2011 Section 8 and 8.1 Annual Report 2011 http://www.seadrill.com/investor_relations/financial_reports
58
Q3 report 2012 Section 8 and 8.1 Third quarter report for 2012
http://www.seadrill.com/investor_relations/financial_reports
59
11 DEFINITIONS AND GLOSSARY OF TERMS
Board of Directors or Board: ............................ The Board of Directors of the Seadrill Limited
Bondholders: ................................................. Any holders of Bonds from time to time
Bond Issue: ................................................... FRN Seadrill Limited Senior Unsecured Bond Issue 2010/
2015
Bonds: ......................................................... The total amount of outstanding bonds issued pursuant to
the Bond Agreement.
Company: .................................................... Seadrill Limited
EFSF: ........................................................... The European Financial Stability Facility
EFSM: .......................................................... The European Financial Stability Mechanism
ESM: ........................................................... The European Stability Mechanism as established by the European Council in March 2011
FSA: ............................................................ The Financial Supervisory Authority of Norway.
Full-Year Consolidated Financial Statements: .... Seadrill’s selected Financial Statements for the years
ended December 31, 2009, 2010 and 2011
Independent Auditor: ..................................... PricewaterhouseCoopers AS
Interim Consolidated Financial Statements: ...... the Company’s Financial Statements for the three months ended June 30, 2011 and 2012
Managers: .................................................... Nordea Markets, Pareto Securities AS, RS Platou Markets
AS and Swedbank First Securities
NOK: ........................................................... Norwegian Kroner, the legal currency of the Kingdom of
Norway
Oslo Børs: .................................................... Oslo Børs ASA
Prospectus: .................................................. This prospectus dated 16 January 2013.
Seadrill: ....................................................... Seadrill Limited and its consolidated subsidiaries
Trustee: ....................................................... Norsk Tillitsmann ASA
USD: ........................................................... United States Dollars, the legal currency of the United
States of America
US Securities Act: ......................................... the United States Securities Act of 1933, as amended
VPS: ............................................................ Verdipapirsentralen (the Norwegian Central Securities Depository)
Q3: .............................................................. Third quarter
A 1
60
Appendix 1: Bond Agreement
A 2
A 3
A 4
A 5
A 6
A 7
A 8
A 9
A 10
A 11
A 12
A 13
A 14
A 15
A 16
61
Appendix 2: By-laws
A 17
A 18
A 19
A 20
A 21
A 22
A 23
A 24
A 25
A 26
A 27
A 28
A 29
A 30
A 31
A 32
A 33
A 34
A 35
A 36
A 37
A 38
A 39
62
Appendix 3: Third Quarter report for 2012
P
ag
e 2
associa
ted c
om
panie
s i
s a
US
$53 m
illio
n l
oss f
rom
our
39.9
perc
ent
eq
uity
associa
te,
Arc
her
Lim
ited.
Incom
e t
axe
s f
or
the t
hird q
uart
er
were
US
$39 m
illio
n,
dow
n f
rom
US
$43 m
illio
n i
n t
he
pre
vious q
uart
er.
N
et
incom
e f
or
the q
uart
er
was U
S$216 m
illio
n r
epre
senting
basic
earn
ing
s p
er
share
of
US
$0.4
0.
The
Com
pany
report
s
opera
ting
re
venues
of
US
$3,2
64
mill
ion,
opera
ting
in
com
e
of
US
$1,3
51 m
illio
n a
nd a
net
incom
e o
f U
S$1,2
07 f
or
the n
ine m
onth
s e
nded S
epte
mber
30,
2012.
This
com
pare
s t
o o
pera
ting
reve
nues o
f U
S$3,1
33 m
illio
n,
opera
ting
incom
e o
f U
S$1,3
40 m
illio
n a
nd a
net
incom
e o
f U
S$1,5
89 f
or
the n
ine m
onth
s e
nded S
epte
mber
30,
2011.
Bala
nce s
heet
As o
f S
epte
mber
30,
2012,
tota
l assets
am
ounte
d t
o U
S$19,4
79 m
illio
n,
an i
ncre
ase o
f U
S$545 m
illio
n c
om
pare
d t
o J
une 3
0,
2012.
Tota
l curr
ent
ass
ets
incre
ased f
rom
US
$1,9
72 m
illio
n t
o U
S$2,2
98 m
illio
n o
ver
the c
ours
e
of
the q
uart
er
prim
arily
rela
ted t
o a
n incr
ease in c
ash a
nd c
ash e
quiv
ale
nts
.
Tota
l non-c
urr
ent
ass
ets
incre
ased f
rom
US
$16,9
62 m
illio
n t
o U
S$17,1
81 m
illio
n m
ain
ly
due t
o p
aym
ents
for
the f
irst
inst
allm
ent
for
West
Carina a
nd t
he s
econd i
nsta
llment
for
West
Satu
rn.
Tota
l curr
ent
liabili
ties incre
ased f
rom
US
$2,7
88 m
illio
n t
o U
S$2,8
96 m
illio
n larg
ely
due t
o
an incre
ase in c
urr
ent port
ion o
f lo
ng
-term
debt.
Long-t
erm
inte
rest
bearing
debt
incre
ased f
rom
US
$8,3
76 m
illio
n t
o U
S$
9,2
96 m
illio
n o
ver
the c
ours
e o
f th
e q
uart
er
and n
et
inte
rest
bearing
debt
incre
ased f
rom
$10,0
10 m
illio
n t
o
US
$10,3
54 m
illio
n.
T
ota
l eq
uity
decre
ased f
rom
US
$6,7
15 m
illio
n t
o U
S$6,5
67 m
illio
n a
s o
f S
epte
mber
30,
2012. T
he d
ecre
ase is m
ain
ly d
ue t
o n
et in
com
e o
ffset
by
paid
div
idends.
C
ash f
low
A
s o
f S
epte
mber
30, 2012,
cash a
nd c
ash e
quiv
ale
nts
am
ounte
d to U
S$518 m
illio
n,
whic
h
corr
esponds to a
n incre
ase o
f U
S$242 m
illio
n c
om
pare
d t
o t
he p
revi
ous q
uart
er.
Net cash
from
opera
ting
activi
ties for
the p
eriod w
as U
S$1,3
49 m
illio
n w
here
as n
et cash u
sed in
inve
sting
activi
ties f
or
the s
am
e p
eriod a
mounte
d t
o U
S$989 m
illio
n,
prim
arily
rela
ted t
o
additio
ns t
o n
ew
build
ing
s.
Net
cash u
sed f
or
financi
ng
activi
ties w
as U
S$325 m
illio
n
main
ly d
ue t
o d
ivid
end p
aym
ents
and n
et pro
ceeds fro
m d
ebt.
Outs
tandin
g s
hare
s
As
of
Septe
mber
30,
2012,
the
issued
com
mon
share
s
in
Seadrill
Lim
ited
tota
led
469,1
21,7
74 a
dju
sted for
our
hold
ing o
f 129,1
59 tre
asury
share
s. In
additio
n,
we h
ad s
tock
options fo
r 3.9
m
illio
n share
s outs
tandin
g under
various share
in
centive
pro
gra
ms fo
r m
anag
em
ent, o
ut
of
whic
h a
ppro
xim
ate
ly 2
.0 m
illio
n h
ad v
este
d a
nd a
re e
xerc
isable
.
Se
ad
rill P
art
ne
rs L
LC
(S
DL
P)
On O
ctober
19 S
DLP
sta
rted t
radin
g o
n t
he N
YS
E f
ollo
win
g a
successfu
l IP
O a
t unit p
rice
of
US
$22.0
. T
he lis
ting
of
SD
LP
is a
landm
ark
tra
nsaction f
or
the o
ffshore
drilli
ng
industr
y as i
t is
the f
irst
offshore
drilli
ng
MLP
in h
isto
ry.
SD
LP
rais
ed t
hro
ug
h t
he o
ffering U
S$207
mill
ion n
et
of
transact
ion f
ees.
Seadrill
receiv
ed t
he f
unds r
ais
ed i
n t
he o
ffering
and 7
5.7
perc
ent
ow
ners
hip
in S
DLP
in r
etu
rn f
or
selli
ng o
wners
hip
sta
kes i
n f
our
off
shore
drilli
ng
units.
SD
LP
ow
ns a
n a
vera
ge o
f appro
xim
ate
ly 3
0 p
erc
ent
in t
he u
ltra
-deepw
ate
r sem
i-
Pag
e 1
Sead
rill
L
imit
ed
(S
DR
L)
- T
hir
d q
uart
er
an
d n
ine
mo
nth
s 2
012 r
esu
lts
Hig
hli
gh
ts
•
Seadrill
genera
tes
third q
uart
er
2012 E
BIT
DA
*) of U
S$574 m
illio
n
•
Seadrill
report
s t
hird q
uart
er
2012 n
et
incom
e o
f U
S$216 m
illio
n a
nd
earn
ing
s p
er
share
of
US
$0.4
0
•
Seadrill
dis
trib
ute
s a
n i
ncre
ased t
hird q
uart
er
reg
ula
r cash d
ivid
end o
f U
S$0.8
5 p
er
share
and a
lso r
esolv
es t
o d
istr
ibute
an a
ccele
rate
d d
ivid
end o
f U
S$0.8
5 p
er
share
for
the fourt
h q
uart
er
2012,
in D
ecem
ber
2012
•
Seadrill
ord
ere
d a
new
ultra
-deepw
ate
r drills
hip
for
an a
ll-in
cost of
US
$600 m
illio
n
•
Seadrill
issued U
S$1 b
illio
n in u
nsecure
d n
ote
s d
ue 2
017
Su
bs
eq
ue
nt
eve
nts
•
Seadrill
announces t
he p
ote
ntial
sale
of
18 t
ender
rig
s t
o S
apura
Kencana P
etr
ole
um
B
hd. fo
r a tota
l consid
era
tion o
f U
S$2.9
bill
ion
•
Seadrill
Part
ners
LLC
lis
ts its
com
mon u
nits o
n the N
YS
E r
ais
ing U
S$207 m
illio
n
•
Alf C
.Thork
ildsen re
sig
ns as C
EO
of
Seadrill
Manag
em
ent
AS
, F
redrik H
alv
ors
en
appoin
ted a
s th
e n
ew
CE
O
•
Seadrill
secure
s a
fiv
e-y
ear
com
mitm
ent
with H
usky
for
the n
ew
build
ultra
-deepw
ate
r sem
i-subm
ers
ible
rig
West
Mira f
or
opera
tions o
ffshore
Canada,
with a
n e
stim
ate
d
tota
l reve
nue p
ote
ntial of
US
$1.2
bill
ion
•
Seadrill
secure
s c
ontr
act
s w
ith a
n e
stim
ate
d r
eve
nue p
ote
ntial
of
US
$820 m
illio
n f
or
seve
n jack
-up r
igs,
of
whic
h f
ive a
re n
ew
build
s
•
Seadrill
incre
ases its
ow
ners
hip
sta
ke in A
sia
Off
shore
Drilli
ng
to 6
5.9
4%
and s
ubm
its
mandato
ry o
ffer
for
the r
em
ain
ing s
hare
s
•
Seadrill`
s
majo
rity
ow
ned
subsid
iary
, N
ort
h
Atla
ntic
Drilli
ng
Ltd
. subm
its
its
initia
l re
gis
tration s
tate
ment to
the S
EC
•
A
subsid
iary
of
Seadrill
sig
ns
a
Lett
er
of
Ag
reem
ent
(LO
A)
to
acq
uire
the
ultra
-deepw
ate
r sem
i-subm
ers
ible
rig
Song
a E
clip
se for
US
$590 m
illio
n
*) E
BIT
DA
is
defined a
s e
arn
ings
befo
re i
nte
rest
, depre
cia
tion a
nd a
mort
ization e
qual
to o
pera
ting p
rofit
plu
s d
epre
cia
tion
and a
mort
ization.
C
on
de
ns
ed
co
ns
olid
ate
d i
nc
om
e s
tate
men
ts
Third q
uart
er
and n
ine m
onth
s 2
012 r
esults
Consolid
ate
d
reve
nues
for
the
third
quart
er
of
2012
am
ounte
d
to
US
$1,0
92
mill
ion
com
pare
d t
o U
S$1,1
22 m
illio
n in t
he s
econd q
uart
er
2012.
O
pera
ting
pro
fit
for
the q
uart
er
was U
S$413 m
illio
n c
om
pare
d t
o U
S$4
83 m
illio
n i
n t
he
pre
cedin
g q
uart
er.
N
et
financia
l item
s f
or
the q
uart
er
show
ed a
loss o
f U
S$158 m
illio
n c
om
pare
d t
o a
gain
of
US
$114 m
illio
n i
n t
he p
revi
ous q
uart
er,
due l
arg
ely
to r
ecord
ing
an a
ccounting g
ain
of
US
$253 m
illio
n r
ela
ted t
o t
he m
erg
er
of
Sapura
Cre
st
Petr
ole
um
Bhd (
Sapura
Cre
st)
and
Kencana
Petr
ole
um
B
hd
(Kencana)
in
second
quart
er
2012,
as
well
as
gain
s
on
deriva
tive
s a
nd f
ore
ign e
xchang
e l
osses i
n t
he c
urr
ent
quart
er.
Inclu
ded i
n r
esults f
rom
A 40
P
ag
e 4
main
reason b
ehin
d t
he d
ecre
ase i
n u
tiliz
ation w
as d
ue
to i
tem
s r
eport
ed i
n o
ur
second
quart
er
report
, th
e 9
0 d
ays
do
wntim
e o
n t
hre
e u
ltra-d
eepw
ate
r rig
s a
nd r
ig m
ove
s f
or
West
A
quarius a
nd W
est
Herc
ule
s.
Exc
ludin
g r
ig m
ove
s o
ur
econom
ic u
tiliz
atio
n w
as 8
8 p
erc
ent
for
the q
uart
er.
O
ur
jack
-up rig
s ave
rag
ed an econom
ic utiliz
ation of
83 perc
ent
in th
e th
ird q
uart
er
com
pare
d t
o 7
9 p
erc
ent
in t
he p
recedin
g q
uart
er.
Econom
ic u
tiliz
ation f
or
the q
uart
er
was
ham
pere
d b
y rig
move
s t
akin
g l
ong
er
than a
nticip
ate
d a
nd t
he W
est
Vig
ilant
not
start
ing
opera
tion befo
re to
ward
s th
e end of
the q
uart
er.
E
xclu
din
g rig
m
ove
s our
econom
ic
utiliz
ation w
as 9
4 p
erc
ent fo
r th
e q
uart
er.
T
he t
ender
rigs a
vera
ge e
conom
ic u
tiliz
ation
rem
ain
ed h
igh a
t 98 p
erc
ent
in t
he q
uart
er,
com
pare
d t
o 9
7 p
erc
ent
in t
he s
econd q
uart
er.
T
ab
le 1
.0 C
on
tract sta
tus o
ffsho
re d
rilli
ng
un
its
Un
it
Cu
rre
nt
cli
en
t A
rea
of
loc
ati
on
C
on
tra
ct
sta
rt
Co
ntr
ac
t e
xp
iry
S
em
i-s
ub
me
rsib
le r
igs
West
Alp
ha *
* E
xxo
nM
ob
il N
orw
ay
Au
g 2
01
2
Ju
l 20
16
West
Aq
ua
riu
s
Exx
on
Mo
bil
In t
ransit
to C
an
ad
a
Ja
n 2
01
3
Ju
n 2
01
5
West
Cap
rico
rn
BP
U
SA
Ju
l 20
12
A
ug
201
7
West
Em
ine
nce
P
etr
ob
ras
Bra
zil
Ju
l 20
09
Ju
l 20
15
West
He
rcule
s
Sta
toil
In t
ransit
to N
orw
ay
Ja
n 2
01
3
De
c 2
01
6
West
Le
o
Tu
llow
Oil
Gh
an
a
Ap
r 2
012
M
ay
20
16
West
Mir
a (
NB
*)
Hu
sky
So
uth
Ko
rea
– H
yun
da
i Sh
ipya
rd
Ju
n 2
01
5
Ju
n 2
02
0
West
Orio
n
Pe
tro
bra
s
Bra
zil
Ju
l 20
10
Ju
l 20
16
West
Pe
gasu
s
PE
ME
X
Me
xico
A
ug
201
1
Au
g 2
01
6
West
Ph
oe
nix
**
To
tal
UK
Ja
n 2
01
2
Ja
n 2
01
5
West
Rig
el (
NB
*)**
Sin
ga
po
re –
Ju
ron
g S
hip
yard
West
Sir
ius
BP
U
SA
Ju
l 20
08
Ju
l 20
19
West
Ta
uru
s
Pe
tro
bra
s
Bra
zil
Fe
b 2
00
9
Fe
b 2
01
5
West
Ve
ntu
re *
* S
tato
il N
orw
ay
Au
g 2
01
0
Ju
l 20
15
Dri
lls
hip
s
West
Cap
ella
T
ota
l
Nig
eri
a
Ap
r 2
009
A
pr
20
17
West
Gem
ini
To
tal
An
go
la
Se
p 2
01
0
Se
p 2
01
7
West
Na
vig
ato
r **
S
he
ll N
orw
ay
Ja
n 2
00
9
Ju
n 2
01
4
West
Po
laris
Exx
on
Mo
bil
Nig
eri
a
No
v 2
01
1
Ja
n 2
01
8
West
Au
rig
a (
NB
*)
BP
S
ou
th K
ore
a –
Sa
msu
ng
Sh
ipya
rd
Ju
n 2
01
3
Oct
20
20
West
Te
llus (
NB
*)
S
ou
th K
ore
a –
Sa
msu
ng
Sh
ipya
rd
West
Ve
la (
NB
*)
BP
S
ou
th K
ore
a –
Sa
msu
ng
Sh
ipya
rd
Se
p 2
01
3
Ja
n 2
02
1
West
Nep
tune
(N
B*)
So
uth
Ko
rea
– S
am
su
ng
Sh
ipya
rd
West
Ju
pite
r (N
B*)
So
uth
Ko
rea
– S
am
su
ng
Sh
ipya
rd
West
Sa
turn
(N
B*)
So
uth
Ko
rea
– S
am
su
ng
Sh
ipya
rd
West
Ca
rin
a (
NB
*)
S
ou
th K
ore
a –
Sa
msu
ng
Sh
ipya
rd
HE
Ja
ck
-up
rig
s
West
Ela
ra **
S
tato
il N
orw
ay
Ma
r 2
01
2
Ma
r 2
01
7
West
Ep
silo
n *
* S
tato
il N
orw
ay
De
c 2
01
0
De
c 2
01
4
West
Lin
us (
NB
*) *
* C
on
oco
Ph
illip
s
Sin
ga
po
re –
Ju
ron
g S
hip
yard
A
pr
20
14
M
ar
20
19
BE
Ja
ck
-up
rig
s
West
Cou
rage
ous
Sh
ell
Ma
lays
ia
Ja
n 2
01
2
Ja
n 2
01
3
West
Defe
nde
r S
he
ll B
run
ei
Au
g 2
01
2
Ma
y 2
01
6
West
Fre
edo
m
KJO
/GD
F S
ue
z S
au
di A
rab
ia /
Ku
wa
it
Ju
n 2
00
9
Ju
n 2
01
3
West
In
trep
id
KJO
S
au
di A
rab
ia /
Ku
wa
it
Ma
y 2
00
9
No
v 2
01
3
West
Mis
chie
f E
qu
ion/E
NI
In t
ransit
to R
ep
ub
lic o
f C
ong
o
Ap
r 2
012
N
ov
20
14
West
Resolu
te
KJO
S
au
di A
rab
ia /
Ku
wa
it
Oct
20
12
O
ct
20
15
West
Vig
ilan
t T
alis
man
M
ala
ysia
O
ct
20
12
O
ct
20
13
West
Arie
l V
iets
ovp
etr
o
Vie
tnam
Ja
n 2
01
2
De
c 2
01
2
P
ag
e 3
subm
ers
ible
rig
s W
est
Aq
uarius a
nd W
est
Capricorn
, th
e u
ltra
-deepw
ate
r drills
hip
West
C
apella
, and t
he s
em
i-te
nder
rig W
est
Vencedor.
S
DLP
has t
he r
ight
of
firs
t re
fusal on a
cquirin
g a
ny
Seadrill
rig
with a
contr
act
length
that
is
gre
ate
r th
an o
r eq
ual to
fiv
e y
ears
. In
additio
n,
SD
LP
has t
he o
ption t
o a
cq
uire t
he t
ender
rig
s T
15 a
nd T
16.
SD
LP
could
pro
vide a
n a
dditio
nal
sourc
e o
f fu
nds a
nd l
ow
er
Seadrill’
s
cost
of
capital
as M
LP
inve
sto
rs p
lace a
pre
miu
m o
n c
ash f
low
sta
bili
ty.
Based o
n t
he
clo
sin
g u
nit p
rice o
f U
S$26.5
8 a
s o
f N
ove
mber
23,
2012 o
ur
ow
ners
hip
sta
ke i
n S
DLP
re
pre
sente
d a
gro
ss v
alu
e o
f U
S$831 m
illio
n.
T
en
de
r ri
g s
ale
to
Sap
ura
Ke
nc
an
a P
etr
ole
um
Bh
d (
Sa
pu
raK
en
ca
na
) In
Nove
mber,
we e
nte
red i
nto
a n
on-b
indin
g a
gre
em
ent
reg
ard
ing
the s
ale
of
18 t
ender
rig
s to
S
apura
Kencana.
The tr
ansaction in
clu
des five
rig
s already
ow
ned jo
intly
with
Sapura
Kencana th
roug
h V
ariaP
erd
ana,
as w
ell
as 10 fu
rther
rig
s in
opera
tion and 3
new
bu
ilds c
urr
ently
und
er
constr
uction.
The a
gre
em
ent
does n
ot
inclu
de t
he t
ender
rigs
West
Vencedor,
T15 a
nd T
16, w
hic
h h
ave
been c
om
mitt
ed t
o S
DLP
.
Sapura
Kencana w
ill acq
uire t
he rig
s as w
ell
as th
e f
ull
tender
rig
org
aniz
ation fo
r an
ente
rprise va
lue of
US
$2.9
bill
ion.
The am
ount
inclu
des U
S$363 m
illio
n in
re
main
ing
capital
exp
enditure
s f
or
the n
ew
build
pro
gra
m,
all
the d
ebt
in t
he t
ender
rig
busin
ess,
w
hic
h is e
xpecte
d t
o b
e a
ppro
xim
ate
ly U
S$800 m
illio
n a
s o
f D
ecem
ber
31,
2012,
US
$187
mill
ion i
n a
selle
rs n
ote
, and U
S$350 m
illio
n i
n n
ew
share
s i
n S
apura
Kencana t
hat
will
in
cre
ase o
ur
share
hold
ing
fro
m 6
.4 p
erc
ent
to a
ppro
xim
ate
ly 1
3 p
erc
ent.
The r
em
ain
ing
consid
era
tion w
ill b
e f
unded b
y S
apura
Kencana t
hro
ug
h a
mix
of
ext
ern
al
borr
ow
ing
s,
inte
rnally
genera
ted funds,
and e
quity.
O
ne o
f th
e m
ain
obje
ctiv
es o
f th
e t
ransaction i
s t
o d
eve
lop a
str
ong
leadin
g p
laye
r in
the
Asia
n
oil
serv
ices
mark
et
and
stre
ngth
en
the
co-o
pera
tion
betw
een
the
com
panie
s.
Seadrill
will
ha
ve t
he r
ight
to n
om
inate
tw
o m
em
bers
to t
he S
apura
Kencana B
oard
of
Directo
rs (
inclu
din
g o
ne a
ltern
ate
). S
eadrill’
s c
hair
man J
ohn F
redriksen i
s exp
ecte
d t
o b
e
one o
f th
ose m
em
bers
. B
oth
part
ies w
ill s
eek t
o g
row
their s
hare
d a
ctivi
ties in B
razi
l w
here
w
e w
ere
a
ward
ed th
ree P
LS
V contr
acts
by
Pe
trobra
s in
2011.
