UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
 
 
FORM 20-F
 
 
 
(Mark One)
¨
REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) or (g) OF THE SECURITIES EXCHANGE ACT OF 1934
OR
ý
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2014
OR
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                      to                     
OR
¨
SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of event requiring this shell company report                     
Commission file number 001- 35704
 
 
 
SEADRILL PARTNERS LLC
(Exact Name of Registrant as Specified in Its Charter)
 
 
 
Republic of The Marshall Islands
(Jurisdiction of Incorporation or Organization)
2nd floor, Building 11, Chiswick Business Park, 566 Chiswick High Road, London,
W4 5YS, United Kingdom
Telephone: +44 20 8811 4700
(Address of Principal Executive Offices)

Graham Robjohns
2nd floor, Building 11, Chiswick Business Park, 566 Chiswick High Road, London,
W4 5YS, United Kingdom
Telephone: +44 20 8811 4700
E-mail: post@seadrill.com
(Name, Telephone, E-mail and/or Facsimile Number and Address of Company Contact Person)
Securities registered or to be registered pursuant to Section 12(b) of the Act:
Title of Each Class
Name of Each Exchange on which Registered
Common units representing limited liability company interests
New York Stock Exchange
Securities registered or to be registered pursuant to Section 12(g) of the Act: None
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None


 
 
 
Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report.
75,278,250 Common Units representing limited liability company interests
16,543,350 Subordinated Units representing limited liability company interests
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes   ý     No   ¨
If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.    Yes   ¨     No   ý
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes   ý     No   ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes   ý     No   ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer   x    
       Accelerated filer  o    
       Non-accelerated filer   ¨
                   
Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:
 
U.S. GAAP   ý
International Financial Reporting Standards as Issued
by the International Accounting Standards Board   ¨
Other   ¨
If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.    Item 17   ¨     Item 18   ¨
If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes   ¨     No   ý



SEADRILL PARTNERS LLC
INDEX TO REPORT ON FORM 20-F
PART I
 
 
Item 1.
Item 2.
Item 3.
A.
B.
C.
D.
Item 4.
A.
B.
C.
D.
Item 4A.
Item 5.
A.
B.
C.
D.
E.
F.
G.
Item 6.
A.
B.
C.
D.
E.
Item 7.
A.
B.
C.
Item 8.
A.
B.
Item 9.
A.
B.
C.
Item 10.
A.
B.
C.
D.
E.
F.
G.


H.
I.
Item 11.
Item 12.
 
 
 
PART II
 
 
Item 13.
Item 14.
Item 15.
Item 16A.
Item 16B.
Item 16C.
Item 16D.
Item 16E.
Item 16F.
Item 16G.
Item 16H.
 
 
 
PART III
 
 
Item 17.
Item 18.
Item 19.






Presentation of Information in this Annual Report
This annual report on Form 20-F for the year ended December 31, 2014 , or the annual report, should be read in conjunction with the Consolidated and Combined Carve-Out Financial Statements and accompanying notes included in this report. Unless the context otherwise requires, references in this annual report to “Seadrill Partners LLC,” “Seadrill Partners,” the “Company,” “we,” “our,” “us” or similar terms refer to Seadrill Partners LLC, a Marshall Islands limited liability company, or any one or more of its subsidiaries (including OPCO, as defined below), or to all of such entities, and, for periods prior to the Company's initial public offering on October 24, 2012 , the Company's combined entity. References to the Company's “combined entity” refer to the subsidiaries of Seadrill Limited that had interests in the drilling units in the Company's initial fleet prior to the Company's initial public offering, or in the case of drilling units subsequently acquired from Seadrill Limited in transactions between parties under common control, the subsidiaries of Seadrill Limited that had interests in the drilling units prior to the date of acquisition. References in this annual report to “Seadrill” refer, depending on the context, to Seadrill Limited (NYSE: SDRL) and to any one or more of its direct and indirect subsidiaries. References to “Seadrill Management” refer to Seadrill Management AS, Seadrill Management Ltd, and Seadrill UK Ltd, the entities that provide the Company with personnel and management, administrative, financial and other support services.
The Company owns (i) a 58% limited partner interest in Seadrill Operating LP, as well as the non-economic general partner interest in Seadrill Operating LP through the Company's 100% ownership of its general partner, Seadrill Operating GP LLC, (ii) a 51% limited liability company interest in Seadrill Capricorn Holdings LLC and (iii) a 100% interest in Seadrill Partners Operating LLC. Seadrill Operating LP owns: (i) a 100% interest in the entities that own and operate the West Aquarius, the West Vencedor, and the West Leo , (ii) an approximate 56% interest in the entity that owns and operates the West Capella and (iii) a 100% limited liability company interest in Seadrill Partners Finco LLC. Seadrill Capricorn Holdings LLC owns 100% of the entities that own and operate the West Capricorn, the West Sirius, the West Auriga , and the West Vela . Seadrill Partners Operating LLC owns 100% of the entities that own and operate the T-15 and T-16 . Seadrill Operating LP, Seadrill Capricorn Holdings LLC and Seadrill Partners Operating LLC are collectively referred to as “OPCO.”
All references in this annual report to “OPCO” when used in a historical context refer to OPCO’s predecessor companies and their subsidiaries, and when used in the present tense or prospectively refer to OPCO and its subsidiaries, collectively, or to OPCO individually, as the context may require.
References in this annual report to “Seadrill Member” refer to the owner of the Seadrill Member interest, which is a non-economic limited liability company interest in Seadrill Partners and is currently held by Seadrill Member LLC. Certain references to the “Seadrill Member” refer to Seadrill Member LLC, as the context requires.
References in this annual report to “ExxonMobil,” “Chevron,” “Total”, “BP”, and "Tullow" refer to subsidiaries of ExxonMobil Corporation, Chevron Corporation, Total S.A., BP Plc, and Tullow Plc respectively, that are the Company’s customers.
 
Cautionary Statement Regarding Forward Looking Statements
This annual report contains certain “forward-looking statements” concerning future events and the Company's operations, performance and financial condition (including any statements concerning plans and objectives of management for future operations or economic performance, or assumptions related thereto). In addition, the Company and the Company's representatives may from time to time make other oral or written statements which are also forward-looking statements. Such statements include, in particular, statements about the Company's plans, strategies, business prospects, changes and trends in the Company's business, and the markets in which the Company operates as described in this annual report. In some cases, you can identify the forward-looking statements by the use of words such as “may,” “could,” “should,” “would,” “expect,” “plan,” “anticipate,” “intend,” “forecast,” “believe,” “estimate,” “predict,” “propose,” “potential,” “continue” or the negative of these terms or other comparable terminology. These forward-looking statements reflect management’s current views only as of the date of this annual report and are not intended to give any assurance as to future results. As a result, unitholders are cautioned not to rely on any forward-looking statements.
Forward-looking statements appear in a number of places in this annual report and include statements with respect to, among other things:
•
the Company's distribution policy and the Company's ability to make cash distributions on the Company's units or any increases or decreases in distributions and the amount of such increases or decreases;
•
the Company's ability to borrow under the credit facility between OPCO, as borrower, and Seadrill, as lender;
•
the Company's future financial condition or results of operations and future revenues and expenses;
•
the repayment of debt;
•
expected compliance with financing agreements and the expected effect of restrictive covenants in such agreements;
•
the ability of the Company's drilling units to perform satisfactorily or to the Company's expectations;
•
fluctuations in the international price of oil;
•
discoveries of new sources of oil that do not require deepwater drilling units;
•
the development of alternative sources of fuel and energy;
•
technological advances, including in production, refining and energy efficiency;
•
weather events and natural disasters;
•
the Company's ability to meet any future capital expenditure requirements;

i

•
the Company's ability to maintain operating expenses at adequate and profitable levels;
•
expected costs of maintenance or other work performed on the Company's's drilling units and any estimates of downtime;
•
the Company's ability to leverage Seadrill’s relationship and reputation in the offshore drilling industry;
•
the Company's ability to purchase drilling units in the future, including from Seadrill;
•
increasing the Company's ownership interest in OPCO;
•
delay in payments by, or disputes with the Company’s customers under its drilling contracts;
•
the financial condition of the Company’s customers and their ability and willingness to fund oil exploration, development and production activity;
•
the Company’s ability to comply with, maintain, renew or extend its existing drilling contracts;
•
the Company’s ability to re-deploy its drilling units upon termination of its existing drilling contracts at profitable dayrates;
•
the Company's ability to respond to new technological requirements in the areas in which the Company operates;
•
the occurrence of any accident involving the Company’s drilling units or other drilling units in the industry;
•
changes in governmental regulations that affect the Company and the interpretations of those regulations, particularly those that relate to environmental matters, export or import and economic sanctions or trade embargo matters, regulations applicable to the oil industry and tax and royalty legislation;
•
competition in the offshore drilling industry and other actions of competitors, including decisions to deploy drilling units in the areas in which the Company currently operates;
•
the availability on a timely basis of drilling units, supplies, personnel and oil field services in the areas in which the Company operates;
•
general economic, political and business conditions globally;
•
military operations, terrorist acts, wars or embargoes;
•
potential disruption of operations due to accidents, political events, piracy or acts by terrorists;
•
the Company's ability to obtain financing in sufficient amounts and on adequate terms;
•
workplace safety regulation and employee claims;
•
the cost and availability of adequate insurance coverage;
•
the Company's incremental general and administrative expenses as a publicly traded limited liability company and the Company's fees and expenses payable under the advisory, technical and administrative services agreements and the management and administrative services agreements;
•
the taxation of the Company's company and distributions to the Company's unitholders;
•
future sales of the Company's common units in the public market;
•
acquisitions and divestitures of assets and businesses by Seadrill; and
•
the Company's business strategy and other plans and objectives for future operations.
Forward-looking statements in this annual report are made based upon management’s current plans, expectations, estimates, assumptions and beliefs concerning future events impacting the Company and therefore involve a number of risks and uncertainties, including those risks discussed in Item 3 “Key Information—Risk Factors.” The risks, uncertainties and assumptions involve known and unknown risks and are inherently subject to significant uncertainties and contingencies, many of which are beyond the Company's control. The Company cautions that forward-looking statements are not guarantees and that actual results could differ materially from those expressed or implied in the forward-looking statements.
The Company undertakes no obligation to update any forward-looking statement or statements to reflect events or circumstances after the date on which such statement is made or to reflect the occurrence of unanticipated events. New factors emerge from time to time, and it is not possible for the Company to predict all of these factors. Further, the Company cannot assess the impact of each such factor on the Company's business or the extent to which any factor, or combination of factors, may cause actual results to be materially different from those contained in any forward-looking statement. The Company makes no prediction or statement about the performance of the Company's common units. The various disclosures included in this annual report and in the Company's other filings made with the Securities and Exchange Commission, or the SEC, that attempt to advise interested parties of the risks and factors that may affect the Company's business, prospects and results of operations should be carefully reviewed and considered.



ii

PART I

Item 1.         Identity of Directors, Senior Management and Advisers
Not applicable.

Item 2.         Offer Statistics and Expected Timetable
Not applicable.
 
Item 3.        Key Information

A.     Selected Financial Data
The following table presents, in each case for the periods and as of the dates indicated, the Company's selected Consolidated and Combined Carve-Out financial and operating data, which includes, for periods prior to the completion of the Company's initial public offering, or the IPO, on October 24, 2012 , selected Consolidated and Combined Carve-Out financial and operating data of the combined entity.
The following financial data should be read in conjunction with Item 5 “Operating and Financial Review and Prospects” and the Company's historical Consolidated and Combined Carve-Out financial statements and the notes thereto included elsewhere in this annual report.
The Company's financial position, results of operations and cash flows could differ from those that would have resulted if the Company operated autonomously or as an entity independent of Seadrill in the periods prior to the Company's IPO for which historical financial data are presented below, and such data may not be indicative of the Company's future operating results or financial performance.
 
 
 
Year Ended December 31,
 
 
2014

2013

2012
 
2011

2010
 
 
(in millions, except per unit data)
Statement of Operations Data:
 
 
 
 
 
 
 
 
 
 
Total operating revenues
 
$
1,342.6

 
$
1,064.3

 
$
911.8

 
$
678.9

 
$
663.0

Total operating expenses
 
(727.8
)
 
(576.6
)
 
(479.7
)
 
(330.9
)
 
(289.9
)
Net operating income
 
614.8

 
487.7

 
432.1

 
348.0

 
373.1

Total financial items
 
(265.4
)
 
(39.1
)
 
(99.6
)
 
(132.3
)
 
(82.8
)
Income before income taxes
 
349.4

 
448.6

 
332.5

 
215.7

 
290.3

Income taxes
 
(34.8
)
 
(33.2
)
 
(38.9
)
 
(34.7
)
 
(44.7
)
Net income
 
$
314.6

 
$
415.4

 
$
293.6

 
$
181.0

 
$
245.6

Earnings per unit (basic and diluted) (1)
 
 
 
 
 
 
 
 
 
 
Common unitholders
 
$
1.75

 
$
2.15

 
$
0.29

 
$
—

 
$
—

Subordinated unitholders
 
$
1.75

 
$
1.83

 
$
0.13

 
$
—

 
$
—


(1) Earnings per unit information has not been presented for any period prior to the Company’s initial public offering (“IPO”) in 2011.  The equity holders of the Company subsequent to the IPO had no contractual rights over the earnings of the Company for periods prior to the IPO.

 
 
As at December 31,
 
 
2014
 
2013
 
2012
 
2011
 
2010
 
 
(in millions, except fleet and unit data)
Balance Sheet Data (at end of period):
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
 
$
242.7

 
$
89.7

 
$
21.2

 
$
15.5

 
$
5.2

Drilling units
 
5,141.1

 
3,448.3

 
3,241.9

 
1,837.0

 
1,924.0

Total assets
 
6,346.5

 
4,072.6

 
3,768.9

 
3,365.0

 
2,445.3

Total interest bearing debt
 
3,650.4

 
2,360.5

 
2,076.0

 
2,186.4

 
1,078.7

Total equity
 
2,044.3

 
1,254.6

 
1,424.4

 
1,034.7

 
1,252.5



1

 
 
Year Ended December 31,
 
 
2014
 
2013
 
2012
 
2011
 
2010
 
 
(in millions, except fleet and unit data)
Cash Flow Data:
 
 
 
 
 
 
 
 
 
 
Net cash provided by operating activities
 
$
608.7

 
$
564.0

 
$
278.2

 
$
395.2

 
$
359.5

Net cash used in investing activities
 
(1,542.8
)
 
(159.3
)
 
(283.5
)
 
(1,010.8
)
 
(147.5
)
Net cash provided by / (used in) financing activities
 
1,087.1

 
(336.2
)
 
11.0

 
625.9

 
(222.5
)
Net increase in cash and cash equivalents
 
153.0

 
68.5

 
5.7

 
10.3

 
(10.8
)
Fleet Data (1) :
 
 
 
 
 
 
 
 
 
 
Number of drilling units in operation at end of period
 
10

 
8

 
6

 
5

 
4

Average age of drilling units in operation at end of period (years)
 
3.6

 
3.1

 
2.9

 
2.3

 
1.9

Other Financial Data:
 
 
 
 
 
 
 
 
 
 
Capital expenditures
 
$
(31.6
)
 
$
(159.3
)
 
$
(283.5
)
 
$
(594.5
)
 
$
(147.8
)
Distributions declared per unit
 
2.1700

 
1.6775

 
0.2906

 
—

 
—

Members Capital:
 
 
 
 
 
 
 
 
 
 
Common Unitholders—units
 
75,278,250

 
44,400,563

 
24,815,000

 
—

 
—

Subordinated Unitholders—units
 
16,543,350

 
16,543,350

 
16,543,350

 
—

 
—


(1)
During the year ended December 31, 2013, the Company acquired from Seadrill two tender rigs, the T-15 and the T-16, which the Company holds through a 100% limited liability company interest in Seadrill Partners Operating LLC, a 51% indirect interest in the semi-submersible drilling rig, the West Sirius , which the Company holds through Seadrill Capricorn Holdings LLC, and a 30% indirect interest in the semi-submersible drilling rig, the West Leo, which the Company holds through Seadrill Operating LP. These transactions were deemed to be a reorganization of entities under common control and therefore the fleet data has been retroactively adjusted as if the Company had acquired the interests in these units when they began operations under the ownership of Seadrill. As of January 2, 2014, the date of the Company’s first annual general meeting, Seadrill ceased to control the Company as defined by generally accepted accounting principles in the United States, or GAAP, and, therefore, Seadrill Partners and Seadrill are no longer be deemed to be entities under common control. As such, acquisitions by the Company from Seadrill subsequent to this date are no longer accounted for under this method.


B.     Capitalization and Indebtedness
Not applicable.

C.     Reasons for the Offer and Use of Proceeds
Not applicable.

D.     Risk Factors

The Company's assets are primarily engaged in offshore contract drilling for the oil and gas industry in benign and harsh environments worldwide, including ultra-deepwater environments. The following summarizes risks that may materially affect the Company's business, financial condition, results of operations, cash available for distributions or the trading price of the Company's common units.
Risks Inherent in the Company's Business
Because the Company's ownership interest in OPCO currently represents the Company's only cash-generating asset, the Company's cash flow depends completely on OPCO’s ability to make distributions to its owners, including the Company.
The Company's cash flow depends completely on OPCO’s distributions to the Company as one of its owners. The amount of cash OPCO can distribute to its owners principally depends upon the amount of cash it generates from its operations, which may fluctuate from quarter to quarter based on, among other things:
•
the dayrates it obtains under its drilling contracts;
•
the level of its rig operating costs, such as the cost of crews, repair, maintenance and insurance;
•
the levels of reimbursable revenues and expenses;
•
its ability to re-contract its drilling units upon expiration or termination of an existing drilling contract and the dayrates it can obtain under such contracts;
•
delays in the delivery of any new drilling units and the beginning of payments under drilling contracts relating to those drilling units;
•
the timeliness of payments from customers under drilling contracts;
•
earn-out payment obligations related to purchases of drilling units;
•
prevailing global and regional economic and political conditions;
•
time spent mobilizing drilling units to the customer location;
•
changes in local income tax rates;
•
currency exchange rate fluctuations and currency controls; and
•
the effect of governmental regulations and maritime self-regulatory organization standards on the conduct of its business.
The actual amount of cash OPCO has available for distribution also depends on other factors, such as:
•
the level of capital and operating expenditures it makes, including for maintaining and replacing drilling units or modifying existing drilling units to meet customer requirements and complying with regulations or to upgrade technology on the Company’s drilling units;
•
its debt service requirements, including fluctuations in interest rates, and restrictions on distributions contained in its debt instruments;
•
fluctuations in its working capital needs;
•
number of days of rig downtime or less than full utilization, which would result in a reduction of revenues under a drilling contract;
•
whether the Company or OPCO exercises any options to purchase drilling units in the future that are required to be offered to the Company or OPCO by Seadrill pursuant to the terms of the Omnibus Agreement or otherwise;
•
the ability to make working capital borrowings and availability under the sponsor credit facility; and
•
the amount of any cash reserves, including reserves for future maintenance and replacement capital expenditures, working capital and other matters, established by the Company's board of directors.
OPCO’s operating agreements provide that it will distribute its available cash to its owners on a quarterly basis. OPCO’s available cash includes cash on hand less any reserves that may be appropriate for operating its business. The amount of OPCO’s quarterly distributions, including the amount of cash reserves not distributed, is determined by the Company's board of directors.

2
Table of Contents

The amount of cash OPCO generates from operations may differ materially from its profit or loss for the period, which is affected by non-cash items. As a result of this and the other factors mentioned above, OPCO may make cash distributions during periods when it records losses and may not make cash distributions during periods when it records net income.
The Company may not have sufficient cash from operations following the establishment of cash reserves and payment of fees and expenses to enable the Company to pay the minimum quarterly distribution on its common units and subordinated units.
The source of the Company's earnings and cash flow consists exclusively of cash distributions from OPCO. Therefore, the amount of cash distributions the Company is able to make to the Company's unitholders currently fluctuates, based on the level of distributions made by OPCO to its owners, including the Company, and, in the future, will fluctuate based on the level of cash distributions made by OPCO and any other subsidiaries through which the Company later conducts operations. OPCO or any such operating subsidiaries may make quarterly distributions at levels that will not permit the Company to make distributions to the Company's common unitholders at the minimum quarterly distribution level or to increase the Company's quarterly distributions in the future. In addition, while the Company would expect to increase or decrease distributions to the Company's unitholders if OPCO increases or decreases distributions to the Company, the timing and amount of any such increased or decreased distributions will not necessarily be comparable to the timing and amount of the increase or decrease in distributions made by OPCO to the Company.
The Company's ability to distribute to its unitholders any cash it may receive from OPCO or any future operating subsidiaries is or may be limited by a number of factors, including, among others:
•
interest expense and principal payments on any indebtedness the Company may incur;
•
restrictions on distributions contained in any of the Company's current or future debt agreements;
•
fees and expenses of the Company, the Seadrill Member, its affiliates or third parties the Company is required to reimburse or pay, including expenses the Company incurs as a result of being a public company; and
•
reserves the Company's board of directors believes are prudent for the Company to maintain for the proper conduct of its business or to provide for future distributions.
Many of these factors will reduce the amount of cash the Company may otherwise have available for distribution. The Company may not be able to pay distributions, and any distributions the Company makes may not be at or above the Company's minimum quarterly distribution. The actual amount of cash that is available for distribution to the Company's unitholders depends on several factors, many of which are beyond the Company's control.
The Company's ability to grow may be adversely affected by its cash distribution policy. OPCO’s ability to meet its financial needs and grow may be adversely affected by its cash distribution policy.
The Company's cash distribution policy, which is consistent with the Company's operating agreement, requires the Company to distribute all of the Company's available cash each quarter. Accordingly, the Company's growth may not be as fast as businesses that reinvest their available cash to expand ongoing operations.
In determining the amount of cash available for distribution by OPCO, the Company's board of directors will approve the amount of cash reserves to set aside for the Company and OPCO, including reserves for anticipated maintenance and replacement capital expenditures, working capital and other matters. OPCO will also rely upon external financing sources, including commercial borrowings, to fund its capital expenditures. Accordingly, to the extent OPCO does not have sufficient cash reserves or is unable to obtain financing, its cash distribution policy may significantly impair its ability to meet its financial needs or to grow.

The Company must make substantial capital and operating expenditures to maintain the operating capacity of its fleet, which will reduce cash available for distribution. In addition, each quarter the Company is required to deduct estimated maintenance and replacement capital expenditures from operating surplus, which may result in less cash available to unitholders than if actual maintenance and replacement capital expenditures were deducted.
The Company must make substantial capital and operating expenditures to maintain and replace, over the long-term, the operating capacity, of its fleet. Maintenance and replacement capital expenditures include capital expenditures for maintenance (including special classification surveys) and capital expenditures associated with modifying an existing drilling unit, including to upgrade its technology, acquiring a new drilling unit or otherwise replacing current drilling units at the end of their useful lives to the extent these expenditures are incurred to maintain or replace the operating capacity of the Company’s fleet. These expenditures could vary significantly from quarter to quarter and could increase as a result of changes in:
•
the cost of labor and materials;
•
customer requirements;
•
fleet size;
•
the cost of replacement drilling units;
•
the cost of replacement parts for existing drilling units;
•
the geographic location of the drilling units;

3
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•
length of drilling contracts;
•
governmental regulations and maritime self-regulatory organization and technical standards relating to safety, security or the environment; and
•
industry standards.
The Company's operating agreement requires its board of directors to deduct estimated maintenance and replacement capital expenditures, instead of actual maintenance and replacement capital expenditures, from operating surplus each quarter in an effort to reduce fluctuations in operating surplus as a result of variations in actual maintenance and replacement capital expenditures each quarter. The amount of estimated maintenance and replacement capital expenditures deducted from operating surplus is subject to review and change by the conflicts committee of the Company's board of directors at least once a year. In years when estimated maintenance and replacement capital expenditures are higher than actual maintenance and replacement capital expenditures, the amount of cash available for distribution to unitholders will be lower than if actual maintenance and replacement capital expenditures were deducted from operating surplus. If the board of directors underestimates the appropriate level of estimated maintenance and replacement capital expenditures, the Company may have less cash available for distribution in future periods when actual capital expenditures exceed the Company's previous estimates.

If capital expenditures are financed through cash from operations or by issuing debt or equity securities, the Company's ability to make cash distributions may be diminished, its financial leverage could increase or its unitholders could be diluted.
Use of cash from operations to expand or maintain the Company’s fleet will reduce cash available for the Company to distribute to its unitholders. The Company's ability to obtain bank financing or to access debt and equity capital markets may be limited by the Company's financial condition at the time of any such financing or offering as well as by adverse market conditions resulting from, among other things, general economic conditions, changes in the offshore drilling industry and contingencies and uncertainties that are beyond the Company's control. Failure to obtain the funds for future capital expenditures could have a material adverse effect on the Company's business, results of operations and financial condition and on the Company's ability to make cash distributions. Even if the Company is successful in obtaining necessary funds, the terms of any debt financings could limit the Company’s ability to pay distributions to unitholders. In addition, incurring additional debt may significantly increase the Company's interest expense and financial leverage, and issuing additional equity securities may result in significant unitholder dilution and would increase the aggregate amount of cash required to pay the minimum quarterly distribution to unitholders, both of which could have a material adverse effect on the Company's ability to make cash distributions.
The Company’s debt levels may limit its flexibility in obtaining additional financing, pursuing other business opportunities and paying distributions to unitholders.
As of December 31, 2014 , the Company's consolidated debt was approximately $3,650 million . The Company has the ability to incur additional debt. Please read Item 5 “Operating and Financial Review and Prospects—Liquidity and Capital Resources.”

The Company’s level of debt could have important consequences to it, including the following:
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the ability to obtain additional financing, if necessary, for working capital, capital expenditures, acquisitions or other purposes may be limited or such financing may not be available on favorable terms;
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a substantial portion of the Company's cash flow will be required to make principal (including amortization payments as required by financing agreements) and interest payments on debt, reducing the funds that would otherwise be available for operations, future business opportunities and distributions to unitholders;
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such debt may make the Company more vulnerable to competitive pressures or a downturn in its business or the economy generally than the Company's competitors with less debt; and
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such debt may limit the Company’s flexibility in responding to changing business and economic conditions.
The Company's ability to service its consolidated debt will depend upon, among other things, its future financial and operating performance, which will be affected by prevailing economic conditions and financial, business, regulatory and other factors, some of which are beyond its control. If the Company's operating results are not sufficient to service its consolidated current or future indebtedness, the Company will be forced to take actions such as reducing distributions, reducing or delaying its business activities, acquisitions, investments or capital expenditures, selling assets, restructuring or refinancing the Company's consolidated debt, or seeking additional equity capital or bankruptcy protection. The Company may not be able to effect any of these remedies on satisfactory terms, or at all.
Furthermore, the Company’s financing agreements contain cross-default clauses which are linked to other indebtedness of Seadrill. In the event of a default by Seadrill under one of its other credit facilities, the Company could be adversely affected by the cross-default clauses, even if Seadrill cures any such default.
Financing agreements containing operating and financial restrictions and other covenants may restrict the Company's business and financing activities.
The operating and financial restrictions and covenants in the financing agreements of Seadrill, or the Company and any future financing agreements of Seadrill or the Company, could adversely affect the Company's ability to finance future operations or capital needs or to engage, expand or

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pursue the Company's business activities. For example, subject to certain exceptions, the financing agreements may restrict the Company's ability to:
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enter into other financing agreements;
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incur additional indebtedness;
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create or permit liens on the Company's respective assets;
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sell drilling units or the capital stock of the Company's respective subsidiaries;
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change the nature of the Company's business;
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make investments;
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pay distributions to the Company's unitholders or to the Company, respectively;
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change the management and/or ownership of the drilling units;
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make capital expenditures; and
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compete effectively to the extent the Company's competitors are subject to less onerous restrictions.
For more information, please read Item 5 “Operating and Financial Review and Prospects—Liquidity and Capital Resources.”
The Company’s ability to comply with the restrictions and covenants, including financial ratios and tests, contained in any financing agreements of Seadrill or the Company is dependent on future performance and may be affected by events beyond its control, including prevailing economic, financial and industry conditions. If market or other economic conditions deteriorate, the Company’s ability to comply with these covenants may be impaired. If the Company 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 obligations under its facilities in which the Company participates could exceed the indebtedness of the Company and its subsidiaries under such agreements. If a default occurs under these agreements, lenders could terminate their commitments to lend and/or accelerate the outstanding loans and declare all amounts borrowed due and payable. The Company has pledged its drilling units as security either under the Company's financing facilities or under Seadrill’s financing facilities in which the Company participates. If the Company's or Seadrill’s lenders were to foreclose on the Company’s drilling units in the event of a default, this may adversely affect the Company’s ability to finance future operations or capital needs or to engage in, expand or pursue its business activities. In addition, all of the Company’s loan agreements contain cross-default provisions, meaning that if the Company 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, the Company cannot guarantee that the Company’s assets will be sufficient to repay in full all of its outstanding indebtedness, and the Company may be unable to find alternative financing. Even if the Company could obtain alternative financing, that financing might not be on terms that are favorable or acceptable. Any of these events would adversely affect its ability to make distributions to the Company's unitholders and cause a decline in the market price of the Company's common units. Please read Item 5 “Operating and Financial Review and Prospects—Liquidity and Capital Resources.”
Restrictions in the Company’s debt agreements may prevent it or the Company from paying distributions.
The payment of principal and interest on the Company’s debt will reduce cash available for distribution to the Company and to its unitholders. In addition, the Company’s current financing agreements contain provisions that, upon the occurrence of certain events, permit lenders to terminate their commitments and/or accelerate the outstanding loans and declare all amounts due and payable, which may prevent the Company from paying distributions to its unitholders. These events include, among others:
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a failure to pay any principal, interest, fees, expenses or other amounts when due;
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a violation of covenants requiring the Company to maintain certain levels of insurance coverage, minimum liquidity levels, minimum interest coverage ratios, maximum leverage ratios and minimum current ratios;
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a default under any other provision of the financing agreements, as well as a default under any provision of related security documents;
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a material breach of any representation or warranty contained in the applicable financing agreement;
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a default under other indebtedness;
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a failure to comply with a final legal judgment from a court of competent jurisdiction;
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a bankruptcy or insolvency event;
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a suspension or cessation of the Company's business;
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the destruction or abandonment of the Company's assets, or the seizure or appropriation thereof by any governmental, regulatory or other authority if the lenders determine such occurrence could have a material adverse effect on the Company's business or the Company's ability to satisfy the Company's obligations under or otherwise comply with the applicable financing agreement;
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the invalidity, unlawfulness or repudiation of any financing agreement or related security document;
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an enforcement of any liens or other encumbrances covering the Company's assets; and

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•
the occurrence of certain other events that the lenders believe is likely to have a material adverse effect on the Company's business or its ability to satisfy its obligations under or otherwise comply with the applicable financing agreement.
OPCO is party to a $100 million revolving credit facility with Seadrill, as the lender, which referred to herein as the "sponsor credit facility". The sponsor credit facility contains customary covenants and provisions relating to events of default. Furthermore, the Company expects that its future financing agreements will contain similar provisions. For more information regarding these financing agreements, please read Item 5 “Operating and Financial Review and Prospects—Liquidity and Capital Resources—Borrowing Activities.”
Seadrill’s failure to comply with covenants and other provisions in its existing or future financing agreements could result in cross-defaults under the Company’s existing financing agreements, which would have a material adverse effect on the Company.
The Company’s existing financing agreements contain cross-default provisions that may be triggered if Seadrill defaults under the terms of its existing or future financing agreements. In turn, Seadrill’s existing financing arrangements contain cross-default provisions that may be triggered if its key subsidiaries, including North Atlantic Drilling Ltd. and Sevan Drilling ASA, default under the terms of their existing or future financing arrangements. In addition Seadrill also consolidates certain Variable Interest Entities (VIEs) owned by Ship Finance International Limited (NYSE: SFL), or Ship Finance. Seadrill's cross-default provisions could also be triggered if Ship Finance or one of the consolidated VIEs breached the terms of their financing arrangements. In the event of a default by Seadrill under one of its financing agreements, the lenders under the Company’s existing financing agreements could determine that the Company is in default under its financing agreements. This could result in the acceleration of the maturity of such debt under these agreements and the lenders thereunder may foreclose upon any collateral securing that debt, including the Company’s drilling units, even if Seadrill were to subsequently cure its default. In the event of such acceleration and foreclosure, the Company might not have sufficient funds or other assets to satisfy all of its obligations, which would have a material adverse effect on the Company's business, results of operations and financial condition and would significantly reduce its ability, or make it unable, to make distributions to the Company's unitholders for so long as such default is continuing.
The failure to consummate or integrate acquisitions in a timely and cost-effective manner could have an adverse effect on the Company's financial condition and results of operations.
The Company believes that acquisition opportunities may arise from time to time, and any such acquisition could be significant. Under the Company's omnibus agreement with Seadrill, subject to certain exceptions Seadrill is obligated to offer to the Company any of its drilling units acquired or placed under drilling contracts of five or more years. Although the Company is not obligated to purchase any of these drilling units offered by Seadrill, any acquisition could involve the payment by the Company 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, the Company may not be able to obtain acceptable terms for the required financing for any such acquisition or investment that arises. The Company cannot predict the effect, if any, that any announcement or consummation of an acquisition would have on the trading price of its common units. The Company'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. The Company may also be subject to additional costs related to compliance with various international laws in connection with such acquisition. If the Company fails to consummate and integrate its acquisitions in a timely and cost-effective manner, its financial condition, results of operations and cash available for distribution could be adversely affected.

The Company's growth 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 drilling industry is cyclical and volatile. The Company's growth strategy focuses on expansion in the offshore drilling sector, which 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 the Company's control, including the following:
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worldwide production and demand for oil and gas;
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the cost of exploring for, developing, producing and delivering oil and gas;
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expectations regarding future energy prices;
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advances in exploration, development and production technology;
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the ability of the Organization of Petroleum Exporting Countries, or OPEC, to set and maintain levels and pricing;
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the level of production in non-OPEC countries;
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government regulations, including restrictions on offshore transportation of oil and gas;
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local and international political, economic and weather conditions;
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domestic and foreign tax policies;
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development and exploitation of alternative fuels;
•
the policies of various governments regarding exploration and development of their oil and gas reserves;

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accidents, severe weather, natural disasters and other similar incidents relating to the oil and gas industry; and
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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, Eastern Europe 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 the Company's future growth. Sustained periods of low oil and gas 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 rigs, particularly older and less technologically-advanced drilling rigs, being idle for long periods of time. The Company cannot predict the future level of demand for drilling rigs or future conditions of the oil and gas industry. In response to the recent decrease in the prices of oil and gas, a number of the Company's oil and gas company customers have recently announced decreases in budgeted expenditures for offshore drilling. Any future decrease in exploration, development or production expenditures by oil and gas companies could reduce the Company's revenues and materially harm its business, results of operations and cash available for distribution.

In addition to oil and gas prices, the offshore drilling industry is influenced by additional factors, including:
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the availability of competing offshore drilling rigs;
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the level of costs for associated offshore oilfield and construction services;
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oil and gas transportation costs;
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the level of rig operating costs including crew and maintenance;
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the discovery of new oil and gas reserves; and
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regulatory restrictions on offshore drilling.
Any of these factors could reduce demand for drilling rigs and adversely affect the Company's business and results of operations.

The current downturn in activity in the oil and gas drilling industry has had and is likely to continue to have an adverse impact on our business and results of operations.
The oil and gas drilling industry is cyclical, and the industry has entered a downcycle. Crude oil prices have fallen during the past year. The price of Brent crude has fallen from over $100 per barrel in March 2014, to approximately $56 per barrel as of March 31, 2015 . In response to the recent decrease in the prices of oil and gas, a number of our oil and gas company customers have recently announced decreases in budgeted expenditures for offshore drilling. Declines in capital spending levels, coupled with additional newbuild supply, have and are likely to continue to put significant pressure on dayrates and utilization. The decline and the perceived risk of a further decline in oil and/or gas prices could cause oil and gas companies to further reduce their overall level of activity or spending, in which case demand for our services may further decline and revenues may continue to be adversely affected through lower drilling unit utilization and/or lower dayrates.
Historically, when drilling activity and spending decline, utilization and dayrates also decline and drilling has been reduced or discontinued, resulting in an oversupply of drilling units. The recent oversupply of drilling units will be exacerbated by the entry of newbuild rigs into the market. The supply of available uncontracted units has and is likely to further intensify price competition as scheduled delivery dates occur and additional contracts terminate without renewal and lead to a reduction in dayrates as the active fleet grows.
If we are unable to secure contracts for our drilling units upon the expiration of our existing contracts, we may idle or stack our units. When idled or stacked, drilling units do not earn revenues, but continue to require cash expenditures for crews, fuel, insurance, berthing and associated items. We currently have no units idled or stacked. However, the West Sirius drilling contract has been recently terminated, and we anticipate that this drilling unit will be idle or stacked following the estimated completion of the contract in May 2015. In addition the drilling contract for the West Vencedor will expire during the second quarter of 2015, and this drilling unit could also be idled or stacked. We have not yet secured a new contract for either of these drilling units. If our lenders are not confident that we are able to employ our assets, we may be unable to secure additional financing on terms acceptable to us or at all.
In general, drilling unit owners are bidding for available work extremely competitively with a focus on utilization over returns, which has and will likely continue to drive rates down to or below cash breakeven levels. To maintain the continued employment of our units, we may also accept contracts at lower dayrates or on less favorable terms due to market conditions. In addition, customers have already and may in the future request renegotiation of existing contracts to lower dayrates. In an over-supplied market, we may have limited bargaining power to renegotiate on more favorable terms. Lower utilization and dayrates have and will adversely affect our revenues and profitability.
The effects of the downcycle may have other impacts on our business as well. Prolonged periods of low utilization and dayrates could result in a reduction in the market value of our drilling units or goodwill. This could lead to the recognition of impairment charges on our drilling units or goodwill if future cash flow estimates, based on information available to management at the time, indicate that the carrying value of these drilling units or goodwill may not be recoverable. In addition, if the market value of our drilling units decreases, and we sell any drilling unit at a time when prices for drilling units have fallen, such a sale may result in a loss, which would negatively affect our results of operations.

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Prolonged periods of low dayrates, the possible termination or loss of contracts and reduced values of our drilling units could negatively impact our ability to comply with certain financial covenants under the terms of our debt agreements. Our ability to comply with these restrictions and covenants, including meeting financial ratios and tests, is dependent on our future performance and may be affected by events beyond our control. If a default occurs under these agreements, lenders could terminate their commitments to lend or in some circumstances accelerate the outstanding loans and declare all amounts borrowed due and payable. In addition, our existing debt agreements contain cross-default provisions. In the event of a default by us under one of our debt agreements, the lenders under our other existing debt agreements could determine that we are in default under our other financing agreements. This could lead to an acceleration and enforcement of such agreements by our lenders.
We do not know when the market for offshore drilling units may recover, or the nature or extent of any future recovery. There can be no assurance that the current demand for drilling rigs will not further decline in future periods. The continued or future decline in demand for drilling rigs would adversely affect our financial position, operating results and cash flows.

The Company depends on certain subsidiaries of Seadrill, including Seadrill Management, to assist the Company in operating and expanding the business.
The Company's ability to enter into new drilling contracts and expand its customer and supplier relationships will depend largely on its ability to leverage its relationship with Seadrill and its reputation and relationships in the offshore drilling industry. If Seadrill suffers material damage to its reputation or relationships, it may harm the Company's ability to:
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renew existing drilling contracts upon their expiration;
•
obtain new drilling contracts;
•
efficiently and productively carry out the Company's drilling activities;
•
successfully interact with shipyards;
•
obtain financing and maintain insurance on commercially acceptable terms;
•
maintain access to capital under the sponsor credit facility; or
•
maintain satisfactory relationships with suppliers and other third parties.
In addition, pursuant to the management and administrative services agreements, Seadrill Management provides the Company with significant management, administrative, financial and other support services and/or personnel. Subsidiaries of Seadrill also provide advisory, technical and administrative services to the Company’s fleet pursuant to advisory, technical and administrative services agreements. The Company's operational success and ability to execute the Company's growth strategy depends significantly upon the satisfactory performance of these services. The Company's business will be harmed if Seadrill and its subsidiaries fail to perform these services satisfactorily, if they cancel their agreements with the Company or if they stop providing these services to it. Please read Item 7 “Major Unitholders and Related Party Transactions—Related Party Transactions.”

The Company’s drilling contracts may not permit it to fully recoup its costs in the event of a rise in expenses.
The Company’s drilling contracts have dayrates that are fixed over the contract term. In order to mitigate the effects of inflation on revenues from these term contracts, all of the Company’s drilling contracts, except for the West Leo include escalation provisions. These provisions allow the Company to adjust the dayrates based on certain published indices. These indices are designed to compensate the Company for certain cost increases, including wages, insurance and maintenance costs. However, actual cost increases may result from events or conditions that do not cause correlative changes to the applicable indices. Furthermore, certain indices are updated semi-annually, and therefore may be outdated at the time of adjustment. In addition, the adjustments are normally performed on a semi-annual or annual basis. For these reasons, the timing and amount received as a result of the adjustments may differ from the timing and amount of expenditures associated with actual cost increases, which could adversely affect the Company's cash flow and ability to make cash distributions.
An increase in operating and maintenance costs could materially and adversely affect the Company's financial performance.
The Company's operating expenses and maintenance costs depend on a variety of factors including crew costs, provisions, equipment, insurance, maintenance and repairs and shipyard costs, many of which are beyond the Company's control and affect the entire offshore drilling industry. During periods after which a rig becomes idle, the Company may decide to “warm stack” the rig, which means the rig is kept fully operational and ready for redeployment, and maintains most of its crew. As a result, the Company's operating expenses during a warm stacking will not be substantially different than those the Company would incur if the rig remained active. The Company may also decide to “cold stack” the rig, which means the rig is stored in a harbor, shipyard or a designated offshore area, and the crew is assigned to an active rig or dismissed. However, reductions in costs following the decision to cold stack a rig may not be immediate, as a portion of the crew may be required to prepare the rig for such storage. Moreover, as the rigs are mobilized from one geographic location to another, the labor and other operating and maintenance costs can vary significantly. 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 rigs and demand for contract drilling services, which in turn, affect dayrates, and the economic utilization and performance of the Company’s fleet of drilling rigs. However, operating costs are generally related to the number of drilling rigs in operation and the cost level in each country or region where such drilling rigs are located. In addition, equipment maintenance costs fluctuate depending upon the type of activity that the drilling rig is performing and the age and condition of the equipment. Escalation provisions contained in the Company’s drilling contracts may not be adequate to substantially mitigate these increased operating and maintenance costs. In connection with new assignments, the Company 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 contractual period over which such expenditures are amortized. In situations where the Company’s drilling units incur idle time between

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assignments, the opportunity to reduce the size of its crews on those drilling units is limited as the crews will be engaged in preparing the drilling unit for its next contract. When a drilling 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 drilling units be idle for a longer period, the Company may not be successful in redeploying crew members, who are not required to maintain the drilling units, and therefore may not be successful in reducing the Company's costs in such cases.
Any limitation in the availability or operation of the Company’s drilling units could have a material adverse effect on the Company's business, results of operations and financial condition and could significantly reduce the Company's ability to make distributions to its unitholders.
As at March 31, 2015 , the Company’s fleet consisted of four semi-submersible drilling rigs, three drillships and three tender rigs. If any of the Company’s drilling units are unable to generate revenues as a result of the expiration or termination of its drilling contracts or sustained periods of downtime, the Company's results of operations and financial condition could be materially adversely affected.
Some of the Company’s customers have the right to terminate their drilling contracts without cause upon the payment of an early termination fee. However, such payments may not fully compensate the Company for the loss of the drilling contract. Under certain circumstances the Company’s contracts may permit customers to terminate contracts early without the payment of any termination fees as a result of non-performance, total loss of the rigs, extended periods of downtime or impaired performance caused by equipment or operational issues, or sustained periods of downtime due to force majeure events beyond the Company’s control. During periods of challenging market conditions, the Company may be subject to an increased risk of its customers seeking to repudiate their contracts, including through claims of non-performance. The Company’s customers’ ability to perform their obligations under their drilling contracts may also be negatively impacted by the prevailing uncertainty surrounding the development of the world economy and the credit markets. If a customer cancels its contract, and the Company is unable to secure a new contract on a timely basis and on substantially similar terms, or if a contract is suspended for an extended period of time or if a contract is renegotiated on different terms, it could adversely affect the Company's business, results of operations and financial condition and may reduce the amount of cash the Company has available to distribute to the Company and that the Company has available for distribution to its unitholders. For more information regarding the termination provisions of the Company’s drilling contracts, please read Item 4 “Information on the Company—Business Overview—Drilling Contracts.”
The Company currently derives all its revenue from four customers, and the loss of any of these customers could result in a significant loss of revenues and cash flow.
The Company currently derives all of its revenues and cash flow from four customers. For the year ended December 31, 2014 , BP accounted for 41.5% , Tullow accounted for 17.4% , ExxonMobil(*) accounted for 26.4% and Chevron accounted for 14.7% of total revenues, respectively. All of the Company’s drilling contracts have fixed terms, but may be terminated early due to certain events or might nevertheless be lost in the event of unanticipated developments, such as the deterioration in the general business or financial condition of a customer, resulting in its inability meet its obligations under its contracts with the Company. The Company's contract with Chevron relating to the West Vencedor will expire early in the second quarter of 2015, no subsequent employment has been obtained for the West Vencedor . (* During 2013 and 2014 the ExxonMobil drilling contract was assigned to Hibernia Management and Development Co. Ltd and Statoil Canada Ltd.).
On March 30, 2015 the Company received a notice of termination from BP for the contract for the West Sirius which will be effective after having completed the current well and demobilization, which the Company estimates to be by early May 2015. No subsequent employment has been obtained for the West Sirius .
If any of the Company’s drilling contracts are terminated, the Company may be unable to re-deploy the drilling unit subject to such terminated contract on terms as favorable to it as its current drilling contracts. If the Company is unable to re-deploy a drilling unit for which the drilling contract has been terminated, the Company may not receive any revenues from that drilling unit (other than termination fees), but it will be required to pay expenses necessary to maintain the drilling unit in proper operating condition. This will cause the Company to receive decreased revenues and cash flows from having fewer drilling units operating in its fleet. The loss of any customers, drilling contracts or drilling units, or a decline in payments under any of the Company’s drilling contracts, could have a material adverse effect on the Company's business, results of operations, financial condition and ability to make cash distributions to the Company's unitholders.
In addition, the Company's drilling contracts subject it to counterparty risks. The ability of each of the Company's counterparties to perform its obligations under a contract with the Company depend on a number of factors that are beyond the Company's control and may include, among other things, general economic conditions, the condition of the offshore drilling industry, prevailing prices for oil and gas, the overall financial condition of the counterparty, the dayrates received for specific types of drilling units and the level of expenses necessary to maintain drilling activities. In addition, in depressed market conditions, the Company's customers may no longer need a drilling unit that is currently under contract or may be able to obtain a comparable drilling unit at a lower dayrate. Should a counterparty fail to honor its obligations under an agreement with the Company, the Company could sustain losses, which could have a material adverse effect on the Company's business, financial condition, results of operations and cash available for distribution.
The Company 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 its revenues and profitability.
The Company’s ability to renew expiring contracts or obtain new contracts will depend on the prevailing market conditions at the time which may vary among different geographic regions, different types of drilling units, and specific conditions. If the Company is not able to obtain new contracts in direct continuation with existing contracts, or if new contracts are entered into at dayrates substantially below the existing dayrates or on terms otherwise less favorable compared to existing contract terms, its revenues and profitability could be adversely affected.

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The offshore drilling markets in which the Company competes experience fluctuations in the demand for drilling services, as measured by the level of exploration and development expenditures and supply of capable drilling equipment. The Company's contract with Chevron relating to the West Vencedor will expire early in the second quarter of 2015, no subsequent employment has been obtained for the West Vencedor . In March 2015 the Company received a notice of termination from BP for the contract for the West Sirius which will be effective after having completed the current well and demobilization, which the Company estimates to be in May 2015. No subsequent employment has been obtained for the West Sirius .
The existing drilling contracts for the remainder of the Company's drilling units , are scheduled to expire from April 2017 through November 2020 . The Company cannot guarantee that it will be able to obtain contracts for the its drilling units upon the expiration or termination of their current contracts or that there will not be a gap in employment of the rigs between current contracts and subsequent contracts. In particular, if oil and gas prices are low as they are currently, or it is expected that such prices will remain low or decrease in the future, at a time when the Company is seeking to arrange contracts for the its drilling units, the Company may not be able to obtain drilling contracts at attractive dayrates or at all.
If the dayrates which the Company receives for the reemployment of the Company's current drilling units are less favorable, the Company will recognize less revenue from their operations. The Company's ability to meet its cash flow obligations will depend on the Company's ability to consistently secure drilling contracts for the Company's drilling units at sufficiently high dayrates. The Company cannot predict the future level of demand for the Company's services or future conditions in the oil and gas industry. If oil and gas companies do not increase exploration, development and production expenditures, the Company may have difficulty securing drilling contracts, or the Company may be forced to enter into contracts at unattractive dayrates, which would adversely affect the Company's ability to make distributions to the Company's unitholders.
Competition within the offshore drilling industry may adversely affect us.
The offshore drilling industry is highly competitive and fragmented and includes several large companies that compete in the markets the Company serves, as well as smaller companies. Offshore drilling contracts are generally awarded on a competitive bid basis or through privately negotiated transactions. In determining which qualified drilling contractor is awarded a contract, the key factors are pricing, rig availability, rig location, condition and integrity of equipment, its record of operating efficiency, including high operating uptime, technical specifications, safety performance record, crew experience, reputation, industry standing and customer relations. The Company’s operations may be adversely affected if its current competitors or new market entrants introduce new drilling units with better features, performance, price or other characteristics in comparison to the Company’s drilling units, or expand into service areas where the Company operates. In addition, mergers among oil and gas exploration and production companies have reduced, and may from time to time further reduce, the number of available customers, which would increase the ability of potential customers to achieve pricing terms favorable to them.
The offshore drilling industry has historically been cyclical and is impacted by oil and gas price levels and volatility. There have been periods of high demand, short rig supply and high dayrates, followed by periods of low demand, excess rig supply and low dayrates. Changes in commodity prices can have a dramatic effect on rig demand, and periods of excess rig supply may intensify competition in the industry and result in the idling of older and less technologically advanced equipment. The Company may in the future idle or stack rigs or enter into lower dayrate drilling contracts in response to market conditions. The Company cannot predict when or if any idled or stacked rigs will return to service.
Competitive pressures and other factors may result in significant price competition, particularly during industry downturns, which could have a material adverse effect on the Company's financial position, results of operations, cash flows and ability to make distributions to the Company's unitholders.
An economic downturn could have a material adverse effect on the Company's revenue, profitability and financial position.
The Company depend 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. Concerns persist regarding the debt burden of certain Eurozone countries and their ability to meet future financial obligations and the overall stability of the euro. An extended period of adverse development in the outlook for European countries could reduce the overall demand for oil and gas and for the Company's services. These potential developments, or market perceptions concerning these and related issues, could affect the Company's financial position, results of operations and cash available for distribution. This includes uncertainty surrounding the sovereign debt and credit crises in certain European countries. In addition, turmoil and hostilities in Korea, Ukraine, the Middle East, North Africa and other geographic areas and countries are adding to overall risk. In addition, worldwide financial and economic conditions could severely restrict the Company's ability to access the capital markets at a time when the Company would like, or need, to access such markets, which could impact the Company's ability to react to changing economic and business conditions. Worldwide economic conditions have in the past impacted, and could in the future impact, the lenders participating in the Company's credit facilities. Such economic conditions could also impact lenders participating in the credit facilities of the Company's customers, causing those customers to fail to meet their obligations to the Company. In addition, a portion of the credit under the Company's credit facilities is provided by European banking institutions. If economic conditions in Europe preclude or limit financing from these banking institutions, the Company may not be able to obtain financing from other institutions on terms that are acceptable, or at all, even if conditions outside Europe remain favorable for lending. An extended period of adverse development in the outlook for the world economy could reduce the overall demand for oil and gas and for the Company's services. Such changes could adversely affect the Company's financial condition, results of operations and ability to make distributions to the Company's unitholders.

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The current state of global financial markets and current economic conditions may adversely impact the Company's ability to obtain additional financing on acceptable terms which may hinder or prevent the Company from expanding the Company's business.
Global financial markets and economic conditions have been, and continue to be, volatile. The current state of global financial markets and current economic conditions might adversely impact the Company's ability to issue additional equity at prices which will not be dilutive to the Company's existing unitholders or preclude the Company from issuing equity at all. The Company cannot be certain that additional financing will be available if needed and to the extent required, on acceptable terms or at all. If additional financing is not available when needed, or is available only on unfavorable terms, the Company may be unable to meet the Company's obligations as they come due or the Company may be unable to expand the Company's existing business, complete drilling unit acquisitions or otherwise take advantage of business opportunities as they arise.

The Company's current backlog of contract drilling revenue may not be ultimately realized.
As of March 31, 2015 , the Company's backlog of contract drilling revenues under firm commitments was approximately $5.2 billion . The actual amount of revenues earned and the actual periods during which revenues are earned may differ from the stated amounts and periods due to shipyard and maintenance projects, downtime and other events within or beyond the Company’s control. In addition, the Company's customers may seek to cancel or renegotiate the Company's contracts for various reasons, including those described under “—Certain work stoppages or maintenance or repair work may cause the Company’s customers to suspend or reduce payment of dayrates until operation of the respective rig is resumed, which may lead to termination or renegotiation of important agreements.”and under "---The Company's growth 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." In addition, some of the Company's customers could experience liquidity issues or could otherwise be unable or unwilling to perform under the contract, which could ultimately lead a customer to go into bankruptcy or to otherwise encourage a customer to seek to repudiate, cancel or renegotiate a contract. The Company's inability or the inability of the Company's customers to perform under the Company's or their contractual obligations could adversely affect the Company's financial position, results of operations and cash available for distribution.
Failure to obtain or retain highly skilled personnel could adversely affect the Company’s operations.
The Company believes that competition for skilled and other labor required for the Company’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 are being delivered. Furthermore, additional rigs currently under construction are expected to increase the future demand for offshore drilling crews. In some regions such as Angola and Nigeria, limited availability of qualified personnel, in combination with local regulations focusing on crew composition, is expected to further increase demand for qualified offshore drilling crews, which may increase costs. A continued expansion of the rig fleet, increased 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 or costly for the Company to staff and service its rigs, or do so on economically viable terms. The current industry downturn may not provide relief from such pressures. Further, if substantial numbers of workers seek employment outside the offshore drilling industry as a result of the downturn, the competition for workers in the offshore drilling industry could remain high, or even increase, during the downturn. Such developments could adversely affect the Company's financial position, results of operations, cash flows and ability to make distributions to the Company's unitholders. Furthermore, as a result of any increased competition for people and risk for higher turnover, the Company may experience a reduction in the experience level of its personnel, which could lead to higher downtime and more operating incidents.
Certain work stoppages or maintenance or repair work may cause the Company’s customers to suspend or reduce payment of dayrates until operation of the respective drilling unit is resumed, which may lead to termination or renegotiation of the drilling contract.
Compensation under the Company’s drilling contracts is based on daily performance and/or availability of each drilling unit in accordance with the requirements specified in the applicable drilling contract agreement. For instance, when the Company's drilling units are idle, but available for operation, the Company’s customers are entitled to pay a waiting rate lower than the operational rate.
Several factors could cause an interruption of operations, including:
•
breakdowns of equipment and other unforeseen engineering problems;
•
work stoppages, including labor strikes;
•
shortages of material and skilled labor;
•
delays in repairs by suppliers;
•
surveys by government and maritime authorities;
•
periodic classification surveys;
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severe weather, strong ocean currents or harsh operating conditions; and
•
force majeure events.
In addition, if the Company’s drilling units are taken out of service for maintenance and repair for a period of time exceeding the scheduled maintenance periods set forth in its drilling contracts, the Company will not be entitled to payment of dayrates until the relevant rig is available for deployment. If the interruption of operations were to exceed a determined period due to an event of force majeure, the Company’s customers have the right to pay a rate (the “force majeure rate”) that is significantly lower than the waiting rate for a period of time, and, thereafter, may terminate the drilling contracts related to the subject rig. For more details on the Company’s drilling contracts, see Item 4 “Information on the

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Company—Business Overview—Drilling Contracts” and Item 5 “Operating and Financial Review and Prospects—Important Financial and Operational Terms and Concepts—Contracted Revenues and Dayrates.” Suspension of drilling contract payments, prolonged payment of reduced rates or termination of any drilling contract agreements as a result of an interruption of operations as described herein could materially adversely affect the Company's financial condition, results of operations and ability to make distributions to the Company's unitholders.
Labor costs and operating restrictions that apply to the Company could increase as a result of collective bargaining negotiations and changes in labor laws and regulations.
A significant portion of the Company’s employees are represented by collective bargaining agreements. The majority of these employees work in Canada, Nigeria and Angola. As part of the legal obligations in some of these agreements, the Company 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 the Company's financial condition, results of operations and ability to pay distributions.
An inability to obtain visas and work permits for drilling unit personnel on a timely basis could hurt its operations and have an adverse effect on the Company's business.
The Company’s ability to operate worldwide depends on obtaining the necessary visas and work permits for the personnel on its drilling units to travel in and out of, and to work in, the jurisdictions in which it operates. Governmental actions in some of the jurisdictions in which the Company operates may make it difficult to move personnel in and out of these jurisdictions by delaying or withholding the approval of these visa and work permits. If visas and work permits cannot be obtained for the employees needed for operating the Company’s rigs on a timely basis or for third-party technicians needed for maintenance or repairs, the Company might not be able to perform its obligations under its drilling contracts, which could lead to periods of prolonged downtime or allow the Company’s customers to cancel the contracts. Any such downtime or cancellation could adversely affect the Company's financial condition, results of operations and ability to make distributions to the Company's unitholders.
The Company’s business and operations involve numerous operating hazards, and its insurance and indemnities from its customers may not be adequate to cover potential losses from its operations.
The Company’s operations are subject to hazards inherent in the offshore drilling industry, such as blowouts, reservoir damage, loss of production, loss of well control, lost or stuck drill strings, equipment defects, craterings, fires, explosions and pollution. Contract drilling requires the use of heavy equipment and exposure to hazardous conditions, which may subject the Company 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. The Company’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, piracy, 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. The Company customarily provides contract indemnity to its customers for claims that could be asserted by the Company relating to damage to or loss of the Company's equipment, including rigs, and claims that could be asserted by the Company or its employees relating to personal injury or loss of life.
Damage to the environment could also result from the Company’s operations, particularly through spillage of hydrocarbons, fuel, lubricants or other chemicals and substances used in drilling operations, or extensive uncontrolled fires. The Company may also be subject to property damage, environmental indemnity and other claims by oil and gas companies. The Company’s insurance policies and drilling contracts contain rights to indemnity that may not adequately cover its losses, and the Company does not have insurance coverage or rights to indemnity for all risks. There are certain risks, including risks associated with the loss of control of a well (such as blowout, cratering, the cost to regain control of or re-drill the well and remediation of associated pollution), against which the Company’s customers may be unable or unwilling to indemnify the Company. In addition, a court may decide that certain indemnities in the Company’s current or future contracts are not enforceable. For example, in a 2012 case related to the fire and explosion that took place on the unaffiliated Deepwater Horizon Mobile Offshore Drilling Unit in the U.S. Gulf of Mexico in April 2010, or the Deepwater Horizon Incident, (to which the Company was not a party), the U.S. District Court in the Eastern District of Louisiana invalidated certain contractual indemnities for punitive damages and for civil penalties under the US Clean Water Act under a drilling contract governed by U.S. maritime law as a matter of public policy. For example, in 2011, a U.S. District Court in the Southern District of Texas invalidated certain contractual indemnities for gross negligence in a drilling master services agreement governed by U.S. maritime law as a matter of public policy. The Company 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. Gulf of Mexico). However, pollution and environmental risks generally are not totally insurable.
The Company’s insurance provides for deductibles for damage to its offshore drilling equipment and third-party liabilities. With respect to hull and machinery, the Company’s insurance provides for a deductible per occurrence of $5 million for all of its fleet. However, in the event of a total loss or a constructive total loss of a drilling unit, such loss is fully covered by its insurance with no deductible. For general and marine third-party liabilities the Company’s insurance provides for up to a $500,000 deductible per occurrence on personal injury liability for crew claims as well as non-crew claims and per occurrence on third-party property damage.
If a significant accident or other event occurs that is not fully covered by the Company’s insurance or an enforceable or recoverable indemnity from a customer, the occurrence could adversely affect the Company's financial position, results of operations or cash available for distribution. The amount of the Company’s insurance may also be less than the related impact on enterprise value after a loss. The Company’s insurance coverage will not in all situations provide sufficient funds to protect it from all liabilities that could result from its drilling operations. The

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Company’s coverage includes annual aggregate policy limits. As a result, the Company retains the risk for any losses in excess of these limits. Any such lack of reimbursement may cause the Company to incur substantial costs. In addition, the Company could decide to retain more risk in the future. This results in a higher risk of losses, which could be material, that are not covered by third-party insurance contracts. Specifically, the Company has at times in the past elected to not insure for physical damage to rigs and equipment caused by named windstorms in the U.S. Gulf of Mexico due to the substantial costs associated with such coverage. The Company insures a limited part of this windstorm risk in a combined single limit annual aggregate policy. The Company is currently negotiating the renewal of its policy to insure a limited part of this windstorm risk for a further period starting May 1, 2015 through March 31, 2016. If the Company elects not to insure such risks in the future, and such windstorms cause significant damage to any rig and equipment the Company has in the U.S. Gulf of Mexico, it could have a material adverse effect on the Company's financial position, results of operations or cash flows. Moreover, no assurance can be made that the Company will be able to maintain adequate insurance in the future at rates that the Company considers reasonable, or obtain insurance against certain risks.
An over-supply of drilling units may lead to a reduction in dayrates and therefore may materially impact the Company’s profitability.
Prior to the current downturn, during the recent period of high utilization and high dayrates, 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 dayrates 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. As of March 31, 2015 , the worldwide fleet of tender rigs, semi-submersible rigs and drillships consisted of 355  units, comprising 39  tender rigs, 198  semi-submersible rigs and 118  drillships. In addition there are 9 tender rigs, 30 semi-submersible rigs and 56 drillships were under construction or on order, which would bring the total fleet to 450  units, assuming no reduction in the total fleet size through retirement of drilling units or otherwise. A relatively large number of the drilling units currently under construction have not been contracted for future work, and a number of units in the existing worldwide fleet are currently off contract.
The supply of available uncontracted units is likely to intensify price competition as scheduled delivery dates occur and additional contracts terminate without renewal, and lead to a reduction in dayrates as the active fleet grows. Any further increase in construction of new units may increase the negative impact on dayrates and utilization. In addition, drilling units may be relocated to markets in which the Company operates, which could exacerbate excess drilling unit supply and lower dayrates in those markets. If a large number of drilling units become available around the time of expiration of the Company's drilling contracts, it could depress the dayrate the Company is able to obtain under a renewed or new contract with respect to the Company's drilling units. In addition, customers may demand renegotiation of existing contracts to lower dayrates. In an over-supplied market, the Company may have limited bargaining power to renegotiate on more favorable terms . Lower utilization and dayrates could adversely affect the Company’s revenues and profitability and ability to make distributions to its unitholders.
In addition, prolonged periods of low utilization and dayrates could also result in the recognition of impairment charges on the Company’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.

