Good day, ladies and gentlemen, and welcome to the Seadrill quarter two 2010 results conference call. (Operator Instructions) At this time, I would now like to hand over the conference to your host today, Mr. Jim Daatland, Vice President of Investor Relations.

Thank you and welcome to our second quarter 2010 earnings call. A copy of the quarterly report has been posted on our website, seadrill.com, along with all the supporting material for this call. Joining me today, we have our CEO, Mr. Alf Thorkildsen; our new CFO, Esa Ikäheimonen; and our Group Controller, Mr. Livar Voll. Before I turn the call over to Alf, I would like to remind everyone that during the course of this call, we may make certain forward-looking statements regarding various matters related to our business and company that are not based on historical facts and could include future financial performance, operating results and the prospects of the contract and drilling business. Please note that any such statements in addition to other information discussed in this call are given within the Safe Harbor provisions provided by the federal securities regulation. For further and more detailed description of all the risks associated with our company and our industry, please see our most recent Form-20F and other filings with the U.S. Securities and Exchange Commission. Should one or more of these risks or uncertainties materialize or underlying assumptions prove incorrect, actual results should differ materially from that indicated. In order to give as many people an opportunity to ask questions, please limit your questions to one initial question and one follow-up. Thank you. That concludes the preliminary details, and I'll now turn the call over to Alf.

Thank you, Jim. I would start with some overall comments to the results and company developments through the quarter, including subsequent events. Esa, our new CFO, will then take us through the final details of our financial accounts before I revert to talk about our current operations, including the performance of our deepwater newbuilds, our contract backlog and market outlook, dividend policy, and close with some summary remarks. Next page please. Before I start, I would like to take this opportunity to thank all the employees in Seadrill who are listening for all the hard work during this reporting period. First of all, we are pleased to deliver an EBITDA of US$493 million. If we adjust for gain on asset sales in previous quarters, the second EBITDA is actually the highest in our company's history. The second quarter was characterized by higher predictability in our operations, resulting in strong contribution from our rigs in operation. We have long talked about reducing cost in our deepwater operations. We have this quarter delivered meaningful reductions on a rig-by-rig basis. Some is due to improved regularity in our operations as we have become more seasoned in deepwater in the various regions we operate, and some is due to better planning. The result is a decrease in daily OpEx for our new deepwater rigs to the extent of US$10,000 to US$15,000 per rig per day. Our net income for the quarter was US$329 million corresponding to earnings per share of $0.77, up from $0.49 in the previous quarter. We continue our payout of quarterly cash dividends and have decided to increase the payout to $0.61 per share, up from $0.60 in the first quarter. We have in effect from June 1 consolidated Scorpion Offshore into our accounts. As most of you know, we have…

Thank you very much. As for a walk through of the financials, if we then go back to the operation side of the company, there have been a few additions to our operational fleet and geographic presence since May. We have, through the acquisition of Scorpion, made the presence of two jack-up rigs in the Middle East. We have added our first operation in Venezuela and we have taken our two jack-up operations in Brazil. The last two jack-ups acquired from Scorpion adds to our already sizable presence in the Southeast Asia that shortly will count 23 units. The ultra-deepwater semi-submersible newbuild West Orion, which in May was then transferred to Brazil, was taken through customs and the acceptance as programmed of Petrobras at record speed. The unit started operation in mid July for Petrobras, and performance have been second to none, with utilization rate exceeding 95%. We have also taken delivery of the ultra-deepwater drill ship West Gemini, which is currently undergoing an acceptance test program in Angola and is expected to commence operation for Total in mid-September. Furthermore, we have taken deliver of two new jack-up rigs that go straight on contracts. West Callisto has started operation for Premier Oil Indonesia and has laid up and is shortly mobilized to start operation for PT Pan also Indonesia. That means that at present we have 40 units in operation, four units under construction, three units on routes to the first assignment and one idle unit ie, the Tender Rig T8. In order of new contracts and/or repeat business, we are dependent on excellence in our operational performance. The combination of high technical utilization and strong HSE performance is key, not only to us, but also to our customers. In the second quarter, we delivered strong overall utilization for the…

(Operator Instructions) Our first question today comes from Rafi Khouri of Raymond James.

I know you got gain from last year and the loss for this year. I'm yet to review all the documents yet. Could you just explain that briefly please? Esa Ikäheimonen: During the quarter, we had interest swap losses of about $90 million, and we have contracts of about $15 million. And then in addition, we have other financial derivative with the loss of $57 million.

So you had a gain last year of $96 million in the similar quarter? Esa Ikäheimonen: You mean 2009? Yes, we have a gain in 2009.

As a shareholder, is there any way to project or try to understand any type of smoothing out of the gains or losses?