The sh
are
d pro
ject
is
curr
ently
active
ly in
volv
ed in a
new
tender
pro
cess
in B
razi
l. F
urt
herm
ore
, a s
hare
d p
roje
ct
betw
een
Seadrill’
s
39.9
perc
ent
ow
ned
subsid
iary
A
rcher
Lim
ited
(Arc
her)
and
Sapura
Kencana w
ill be
esta
blis
hed.
The sco
pe of
such
a ve
hic
le w
ill be to
fo
cus on
deve
lopin
g a
nd e
xpandin
g A
rcher’s w
irelin
e s
erv
ices in t
he A
sia
n m
ark
ets
. C
losin
g o
f th
e t
ransact
ion is s
ubje
ct t
o a
ppro
val fr
om
our
tender
rig
org
aniz
ation a
s w
ell
as
from
our
cust
om
ers
. T
he
transaction
is
furt
her
subje
ct
to
cust
om
ary
due
dili
gence
pro
cedure
s,
clo
sin
g
adju
stm
ents
, re
gula
tory
appro
vals
, and
agre
em
ent
betw
een
the
part
ies o
n t
he t
erm
s o
f th
e s
ale
and p
urc
hase a
gre
em
ent
and o
ther
ancill
ary
tra
nsaction
docum
ents
.
The com
bin
ation of
Sapura
Kencana's
and S
eadrill'
s te
nder
rig
busin
esses pro
vides a
str
ate
gic
pla
tform
fo
r S
apura
Kencana's
and
Seadrill'
s
share
hold
ers
to
enhance
their
positio
n a
s p
art
of
a h
ighly
div
ers
ifie
d a
nd leadin
g o
ffshore
serv
ices p
rovi
der
glo
bally
with
multip
le g
row
th o
pport
unitie
s a
nd s
trong v
alu
e c
reation p
ote
ntial.
Op
era
tio
ns
O
ffshore
drilli
ng u
nits
Seadrill
had 4
8 o
ffshore
drilli
ng
units i
n o
pera
tion d
uring
the t
hird q
uart
er
in N
ort
hern
E
uro
pe,
US
G
ulf
of
Mexi
co,
Me
xico,
South
A
mericas,
W
est
A
fric
a,
Mid
dle
E
ast
and
South
east A
sia
(in
clu
din
g f
ive t
ender
rig
s ow
ned b
y V
aria P
erd
ana).
F
or
our
floate
rs (
drills
hip
s a
nd s
em
i-su
bm
ers
ible
rig
s) t
he e
conom
ic u
tiliz
ation r
ate
in t
he
third q
uart
er
ave
rag
ed 8
2 p
erc
ent
com
pare
d t
o 8
8 p
erc
ent
in t
he s
econd q
uart
er.
The
A 41
P
ag
e 6
opera
tional
perf
orm
ance
. T
he
neg
ative
deve
lopm
ent
in
opera
ting
re
sults
have
been
reduced a
nd t
he B
oard
feels
that
good p
rog
ress h
as b
een m
ade d
uring
the l
ast
nin
e
month
s.
We n
ote
fro
m A
rcher’s p
ublic
ly a
vaila
ble
pre
limin
ary
guid
ance f
or
the t
hird q
uart
er
2012
rele
ased N
ove
mber
25,
2012,
that
Arc
her
has
made a
n i
mpairm
ent
of
its o
wn a
ssets
during
th
e
third
quart
er
2012
to
reflect
low
ere
d
exp
ecta
tions
of
futu
re
results.
In
accord
ance w
ith U
S G
AA
P w
e ha
ve alig
ned our
carr
ying
va
lues appro
priate
ly,
takin
g
US
$51 m
illio
n in im
pairm
ent
during
this
quart
er,
repre
senting
our
share
of
this
reduction in
valu
e a
fter
takin
g into
acc
ount
our
his
torical g
oodw
ill b
asis
diffe
rence.
T
he B
oard
of
Seadrill
sees s
ignific
ant
valu
e i
n a
sum
of
the p
art
analy
sis
and r
em
ain
s confident th
at th
e A
rcher
inve
stm
ent w
ill p
rovi
de a
satisf
acto
ry r
etu
rn o
ver
tim
e.
Asia
Offshore
Drilli
ng L
td (
“AO
D”)
A
OD
is a
n o
ffshore
drilli
ng
com
pany
liste
d o
n O
slo S
tock E
xchang
e t
hat
has t
hre
e jack
-up
rig
s under
constr
uct
ion a
t K
eppel
FE
LS
in S
ing
apore
. A
t th
e e
nd o
f th
e t
hird q
uart
er,
S
eadrill
had a
33.7
5 p
erc
ent
ow
ners
hip
sta
ke in A
OD
. H
ow
eve
r, d
uring
the f
ourt
h q
uart
er
we h
ave
thro
ug
h a
cquis
itio
n o
f 26,3
76,4
16 s
hare
s in t
he s
econdary
mark
et
incre
ased o
ur
ow
ners
hip
to 6
5.9
4 p
erc
ent.
As a
result,
on N
ove
mber
9,
2012,
we launched a
mandato
ry
off
er
for
all
the r
em
ain
ing
share
s in A
OD
at
a s
hare
price o
f N
OK
28.7
1.
The o
ffer
periods
ends o
n D
ecem
ber
10,
2012.
Our
share
hold
ing i
n A
OD
had a
gro
ss v
alu
e o
f U
S$132
mill
ion based on th
e clo
sin
g share
price of
NO
K28.6
0 on N
ove
mber
23,
2012.
AO
D
contr
ibute
d U
S$0 m
illio
n t
o o
ur
third q
uart
er
net
incom
e c
om
pare
d t
o U
S$0 m
illio
n i
n t
he
second q
uart
er.
Contr
ibution f
rom
AO
D i
s r
eport
ed u
nder
oth
er
financia
l item
s a
s p
art
of
inve
stm
ent
in associa
ted com
panie
s.
For
more
in
form
ation on A
OD
, ple
ase see th
eir
separa
te q
uart
erly
report
publis
hed o
n w
ww
.aodrilli
ng
.com
.
Sevan D
rilli
ng A
SA
(“S
evan D
rilli
ng
”)
Seva
n D
rilli
ng
is
an off
shore
drilli
ng
com
pany
liste
d on O
slo
S
tock E
xchang
e.
Seva
n
Drilli
ng
o
wns and opera
tes tw
o ultra
-deepw
ate
r rig
of
the cyl
indrical
Seva
n desig
n in
B
razi
l. S
eva
n D
rilli
ng
has t
wo f
urt
her
new
build
s o
f sim
ilar
desig
n u
nder
constr
uct
ion,
with
deliv
ery
schedule
d f
or
fourt
h q
uart
er
2013 a
nd s
econd q
uart
er
2014.
Seadrill
has a
28.5
perc
ent
ow
ners
hip
sta
ke i
n S
eva
n D
rilli
ng
, re
pre
senting a
gro
ss m
ark
et
valu
e o
f U
S$63
mill
ion b
ased o
n t
he c
losin
g s
hare
price o
n N
ove
mber
23,
2012.
Contr
ibution f
rom
Seva
n
Drilli
ng
is r
eport
ed a
s p
art
of
inve
stm
ent
in a
sso
cia
ted c
om
panie
s u
nder
oth
er
financia
l item
s.
For
the
third
quart
er,
S
eva
n
Drilli
ng
contr
ibute
d
US
$2
mill
ion
to
net
incom
e
com
pare
d t
o a
loss o
f U
S$1 m
illio
n i
n t
he s
econd q
uart
er.
We v
iew
the i
nve
stm
ent
in
Seva
n D
rilli
ng
as o
pport
unis
tic a
nd w
ill c
ontinue t
o e
valu
ate
it
com
pare
d t
o a
ltern
ative
s t
o
furt
her
gro
w S
eadrill.
Fo
r m
ore
info
rmation o
n S
eva
n D
rilli
ng
, see t
heir s
epara
te q
uart
erly
report
publis
hed o
n w
ww
.seva
ndrilli
ng
.com
.
Varia P
erd
ana B
hd.(
“Varia P
erd
ana
”)
We h
ave
a 4
9 p
erc
ent
ow
ners
hip
inte
rest
in V
aria P
erd
ana,
whic
h o
wns a
nd o
pera
tes f
ive
self-e
rect
ing
tender
rig
s. D
uring t
he t
hird q
uart
er,
the t
ender
rig
T3 w
ork
ed f
or
PT
TE
P i
n
Thaila
nd a
nd T
10 w
ork
ed f
or
Chevr
on i
n T
haila
nd.
The t
ender
rig
T6 w
ork
ed f
or
CP
OC
(C
arig
ali
PT
TE
P O
pera
ting
Com
pany)
and C
arigali
Hess i
n t
he M
ala
ysia
- T
haila
nd J
oin
t D
eve
lopm
ent
Are
a w
hile
the T
eknik
Berk
at
work
ed f
or
Petr
onas C
arig
ali.
T9 o
pera
ted f
or
Petr
onas C
arig
ali
off
shore
Mala
ysia
. V
aria
Perd
ana c
ontr
ibute
d U
S$12 m
illio
n t
o o
ur
third
quart
er
earn
ing
s com
pare
d to
U
S$10 m
illio
n in
th
e second q
uart
er.
C
ontr
ibution fr
om
V
aria P
erd
ana i
s r
eport
ed a
s p
art
of
inve
stm
ent
in a
ssocia
ted c
om
panie
s u
nder
oth
er
financia
l item
s.
Sapura
Kencana P
etr
ole
um
Bhd.(
“Sapura
Kencana
”)
As r
eport
ed w
e h
ave
en
tere
d i
nto
a n
on-b
indin
g a
gre
em
ent
to s
ale
the l
arg
e p
art
of
our
tender
rig
fleet
to
Sapura
Kencana,
whic
h
is
a
fully
in
teg
rate
d
Mala
ysia
n
oil
serv
ice
pro
vider
liste
d o
n t
he M
ala
ysia
n S
tock E
xchange.
We c
urr
ently
ow
n 3
19,5
40,8
02 s
hare
s
Pag
e 5
Un
it
Cu
rre
nt
cli
en
t A
rea
of
loc
ati
on
C
on
tra
ct
sta
rt
Co
ntr
ac
t e
xp
iry
W
est
Calli
sto
T
ota
l
In t
ransit
to S
au
di A
rab
ia
No
v 2
01
2
No
v 2
01
5
West
Cre
ssi
da
P
TT
EP
T
ha
ilan
d
No
v 2
01
0
Ma
y 2
01
4
West
Ja
nu
s**
* V
iets
ovp
etr
o
Vie
tnam
Ju
l 20
12
D
ec 2
01
2
West
Le
da
E
xxo
nM
ob
il M
ala
ysia
M
ar
20
12
A
pr
20
14
West
Pro
spe
ro
Vie
tso
vpe
tro
V
ietn
am
Ja
n 2
01
2
De
c 2
01
2
West
Tri
ton
K
JO
S
au
di A
rab
ia /
Ku
wa
it
Au
g 2
01
2
Au
g 2
01
5
West
Casto
r (N
B*)
S
au
di A
ram
co
S
ing
ap
ore
– J
uro
ng S
hip
yard
A
ug
201
3
Au
g 2
01
6
West
Tu
can
a (
NB
*)
PV
EP
S
ing
apo
re –
Ju
ron
g S
hip
yard
Ja
n 2
01
3
Ap
ril 20
13
West
Te
lesto
(N
B*)
S
au
di A
ram
co
C
hin
a –
Da
lian
Ship
yard
A
pr
20
13
A
pri
l 20
16
West
Obe
ron
(N
B*)
P
rem
ier
Ch
ina
– D
alia
n S
hip
yard
A
pr
20
13
A
ug
201
3
AO
R-1
(N
B*)
****
S
au
di A
ram
co
S
ing
apo
re -
Ke
pp
el F
EL
S
Ju
n 2
01
3
Ju
n 2
01
6
AO
R-2
(N
B*)
****
Sin
ga
po
re -
Ke
pp
el F
EL
S
AO
R-3
(N
B*)
****
Sin
ga
po
re -
Ke
pp
el F
EL
S
Te
nd
er
rig
s
T4
C
he
vro
n
Th
aila
nd
Ju
l 20
08
Ju
n 2
01
3
T7
C
he
vro
n
Th
aila
nd
N
ov
20
11
M
ar
20
13
T1
1
Ch
evr
on
T
ha
ilan
d
Ma
y 2
00
8
Ma
y 2
01
7
T1
2
Ch
evr
on
T
ha
ilan
d
Ap
r 2
011
A
pr
20
14
T1
5 (
NB
*)
Ch
evr
on
C
hin
a –
CO
SC
O S
hip
yard
A
pr
20
13
A
pr
20
18
T1
6 (
NB
*)
Ch
evr
on
C
hin
a –
CO
SC
O S
hip
yard
Ju
n 2
01
3
Ju
n 2
01
8
T1
7 (
NB
*)
PT
TE
P
Ch
ina
– C
OS
CO
Sh
ipya
rd
Ma
y 2
01
3
Ma
y 2
01
8
T1
8 (
NB
*)
Ch
evr
on
C
hin
a –
CO
SC
O S
hip
yard
M
ar
20
14
M
ar
20
19
West
Alli
an
ce
Sh
ell
Ma
lays
ia
Ja
n 2
01
0
Ja
n 2
01
5
West
Be
ran
i C
he
vro
n
Ind
one
sia
A
pr
20
12
A
pr
20
13
West
Ja
ya
BP
T
rin
ida
d &
To
bag
o
No
v 2
01
1
Se
p 2
01
4
West
Esp
era
nza
(N
B*)
A
me
rada
He
ss
Sin
ga
po
re -
Ke
pp
el F
EL
S
Ju
l 20
13
D
ec 2
01
4
West
Me
na
ng
M
urp
hy
Ma
lays
ia
Au
g 2
01
1
Se
p 2
01
4
West
Pe
laut
Sh
ell
Bru
ne
i A
pr
20
12
M
ar
20
15
West
Se
tia
C
he
vro
n
An
go
la
Au
g 2
01
2
Au
g 2
01
4
West
Ve
nce
do
r C
he
vro
n
An
go
la
Ma
r 2
01
0
Ma
r 2
01
5
*
N
ew
bu
ild u
nde
r co
nstr
uct
ion
or
in m
ob
iliza
tion
to
its
first
drilli
ng
assig
nm
en
t.
**
Ow
ne
d b
y o
ur
su
bsid
iary
NA
DL
in
wh
ich w
e o
wn
73
pe
rce
nt o
f th
e o
uts
tand
ing
sh
are
s.
***
S
ea
drill
ha
s e
nte
red
into
an
agre
em
en
t to
sell
the
un
it, a
tra
nsa
ctio
n c
urr
en
tly
exp
ecte
d t
o b
e
co
mp
lete
d d
uri
ng
th
e f
irst
qu
art
er
20
13
. **
**
Ow
ne
d b
y o
ur
su
bsid
iary
AO
D in
wh
ich
we
ow
n 6
6 p
erc
en
t of
the
ou
tsta
ndin
g s
ha
res.
D
uring
the t
hird q
uart
er
we
had in
tota
l tw
o f
loate
rs a
nd s
eve
n jack-u
ps in t
ransit b
etw
een
contr
act
s f
or
the w
hole
or
part
of
the q
uart
er.
In t
ota
l appro
xim
ate
ly U
S$1
35 m
illio
n h
as o
r w
ill
be
receiv
ed
as
mobili
zation
pa
yments
w
hen
these
contr
act
s
com
mence.
In
accord
ance w
ith U
S G
AA
P m
obili
zation re
venue re
ceiv
ed and m
obili
zation costs
are
defe
rred a
nd r
ecog
niz
ed o
ver
futu
re p
eriods.
Op
era
tio
ns
in
ass
oc
iate
d c
om
pa
nie
s
Arc
her
Lim
ited (
“Arc
her”
) A
rcher
is a
n inte
rnational oilf
ield
serv
ice c
om
pany
liste
d o
n t
he O
slo
Sto
ck E
xchang
e. W
e
curr
ently
ow
n 1
46,2
38,4
46 s
hare
s in
Arc
her,
repre
senting a
gro
ss
valu
e o
f U
S$178 m
illio
n
based o
n the c
losin
g s
hare
price o
f N
OK
6.9
5 o
n N
ove
mber
23, 2012. O
ur
Arc
her
positio
n
contr
ibute
d a
loss
of
US
$53.3
mill
ion t
o o
ur
third q
uart
er
net
incom
e, based o
n p
ublic
ly
ava
ilable
pre
limin
ary
info
rmation, com
pare
d to U
S$3 m
illio
n in t
he s
econd q
uart
er.
C
ontr
ibution fro
m A
rcher
is r
eport
ed u
nder
oth
er
financia
l item
s a
s part
of
inve
stm
ent in
associa
ted c
om
panie
s. F
or
more
info
rmation o
n A
rcher
we r
efe
r to
their q
uart
erly
report
, w
hic
h w
ill b
e r
ele
ased o
n N
ove
mber
28 a
nd p
ublis
hed o
n w
ww
.arc
herw
ell.
com
.
The B
oard
is d
isappoin
ted w
ith t
he o
pera
tional and f
inancia
l perf
orm
ance o
f A
rcher
sin
ce
2010.
Cert
ain
act
ions have
been im
ple
mente
d to
im
pro
ve contr
ol
and str
ength
en th
e
A 42
P
ag
e 8
Ma
rke
t d
eve
lop
me
nt
The m
ark
et
fundam
enta
ls i
n t
he o
ffsh
ore
drilli
ng
industr
y re
main
str
ong
acro
ss a
ll asset
cla
sses a
s o
il com
panie
s c
ontinue t
o s
earc
h f
or
new
reserv
es a
nd d
eve
lop p
revi
ous f
inds
in o
rder
to m
eet
eve
r in
creasin
g g
lobal dem
and a
nd k
eep p
ace w
ith p
roduction d
eclin
es in
matu
re f
ield
s.
His
tory
has
dem
onstr
ate
d
a
cle
ar
corr
ela
tion
with
exp
lora
tion
success
follo
wed
by
incre
menta
l rig
dem
and d
ue t
o t
he n
um
ber
of
wells
needed t
o d
elin
eate
and d
eve
lop t
hese
finds.
We e
xpect
the s
ignific
ant
exp
lora
tion s
uccesses o
f th
e p
ast
few
years
to s
imila
rly
transla
te
into
in
cre
ased
rig
dem
and
as
oil
com
panie
s’
work
to
cle
ar
the
back
log
of
deve
lopm
ent
drilli
ng
pro
jects
in
an
att
em
pt
to
meet
pro
duction
targ
ets
and
main
tain
re
serv
e r
epla
cem
ent ra
tios.
The t
rend t
ow
ard
s incre
asin
gly
com
ple
x and d
em
andin
g w
ells
continues t
o b
enefit
drilli
ng
contr
act
ors
who c
an p
rovi
de a
ccess t
o h
igh s
pecific
ation e
quip
ment
opera
ted b
y hig
hly
com
pete
nt
cre
ws and w
e re
main
bulli
sh on o
ur
abili
ty to
capitaliz
e o
n th
e continued
deve
lopm
ent
within
the industr
y.
Ultra
-deepw
ate
r floate
rs (
>7,5
00 ft w
ate
r)
The
ultra
-deepw
ate
r m
ark
et
show
s
continued
str
eng
th
drive
n
prim
arily
b
y in
cre
asin
g
dem
and i
n A
fric
a a
nd t
he G
ulf o
f M
exi
co.
In t
he G
ulf
of
Me
xico i
t is
estim
ate
d t
hat
more
th
an 5
0%
of
reserv
es a
re in w
ate
r depth
s g
reate
r th
an 5
000 f
t and a
s a
result w
ell
desig
ns
invo
lve m
ore
technic
ally
dem
andin
g w
ell
constr
uction t
echniq
ues.
These
chara
cte
ristics
both
drive
the d
em
and t
ow
ard
s n
ew
er
rig
s w
ith g
reate
r lo
adpath
capacitie
s a
nd w
e e
xpect
this
tre
nd t
o p
ut
furt
her
pre
ssure
on t
he s
upply
of
new
build
1250 t
on u
nits i
n 2
013 a
nd
2014.
C
ontr
act
ing
and t
endering
activi
ty f
or
modern
ultra
-deepw
ate
r units h
as
continued a
t a
solid
pace
with
daily
ra
tes
in
the
US
$550,0
00
to
US
$650,0
00
range,
dependin
g
on
location a
nd c
ontr
act
dura
tion.
Seadrill,
with n
ine u
ltra
-deepw
ate
r new
build
units u
nder
constr
uction,
is w
ell
positio
ned t
o c
apita
lize o
n t
he incre
ased s
pend in t
his
are
a.
We h
ave
contr
act
ed t
hre
e o
f our
nin
e n
ew
build
s a
nd a
re a
lready
receiv
ing
inte
rest
fro
m c
ust
om
ers
re
gard
ing
units
ava
ilable
in 2
014 a
nd 2
015.
Our
rece
nt
fixt
ure
of
a f
ive-y
ear
term
for
the
West
Mira w
hic
h w
ill b
e d
eliv
ere
d i
n e
arl
y 2015,
indic
ate
s t
hat
oil
& g
as c
om
panie
s a
re
will
ing
to s
ecure
modern
hig
h s
pecific
ation d
rilli
ng
units w
ell
in a
dva
nce o
f deliv
ery
in o
rder
to g
ain
the benefits
that
these assets
can bring
to
their exp
lora
tion and deve
lopm
ent
pla
ns.
T
he h
ars
h e
nvi
ronm
ent
floate
r m
ark
et
continues
to s
how
str
eng
th w
ith e
xtre
mely
lim
ited
capacity
ava
ilab
le i
n 2
014 a
nd 2
015,
and e
ven l
ess w
hen t
he a
ge a
nd s
pecific
ations o
f units are
consid
ere
d.
We are
ve
ry confident
that
we w
ill be ab
le to
secure
attra
ctiv
e
contr
act
s fo
r our
open n
ew
bu
ildin
gs.
Seadrill
have
been t
he m
ost
agg
ressiv
e p
laye
r in
the n
ew
build
ing
mark
et
sin
ce 2
010.
We
continue t
o s
ee t
his
as a
uniq
ue o
pport
unity
as l
ong
as,
yard
prices r
em
ain
s a
t his
toric
low
s ,
long
-term
rate
s is c
lose t
o h
isto
ric h
ighs w
ith s
olid
long
-term
cove
rag
e a
nd n
o o
ther
com
petit
or
acts
agg
ressiv
ely
.
W
e w
ill c
ontinue t
o s
ee
k o
ut
additio
nal
inve
stm
ent
opport
uniti
es i
n b
oth
the b
enig
n a
nd
hars
h e
nvi
ronm
ent
deepw
ate
r secto
rs thro
ug
h o
rganic
gro
wth
and s
ele
ctive
acq
uis
itio
n.
The
targ
et
is
to
aggre
ssiv
ely
continue
to
bu
ild
Seadrills
m
odern
fleet
without
takin
g
impro
per
financia
l or
opera
tional risk
.
Pre
miu
m jack-u
p r
igs (
>350 ft w
ate
r)
P
ag
e 7
eq
uiv
ale
nt
to a
6.4
perc
ent
ow
ners
hip
sta
ke,
whic
h h
ad a
gro
ss v
alu
e o
f U
S$298 m
illio
n
based o
n a
clo
sin
g s
hare
price o
f M
YR
2.8
5 o
n N
ove
mber
23,
2012.
Our
ow
ners
hip
in
Sapura
Kencana is t
reate
d a
s m
ark
eta
ble
security
and is m
ark
ed-t
o-m
ark
et
with n
o e
quity
pic
k-u
p.
For
more
in
form
ation on S
apura
Kenca
na,
see th
eir separa
te q
uart
erly
report
publis
hed o
n w
ww
. sapura
kencana.c
om
.
New
co
ntr
ac
ts a
nd
co
ntr
ac
t e
xte
nsio
ns
S
ubseq
uent
to t
he f
iling o
f our
second q
uart
er
2012 r
eport
, w
e h
ave
ente
red i
nto
the
follo
win
g n
ew
contr
acts
and r
eceiv
ed t
he f
ollo
win
g c
om
mitm
ents
with a
tota
l estim
ate
d
reve
nue
pote
ntial
of
US
$2
bill
ion:
Tota
l ord
erb
acklo
g
as
of
Nove
mber
23,
2012,
is
appro
xim
ate
ly U
S$21.3
bill
ion.