The market value of the Company’s existing drilling units has decreased and drilling units the Company may acquire in the future could decrease, which could cause the Company to incur losses if the Company decides to sell them following a decline in their market values.

During the second half of 2014, the estimated fair value of the Company's drilling units, based upon various broker valuations, decreased by approximately 10% . If the offshore contract drilling industry suffers adverse developments in the future, the fair market value of the Company's drilling units may decline further. The fair market value of the drilling units that we 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 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 dayrates;
•
governmental or other regulations; and
•
technological advances.
If the Company 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 the Company's business prospects, financial condition, liquidity, results of operations and ability to make distributions to its unitholders.
The Company may incur impairment charges as a result of reduced demand for drilling services or other factors
In the future, the Company may be required to record impairment charges to goodwill or other assets. Such impairment charges could have a material adverse effect on the Company's financial performance or results of operations, and its ability to pay distributions. In addition, such impairment charges could adversely impact the Company's ability to comply with the restrictions and covenants in the Company's debt agreements, including meeting financial ratios and tests in those agreements. If the Company is unable to comply with the restrictions and covenants in the agreements governing its indebtedness or in current or future debt financing agreements, a default could occur under the terms of those agreements.

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Consolidation and governmental regulation of suppliers may increase the cost of obtaining supplies or restrict the Company’s ability to obtain needed supplies, which may have a material adverse effect on the Company's results of operations and financial condition.
The Company relies 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. With respect to certain items, such as blow-out preventers, the Company is dependent upon the original equipment manufacturer for repair and replacement of the item or its spare parts. For instance, several drilling companies, including Seadrill, experienced significant interruption of operations in early 2013 as a result of a defective batch of connector bolts procured by a supplier of BOP equipment, and the only source of approved replacement bolts was that same supplier. 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 Company’s results of operations and result in rig downtime, and delays in the repair and maintenance of its drilling units.
Furthermore, most of the Company's suppliers are U.S. companies, which means that in the event a U.S. supplier was debarred or otherwise restricted by the U.S. government from delivering its products the Company's ability to supply and service its operations in areas of the U.S. Gulf of Mexico subject to federal lease could be severely impacted.
The Company’s international operations involve additional risks, which could adversely affect the Company's business.
As a result of the Company’s international operations, the Company 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 drilling units trading in regions of the world such as the South China Sea, the Gulf of Aden off the coast of Somalia, where piracy has increased significantly in frequency since 2008, 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;
•
U.S. and foreign sanctions or trade embargoes;
•
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 the Company's control; and
•
governmental corruption.
In addition, international contract drilling operations are subject to various laws and regulations of the countries in which the Company operates, including laws and regulations relating to:
•
the equipping and operation of drilling units;
•
exchange rates or exchange controls;
•
oil and gas exploration and development;
•
taxation of offshore earnings and the earnings of expatriate personnel; and
•
use and compensation of local employees and suppliers by foreign contractors.

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 the Company's ability to compete. Failure to comply with applicable laws and regulations, including those relating to sanctions and export restrictions, may subject the Company to criminal sanctions or civil remedies, including fines, denial of export privileges, injunctions or seizures of assets.

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If the Company’s business activities involve countries, entities and individuals that are subject to restrictions imposed by the U.S. or other governments, the Company could be subject to enforcement action and the Company's reputation and the market for the Company's common units could be adversely affected.
In 2010, the U.S. enacted the Comprehensive Iran Sanctions Accountability and Divestment Act, or CISADA, which expanded the scope of the former Iran Sanctions Act. Among other things, CISADA expands the application of the prohibitions to non-U.S. companies, such as the Company, and introduces 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. On August 10, 2012, the U.S. signed into law the Iran Threat Reduction and Syria Human Rights Act of 2012, or the Iran Threat Reduction Act, which places further restrictions on the ability of non-U.S. companies to do business or trade with Iran and Syria. Perhaps the most significant provision in the Iran Threat Reduction Act is that prohibitions in the existing Iran sanctions applicable to U.S. persons will now apply to any foreign entity owned or controlled by a U.S. person (essentially making the U.S. sanctions against Iran as expansive as U.S. sanctions against Cuba). These new sanctions were codified within the Iranian Transactions Regulations on or about December 26, 2012. The other major provision in the Iran Threat Reduction Act is that issuers of securities must disclose to the SEC in their annual and quarterly reports filed after February 6, 2013 if the issuer or “any affiliate” has “knowingly” engaged in certain sanctioned activities involving Iran during the timeframe covered by the report. The disclosure must describe the nature and extent of the activity in detail and the SEC will publish the disclosure on its website. The President must then initiate an investigation and determine whether sanctions on the issuer or its affiliate will be imposed. Such negative publicity and the possibility that sanctions could be imposed would present a risk for any issuer that is knowingly engaged in sanctioned conduct or that has an affiliate that is knowingly engaged in such conduct. At this time, the Company is not aware of any sanctionable activity, conducted by ourselves or by any affiliate of Seadrill that is likely to trigger an SEC disclosure requirement.
Sanctions affecting non-U.S. companies like the Company were expanded yet again under the 2013 National Defense Authorization Act, with the passage of the Iran Freedom and Counter-Proliferation Act, and the Company believes that these sanctions will continue to become more restrictive for the foreseeable future. In addition to the sanctions against Iran, U.S. law continues to restrict U.S. owned or controlled entities from doing business with Cuba and various U.S. sanctions have certain other extraterritorial effects that need to be considered by non-U.S. companies. Moreover, any U.S. persons who serve as officers, directors or employees of the Company would be fully subject to U.S. sanctions. It should also be noted that other governments are more frequently implementing sanctions regimes.
The Company does not currently have any drilling contracts or plans to initiate any drilling contracts involving operations in countries or with government-controlled entities 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. However, from time to time, the Company may enter into drilling contracts involving operations in countries or with government-controlled entities 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 in cases where entering into such contracts would not violate U.S. law or may enter into drilling contracts involving operations in countries or with government-controlled entities that may become subject to sanctions and embargoes imposed by the U.S. government and/or identified by the U.S. government as state sponsors of terrorism. However, this could negatively affect the Company's ability to obtain investors. In some cases, U.S. investors would be prohibited from investing in an arrangement in which the proceeds could directly or indirectly be transferred to or may benefit a sanctioned entity. Moreover, even in cases where the investment would not violate U.S. law, potential investors could view such drilling contracts negatively, which could adversely affect the Company's reputation and the market for the Company's common units.
As stated above, the Company believes that it is in compliance with all applicable sanctions and embargo laws and regulations, and intend to maintain such compliance. However, there can be no assurance that the Company will be in compliance in the future, particularly as such laws are subject to frequent changes, the scope of certain laws may be unclear and may be subject to changing interpretations. For instance, new sanctions were announced in March 2014 in relation to certain individuals in Russia and Ukraine, and subsequently modified in August and September 2014. 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's common units. Additionally, some investors may decide to divest their interest, or not to invest, in the Company's common units simply because the Company may do business with companies that do business in sanctioned countries. Moreover, the Company’s drilling contracts may violate applicable sanctions and embargo laws and regulations as a result of actions that do not involve the Company or its drilling units, and those violations could in turn negatively affect the Company's reputation. Investor perception of the value of the Company's common units may also be adversely affected by the consequences of war, the effects of terrorism, civil unrest and governmental actions in these and surrounding countries.
Local content policies may impair the Company’s ability to compete in local jurisdictions, and changes in these policies may adversely affect the Company's financial conditions and results of operations.
Certain foreign governments, such as those of Nigeria and Angola, favor or effectively require (i) the awarding of drilling contracts to local contractors or to drilling units 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. For example, the local content policy in Angola requires the Company's customers to develop and implement a plan to increase local Angolan content, including specific goals. In addition, Nigerian laws required one of the Company's subsidiaries to enter into a joint venture with Nigerian investors to own the West Capella . These regulations may adversely affect the Company’s ability to compete in these contract drilling markets. Further, local content policies may be subject to significant and unpredictable changes, which may lead to greater uncertainty in operational planning in those jurisdictions.


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If the Company's drilling units fail to maintain their class certification or fail any required survey, that drilling unit would be unable to operate, thereby reducing the Company's revenues and profitability.
Every offshore drilling unit is a registered marine vessel and must be “classed” by a classification society. The classification society certifies that the drilling unit is “in-class,” signifying that such drilling unit has been built and maintained in accordance with the rules of the classification society and complies with applicable rules and regulations of the drilling unit’s country of registry and the international conventions of which that country is a member. In addition, where surveys are required by international conventions and corresponding laws and ordinances of a flag state, the classification society will undertake them on application or by official order, acting on behalf of the authorities concerned. If any drilling unit does not maintain its class and/or fails any annual survey or special survey, the drilling unit will be unable to carry on operations and will be unemployable and uninsurable, which could cause the Company to be in violation of certain covenants in the Company's credit facilities. Any such inability to carry on operations or be employed, could have a material adverse impact on the Company's financial condition, results of operations, and ability to make distributions to the Company's unitholders.
Fluctuations in exchange rates or exchange controls could result in losses to us.
As a result of the Company’s international operations, the Company 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, the Company may experience currency exchange losses if the Company has not fully hedged the Company's exposure to a foreign currency, or if revenues are received in currencies that are not readily convertible. The Company may also be unable to collect revenues because of a shortage of convertible currency available to the country of operation, controls over the repatriation of income or capital or controls over currency exchange.
The Company and the majority of its subsidiaries use the U.S. Dollar as their functional currency because the majority of their revenues and expenses are denominated in U.S. Dollars. Accordingly, the Company's reporting currency is also U.S. Dollars. The Company does, however, earn revenue and incur expenses in other currencies and there is a risk that currency fluctuations could have an adverse effect on the Company's statements of operations and cash flows.
The Company may be unable to obtain, maintain, and/or renew permits necessary for the Company's operations or experience delays in obtaining such permits, which could have a material effect on the Company's operations.
The operation of the Company’s drilling units are subject to certain governmental approvals and permits. The permitting rules in most jurisdictions are complex and subject to change, including their interpretations by regulators, all of which may make compliance more difficult or impractical, and may increase the length of time it takes to receive regulatory approval for offshore drilling operations. In many jurisdictions, substantive requirements under environmental laws are implemented through permits and permit renewals. If the Company fails to timely secure the necessary approvals or permits, the Company’s customers may have the right to terminate or seek to renegotiate their drilling contracts to the Company’s detriment. In the future, 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 or increasing the time needed to obtain necessary environmental permits, could have a material adverse effect on the Company's business, operating results or financial condition.
The Company is subject to complex environmental laws and regulations that can adversely affect the cost, manner or feasibility of doing business.
The Company’s operations are subject to numerous environmental laws and regulations in the form of international conventions and treaties, and national, state and local laws and regulations in force in the jurisdictions in which its drilling units operate or are registered, which can significantly affect the operation of its drilling units. The offshore drilling industry is dependent on demand for services from the oil and gas exploration and production industry, and, accordingly, the Company is directly affected by the adoption of laws and regulations that, for economic, environmental or other policy reasons, may curtail exploration and development drilling for oil and gas. 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 the Company’s drilling units.
The Company 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 its ability to address pollution incidents. These costs could have a material adverse effect on the Company'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 the Company’s operations.
Environmental laws often impose strict liability for remediation of spills and releases of oil and hazardous substances, which could subject the Company to liability without regard to whether it was negligent or at fault. Under the U.S. Oil Pollution Act of 1990, or OPA, for example, owners, operators and bareboat charterers are jointly and severally strictly liable for the discharge of oil within the 200-mile exclusive economic zone around the United States. An oil or chemical spill, for which the Company is deemed a responsible party, 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, which could have a material adverse effect on the Company's business, financial condition, results of operations and cash flows. Furthermore, the 2010 explosion of the Deepwater Horizon well and the subsequent release of oil into the Gulf of Mexico, or other similar events, may result in further regulation of the shipping industry, and modifications to statutory liability schemes, thus exposing the Company to further potential financial risk in the event of any such oil or chemical spill.

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The Company is required by various governmental and quasi-governmental agencies to obtain certain permits, licenses, and certificates with respect to the Company's operations, and satisfy insurance and financial responsibility requirements for potential oil (including marine fuel) spills and other pollution incidents. Although the Company has arranged insurance to cover certain environmental risks, there can be no assurance that such insurance will be sufficient to cover all such risks or that any claims will not have a material adverse effect on its business, results of operations, cash flows and financial condition and its ability to pay distributions, if any, in the future.
Although the Company'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 the Company could be subject to liability upon a judgment against the Company or any one of the Company's subsidiaries.
The Company’s drilling units could cause the release of oil or hazardous substances, especially as its drilling units age. Any releases may be large in quantity, above the Company'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 the Company, such as costs to upgrade its drilling units, clean up the releases, and comply with more stringent requirements in its discharge permits. Moreover, these releases may result in the Company’s customers or governmental authorities suspending or terminating its operations in the affected area, which could have a material adverse effect on the Company's business, results of operation and financial condition.
If the Company is able to obtain from the Company's customers some degree of contractual indemnification against pollution and environmental damages, the indemnification may not be applicable in all instances or the customer may not be financially able to comply with its indemnity obligations. In the future, the Company may not be able to obtain contractual indemnification against pollution and environmental damages.
In addition, the Company is required to satisfy insurance and financial responsibility requirements for potential oil (including marine fuel) spills and other pollution incidents. The Company's insurance coverage may not be available in the future, or the Company may not obtain certain insurance coverage. Even if insurance is available and the Company has obtained the coverage, the insurance coverage may not be adequate to satisfy the Company's liabilities or its 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 the Company's business, operating results and financial condition.
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, the Company's business or prospects could be materially adversely affected. Future earnings and cash available for distribution may be negatively affected by compliance with any such new legislation or regulations.
Climate change and regulation of greenhouse gases may have an adverse impact on the Company's business.
Due to concern over the risk of climate change, a number of countries and the United Nations’ International Maritime Organization, or the 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. As of January 1, 2013, all ships (including rigs and drillships) must comply with mandatory requirements adopted by the IMO’s Maritime Environment Protection Committee, or MEPC, in July 2011, relating to greenhouse gas emissions. 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.
All ships are required to follow the Ship Energy Efficiency Management Plans, or SEEMP, and minimum energy efficiency levels per capacity mile, outlined in the Energy Efficiency Design Index, or EEDI, applies to all new ships. These requirements could cause the Company to incur additional compliance costs. The IMO is planning to implement market-based mechanisms to reduce greenhouse gas emissions from ships at an upcoming MEPC session. In April 2013, the European Union Parliament rejected proposed changes to the European Union Emissions law regarding carbon trading. The measures would have limited the availability of permits that allow companies to emit greenhouse gases. The European Union is still considering an expansion of the existing European Union emissions trading scheme to include emissions of greenhouse gases from marine vessels, including drilling units, and in June 2013, the European Commission issued a memorandum recommending a “gradual approach” starting with a program to monitor, report and verify such 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. In June 2014, the Supreme Court overturned the EPA “Tailoring Rule,” which required a Title V permit for statutory sources based on potential emissions of greenhouse gases. The Supreme Court also ruled, however, that EPA properly determined that Best Available Control Technology requirements for greenhouse gases would apply to sources that require Title V permits based on potential to emit conventional pollutants.
Compliance with changes in laws, regulations and obligations relating to climate change could increase the Company's costs related to operating and maintaining the Company's assets, and might also require the Company to install new emission controls, acquire allowances or pay taxes related to the Company's 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 the Company'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

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energy sources. Any long-term material adverse effect on the oil and gas industry could have a significant financial and operational adverse impact on the Company's business, including capital expenditures to upgrade the Company's drilling units, that the Company cannot predict with certainty at this time.
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 us.
In the near-term aftermath of the Deepwater Horizon Incident, in which the Company 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. Gulf of Mexico and subsequently implemented Notices to Lessees 2010-N05 and 2010-N06, providing enhanced safety requirements applicable to all drilling activity in the U.S. Gulf of Mexico, 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. Gulf of Mexico 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 and various requirements imposed through Notices to Lessees and Operators (SEMS). Operators were required to implement a SEMS program by November 15, 2011 and submit their first completed SEMS audit to the Bureau of Safety and Environmental Enforcement, or BSEE, by November 15, 2013. The original SEMS rule was later modified by the SEMS II final rule which became effective June 4, 2013. SEMS II enhanced and supplemented operators' SEMS programs with employee training, empowering field level personnel with safety management decisions and strengthening auditing procedures by requiring them to be completed by independent third parties. Operators had until June 4, 2014 to comply with SEMS II, except for certain auditing requirements. All SEMS audits must comply with SEMS II by June 4, 2015. The U.S. Occupational Safety and Health Act (OSHA) imposes additional recordkeeping obligations concerning occupational injuries and illnesses for MODUs attached to the outer continental shelf.
In addition, in order to obtain drilling permits, operators must submit applications that demonstrate compliance with the enhanced regulations, which require independent third-party inspections, certification of well design and well control equipment and emergency response plans in the event of a blowout, among other requirements. Operators have previously had, and may in the future have, difficulties obtaining drilling permits in the U.S. Gulf of Mexico. In addition, the oil and gas industry has adopted new equipment and operating standards, such as the American Petroleum Institute Standard 53 relating to the installation and testing of well control equipment. Likewise, in August 2014, BSEE proposed an Advanced Notice of Proposed Rulemaking proposing variations to the permitting program that would bolster the offshore financial assurance and bonding program. These new and proposed guidelines and standards for safety, environmental and financial assurance and any other new guidelines or standards the U.S. government or industry may issue or any other steps the U.S. government or industry may take, could disrupt or delay operations, increase the cost of operations, increase out-of-service time or reduce the area of operations for drilling rigs in U.S. and non-U.S. offshore areas.
The Company continues to evaluate these new measures to ensure that its drilling units and equipment are in full compliance, where applicable. As new standards and procedures are being integrated into the existing framework of offshore regulatory programs, the Company anticipates that there may be increased costs associated with regulatory compliance and delays in obtaining permits for other operations such as recompletions, workovers and abandonment activities.
Additional requirements could be forthcoming based on further recommendations by regulatory agencies investigating the Macondo incident. The Company 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. The current and future regulatory environment in the U.S. Gulf of Mexico could impact the demand for drilling units in the U.S. Gulf of Mexico in terms of overall number of rigs in operation and the technical specification required for offshore rigs to operate in the U.S. Gulf of Mexico. It is possible that short-term potential migration of rigs from the U.S. Gulf of Mexico 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 the Company’s operations, and escalating costs borne by its customers, along with permitting delays, could reduce exploration and development activity in the U.S. Gulf of Mexico and, therefore, reduce demand for the Company’s services. In addition, insurance costs across the industry have increased 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. The Company cannot predict if the U.S. government will issue new drilling permits in a timely manner, nor can the Company predict the potential impact of new regulations that may be forthcoming as the investigation into the Macondo well incident continues. Nor can the Company predict if implementation of additional regulations might subject the Company to increased costs of operating and/or a reduction in the area of operation in the U.S. Gulf of Mexico. As such, the Company's cash available for distribution and financial position could be adversely affected if the Company's drilling unit operating in the U.S. Gulf of Mexico became subject to the risks mentioned above.

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The Company's ability to operate its drilling units in the U.S. Gulf of Mexico could be restricted by governmental regulation
Hurricanes have from time to time caused damage to a number of unaffiliated drilling units in the U.S. Gulf of Mexico. The Bureau of Ocean Energy Management, Regulation and Enforcement, or 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, or BOEM, and 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. BSEE subsequently issued additional guidelines requiring Mobile Offshore Drilling Units (MODUs) to be outfitted with Global Positioning Systems (GPS) and to provide BSEE with real-time GPS location data for MODUs effective March 19, 2013. These guidelines effectively impose new requirements on the offshore oil and 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 gas companies that operate properties in the U.S. Gulf of Mexico 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 the Company’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 the Company to increased costs and limit the operational capabilities of its drilling units, although such risks to the extent possible should rest with the Company’s customers.
The Company cannot guarantee that the use of the Company’s drilling units will not infringe the intellectual property rights of others.
The majority of the intellectual property rights relating to the Company’s drilling units and related equipment are owned by its suppliers. In the event that one of the Company’s suppliers becomes involved in a dispute over infringement of intellectual property rights relating to equipment owned by the Company, it may lose access to repair services, replacement parts, or could be required to cease use of some equipment. In addition, the Company’s competitors may assert claims for infringement of intellectual property rights related to certain equipment on its drilling units and the Company 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 the Company’s suppliers or competitors could adversely affect its financial results, operations and cash available for distribution. The Company has provisions in some of its supply contracts which provide indemnity from the supplier against intellectual property lawsuits. However, the Company cannot be assured that these suppliers will be willing or financially able to honor their indemnity obligations, or guarantee that the indemnities will fully protect the Company from the adverse consequences of such technology disputes. The Company also has provisions in some of its customer contracts to require the customer to share some of these risks on a limited basis, but the Company cannot provide assurance that these provisions will fully protect the Company from the adverse consequences of such technology disputes.

Failure to comply with the U.S. Foreign Corrupt Practices Act or the UK Bribery Act could result in fines, criminal penalties, drilling contract terminations and an adverse effect on the Company's business.
The Company currently operates its drilling units in a number of countries throughout the world, including some with developing economies. Also, the Company's business with national oil companies and state or government-owned shipbuilding enterprises and financing agencies puts the Company in contact with persons who may be considered “foreign officials” or “foreign public officials” under the U.S. Foreign Corrupt Practices Act of 1977, or the FCPA, and the Bribery Act 2010 of the Parliament of the United Kingdom, or the UK Bribery Act, respectively. The Company is subject to the risk that the Company, the Company's affiliated entities or their respective officers, directors, employees and agents may take actions determined to be in violation of such anti-corruption laws, including the FCPA and the UK Bribery Act. Any such violation could result in substantial fines, sanctions, civil and/or criminal penalties, curtailment of the Company’s operations in certain jurisdictions, and might adversely affect the Company's business, results of operations or financial condition. In addition, actual or alleged violations could damage the Company's reputation and ability to do business. Furthermore, detecting, investigating and resolving actual or alleged violations would be expensive and consume significant time and attention of the Company's senior management.
In order to effectively compete in some foreign jurisdictions, the Company utilizes local agents and/or establishes joint ventures with local operators or strategic partners. For example, in Nigeria, Nigerian investors have invested in a subsidiary of Seadrill Operating LP that is fully controlled and approximately 56% owned by Seadrill Operating LP, and has resulted in a Nigerian joint venture partner owning an effective 1% interest in the West Capella . Seadrill owns the remaining ownership interest in the joint venture. All of these activities involve interaction by the Company's agents with non-U.S. government officials. Even though some of the Company's agents and partners may not themselves be subject to the FCPA, the UK Bribery Act or other anti-bribery laws to which the Company may be subject, if the Company's agents or partners make improper payments to non-U.S. government officials in connection with engagements or partnerships with the Company, the Company could be investigated and potentially found liable for violation of such anti-bribery laws and could incur civil and criminal penalties and other sanctions, which could have a material adverse effect on the Company's business, financial position, results of operations and cash flows.
Acts of terrorism, piracy and political and social unrest could affect the Company specifically or, more generally, the markets for drilling services, which may have a material adverse effect on the Company'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 ours. the Company’s drilling operations may be targeted by acts of terrorism, piracy, or acts of vandalism or sabotage carried out by environmental activist groups. In addition, acts of terrorism and political and social unrest could lead to increased volatility in prices for crude oil and gas and could affect the markets for drilling services and result in lower dayrates. The Company’s insurance premiums could increase as a result of these events, and coverage may be unavailable in the future.

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Any failure to comply with the complex laws and regulations governing international trade could adversely affect the Company's operations.
The shipment of goods, services and technology across international borders subjects the Company's business 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 record keeping and reporting obligations. Governments also may impose economic sanctions against certain countries, persons and other entities that may restrict or prohibit transactions involving such countries, persons and entities. U.S. sanctions, in particular, are targeted against countries (such as Russia, Venezuela, Iran, Myanmar and Sudan, among others) that are heavily involved in the petroleum and petrochemical industries, which includes drilling activities.
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 the Company's operations. Shipments can be delayed and denied export or entry for a variety of reasons, some of which are outside the Company'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 could also result in criminal and civil penalties and sanctions, such as fines, imprisonment, debarment from government contracts, and seizure of shipments and loss of import and export privileges.
Public health threats could have an adverse effect on the Company's operations and the Company's financial results.
Public health threats, such as ebola, influenza, Severe Acute Respiratory Syndrome and other highly communicable diseases or viruses, outbreaks of which have from time to time occurred in various parts of the world in which the Company operates, could adversely impact the Company's operations, and the operations of the Company's customers. In addition, public health threats in any area, including areas where the Company does not operate, could disrupt international transportation. The Company's crews generally work on a rotation basis, with a substantial portion relying on international air transport for rotation. Any such disruptions could impact the cost of rotating the Company's crews, and possibly impact the Company's ability to maintain a full crew on all rigs. Any of these public health threats and related consequences could adversely affect the Company's financial results.
A cyber-attack could materially disrupt the Company's business
The Company relies on information technology systems and networks, the majority of which are provided by Seadrill, in its operations and administration of its business. The Company's drilling operations or other business operations, or those of Seadrill, could be targeted by individuals or groups seeking to sabotage or disrupt the Company's or Seadrill's information technology systems and networks, or to steal data. A successful cyber-attack could materially disrupt the Company's operations, including the safety of its operations, or lead to unauthorized release of information or alteration of information on its systems. Any such attack or other breach of the Company's information technology systems could have a material adverse effect on the Company's business and results of operations.
We may be subject to litigation, arbitration and other proceedings that could have an adverse effect on us.
The Company is currently involved in various litigation matters, none of which are expected to have a material adverse effect on the Company's financial condition. The Company anticipates that it will be involved in litigation matters from time to time in the future. The operating hazards inherent in the Company's business expose it 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 the Company's drilling units. The Company cannot predict with certainty the outcome or effect of any claim or other litigation matter, or a combination of these. If the Company is involved in any future litigation, or if the Company's positions concerning current disputes are found to be incorrect, this may have an adverse effect on the Company's business, financial position, results of operations and available cash, because of potential negative outcomes, the costs associated with asserting the Company's claims or defending such lawsuits, and the diversion of management’s attention to these matters.

Risks Inherent in an Investment in Us
Seadrill and its affiliates may compete with us.
Pursuant to the Company's omnibus agreement, Seadrill and its controlled affiliates generally have agreed not to acquire, own, operate or contract for certain drilling units operating under drilling contracts of five or more years, unless Seadrill offers to sell such drilling units to us. The omnibus agreement, however, contains significant exceptions that may allow Seadrill or any of its controlled affiliates to compete with the Company, which could harm the Company's business. Please read Item 7 “Major Unitholders and Related Party Transactions—Related Party Transactions—Agreements Governing the Transactions—Omnibus Agreement—Noncompetition.”
Unitholders have limited voting rights, and the Company's operating agreement restricts the voting rights of the unitholders owning more than 5% of the Company's common units.
Unlike the holders of common stock in a corporation, holders of common units have only limited voting rights on matters affecting the Company's business. The Company will hold a meeting of the members every year to elect one or more members of the Company's board of directors and to vote on any other matters that are properly brought before the meeting. Common unitholders are entitled to elect only four of the seven members of the Company's board of directors. The elected directors are elected on a staggered basis and will serve for three year terms. The Seadrill Member in its sole discretion appoints the remaining three directors and sets the terms for which those directors will serve. The operating

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agreement also contains provisions limiting the ability of unitholders to call meetings or to acquire information about the Company's operations, as well as other provisions limiting the unitholders’ ability to influence the manner or direction of management. Unitholders have no right to elect the Seadrill Member, and the Seadrill Member may not be removed except by a vote of the holders of at least 66  2 / 3 % of the outstanding common and subordinated units, including any units owned by the Seadrill Member and its affiliates, voting together as a single class.
The Company's operating agreement further restricts unitholders’ voting rights by providing that if any person or group owns beneficially more than 5% of any class of units then outstanding, any such units owned by that person or group in excess of 5% may not be voted on any matter and will not be considered to be outstanding when sending notices of a meeting of unitholders, calculating required votes (except for purposes of nominating a person for election to the Company's board), determining the presence of a quorum or for other similar purposes, unless required by law. The voting rights of any such unitholders in excess of 5% will effectively be redistributed pro rata among the other common unitholders holding less than 5% of the voting power of all classes of units entitled to vote. The Seadrill Member, its affiliates and persons who acquired common units with the prior approval of the Company's board of directors are not be subject to this 5% limitation except with respect to voting their common units in the election of the elected directors.
The Seadrill Member and its other affiliates own a substantial interest in the Company and have conflicts of interest and limited duties to the Company and the Company's common unitholders, which may permit them to favor their own interests to the detriment of the Company's unitholders.
As of March 31, 2015 , Seadrill owned a 46.6% limited liability company interest in the Company, and owned and controlled the Seadrill Member. Certain of the Company's officers and directors are directors and/or officers of Seadrill and its subsidiaries and, as such, they have fiduciary duties to Seadrill that may cause them to pursue business strategies that disproportionately benefit Seadrill or which otherwise are not in the best interests of the Company or the Company's unitholders. Conflicts of interest may arise between Seadrill and its subsidiaries on the one hand, and the Company and the Company's unitholders, on the other hand. As a result of these conflicts, Seadrill and its subsidiaries may favor their own interests over the interests of the Company's unitholders. Please read “—The Company's operating agreement limits the duties the Seadrill Member and the Company's directors and officers may have to the Company's unitholders and restricts the remedies available to unitholders for actions taken by the Seadrill Member or the Company's directors and officers.” These conflicts include, among others, the following situations:
•
neither the Company's operating agreement nor any other agreement requires the Seadrill Member or Seadrill or its affiliates to pursue a business strategy that favors the Company or utilizes the Company's assets, and Seadrill’s officers and directors have a fiduciary duty to make decisions in the best interests of the shareholders of Seadrill, which may be contrary to the Company's interests;
•
the Company's operating agreement provides that the Seadrill Member may make determinations to take or decline to take actions without regard to the Company's or the Company's unitholders’ interests. Specifically, the Seadrill Member may exercise its call right, pre-emptive rights, registration rights or right to make a determination to receive common units in exchange for resetting the target distribution levels related to the incentive distribution rights, consent or withhold consent to any merger or consolidation of the company, appoint any directors or vote for the election of any director, vote or refrain from voting on amendments to the Company's operating agreement that require a vote of the outstanding units, voluntarily withdraw from the company, transfer (to the extent permitted under the Company's operating agreement) or refrain from transferring its units, the Seadrill Member interest or incentive distribution rights or vote upon the dissolution of the company;
•
the Seadrill Member and the Company's directors and officers have limited their liabilities and any fiduciary duties they may have under the laws of the Marshall Islands, while also restricting the remedies available to the Company's unitholders, and, as a result of purchasing common units, unitholders are treated as having agreed to the modified standard of fiduciary duties and to certain actions that may be taken by the Seadrill Member and the Company's directors and officers, all as set forth in the operating agreement;
•
the Seadrill Member is entitled to reimbursement of all costs incurred by it and its affiliates for the Company's benefit;
•
the Company's operating agreement does not restrict the Company from paying the Seadrill Member or its affiliates for any services rendered to the Company on terms that are fair and reasonable or entering into additional contractual arrangements with any of these entities on the Company's behalf;
•
the Seadrill Member may exercise its right to call and purchase the Company's common units if it and its affiliates own more than 80% of the Company's common units; and
•
the Seadrill Member is not obligated to obtain a fairness opinion regarding the value of the common units to be repurchased by it upon the exercise of its limited call right.
Although a majority of the Company's directors are elected by common unitholders, the Seadrill Member will likely have substantial influence on decisions made by the Company's board of directors. Please read Item 7 “Major Unitholders and Related Party Transactions—Related Party Transactions”
Although the Company controls OPCO, the Company owes duties to OPCO and its other owner, Seadrill, which may conflict with the interests of the Company and the Company's unitholders.
Conflicts of interest may arise as a result of the relationships between the Company and the Company's unitholders, on the one hand, and OPCO, and its other owner, Seadrill, on the other hand. Seadrill owns a 42% limited partner interest in Seadrill Operating LP, a 49% limited liability company interest in Seadrill Capricorn Holdings LLC and a 100% limited liability company interest in the Seadrill Member. The Company's directors have duties to manage OPCO in a manner beneficial to us. At the same time, the Company's directors have a duty to manage OPCO in a manner beneficial to OPCO’s owners, including Seadrill. The Company's board of directors may resolve any such conflict and has broad

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latitude to consider the interests of all parties to the conflict. The resolution of these conflicts may not always be in the best interest of the Company or the Company's unitholders.
For example, conflicts of interest may arise in the following situations:
•
the allocation of shared overhead expenses to OPCO and us;
•
the interpretation and enforcement of contractual obligations between the Company and the Company's affiliates,
on the one hand, and OPCO or its subsidiaries, on the other hand;
•
the determination and timing of the amount of cash to be distributed to OPCO’s owners and the amount of cash to be reserved for the future conduct of OPCO’s business;
•
the decision as to whether OPCO should make asset or business acquisitions or dispositions, and on what terms;
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the determination of the amount and timing of OPCO’s capital expenditures;
•
the determination of whether OPCO should use cash on hand, borrow or issue equity to raise cash to finance maintenance or expansion capital projects, repay indebtedness, meet working capital needs or otherwise; and
•
any decision the Company makes to engage in business activities independent of, or in competition with, OPCO.
Certain of the Company's officers face conflicts in the allocation of their time to the Company's business.
Certain of the Company's officers are not required to work full-time on the Company's affairs and also perform services for other companies, including Seadrill. For example, Rune Magnus Lundetræ, who is the Company's Chief Financial Officer, also provides services in a similar capacity for Seadrill. In addition, Graham Robjohns, who is the Company's Chief Executive Officer, also acts as the Chief Executive Officer of Golar LNG Partners LP. These other companies conduct substantial businesses and activities of their own in which the Company has no economic interest. As a result, there could be material competition for the time and effort of the Company's officers who also provide services to other companies, which could have a material adverse effect on the Company's business, results of operations and financial condition. Please read Item 6 “Directors, Senior Management and Employees—Directors and Senior Management—Executive Officers—Allocation of Executive Officers’ Time.”
The Company's operating agreement limits the duties the Seadrill Member and the Company's directors and officers may have to the Company's unitholders and restricts the remedies available to unitholders for actions taken by the Seadrill Member or the Company's directors and officers.
The Company's operating agreement provides that the Company's board of directors has the authority to oversee and direct the Company's operations, management and policies on an exclusive basis. The Marshall Islands Limited Liability Company Act of 1996, or the Marshall Islands Act, states that a member or manager’s “duties and liabilities may be expanded or restricted by provisions in a limited liability company agreement.” As permitted by the Marshall Islands Act, the Company's operating agreement contains provisions that reduce the standards to which the Seadrill Member and the Company's directors and the Company's officers may otherwise be held by Marshall Islands law. For example, the Company's operating agreement:
•
provides that the Seadrill Member may make determinations or take or decline to take actions without regard to the Company's or the Company's unitholders’ interests. The Seadrill Member may consider only the interests and factors that it desires, and it has no duty or obligation to give any consideration to any interest of, or factors affecting the Company, the Company's affiliates or the Company's unitholders. Decisions made by the Seadrill Member are made by its sole owner, Seadrill. Specifically, the Seadrill Member may decide to exercise its right to make a determination to receive common units in exchange for resetting the target distribution levels related to the incentive distribution rights, call right, pre-emptive rights or registration rights, consent or withhold consent to any merger or consolidation of the company, appoint any directors or vote for the election of any director, vote or refrain from voting on amendments to the Company's operating agreement that require a vote of the outstanding units, voluntarily withdraw from the company, transfer (to the extent permitted under the Company's operating agreement) or refrain from transferring its units, the Seadrill Member interest or incentive distribution rights or vote upon the dissolution of the company;
•
provides that the Company's directors and officers are entitled to make other decisions in “good faith,” meaning they believe that the decision is in the Company's best interests;
•
generally provides that affiliated transactions and resolutions of conflicts of interest not approved by the conflicts committee of the Company's board of directors and not involving a vote of unitholders must be on terms no less favorable to the Company than those generally being provided to or available from unrelated third parties or be “fair and reasonable” to the Company and that, in determining whether a transaction or resolution is “fair and reasonable,” the Company's board of directors may consider the totality of the relationships between the parties involved, including other transactions that may be particularly advantageous or beneficial to us; and
•
provides that neither the Seadrill Member nor the Company's officers or the Company's directors will be liable for monetary damages to the Company, the Company's members or assignees for any acts or omissions unless there has been a final and non-appealable judgment entered by a court of competent jurisdiction determining that the Seadrill Member, the Company's directors or officers or those other persons engaged in actual fraud or willful misconduct.

The standard of care applicable to an officer or director of Seadrill when that individual is acting in such capacity is, in a number of circumstances, stricter than the standard of care the same individual may have when acting as an officer or director of us. The fact that an officer or director of the Company may have a fiduciary duty to Seadrill does not, however, diminish the duty that such individual owes to us. Compliance by such

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officer or director of the Company with such individual’s duty to the Company should not result in a violation of such individual’s duties to Seadrill.
In order to become a member of the Company, a common unitholder is required to agree to be bound by the provisions in the operating agreement, including the provisions discussed above.
Fees and cost reimbursements, which Seadrill Management and certain other subsidiaries of Seadrill determine for services provided to the Company, OPCO, and its subsidiaries, will be substantial, will be payable regardless of the Company's profitability and will reduce the Company's cash available for distribution to the Company's unitholders.
Pursuant to the advisory, technical and administrative service agreements, OPCO pays fees for services provided to OPCO and its subsidiaries by certain subsidiaries of Seadrill, and the Company and its subsidiaries reimburse these entities for all expenses they incur on their behalf. These fees and expenses include all costs and expenses incurred in providing certain advisory, technical and administrative services to the OPCO’s subsidiaries.
In addition, pursuant to the management and administrative services agreements Seadrill Management provides the Company with significant management, administrative, financial and other support services and/or personnel. The Company reimburses Seadrill Management for the reasonable costs and expenses incurred in connection with the provision of these services. In addition, the Company pays Seadrill Management a management fee.
There is no cap on the amount of fees and cost reimbursements that OPCO and its subsidiaries may be required to pay such subsidiaries of Seadrill pursuant to the advisory, technical and administrative service agreements, or that the Company may be required to pay under the management and administrative services agreements. For a description of the advisory, technical and administrative service agreements and the management and administrative services agreements, please read Item 7 “Major Unitholder and Related Party Transactions—Related Party Transactions.” The fees and expenses payable pursuant to the advisory, technical and administrative service agreements and the management and administrative services agreements will be payable without regard to the Company's financial condition or results of operations. The payment of fees to and the reimbursement of expenses of Seadrill Management, and certain other subsidiaries of Seadrill could adversely affect the Company's ability to pay cash distributions the Company's unitholders.
The Company's operating agreement contains provisions that may have the effect of discouraging a person or group from attempting to remove the Company's current management or the Seadrill Member, and even if public unitholders are dissatisfied, they will be unable to remove the Seadrill Member without Seadrill’s consent, unless Seadrill’s ownership interest in the Company is decreased; all of which could diminish the trading price of the Company's common units.
The Company's operating agreement contains provisions that may have the effect of discouraging a person or group from attempting to remove the Company's current management or the Seadrill Member.
•
The unitholders are unable to remove the Seadrill Member without its consent because the Seadrill Member and its affiliates own sufficient units to be able to prevent its removal. The vote of the holders of at least 66 2 / 3 % of all outstanding common and subordinated units voting together as a single class is required to remove the Seadrill Member. As of March 31, 2015 , Seadrill owned 46.6% of the outstanding common and subordinated units.
•
If the Seadrill Member is removed without “cause” during the subordination period and units held by the Seadrill Member and Seadrill are not voted in favor of that removal, all remaining subordinated units will automatically convert into common units, any existing arrearages on the common units will be extinguished, and the Seadrill Member will have the right to convert its incentive distribution rights into common units or to receive cash in exchange for those interests based on the fair market value of those interests at the time. A removal of the Seadrill Member under these circumstances would adversely affect the common units by prematurely eliminating their distribution and liquidation preference over the subordinated units, which would otherwise have continued until the Company has met certain distribution and performance tests. Any conversion of the Seadrill Member interest or incentive distribution rights would be dilutive to existing unitholders. Furthermore, any cash payment in lieu of such conversion could be prohibitively expensive. “Cause” is narrowly defined to mean that with respect to a director or officer, a court of competent jurisdiction has entered a final, non-appealable judgment finding such director or officer liable for actual fraud or willful misconduct, and with respect to the Seadrill Member, the Seadrill Member is in breach of the operating agreement or a court of competent jurisdiction has entered a final, non-appealable judgment finding the Seadrill Member liable for actual fraud or willful misconduct against the Company or its members, in their capacity as such. Cause does not include most cases of charges of poor business decisions, such as charges of poor management of the Company's business by the directors appointed by the Seadrill Member, so the removal of the Seadrill Member because of the unitholders’ dissatisfaction with the Seadrill Member’s decisions in this regard would most likely result in the termination of the subordination period.
•
Common unitholders are entitled to elect only four of the seven members of the Company's board of directors. The Seadrill Member in its sole discretion appoints the remaining three directors.
•
Election of the four directors elected by unitholders is staggered, meaning that the members of only one of three classes of the Company's elected directors are selected each year. In addition, the directors appointed by the Seadrill Member serve for terms determined by the Seadrill Member.
•
The Company's operating agreement contains provisions limiting the ability of unitholders to call meetings of unitholders, to nominate directors and to acquire information about the Company's operations as well as other provisions limiting the unitholders’ ability to influence the manner or direction of management.

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•
Unitholders’ voting rights are further restricted by the operating agreement provision providing that if any person or group owns beneficially more than 5% of any class of units then outstanding, any such units owned by that person or group in excess of 5% may not be voted on any matter and will not be considered to be outstanding when sending notices of a meeting of unitholders, calculating required votes (except for purposes of nominating a person for election to the Company's board), determining the presence of a quorum or for other similar purposes, unless required by law. The voting rights of any such unitholders in excess of 5% will effectively be redistributed pro rata among the other common unitholders holding less than 5% of the voting power of all classes of units entitled to vote. The Seadrill Member, its affiliates and persons who acquired common units with the prior approval of the Company's board of directors are not subject to this 5% limitation except with respect to voting their common units in the election of the elected directors.
•
There are no restrictions in the Company's operating agreement on the Company's ability to issue additional equity securities.
The effect of these provisions may be to diminish the price at which the common units trade.
The control of the Seadrill Member may be transferred to a third party without unitholder consent.
The Seadrill Member may transfer its Seadrill Member interest to a third party in a merger or in a sale of all or substantially all of its assets without the consent of the unitholders. In addition, the Company's operating agreement does not restrict the ability of the members of the Seadrill Member from transferring their respective limited liability company interests in the Seadrill Member to a third party.

If the Company ceases to control OPCO, the Company may be deemed to be an investment company under the Investment Company Act of 1940.
If the Company ceases to manage and control OPCO and are deemed to be an investment company under the Investment Company Act of 1940 because of the Company's ownership of OPCO interests, the Company would either have to register as an investment company under the Investment Company Act, obtain exemptive relief from the SEC or modify the Company's organizational structure or the Company's contract rights to fall outside the definition of an investment company. Registering as an investment company could, among other things, materially limit the Company's ability to engage in transactions with affiliates, including the purchase and sale of certain securities or other property to or from the Company's affiliates, restrict the Company's ability to borrow funds or engage in other transactions involving leverage, and require the Company to add additional directors who are independent of the Company or the Company's affiliates.
Substantial future sales of the Company's common units in the public market could cause the price of the Company's common units to fall.
The Company has granted registration rights to Seadrill and certain of its affiliates. These unitholders have the right, subject to some conditions, to require the Company to file registration statements covering any of the Company's common, subordinated or other equity securities owned by them or to include those securities in registration statements that the Company may file for the Company or other unitholders. As of March 31, 2015 , Seadrill owned 26,275,750 common units and 16,543,350 subordinated units and all of the incentive distribution rights (through its ownership of the Seadrill Member). Following their registration and sale under an applicable registration statement, those securities will become freely tradable. By exercising their registration rights and selling a large number of common units or other securities, these unitholders could cause the price of the Company's common units to decline.
The Seadrill Member, as the initial holder of all of the incentive distribution rights, may elect to cause the Company to issue additional common units to it in connection with a resetting of the target distribution levels related to the Seadrill Member’s incentive distribution rights without the approval of the conflicts committee of the Company's board of directors or holders of the Company's common units and subordinated units. This may result in lower distributions to holders of the Company's common units in certain situations.
The Seadrill Member, as the initial holder of all of the incentive distribution rights, has the right, at a time when there are no subordinated units outstanding and the Seadrill Member has received incentive distributions at the highest level to which it is entitled (50%) for each of the prior four consecutive fiscal quarters, to reset the initial cash target distribution levels at higher levels based on the distribution at the time of the exercise of the reset election. Following a reset election by the Seadrill Member, the minimum quarterly distribution amount will be reset to an amount equal to the average cash distribution amount per common unit for the two fiscal quarters immediately preceding the reset election (such amount is referred to as the “reset minimum quarterly distribution”), and the target distribution levels will be reset to correspondingly higher levels based on the same percentage increases above the reset minimum quarterly distribution amount.
In connection with resetting these target distribution levels, the Seadrill Member will be entitled to receive a number of common units equal to that number of common units whose aggregate quarterly cash distributions equaled the average of the distributions to the Seadrill Member on the incentive distribution rights in the prior two quarters. The Company anticipates that the Seadrill Member would exercise this reset right in order to facilitate acquisitions or internal growth projects that would not be sufficiently accretive to cash distributions per common unit without such conversion; however, it is possible that the Seadrill Member could exercise this reset election at a time when it is experiencing, or may be expected to experience, declines in the cash distributions it receives related to its incentive distribution rights and may therefore desire to be issued the Company's common units, rather than retain the right to receive incentive distributions based on the initial target distribution levels. As a result, a reset election may cause the Company's common unitholders to experience dilution in the amount of cash distributions that they would have otherwise received had the Company not issued additional common units to the Seadrill Member in connection with resetting the target distribution levels related to the Seadrill Member’s incentive distribution rights.


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The Company may issue additional equity securities, including securities senior to the common units, without the approval of the Company's unitholders, which would dilute the ownership interests of the Company's existing unitholders.
The Company may, without the approval of the Company's unitholders, issue an unlimited number of additional units or other equity securities. In addition, the Company may issue an unlimited number of units that are senior to the common units in right of distribution, liquidation and voting. The issuance by the Company of additional common units or other equity securities of equal or senior rank will have the following effects:
•
the Company's unitholders’ proportionate ownership interest in the Company will decrease;
•
the amount of cash available for distribution on each unit may decrease;
•
because a lower percentage of total outstanding units will be subordinated units, the risk that a shortfall in the payment of the minimum quarterly distribution will be borne by the Company's common unitholders will increase;
•
the relative voting strength of each previously outstanding unit may be diminished; and
•
the market price of the common units may decline.
Upon the expiration of the subordination period, the subordinated units will convert into common units and will then participate pro rata with other common units in distributions of available cash.
During the subordination period, the common units will have the right to receive distributions of available cash from operating surplus in an amount equal to the minimum quarterly distribution of $0.3875 per unit, plus any arrearages in the payment of the minimum quarterly distribution on the common units from prior quarters, before any distributions of available cash from operating surplus may be made on the subordinated units. Distribution arrearages do not accrue on the subordinated units. The purpose of the subordinated units is to increase the likelihood that during the subordination period there will be available cash from operating surplus to be distributed on the common units. Upon the expiration of the subordination period, the subordinated units will convert into common units and will then participate pro rata with other common units in distributions of available cash. The subordination period is not due to end until September 30, 2017 but may last longer until various other conditions are met.
In establishing cash reserves, the Company's board of directors may reduce the amount of cash available for distribution to the Company's unitholders.
The OPCO’s operating agreements provide that the Company's board of directors approves the amount of reserves from the OPCO’s cash flow that will be retained by OPCO to fund its future operating and capital expenditures. The Company's operating agreement requires the Company's board of directors to deduct from operating surplus cash reserves that it determines are necessary to fund the Company's future operating and capital expenditures. These reserves also affect the amount of cash available for distribution by OPCO to the Company, and by the Company to the Company's unitholders. In addition, the Company's board of directors may establish reserves for distributions on the subordinated units, but only if those reserves do not prevent the Company from distributing the full minimum quarterly distribution, plus any arrearages, on the common units for the following four quarters. As described above in “—Risks Inherent in The Company's Business— the Company must make substantial capital and operating expenditures to maintain the operating capacity of its fleet, which will reduce cash available for distribution. In addition, each quarter the Company is required to deduct estimated maintenance and replacement capital expenditures from operating surplus, which may result in less cash available to unitholders than if actual maintenance and replacement capital expenditures were deducted,” the Company's operating agreement requires the Company's board of directors each quarter to deduct from operating surplus estimated maintenance and replacement capital expenditures, as opposed to actual maintenance and replacement capital expenditures, which could reduce the amount of available cash for distribution. The amount of estimated maintenance and replacement capital expenditures deducted from operating surplus is subject to review and change by the Company's board of directors at least once a year, provided that any change must be approved by the conflicts committee of the Company's board of directors.

The Seadrill Member has a limited call right that may require the Company's common unitholders to sell their common units at an undesirable time or price.
If at any time the Seadrill Member and its affiliates own more than 80% of the common units, the Seadrill Member will have the right, which it may assign to any of its affiliates or to the Company, but not the obligation, to acquire all, but not less than all, of the common units held by unaffiliated persons at a price not less than the then-current market price of the Company's common units. The Seadrill Member is not obligated to obtain a fairness opinion regarding the value of the common units to be repurchased by it upon the exercise of this limited call right. As a result, the holders of the Company's common units may be required to sell their common units at an undesirable time or price and may not receive any return on their investment. Such common unitholders may also incur a tax liability upon a sale of their common units.
As of March 31, 2015 , Seadrill, which owns and controls the Seadrill Member, owned 34.9% of the Company's common units. At the end of the subordination period, assuming no additional issuances of common units and the conversion of the Company's subordinated units into common units, Seadrill would own 46.6% of the Company's common units.
The Company can borrow money to pay distributions, which would reduce the amount of credit available to operate the Company's business.
The Company's operating agreement allows the Company to make working capital borrowings to pay distributions. Accordingly, if the Company has available borrowing capacity, the Company can make distributions on all the Company's units even though cash generated by the Company's operations may not be sufficient to pay such distributions. Any working capital borrowings by the Company to make distributions will reduce the amount of working capital borrowings the Company can make for operating the Company's business. For more information, please read Item 5 “Operating and Financial Review and Prospects—Liquidity and Capital Resources.”

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Increases in interest rates may cause the market price of the Company's common units to decline.
An increase in interest rates may cause a corresponding decline in demand for equity investments in general, and in particular for yield-based equity investments such as the Company's common units. Any such increase in interest rates or reduction in demand for the Company's common units resulting from other relatively more attractive investment opportunities may cause the trading price of the Company's common units to decline.
Unitholders may have liability to repay distributions.
Under some circumstances, unitholders may have to repay amounts wrongfully returned or distributed to them. Under the Marshall Islands Act, the Company may not make a distribution to the Company's unitholders if the distribution would cause the Company's liabilities to exceed the fair value of the Company's assets. The Marshall Islands Act provides that for a period of three years from the date of the impermissible distribution, members who received the distribution and who knew at the time of the distribution that it violated the Marshall Islands Act will be liable to the limited liability company for the distribution amount. Assignees who become substituted members are liable for the obligations of the assignor to make contributions to the company that are known to the assignee at the time it became members and for unknown obligations if the liabilities could be determined from the operating agreement. Liabilities to members on account of their limited liability company interest and liabilities that are non-recourse to the company is not counted for purposes of determining whether a distribution is permitted.
The Company has been organized as a limited liability company under the laws of the Republic of the Marshall Islands, which does not have a well-developed body of limited liability company law.
The Company's limited liability company affairs are governed by the Company's operating agreement and by the Marshall Islands Act. The provisions of the Marshall Islands Act resemble provisions of the limited liability company laws of a number of states in the United States, most notably Delaware. The Marshall Islands Act also provides that it is to be applied and construed to make it uniform with the Delaware Limited Liability Company Act and, so long as it does not conflict with the Marshall Islands Act or decisions of the Marshall Islands courts, interpreted according to the non-statutory law (or case law) of the State of Delaware. There have been, however, few, if any, court cases in the Marshall Islands interpreting the Marshall Islands Act, in contrast to Delaware, which has a fairly well-developed body of case law interpreting its limited liability company statute. Accordingly, the Company cannot predict whether Marshall Islands courts would reach the same conclusions as the courts in Delaware. For example, the rights of the Company's unitholders and the duties of the Seadrill Member and the Company's directors and officers under Marshall Islands law are not as clearly established as under judicial precedent in existence in Delaware. As a result, unitholders may have more difficulty in protecting their interests in the face of actions by the Seadrill Member and the Company's officers and directors than would unitholders of a similarly organized limited liability company in the United States.
Because the Company is organized under the laws of the Marshall Islands, it may be difficult to serve the Company with legal process or enforce judgments against the Company, the Company's directors or the Company's management.
The Company is organized under the laws of the Marshall Islands, and substantially all of the Company's assets are located outside of the United States. In addition, the Seadrill Member is a Marshall Islands limited liability company, and the Company's directors and officers generally are or will be non-residents of the United States, and all or a substantial portion of the assets of these non-residents are located outside the United States. As a result, it may be difficult or impossible for you to bring an action against the Company or against these individuals in the United States if you believe that your rights have been infringed under securities laws or otherwise. Even if you are successful in bringing an action of this kind, the laws of the Marshall Islands and of other jurisdictions may prevent or restrict you from enforcing a judgment against the Company's assets or the assets of the Seadrill Member or the Company's directors or officers.
Tax Risks
In addition to the following risk factors, you should read Item 4 “Information on the Company—Business Overview—Taxation of the Company,” and Item 10 “Additional Information—Taxation” for a more complete discussion of the expected material U.S. federal and non-U.S. income tax considerations relating to the Company and the ownership and disposition of the Company's common units.

The Company will be subject to taxes, which will reduce the Company's cash available for distribution to the Company's unitholders.
Some of the Company's subsidiaries will be subject to tax in the jurisdictions in which they are organized or operate, reducing the amount of cash available for distribution. In computing the Company's tax obligation in these jurisdictions, the Company is required to take various tax accounting and reporting positions on matters that are not entirely free from doubt and for which the Company has not received rulings from the governing authorities. The Company cannot assure you that upon review of these positions the applicable authorities will agree with the Company's positions. A successful challenge by a tax authority could result in additional tax imposed on the Company's subsidiaries, further reducing the cash available for distribution. In addition, changes in the Company's operations could result in additional tax being imposed on the Company or its subsidiaries in jurisdictions in which operations are conducted. Please read Item 4 “Information on the Company—Business Overview—Taxation of the Company.”

