Good day and welcome to the Q1 2013 Seadrill Limited earnings conference call. Today’s conference is being recorded. At this time, I would like to turn the conference over to Mr. John [Roach], director of investor relations. Please go ahead, sir.

Thanks, operator. Thank you all and welcome to Seadrill’s first quarter 2013 earnings conference call. Please note that this conference call also includes comments on the first quarter of 2013 accounts for majority owned subsidiary, North Atlantic Drilling. The quarterly reports and other supporting materials are available on seadrill.com and nadlcorp.com. Together with me on this call, I have our Chief Executive Officer, Mr. Fredrik Halvorsen; our CFO and Senior Vice President, Mr. Rune Magnus Lundetrae; Robert Hingley-Wilson, our Senior Vice President and Chief Accounting Officer; and also with me, Mr. Alf Ragnar Lovdal, the CEO of NADL. Before I give the microphone over to Fredrick, I would like to remind everyone that during the course of this call, we may make certain forward-looking statements regarding matters related to our business and company that are not based on historical facts. Please note that such statements, in addition to other information discussed here, are within the Safe Harbor provisions provided by the Federal Securities regulations. For further and more detailed description of other risks associated with our company and industry please see our most recent annual Report on Form 20-F and other filings with the SEC. If we all turn the page to page two, I trust we all read the disclaimer. And with that, I’d like to turn over the microphone to Fredrik.

Good morning, and good afternoon to all of you. And thank you for joining us on the call today. I’ll start by going through the highlights for the first quarter. Thereafter, we’ll go through the market outlook for the business and the contract backlog. I’ll then go through our dividend policy before ending on some summary comments. I’ll then hand the call over to Rune Magnus to take you through the financials for both Seadrill and North Atlantic in some more detail, and then in the usual fashion we’ll finish on a combined Q&A session for both companies. So let me start with some highlights. I’m very pleased to share a record quarter of $662 million in operational EBITDA. Now, in addition, we executed the sale of the West Janus, which gave a solid gain of $61 million, bringing the overall EBITDA for the quarter to $713 million. The net income for the quarter was $440 million, corresponding to an earnings per share of $0.87. The quarter was marked by a significant improvement in utilization for our floaters. Economic utilization for the quarter came in at 92%, which is up from 86% in the previous quarter. As discussed in our last conference call, the first half of the quarter in Q1 was affected by the change out of the [connector bolts] in our subsea well control equipment. I’m happy to say that we were able to take care of these issues, both on cost and on time, and since then we’ve seen a sequential pickup in utilization month over month. On a positive note, technical utilization quarter-to-date - I’m now talking about Q2 - is at 97% for our floaters. So I’d say we’re quite proud to have reverted to our historic norm and we will work very hard to…

Thank you, Fredrik, and good afternoon and good morning, everyone. I’ll start with the financial performance highlights of Seadrill, then move on to some nonfinancial highlights for the North Atlantic Drilling, and then finishing off with a brief review of their financial performance, before we open up for Q&A. Financial performance highlights for Seadrill, as Fredrik said, we achieved an EBITDA of $713 million, including the West Janus sale. Earnings per share was $0.87, and we declared a dividend of $0.88, which is an increase of $0.03 from the previous quarter. The EBITDA contribution increased by $48 million from the fourth quarter, excluding the $61 million gain on the sale of the West Janus, so a very solid operation performance compared to last quarter. For the floater segment, the increase amounted to approximately $21 million, and the main drivers were the acquisition of the West Eclipse that operated for 87 days in the quarter and the West Hercules, that operated for 60 days versus the mobilization and the [unintelligible] that it had in the previous quarter. For Q1, we experienced operational downtime, mainly due to the connector bolt issue that we had discussed in also other quarterly calls. The jack-up units, the increase of $31 million, was related to units operating in Q1 that were partly in transit in the previous quarter, and increased utilization across the fleet. The tendering performance was relatively flat for the quarter, which is a very good story. The tendering segment has performed with the same [unintelligible] and [unintelligible] of operation as we have seen last year. Operating income for the floaters, as mentioned in the EBITDA overview, there was an increase in operating profit in the first quarter compared to the last. The floating segment increase was a net operating profit that amounted to…

Sure. Thanks, Rune, and thanks, Fredrik, for your comments. With that, I will turn it back over to the operator to poll the audience for questions.