In N
ove
mber
2012,
we r
eceiv
ed a
Lett
er
of
Aw
ard
fro
m H
usk
y fo
r th
e n
ew
build
ultra
-deepw
ate
r sem
i-subm
ers
ible
rig
W
est
Mira
for
opera
tions
off
shore
C
anada
and
Gre
enla
nd.
The f
ive-y
ear
contr
act
has a
n a
gre
ed d
aily
rate
of
US
$590,0
00 e
xclu
din
g 5
perc
ent
in b
onus p
ote
ntia
l. I
n a
dditio
n,
the r
ig w
ill b
e o
utf
itted w
ith a
second 6
-ram
BO
P a
t cost to
Seadrill.
F
or
our
jack
-up r
igs
in o
pera
tion w
e h
ave
receiv
ed t
he f
ollo
win
g n
ew
com
mitm
ents
:
West
V
igila
nt
has secure
d a one-y
ear
contr
act
w
ith T
alis
man fo
r opera
tions off
shore
M
ala
ysia
at
an a
gre
ed d
aily
rate
of
US
$146,0
00,
and t
he W
est
Mis
chie
f has r
eceiv
ed a
tw
o-y
ear
contr
act
fro
m E
NI
for
opera
tions o
ffsh
ore
Republic
of
Cong
o a
t an a
gre
ed d
aily
ra
te o
f U
S$175,0
00.
For
our
jack
-up r
igs
under
const
ruction, w
e h
ave
receiv
ed t
he f
ollo
win
g n
ew
contr
acts
:
West
Casto
r, W
est
Tele
sto
, and A
OR
-1 h
ave
secure
d a
thre
e-y
ear
contr
acts
with S
aud
i A
ram
co w
ith a daily
ra
te of
US
$198,5
00,
US
$185,0
00 and U
S$180,0
00,
respective
ly.
Pre
mie
r O
il has c
ontr
act
ed t
he W
est
Obero
n f
or
four
month
s a
t a d
aily
rate
of
US
$149,5
00
for
opera
tions
off
shore
V
ietn
am
, and
the
West
Tucana
has
secure
d
thre
e-m
onth
em
plo
yment
with P
VE
P a
t an a
gre
ed d
aily
rate
of U
S$160,0
00.
For
more
deta
iled
info
rmation
reg
ard
ing
daily
ra
tes
and
contr
act
dura
tions
inclu
din
g
escala
tion,
curr
ency
adju
stm
ent
or
oth
er
min
or
chang
es
to
daily
ra
tes
and
dura
tion
pro
file
s,
see
our
fleet
statu
s re
port
or
new
s
rele
ases
on
the
our
website
ww
w.s
ead
rill.c
om
New
bu
ild
ing
pro
gra
m
In S
epte
mber,
we o
rdere
d a
ne
w d
rills
hip
at
the S
am
sung
ship
yard
in S
outh
Kore
a.
The
drills
hip
will
be o
f eq
ual
specific
ation a
s t
he o
ther
six
dri
llship
s w
e c
urr
ently
ha
ve u
nder
constr
uction a
t th
e s
am
e y
ard
. T
he e
xpecte
d t
ota
l pro
ject
price is e
stim
ate
d t
o b
e U
S$600
mill
ion,
and d
eliv
ery
is s
chedule
d f
or
the f
ourt
h q
uart
er
2014.
W
e n
ow
have
22 u
nits u
nder
constr
uct
ion.
The n
ew
build
pro
gra
m i
nclu
des s
eve
n u
ltra
-deepw
ate
r drills
hip
s,
two u
ltra
-deepw
ate
r sem
i-subm
ers
ible
rig
s,
one h
ars
h-e
nvi
ronm
ent
jack
-up r
ig,
seve
n p
rem
ium
benig
n e
nvi
ronm
ent
jack-u
p r
igs,
one s
em
i-te
nder
rig
, and f
our
tender
rig
s. T
he n
ew
build
ing
pro
gra
m p
rog
ress a
ccord
ing t
o s
chedule
with r
espect
to c
ost
w
ith o
nly
min
or
dela
ys f
or
som
e o
f th
e j
ack
-ups.
In t
ota
l 12 o
f th
e 2
2 n
ew
build
ing
s h
ave
already
been c
hart
ere
d o
ut
on long-t
erm
contr
act
s.
The d
eliv
ery
schedule
for
the n
ew
build
s u
nder
constr
uct
ion is f
rom
the f
ourt
h q
uart
er
2012
to th
e firs
t q
uart
er
2015,
with th
e m
ajo
rity
of
deliv
eries in
2013 and 2014.
The to
tal
rem
ain
ing
yard
insta
llments
for
our
new
build
s a
re a
ppro
xim
ate
ly U
S$5.9
bill
ion,
exc
lud
ing
AO
D. In
tota
l U
S$1.6
bill
ion h
as b
een p
aid
to the y
ard
s in p
re-d
eliv
ery
insta
llments
.
For
furt
her
info
rmation o
n o
ur
new
build
ing
pro
gra
m p
lease s
ee N
ote
9 a
nd N
ote
18 t
o o
ur
financia
l st
ate
ments
.
A 43
P
ag
e 1
0
Reven
ue b
acklo
g
We h
ave
sin
ce o
ur
second q
uart
er
report
ente
red i
nto
new
contr
acts
with a
tota
l re
venue
pote
ntial of
US
$2 b
illio
n,
incre
asin
g o
ur
ord
erb
ack
log
fro
m U
S$19.9
bill
ion t
o a
record
hig
h
of
US
$21.3
bill
ion a
s o
f N
ove
mber
23, 2012.
Our
ord
erb
ack
log
pro
vides com
mitm
ent
for
our
futu
re earn
ing
s as w
ell
as g
enera
ting
futu
re v
isib
ility
for
div
ide
nd c
apacity.
For
our
ultra
-deepw
ate
r fleet
we s
till
ha
ve t
he W
est
Tellu
s a
vaila
ble
at
a v
ery
att
ract
ive s
lot
in 2
013,
wh
ile w
e in 2
014 h
ave
open p
ositio
ns f
or
all
of
our
ultr
a-d
eepw
ate
r rig
s a
nd t
he W
est
Rig
el, w
hic
h w
ill b
e a
vaila
ble
in 2
015.
The
ave
rag
e c
ontr
act
dura
tion,
inclu
din
g o
ur
new
bu
ilds i
s 4
9 m
onth
s f
or
our
ultra
-deepw
ate
r fleet.
W
ith r
eg
ard
s to
our
shallo
w w
ate
r capacity,
nearly
all
our
futu
re jack
-up c
apacity
has b
een
firm
ed u
p t
hro
ug
h r
ecent
contr
act
ing
act
ivity,
evid
encin
g t
hat
both
daily
rate
s a
nd d
ura
tion
are
in
cre
asin
g in
th
e pre
miu
m ja
ck-u
p segm
ent.
W
e now
have
only
tw
o rig
s w
ithout
contr
act
, both
of
whic
h a
re n
ew
build
s t
o b
e d
eliv
ere
d n
ext
year.
The a
vera
ge c
ontr
act
le
ng
th f
or
our
jack
-ups is 2
2 m
onth
s.
All
of
our
tender
rig
s h
ave
secure
d e
mplo
yment,
and
the ave
rag
e contr
act
le
ngth
is
25 m
onth
s. T
he B
oard
w
ants
to
g
ive cre
dit to
all
the
em
plo
yees w
ho h
ave
be
en i
nvo
lved i
n s
ecuring
this
ord
erb
ack
log
for
a v
ery
pro
fessio
nal
and s
olid
job.
Fin
an
cia
l fl
exib
ilit
y
Substa
ntial
pro
gre
ss h
as b
een m
ade o
n S
eadrill
financin
g d
uring
the r
ecent
quart
er.
In
Septe
mber
we ra
ised U
S$1.0
bill
ion th
roug
h a U
.S.
issued unsecure
d b
ond,
whic
h is
unra
ted a
nd b
ears
inte
rest
of
5.6
25 p
erc
ent
per
annum
and m
atu
res i
n S
epte
mber
2017.
This
mark
s a l
andm
ark
tra
nsact
ion f
or
Seadrill
as i
t is
the f
irst
U.S
. bond i
ssued b
y th
e
Com
pany,
wh
ich o
pens u
p a
ne
w a
venue f
or
the C
om
pany
to r
ais
e f
utu
re d
ebt financin
g in
a m
ark
et
with substa
ntia
l siz
e th
at
was pre
vio
usly
un-t
apped.
The bond w
as hea
vily
ove
rsubscribed a
nd h
ave
tra
ded w
ell
in t
he a
fter
mark
et
dem
onst
rating t
he s
trength
that
Seadrill
cre
dit h
as
in the m
ark
et.
We h
ave
receiv
ed f
irm
com
mitm
ents
fro
m b
anks a
nd E
xport
Cre
dit
Ag
encie
s (
EC
A)
for
our
new
bu
ilds t
hat
have
schedule
d d
eliv
ery
in t
he p
eriod fro
m D
ecem
ber
2012 t
o D
ecem
ber
2013. T
he c
om
mitm
ents
receiv
ed t
o d
ate
tota
l som
e U
S$1.7
bill
ion a
nd d
em
onstr
ate
S
eadrill´
s c
ontinuin
g s
trong r
ela
tionship
and s
upport
fro
m leadin
g f
inancia
l in
stitu
tions.
Furt
her
com
mitm
ents
are
exp
ecte
d to b
e r
eceiv
ed b
y th
e tim
e w
e r
eport
our
fort
h q
uart
er
financia
l results.
Subst
antial pro
gre
ss h
as
als
o b
een a
chie
ved w
ith r
espect to
fin
ancin
g o
f th
e n
ew
build
ing
s f
or
deliv
ery
in 2
014 a
nd 2
015. T
he B
oard
is
confident th
at th
e a
ll new
bu
ilidng
s c
an b
e f
inanced w
ithout
rais
ing
additi
onal eq
uity
. T
hese p
redic
tions e
xclu
des
use o
f any
of
the p
roceed e
xpecte
d to b
e r
ele
ased in
the S
apura
Kencana tra
nsact
ion. T
he
successf
ul b
ond issue t
og
eth
er
with t
he lis
ting
of S
eadrill
Part
ners
in O
cto
ber
create
s sig
nific
ant financia
l fle
xibili
ty in t
he s
hort
and long-t
erm
for
the C
om
pany.
O
ther
Sig
nif
ican
t In
vestm
en
ts
We
hold
va
rious
ow
ners
hip
positio
ns
in
oth
er
liste
d
off
shore
drille
rs
and
oil
serv
ice
com
panie
s.
Our
port
folio
inclu
des a
39.9
perc
ent
hold
ing
in A
rcher
Lim
ited,
a 2
8.5
perc
ent
in S
eva
n D
rilli
ng
AS
A,
and 6
.4 p
erc
ent
hold
ing
in S
apura
Kencana.
Exc
ept fo
r our
str
ate
gic
in
vestm
ents
in A
rcher
and S
apura
Kencana,
the B
oard
eva
luate
s t
he p
rospects
of
these
inve
stm
ents
on a
continuous b
asis
.
At
curr
ent
mark
et
prices,
the t
ota
l cash i
nve
ste
d i
n t
hese i
nve
stm
ents
is a
ppro
xim
ate
ly
US
$670 m
illio
n.
Q
uart
erl
y C
ash
Div
iden
d
The B
oard
has in c
onnection w
ith t
he d
isclo
sure
of
the t
hird q
uart
er
results
eva
luate
d t
he
curr
ent
div
idend l
eve
l a
nd p
rospects
and h
as r
esolv
ed t
o i
ncre
ase t
he r
eg
ula
r q
uart
erly
P
ag
e 9
The d
em
and f
or
pre
miu
m jack
-ups c
ontinues t
o s
trength
en a
s evi
denced b
y sim
ultaneous
incre
ases in
contr
act
le
ad tim
es,
dayr
ate
s and contr
act
dura
tions.
Jack
-up utiliz
ations
rate
s have
rem
ain
ed a
bove
90%
sin
ce e
arly
2011,
on a
vera
ge m
ore
than 2
jack
-ups
have
been r
eact
ivate
d,
scra
pped o
r conve
rted p
er
month
sin
ce m
id 2
011.
Dem
and f
or
hig
h s
pecific
ation j
ack
-ups
continues t
o b
e d
rive
n p
rim
arily
in A
sia
and t
he
Mid
dle
E
ast
but
more
re
cently
we
have
se
en
incre
asin
g
inte
rest
in
new
er
hig
her
specific
ation u
nits f
rom
custo
mers
in o
ther
mark
ets
inclu
din
g W
est
Afr
ica a
nd A
ustr
alia
/
New
Zeala
nd a
s o
il com
panie
s s
eek t
o r
epla
ce a
gin
g f
leets
units
and g
ain
eff
icie
ncy
and
safe
ty b
enefits
of
new
er
and m
ore
eff
icie
nt
units. O
ur
custo
mers
are
dem
onstr
ating a
cle
ar
pre
fere
nce to
ward
s ja
ck-u
ps th
at
are
yo
ung
er
in ag
e w
ith enhanced capabili
ties th
at
impro
ve w
ork
er
safe
ty a
nd d
rilli
ng
eff
icie
ncy.
The w
ells
bein
g d
rille
d a
re d
eeper
and m
ore
com
ple
x, o
n a
vera
ge,
whic
h a
lso r
eq
uires t
he incre
ased c
apacity
that
hig
her
specific
ation
units p
rovi
de.
With
few
er
wells
bein
g d
rille
d p
er
rig
due t
o m
ore
technic
ally
dem
andin
g
pro
gra
ms
we
exp
ect
the
curr
ent
dem
and
str
ength
fo
r hig
h
specific
atio
n
jack-u
ps
to
continue.
Despite t
he a
dditio
n o
f 90 p
rem
ium
cla
ss jack
-ups,
during
the p
ast
5 y
ears
, alm
ost
70%
of
the c
urr
ently
contr
act
ed f
leet
is m
ore
than 3
0 y
ears
old
. W
hile
appro
xim
ate
ly 9
0 u
nits a
re
curr
ently
under
constr
uction,
alm
ost
a
third
of
these
will
not
ente
r th
e
com
petitive
in
tern
ational
mark
et
and a
t th
e s
am
e t
ime,
an e
qual
num
ber
of
rig
s w
ill h
ave
reached 3
5
years
of
ag
e b
y th
e e
nd o
f 2014.
We s
ee s
olid
in
tere
st in o
ur
rem
ain
ing
ava
ilable
jack-u
p
fleet
and e
xpect
our
curr
ently
pla
nned n
ew
build
s t
o b
e e
ffect
ively
absorb
ed into
the m
ark
et
at
attra
ctive
rate
s a
nd d
ura
tions.
In lin
e w
ith w
hat
we h
ave
com
munic
ate
d in
th
e re
cent
quart
ers
w
e continue to
see
dem
and o
uts
trip
pin
g s
upply
at
least
into
2013 a
nd e
xpect
the j
ack
-up m
ark
et
to s
how
a
positiv
e d
eve
lopm
ent
in t
he q
uart
ers
to c
om
e.
This
could
als
o d
rive
furt
her
acquis
itio
n
activi
ty a
mong t
he s
pecula
tive
ne
wbuild
pla
yers
. T
ender
rigs
We s
ee a
continued i
nte
rest
in o
ur
tender
rig
fle
et
from
cust
om
ers
and r
ecog
niz
e t
he
mark
et
as havi
ng
fu
rther
room
fo
r gro
wth
and deve
lopm
ent.
T
ender
rig
s continue to
pro
vide a
dva
nta
ges i
n f
ixed p
latf
orm
, T
LP
, and s
par
deve
lopm
ent
econom
ics w
ith c
lear
enhancem
ents
ove
r th
e s
tandard
pla
tform
-drilli
ng
packag
e p
lus t
he a
bili
ty t
o w
ork
in w
ate
r depth
s u
p t
o 6
500 ft.
C
orp
ora
te s
tra
teg
y,
div
ide
nd
an
d o
utl
oo
k
Gro
wth
an
d In
vestm
en
ts
We h
ave
in-lin
e w
ith o
ur
str
ate
gy
deve
loped a
modern
fle
et
of
hig
hly
adva
nced d
rilli
ng
units
thro
ug
h
new
build
ord
ers
and
sele
ctive
acq
uis
itio
ns
of
modern
assets
. W
e
are
curr
ently
in
a
str
ong
cy
cle
fo
r ultra
-deepw
ate
r m
ark
et
with
fixt
ure
s
in
the
reg
ion
of
US
$600,0
00 p
er
day a
nd h
ave
pro
ceeded a
ccord
ing
to o
ur
str
ate
gy
with t
he o
rdering
a
seve
nth
drills
hip
at
Sam
sung
and t
he p
endin
g a
cquis
itio
n o
f th
e S
ong
a E
clip
se,
wh
ich is a
2011 b
uilt
ultra
-deepw
ate
r sem
i-subm
ers
ible
rig
for
US
$590 m
illio
n.
The p
urc
hase o
f th
e
Song
a E
clip
se t
hro
ug
h a
subsid
iary
is e
xpecte
d t
o b
e f
inaliz
ed m
id-D
ecem
ber
2012.
We
have
receiv
ed s
eve
ral attra
ctive
off
ers
to f
inance this
rig
. T
he t
ransf
er
of
most
of
our
tender
rig
s t
o S
apura
Kencana i
s a
n a
ttra
ctive
opera
tional
solu
tion t
o e
nsure
that
the t
ender
rig
div
isio
n c
ontinues t
o g
row
. T
he c
ash
rele
ased in t
he
transact
ion
will
enable
us t
o inve
st
furt
her
in b
oth
the u
ltra
-deepw
ate
r and p
rem
ium
jack
-up segm
ents
. O
ur
curr
ent
inve
stm
ent
pro
gra
m w
ill enab
le us to
g
row
fu
ture
earn
ings
incre
ase o
ur
div
idend c
apacity.
W
e c
urr
ently
have
22 n
ew
bu
ilds u
nder
constr
uct
ion a
t a
tota
l all-
in c
ost
of
US
$7.5
bill
ion,
exc
lud
ing
AO
D,
bein
g d
eliv
ere
d b
etw
ee
n 2
012 a
nd 2
015
with th
e m
ajo
rity
of
deliv
eries in
2013 and 201
4.
Appro
xim
ate
ly U
S$1.6
bill
ion of
the
pro
ject
costs
have
already
been p
aid
.
A 44
P
ag
e 1
2
The B
oard
is
not satisf
ied w
ith t
he o
pera
tional perf
orm
ace in the third q
uart
er.
This
is
main
ly lin
ked t
o t
he 9
0 d
ays
of
off
-hire for
our
floate
rs,
whic
h t
o a
larg
e d
eg
ree w
as
cre
ate
d b
y m
anufa
ctu
ring f
ailu
res
on the s
ubsea e
quip
ment. T
he r
esults
are
furt
her
weakened b
y th
e c
om
merc
ial decis
ion t
o m
ove
West
Herc
ule
s a
nd W
est
Aq
uarius t
o n
ew
m
ark
ets
, and a
t th
e s
am
e t
ime u
se t
his
opport
unity
to g
o t
hro
ug
h fiv
e-y
ear
cla
ssific
ation
work
. T
ota
l tim
e b
etw
een d
rilli
ng
is e
xpecte
d t
o b
e a
ppro
xim
ate
ly 3
46 d
ays
for
West
H
erc
ule
s a
nd W
est
Aq
uarius,
of
whic
h 1
64 d
ays
have
occurr
ed in t
he t
hird q
uart
er.
This
tim
e inclu
des
transit, upgra
de w
ork
and d
rydock
ing,
and s
om
e o
f th
e tim
e w
ill b
e
com
pensate
d b
y th
e o
pera
tor.
The o
pera
tional perf
orm
ance s
o f
ar
in the fourt
h q
uart
er,
w
hile
still
bein
g im
pact
ed b
y th
e s
ubsea issues
exp
erienced in the third q
uart
er,
is tre
ndin
g
back t
o n
orm
al.
Dow
ntim
e f
or
the d
eepw
ate
r fleet opera
ting
so far
in t
he f
ourt
h q
uart
er
2012 is e
stim
ate
d to b
e 4
1 d
ays
. W
est
Alp
ha h
as
pro
long
ed its
yard
sta
y and c
om
menced
Octo
ber
19. T
hirte
en d
ays
of
zero
rate
was o
ccurr
ed in O
cto
ber.
The B
oard
anticip
ate
s a
sig
nific
ant im
pro
vem
ent in
the o
pera
ting r
esults in o
ur
fourt
h q
uart
er
2012 r
esults a
nd
exp
ects
continued im
pro
vem
ents
in r
esults
as furt
her
new
build
ing
s c
om
mence o
pera
tion
in t
he p
eriod 2
013 –
2015.
The B
oard
rem
ain
s v
ery
confident
about th
e w
ay
the C
om
pany
is p
ositio
ned,
and t
he
opport
unitie
s ahead o
f us. T
he s
hare
hold
ers
should
exp
ect
solid
opera
ting r
esults
and
hig
h d
ivid
end p
aym
ent
in t
he y
ears
to c
om
e.
Fo
rward
-Lo
ok
ing
Sta
tem
en
ts
This
report
conta
ins f
orw
ard
-lookin
g s
tate
ments
. T
hese s
tate
ments
are
based o
n v
arious
assum
ptions,
many
of
wh
ich are
based,
in tu
rn,
upon fu
rther
assum
ptions,
inclu
din
g
Seadrill
managem
ent’s e
xam
ination o
f his
torical opera
ting
tre
nds.
Inclu
din
g a
mong
oth
ers
, fa
cto
rs t
hat,
in S
eadrill’
s v
iew
, could
cause a
ctu
al re
sults t
o d
iffer
mate
rially
fro
m t
he f
orw
ard
lookin
g s
tate
ments
conta
ined in t
his
report
are
the f
ollo
win
g:
(i)
the
com
petitive
natu
re
of
the
off
shore
drilli
ng
in
dust
ry;
(ii)
oil
and
gas
prices;
(iii)
te
chnolo
gic
al
deve
lopm
ents
; (iv)
g
ove
rnm
ent
reg
ula
tions;
(v
) chang
es
in
econom
ical
conditio
ns o
r polit
ical
eve
nts
; (v
i) i
nabili
ty o
f S
eadrill
to o
bta
in f
inancin
g f
or
the n
ew
build
s or
exi
sting
assets
on f
avo
rable
term
s o
r at
all;
(vi
i) c
hang
es o
f th
e s
pendin
g p
lan o
f our
custo
mers
; (v
iii)
chang
es
in
Seadrill’
s
opera
ting
exp
enses
inclu
din
g
crew
w
ag
es;
(ix)
in
sura
nce;
(x)
dry
-dock
ing;
(xi)
repairs
and
main
tenance;
(xii)
fa
ilure
of
ship
yard
s
to
com
ply
w
ith
deliv
ery
schedule
s
on
a
tim
ely
basis
; (x
ii)
and
oth
er
import
ant
fact
ors
m
entioned f
rom
tim
e t
o t
ime in o
ur
report
s f
iled w
ith t
he U
nited S
tate
s S
ecurity
Exc
hang
e
Com
mis
sio
n (
“SE
C”)
and t
he O
slo
Sto
ck E
xchange.
Nove
mber
26, 2012
The B
oard
of
Directo
rs
Seadrill
Lim
ited
Ham
ilton,
Berm
uda
Questions
should
be d
irecte
d to S
eadrill
Manag
em
ent A
S r
epre
sente
d b
y:
Fre
drik H
alv
ors
en:
C
hie
f E
xecutive
Off
icer
and P
resid
ent
Rune M
ag
nus L
undetr
æ:
Chie
f F
inancia
l O
ffic
er
and S
enio
r V
ice P
resid
ent
P
ag
e 1
1
div
idend
by
US
$0.0
1
to
US
$0.8
5.