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A change in tax laws in any country in which the Company operates could result in higher tax expense.
The Company conducts its operations through various subsidiaries. Tax laws and regulations are highly complex and subject to interpretation. Consequently, the Company is subject to changing tax laws, treaties and regulations in and between countries in which the Company operates. The Company's income tax expense is based on the Company's interpretation of the tax laws in effect at the time the expense was incurred. A change in tax laws, treaties or regulations, or in the interpretation thereof, could result in a materially higher tax expense or a higher effective tax rate on the Company's earnings.
The Company files periodic tax returns that are subject to review and audit by various revenue agencies in the jurisdictions in which the Company operates. Taxing authorities may challenge any of the Company's tax positions, at which time the Company will contest such assessments where the Company believes the assessments are in error. Determinations by such authorities that differ materially from the Company's recorded estimates, favorably or unfavorably, may have a material impact on the Company's results of operations, financial position or cash available for distribution.
A loss of a major tax dispute or a successful tax challenge to the Company's operating structure, intercompany pricing policies or the taxable presence of the Company's subsidiaries in certain countries could result in a higher tax rate on the Company's worldwide earnings, which could result in a significant negative impact on the Company's earnings and cash flows from operations.
The Company's income tax returns are subject to review and examination. The Company does not recognize the benefit of income tax positions the Company believes are more likely than not to be disallowed upon challenge by a tax authority. If any tax authority successfully challenges the Company's operational structure, intercompany pricing policies or the taxable presence of the Company's subsidiaries in certain countries; or if the terms of certain income tax treaties are interpreted in a manner that is adverse to the Company's structure; or if the Company loses a material tax dispute in any country, the Company's effective tax rate on the Company's worldwide earnings could increase substantially and the Company's earnings and cash flows from operations could be materially adversely affected.
U.S. tax authorities could treat the Company as a “passive foreign investment company,” which would have adverse U.S. federal income tax consequences to U.S. unitholders.
A non-U.S. entity treated as a corporation for U.S. federal income tax purposes will be treated as a “passive foreign investment company,” or PFIC, for U.S. federal income tax purposes if at least 75% of its gross income for any taxable year consists of “passive income” or at least 50% of the average value of its assets for any taxable year produce, or are held for the production of, “passive income.” For purposes of these tests, “passive income” includes dividends, interest, gains from the sale or exchange of investment property, and rents and royalties other than rents and royalties that are received from unrelated parties in connection with the active conduct of a trade or business. For purposes of these tests, income derived from the performance of services does not constitute “passive income.” U.S. unitholders of a PFIC are subject to a disadvantageous U.S. federal income tax regime with respect to the income derived by the PFIC, the distributions they receive from the PFIC, and the gain, if any, they derive from the sale or other disposition of their interests in the PFIC.
Based on the Company's current and projected method of operation, the Company believes that it was not a PFIC for the Company's 2014 taxable year, and the Company expects that the Company will not be treated as a PFIC for the current or any future taxable year. The Company expects that more than 25% of the Company's gross income for the Company's 2014 taxable year arose and for the current and each future year will arise from such drilling contracts or other income that the Company believes should not constitute passive income, and more than 50% of the average value of the Company's assets for each such year will be held for the production of such nonpassive income. Assuming the composition of the Company's income and assets is consistent with these expectations, the Company believes that the Company should not be a PFIC for the Company's 2014 taxable year or the Company's current or any future year.
The conclusions that the Company has reached are not free from doubt and the U.S. Internal Revenue Service, or IRS, or a court could disagree with the Company's position. In addition, although the Company intends to conduct the Company's affairs in a manner to avoid, to the extent possible, being classified as a PFIC with respect to any taxable year, the Company cannot assure you that the nature of the Company's operations will not change in the future or that the Company will not be a PFIC in the future. If the IRS were to find that the Company is or has been a PFIC for any taxable year (and regardless of whether the Company remains a PFIC for any subsequent taxable year), the Company's U.S. unitholders would face adverse U.S. federal income tax consequences. Please read Item 10 “Additional Information—Taxation—Material U.S. Federal Income Tax Considerations—U.S. Federal Income Taxation of U.S. Holders—PFIC Status and Significant Tax Consequences” for a more detailed discussion of the U.S. federal income tax consequences to U.S. unitholders if the Company is treated as a PFIC.


Item 4.         Information on the Company

A.     History and Development of the Company
General
Seadrill Partners, LLC is a publicly traded limited liability company formed on June 28, 2012 as a wholly owned subsidiary of Seadrill Limited. In connection with the Company's IPO in October 2012, the Company acquired (i) a 30% limited partner interest in Seadrill Operating LP, as well as the non-economic general partner interest in Seadrill Operating LP through the Company's 100% ownership of its general partner, Seadrill Operating GP LLC, and (ii) a 51% limited liability company interest in Seadrill Capricorn Holdings LLC. Immediately following the Company's IPO, Seadrill Operating LP owned (i) a 100% interest in the entities that own the West Aquarius and the West Vencedor and (ii) an approximate

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56% interest in the entity that owns and operates the West Capella . In addition, immediately following the Company's IPO, Seadrill Capricorn Holdings LLC owned 100% of the entities that own and operate the West Capricorn .
During the year ended December 31, 2013, the Company acquired from Seadrill (i) a 100% interest in two tender rigs, the T-15 and the T-16 , which the Company owns through its wholly owned subsidiary Seadrill Partners Operating LLC, (ii) a 51% indirect interest in the semi-submersible drilling rig the West Sirius , which the Company owns through Seadrill Capricorn Holdings LLC and (iii) a 30% indirect interest in the semi-submersible drilling rig, the West Leo , which the Company owns through Seadrill Operating LP.
As of January 2, 2014, the date of the date of the Company’s first annual general meeting, Seadrill ceased to control the Company as defined by generally accepted accounting principles in the United States, or GAAP, and, therefore, Seadrill Partners and Seadrill are no longer deemed to be entities under common control. As such, acquisitions by the Company from Seadrill subsequent to this date are no longer accounted for as transactions between parties under common control.

During the year ended December 31, 2014, the Company acquired from Seadrill (i) a 51% indirect interest in two drillships, the West Auriga and West Vela , which the Company owns through Seadrill Capricorn Holdings LLC, and (ii) an additional 28% limited partner interest in Seadrill Operating LP, bringing its total ownership in Seadrill Operating LP to 58%.

The Company listed its common units on the New York Stock Exchange in October 2012 under the ticker symbol “SDLP.”
The Company was formed under the laws of the Marshall Islands and maintain the Company's principal executive headquarters at 2nd Floor, Building 11, Chiswick Business Park, 566 Chiswick High Road, London, W4 5YS, United Kingdom. The Company's telephone number at that address is +44 20 8811 4700. The Company's agent for service of process in the United States is Watson, Farley & Williams LLP and its address is 1133 Avenue of the Americas New York, New York 10036.

B.     Business Overview
General
The Company is a growth-oriented limited liability company formed on June 28, 2012 by Seadrill Limited (NYSE: SDRL) to own, operate and acquire offshore drilling units. The Company's drilling units are under long-term contracts with major oil companies such as Chevron, BP, ExxonMobil and Tullow with an average remaining term of 2.9 years as of March 31, 2015 . The Company intends to grow the Company's position in the offshore drilling market by continuing to provide excellent service to these customers with the Company's modern, technologically advanced fleet. The Company also intends to leverage the relationships, expertise and reputation of Seadrill to re-contract the Company’s fleet under long-term contracts and to identify opportunities to expand the Company's fleet through acquisitions. Seadrill is one of the world’s largest international offshore drilling contractors, and the Company believes Seadrill is, and will continue to be, motivated to facilitate the Company's growth because of its significant ownership interest in the Company.
The Company’s fleet as at March 31, 2015 consisted of:
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the semi-submersible West Aquarius , which was delivered from the shipyard in 2009 and is under a drilling contract with ExxonMobil that expires in April 2017;
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the semi-submersible West Capricorn , which was delivered from the shipyard at the end of 2011 and is under a drilling contract with BP that expires in July 2019;
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the semi-submersible West Leo , which was delivered from the shipyard in 2012 and commenced operations under a 5-year drilling contract with Tullow that expires in May 2018;
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the semi-submersible West Sirius , which was delivered from the shipyard in 2008 and has a drilling contract with BP which has been terminated early and is expected to end in May 2015;
•
the semi-tender West Vencedor , which was delivered from the shipyard in early 2010 and is under a drilling contract with Chevron that is expected to end in May 2015;
•
the tender rig T-15 , which was delivered from the shipyard in 2013 and commenced operations under a 5-year drilling contract with Chevron that expires in July 2018;
•
the tender rig T-16 , which was delivered from the shipyard in 2013 and commenced operations under a 5-year drilling contract with Chevron that expires in August 2018;
•
the drillship West Auriga , which was delivered from the shipyard in 2013 and commenced operations under a drilling contract with BP that expires in October 2020;
•
the drillship West Vela , which was delivered from the shipyard in 2013 and commenced operations under a drilling contract with BP that expires in November 2020; and,
•
the drillship West Capella , which was delivered from the shipyard in 2008 and is under a drilling contract with ExxonMobil that expires in April 2017.
For more information about the Company's fleet, including the Company's ownership interests in each of the drilling units, please see " - Fleet and Customers" below.
Business Strategies
The Company's primary business objective is to increase the quarterly cash distributions to the Company's unitholders over time. The Company intends to accomplish this objective by executing the following strategies:
•
Grow Through Strategic and Accretive Acquisitions . The Company intends to capitalize on opportunities to grow the Company's fleet of drilling units through acquisitions of offshore drilling units from Seadrill, either by the Company or by OPCO, and acquisitions of offshore drilling units from third parties. The Company will have opportunities, pursuant to the omnibus agreement, to acquire additional interests in OPCO and certain of Seadrill’s other drilling units with drilling contracts of five or more years.
•
Pursue Long-term Contracts and Maintain Stable Cash Flow . The Company seeks to maintain stable cash flows by continuing to pursue long-term contracts. The Company's focus on long-term contracts improves the stability and predictability of the Company's operating cash flows, which the Company believes will enable the Company to access equity and debt capital markets on attractive terms and, therefore, facilitate the Company's growth strategy.
•
Provide Excellent Customer Service and Continue to Prioritize Safety as a Key Element of The Company's Operations . The Company believes that Seadrill has developed a reputation as a preferred offshore drilling contractor and that the Company can capitalize on this reputation by continuing to provide excellent customer service. The Company seeks to deliver exceptional performance to the Company's customers by consistently meeting or exceeding their expectations for operational performance, including by maintaining high safety standards and minimizing downtime.
•
Maintain a Modern and Reliable Fleet . The Company has one of the youngest and most technologically advanced fleets in the industry, and plans to maintain a modern and reliable fleet.
The Company can provide no assurance, however, that the Company will be able to implement its business strategies described above. particularly in the current challenging low oil price market environment.

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For further discussion of the risks that the Company faces, please read “Item 3—Key Information—Risk Factors”.

Offshore Drilling Industry
The offshore drilling industry provides drilling, workover and well construction services to oil and gas exploration and production, or E&P, companies using jack-up rigs, tender rigs, semi-submersible rigs, drillships and other types of drilling units. Although terminology can differ across the industry, the depths at which offshore drilling units operate can be generally divided into four categories: ultra-deepwater, deepwater, midwater and shallow water. The Company generally considers ultra-deepwater to be depths of between 7,500 feet and 12,000 feet. The Company considers deepwater to cover depths between 4,500 and 7,500 feet, midwater to cover depths between 500 and 4,500 feet and shallow water to cover depths less than 500 feet.
E&P companies generally contract with drilling companies through agreements that set forth the contractual rate to be received each day, which is referred to as the dayrate. These rates generally cover chartering and operational services associated with the drilling unit and vary based on the type of rig contracted, the geographic location of the well, the duration of the work, the amount and type of service provided, market conditions and other variables. Contracts are entered into through various procedures including private and public tenders, market inquiries and requests for proposals. A dayrate drilling contract generally covers either the drilling of a single well or group of wells or has a stated term. Contracts may also grant the customer renewal options at either a fixed dayrate or at a rate to be determined based on market conditions at the time of exercise of the renewal option.
The dayrates that E&P companies are willing to pay also depend on the supply of and demand for offshore rigs as well as the outlook for investment in the exploration and development of oil and gas reservoirs, which in turn is affected by forecasts of oil and gas prices, the availability of acreage for exploration and the cash flow of E&P companies. These related matters are, in turn, affected by various political and economic factors, such as global production levels, government policies, political stability in oil producing countries, particularly in OPEC nations, and prices of alternative energy sources, among others.

Types of Offshore Drilling Units
Offshore drilling units are generally divided into four main categories of rigs:
Jack-Up Rig Jack-up rigs are mobile, self-elevating drilling platforms equipped with legs that are lowered to the ocean floor. A jack-up rig is either towed to the drill site with its hull riding in the sea as a vessel, or transported on the back of a heavy lift vessel, with 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, the legs are raised and the rig can be relocated to another drill site. Jack-ups generally operate with crews of 40 to 60 people.
Tender Rig 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 self-erecting 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 Rig Semi-submersible drilling rigs (which include cylindrical designed units) consist of an upper working and living quarters deck connected to a lower hull, such as columns and 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.
Drillship 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.

Market Overview
We provide operations in oil and gas exploration and development in regions throughout the world and our customers include major oil and gas companies, state-owned national oil companies and independent oil and gas companies. Our customers have experienced a significant decline in oil prices and have reduced near term capital expenditures. As a result, the offshore drilling market is encountering a significant reduction in demand.


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Global Offshore Drilling Rig Fleet
The global fleet of offshore drilling units consists of drillships, semi-submersible rigs, jack-up rigs and tender rigs. The existing world-wide fleet as at March 20, 2015 totals 899 units including 118 drillships, 198 semi-submersible rigs, 544 jack-up rigs and 39 tender rigs. In addition, there are 56 drillships, 128 jack-up rigs, 30 semi-submersible rigs and 9 tender rigs under construction. The water depth capacities for the various drilling rig types depend on rig specifications, capabilities and equipment outfitting. Jack-up rigs normally work in water depths up to 450ft while semi-submersible rigs and drillships can work in water depths up to 12,000ft and tender rigs work in water depths up to 410ft for tender barges and up to 6,000ft for semi-tenders. All offshore rigs are capable of working in benign environment but there are certain additional requirements for rigs to operate in harsh environments due to extreme marine and climatic conditions, as well as, temperatures. The number of units outfitted for such operations are limited and the present number of rigs operating in harsh environment totals 43 units.

Semi-Submersibles and Drillships
The world fleet of semi-submersible rigs and drillships totals 316 units as of March 20, 2015. In addition, there are 86 units under construction, 30 semi-submersible rigs and 56 drillships. Of the total fleet, 131 units were built before 1998. These units are mainly moored units and have an average age of 33 years. For the existing 185 rigs built after 1998, the majority have been outfitted with thrusters allowing for dynamic positioning. 29 of the 185 units are capable of operations in water depths up to 7,500ft and 156 of the 185 units are capable of operations in ultra-deep waters (waters deeper than 7,500ft).
 
Until recently, higher oil prices and an improved economic outlook have spurred a higher activity level from oil companies that increased the demand for ultra-deepwater units resulting in renewed interest for construction of further new ultra-deepwater units, and increased dayrates. As a result of the recent decline in oil prices and substantial reductions or planned reductions in oil company capital spending levels, the offshore drilling market is currently entering its second year of a downturn. Approximately one quarter of ultra-deepwater floaters will become available in 2015, a third of which are newbuilds that are yet to be delivered. Based on this available capacity, significant delays or cancellation of newbuild projects are expected. New tendering activity remains subdued as oil companies set their budgets at materially lower levels than seen in recent years. Rig owners are bidding for available work extremely competitively with a focus on utilization over returns, which will likely drive rates down to or below cash breakeven levels.

Tender Rigs
As at March 20, 2015 there are 39 self-erecting tender rigs globally. In addition there are 9 units under construction. Out of the 39 delivered rigs, 28 are barges and 11 are semi-submersibles (semi-tenders). There are 6 barges and 3 semi-tenders under construction. The main markets for tender rigs are West Africa and Southeast Asia, employing 26% and 59% of tender rigs respectively. The daily rate for tender rigs depends on country, region, water depth, capabilities, technical specification, contract length and overall contract terms.
The above overview of the various offshore drilling sectors is based on previous market developments and current market conditions. Future markets conditions and developments cannot be predicted and may well differ from the Company's current expectations.

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Fleet and Customers
The following table provides additional information about OPCO’s fleet as of March 31, 2015 :
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Current Contract
Rig Name
Seadrill Partners Ownership Interest
 
Year Built
 
Water
Depth
(feet)
 
Drilling
Depth
(feet)
 
Location
 
Customer
 
Start
 
Expire
 
Dayrate
(US$)
Semi-submersible
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
West Aquarius
58%
 
2009
 
10,000

 
35,000

 
Canada
 
ExxonMobil/Hibernia Management (1)
 
January 2013
 
October 2015
 
$ 540,000 (2)

 
 
 
 
 
 
 
 
 
Canada
 
ExxonMobil/Hibernia Management (1)
 
October 2015
 
April 2017
 
$
615,000

West Capricorn
51%
 
2011
 
10,000

 
35,000

 
USA (Gulf of Mexico)
 
BP
 
July 2012
 
April 2015
 
$ 495,000 (3)

 
 
 
 
 
 
 
 
 
USA (Gulf of Mexico) (4)
 
BP (4)
 
April 2015 (4)
 
July 2019 (4)
 
$ 535,000 (4)

West Leo
58%
 
2012
 
10,000

 
35,000

 
Ghana
 
Tullow
 
June 2013
 
July 2018
 
$ 605,000 (5)(6)

West Sirius (7)
51%
 
2008
 
10,000

 
35,000

 
USA (Gulf of Mexico)
 
BP
 
July 2014
 
April 2015
 
$
535,000

 
 
 
 
 
 
 
 
 
USA (Gulf of Mexico)
 
BP
 
April 2015 (4)
 
May 2015 (4)
 
495,000 (4)

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Drillship
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
West Capella (8)
33%
 
2008
 
10,000

 
35,000

 
Nigeria
 
ExxonMobil
 
April 2014
 
April  2017
 
$
627,500

West Auriga
51%
 
2013
 
12,000

 
40,000

 
USA (Gulf of Mexico)
 
BP
 
October 2013
 
October 2020
 
$ 565,000 (9)

West Vela
51%
 
2013
 
12,000

 
40,000

 
USA (Gulf of Mexico)
 
BP
 
November 2013
 
November 2020
 
$ 525,000 (10)

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Tender Rig
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
West Vencedor
58%
 
2010
 
6,500

 
30,000

 
Angola
 
Chevron
 
March 2010
 
May 2015
 
$ 212,000 (11)

T-15
100%
 
2013
 
6,500

 
30,000

 
Thailand
 
Chevron
 
July 2013
 
July 2018
 
$
127,000

T-16
100%
 
2013
 
6,500

 
30,000

 
Thailand
 
Chevron
 
August 2013
 
August 2018
 
$
127,000


(1)
On November 27, 2013 , the Company signed an 18-month extension on the drilling contract with Hibernia Management and Development Company following a settlement agreement reached for 37 days of non-payment during the mobilization period.
(2)
Dayrate includes a mobilization fee of $30 million that will be amortized over the contract period.
(3)
Excludes approximately $55,167 per day payable by the customer over the initial term of the contract related to mobilization, blow out preventor modification, variation orders and other special and standby rates.
(4)
Reflects dayrate and term swap for the West Sirius and the West Capricorn . Under the terms of the West Sirius termination, BP pay a termination fee of $297,000 per day from May 2015 until July 2017.
(5)
The base dayrate is $590,000 for operations in Ghana and will be adjusted for operations in Côte d’Ivoire and Guinea. The dayrate shown above for Ghana includes a performance bonus based on achievement of 95% utilization.
(6)
A mobilization fee of $18 million will be amortized into income over the period of the term of this contract.
(7)
BP notified the Company that it was terminating the West Sirius contract, upon completion of the current well and demobilization, which the Company estimates to be by early May 2015. Commencing April 1, 2015, the West Sirius will swap terms and dayrates with the West Capricorn and receive $495,000 per day until completion of the current well and demobilization. In accordance with the termination provisions in the West Sirius contract, the Company will receive a termination fee of $297,000 per day from May 2015 to July 2017.
(8)
The Company owns 58% of Seadrill Operating LP, which controls and owns 56% of the entity that owns the West Capella . Pursuant to Nigerian law, a Nigerian partner owns an effective 1% interest in the West Capella . Seadrill owns the remaining ownership interest in the entity that owns the West Capella .

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(9)
A mobilization fee payable daily over the term of the contract of $37.5 million will be amortized into income over the period of the term of this contract.
(10)
A mobilization fee payable daily over the term of the contract of $37.5 million will be amortized into income over the period of the term of this contract. This amount is payable to Seadrill for the remainder of the contract under the terms of the West Vela acquisition agreement.
(11)
The current contract expires in May 2015. After the well is completed, all third party equipment is offloaded and the unit has left the concession block, the Company will receive a lump sum de-mobilization payment of $8.5 million after which the contract will be complete.


Contract Backlog
The Company’s drilling units are contracted to customers for an average remaining term of 2.9  years as of March 31, 2015 . Backlog is calculated as the full operating dayrate multiplied by the number of days remaining on the contract, assuming full utilization. Backlog excludes revenues for mobilization and demobilization, contract preparation, and customer reimbursables. Backlog also includes, in the case of contracts for which we have received a notice of termination, an amount equal to the termination fee per day multiplied by the number of days for which the termination fee is payable under the terms of the contract. The actual amounts of revenues earned and the actual periods during which revenues are earned may differ from the backlog amounts and periods shown in the table below due to various factors, including shipyard and maintenance projects, downtime and other factors. Downtime, caused by unscheduled repairs, maintenance, weather and other operating factors, may result in lower applicable dayrates than the full contractual operating dayrate.
In addition, the Company’s contracts provide for termination at the election of the customer with an “early termination payment” to be paid to the Company if a contract is terminated prior to the expiration of the fixed term. However, under certain limited circumstances, such as destruction of a drilling unit, the Company’s bankruptcy, sustained unacceptable performance by the Company or delivery of a rig beyond certain grace and/or liquidated damages periods, no early termination payment would be paid. Accordingly, if one of these events were to occur, the actual amount of revenues earned may be substantially lower than the backlog reported.
The Company’s contract backlog as of March 31, 2015 totals $ 5.2 billion and is as follows:
 
Rig
Contracted
Location
 
Customer
 
Contract
Backlog(1)
(US $ millions)
 
Contractual
Dayrate
(US $)
 
Actual/Expected
Contract
Commencement
 
Contract
Termination
Date
West Aquarius
Canada
 
ExxonMobil / Hibernia Management
 
$
111

 
$
540,000

 
Jan 2013
 
Oct 2015
 
Canada
 
ExxonMobil / Hibernia Management
 
$
331

 
$
615,000

 
Oct 2015
 
Apr 2017
West Capricorn(2)
USA
 
BP
 
$
1

 
$
495,000

 
Jul 2012
 
Apr 2015
 
USA
 
BP
 
$
830

 
$
535,000

 
Apr 2015
 
Jul 2019
West Leo
Ghana
 
Tullow
 
$
719

 
$
605,000

 
Jun 2013
 
Jul 2018
West Sirius(3)
USA
 
BP
 
$
1

 
$
535,000

 
Jul 2014
 
Apr 2015
 
USA
 
BP
 
$
15

 
$
495,000

 
Apr 2015
 
May 2015
 
USA
 
BP
 
$
235

 
$
297,000

 
(3)
 
(3)
West Capella
Nigeria
 
Total
 
$
455

 
$
627,500

 
Apr 2014
 
Apr 2017
West Auriga
USA
 
BP
 
$
1,131

 
$
565,000

 
Oct 2013
 
Oct 2020
West Vela
USA
 
BP
 
$
1,073

 
$
525,000

 
Nov 2013
 
Nov 2020
West Vencedor (4)
Angola
 
Chevron
 
$
—

 
$
212,000

 
Mar 2010
 
May 2015
T15
Thailand
 
Chevron
 
$
150

 
$
127,000

 
Jul 2013
 
Jul 2018
T16
Thailand
 
Chevron
 
$
154

 
$
127,000

 
Aug 2013
 
Aug 2018
(1)
Expressed in millions. Based on executed drilling contracts.
(2)
BP has an option to extend the expiration date of the contract for up to two years from July 2019.
(3)
The signed drilling contract was terminated by BP, which we expect will take effect in May 2015. Commencing April 1, 2015, the West Sirius will swap terms and dayrate with the West Capricorn and receive $495,000 per day until completion of the current well and demobilization . The backlog of $235.2 million consists of $297,000 per day from May 2015 until July 2017, to be received by the Company i n accordance with the termination provisions in the West Sirius contract . The average remaining contract term of 2.9 years as of March 31, 2015 for the fleet does not include this period for the West Sirius .
(4)
After the current well is completed, and all third party equipment is offloaded and the unit has left the concession block, the Company will receive a lump sum de-mobilization payment of $8.5 million at which the contract will be complete.


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Drilling Contracts
The Company provides drilling services on a “dayrate” contract basis. The Company does not provide “turnkey” or other risk-based drilling services to the customer. Under dayrate contracts, the drilling contractor provides a drilling unit and rig crews and charges the customer a fixed amount per day regardless of the number of days needed to drill the well. The customer bears substantially all of the ancillary costs of constructing the well and supporting drilling operations, as well as the economic risk relative to the success of the well. In addition, dayrate contracts usually provide for a lump sum amount or dayrate for mobilizing the rig to the initial operating location, which is usually lower than the contractual dayrate for uptime services, and a reduced dayrate when drilling operations are interrupted or restricted by equipment breakdowns, adverse weather conditions or other conditions beyond the contractor’s control. A dayrate drilling contract generally covers either the drilling of a single well or a number of wells or has a stated term regardless of the number of wells. These contracts may generally be terminated by the customer in the event the drilling unit is destroyed or lost or if drilling operations are suspended for an extended period of time as a result of a breakdown of equipment, “force majeure” events beyond the control of either party or upon the occurrence of other specified conditions. In some instances, the dayrate contract term may be extended by the customer exercising options for the drilling of additional wells or for an additional length of time at fixed or mutually agreed terms, including dayrates.
The Company’s drilling contracts are the result of negotiations with its customers. The Company’s existing drilling contracts generally contain, among other things, the following commercial terms: (i) contract duration extending over a specific period of time; (ii) term extension options in favor of its customer, generally upon advance notice to the Company, at mutually agreed, indexed or fixed rates; (iii) provisions permitting early termination of the contract if the drilling unit is lost or destroyed, if operations are suspended for an extended period of time due to breakdown of major rig equipment or “force majeure” events beyond the Company’s control and the control of the customer; (iv) provisions allowing early termination of the contract by the customer without cause with a specified early termination fee in the form of a reduced rate for a specified period of time; (v) payment of compensation to the Company (generally in U.S. Dollars although some contracts require a portion of the compensation to be paid in local currency) on a dayrate basis (lower rates or no compensation generally apply during periods of equipment breakdown and repair or in the event operations are suspended or interrupted by other specified conditions, some of which may be beyond the Company’s control); (vi) payment by the Company of the operating expenses of the drilling unit, including crew labor and incidental rig supply costs; (vii) provisions entitling the Company to adjustments of dayrates (or revenue escalation payments) in accordance with published indices or otherwise; (viii) provisions requiring the Company or Seadrill to provide a performance guarantee; (ix) indemnity provisions between the Company and its customers in respect of third-party claims and risk allocations between the Company and its customers relating to damages, claims or losses to the Company, its customers, or third parties; and (x) provisions permitting the assignment to a third party with the Company’s prior consent, such consent not to be unreasonably withheld. The Company’s indemnification may not cover all damages, claims or losses to the Company or third parties, and the indemnifying party may not have sufficient resources to cover its indemnification obligations.
See also Item 3 “Key Information—Risk Factors—Risks Inherent in The Company's Business—the Company’s customers may be unable or unwilling to indemnify the Company.” In addition, the Company’s drilling contracts typically provide for situations where the drilling unit would operate at reduced operating dayrates. See Item 5 “Operating and Financial Review and Prospects—Important Financial and Operational Terms and Concepts—Economic Utilization.”
Joint Venture, Agency and Sponsorship Relationships
In some areas of the world, local customs and practice or governmental requirements necessitate the formation of joint ventures with local participation. Local laws or customs in some areas of the world also effectively mandate establishment of a relationship with a local agent or sponsor. When appropriate in these areas, the Company will enter into agency or sponsorship agreements. For more information regarding the regulations in the countries in which the Company currently are contracted to operate, please see “—Environmental and Other Regulations in the Offshore Drilling Industry.”
Nigerian investors have invested in a subsidiary of Seadrill Operating LP. The entity is fully controlled and approximately 56% owned by Seadrill Operating LP, resulting in the Nigerian joint venture partner owning an effective 2% interest in the West Capella . Seadrill owns the remaining ownership interest in the joint venture. The joint venture agreement provides the joint venture partner with the right to purchase up to an approximate effective 25% interest in the West Capella at a fair market value price over the course of five years, subject to additional mutually agreed upon terms. Any such purchase is expected to be from Seadrill’s ownership interest and not from Seadrill Operating LP.
Seasonality
In general, seasonal factors do not have a significant direct effect on the Company’s business. The Company has operations in certain parts of the world where weather conditions during parts of the year could adversely impact the operation of its rigs, but generally such operational interruptions do not have a significant impact on the Company’s revenues. Please read “—Drilling Contracts.” Such adverse weather could include the hurricane season for the Company’s operations in the U.S. Gulf of Mexico.
Customers
Offshore exploration and production is a capital intensive, high-risk industry. Operating and pursuing opportunities in deepwater basins significantly increases the amount of capital required to effectively conduct such operations. As a result, a significant number of operators in this segment of the offshore exploration and production industry are either national oil companies, major oil and gas companies or well-capitalized large independent oil and gas companies. The Company’s current customers are BP, Chevron, ExxonMobil and Tullow. For the year ended December 31, 2014 ExxonMobil(*) accounted for 26.4% , Chevron accounted for 14.7% , BP accounted for 41.5% , and Tullow accounted for 17.4% of the Company’s total revenues, respectively. (* During 2013 and 2014 the ExxonMobil drilling contract was assigned to Hibernia Management and Development Co. Ltd and Statoil Canada Ltd.).

Competition

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The offshore drilling industry is highly competitive, with market participants ranging from large multinational companies to smaller companies with fewer than five drilling units.
The demand for offshore drilling services is driven by oil and gas companies’ exploration and development drilling programs. These drilling programs are affected by oil and gas companies’ expectations regarding oil and gas prices, anticipated production levels, worldwide demand for oil and gas products and many other factors. The availability of quality drilling prospects, exploration success, availability of qualified rigs and operating personnel, relative production costs, availability and lead time requirements for drilling and production equipment, the stage of reservoir development and political and regulatory environments also affect customers’ drilling programs. Oil and gas prices are volatile, which has historically led to significant fluctuations in expenditures by customers for drilling services. Variations in market conditions impact the Company in different ways, depending primarily on the length of drilling contracts in different markets. Short-term changes in these markets may have a minimal short-term impact on revenues and cash flows, unless the timing of contract renewals coincides with short-term movements in the market.
Offshore drilling contracts are generally awarded on a competitive bid basis or through privately negotiated transactions. In determining which qualified drilling contractor is awarded a contract, the key factors are pricing, rig availability, rig location, condition and integrity of equipment, their record of operating efficiency, including high operating uptime, technical specifications, safety performance record, crew experience, reputation, industry standing and customer relations.
Competition for offshore drilling units, particularly submersible semi-tenders and drillships, is generally on a global basis, as rigs are highly mobile. However, the cost associated with mobilizing rigs between regions is sometimes substantial, as entering a new region could necessitate modifications of the drilling unit and its equipment to specific regional requirements.
The Company believes that the market for drilling contracts will continue to be highly competitive for the foreseeable future. The Company believes that the Company’s fleet of recently constructed technologically advanced drilling units provides it with a competitive advantage over competitors with older fleets, as the Company’s drilling units are generally better suited to meet the requirements of customers for drilling in deepwater. However, certain competitors may have greater financial resources than the Company does, which may enable them to better withstand periods of low utilization, and compete more effectively on the basis of price.
Principal Suppliers
The Company sources the equipment used on its drilling units from well-established suppliers, including: Cameron International Corp. and National Oilwell Varco, Inc., or NOV, each of which supply blowout preventers, and, with respect to NOV, top drives (the device used to turn the drillstring, which is a combination of devices that turn the drill bit), drawworks (the hoisting mechanism on a drilling unit) and other significant drilling equipment; Kongsberg Gruppen, which supplies dynamic positioning systems; Aker-MH AS, which supplies drilling software as well as top drives and drawworks; Rolls Royce, which supplies thrusters; and Caterpillar Inc., which supplies cranes.
In addition, each of the Company’s customers are responsible for providing the fuel to be used by the drilling unit that it contracts from the Company, at such customer’s cost.
Risk of Loss and Insurance
The Company’s operations are subject to hazards inherent in the drilling of oil and gas wells, including blowouts and well fires, which could cause personal injury, suspend drilling operations, destroy the equipment involved or cause serious environmental damage. Offshore drilling contractors such as the Company are also subject to hazards particular to marine operations, including capsizing, grounding, collision and loss or damage from severe weather. The Company’s marine insurance package policy provides insurance coverage for physical damage to the Company’s drilling units, loss of hire for some of its rigs and third-party liability.
The Company’s insurance claims are subject to a deductible, or non-recoverable, amount. The Company currently maintains a deductible per occurrence of up to $5 million related to physical damage to its rigs. However, a total loss of, or a constructive total loss of, a drilling unit is recoverable without being subject to a deductible. For general and marine third-party liabilities, the Company generally maintains a deductible of up to $500,000 per occurrence on personal injury liability for crew claims, non-crew claims and third-party property damage including oil pollution from the drilling units. Furthermore, the Company purchases insurance for certain of its drilling units to cover loss due to the drilling unit being wholly or partially deprived of income as a consequence of damage to the unit. The loss of hire insurance has a deductible period of 60 days after the occurrence of physical damage. Thereafter, insurance policies are limited to 290 days . If the repair period for any physical damage exceeds the number of days permitted under the Company’s loss of hire policy, it will be responsible for the costs in such period. The Company does not have loss of hire insurance on the Company's tender rigs with the exception of the semi-tender rig the West Vencedor .
The Company previously elected to place an insurance policy for physical damage to rigs and equipment caused by named windstorms in the U.S. Gulf of Mexico with a Combined Single Limit of $100 million in the annual aggregate, which includes loss of hire. The policy is effective from April 1, 2014 to May 1, 2015 . The Company is currently negotiating the renewal of its policy to insure a limited part of this windstorm risk for a further period starting May 1, 2015 through March 31, 2016.

Environmental and Other Regulations in the Offshore Drilling Industry
The Company's operations are subject to numerous laws and regulations in the form of international treaties and maritime regimes, flag state requirements, national environmental laws and regulations, navigation and operating permits requirements, local content requirements, and other national, state and local laws and regulations in force in the jurisdictions in which the Company's drilling units operate or are registered, which can significantly affect the ownership and operation of the Company's drilling units. See Item 3. Key Information - D. “Risk Factors - Governmental laws and regulations, including environmental laws and regulations, may add to the Company's costs or limit the Company's drilling activity.”

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Flag State Requirements
All of the Company's drilling units are subject to regulatory requirements of the flag state where the drilling unit is registered. These include engineering, safety and other requirements related to the drilling industry and to maritime vessels in general. In addition, each of its drilling units must be “classed” by a classification society. The classification society certifies that the drilling rig is “in-class,” signifying that such drilling rig has been built and maintained in accordance with the rules of the classification society and complies with applicable rules and regulations of the flag state and the international conventions of which that country is a member. Maintenance of class certification requires expenditure of substantial sums, and can require taking a drilling unit out of service from time to time for repairs or modifications to meet class requirements. The Company's drilling units must generally undergo a class survey once every five years.
International Maritime Regimes
These requirements include, but are not limited to, MARPOL, the International Convention on Civil Liability for Oil Pollution Damage of 1969, or the CLC, the International Convention on Civil Liability for Bunker Oil Pollution Damage of 2001 (ratified in 2008), or the Bunker Convention, the International Convention for the Safety of Life at Sea of 1974, or SOLAS, the International Safety Management Code for the Safe Operation of Ships and for Pollution Prevention, or the ISM Code, and the International Convention for the Control and Management of Ships’ Ballast Water and Sediments in February 2004, or the “BWM Convention. These various conventions regulate air emissions and other discharges to the environment from the Company's drilling units worldwide, and the Company may incur costs to comply with these regimes and continue to comply to these regimes as they may be amended in the future. In addition, these conventions impose liability for certain discharges, including strict liability in some cases. See Item 3.D “Risk Factors - The Company is subject to complex environmental laws and regulations that can adversely affect the cost, manner or feasibility of doing business.”
Environmental Laws and Regulations
These laws and regulations include the U.S. Oil Pollution Act of 1990, or OPA, the Comprehensive Environmental Response, Compensation and Liability Act, or CERCLA”), the U.S. Clean Water Act, the U.S. Clean Air Act, the U.S. Outer Continental Shelf Lands Act, the U.S. Maritime Transportation Security Act of 2002, or the “MTSA", European Union regulations including the EU Directive 2013/30 on the Safety of Offshore Oil and Gas Operations, and Brazil’s National Environmental Policy Law (6938/81), Environmental Crimes Law (9605/98) and Law (9966/2000) relating to pollution in Brazilian waters. These laws govern the discharge of materials into the environment or otherwise relate to environmental protection. In certain circumstances, these laws may impose strict liability, rendering the Company liable for environmental and natural resource damages without regard to negligence or fault on the Company's part. Implementation of new environmental laws or regulations that may apply to ultra deepwater drilling units may subject the Company to increased costs or limit the operational capabilities of the Company's drilling units and could materially and adversely affect the Company's operations and financial condition. For instance, certain Annex VI Regulations under MARPOL which took effect on January 1, 2015 set a 0.1% sulphur limit on marine gas oil and marine diesel in the Baltic Sea, North Sea, North America and the United States Sea Emission Control Areas. See Item 3.D “Risk Factors - The Company is subject to complex environmental laws and regulations that can adversely affect the cost, manner or feasibility of doing business.”
Safety Requirements
The Company's operations are subject to special safety regulations relating to drilling and to the oil and gas industry in many of the countries where the Company operates. The United States undertook substantial revision of the safety regulations applicable to the Company's industry following the Deepwater Horizon Incident, in which the Company was not involved, that led to the Macondo well blow out situation, in 2010. Other countries are also undertaking a review of their safety regulations related to the Company's industry. These safety regulations may impact the Company's operations and financial results. For instance, the revisions to the regulations in the United States have resulted in new requirements, such as specific requirements for maintenance and certification of BOP’s, which may cause the Company to incur cost and may result in additional downtime for the Company's drilling units in the US Gulf of Mexico. See Item 3.d “Risk Factors -- 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 us.” The EU has also recently undertaken a significant revision of its safety requirements for offshore oil and gas activity through the issuance of the EU Directive 2013/30 on the Safety of Offshore Oil and Gas Operations. These requirements will take effect later this year in July.
Navigation and Operating Permit Requirements
Numerous governmental agencies issue regulations to implement and enforce the laws of the applicable jurisdiction, which often involve lengthy permitting procedures, impose difficult and costly compliance measures, particularly in ecologically sensitive areas, and subject operators to substantial administrative, civil and criminal penalties or may result in injunctive relief for failure to comply. Some of these laws contain criminal sanctions in addition to civil penalties.
Local Content Requirements
Governments in some countries have become increasingly active in local content requirements on the ownership of drilling companies, local content requirements for equipment utilized in the Company's operations, and other aspects of the oil and gas industries in their countries. These regulations include requirements for participation of local investors in the Company's local operating subsidiaries in countries such as Angola and Nigeria. Although these requirements have not had material impact on its operations in the past, they could have a material impact on the Company's earnings, operations and financial condition in the future.

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Other Laws and Regulations
In addition to the requirements described above, the Company's international operations in the offshore drilling segment are subject to various other international conventions and laws and regulations in countries in which the Company operates, including laws and regulations relating to the importation of and operation of drilling units and equipment, currency conversions and repatriation, oil and gas exploration and development, Important laws and regulations in countries other than the United States where the Company currently operates are described below.
Canada
The main legislation for oil and gas operations is the Canada Oil and Gas Operations Act, or COGOA. This Act regulates exploration for resources and operations of offshore activities. COGOA describes the responsibility of the operator to ensure worker safety and protection of the environment and outlines requirements to obtain a well approval.
The Company's operations are also subject to the requirements for oil spill planning and preparedness under the Canadian Environmental Protection Act, the Canadian Environmental Assessment Act, the Emergencies Act and the Emergency Preparedness Act.
In Eastern Canada, the Canada–Nova Scotia Offshore Petroleum Board and the Canada–Newfoundland and Labrador Offshore Petroleum Board regulate drilling and production off the coasts of Nova Scotia and Newfoundland and Labrador, respectively.
The Canadian Environmental Protection Act, or CEPA, regulates water pollution, including disposal at sea and the management of hazardous waste. Insofar as the offshore drilling industry is concerned, CEPA prohibits the disposal or incineration of substances at sea except with a permit issued under CEPA, the importation or exportation of a substance for disposal at sea without a permit, and the loading on a ship of a substance for disposal at sea without a permit.
Nigeria
The Petroleum Act is the key Nigerian legislation that governs the oil and gas industry in Nigeria. The Company is also subject to Petroleum (Drilling and Production) Amendment Regulations 1988, Environmental Guidelines and Standards for the Petroleum Industry of Nigeria, and the Environmental Impact Assessment Act. There is no assurance that compliance with current laws and regulations or amended or newly adopted laws and regulations can be maintained in the future or that future expenditures required to comply with all such laws and regulations in the future will not be material.
Thailand
The Company is subject to contractor licensing requirements in Thailand administered by the Bureau of Foreign Business Registration.  These licensing requirements regulate the activities that the Company’s affiliates may undertake in Thailand.
Angola
The Petroleum Activities Law, as implemented by the Petroleum Operations Regulations approved in 2009, is the key Angolan legislation that covers the oil and gas industry. The Company is also subject to the Environmental Framework Law, the Regulations on Liability for Environmental Damages, Decree 39/00 (setting forth specific rules on environmental protection in the performance of petroleum operations), and Executive Decree 12/05 (setting out procedures for reporting of the occurrence of oil spills). There is no assurance that compliance with current laws and regulations or amended or newly adopted laws and regulations can be maintained in the future or that future expenditures required to comply with all such laws and regulations in the future will not be material.
Ghana
The Company is required to obtain a permit to operate in Ghana from the Petroleum Commission. Further, the Company is subject to the Local Content and Local Participation regulations.
Ivory Coast
The principal legal and regulatory regime applicable to the Company's operations in Ivory Coast is the petroleum code and implementing legislation.
Legal Proceedings
From time to time the Company has been, and expects that in the future it will be, subject to legal proceedings and claims in the ordinary course of business, principally personal injury and property casualty claims. These claims, even if lacking merit, could result in the expenditure of significant financial and managerial resources. The Company is not aware of any legal proceedings or claims that the Company believes will have, individually or in the aggregate, a material adverse effect on the Company. Please also see Note 16, “Commitments and Contingencies—Legal Proceedings” to the audited Consolidated and Combined Carve-Out Financial Statements included elsewhere in this annual report.

Taxation of the Company
The Company is organized as a limited liability company under the laws of the Republic of the Marshall Islands and the Company is resident in the United Kingdom for taxation purposes by virtue of being centrally managed and controlled in the United Kingdom. Certain of the Company's controlled affiliates are subject to taxation in the jurisdictions in which they are organized, conduct business or own assets. The Company intends that the Company's business and the business of the Company's controlled affiliates will be conducted and operated in a tax efficient manner. However, the Company cannot assure this result as tax laws in these or other jurisdictions may change or the Company may enter into new business transactions, which could affect the Company's tax liabilities.

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Marshall Islands
Because the Company and the Company's controlled affiliates do not conduct business or operations in the Republic of the Marshall Islands, neither the Company nor the Company's controlled affiliates will be subject to income, capital gains, profits or other taxation under current Marshall Islands law, and the Company does not expect this to change in the future. As a result, distributions OPCO receives from the Company's controlled affiliates, and distributions the Company receives from OPCO, are not expected to be subject to Marshall Islands taxation.
United Kingdom
The Company is a resident of the United Kingdom for taxation purposes. Nonetheless, the Company expects that the distributions the Company receives from OPCO, generally will be exempt from taxation in the United Kingdom under applicable exemptions for distributions from subsidiaries. As a result, the Company does not expect to be subject to a material amount of taxation in the United Kingdom as a consequence of the Company's United Kingdom residency for taxation purposes.
United States
The Company has elected to be treated as a corporation for U.S. federal income tax purposes. As a result, the Company is subject to U.S. federal income tax to the extent the Company earns income from U.S. sources or income that is treated as effectively connected with the conduct of a trade or business in the United States. The Company does not expect to earn a material amount of such taxable net income; however, the Company has controlled affiliates that conduct drilling operations in the U.S. Gulf of Mexico that are subject to taxation by the United States on their net income and may be required to withhold U.S. federal tax from distributions made to their owner.
Other Jurisdictions and Additional Information
The Company directly and indirectly owns or controls various additional subsidiaries that are subject to taxation in other jurisdictions. For additional information regarding the taxation of the Company’s subsidiaries, please read Note 5 of the Company's Consolidated and Combined Carve-Out Financial Statements included elsewhere in this annual report.


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C.     Organizational Structure
A simplified organizational structure as at March 31, 2015 is shown below.
A full list of the Company's significant operating and rig-owning subsidiaries is included in Exhibit 8.1.

D.     Property, Plant and Equipment
The Company owns a modern fleet of drilling units. The units in the Company's fleet are set out in Item 4.B "Information on the Company - Business Overview".
 

Item 4A.     Unresolved Staff Comments
None.


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Item 5.         Operating and Financial Review and Prospects

The following should be read in conjunction with Item 3A “Key Information—Selected Financial Data,” Item 4 “Information on the Company” and the Company's Consolidated and Combined Carve-Out Financial Statements and Notes thereto included elsewhere in this annual report. Among other things, those financial statements include more detailed information regarding the basis of presentation for the following information. The Company's Consolidated and Combined Carve-Out Financial Statements have been prepared in accordance with U.S. GAAP and are presented in U.S. Dollars.
The following discussion assumes that the Company's business was operated as a separate entity prior to the Company's IPO on October 24, 2012 . References in this annual report to the Company’s “initial fleet” refer to the West Aquarius , the West Capricorn , the West Capella and the West Vencedor , interests in each of which were contributed to the Company at or prior to the Company's IPO. The historical financial statements for periods prior to the completion of the Company's IPO on October 24, 2012 , which are discussed below, have been carved out of the consolidated financial statements of Seadrill, which operated the vessels in the Company’s initial fleet for periods prior to the Company's IPO and represent 100% of the combined results of operations of all of the drilling units in the Company’s fleet.

The Company's financial position, results of operations and cash flows reflected in the Company's Consolidated and Combined Carve-Out Financial Statements include all expenses allocable to the Company's business, but may not be indicative of those that would have been achieved had the Company operated as a separate public entity for all periods presented or of future results.
Overview
The Company is a growth-oriented limited liability company formed by Seadrill to own, operate and acquire offshore drilling units. The Company's drilling units are under long-term contracts with major oil companies such as Chevron, Total, BP and ExxonMobil with an average remaining term of 2.9 years as of March 31, 2015 . The Company intends to grow the Company's position in the offshore drilling market by continuing to provide excellent service to these customers with the Company's modern, technologically advanced fleet. The Company also intend to leverage the relationships, expertise and reputation of Seadrill to re-contract the Company’s fleet under long-term contracts and to identify opportunities to expand the Company’s fleet through acquisitions. Seadrill is one of the world’s largest international offshore drilling contractors, and the Company believes Seadrill is, and will continue to be, motivated to facilitate the Company's growth because of its significant ownership interest in us.
On October 24, 2012 , the Company completed its IPO and in connection with the Company's IPO, the Company issued 10,062,500 common units to the public (including 1,312,500 common units pursuant the underwriter’s option to purchase additional common unit in full) at a price of $22.00 per common unit and issued to Seadrill 14,752,525 common units and 16,543,350 subordinated units. In addition, the Company issued to Seadrill Member LLC, a wholly owned subsidiary of Seadrill, the Seadrill Member interest, which is a non economic-limited liability company interest in the Company, and all of the Company's incentive distribution rights.
In connection with the Company's IPO, the Company acquired (i) a 30% limited partner interest in Seadrill Operating LP, as well as the non-economic general partner interest in Seadrill Operating LP through the Company's 100% ownership of its general partner, Seadrill Operating GP LLC, and (ii) a 51% limited liability company interest in Seadrill Capricorn Holdings LLC. The Company controls Seadrill Operating LP through the Company's ownership of its general partner and Seadrill Capricorn Holdings LLC through the Company's ownership of the majority of the limited liability company interests.
On May 17, 2013, the Company's wholly-owned subsidiary, Seadrill Partners Operating LLC, acquired from Seadrill a 100% ownership interest in the entities that own and operate the tender rig the T-15 . On October 18, 2013, Seadrill Partners Operating LLC, acquired from Seadrill a 100% ownership interest in the entity that owns the tender rig the T-16 . As consideration for the purchase of the T-16 , the Company issued 3,310,622 common units to Seadrill.
On December 13, 2013, Seadrill Operating LP acquired (the “Leo Acquisition”) all of the ownership interests in each of the entities that own, operate and manage the semi-submersible drilling rig, West Leo (the “Leo Business”) and Seadrill Capricorn Holdings LLC acquired (the “Sirius Acquisition”) all of the ownership interests in each of the entities that own and operate the semi-submersible drilling rig, West Sirius (the “Sirius Business”). The Leo Acquisition and the Sirius Acquisition were accomplished through a series of purchases and contributions. The implied purchase prices of the Leo Acquisition and the Sirius Acquisition were $1.250 billion and $1.035 billion, respectively, in each case, including working capital. The Company's portion of the purchase price after debt financing at the OPCO level for the Leo Acquisition was $229.4 million. In addition, the owner of the West Leo , Seadrill Leo Ltd., entered into a $485.5 million intercompany loan agreement with Seadrill, which was repaid in full in February 2014. The Company's portion of the purchase price after debt financing at the OPCO level for the Sirius Acquisition was $298.4 million. The Company funded $70 million of the $298.4 million purchase price by issuing a zero coupon discount note to Seadrill which was repaid in full in March 2014. Seadrill Hungary Kft., the owner of the West Sirius , entered into a $220.1 million intercompany loan agreement with Seadrill which was repaid in full in February 2014. In addition, Seadrill Capricorn Holdings LLC financed $229.9 million of the purchase price of the Sirius Acquisition by issuing a zero coupon discount note to Seadrill which was repaid in full in February 2014. As a result of these transactions, the Company acquired a (i) 30% indirect interest in the Leo Business and (ii) 51% indirect interest in the Sirius Business.
In order to fund the Company's portion of the purchase price for the Sirius Acquisition and Leo Acquisition, on December 9, 2013, the Company sold an aggregate of (i) 12,880,000 common units to the public at a price of $29.50 per unit and (ii) 3,394,916 common units to Seadrill in a concurrent private placement at a price of $29.50 per unit. The aggregate net proceeds from these offerings were approximately $464.8 million.

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The transactions described above occurred prior to the IPO and through December 31, 2013, have been reflected as a reorganization of entities under common control and, therefore, the assets and liabilities acquired from Seadrill have been recorded at historical cost by the Company and the historical operating results have been retrospectively adjusted to include the results of the combined entities during the periods they were under common control of Seadrill.
As of January 2, 2014, the date of the Company’s first annual general meeting, Seadrill ceased to control the Company in accordance with US GAAP and, therefore, the Company and Seadrill are no longer deemed to be entities under common control.
On February 21, 2014, Seadrill Operating LP, Seadrill Capricorn Holdings LLC and the Company's new subsidiary, Seadrill Partners Finco LLC (the “Borrowers”), entered into Senior Secured Credit Facilities (the “Senior Secured Credit Facilities”). The Senior Secured Credit Facilities consist of (i) a $100.0 million revolving credit facility (the “revolving facility”) available for borrowing from time to time by any Borrower, and (ii) a $1.8 billion term loan (the “term loan”) which was borrowed by Seadrill Operating LP in full on February 21, 2014. The proceeds from the transaction were used to (a) refinance debt secured by the West Aquarius, West Capella, West Leo and West Sirius , (b) repay in part the Company's unsecured loans from Seadrill, (c) add cash to the balance sheet in support of general company purposes and (d) pay all fees and expenses associated therewith.
On March 24, 2014, Seadrill Capricorn Holdings LLC acquired from Seadrill all of the ownership interests in each of Seadrill Auriga Hungary Kft., a Hungarian company which owns the drillship, the West Auriga , and Seadrill Gulf Operations Auriga LLC, a Delaware limited liability company which operates the West Auriga ( the "Auriga Acquisition"). The Auriga Acquisition was accomplished through a series of purchases and contributions. As a result of these transactions, the Company acquired a 51% indirect interest in the ownership and operations of the West Auriga . The implied purchase price of the Auriga Acquisition was $1.24 billion. The Company's portion of the purchase price for the Auriga Acquisition, after debt financing at the OPCO level, was $355.4 million. In addition, Seadrill Capricorn Holdings LLC financed $100.0 million of the purchase price by issuing a zero coupon limited recourse discount note to Seadrill that matures in September 2015. Upon maturity of such note, Seadrill Capricorn Holdings LLC will repay $103.7 million to Seadrill. Seadrill Auriga Hungary Kft. is a borrower under the $1.45 billion credit facility (the “Auriga Facility”) used to finance the West Auriga , and under which its obligations are secured by the West Auriga . As of the closing date of the Auriga Acquisition, Seadrill Auriga Hungary owed $443.1 million in principal under the Auriga Facility. In June 2014, this facility was refinanced with proceeds from the Amended Senior Secured Credit Facility.
In order to fund the Company's portion of the cash purchase price of the Auriga Acquisition, on March 17, 2014, the Company sold an aggregate of (i) 11,960,000 common units to the public at a price of $30.60 per unit and (ii) 1,633,987 common units to Seadrill.

On June 24, 2014, the Company issued 6,100,000 common units to the public and 3,183,700 common units to Seadrill.

On June 26, 2014, the Borrowers amended and restated their senior secured credit facilities (as amended and restated, the “Amended Senior Secured Credit Facilities”) to provide for the borrowing by Seadrill Operating LP of $1.1 billion of additional term loans, in addition to the $1.8 billion term loan already outstanding under the Senior Secured Credit Facilities. Thus, following the amendment and restatement, the Amended Senior Secured Credit Facilities consisted of (i) a $100.0 million revolving credit facility (the “revolving facility”) available for borrowing from time to time by any Borrower, and (ii) a $2.9 billion term loan (the “term loan”). The proceeds from the additional $1.1 billion of term loans were used to (a) refinance debt secured by the West Auriga of $443.1 million and the West Capricorn of $426.3 million, (b) repay in part certain of our unsecured loans from Seadrill in the amount of $100.0 million, (c) add cash to the Company’s balance sheet for general company purposes, (d) pay all fees and expenses associated with the Amended Senior Secured Credit Facilities and (e) partially fund the acquisition of an additional interest in Seadrill Operating LP discussed below.

On July 21, 2014, the Company acquired an additional 28% interest in Seadrill Operating LP from Seadrill Limited for $373 million, bringing its total ownership interest in Seadrill Operating LP to 58%.

On September 23, 2014, the Company issued 8,000,000 common units to the public.
On November 4, 2014, Seadrill Capricorn Holdings LLC acquired from Seadrill all of the ownership interests in each of Seadrill Vela Hungary Kft., a Hungarian company which owns the drillship, the West Vela , and Seadrill Gulf Operations Vela LLC, a Delaware limited liability company which operates the West Vela ( the "Vela Acquisition"). The Vela Acquisition was accomplished through a series of purchases and contributions. As a result of these transactions, the Company acquired a 51% indirect interest in the ownership and operations of the West Vela . The implied initial purchase price of the Vela Acquisition was $900 million. The Company's portion of the initial purchase price for the Vela Acquisition, after debt financing at the OPCO level, was $238 million. Under the terms of the  West Vela  contract, the customer is paying a daily rate of $565,000, plus approximately $44,000 per day as a mobilization fee paid over the term of the contract. In addition to the initial purchase price, Seadrill Capricorn Holdings LLC will pay Seadrill $40,000 per day of day rate revenue actually received, as well as the $44,000 per day mobilization fee. These payments to Seadrill will cease at the end of the current contract. Thus, the total consideration included deferred consideration payable to Seadrill of $73.7 million and contingent consideration of $65.7 million. The purchase price was subsequently adjusted by a working capital adjustment of $6.0 million. The acquisition was financed with debt and $238 million in cash for the Company’s 51% equity share.
As of the closing date of the Vela Acquisition, Seadrill Vela Hungary Kft owed $433.1 million in principal under the Vela Facility. Seadrill Vela Hungary’s liability to repay debt under the Vela Facility that relates to the other rigs owned by Seadrill remains. However, Seadrill indemnified Seadrill Vela Hungary Kft. against any liability it may incur under the Vela Facility in respect of such debt. Unless the context requires otherwise, references in this section to the “Company” include OPCO and its subsidiaries.


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On March 31, 2015 the Company received a notice of termination from BP for the contract for the West Sirius which will be effective after having completed the current well and demobilization, which the Company estimates to be by early May 2015. 

Prior to the cancellation notice, the dayrate and term for the West Sirius and West Capricorn contracts were swapped. The West Sirius dayrate was decreased by $40,000 per day and the term was decreased by two years to expire in July 2017 while the dayrate for the West Capricorn was increased by $40,000 per day and the term was extended by two years to expire in July 2019. Amortized payments for the West Capricorn such as mobilization and upgrades will continue on the original schedule ending in July 2017.  In accordance with the cancellation provisions in the West Sirius contract, the Company will receive termination payments over the remaining contract term, now expiring in July 2017.

The Company's interests in OPCO represent its only cash-generating assets. The Company anticipates growing by acquiring additional drilling units and operations directly and through OPCO and by acquiring additional equity interests in OPCO.
The Company manages its business and analyzes and reports its results of operations in a single global segment. The Company’s fleet is reviewed by the Chief Operating Decision Maker, which is the board of directors, as an aggregated sum of assets, liabilities and activities generating distributable cash to meet minimum quarterly distributions.

The Company’s Drilling Contracts
In general, each of the Company’s drilling units is contracted to an oil and gas company to provide offshore drilling services at an agreed dayrate and for a fixed time period. Dayrates can vary, depending on the type of drilling unit and its capabilities, operating expenses, taxes and other factors, including contract length, geographical location and prevailing economic conditions.
An important factor in understanding the Company's revenue is the economic utilization of the drilling unit. For a description of how the Company determines economic utilization, see “—Important Financial and Operational Terms and Concepts—Economic Utilization” below.
In addition to contracted daily revenue, customers may pay mobilization and demobilization fees for drilling units before and after their drilling assignments, and may also reimburse costs incurred by the Company at their request for additional supplies, personnel and other services, not covered by the contractual dayrate. Customers may also pay termination fees.

Factors Affecting the Comparability of Future Results
You should consider the following facts when evaluating the Company's historical results of operations and assessing its future prospects:
•
The Company does not own all of the interests in OPCO . As a result, the Company's cash flow does not include distributions on Seadrill’s interest in OPCO. The Company owns (i) a 58% limited partner interest in Seadrill Operating LP, as well as the non-economic general partner interest in Seadrill Operating LP through its 100% ownership of its general partner, Seadrill Operating GP LLC, and (ii) a 51% limited liability company interest in Seadrill Capricorn Holdings LLC. The Company controls Seadrill Operating LP through its ownership of Seadrill Operating LP's general partner and Seadrill Capricorn Holdings LLC through its ownership of the majority of its limited liability company interests. Seadrill owns the remaining 42% limited partner interest in Seadrill Operating LP and the remaining 49% limited liability company interest in Seadrill Capricorn Holdings LLC. In July 2014 the Company acquired an additional 28% limited partner interest in Seadrill Operating LP from Seadrill Limited bringing its total ownership interest in Seadrill Operating LP from 30% to 58%. The operating agreements of OPCO require it to distribute all of its available cash each quarter. In determining the amount of cash available for distribution by the Company to its unitholders, the Company's board of directors must approve the amount of cash reserves to be set aside, including reserves for future maintenance and replacement capital expenditures, working capital and other matters. Distributions by OPCO to Seadrill in respect of its ownership interest in OPCO are not available for distribution to unitholders of the Company.
•
Business combinations between entities under common control. Reorganization of entities under common control is accounted for as if the transfer occurred from the date that both the combining entity and combined entity were both under the common control of Seadrill. Therefore, the Company’s financial statements prior to the date the interests in the combining entity were actually acquired are retroactively adjusted to include the results of the combined entities during the period it was under common control of Seadrill. The acquisitions of the entities that own and operate the T-15, T-16 , West Leo and West Sirius in 2013 from Seadrill Limited were accounted for under this method. As of January 2, 2014, the date of the Company's first annual general meeting, Seadrill ceased to control the Company as defined by GAAP and therefore Seadrill Partners and Seadrill are no longer deemed to be entities under common control. As such acquisitions by the Company from Seadrill subsequent to this date are no longer accounted for under this method.
•
The size of the Company’s fleet continues to change. The Company's financial statements reflect changes in the size and composition of the Company’s fleet due to certain rig deliveries and contract commencement dates. For instance, the West Capricorn was delivered from the shipyard at the end of 2011, and the contract commencement date occurred in July 2012. Furthermore, during 2013 the Company acquired the T-15, T-16, West Leo and West Sirius , and during 2014 the Company acquired the West Auriga and West Vela . The Company expects the Company’s fleet will continue to change over time. Furthermore, the Company may grow in the future through the acquisition of additional drilling units as part of the Company's growth strategy.
•
The Company may enter into different financing agreements . The financing agreements, including the interest expense relating thereto, currently in place may not be representative of the agreements that will be in place in the future. For example, the Company may amend its existing credit facilities or enter into new financing agreements and such new agreements may not be on the same terms as Seadrill’s

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financing agreements. In connection with the closing of the Company's IPO, the Company entered into a $300 million revolving credit facility with Seadrill as the lender, which the Company refers to as the "sponsor credit facility". In 2014 the sponsor credit facility was reduced to $100 million . In addition, in February 2014, the Company entered into the Senior Secured Credit Facilities and refinanced its debt secured by the West Aquarius, West Capella, West Leo and West Sirius, and in June 2014 entered into the Amended Senior Secured Credit Facilities and refinanced its debt secured by the West Capricorn and the West Auriga and in November 2014, refinanced its debt secured by the West Vela . For descriptions of its current financing agreements, please read “—Item 5. Liquidity and Capital Resources—Borrowing Activities.”