[Operator instructions.] We will now take the first question from Mike Urban of Deutsche Bank. Please go ahead.

You’ve expressed, obviously, a pretty confident view in the jack-up market, which you’ve signaled with ordering some additional newbuilds. I would agree that it’s been a very strong market here in the near term, but what gives you the long term confidence to make those types of investments. I think deepwater, I think everybody agrees it make sense. Clear tailwind there from all the discoveries that have been made. Just would be interested on your thought process on the longevity and the sustainability of the jack-up market.

I think first of all, we are looking at the overall aging profile of the fleet, with more than 60% of the premium units being 25 years or older. So we do see now a move toward a lot of new units, and I think that’s where a lot of this confidence is coming from. Now, of course we are also in active discussions, and so with our market intelligence, we do see that a lot of operators are moving quite aggressively to newer types of units for operating concerns and for safety concerns. So taking those two together, we remain quite bullish on this segment.

And in the near term, you’d mentioned Mexico as a potential emerging source of strength in the jack-up market. I think that’s been the case for a while. They’ve expressed a need for additional rigs in the particular newer units, but haven’t really been willing to pay for high spec assets. Is there anything you’re seeing that might be changing there or a potential change in their attitude? Or is it more just the discussions that you’ve had with them in terms of their expressing a need for additional units?

We think it’s changing. Both West Africa and Mexico we see as strong drivers going forward, and that is on top of the demand we’re seeing out of Saudi and Asia.

We will now take our next question from Ryan Kauppila of Citi. Please go ahead.

You mentioned in your press release that you anticipate increasing diversity of contract terms in the ultradeep market. Just wondering what you think is driving that. Are the majors now being patient for lower rates on longer term? And as far as your strategy, do you see an opportunity or an environment where you may shift more towards shorter term, higher rate, over the near term?

I think we have fairly good visibility at this point, and we are very confident that there are some good long term drilling opportunities out there, and we’re going after several of them. So I think the first comment is, I don’t think a lot has changed. I wouldn’t preclude us doing some short term work for some of the units, but if I were to summarize it, I would say - and being probably a little bit on the aggressive side - as we get to the other side of the summer, we’d probably have only a couple of rigs open for ’14.

Okay, and just I guess with regard to all the newbuilds coming online in ’14, as you’re hiring out for your vessels, have you noticed an uptick in attrition at Seadrill? And generally, how are you finding your ability to source labor?

So the question is just around being able to attract the best people to run all the newbuilds, yes?

Well yeah. Have you noticed, over the last six months, an increase in your attrition rate?

No, we have not seen an increase in attrition. We have, however, I think very proactively, got in and installed a lot of extra incentives to make sure that we can train people very effectively out on the rigs using simulators and so forth so we can utilize some people that are already [unintelligible] and couple that with some of the new people we have coming in. I think one of the benefits here is having a big fleet with quite a few units, and with some operations in all geographies. So we have that scale from which to recruit and train people as we take delivery of new rigs.

We will now take the next question from Greg Lewis of Credit Suisse. Please go ahead.

In the press release, you pointed to, you know, beyond the Sevan transaction, there are other alternatives for growth and/or expansion at Seadrill. What do we think about those types of alternatives? Is that primarily newbuilds of offshore floaters and jack-ups? Or is that potential additional opportunity to maybe acquire rigs from companies and/or companies? And if so, could you maybe provide a little bit of color around that?

We’re not against acquiring single assets or even companies. I think what we’ve found, though, is that the yard prices have been coming down, and are at very attractive levels. So the economics in a newbuild has just been superior. We did, of course, buy the Eclipse, which was also a single asset, and that is working out very well. So I would not rule out us buying single assets, both in the jack-up and the deepwater space. At the same time, I think the yard rates are probably not going to run away from you either in the next six months. And in that sense, there’s no rush. So over the next six months, we’ll figure out probably a combination of newbuilds and single asset purchases.