The
incre
ase
reflect
S
eadrill’
s
impro
ved
financia
l flexi
bili
ty a
nd t
he c
urr
ent
stro
ng m
ark
et
as
evi
denced b
y re
cent
fixt
ure
s. T
he B
oard
has
noticed th
at
a sig
nific
ant
part
of
Seadrill’
s U
.S.
share
hold
er
base m
ay
be
subje
ct
to
incre
ased d
ivid
end t
axa
tion f
or
2013,
pendin
g c
ert
ain
chang
es
in t
he U
.S.
tax
code.
In
vie
w o
f th
is,
the B
oard
has d
ecid
ed t
o a
ccele
rate
the d
ivid
end p
aym
ent
for
the f
ourt
h
quart
er
2012 s
uch t
hat
a d
ivid
end c
an
be p
aid
ou
t to
geth
er
with t
he t
hird q
uart
er
div
idend.
This
adva
nced div
idend
fo
r th
e f
ourt
h q
uart
er
2012 is
als
o set
to U
S$0.8
5.
The to
tal
div
idend p
aym
ent
due w
ill t
here
fore
be U
S$1,7
0 p
er
share
. T
he e
x. D
ivid
end d
ate
has
been s
et
to D
ecem
ber
4,
2012,
record
date
is D
ecem
ber
6,
2012,
and p
aym
ent
date
is o
n
or
about
Decem
ber
21,
2012.
In vi
ew
of
the accele
ration of
the fo
urt
h q
uart
er
2012
div
idend p
aym
ent,
no a
dditio
nal div
idend p
aym
ent
can b
e e
xpecte
d p
rior
to d
ecla
ration o
f a f
irst
quart
er
div
idend in 2
013.
Near-
term
pro
sp
ects
O
ur
curr
ent in
vestm
ent
pro
gra
m n
ow
tota
ls 2
2 u
nits u
nder
constr
uction. W
e h
ave
already
secure
d c
ontr
acts
for
14 o
f th
ese r
igs. W
ith p
ote
ntia
l sale
of
our
tender
rig fle
et,
we w
ill
receiv
e e
stim
ate
d funds o
f U
S$1.2
bill
ion.
These funds a
re n
ot
likely
to b
e d
istr
ibute
d a
s
ext
raord
inary
div
idends,
but
are
more
lik
ely
to b
e u
sed t
o s
upport
in
vestm
ents
, either
thro
ug
h n
ew
build
s o
r M
&A
in e
ither
the u
ltra-d
eepw
ate
r or
pre
miu
m jack
-up r
ig s
egm
ent.
The p
rem
ium
jack
-up r
ig s
egm
ent is
show
ing
str
ong s
igns o
f im
pro
ving
with incre
asin
g
daily
rate
s and long
er
dura
tion in the r
ecent
contr
acts
. In
Octo
ber,
we incre
ased o
ur
inve
stm
ent
in this
segm
ent
by
incre
asin
g o
ur
ow
ners
hip
sta
ke in A
OD
. W
e b
elie
ve t
he
jack
-up m
ark
et
will
continue t
o im
pro
ve furt
her,
especia
lly a
s c
lose to 7
0 p
erc
ent of
the
world
wid
e jack
-up f
leet
is o
lder
than 2
5 y
ears
O
ur
str
ate
gy
with a
hig
h d
ivid
end p
ayo
ut
and a
ggre
ssiv
e g
row
th t
hro
ug
h in
vestm
ents
in
modern
assets
has
deliv
ere
d s
uperior
retu
rns
to o
ur
share
hold
ers
. T
he B
oard
is p
leased
with t
he e
sta
blis
hm
ent of
SD
LP
as a
futu
re s
ourc
e f
or
gro
win
g t
he C
om
pany
furt
her.
SD
LP
can a
ct as
a v
ehic
le t
o g
row
the C
om
pany
at an a
ccele
rate
d p
ace a
s w
ell
as low
ering
the
curr
ent
cost of
capital f
or
Seadrill.
The B
oard
sees b
ased o
n the e
xisting a
sset
and
contr
act
port
folio
good o
pport
unitie
s fo
r S
DLP
to b
e o
ne o
f th
e fast
est g
row
ing
MLP
s in t
he
next
thre
e t
o f
ive y
ears
. W
e a
nnounced in O
cto
ber
that A
lf C
Thork
ildsen h
ad r
esig
ned a
s C
hie
f E
xecutive
Off
icer
of
Seadrill
Manag
em
ent A
S a
nd F
redrik H
alv
ors
en h
ad a
ssum
ed h
is r
esponsib
ilities.
The
Board
has
the u
tmost
confidence in M
r.H
alv
ors
en a
nd is s
ure
that
he w
ill m
anag
e the
Com
pany
successf
ully
thro
ug
h the c
urr
ent gro
wth
phase. T
he B
oard
has
als
o m
ade t
he
decis
ion t
o r
elo
cate
Seadrill
Manag
em
ent
AS
fro
m S
tava
ng
er
to L
ondon. T
his
relo
cation is
exp
ecte
d t
o r
eap c
ost benefits
ove
r tim
e.
How
eve
r, in t
he s
hort
-term
, g
enera
l and
adm
inis
trative
cost
will
in
cre
ase r
ela
ted t
o o
ne-o
ff c
osts
during
the m
anag
em
ent tr
ansitio
n
pro
cess.
All
senio
r m
anag
em
ent have
accepte
d a
n o
ffer
to m
ove
fro
m S
tava
ng
er
to
London d
uring
early
2013.
T
he B
oard
sees this
move
as a
n im
port
ant
step in p
reserv
ing
Seadrill’
s d
ynam
ic
org
aniz
ation a
nd e
nsure
that th
e incre
ased s
ize o
f th
e C
om
pany
does
not harm
the
entr
epre
nurial spirit
and d
irect d
ecis
ion m
akin
g p
rocess
thro
ug
h w
hic
h t
he c
om
pany
was
built
. O
ne o
f th
e m
ain
targ
ets
of th
e r
elo
cation is
to lim
it the s
ize o
f th
e c
orp
ora
te
org
aniz
ation a
nd inste
ad c
ontinue to b
uild
and s
trength
en the o
pera
tional e
xcelle
nce in t
he
reg
ional off
ices.
We v
ery
much b
elie
ve in b
uild
ing
reg
ional com
pete
nce c
ente
rs c
lose to
the o
pera
ting
activi
ties. T
he B
oard
anticip
ate
s th
at such a
n o
rganiz
ation w
ill b
e a
ble
to
work
bett
er
with o
ur
custo
mers
, pro
vide a
better
serv
ice,
have
tig
hte
r contr
ol, s
timula
te
opera
tional le
aders
hip
and o
ffer
more
dyn
am
ic w
ork
opport
unitie
s fo
r our
em
plo
yees. T
he
deve
lopm
ent
of
NA
DL,
Seabra
s, S
DLP
, and t
he n
ew
ow
ners
hip
str
uct
ure
of th
e tender
rig
s exe
mplif
ies this
model. T
he B
oard
is
continuously
monitoring
ways
to im
pro
ve t
he
opera
tional eff
icie
ncy,
, fu
rther
stre
ngth
en the s
afe
ty r
ecord
and g
et in
cre
ase
d c
ost
eff
icie
ncy.
Such o
pport
unitie
s m
ight in
clu
de f
urt
her
corp
ora
te s
egm
enta
tion in t
he f
utu
re.
A 45
2
Sea
dri
ll L
imit
ed
UN
AU
DIT
ED
CO
NS
OL
IDA
TE
D S
TA
TE
ME
NT
S O
F O
PE
RA
TIO
NS
fo
r th
e th
ree
mo
nth
per
iod
s a
nd
nin
e m
on
ths
per
iod
s en
ded
Sep
tem
ber
30
, 2
01
2 a
nd
201
1
(In
US
$ m
illi
on
s)
Thre
e mon
th p
erio
d
ende
d Se
p 30
, Ni
ne m
onth
per
iod
en
ded
Sep
30,
20
12
2011
20
12
2011
Ope
ratin
g re
venu
es
C
ontra
ct re
venu
es
1,05
6 1,
007
3,16
8 3,
055
R
eimbu
rsabl
es
33
24
95
74
Oth
er re
venu
es
2 (
2)
1 4
Tota
l ope
ratin
g rev
enue
s 1,
092
1,02
9 3,
264
3,13
3
Gai
n on
sale
of as
sets
0 23
0
23
O
pera
ting
expe
nses
Ves
sel a
nd ri
g ope
ratin
g exp
ense
s 42
3 36
7 1,
207
1,17
8
Reim
bursa
ble e
xpen
ses
30
22
88
69
D
epre
ciatio
n and
amor
tizati
on
161
132
452
423
G
ener
al an
d adm
inist
rativ
e exp
ense
s 65
51
16
6 14
6 To
tal o
pera
ting e
xpen
ses
679
572
1,91
3 1,
816
Ne
t ope
ratin
g inc
ome
413
480
1,35
1 1,
340
Fi
nanc
ial i
tem
s
Inter
est i
ncom
e 5
5 14
17
Inter
est e
xpen
ses
(102
) (6
4)
(249
) (2
21)
S
hare
in re
sults
from
asso
ciated
com
pani
es n
et of
tax
(38)
26
(5
) 62
Gain
/ (lo
ss) o
n de
rivati
ve fi
nanc
ial in
strum
ents
20
(330
) 15
(3
79)
F
oreig
n ex
chan
ge (l
oss)
(43)
(4
) (5
1)
(32)
Gain
on lo
ss of
cont
rol i
n su
bsid
iary
0 0
0 54
0
Gain
on re
aliza
tion o
f mar
ketab
le se
curit
ies
0 0
85
416
G
ain on
dec
line i
n own
ersh
ip in
teres
t 0
0 16
9 0
O
ther
fina
ncial
item
s 0
(6)
3 (6
) To
tal f
inan
cial i
tem
s (1
58)
(372
) (2
0)
397
(L
oss)/
inco
me b
efor
e inc
ome t
axes
25
5 10
8 1,
331
1,73
7
In
com
e tax
es
(39)
(5
0)
(124
) (1
48)
Net (
loss
)/inc
ome
216
58
1,20
7 1,
589
Ne
t inc
ome a
ttrib
utab
le to
the p
aren
t 18
9 35
1,
129
1,52
9 Ne
t inc
ome a
ttrib
utab
le to
the n
on-c
ontr
ollin
g int
eres
t 27
23
78
60
Basic
earn
ings
per
shar
e (US
$)
0.40
0.
07
2.41
3.
36
Dilu
ted
earn
ings
per
shar
e (US
$)
0.40
0.
07
2.36
3.
21
Decla
red
regu
lar d
ivid
end
per s
hare
(US$
) 0.
85
0.76
2.
51
2.26
De
clare
d ex
trao
rdin
ary
divi
dend
per
shar
e (US
$)
0.85
-
1.00
-
1 Se
adril
l Lim
ited
IN
DEX
TO U
NAUD
ITED
FIN
ANCI
AL S
TATE
MEN
TS
Unau
dited
Con
solid
ated S
tatem
ents
of O
pera
tions
for t
he th
ree a
nd n
ine
mon
ths e
nded
Sep
tembe
r 30,
2012
and 2
011
Pa
ge 2
Unau
dited
Con
solid
ated S
tatem
ents
of C
ompr
ehen
sive I
ncom
e for
the
thre
e and
nin
e mon
ths e
nded
Sep
tembe
r 30,
2012
and 2
011
Pa
ge 3
Unau
dited
Con
solid
ated B
alanc
e She
ets as
of S
eptem
ber 3
0, 20
12 an
d De
cem
ber 3
1, 20
11
Page
4
Unau
dited
Con
solid
ated S
tatem
ents
of C
ash F
lows
for t
he ni
ne m
onth
s en
ded
Sept
embe
r 30,
2012
and 2
011
Page
5
Unau
dited
Con
solid
ated S
tatem
ents
of C
hang
es in
Sha
reho
lder
s’ Eq
uity
fo
r the
nine
mon
ths e
nded
Sep
tembe
r 30,
2012
Pa
ge 7
Notes
to U
naud
ited F
inan
cial S
tatem
ents
Pa
ge 8
A 46
4
Sead
rill L
imite
d U
NA
UD
ITE
D C
ON
SO
LID
AT
ED
BA
LA
NC
E S
HE
ET
(In
US
$ m
illi
on
s)
ASSE
TS
Sept
embe
r 30,
2012
De
cem
ber 3
1, 20
11
Curr
ent a
sset
s
Cas
h an
d cas
h eq
uiva
lents
518
483
Res
tricte
d cas
h 15
1 23
2
M
arke
table
secu
rities
24
6 24
Acc
ount
s rec
eivab
les, n
et 83
5 72
0
A
mou
nt d
ue fr
om re
lated
party
21
3 18
5
O
ther
curre
nt as
sets
335
323
To
tal c
urre
nt as
sets
2,29
8 1,
967
Non-
curr
ent a
sset
s
Inve
stmen
t in
asso
ciated
com
pani
es
658
721
New
build
ings
1,
629
2,53
1
Dril
ling u
nits
12
,956
11
,223
Goo
dwill
1,
320
1,32
0
Res
tricte
d cas
h 23
1 25
0
D
efer
red t
ax as
sets
31
33
E
quip
men
t 38
25
Am
ount
due
from
relat
ed pa
rty
0 0
O
ther
non
-cur
rent
asse
ts 31
8 23
4
Tota
l non
-cur
rent
asse
ts 17
,181
16
,337
To
tal a
sset
s 19
,479
18
,304
LI
ABIL
ITIE
S AN
D EQ
UITY
Cu
rren
t lia
bilit
ies
C
urre
nt po
rtion
of lo
ng-te
rm d
ebt
1,
523
1,41
9
Tra
de ac
coun
ts pa
yabl
e 62
38
Sho
rt-ter
m d
efer
red
taxes
6
10
S
hort-
term
deb
t to
relat
ed p
arty
14
19
Oth
er cu
rrent
liab
ilitie
s 1,
291
1,28
5 To
tal c
urre
nt li
abili
ties
2,89
6 2,
771
Non-
curr
ent l
iabi
lities
Lon
g-ter
m in
teres
t bea
ring d
ebt
9,29
6 8,
574
L
ong-
term
deb
t to r
elated
party
43
5 43
5
D
efer
red t
axes
19
34
Oth
er n
on-c
urre
nt li
abili
ties
266
188
To
tal n
on-c
urre
nt li
abili
ties
10,0
16
9,23
1 Eq
uity
Com
mon
shar
es o
f par
valu
e US$
2.00
per s
hare
:
800,
000,0
00 sh
ares
auth
orize
d
46
9,12
1,774
outst
andi
ng at
Sep
tembe
r 30,
2012
(D
ecem
ber,
31 20
11: 4
67,7
72,17
4 )
938
935
Add
ition
al pa
id in
capi
tal
2,19
4 2,
097
C
ontri
buted
surp
lus
1,95
6 1,
956
A
ccum
ulate
d ot
her c
ompr
ehen
sive i
ncom
e 12
4 (5
)
Acc
umul
ated
earn
ings
90
5 99
4
Equi
ty a
ttrib
utab
le to
the p
aren
t 6,
117
5,97
7
Non
-con
trolli
ng in
teres
t 45
0 32
5
Tota
l equ
ity
6,56
7 6,
302
Tota
l lia
bilit
ies a
nd eq
uity
19
,479
18
,304
3 Se
adril
l Lim
ited
UN
AU
DIT
ED
CO
NS
OL
IDA
TE
D S
TA
TE
ME
NT
S O
F C
OM
PR
EH
EN
SIV
E I
NC
OM
E
fo
r th
e th
ree
an
d n
ine
mo
nth
per
iod
s en
ded
Sep
tem
ber
30
, 2
012
an
d 2
011
(In
US
$ m
illi
on
s)
Thre
e mon
th p
erio
d en
ded
Se
ptem
ber 3
0,
Nine
mon
th p
erio
d en
ded
Se
ptem
ber 3
0,
20
12
2011
20
12
2011
Net (
loss
)/ in
com
e 21
6 58
1,2
07
1,589
Othe
r com
preh
ensiv
e inc
ome/
(loss
), ne
t of t
ax:
C
hang
e in
unre
alize
d ga
in/ (
loss
) on
mar
ketab
le se
curit
ies
20
(1)
118
(292
)
Cha
nge i
n un
reali
zed
fore
ign
exch
ange
diffe
renc
es
12
5 12
33
Cha
nge i
n un
reali
zed
gain
/ (lo
ss) r
elatin
g to
pens
ion
(1
) 0
(1)
1
Dec
onso
lidati
on o
f sub
sidiar
ies
0 0
0 (6
3)
C
hang
e in
unre
alize
d ga
in/ (
loss
) on
inter
est r
ate sw
aps i
n VI
Es
6 5
17
13
Oth
er co
mpr
ehen
sive i
ncom
e/ (lo
ss):
37
9 14
6 (3
08)
To
tal c
ompr
ehen
sive (
loss
)/inc
ome f
or th
e per
iod
253
67
1,353
1,2
81
Co
mpr
ehen
sive i
ncom
e attr
ibut
able
to th
e non
-con
trol
ling
inte
rest
6 28
68
83
Co
mpr
ehen
sive (
loss
)/inc
ome a
ttrib
utab
le to
the p
aren
t 24
7 39
1,2
85
1,198
See a
ccom
pany
ing n
otes
that
are a
n int
egra
l par
t of t
hese
Con
solid
ated F
inan
cial S
tatem
ents.
A 47
6
Sea
dri
ll L
imit
ed
UN
AU
DIT
ED
CO
NS
OL
IDA
TE
D S
TA
TE
ME
NT
OF
CA
SH
FL
OW
S
for
the
nin
e m
on
th p
erio
ds
end
ed S
epte
mb
er 3
0, 2
012
an
d 2
01
1
(In
US
$ m
illi
on
s)
20
12
2011
Ca
sh F
lows
from
Inve
sting
Act
iviti
es
A
dditi
ons t
o ne
wbui
ldin
gs
(1,0
91)
(1,8
43)
A
dditi
ons t
o rig
s and
equi
pmen
t (2
43)
(133
)
Sale
of ri
gs an
d eq
uipm
ent
0 24
5
Sett
lemen
t of d
isput
es w
ith sh
ip ya
rd
38
0
Cha
nge i
n m
argi
n call
s and
othe
r res
tricte
d ca
sh
116
(68)
Pur
chas
e of m
arke
table
secu
rities
(1
9)
0
Inve
stmen
t in
subs
idiar
ies, n
et of
cash
acqu
ired
0 (2
6)
C
ash
deco
nsol
idate
d upo
n lo
ss of
cont
rol i
n su
bsid
iary
0 (1
27)
In
vestm
ent i
n as
socia
ted co
mpa
nies
(7
4)
(221
)
Disp
osal
of as
socia
ted co
mpa
nies
65
0
L
ong t
erm
loan
gran
ted to
relat
ed p
artie
s (2
0)
0
Rep
aym
ent o
f loa
n gr
anted
to re
lated
parti
es
20
0
Pro
ceed
s fro
m re
aliza
tion o
f mar
ketab
le se
curit
ies
219
141
Net c
ash
used
in in
vesti
ng a
ctiv
ities
(9
89)
(2,0
32)
Ca
sh F
lows
from
Fin
ancin
g Act
iviti
es
P
roce
eds f
rom
deb
t 3,
160
4,94
6
Rep
aym
ents
of d
ebt
(2,3
65)
(3,7
16)
D
ebt f
ees p
aid
(29)
(3
4)
P
roce
eds f
rom
deb
t to r
elated
party
48
7 0
R
epay
men
ts of
deb
t to
relat
ed p
arty
(4
87)
0
Con
tribu
tion
(to) /
from
non
-con
trolli
ng in
teres
ts (3
6)
(71)
Con
tribu
tion
from
non-
cont
rolli
ng in
teres
ts re
lated
to pr
ivate
plac
emen
t 14
7 41
8
Pur
chas
e of t
reas
ury s
hare
s 0
(130
)
Pro
ceed
s fro
m sa
le of
trea
sury
shar
es
15
12
D
ivid
ends
paid
(1
,217
) (1
,080
) Ne
t cas
h us
ed b
y fin
ancin
g ac
tiviti
es
(325
) 34
5
Effe
ct of
exch
ange
rate
chan
ges o
n ca
sh an
d cas
h eq
uiva
lents
0 7
Ne
t inc
reas
e / (d
ecre
ase)
in ca
sh a
nd ca
sh eq
uiva
lents
35
(2
91)
Cash
and c
ash
equi
valen
ts at
begi
nnin
g of t
he y
ear
483
755
Cash
and
cash
equi
valen
ts at
the e
nd of
per
iod
518
464
Su
pplem
enta
ry d
isclo
sure
of c
ash
flow
info
rmat
ion
In
teres
t paid
, net
of ca
pital
ized i
nter
est
(245
) (2
02)
T
axes
paid
(1
27)
(97)
S
ee a
ccom
pa
nyi
ng n
ote
s th
at
are
an i
nte
gra
l part
of
thes
e C
onso
lid
ate
d F
ina
nci
al
Sta
tem
ents
.
5
S
ead
rill
Lim
ited
UN
AU
DIT
ED
CO
NS
OL
IDA
TE
D S
TA
TE
ME
NT
OF
CA
SH
FL
OW
S
for
the
nin
e m
on
th p
erio
ds
end
ed S
epte
mb
er 3
0, 2
012
an
d 2
01
1
(In
US
$ m
illi
on
s)
Ni
ne m
onth
per
iod
ende
d Se
ptem
ber 3
0,
20
12
2011
Ca
sh F
lows
from
Ope
ratin
g Ac
tiviti
es
Net
inco
me/
(loss
) 1,
207
1,58
9 Ad
justm
ents
to re
conc
ile n
et in
com
e to n
et ca
sh pr
ovid
ed b
y op
erati
ng
ac
tiviti
es:
D
epre
ciatio
n and
amor
tizati
on
452
423
A
mor
tizati
on of
def
erre
d lo
an ch
arge
s 22
25
Am
ortiz
ation
of u
nfav
orab
le co
ntra
cts
0 (2
1)
A
mor
tizati
on of
favo
rabl
e con
tracts
9
18
A
mor
tizati
on of
mob
iliza
tion r
even
ue
(115
) (6
8)
S
hare
of re
sults
from
asso
ciate
d com
pani
es
5 (6
2)
S
hare
-bas
ed co
mpe
nsati
on ex
pens
e 4
8
Unr
ealiz
ed (g
ain)/
loss
relat
ed to
der
ivati
ve fi
nanc
ial in
strum
ents
8 31
0
Div
iden
d rec
eived
from
asso
ciated
com
pany
17
38
Def
erre
d in
com
e tax
expe
nse
0 55
Unr
ealiz
ed fo
reig
n ex
chan
ge lo
ss (g
ain) o
n lo
ng te
rm in
teres
t bea
ring d
ebt
4 2
G
ain on
disp
osal
of fi
xed
asse
ts 0
(23)
Gain
on di
spos
al of
othe
r inv
estm
ents
(86)
0
N
on ca
sh ga
in re
cogn
ized
relat
ed to
reali
zatio
n of m
arke
table
secu
rities
0
(416
)
Non
cash
gain
reco
gnize
d re
lated
to lo
ss of
cont
rol i
n sub
sidiar
y 0
(540
)
Gain
on d
eclin
e in o
wner
ship
inter
est
(169
) 0
Chan
ges i
n op
erat
ing
asse
ts an
d lia
bilit
ies, n
et of
effe
ct of
acq
uisit
ions
Unr
ecog
nize
d m
obili
zatio
n fe
es re
ceiv
ed fr
om cu
stom
ers
203
37
T
rade
acco
unts
rece
ivab
le
(115
) (1
6)
T
rade
acco
unts
paya
ble
24
(39)
Pre
paid
expe
nses
/accr
ued r
even
ue
(9)
104
O
ther
, net
(112
) (3
5)
Net c
ash
prov
ided
by
oper
atin
g ac
tiviti
es
1,34
9 1,
389
A 48
8
Note
1- G
ener
al in
form
atio
n Se
adril
l Lim
ited
(“we
”, “th
e Com
pany
”, or
“our
”) is
a pu
blicl
y lis
ted co
mpa
ny o
n th
e New
Yor
k St
ock
Exch
ange
and
the O
slo S
tock
Exc
hang
e. W
e wer
e inc
orpo
rated
in B
erm
uda i
n M
ay 2
005.