Factors Affecting the Company's Results of Operations
The Company believes the principal factors that will affect its future results of operations include:
•
the Company’s ability to successfully employ its drilling units at economically attractive dayrates as long-term contracts expire or are otherwise terminated;
•
the ability to maintain good relationships with the Company’s existing customers and to increase the number of customer relationships;
•
the number and availability of the Company's drilling units, including the Company's ability to exercise any options to purchase additional drilling units that may arise under the omnibus agreement or otherwise;
•
changes in the Company's ownership of OPCO;
•
fluctuations in the price of oil and gas, which influence the demand for offshore drilling services;
•
the effective and efficient technical management of drilling units;
•
The Company’s ability to obtain and maintain major oil and gas company approvals and to satisfy their quality, technical, health, safety and compliance standards;
•
economic, regulatory, political and governmental conditions that affect the offshore drilling industry;
•
accidents, natural disasters, adverse weather, equipment failure or other events outside of its control that may result in downtime;
•
mark-to-market changes in interest rate swaps;
•
foreign currency exchange gains and losses;
•
the Company's access to capital required to acquire additional drilling units or equity interests in OPCO and/or to implement its business strategy;
•
increases in crewing and insurance costs and other operating costs;
•
the level of debt and the related interest expense and amortization of principal; and
•
the level of any distribution on the Company's common units.
Please read Item 3 “Key Information—Risk Factors” for a discussion of certain risks inherent in the Company's business.

Important Financial and Operational Terms and Concepts
The Company uses a variety of financial and operational terms and concepts when analyzing its performance. These include the following:
Contracted Revenues and Dayrates. In general, each of the Company’s drilling units is contracted for a fixed term to an oil and gas company to provide offshore drilling services at an agreed dayrate. A drilling unit will be “stacked” if it has no contract in place. Drilling units may be either warm stacked or cold stacked. When a rig is warm stacked, the rig is idle but operational and typically retains most of its crew and can deploy quickly if an operator requires its services. Cold stacking a rig involves reducing the crew to either zero or just a few key individuals and storing the rig in a harbor, shipyard or designated area offshore.
To the extent that the Company’s operations are interrupted due to equipment breakdown or operational failures, the Company does not generally receive dayrate compensation for the period of the interruption in excess of contractual allowances. Furthermore, the Company’s dayrates can be reduced in instances of interrupted or suspended service due to, among other things, repairs, upgrades, weather, maintenance, force majeure or requested suspension of services by the customer and other operating factors.
The Company's contracts may generally be terminated by the customer in the event the drilling unit is destroyed or lost or if drilling operations are suspended for an extended period of time as a result of a breakdown of equipment, “force majeure” or upon the occurrence of other specified conditions.
The terms and conditions of the contracts allow for compensation when factors beyond the Company’s control, including weather conditions, influence the drilling operations and, in some cases, for compensation when the Company performs planned maintenance activities. In many of the Company’s contracts, the Company is entitled to cost escalation to compensate for industry specific cost increases as reflected in publicly available cost indices. In connection with drilling contracts, the Company may receive lump sum fees for the mobilization of equipment and personnel or for capital additions and upgrades prior to commencement of drilling services. These up-front fees are recognized as revenue over the original contract term, excluding any extension option periods.

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In some cases, the Company may receive lump sum non-contingent fees or dayrate based fees from customers for demobilization upon completion of a drilling contract. Non-contingent demobilization fees are recognized as revenue on a straight line basis over the original contract term, excluding any extension option periods. Contingent demobilization fees are recognized as earned upon completion of the drilling contract.
Economic Utilization. Economic utilization is calculated as the total revenue received during the period divided by the full operating dayrate multiplied by the number of days in the period excluding bonuses. In arriving at economic utilization, the Company has taken into account certain contractual elements that generally exist in its drilling contracts. For example, drilling contracts generally provide for a general repair allowance for preventive maintenance or repair of equipment, which could range between 18 to 48  hours per month. Such allowance varies from contract to contract, and the Company may be compensated at the full operating dayrate or at a reduced operating dayrate for such general repair allowance.
In addition, drilling contracts typically provide for situations where the drilling unit would operate at reduced operating dayrates, such as, among others, a standby rate, where the rig is prevented from commencing operations for reasons such as bad weather, waiting for customer orders, waiting on other contractors; a moving rate, where the drilling unit is in transit between locations; a reduced performance rate in the event of major equipment failure; or a force majeure rate in the event of a force majeure that causes the suspension of operations. In addition, the drilling unit could operate at a zero rate in the event of a shutdown of operations for repairs where the general repair allowance has been exhausted or for any period of force majeure in excess of a specific number of days allowed under a drilling contract. Operating at these reduced rates impacts the economic utilization of the rig. The Company then use this metric to determine if changes in the operations of a rig should be implemented to increase economic utilization.
Vessel and Rig Operating Expenses. Rig operating expenses are costs associated with operating a drilling unit that is either in operation or stacked, and include the remuneration of offshore crews and related costs, rig supplies, insurance costs, expenses for repairs and maintenance as well as costs related to onshore personnel in various locations where the Company operates the rigs.
Reimbursable Revenues and Expenses. Reimbursable revenues are revenues that constitute reimbursements from the Company’s customers for reimbursable expenses. Reimbursable expenses are expenses the Company incurs on behalf, and at the request, of customers, and include provision of supplies, personnel and other services that are not covered under the drilling contract.
Mobilization and Demobilization Expenses. Mobilization costs incurred as part of a contract are capitalized and recognized over the original contract term, excluding any extension option periods. Costs related to first time mobilization are capitalized and depreciated over the lifetime of the rig. The costs of relocating drilling units that are not under contract are expensed as incurred. Demobilization costs are costs related to the transfer of a rig to a safe harbor or different geographic area and are expensed as incurred.
General and Administrative Expenses. General and administrative expenses are composed of general overhead, including personnel costs, legal and professional fees, property costs and other general administration expenses. For the historical periods presented, certain administrative expenses have been carved out from the administrative expenses of Seadrill and allocated or charged to the Company based on rig type, with a greater portion of costs allocated or charged to the larger drilling units compared to the smaller drilling units.
Depreciation and Amortization. Depreciation and amortization costs are based on the historical cost of the Company’s drilling units. Drilling units are recorded at historical cost less accumulated depreciation. The cost of these assets less estimated residual value is depreciated on a straight-line basis over their estimated remaining economic useful lives. The estimated economic useful life of the Company’s rigs, when new, is thirty years . Costs related to periodic surveys of drilling units are capitalized as part of drilling units and amortized over the anticipated period between surveys, which is generally five years . These costs are primarily shipyard costs and the cost of employees directly involved in the work. Amortization costs for periodic surveys are included in depreciation and amortization expense.
Interest Expense. The Company's interest expense depends on the overall level of debt, and may significantly increase if the Company incurs additional debt, for instance to acquire additional drilling units or additional equity interests in the Company. Interest expense may also change with prevailing interest rates, although interest rate swaps or other derivative instruments may reduce the effect of these changes.
Interest expense may be reduced as a consequence of capitalization of interest expenses relating to drilling units under construction. Interest expense is capitalized during construction of newbuildings based on accumulated expenditures for the applicable project at its current rate of borrowing. The amount of interest expense capitalized in an accounting period is determined by applying an interest rate (“the capitalization rate”) to the average amount of accumulated expenditures for the asset during the period. The capitalization rates used in an accounting period are based on the rates applicable to borrowings outstanding during the period. Amounts beyond the actual interest expense incurred in the period are not capitalized.
The Combined Carve-Out Financial Statements include an allocation of interest expense on Seadrill’s general corporate debt, based upon the fair value of the Company’s fleet in proportion to the fair value of Seadrill’s fleet for periods prior to the Company's IPO. This allocation has not occurred for periods subsequent to its IPO and actual interest expense is included in the consolidated financial statements.
Deferred Charges. Loan related costs, including debt arrangement fees, are capitalized and amortized over the term of the related loan and are included in interest expense.
Impairment of Long-Lived Assets. The carrying value of long-lived assets are reviewed for impairment whenever certain trigger events indicate that the carrying amount of an asset may no longer be appropriate. Recoverability of the carrying value of the asset is assessed by estimating the undiscounted future net cash flows expected to result from the asset, including eventual disposition. If the undiscounted future net cash flows are less than the carrying value of the asset, an impairment loss is recognized based on a determination of the asset fair value.
Gain/loss on Interest Rate Swaps. A portion of Seadrill’s mark-to-market adjustments for interest rate swap derivatives were allocated to the Combined Carve-Out Statement of Operations for periods prior to the Company's IPO on the basis of the Company’s portion of Seadrill’s floating

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rate debt. Post IPO any mark-to-market adjustments for interest rate swap derivatives are based on specific swaps that the company entered into with Seadrill.
Customers
The following table represents the break-down of contract and reimbursable revenues by customer and geography for the years ended December 31, 2014 , 2013 and 2012 :
 
 
 
 
2014
 
2013
 
2012
Customer
Country
Rig Name
 
($ in millions)
 
%
 
($ in millions)
 
%
 
($ in millions)
 
%
Total
Nigeria
West Capella
 
$
228.5

 
17.0
%
 
$
207.5

 
19.7
%
 
$
209.8

 
23.4
%
ExxonMobil (1)
China
West Aquarius
 
—

 
—

 
—

 
—
%
 
84.1

 
9.4
%
ExxonMobil (1)
Vietnam
West Aquarius
 
—

 
—

 
—

 
—
%
 
39.1

 
4.4
%
ExxonMobil (1)
Canada
West Aquarius
 
126.1

 
9.4
%
 
153.5

 
14.5
%
 
87.3

 
9.8
%
BP
USA
West Capricorn
 
176.3

 
13.1
%
 
183.5

 
17.3
%
 
88.2

 
9.9
%
Chevron
Angola
West Vencedor
 
92.4

 
6.9
%
 
87.9

 
8.3
%
 
86.3

 
9.7
%
BP
USA
West Sirius
 
179.8

 
13.4
%
 
186.9

 
17.7
%
 
171.1

 
19.2
%
Tullow Oil
Ghana
West Leo
 
233.5

 
17.4
%
 
198.6

 
18.8
%
 
126.8

 
14.2
%
Chevron
Thailand
T-15
 
54.4

 
4.1
%
 
24.5

 
2.3
%
 
—

 
—
%
Chevron
Thailand
T-16
 
51.2

 
3.8
%
 
16.1

 
1.5
%
 
—

 
—
%
BP
USA
West Auriga
 
167.5

 
12.5
%
 
—

 
—
%
 
—

 
—
%
BP
USA
West Vela
 
32.9

 
2.5
%
 
—

 
—
%
 
—

 
—
%
Total
 
 
 
$
1,342.6

 
100
%
 
$
1,058.5

 
100
%
 
$
892.7

 
100
%
(1)
For each country where the West Aquarius operates under its International Drilling Contract, a specific local contract and corresponding dayrate is agreed between the local ExxonMobil operating company and the local Seadrill subsidiary. In addition, the International Drilling Contract permits ExxonMobil to assign the contract to third parties in certain circumstances. During 2014 and 2013 the ExxonMobil drilling contract was assigned to Hibernia Management and Development Co. Ltd and Statoil Canada Ltd.
Inflation
The Company’s drilling units generally operate under long-term contracts. As of March 31, 2015 , the average remaining term of the Company's contracts was 2.9 years. The majority of these contracts have dayrates that are fixed over the contract term. In order to mitigate the effects of inflation on revenues from long term contracts, all of the Company’s long term contracts, except for the West Leo , include escalation provisions. These provisions allow the Company to adjust the dayrates based on stipulated cost increases, including wages, insurance and maintenance cost. However, because these escalations are normally performed on an annual basis, the timing and amount awarded as a result of such adjustments may differ from actual cost increases, which could adversely affect the stability of the Company's cash flow and ability to make cash distributions.
Critical Accounting Estimates
The preparation of the Consolidated and Combined Carve-Out Financial Statements requires the Company to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosures about contingent assets and liabilities. The Company bases these estimates and assumptions on historical experience and on various other information and assumptions that the Company believes to be reasonable. Critical accounting estimates are important to the portrayal of both the Company's financial condition and results of operations and require the Company to make subjective or complex assumptions or estimates about matters that are uncertain. Basis of preparation and significant accounting policies are discussed in Note 1 “General Information”, and Note 2 “Accounting Policies”, to the Company's Consolidated and Combined Carve-Out Financial Statements appearing elsewhere in this annual report. The Company believes that the following are the critical accounting estimates used in the preparation of the Consolidated and Combined Carve-Out Financial Statements. In addition, there are other items within the Consolidated and Combined Carve-Out Financial Statements that require estimation.
Drilling Units
Rigs, vessels and equipment are recorded at historical cost less accumulated depreciation. The cost of these assets less estimated residual value is depreciated on a straight-line basis over their estimated remaining economic useful lives. The estimated economic useful life of its semi-submersible drilling rigs, drillships and tender rigs, when new, is 30 years.
Significant investments are capitalized and depreciated in accordance with the nature of the investment. Significant investments that are deemed to increase an asset’s value for its remaining useful life are capitalized and depreciated over the remaining life of the asset.
The Company determines the carrying value of these assets based on policies that incorporate its estimates, assumptions and judgments relative to the carrying value, remaining useful lives and residual values. The assumptions and judgments the Company uses in determining the estimated useful lives of its drilling units reflect both historical experience and expectations regarding future operations, utilization and performance. The

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use of different estimates, assumptions and judgments in establishing estimated useful lives could result in materially different net book values of its drilling units and results of operations.
The useful lives of rigs and related equipment are difficult to estimate due to a variety of factors, including technological advances that impact the methods or cost of oil and gas exploration and development, changes in market or economic conditions and changes in laws or regulations affecting the drilling industry. The Company re-evaluates the remaining useful lives of its drilling units as and when certain events occur which directly impact its assessment of their remaining useful lives and include changes in operating condition, functional capability and market and economic factors.
The carrying values of the Company's long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may no longer be appropriate. The Company assesses recoverability of the carrying value of the asset by estimating the undiscounted future net cash flows expected to result from the asset, including eventual disposition. If the undiscounted future net cash flows are less than the carrying value of the asset, an impairment loss is recorded equal to the difference between the asset’s carrying value and fair value. In general, impairment analyses are based on expected costs, utilization and dayrates for the estimated remaining useful lives of the asset or group of assets being assessed. An impairment loss is recorded in the period in which it is determined that the aggregate carrying amount is not recoverable. Asset impairment evaluations are, by nature, highly subjective. They involve expectations about future cash flows generated by the Company's assets, and reflect management’s assumptions and judgments regarding future industry conditions and their effect on future utilization levels, dayrates and costs. The use of different estimates and assumptions could result in significantly different carrying values of its assets and could materially affect its results of operations.
Income Taxes
Income taxes, as presented for the periods presented prior to the Company's IPO, are calculated on an “as if” separate tax return basis. Seadrill’s global tax model has been developed based on its entire business. Accordingly, the tax results are not necessarily reflective of the results that the Company would have generated on a stand-alone basis. Income tax expense is based on reported income or loss before income taxes.
Seadrill Partners LLC is organized in the Republic of the Marshall Islands and resident in the United Kingdom for taxation purposes. The Company and the Company's controlled affiliates do not conduct business or operate in the Republic of the Marshall Islands and therefore are not subject to income, capital gains, profits or other taxation under current Marshall Island law. As a tax resident of the United Kingdom the Company is subject to tax on income earned from sources within the United Kingdom. Certain subsidiaries operate in other jurisdictions where taxes are imposed. Consequently income taxes have been recorded in these jurisdictions when appropriate. Significant judgment is involved in determining the provision for income taxes. There are certain transactions for which the ultimate tax determination is unclear due to uncertainty in the ordinary course of business. The Company recognizes tax liabilities based on its assessment of whether its tax positions are more likely than not sustainable, based on the technical merits and considerations of the relevant taxing authority’s widely understood administrative practices and precedence.
Income tax expense consists of taxes currently payable and changes in deferred tax assets and liabilities calculated according to local tax rules. Deferred tax assets and liabilities are based on temporary differences that arise between carrying values used for financial reporting purposes and amounts used for taxation purposes of assets and liabilities and the future tax benefits of tax loss carry forwards. A deferred tax asset is recognized only to the extent that it is more likely than not that future taxable profits will be available against which the asset can be utilized. The amount of deferred tax provided is based upon the expected manner of settlement of the carrying amount of assets and liabilities, using tax rates enacted at the balance sheet date. The impact of tax law changes is recognized in periods when the change is enacted.

Business Combinations

The Company accounts for business combinations using the acquisition method of accounting, which requires that the assets acquired and liabilities assumed be recorded at the date of acquisition at their respective fair values. Any excess of the fair value of consideration given and the fair value of any non-controlling interest over the fair values of the identifiable assets and liabilities acquired is recorded as goodwill. The determination of the estimated fair values of acquired tangible and intangible assets, as well as the useful economic life ascribed to finite lived assets, requires the use of significant judgment.

When acquiring drilling units with attached customer contracts the Company has recognized the value of the drilling unit separately from the associated contract. The drilling unit has been valued at fair value which was estimated using an income approach based upon market participant assumptions and prevailing market conditions. The fair value of the drilling contract has been also been assessed separately using an 'excess earnings' technique where the terms of the contract are assessed relative to current prevailing market rates. The assumptions and judgments made by management are subjective and derived from unobservable inputs. The use of different judgments and assumptions to those used by the Company could result in a materially different valuation of acquired assets, which could have a material effect on the Company’s results of operations.


New Accounting Pronouncements
Refer to Note 2 “Accounting policies” of the Combined and Consolidated Carve-out Financial Statements included elsewhere in this annual report.


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A.     Operating Results
Year Ended December 31, 2014 Compared to Year Ended December 31, 2013

The following table summarizes the Company's operating results for the years ended December 31, 2014 and 2013 :
 
Year Ended December 31,
 
Increase/Decrease
 
2014
 
2013
 
$
 
%
 (US$ in millions)
 
 
 
 
 
Operating revenues:
 
 
 
 
 
 
 
Contract revenues
$
1,302.7

 
$
1,047.1

 
$
255.6

 
24.4
 %
Reimbursable revenues
39.9

 
11.4

 
28.5

 
250.0
 %
Other revenues
—

 
5.8

 
(5.8
)
 
(100.0
)%
Total operating revenues
1,342.6

 
1,064.3

 
278.3

 
26.1
 %
 
 
 
 
 
 
 
 
Operating expenses:
 
 
 
 
 
 
 
Vessel and rig operating expenses
425.0

 
375.2

 
49.8

 
13.3
 %
Amortization of favorable contracts
14.8

 
—

 
14.8

 
—
 %
Reimbursable expenses
37.9

 
10.6

 
27.3

 
257.5
 %
Depreciation and amortization
198.7

 
141.2

 
57.5

 
40.7
 %
General and administrative expenses
51.4

 
49.6

 
1.8

 
3.6
 %
Total operating expenses
727.8

 
576.6

 
151.2

 
26.2
 %
Net operating income
$
614.8

 
$
487.7

 
$
127.1

 
26.1
 %
 
 
 
 
 
 
 
 
Financial items:
 
 
 
 
 
 
 
Interest income
3.7

 
4.4

 
(0.7
)
 
(15.9
)%
Interest expense
(140.9
)
 
(92.2
)
 
(48.7
)
 
52.8
 %
(Loss) / Gain on derivative financial instruments
(124.9
)
 
49.9

 
(174.8
)
 
(350.3
)%
Currency exchange loss
(3.3
)
 
(1.2
)
 
(2.1
)
 
175
 %
Total financial items
(265.4
)
 
(39.1
)
 
(226.3
)
 
578.8
 %
Income before income taxes
349.4

 
448.6

 
(99.2
)
 
(22.1
)%
Income taxes
(34.8
)
 
(33.2
)
 
(1.6
)
 
4.8
 %
Net Income
$
314.6

 
$
415.4

 
$
(100.8
)
 
(24.3
)%
Contract revenues
Contract revenues increased by $255.6 million , or 24.4% , to $1,302.7 million , for the year ended December 31, 2014 , from $1,047.1 million in the year ended December 31, 2013 . The increase was primarily due to the results of the West Auriga which was acquired by the Company in March 2014 and contributed contract revenues of $158.3 million since acquisition, and the results of the West Vela which was acquired in November 2014 and contributed contract revenues of $32.3 million since acquisition. The T-15 and T-16 commenced operations in July 2013 and September 2013, and therefore their full year impact contributed additional contract revenues. An increase in the day rate on the West Capella also contributed to increased contract revenues. This was partly offset by a decrease in contract revenues compared to 2013 for the West Aquarius attributable to the downtime of the rig in the first and fourth quarters of 2014.

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The following table summarizes average daily revenues and economic utilization percentage by drilling unit type of the Company’s fleet for the periods presented:
 
Year Ended December 31,
 
2014
 
2013
 
Average Daily
Revenues (USD)
 
Economic
Utilization
 
Average Daily
Revenues (USD)
 
Economic
Utilization
Semi-submersible rigs
$
444,149

 
83.2
%
 
$
464,300

 
90.4
%
Drillship
$
578,856

 
98.3
%
 
$
541,800

 
96.9
%
Tender rigs
$
154,611

 
98.0
%
 
$
154,967

 
100.0
%
(1)
Average daily revenues are the average revenues for each type of rig, based on the actual days available for each rig of that type.
(2)
Economic utilization is calculated as the total revenue received divided by the full operating dayrate multiplied by the number of days in the period, excluding bonuses.

Reimbursable revenues
Reimbursable revenues increased by $28.5 million , or 250.0% , to $39.9 million for the year ended December 31, 2014 , from $11.4 million in the year ended December 31, 2013 . The increase is due to additional equipment purchased on behalf of customers, for which we have been reimbursed.

Other revenues
During the year ended December 31, 2013, the Company earned other revenues within its Nigerian service company of $5.8 million . The revenues relate to certain services, including the provision of onshore and offshore personnel, which the Company provided to Seadrill’s West Polaris drilling rig while it operated in Nigeria during that period. There were no such services provided for the year ended December 31, 2014.

Vessel and rig operating expenses
Rig operating expenses increased by $49.8 million , or 13.3% , to $425.0 million in the year ended December 31, 2014 , from $375.2 million in the year ended December 31, 2013 . This increase was primarily due to the acquisition of the West Auriga in March 2014 , the acquisition of the West Vela in November 2014, and the full year of expenses of the T-15 and T-16 , which commenced operations in the third quarter of 2013. The increases were partly offset by lower operating costs of the West Aquarius due to downtime.

Amortization of favorable contracts
Amortization of favorable contracts increased to $14.8 million for the year ended December 31, 2014 from nil in the year ended December 31, 2013 . The increase was due to the favorable contracts recognized on the purchase of the West Auriga in March 2014, and the acquisition of the West Vela in November 2014. The favorable drilling contracts are recorded as an intangible asset at fair value on the date of acquisition. These intangibles are amortized on a straight-line basis over the remaining contract period.

Reimbursable expenses
Reimbursable expenses increased by $27.3 million , or 257.5% , to $37.9 million for the year ended December 31, 2014 from $10.6 million in the year ended December 31, 2013 . The increase was due to additional equipment purchased on behalf of customers, for which we have been reimbursed.

Depreciation and amortization
Depreciation and amortization expenses increased by $57.5 million , or 40.7% , to $198.7 million for the year ended December 31, 2014 , from $141.2 million in the year ended December 31, 2013 . The increase was primarily due to the acquisition of the West Auriga in March 2014, the acquisition of the West Vela in November 2014, and depreciation relating to the T-15 and T-16 , which had a lower expense in the comparative period as they commenced operations during the third quarter of 2013.

General and administrative expenses
General and administrative expenses increased by $1.8 million , or 3.6% , to $51.4 million for the year ended December 31, 2014 , from $49.6 million for the year ended December 31, 2013 . The increase was due to higher administrative management fees charged by Seadrill due to the increased size of the Company's fleet.


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Interest expense
Interest expense increased by $48.7 million , or 52.8% , to $140.9 million for the year ended December 31, 2014 , compared to $92.2 million for the year ended December 31, 2013 . The increase in the interest expense was primarily due to the increase in the outstanding debt, which was driven by the acquisition of the West Auriga in March 2014, the acquisition of the West Vela in November 2014, and the debt issued under the new Amended Senior Secured Credit Facilities.

Loss on derivatives
In the year ended December 31, 2014 , the Company recognized losses from derivative financial instruments of $124.9 million compared to gains of $49.9 million in 2013. The loss on the derivatives during 2014 was due to adverse movements in future expected interest rates which impact the interest rate swaps, compared to favorable movements in 2013. The corresponding fair market value of the interest rate swaps was a $50.1 million liability as at December 31, 2014 compared to an asset of $42.4 million as at December 31, 2013 . The unrealized portion of the loss on the derivatives during the year was $99.1 million and the realized portion of the loss on derivatives during the year was $25.8 million . In the prior year, the unrealized gain was $60.2 million and the realized loss was $10.3 million .

Other financial items
Other financial items reported in the income statement include the following items:
   
Year Ended December 31,
(US$ millions)
2014
 
2013
Interest income
3.7

 
4.4

Currency exchange loss
(3.3
)
 
(1.2
)
Total other financial items
0.4

 
3.2

Other financial items decreased by $2.8 million , or 88% , to $0.4 million for the year ended December 31, 2014 , compared to $3.2 million for the year ended December 31, 2013 . The decrease is related to a decrease in interest earned on cash balances and an increase in the losses of foreign currency translation, primarily relating to the West Capella and West Leo operating in Nigeria and Ghana respectively.

Income taxes
Income tax expense was $34.8 million and $33.2 million , and the Company's effective income tax rate was 10.0% and 7.5% for the years ended December 31, 2014 and 2013 respectively. The increase in the Company's effective income tax rate was due to the change in taxing jurisdictions in which the Company's drilling units operated and/or were owned.


48
Table of Contents

Year Ended December 31, 2013 Compared to Year Ended December 31, 2012
The following table summarizes the Company's operating results for the years ended December 31, 2013 and 2012 :
 
($US in millions)
Year Ended December 31,
 
Increase/Decrease
 
2013
 
2012
 
$
 
%
Operating revenues:
 
 
 
 
 
 
 
Contract revenues
$
1,047.1

 
$
859.5

 
$
187.6

 
21.8
 %
Reimbursable revenues
11.4

 
33.2

 
(21.8
)
 
(65.7
)%
Other revenues
5.8

 
19.1

 
(13.3
)
 
(69.6
)%
Total operating revenues
1,064.3

 
911.8

 
152.5

 
16.7
 %
 
 
 
 
 
 
 
 
Operating expenses:
 
 
 
 
 
 
 
Vessel and rig operating expenses
375.2

 
296.1

 
79.1

 
26.7
 %
Reimbursable expenses
10.6

 
32.4

 
(21.8
)
 
(67.3
)%
Depreciation and amortization
141.2

 
114.0

 
27.2

 
23.9
 %
General and administrative expenses
49.6

 
37.2

 
12.4

 
33.3
 %
Total operating expenses
576.6

 
479.7

 
96.9

 
20.2
 %
Net operating income
$
487.7

 
$
432.1

 
$
55.6

 
12.9
 %
 
 
 
 
 
 
 
 
Financial items:
 
 
 
 
 
 
 
Interest income
4.4

 
1.7

 
2.7

 
158.8
 %
Interest expense
(92.2
)
 
(65.8
)
 
(26.4
)
 
40.1
 %
Gain/(Loss) on derivative financial instruments
49.9

 
(32.9
)
 
82.8

 
(251.7
)%
Currency exchange loss
(1.2
)
 
(2.6
)
 
1.4

 
(53.8
)%
Total financial items
(39.1
)
 
(99.6
)
 
60.5

 
(60.7
)%
Income before income taxes
448.6

 
332.5

 
116.1

 
34.9
 %
Income taxes
(33.2
)
 
(38.9
)
 
5.7

 
(14.7
)%
Net Income
$
415.4

 
$
293.6

 
$
121.8

 
41.5
 %
Contract revenues
Contract revenues increased by $187.6 million , or 21.8% , to $1,047.1 million , for the year ended December 31, 2013 , from $859.5 million for the same period in 2012 . The increase was primarily due to a full year of operations for the West Capricorn in 2013 compared with half a year in 2012, with an increased contribution of $90.1 million. The West Leo also achieved a full year of operations in 2013 compared to eight months in 2012 with an increased contribution of $74.2 million. The West Sirius achieved better economic utilization in 2013 compared to 2012 resulting in higher contract revenues of $17.3 million. The T-15 and T-16 commenced operations in July 2013 and September 2013 and contributed $16.1 million and $17.3 million respectively, to contract revenues.
This was partly offset by a decrease of $33.0 million in contract revenues in 2013 for the West Aquarius. The reduction in revenues was a result of the Company's entry into a settlement in 2013 with ExxonMobil. This relates to an agreement for non-payment during the recent mobilization period of the West Aquarius to Canada , as a result of the time needed to complete modifications and repairs in order to meet regulatory requirements. As a result of this settlement, its contract revenues were reduced by $22.1 million net of local taxes. The remaining decrease of $10.9 million was related to the West Aquarius due to anchor chain failures in December 2013.

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The following table summarizes average daily revenues and economic utilization percentage by drilling unit type of the Company’s fleet for the periods presented:
 
Year Ended December 31,
 
2013
 
2012
 
Average Daily
Revenues ($US)
 
Economic
Utilization
 
Average Daily
Revenues ($US)
 
Economic
Utilization
Semi-submersible rigs
$
464,300

 
90.4
%
 
$
449,925

 
88.2
%
Drillship
$
541,800

 
96.9
%
 
$
549,200

 
100.0
%
Tender rigs
$
154,967

 
100.0
%
 
$
210,500

 
100.0
%
(1)
Average daily revenues are the average revenues for each type of rig, based on the actual days available for each rig of that type.
(2)
Economic utilization is calculated as the total revenue received divided by the full operating dayrate multiplied by the number of days in the period, excluding bonuses.

Reimbursable revenues
Reimbursable revenues decreased by $21.8 million , or 65.7% , to $11.4 million , for the year ended December 31, 2013 , from $33.2 million for the same period in 2012 . The decrease was mainly due to the West Aquarius mobilizing to Canada in 2012, as well as certain client-requested upgrades to the West Aquarius in 2012. There were no similar reimbursable revenues in 2013.

Other revenues
During the year ended December 31, 2013 , the Company earned other revenues within its Nigerian service company of $5.8 million a decrease of $13.3 million , or 69.6% , compared to $19.1 million for the year ended December 31, 2012 . The revenues relate to certain services, including the provision of onshore and offshore personnel, which the Company provided to Seadrill’s West Polaris drilling rig while it operated in Nigeria during that period. The $13.3 million decrease was due to the fact that the West Polaris rig operated in Nigeria for only a short period during the year ended December 31, 2013 compared to a full year of operations in 2012.

Vessel and rig operating expenses
Rig operating expenses increased by $79.1 million , or 26.7% , to $375.2 million , for the year ended December 31, 2013 , from $296.1 million for the same period in 2012 . The increase was primarily due to the West Capricorn , the West Leo each contributing full year operations in 2013 which accounted for an increase of $27.1 million and $25.1 million, respectively, in rig operating expenses. The increase was also attributed to the T-15 and T-16 commencing operations in July and September 2013, respectively, which amounted to $9.7 million and $6.3 million respectively and to the West Aquarius operating in Canada during 2013 with higher personnel and start-up costs, the effect of the bareboat charters and also increased costs due to the anchor chain failures in December 2013, which accounted for $13.0 million in total.
During the year ended December 31, 2013 , the Company also provided certain services, including the provision of onshore and offshore personnel, which the Company provided to the West Polaris drilling rig owned by Seadrill while it operated in Nigeria during a short period in 2013. Please also see Note 6, “Other revenues” and Note 14, “Related party transactions” to the audited Consolidated and Combined Carve-Out Financial Statements included elsewhere in this annual report.

Reimbursable expenses
Reimbursable expenses decreased by $21.8 million , or 67.3% , to $10.6 million , for the year ended December 31, 2013 , from $32.4 million for the same period in 2012 . The decrease was mainly due to the completion of the mobilization of the West Aquarius to Canada and the completion of client-requested upgrades to the West Aquarius in 2012, which generated reimbursable expenses. There were no similar reimbursable expenses in 2013.

Depreciation and amortization
Depreciation and amortization increased by $27.2 million , or 23.9% , to $141.2 million , for the year ended December 31, 2013 , from $114.0 million in 2012 . The increase was primarily due to a full year of depreciation expense for the West Capricorn and West Leo in 2013. Also, the T-15 and T-16 commenced operations in July and September 2013 with no depreciation expense included in 2012.

General and administrative expenses
General and administrative expenses increased by $12.4 million , or 33.3% , to $49.6 million , for the year ended December 31, 2013 , from $37.2 million for 2012 . The increase was primarily due to a full year of operations for the West Capricorn and West Leo in 2013 and T-15 and T-16 commencing operations in July and September 2013, respectively.

Interest income
Interest income for the year ended December 31, 2013 , increased by $2.7 million , or 158.8% , to $4.4 million , compared to $1.7 million for 2012 . The increase was related to interest earned on cash held at bank of $89.7 million, as well as interest earned on the West Capricorn deferred mobilization revenue of $3.2 million.

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Interest expense
Interest expense increased by $26.4 million , or 40.1% , to $92.2 million for the year ended December 31, 2013 , compared to interest expense of $65.8 million for the same period in 2012 . The increase was primarily due to the secured credit facility used to partly fund the delivery of the West Capricorn and a full year of interest expense for the credit facility for the West Leo. The increase can also be attributed to the interest charged on the $440 million facility for the T-15 and T-16 in 2013, which was not charged in 2012 . In addition, the increase was attributed to the interest charged on the revolving credit facility with Seadrill of $125.9 million and the commitment fee expense for the undrawn balance . This facility was entered into at the time of the Company's IPO in October 2012 . There has not been a significant change in interest rates during the period.

Loss on derivative financial instruments
In the year ended December 31, 2013 , the Company recognized gains from derivative instruments of $49.9 million compared to losses of $32.9 million in 2012 . The increase was related to an interest rate swap gain incurred by Seadrill in 2013, which was charged to the Company on a back to back basis under the agreements with Seadrill. The corresponding fair market value of the interest rate swaps was an asset of $42.4 million as at December 31, 2013, compared with a liability of $5.9 million as of December 31, 2012.

Income taxes
Income tax expense was $33.2 million and $38.9 million , and the Company's effective income tax rate was 7.5% and 11.7% for the years ended December 31, 2013 and 2012 respectively. The decrease in the Company's effective income tax rate was due to the change in taxing jurisdictions in which the Company's drilling units operated and/or were owned.


B.     Liquidity and Capital Resources

Liquidity and Cash Needs
The Company operates in a capital-intensive industry, and its primary liquidity needs are to finance the purchase of additional drilling units and other capital expenditures, service its significant debt, fund investments (including the equity portion of investments in drilling units), fund working capital, maintain cash reserves against fluctuations in operating cash flows and pay distributions. The Company expects to fund its short-term liquidity needs through a combination of cash generated from operations and debt and equity financings.

As of December 31, 2014 , the Company's cash and cash equivalents were $242.7 million , compared to $89.7 million as of December 31, 2013 . In connection with the closing of its IPO, OPCO entered into a five-year $300 million revolving credit facility with Seadrill as the lender, which is referred to as the sponsor credit facility. This was reduced to $100 million following a refinancing in February 2014, where OPCO also entered into a five year $100 million revolving credit facility with a syndicate of external banks. As of December 31, 2014 the outstanding balance of both these revolving credit facilities was zero, whereas at December 31, 2013 the outstanding balance was $125.9 million . The Company believes its current resources, including the potential borrowings under the revolving credit facilities, are sufficient to meet its working capital requirements for its current business for at least the next twelve months. Generally, the Company's long-term sources of funds will be a combination of borrowings from and leasing arrangements with commercial banks, cash generated from operations and debt and equity financing. Because the Company distributes all of its available cash, the Company expects that it will rely upon financing from related parties and external financing sources, including bank borrowings and the issuance of debt and equity securities, to fund acquisitions and other expansion capital expenditures.
The Company's funding and treasury activities are intended to maintain appropriate liquidity. Cash and cash equivalents are held primarily in U.S. Dollars with some balances held in Canadian Dollars, Euros and Nigerian Naira. The Company has not entered into any foreign currency derivatives related to the Canadian Dollar, Euro or Naira in the periods presented, and, therefore, the Consolidated and Combined Carve-Out Financial Statements do not include any unrealized gains or losses on foreign currency derivatives. Because the Company incurs certain operating costs related to the West Capella in Nigerian Naira, the Company has been able to offset a significant portion of its foreign currency exposure with respect to revenues earned in Nigerian Naira.
As the Company’s fleet matures and expands, long-term maintenance expenses will likely increase. The Company is not aware of any regulatory changes or environmental liabilities that would have a material impact on the Company's current or future operations.
As of December 31, 2014 , the Company's current assets exceeded current liabilities by $110.3 million . As at December 31, 2013 , the Company's current liabilities exceeded current assets by $85.6 million , respectively. This was due to the current portion of its related party debt, however the Company had undrawn revolving credit facilities sufficient to cover the shortfall.
Net cash flow from operating activities was $608.7 million and $564.0 million in the year ended December 31, 2014 and 2013 , respectively.

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Estimated Maintenance and Replacement Capital Expenditures
The Company's operating agreements require it to distribute its available cash each quarter. In determining the amount of cash available for distribution, the Company's board of directors determines the amount of cash reserves to set aside, including reserves for future maintenance capital expenditures, working capital and other matters. Because of the substantial capital expenditures the Company is required to make to maintain its fleet, the Company’s current annual estimated maintenance and replacement capital expenditures will be $169 million per year, which is comprised of $63 million for long term maintenance and society classification surveys and $107 million , including financing costs, for replacing the Company's existing drilling units at the end of their useful lives.
The estimate for future rig replacement is based on assumptions regarding the remaining useful life of the Company’s drilling units, a net investment rate applied on reserves, replacement values of the Company’s existing rigs based on current market conditions, and the residual value of the rigs. The actual cost of replacing the drilling units in the Company’s fleet will depend on a number of factors, including prevailing market conditions, drilling contract operating dayrates and the availability and cost of financing at the time of replacement. The Company's operating agreement requires its board of directors to deduct from the Company's operating surplus each quarter estimated maintenance and replacement capital expenditures, as opposed to actual maintenance and replacement capital expenditures, in order to reduce disparities in operating surplus caused by fluctuating maintenance and replacement capital expenditures, such as society classification surveys and rig replacement. The Company's board of directors, with the approval of the conflicts committee, may determine that one or more of the assumptions should be revised, which could cause the board of directors to increase the amount of estimated maintenance and replacement capital expenditures. The Company may elect to finance some or all of its maintenance and replacement capital expenditures through the issuance of additional common units which could be dilutive to existing unitholders. Please read Item 3 “Key Information—Risk Factors—Risks Inherent in the Company's Business". The Company must make substantial capital and operating expenditures to maintain and replace the operating capacity of its fleet, which will reduce its cash available for distribution. In addition, each quarter the Company is required to deduct estimated maintenance and replacement capital expenditures from operating surplus, which may result in less cash available to unitholders than if actual maintenance and replacement capital expenditures were deducted.”

Cash Flows
The following table summarizes the Company's net cash flows from operating, investing and financing activities and our cash and cash equivalents for the periods presented:
 
($ in millions)
Year Ended December 31,
 
2014
 
2013
 
2012
Net cash provided by operating activities
$
608.7

 
$
564.0

 
$
278.2

Net cash used in investing activities
(1,542.8
)
 
(159.3
)
 
(283.5
)
Net cash provided by/ (used in) financing activities
1,087.1

 
(336.2
)
 
11.0

Net increase in cash and cash equivalents
153.0

 
68.5

 
5.7

Cash and cash equivalents at beginning of period
89.7

 
21.2

 
15.5

Cash and cash equivalents at end of period
242.7

 
89.7

 
21.2


Net Cash Provided by Operating Activities
Net cash provided by operating activities was $608.7 million and $564.0 million for the years ended December 31, 2014 and 2013 , respectively, an increase of $44.7 million or 7.9% . The increase was primarily due to an increase in net income for the year due to a larger fleet, offset by increased interest expenses and realized losses on derivative financial instruments.
Net cash provided by operating activities was $564.0 million and $278.2 million for the years ended December 31, 2013 and 2012 , respectively. The increase of $285.8 million or 102.7% , resulted from an increase in net income of $121.8 million and working capital changes of $103.6 million, mainly driven by better cash collections during 2013.

Net Cash Used in Investing Activities
Net cash used in investing activities of $1,542.8 million in 2014 was due to the Company's acquisitions of the entities that own and operate the West Auriga and the West Vela from Seadrill . The cash consideration, net of cash acquired, paid to acquire the West Auriga and the West Vela was $672.6 million and $465.1 million respectively. The Company also purchased from Seadrill an additional 28% limited partner interest in Seadrill Operating LP for $373.5 million . As a result of the acquisition, the Company’s limited partner interest in Seadrill Operating LP increased from 30% to 58% . Additions to drilling units were $31.6 million , relating mainly to the West Aquarius .
Net cash used in investing activities of $159.3 million in 2013 and $283.5 million in 2012 was, in each case, mainly due to the costs of construction of the T-15 and T-16.


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Net Cash Provided by / (Used in) Financing Activities
Net cash provided by financing activities was $1,087.1 million during the year ended December 31, 2014 . Net cash provided by financing activities was impacted by (i) net proceeds from long term debt of $2,825.4 million due to the new Amended Senior Secured Credit Facility (Term Loan B), (ii) repayments of debt of $472.1 million , (iii) repayments of related party debt with Seadrill of $1,588.3 million , (iv) repayment of the revolving credit facility with Seadrill of $125.9 million , (v) repayments of related party discount notes with Seadrill of $399.9 million , (vi) cash distributions totalling $660.2 million , (vii) proceeds from issuance of common units of $937.8 million , and (viii) proceeds from the issuance of units by Seadrill Capricorn Holdings LLC of $570.3 million .
Net cash used in financing activities was $336.2 million during the year ended December 31, 2013. Net cash used in financing activities of $336.2 million was impacted by (i) repayments of debt of $348.8 million, (ii) a repayment of its revolving credit facility with Seadrill of $43.7 million, (iii) cash distributions totalling $140.9 million, (iv) $112.4 million relating to changes in invested equity and (v) $939.2 million relating to distributions to Seadrill for the acquisition of T-15, T-16, West Leo and West Sirius . This was offset by $98.0 million from the proceeds of debt, $169.6 million relating to proceeds from borrowings under its revolving credit facility with Seadrill, $409.5 million relating to proceeds from related party vendor financing, $464.8 million relating to proceeds from issuing equity relating to the acquisition of the T-16, West Leo and West Sirius and $106.9 million relating to proceeds from issuing equity to related parties.
Net cash provided by financing activities was $11.0 million during the year ended December 31, 2012. Net cash provided by financing activities of $11.0 million relates to repayment of debt of $215.9 million and repayment of owner's funding of $165.3 million. This was offset by $100.5 million from the proceeds of debt, $207.1 million relates to the proceeds from its initial public offering in October 2012 and $79.6 million relates to changes in invested equity.

Net Increase in Cash and Cash Equivalents
As a result of the foregoing, cash and cash equivalents increased in 2014 by $153 million , increased in 2013 by $68.5 million , and increased in 2012 by $5.7 million .

Borrowing Activities
Rig Financing Agreements
Seadrill financed the acquisitions of the drilling units in the Company’s fleet with borrowings under third party credit facilities. In connection with the Company's IPO and subsequent acquisitions from Seadrill, Seadrill amended and restated the various third party facilities to allow for the transfer of the respective drilling units to OPCO and to provide for OPCO and its subsidiaries that, directly or indirectly, own the drilling units to guarantee the obligations under the facilities.

In September 2012, each of OPCO’s subsidiaries that owns the West Capricorn, West Vencedor, West Aquarius , and West Capella , or the rig owning subsidiaries, entered into intercompany loan agreements with Seadrill in the amount of approximately $522.5 million, $115.2 million, $304.6 million and $295.3 million respectively, corresponding to the aggregate principal amount outstanding under the facilities allocable to the West Capricorn, West Vencedor, West Aquarius, and West Capella respectively.

During 2013, the rig owning companies of the T15, T16 , West Leo and West Sirius entered into intercompany loan agreements with Seadrill in the amount of approximately $100.5 million, $93.1 million, $485.5 million and $220.1 million respectively, corresponding to the aggregate principal amount outstanding under the facilities allocable to the T15, T16, West Leo and West Sirius, respectively.

Pursuant to these intercompany loan agreements, each rig owning subsidiary can make payments of principal and interest to Seadrill or directly to the third party lenders under each facility.

The outstanding Rig Financing Agreements bear interest at LIBOR plus an applicable margin (as defined in the applicable Rig Financing Agreement) and mandatory costs (if any), both of which accrue and are payable every three months. In addition, a commitment fee of 40% of the applicable margin is payable quarterly in arrears and on the final maturity date or termination date for each of the outstanding Rig Financing Agreements. As all of the outstanding Rig Financing Agreements are fully drawn, the Company does not expect to pay a commitment fee on these facilities.

The Company refers to the T15 and T16 facility, and, prior to their repayment and refinancing in February and June 2014, the West Capella, West Aquarius, West Sirius, West Leo and West Capricorn facilities, collectively, as the Rig Financing Agreements. The West Vencedor Facility was referred to as a Rig Financing Agreement until June 2014 when it was amended, as described below.

The repayment and refinancing of the facilities in February and June 2014 relating to the West Capella, West Aquarius, West
Sirius, West Leo, West Capricorn and West Auriga are described below.





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West Vencedor Loan Agreement
In June 2010, Seadrill entered into a $1,200 million senior secured term loan in part to fund the delivery of the West Vencedor, as well as other Seadrill rigs. The Company refers to this secured term loan as the West Vencedor Facility. The West Vencedor was pledged to secure Seadrill’s obligations under the West Vencedor Facility. In connection with the Company's IPO, Seadrill amended and restated the West Vencedor Facility to allow for the transfer of the West Vencedor to OPCO and to provide for Seadrill Operating LP and Seadrill Vencedor Ltd. the owner of the West Vencedor Facility to guarantee the obligations under the West Vencedor Facility. The West Vencedor facility bore interest at LIBOR plus 2.25% . The West Vencedor Facility was repaid in full by Seadrill in June 2014, and subsequently the related party loan agreement between Seadrill Vencedor Ltd and Seadrill was amended to carry on this loan on the same terms, as the West Vencedor Facility. This inter-company loan agreement is referred to as the West Vencedor Loan Agreement. On April 14, 2015 the loan was extended to June 2018 under the same terms as the West Vencedor Facility. Under the extension associated with the amendment, the loan bears interest at a rate equal to LIBOR plus 2.25% , and provides for a guarantee fee of 1.4% and a balloon payment of $20.6 million at maturity. Repayments of principal of $4.1 million are due quarterly. Please refer to "Note 19 - Subsequent Events" included in the Consolidated Financial Statements appearing elsewhere in this Annual Report. As at December 31, 2014 the total net book value of the West Vencedor pledged as security was $182 million . The outstanding balance under the West Vencedor Loan Agreement was $78.2 million as of December 31, 2014 .

T-15 and T-16 Facility
In December 2012, Seadrill entered into a $440 million secured term loan facility with a syndicate of banks in part to fund the acquisition of the T-15 and T-16 . This secured term loan is referred to herein as the T-15 and T-16 Credit Facility. The T-15 and the T-16 were pledged to secure Seadrill’s obligations under the T-15 and T-16 Credit Facility. The T-15 and T-16 Credit Facility bears interest at a rate of LIBOR plus 3.25% and will mature in December 2017. In May 2013, Seadrill entered into an amendment to the T-15 and T-16 Credit Facility to allow for the transfer of the T-15 to Seadrill Partners Operating LLC and to provide for Seadrill Partners Operating LLC to guarantee the obligations under the T-15 and T-16 Credit Facility. In October 2013, Seadrill entered into an amendment to the T-15 and T-16 Credit Facility to allow for the transfer of the T-16 to Seadrill Partners Operating LLC. Effective from the respective dates of transfer of the T-15 and the T-16 from Seadrill to Seadrill Partners Operating LLC, the entities which own the T-15 and T-16 make payments of principal and interest directly to the lenders under the T-15 and T-16 Credit Facility, at Seadrill’s direction and on its behalf, corresponding to payments of principal and interest due under the T-15 and T-16 Credit Facility that are allocable to the T-15 and the T-16 . Pursuant to these intercompany loan agreements, each rig owning subsidiary can make payments of principal and interest to Seadrill or directly to the third party lenders under each facility. At maturity in December 2017 this facility will terminate and all outstanding amounts thereunder will be due and payable, including a balloon payment of $109.2 million . As at December 31, 2014 , the total net book value of the T-15 and T-16 pledged as security was $261 million . The outstanding balance relating to the Company as of December 31, 2014 was $158.8 million .

Amended Senior Secured Credit Facilities
On February 21, 2014, Seadrill Operating LP, Seadrill Capricorn Holdings LLC, and Seadrill Partners Finco LLC (the “Borrowers”), entered into Senior Secured Credit Facilities (the “Senior Secured Credit Facilities”). The Senior Secured Credit Facilities consist of (i) a $100.0 million revolving credit facility (the “revolving facility”), and (ii) a $1.8 billion term loan (the “term loan”) which was borrowed by Seadrill Operating LP in full on February 21, 2014. The proceeds from the transaction were used to (a) refinance the West Capella , West Aquarius , West Sirius and West Leo rig facilities, (b) repay in part unsecured loans from Seadrill, (c) add cash to the balance sheet in support of general company purposes and (d) pay all fees and expenses associated therewith.

On June 26, 2014, the Senior Secured Credit Facilities were amended ("Amended Senior Secured Credit Facilities") for the borrowing by Seadrill Operating LP of $1.1 billion of additional term loans in addition to the term loans already outstanding under the Senior Secured Credit Facilities as noted above. The proceeds from the additional $1.1 billion of term loans were used to (a) refinance debt secured by West Auriga of $443.1 million and West Capricorn of $426.3 million, (b) repay certain unsecured loans from Seadrill, (c) add cash to our balance sheet for general company purposes and (d) pay all fees and expenses associated with the Amended Senior Secured Credit Facilities. The Amended Senior Secured Credit Facilities are guaranteed on a senior secured basis by the Borrowers and the Borrowers’ subsidiaries that own or charter the West Capella , West Aquarius , West Sirius, West Leo, West Capricorn and West Auriga . The Amended Senior Secured Credit Facilities also are secured by mortgages on the six drilling units, security interests on the earnings, earnings accounts, and insurances owned by the subsidiary guarantors relating to the six drilling units, and pledges of the equity interests of each subsidiary guarantor. As at December 31, 2014 the total net book value of the drilling units pledged as security was $3.9 billion .

Loans under the Amended Senior Secured Credit Facilities will bear interest, at the Company's option, at a rate per annum equal to either the LIBOR Rate (subject to a 1% floor) for interest periods of one, two, three or six months plus the applicable margin or the Base Rate plus the applicable margin. The Base Rate is the highest of (a) the prime rate of interest announced from time to time by the agent bank as its prime lending rate, (b) 0.5% per annum above the Federal Funds rate as in effect from time to time, (c) the Eurodollar Rate for 1month LIBOR as in effect from time to time plus 1.0% per annum, and (d) for term loans only, 2.0% per annum. The applicable margin is 2.0% for term loans bearing interest at the Base Rate and 3.0% for term loans bearing interest at the Eurodollar Rate. The applicable margin is 1.25% for revolving loans bearing interest at the Base Rate and 2.25% for revolving loans bearing interest at the Eurodollar Rate. In addition, the Company will incur a commitment fee based on the unused portion of the revolving facility of 0.5% per annum.

The Company has entered into interest rate swap transactions to hedge 100% of the variable element of the term loan facility, including the LIBOR floor at a weighted average fixed rate of 2.49% per annum. A variable rate option included in the swap provides that the hedge counterparty

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shall pay the greater of 1.0% or 3 Month LIBOR. Thus, where the variable rate is less than 1%, the variable rate payment shall be deemed to be equal to 1%.

The term loan matures on February 21, 2021. Amortization payments in the amount of 0.25% of the original term loan amount are required to be paid on the last day of each calendar quarter. The revolving facility matures on February 21, 2019 and does not amortize. The Company is required to make mandatory prepayments of term loans using proceeds from asset sales that are not otherwise utilized for permitted purposes and to make offers to purchase term loans using proceeds of loss events that are not otherwise utilized for permitted purposes.

As of December 31, 2014 , the outstanding balance of the term loan was $2,881.0 million , and the $100.0 million revolving credit facility was not yet drawn.

$1,450 million Senior Secured Credit Facility
In March 20, 2013 Seadrill entered into a $1,450 million senior secured credit facility with a syndicate of banks and export credit agencies, relating to the West Auriga , the West Vela and one other drilling unit owned by Seadrill. Upon closing of the West Auriga acquisition in March 2014, the entity which owns the West Auriga owed $443.1 million under the facility. This amount was repaid with proceeds from the Amended Senior Secured Credit Facilities discussed above. Upon closing of the West Vela acquisition in November 2014, the entity that owns the West Vela owed $433.0 million under the facility. The facility has a final maturity in 2025, with a commercial tranche due for renewal in 2018, and bears interest at a rate equal to LIBOR plus a margin in the range of 1.2% to 3%. If the balloon payment of $86 million on the commercial tranche does not get refinanced to the satisfaction of the remaining lenders after five years, the remaining tranches also become due after five years.

Under the terms of the amended $1,450 million senior secured credit facility, certain subsidiaries of Seadrill and the entity that owns the West Vela are jointly and severally liable for their own debt and obligations under the facility and the debt and obligations of other borrowers who are also party to such facility. These obligations are continuing and extend to amounts payable by any borrower under the facility. The total amount owed by all parties under this facility as of December 31, 2014 is $856 million (2013: $ $1,390 million ). The total amount related to the West Vela as of December 31, 2014 was $422.9 million (2013: nil ). The Company has received an indemnity from Seadrill for any payments or obligations related to this facility that are not related to the West Vela .

Sponsor Revolving Credit Facility
In connection with the closing of the Company's IPO on October 24, 2012 , OPCO entered into a $300 million revolving credit facility, with Seadrill as the lender. The sponsor revolving credit facility matures in October 2017 and bears interest at a rate of LIBOR plus 5%  per annum, with an annual 2% commitment fee on the undrawn balance. On March 1, 2014, the revolving credit facility was amended to reduce the maximum borrowing limit to $100 million , As of December 31, 2014 , the outstanding balance under the sponsor revolving credit facility was zero .

$109.5 million vendor financing loan
On May 17, 2013, the Company borrowed from Seadrill $109.5 million as vendor financing to fund the acquisition of the T-15 . The loan bears interest at rate of LIBOR plus a margin of 5.00% and matures in May 2016.

$229.9 million discount note
On December 13, 2013, as part of the acquisition of the West Sirius , Seadrill Capricorn Holdings LLC issued a zero coupon discount note to Seadrill in an initial amount of $229.9 million. The note was repayable in June 2015 and upon maturity, Seadrill Capricorn Holdings LLC was due to pay $238.5 million to Seadrill. The note was repaid in full in February 2014 with proceeds from the Senior Secured Credit Facilities.

$70.0 million discount note
On December 13, 2013, as part of the acquisition of the West Sirius , the Company issued a zero coupon discount note to Seadrill for an initial amount of $70.0 million. The note was repayable in June 2015 and upon maturity, the Company would have been obligated to pay $72.6 million to Seadrill. The note was repaid in full in February 2014 with the proceeds from the Senior Secured Credit Facilities as further discussed above.

$100.0 million discount note
In March 2014, as part of the acquisition of the West Auriga , Seadrill Capricorn Holdings LLC issued a zero coupon discount note to
Seadrill in an initial amount of $100.0 million. The note was repayable in September 2015 and upon maturity, Seadrill Capricorn Holdings LLC was due to pay $103.7 million to Seadrill. This note was repaid in June 2014 with proceeds from the Amended Senior Secured Credit Facilities.


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Restrictive Covenants
The Company's facilities and related party loan agreements include financial and non-financial covenants applicable to the Company, certain of its subsidiaries, and Seadrill.

Amended Senior Secured Credit Facilities
Our subsidiaries that are borrowers or guarantors of the Amended Senior Secured Credit Facilities are subject to certain financial and restrictive covenants contained in our Amended Senior Secured Credit Facilities including the following:
•
Limitations on the incurrence of indebtedness and issuance of preferred equity;
•
Limitations on the incurrence of liens;
•
Limitations on dividends and other restricted payments;
•
Limitations on investments;
•
Limitations on mergers, consolidation and sales of all or substantially all assets;
•
Limitations on asset sales;
•
Limitations on transactions with affiliates;
•
Limitation on business activities to businesses similar to those now being conducted; and
•
Requirement to maintain a senior secured net leverage ratio of no more than 5.5 to 1.0 (5.0 to 1.0 for the quarter ending March 31, 2015 and thereafter).

In addition, the Amended Senior Secured Credit Facilities contain other customary terms, including the following events of
default (subject to customary grace periods), upon the occurrence of which, the loans may be declared (or in some cases
automatically become) immediately due and payable:
•
Failure of any borrow of the term loan to pay principal, interest or other amounts owing with respect to the loans under the Amended Senior Secured Credit Facilities;
•
Breach in any material respect of any representation or warranty contained in Amended Senior Secured Credit Facilities documentation;
•
Breach of any covenant contained in Amended Senior Secured Credit Facilities documentation;
•
The occurrence of a payment default under, or acceleration of, any indebtedness aggregating $25.0 million or more other than the term loan;
•
Failure by our subsidiaries that are borrowers or guarantors of our Amended Senior Secured Credit Facilities to pay or stay any judgment in excess of $25.0 million;
•
Repudiation by our subsidiaries that are borrowers or guarantors of our Amended Senior Secured Credit Facilities of any guarantee or collateral documents related to the Amended Senior Secured Credit Facilities;
•
Any guarantee related to the Amended Senior Secured Credit Facilities is found to be unenforceable or invalid or is not otherwise effective;
•
Any of our subsidiaries that are borrowers or guarantors of our Amended Senior Secured Credit Facilities file for bankruptcy or become the subject of an involuntary bankruptcy case or other similar proceeding;
•
The equity interests of any of the company, Seadrill Operating LP or Seadrill Capricorn Holdings LLC is pledged to anyone other than the collateral agent for the term loan; and
•
The occurrence of a change of control.

The borrowers and guarantors were in compliance with the covenants under the Amended Senior Secured Credit Facilities as of December 31, 2014 .

Rig Financing Agreements
The loan agreements described above under "-Rig Financing Agreements" (which we refer to as the Rig Financing Agreements) contain various customary covenants that may limit, among other things, the ability of the borrower to:
•
sell the applicable drilling unit;
•
incur additional indebtedness or guarantee other indebtedness;
•
make investments or acquisitions;
•
pay dividends or make any other distributions if an event of default occurs; or
•
enter into inter-company charter arrangements for the drilling units not contemplated by the applicable Rig Financing Agreement.

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The Rig Financing Agreements also contain financial covenants requiring Seadrill Limited to:
•
Aggregated minimum liquidity requirement for Seadrill's consolidated group: to maintain cash and cash equivalents of at least $150 million within the group.
•
Interest coverage ratio: to maintain an EBITDA to interest expense ratio of at least 2.5 :1.
•
Current ratio: to maintain current assets to current liabilities ratio of at least 1 :1. Current assets are defined as book value less minimum liquidity, but including up to 20.0% of shares in listed companies owned 20.0% or more. Current liabilities are defined as book value less the current portion of long term debt.
•
Equity to asset ratio: to maintain total equity to total assets ratio of at least 30.0% . Both equity and total assets are adjusted for the difference between book and market values of drilling units.
•
Leverage ratio: to maintain a ratio of net debt to EBITDA no greater than 4.5 :1. Net debt is calculated as all interest bearing debt less cash and cash equivalents excluding minimum liquidity requirements.