And then just real quick, clearly you have the jack-up rigs on the construction that you’re on and at Dalian. Has there been any delay? Is everything running smoothly on all those rigs? Clearly there’s multiple rigs at both yards. If you could just maybe provide an update on the performance of both of those yards?

One of the things that the industry went through was an issue with the pinion gears for the jack-ups built both at [unintelligible] and at Dalian. I think it’s just been discussed quite a bit before. I think in connection with our last quarter said it was probably a six-month delay related to this pinion gear failure. We are now on track, and we’re on that schedule, to get them delivered, and I think the fortunate thing is that we’ve also had our AOD jack-ups and have successfully been able to discuss and agree with the clients to substitute units. So this does not cost anything, except of course a later delivery. I think we also took a very conscious choice not to go for the hybrid model of having to have the rigs delivered and then try to modify them once in the field, [unintelligible] load and so forth. So a decision was made, you know, let’s keep them there until they are done and [unintelligible] from the yard and rather fulfill the contract obligations with the [unintelligible] offshore drilling units.

We will now take our next question from Thijs Berkelder from ABN AMRO. Please go ahead.

Three basic questions. When looking at the opex in the floater segment, can you explain why the vessel opex is so large compared to previous quarters? Of course, partly it’s the Eclipse, but what explains the rest? Secondly, were there, in Q1, any movement cost for moving from Stavanger to London? And how large were they? And thirdly, maybe can we still expect to book profit on the sale of tenderings to SapuraKencana and what size can we expect there?

Could you just repeat the first question?

The vessel opex for the floaters.

Right. I’ll rely a little bit on my, we have both the chief accountant and the CFO in the room as well. The main event during Q1 that would have driven up cost to not see the margin on the incremental revenue you would expect was the connector bolt issue. We had to pull the BOP on three units and get that rectified.

We don’t comment specifically on our opex, generally, but I think it’s, like Fredrik says, mostly related to the connector bolt issue and also the Eclipse. And of course we’re getting close to some newbuilds coming into operation.

But underlying opex should be then something like 260, 270 a quarter?

You know, we also have some costs related to the preparation for [five-year] classes, and that’s also being expensed. But I think the expectation is margins between 55% and 60% EBITDA margin on our floaters. And then accounting, then, on the Sapura, without being too specific, I think it was somewhere between $1 billion and $1.3 billion is the accounting gain that one can expect. But of course we haven’t finalized the books yet for the second quarter. But that’s the range that you can expect. And that would be on a separate line of other financial items.

On the question about the G&A and the moving costs, yes, there were some costs associated with the move, but equally there were some costs associated with the move in Q4, when we announced the transition. I think what we can say is there’s been a fair degree of focus from the management team on control of G&A and I think the benefits of that are being seen a little sooner than maybe we would have expected and I think the number that’s in there this quarter is probably the right indicative level certainly for the rest of ’13.

[Operator instructions.] We will now take the next question from Darren Garcia from Guggenheim. Please go ahead.

I was curious, with the drop down of the T-15, it seems to me that Seadrill Partners will be doing most of that in raising debt and [units] out of the gate, but the tender was dropped down for 210 and it was originally paid for at the end of last year for I think 112. How does the mechanics of that work? Is it basically the mark-to-market of what that asset is worth and then Seadrill Partners will acquire, is that kind of how we are looking at dropping down in the future, where you pretty much get kind of the yield base rerate on the sale, kind of going towards the Seadrill parent versus [unintelligible] structure?

You’re lucky. We have Graham Robjohns here, of course, the CEO of Seadrill Partners. So he will take that question. Of course, we have a separate call after this on Seadrill Partners. But Graham?

I think basically what you have to remember is the rigs are sold down to Seadrill Partners at a point in time that they are built, delivered, derisked, and ready to go. So there’s obviously a big premium. I think the 112 number is probably a bit low from the actual total all-in cost. So the way that we would arrive at that valuation is relatively simply looking at a discounted cash flow for the contract term and putting sort of a risk to value on the residual value after the initial contract term and working that out on Seadrill Partners’ weighted average cost of capital to come up with the 210 purchase price, which is around about 9 times EBITDA multiple. Which I think is, for a rig that’s about to commence operations, is reasonable.