As
sisted
by
the
acqu
isitio
n of
oth
er c
ompa
nies
and
inv
estm
ent
in n
ewbu
ildin
gs,
we h
ave
deve
lope
d in
to an
inter
natio
nal o
ffsho
re d
rillin
g co
ntra
ctor p
rovi
ding
serv
ices w
ithin
dril
ling
and
well
serv
ices,
and
as o
f Sep
tembe
r 30,
2012
we
owne
d an
d op
erate
d 43
offs
hore
dril
ling
units
, an
d ha
ve ad
ditio
nally
19
units
und
er c
onstr
uctio
n. Ou
r ver
satil
e flee
t con
sists
of d
rillsh
ips,
jack-
up ri
gs, s
emi-s
ubm
ersib
le rig
s and
tend
er ri
gs fo
r ope
ratio
ns in
shall
ow a
nd d
eepw
ater a
reas
, as
well
as b
enig
n and
harsh
envi
ronm
ents.
As
used
here
in, a
nd un
less o
ther
wise
requ
ired b
y the
cont
ext,
the t
erm
“Sea
drill
” ref
ers t
o Se
adril
l Li
mite
d an
d th
e ter
ms
“Com
pany
”, “w
e”, “
Grou
p”, “
our”
and
wor
ds o
f sim
ilar i
mpo
rt re
fer t
o Se
adril
l and
its c
onso
lidate
d co
mpa
nies
. The
use
her
ein o
f suc
h ter
ms a
s gro
up, o
rgan
izatio
n, we
, us
, our
and
its,
or re
fere
nces
to s
pecif
ic en
tities
, is
not i
nten
ded
to b
e a
prec
ise d
escr
iptio
n of
co
rpor
ate re
latio
nshi
ps.
Basis
of p
rese
ntat
ion
The
unau
dited
inter
im c
onso
lidate
d fin
ancia
l stat
emen
ts ar
e sta
ted in
acc
orda
nce
with
gen
erall
y ac
cept
ed a
ccou
ntin
g pr
incip
les in
the
Unite
d St
ates
of A
mer
ica (
US G
AAP)
. The
una
udite
d in
terim
con
solid
ated
finan
cial
statem
ents
do n
ot i
nclu
de a
ll of
the
disc
losu
res
requ
ired
in
com
plete
ann
ual
finan
cial
statem
ents.
The
se i
nter
im f
inan
cial
statem
ents
shou
ld b
e re
ad i
n co
njun
ction
with
our
fin
ancia
l stat
emen
ts as
at D
ecem
ber
31, 2
011.
The
year
-end
con
dens
ed
balan
ce s
heet
data
that
was
deriv
ed f
rom
aud
ited
finan
cial
statem
ents
does
not
inc
lude
all
disc
losu
res r
equi
red
by ac
coun
ting
prin
ciples
gen
erall
y ac
cept
ed in
the U
nited
Stat
es o
f Am
erica
. In
the o
pini
on o
f man
agem
ent,
all ad
justm
ents
(con
sistin
g of n
orm
al re
curri
ng ac
cruals
) con
sider
ed
nece
ssar
y for
a fai
r stat
emen
t hav
e bee
n inc
lude
d. Si
gnifi
cant
acco
untin
g pol
icies
Th
e ac
coun
ting
polic
ies a
dopt
ed in
the
prep
arati
on o
f the
una
udite
d in
terim
fina
ncial
state
men
ts ar
e co
nsist
ent
with
tho
se f
ollo
wed
in t
he p
repa
ratio
n of
our
ann
ual
cons
olid
ated
finan
cial
statem
ents
and a
ccom
pany
ing n
otes
for t
he ye
ar en
ded D
ecem
ber 3
1, 20
11.
7
Sead
rill L
imite
d
UN
AU
DIT
ED
CO
NS
OL
IDA
TE
D S
TA
TE
ME
NT
OF
CH
AN
GE
S I
N E
QU
ITY
fo
r th
e n
ine
mo
nth
s en
ded
Sep
tem
ber
30
, 2
01
2
(In
US
$ m
illi
on
s)
Sh
are
Capi
tal
Addi
tiona
l pa
id-in
ca
pita
l Co
ntrib
uted
su
rplu
s Ac
cum
ulat
ed
OCI
Re
tain
ed
earn
ings
NC
I To
tal
equi
ty
Balan
ce at
Dec
embe
r 31,
201
1 93
5 2,
097
1,95
6 (5
) 99
4 32
5
6,30
2 Sa
le of
trea
sury
shar
es
3 12
15
Pu
rcha
se of
trea
sury
shar
es
0 Em
ploy
ee st
ock
optio
ns is
sued
4
4
Priv
ate pl
acem
ent i
n sub
sidiar
y
84
66
15
0 Co
sts re
lated
to ca
pital
incr
ease
in su
bsid
iary
(3
)
(3
)
Othe
r com
preh
ensiv
e inc
ome
12
9
17
146
Divi
dend
paym
ent
(1,21
7)
(36)
(1
,253)
Di
vide
nd p
aid t
o No
n-co
ntro
lling
int
eres
ts in
VI
E
0
Shar
es pu
rcha
sed
from
non
cont
rolli
ng in
teres
ts
0
Deco
nsol
idati
on o
f sub
sidiar
ies
0 In
duce
d co
nver
sion
of co
nver
tible
bond
s
0
Net i
ncom
e
1,
129
78
1,20
7 Ba
lanc
e at S
epte
mbe
r 30,
2012
93
8 2,
194
1,95
6 12
4 90
5 45
0 6,
567
U
NA
UD
ITE
D C
ON
SO
LID
AT
ED
ST
AT
EM
EN
T O
F C
HA
NG
ES
IN
EQ
UIT
Y
for
the
nin
e m
on
ths
end
ed S
epte
mb
er 3
0, 2
01
1
(In
mil
lio
ns
of
US
$)
Sh
are
Capi
tal
Addi
tiona
l pa
id-in
ca
pita
l Co
ntrib
uted
su
rplu
s Ac
cum
ulat
ed
OCI
Re
tain
ed
earn
ings
NC
I To
tal
equi
ty
Balan
ce at
Dec
embe
r 31,
201
0 88
6
1,21
7 1,
956
323
1,016
53
9 5,
937
Sale
of tr
easu
ry sh
ares
1
11
12
Pu
rcha
se of
trea
sury
shar
es
(6)
(119
)
(5)
(130
) Em
ploy
ee st
ock
optio
ns is
sued
8
8
Priv
ate pl
acem
ent i
n sub
sidiar
y
307
11
8 42
5 Co
sts re
lated
to ca
pital
incr
ease
in su
bsid
iary
(7
)
(7
) (U
n)re
alize
d ga
in/(l
oss)
on m
arke
table
secu
rities
(292
)
(2
92)
Fore
ign
exch
ange
diff
eren
ces
23
10
33
Chan
ge in
unr
ealiz
ed (l
oss)
on in
teres
t rate
swap
s in
VIE
s
13
13
Chan
ge in
unr
ealiz
ed (l
oss)
on in
teres
t rate
swap
s in
subs
idiar
ies
1
1 Di
vide
nd pa
ymen
t
(1
,071
) (9
) (1
,080)
Di
vide
nd pa
id to
Non
-con
trolli
ng in
teres
ts in
VIE
(23)
(2
3)
Paid
to N
on-c
ontro
lling
inter
est i
n VIE
(4)
(4
4)
(48)
De
cons
olid
ation
of s
ubsid
iary
(6
3)
(3
30)
(393
) In
duce
d co
nver
sion
of co
nver
tible
bond
s 53
67
4
72
7 Ne
t inc
ome
1,529
60
1,
589
Bala
nce a
t Sep
tem
ber 3
0, 20
11
934
2,
087
1,95
6 (8
) 1,4
74
329
6,77
2 S
ee a
ccom
pa
nyi
ng n
ote
s th
at
are
an i
nte
gra
l part
of
thes
e C
onso
lid
ate
d F
ina
nci
al
Sta
tem
ents
.
A 49
No
tes
to t
he
un
audit
ed c
onso
lid
ate
d f
inan
cial
sta
tem
ents
10
Tend
er ri
gs: W
e of
fer s
ervi
ces e
ncom
pass
ing
drill
ing,
com
pleti
on a
nd m
ainten
ance
of o
ffsho
re
prod
uctio
n we
lls in
Sou
thea
st As
ia, W
est A
frica
and
the A
mer
icas.
The d
rillin
g con
tracts
relat
e to
self-
erec
ting t
ende
r rig
s and
sem
i-sub
mer
sible
tende
r rig
s. Se
gmen
t res
ults
are e
valu
ated
on th
e bas
is of
ope
ratin
g pr
ofit,
and
the i
nfor
mati
on g
iven
belo
w is
base
d on
info
rmati
on u
sed
for i
nter
nal r
epor
ting.
The a
ccou
ntin
g pr
incip
les fo
r the
segm
ents
are
the s
ame a
s for
our
cons
olid
ated f
inan
cial s
tatem
ents.
C
on
tra
ct r
even
ues
(In
US
$ m
illi
on
s )
Thre
e mon
ths e
nded
Se
ptem
ber 3
0,
Nine
mon
ths e
nded
Se
ptem
ber 3
0,
2012
2011
201
2
201
1 Fl
oater
s 67
4 67
3 2,
049
1,937
Ja
ck-u
p rig
s 20
3 18
8 58
8 58
2 Te
nder
rigs
17
8 14
6 53
0 40
9 W
ell S
ervi
ces *
-
0 -
127
Total
1,0
56
1,00
7 3,
168
3,055
* R
epre
sent
s the
activ
ity u
p to t
he ti
me o
f dec
onso
lidati
on in
Feb
ruar
y 201
1. D
epre
cia
tion
an
d a
mo
rtiz
ati
on
(In
US
$ m
illi
on
s )
Thre
e mon
ths e
nded
Se
ptem
ber 3
0,
Nine
mon
ths e
nded
Se
ptem
ber 3
0,
2012
2011
201
2
201
1 Fl
oater
s 10
7 89
30
2 26
3 Ja
ck-u
p rig
s 39
31
10
7 10
2 Te
nder
rigs
15
12
42
51
W
ell S
ervi
ces*
-
0 -
7 To
tal
161
132
452
423
* Rep
rese
nts t
he ac
tivity
up t
o the
tim
e of d
econ
solid
ation
in F
ebru
ary 2
011.
Op
era
tin
g i
nco
me
- n
et i
nco
me
(In
US
$ m
illi
on
s )
Thre
e mon
ths e
nded
Se
ptem
ber 3
0,
Nine
mon
ths e
nded
Se
ptem
ber 3
0,
2012
2011
201
2
201
1 Fl
oater
s 28
2 34
9 94
6 1,0
02
Jack
-up r
igs
47
71
173
184
Tend
er ri
gs
84
60
233
149
Well
Ser
vice
s*
- 0
- 5
Oper
ating
inco
me
413
480
1,35
1 1,3
40
U
na
llo
cate
d i
tem
s:
Total
fina
ncial
item
s (1
58)
(372
) (2
0)
397
Inco
me t
axes
(3
9)
(50)
(1
24)
(148
) Ne
t inc
ome
216
58
1,20
7 1,5
89
* Rep
rese
nts t
he ac
tivity
up t
o the
tim
e of d
econ
solid
ation
in F
ebru
ary 2
011.
No
tes
to t
he
un
audit
ed c
onso
lid
ate
d f
inan
cial
sta
tem
ents
9
Note
2 —
Rec
ent A
ccou
ntin
g Pro
noun
cem
ents
R
ecen
tly
Ad
opte
d A
cco
un
tin
g S
tan
dard
s In
tangi
bles
-goo
dwill
and
othe
r—Ef
fecti
ve Ja
nuar
y 1, 2
012,
we ad
opted
the a
ccou
ntin
g sta
ndar
ds
upda
te th
at am
ends
the
good
will
impa
irmen
t tes
ting
requ
irem
ents
by g
ivin
g an
ent
ity th
e op
tion
to fi
rst as
sess
qua
litati
ve fa
ctors
to d
eterm
ine
wheth
er th
e ex
isten
ce o
f eve
nts
or c
ircum
stanc
es
leads
to a
deter
min
ation
that
it is
mor
e lik
ely th
an n
ot th
at th
e fair
valu
e of a
repo
rting
uni
t is l
ess
than
its
carry
ing
amou
nt a
nd w
heth
er th
e tw
o-ste
p im
pairm
ent t
est i
s re
quire
d. T
he u
pdate
is
effe
ctive
for g
oodw
ill im
pairm
ent t
ests
perfo
rmed
for a
nnua
l and
inter
im p
erio
ds b
egin
ning
after
De
cem
ber 1
5, 20
11. O
ur ad
optio
n di
d no
t hav
e an
effe
ct on
our
cond
ense
d co
nsol
idate
d fin
ancia
l sta
temen
ts be
caus
e a
good
will
impa
irmen
t tes
t wa
s no
t re
quire
d in
the
nin
e mon
ths
ende
d Se
ptem
ber 3
0, 20
12.
Fair
valu
e m
easu
rem
ents—
Effe
ctive
Jan
uary
1,
2012
, we
ado
pted
the
acc
ount
ing
stand
ards
up
date
that
requ
ires a
dditi
onal
disc
losu
re a
bout
fair
valu
e m
easu
rem
ents
that
invo
lve
signi
fican
t un
obse
rvab
le in
puts,
inclu
ding
addi
tiona
l qua
ntita
tive i
nfor
mati
on ab
out t
he u
nobs
erva
ble i
nput
s, a d
escr
iptio
n of
valu
ation
tech
niqu
es u
sed,
and
a qua
litati
ve ev
aluati
on o
f the
sens
itivi
ty o
f the
se
mea
sure
men
ts. O
ur a
dopt
ion
did
not h
ave
a m
ateria
l effe
ct on
the
disc
losu
res c
ontai
ned
in o
ur
notes
to co
nden
sed c
onso
lidate
d fin
ancia
l stat
emen
ts.
Rec
entl
y Is
sued
Acc
ou
nti
ng
Sta
ndard
s Ba
lance
she
et—Ef
fecti
ve J
anua
ry 1
, 201
3, we
will
ado
pt th
e ac
coun
ting
stand
ards
upd
ate th
at ex
pand
s the
disc
losu
re re
quire
men
ts fo
r the
offs
ettin
g of
ass
ets a
nd li
abili
ties r
elated
to c
ertai
n fin
ancia
l ins
trum
ents
and
deriv
ative
instr
umen
ts. T
he u
pdate
requ
ires d
isclo
sure
s to
pres
ent b
oth
gros
s in
form
ation
and
net
info
rmati
on fo
r fin
ancia
l ins
trum
ents
and
deriv
ative
instr
umen
ts th
at ar
e elig
ible
for n
et pr
esen
tatio
n due
to a
right
of of
fset,
an en
forc
eabl
e mas
ter ne
tting
arra
ngem
ent
or si
mila
r agr
eem
ent.
The
upda
te is
effe
ctive
for i
nter
im an
d an
nual
perio
ds b
egin
ning
on
or af
ter
Janu
ary 1
, 201
3. W
e do
not e
xpec
t tha
t our
adop
tion w
ill ha
ve a
mate
rial e
ffect
on ou
r con
dens
ed
cons
olid
ated
balan
ce s
heet
or th
e di
sclo
sure
s con
taine
d in
our
not
es to
con
dens
ed c
onso
lidate
d fin
ancia
l stat
emen
ts.
Note
3– S
egm
ent i
nfor
mat
ion
Op
era
tin
g s
egm
ents
W
e pro
vide
offsh
ore d
rillin
g ser
vice
s to t
he oi
l and
gas i
ndus
try. O
ur b
usin
ess h
as be
en or
gani
zed
into
seg
men
ts ba
sed
on
diffe
renc
es
in
man
agem
ent
struc
ture
an
d re
porti
ng,
econ
omic
char
acter
istics
, cus
tom
er b
ase,
asse
t clas
s an
d co
ntra
ct str
uctu
re. W
e cu
rrent
ly o
pera
te in
the
follo
wing
thre
e seg
men
ts:
Floa
ters:
We
offe
r se
rvice
s en
com
pass
ing
drill
ing,
com
pleti
on a
nd m
ainten
ance
of
offsh
ore
expl
orati
on an
d pro
ducti
on w
ells.
The d
rillin
g con
tracts
relat
e to s
emi-s
ubm
ersib
le rig
s and
drill
ship
s for
harsh
and b
enig
n env
ironm
ents
in m
id-,
deep
- and
ultra
-dee
p wa
ters.
Jack
-up
rigs:
We
offe
r ser
vice
s enc
ompa
ssin
g dr
illin
g, co
mpl
etion
and
main
tenan
ce o
f offs
hore
ex
plor
ation
and
pro
ducti
on w
ells.
The
drill
ing
cont
racts
relat
e to
jack
-up
rigs
for o
pera
tions
in
harsh
and b
enig
n env
ironm
ent.
A 50
No
tes
to t
he
un
audit
ed c
onso
lid
ate
d f
inan
cial
sta
tem
ents
12
Note
5 – T
axat
ion
Inco
me t
axes
cons
ist of
the f
ollo
wing
:
(In m
illi
on
s of
US
doll
ar)
Thre
e mon
th
perio
d en
ded
Sept
embe
r 30,
20
12
Thre
e mon
th
perio
d en
ded
Se
ptem
ber 3
0,
2011
Cu
rrent
tax e
xpen
se:
Ber
mud
a
-
- F
oreig
n
23
52
Defe
rred
tax ex
pens
e:
B
erm
uda
-
-
For
eign
14
(4)
Def
erre
d tax
es ac
quire
d dur
ing
the y
ear
Tax
rela
ted t
o in
terna
l sa
le of
ass
ets i
n su
bsid
iary,
am
ortiz
ed f
or
grou
p pu
rpos
es
2
2
Total
pro
visio
n
39
50
Ef
fecti
ve ta
x rate
15.3
%
46
.3%
(In m
illi
on
s of
US
doll
ar)
Nine
mon
th
perio
d en
ded
Se
ptem
ber 3
0,
2012
Nine
mon
th
perio
d en
ded
Se
ptem
ber 3
0,
2011
Cu
rrent
tax e
xpen
se:
Ber
mud
a
-
- F
oreig
n
110
23
4
Defe
rred
tax ex
pens
e:
Ber
mud
a
-
- F
oreig
n
9
1
Def
erre
d tax
es ac
quire
d dur
ing
the y
ear
Tax
rela
ted t
o in
terna
l sa
le of
ass
ets i
n su
bsid
iary,
am
ortiz
ed f
or
grou
p pu
rpos
es
5
(8
7)
Total
pro
visio
n
124
14
8 Ef
fecti
ve ta
x rate
9.3 %
8.5%
Th
e Co
mpa
ny, i
nclu
ding
its
subs
idiar
ies, i
s tax
able
in s
ever
al ju
risdi
ction
s ba
sed
on i
ts rig
op
erati
ons.
A lo
ss i
n on
e ju
risdi
ction
may
not
be
offse
t ag
ainst
taxab
le in
com
e in
ano
ther
ju
risdi
ction
. Thu
s, th
e Com
pany
may
pay
tax
with
in so
me j
urisd
ictio
ns ev
en th
ough
it m
ight
have
an
ove
rall
loss
at th
e con
solid
ated l
evel.
Th
e in
com
e tax
es fo
r the
thre
e an
d ni
ne m
onth
s en
ded
Sept
embe
r 30,
2012
and
201
1 di
ffere
d fro
m th
e am
ount
com
puted
by a
pply
ing t
he st
atuto
ry in
com
e tax
rate
of 0
% as
follo
ws:
(In m
illi
on
s of
US
doll
ar)
Thre
e mon
th
perio
d en
ded
Sept
embe
r 30,
20
12
Thre
e mon
th
perio
d en
ded
Sept
embe
r 30,
20
11
Inco
me t
axes
at st
atuto
ry ra
te
-
- Ef
fect
of tr
ansfe
rs to
new
tax
juris
dicti
ons
2
(8
0)
Effe
ct of
chan
ge in
taxa
ble c
urre
ncy
-
-
Effe
ct of
taxa
ble i
ncom
e in
vario
us co
untri
es
37
130
Total
39
50
No
tes
to t
he
un
audit
ed c
onso
lid
ate
d f
inan
cial
sta
tem
ents
11
Tota
l A
sset
s
(In
US
$ m
illi
on
s )
Sept
embe
r 30,
20
12
Dece
mbe
r 31,
2
011
Floa
ters
13,6
60
12,6
00
Jack
-up r
igs
4,23
2 4,
200
Tend
er ri
gs
1,58
7 1,
504
Total
19
,479
18
,304
No
te 4
– Ear
ning
s per
shar
e Th
e com
putat
ion
of b
asic
earn
ings
per
shar
e (“E
PS”)
is b
ased
on th
e weig
hted
aver
age n
umbe
r of
shar
es o
utsta
ndin
g du
ring
the p
erio
d. Di
luted
EPS
inclu
des t
he ef
fect
of th
e ass
umed
conv
ersio
n of
pot
entia
lly d
ilutiv
e ins
trum
ents.
Th
e com
pone
nts o
f the
num
erato
r for
the c
alcul
ation
of b
asic
and d
iluted
EPS
are a
s fol
lows
: (I
n U
S$
mil
lio
ns)
Th
ree m
onth
s end
ed
Sept
embe
r 30,
Ni
ne m
onth
s end
ed
Sept
embe
r 30,
2012
201
1
2012
2011
Ne
t (lo
ss)/
inco
me a
vaila
ble t
o sto
ckho
lder
s 18
9 35
1,
129
1,529
Effe
ct of
dilu
tion
9 9
28
40
Dilu
ted n
et (lo
ss)/
inco
me a
vaila
ble t
o sto
ckho
lder
s 19
8 44
1,
157
1,569
Th
e com
pone
nts o
f the
deno
min
ator f
or th
e calc
ulati
on o
f bas
ic an
d dilu
ted E
PS ar
e as f
ollo
ws:
(In
nu
mb
er o
f sh
are
s)
Thre
e mon
ths e
nded
Se
ptem
ber 3
0,
Nine
mon
ths e
nded
Se
ptem
ber 3
0,
20
12
201
1
2012
20
11
Ba
sic
earn
ing
s p
er s
ha
re:
Weig
hted
aver
age n
umbe
r of c
omm
on sh
ares
outst
andi
ng
469
467
468
455
Dil
ute
d e
arn
ing
s p
er s
ha
re:
Weig
hted
aver
age n
umbe
r of c
omm
on sh
ares
outst
andi
ng
469
467
468
455
Effe
ct of
dilu
tive s
hare
optio
ns
1 2
1 2
Effe
ct of
dilu
tive c
onve
rtibl
e bon
ds
20
18
20
32
49
0 48
7 48
9 48
9
A 51
No
tes
to t
he
un
audit
ed c
onso
lid
ate
d f
inan
cial
sta
tem
ents
14
Net
def
erre
d t
axe
s a
re c
lass
ifie
d a
s fo
llo
ws:
(I
n U
S$ m
illi
ons)
Sep
tem
ber 3
0,
201
2 De
cem
ber 3
1,
2011
Shor
t-ter
m d
efer
red t
ax as
set
-
10
Long
-term
def
erre
d tax
asse
t
31
33
Shor
t-ter
m d
efer
red t
ax li
abili
ty
6
10
Long
-term
def
erre
d tax
liab
ility
19
34
Net d
efer
red t
ax
6
1
Futu
re ta
xabl
e in
com
e ju
stifie
s the
inclu
sion
of ta
x lo
ss c
arry
-forw
ard
in th
e ca
lculat
ion
of n
et de
ferre
d tax
es.
Tax
issu
e re
late
d t
o r
elo
cati
on o
f ri
gs
and f
un
ctio
nal
curr
ency
Th
ere h
ave b
een n
o dev
elopm
ents
durin
g thi
rd q
uarte
r rela
ted to
thes
e iss
ues.