For the purposes of the above tests, EBITDA is defined as the earnings before interest, taxes, depreciation and amortization on a consolidated basis and (ii) the cash distributions from investments, each for the previous period of twelve months as such term is defined in accordance with accounting principles consistently applied. However, in the event that Seadrill or a member of the group acquires rigs or rig owning entities with historical EBITDA available for the rigs' previous ownership, such EBITDA shall be included for covenant purposes in the relevant loan agreement, and if necessary, be annualized to represent a twelve (12) month historical EBITDA. In the event that Seadrill or a member of the group acquires rigs or rig owning companies without historical EBITDA available, Seadrill is entitled to base a twelve month historical EBITDA calculation on future projected EBITDA only subject to any such new rig having (i) a firm charter contract in place at the time of delivery of the rig, with a minimum duration of twelve months, and (ii) a firm charter contract in place at the time of such EBITDA calculation, provided Seadrill provides the agent bank with a detailed calculation of future projected EBITDA. Further, EBITDA shall include any realized gains and/or losses in respect of the disposal of rigs or the disposal of shares in rig owning companies.

Cash distributions from investments are defined as cash received by Seadrill, by way of dividends, in respect of its ownership interests in companies which Seadrill does not control but over which it exerts significant influence.

In addition to financial covenants, the Rig Financing Agreements generally contain covenants which are customary in secured financing in this industry, including  operational covenants in relation to the relevant rigs, information undertakings and covenants in relation to corporate existence and conduct of business.
The Rig Financing Agreements also identify various events that may trigger mandatory reduction, prepayment, and cancellation of the facility including, among others, the following:
•
total loss or sale of a drilling unit securing a Rig Facility;
•
cancellation or termination of any existing charter contract or satisfactory drilling contract; and
•
a change of control.

The Rig Financing Agreements contains customary events of default, such as failure to repay principal and interest, and other events of defaults, such as:
•
failure to comply with the financial or insurance covenants;
•
cross-default to other indebtedness held by both Seadrill and its subsidiaries and by the Company;
•
failure by Seadrill or by the Company to remain listed on a stock exchange;
•
the occurrence of a material adverse change;
•
revocation, termination, or modification of any authorization, license, consent, permission, or approval as necessary to conduct operations as contemplated by the applicable Rig Financing Agreement; and
•
the destruction, abandonment, seizure, appropriation or forfeiture of property of the guarantors or Seadrill and its subsidiaries, or the limitation by seizure, expropriation, nationalization, intervention, restriction or other action by or on behalf of any governmental, regulatory or other authority, of the authority or ability of Seadrill or any subsidiary thereof to conduct its business, which has or reasonably may be expected to have a material adverse effect.

The Rig Financing Agreements are secured by:
•
guarantees from rig owning subsidiaries (guarantors),
•
a first priority share pledge over all the shares issued by each of the guarantors,
•
a first priority perfected mortgage in all collateral rigs and any deed of covenant thereto, subject to contractual agreed "quiet enjoyment" undertakings with the end-user of the collateral rigs to be entered into if this is required by the relevant end-user pursuant to the relevant contract,
•
a first priority security interest over each of the rig owners' with respect to all earnings and proceeds of insurance, and
•
a first priority security interest in the earnings accounts.

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Our Rig Financing Agreements also contain, as applicable, loan-to-value clauses, which could require the Company, at its option, to post additional collateral or prepay a portion of the outstanding borrowings should the value of the drilling units securing borrowings under each of such agreements decrease below required levels. The market value of the rigs must be at least 135% of the loan outstanding.

If an event of default exists under any of the Rig Financing Agreement, the lenders have the ability to accelerate the maturity of the applicable Rig Financing Agreement and exercise other rights and remedies. In addition, if Seadrill were to default under one of its other financing agreements, it could cause an event of default under each of the Rig Financing Agreement. Further, because the Company’s drilling units are pledged as security for Seadrill’s obligations under the Rig Facilities, lenders thereunder could foreclose on the Company’s drilling units in the event of a default thereunder. See Item 3 “Key Information—Risk Factors—Risks Inherent in the Company's Business—Seadrill’s failure to comply with covenants and other provisions in its existing or future financing agreements could result in cross-defaults under the Company’s existing financing agreements, which would have a material adverse effect on us.”

The borrowers and Seadrill were in compliance with the covenants under the Rig Financing Agreements as of December 31, 2014 .

$ 1,450 million Senior Secured Credit Facility
The $ 1,450 million Senior Secured Credit Facility contains materially the same covenants as those set out for the Rig Financing Agreements above. In addition to the financial covenants relating to Seadrill Limited, each of the borrowers are required to ensure that their individual Debt Service Cover ratio shall not be less than 1.15:1.

If Seadrill were to default under the facility, or to default under one of its other financing agreements, it could cause an event of default under the facility. Further, because the West Vela is pledged as security under the facility, lenders thereunder could foreclose on the West Vela in the event of a default thereunder.

The borrowers and the gaurantors were in compliance with the covenants under the facility as of December 31, 2014 .

Sponsor revolving credit facility
The sponsor revolving credit facility contains covenants that require us to, among other things:
•
notify Seadrill of the occurrence of any default or event of default; and
•
provide Seadrill with information in respect of its business and financial status as Seadrill may reasonably require, including, but not limited to, copies of the Company's unaudited quarterly financial statements and its audited annual financial statements.

Events of default under the sponsor revolving credit facility include, among others, the following:
•
failure to pay any sum payable under the sponsor credit facility when due;
•
breach of certain covenants and obligations of the sponsor credit facility;
•
a material inaccuracy of any representation or warranty;
•
default under other indebtedness in excess of $25.0 million ;
•
bankruptcy or insolvency events; and
•
commencement of proceedings seeking issuance of a warrant of attachment, execution, distraint or similar process against all or any substantial part of the Company’s assets that results in an entry of an order for any such relief that is not vacated, discharged, stayed or bonded pending appeal within sixty days of the entry thereof.

The Company was in compliance with the covenants under the sponsor revolving credit facility as of December 31, 2014 .

Derivative Instruments and Hedging Activities
The Company uses financial instruments to reduce the risk associated with fluctuations in interest rates. These agreements do not qualify for hedge accounting and any changes in the fair values of interest rate swap agreements are included in the Consolidated and Combined Statement of Operations within "Loss/(gain) on derivative financial instruments".
Interest-rate swap agreements:
Total realized and unrealized loss on interest-rate swap agreements, not qualified for hedge accounting, amounted to $124.9 million for the year ended December 31, 2014 .
As of December 31, 2014 , the Company and its consolidated subsidiaries had entered into interest rate swap contracts with Seadrill with a combined outstanding principal amount of $690.1 million , at fixed rates between 1.10%  per annum and 1.93%  per annum.
As of December 31, 2014 , the Company and its consolidated subsidiaries had entered into interest rate swap contracts with external parties with a combined outstanding principal amount of $2,881.7 million , at an average fixed rate of 2.49%  per annum.

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As of December 31, 2014 , its net exposure to short term fluctuations in interest rates on its outstanding debt was $78.6 million , based on its total net interest bearing debt of $3,650.4 million , including related party debt agreements, less the $3,571.8 million outstanding balance of fixed interest rate swaps.
The Company receives part of its revenue in the Euro, Canadian dollar and Nigerian Naira. Because the Company incurs operating costs related to the West Capella in Nigerian Naira, the Company is able to offset a portion of its foreign currency exposure with respect to revenues earned in Nigerian Naira. Depending on the level of the Company's currency exposure, the Company may in the future enter into derivative instruments to manage currency risk.

C.     Research and Development
The Company does not undertake any significant expenditures on research and development, and has no significant interests in patents or licenses.

D.     Trend Information
The offshore drilling market, which has been challenged by the pace of supply additions and reduced capital expenditure by oil companies, is now also dealing with a more significant reduction in demand. To compound these issues, during the fourth quarter of 2014 OPEC made clear its intention to focus on market share rather than price. A desire by oil companies to reduce capital expenditures amidst the significant price decline has severely curtailed drilling budgets for at least the 2015 year. Consequently significant additional spare capacity for offshore drilling units is likely to materialize as 2015 progresses.
The offshore drilling market is entering its second year of a downturn. Approximately a quarter of ultra-deepwater floaters will become available in 2015, a third of which are newbuilds that are yet to be delivered. Based on this available capacity, significant delays or cancellation of newbuild projects can be expected. New tendering activity remains subdued as oil companies set their budgets at materially lower levels than seen in recent years. Rig owners are bidding for available work extremely competitively with a focus on utilization over returns, which will likely drive rates down to or below cash breakeven levels.
The severity of this downturn is forcing the contract drilling industry to make decisions regarding cold stacking and scrapping of older units. This activity is expected to accelerate, likely to levels which have not been seen in two decades. Owners of older, inefficient units face difficult decisions as these units approach periodic classing activities and most seem to be opting not to invest the significant expenditures required, instead choosing to stack or scrap the unit. From a long term perspective, these decisions should ultimately create a more healthy industry as weaker players leave the business and old rigs are retired.
In light of the current environment, Seadrill Partners is encountering and may in the future encounter situations where counterparties request relief to contracted dayrates or seek early contract termination. In the event of early termination for the customer's convenience, an early termination amount is typically payable to Seadrill Partners, in accordance with the terms of the drilling contract. While the Company believes that its contract terms are enforceable, it may be willing to engage in discussions to modify such contracts if there is a commercial agreement that is beneficial to both parties.

E.     Off-Balance Sheet Arrangements
The Company had no off-balance sheet arrangements as of December 31, 2014 or 2013 , other than operating lease obligations and other commitments in the ordinary course of business that it is are contractually obligated to fulfill with cash under certain circumstances. These commitments include guarantees in favor of banks as well as guarantees towards third parties such as surety performance guarantees towards customers as it relates to the Company's drilling contracts, contract bidding, customs duties, tax appeals and other obligations in various jurisdictions. Obligations under these guarantees are not normally called, as the Company typically complies with the underlying performance requirement. As of December 31, 2014 , the Company had not been required to make collateral deposits with respect to these agreements.
The maximum potential future payments are summarized in Note 16 in the Consolidated and Combined Carve-Out Financial Statements appearing elsewhere in this Annual Report.


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F.     Tabular Disclosure of Contractual Obligations
The following table summarizes the Company's long-term contractual obligations as of December 31, 2014 :
 
 
Payments Due by Period
  ($ in millions)
Total
 
Less than
1 Year
 
1-3 Years
 
4-5 Years
 
More than
5 Years
Long-term debt obligations
$
3,650.4

 
$
116.9

 
$
419.9

 
$
185.6

 
$
2,928.0

Interest expense commitments on long-term debt obligations (1)
884.2

 
127.0

 
281.9

 
312.9

 
162.4

Commitment fee on undrawn facility (2)
17.5

 
2.5

 
5.0

 
5.0

 
5.0

Total
$
4,552.1

 
$
246.4

 
$
706.8

 
$
503.5

 
$
3,095.4

(1)
The Company's interest commitment on its long-term debt is calculated based on an assumed average U.S. Dollar 3 month LIBOR of 0.25% and taking into account the various applicable margin rates associated with each facility.
(2)
The $100 million revolving credit facility with Seadrill and the $100.0 million revolving credit facility under the Amended Senior Secured Credit Facilities incur commitment fees on the undrawn balance of 2%  per annum and 0.5% per annum respectively.

G.     Safe Harbor
See “Cautionary Statement Regarding Forward-Looking Statements.”


Item 6.         Directors, Senior Management and Employees

A.     Directors and Senior Management
Directors
The following provides information about each of the Company's directors. The business address through which the board can be contacted is 2nd Floor, Building 11, Chiswick Business Park, 566 Chiswick High Road, London, W4 5YS, United Kingdom.
 
Name
Age
Position
Graham Robjohns
50
Chief Executive Officer and Director
Bert Bekker
76
Director and Audit Committee Member
Kate Blankenship
50
Director and Audit Committee Member
Harald Thorstein
35
Director
Bart Veldhuizen (1)
48
Former Director, Audit Committee Member and Conflicts Committee Member
Tony Curry
63
Director and Conflicts Committee Member
Keith MacDonald
57
Director Audit Committee Member and Conflicts Committee Member

(1) On April 6, 2015, Mr. Bart Veldhuizen accepted a role with DVB Bank and resigned from the Board of Directors.

Bert Bekker has served as the Company's director since September 2012, and serves on the audit committee of the Company's board of directors. Mr. Bekker has been in the heavy marine transport industry since 1978 when he co-founded Dock Express Shipping Rotterdam (the predecessor of Dockwise Transport). Mr. Bekker retired from his position as Chief Executive Officer of Dockwise Transport B.V. in May 2003. Mr. Bekker served as Chief Executive Officer of Cableship Contractors N.V. Curacao from March 2001 until June 2006. In May 2006, Mr. Bekker was appointed Executive Advisor Heavy Lift of Frontline Management AS, an affiliate of Frontline, and in January 2007, he was appointed CEO of Sealift Management B.V. Mr. Bekker held that position until its merger with Dockwise Ltd in May 2007. Mr. Bekker served as a director of Dockwise Ltd. from June 2007 until December 2009. Mr. Bekker has served as a director of Wilh. Wilhelmsen Netherlands B.V., part of the Wilh. Wilhelmsen ASA Group, since July 2003. Mr. Bekker has served as a director of Seadrill since April 2013.

Kate Blankenship has served as the Company's director since June 2012, and as a director of Seadrill 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. Mrs. Blankenship has been a director of North Atlantic Drilling Limited, or North Atlantic, a Bermuda company listed on the New York Stock Exchange, since February 2011, Independent Tankers Corporation Limited, or Independent Tankers, since February 2008, Golar since July 2003, Golar LNG Partners LP since April 2011, Golden Ocean since November 2004, Archer since its incorporation in 2007, and Avance Gas Holding Ltd. since October 2013. She is a member of the Institute of Chartered Accountants in England and Wales.


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Harald Thorstein has served as the Company's director since September 2012. Mr. Thorstein has been employed by Frontline Corporate Services, a subsidiary of Frontline Ltd., in London since 2011, prior to which he was employed in the Corporate Finance Division of DnB NOR Markets from 2008 to 2011, specializing in the offshore and shipping sectors. Mr. Thorstein has served as a director of Ship Finance International since  September 2011, North Atlantic Drilling Ltd since September 2013, and Northern Offshore Limited since February 2012, and has served as Chairman of the Board of Directors of Aktiv Kapital AS and Deep Sea Supply plc since May 2013. Mr. Thorstein has an M Sc. in Industrial Economics and Technology Management from the Norwegian University of Science and Technology.

Bart Veldhuizen served as the Company's director from January 2013 until his resignation on April 6, 2015. On April 6, 2015, Mr. Veldhuizen became a member of the Managing Board of DVB Bank, responsible for its shipping and offshore finance franchise. Mr. Veldhuizen has been working in the shipping industry since 1994 on both the banking and non-banking side. Mr. Veldhuizen is a founding director in Breakwater Capital Ltd. Breakwater Capital is an investment and advisory company in London focusing on the maritime industry. Mr. Veldhuizen is also a director of Golar LNG Partners LP. From August 2007 until October 2011, he was the Managing Director & Head of Shipping of Lloyds Banking. In this capacity, Mr. Veldhuizen managed the combined Lloyds Bank and Bank of Scotland’s USD 16 billion shipping loan and lease portfolio. He started his career with Van Ommeren Shipping, a Dutch public shipping & storage company after which he joined DVB bank as a shipping banker working in both Rotterdam and Piraeus. In 2000, he joined Smit International, a publicly listed Maritime service provider active in salvage, marine contracting and harbour towage. After working for Smit in both Greece and Singapore, Mr. Veldhuizen returned to the Netherlands in August 2003 to work with NIBC Bank, a Dutch based merchant bank. Mr. Veldhuizen holds a degree in Business Economics from the Erasmus University in Rotterdam, the Netherlands.

Tony Curry was appointed to the Company's board of directors in April 2013. Mr. Curry also serves on the conflicts committee of the Company’s board of directors. Mr. Curry retired from Shell in May 2009 having spent 40 years in Shell Shipping. For the last 12 years of his employment with Shell Shipping Mr. Curry was the Time Charter & Sale and Purchase Manager. Prior to this Mr. Curry spent seven years in Shell Western Services, Nassau, Bahamas as the Oil Freight Manager. Mr. Curry was a Director of Frontline Ltd from October 2009 to April 2013.

Keith MacDonald was appointed to the Company’s board of directors in October 2014. Mr. MacDonald also serves on the audit and conflicts committees of the Company's board of directors. Mr. MacDonald has over 30 years of experience in asset finance as an adviser, banker and independent board director. From 2009 to 2013 he was Global Head of Structured Corporate Finance for Lloyds Banking Group which included the Shipping and other asset finance operations of the Bank. Prior to Lloyds he held a number of senior roles for Citibank from 1990 to 2006 culminating in being Asia-Pacific Head of Structured Corporate Finance based in Hong Kong and was extensively involved in the Bank’s ship finance activities for the Asian market. From 2006 to 2009 he was a Founding Partner of Manresa Partners, a London-based Corporate Finance boutique that specialized in cross-border asset financing. Mr. MacDonald currently acts as an adviser to a number of companies and financial institutions. He is also an Independent Director of two asset finance entities, AABS Limited and RISE Limited and is a Non-Executive Director of First Derivatives plc, a financial technology company listed in London and Dublin. He is a graduate of the National University of Ireland, a Fellow of the Institute of Chartered Accountants in Ireland and a member of the Institute of Directors.
Executive Officers
The Company currently does not employ any of the Company's executive officers and relies solely on Seadrill Management to provide the Company with personnel who perform executive officer services for the Company's benefit pursuant to the management and administrative services agreements and who are responsible for the Company's day-to-day management subject to the direction of the Company's board of directors. Seadrill Management also provides certain advisory, technical management services to the Company’s fleet and administrative services to the Company pursuant to the management and administrative services agreement. The following table provides information about each of the personnel of Seadrill Management who perform executive officer services for us. The business address for the Company's executive officers is 2nd Floor, Building 11, Chiswick Business Park, 566 Chiswick High Road, London, W4 5YS, United Kingdom.
 
Name
Age
Position
Graham Robjohns
50
Chief Executive Officer and Director
Rune Magnus Lundetræ (1)
38
Chief Financial Officer
(1) Rune Magnus Lundetræ will step down as Chief Financial Officer as of 30 June 2015.
Graham Robjohns has served as the Company's Chief Executive Officer since June 2012 and as the Company's director since September 2012. Mr. Robjohns currently serves as a director of Seadrill UK Ltd., a wholly owned subsidiary of Seadrill, and has served in such position since June 2010. Mr. Robjohns has also served as Principal Executive Officer of Golar LNG Partners LP since July 2011 and prior to that, served as its Chief Executive Officer and Chief Financial Officer from April 2011 to July 2011. Mr. Robjohns served as the Chief Financial Officer of Golar Management from November 2005 until June 2011. Mr. Robjohns also served as Chief Executive Officer of Golar LNG Management from November 2009 until July 2011. Mr. Robjohns served as Group Financial Controller of Golar Management from May 2001 to November 2005 and as Chief Accounting Officer of Golar Management from June 2003 until November 2005. He was the Financial Controller of Osprey Maritime (Europe) Ltd from March 2000 to May 2001. From 1992 to March 2000 he worked for Associated British Foods Plc. and then Case Technology Ltd (Case), both manufacturing businesses, in various financial management positions and as a director of Case. Prior to 1992, Mr. Robjohns worked for PricewaterhouseCoopers in their corporation tax department. He is a member of the Institute of Chartered Accountants in England and Wales.

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Rune Magnus Lundetræ has served as the Company's Chief Financial Officer since June 2012. Mr. Lundetræ has also served as Chief Financial Officer of Seadrill Management since 2012. From November 2010 to February 2012, Mr. Lundetræ was Finance Director for Seadrill Americas and Commercial Director for Seadrill Europe (now North Atlantic). 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, and as Chief Financial Officer of North Atlantic from May 2012 until February 2014. Prior to joining Seadrill in 2007, 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.

B.     Compensation
Reimbursement of Expenses
The Seadrill Member does not receive compensation from the Company for any services it may provide on the Company's behalf, although it is entitled to reimbursement for expenses incurred on the Company's behalf. In addition, the Company reimburses Seadrill Management and Seadrill UK Ltd. for expenses incurred pursuant to the management and administrative services agreements that the Company entered into with Seadrill Management and Seadrill UK Ltd. in connection with the closing of the Company's IPO. Please read Item 7 “Major Unitholders and Related Party Transactions—Related Party Transactions—Management and Administrative Services Agreements.”
Executive Compensation
The Company did not pay any compensation to its directors or officers nor did it accrue any obligations with respect to management incentive or retirement benefits for periods prior to the Company's IPO. Under the management and administrative services agreements, the Company is obligated to reimburse Seadrill Management for their reasonable costs and expenses incurred in connection with the provision of executive officer and other administrative services to us. In addition, the Company is obligated to pay Seadrill Management a management fee equal to 5% of the costs and expenses incurred on the Company's behalf. For the year ended December 31, 2014 , the Company incurred total costs, expenses and fees under these agreements of approximately $0.8 million . The amount of the Company's reimbursement to Seadrill Management for the time of the Company's officers depends on an estimate of the percentage of time the Company's officers spend on the Company's business and is based upon a percentage of the salary and benefits Seadrill Management, as applicable, pays to such officers. Seadrill Management Ltd. provides for the compensation of Mr. Lundetræ and Mr. Robjohns in accordance with its own policies and procedures. The Company does not pay any additional compensation to the Company's officers. Officers and employees of affiliates of Seadrill may participate in employee benefit plans and arrangements sponsored by Seadrill or its affiliates, including plans that may be established in the future. Please read Item 7 “Major Unitholders and Related Party Transactions—Related Party Transactions—Management and Administrative Services Agreements.”

Compensation of Directors
The Company's officers or officers of Seadrill who also serve as the Company's directors receive additional compensation for their service as directors. Additionally the Company's directors receive compensation for their service as directors and members of the audit committee and conflicts committee receive additional compensation for their services on these committees. During the year ended December 31, 2014 , the Company's directors received aggregate compensation for services of $0.3 million . In addition, each director is reimbursed for out-of-pocket expenses in connection with attending meetings of the board of directors or committees. Each director is fully indemnified by the Company for actions associated with being a director to the extent permitted under Marshall Islands law.
 
C.     Board Practices
General
The Company's operating agreement provides that the Company's board of directors has authority to oversee and direct the Company's operations, management and policies on an exclusive basis. The Company's executive officers manage the Company's day-to-day activities consistent with the policies and procedures adopted by the Company's board of directors. Certain of the Company's current executive officers and directors are also executive officers or directors of Seadrill or its subsidiaries.
The Company's current board of directors consists of six members: Kate Blankenship, Graham Robjohns, Bert Bekker, Harald Thorstein, Tony Curry, and Keith MacDonald. On April 6, 2015, Mr. Bart Veldhuizen resigned from the board. The Company's board has determined that each of Mrs. Blankenship, Mr. Bekker, Mr. Curry and Mr. MacDonald satisfies the independence standards established by The New York Stock Exchange, or NYSE, and Rule 10A-3 of the Exchange Act as applicable to the Company. The Company's board currently consists of six members, three of whom were appointed by the Seadrill Member in its sole discretion and three of whom were elected by its common unitholders. The directors appointed by the Seadrill Member, Kate Blankenship, Graham Robjohns and Keith MacDonald, will serve as directors for terms determined by the Seadrill Member. Directors elected by its common unitholders are divided into three classes serving staggered three-year terms. Harald Thorstein, Bert Bekker and Tony Curry were elected by the Company's common unitholders. Harald Thorstein is designated as the Class I elected director and will serve until the Company's annual meeting of unitholders in 2017, Bert Bekker is designated as the Class II elected director and will serve until the Company's annual meeting of unitholders in 2015, and Tony Curry is designated as the Company's Class III elected director and will serve until the Company's annual meeting of unitholders in 2016. Mr. Bart Veldhuizen was elected as a Class III elected director. The remaining elected directors are entitled to appoint a replacement director to serve the remainder of Mr. Veldhuizen's term. At each annual meeting of unitholders, directors will be elected to succeed the class of directors whose terms have expired by a plurality of the votes of the common unitholders. Directors elected by the Company's common unitholders will be nominated by the board of directors or by any member or group of members that holds at least 10% of the outstanding common units.

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Each outstanding common unit is entitled to one vote on matters subject to a vote of common unitholders. However, if at any time, any person or group owns beneficially more than 5% or more of any class of units then outstanding, any such units owned by that person or group in excess of 5% may not be voted (except for purposes of nominating a person for election to the board). The voting rights of any such unitholders in excess of 5% will effectively be redistributed pro rata among the other common unitholders holding less than 5% of the voting power of such class of units. The Seadrill Member, its affiliates and persons who acquired common units with the prior approval of its board of directors is not subject to this 5% limitation except with respect to voting their common units in the election of the elected directors.
Committees
The Company has an audit committee that, among other things, reviews the Company's external financial reporting, engages external auditors and oversees its internal audit activities and procedures and the adequacy of its internal accounting controls. The Company's audit committee is currently composed of three directors, Kate Blankenship, Bert Bekker and Keith MacDonald. The Company's board has determined that each of Ms. Blankenship, Mr. Bekker and Mr. MacDonald satisfies the independence standards established by the NYSE. Ms. Blankenship qualifies as an “audit committee expert” for purposes of SEC rules and regulations.

The Company also has a conflicts committee composed of two members of its board of directors. The conflicts committee is available at the board’s discretion to review specific matters that the board believes may involve conflicts of interest. The conflicts committee will determine if the resolution of the conflict of interest is fair and reasonable to the Company. The members of the conflicts committee may not be officers or employees of the Company or directors, officers or employees of the Seadrill Member or its affiliates, and must meet the independence standards established by the NYSE to serve on an audit committee of a board of directors and certain other requirements. Any matters approved by the conflicts committee will be conclusively deemed to be fair and reasonable to the Company, approved by all of its members, and not a breach by its directors, the Seadrill Member or its affiliates of any duties any of them may owe the Company or its unitholders. The current members of the Company's conflicts committee are Tony Curry and Keith MacDonald.
Exemption from NYSE Corporate Governance Rules
Because the Company qualifies as a foreign private issuer under SEC rules, the Company is permitted to follow the corporate governance practices of the Marshall Islands (the jurisdiction in which the Company is organized) in lieu of certain NYSE corporate governance requirements that would otherwise be applicable to U.S. companies. NYSE rules do not require a listed company that is a foreign private issuer to have a board of directors that is composed of a majority of independent directors. Under Marshall Islands law, the Company is not required to have a board of directors composed of a majority of directors meeting the independence standards described in NYSE rules. Accordingly, its board of directors is not composed of a majority of independent directors. NYSE rules do not require foreign private issuers like us to establish a compensation committee or a nominating/corporate governance committee. Similarly, under Marshall Islands law, the Company is not required to have a compensation committee or a nominating/corporate governance committee. Accordingly, the Company does not have a compensation committee or a nominating/corporate governance committee. For a listing and further discussion of how the Company's corporate governance practices differ from those required of U.S. companies listed on the NYSE, please see Item 16G or visit the corporate governance section of our website at www.seadrillpartners.com.
Management of OPCO
The Company's wholly owned subsidiary, Seadrill Operating GP LLC, the general partner of Seadrill Operating LP, manages Seadrill Operating LP’s operations and activities. The Company's board of directors has the authority to appoint and elect the directors of Seadrill Operating GP LLC, who in turn appoint the officers of Seadrill Operating GP LLC. Certain of the Company's directors and officers also serve as directors or executive officers of Seadrill Operating GP LLC. The partnership agreement of Seadrill Operating LP provides that certain actions relating to Seadrill Operating LP must be approved by its board of directors. These actions include, among other things, establishing maintenance and replacement capital and other cash reserves and the determination of the amount of quarterly distributions by Seadrill Operating LP to its partners, including us. In addition, the Company owns 51% of the limited liability company interests in Seadrill Capricorn Holdings LLC and control its operations and activities. The Company also owns 100% of the limited liability company interests in Seadrill Partners Operating LLC and control its operations and activities. Please read Item 7 “Major Unitholders and Related Party Transactions—Related Party Transactions—OPCO Operating Agreements.”

D.     Employees
The Company's Chief Executive Officer and Chief Financial Officer provide their services to us pursuant to the management and administrative services agreements.
As of December 31, 2014 , approximately 1,638  offshore staff served on the Company’s offshore drilling units and approximately 68  staff served onshore in technical, commercial and administrative roles in various countries. Certain subsidiaries of Seadrill provide onshore advisory, operational and administrative support to the Company’s operating subsidiaries pursuant to service agreements. Please read Item 7 “Major Unitholders and Related Party Transactions—Related Party Transactions—Advisory, Technical and Administrative Services Agreements,” “Major Unitholders and Related Party Transactions—Related Party Transactions—Management and Administrative Services Agreements”.
Some of Seadrill’s employees that provide services for the Company and the Company’s contracted labor are represented by collective bargaining agreements. Some of these agreements require the contribution of certain amounts to retirement funds and pension plans and special procedures for the dismissal of 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 for the Company, other increased costs or increased operating restrictions

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that could adversely affect its financial performance. Seadrill considers its relationships with the various unions as stable, productive and professional.

E.     Unit Ownership
See Item 7 “Major Unitholders and Related Party Transactions—Major Unitholders.”

Item 7.         Major Unitholders and Related Party Transactions

A.     Major Unitholders
The following table sets forth the beneficial ownership of units of Seadrill Partners LLC owned by beneficial owners of 5% or more of the units, and its directors and executive officers as of April 16, 2015 :
 
Name of Beneficial Owner
Common Units
Beneficially Owned
 
Subordinated Units
Beneficially Owned
 
Percentage of Total Common and Subordinated Units Beneficially Owned
 
Number
 
Percent
 
Number
 
Percent
 
 
Seadrill Limited (1)
26,275,750

 
34.9
%
 
16,543,350

 
100.0
%
 
46.6
%
OppenheimerFunds, Inc. and Oppenheimer SteelPath MLP Alpha Fund (2)
13,586,222

 
18.0
%
 
—

 
—
%
 
14.8
%
Goldman Sachs Asset Management (3)
6,766,024

 
9.0
%
 
—

 
—
%
 
7.4
%
Graham Robjohns (Chief Executive Officer and Director)
*

 
*

 
—

 
—
%
 
*

Rune Magnus Lundetræ (Chief Financial Officer)
*

 
*

 
—

 
—
%
 
*

Bert Bekker (Director)
—

 
—
%
 
—

 
—
%
 
—

Kate Blankenship (Director)
—

 
—
%
 
—

 
—
%
 
—

Harald Thorstein (Director)
—

 
—
%
 
—

 
—
%
 
—

Tony Curry (Director)
—

 
—
%
 
—

 
—
%
 
—

Keith MacDonald (Director)
*

 
*

 
—

 
—
%
 
—

All directors and executive officers as a group (7 persons)
*

 
*

 
—

 
—
%
 
*

 * Less than 1%.

(1)
Seadrill’s principal shareholder is Hemen Holdings Limited. Hemen Holding Limited, a Cyprus Holding Company, and other related companies which are collectively referred to herein as Hemen, the shares of which are held in trusts established by Mr. John Fredriksen for the benefit of his immediate family. Mr. Fredriksen disclaims beneficial ownership of the 119,097,583 shares, or 24.2% , of the common stock of Seadrill, except to the extent of his voting and dispositive interest in such shares of common stock. Mr. Fredriksen has no pecuniary interest in the shares held by Hemen. In addition to the holdings of shares above, as of March 31, 2015 , Hemen is party to Total Return Swap agreements relating to 3,900,000 of Seadrill’s common shares.
(2)
Oppenheimer Funds, Inc. has shared voting power and shared dispositive power as to 13,586,222 common units, which represents  18.0% of the common units outstanding and 14.8% of the common and subordinated units outstanding. Oppenheimer SteelPath MLP Alpha Fund has shared voting power and shared dispositive power as to 7,398,374 common units, which represents 9.8%  of the common units outstanding and 8.1% of the common and subordinated units outstanding. This information is based solely on the Schedule 13G/A filed by Oppenheimer Funds, Inc. and Oppenheimer SteelPath MLP  Alpha Fund on February 10, 2015. 
(3)
Goldman Sachs Asset Management, L.P. and Goldman Sachs Asset Management LP and GS Investment Strategies, LLC (collectively, “Goldman Sachs Asset Management”) have shared voting power and shared dispositive power as to 6,766,024 common units. This information is based solely on the Schedule 13G/A filed by Goldman Sachs Asset Management on February 12, 2015.

Each outstanding common unit is entitled to one vote on matters subject to a vote of common unitholders. However, if at any time any person or group owns beneficially more than 5% of any class of units then outstanding, any units beneficially owned by that person or group in excess of 5% may not be voted on any matter and will not be considered to be outstanding when sending notices of a meeting of unitholders, calculating required votes (except for purposes of nominating a person for election to the board), determining the presence of a quorum or for other similar purposes under the Company's operating agreement, unless otherwise required by law. The voting rights of any such unitholders in excess of 5% will effectively be redistributed pro rata among the other common unitholders holding less than 5% of the voting power of all classes of units entitled to vote. The Seadrill Member, its affiliates and persons who acquired common units with the prior approval of the Company's board of directors will not be subject to this 5% limitation except with respect to voting their common units in the election of the elected directors.

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B.     Related Party Transactions
From time to time the Company has entered into agreements and have consummated transactions with certain related parties. The Company may enter into related party transactions from time to time in the future. In connection with the Company's IPO, the Company established a conflicts committee, comprised entirely of independent directors, which must approve all proposed material related party transactions. The related party transactions that the Company has entered into or were party to during the years ended December 31, 2014 and 2013 are discussed below.

T-15 Acquisition
On May 17, 2013, Seadrill Partners Operating LLC acquired Seadrill T-15 Ltd., or Seadrill T-15, the entity that owns the T-15 , and Seadrill International Limited, or Seadrill International, the entity that is party to the T-15 and T-16 drilling contracts, from Seadrill for a total purchase price of $210 million, less approximately $100.5 million of Seadrill’s debt outstanding and related to the T-15 under the T-15 and T-16 Credit Facility described below. Seadrill Partners Operating LLC financed the purchase price by borrowing $109.5 million from Seadrill under a loan agreement. The loan bears interest at a rate of LIBOR plus 5% and matures in May 2016.

In connection with the T-15 acquisition, Seadrill T-15 entered into a related party loan agreement with Seadrill in the amount of approximately $100.5 million, corresponding to the aggregate principal amount outstanding under the T-15 and T-16 Credit Facility allocable to the T-15 . Pursuant to the related party loan agreement, Seadrill T-15 can make payments of principal and interest directly to the lenders under the T-15 and T-16 Credit Facility on Seadrill's behalf or to Seadrill, corresponding to payments of principal and interest due under the T-15 and T-16 Credit Facility that are allocable to the T-15 . Seadrill has the option to make the payments of principal and interest directly to the lenders themselves, and specify an alternate method of compensation from Seadrill T-15. The T-15 and T-16 Credit Facility is a $440 million senior secured term loan with a syndicate of banks. The T-15 and the T-16 are pledged to secure Seadrill’s obligations under the T-15 and T-16 Credit Facility. The T-15 and T-16 Credit Facility bears interest at a rate of LIBOR plus 3.25% and will mature in December 2017.

T-16 Acquisition

On October 18, 2013, Seadrill Partners Operating LLC acquired Seadrill T-16 Ltd, or Seadrill T-16 , the entity that owns the T-16 , and the beneficial interest in the T-16 drilling contract, from Seadrill for a total purchase price of $200 million, less approximately $93.1 million debt outstanding under the T-15 and T-16 Credit Facility relating to the T-16 . The Company issued 3,310,622 common units to Seadrill as consideration for the purchase in a private placement transaction.

In connection with the T-16 acquisition, Seadrill T-16 entered into a related party loan agreement with Seadrill in the amount of approximately $93.1 million, corresponding to the aggregate principal amount outstanding under the T-15 and T-16 Credit Facility allocable to the T-16 . Pursuant to the related party loan agreement, Seadrill T-16 can make payments of principal and interest directly to the lenders under the T-15 and T-16 Credit Facility on Seadrill's behalf or to Seadrill, corresponding to payments of principal and interest due under the T-15 and T-16 Credit Facility that are allocable to the T-16 .

T-15 and T-16 Bareboat Charters

Seadrill T-15 and Seadrill International are each party to a bareboat charter agreement with Seadrill UK Ltd., a wholly owned subsidiary of Seadrill. Under this arrangement, the difference in the charter hire rate between the two charters is retained by Seadrill UK Ltd., in the amount of approximately $820 per day.

Seadrill T-16 Ltd. and Seadrill International Ltd. are each party to a bareboat charter agreement with Seadrill UK Ltd. Under this arrangement, the difference in the charter hire rate between the two charters is retained by Seadrill UK Ltd., in the amount of approximately $770 per day.

West Leo and West Sirius Acquisition s

On December 13, 2013, Seadrill Operating LP acquired (the “Leo Acquisition”) all of the ownership interests in each of the entities that own, operate and manage the semi-submersible drilling rig, West Leo (the “Leo Business”) and Seadrill Capricorn Holdings LLC acquired (the “Sirius Acquisition”) all of the ownership interests in each of the entities that own and operate the semi-submersible drilling rig, West Sirius (the “Sirius Business”). The Leo Acquisition and the Sirius Acquisition were accomplished through a series of purchases and contributions. The implied purchase prices of the Leo Acquisition and the Sirius Acquisition were $1.250 billion and $1.035 billion, respectively, in each case, including working capital. The Company's portion of the purchase price after debt financing at the OPCO level for the Leo Acquisition was $229.4 million. The Company's portion of the purchase price after debt financing at the OPCO level for the Sirius Acquisition was $298.4 million. The Company funded $70 million of the $298.4 million purchase price by issuing a zero coupon discount note to Seadrill which was repaid in full in March 2014. In addition, Seadrill Capricorn Holdings LLC financed $229.9 million of the purchase price of the Sirius Acquisition by issuing a zero coupon discount note to Seadrill which was repaid in full in February 2014. As a result of these transactions, the Company acquired a (i) 30% indirect interest in the Leo Business and (ii) 51% indirect interest in the Sirius Business.

In connection with the acquisitions, Seadrill Capricorn Holdings LLC and Seadrill Leo Ltd each entered into related party loan agreements with Seadrill in the amount of approximately $220.1 million and $485.5 million, respectively, corresponding to the aggregate principal amount outstanding under Seadrill's rig financing facilities allocable to the West Sirius and the West Leo , respectively. Pursuant to the related party loan agreements, Seadrill Capricorn Holdings LLC and Seadrill Leo Ltd could make payments of principal and interest directly to the lenders under

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each rig financing facility on Seadrill's behalf or to Seadrill, corresponding to payments of principal and interest due under such rig financing facility that were allocable to the West Sirius and the West Leo , respectively. The rig financing facility relating to the West Sirius bore interest at a rate of LIBOR plus 3.31%. The rig financing facility relating to the West Leo bore interest at a rate of LIBOR plus 2.25% to 5.0%. These loans were repaid in full in February 2014. See Item 5B. “Liquidity and Capital Resources-Borrowing Activities-Senior Secured Credit Facilities.”

West Auriga Acquisition
On March 24, 2014, Seadrill Capricorn Holdings LLC completed the acquisition from Seadrill all of the ownership interests in each of Seadrill Auriga Hungary Kft., a Hungarian company which owns the drillship, the West Auriga , and Seadrill Gulf Operations Auriga LLC, a Delaware limited liability company which operates the West Auriga . The Auriga Acquisition was accomplished through a series of purchases and contributions. As a result of these transactions, the Company acquired a 51% indirect interest in the ownership and operations of the West Auriga , pursuant to a Contribution, Purchase and Sale Agreement, dated as of March 11, 2014, by and among the Company, Seadrill, Seadrill Capricorn Holdings LLC and Seadrill Americas Inc.
The implied purchase price of the Auriga Acquisition was $1.24 billion. The Company's portion of the purchase price for the Auriga Acquisition, after debt financing at the OPCO level, was $355.4 million. In addition, Seadrill Capricorn Holdings LLC financed $100.0 million of the purchase price by issuing a zero coupon limited recourse discount note to Seadrill that matures in September 2015. Upon maturity of such note, Seadrill Capricorn Holdings LLC will repay $103.7 million to Seadrill. Seadrill Auriga Hungary Kft. is a borrower under the $1.45 billion credit facility (the “Auriga Facility”) used to finance the West Auriga , and under which its obligations are secured by the West Auriga . As of the closing date of the Auriga Acquisition, Seadrill Auriga Hungary Kft owed $443.1 million in principal under the Auriga Facility. Seadrill Auriga Hungary’s liability to repay debt under the Auriga Facility that relates to the other rigs owned by Seadrill remained. However, Seadrill agreed to indemnify the Company, Seadrill Capricorn Holdings LLC and Seadrill Auriga Hungary Kft. against any liability they may incur under the Auriga Facility in respect of such debt. The liabilities relating to the Company under the Auriga Facility were subsequently extinguished when the facility was repaid in June 2014, refer to "Item 5B. Liquidity and Capital Resources-"
In order to fund the Company's portion of the purchase price of the Auriga Acquisition, on March 17, 2014, the Company sold an aggregate of (i) 11,960,000 common units to the public at a price of $30.60 per unit and (ii) 1,633,987 common units to Seadrill at a price of $30.60 per unit, pursuant to a Unit Purchase Agreement, dated March 12, 2014, between the Company and Seadrill.

Acquisition of Additional Limited Partner Interest in Seadrill Operating LP
On July 21, 2014, the Company completed the purchase of an additional 28% limited partner interest in Seadrill Operating LP, an existing controlled subsidiary of the Company, from Seadrill for $372.8 million , pursuant to a Limited Partner Interest Purchase Agreement, dated as of July 17, 2014, between the Company and Seadrill. As a result of this acquisition, the Company’s limited partner interest in Seadrill Operating LP increased from 30% to 58% . Seadrill Operating LP is already a controlled subsidiary of the Company and therefore this has been accounted for as an equity transaction.

West Vela Acquisition
On November 4, 2014, the Company’s 51% owned subsidiary, Seadrill Capricorn Holdings LLC, completed the purchase oownership interests in each of Seadrill Vela Hungary Kft, a Hungarian company which owns the drillship, the West Vela , and Seadrill Gulf Operations Vela LLC a Delaware limited liability company which operates the West Vela , pursuant to a Contribution, Purchase and Sale Agreement, dated as of November 4, 2014, by and among Seadrill, the Company, Seadrill Capricorn Holdings LLC and Seadrill Americas Inc. The Vela Acquisition was accomplished through a series of purchases and contributions. As a result of these transactions, the Company acquired a 51% indirect interest in the ownership and operations of the West Auriga .
The implied initial purchase price was $900.0 million . Seadrill Vela Hungary Kft. is a borrower under the $1.45 billion credit facility (the “Vela Facility”) used to finance the West Vela , and under which its obligations are secured by the West Vela . As of the closing date of the Vela Acquisition, Seadrill Vela Hungary Kft owed $433.1 million in principal under the Vela Facility. Seadrill Vela Hungary’s liability to repay debt under the Vela Facility that relates to the other rigs owned by Seadrill and financed under the Vela Facility remains. However, Seadrill has agreed to indemnify us, Seadrill Capricorn Holdings LLC and Seadrill Vela Hungary Kft. against any liability we may incur under the Vela Facility in respect of such debt.
As part of the agreement Seadrill Capricorn Holdings LLC also has an obligation to pay $44,000 per day for the West Vela's current contract with BP which expires in November 2020. In addition the Company will pay contingent consideration of up to $40,000 per day for the remainder of the BP contract, depending on the actual amount of contract revenue received from BP per day. The total consideration thus included deferred consideration payable to Seadrill of $73.7 million and contingent consideration of $65.7 million . The purchase price was subsequently adjusted by a working capital adjustment of $6.0 million .

Interest Rate Swaps
As of December 31, 2014, the Company was party to interest rate swap agreements with Seadrill for a combined outstanding principal amount of approximately $690.1 million at rates between 1.10% per annum and 1.93% per annum. The swap agreements mature between July 2018 and December 2020. The net loss recognized on the Company’s interest rate swaps for the year ended December 31, 2014, was $41.6 million. See Item 11 ”Quantitative and Qualitative Disclosures About Market Risk-Interest Rate Risks.”

Amendment to Contribution and Sale Agreement

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On June 30, 2013, the Company and certain of its subsidiaries entered into an agreement with Seadrill and certain of its subsidiaries to amend the Contribution and Sale Agreement that was entered into with Seadrill at the time of the IPO in October 2012 to convert certain intercompany payables to equity. Pursuant to that amendment, as of June 30, 2013, its accounts and those of Seadrill were adjusted to reflect a net capital contribution in the amount of $20.0 million by Seadrill to Seadrill Operating LP and a net capital contribution in the amount of $20.5 million by Seadrill to Seadrill Capricorn Holdings LLC. No additional units were issued to Seadrill in connection with either of these contributions.

Omnibus Agreement
At the closing of the Company's IPO, the Company and OPCO entered into an omnibus agreement with Seadrill, the Seadrill Member and certain of the Company's other subsidiaries. The following discussion describes certain provisions of the omnibus agreement.
Noncompetition
Under the omnibus agreement, Seadrill agreed, and caused its controlled affiliates (other than the Company and the Seadrill Member) to agree, not to acquire, own, operate or contract for any drilling rig operating under a contract for five or more years. For purposes of the omnibus agreement, the term drilling rigs refers only to semi-submersibles, drillships and tender rigs. The Company refers to these drilling rigs, together with any related contracts, as “Five-Year Drilling Rigs” and to all other drilling rigs, together with any related contracts, as “Non-Five-Year Drilling Rigs.” The restrictions in this paragraph do not prevent Seadrill or any of its controlled affiliates (including us and its subsidiaries) from:
(1)
acquiring, owning, operating or contracting for Non-Five-Year Drilling Rigs;
(2)
acquiring one or more Five-Year Drilling Rigs if Seadrill promptly offers to sell the drilling rig to us for the acquisition price plus any administrative costs (including reasonable legal costs) associated with the transfer to us at the time of the acquisition;
(3)
putting a Non-Five-Year Drilling Rig under contract for five or more years if Seadrill offers to sell the drilling rig to us for fair market value (x) promptly after the time it becomes a Five-Year Drilling Rig and (y) at each renewal or extension of that contract for five or more years;
(4)
acquiring one or more Five-Year Drilling Rigs as part of the acquisition of a controlling interest in a business or package of assets and owning, operating or contracting for those drilling rigs; provided, however, that:
(2)
if less than a majority of the value of the business or assets acquired is attributable to Five-Year Drilling Rigs, as determined in good faith by Seadrill’s board of directors, Seadrill must offer to sell such drilling rigs to us for their fair market value plus any additional tax or other similar costs that Seadrill incurs in connection with the acquisition and the transfer of such drilling rigs to us separate from the acquired business; and
(3)
if a majority or more of the value of the business or assets acquired is attributable to Five-Year Drilling Rigs, as determined in good faith by Seadrill’s board of directors, Seadrill must notify us of the proposed acquisition in advance. Not later than 10 days following receipt of such notice, the Company will notify Seadrill if the Company wishes to acquire such drilling rigs in cooperation and simultaneously with Seadrill acquiring the Non-Five-Year Drilling Rigs. If the Company does not notify Seadrill of its intent to pursue the acquisition within 10 days , Seadrill may proceed with the acquisition and then offer to sell such drilling rigs to us as provided in (a) above;
(5)
acquiring a non-controlling interest in any company, business or pool of assets;
(6)
acquiring, owning, operating or contracting for any Five-Year Drilling Rig if the Company does not fulfill its obligation to purchase such drilling rig in accordance with the terms of any existing or future agreement;
(7)
acquiring, owning, operating or contracting for a Five-Year Drilling Rig subject to the offers to us described in paragraphs (2), (3) and (4) above pending the Company's determination whether to accept such offers and pending the closing of any offers the Company accepts;
(8)
providing drilling rig management services relating to any drilling rig;
(9)
owning or operating a Five-Year Drilling Rig that Seadrill owned and operated as of October 24, 2012 , and that was not included in the Company’s initial fleet; or
(10)
acquiring, owning, operating or contracting for a Five-Year Drilling Rig if the Company has previously advised Seadrill that the Company consents to such acquisition, operation or contract.
If Seadrill or any of its controlled affiliates (other than us or its subsidiaries) acquires, owns, operates or contracts for Five-Year Drilling Rigs pursuant to any of the exceptions described above, it may not subsequently expand that portion of its business other than pursuant to those exceptions.
Under the omnibus agreement the Company is not restricted from acquiring, operating or contracting for Non-Five-Year Drilling Rigs.
Upon a change of control of us or the Seadrill Member, the noncompetition provisions of the omnibus agreement will terminate immediately. Upon a change of control of Seadrill, the noncompetition provisions of the omnibus agreement applicable to Seadrill will terminate at the time that is the later of the date of the change of control and the date on which all of our outstanding subordinated units have converted to common units.

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Rights of First Offer on Drilling Rigs
Under the omnibus agreement, the Company and its subsidiaries granted to Seadrill a right of first offer on any proposed sale, transfer or other disposition of any Five-Year Drilling Rigs or Non-Five-Year Drilling Rigs owned by us. Under the omnibus agreement, Seadrill agreed (and will cause their subsidiaries to agree) to grant a similar right of first offer to us for any Five-Year Drilling Rigs they might own. These rights of first offer do not apply to a (a) sale, transfer or other disposition of drilling rigs between any affiliated subsidiaries, or pursuant to the terms of any current or future contract or other agreement with a contractual counterparty or (b) merger with or into, or sale of substantially all of the assets to, an unaffiliated third-party.
Prior to engaging in any negotiation regarding any drilling rig’s disposition with respect to a Five-Year Drilling Rig with a non-affiliated third-party or any Non-Five-Year Drilling Rig, the Company or Seadrill, as the case may be, will deliver a written notice to the other relevant party setting forth the material terms and conditions of the proposed transaction. During the 30 day period after the delivery of such notice, the Company and Seadrill will negotiate in good faith to reach an agreement on the transaction. If the Company does not reach an agreement within such 30 day period, the Company or Seadrill, as the case may be, will be able within the next 180  calendar days to sell, transfer, dispose or re-contract the drilling rig to a third party (or to agree in writing to undertake such transaction with a third party) on terms generally no less favorable to us or Seadrill, as the case may be, than those offered pursuant to the written notice.
Upon a change of control of us or the Seadrill Member, the right of first offer provisions of the omnibus agreement will terminate immediately. Upon a change of control of Seadrill, the right of first offer provisions applicable to Seadrill under the omnibus agreement will terminate at the time that is the later of the date of the change of control and the date on which all of its outstanding subordinated units have converted to common units.
Rights of First Offer on OPCO Equity Interests
Pursuant to the omnibus agreement, Seadrill granted (and caused its controlled affiliates other than us to grant) to us a 30 day right of first offer on any proposed transfer, assignment, sale or other disposition of any equity interests in OPCO upon agreement of the purchase price of such equity interests by Seadrill and us. The right of first offer under the omnibus agreement does not apply to a transfer, assignment, sale or other disposition of any equity interest in OPCO between any controlled affiliates.
Prior to engaging in any negotiation regarding any disposition of equity interests in OPCO to an unaffiliated third party, Seadrill will deliver a written notice setting forth the material terms and conditions of the proposed transactions. During the 30 days period after the delivery of such notice, the Company and Seadrill will negotiate in good-faith to reach an agreement on the transaction. If the parties do not reach an agreement within such 30 day period, Seadrill will be able within the next 180 days to transfer, assign, sell or otherwise dispose of any equity interest in OPCO to an unaffiliated third party (or agree in writing to undertake such transaction with a third party) on terms generally no less favorable to the third party than those included in the written notice.
If Seadrill or its affiliates no longer control the Seadrill Member or the Company, the provisions of the omnibus agreement relating to the right of first offer with respect to the equity interests in OPCO will terminate automatically. Upon a change of control of Seadrill, the provisions of the omnibus agreement relating to the right of first offer with respect to the equity interests in OPCO will terminate at the later of (a) the date on which all of the outstanding subordinated units have converted into common units and (b) the date of the change of control of Seadrill.
Indemnification
Under the omnibus agreement, Seadrill has agreed to indemnify us until October 24, 2017 against certain environmental and toxic tort liabilities with respect to the assets contributed or sold to us to the extent arising prior to the time they were contributed or sold to us. Liabilities resulting from a change in law after October 24, 2012 are excluded from the environmental indemnity. There is an aggregate cap of $10 million on the amount of indemnity coverage provided by Seadrill for environmental and toxic tort liabilities. No claim may be made unless the aggregate dollar amount of all claims exceeds $500,000 , in which case Seadrill is liable for claims only to the extent such aggregate amount exceeds $500,000 .
Seadrill has also agreed to indemnify us for liabilities related to:
•
certain defects in title to Seadrill’s assets contributed or sold to OPCO and any failure to obtain, prior to the time they were contributed, certain consents and permits necessary to conduct, own and operate such assets, which liabilities arise on or before October 24, 2015 (or, in the case of the T-15 or the T-16 , within three years after its purchase of the T-15 or the T-16 ); and
•
tax liabilities attributable to the operation of the assets contributed or sold to OPCO prior to the time they were contributed or sold.
Amendments
The omnibus agreement may not be amended without the prior approval of the conflicts committee of the Company's board of directors if the proposed amendment will, in the reasonable discretion of its board of directors, adversely affect holders of its common units.
Management and Administrative Services Agreements
On October 24, 2012 , in connection with the closing of the Company's IPO, it entered into a management and administrative services agreement with Seadrill Management, pursuant to which Seadrill Management or its affiliates provide certain management and administrative support services to us. The agreement has an initial term of five years .

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The management and administrative services agreement with Seadrill Management may be terminated prior to the end of its term by us upon 90 days ’ written notice for any reason in the sole discretion of its board of directors. In addition, the management and administrative services agreement may be terminated by Seadrill Management upon 90 days ’ written notice if:
•
there is a change of control of us or the Seadrill Member;
•
a receiver is appointed for all or substantially all of its property;
•
an order is made to wind up the company;
•
a final judgment, order or decree that materially and adversely affects its ability to perform the agreement is obtained or entered and not vacated, discharged or stayed; or
•
the Company makes a general assignment for the benefit of its creditors, file a petition in bankruptcy or liquidation or are adjudged insolvent or bankrupt or commence any reorganization proceedings.
Under the management and administrative services agreement with Seadrill Management, certain officers of Seadrill Management provide executive officer functions for its benefit. These officers of Seadrill Management are responsible for the Company's day-to-day management subject to the direction of the board of directors. The Company's board of directors has the ability to terminate the arrangement with Seadrill Management regarding the provision of executive officer services to us with respect to any or all of such officers at any time in its sole discretion.
The management and administrative services provided by Seadrill Management include:
•
Corporate Governance Services : assistance in the provision of general company secretarial services;
•
Company Records Services : the safekeeping and professional filing of all original corporate documents;
•
Treasury Services : assistance in the operation of bank accounts in accordance with such principles as its board of directors from time to time shall approve; assistance in collection of accounts receivable and payment of accounts payable;
•
Financing : assistance in all matters relevant to the financing of its activities, including the identification of sources of potential financing and negotiation of financing arrangements;
•
Insurance : assistance in arranging to insure the Company’s drilling units and other necessary insurance and assistance in management of insurance claims;
•
Sale and Purchase of Assets : assistance in the sale and purchase of assets including reviewing the market for the sale and purchase of assets, arranging the financing in the case of a purchase and if necessary renegotiating existing financing, and arranging any other contractual arrangements required by such transaction and the general completion of the specific transaction;
•
Accidents—Contingency Plans : assistance in handling all accidents in the course of operations, and development of a crisis management procedure, and other advice and assistance in connection with crisis response, including crisis communications assistance;
•
Disputes : assistance in the prosecution or defense of any and all legal proceedings by or against us;
•
Marketing Services : assistance in the marketing of the Company’s drilling units; and
•
General Administrative Services : any general administrative services as the Company may require.
Each quarter, the Company will reimburse Seadrill Management for its reasonable costs and expenses incurred in connection with the provision of these services. In addition, the Company will pay Seadrill Management a management fee equal to 5% of its costs and expenses incurred in connection with providing services to us for the quarter. Amounts payable under the management and administrative services agreement must be paid within 30 days after Seadrill Management submits to us an invoice for such fees, costs and expenses, together with any supporting detail that may be reasonably required.
Under the management and administrative services agreement with Seadrill Management, the Company has agreed to indemnify Seadrill Management and its officers, employees, agents and sub-contractors against all actions which may be brought against them under the management and administrative services agreement; provided, however that such indemnity excludes losses which may be caused by or due to the fraud, gross negligence or willful misconduct of Seadrill Management or its officers, employees, agents or sub-contractors.
Advisory, Technical and Administrative Services Agreements
Each of the Company’s operating subsidiaries have entered into certain advisory, technical and/or administrative services agreements with subsidiaries of Seadrill, pursuant to which such subsidiaries provide advisory, technical and administrative services. Each quarter, the Company’s subsidiaries will reimburse such Seadrill subsidiaries for their reasonable costs and expenses incurred in connection with the provision of these services. In addition, the Company’s subsidiaries will pay to such Seadrill subsidiaries a service fee equal to approximately 5% of their costs and expenses incurred in connection with providing services to the Company’s subsidiaries for the quarter. Amounts payable under advisory, technical and administrative services agreements must be paid within 30 days after such Seadrill subsidiary submits to the applicable subsidiary an invoice for such fees, costs and expenses, together with any supporting detail that may be reasonably required. Such services include:
•
Operations Services : assistance and support for the development of technical standards, supervision of third-party contractors, development of maintenance practices and strategies, development of operating policies, improvement of efficiency, minimizing environmental and safety incidents, periodic auditing of operations and purchasing and logistics;
•
Technical Supervision Services : assistance and advice on maintaining vessel classification and compliance with local regulatory requirements, compliance with contractual technical requirements for the drilling units, ensuring that technical operations are professional and satisfactory in every respect;

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•
Accidents—Contingency Plans : assistance in handling all accidents in the course of operations, and development of a crisis management procedure, and other advice and assistance in connection with crisis response, including crisis communications assistance; and
•
General Administrative Services : any general administrative services as needed.
Under the advisory, technical and administrative services agreements, the Company’s operating subsidiaries have agreed to indemnify certain affiliates of Seadrill and their officers, employees, agents and sub-contractors against all actions which may be brought against them under the advisory, technical and administrative services agreements; provided, however that such indemnity excludes losses which may be caused by or due to the fraud, gross negligence or willful misconduct of Seadrill Management or its officers, employees, agents and sub-contractors. Except for losses that are caused by or due to the fraud of Seadrill Management or its officers, employees, agents and sub-contractors, in no event shall such affiliates of Seadrill’s liability to us exceed ten times the annual services fee.
Operating Agreements for Seadrill Operating LP and Seadrill Capricorn Holdings LLC
The Company's wholly-owned subsidiary, Seadrill Operating GP LLC, and Seadrill have entered into an agreement of limited partnership of Seadrill Operating LP. This agreement governs the ownership and management of Seadrill Operating LP, designates Seadrill Operating GP LLC as the general partner of Seadrill Operating LP, and provides for quarterly distributions of available cash to its partners, as determined by us as the sole member of the general partner of Seadrill Operating LP. Seadrill owns 42% of the limited partner interests in Seadrill Operating LP and the Company owns 58% of such interests.
The Company owns 51% of the limited liability company interests in Seadrill Capricorn Holdings LLC and controls its operations and activities. Seadrill owns 49% of the limited liability company interests. The limited liability company agreement that governs the ownership and management of Seadrill Capricorn Holdings LLC provides for quarterly distributions of available cash to its members, as determined by us as its controlling member.
These operating agreements provide that the amount of cash reserves for future maintenance and replacement capital expenditures, working capital and other matters and the amount of quarterly cash distributions to owners will be determined by the Company as the sole member of Seadrill Operating GP LLC and by the board of directors of Seadrill Capricorn Holdings LLC. In addition, its approval as the sole member of Seadrill Operating GP LLC and as the controlling member of Seadrill Capricorn Holdings LLC is required for the following actions relating to Seadrill Operating LP or Seadrill Capricorn Holdings LLC:
•
effecting any merger or consolidation involving Seadrill Operating LP or Seadrill Capricorn Holdings LLC;
•
effecting any sale or exchange of all or substantially all of Seadrill Operating LP or Seadrill Capricorn Holdings LLC's assets;
•
dissolving or liquidating Seadrill Operating LP or Seadrill Capricorn Holdings LLC;
•
creating or causing to exist any consensual restriction on the ability of Seadrill Operating LP or Seadrill Capricorn Holdings LLC to make distributions, pay any indebtedness, make loans or advances or transfer assets to us or its subsidiaries;
•
settling or compromising any claim, dispute or litigation directly against, or otherwise relating to indemnification by Seadrill Operating LP or Seadrill Capricorn Holdings LLC of, any of the directors or officers of Seadrill Operating GP LLC or Seadrill Capricorn Holdings LLC; or
•
issuing additional interests in Seadrill Operating LP or Seadrill Capricorn Holdings LLC.
Approval of the conflicts committee of the Company's board of directors is required to amend these operating agreements.