Sure, because it’s obviously very good and accretive for Seadrill to kind of work that as a financing vehicle, but I’m imagining that at a certain point, in terms of doing things on an all-debt basis, you’ll eventually do this on a unit basis, obviously [using] units to finance that growth. How are we looking to balance where the premium that the Seadrill Partners trades to NAV against acquisitions and prices? And what’s kind of the logic of how we should be thinking about drop downs coming from Seadrill in the future? Should we be looking at kind of similar premiums in line with the premium that Seadrill Partners probably trades to its [breakup] value? Or is it, again, maybe just more like thinking about things on a DCF basis as we’ve spoken?

You’re quite right that we won’t be able to continue Seadrill Partners financing acquisitions on an all-debt basis, so new equity will come. And as was mentioned in the presentation, Seadrill Partners will have its seasoned issuer status in October, so that will all become a lot easier at that time. Obviously we are still going to prudently use debt to fund our acquisition growth as we can moving forward. In terms of the premiums or the valuations if you like, it will be done in a similar way moving forward. We expect Seadrill Partners to trade extremely well given the growth profile that we have, which will allow us to continue to acquire rigs at value, that are fair to Seadrill and fair to Seadrill Partners, and are win-wins. It would be done on a DCF basis, which will be dependent upon the contract terms, largely, in terms of where the multiple is.

So the last question, and maybe kind of an ignorant one. The seasoned status, what does that status change and help out with? Just because maybe I’m not familiar. How do I want to think about that?

That’s where Seadrill Partners flips from being a first-year issuer on the stock exchange. On kind of day 365, assuming all the filings are current, and our market capital holds up, you switch to what’s known as well-known seasoned issuer status, which means you don’t have to go through the drawn-out process of filing in advance with the SEC, waiting for comments, and then ultimately having things in the public domain for quite a while before you can actually pull the trigger on an equity transaction. Think of it as us becoming akin to any other domestic U.S. company where we can go to the equity market overnight if we’re arranged in a decent fashion.

[Operator instructions.] We will now take the next question from Richard Haydon of Yield Capital. Please go ahead.

Is it possible that you could expand upon the potential benefits to North Atlantic from a strategic relationship?

I’m happy to take a first stab. We also have, of course, the CEO of North Atlantic here, Mr. Alf Ragnar Lovdal. I’ll let him answer the second part of the question. I think one of the things that Seadrill has traditionally created a lot of value from is to have quite standardized assets that can be traded in quite broad markets across multiple customers. We feel very strongly that the harsh environment units could be such an asset class, but for that to be true, it can’t be traded only in the North Sea towards, well, frankly speaking, one client. So in creating a good growth story, I think you need to expand the area of operations, get more harsh environment areas under your wings. And as part of that, we’ve always had a multitude of initiatives going around North Atlantic drilling, and we’re happy to say that, you know, we’ve had some discussions now around JVs or partial buy-ins from parties that could help us gain credibility and gain access to more growth in a broader area of operations.

We will now take the next question from Julien Laurent of Natixis. Please go ahead.

I was wondering, why do you consider that jack-ups are more pro-business than tender rigs. And do you believe that in terms of capital location it would make sense to keep [unintelligible] more capital on deep offshore vessels than jack-ups?

First, there are more people with opinions in the room. What we feel is that we have a very strong and longstanding relationship with SapuraKencana [or Malaysia]. That market was predominantly a Southeast Asia market, mainly in Thailand, Malaysia, and so forth, with a few international units. And we especially had a partner that was very capable, especially after the merger between Sapura and Kencana of running those assets. In just as good fashion as us, we remain shareholders in that business, and that has allowed us to allocate more capital into what we now see as our [core], which is the deepwater and the jack-up units. I think this is partly a decision to concentrate on fewer asset classes as the company also grows bigger. Again, one of the things I think that has traditionally proven very fruitful for shareholders of the company is we build very similar units in very similar markets, make it very standardized, allowing for scale within asset classes, and that’s going to grow both jack-ups and deepwater units. We hope to replicate that. So if you’re going to grow some segments, something’s got to give, and the decision was to therefore exit the tender class.

There are no further questions.