No
tes
to t
he
un
audit
ed c
onso
lid
ate
d f
inan
cial
sta
tem
ents
13
(In m
illi
on
s of
US
doll
ar)
Nine
mon
th
perio
d en
ded
Sept
embe
r 30,
20
12
Nine
mon
th
perio
d en
ded
Sept
embe
r 30,
20
11
Inco
me t
axes
at st
atuto
ry ra
te
-
- Ef
fect
of tr
ansfe
rs to
new
tax
juris
dicti
ons
5
(8
9 )
Effe
ct of
chan
ge in
taxa
ble c
urre
ncy
-
-
Effe
ct of
taxa
ble i
ncom
e in
vario
us co
untri
es
11
9
237
Total
124
14
8 De
ferr
ed In
com
e Tax
es
Defe
rred
inco
me
taxes
refle
ct th
e im
pact
of te
mpo
rary
diff
eren
ces b
etwee
n th
e am
ount
of a
ssets
an
d lia
bilit
ies re
cogn
ized
for f
inan
cial r
epor
ting
purp
oses
and
suc
h am
ount
s rec
ogni
zed
for t
ax
purp
oses
. The
net
defe
rred t
ax as
sets
(liab
ilitie
s) co
nsist
of t
he fo
llowi
ng:
Def
erre
d T
ax
Ass
ets:
(I
n U
S$ m
illi
ons)
Sep
tem
ber 3
0,
2
012
D
ecem
ber 3
1 ,
2
011
Pens
ion
6
11Pr
ovisi
ons
8
15Pr
oper
ty, p
lant a
nd eq
uipm
ent
12
9Ot
her
5
8Gr
oss d
efer
red t
ax as
set
31
43 D
efer
red T
ax
Lia
bil
ity:
(I
n U
S$ m
illi
ons)
S
epte
mbe
r 30,
20
12De
cem
ber 3
1,
2011
Prop
erty
, plan
t and
equi
pmen
t
12
-
Gain
from
sale
of fi
xed
asse
ts
11
31
Othe
r
2
13
Gros
s def
erre
d tax
liab
ility
25
44
Net d
efer
red t
ax
6
(1)
A 52
No
tes
to t
he
un
audit
ed c
onso
lid
ate
d f
inan
cial
sta
tem
ents
16
Note
7 - I
mpa
irmen
t los
s on
inve
stmen
ts in
ass
ocia
ted
com
pani
es
On N
ovem
ber 2
5th
our a
ssoc
iated
com
pany
Arc
her m
ade
publ
ic ce
rtain
pre
limin
ary
guid
ance
pe
rtain
ing
to w
ritin
g of
f a
total
of
US$3
38 m
illio
n of
their
goo
dwill
, int
angi
ble
and
tangi
ble
asse
ts as
of S
eptem
ber 3
0, 20
12. S
eadr
ill o
wns 3
9.9%
of A
rche
r and
ther
efor
e our
pre
dicte
d sha
re
of th
is im
pairm
ent w
ould
amou
nt to
US$
135
mill
ion.
Howe
ver w
e hav
e an
hist
orica
l und
erlyi
ng
basis
diff
eren
ce r
elated
to
good
will,
and
we
have
onl
y re
cogn
ized
US$5
1 m
illio
n of
the
se
impa
irmen
t los
ses.
No
te 8
– G
ain/
(los
s) on
der
ivat
ive f
inan
cial i
nstr
umen
ts Th
e yea
r to d
ate ga
in o
f US$
15m
illio
n in o
ur S
tatem
ent o
f Ope
ratio
ns co
nsist
s of t
he fo
llowi
ng:
Tota
l R
eturn
Sw
aps
(TR
S):
We h
ave
a TRS
agre
emen
t with
2,00
0,000
Sea
drill
Lim
ited
shar
es as
und
erly
ing
secu
rity,
with
a re
fere
nce
price
of
NOK
242.7
9 an
d ex
piry
on
Dece
mbe
r 6,
2012
. Th
e to
tal r
ealiz
ed a
nd
unre
alize
d ga
in re
lated
to th
e TR
S ag
reem
ents
amou
nted
to U
S$9
mill
ion
for t
he n
ine
mon
ths
ende
d Se
ptem
ber 3
0, 20
12.
Inte
rest
-ra
te s
wap a
gre
emen
ts a
nd f
orw
ard
exc
ha
ng
e co
ntr
act
s:
Total
rea
lized
and
unr
ealiz
ed l
oss
on i
nter
est-r
ate s
wap
agre
emen
ts, n
ot q
ualif
ied f
or h
edge
ac
coun
ting,
and
for
ward
exc
hang
e co
ntra
cts a
mou
nted
to U
S$92
mill
ion
for
the
nine
mon
ths
ende
d Se
ptem
ber 3
0, 20
12.
Oth
er d
eriv
ati
ve i
nst
rum
ents
: To
tal re
alize
d an
d un
reali
zed
gain
on
othe
r der
ivati
ve in
strum
ents
amou
nted
to U
S$98
mill
ion
for
the
nine
mon
ths e
nded
Sep
tembe
r 30,
2012
, main
ly d
ue to
reali
zed
gain
on
our E
nsco
forw
ards
co
ntra
cts in
the f
irst q
uarte
r (US
$63 m
illio
n).
No
tes
to t
he
un
audit
ed c
onso
lid
ate
d f
inan
cial
sta
tem
ents
15
Note
6 – M
arke
tabl
e sec
uriti
es
The
histo
ric c
ost
of m
arke
table
secu
rities
is
mar
ked
to m
arke
t, wi
th c
hang
es i
n fa
ir va
lue
reco
gnize
d as “
Othe
r com
preh
ensiv
e inc
ome”
. M
arke
table
secu
rities
held
by
us i
nclu
de n
ow 8
1.1%
of
the
parti
ally
rede
emed
Petr
omen
a NO
K2,0
00
mill
ion
bond
(“
Petro
men
a”)
and
6.38%
of
Sa
pura
Kenc
ana
Petro
leum
Bh
d (“
Sapu
raKe
ncan
a”).
At
the e
nd o
f Q1
2012
Sea
drill
own
ed a
23.5
9% sh
are i
n Sa
pura
Cres
t Petr
oleu
m B
hd ,
which
was
ac
coun
ted fo
r usin
g th
e eq
uity
meth
od w
ith in
com
e pi
ckup
on
quar
ter in
arre
ars.
On M
ay 1
7, 20
12 S
apur
aCre
st Pe
troleu
m B
hd a
nd K
enca
na P
etrol
eum
Bhd
mer
ged
resu
lting
in d
ilutio
n of
Se
adril
l sha
reho
ldin
gs fr
om 2
3.59
% to
11.7
7% re
cogn
izing
a g
ain o
f US$
169
mill
ion
pres
ented
in
the
statem
ent o
f ope
ratio
ns. T
he in
vestm
ent w
as c
onse
quen
tly tr
ansfe
rred
from
Inve
stmen
t in
asso
ciated
com
pani
es t
o an
inv
estm
ent
acco
unted
for
at
fair
valu
e as
an
avail
able-
for-s
ale
secu
rity.
The
inve
stmen
t is
mar
ked-
to-m
arke
t eac
h qu
arter
with
the
diffe
renc
e be
twee
n bo
ok
valu
e and
mar
ket v
alue o
f the
inve
stmen
t rec
ogni
zed i
n OCI
.
In th
e per
iod
betw
een
May
23
and
29 w
e pur
chas
ed a
total
of 3
0.1 m
illio
n sh
ares
in S
apur
aKen
cana
. On
May
30,
201
2 Se
adril
l sol
d 30
0 m
illio
n sh
ares
for a
total
cons
ider
ation
of a
ppro
xim
ately
US$
200
mill
ion
in S
apur
aKen
cana
rec
ogni
zing
a ga
in o
f US
$84
mill
ion
pres
ented
in
the
statem
ent
of
oper
ation
s. Af
ter th
is tra
nsac
tion
Sead
rill o
wns s
hare
s in
Sapu
raKe
ncan
a co
nstit
utin
g 6.
38%
of t
he
com
pany
. M
arke
table
secu
rities
and c
hang
es in
their
carry
ing v
alue a
re as
follo
ws:
(In
US
$ m
illi
on
s)
Petr
omen
a Sa
pura
Ken
cana
G
olde
n Cl
ose
Ensc
o To
tal
Histo
ric co
st at
Dece
mbe
r 31,
2011
4
- 15
5
24
Fair
Mar
ket v
alue a
djus
tmen
ts re
cogn
ized
via O
CI or
P&
L as
of D
ecem
ber 3
1, 20
11
- -
1 (1
) -
Net b
ook v
alue a
t Dec
embe
r 31,
2011
4
- 16
4
24
Addi
tions
237
- -
237
Fair
mar
ket v
alue a
djus
tmen
ts re
cogn
ized
via O
CI
- 84
-
- 84
Relea
se of
OCI
into
pro
fit &
loss
-
(84)
(1
) -
(85)
Re
aliza
tion o
f hist
oric
cost
- (1
13)
(15)
(4
) (
132)
Ot
her t
han t
empo
rary
impa
irmen
ts -
- -
- -
Histo
ric co
st at
Sept
embe
r 30,
2012
4
124
- -
128
Fair
Mar
ket v
alue a
djus
tmen
ts re
cogn
ized
via O
CI as
of S
eptem
ber
30, 2
012
- 11
8 -
- 11
8 Fa
ir M
arke
t valu
e adj
ustm
ents
reco
gnize
d vi
a P&
L -
- -
- -
Net b
ook v
alue a
t Sep
tembe
r 30,
201
2 4
242
- -
246
A 53
No
tes
to t
he
un
audit
ed c
onso
lid
ate
d f
inan
cial
sta
tem
ents
18
Note
10 –
Dril
ling u
nits
(In
US
$ m
illi
on
s)
Sept
embe
r 30,
20
12
Dece
mbe
r 31,
201
1 Co
st
1
5,07
8
12,89
8 Ac
cum
ulate
d de
prec
iatio
n
(2,1
22)
(
1,67
5)
Net b
ook v
alue
12,
956
11
,223
The
incr
ease
in c
ost i
s mos
tly re
lated
to th
e tra
nsfe
r of W
est C
apric
orn
and
Wes
t Leo
from
the
Newb
uild
ings
in Q
2 and
Wes
t Elar
a in Q
1. De
prec
iatio
n ex
pens
e was
US$
447
mill
ion
and
US$4
09 m
illio
n fo
r the
nin
e mon
ths,
and
US$1
59
mill
ion
and
US$1
30 m
illio
n fo
r th
e th
ree
mon
ths
ende
d Se
ptem
ber
30,
2012
and
201
1, re
spec
tively
. No
te 1
1– E
quip
men
t Eq
uipm
ent c
onsis
ts of
IT an
d of
fice e
quip
men
t, fu
rnitu
re an
d fitt
ings
.
(In
US
$ m
illi
on
s)
Sept
embe
r 30,
20
12
Dece
mbe
r 31,
201
1 Co
st
58
40
Accu
mul
ated
depr
eciat
ion
(20
) (1
5)
Net b
ook v
alue
38
25
Depr
eciat
ion
expe
nse
was
US$5
mill
ion
and
US$1
4 m
illio
n fo
r th
e ni
ne m
onth
s, an
d US
$2
mill
ion a
nd U
S$2 m
illio
n for
the t
hree
mon
ths e
nded
Sep
tembe
r 30,
2012
and 2
011,
resp
ectiv
ely.
Note
12 –
Goo
dwill
In
the t
hree
and
nine
mon
ths p
erio
ds en
ded
Sept
embe
r 30,
2012
ther
e wer
e no
impa
irmen
t los
ses.
Good
will
balan
ce an
d cha
nges
in th
e car
ryin
g am
ount
of go
odwi
ll ar
e as f
ollo
ws:
(In
US
$ m
illi
on
s)
Perio
d en
ded
Se
ptem
ber 3
0, 20
12
Year
ende
d De
cem
ber 3
1, 20
11
Net b
ook b
alanc
e at b
egin
ning
of p
erio
d 1,
320
1,676
Go
odwi
ll ac
quire
d du
ring t
he p
erio
d -
- Go
odwi
ll de
reco
gnize
d re
lated
to lo
ss of
cont
rol i
n su
bsid
iary
- (3
56)
Impa
irmen
t los
ses
- -
Curre
ncy a
djus
tmen
ts -
- Ne
t boo
k bala
nce a
t end
of p
erio
d 1,
320
1,320
No
tes
to t
he
un
audit
ed c
onso
lid
ate
d f
inan
cial
sta
tem
ents
17
Note
9 – N
ewbu
ildin
gs
(In
US
$ m
illi
on
s )
Op
enin
g bala
nce a
t Dec
embe
r 31,
2011
2,
531
Addi
tions
1,
091
Re-c
lassif
ied as
dril
ling u
nits
(1,99
2)
Clos
ing b
alanc
e at S
eptem
ber 3
0, 2
012
1,62
9 Th
ere h
ave b
een n
o rec
lassif
icatio
ns fr
om N
ewbu
ildin
gs to
Dril
ling u
nits
in Q
3. T
he ad
ditio
ns ar
e m
ostly
relat
ed to
first
insta
lmen
ts on
Wes
t Car
ina a
nd se
cond
insta
lmen
t on W
est S
aturn
In
201
2, a
dditi
ons
to n
ewbu
ildin
gs a
re p
rincip
ally
relat
ed t
o ac
quisi
tion
of r
igs
and
yard
in
stalm
ents,
but a
lso in
clude
capi
talize
d int
eres
t exp
ense
s am
ount
ing t
o US$
59 m
illio
n. Ne
wbui
ldin
gs as
at S
eptem
ber 3
0, 20
12, a
re as
follo
ws:
Drill
ing u
nit
Yard
De
liver
y da
te
Book
Val
ue as
of S
epte
mbe
r 30
, 201
2 Es
timat
ed to
tal
proj
ect p
rice
In
US$
mill
ions
In
US$
mill
ions
Ja
ck-u
p rig
s
W
est T
elesto
Da
lian
1Q20
13
24
190
Wes
t Tuc
ana
Juro
ng
1Q 20
13
44
200
Wes
t Cas
tor
Juro
ng
1Q 20
13
41
200
Wes
t Obe
ron
Dalia
n 1Q
2013
22
19
0 W
est L
inus
Ju
rong
3Q
2013
12
0 53
0 Te
nder
rigs
T-
15
Nant
ong
4Q 20
12
43
113
T-16
Na
nton
g 1Q
2013
38
11
3 T-
17
Nant
ong
1Q 20
13
36
115
T-18
Na
nton
g 4Q
2013
19
13
5 W
est E
sper
anza
Ke
ppel
2Q 20
13
51
200
Sem
i-sub
mer
sible
rigs
Wes
t Mira
Hy
unda
i 4Q
2014
58
65
0 W
est R
igel
Juro
ng
1Q 20
15
118
650
Drill
ship
s
W
est A
urig
a Sa
msu
ng
2Q 20
13
157
600
Wes
t Vela
Sa
msu
ng
2Q 20
13
147
600
Wes
t Tell
us
Sam
sung
3Q
2013
14
5 60
0 W
est N
eptu
ne
Sam
sung
2Q
2014
16
2 60
0 W
est J
upite
r Sa
msu
ng
3Q 20
14
162
600
Wes
t Satu
rn
Sam
sung
2Q
2014
16
0 60
0 W
est C
arin
a Sa
msu
ng
4Q 20
14
78
600
Total
1,
629
7,48
6 Re
fer a
lso n
ote 1
8 (co
mm
itmen
ts an
d con
tinge
ncies
) for
an o
verv
iew o
f the
matu
rity s
ched
ule f
or
rem
ainin
g yar
d in
stallm
ents.
A 54
No
tes
to t
he
un
audit
ed c
onso
lid
ate
d f
inan
cial
sta
tem
ents
20
On Ju
ly 1
1, 2
012
we re
finan
ced
the
US$5
85 m
illio
n Te
nder
Rig
facil
ity a
nd e
nter
ed in
to a
new
US
$900
mill
ion
facil
ity w
ith m
aturit
y in
Jul
y 20
17. T
he f
acili
ty b
ears
inter
est
at LI
BOR
+ m
argi
n.
On S
eptem
ber 1
4, 2
012
we h
ave
succ
essfu
lly c
ompl
eted
a US
$1,00
0 m
illio
n se
nior
uns
ecur
ed
bond
issu
e wi
th m
aturit
y in
Sep
tembe
r 201
7. Th
e ne
t pro
ceed
s fro
m th
e bo
nd is
sue
will
be u
sed
to re
pay e
xisti
ng in
debt
ness
. C
ove
na
nts
- C
redit
fa
cili
ties
: W
e ha
ve v
ario
us c
oven
ants
relat
ing
to it
s cr
edit
facil
ities
. The
se m
ainly
con
sist o
f m
inim
um
liqui
dity
requ
irem
ents,
inter
est c
over
age
ratio
, cur
rent
ratio
, equ
ity ra
tio a
nd le
vera
ge ra
tio -
for
mor
e deta
ils se
e our
Ann
ual R
epor
t 201
1. No
te 1
4 – E
quity
Sept
embe
r 30,
2012
De
cem
ber 3
1, 20
11
All
sh
are
s a
re c
om
mo
n s
ha
res
of
US
$2
.00
pa
r va
lue
each
Sh
ares
US
$ mill
ions
Sh
ares
US
$ m
illio
ns
Auth
orize
d sh
are c
apita
l 80
0,000
,000
1,6
00
800,0
00,0
00
1,600
Issue
d an
d ful
ly p
aid sh
are c
apita
l 46
9,250
,933
93
8 46
9,250
,933
93
8 Tr
easu
ry sh
ares
held
by
Com
pany
(1
29,1
59 )
0 (1
,478,
759)
(3
) Sh
ares
issu
ed an
d ou
tstan
ding
46
9,121
,774
93
8 46
7,772
,174
93
5 No
te 1
5 – O
ther
com
preh
ensiv
e inc
ome
Acc
um
ula
ted o
ther
co
mp
rehen
sive
in
com
e a
s per
Sep
tem
ber
30,
20
12 a
nd D
ecem
ber
31,
20
11
:
Sept
embe
r 30,
De
cem
ber 3
1,
20
12
2011
Th
e tot
al ba
lance
of a
ccum
ulate
d ot
her c
ompr
ehen
sive i
ncom
e is m
ade
up as
follo
ws:
Unre
alize
d ga
in on
mar
ketab
le se
curit
ies
119
1
Unre
alize
d ga
in on
fore
ign
exch
ange
66
54
Ac
tuar
ial ga
in re
latin
g to
pens
ion
(1
2)
(11)
Un
reali
zed
gain
/ (lo
ss) o
n in
teres
t rate
swap
s in
subs
idiar
ies
0 0
Un
reali
zed
gain
/ (lo
ss) o
n in
teres
t rate
swap
s in
VIEs
(4
9)
(49)
Ac
cum
ulat
ed ot
her c
ompr
ehen
sive i
ncom
e 12
4 (5
) No
te: A
ll ite
ms o
f oth
er co
mpr
ehen
sive i
ncom
e/ (lo
ss) a
re st
ated
net o
f tax
. Th
e ap
plica
ble
amou
nt o
f inc
ome
taxes
ass
ociat
ed w
ith e
ach
com
pone
nt o
f oth
er c
ompr
ehen
sive
inco
me
is $0
due
to
the f
act t
hat t
he it
ems r
elate
to co
mpa
nies
dom
iciled
in n
on-ta
xabl
e jur
isdict
ions
.
No
tes
to t
he
un
audit
ed c
onso
lid
ate
d f
inan
cial
sta
tem
ents
19
Note
13 –
Lon
g-te
rm in
tere
st be
arin
g de
bt a
nd in
tere
st ex
pens
es
(I
n U
S$
mil
lio
ns)
Se
ptem
ber
30, 2
012
Dece
mbe
r 31
, 201
1
Cr
edit
facil
ities
:
US
$800
facil
ity
239
272
US$5
85 fa
cility
* 0
337
US$9
00 fa
cility
75
0 -
US$1
00 fa
cility
70
74
US
$1,5
00 fa
cility
92
6 1,
059
US$1
,200
facil
ity
900
1,00
0 US
$700
facil
ity
577
630
US$1
,121
facil
ity
936
985
US$2
,000
facil
ity (N
orth
Atla
ntic
Drill
ing)
1,7
92
1,91
7 US
$170
facil
ity
85
92
US$5
50 fa
cility
50
9 55
0 US
$400
facil
ity
370
400
Total
Ban
k Lo
ans +
oth
er
7,154
7,
316
De
bt re
cord
ed in
cons
olid
ated
VIE’
s:
US
$700
facil
ity
412
470
US$1
,400
facil
ity
851
939
Total
Shi
p Fin
ance
Fac
ilitie
s 1,2
63
1,40
9
Bond
s and
conv
ertib
le bo
nds:
Bond
s 1,5
62
425
Conv
ertib
le bo
nds
557
545
Total
bond
s 2,1
19
970
Ot
her c
redi
t fac
ilitie
s with
corre
spon
ding
restr
icted
cash
dep
osits
: 28
2 29
8
Total
inter
est b
earin
g deb
t 10
,818
9,99
3 Le
ss: c
urre
nt po
rtion
(
1,52
3)
(1
,419
) L
ong-
term
porti
on of
inter
est b
earin
g deb
t 9,2
96
8,57
4 * R
epaid
whe
n ref
inan
cing t
he ne
w 90
0 fac
ility
Th
e out
stand
ing
debt
as o
f Sep
tembe
r 30,
2012
is re
paya
ble a
s fol
lows
: (
In U
S$
mil
lio
ns)
Year
endi
ng D
ecem
ber 3
1
2012
27
9 20
13
2,39
9 20
14
1,67
5 20
15
1,84
5 20
16 an
d the
reaf
ter
4,71
4 Ef
fect
of am
ortiz
ation
of co
nver
tible
bond
(9
4)
Total
deb
t 10
,818
A 55
No
tes
to t
he
un
audit
ed c
onso
lid
ate
d f
inan
cial
sta
tem
ents
22
a ris
k th
at cu
rrenc
y an
d in
teres
t rate
fluc
tuati
ons w
ill h
ave
a ne
gativ
e ef
fect
on th
e va
lue
of th
e Co
mpa
ny's
cash
flow
s. In
tere
st ra
te ri
sk m
anag
emen
t Th
e Co
mpa
ny's
expo
sure
to in
teres
t rate
risk
relat
es m
ainly
to it
s flo
ating
inter
est r
ate d
ebt a
nd
balan
ces o
f sur
plus
fund
s plac
ed w
ith fi
nanc
ial in
stitu
tions
. Thi
s exp
osur
e is m
anag
ed th
roug
h the
us
e of i
nter
est r
ate sw
aps a
nd ot
her d
eriv
ative
arra
ngem
ents.
The
Com
pany
's am
bitio
n is t
o obt
ain
the
mos
t fav
orab
le in
teres
t ra
te bo
rrowi
ngs
avail
able
with
out i
ncre
asin
g its
for
eign
curre
ncy
expo
sure
. Su
rplu
s fu
nds
are
gene
rally
plac
ed i
n fix
ed d
epos
its w
ith r
eput
able
finan
cial
insti
tutio
ns,
yield
ing
high
er r
eturn
s th
an a
re a
vaila
ble
on o
vern
ight
dep
osits
in
bank
s. Su
ch
depo
sits g
ener
ally
have
shor
t-ter
m m
aturit
ies, i
n or
der t
o pr
ovid
e the
Com
pany
with
flex
ibili
ty to
m
eet
all r
equi
rem
ents
for
work
ing
capi
tal a
nd c
apita
l in
vestm
ents.