Sponsor Credit Facility
On October 24, 2012 , in connection with the closing of the Company's IPO, OPCO entered into a $300 million revolving credit facility with Seadrill, as the lender, to be used to fund working capital requirements, acquisitions and other general company purposes. On March 1, 2014, the revolving credit facility was amended to reduce its capacity to $100 million . The sponsor credit facility is for a term of 5 years , and bears interest at a rate of LIBOR plus 5%  per annum, with an annual 2% commitment fee on the undrawn balance. For a more detailed description of the sponsor credit facility, please read Item 5 “Operating Financial Review and Prospects—Liquidity and Capital Resources—Borrowing Activities—Sponsor Credit Facility.”

Rig Financing Agreements
Seadrill financed the construction of the drilling units in the Company’s fleet with borrowings under third party credit facilities. In connection with the Company's IPO and subsequent acquisitions from Seadrill, Seadrill amended and restated the various third party facilities to allow for the transfer of the respective drilling units to OPCO and to provide for OPCO and its subsidiaries that, directly or indirectly, own the drilling units to guarantee the obligations under the facilities. In September 2012, each of OPCO’s subsidiaries that owns the West Capricorn, West Vencedor, West Aquarius , and West Capella , or the rig owning subsidiaries, entered into intercompany loan agreements with Seadrill in the amount of approximately $522.5 million, $115.2 million, $304.6 million and $295.3 million respectively, corresponding to the aggregate principal amount outstanding under the facilities allocable to the West Capricorn, West Vencedor, West Aquarius, and West Capella respectively. During 2013, the rig owning companies of the T15, T16 , West Leo and West Sirius entered into intercompany loan agreements with Seadrill in the amount of approximately $100.5 million, $93.1 million, $485.5 million and $220.1 million respectively, corresponding to the aggregate principal amount

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outstanding under the facilities allocable to the T15, T16, West Leo and West Sirius, respectively. Pursuant to these intercompany loan agreements, each rig owning subsidiary can make payments of principal and interest to Seadrill or directly to the third party lenders under each facility.

The senior secured credit facility relating the West Vencedor was repaid in full by Seadrill in June 2014, and subsequently the intercompany loan between Seadrill Vencedor Ltd. and Seadrill was amended to carry on this facility on the same terms as the West Vencedor Facility, referred to as the West Vencedor Loan Agreement. The West Vencedor Loan Agreement was scheduled to mature in June 2015. On April 14, 2015, the West Vencedor Loan Agreement was amended and the maturity was extended to June 25, 2018 . Please read Note 19 of the Company’s Consolidated and Combined Carve-Out Financial Statements.

The Company refers to the T15 and T16 facilities, and, prior to their repayment and refinancing in February and June 2014, the West Capella, West Aquarius, West Sirius, West Leo and West Capricorn facilities, collectively, as the Rig Financing Agreements.

For a more detailed description of the Rig Financing Agreements and related intercompany loan agreements, please read Item 5 “Operating Financial Review and Prospects—Liquidity and Capital Resources—Borrowing Activities—Rig Financing Agreements.”

West Aquarius Bareboat Charters
In connection with the transfer of the West Aquarius operations to Canada, the West Aquarius drilling contract was assigned to Seadrill Canada Ltd., a wholly owned subsidiary of OPCO, necessitating certain changes to the inter-company contractual arrangements relating to the West Aquarius. Seadrill China Operations Ltd, the owner of the West Aquarius and a wholly-owned subsidiary of OPCO, had previously entered into a bareboat charter arrangement with Seadrill Offshore AS, a wholly-owned subsidiary of Seadrill, providing Seadrill Offshore AS with the right to use the West Aquarius. In October 2012, this bareboat charter arrangement was replaced with a new bareboat charter between Seadrill China Operations Ltd and Seadrill Offshore AS, and at the same time, Seadrill Offshore AS entered into a bareboat charter arrangement providing Seadrill Canada Ltd. with the right to use the West Aquarius in order to perform its obligations under the drilling contract described above. The net effect to OPCO of these bareboat charter arrangements is a reduction in revenue of $25,500 per day, but due to the downtime of the rig during 2014 the total effect was a benefit to revenue of $26.4 million for 2014 .


C.     Interests of Experts and Counsel
Not applicable.

Item 8.         Financial Information

A.     Consolidated Statements and Other Financial Information
Please see Item 18—Financial Statements below for additional information required to be disclosed under this item.
Legal Proceedings
From time to time the Company has been, and expects that in the future it will be, subject to legal proceedings and claims in the ordinary course of business, principally personal injury and property casualty claims. These claims, even if lacking merit, could result in the expenditure of significant financial and managerial resources. The Company is not aware of any legal proceedings or claims that the Company believes will have, individually or in the aggregate, a material adverse effect on the Company. Please also see Note 16 on Commitments and Contingencies to the audited Consolidated and Combined Carve-Out Financial Statements included elsewhere in this annual report.
The Company's Cash Distribution Policy
Rationale for the Company's Cash Distribution Policy
The Company's cash distribution policy reflects a judgment that its unitholders will be better served by the Company distributing its available cash (after deducting expenses, including estimated maintenance and replacement capital expenditures and reserves) rather than retaining it. The Company will generally finance any expansion capital expenditures from external financing sources, including borrowings from commercial banks and the issuance of equity and debt securities. The Company's cash distribution policy is consistent with the terms of its operating agreement, which requires that the Company distribute all of the Company's available cash quarterly (after deducting expenses, including estimated maintenance and replacement capital expenditures and reserves).

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Limitations on Cash Distributions and the Company's Ability to Change the Company's Cash Distribution Policy
There is no guarantee that unitholders will receive quarterly distributions from us. The Company's distribution policy is subject to certain restrictions and may be changed at any time, including:
•
The Company's unitholders have no contractual or other legal right to receive distributions other than the obligation under the Company's operating agreement to distribute available cash on a quarterly basis, which is subject to the broad discretion of the Company's board of directors to establish reserves and other limitations.
•
The board of directors of Seadrill Operating LP’s general partner, Seadrill Operating GP LLC (subject to approval by the Company's board of directors), has authority to establish reserves for the prudent conduct of its business. In addition the Company's board of directors controls Seadrill Capricorn Holdings LLC and Seadrill Partners Operating LLC, and has the authority to establish reserves for the prudent conduct of their respective businesses. The establishment of these reserves could result in a reduction in cash distributions to the Company's unitholders from levels the Company currently anticipates pursuant to the Company's stated cash distribution policy.
•
The Company's ability to make cash distributions will be limited by restrictions on distributions under its financing agreements. The Company’s financing agreements contain material financial tests and covenants that must be satisfied in order to pay distributions. If the Company is unable to satisfy the restrictions included in any of its financing agreements or is otherwise in default under any of those agreements, it could have a material adverse effect on the Company's ability to make cash distributions to its unitholders, notwithstanding the Company's stated cash distribution policy. These financial tests and covenants are described in this annual report in Item 5 “Operating and Financial Review and Prospects—Liquidity and Capital Resources—Borrowing Activities.”
•
The Company will be required to make substantial capital expenditures to maintain and replace its fleet. These expenditures may fluctuate significantly over time, particularly as drilling units near the end of their useful lives. In order to minimize these fluctuations, the Company is required to deduct estimated, as opposed to actual, maintenance and replacement capital expenditures from the amount of cash that the Company would otherwise have available for distribution to the Company's unitholders. In years when estimated maintenance and replacement capital expenditures are higher than actual maintenance and replacement capital expenditures, the amount of cash available for distribution to unitholders will be lower than if actual maintenance and replacement capital expenditures were deducted.
•
Although the Company's operating agreement requires the Company to distribute all of the Company's available cash, the Company's operating agreement, including provisions requiring the Company to make cash distributions, may be amended. During the subordination period, with certain exceptions, the Company's operating agreement may not be amended without the approval of a majority of the units held by non-affiliated common unitholders. After the subordination period has ended, the Company's operating agreement can be amended with the approval of a majority of the outstanding common units, including those held by Seadrill. As of March 31, 2015 , Seadrill owns approximately 34.9% of the Company's common units and all of the Company's subordinated units.
•
Even if the Company's cash distribution policy is not modified or revoked, the amount of distributions the Company pays under the Company's cash distribution policy and the decision to make any distribution is determined by the Company's board of directors, taking into consideration the terms of the Company's operating agreement.
•
Under Section 40 of the Marshall Islands Act, the Company may not make a distribution to the Company's unitholders if the distribution would cause the Company's liabilities to exceed the fair value of the Company's assets.
•
The Company may lack sufficient cash to pay distributions to the Company's unitholders due to, among other things, changes in the Company's business, including decreases in total operating revenues, decreases in dayrates, the loss of a drilling unit, increases in operating or general and administrative expenses, principal and interest payments on outstanding debt, taxes, working capital requirements, maintenance and replacement capital expenditures or anticipated cash needs. Please read Item 3 “Key Information—Risk Factors” for a discussion of these factors.
The Company's ability to make distributions to the Company's unitholders depends on the performance of the Company's controlled affiliates, including OPCO, and their ability to distribute cash to us. The Company's interests in OPCO represent the Company's only cash-generating assets. The ability of the Company's controlled affiliates, including OPCO, to make distributions to the Company may be restricted by, among other things, the provisions of existing and future indebtedness, applicable limited partnership and limited liability company laws and other laws and regulations.
Minimum Quarterly Distribution
Common unitholders are entitled under the Company's operating agreement to receive a quarterly distribution of $0.3875 per unit, or $1.55 per unit per year, prior to any distribution on the subordinated units and to the extent the Company has sufficient cash on hand to pay the distribution, after establishment of cash reserves and payment of fees and expenses. There is no guarantee that the Company will pay the minimum quarterly distribution on the common units and subordinated units in any quarter. Even if the Company's cash distribution policy is not modified or revoked, the amount of distributions paid under the Company's policy and the decision to make any distribution is determined by the Company's board of directors, taking into consideration the terms of the Company's operating agreement. The Company will be prohibited from making any distributions to unitholders if it would cause an event of default, or an event of default then exists under the Company's financing agreements. Please read Item 5 “Operating and Financial Review and Prospects—Liquidity and Capital Resources” for a discussion of the restrictions contained in the Company's credit facilities and lease arrangements that may restrict the Company's ability to make distributions.

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Subordination Period
During the subordination period, the common units will have the right to receive distributions of available cash from operating surplus in an amount equal to the minimum quarterly distribution of $0.3875 per unit, plus any arrearages in the payment of the minimum quarterly distribution on the common units from prior quarters, before any distributions of available cash from operating surplus may be made on the subordinated units. Distribution arrearages do not accrue on the subordinated units. The purpose of the subordinated units is to increase the likelihood that during the subordination period there will be available cash from operating surplus to be distributed on the common units.
Incentive Distribution Rights
Incentive distribution rights represent the right to receive an increasing percentage of quarterly distributions of available cash from operating surplus after the minimum quarterly distribution and the target distribution levels have been achieved. The Seadrill Member currently holds the incentive distribution rights, which may be transferred separately from the Seadrill Member interest, subject to restrictions in the operating agreement. Except for transfers of incentive distribution rights to an affiliate or another entity as part of the Seadrill Member’s merger or consolidation with or into, or sale of substantially all of its assets to such entity, the approval of a majority of the Company's common units (excluding common units held by the Seadrill Member and its affiliates) generally is required for a transfer of the incentive distribution rights to a third party prior to September 30, 2017. Any transfer by the Seadrill Member of the incentive distribution rights would not change the percentage allocations of quarterly distributions with respect to such rights.
The following table illustrates the percentage allocations of the additional available cash from operating surplus among the unitholders and the holders of the incentive distribution rights up to the various target distribution levels. The amounts set forth under “Marginal Percentage Interest in Distributions” are the percentage interests of the unitholders and the holders of the incentive distribution rights in any available cash from operating surplus the Company distributes up to and including the corresponding amount in the column “Total Quarterly Distribution Target Amount,” until available cash from operating surplus the Company distributes reaches the next target distribution level, if any. The percentage interests shown for the unitholders and the holders of the incentive distribution rights for the minimum quarterly distribution are also applicable to quarterly distribution amounts that are less than the minimum quarterly distribution.
 
 
 
 
Marginal Percentage Interest in Distributions
 
Total Quarterly 
Distribution 
Target
Amount
 
Unitholders
 
Holders of IDRs
Minimum Quarterly Distribution
$0.3875
 
100
%
 
—
%
First Target Distribution
up to $0.4456
 
100
%
 
—
%
Second Target Distribution
above $0.4456 up to $0.4844
 
85
%
 
15
%
Third Target Distribution
above $0.4844 up to $0.5813
 
75
%
 
25
%
Thereafter
above $0.5813
 
50
%
 
50
%
Quarterly distributions
The table below sets out the quarterly distributions declared and paid to unitholders since December 31, 2013.
 
Amount declared and paid per unit ($)
 
Amount declared and paid ($ in millions)
Period in respect of:
Common units
Subordinated units
 
Common units
Subordinated units
Incentive distribution rights
Total
2013 Q4
0.4450
0.4450
 
19.76

7.36

—

27.12

2014 Q1
0.5075
0.5075
 
29.43

8.40

1.08

38.91

2014 Q2
0.5425
0.5425
 
36.50

8.97

2.20

47.67

2014 Q3
0.5525
0.5525
 
41.59

9.14

2.71

53.44

2014 Q4 (1)
0.5675
0.5675
 
42.72

9.39

3.17

55.28


(1) This cash distribution was paid on February 13, 2015 to all unitholders of record as of the close of business on February 6, 2015.

B.     Significant Changes
Not applicable.

Item 9.         The Offer and Listing


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A.     Offer and Listing Details
The high and low sales prices of the Company's common units as reported by the New York Stock Exchange, for the years, quarters and months indicated, are as follows:
 
Year Ended
High
 
Low
December 31, 2014
$35.10
 
$14.57
December 31, 2013
$33.68
 
$25.65

Quarter Ended
High
 
Low
March 31, 2015
$17.24
 
$11.75
December 31, 2014
$31.04
 
$14.57
September 30, 2014
$35.10
 
$30.34
June 30, 2014
$33.70
 
$28.84
March 31, 2014
$32.95
 
$29.25
December 31, 2013
$33.68
 
$29.50

Month Ended
High
 
Low
April 20, 2015 (1)
$13.30
 
$12.25
March 31, 2015
$15.13
 
$11.75
February 28, 2015
$16.86
 
$13.97
January 31, 2015
$17.24
 
$13.29
December 31, 2014
$19.12
 
$14.57
November 30, 2014
$24.44
 
$16.92
October 31, 2014
$31.04
 
$25.15

(1) Includes the period from April 1, 2015 through April 20, 2015 .


B.      Plan of distribution
Not applicable.

C.     Markets
The Company's common units currently trade on the New York Stock Exchange under the symbol “SDLP”.

Item 10.         Additional Information

A.     Share Capital
Not applicable.

B.     Memorandum and Articles of Association
The information required to be disclosed under Item 10B is incorporated by reference to the Company's Registration Statement on Form 8-A filed with the SEC on October 17, 2012.

C.     Material Contracts
The following is a summary of each material contract, other than material contracts entered into in the ordinary course of business, to which the Company or any of the Company's subsidiaries is a party, for the two years immediately preceding the date of this Annual Report, each of which is included in the list of exhibits in Item 19:

(1)
Contribution and Sale Agreement among Seadrill Partners LLC, Seadrill Member LLC, Seadrill Operating GP LLC, Seadrill Operating LP, Seadrill Capricorn Holdings LLC, Seadrill Opco Sub LLC, Seadrill Americas Inc., Seadrill Offshore AS, and Seadrill UK Ltd., dated as of October 22, 2012. This agreement effected the transfer of the ownership interests in OPCO to the Company, and the use of the net proceeds of the IPO.
(2)
Omnibus Agreement among Seadrill Limited, Seadrill Partners LLC, Seadrill Member LLC, Seadrill Operating LP, Seadrill Operating GP LLC, and Seadrill Capricorn, dated as of October 24, 2012. See Item 7 “Major Unitholders and Related Party Transactions—Related Party Transactions—Omnibus Agreement.”
(3)
Management and Administrative Services Agreement with Seadrill Management Ltd. See Item 7 “Major Unitholders and Related Party Transactions—Related Party Transactions—Management and Administrative Services Agreements.”
(4)
Management and Administrative Services Agreement with Seadrill UK Ltd. See Item 7 “Major Unitholders and Related Party Transactions-Related Party Transactions-Management and Administrative Services Agreements.”
(5)
Advisory, Technical and Administrative Services Agreement with Seadrill Americas, Inc. See Item 7 “Major Unitholders and Related Party Transactions—Related Party Transactions—Advisory, Technical and Administrative Services Agreements.”
(6)
Advisory, Technical and Administrative Services Agreement between Seadrill Management AME Ltd and Seadrill Vencedor Ltd. dated January 1, 2012.See Item 7 “Major Unitholders and Related Party Transactions—Related Party Transactions—Advisory, Technical and Administrative Services Agreements.”
(7)
Advisory, Technical and Administrative Services Agreement between Seadrill Management AME Ltd and Seadrill Deepwater Drillship Ltd. dated January 1, 2012. See Item 7 “Major Unitholders and Related Party Transactions—Related Party Transactions—Advisory, Technical and Administrative Services Agreements.”
(8)
Management Services Agreement with Seadrill UK Ltd. See Item 7 “Major Unitholders and Related Party Transactions—Related Party Transactions—Management and Administrative Services Agreements.”
(9)
Amended and Restated Revolving Loan Agreement, dated August 31, 2013 among Seadrill Operating LP, Seadrill Capricorn Holdings LLC, and Seadrill Partners Operating LLC as borrowers, and Seadrill Limited, as lender. See Item 7 “Major Unitholders and Related Party Transactions—Related Party Transactions—Sponsor Credit Facility.”
(10)
Amended and Restated US$1,500,000,000 Senior Secured Credit Facility Agreement dated October 15, 2012 for Seadrill Limited, as Borrower, the subsidiaries of Seadrill Limited named therein as guarantors, and the banks and financial institutions named therein as lenders, dated October 15, 2012. See Item 7 “Major Unitholders and Related Party Transactions—Related Party Transactions—Rig Financing Agreements.”
(11)
Amended and Restated US$1,200,000,000 Senior Secured Credit Facility Agreement dated October 10, 2012 for Seadrill Limited, as Borrower, the subsidiaries of Seadrill Limited named therein as guarantors, and the banks and financial institutions named therein as lenders, dated October 10, 2012. See Item 7 “Major Unitholders and Related Party Transactions—Related Party Transactions—Rig Financing Agreements.”
(12)
Amended and Restated US$275,000,000 Senior Secured Term Loan and Revolving Credit Facility Agreement dated October 10, 2012 for Seadrill Limited, as Borrower, the subsidiaries of Seadrill Limited named therein, as guarantors, and the banks and financial institutions named therein as lenders, dated October 10, 2012. See Item 7 “Major Unitholders and Related Party Transactions—Related Party Transactions—Rig Financing Agreements.”
(13)
Amended and Restated US$275,000,000 Senior Secured Term Loan Facility Agreement dated October 10, 2012 for Seadrill Limited, as Borrower, the subsidiaries of Seadrill Limited named therein, as guarantors, as the banks and financial institutions named therein as lenders, dated October 10, 2012. See Item 7 “Major Unitholders and Related Party Transactions—Related Party Transactions—Rig Financing Agreements.”
(14)
Amended and Restated Common Terms Agreement dated October 10, 2012 for Seadrill Limited, as Borrower, the subsidiaries of Seadrill Limited named therein as guarantors, DNB Bank ASA as Agent, GIEK Facility Agent and Security Agent and Citibank NA, London Branch as GIEK Agent, dated October 10, 2012. See Item 7 “Major Unitholders and Related Party Transactions—Related Party Transactions—Rig Financing Agreements.”

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(15)
Loan Agreement dated September 28, 2012 between Seadrill Limited and Seadrill China Operations Ltd. See Item 7 “Major Unitholders and Related Party Transactions—Related Party Transactions—Rig Financing Agreements.”
(16)
Loan Agreement dated September 28, 2012 between Seadrill Limited and Seabras Rig Holdco Kft. See Item 7 “Major Unitholders and Related Party Transactions—Related Party Transactions—Rig Financing Agreements.”
(17)
Loan Agreement dated September 28, 2012 between Seadrill Limited and Seadrill Deepwater Drillship Ltd. See Item 7 “Major Unitholders and Related Party Transactions—Related Party Transactions—Rig Financing Agreements.”
(18)
Loan Agreement dated September 28, 2012 between Seadrill Limited and Seadrill Vencedor Ltd. See Item 7 “Major Unitholders and Related Party Transactions—Related Party Transactions—Rig Financing Agreements.”
(19)
Bareboat Charter Agreement between Seadrill Offshore AS and Seadrill Canada Ltd. dated October 5, 2012. See Item 7 “Major Unitholders and Related Party Transactions—Related Party Transactions— West Aquarius Bareboat Charters.”
(20)
Bareboat Charter Agreements between Seadrill China Operations Ltd. and Seadrill Offshore AS dated October 5, 2012.See Item 7 “Major Unitholders and Related Party Transactions—Related Party Transactions— West Aquarius Bareboat Charters.”
(21)
Amendment No. 1 to Contribution and Sale Agreement among Seadrill Partners LLC, Seadrill Member LLC, Seadrill Operating GP LLC, Seadrill Operating LP, Seadrill Capricorn Holdings LLC, Seadrill Opco Sub LLC, Seadrill Americas Inc., Seadrill Offshore AS, and Seadrill UK Ltd., dated as of June 30, 2013. See Item 7 “Major Unitholders and Related Party Transactions-Related Party Transactions- Amendment to Contribution and Sale Agreement..”
(22)
US$440,000,000 Secured Credit Facility Agreement dated December 4, 2012 between Seadrill Limited, as borrower, the subsidiaries of Seadrill Limited named therein as guarantors, and the banks and financial institutions named therein as lenders. See Item 7 “Major Unitholders and Related Party Transactions-Related Party Transactions-Rig Financing Agreements- T-15 and T-16 Credit Facility .”
(23)
Loan Agreement, dated May 16, 2013, between Seadrill Limited, Seadrill T-15 Ltd., Seadrill Partners Operating LLC and Seadrill International Limited. This is an intercompany loan agreement with Seadrill pursuant to which Seadrill T-15 Ltd. makes payments of principal and interest to the lenders of the T-15 and T-16 Credit Facility on Seadrill’s behalf. See Item 7 “Major Unitholders and Related Party Transactions-Related Party Transactions- T-15 Acquisition .”
(24)
Intercompany Loan Agreement, dated May 16, 2013, between Seadrill Limited, as lender and Seadrill Partners Operating LLC, as borrower. Pursuant to this agreement, Seadrill Partners Operating borrowed $109.5 million to fund the acquisition of the entities that own and operate the T-15. See Item 7 “Major Unitholders and Related Party Transactions-Related Party Transactions- T-15 Acquisition .”
(25)
Purchase and Sale Agreement, dated May 7, 2013, between Seadrill Limited and Seadrill Partners Operating LLC. Pursuant to this agreement, Seadrill Partners Operating LLC purchase the equity interest in each of the entities that own and operate the T-15 . See Item 7 “Major Unitholders and Related Party Transactions-Related Party Transactions- T-15 Acquisition .”
(26)
Rig Rental Agreement, effective as of December 10, 2012, by and among Seadrill T-15 Ltd. and Seadrill UK Ltd. See Item 7 “Major Unitholders and Related Party Transactions-Related Party Transactions- T-15 and T-16 Bareboat Charters .”
(27)
Rig Rental Agreement, effective as of December 10, 2012, by and among Seadrill T-16 Ltd. and Seadrill UK Ltd. See Item 7 “Major Unitholders and Related Party Transactions-Related Party Transactions- T-15 and T-16 Bareboat Charters .”
(28)
Rig Rental Agreement, effective as of December 10, 2012, by and among Seadrill International Ltd. and Seadrill UK Ltd., relating to the T-15 . See Item 7 “Major Unitholders and Related Party Transactions-Related Party Transactions- T-15 and T-16 Bareboat Charters .”
(29)
Rig Rental Agreement, effective as of December 10, 2012, by and among Seadrill International Ltd. and Seadrill UK Ltd., relating to the T-16 . See Item 7 “Major Unitholders and Related Party Transactions-Related Party Transactions- T-15 and T-16 Bareboat Charters .”
(30)
Purchase and Sale Agreement, dated October 11, 2013, by and among Seadrill Limited, Seadrill Partners LLC and Seadrill Partners Operating LLC. Pursuant to this agreement, Seadrill Partners Operating purchased the equity interests in the entity that owns the T - 16 . See Item 7 “Major Unitholders and Related Party Transactions-Related Party Transactions- T-16 Acquisition .”
(31)
Loan Agreement, dated October 11, 2013, by and among Seadrill Limited, Seadrill T-16 Ltd. and Seadrill Partners Operating LLC. Pursuant to this agreement, Seadrill T-15 makes payments of principal and interest directly to the lenders under the T-15 and T-16 Credit Facility on Seadrill's behalf. See Item 7 “Major Unitholders and Related Party Transactions-Related Party Transactions- T-16 Acquisition .”
(32)
Unit Purchase Agreement, dated December 3, 2013. Seadrill Partners LLC sold 3,394,916 common units to Seadrill for an aggregate payment of $100.2 million in a private placement. The proceeds from the transaction were used to fund a portion of the cash purchase price for the West Leo and West Sirius Acquisitions . See Item 7 “Major Unitholders and Related Party Transactions-Related Party Transactions- West Leo and West Sirius Acquisitions .”
(33)
Contribution, Purchase and Sale Agreement, dated December 2, 2013, as amended by Amendment to Contribution, Purchase and Sale Agreement, dated as of December 12, 2013, by and among Seadrill Limited, a Bermuda exempted company Seadrill Partners LLC, Seadrill Operating LP, Seadrill Capricorn Holdings LLC, and Seadrill Americas Inc. Pursuant to this agreement, as amended, Seadrill Operating LP acquired all of the ownership interests in each of the entities that own, operate and manage the semi-submersible drilling rig, West Leo and Seadrill Capricorn Holdings LLC acquired all of the ownership interests in each of the entities that own and operate the semi-submersible drilling rig, West Sirius . See Item 7 “Major Unitholders and Related Party Transactions-Related Party Transactions- West Leo and West Sirius Acquisitions.”
(34)
Loan Agreement, dated December 13, 2013 by and among Seadrill Limited and Seadrill Leo Ltd. and Seadrill Operating LP. Pursuant to this agreement, Seadrill Leo Ltd. makes payments of principal and interest directly to the lenders under the West Leo Credit Facility on Seadrill's behalf. See Item 7 “Major Unitholders and Related Party Transactions-Related Party Transactions- West Leo and West Sirius Acquisitions .”

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(35)
Loan Agreement, dated December 13, 2013 by and among Seadrill Limited and Seadrill Capricorn Holdings. Pursuant to this agreement, Seadrill Capricorn Holdings LLC makes payments of principal and interest relating to the amounts outstanding with respect to the West Sirius under the West Capella, West Aquarius and West Sirius Credit Facility on Seadrill's behalf. See Item 7 “Major Unitholders and Related Party Transactions-Related Party Transactions- West Leo and West Sirius Acquisitions .”
(36)
Administrative, Technical and Advisory Agreement, effective as of January 1, 2012 by and among Seadrill Management AME Ltd. and Seadrill Ghana Operations Ltd. See Item 7 “Major Unitholders and Related Party Transactions-Related Party Transactions-Advisory, Technical and Administrative Services Agreements.”
(37)
Administrative, Technical and Advisory Agreement, effective as of January 1, 2012 by and among Seadrill Management AME Ltd. and Seadrill Ghana Operations Ltd., effective as of December 13, 2013, by and among Seadrill Americas Inc. and Seadrill Gulf Operations Sirius LLC. See Item 7 “Major Unitholders and Related Party Transactions-Related Party Transactions-Advisory, Technical and Administrative Services Agreements.”
(38)
Promissory Discount Note dated December 13, 2013 by and among Seadrill Partners LLC and Seadrill Limited. See Item 7 “Major Unitholders and Related Party Transactions-Related Party Transactions- West Leo and West Sirius Acquisitions .”
(39)
Promissory Discount Note dated December 13, 2013 by and among Seadrill Capricorn Holdings LLC and Seadrill Limited. See Item 7 “Major Unitholders and Related Party Transactions-Related Party Transactions- West Leo and West Sirius Acquisitions .”
(40)
Credit Agreement dated February 21, 2013 among Seadrill Operating LP, Seadrill Partners Finco LLC, Seadrill Capricorn Holdings LLC, various lenders and Deutsche Bank AG New York Branch, as Administrative Agent and Collateral Agent. See Item 5B “Liquidity and Capital Resources-Borrowing Activities-Senior Secured Credit Facilities.”
(41)
Unit Purchase Agreement, dated March 12, 2014. Seadrill Partners LLC sold 1,633,987 common units to Seadrill for an aggregate payment of $50.0 million in a private placement. The proceeds from the transaction were used to fund a portion of the cash purchase price for the Auriga Acquisition. See Item 7 “Major Unitholders and Related Party Transactions-Related Party Transactions-Auriga Acquisition.”
(42)
Contribution, Purchase and Sale Agreement, dated March 11, 2014. Pursuant to this agreement, Seadrill Capricorn Holdings LLC acquired the entities that own and operate the West Auriga . See Item 7 “Major Unitholders and Related Party Transactions-Related Party Transactions-Auriga Acquisition.”
(43)
Promissory Discount Note, dated March 21, 2014 issued by Seadrill Capricorn Holdings LLC. See Item 7 “Major Unitholders and Related Party Transactions - Related Party Transactions - Auriga Acquisition.”
(44)
Administrative, Technical and Advisory Agreement, effective as of March 21, 2014, by and among Seadrill Americas Inc. and Seadrill Gulf Operations Auriga LLC. See Item 7 “Major Unitholders and Related Party Transactions-Related Party Transactions-Advisory, Technical and Administrative Services Agreements.”
(45)
Administrative, Technical and Advisory Agreement, effective as of February 15, 2013, between Seadrill Americas Inc. and Seadrill Gulf Operations Vela LLC. See Item 7 “Major Unitholders and Related Party Transactions-Related Party Transactions-Advisory, Technical and Administrative Services Agreements.”
(46)
Limited Partner Interest Purchase Agreement, dated as of July 17, 2014, between Seadrill Limited and Seadrill Partners LLC. Pursuant to this agreement, the Company purchased an additional 28% limited partner interest in Seadrill Operating LP. See Item 7 “Major Unitholders and Related Party Transactions-Related Party Transactions-Acquisition of additional limited partner interest in Seadrill Operating LP”.
(47)
Contribution, Purchase and Sale Agreement, dated November 4, 2014, by and among Seadrill Limited, Seadrill Partners LLC, Seadrill Capricorn Holdings LLC and Seadrill Americas Inc. Pursuant to this agreement, Seadrill Capricorn Holdings LLC acquired the entities that own and operate the West Vela . See Item 7 ”Major Unitholders and Related Party Transactions-Related Party Transactions-West Vela Acquisition.”
(48)
Second Amended and Restated $1,450 Million Senior Secured Credit Facility Agreement, dated as of November 4, 2014, among Seadrill Tellus Ltd. and Seadrill Vela Hungary Kft., as Borrowers, Seadrill Limited, as Parent, the guarantors party thereto, ING Bank N.V., as Agent, the lenders party thereto and the other parties thereto. See Item 5B “Liquidity and Capital Resources-Borrowing Activities-Senior Secured Credit Facilities.”
(49)
Amendment to the Loan Agreement between Seadrill Limited and Seadrill Vencedor Limited dated August 28, 2014. See Item 7 “Major Unitholders and Related Party Transactions—Related Party Transactions—Rig Financing Agreements.”
(50)
Second Amendment to the Loan Agreement between Seadrill Limited and Seadrill Vencedor Limited dated April 14, 2015. See Item 7 “Major Unitholders and Related Party Transactions—Related Party Transactions—Rig Financing Agreements.”
(51)
On Demand and Guarantee and Indemnity, dated November 4, 2014, between Seadrill Partners LLC and ING Bank N.V. Pursuant to this agreement, Seadrill Partners LLC has guaranteed the obligations of Seadrill Vela Hungary Kft. under the $1,450 Million Senior Secured Credit Facility Agreement, dated as of November 4, 2014, among Seadrill Tellus Ltd. and Seadrill Vela Hungary Kft., as Borrowers, Seadrill Limited, as Parent, the guarantors party thereto, ING Bank N.V., as Agent, the lenders party thereto and the other parties thereto, in an amount up to $497.5 million plus interest and costs.


D.     Exchange Controls
The Company is not aware of any governmental laws, decrees or regulations, including foreign exchange controls, in the Republic of The Marshall Islands that restrict the export or import of capital, or that affect the remittance of dividends, interest or other payments to non-resident holders of the Company's securities.
The Company is not aware of any limitations on the right of non-resident or foreign owners to hold or vote the Company's securities imposed by the laws of the Republic of The Marshall Islands or the Company's operating agreement.

E.     Taxation
Material U.S. Federal Income Tax Considerations
The following is a discussion of the material U.S. federal income tax considerations that may be relevant to prospective unitholders.
This discussion is based upon provisions of the Code, Treasury Regulations, and current administrative rulings and court decisions, all as in effect or existence on the date of this prospectus and all of which are subject to change, possibly with retroactive effect. Changes in these authorities may cause the tax consequences of unit ownership to vary substantially from the consequences described below. Unless the context otherwise requires, references in this section to “we,” “our” or “us” are references to Seadrill Partners LLC.
The following discussion applies only to beneficial owners of common units that own the common units as “capital assets” within the meaning of Section 1221 of the Code (i.e., generally, for investment purposes) and is not intended to be applicable to all categories of investors, such as unitholders subject to special tax rules (e.g., financial institutions, insurance companies, broker-dealers, tax-exempt organizations, retirement plans or individual retirement accounts or former citizens or long-term residents of the United States), persons who will hold the units as part of a straddle, hedge, conversion, constructive sale or other integrated transaction for U.S. federal income tax purposes, or persons that have a functional currency other than the U.S. Dollar, each of whom may be subject to tax rules that differ significantly from those summarized below. If a partnership or other entity classified as a partnership for U.S. federal income tax purposes holds the Company's common units, the tax treatment of its partners generally will depend upon the status of the partner and the activities of the partnership. If you are a partner in a partnership holding the Company's common units, you should consult your own tax advisor regarding the tax consequences to you of the partnership’s ownership of the Company's common units.
No ruling has been or will be requested from the IRS regarding any matter affecting the Company or prospective unitholders. The statements made herein may be challenged by the IRS and, if so challenged, may not be sustained upon review in a court.
This discussion does not contain information regarding any U.S. state or local, estate, gift or alternative minimum tax considerations concerning the ownership or disposition of common units. This discussion does not comment on all aspects of U.S. federal income taxation that may be important to particular unitholders in light of their individual circumstances, and each prospective unitholder is urged to consult its own tax advisor regarding the U.S. federal, state, local and other tax consequences of the ownership or disposition of common units.
Election to be Treated as a Corporation
The Company has elected to be treated as a corporation for U.S. federal income tax purposes. As a result, U.S. Holders (as defined below) will not be directly subject to U.S. federal income tax on the Company's income, but rather will be subject to U.S. federal income tax on distributions received from the Company and dispositions of units as described below.
U.S. Federal Income Taxation of U.S. Holders
As used herein, the term “U.S. Holder” means a beneficial owner of the Company's common units that owns (actually or constructively) less than 10% of the Company's equity and that is:
•
an individual U.S. citizen or resident (as determined for U.S. federal income tax purposes),
•
a corporation (or other entity that is classified as a corporation for U.S. federal income tax purposes) organized under the laws of the United States or any of its political subdivisions,
•
an estate the income of which is subject to U.S. federal income taxation regardless of its source, or
•
a trust if (i) a court within the United States is able to exercise primary jurisdiction over the administration of the trust and one or more U.S. persons have the authority to control all substantial decisions of the trust or (ii) the trust has a valid election in effect to be treated as a U.S. person for U.S. federal income tax purposes.

Distributions
Subject to the discussion below of the rules applicable to PFICs, any distributions to a U.S. Holder made by the Company with respect to the Company's common units generally will constitute dividends, to the extent of the Company's current and accumulated earnings and profits, as determined under U.S. federal income tax principles. Distributions in excess of the Company's earnings and profits will be treated first as a nontaxable return of capital to the extent of the U.S. Holder’s tax basis in its common units and, thereafter, as capital gain. U.S. Holders that are corporations generally will not be entitled to claim dividends received deductions with respect to distributions they receive from the Company because the Company is not a U.S. corporation. Dividends received with respect to the Company's common units generally will be treated as “passive category income” for purposes of computing allowable foreign tax credits for U.S. federal income tax purposes.

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Dividends received with respect to the Company's common units, by a U.S. Holder that is an individual, trust or estate (a “U.S. Individual Holder”) generally will be treated as “qualified dividend income,” which is taxable to such U.S. Individual Holder at preferential tax rates provided that: (i) the Company's common units are readily tradable on an established securities market in the United States (such as The New York Stock Exchange on which the Company's common units are traded); (ii) the Company is not a PFIC for the taxable year during which the dividend is paid or the immediately preceding taxable year (which the Company does not believe it is, has been or will be, as discussed below under “PFIC Status and Significant Tax Consequences”); (iii) the U.S. Individual Holder has owned the common units for more than 60 days during the 121 days period beginning 60 days before the date on which the common units become ex-dividend (and has not entered into certain risk limiting transactions with respect to such common units); and (iv) the U.S. Individual Holder is not under an obligation to make related payments with respect to positions in substantially similar or related property.
There is no assurance that any dividends paid on the Company's common units will be eligible for these preferential rates in the hands of a U.S. Individual Holder, and any dividends paid on the Company's common units that are not eligible for these preferential rates will be taxed as ordinary income to a U.S. Individual Holder.
Special rules may apply to any amounts received in respect of the Company's common units that are treated as “extraordinary dividends.” In general, an extraordinary dividend is a dividend with respect to a common unit that is equal to or in excess of 10% of a unitholder’s adjusted tax basis (or fair market value upon the unitholder’s election) in such common unit. In addition, extraordinary dividends include dividends received within a one year period that, in the aggregate, equal or exceed 20% of a unitholder’s adjusted tax basis (or fair market value). If the Company pays an “extraordinary dividend” on the Company's common units that is treated as “qualified dividend income,” then any loss recognized by a U.S. Individual Holder from the sale or exchange of such common units will be treated as long-term capital loss to the extent of the amount of such dividend.
Sale, Exchange or Other Disposition of Common Units
Subject to the discussion of PFIC status below, a U.S. Holder generally will recognize capital gain or loss upon a sale, exchange or other disposition of the Company's units in an amount equal to the difference between the amount realized by the U.S. Holder from such sale, exchange or other disposition and the U.S. Holder’s adjusted tax basis in such units. The U.S. Holder’s initial tax basis in its units generally will be the U.S. Holder’s purchase price for the units and that tax basis will be reduced (but not below zero) by the amount of any distributions on the units that are treated as non-taxable returns of capital (as discussed above under “Distributions”). Such gain or loss will be treated as long-term capital gain or loss if the U.S. Holder’s holding period is greater than one year at the time of the sale, exchange or other disposition. Certain U.S. Holders (including individuals) may be eligible for preferential rates of U.S. federal income tax in respect of long-term capital gains. A U.S. Holder’s ability to deduct capital losses is subject to limitations. Such capital gain or loss generally will be treated as U.S. source income or loss, as applicable, for U.S. foreign tax credit purposes.
Medicare Tax on Net Investment Income
Certain U.S. Holders, including individuals, estates and trusts, will be subject to an additional 3.8% Medicare tax on, among other things, dividends and capital gains from the sale or other disposition of equity interests. For individuals, the additional Medicare tax applies to the lesser of (i) “net investment income” or (ii) the excess of “modified adjusted gross income” over $200,000 ( $250,000 if married and filing jointly or $125,000 if married and filing separately). “Net investment income” generally equals the taxpayer’s gross investment income reduced by deductions that are allocable to such income. Unitholders should consult their tax advisors regarding the implications of the additional Medicare tax resulting from their ownership and disposition of the Company's common units.

PFIC Status and Significant Tax Consequences
Adverse U.S. federal income tax rules apply to a U.S. Holder that owns an equity interest in a non-U.S. corporation that is classified as a PFIC for U.S. federal income tax purposes. In general, the Company will be treated as a PFIC with respect to a U.S. Holder if, for any taxable year in which the holder held the Company's units, either:
•
at least 75% of the Company's gross income (including the gross income of the Company's drilling unit owning subsidiaries) for such taxable year consists of passive income (e.g., dividends, interest, capital gains from the sale or exchange of investment property and rents derived other than in the active conduct of a rental business); or
•
at least 50% of the average value of the assets held by the Company (including the assets of the Company's drilling unit owning subsidiaries) during such taxable year produce, or are held for the production of, passive income.
Income earned, or treated as earned (for U.S. federal income tax purposes), by the Company in connection with the performance of services would not constitute passive income. By contrast, rental income generally would constitute “passive income” unless the Company was treated as deriving that rental income in the active conduct of a trade or business under the applicable rules.
Based on the Company's current and projected method of operation, the Company believes that the Company was not a PFIC for the Company's 2014 taxable year, and the Company expects that the Company will not be treated as a PFIC for the current or any future taxable year. The Company expects that more than 25% of the Company's gross income for the Company's 2014 taxable year arose and for the current and each future year will arise from such drilling contracts or other income that the Company believes should not constitute passive income, and more than 50% of the average value of the Company's assets for each such year will be held for the production of such nonpassive income. Assuming the composition of the Company's income and assets is consistent with these expectations, the Company believes that the Company should not be a PFIC for the Company's 2014 taxable year or the Company's current or any future year.

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Distinguishing between arrangements treated as generating rental income and those treated as generating services income involves weighing and balancing competing factual considerations, and there is no legal authority under the PFIC rules addressing the Company's specific method of operation. Conclusions in this area therefore remain matters of interpretation. The Company is not seeking a ruling from the IRS on the treatment of income generated from the Company's drilling contracts or charters. Thus, it is possible that the IRS or a court could disagree with this position. In addition, although the Company intends to conduct the Company's affairs in a manner to avoid being classified as a PFIC with respect to any taxable year, the Company cannot assure unitholders that the nature of the Company's operations will not change in the future and that the Company will not become a PFIC in any future taxable year.
As discussed more fully below, if the Company was to be treated as a PFIC for any taxable year, a U.S. Holder would be subject to different taxation rules depending on whether the U.S. Holder makes an election to treat the Company as a “Qualified Electing Fund,” which the Company refers to as a “QEF election.” As an alternative to making a QEF election, a U.S. Holder should be able to make a “mark-to-market” election with respect to the Company's common units, as discussed below. If the Company is a PFIC, a U.S. Holder will be subject to the PFIC rules described herein with respect to any of the Company's subsidiaries that are PFICs. However, the mark-to-market election discussed below will likely not be available with respect to shares of such PFIC subsidiaries. In addition, if a U.S. Holder owns the Company's common units during any taxable year that the Company is a PFIC, such holder must file an annual report with the IRS.
Taxation of U.S. Holders Making a Timely QEF Election
If a U.S. Holder makes a timely QEF election (an “Electing Holder”), then, for U.S. federal income tax purposes, that holder must report as income for its taxable year its pro rata share of the Company's ordinary earnings and net capital gain, if any, for the Company's taxable years that end with or within the taxable year for which that holder is reporting, regardless of whether or not the Electing Holder received distributions from the Company in that year. The Electing Holder’s adjusted tax basis in the common units will be increased to reflect taxed but undistributed earnings and profits. Distributions of earnings and profits that were previously taxed will result in a corresponding reduction in the Electing Holder’s adjusted tax basis in common units and will not be taxed again once distributed. An Electing Holder generally will recognize capital gain or loss on the sale, exchange or other disposition of the Company's common units. A U.S. Holder makes a QEF election with respect to any year that the Company is a PFIC by filing IRS Form 8621 with its U.S. federal income tax return. If contrary to the Company's expectations, the Company determines that the Company is treated as a PFIC for any taxable year, the Company will provide each U.S. Holder with the information necessary to make the QEF election described above.

Taxation of U.S. Holders Making a “Mark-to-Market” Election
If the Company was to be treated as a PFIC for any taxable year and, as the Company anticipates, the Company's units were treated as “marketable stock,” then, as an alternative to making a QEF election, a U.S. Holder would be allowed to make a “mark-to-market” election with respect to the Company's common units, provided the U.S. Holder completes and files IRS Form 8621 in accordance with the relevant instructions and related Treasury Regulations. If that election is made, the U.S. Holder generally would include as ordinary income in each taxable year the excess, if any, of the fair market value of the U.S. Holder’s common units at the end of the taxable year over the holder’s adjusted tax basis in the common units. The U.S. Holder also would be permitted an ordinary loss in respect of the excess, if any, of the U.S. Holder’s adjusted tax basis in the common units over the fair market value thereof at the end of the taxable year, but only to the extent of the net amount previously included in income as a result of the mark-to-market election. A U.S. Holder’s tax basis in its common units would be adjusted to reflect any such income or loss recognized. Gain recognized on the sale, exchange or other disposition of the Company's common units would be treated as ordinary income, and any loss recognized on the sale, exchange or other disposition of the common units would be treated as ordinary loss to the extent that such loss does not exceed the net mark-to-market gains previously included in income by the U.S. Holder. Because the mark-to-market election only applies to marketable stock, however, it would not apply to a U.S. Holder’s indirect interest in any of the Company's subsidiaries that were determined to be PFICs.
Taxation of U.S. Holders Not Making a Timely QEF or Mark-to-Market Election
If the Company was to be treated as a PFIC for any taxable year, a U.S. Holder that does not make either a QEF election or a “mark-to-market” election for that year (or a Non-Electing Holder) would be subject to special rules resulting in increased tax liability with respect to (1) any excess distribution (i.e., the portion of any distributions received by the Non-Electing Holder on the Company's common units in a taxable year in excess of 125% of the average annual distributions received by the Non-Electing Holder in the three preceding taxable years, or, if shorter, the Non-Electing Holder’s holding period for the common units), and (2) any gain realized on the sale, exchange or other disposition of the units. Under these special rules:
•
the excess distribution or gain would be allocated ratably over the Non-Electing Holder’s aggregate holding period for the common units;
•
the amount allocated to the current taxable year and any taxable year prior to the taxable year the Company was first treated as a PFIC with respect to the Non-Electing Holder would be taxed as ordinary income; and
•
the amount allocated to each of the other taxable years would be subject to tax at the highest rate of tax in effect for the applicable class of taxpayers for that year, and an interest charge for the deemed deferral benefit would be imposed with respect to the resulting tax attributable to each such other taxable year.
These penalties would not apply to a qualified pension, profit sharing or other retirement trust or other tax-exempt organization that did not borrow money or otherwise utilize leverage in connection with its acquisition of the Company's common units. If the Company was treated as a PFIC for any taxable year and a Non-Electing Holder who is an individual dies while owning the Company's common units, such holder’s successor generally would not receive a step-up in tax basis with respect to such units.

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U.S. Federal Income Taxation of Non-U.S. Holders
A beneficial owner of the Company's common units (other than a partnership or an entity or arrangement treated as a partnership for U.S. federal income tax purposes) that is not a U.S. Holder is referred to as a “Non-U.S. Holder.” If you are a partner in a partnership (or an entity or arrangement treated as a partnership for U.S. federal income tax purposes) holding the Company's common units, you should consult your own tax advisor regarding the tax consequences to you of the partnership’s ownership of the Company's common units.
Distributions
Distributions the Company pays to a Non-U.S. Holder will not be subject to U.S. federal income tax or withholding tax if the Non-U.S. Holder is not engaged in a U.S. trade or business. If the Non-U.S. Holder is engaged in a U.S. trade or business, the Company's distributions will be subject to U.S. federal income tax to the extent they constitute income effectively connected with the Non-U.S. Holder’s U.S. trade or business. However, distributions paid to a Non-U.S. Holder that is engaged in a U.S. trade or business may be exempt from taxation under an income tax treaty if the income arising from the distribution is not attributable to a U.S. permanent establishment maintained by the Non-U.S. Holder.
Disposition of Units
In general, a Non-U.S. Holder is not subject to U.S. federal income tax or withholding tax on any gain resulting from the disposition of the Company's common units provided the Non-U.S. Holder is not engaged in a U.S. trade or business. A Non-U.S. Holder that is engaged in a U.S. trade or business will be subject to U.S. federal income tax in the event the gain from the disposition of units is effectively connected with the conduct of such U.S. trade or business (provided, in the case of a Non-U.S. Holder entitled to the benefits of an income tax treaty with the United States, such gain also is attributable to a U.S. permanent establishment). However, even if not engaged in a U.S. trade or business, individual Non-U.S. Holders may be subject to tax on gain resulting from the disposition of the Company's common units if they are present in the United States for 183 days or more during the taxable year in which those units are disposed and meet certain other requirements.
Backup Withholding and Information Reporting
In general, payments to a non-corporate U.S. Holder of distributions or the proceeds of a disposition of common units is subject to information reporting. These payments to a non-corporate U.S. Holder also may be subject to backup withholding if the non-corporate U.S. Holder:
•
fails to provide an accurate taxpayer identification number;
•
is notified by the IRS that it has failed to report all interest or corporate distributions required to be reported on its U.S. federal income tax returns; or
•
in certain circumstances, fails to comply with applicable certification requirements.
Non-U.S. Holders may be required to establish their exemption from information reporting and backup withholding by certifying their status on IRS Form W-8BEN, W-8BEN-E, W-8ECI or W-8IMY, as applicable.
Backup withholding is not an additional tax. Rather, a unitholder generally may obtain a credit for any amount withheld against its liability for U.S. federal income tax (and obtain a refund of any amounts withheld in excess of such liability) by timely filing a U.S. federal income tax return with the IRS.
In addition, individual citizens or residents of the United States holding certain “foreign financial assets” (which generally includes stock and other securities issued by a foreign person unless held in account maintained by a financial institution) that exceed certain thresholds (the lowest being holding foreign financial assets with an aggregate value in excess of: (1)  $50,000 on the last day of the tax year, or (2)  $75,000 at any time during the tax year) are required to report information relating to such assets. Significant penalties may apply for failure to satisfy the reporting obligations described above. Unitholders should consult their tax advisors regarding the reporting obligations, if any, that result from their purchase, ownership or disposition of the Company's units.
Non-United States Tax Considerations
Unless the context otherwise requires, references in this section to “we,” “our” or “us” are references to Seadrill Partners LLC.
Marshall Islands Tax Consequences
The following discussion is based upon the opinion of Watson, Farley & Williams LLP, the Company's counsel as to matters of the laws of the Republic of the Marshall Islands, and the current laws of the Republic of the Marshall Islands applicable to persons who do not reside in, maintain offices in or engage in business in the Republic of the Marshall Islands.
Because the Company and the Company's subsidiaries do not and do not expect to conduct business or operations in the Republic of the Marshall Islands, under current Marshall Islands law the Company's unitholders will not be subject to Marshall Islands taxation or withholding on distributions, including upon distribution treated as a return of capital, the Company makes to the Company's unitholders. In addition, the Company's unitholders will not be subject to Marshall Islands stamp, capital gains or other taxes on the purchase, ownership or disposition of common units, and will not be required by the Republic of the Marshall Islands to file a tax return relating to their ownership of common units.


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United Kingdom Tax Consequences
The following is a discussion of the material U.K. tax consequences that may be relevant to unitholders who are persons not resident for tax purposes in the United Kingdom (and who are persons who have not been resident for tax purposes in the United Kingdom), or “non-U.K. Holders.”
Unitholders who are, or have been, resident in the United Kingdom are urged to consult their own tax advisors regarding the potential U.K. tax consequences to them of an investment in the Company's common units. For this purpose, a company incorporated outside of the U.K. will be treated as resident in the United Kingdom in the event its central management and control is carried out in the United Kingdom.
The discussion that follows is based upon existing U.K. legislation and current H.M. Revenue & Customs practice as of April 16, 2015, both of which may change, possibly with retroactive effect. Changes in these authorities may cause the tax consequences to vary substantially from the consequences of unit ownership described below.
The Company is not required to withhold U.K. tax when paying distributions to unitholders.
Under U.K. taxation legislation, non-U.K. Holders will not be subject to tax in the United Kingdom on income or profits, including chargeable (capital) gains, in respect of the acquisition, holding, disposition or redemption of the common units, provided that:
•
such holders do not use or hold and are not deemed or considered to use or hold their common units in the course of carrying on a trade, profession or vocation in the United Kingdom; and
•
such holders do not have a branch or agency or permanent establishment in the United Kingdom through which such common units are used, held or acquired.
U.K. stamp duty should not be payable in connection with a transfer of units, provided that the instrument of transfer is executed and retained outside the U.K. and no other action is taken in the U.K in relation to the transfer.
No U.K. stamp duty reserve tax will be payable in respect of any agreement to transfer units provided that the units are not registered in a register kept in the U.K. by or on behalf of the Company. The Company currently does not intend that any such register will be maintained in the U.K.
EACH PROSPECTIVE UNITHOLDER IS URGED TO CONSULT HIS OWN TAX COUNSEL OR OTHER ADVISOR WITH REGARD TO THE LEGAL AND TAX CONSEQUENCES OF UNIT OWNERSHIP UNDER HIS PARTICULAR CIRCUMSTANCES.
 
F.     Dividends and Paying Agents
Not applicable.

G.     Statements by Experts
Not applicable.

H.     Documents on Display
Documents concerning the Company that are referred to herein may be inspected at the Company's principal executive headquarters at 2nd Floor, Building 11, Chiswick Business Park, 566 Chiswick High Road, London, W4 5YS, United Kingdom. Those documents electronically filed via the SEC’s Electronic Data Gathering, Analysis, and Retrieval (or EDGAR) system may also be obtained from the SEC’s website at www.sec.gov, free of charge, or from the SEC’s Public Reference Section at 100 F Street, NE, Washington, D.C. 20549, at prescribed rates. Further information on the operation of the SEC public reference rooms may be obtained by calling the SEC at 1-800-SEC-0330.
 
I.     Subsidiary Information
Not applicable.

Item 11.         Quantitative and Qualitative Disclosures About Market Risk
The Company is exposed to various market risks, including interest rate, foreign currency exchange and concentration of credit risks. The Company may enter into a variety of derivative instruments and contracts to maintain the desired level of exposure arising from these risks.
Interest Rate Risks
The Company’s exposure to interest rate risk relates mainly to its floating interest rate debt and balances of surplus funds placed with financial institutions. This exposure is managed through the use of interest rate swaps and other derivative arrangements. The Company’s objective is to obtain the most favorable interest rate borrowings available without increasing its foreign currency exposure. Surplus funds are used to repay revolving credit tranches, or placed in accounts and deposits with reputable financial institutions in order to maximize returns, while providing the Company with flexibility to meet all requirements for working capital and capital investments. The extent to which the Company utilizes interest rate swaps derivatives to manage its interest rate risk is determined by the net debt exposure and its views on future interest rates.
As of December 31, 2014 , the Company was party to interest rate swap agreements with Seadrill for a combined outstanding principal amount of approximately $690.1 million at rates between 1.10%  per annum and 1.93%  per annum. The swap agreements mature between July 2018 and December 2020 . The net loss recognized on the Company's interest rate swaps for the year ended December 31, 2014 , was $41.6 million .
As of December 31, 2014 , the Company was party to interest rate swap agreements with external counterparties for a combined outstanding principal amount of approximately $2,881.7 million at an average rate of 2.49%  per annum. The swap agreements mature in February 2021 . The net loss recognized on the Company's interest rate swaps for the year ended December 31, 2014 , was $83.3 million .
As of December 31, 2014 , the Company's exposure to floating interest rate fluctuations on the Company's outstanding debt (including related party debt agreements) was $78.6 million , compared with $7.2 million as of December 31, 2013 . An increase or decrease in short-term interest rates of 100 bps would thus increase or decrease, respectively, the Company's interest expense by approximately $0.8 million on an annual basis as of December 31, 2014 , as compared to $0.1 million in 2013 .
The fair values of the Company's interest rate swap agreements as of December 31, 2014 and 2013 were as follows:
 
December 31, 2014
 
December 31, 2013
(In millions of US dollars)
Outstanding
principal
 
Fair Value
 
Outstanding
Principal
 
Fair Value
Related party receivables (payables) - interest rate swap agreements
$
690.1

 
$
6.0

 
$
2,067.8

 
$
42.4

Other current assets (liabilities) - interest rate swap agreements
$
2,881.7

 
$
(56.1
)
 
$
—

 
$
—

For disclosure of the fair value of the derivatives and debt obligations outstanding as of December 31, 2014 , please read Note 15 of the Consolidated and Combined Carve-Out Financial Statements included elsewhere in this annual report.

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Credit Risk
The Company has financial assets which expose the Company to credit risk arising from possible default by a counterparty. The Company considers the counterparties to be creditworthy and does not expect any significant loss to result from non-performance by such counterparties. The Company in the normal course of business does not demand collateral from its counterparties.
Foreign Currency Fluctuation Risks
The Company and all of its subsidiaries use the U.S. Dollar as their functional currency because the majority of their revenues and expenses are denominated in U.S. Dollars. Accordingly, the Company's reporting currency is also U.S. Dollars. The Company does, however, earn revenue and incur expenses in other currencies and there is a risk that currency fluctuations could have an adverse effect on the value of the Company's cash flows.
The Company is exposed to some extent in respect of the West Vencedor , which receives approximately 30% of its dayrate in Euros. In addition, the Company receives 10% of the West Capella’s revenues in Nigerian Naira. There is a natural hedge of exposure to Nigerian Naira as a portion of the Company's operating costs are denominated in Nigerian Naira. A 10% appreciation or depreciation in the exchange rate of Euros against the U.S. Dollar would increase or decrease the Company’s revenue by $2.0 million . Due to the operations of the West Acquarius in Canada, a portion of the Company's revenues and expenses denominated in the Canadian Dollar. The impact of a 10% appreciation or depreciation in the exchange rate of Canadian Dollar against the US Dollar would not have a material impact on the Company.
The Company's foreign currency risk arises from:
•
the measurement of monetary assets and liabilities denominated in foreign currencies converted to US Dollars, with the resulting gain or loss recorded as “Foreign exchange gain/(loss);”
•
the impact of fluctuations in exchange rates on the reported amounts of the Company's revenues and expenses which are denominated in foreign currencies; and
•
foreign subsidiaries whose accounts are not maintained in U.S. Dollars, which when converted into US Dollars can result in exchange adjustments, which are recorded as a component in shareholders’ equity.
The Company does not use foreign currency forward contracts or other derivative instruments related to foreign currency exchange risk.
Retained Risk
Physical Damage Insurance. Seadrill purchases hull and machinery insurance to cover for physical damage to its drilling units and charges the Company for the cost related to the Company’s fleet.
The Company retains the risk for the deductibles relating to physical damage insurance on the Company’s fleet. The deductible is currently a maximum of $5 million per occurrence.
The Company has elected to place an insurance policy for physical damage to rigs and equipment caused by named windstorms in the U.S. Gulf of Mexico with a Combined Single Limit of $100 million in the annual aggregate, which includes loss of hire. The policy covers the 2014 windstorm season from April 1, 2014 to May 1, 2015 .The Company is negotiating the renewal of the insurance policy for physical damage to rigs and equipment caused by named windstorms in the U.S Gulf of Mexico with a Combined Single Limit of $100 million in the annual aggregate, which includes loss of hire. If renewed, the policy will cover the 2015 windstorm season from May 1, 2015 to March 31, 2016 .
Loss of Hire Insurance. With the exception of T-15 and T-16 , Seadrill purchases insurance to cover for loss of revenue in the event of extensive downtime caused by physical damage to its drilling units, where such damage is covered under the Seadrill’s physical damage insurance, and charges the Company for the cost related to the Company’s fleet.
The loss of hire insurance has a deductible period of 60 days after the occurrence of physical damage. Thereafter, insurance policies according to which the Company is compensated for loss of revenue are limited to 290 days per event and aggregated per year. The daily indemnity is approximately 75% of the contracted dayrate. The Company retains the risk related to loss of hire during the initial 60  day period, as well as any loss of hire exceeding the number of days permitted under insurance policy.
Protection and Indemnity Insurance. Seadrill purchases protection and indemnity insurance and excess liability insurance for personal injury liability for crew claims, non-crew claims and third-party property damage including oil pollution from the drilling units to cover claims of up to $250 million per event and in the aggregate for the West Vencedor, T-15 and T-16, up to $400 million per event, and in the aggregate for the West Aquarius, West Capella and West Leo , up to $750 million per event and in the aggregate for each of the West Capricorn, West Sirius, West Auriga and West Vela.
The Company retains the risk for the deductible of up to $0.5 million per occurrence relating to protection and indemnity insurance.
Concentration of Credit Risk
The market for the Company’s services is the offshore oil and gas industry, and the customers consist primarily of major oil and gas companies, independent oil and gas producers and government-owned oil companies. Ongoing credit evaluations of the Company's customers are performed and generally do not require collateral in the Company's business agreements. Reserves for potential credit losses are maintained when necessary.


