Seadrill Partners LLC (SDLP) Ari Lazar, Jessica Kan, Sai Poddutur, Gongsheng Wang New Company Presentation 3/17/15 1

Introduction  Oil drilling company that rents rigs to large oil companies in exchange for daily payments.  jack-up rigs, tender rigs, semi-submersible rigs, and drill ships  Long term contracts with average duration of 3.3 years  Customers: BP, Exon Mobile, Chevron, Tullow Oil  Locations: 10 Oil Rigs in Canada, the US Gulf of Mexico, southeast Asia and West Africa  Major Competitors: Atwood Oceanics, Teekay Offshore Partners, Ocean Rig UDW, Hercules Offshore Inc  Business Phase: Growth  Price: $11.70  P/E Ratio: 7.77  52 Week Range: $ $36.07 Sources: SDLP 2014 Investor Presentation and Yahoo Finance on 3/15/15 2

Macroeconomic Review  Price of oil decreasing drastically in the past few months  Decline in price that Seadrill can charge on new contracts  Close relationship between oil price, rig count, and revenue Source: trading economic website, 3 Historic Oil Price

Relevant Stock Market Prospects  Long Term Contracts  Average duration of 3.3 years  Seadrill plans to extend existing contracts at slightly lower prices  All contracts are legally enforceable  Unlike Diamond Offshore (DO) who is losing contracts  9 out of 10 contracts are locked in at pre oil crash prices until at least 2017  If price of oil rises, SDLP will likely increase as well  Acquisitions and Expansion  Recently purchased new rig in November for $900 Million  Management is committed to future expansion  New, advanced floaters compared to the aging old floaters  17.30% Dividend Yield  Based on current price  Management has promised to maintain or raise dividends throughout 2015  Operating agreement forces them to distribute all excess cash Source: SDLP Q earnings call transcript 4

Business Overview- Portfolio Sources: SDLP 2014 Investor Presentation 5

Business Overview – Portfolio Changes  West Vela  Recently purchased West Vela rig on November 6th for $900 Million  $525,000 day rate from BP with contract locked until November 2020  West Vencedor  Contract expires at the end of Q with a day rate of $218,000  Future contracts for this rig are still being explored  Only contract that expires before 2017 Source: SDLP Q earnings call transcript 6

Business Overview - Management  CEO: Graham Robjohns  In office since June 2012  Previous experience: CEO and CFO Golar LNG Partners Nov 2009-July 2011  Under his management stock saw over 200% returns  Management Goals and Outlook  See themselves to be in a challenging macroeconomic environment  Committed to expansion and future acquisitions  Maintaining excellent customer service  Sustaining or raising dividends  47% of stock held by Seadrill Limited (SDRL)  High incentive for highest possible dividends Source : Capital IQ and SDLP 2014 Q4 earnings call transcript 7

Business Overview - Risks  Price of Oil  If Oil prices do not increase new contracts will see a decrease in price  West Vencedor rig is a “tender situation” because new contract expires at the end of this quarter and no agreement has been reached yet on a new contract  One time Expenses  Had 36.4 million dollar investing expense for hedging floating rate interest but remains as a fully non cash movement unless swap is terminated  10 year swap and will directly increase net income if interest rates rise  Natural Disasters  Hurricanes or other storms could potentially cause damage to equipment  Alternative Energy  Alternative energy may decrease demand for oil in the future  Debt Obligations  Very high debt levels which have lead to recent negative outlooks from Moody’s  No long term debt due until the end of 2016  98% of debit is locked in at 2.5% + Libor and fully hedged with an interest rate swap Source: SDLP Q earnings call transcript 8

Porter 5 Analysis  Threat of Substitutes - Moderate  Threat of New Entrants - Low  Supplier Bargaining Power – Low  Customer Bargaining Power – Moderate/High  Rivalry Within Industry - Moderate 9

SWOT Analysis  Strengths  Long-term, legally enforceable contracts  Attractive rates paid daily in cash  High dividend pay out rates  Weaknesses  Tender situation with West Vencedor rig  Opportunities  Contract length extensions with current customers at slightly lower day rates  Acquisitions of new rigs  Threats  Challenging macroeconomic environment especially with oil prices 10

Recent Earnings (Q4 2014)  Revenue of $380.6 Million  34.8% Increase year over year  Beat Analyst Expectations by $27.04 Million  Net Income of $70.1 Million  Before minority interest  Slightly lower than Q  EPS of $0.86  Outperformed analysts expectations of $0.76 Source: SDLP Q earnings call transcript 11

Recent Returns Source: Google Finance 12

Capital Structure  Cash  $243 million in cash  $200 million in undrawn revolvers  Used to Finance Dividends  Debt  No debt due until 2016  $4,302 million  Used to finance expansion  Equity  $2,044 million  47% of company held by Seadrill ltd (SDRL) Source: SDLP Q earnings call transcript 13

Technical Analysis Source: bigcharts.marketwatch.com 14  Current Price Below 20 day and 200 day moving averages  Strong bearish signal

Financial Analysis Source: Capital IQ 15

Financial Projections - Revenue 16

Financial Projections 17

Discount Rate 18

DCF 19

Price Target Sensitivity Analysis 20 Discount Rate Change in Oil Price

Comparable Analysis Source: Capital IQ 21

Comparable Analysis Source: Capital IQ 22  Large difference in comparable implied price and market price  Levered ratios vs. Unlevered ratios  Seadrill has more debt than competitors

Comparable Stats 23

Recommendation  Current Price: $11.70  DCF Implied Price: $30.83  Comparable Analysis Implied Price: $32.98  Average Projected Price of $31.90  Technical Analysis Conclusion: Sell  We recommend adding SDLP to watch list  Should be reconsidered if macroeconomic conditions improve 24