The
ext
ent
to w
hich
the
Co
mpa
ny u
tilize
s in
teres
t rate
swa
ps a
nd o
ther
der
ivati
ves
to m
anag
e its
inter
est r
ate r
isk is
de
term
ined
by t
he n
et de
bt ex
posu
re an
d its
view
s on f
utur
e int
eres
t rate
s. In
tere
st ra
te sw
ap ag
reem
ents
not q
ualif
ied a
s hed
ge ac
coun
ting
At S
eptem
ber 3
0, 20
12, t
he C
ompa
ny h
ad in
teres
t rate
swa
p ag
reem
ents
with
an
outst
andi
ng
prin
cipal
of U
S$4,7
20 m
illio
n (De
cem
ber 3
1, 20
11: U
S$4,7
38 m
illio
n). I
n add
ition
, the
Com
pany
ha
d ou
tstan
ding
cros
s cur
renc
y int
eres
t rate
swap
s at S
eptem
ber 3
0, 2
012
with
a pr
incip
al am
ount
of U
S$21
6 m
illio
n (D
ecem
ber 3
1, 20
11: U
S$34
mill
ion)
. The
se a
gree
men
ts do
not
qua
lify
for
hedg
e ac
coun
ting,
and
acco
rdin
gly
any
chan
ges
in th
e fa
ir va
lues
of t
he s
wap
agre
emen
ts ar
e in
clude
d in
the
Cons
olid
ated
State
men
t of O
pera
tions
und
er "G
ain/(l
oss)
on d
eriv
ative
fina
ncial
in
strum
ents"
. The
com
bine
d to
tal fa
ir va
lue o
f the
inter
est r
ate sw
aps a
nd cr
oss c
urre
ncy
inter
est
swap
s out
stand
ing
Sept
embe
r 30,
2012
amou
nted
to m
inus
US$
400
mill
ion
(Dec
embe
r 31,
2011
: m
inus
US$
345
mill
ion)
. The
fair
valu
e of
the
inter
est r
ate s
waps
and
cro
ss c
urre
ncy
inter
est
swap
s are
clas
sified
as o
ther
curre
nt li
abili
ties i
n the
bala
nce s
heet.
Du
ring f
irst q
uarte
r 201
2 the
Com
pany
has
enter
ed in
to o
ne ne
w cr
oss c
urre
ncy i
nter
est r
ate sw
ap
in c
onne
ction
with
the
NOK
1,250
mill
ion
bond
. In
Sept
embe
r 201
2 on
e cr
oss c
urre
ncy
inter
est
rate
swap
agre
emen
t exp
ired.
In ad
ditio
n to
this
the o
nly
chan
ge to
the n
otio
nal a
mou
nts o
n th
ese
agre
emen
ts fro
m D
ecem
ber 3
1, 2
011
is th
e am
ortiz
ation
of t
he n
otio
nal a
mou
nt o
n on
e in
teres
t ra
te sw
ap; o
utsta
ndin
g pr
incip
al ch
ange
d fro
m U
S$88
mill
ion
as p
er D
ecem
ber
31, 2
011
to
US$7
1 m
illio
n as
per
Sep
tembe
r 30
, 20
12 .
The
table
belo
w re
flects
the
abo
ve m
entio
ned
chan
ges.
For a
com
plete
ove
rview
of t
he in
teres
t rate
swap
agr
eem
ents
plea
se re
fer t
o th
e 20
11
20-F
.
No
tes
to t
he
un
audit
ed c
onso
lid
ate
d f
inan
cial
sta
tem
ents
21
Note
16 –
Rela
ted
part
y tra
nsac
tions
W
e ha
ve e
nter
ed in
to s
ale a
nd le
aseb
ack
cont
racts
for s
ever
al dr
illin
g un
its w
ith S
hip
Fina
nce
Inter
natio
nal L
imite
d (“
Ship
Fin
ance
”), a
com
pany
in w
hich
our
prin
cipal
shar
ehol
ders
Hem
en
Hold
ing
Ltd
and
Fara
head
Inv
estm
ents
Inc
(her
eafte
r jo
intly
ref
erre
d to
as
“Hem
en”)
and
co
mpa
nies
ass
ociat
ed w
ith H
emen
hav
e a
signi
fican
t int
eres
t. He
men
is c
ontro
lled
by t
rusts
es
tablis
hed
by th
e Com
pany
’s Pr
esid
ent a
nd C
hairm
an M
r. Jo
hn F
redr
ikse
n fo
r the
ben
efit
of h
is im
med
iate
fam
ily. W
e ha
ve d
eterm
ined
that
the
Ship
Fin
ance
subs
idiar
ies, w
hich
own
the
units
, ar
e va
riabl
e in
teres
t ent
ities
(VIE
s), a
nd th
at we
are
the
prim
ary
bene
ficiar
y of
the
risks
and
re
ward
s con
necte
d wi
th th
e ow
nersh
ip o
f the
uni
ts an
d th
e ch
arter
con
tracts
. Acc
ordi
ngly
, the
se
VIEs
are f
ully
cons
olid
ated
in o
ur co
nsol
idate
d ac
coun
ts. T
he eq
uity
attri
butab
le to
Shi
p Fi
nanc
e in
the V
IEs i
s inc
lude
d in n
on-c
ontro
lling
inter
ests
in ou
r con
solid
ated a
ccou
nts.
In th
e ni
ne m
onth
per
iod
ende
d Se
ptem
ber 3
0, 2
012,
we in
curre
d th
e fo
llowi
ng le
ase
costs
on
units
leas
ed b
ack f
rom
Shi
p Fin
ance
subs
idiar
ies:
Rig
W
est P
olar
is 90
W
est H
ercu
les
56
Wes
t Tau
rus
85
Tota
l 23
1 Th
ese l
ease
costs
are e
limin
ated a
t con
solid
ation
. On
Jul
y 1,
201
1, th
e VI
E co
mpa
nies
SFL
Dee
pwate
r an
d SF
L Po
laris
decla
red
and
paid
a
divi
dend
of
US$2
90 m
illio
n an
d US
$145
mill
ion
resp
ectiv
ely t
o Sh
ip F
inan
ce I
nter
natio
nal
Lim
ited
(SFI
L). S
FIL
simul
taneo
usly
gra
nted
loan
s to
SFL
Dee
pwate
r and
SFL
Pol
aris
of th
e sa
me a
mou
nts w
ith an
inter
est r
ate of
4.5%
. The
se lo
ans a
re pr
esen
ted as
long
term
debt
to re
lated
pa
rties
in ou
r bala
nce s
heet
on S
eptem
ber 3
0, 20
12 an
d Dec
embe
r 31,
2011
. On
May
15,
2012
we
obtai
ned
a sh
ort t
erm
uns
ecur
ed c
redi
t fac
ility
of
US$5
0 m
illio
n fro
m
Metr
ogas
. The
prin
cipal
plus
inter
est w
as re
paid
in Ju
ly 2
012.
On
June
7, 2
012
we o
btain
ed a
long
term
uns
ecur
ed c
redi
t fac
ility
of N
OK 1
,200
mill
ion
from
M
etrog
as. T
his l
oan
agre
emen
t was
amen
ded
on Ju
ne 1
4 an
d Ju
ne 2
7 in
crea
sing
the l
oan
amou
nt
to a
total
of N
OK 2
,100
mill
ion
(US$
352
mill
ion)
. The
prin
cipal
plus
inter
est w
as r
epaid
in
Sept
embe
r 201
2. On
June
27,
2012
the
Com
pany
gra
nted
Arc
her a
long
term
uns
ecur
ed c
redi
t fac
ility
of U
S$20
m
illio
n. Th
e prin
cipal
plus
inter
est w
as re
paid
in Ju
ly 2
012.
Note
17 –
Risk
man
agem
ent a
nd fi
nanc
ial i
nstr
umen
ts Th
e m
ajorit
y of
our
gro
ss e
arni
ngs
from
rigs
and
ves
sels
are
rece
ivab
le in
US
dolla
rs an
d th
e m
ajorit
y of
our
oth
er t
rans
actio
ns,
asse
ts an
d lia
bilit
ies a
re d
enom
inate
d in
US
dolla
rs, t
he
func
tiona
l cur
renc
y of
the
Com
pany
. How
ever
, the
Com
pany
has
ope
ratio
ns a
nd a
ssets
in a
nu
mbe
r of c
ount
ries
world
wide
and
incu
rs ex
pend
iture
s in
oth
er c
urre
ncies
, cau
sing
its re
sults
fro
m o
pera
tions
to b
e affe
cted
by fl
uctu
ation
s in c
urre
ncy e
xcha
nge r
ates,
prim
arily
relat
ive t
o the
US
dol
lar. T
he C
ompa
ny is
also
expo
sed
to ch
ange
s in
inter
est r
ates o
n flo
ating
inter
est r
ate d
ebt,
and
to th
e im
pact
of ch
ange
s in c
urre
ncy e
xcha
nge r
ates o
n NOK
den
omin
ated d
ebt.
Ther
e is t
hus
A 56
No
tes
to t
he
un
audit
ed c
onso
lid
ate
d f
inan
cial
sta
tem
ents
24
Fair
valu
es o
f fin
ancia
l ins
trum
ents
The c
arry
ing
valu
e and
estim
ated
fair
valu
e of t
he C
ompa
ny's
finan
cial i
nstru
men
ts at
Sept
embe
r 30
, 201
2 and
Dec
embe
r 31,
2011
are a
s fol
lows
:
Se
ptem
ber 3
0, 2
012
Dece
mbe
r 31,
2011
(In U
S$ m
illio
ns)
Fa
ir va
lue
Carr
ying
valu
e
F air
valu
e
Carry
ing
valu
e
Ca
sh an
d ca
sh eq
uiva
lents
518
518
483
483
Re
strict
ed ca
sh
382
382
482
482
Cu
rrent
por
tion
of lo
ng-te
rm de
bt
1,52
3
1,
523
1,41
9
1,
419
Lo
ng-te
rm p
ortio
n of f
loati
ng ra
te de
bt
6,94
5
6,
945
7,71
1
7,
711
Lo
ng te
rm p
ortio
n of
fixe
d ra
te CI
RR lo
ans
231
231
250
250
Fi
xed
inter
est c
onve
rtibl
e bon
ds
8 92
557
735
545
Fi
xed
inter
est b
onds
1
,387
1
,342
333
350
Fl
oatin
g int
eres
t bon
ds
220
2
20
75
75
The c
arry
ing
valu
e of c
ash
and
cash
equi
valen
ts an
d re
strict
ed ca
sh, w
hich
are h
ighl
y liq
uid,
is a
reas
onab
le es
timate
of
fair
valu
e an
d ca
tegor
ized
at lev
el 1
on t
he f
air v
alue
mea
sure
men
t hi
erar
chy.
The f
air va
lue o
f the
curre
nt an
d lo
ng-te
rm po
rtion
of f
loati
ng ra
te de
bt is
estim
ated
to b
e equ
al to
th
e car
ryin
g va
lue s
ince
it b
ears
varia
ble i
nter
est r
ates,
which
are
rese
t on
a qua
rterly
bas
is. T
his
debt
is n
ot fr
eely
trad
able
and
cann
ot b
e pu
rcha
sed
by th
e Co
mpa
ny a
t pric
es o
ther
than
the
outst
andi
ng b
alanc
e pl
us a
ccru
ed in
teres
t. W
e ha
ve c
atego
rized
this
at lev
el 2
on th
e fa
ir va
lue
mea
sure
men
t hier
arch
y. Th
e fair
valu
e of t
he lo
ng-te
rm p
ortio
n of
the f
ixed
rate
CIRR
loan
s is e
qual
to th
e car
ryin
g valu
e, as
they
are m
atche
d wi
th eq
ual b
alanc
es o
f res
tricte
d ca
sh. W
e hav
e cate
goriz
ed th
is at
level
2 on
th
e fair
valu
e mea
sure
men
t hier
arch
y. Th
e co
nver
tible
bond
s are
free
ly tr
adab
le an
d th
eir fa
ir va
lue
has b
een
set e
qual
to th
e pr
ice a
t wh
ich th
ey w
ere t
rade
d at
on S
eptem
ber 3
0, 20
12 an
d De
cem
ber 3
1, 20
11. W
e hav
e cate
goriz
ed
this
at lev
el 1 o
n the
fair
valu
e mea
sure
men
t hier
arch
y.
No
tes
to t
he
un
audit
ed c
onso
lid
ate
d f
inan
cial
sta
tem
ents
23
Out
st and
ing
prin
cipal
Re
ceiv
e rat
e
Pay
rate
Le
ngth
of c
ontr
act
(In U
S$ m
illio
ns)
79
6
mon
th L
IBOR
3.
83%
M
ar 2
008
- Sep
201
621
6 (N
OK 1,
250 m
ill)
3m
onth
NIB
OR+3
.2%
3
mon
th L
IBOR
+3.
8 %
Feb
2012
– F
eb 20
1 4
In
tere
st ra
te h
edge
acc
ount
ing
Two
of th
e Sh
ip F
inan
ce su
bsid
iaries
con
solid
ated
by th
e Co
mpa
ny a
s VIE
's ha
ve e
nter
ed in
to
inter
est r
ate sw
aps i
n or
der t
o m
itiga
te th
e Co
mpa
ny's
expo
sure
to v
ariab
ility
in c
ash
flows
for
futu
re in
teres
t pay
men
ts on
the
loan
s tak
en o
ut to
fina
nce
the
acqu
isitio
n of
Wes
t Pol
aris
and
Wes
t Tau
rus.
The
se in
teres
t rate
swap
s qua
lify f
or he
dge a
ccou
ntin
g and
any c
hang
es in
their
fair
valu
e ar
e in
clude
d in
"Oth
er c
ompr
ehen
sive
inco
me/l
oss"
. Belo
w is
a su
mm
ary
of th
e no
tiona
l am
ount
s, fix
ed in
teres
t rate
s pay
able
and d
urati
ons o
f the
se in
teres
t rate
swap
s. O
utsta
ndin
g pr
incip
al
Rece
ive r
ate
Pay
rate
Le
ngth
of c
ontr
act
(In U
S$ m
illio
ns)
47
0 (W
est
Po
lari
s )
1 m
onth
LIB
OR
3.89
%Ju
ly 2
008
- Oct
2012
518
(Wes
t T
au
rus)
1 m
onth
LIB
OR
2.19
%De
c 200
8 - A
ug 2
013
In th
e nin
e mon
th p
erio
d en
ded
Sept
embe
r 30,
2012
the a
bove
two
VIE
Ship
Fin
ance
subs
idiar
ies
reco
rded
fair
valu
e ga
ins o
f $17
mill
ion
on th
eir in
teres
t rate
swap
s. Th
ese
gain
s wer
e rec
orde
d by
thos
e VI
Es a
s "O
ther
com
preh
ensiv
e in
com
e" b
ut d
ue to
their
own
ersh
ip b
y Sh
ip F
inan
ce
thes
e los
ses a
re al
loca
ted to
"Non
-con
trolli
ng in
teres
t" in
our
equi
ty sta
temen
t. An
y ch
ange
in
fair
valu
e re
sulti
ng f
rom
hed
ge in
effe
ctive
ness
is r
ecog
nize
d im
med
iately
in
earn
ings
. The
two
VIEs
and
ther
efor
e th
e Co
mpa
ny, d
id n
ot re
cogn
ize a
ny g
ain o
r los
s du
e to
he
dge i
neffe
ctive
ness
in th
e con
solid
ated f
inan
cial s
tatem
ents
durin
g the
nine
mon
th p
erio
d end
ed
Sept
embe
r 30,
2012
and
2011
relat
ing t
o de
rivati
ve fi
nanc
ial in
strum
ents.
Fo
reig
n cu
rren
cy ri
sk m
anag
emen
t Th
e Co
mpa
ny u
ses
fore
ign
curre
ncy
forw
ard
cont
racts
and
oth
er d
eriv
ative
s to
man
age
its
expo
sure
to fo
reig
n cu
rrenc
y ris
k on
certa
in as
sets,
liab
ilitie
s and
futu
re an
ticip
ated
trans
actio
ns.
Such
der
ivati
ve c
ontra
cts d
o no
t qua
lify
for h
edge
acc
ount
ing
treatm
ent a
nd a
re re
cord
ed in
the
balan
ce s
heet
unde
r rec
eivab
les if
the
cont
racts
hav
e a
net p
ositi
ve fa
ir va
lue,
and
unde
r oth
er
shor
t-ter
m li
abili
ties i
f the
con
tracts
hav
e a
net n
egati
ve fa
ir va
lue.
At S
eptem
ber 3
0, 20
12, t
he
Com
pany
had
for
ward
con
tracts
and
cro
ss c
urre
ncy
inter
est r
ate s
waps
to s
ell a
ppro
xim
ately
US
$381
mill
ion
betw
een
Octo
ber
2012
and
Jan
uary
201
3 at
exch
ange
rate
s ra
ngin
g fro
m
NOK5
.70
to N
OK6.
10 p
er U
S do
llar.
The
total
fair
valu
e of
cur
renc
y fo
rwar
d co
ntra
cts
Sept
embe
r 30,
2012
amou
nted
to U
S$5 m
illio
n (Se
ptem
ber 3
0, 20
11: m
inus
US$
11 m
illio
n).
Tota
l Ret
urn
Swap
Agr
eem
ents
In S
eptem
ber 2
012,
the C
ompa
ny en
tered
into
a TR
S ag
reem
ent w
ith 2
,000
,000
Sead
rill L
imite
d sh
ares
as un
derly
ing s
ecur
ity. T
his a
gree
men
t exp
ires i
n De
cem
ber 2
012
and t
he ag
reed
refe
renc
e pr
ice w
as N
OK 2
42.80
per
shar
e. Th
e to
tal re
alize
d an
d un
reali
zed
gain
relat
ing
to T
RS a
gree
men
ts in
201
2 am
ount
ed to
US$
9 m
illio
n (Se
ptem
ber 3
0, 20
11 U
S$7 m
illio
n).
A 57
No
tes
to t
he
un
audit
ed c
onso
lid
ate
d f
inan
cial
sta
tem
ents
26
ASC
Topi
c 82
0 Fa
ir Va
lue
Mea
sure
men
t and
Disc
losu
res (
form
erly
FAS
157
) em
phas
izes t
hat
fair
valu
e is
a m
arke
t-bas
ed m
easu
rem
ent,
not a
n en
tity-
spec
ific
mea
sure
men
t, an
d sh
ould
be
deter
min
ed b
ased
on
the
assu
mpt
ions
that
mar
ket p
artic
ipan
ts wo
uld
use
in p
ricin
g th
e as
set o
r lia
bilit
y. As
a b
asis
for c
onsid
erin
g m
arke
t par
ticip
ant a
ssum
ptio
ns in
fair
valu
e m
easu
rem
ents,
AS
C To
pic
820
estab
lishe
s a fa
ir va
lue
hier
arch
y th
at di
sting
uish
es b
etwee
n m
arke
t par
ticip
ant
assu
mpt
ions
bas
ed o
n m
arke
t data
obt
ained
fro
m s
ourc
es in
depe
nden
t of
the
repo
rting
ent
ity
(obs
erva
ble i
nput
s tha
t are
clas
sified
with
in le
vels
one a
nd tw
o of
the h
ierar
chy)
and
the r
epor
ting
entit
y's o
wn a
ssum
ptio
ns a
bout
mar
ket p
artic
ipan
t ass
umpt
ions
(uno
bser
vabl
e in
puts
class
ified
wi
thin
leve
l thr
ee o
f the
hier
arch
y).
Leve
l on
e in
put
utili
zes
unad
juste
d qu
oted
pric
es i
n ac
tive
mar
kets
for
iden
tical
asse
ts or
lia
bilit
ies th
at th
e Co
mpa
ny h
as th
e ab
ility
to a
cces
s. Le
vel t
wo in
puts
are
inpu
ts ot
her
than
qu
oted
pric
es in
clude
d in
leve
l one
that
are o
bser
vabl
e for
the a
sset
or li
abili
ty, e
ither
dire
ctly
or
indi
rectl
y. Le
vel t
wo in
puts
may
inclu
de q
uoted
pric
es fo
r sim
ilar a
ssets
and
liab
ilitie
s in
activ
e m
arke
ts, a
s well
as i
nput
s tha
t are
obs
erva
ble
for t
he a
sset
or li
abili
ty, o
ther
than
quo
ted p
rices
, su
ch a
s int
eres
t rate
s, fo
reig
n ex
chan
ge ra
tes a
nd y
ield
curv
es th
at ar
e ob
serv
able
at co
mm
only
qu
oted
inter
vals.
Lev
el th
ree
inpu
ts ar
e un
obse
rvab
le in
puts
for t
he a
sset
or li
abili
ty, w
hich
are
ty
pica
lly b
ased
on
an en
tity's
own
assu
mpt
ions
, as t
here
is li
ttle,
if an
y, re
lated
mar
ket a
ctivi
ty. I
n in
stanc
es w
here
the d
eterm
inati
on o
f the
fair
valu
e mea
sure
men
t is b
ased
on in
puts
from
diff
eren
t lev
els o
f the
fair
valu
e hier
arch
y, th
e lev
el in
the f
air v
alue h
ierar
chy
with
in w
hich
the e
ntire
fair
valu
e m
easu
rem
ent f
alls
is ba
sed
on th
e lo
west
level
inpu
t tha
t is
signi
fican
t to
the
fair
valu
e m
easu
rem
ent i
n its
entir
ety. T
he C
ompa
ny's
asse
ssm
ent o
f the
sign
ifica
nce o
f a p
artic
ular
inpu
t to
the f
air v
alue m
easu
rem
ent i
n its
entir
ety re
quire
s jud
gmen
t, an
d co
nsid
ers f
acto
rs sp
ecifi
c to
the
asse
t or l
iabili
ty.
Note
18 –
Com
mitm
ents
and
cont
inge
ncies
Pu
rcha
se C
omm
itmen
ts At
Sep
tembe
r 30,
201
2, we
had
nin
eteen
cont
ractu
al co
mm
itmen
ts un
der n
ewbu
ildin
g co
ntra
cts.
The c
ontra
cts ar
e for
the c
onstr
uctio
n of
two
sem
i-sub
mer
sible
rigs,
seve
n dr
illsh
ips,
five j
ack-
up
rigs,
and
five t
ende
r rig
s. Th
e uni
ts ar
e sc
hedu
led to
be d
elive
red
in 2
012,
2013
, 201
4 an
d 20
15.
As o
f Sep
tembe
r 30,
we h
ave p
aid $
1,629
mill
ion
relat
ed to
thes
e rig
s, in
cludi
ng p
aym
ents
to th
e co
nstru
ction
yar
ds a
nd o
ther
pay
men
ts, a
nd a
re c
omm
itted
to m
ake
furth
er p
aym
ents
amou
ntin
g to
$5,8
37 m
illio
n. Th
ese
amou
nts
inclu
de c
ontra
ct va
riatio
n or
ders,
spa
res,
accr
ued
inter
est
expe
nses
, con
struc
tion s
uper
visio
n, op
erati
on pr
epar
ation
and m
obili
zatio
n.