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Item 12.     Description of Securities Other than Equity Securities
Not applicable.

PART II

Item 13.     Defaults, Dividend Arrearages and Delinquencies
Neither the Company, nor any of its subsidiaries has been subject to a material default in the payment of principal, interest, a sinking fund or purchase fund installment, or any other material delinquency that was not cured within 30 days .

Item 14.         Material Modifications to the Rights of Security Holders and Use of Proceeds
Not applicable

Item 15.     Controls and Procedures

a)    Disclosure Controls and Procedures
Management assessed the effectiveness of the design and operation of the Company's disclosure controls and procedures pursuant to Rule 13a-15 (e) of the Exchange Act as of December 31, 2014 . Based upon that evaluation the Principal Executive Officer and the Principal Financial Officer concluded that the Company's disclosure controls and procedures are effective as of the evaluation date.

b)    Management’s Report on Internal Control over Financial Reporting
The Company's management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15 (f) promulgated under the Exchange Act. Internal control over financial reporting is defined in Rule 13a-15(f) or 15d-15(f) promulgated under the Exchange Act as a process designed by, or under the supervision of, the Company's principal executive and principal financial officers and effected by the Company's board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:
•
Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company;
•
Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that the Company's receipts and expenditures are being made only in accordance with authorizations of Company's management and directors; and
•
Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company's assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree or compliance with the policies or procedures may deteriorate.
Management conducted the evaluation of the effectiveness of the internal controls over financial reporting using the control criteria framework issued by the Committee of Sponsoring Organizations of the Treadway Commission, or COSO, published in its report entitled Internal Control- Integrated Framework (2013).
The Company's management with the participation of the Company's Principal Executive Officer and the Principal Financial Officer assessed the effectiveness of the design and operation of the Company's internal controls over financial reporting pursuant to Rule 13a-15 of the Exchange Act as of December 31, 2014 . Based upon that evaluation, management, including the Principal Executive Officer and Principal Financial Officer, concluded that the Company's internal controls over financial reporting are effective as of December 31, 2014 .
The effectiveness of the Company's internal control over financial reporting as of December 31, 2014 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which appears herein.

c)     Attestation report of the registered public accounting firm
The independent registered public accounting firm that audited the Consolidated Financial Statements, PricewaterhouseCoopers LLP, has issued an attestation report on the effectiveness of the Company's internal control over financial reporting as of December 31, 2014 , appearing under Item 18, and such report is incorporated herein by reference.


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d)    Changes in Internal Control over Financial Reporting
There were no changes in the Company's internal controls over financial reporting that occurred during the period covered by this annual report that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

Item 16A.     Audit Committee Financial Expert
The Company's board of directors has determined that Kate Blankenship qualifies as an audit committee financial expert and is independent under applicable NYSE and SEC standards.

Item 16B.     Code of Ethics
The Company has adopted a Code of Ethics that applies to all entities controlled by the Company and its employees, directors, officers and agents of the Company. The Company has posted a copy of the Company's Code of Ethics on the Company's website at www.seadrillpartners.com. The Company will provide any person, free of charge, a copy of the Code of Ethics upon written request to the Company's registered office.

Item 16C.     Principal Accountant Fees and Services
The Company's principal accountant for 2014 and 2013 was PricewaterhouseCoopers LLP in the United Kingdom.

Fees Incurred by the Company for PricewaterhouseCoopers LLP’s Services
In 2014 , the fees rendered by the Company's principal accountant was as follows:
 
 
2014
 
2013
Audit Fees
$
1,205,808

 
$
933,534

Audit-Related Fees
—

 
—

Tax Fees
—

 
15,000

All other fees
—

 
—

 
$
1,205,808

 
$
948,534

Audit Fees
Audit fees represent professional services rendered for the audit of the Company's annual financial statements and services provided by the principal accountant in connection with statutory and regulatory filings or engagements.
Audit-Related Fees
Not applicable.
Tax Fees
Fees for tax services in 2014 and 2013 were not significant.
All Other Fees
Not applicable.
The audit committee has the authority to pre-approve permissible audit-related and non-audit services not prohibited by law to be performed by the Company's independent auditors and associated fees. Engagements for proposed services either may be separately pre-approved by the audit committee or entered into pursuant to detailed pre-approval policies and procedures established by the audit committee, as long as the audit committee is informed on a timely basis of any engagement entered into on that basis. The audit committee separately pre-approved all engagements and fees paid to the Company's principal accountant for all periods in 2014 .

Item 16D.     Exemptions from the Listing Standards for Audit Committees
Not applicable.

Item 16E.     Purchases of Equity Securities by the Issuer and Affiliated Purchasers
Not applicable.

Item 16F.     Change in Registrants’ Certifying Accountant
Not applicable.

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Item 16G.     Corporate Governance
Overview
Pursuant to an exception under the NYSE listing standards for foreign private issuers, the Company is not required to comply with the corporate governance practices followed by U.S. companies under the NYSE listing standards. However, pursuant to Section 303.A.11 of the NYSE Listed Company Manual, the Company is required to state any significant differences between the Company's corporate governance practices and the practices required by the NYSE for U.S. companies. The Company believes that the Company's established practices in the area of corporate governance are in line with the spirit of the NYSE standards and provide adequate protection to the Company's unitholders. The significant differences between the Company's corporate governance practices and the NYSE standards applicable to listed U.S. companies are set forth below.
Independence of Directors
NYSE rules do not require a listed company that is a foreign private issuer to have a board of directors that is composed of a majority of independent directors. Under Marshall Islands law, the Company is not required to have a board of directors composed of a majority of directors meeting the independence standards described in NYSE rules. Accordingly, the Company's board of directors is not composed of a majority of independent directors. However, the Company's board has determined that each of Mrs. Blankenship, Mr. Bekker,and Mr MacDonald satisfies the independence standards established by The New York Stock Exchange, or NYSE, as applicable to us.
Executive Sessions
The NYSE requires that non-management directors of a listed U.S. company meet regularly in executive sessions without management. The NYSE also requires that all independent directors of a listed U.S. company meet in an executive session at least once a year. As permitted under Marshall Islands law and the Company's limited liability company agreement, the Company's non-management directors do not regularly hold executive sessions without management and the Company does not expect them to do so in the future.

Nominating/Corporate Governance Committee
The NYSE requires that a listed U.S. company have a nominating/corporate governance committee of independent directors and a committee charter specifying the purpose, duties and evaluation procedures of the committee. As permitted under Marshall Islands law and the Company's limited liability company agreement, the Company does not currently have a nominating or corporate governance committee.
Compensation Committee
The NYSE requires that a listed U.S. company have a compensation committee of independent directors and a committee charter specifying the purpose, duties and evaluation procedures of the committee. As permitted under Marshall Islands law and the Company's limited liability company agreement, the Company does not have a compensation committee.
Corporate Governance Guidelines
The NYSE requires U.S. companies to adopt and disclose corporate governance guidelines. The guidelines must address, among other things: director qualification standards, director responsibilities, director access to management and independent advisers, director compensation, director orientation and continuing education, management succession and an annual performance evaluation. The Company is not required to adopt such guidelines under Marshall Islands law and the Company has not adopted such guidelines.
Issuance of Additional Units
The NYSE requires that a listed U.S. company obtain unitholder approval in certain circumstances prior to the issuance of additional units. Consistent with Marshall Islands Law and the Company's operating agreement, the Company is authorized to issue an unlimited amount of additional limited liability company interests and options, rights and warrants to buy limited liability company interests for the consideration and on the terms and conditions determined by the Company's board of directors without the approval of the unitholders.
The Company believes that the Company's established corporate governance practices satisfy the NYSE listing standards.

Item 16H.     Mine Safety Disclosure
Not applicable.

PART III

Item 17.     Financial Statements
Please refer to Item 18.

Item 18.     Financial Statements
The following financial statements listed below and set forth on pages F-1 through F-39 together with the related report of PricewaterhouseCoopers LLP, Independent Registered Public Accounting Firm, are filed as part of this annual report:
 


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Item 19.     Exhibits
The following exhibits are filed as part of this annual report:
 
Exhibit
Number
Description
1.1
Certificate of Formation of Seadrill Partners LLC (incorporated by reference to Exhibit 3.1 to the registrant’s Registration Statement on Form F-1 (File No. 333-184023), filed on September 21, 2012)
1.2
First Amended and Restated Operating Agreement of Seadrill Partners LLC, dated October 24, 2012, (incorporated by reference to Exhibit 1.2 of the registrant's Annual Report on Form 20-F for the year ended December 31, 2012, filed on April 30, 2013)
1.2.1*
Amendment No. 1 to the First Amended and Restated Operating Agreement of Seadrill Partners LLC, dated February 23, 2014
1.3
Amended and Restated Agreement of Limited Partnership of Seadrill Operating LP dated July 21, 2014 (incorporated by reference to Exhibit 10.2 of the registrant’s Current Report on Form 6-K for the month of July, filed on July 21, 2014)
1.4
Limited Liability Company Agreement of Seadrill Operating GP LLC, dated September 27, 2012 (incorporated by reference to Exhibit 1.4 of the registrant’s Annual Report on Form 20-F for the year ended December 31, 2012, filed on April 30, 2013)
1.5
Amended & Restated Limited Liability Company Agreement of Seadrill Capricorn Holdings LLC dated October 18, 2012 (incorporated by reference to Exhibit 1.5 of the registrant’s Annual Report on Form 20-F for the year ended December 31, 2012, filed on April 30, 2013)
4.1.1
Contribution and Sale Agreement among Seadrill Partners LLC, Seadrill Member LLC, Seadrill Operating GP LLC, Seadrill Operating LP, Seadrill Capricorn Holdings LLC, Seadrill Opco Sub LLC, Seadrill Americas Inc., Seadrill Offshore AS, and Seadrill UK Ltd., dated as of October 22, 2012 (incorporated by reference to Exhibit 4.1 of the registrant’s Annual Report on Form 20-F for the year ended December 31, 2012, filed on April 30, 2013)
4.1.2
Amendment No. 1 to Contribution and Sale Agreement among Seadrill Partners LLC, Seadrill Member LLC, Seadrill Operating GP LLC, Seadrill Operating LP, Seadrill Capricorn Holdings LLC, Seadrill Opco Sub LLC, Seadrill Americas Inc., Seadrill Offshore AS, and Seadrill UK Ltd., dated as of June 30, 2013 (incorporated by reference to the Exhibit 10.1 of the registrant’s Report on Form 6-K for the six month period ended June 30, 2013, filed on September 30, 2013)
4.2
Omnibus Agreement among Seadrill Limited, Seadrill Partners LLC, Seadrill Member LLC, Seadrill Operating LP, Seadrill Operating GP LLC, and Seadrill Capricorn, dated as of October 24, 2012 (incorporated by reference to Exhibit 4.2 of the registrant’s Annual Report on Form 20-F for the year ended December 31, 2012, filed on April 30, 2013)
4.3
Management and Administrative Services Agreement with Seadrill Management AS (incorporated by reference to Exhibit 4.3 of the registrant’s Annual Report on Form 20-F for the year ended December 31, 2012, filed on April 30, 2013)
4.4
Management Services Agreement with Seadrill UK Ltd. (incorporated by reference to Exhibit 4.6 of the registrant’s Annual Report on Form 20-F for the year ended December 31, 2012, filed on April 30, 2013)
4.5
Advisory, Technical and Administrative Services Agreement with Seadrill Americas, Inc. (incorporated by reference to Exhibit 4.4 of the registrant’s Annual Report on Form 20-F for the year ended December 31, 2012, filed on April 30, 2013)
4.7.1
Advisory, Technical and Administrative Services Agreement between Seadrill Management AME Ltd and Seadrill Vencedor Ltd. dated January 1, 2012 (incorporated by reference to Exhibit 10.5.1 of Amendment No. 3 to the registrant’s Registration Statement on Form F-1 (File No. 333-184023), filed on October 17, 2012)
4.7.2
Advisory, Technical and Administrative Services Agreement between Seadrill Management AME Ltd and Seadrill Deepwater Drillship Ltd. dated January 1, 2012 (incorporated by reference to Exhibit 10.5.2 of Amendment No. 3 to the registrant’s Registration Statement on Form F-1 (File No. 333-184023), filed on October 17, 2012)
4.7.3
Administrative, Technical and Advisory Agreement, effective as of January 1, 2012 by and among Seadrill Management AME Ltd. and Seadrill Ghana Operations Ltd., effective as of December 13, 2013, by and among Seadrill Americas Inc. and Seadrill Gulf Operations Sirius LLC (incorporated by reference to the Exhibit 10.4 of the registrant’s Report on Form 6-K for the month of March 2014, filed on March 11, 2014)
4.7.4
Administrative, Technical and Advisory Agreement, effective as of January 1, 2012 by and among Seadrill Management AME Ltd. and Seadrill Ghana Operations Ltd., effective as of December 13, 2013, by and among Seadrill Americas Inc. and Seadrill Gulf Operations Sirius LLC (incorporated by reference to the Exhibit 10.5 of the registrant’s Report on Form 6-K for the month of March 2014, filed on March 11, 2014)
4.7.5
Administrative, Technical and Advisory Agreement, effective as of March 21, 2014 between Seadrill Americas Inc. and Seadrill Gulf Operations Auriga LLC. (incorporated by reference to Exhibit 4.7.5 of the registrant's Annual Report on Form 20-F for the year ended December 31, 2013, filed on April 30, 2014).
4.7.6*
Administrative, Technical and Advisory Agreement, effective as of February 15, 2013, between Seadrill Americas Inc. and Seadrill Gulf Operations Vela LLC
4.8.1
Revolving Agreement between Seadrill Operating LP and Seadrill Capricorn Holdings LLC, as borrowers, and Seadrill Limited, as lender, dated October 24, 2012 (incorporated by reference to Exhibit 4.7 of the registrant’s Annual Report on Form 20-F for the year ended December 31, 2012, filed on April 30, 2013)
4.8.2
Amended and Restated Revolving Loan Agreement, dated August 31, 2013, among Seadrill Operating LP, Seadrill Capricorn Holdings LLC and Seadrill Partners Operating LLC, as borrowers, and Seadrill Limited, as lender (incorporated by reference to the Exhibit 10.1 of the registrant’s Report on Form 6-K for the six month period ended June 30, 2013, filed on September 30, 2013)
4.8.3
Second Amendment to Revolving Loan Agreement, dated March 1, 2014, among Seadrill Operating LP, Seadrill Capricorn Holdings LLC and Seadrill Partners Operating LLC, as borrowers, and Seadrill Limited, as lender (incorporated by reference to Exhibit 4.8.3 of the registrant’s Annual Report on Form 20-F for the year ended December 31, 2013, filed on April 30, 2014)
4.9
Amended and Restated US$1,500,000,000 Senior Secured Credit Facility Agreement dated October 15, 2012 for Seadrill Limited, as Borrower, the subsidiaries of Seadrill Limited named therein as guarantors, and the banks and financial institutions named therein as lenders, dated October 15, 2012 (incorporated by reference to Exhibit 10.9 of Amendment No. 3 to the registrant’s Registration Statement on Form F-1 (File No. 333-184023), filed on October 17, 2012)
4.10
Amended and Restated US$1,200,000,000 Senior Secured Credit Facility Agreement dated October10, 2012 for Seadrill Limited, as Borrower, the subsidiaries of Seadrill Limited named therein as guarantors, and the banks and financial institutions named therein as lenders, dated October 10, 2012 (incorporated by reference to Exhibit 10.9 of Amendment No. 3 to the registrant’s Registration Statement on Form F-1 (File No. 333-184023), filed on October 17, 2012)
4.11.1
Amended and Restated US$275,000,000 Senior Secured Term Loan and Revolving Credit Facility Agreement dated October 10, 2012 for Seadrill Limited, as Borrower, the subsidiaries of Seadrill Limited named therein, as guarantors, and the banks and financial institutions named therein as lenders, dated October 10, 2012 (incorporated by reference to Exhibit 10.10.1 of Amendment No. 3 to the registrant’s Registration Statement on Form F-1 (File No. 333-184023), filed on October 17, 2012)
4.11.2
Amended and Restated the US$275,000,000 Senior Secured Term Loan Facility Agreement dated October 10, 2012 for Seadrill Limited, as Borrower, the subsidiaries of Seadrill Limited named therein, as guarantors, as the banks and financial institutions named therein as lenders, dated October 10, 2012 (incorporated by reference to Exhibit 10.10.2 of Amendment No. 3 to the registrant’s Registration Statement on Form F-1 (File No. 333-184023), filed on October 17, 2012)
4.12
Amended and Restated Common Terms Agreement dated October 10, 2012 for Seadrill Limited, as Borrower, the subsidiaries of Seadrill Limited named therein as guarantors, DNB Bank ASA as Agent, GIEK Facility Agent and Security Agent and Citibank NA, London Branch as GIEK Agent, dated October 10, 2012 (incorporated by reference to Exhibit 10.11 of Amendment No. 3 to the registrant’s Registration Statement on Form F-1 (File No. 333-184023), filed on October 17, 2012)
4.13
Loan Agreement dated September 28, 2012 between Seadrill Limited and Seadrill China Operations Ltd. (incorporated by reference to Exhibit 10.12 of Amendment No. 1 to the registrant’s Registration Statement on Form F-1 (File No. 333-184023), filed on October 5, 2012)
4.14
Loan Agreement dated September 28, 2012 between Seadrill Limited and Seabras Rig Holdco Kft. (incorporated by reference to Exhibit 10.13 of Amendment No. 1 to the registrant’s Registration Statement on Form F-1 (File No. 333-184023), filed on October 5, 2012)
4.15
Loan Agreement dated September 28, 2012 between Seadrill Limited and Seadrill Deepwater Drillship Ltd. (incorporated by reference to Exhibit 10.14 of Amendment No. 1 to the registrant’s Registration Statement on Form F-1 (File No. 333-184023), filed on October 5, 2012)
4.16
Loan Agreement dated September 28, 2012 between Seadrill Limited and Seadrill Vencedor Ltd. (incorporated by reference to Exhibit 10.15 of Amendment No. 1 to the registrant’s Registration Statement on Form F-1 (File No. 333-184023), filed on October 5, 2012)
4.17
US$440,000,000 Secured Credit Facility Agreement dated December 4, 2012 between Seadrill Limited, as borrower, the subsidiaries of Seadrill Limited named therein as guarantors, and the banks and financial institutions named therein as lenders(incorporated by reference to the Exhibit 10.1 of the registrant’s Report on Form 6-K for the six months ended June 30, 2013, filed on September 30, 2013)
4.18
Loan Agreement, dated May 16, 2013, between Seadrill Limited, Seadrill T-15 Ltd., Seadrill Partners Operating LLC and Seadrill International Limited (incorporated by reference to the Exhibit 10.3 of the registrant’s Report on Form 6-K for the six months ended June 30, 2013, filed on September 30, 2013)
4.19
Intercompany Loan Agreement, dated May 16, 2013, between Seadrill Limited, as lender and Seadrill Partners Operating LLC, as borrower (incorporated by reference to the Exhibit 10.4 of the registrant’s Report on Form 6-K for the six months ended June 30, 2013, filed on September 30, 2013)
4.20
Loan Agreement, dated October 11, 2013, by and among Seadrill Limited, Seadrill T-16 Ltd. and Seadrill Partners Operating LLC (incorporated by reference to Exhibit 10.6 of the registrant’s Registration Statement on Form F-3 (File No. 333-192053), filed on November 1, 2013)
4.21
Loan Agreement, dated December 13, 2013 by and among Seadrill Limited and Seadrill Capricorn Holdings (incorporated by reference to the Exhibit 10.2 of the registrant’s Report on Form 6-K for the month of March, filed on March 11, 2014)
4.22
Loan Agreement, dated December 13, 2013 by and among Seadrill Limited, Seadrill Leo Ltd., and Seadrill Operating LP (incorporated by reference to the Exhibit 10.3 of the registrant’s Report on Form 6-K for the month of March, filed on March 11, 2014)
4.23
Promissory Discount Note dated December 13, 2013 by and among Seadrill Partners LLC and Seadrill Limited (incorporated by reference to the Exhibit 10.7 of the registrant’s Report on Form 6-K for the month of March, filed on March 11, 2014)
4.24
Promissory Discount Note dated December 13, 2013 by and among Seadrill Capricorn Holdings LLC and Seadrill Limited (incorporated by reference to the Exhibit 10.7 of the registrant’s Report on Form 6-K for the month of March, filed on March 11, 2014)
4.25
Amended and Restated Credit Agreement dated as of June 26, 2014, among Seadrill Operating LP, Seadrill Partners Finco LLC, Seadrill Capricorn Holdings LLC, various lenders and Deutsche Bank AG New York Branch, as Administrative Agent and Collateral Agent (incorporated by reference to the Exhibit 10.1 of the registrant’s Report on Form 6-K for the month of June, filed on June 30, 2014)
4.26
Bareboat Charter Agreement between Seadrill Offshore AS and Seadrill Canada Ltd. dated October 5, 2012 (incorporated by reference to Exhibit 10.16 of Amendment No. 3 to the registrant’s Registration Statement on Form F-1 (File No. 333-184023), filed on October 17, 2012)
4.27
Bareboat Charter Agreements between Seadrill China Operations Ltd. and Seadrill Offshore AS dated October 5, 2012 (incorporated by reference to Exhibit 10.17 of Amendment No. 3 to the registrant’s Registration Statement on Form F-1 (File No. 333-184023), filed on October 17, 2012)
4.28
Rig Rental Agreement, effective as of December 10, 2012, by and among Seadrill T-15 Ltd. and Seadrill UK Ltd. (incorporated by reference to Exhibit 10.1 of Amendment No. 3 to the registrant’s Registration Statement on Form F-3 (File No. 333-192053), filed on November 1, 2013)
4.29
Rig Rental Agreement, effective as of December 10, 2012, by and among Seadrill T-16 Ltd. and Seadrill UK Ltd. (incorporated by reference to Exhibit 10.2 of the registrant’s Registration Statement on Form F-3 (File No. 333-192053), filed on November 1, 2013)
4.30
Rig Rental Agreement, effective as of December 10, 2012, by and among Seadrill International Ltd. and Seadrill UK Ltd., relating to the T-15  (incorporated by reference to Exhibit 10.3 of the registrant’s Registration Statement on Form F-3 (File No. 333-192053), filed on November 1, 2013)
4.31
Rig Rental Agreement, effective as of December 10, 2012, by and among Seadrill International Ltd. and Seadrill UK Ltd., relating to the T-16  (incorporated by reference to Exhibit 10.2 of the registrant’s Registration Statement on Form F-3 (File No. 333-192053), filed on November 1, 2013)
4.32
Purchase and Sale Agreement, dated May 7, 2013, between Seadrill Limited and Seadrill Partners Operating LLC (incorporated by reference to the Exhibit 10.5 of the registrant’s Report on Form 6-K for the six months ended June 30, 2013, filed on September 30, 2013)
4.33
Purchase and Sale Agreement, dated October 11, 2013, by and among Seadrill Limited, Seadrill Partners LLC and Seadrill Partners Operating LLC (incorporated by reference to Exhibit 10.5 of the registrant’s Registration Statement on Form F-3 (File No. 333-192053), filed on November 1, 2013)
4.34
Unit Purchase Agreement, dated December 3, 2013 (incorporated by reference to the Exhibit 10.1 of the registrant’s Report on Form 6-K for the month of December, filed on December 9, 2013)
4.35
Unit Purchase Agreement, dated March 12, 2014 (incorporated by reference to the Exhibit 10.1 of the registrant’s Report on Form 6-K for the month of March, filed on March 17, 2014)
4.36.1
Contribution, Purchase and Sale Agreement, dated December 2, 2013 (incorporated by reference to the Exhibit 10.2 of the registrant’s Report on Form 6-K for the month of December, filed on December 9, 2013)
4.36.2
Amendment to Contribution, Purchase and Sale Agreement, dated as of December 12, 2013, by and among Seadrill Limited, a Bermuda exempted company Seadrill Partners LLC, Seadrill Operating LP, Seadrill Capricorn Holdings LLC, and Seadrill Americas Inc. (incorporated by reference to the Exhibit 10.1 of the registrant’s Report on Form 6-K for the month of March, filed on March 11, 2014)
4.36
Contribution, Purchase and Sale Agreement, dated March 11, 2014 (incorporated by reference to the Exhibit 10.2 of the registrant’s Report on Form 6-K for the month of March, filed on March 17, 2014)
4.37*
Promissory Discount Note, dated March 21, 2014 issued by Seadrill Capricorn Holdings LLC (incorporated by reference to Exhibit 4.37 of the registrant’s Annual Report on Form 20-F for the year ended December 31, 2013, filed on April 30, 2014)
4.38
Limited Partner Interest Purchase Agreement, dated as of July 17, 2014, between Seadrill Limited and Seadrill Partners LLC (incorporated by reference to Exhibit 10.1 of the registrant’s Report on Form 6-K for the month of July, filed on July 21, 2014.
4.39*
Contribution, Purchase and Sale Agreement, dated November 4, 2014, by and among Seadrill Limited, Seadrill Partners LLC, Seadrill Capricorn Holdings LLC and Seadrill Americas Inc.
4.40*
Second Amended and Restated Agreement dated November 4, 2014, among Seadrill Tellus Ltd. and Seadrill Vela Hungary Kft., as Borrowers, Seadrill Limited, as Parent, the guarantors party thereto, ING Bank N.V., as Agent, the lenders party thereto and the other parties thereto, relating to the US$1,450,000,000 Senior Secured Credit Facility Agreement, originally dated March 20, 2013
4.41*
On Demand and Guarantee and Indemnity, dated November 4, 2014, between Seadrill Partners LLC and ING Bank N.V.
4.42*
Amendment to the Loan Agreement between Seadrill Limited and Seadrill Vencedor Limited dated August 28, 2014
4.43*
Amendment to the Loan Agreement between Seadrill Limited and Seadrill Vencedor Limited dated April 14, 2015
8.1*
List of Subsidiaries of Seadrill Partners LLC
12.1*
Rule 13a-14(a)/15d-14(a) Certification of Principal Executive Officer
12.2*
Rule 13a-14(a)/15d-14(a) Certification of Principal Financial and Accounting Officer
13.1*
Certification under Section 906 of the Sarbanes-Oxley Act of 2002 of the Principal Executive Officer
13.2*
Certification under Section 906 of the Sarbanes-Oxley Act of 2002 of the Principal Financial and Accounting Officer
15.1*
Consent of Independent Registered Public Accounting Firm - PricewaterhouseCoopers LLP
101. INS**
XBRL Instance Document
101. SCH**
XBRL Taxonomy Extension Schema
101. CAL**
XBRL Taxonomy Extension Schema Calculation Linkbase
101. DEF**
XBRL Taxonomy Extension Schema Definition Linkbase
101. LAB**
XBRL Taxonomy Extension Schema Label Linkbase
101. PRE**
XBRL Taxonomy Extension Schema Presentation Linkbase

86
Table of Contents


87
Table of Contents

*     Filed herewith.


88
Table of Contents

Index to Consolidated and Combined Carve-out Financial Statements of Seadrill Partners LLC
 


F- 1
Table of Contents

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Members of Seadrill Partners LLC

In our opinion, the accompanying consolidated balance sheets and the related consolidated and combined carve-out statements of operations, of changes in members’ capital/owners' equity and of cash flows present fairly, in all material respects, the financial position of Seadrill Partners LLC and its subsidiaries at December 31, 2014 and 2013, and the results of their operations and their cash flows for each of the three years ended December 31, 2014 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2014, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company's management is responsible for these financial statements, for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in Management's Report on Internal Control over Financial Reporting appearing under Item 15(b). Our responsibility is to express opinions on these financial statements and on the Company's internal control over financial reporting based on our audits (which were integrated audits in 2014 and 2013). We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.


/s/PricewaterhouseCoopers LLP

PricewaterhouseCoopers LLP
Uxbridge, United Kingdom
April 21, 2015


F- 2
Table of Contents

SEADRILL PARTNERS LLC
CONSOLIDATED AND COMBINED CARVE-OUT STATEMENTS OF OPERATIONS
for the years ended December 31, 2014 , 2013 and 2012
(In US$ millions, except per unit data)
 
 
 
2014
 
2013
 
2012
Operating revenues
 
 
 
 
 
 
Contract revenues
 
$
1,302.7

 
$
1,047.1

 
$
859.5

Reimbursable revenues
 
39.9

 
11.4

 
33.2

Other revenues
 
—

 
5.8

 
19.1

Total operating revenues
 
1,342.6

 
1,064.3

 
911.8

 
 
 
 
 
 
 
Operating expenses
 
 
 
 
 
 
Vessel and rig operating expenses
 
425.0

 
375.2

 
296.1

Amortization of favorable contracts
 
14.8

 
—

 
—

Reimbursable expenses
 
37.9

 
10.6

 
32.4

Depreciation and amortization
 
198.7

 
141.2

 
114.0

General and administrative expenses
 
51.4

 
49.6

 
37.2

Total operating expenses
 
727.8

 
576.6

 
479.7

 
 
 
 
 
 
 
Operating income
 
614.8

 
487.7

 
432.1

 
 
 
 
 
 
 
Financial items
 
 
 
 
 
 
Interest income
 
3.7

 
4.4

 
1.7

Interest expense
 
(140.9
)
 
(92.2
)
 
(65.8
)
(Loss)/gain on derivative financial instruments
 
(124.9
)
 
49.9

 
(32.9
)
Currency exchange loss
 
(3.3
)
 
(1.2
)
 
(2.6
)
Total financial items
 
(265.4
)
 
(39.1
)
 
(99.6
)
 
 
 
 
 
 
 
Income before income taxes
 
349.4

 
448.6

 
332.5

Income taxes
 
(34.8
)
 
(33.2
)
 
(38.9
)
Net income
 
$
314.6

 
$
415.4

 
$
293.6

Net income attributable to the non-controlling interest
 
(176.4
)
 
(271.0
)
 
(95.0
)
Net income attributable to Seadrill Partners LLC owners
 
$
138.2

 
$
144.4

 
$
198.6

 
 
 
 
 
 
 
Earnings per unit (basic and diluted)
 
 
 
 
 
 
Common unitholders
 
$
1.75

 
$
2.15

 
$
0.29

Subordinated unitholders
 
$
1.75

 
$
1.83

 
$
0.13

A Statement of Other Comprehensive Income has not been presented as there are no items recognized in other comprehensive income.
See accompanying notes that are an integral part of these Consolidated and Combined Carve-out Financial Statements.

F- 3
Table of Contents

SEADRILL PARTNERS LLC
CONSOLIDATED BALANCE SHEETS
for the years ended December 31, 2014 and 2013
(In US$ millions)
 
 
 
2014
 
2013
ASSETS
 
 
 
 
Current assets:
 
 
 
 
Cash and cash equivalents
 
$
242.7

 
$
89.7

Accounts receivables, net
 
294.5

 
175.8

Amount due from related party
 
62.7

 
248.3

Other current assets
 
138.4

 
54.7

Total current assets
 
738.3

 
568.5

Non-current assets:
 
 
 
 
Drilling units
 
5,141.1

 
3,448.3

Goodwill
 
3.2

 
—

Deferred tax assets
 
16.9

 
9.8

Other non-current assets
 
447.0

 
46.0

Total non-current assets
 
5,608.2

 
3,504.1

Total assets
 
$
6,346.5

 
$
4,072.6

 
 
 
 
 
LIABILITIES AND MEMBERS’ CAPITAL
 
 
 
 
Current liabilities:
 
 
 
 
Current portion of long-term debt
 
$
76.5

 
$
—

Current portion of long-term related party debt
 
40.4

 
108.3

Related party revolving credit facility
 
—

 
125.9

Trade accounts payable and accruals
 
7.9

 
9.1

Related party payable
 
275.8

 
292.1

Other current liabilities
 
227.4

 
118.7

Total current liabilities
 
628.0

 
654.1

Non-current liabilities:
 
 
 
 
Long-term debt
 
3,227.4

 
—

Long-term related party debt
 
306.1

 
1,826.4

Related party discount notes
 
—

 
299.9

Deferred consideration to related party
 
111.2

 
—

Other non-current liabilities
 
29.5

 
37.6

Total non-current liabilities
 
3,674.2

 
2,163.9

 
 
 
 
 
Commitments and contingencies (see note 16)
 


 


Equity
 
 
 
 
Members’ Capital:
 


 


Common unitholders (issued 75,278,250 units)
 
913.3

 
280.2

Subordinated unitholders (issued 16,543,350 units)
 
11.7

 
18.8

Seadrill member interest
 
3.2

 
—

Total members’ capital
 
928.2

 
299.0

Non-controlling interest
 
1,116.1

 
955.6

Total equity
 
2,044.3

 
1,254.6

Total liabilities and equity
 
$
6,346.5

 
$
4,072.6

See accompanying notes that are an integral part of these Consolidated and Combined Carve-out Financial Statements.

F- 4
Table of Contents


SEADRILL PARTNERS LLC
CONSOLIDATED AND COMBINED CARVE-OUT STATEMENTS OF CASH FLOWS
for the years ended December 31, 2014 , 2013 and 2012
(In US$ millions)
 
 
 
2014
 
2013
 
2012
Cash Flows from Operating Activities
 
 
 
 
 
 
Net income
 
$
314.6

 
$
415.4

 
$
293.6

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
 
 
 
Depreciation and amortization
 
198.7

 
141.2

 
114.0

Amortization of deferred loan charges
 
17.6

 
7.1

 
8.5

Amortization of mobilization revenue
 
(21.0
)
 
(31.8
)
 
(32.5
)
Amortization of favorable contracts
 
14.8

 
—

 
—

Unrealized loss / (gain) related to derivative financial instruments
 
99.1

 
(60.2
)
 
32.9

Payment for long term maintenance
 
(39.1
)
 
(26.5
)
 
(18.2
)
Deferred income tax (benefit) / expense
 
(8.6
)
 
(9.2
)
 
0.5

West Aquarius  settlement
 
—

 
25.0

 
—

 
 
 
 
 
 
 
Changes in operating assets and liabilities, net of effect of acquisitions
 
 
 
 
 
 
Mobilization fees received from customers
 
6.6

 
16.2

 
—

Trade accounts receivable
 
(46.3
)
 
(9.4
)
 
(109.3
)
Trade accounts payable
 
(10.7
)
 
48.6

 
(5.7
)
Related party balances
 
31.4

 
56.9

 
4.4

Other assets
 
9.9

 
4.7

 
(70.5
)
Other liabilities
 
41.7

 
(14.0
)
 
60.5

Net cash provided by operating activities
 
$
608.7

 
$
564.0

 
$
278.2

 
 
 
 
 
 
 
Cash Flows from Investing Activities
 
 
 
 
 
 
Additions to newbuildings and drilling units
 
(31.6
)
 
(159.3
)
 
(283.5
)
Acquisition of subsidiaries, net of cash acquired
 
(1,137.7
)
 
—

 
—

Purchase of non-controlling interest in Seadrill Operating LP
 
(373.5
)
 
—

 
—

Net cash used in investing activities
 
$
(1,542.8
)
 
$
(159.3
)
 
$
(283.5
)



F- 5
Table of Contents

SEADRILL PARTNERS LLC
CONSOLIDATED AND COMBINED CARVE-OUT STATEMENTS OF CASH FLOWS
for the years ended December 31, 2014 , 2013 and 2012
(In US$ millions)
 
 
 
2014
 
2013
 
2012
Cash Flows from Financing Activities
 
 
 
 
 
 
Net proceeds from long term debt
 
$
2,825.4

 
$
98.0

 
$
100.5

Repayments of long term debt
 
(472.1
)
 
(348.8
)
 
(215.9
)
Net proceeds from related party debt
 
—

 
409.5

 
5.0

Repayments of related party debt
 
(1,588.3
)
 
—

 
—

Proceeds from revolving credit facility
 
—

 
169.6

 
—

Repayments of revolving credit facility
 
(125.9
)
 
(43.7
)
 
—

Repayments of related party discount notes
 
(399.9
)
 
—

 
—

Cash distributions
 
(660.2
)
 
(140.9
)
 
—

Proceeds on issuance of equity, net of fees
 
937.8

 
464.8

 
207.1

Proceeds on issuance of equity to related parties
 
—

 
106.9

 
—

Proceeds on issuance of units by Seadrill Capricorn Holdings LLC
 
570.3

 
—

 
—

Distribution to Seadrill Limited for the acquisition of T-15, T-16, Leo and Sirius  (1)
 
—

 
(939.2
)
 
—

Owner’s funding repaid
 
—

 
(112.4
)
 
(85.7
)
Net cash provided by/ (used in) financing activities
 
$
1,087.1

 
$
(336.2
)
 
$
11.0

 
 
 
 
 
 
 
Net increase in cash and cash equivalents
 
153.0

 
68.5

 
5.7

Cash and cash equivalents at beginning of the year
 
89.7

 
21.2

 
15.5

Cash and cash equivalents at the end of year
 
$
242.7

 
$
89.7

 
$
21.2

 
 
 
 
 
 
 
Supplementary disclosure of cash flow information
 
 
 
 
 
 
Interest paid net of capitalized interest
 
$
150.5

 
$
92.2

 
$
63.8

Taxes paid
 
42.6

 
35.1

 
49.0

(1) Presented net of capital contributions from Seadrill related to the acquisition of the West Leo and West Sirius. For further information refer to Note 3 - Business Acquisitions.
See accompanying notes that are an integral part of these Consolidated and Combined Carve-out Financial Statements.

F- 6
Table of Contents

SEADRILL PARTNERS LLC
CONSOLIDATED AND COMBINED CARVE-OUT STATEMENTS OF CHANGES IN MEMBERS’
CAPITAL / OWNERS' EQUITY
for the years ended December 31, 2014 , 2013 and 2012
(In US$ millions)
 
 
 
 
 
Members’ Capital
 
 
 
 
 
 
 
 
Owners'
Equity
 
Common
Units
 
Subordinated
Units
 
Seadrill
Member
 
Total Before
Non-
Controlling
interest
 
Non-
controlling
Interest
 
Total 
Members’
Capital/Owners'
Equity
Combined balance as at December 31, 2011
 
$
793.0

 
—

 
—

 
$
153.2

 
$
946.2

 
$
109.0

 
$
1,055.2

Movement in invested equity
 
(6.4
)
 
—

 
—

 
30.8

 
24.4

 
51.2

 
75.6

Elimination of equity transferred to the Company
 
(644.6
)
 
—

 
—

 
—

 
(644.6
)
 
644.6

 
—

Allocation of Company capital to unitholders
 
(288.5
)
 
288.5

 
—

 
—

 
—

 
—

 
—

Issuance of 24,815,025 common units and 16,543,350 subordinated units
 
—

 
221.4

 
—

 
—

 
221.4

 
—

 
221.4

Expenses related to IPO
 
—

 
(18.8
)
 
—

 
—

 
(18.8
)
 
—

 
(18.8
)
Proceeds distributed back to Seadrill
 
—

 
(202.6
)
 
—

 
—

 
(202.6
)
 
—

 
(202.6
)
Consolidated and Combined carve-out net income
 
146.5

 
5.6

 
3.7

 
42.8

 
198.6

 
95.0

 
293.6

Consolidated and Combined Balance at December 31, 2012
 
$
—

 
$
294.1

 
$
3.7

 
$
226.8

 
$
524.6

 
$
899.8

 
$
1,424.4



F- 7
Table of Contents

 
 
 
 
Members’ Capital
 
 
 
 
 
 
 
 
Owners'
Equity
 
Common
Units
 
Subordinated
Units
 
Seadrill
Member
 
Total Before
Non-
Controlling
interest
 
Non-
controlling
Interest
 
Total 
Members’
Capital/Owners'
Equity
Consolidated and Combined Balance at December 31, 2012
 
$
—

 
$
294.1

 
$
3.7

 
$
226.8

 
$
524.6

 
$
899.8

 
$
1,424.4

Movement in invested equity
 
—

 
—

 
—

 
(62.3
)
 
(62.3
)
 
(50.1
)
 
(112.4
)
Acquisition of dropdown companies from Seadrill
 
—

 
—

 
—

 
(831.5
)
 
(831.5
)
 
(962.5
)
 
(1,794.0
)
Deemed distribution to Seadrill for the acquisition of dropdown companies
 
—

 


 


 
609.7

 
609.7

 
696.9

 
1,306.6

Allocation of deemed distribution to Seadrill for the acquisition of dropdown companies
 
 
 
(609.7
)
 
 
 
 
 
(609.7
)
 
(696.9
)
 
(1,306.6
)
Equity contribution from Seadrill to Seadrill Operating LP
 
—

 
—

 
—

 
—

 
—

 
511.1

 
511.1

Units issued by Seadrill Capricorn Holdings LLC to Seadrill Limited
 
—

 
—

 
—

 
—

 
—

 
338.8

 
338.8

Common units issued to Seadrill for the acquisition of the T-16
 
—

 
106.9

 
—

 
—

 
106.9

 
—

 
106.9

Common units issued to Seadrill and public (net of transaction costs of $15.3m)
 
—

 
464.8

 
—

 
—

 
464.8

 
—

 
464.8

Capital injection due to forgiveness of related party payables
 
—

 
9.9

 
6.6

 
—

 
16.5

 
24.0

 
40.5

Consolidated and Combined carve-out net income
 
—

 
53.4

 
33.7

 
57.3

 
144.4

 
271.0

 
415.4

Cash Distributions paid
 
—

 
(39.2
)
 
(25.2
)
 
—

 
(64.4
)
 
(76.5
)
 
(140.9
)
Consolidated Balance at December 31, 2013
 
$
—

 
$
280.2

 
$
18.8

 
$
—

 
$
299.0

 
$
955.6

 
$
1,254.6

Purchase of non-controlling interest
 
—

 
(279.6
)
 
—

 
—

 
(279.6
)
 
(93.2
)
 
(372.8
)
Common units issued to Seadrill and public (net of transaction costs)
 
—

 
937.8

 
—

 
—

 
937.8

 
—

 
937.8

Issuance of units by Seadrill Capricorn Holdings LLC
 
—

 
—

 
—

 
—

 
—

 
570.3

 
570.3

Net income
 
—

 
102.2

 
26.8

 
9.2

 
138.2

 
176.4

 
314.6

Cash Distributions
 
—

 
(127.3
)
 
(33.9
)
 
(6.0
)
 
(167.2
)
 
(493.0
)
 
(660.2
)
Consolidated Balance at December 31, 2014
 
$
—

 
$
913.3

 
$
11.7

 
$
3.2

 
$
928.2

 
$
1,116.1

 
$
2,044.3

See accompanying notes that are an integral part of these Consolidated and Combined Carve-out Financial Statements.

F- 8
Table of Contents

SEADRILL PARTNERS LLC
NOTES TO CONSOLIDATED AND COMBINED CARVE-OUT FINANCIAL STATEMENTS
Note 1- General information
Background
On June 28, 2012, Seadrill Limited (“Seadrill”) formed Seadrill Partners LLC (the “Company”) under the laws of the Republic of the Marshall Islands
On October 24, 2012, the Company completed its initial public offering of its common units ("IPO"), in which the Company sold 10,062,500 common units representing limited liability company interests in the Company (including 1,312,500 common units issued in connection with the exercise by the underwriters’ of their option to purchase additional common units) to the public at a price of $22.00 per unit, raising gross proceeds of $221.4 million . Net proceeds from the offering were $202.6 million , after deducting underwriting discounts, commissions, and structuring fees and expenses of $18.8 million . As part of this transaction, the Company issued to Seadrill 14,752,525 common units and 16,543,350 subordinated units. The Company’s common units are listed on the New York Stock Exchange (“NYSE”) under the symbol “SDLP”.
In addition, the Company issued to Seadrill Member LLC, a wholly owned subsidiary of Seadrill, the Seadrill Member interest, which is a non-economic limited liability company interest in the Company, and all of the Company's incentive distribution rights, which entitle the Seadrill Member to increasing percentages of the cash the Company can distribute in excess of $0.4456 per unit, per quarter.
On October 24, 2012, in connection with the Company's IPO, the Company acquired in return for the issuance of common and subordinated units to Seadrill and the net proceeds received from the IPO (i) a 30% limited partner interest in Seadrill Operating LP, as well as the non-economic general partner interest in Seadrill Operating LP through the Company's 100% ownership of its general partner, Seadrill Operating GP LLC, and (ii) a 51% limited liability company interest in Seadrill Capricorn Holdings LLC. Seadrill Operating LP owned: (i) a 100% interest in the entities that own the West Aquarius and the West Vencedor and (ii) an approximate 56% interest in the entity that owns and operates the West Capella . Seadrill Capricorn Holdings LLC owned 100% of the entities that own and operate the West Capricorn . Seadrill Operating LP, Seadrill Capricorn Holdings LLC and Seadrill Partners Operating LLC are collectively referred to as “OPCO”. These transactions described above were reflected as a reorganization of entities under common control and, therefore, the assets and liabilities acquired from Seadrill were recorded at historical cost by the Company.
On May 17, 2013, the Company's wholly owned subsidiary, Seadrill Partners Operating LLC, acquired from Seadrill a 100% ownership interest in the entities that own and operate the tender rig T-15 .
On October 18, 2013, the Company's wholly owned subsidiary, Seadrill Partners Operating LLC, acquired from Seadrill a 100% ownership interest in the entity that owns the tender rig  T-16 . As consideration for the purchase, the Company issued 3,310,622 common units to Seadrill.
On December 13, 2013, the Company completed the acquisition of the companies that own and operate the ultra-deepwater semi-submersible rigs, the West Sirius and West Leo . The West Sirius was acquired by Seadrill Capricorn Holdings LLC ( 51% owned by the Company) and the West Leo was acquired by Seadrill Operating LP (at the time 30% owned by the Company). In order to finance the acquisitions, the Company issued 11,200,000 common units to the public and 3,394,916 common units to Seadrill, and a further 1,680,000 units to the underwriters, issued in connection with the exercise of the underwriters’ option to purchase additional common units.
These transactions that occurred prior to the IPO and through December 31, 2013 described above, have been reflected as a reorganization of entities under common control and therefore the assets and liabilities acquired from Seadrill have been recorded at historical cost by the Company. See further discussion below for the impact on the year ending December 31, 2013.
As of January 2, 2014, the date of the Company's first annual general meeting, Seadrill ceased to control the Company as defined under US GAAP and, therefore, Seadrill Partners and Seadrill are no longer deemed to be entities under common control.
On March 21, 2014, Seadrill Capricorn Holdings LLC completed the acquisition of the companies that own and operate the drillship, the West Auriga which has been accounted for as a business combination. In order to finance the acquisition, the Company issued 11,960,000 common units to the public and 1,633,987 common units to Seadrill. Refer to Note 3 for more information.
On June 24, 2014, the Company issued 6,100,000 common units to the public and 3,183,700 common units to Seadrill.
On July 21, 2014, the Company purchased an additional 28% limited partner interest in Seadrill Operating LP, an existing controlled subsidiary of the Company, from Seadrill for $372.8 million . As a result of the acquisition, the Company’s limited partner interest in Seadrill Operating LP increased from 30% to 58% .
On September 23, 2014, the Company issued 8,000,000 common units to the public.
On November 4, 2014, Seadrill Capricorn Holdings LLC completed the acquisition of the companies that own and operate the drillship West Vela from Seadrill which has been accounted for as a business combination. Refer to Note 3 for more information.
As of December 31, 2014 , Seadrill owned 46.6% of the outstanding limited liability interests of the Company, which included Seadrill's interest in both the common and subordinated units ( December 31, 2013 : Seadrill owned 62.4% ).


F- 9
Table of Contents

Basis of consolidation and presentation
The financial statements are presented in accordance with generally accepted accounting principles in the United States of America (“US GAAP”). The amounts are presented in United States dollar (US dollar) rounded to the nearest hundred thousand, unless otherwise stated.
The accounting policies set out below have been applied consistently to all periods in these consolidated and combined carve-out financial statements, unless otherwise noted.

Pre - IPO Basis of consolidation
Before the Company’s initial public offering, the Company’s Combined Carve-out Financial Statements have been prepared on a “carve-out” basis for the period January 1, 2012 to October 23, 2012, from the accounting records of Seadrill using historical results of operations, assets and liabilities attributable to the Company, including allocation of expenses from Seadrill. Management believes the assumptions and allocations of the carve-out period have been determined on a basis that is a reasonable reflection of the utilization of services provided to, or the benefit received by, the Company during the periods presented. The actual basis of allocation for each item is described below.
The Company’s Combined Carve-out Financial Statements include the assets, liabilities, revenues, expenses and cash flows directly attributable to the OPCO’s companies and their rig-owning and operating subsidiaries, plus the following items which have been assigned or allocated as set forth below:
•
The loan related to the West Capricorn drilling rig and associated balances have been assigned based on the actual debt agreements, as these are readily separable and identifiable within the books of Seadrill.
•
The Company’s debts relating to the West Capella , the West Aquarius and the West Vencedor drilling rigs are held by Seadrill in connection with loan facilities which also cover non-Seadrill Partners LLC drilling units. Accordingly, the Company’s share of these loan facilities, interest expense, deferred financing fees and related repayments and drawdowns for all periods presented have been carved-out based on the relative fair value of the Company’s drilling units at December 31, 2012, which is based on external fair value assessments.
The company has also benefited from Seadrill's general corporate debt. As the use of this debt was for general corporate purposes within the Seadrill corporate group, a proportion of the interest cost of this debt has been included in the Company’s Combined Carve-out Financial Statements for the periods presented, based upon the relative fair value of the Company’s drilling units at December 31, 2012 in proportion to the fair value of Seadrill’s drilling units (including the Company’s drilling units).
•
A portion of Seadrill’s mark-to-market adjustments for interest rate swap derivatives have been allocated to the Company’s Combined Carve-out Statement of Operations on the basis of the Company’s proportion of Seadrill’s floating rate debt.
•
Rig operating expenses, which include rig management fees for the provision of technical and commercial management of rigs, that cannot be attributed to specific drilling units have been allocated to the Company based on intercompany charges from Seadrill.
•
Administrative expenses, which include stock-based compensation and defined benefit pension plan costs of Seadrill that cannot be attributed to specific drilling units, and for which the Company is deemed to have received the benefit of, have been allocated to the Company based on intercompany charges from Seadrill. The Company has treated the defined benefit plan as a multiemployer plan operated by Seadrill and has included only period costs from Seadrill during the periods presented.
In accordance with the convention for carve-out financial statements, amounts due to and due from the Company to other Seadrill entities are recognized within owner’s equity in the Company’s Combined Carve-out Financial Statements. Because Seadrill uses a centralized cash management system, whereby cash held at a subsidiary level is swept on a daily basis into a centralized treasury function at Seadrill, intercompany payables and receivables outstanding for the periods presented prior to the Company's IPO, have been deemed to have been treated as equity in the Company.
The financial position, results of operations and cash flows of the Company may differ from those that would have been achieved had the Company operated autonomously as a publicly traded entity for all years presented, as the Company may have had, for example, additional administrative expenses, including legal, accounting, treasury and regulatory compliance and other costs normally incurred by a publicly traded entity.

Post - IPO Basis of consolidation
Investments in companies in which the Company directly or indirectly holds more than 50% of the voting control are consolidated in the financial statements. The Company owns a 58% limited partner interest in Seadrill Operating LP, as well as the non-economic general partner interest in Seadrill Operating LP, through the Company's 100% ownership of its general partner Seadrill Operating GP LLC. Ownership of the general partner is deemed to provide the Company with a controlling financial interest and, as such, the Company consolidates Seadrill Operating LP in its financial statements.
All inter-company balances and transactions are eliminated. The Company allocated the initial company capital of unitholders on the basis of how distributions would be made in a liquidation situation.


F- 10
Table of Contents

Business combinations between entities under common control
Reorganization of entities under common control is accounted for similar to the pooling of interests method of accounting. Under this method, the carrying amount of net assets recognized in the balance sheets of each combining entity are carried forward to the balance sheet of the combined entity, and no other assets or liabilities are recognized as a result of the combination. The excess of the proceeds paid, if any, over the historical cost of the combining entity is accounted for as a change in equity. In addition re-organization of entities under common control is accounted for as if the transfer occurred from the date that both the combining entity and combined entity were both under the common control of Seadrill. Therefore, the Company’s financial statements prior to the date the interests in the combining entity were actually acquired are retroactively adjusted to include the results of the combined entities during the periods it was under common control of Seadrill.
The acquisitions of the entities that own and operate the T-15, T-16, West Leo and West Sirius in 2013 from Seadrill Limited were accounted for under this method. The companies acquired from Seadrill relating to the T-15 , T-16 , West Leo and West Sirius are referred to as the "dropdown companies" throughout these financial statements.
As of January 2, 2014, the date of the Company's first annual general meeting, Seadrill ceased to control the Company as defined by US GAAP and therefore Seadrill Partners and Seadrill are no longer be deemed to be entities under common control.

Business combinations
The Company applies the acquisition method of accounting for business combinations. The acquisition method requires the total of the purchase price of acquired businesses and any non-controlling interest recognized to be allocated to the identifiable tangible and intangible assets and liabilities acquired at fair value, with any residual amount being recorded as goodwill as of the acquisition date. Costs associated with the acquisition are expensed as incurred. See Note 3 for further discussion on business acquisitions.

Reclassification
Current accrued liabilities are now reported as other current liabilities in the Company's consolidated balance sheet and therefore the prior period has been reclassified to conform to the current period presentation. This has decreased trade accounts payable by $80 million with a corresponding increase in other current liabilities as of December 31, 2013. There was no effect on total current liabilities.

Note 2- Accounting policies
Use of estimates
Preparation of financial statements in accordance with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Contract revenue
A substantial majority of the Company’s revenues are derived from dayrate based drilling contracts (which may include lump sum fees for mobilization and demobilization) and other service contracts. Both dayrate base and lump sum fee revenues are recognized ratably over the contract period when services are rendered. Under some contracts, the Company is entitled to additional payments for meeting or exceeding certain performance targets. Such additional payments are recognized when any uncertainties regarding achievements of such targets are resolved or upon completion of the drilling program.
In connection with drilling contracts, the Company may receive lump sum fees for the mobilization of equipment and personnel or for capital additions and upgrades prior to commencement of drilling services. These up-front fees are recognized as revenue over the original contract term, excluding option periods.
In some cases, the Company may receive lump sum non-contingent fees or dayrate based fees from customers for demobilization upon completion of a drilling contract. Non-contingent demobilization fees are recognized as revenue over the original contract term, excluding any extension option periods not exercised by the Company's customers. Contingent demobilization fees are recognized as earned upon completion of the drilling contract.
Fees received from customers under drilling contracts for capital upgrades are deferred and recognized over the remaining contract term, excluding any extension option periods not exercised.
In certain countries in which the Company operates, taxes such as sales, use, value-added, gross receipts and excise may be assessed by the local government on the Company's revenues. The Company generally records tax-assessed revenue transactions on a net basis in the consolidated and combined carve-out statement of income.

Reimbursable revenue and expenses
Reimbursements received for the purchases of supplies, personnel services and other services provided on behalf of and at the request of the Company's customers in accordance with a contract or agreement are recorded as revenue. The related costs are recorded as reimbursable expenses in the same period.

F- 11
Table of Contents


Other revenues
Other revenues are for revenues earned within the Company's Nigerian service company relating to certain services, including the provision of onshore and offshore personnel, which are provided to Seadrill’s West Polaris drilling rig that was operating in Nigeria for the year ended December 31, 2012 and for a portion of the year ended December 31, 2013.

Mobilization and demobilization expenses
Mobilization costs incurred as part of a contract are capitalized and recognized as expense over the contract term, excluding any extension periods not exercised by the Company's customers. The costs of relocating drilling units that are not under contract are expensed as incurred.
Demobilization costs are costs related to the transfer of a vessel or drilling unit to a safe harbor or different geographic area and are expensed as incurred.

Vessel and rig operating expenses
Vessel and rig operating expenses are costs associated with operating a drilling unit that is either in operation or stacked, and include the remuneration of offshore crews and related costs, rig supplies, insurance costs, expenses for repairs and maintenance as well as costs related to onshore personnel in various locations where the Company operates the rigs and are expensed as incurred.

Repairs, maintenance and periodic surveys
Costs related to periodic overhauls of drilling units are capitalized under drilling units and amortized over the anticipated period between overhauls, which is generally five years . Related costs are primarily yard costs and the cost of employees directly involved in the work. Amortization costs for periodic overhauls are included in depreciation and amortization expense. Costs for other repair and maintenance activities are included in vessel and rig operating expenses and are expensed as incurred.

Foreign currencies
The Company and all of its subsidiaries use the U.S. dollars as their functional currency because the majority of their revenues and expenses are denominated in U.S. dollars. Accordingly, the Company’s reporting currency is also U.S. dollars.
Transactions in foreign currencies during a period are translated into U.S. dollars at the rates of exchange in effect at the date of the transaction. Foreign currency assets and liabilities are translated using rates of exchange at the balance sheet date. Gains and losses on foreign currency transactions are included in the consolidated statements of operations.

Earnings Per Unit
The Company computes earnings per unit using the two-class method set out in US GAAP. Any undistributed earnings for the period are allocated to the various unitholders in accordance with the cash distribution provisions contained in the Company's Operating Agreement across the common and subordinated members and incentive distribution right holders. Where distributions relating to the period are in excess of earnings, the deficit is also allocated according to the cash distribution model.
The sum of the distributed amounts and the allocation of the undistributed earnings or deficit to each class of unitholders is divided by the weighted average number of units outstanding during the period. Diluted earnings per unit, if applicable, reflects the potential dilution that could occur if potentially dilutive instruments were exercised, resulting in the issuance of additional units that would then share in the Company's net earnings.

Current and non-current classification
Assets and liabilities are classified as current assets and liabilities respectively, if their maturity is within one year of the balance sheet date. Otherwise, they are classified as non-current assets and liabilities.

Cash and cash equivalents
Cash and cash equivalents consist of cash, bank deposits and highly liquid financial instruments with original maturities of three months or less.
Receivables
Receivables, including accounts receivable, are recorded in the balance sheet at their nominal amount less an allowance for doubtful accounts. The Company establishes reserves for doubtful accounts on a case-by-case basis when it is unlikely that required payments of specific amounts will occur. In establishing these reserves, the Company considers the financial condition of the customer as well as specific circumstances related to the receivable such as customer disputes. Receivable amounts determined as being unrecoverable are written off.