I think it is hard to say that. We have secured our interest rate flow with $5 billion in loans. So that process is the biggest impact. And of course, when the interest rate reduces so significantly, we have some losses. If they are coming up again, you will see some gains, because we mark-to-market them every quarter. So it's just hard to give you how we should smooth it. But a key component here is the interest rate going forward.

What is your risk with your interest rates swaps? What would cause them to blow up in effect if that is a fair question? What is the biggest risk with your interest rates swap policy?

If you look at swap and our fixed-income interest, we have today an average interest cost of 5%. That is the assumption for our calculation as well. And I don't think there are any other issues, and there are no chances of blowing up anything.

Our next question today comes from Lukas Daul of SEB Enskilda.

I was wondering, Alf, if you could give us a little bit more flavor on the reduction of the operating cost. How was that exactly achieved? Could you give us some more details on that?

I think the thing we have seen is that you know that we had startup issues both in Brazil, Nigeria, the Far East, and we started up eight rigs within the 12-month period. We had significant startup cost. And then also, on some of the rigs, particularly those of our prototypes, which was West Hercules, West Polaris and there is Phoenix, we had some issues when they came to the startup. We feel that we have more control over the cost. We are also having a more stringent cost control after the initial startup where the most important thing is to get the rigs going. So we can focus on two things, not only on utilization, but we are focusing both on utilization and cost when it comes to performance.

Secondly, you are mentioning Brazil in your report that you see opportunities there. I was just wondering there are a number of uncontracted newbuilds which like financing, if you were to in any way pursue these opportunities towards Brazil, would you stick to your investment criterion of five-year payback on the investment?

I think we are trying to do that. We believe we did that in the Scorpion. We believe we did that in the CJ70. Of course, we are in opportunistic position with some flexibility both short term and long term. But yes, I think over time, we will try to stick to our five-year return cash on cash. That may not be possible in the short term on the deepwater market, but the underlying assumption must be that we are able to do so over time. There is a strategic interest for us to develop the distance further in Brazil. Just to mention, we were down there last week. And of course, when Petrobras tell us that they will spend $224 billion the next years, and it's only offshore, then it becomes an extremely attractive area to be well placed.

Our next question comes from Fiona Maclean of Merrill Lynch.

Speaking on Brazil, can you provide us with some more clarity in that sentence that you have in your statement where you say you are considering several options on how to be best positioned to take part in the Brazilian growth? I'm just not really sure what you are talking about there, because you were already pretty well positioned. Then secondly just looking at your stake in Pride, how much longer are you willing to hold on to that stake given the stockish nature of the stock market for Petrobras, especially in the U.S.? And thirdly, have you got any further update for us in terms of your European listing and whether you're going to move it out of Norway?

Let me start with the position in Brazil. You may be aware that there are and will become even more stringent regulation when it comes to local content. And that is the reflection of some of what our statement is all about. We have at the moment 4 deepwater units and two jack-ups in Brazil. We have been able to get very long term and very attractive contract for our deepwater and reasonable contracts for our jack-ups. We believe that the requirement for local content will increase and we have to find a strategy where we can encompass that and put that into our operational modus operandi. So that is a backlog for that statement. The way to do it is still under discussion internally, and we are working on that as we speak. When it comes to Pride, we have 9.4% of the Pride. We've had it for some years. I have no further comments. When it comes to European listing, there is no news on that as we speak today. And I will keep the market updated if there is breaking news on that.

We will take our next question from Matt Conlan with Wells Fargo.

The tax rates in the U.S. on dividends are scheduled to go up next year, undetermined how far, but they are likely to go up next year. Does that change your opinion or your balance on dividends versus other ways of giving cash back to the shareholders?

Our clear vision is to keep the dividend high as we go forward. Yes, we have significant shareholdings in the U.S. I don't know if all of them are impacted by it, but we will judge it when we see it. But the underlying ambition for Seadrill is to keep the dividend policy as we speak today.

And this may be too technical for the call, but after the $0.60 dividend, the conversion price on your converts declined by $0.88 and $0.69 from the last quarter. How was that formula calculated that the convert price declined by more than the dividend? Esa Ikäheimonen: Well, the formula is included in the loan agreement documents. It is on our website. But of course the adjustment is related to where the actual share price is on the date that you announce the dividend. The share price had been around the strike price, the reduction would have been equal, but as long as the share price is significantly below the strike price, there is this slightly higher reduction in the conversion price.

Our next question will come from Phil Lindsay of RBS.

First of all as a follow-up on the OpEx question, you could see it coming down following the difficulty in the first quarter. Is that level of saving at 10,000 to 15,000 sustainable in the near-term, or can it be improved upon? And also, how may potential new regulations impact this in the medium-term? The second question is on M&A really. I'm just trying to think about, given the operators are looking for modern equipment, but at the same time they're also looking for experienced drilling contractors. Just what kind of opportunities are you seeing out there for single unit purchases?