The m
aturit
y sch
edul
e for
the r
emain
ing p
aym
ents
is as
follo
ws:
Mat
urity
sche
dule
for r
emai
ning
new
build
pay
men
ts as
of S
epte
mbe
r 30,
2012
(I
n U
S$
mil
lio
ns)
2012
39
2
2013
2,
505
2014
2,
428
2015
53
2 To
tal
5,85
7
No
tes
to t
he
un
audit
ed c
onso
lid
ate
d f
inan
cial
sta
tem
ents
25
Fina
ncial
instr
umen
ts th
at ar
e mea
sure
d at f
air va
lue o
n a re
curri
ng b
asis:
Fair
valu
e
Fair
valu
e mea
sure
men
ts at
repo
rtin
g da
te u
sing
Quo
ted
Price
s in
Activ
e M
arke
ts fo
r Id
entic
al
Asse
ts
Sign
ifica
nt
Oth
er
Obs
erva
ble
Inpu
ts
Sign
ifica
nt
Unob
serv
able
Inpu
ts
(In U
S$ m
illio
ns)
Sept
embe
r30
, 201
2(L
evel
1)(L
evel
2)(L
evel
3)
Asse
ts:
M
arke
table
secu
rities
246
24
2
-
4
Ot
her
deriv
ative
in
strum
ents
– sh
ort
term
re
ceiv
able
22
-
22
-
Total
asse
ts
2 68
24
2
22
4
Liab
ilitie
s:
Inter
est r
ate sw
ap co
ntra
cts –
shor
t ter
m p
ayab
le
407
-
407
- Ot
her d
eriv
ative
instr
umen
ts – s
hort
term
pay
able
-
-
Total
liab
ilitie
s
407
-
407
-
Fair
valu
e
Fair
valu
e mea
sure
men
ts at
repo
rtin
g da
te u
sing
Quo
ted
Price
s in
Activ
e M
arke
ts fo
r Id
entic
al
Asse
ts
Sign
ifica
nt
Oth
er
Obs
erva
ble
Inpu
ts
Sign
ifica
nt
Unob
serv
able
Inpu
ts
(In
mil
lio
ns
of
US
doll
ar)
De
cem
ber
31, 2
011
(Lev
el 1)
(Lev
el 2)
(Lev
el 3)
As
sets:
M
arke
table
secu
rities
24
4
-
20
TR
S eq
uity
swap
cont
racts
11
-
11
-
Othe
r de
rivati
ve
instr
umen
ts –
shor
t ter
m
rece
ivab
le
3
1
2
-
Total
asse
ts
38
5
13
20
Li
abili
ties:
In
teres
t rate
swap
cont
racts
– sh
ort t
erm
pay
able
37
2
-
372
- Cu
rrenc
y for
ward
cont
racts
– sh
ort t
erm
pay
able
3
3
Othe
r der
ivati
ve in
trum
ents
– sho
rt ter
m p
ayab
le
39
39
To
tal li
abili
ties
41
4
41
4
-
Roll
forw
ard
of fa
ir va
lue m
easu
rem
ents
usin
g uno
bser
vabl
e inp
uts (
Leve
l 3):
(In
US$
mill
ions
)
Begi
nnin
g bala
nce J
anua
ry 1
, 201
2
20
Reali
zatio
n
-16
Purc
hase
- Ch
ange
s in
fair
valu
e of b
onds
-
Clos
ing
balan
ce S
eptem
ber
30, 2
012
4
A 58
No
tes
to t
he
un
audit
ed c
onso
lid
ate
d f
inan
cial
sta
tem
ents
28
2012
2013
2014
2015
2016
Ba
se L
IBOR
In
teres
t Rate
(In U
S$
thou
sand
s)
(In U
S$
thou
sand
s)
(In U
S$
thou
sand
s)
(In U
S$
thou
sand
s)
(In U
S$
thou
sand
s)
Wes
t P
ola
ris
2.
85%
32
3.5*
22
3.3
176.5
17
5.4
170.0
Wes
t T
au
rus
4.
25%
31
1.9*
31
6.2*
320.7
16
5.0
158.8
Wes
t H
ercu
les
4.
25%
25
0.0
250.
0
23
8.5
180.
0
17
2.5
*
For a
per
iod
the
inter
est r
ates f
or W
est
Pola
ris
and
Wes
t T
au
rus h
ave
been
fixe
d at
3.89%
and
2.1
7%,
resp
ectiv
ely, a
nd th
e ba
rebo
at ch
arter
rate
for t
hese
two
units
is fi
xed
rega
rdles
s of m
ovem
ents
in L
IBOR
in
teres
t rate
s. Th
ese f
ixed
char
ter ra
tes ar
e ref
lected
in th
e abo
ve ta
ble.
Th
e ass
ets an
d lia
bilit
ies in
the s
tatut
ory a
ccou
nts o
f the
VIE
s as a
t Sep
tembe
r 30,
2012
and
as at
De
cem
ber 3
1, 20
11 ar
e as f
ollo
ws:
Sept
embe
r 30,
2012
D
ecem
ber 3
1, 2
011
(In U
S$ m
illio
ns)
SFL
Wes
t Po
laris
Li
mite
d
SFL
Deep
wate
r Lt
d.
SFL
Wes
t Po
laris
Li
mite
d SF
L De
epwa
ter
Ltd.
Nam
e of u
nit
W
est
Po
lari
s
Wes
t T
au
rus
Wes
t H
ercu
les
Wes
t Po
laris
Wes
t Ta
urus
Wes
t
Her
cules
In
vestm
ent i
n fin
ance
leas
e
54
8
1,15
161
11,
240
Othe
r ass
ets
11
2012
23
Total
asse
ts
55
9
1,17
162
31,
263
Long
term
deb
t
0
73
139
882
2 Ot
her l
iabili
ties
436
29
817
432
6 To
tal li
abili
ties
436
1,
029
572
1,14
8 Eq
uity
71
14
251
115
Book
va
lue
of
units
in
th
e Co
mpa
ny's
cons
olid
ated
acco
unts
601
1,
026
614
1,02
1 No
te 2
0 – S
ubse
quen
t Eve
nts
On O
ctobe
r 15
, Se
adril
l Pa
rtner
s LL
C ("S
eadr
ill P
artn
ers"
), a
whol
ly-o
wned
sub
sidiar
y of
Se
adril
l Li
mite
d an
noun
ced
that
it ha
s co
mm
ence
d an
ini
tial
publ
ic of
ferin
g of
8,7
50,0
00
com
mon
uni
ts, r
epre
sent
ing
limite
d lia
bilit
y co
mpa
ny i
nter
ests,
pur
suan
t to
a r
egist
ratio
n sta
temen
t on
Form
F-1
(in
cludi
ng a
pro
spec
tus)
prev
ious
ly fi
led w
ith th
e U.
S. S
ecur
ities
and
Ex
chan
ge C
omm
issio
n. Se
adril
l Pa
rtner
s wa
s fo
rmed
to
own,
ope
rate
and
acqu
ire o
ffsho
re
drill
ing
rigs
unde
r lon
g-ter
m c
ontra
cts.
Sead
rill P
artn
ers'
initi
al fle
et wi
ll co
nsist
of t
wo s
emi-
subm
ersib
le rig
s (W
est C
apric
orn
and
Wes
t Aqu
ariu
s), o
ne d
rillsh
ip (
Wes
t Cap
ella)
and
one
ten
der r
ig (W
est V
ence
dor).
On
Octo
ber
18, S
eadr
ill P
artn
ers
LLC
anno
unce
d th
at it
price
d its
initi
al pu
blic
offe
ring
of
8,75
0,000
com
mon
uni
ts at
a pric
e of $
22.0
0 per
uni
t. Se
adril
l Par
tner
s gra
nted
the u
nder
write
rs a
30-d
ay o
ver-a
llotm
ent o
ptio
n to
pur
chas
e up
to 1
,312,5
00 a
dditi
onal
com
mon
uni
ts, a
t the
sam
e pr
ice p
er u
nit,
to co
ver o
ver-a
llotm
ents.
The
com
mon
uni
ts we
re o
ffere
d to
the p
ublic
and
bega
n tra
ding
on O
ctobe
r 19,
on th
e New
Yor
k Sto
ck E
xcha
nge u
nder
the s
ymbo
l "SD
LP".
No
tes
to t
he
un
audit
ed c
onso
lid
ate
d f
inan
cial
sta
tem
ents
27
Lega
l Pro
ceed
ings
W
e are
a pa
rty, a
s plai
ntiff
or d
efen
dant
, to
a few
laws
uits
in v
ario
us ju
risdi
ction
s for
dem
urra
ge,
dam
ages
, off-
hire
and
oth
er c
laim
s an
d co
mm
ercia
l disp
utes
aris
ing
from
the
cons
tructi
on o
r op
erati
on o
f ou
r dr
illin
g un
its, i
n th
e or
dina
ry c
ourse
of
busin
ess
or in
con
necti
on w
ith o
ur
acqu
isitio
n ac
tiviti
es.
We
belie
ve th
at th
e re
solu
tion
of s
uch
claim
s wi
ll no
t hav
e a
mate
rial
impa
ct in
divi
dual
or in
the
aggr
egate
on
our o
pera
tions
or f
inan
cial c
ondi
tion.
Our b
est e
stim
ate
of t
he o
utco
me
of t
he v
ario
us d
isput
es h
as b
een
refle
cted
in o
ur f
inan
cial
statem
ents
as o
f Se
ptem
ber 3
0, 20
12.
Note
19 –
Var
iabl
e Int
eres
t Ent
ities
(VIE
s) As
of S
eptem
ber 3
0, 20
12, t
he C
ompa
ny le
ased
a d
rillsh
ip a
nd tw
o se
mi-s
ubm
ersib
le rig
s fro
m
VIEs
und
er fi
nanc
e lea
ses.
Each
of t
he u
nits
had
been
sol
d by
the
Com
pany
to s
ingl
e pu
rpos
e su
bsid
iaries
of S
hip
Fina
nce
Ltd
and
simul
taneo
usly
leas
ed b
ack
by th
e Co
mpa
ny o
n ba
rebo
at ch
arter
cont
racts
for a
term
of 1
5 ye
ars.
The C
ompa
ny h
as se
vera
l opt
ions
to re
purc
hase
the u
nits
durin
g th
e ch
arter
per
iods
, and
obl
igati
ons t
o pu
rcha
se th
e as
sets
at th
e en
d of
the
15 y
ear l
ease
pe
riod.
The
follo
wing
tabl
e gi
ves
a su
mm
ary
of th
e sa
le an
d lea
seba
ck a
rrang
emen
ts, a
s of
Se
ptem
ber 3
0, 20
12:
Unit
Effe
ctive
fro
m
Sa
le va
lue
(In U
S$ m
illio
ns)
First
re
purc
hase
op
tion
(In U
S$ m
illio
ns)
Mon
th o
f firs
t re
purc
hase
op
tion
Last
re
purc
hase
op
tion
* (In
US$
mill
ions
)
Mon
th o
f las
t re
purc
hase
Optio
n *
Wes
t P
ola
ris
July
200
8
850
548
Se
ptem
ber
2012
17
8 Ju
ne 20
23
Wes
t T
au
rus
Nov
2008
850
418
Feb
ruar
y 201
5
149
Nov
2023
W
est
Her
cule
s Oc
t 20
08
85
0
58
0
Augu
st 20
11
135
Aug
2023
* Fo
r the
uni
t Wes
t P
ola
ris,
Shi
p Fi
nanc
e ha
s a
put o
ptio
n ex
ercis
able
at th
e en
d of
the
lease
term
s by
wh
ich th
e ve
ssel
may
be
sold
to S
eadr
ill f
or a
fix
ed p
rice
of $
75 m
illio
n. F
or W
est
Tau
rus
and
Wes
t H
ercu
les r
epur
chas
e ob
ligati
ons a
t the
end
of t
he le
ase
term
s hav
e be
en a
gree
d, a
t $14
9 m
illio
n an
d $1
35
mill
ion,
resp
ectiv
ely.
The
Com
pany
has
dete
rmin
ed t
hat
the
Ship
Fin
ance
sub
sidiar
ies,
which
own
the
uni
ts, a
re
varia
ble i
nter
est e
ntiti
es (V
IEs),
and
that
the C
ompa
ny is
the p
rimar
y ben
efici
ary
of th
e risk
s and
re
ward
s con
necte
d wi
th th
e ow
nersh
ip o
f the
uni
ts an
d th
e ch
arter
con
tracts
. Acc
ordi
ngly
, the
se
VIEs
are
ful
ly c
onso
lidate
d in
the
Com
pany
's co
nsol
idate
d ac
coun
ts. T
he C
ompa
ny d
id n
ot
reco
rd a
ny g
ains
from
the
sale
of th
e un
its, a
s th
ey c
ontin
ued
to b
e re
porte
d as
ass
ets a
t the
ir or
igin
al co
st in
the
Com
pany
's ba
lance
she
et at
the
time
of e
ach
trans
actio
n. Th
e eq
uity
att
ribut
able
to S
hip
Fina
nce i
n th
e VIE
s is i
nclu
ded
in n
on-c
ontro
lling
inter
ests
in th
e Com
pany
's co
nsol
idate
d ac
coun
ts. A
t Sep
tembe
r 30,
2012
(as
well
as a
t Dec
embe
r 31,
2011
) the
uni
ts ar
e re
porte
d und
er dr
illin
g uni
ts in
the C
ompa
ny's
balan
ce sh
eet.
The
bare
boat
char
ter ra
tes a
re se
t on
the
basis
of a
Bas
e LI
BOR
Inter
est R
ate fo
r eac
h ba
rebo
at ch
arter
cont
ract,
and t
here
after
are a
djus
ted fo
r diff
eren
ces b
etwee
n the
LIB
OR fi
each
mon
th
and
the B
ase L
IBOR
Inter
est R
ate fo
r eac
h co
ntra
ct. A
sum
mar
y of t
he b
areb
oat c
harte
r rate
s per
da
y for
each
uni
t is g
iven
belo
w. T
he am
ount
s sho
wn ar
e bas
ed o
n the
Bas
e LIB
OR In
teres
t Rate
, an
d ref
lect a
vera
ge ra
tes fo
r the
year
.
A 59
No
tes
to t
he
un
audit
ed c
onso
lid
ate
d f
inan
cial
sta
tem
ents
30
As o
f Nov
embe
r 9, w
e ow
n 26
,376
,516
sha
res
in A
OD, c
orre
spon
ding
to 6
5,94%
of t
he to
tal
num
ber o
f out
stand
ing s
hare
s in t
he co
mpa
ny.
On N
ovem
ber 1
2, we
rece
ived
a L
etter
of A
ward
from
Hus
ky O
il Op
erati
ons L
imite
d fo
r a n
ew
five-
year
con
tract
for
the
newb
uild
har
sh e
nviro
nmen
t se
mi-s
ubm
ersib
le rig
Wes
t M
ira f
or
oper
ation
s in
Cana
da an
d Gr
eenl
and.
Total
estim
ated
reve
nue p
oten
tial f
or th
e con
tract,
inclu
ding
m
obili
zatio
n an
d pe
rform
ance
bon
us is
app
roxi
mate
ly US
$1.1
8 bi
llion
for t
he fi
ve fi
rm y
ears.
Th
e W
est M
ira is
cur
rent
ly u
nder
con
struc
tion
at th
e Hy
unda
i Sam
ho S
hipy
ard
in S
outh
Kor
ea
and
deliv
ery
is sc
hedu
led fo
r Q4
2014
with
esti
mate
d sta
rt-up
of o
pera
tions
dur
ing
Q2 2
015.
On
Nov
embe
r 12,
we gr
anted
Arc
her a
shor
t ter
m u
nsec
ured
cred
it fa
cility
of U
S$50
mill
ion.
The
loan
is re
paya
ble D
ecem
ber 1
0, 20
12 an
d bea
rs an
inter
est o
f 3 m
onth
s LIB
OR +
5%.
On N
ovem
ber 1
6, a
sub
sidiar
y of
Sea
drill
ent
ered
into
an
agre
emen
t with
Son
ga O
ffsho
re to
ac
quire
the
ultra
-dee
pwate
r sem
i-sub
mer
sible
rig S
onga
Ecli
pse
for a
con
sider
ation
of U
S$59
0 m
illio
n. Th
e rig
was
deli
vere
d fro
m th
e Ju
rong
Shi
pyar
d in
Sin
gapo
re in
201
1, an
d is
curre
ntly
op
erati
ng fo
r Tot
al of
fshor
e An
gola
on a
fixe
d co
ntra
ct en
ding
in D
ecem
ber 2
013.
In a
dditi
on
Total
has
thre
e one
-yea
r opt
ions
to fu
rther
exten
d th
e con
tract.
Sea
drill
inten
ds to
take
deli
very
of
the
rig d
urin
g De
cem
ber
2012
. The
pur
chas
e of
the
Son
ga E
clips
e wi
ll be
acc
ount
ed f
or a
bu
sines
s com
bina
tion.
No
tes
to t
he
un
audit
ed c
onso
lid
ate
d f
inan
cial
sta
tem
ents
29
On O
ctobe
r 24
, 20
12,
the
Com
pany
sol
d 10
,062,5
00 C
omm
on U
nits
in t
he I
PO, i
nclu
ding
1,
312,5
00 C
omm
on U
nits
that
were
rede
emed
from
Sea
drill
Lim
ited
upon
the f
ull e
xerc
ise o
f the
op
tion
which
Co
mpa
ny
gran
ted
to
the
unde
rwrit
ers
to
purc
hase
ad
ditio
nal
Com
mon
Un
its. F
ollo
wing
the
closin
g of
the
offe
ring,
Sead
rill L
imite
d ow
n 14
,752
,525
Com
mon
Uni
ts an
d 16
,543
,350
Sub
Uni
ts, co
llecti
vely
repr
esen
ting
a 75.7
% li
mite
d lia
bilit
y com
pany
inter
est i
n th
e Com
pany
. Th
e Com
mon
Uni
ts we
re re
giste
red u
nder
the E
xcha
nge A
ct on
Octo
ber 1
8, 20
12.
After
clo
se o
f tra
ding
on
Oslo
Bør
s on
Octo
ber
25 w
e ac
quire
d 12
,190
,858
sha
res
of A
sia
Offsh
ore
Drill
ing
Lim
ited)
("AO
D").
The
shar
es w
ere
acqu
ired
at a
price
of U
S$5.0
per
sha
re
(equ
als N
OK28
.71 b
ased
on
the U
SD/N
OK ex
chan
ge ra
te se
t by t
he N
orwe
gian
Cen
tral B
ank
on
Octo
ber
25).
Follo
wing
th
is ac
quisi
tion,
we
own
25,6
90,9
58
shar
es
in
the
com
pany
, co
rresp
ondi
ng to
64.2
3% o
f the
total
num
ber o
f out
stand
ing s
hare
s in
the c
ompa
ny.
On N
ovem
ber 5
, Sap
uraK
enca
na P
etrol
eum
Ber
had (
"Sap
uraK
enca
na")
and S
eadr
ill L
imite
d en
tered
into
a no
n-bi
ndin
g mem
oran
dum
of u
nder
stand
ing (
"MOU
") to
com
bine
and
integ
rate
both
com
pani
es' te
nder
rig b
usin
esse
s. Th
e enl
arge
d ten
der r
ig bu
sines
s und
er S
apur
aKen
cana
wi
ll co
mpr
ise, 1
6 ten
der r
igs i
n ope
ratio
n (in
cludi
ng th
e KM
1 rig
curre
ntly
own
ed b
y Sa
pura
Kenc
ana)
, 5 o
f whi
ch ar
e alre
ady 5
1%-o
wned
and
man
aged
thro
ugh i
ts ex
istin
g joi
nt-
vent
ure w
ith S
eadr
ill in
Var
ia Pe
rdan
a Sdn
Bhd
and T
iom
an D
rillin
g Com
pany
Sdn
Bhd
, and
an
addi
tiona
l 5 u
nits
curre
ntly
und
er co
nstru
ction
, 3 o
f whi
ch w
ill be
acqu
ired t
hrou
gh th
is tra
nsac
tion a
nd ar
e exp
ected
to b
e deli
vere
d in
2013
. In a
dditi
on S
apur
aKen
cana
will
also
be
offe
red t
he ri
ght t
o be t
he m
anag
er fo
r thr
ee fu
rther
tend
er ri
gs w
hich
are n
ot p
art o
f the
tra
nsac
tion.
Thes
e rig
s, W
est V
ence
dor,
T-15
and T
-16,
are t
oday
eith
er o
wned
or p
lanne
d to b
e ow
ned
by S
eadr
ill P
artn
ers L
LC an
d ar
e the
refo
re n
ot in
clude
d in t
he tr
ansa
ction
. Sa
pura
Kenc
ana w
ill ta
ke ov
er th
e rig
s inc
ludi
ng th
e ful
l ten
der r
ig or
gani
zatio
n for
an en
terpr
ise
valu
e of U
S$ 2.
9 bill
ion.
The o
rgan
izatio
n will
cont
inue
to op
erate
from
the e
xisti
ng pr
emise
s in
Sing
apor
e. Th
e tot
al en
terpr
ise va
lue i
nclu
des U
S$ 3
63 m
illio
n in r
emain
ing c
apita
l exp
endi
ture
s lin
ked t
o the
new
build
s pro
gram
and a
ll th
e deb
t in t
he te
nder
rig b
usin
ess i
nclu
ding
exist
ing b
ank
facil
ities
that
are e
xpec
ted to
be ap
prox
imate
ly U
S$ 80
0 m
illio
n as o
f Dec
embe
r 31s
t 201
2.
One o
f the
main
obj
ectiv
es of
the t
rans
actio
n is t
o dev
elop a
stro
ng le
adin
g play
er in
the F
ar E
ast
mar
ket.
Sead
rill w
ill, t
o sup
port
this
posit
ion,
rece
ive a
min
imum
of U
S$ 35
0 mill
ion i
n ne
w sh
ares
of S
apur
aKen
cana
. Thi
s com
es in
addi
tion t
o the
6.4%
stak
e tha
t Sea
drill
pres
ently
own
s in
Sap
uraK
enca
na. S
eadr
ill w
ill fu
rther
have
the r
ight
to no
min
ate tw
o m
embe
rs to
the
Sapu
raKe
ncan
a boa
rd o
f dire
ctors
(inclu
ding
one
alter
nate)
. Se
adril
l's ch
airm
an Jo
hn F
redr
ikse
n is
expe
cted t
o be o
ne o
f tho
se m
embe
rs. T
he re
main
ing c
onsid
erati
on w
ill b
e fun
ded
by
Sapu
raKe
ncan
a thr
ough
a m
ix o
f ext
erna
l bor
rowi
ngs,
a sell
er's
note
of u
p to U
S$ 1
87 m
illio
n, in
terna
lly ge
nera
ted fu
nds a
nd eq
uity
. Th
e MOU
furth
er st
ipul
ates t
hat t
he p
artie
s will
seek
to gr
ow th
eir jo
int v
entu
re ac
tiviti
es in
Br
azil
wher
e the
y wer
e awa
rded
3 P
LSV
cont
racts
by P
etrob
ras i
n 201
1. Th
e par
ties a
lso ag
ree t
o es
tablis
h a jo
int v
entu
re b
etwee
n Se
adril
l's 4
0 % ow
ned s
ubsid
iary A
rche
r Lim
ited
and
Sapu
raKe
ncan
a. Th
e sco
pe o
f suc
h ven
ture
will
be t
o foc
us o
n dev
elopi
ng an
d exp
andi
ng A
rche
r Li
mite
d's w
irelin
e ser
vice
s in
the F
ar E
ast A
sian m
arke
ts.
On N
ovem
ber 9
, we r
esol
ved t
o lau
nch a
n unc
ondi
tiona
l man
dato
ry o
ffer f
or al
l the
issu
ed an
d ou
tstan
ding
shar
es o
f Asia
Offs
hore
Dril
ling L
imite
d ("A
OD")
at a p
rice o
f NOK
28.7
1 per
AOD
sh
are.
The o
ffer p
erio
d in t
he M
anda
tory
Offe
r run
s fro
m an
d inc
ludi
ng N
ovem
ber 1
2 to 1
6:30
ho
urs (
CET)
on 1
0 Dec
embe
r 201
2, an
d may
be e
xten
ded b
y up t
o two
wee
ks. I
n th
e per
iod
betw
een O
ctobe
r 25 a
nd N
ovem
ber 9
, we h
ave a
cqui
red 6
85,5
58 sh
ares
in th
e com
pany
, co
rresp
ondi
ng to
1.71
% o
f the
total
num
ber o
f out
stand
ing s
hare
s.
63
Seadrill Limited Par-la-Ville Place
14 Par-la-Ville Road Hamilton HM 08
Bermuda
Nordea Markets Middelthunsgt. 17
P.O. Box 1166 Sentrum NO-0107 Oslo
Norway
Telephone: +47 22 48 50 00 Fax: +47 22 69 08 88
www.nordea.no
Pareto Securities AS Dronning Mauds gate 3
P.O. Box 1411 Vika NO-0115 Oslo
Norway
Telephone: +47 22 87 87 00 Fax: +47 22 87 87 10
www.paretosec.no
RS Platou Markets AS Haakon VII’s gt. 10 P.O. Box 1474 Vika
0116 Oslo Norway
Telephone: +47 22 01 63 00
Fax: +47 22 01 63 10 www.platou.com
Swedbank First Securities Filipstad Brygge 1
Postboks 1441 Vika 0115 Oslo Norway
Telephone: +47 23 23 80 00
Fax: +47 23 23 80 01 www.swedbank.no