Let me try to answer your first one, the operating cost question. I believe that it is sustainable. So that was the first question. Can we improve it further? We will try, but I will not guarantee that in any form and shape. So I think it is sustainable where we are. I think it is sustainable where we are with our tender rigs and our jack-ups. We are very cost conscious and focused, as well as utilization and A to Z, but it comes as part of a whole package with operational excellence for Seadrill. But I believe that we are on an overall basis becoming competitive. When it comes to new regulation, yes we see that already coming. There are changes in the standards for our rigs. We believe that our rigs and particularly on the BOP side, the blow operators, we are in very good shape due to the new fleet. And at the time we ordered it, we ordered the most modern equipment available at that time. We believe that if there are changes, they will be relatively minor to the Seadrill fleet in total. When it comes to your M&A question, I think it is hard to comment any further than that there are exits, and if there are, you may be aware, we always get a chance to have a look at it. And I think that's where I would stop my comments.

We will be taking our next question today from Ole Slorer of Morgan Stanley.

Could you give us an update on what type of risk you would be willing to take in Brazil?

As I said previously, Brazil is the most coming market. In Brazil in total, the economic growth in the country is 6%. It's exponential, when it comes to deepwater and offshore. We believe that with the current experience, we are accepting the Brazilian risk outlined by Petrobras. So I think from that perspective, we are more confident that we can manage the client risk and the operation challenges that that has compared to an international standard. So from that perspective, we are more confident today that we can operate like a local player in Brazil.

How about newbuilding construction risk in Brazil, you talked about as local content and I presume that your ambition is to somehow get inside those 28 rigs to be built or additional rigs to be built in Brazil. Just to be more specific, what type of newbuilding construction risk are you willing to take in Brazil?

I think we are willing to take some newbuilding risk in Brazil. I think the easiest one to build in the new yards in Brazil would be drillships. But I think we will carefully look at that, and we are given the right setup and the right sharing of risk between the yard or as the drilling operator, and enterprises client. If we can share that in the right way, I can say that we are prepared to take some newbuild risk in Brazil. But it's not only us, but it's the free parties who have to share in a sensible way, ie., that we might not have a standard Brazilian contract that the client is maybe prepared to take some more newbuild risk combined with us. And we also share the same with the yard in question. We are reasonably experienced in this, and I think we understand some of risk as speculated and I think we understand the yard situation as well.

We will take our next question today from Kenan Najafov of Citigroup

I just have a question about the seven jack-ups that you are taking over as part of Scorpion. What is the cost OpEx per day compared to your existing fleet, and what's the room for improvement you see there?

If you exclude overheads on Scorpion, which we believe that we can eliminate with out total fleet exposure and our total overheads, we believe that the OpEx cost is similar to, maybe there are some small elements that I as an analyst of Seadrill I would not put that into the formula yet. I think you can assume that the cost is similar to what it has been. There are a couple of new areas where they are working, Venezuela, we are working in Northern Brazil, and that's a start up operation in Brazil. Other cost we have seen there is stable in the next quarters.

So the major question is it would come from eliminating the overhead, mostly.

That is correct.

(Operator Instructions) We will take our next question today from A. J. Strasser from Cooper Creek Partners.

I was hoping if you could elaborate on your views of consolidation and acquisition, with several companies trading below net asset value, are you more amendable to corporate acquisition versus purchasing particular assets. And also are you more prone to consolidation in the jack-up market or the deepwater market, and why? And I just have one additional question, I was wondering if you could just tell us where you see day rates for high spec jack-ups in 2011 and current commodity environment?

Definitely, we started to say that when it comes to M&A deals and single assets, we drill through the location both in London and in Norway. We are all in the network we have it with brokers, we are always able to see entities going on in this market. I will not point you to a direction of single assets or oil company. I think we are an opportunistic company and we will judge it on an individual basis there and then if we go for a company, or if at all go for anything at all. So I will not give you any answer, but we are looking at single assets, corporate acquisitions and do nothing. But still we are optimistic about the longer-term of this business. No, we have not lost faith in our deepwater. As we have said in our board report, we have in the short-term we are uncertain, longer-to-medium term in the deepwater, we believe that we see an attractive market going forward. When it comes to the jack-ups, we have indicated that we see that our rates will be in the 120s. I don't think there will be a major shift in that into '11. We are prepared to enter contracts at that level going forward, covering to those in the level.

We will take our next question from Truls Olsen of Fearnleys.

Firstly, regarding the jack-ups, it is coming up for the (inaudible). You have an option not to take delivery, given the remaining cost which is underneath $5 million. What is the (inaudible) building current market, how should we think about that?

You should think about it positively.

And secondly, what was you capitalized interest in the quarter? Esa Ikäheimonen: $19 million.

$19 million

I think we will stop the question line there. I thank you all for participating in our call today. See you in November.

Ladies and gentlemen, that will conclude today's conference call. Thank you for your participation. You may now disconnect.