Newbuildings
The carrying value of rigs under construction (“Newbuildings”) represents the accumulated costs at the balance sheet date. Cost components include payments for yard installments and variation orders, construction supervision, equipment, spare parts, capitalized interest, costs related to first time mobilization and commissioning costs. No charge for depreciation is made until commissioning of the newbuilding has been completed and it is ready for its intended use.

F- 12
Table of Contents


Drilling units
Rigs, vessels and related equipment are recorded at historical cost less accumulated depreciation. The cost of these assets, less estimated residual value is depreciated on a straight-line basis over their estimated remaining economic useful lives. The estimated economic useful life of the Company’s semi-submersibles, drillships and tender rigs, when new, is 30 years . Significant investments are capitalized and depreciated in accordance with the nature of the investment. Significant investments that are deemed to increase an asset’s value for its remaining useful life are capitalized and depreciated over the remaining life of the asset.
Cost of property and equipment sold or retired, with the related accumulated depreciation and write-downs are removed from the consolidated balance sheet, and resulting gains or losses are included in the consolidated statement of operations.

Goodwill
The Company allocates the purchase price of acquired businesses to the identifiable tangible and intangible assets and liabilities acquired, with any remaining amount being recorded as goodwill. Goodwill is tested for impairment at least annually at the reporting unit level, which is defined as an operating segment or a component of an operating segment that constitutes a business for which financial information is available and is regularly reviewed by management. The Company has determined that its reporting units are the same as its operating segments for the purpose of allocating goodwill and the subsequent testing of goodwill for impairment.
 
The Company tests goodwill for impairment on an annual basis as of December 31 each year or when events or circumstances indicate that a potential impairment exists. The Company may first assess qualitative factors to determine whether it is more-likely-than-not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two step goodwill impairment test.

If the qualitative factors indicate possible impairment, the Company performs a quantitative assessment to estimate fair value of its reporting units compared to their carrying value.  In the event that the fair value is less than carrying value, the Company must perform an exercise similar to a purchase price allocation in a business combination in order to determine the amount of the impairment charge.The quantitative goodwill impairment test for a reporting unit is based on discounted cash flows. The Company uses estimated future cash flows applying contract dayrates during the firm contract periods and estimated forecasted dayrates for the periods after expiry of firm contract periods. The estimated future cash flows will be based on remaining economic useful lives for the assets, and discounted using a weighted average cost of capital (WACC).

Favorable drilling contracts - intangible assets
Favorable drilling contracts are recorded as an intangible asset at fair value on the date of acquisition less accumulated amortization. The amortization is recognized in the statement of operations under "amortization of favorable contracts". The amounts of these assets are amortized on a straight-line basis over the estimated remaining economic useful life or contractual period.

Impairment of long-lived assets
The carrying value of long-lived assets that are held and used by the Company are reviewed for impairment whenever certain trigger events or changes in circumstances indicate that the carrying amount of an asset may no longer be appropriate. The Company assesses recoverability of the carrying value of the asset by estimating the undiscounted future net cash flows expected to result from the asset, including eventual disposition. If the undiscounted future net cash flows are less than the carrying value of the asset, an impairment loss is recorded equal to the difference between the asset’s carrying value and fair value.

Derivative Financial Instruments and Hedging Activities
The Company’s interest-rate swap agreements are recorded at fair value, and are recorded within related party receivables/payables on the balance sheet when the counter party to the agreements is Seadrill, and within other current assets/liabilities when the counter party to the agreements is an external party. Changes in the fair value of interest-rate swap agreements, which have not been designated as hedging instruments, are recorded as a gain or loss as a separate line item within financial items in the statement of operations.

Income taxes
Seadrill Partners LLC is organized in the Republic of the Marshall Islands and resident in the United Kingdom for taxation purposes. The Company and its controlled affiliates do not conduct business or operate in the Republic of the Marshall Islands and therefore are not subject to income, capital gains, profits or other taxation under current Marshall Island law. As a tax resident of the United Kingdom the Company is subject to tax on income earned from sources within the United Kingdom. Certain subsidiaries operate in other jurisdictions where taxes are imposed. Consequently income taxes have been recorded in these jurisdictions when appropriate.
Significant judgment is involved in determining the provision for income taxes. There are certain transactions for which the ultimate tax determination is unclear due to uncertainty in the ordinary course of business. The Company recognizes tax liabilities based on its assessment of whether its tax positions are more likely than not sustainable, based on the technical merits and considerations of the relevant taxing authority’s widely understood administrative practices and precedence.
Income tax expense consists of taxes currently payable and changes in deferred tax assets and liabilities calculated according to local tax rules. Deferred tax assets and liabilities are based on temporary differences that arise between carrying values used for financial reporting purposes and amounts used for taxation purposes of assets and liabilities and the future tax benefits of tax loss carry forwards. A deferred tax asset is

F- 13
Table of Contents

recognized only to the extent that it is more likely than not that future taxable profits will be available against which the asset can be utilized. The amount of deferred tax provided is based upon the expected manner of settlement of the carrying amount of assets and liabilities, using tax rates enacted at the balance sheet date. The impact of tax law changes is recognized in periods when the change is enacted.

Deferred charges
Loan related costs, including debt arrangement fees and legal expenses, are capitalized within current and non-current assets, and amortized over the term of the related loan and the amortization is included in interest expense.

Provisions
A provision is recognized in the balance sheet when the Company has a present legal or constructive obligation as a result of a past event, and it is probable that an outflow of economic benefits will be required to settle the obligation and a reliable estimate of the amount can be made. If the effect is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability.

Related parties
Parties are related if one party has the ability, directly or indirectly, to control the other party or exercise significant influence over the other party in making financial and operating decisions. Parties are also related if they are subject to common control or common significant influence. Prior to IPO, all transactions between related parties were recognized on an allocation basis. Post IPO, all related party transactions are based on the principle of arm’s length estimated market value. For businesses acquired from Seadrill subsequent to IPO, transactions between related parties prior to acquisition were recognized on an allocation basis. The acquisition transactions and all post acquisition transactions are based on the principle of arm's length estimated market value.

Equity allocation
Earnings attributable to unitholders of Seadrill Partners are allocated to all unitholders on a pro rata basis for the purposes of presentation in the Company’s consolidated and combined carve-out statements of changes in members’ capital. Earnings attributable to unitholders for any period are first reduced for any cash distributions for the period to be paid to the holders of the incentive distribution rights.
At the time of the IPO the equity attributable to unitholders was allocated using the hypothetical amounts which would be distributed to the various unitholders on a liquidation of the Company ("hypothetical liquidation method"). This method has also been used to account for issuances of common units by the Company, and the deemed distributions from equity which resulted from acquisitions of drilling units from Seadrill.
Pre-acquisition earnings presented which relates to entities acquired from Seadrill as part of common control transactions have been allocated to the Seadrill member interest. The Seadrill Member interest, and its rights to the Incentive distribution rights, is owned by the predecessor owner of acquired entities, Seadrill Limited.

Recently Adopted Accounting Standards
Balance sheet - Effective January 1, 2014, the Company adopted the accounting standards update that expands on the recognition, measurement and disclosure obligations resulting from joint and several liability arrangements for which the total amount of the obligation is fixed at the reporting date, except for obligations addressed within existing guidance in U.S. generally accepted accounting principles (GAAP). The update requires measurement of the obligations resulting from joint and several liability arrangements for which the total amount of the obligation is fixed at the reporting date, as the sum of the amount the entity agreed to pay on the basis of its arrangement and any additional amount the Company expects to pay on behalf of its co-obligors. The update also requires an entity to disclose the nature, amount and other information of the obligation. The update was effective for interim and annual periods beginning on or after December 15, 2013. As a result, the Company has disclosed relevant obligations in Note 12.

Recently Issued Accounting Standards
In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 201409, Revenue from Contracts with Customers , which provides new authoritative guidance on the methods of revenue recognition and related disclosure requirements. The accounting standard update will be effective for the first interim period beginning after December 15, 2016 (December 31, 2016 for calendar year end entities) and early adoption is not permitted. The Company is in the process of evaluating the impact of the ASU on its consolidated financial statements and related disclosures.

In August 2014, the FASB issued ASU No. 201415, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern , which provides new authoritative guidance regards to management's responsibility to assess an entity's ability to continue as a going concern, and to provide related footnote disclosures in certain circumstances. The accounting standard update will be effective for all entities in the first annual period ending after December 15, 2016 (December 31, 2016 for calendar yearend entities) and earlier application is permitted. The Company does not expect the adoption of this standard to have a material impact on its consolidated financial statements and related disclosures.


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Table of Contents

In February 2015, the FASB issued ASU 2015-02, Consolidation (Topic 810): Amendments to the Consolidation Analysis, which made targeted amendments to the current consolidation guidance that could affect all industries . The ASU will be effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015 and early adoption is not permitted. The Company is in the process of evaluating the impact of this standard update on its consolidated financial statements and related disclosures.

In April 2015, the FASB issued ASU 2015-03, Interest - Imputation of Interest, (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs , which requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The accounting standard update will be effective for the first interim period beginning after December 15, 2015 and early adoption is permitted. The Company is in the process of evaluating the impact of this standard update on its consolidated financial statements and related disclosures.

Note 3 - Business acquisitions

For the year-ended December 31, 2014

West Auriga Acquisition
On March 21, 2014, the Company’s 51% owned subsidiary, Seadrill Capricorn Holdings LLC, completed the purchase of 100% of the ownership interests in the entities that own and operate the West Auriga (the “Auriga business”) from Seadrill. The acquisition is in line with the Company’s strategy to increase quarterly cash distributions through accretive acquisitions of modern offshore drilling units with long-term contracts attached.
The purchase price was $1,240.0 million , less debt of $443.1 million that was outstanding under the existing facility related to West Auriga . The total consideration of $797.0 million comprised of cash of $696.9 million , and a zero coupon limited recourse discount note issued by Seadrill Capricorn Holdings LLC to Seadrill in an initial amount of $100.0 million that matures in September 2015. Upon maturity of such note, Seadrill Capricorn Holdings LLC was due to repay $103.7 million to Seadrill. The purchase price was subsequently adjusted by a working capital adjustment of $330.4 million . The working capital adjustment predominately arose as a result of related party payable balances which remained in the acquired entities. These payable balances related to funding provided by Seadrill to the acquired entities for the construction, equipping and mobilization of the West Auriga .
In conjunction with this acquisition, the Company issued 11,960,000 common units to the public and 1,633,987 common units to Seadrill, at a price of $30.60 per unit, raising total net proceeds after fees of $401.3 million . Issuance costs of $14.7 million were charged against Members’ Capital.
The Company funded its 51% share of the cash purchase price with proceeds from the equity issuance described above. The remaining 49% was funded through the issuance of new units by Seadrill Capricorn Holdings LLC to Seadrill for $341.5 million .
Following the deconsolidation of the Company from Seadrill on January 2, 2014, this transaction is deemed to constitute a business combination rather than a transaction between entities under common control. The following table summarizes the consideration paid and the amounts of the assets acquired and liabilities assumed recognized at the acquisition date.
(In US$ millions)
March 21, 2014

Consideration
 
Cash
696.9

Discount note issued
100.0

Working capital adjustment
(330.4
)
Fair value of total consideration transferred
466.5

 
 
Recognized amounts of identifiable assets acquired and liabilities assumed at estimated fair value

Cash
24.4

Current assets
44.4

Intangible asset - favorable drilling contract
76.2

Drilling unit
1,065.7

Non current assets
76.6

Long term interest bearing debt
(443.1
)
Current liabilities
(380.6
)
Total identifiable net assets
463.6

 
 
Goodwill
2.9

Total
466.5


F- 15
Table of Contents


The Company recognized goodwill from the acquisition of $2.9 million , which is the excess of consideration transferred over the net assets acquired. The value of the goodwill is attributed to the assembled workforce. None of the goodwill recognized is expected to be deductible for income tax purposes.
The drilling unit has been valued at fair value separately from the related drilling contract. The estimated fair value of the drilling unit was derived using an income approach with market participant based assumptions. The fair value of the drilling contract has been also been assessed separately. The contract was valued using an 'excess earnings' technique where the terms of the contract are assessed relative to current market conditions. The value of the contract related intangible was determined by means of calculating the incremental or decremental cash flows arising over the life of the contract compared with a contract with terms at prevailing market rates.

The fair value of trade receivables is $28.3 million , which is also the gross contractual amount. All amounts are expected to be collected. The fair value of the mobilization fee receivable included in other current and non-current assets is $92.4 million , which equals the book value. All amounts are expected to be collected over the duration of the drilling contract.
Acquisition related transaction costs consisted of various advisory, legal, accounting, valuation and other professional fees of $0.2 million , which were expensed as incurred and are presented in the statement of operations within general and administrative expenses.
In the consolidated statement of operations, revenue of $164.5 million and net income of $46.1 million have been included since the acquisition date of the Auriga Business until December 31, 2014 .
The pro forma revenue and pro forma net income of the combined entity for the year ended December 31, 2014 and 2013 , had the acquisition date been January 1, 2013 are as follows:
 
Twelve months ended December 31, 2014
(In US$ millions)
2014
2013
 
Seadrill Partners LLC as reported
Supplemental pro forma combined entity
Seadrill Partners LLC as reported
Supplemental pro forma combined entity
Revenues
$
1,342.6

$
1,390.7

$
1,064.3

$
1,096.1

Net Income
314.6

331.0

415.4

412.5


Acquisition of additional limited partner interest in Seadrill Operating LP

On July 21, 2014, the Company completed the purchase of an additional 28% limited partner interest in Seadrill Operating LP from Seadrill for a total of $372.8 million . As a result of this acquisition, the Company’s limited partner interest in Seadrill Operating LP increased from 30% to 58% . Seadrill Operating LP was already a controlled subsidiary of the Company and therefore this has been accounted for as an equity transaction. Non-controlling interests of $93.2 million were derecognized with the residual $279.6 million recognized against members' capital.

West Vela Acquisition
On November 4, 2014, the Company’s 51% owned subsidiary, Seadrill Capricorn Holdings LLC, completed the purchase of 100% of the ownership interests in the entities that own and operate the West Vela (the “Vela business”) from Seadrill. The acquisition is in line with the Company’s strategy to increase quarterly cash distributions through accretive acquisitions of modern offshore drilling units with long-term contracts attached.
The initial purchase price was $900.0 million , less debt of $433.1 million that was outstanding under the existing facility related to West Vela . As part of the agreement Seadrill Capricorn Holdings LLC also has an obligation to pay deferred consideration of $44,000 per day for the remainder of the West Vela's current contract with BP which runs to November 2020. In addition Seadrill Capricorn Holdings will pay contingent consideration of up to $40,000 per day for the remainder of the BP contract, depending on the actual amount of contract revenue received from BP per day. The total consideration thus included deferred consideration payable to Seadrill of $73.7 million and contingent consideration of $65.7 million . The purchase price was subsequently reduced by a working capital adjustment of $6.0 million .
The Company funded its 51% share of the cash purchase price with proceeds from the equity issuance in September 2014 where the Company issued 8,000,000 common units to the public at a price of $30.68 per unit, raising total proceeds after fees of $245.4 million . Issuance costs of $10.9 million were charged against Members’ Capital. The remaining 49% was funded through the issuance of new units by Seadrill Capricorn Holdings LLC to Seadrill for $228.8 million .

F- 16
Table of Contents


Following the deconsolidation of the Company from Seadrill on January 2, 2014, this transaction is deemed to constitute a business combination rather than a transaction between entities under common control. The following table summarizes the consideration paid and the amounts of the assets acquired and liabilities assumed recognized at the acquisition date.
(In US$ millions)
November 4, 2014

Consideration
 
Cash
467.0

Mobilization payable
73.7

Contingent consideration
65.7

Less: Working capital adjustment
(6.0
)
Fair value of total consideration transferred
600.4

 
 
Recognized amounts of identifiable assets acquired and liabilities assumed at estimated fair value
 
Cash
1.9

Current assets
61.4

Intangible asset - favorable drilling contract
204.7

Drilling unit
755.8

Non current assets
61.8

Long term interest bearing debt
(433.1
)
Current liabilities
(52.3
)
Total identifiable net assets
600.2

 
 
Goodwill
0.2

Total
600.4



The Company recognized goodwill from the acquisition of $0.2 million , which is the excess of consideration transferred over the net assets acquired. The value of the goodwill is attributed to the assembled workforce. None of the goodwill recognized is expected to be deductible for income tax purposes.
The drilling unit has been valued at fair value separately from the related drilling contract. The estimated fair value of the drilling unit was derived using an income approach with market participant based assumptions. The fair value of the drilling contract has been also been assessed separately. The contract was valued using an 'excess earnings' technique where the terms of the contract are assessed relative to current market conditions. The value of the contract related intangible was determined by means of calculating the incremental or decremental cash flows arising over the life of the contract compared with a contract with terms at prevailing market rates.

The fair value of trade receivables is $44.1 million , which is also the gross contractual amount. All amounts are expected to be collected. The fair value of the mobilization fee receivable included in other current and non-current assets is $94.2 million , which equals the book value. All amounts are expected to be collected over the duration of the drilling contract.
Acquisition related transaction costs consisted of various advisory, legal, accounting, valuation and other professional fees of $0.2 million , which were expensed as incurred and are presented in the statement of operations within general and administrative expenses.
In the consolidated statement of operations, revenue of $32.9 million and net income of $5.7 million have been included since the acquisition date of the Vela Business until December 31, 2014 .

F- 17
Table of Contents

The pro forma revenue and pro forma net income of the combined entity for the twelve months ended December 31, 2014 and December 31, 2013 , had the acquisition date been January 1, 2013 are as follows:
 
Twelve months ended December 31,
(In US$ millions)
2014
2013
 
Seadrill Partners LLC as reported
Supplemental pro forma combined entity
Seadrill Partners LLC as reported
Supplemental pro forma combined entity
Revenues
$
1,342.6

$
1,532.4

$
1,064.3

$
1,083.4

Net Income
314.6

407.6

415.4

403.8


For the year-ended December 31, 2013

T-15 Acquisition
On May 17, 2013, the Company's wholly owned subsidiary, Seadrill Partners Operating LLC, acquired a 100% interest in the companies that own and operate the tender rig T-15 from Seadrill for a total purchase price of $210.0 million , less $100.5 million of debt assumed relating to the proportion of Seadrill's existing $440 million credit facility, relating to the T-15 . Working capital adjustments reduced the purchase price by $34.9 million , which was settled in cash during the year. The acquisition has been accounted for as a transaction between entities under common control. The net assets acquired are recorded at the historic book value of Seadrill. The excess of the purchase price over the book value of net assets acquired of $79.4 million has been recorded as a reduction of equity. The acquisition was funded by a vendor financing loan from Seadrill of $109.5 million .

T-16 Acquisition
On October 18, 2013, Seadrill Partners Operating LLC, acquired from Seadrill a 100% ownership interest in the entity that owns the tender rig  T-16 for a total purchase price of $200.0 million , less $93.1 million of debt assumed relating to the proportion of Seadrill's existing $440 million credit facility, relating to the T-16 . Working capital adjustments reduced the purchase price by $39.0 million , which was recognized within related party receivables at December 31, 2013. The acquisition has been accounted for as a transaction between entities under common control. The net assets acquired are recorded at the historic book value of Seadrill. The excess of the purchase price over the book value of net assets acquired of $67.6 million has been recorded as a reduction of equity. As consideration for the purchase, the Company issued 3,310,622 common units to Seadrill in a private placement transaction at a price of $32.29 per unit, which was valued at $106.9 million .

West Sirius and West Leo Acquisition
On December 13, 2013, the acquisition of the companies that own and operate the West Sirius (the "Sirius Business") and West Leo (the "Leo Business") was completed. The Sirius Business was acquired by Seadrill Capricorn Holdings LLC ( 51% owned by the Company) and the Leo Business was acquired by Seadrill Operating LP ( 30% owned by the Company).
The total purchase price of the Sirius Business was $1,035.0 million , less debt assumed of $220.2 million , relating to the proportion of Seadrill's existing $1,500 million credit facility relating to the West Sirius . Working capital adjustments increased the purchase price by $106.7 million . 51% (which corresponds to the Company's ownership share of Seadrill Capricorn Holdings LLC) of this was recognized within related party payables at December 31, 2013. The remaining amount was recognized as an increase in the equity contribution from Seadrill described below. The acquisition has been accounted for as a transaction between entities under common control. The net assets acquired are recorded at the historic book value of Seadrill. The excess of the purchase price over the book value of net assets acquired of $546.9 million has been recorded as a reduction of equity. The Company funded its share of the purchase price through the equity issue described below, the issuance of a $229.9 million discount note by Seadrill Capricorn Holdings LLC, the issuance of a $70.0 million discount note by the Company, with the remaining 49% (which corresponds to Seadrill's share of Seadrill Capricorn Holdings LLC) being funded by an issuance of common units by Seadrill Capricorn Holdings LLC to Seadrill, totalling $338.8 million .
The total purchase price of the Leo Business was $1,250.0 million , less debt assumed of $485.0 million , relating to the proportion of Seadrill's existing $1,121 million credit facility relating to the West Leo . Working capital adjustments reduced the purchase price by $35.0 million . 30% (which corresponds to the Company's ownership share of Seadrill Operating LP) of this was recognized within related party payables at December 31, 2013. The remaining amount was recognized as a reduction in the equity contribution from Seadrill described below. The acquisition has been accounted for as a transaction between entities under common control. The net assets acquired are recorded at the historic book value of Seadrill. The excess of the purchase price over the book value of net assets acquired of $612.7 million has been recorded as a reduction of equity. The Company funded its share of the purchase price through the equity issue described below, with the remaining 70% (which corresponds to Seadrill's share of Seadrill Operating LP) being funded by an equity contribution to Seadrill Operating LP, by Seadrill totaling $511.1 million .

F- 18
Table of Contents

In order to fund the cash portion of the purchase price of these acquisitions, Seadrill Partners issued 12,880,000 common units to the public (including 1,680,000 common units issued to underwriters’ option to purchase additional common units) and 3,394,916 common units to Seadrill, at a price of $29.50 per unit on December 9, 2013 amounting to total gross proceeds of $480.1 million . Issuance fees were $15.3 million .


The following table summarizes the above acquisitions during the year ended December 31, 2013 :
(In US$ millions)
 
T-15
 
T-16
 
Sirius
 
Leo
 
Total
 
 
 
 
 
 
 
 
 
 
 
Total purchase price
 
210.0

 
200.0

 
1,035.0

 
1,250.0

 
2,695.0

Debt assumed
 
(100.5
)
 
(93.1
)
 
(220.2
)
 
(485.0
)
 
(898.8
)
Purchase price less debt
 
109.5

 
106.9

 
814.8

 
765.0

 
1,796.2

Working capital adjustments
 
(34.9
)
 
(39.0
)
 
106.7

 
(35.0
)
 
(2.2
)
Adjusted purchase price
 
74.6

 
67.9

 
921.5

 
730.0

 
1,794.0

Carrying value of net assets / (liabilities) acquired
 
(4.8
)
 
0.3

 
374.6

 
117.3

 
487.4

Excess of sales price over net assets acquired
 
79.4

 
67.6

 
546.9

 
612.7

 
1,306.6


Refer to Note 1 - Business combinations between entities under common control - for further information on how these transactions have had an effect on the Company's consolidated and combined carve out financial statements.

Note 4 – Segment information
Operating segment
OPCO’s fleet, which is regarded as one single global segment, and is reviewed by the Chief Operating Decision Maker, which is the Company's board of directors, as an aggregated sum of assets, liabilities and activities generating distributable cash to meet minimum quarterly distributions.
A breakdown of the Company’s contract revenues by customer for the years ended December 31, 2014 , 2013 and 2012 is as follows:
 
 
2014
 
2013
 
2012
BP
41.5
%
 
35.0
%
 
28.9
%
ExxonMobil *
26.4
%
 
14.5
%
 
23.6
%
Tullow
17.4
%
 
18.8
%
 
13.9
%
Chevron
14.7
%
 
12.1
%
 
9.4
%
Total
—
%
 
19.6
%
 
24.2
%
Total
100.0
%
 
100.0
%
 
100.0
%
* During 2014 and 2013 the ExxonMobil drilling contract relating to the West Aquarius was assigned to Hibernia Management and Development Co. Ltd.
Geographic Data
Revenues are attributed to geographical areas based on the country of operations for drilling activities, i.e. the country where the revenues are generated. The following presents the revenues for the years ended December 31, 2014 , 2013 and 2012 and fixed assets as of December 31, 2014 and 2013 by geographic area:
Revenues
 
(In US$ millions)
2014
 
2013
 
2012
United States
556.6

 
370.4

 
259.3

Ghana
233.5

 
198.6

 
126.8

Nigeria
228.5

 
207.5

 
209.8

Canada
126.1

 
153.5

 
87.3

Thailand
105.6

 
40.6

 
—

Other
92.3

 
93.7

 
228.6

Total
1,342.6

 
1,064.3

 
911.8


F- 19
Table of Contents

Fixed Assets—Drilling Units (1)
 
(In US$ millions)
2014
 
2013
United States
3,024.3

 
1,274.8

Ghana
608.4

 
632.1

Canada
539.3

 
543.5

Nigeria
525.4

 
543.5

Thailand
261.2

 
271.8

Angola
182.5

 
182.6

Total
5,141.1

 
3,448.3


(1)
The fixed assets referred to in the table above include the ten drilling units at December 31, 2014 and eight drilling units at December 31, 2013 . Asset locations at the end of a period are not necessarily indicative of the geographic distribution of the revenues or operating profits generated by such assets during such period.

Note 5 – Taxation
Income taxes consist of the following:
 
Year Ended December 31,
(In US$ millions)
2014
 
2013
 
2012
Current tax expense:
 
 
 
 
 
United Kingdom
—

 
—

 
—

Foreign
43.5

 
42.4

 
39.5

Total current tax expense
43.5

 
42.4

 
39.5

Deferred tax (benefit) expense:
 
 
 
 
 
United Kingdom
—

 
—

 
—

Foreign
(8.7
)
 
(9.2
)
 
(0.6
)
Total income tax expense
34.8

 
33.2

 
38.9


Seadrill Partners LLC is tax resident in the United Kingdom. The Company's controlled affiliates operate and earn income in several countries and are subject to the laws of taxation within those countries. Currently none of the Company's controlled affiliates operate in the United Kingdom and therefore the Company is not subject to U.K. tax. Subject to changes in the jurisdictions in which the Company's drilling units operate and/or are owned, differences in levels of income and changes in tax laws, the Company's effective income tax rate may vary substantially from one reporting period to another. The Company's effective income tax rate for each of the years ended on December 31, 2014 , 2013 and 2012 differs from the U.K. statutory income tax rate as follows:
 
 
2014
 
2013
 
2012
U.K. statutory income tax rate
21.3
 %
 
23.3
 %
 
24.5
 %
Non-U.K. taxes
(11.3
)%
 
(15.8
)%
 
(12.8
)%
Effective income tax rate
10.0
 %
 
7.5
 %
 
11.7
 %
Deferred income taxes reflect the impact of temporary differences between the amount of assets and liabilities recognized for financial reporting purposes and such amounts recognized for tax purposes.

F- 20
Table of Contents

The net deferred tax assets consist of the following:
(In US$ millions)
2014
 
2013
Deferred mobilization revenue
—

 
0.3

Provisions
1.5

 
—

Net operating losses carry forward
14.8

 
9.5

Property, plant and equipment
3.0

 
—

Gross deferred tax assets
19.3

 
9.8

Valuation allowance related to NOL
(0.9
)
 
—

Net deferred tax asset
18.4

 
9.8

The net deferred taxes are classified as follows:
(In US$ millions)
2014
 
2013
Short-term deferred tax asset
1.5

 
—

Long-term deferred tax asset
16.9

 
9.8

Net deferred tax
18.4

 
9.8

As of December 31, 2014 , deferred tax assets related to net operating loss ("NOL") carryforwards was $14.8 million , which can be used to offset future taxable income. NOL carry forwards, which were generated in various jurisdictions will expire, if not utilized, in 2033 and 2034 . A valuation allowance of $0.9 million on the NOL carryforwards results where we do not expect to generate future taxable income. The Company did not have any deferred tax liabilities at December 31, 2014 and 2013 .

Note 6 – Other revenues
Related party other revenues comprise the following items:
 
 
Year Ended December 31,
(In US$ millions)
2014
 
2013
 
2012
Related party other revenues
—

 
5.8

 
19.1

Total
—

 
5.8

 
19.1

The Company's Nigerian service company earned related party revenues relating to certain services, including the provision of onshore and offshore personnel, which the Company provided to Seadrill’s West Polaris drilling rig that was operating in Nigeria during the years ended December 31, 2013 and December 31, 2012 .

Note 7 – Accounts receivable
Accounts receivable are presented net of allowances for doubtful accounts. There was a provision of $5.9 million related to allowances for doubtful accounts at December 31, 2014 . There was no allowance for doubtful accounts as at December 31, 2013 .
The Company did not recognize any bad debt expense in 2014 , 2013 or 2012 , but has instead reduced contract revenues for any disputed amounts. Contract revenues were reduced by $6.5 million in 2014 , $22.1 million in 2013 and $3.4 million in 2012 . The reduction in 2014 was the result of a write-off of rechargeables of $0.6 million relating to the West Leo as well as $5.9 million disputed with Hibernia relating to the West Aquarius . The reduction in 2013 was the result of amounts disputed with Hibernia in relation to the West Aquarius. The reduction in 2012 was a result of the Company's entry into a settlement with ExxonMobil, which related to an agreement for non-payment during the mobilization period of the West Aquarius, as a result of the time needed to complete modifications and repairs to meet regulatory requirements.


F- 21
Table of Contents

Note 8 – Other current assets
Other current assets include:
(In US$ millions)
December 31,
2014
 
December 31,
2013
Reimbursable amounts due from customers
18.5

 
19.8

Mobilization revenue receivable - short-term
42.0

 
16.6

Favorable contracts to be amortized - short-term
40.5

 
—

Deferred charges – short term portion
7.6

 
7.7

Prepaid expenses
11.2

 
10.1

Other
18.6

 
0.5

Total other current assets
138.4

 
54.7


The Mobilization revenue receivable - short-term portion consists and Favorable contracts to be amortized - short-term portion relates to the mobilization revenue and favorable contracts acquired with the West Vela and West Auriga from Seadrill.

Note 9 – Newbuildings
 
(In US$ millions)
December 31,
2014
 
December 31,
2013
Opening balance
—

 
161.8

Additions
—

 
89.6

Capitalized interest and loan related costs
—

 
3.9

Re-classified as Drilling Units
—

 
(255.3
)
Closing balance
—

 
—


The Company had no newbuildings in 2014.
Transfers from newbuildings to drilling units in 2013 relate to the T-15 and T-16 .

Note 10 – Drilling units
 
(In US$ millions)
December 31,
2014
 
December 31,
2013
Cost
5,790.5

 
3,899.0

Accumulated depreciation
(649.4
)
 
(450.7
)
Net book value
5,141.1

 
3,448.3

Depreciation and amortization expense related to the drilling units was $198.7 million , $141.2 million and $114.0 million for the years ended December 31, 2014 , 2013 and 2012 respectively.

Note 11 – Other non-current assets
 
(In US$ millions)
December 31,
2014
 
December 31,
2013
Deferred charges – long-term portion
70.8

 
2.3

Mobilization revenue receivable - long-term portion
150.6

 
43.7

Favorable contract – long-term portion
225.6

 
—

Total other non-current assets
447.0

 
46.0


The Mobilization revenue receivable - long-term portion and Favorable contracts to be amortized - long-term portion consists of the mobilization receivable and favorable contracts acquired with the West Vela and West Auriga from Seadrill.


F- 22
Table of Contents

Note 12 – Debt

As of December 31, 2014 and December 31, 2013 , the Company had the following debt amounts outstanding:
 (In US$ millions)
December 31, 2014

 
December 31, 2013

External debt agreements
 
 
 
Amended Senior Secured Credit Facilities
2,881.0

 
—

$1,450 facility
422.9

 
—

Sub-total external debt
3,303.9

 
—

Less current portion long term debt
(76.5
)
 
—

Long-term external debt
3,227.4

 
—

 
 
 
 
Related party debt agreements
 
 
 
 Rig Financing and Loan Agreements
 
 
 
   $1,500 facility
—

 
643.5

    West Vencedor  Loan Agreement (previously $1,200 facility)
78.2

 
90.5

   $550 facility
—

 
440.0

   $440 facility
158.8

 
178.6

   $1,121 facility
—

 
472.6

Sub-total Rig Financing Agreements
237.0

 
1,825.2

 
 
 
 
 Other related party debt
 
 
 
$109.5 T-15 vendor financing facility
109.5

 
109.5

$229.9 discount note
—

 
229.9

$70.0 discount note
—

 
70.0

Related party revolving credit facility
—

 
125.9

Total related party debt
346.5

 
2,360.5

Less current portion of related party debt and short term revolver
(40.4
)
 
(234.2
)
Long-term related party debt and related party loan notes
306.1

 
2,126.3

 
 
 
 
Total external and related party debt
3,650.4

 
2,360.5

The outstanding debt as of December 31, 2014 is repayable as follows: 
(In US$ millions)
As at December 31,
2015
116.9

2016
215.1

2017
204.8

2018
122.0

2019
63.6

2020 and thereafter
2,928.0

Total external and related party debt
3,650.4


Amended Senior Secured Credit Facilities
On February 21, 2014, Seadrill Operating LP, Seadrill Capricorn Holdings LLC and Seadrill Partners Finco LLC, which are subsidiaries of the Company (the “Borrowers”), entered into Senior Secured Credit Facilities (the “Senior Secured Credit Facilities”). The Senior Secured Credit Facilities consist of (i) a $100.0 million revolving credit facility (the “revolving facility”) available for borrowing from time to time by any Borrower, and (ii) a $1.8 billion term loan (the “term loan”) which was borrowed by Seadrill Operating LP in full on February 21, 2014. The proceeds from this transaction were used to (a) refinance debt related to the West Capella , West Aquarius , West Sirius and West Leo Rig Facilities, (b) repay in part unsecured loans from Seadrill, (c) add cash to the balance sheet in support of general company purposes and (d) pay all fees and expenses associated therewith.

F- 23
Table of Contents

On June 26, 2014, the Senior Secured Credit Facilities were amended ("Amended Senior Secured Credit Facilities") for the borrowing by Seadrill Operating LP of $1.1 billion of additional term loans in addition to the term loans already outstanding under the Senior Secured Credit Facilities as noted above. The proceeds from the additional $1.1 billion of term loans were used to (a) refinance debt secured by West Auriga of $443 million and West Capricorn of $426.3 million , (b) repay in part certain unsecured loans from Seadrill, (c) add cash to the Company's balance sheet for general company purposes and (d) pay all fees and expenses associated with the Amended Senior Secured Credit Facilities.
The Amended Senior Secured Credit Facilities are guaranteed on a senior secured basis by the Borrowers and the Borrowers’ subsidiaries that own or charter the West Capella , West Aquarius , West Sirius, West Leo, West Capricorn and West Auriga . The Amended Senior Secured Credit Facilities also are secured by mortgages on the six drilling units, security interests on the earnings, earnings accounts, and insurances owned by the subsidiary guarantors relating to the six drilling units, and pledges of the equity interests of each subsidiary guarantor. As at December 31, 2014 , the total net book value of the drilling units pledged as security was $3.9 billion .
Loans under the Amended Senior Secured Credit Facilities will bear interest, at the Company's option, at a rate per annum equal to either the LIBOR Rate (subject to a 1% floor) for interest periods of one, two, three or six months plus the applicable margin or the Base Rate plus the applicable margin. The Base Rate is the highest of (a) the prime rate of interest announced from time to time by the agent bank as its prime lending rate, (b) 0.50% per annum above the Federal Funds rate as in effect from time to time, (c) the Eurodollar Rate for 1-month LIBOR as in effect from time to time plus 1.0% per annum, and (d) for term loans only, 2.0% per annum. The applicable margin is 2.00% for term loans bearing interest at the Base Rate and 3.00% for term loans bearing interest at the Eurodollar Rate. The applicable margin is 1.25% for revolving loans bearing interest at the Base Rate and 2.25% for revolving loans bearing interest at the Eurodollar Rate. In addition, the Company will incur a commitment fee based on the unused portion of the revolving facility of 0.5% per annum.
The term loan matures in February 2021. Amortization payments in the amount of 0.25% of the original term loan amount are required to be paid on the last day of each calendar quarter. The revolving facility matures in February 2019 and does not amortize. The Company is required to make mandatory prepayments of term loans using proceeds from asset sales that are not otherwise utilized for permitted purposes and to make offers to purchase term loans using proceeds of loss events that are not otherwise utilized for permitted purposes.
The Company has entered into interest rate swap transactions to fix 100% of the variable element of the term loan facility at a weighted average fixed rate of 2.49% per annum. A variable rate option included in the swap provides that the counterparty shall pay the greater of 1.00% or 3 Month LIBOR . Thus, where the variable rate is less than 1% , the variable rate payment shall be deemed to be equal to 1% .
As of December 31, 2014 , the outstanding balance of the term loan was $2,881.0 million and the $100 million revolving facility was not yet drawn.

$ 1,450 million Senior Secured Credit Facility
In March 20, 2013 Seadrill entered into a $1,450 million senior secured credit facility with a syndicate of banks and export credit agencies, relating to the West Auriga, the West Vela and one other drilling unit owned by Seadrill. Upon closing of the West Auriga acquisition in March 2014, the entity which owns the West Auriga owed $443 million under the facility. This amount was repaid in June 2014 with proceeds from the Amended Senior Secured Credit Facilities discussed above. Upon closing of the West Vela acquisition in November 2014, the entity that owns the West Vela owed $433 million under the facility. The facility has a final maturity in 2025, with a commercial tranche due for renewal in 2018, and bears interest at a rate equal to LIBOR plus a margin in the range of 1.2% to 3% . If the balloon payment of $86 million on the commercial tranche does not get refinanced to the satisfaction of the remaining lenders after five years, the remaining tranches also become due after five years. Under the terms of the $1,450 million secured credit facility agreement, certain subsidiaries of Seadrill and the entity that owns the West Vela are jointly and severally liable for their own debt and obligations under the facility and the debt and obligations of other borrowers who are also party to such agreement.  These obligations are continuing and extend to amounts payable by any borrower under the facility. The total amount owed by all parties under this facility as of December 31, 2014 is $856 million . The Company has not recognized any amounts that are related to amounts owed under the facility by other borrowers.  Seadrill has provided an indemnity to the Company for any payments or obligations related to this facility that are not related to the West Vela . As at December 31, 2014 , the total net book value of the West Vela pledged as security was $748.5 million . The outstanding balance relating to the West Vela as of December 31, 2014 was $422.9 million .

Rig Financing and Loan Agreements
For each of the Rig Financing Agreements, the Company entered into a loan agreement with Seadrill on a back to back basis at the time of the IPO or in conjunction with the purchase of entities that own and operate drilling units by the Company. These loan agreements with Seadrill are classified as related party transactions. Pursuant to these loan agreements of the related drilling unit, each rig owning subsidiary can make payments of principal and interest to Seadrill or directly to the third party lenders under each facility, corresponding to that proportion of the loan facility. As of December 31, 2014 , Rig Financing Agreements with Seadrill related to the T-15, and T-16 (December 31, 2013: West Capella , West Aquarius , West Vencedor, West Capricorn, T-15, T-16, West Leo and West Sirius). During the twelve months ended December 31, 2014 certain Rig Financing Agreements were repaid by the Company in conjunction with the drawdown of the Senior Secured Credit Facilities as further discussed above.

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The senior secured credit facility relating the West Vencedor was repaid in full by Seadrill in June 2014, and subsequently the related party agreement between the Company and Seadrill was amended to carry on this facility on the same terms, referred to as the West Vencedor Loan Agreement. The West Vencedor Loan Agreement was scheduled to mature in June 2015 and all outstanding amounts thereunder would be due and payable, including a balloon payment of $69.9 million . On April 14, 2015 the Loan Agreement was amended and the maturity date was extended to June 25, 2018 . Please see Note 19 . The West Vencedor Loan Agreement bears a margin of 2.25% , a guarantee fee of 1.4% and a balloon payment of $20.6 million due at maturity in June 2018. As at December 31, 2014 the total net book value of the West Vencedor pledged as security was $182 million . The outstanding balance under the West Vencedor Loan Agreement due to Seadrill was $78.2 million as of December 31, 2014 ( $90.5 million as of December 31, 2013 ).

Under the terms of the external secured credit facility agreements for the T-15 and T-16, certain subsidiaries of Seadrill and the Company are jointly and severally liable for their own debt and obligations under the relevant facility and the debt and obligations of other borrowers who are also party to such agreements. These obligations are continuing and extend to amounts payable by any borrower under the relevant agreement. The total amount owed under the external facility which includes T-15 and T-16 as of December 31, 2014 is $258.4 million ( $293 million as of December 31, 2013 ); the Company retains a related party balance as of December 31, 2014 of $158.8 million ( $178.6 million as of December 31, 2013 ) payable to Seadrill. The Company has not recognized any amounts that are related to amounts owed by Seadrill subsidiaries. Additionally the Company has received an indemnity from Seadrill for any payments or obligations related to these facilities that are not related to the T-15 and T-16. As at December 31, 2014 the total net book value of the T-15 and T-16 pledged as security was $261 million .

$109.5 million Vendor Financing Loan Agreement
In May 2013, the Company borrowed from Seadrill $109.5 million as vendor financing to fund the acquisition of the T-15 . The facility bears interest of LIBOR plus a margin of 5.0% and is due in May 2016 .

$229.9 million Discount Note
In December 2013, as part of the acquisition of the West Sirius , Seadrill Capricorn Holdings LLC issued a zero coupon discount note to Seadrill for $229.9 million . The note was repayable in June 2015 and upon maturity Seadrill Capricorn Holdings LLC was due to pay $238.5 million to Seadrill. The note was repaid in full in February 2014 with proceeds from the Senior Secured Credit Facilities as discussed further above.

$70 million Discount Note
In December 2013, as part of the acquisition of the West Sirius , the Company issued a zero coupon discount note to Seadrill for $70.0 million . The note was repayable in June 2015 and upon maturity the Company was due to pay $72.6 million to Seadrill. The note was repaid in full in February 2014 with proceeds from the Senior Secured Credit Facilities as discussed further above.

$ 100 million Discount Note
In March 2014, as part of the acquisition of the West Auriga, Seadrill Capricorn Holdings LLC issued a zero coupon discount note to Seadrill in an initial amount of $100.0 million . The note was repayable in September 2015 and upon maturity, the Seadrill Capricorn Holdings LLC was due to pay $103.7 million to Seadrill. This note was repaid in June 2014 with proceeds from the Amended Senior Secured Credit Facilities as further discussed above.

Revolving Credit Facility
In October 2012, the Company entered into a $300 million revolving credit facility with Seadrill. The facility is for a term of 5 years and bears interest at a rate of LIBOR plus 5.0%  per annum, with an annual 2% commitment fee on the undrawn balance. During 2014 the Company drew down none of the revolving credit facility and repaid $125.9 million . The outstanding balance at December 31, 2013 was $125.9 million . On March 1, 2014, the revolving credit facility was reduced to $100 million . There were no amounts owed under the facility as of December 31, 2014 .


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Restrictive Covenants
The Company's facilities and related party loan agreements include financial and non-financial covenants applicable to the Company and Seadrill. Financing agreements entered into during the year ended December 31, 2014 are discussed further below. The Company and Seadrill were in compliance with the related covenants as of December 31, 2014 and December 31, 2013 .
In addition to the collateral provided to lenders in the form of pledged assets, the Company's and Seadrill’s credit facility agreements generally contain financial covenants, the primary covenants being as follows:
The Amended Senior Secured Credit Facilities
Our subsidiaries that are borrowers or guarantors of the Amended Senior Secured Credit Facilities are subject to certain financial and restrictive covenants contained in our Amended Senior Secured Credit Facilities including the following:
•
Limitations on the incurrence of indebtedness and issuance of preferred equity;
•
Limitations on the incurrence of liens;
•
Limitations on dividends and other restricted payments;
•
Limitations on investments;
•
Limitations on mergers, consolidation and sales of all or substantially all assets;
•
Limitations on asset sales;
•
Limitations on transactions with affiliates;
•
Limitation on business activities to businesses similar to those now being conducted; and
•
Requirement to maintain a senior secured net leverage ratio of no more than 5.5 to 1.0 ( 5.0 to 1.0 for the fiscal quarter ending March 31, 2015 and thereafter).

In addition, the Amended Senior Secured Credit Facilities contain other customary terms, including the following events of default (subject to customary grace periods), upon the occurrence of which, the loans may be declared (or in some cases automatically become) immediately due and payable:
•
Failure of any borrow of the term loan to pay principal, interest or other amounts owing with respect to the loans under the Amended Senior Secured Credit Facilities;
•
Breach in any material respect of any representation or warranty contained in Amended Senior Secured Credit Facilities documentation;
•
Breach of any covenant contained in Amended Senior Secured Credit Facilities documentation;
•
The occurrence of a payment default under, or acceleration of, any indebtedness aggregating $25 million or more other than the term loan;
•
Failure by our subsidiaries that are borrowers or guarantors of our Amended Senior Secured Credit Facilities to pay or stay any judgment in excess of $25 million ;
•
Repudiation by our subsidiaries that are borrowers or guarantors of our Amended Senior Secured Credit Facilities of any guarantee or collateral documents related to the Amended Senior Secured Credit Facilities;
•
Any guarantee related to the Amended Senior Secured Credit Facilities is found to be unenforceable or invalid or is not otherwise effective;
•
Any of our subsidiaries that are borrowers or guarantors of our Amended Senior Secured Credit Facilities file for bankruptcy or become the subject of an involuntary bankruptcy case or other similar proceeding;
•
The equity interests of any of the company, Seadrill Operating LP or Seadrill Capricorn Holdings LLC is pledged to anyone other than the collateral agent for the term loan; and
•
The occurrence of a change of control.

As of December 31, 2014 , the Company was in compliance with all covenants under the Amended Senior Secured Credit Facilities.

Rig Financing Agreements
The Rig Financing Agreements contain various customary covenants that may limit, among other things, the ability of the borrower to:
•
sell the applicable drilling unit;
•
incur additional indebtedness or guarantee other indebtedness;
•
make investments or acquisitions;
•
pay dividends or make any other distributions if an event of default occurs; or
•
enter into inter-company charter arrangements for the drilling units not contemplated by the applicable Rig Facility.

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The Rig Financing Agreements also contain financial covenants requiring Seadrill Limited to:
•
Aggregated minimum liquidity requirement for Seadrill's consolidated group: to maintain cash and cash equivalents of at least $150 million within the group.
•
Interest coverage ratio: to maintain an EBITDA to interest expense ratio of at least 2.5 :1.
•
Current ratio: to maintain current assets to current liabilities ratio of at least 1 :1. Current assets are defined as book value less minimum liquidity, but including up to 20.0% of shares in listed companies owned 20.0% or more. Current liabilities are defined as book value less the current portion of long term debt.
•
Equity to asset ratio: to maintain total equity to total assets ratio of at least 30.0% . Both equity and total assets are adjusted for the difference between book and market values of drilling units.
•
Leverage ratio: to maintain a ratio of net debt to EBITDA no greater than 4.5 :1. Net debt is calculated as all interest bearing debt less cash and cash equivalents excluding minimum liquidity requirements.

For the purposes of the above tests, EBITDA is defined as the earnings before interest, taxes, depreciation and amortization on a consolidated basis and (ii) the cash distributions from investments, each for the previous period of twelve months as such term is defined in accordance with accounting principles consistently applied. However, in the event that Seadrill or a member of the group acquires rigs or rig owning entities with historical EBITDA available for the rigs' previous ownership, such EBITDA shall be included for covenant purposes in the relevant loan agreement, and if necessary, be annualized to represent a twelve (12) month historical EBITDA. In the event that Seadrill or a member of the group acquires rigs or rig owning companies without historical EBITDA available, Seadrill is entitled to base a twelve month historical EBITDA calculation on future projected EBITDA only subject to any such new rig having (i) a firm charter contract in place at the time of delivery of the rig, with a minimum duration of twelve months, and (ii) a firm charter contract in place at the time of such EBITDA calculation, provided Seadrill provides the agent bank with a detailed calculation of future projected EBITDA. Further, EBITDA shall include any realized gains and/or losses in respect of the disposal of rigs or the disposal of shares in rig owning companies.
Cash distributions from investments are defined as cash received by Seadrill, by way of dividends, in respect of its ownership interests in companies which Seadrill does not control but over which it exerts significant influence.

In addition to financial covenants, our credit facility agreements generally contain covenants which are customary in secured financing in this industry, including operational covenants in relation to the relevant rigs, information undertakings and covenants in relation to corporate existence and conduct of our business.
The Rig Financing Agreements s also identify various events that may trigger mandatory reduction, prepayment, and cancellation of the facility including, among others, the following:
•
total loss or sale of a drilling unit securing a Rig Financing Agreements;
•
cancellation or termination of any existing charter contract or satisfactory drilling contract; and
•
a change of control.

The Rig Financing Agreements contain customary events of default, such as failure to repay principal and interest, and other events of defaults, such as:
•
failure to comply with the financial or insurance covenants;
•
cross-default to other indebtedness held by both Seadrill and its subsidiaries and by the Company;
•
failure by Seadrill or by the Company to remain listed on a stock exchange;
•
the occurrence of a material adverse change;
•
revocation, termination, or modification of any authorization, license, consent, permission, or approval as necessary to conduct operations as contemplated by the applicable Rig Financing Agreement ; and
•
the destruction, abandonment, seizure, appropriation or forfeiture of property of the guarantors or Seadrill and its subsidiaries, or the limitation by seizure, expropriation, nationalization, intervention, restriction or other action by or on behalf of any governmental, regulatory or other authority, of the authority or ability of Seadrill or any subsidiary thereof to conduct its business, which has or reasonably may be expected to have a material adverse effect.
Our secured credit facilities are secured by:
•
guarantees from rig owning subsidiaries (guarantors),
•
a first priority share pledge over all the shares issued by each of the guarantors,
•
a first priority perfected mortgage in all collateral rigs and any deed of covenant thereto, subject to contractual agreed "quiet enjoyment" undertakings with the end-user of the collateral rigs to be entered into if this is required by the relevant end-user pursuant to the relevant contract,
•
a first priority security interest over each of the rig owners' with respect to all earnings and proceeds of insurance, and
•
a first priority security interest in the earnings accounts.

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Our Rig Financing Agreements also contain, as applicable, loan-to-value clauses, which could require the Company, at its option, to post additional collateral or prepay a portion of the outstanding borrowings should the value of the drilling units securing borrowings under each of such agreements decrease below required levels. The market value of the rigs must be at least 135% of the loan outstanding.

If an event of default exists under any of the Rig Financing Agreements , the lenders have the ability to accelerate the maturity of the applicable Rig Financing Agreements and exercise other rights and remedies. In addition, if Seadrill were to default under one of its other financing agreements, it could cause an event of default under each of the Rig Financing Agreements. Further, because the Company's drilling units are pledged as security for Seadrill’s obligations under the Rig Financing Agreements , lenders thereunder could foreclose on the company’s drilling units in the event of a default thereunder. Seadrill’s failure to comply with covenants and other provisions in its existing or future financing agreements could result in cross-defaults under the Company’s existing financing agreements, which would have a material adverse effect on us.

Seadrill was in compliance with the covenants under the Rig Facilities as of December 31, 2012 ,  December 31, 2013 , and December 31, 2014 .

$ 1,450 million Senior Secured Credit Facility
The above facility contains materially the same covenants as those set out for the Rig Financing Agreements above. In addition to the financial covenants relating to Seadrill Limited, each of the borrowers are required to ensure that their individual Debt Service Cover ratio shall not be less than 1.15 :1.
If Seadrill were to default under the facility, or to default under one of its other financing agreements, it could cause an event of default under the facility. Further, because the West Vela is pledged as security under the facility, lenders thereunder could foreclose on the West Vela in the event of a default thereunder.

Seadrill and the Company were in compliance with the covenants under the facility as of   December 31, 2013 , and December 31, 2014 .

Revolving credit facility
The revolving credit facility contains covenants that require us to, among other things:
•
notify Seadrill of the occurrence of any default or event of default; and
•
provide Seadrill with information in respect of its business and financial status as Seadrill may reasonably require, including, but not limited to, copies of the Company's unaudited quarterly financial statements and its audited annual financial statements.

Events of default under the revolving credit facility include, among others, the following:
•
failure to pay any sum payable under the revolving credit facility when due;
•
breach of certain covenants and obligations of the revolving credit facility;
•
a material inaccuracy of any representation or warranty;
•
default under other indebtedness in excess of $25.0 million ;
•
bankruptcy or insolvency events; and
•
commencement of proceedings seeking issuance of a warrant of attachment, execution, distraint or similar process against all or any substantial part of the Company’s assets that results in an entry of an order for any such relief that is not vacated, discharged, stayed or bonded pending appeal within sixty days of the entry thereof.

As of December 31, 2012 , December 31, 2013 and December 31, 2014 , the Company was in compliance with all covenants under the revolving credit facility.


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Note 13 – Other current liabilities
Other current liabilities are comprised of the following:
 
(In US$ millions)
December 31, 2014

 
December 31, 2013

Taxes payable
12.1

 
8.1

Employee and business withheld taxes, social security and vacation payment
19.5

 
9.6

VAT payable
6.1

 
9.8

Deferred mobilization/demobilization revenues short-term
15.9

 
20.3

Unrealized loss on derivatives
56.1

 
—

Accrued expenses
114.3

 
70.4

Other current liabilities
3.4

 
0.5

Total other current liabilities
227.4

 
118.7



Note 14 – Related party transactions
As described in Note 1, prior to the IPO closing date in October 2012, Seadrill charged the Company for the provision of technical and commercial management of the drilling units, as well as a share of Seadrill’s general and administrative costs. In connection with the IPO, the Company entered into certain agreements with affiliates of Seadrill to provide certain management and administrative services, as well as technical and commercial management services. Amounts charged to the Company for the years ended December 31, 2014 , 2013 and 2012 were $158.1 million , $122.5 million and $166.1 million respectively.

Net expenses (income) with Seadrill: 
(In US$ millions)
 
2014
 
2013
 
2012
Management and administrative fees (a) and (b)
 
58.6

 
47.1

 
27.5

Rig operating costs (c)
 
22.4

 
16.5

 
23.7

Insurance premiums (d)
 
20.8

 
21.8

 
17.3

Interest expense (e)
 
38.3

 
87.7

 
65.5

Commitment fee (f)
 
2.2

 
4.5

 
—

Derivative (gains) / losses (e)
 
41.6

 
(49.9
)
 
32.9

Bareboat charters (h)
 
(25.8
)
 
(4.9
)
 
—

Other revenues due to West Polaris  (i)
 
—

 
(5.8
)
 
(19.1
)
Operating expenses for West Polaris  (i)
 
—

 
5.5

 
18.3

Total
 
158.1

 
122.5

 
166.1


Receivables (payables) with Seadrill:
(In US$ millions)
 
December 31, 2014

 
December 31, 2013

Trading balances due from Seadrill and subsidiaries (j)
 
56.7

 
205.9

Trading balances due to Seadrill and subsidiaries (j)
 
(250.0
)
 
(292.1
)
Revolving credit facility with Seadrill (f)
 
—

 
(125.9
)
Rig financing agreements with Seadrill (g)
 
(158.8
)
 
(1,825.2
)
Loan agreement with Seadrill (g)
 
(78.2
)
 
—

Vendor financing loan agreement with Seadrill (k)
 
(109.5
)
 
(109.5
)
Discount notes with Seadrill (l)
 
—

 
(299.9
)
Deferred and contingent consideration to related party - short term portion (m)
 
(25.8
)
 
—

Deferred and contingent consideration to related party - long term portion (m)
 
(111.2
)
 
—

Derivatives with Seadrill - interest rate swaps (n)
 
6.0

 
42.4

 
(a)
Management and administrative service agreements – In connection with the IPO, OPCO entered into a management and administrative services agreement with Seadrill Management a wholly owned subsidiary of Seadrill, pursuant to which Seadrill Management provides the Company certain management and administrative services. The services provided by Seadrill Management are charged at cost plus management fee equal to 5% of Seadrill Management’s costs and expenses incurred in connection with providing these services. The agreement has an initial term for 5 years and can be terminated by provided 90 days written notice.
(b)
Technical and administrative service agreement – In connection with the IPO, OPCO entered into certain advisory, technical and/or administrative services agreements with subsidiaries of Seadrill. The services provided by Seadrill’s subsidiaries are charged at cost plus service fee equal to approximately 5% of Seadrill’s costs and expenses incurred in connection with providing these services.
(c)
Rig operating costs – relates to rig operating costs charged by Seadrill in relation to costs incurred on behalf of the West Vencedor .
(d)
Insurance premiums – the Company’s drilling units are insured by a Seadrill company and the insurance premiums incurred are recharged to the Company.
(e)
Interest expense and loss on derivatives – consists of interest expense incurred on Rig Financing Agreements, Loan Agreements, discount notes and the $109.5 million T-15 Vendor Financing Loan as described within. Prior to entering the Rig Financing Agreements these costs were allocated to the Company from Seadrill based on the Company’s debt as a percentage of Seadrill’s overall debt. Upon entering the Rig Financing Agreements with Seadrill, the costs and expenses have been incurred by the Company.
(f)
$100 million revolving credit facility – In October 2012 the Company entered into a $300 million revolving credit facility with Seadrill. The facility is for a term of five years and bears interest at a rate of LIBOR plus 5%  per annum, with an annual 2% commitment fee on the undrawn balance. On March 1, 2014, the revolving credit facility was amended to reduce the maximum borrowing limit from $300 million

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to $100 million . During 2014 the Company drew down $0.0 million on the revolving credit facility and repaid $125.9 million . As at December 31, 2014 the outstanding balance was nil .
(g)
Rig Financing Agreements and Loan Agreements – See note 12 for details of the Rig Financing Agreements and Loan Agreements. Under the agreements each rig owning subsidiary makes payments of principal and interest directly to the lenders under each Rig Financing Agreement, at Seadrill’s direction and on its behalf, corresponding to payments of principal and interest due under each Rig Financing Agreement that are allocable to each rig.
The Loan Agreement relates to the financing of the West Vencedor , which was previously classified as a Rig Financing Agreement until June 2014 when Seadrill repaid the underlying senior secured loan, and the related party agreement between the Company and Seadrill was amended to carry on this facility on the same terms. Please refer to Note 12 for further information.
(h)
Bareboat charters – In connection with the transfer of the West Aquarius operations to Canada, the West Aquarius drilling contract was assigned to Seadrill Canada Ltd., a wholly owned subsidiary of OPCO, necessitating certain changes to the related party contractual arrangements relating to the West Aquarius . Seadrill China Operations Ltd, the owner of the West Aquarius and a wholly-owned subsidiary of OPCO, had previously entered into a bareboat charter arrangement with Seadrill Offshore AS, a wholly-owned subsidiary of Seadrill, providing Seadrill Offshore AS with the right to use the West Aquarius . In October 2012, this bareboat charter arrangement was replaced with a new bareboat charter between Seadrill China Operations Ltd and Seadrill Offshore AS, and at the same time, Seadrill Offshore AS entered into a bareboat charter arrangement providing Seadrill Canada Ltd. with the right to use the West Aquarius in order to perform its obligations under the drilling contract described above. For year ended December 31, 2014 the net effect to OPCO of the bareboat charters was net income of $25.8 million ( 2013 : net income of $(4.9) million ).
(i)
Other revenues and expenses - During the year ended December 31, 2014 the Company earned no other revenues. During the year ended December 31, 2013 the Company earned other revenues within the Company's Nigerian service company of $5.8 million , relating to certain services, including the provision of onshore and offshore personnel, which the Company provided to Seadrill’s West Polaris drilling rig that was operating in Nigeria during that period. Related operating expenses in the year ended December 31, 2014 were nil ( 2013 : $5.5 million ).
(j)
Trading balances – Receivables and payables with Seadrill and its subsidiaries are comprised primarily of unpaid management fees, advisory and administrative services, as well as, accrued interest. In addition, certain receivables and payables arise when the Company pays an invoice on behalf of a related party and vice versa. Receivables and payables are generally settled quarterly in arrears. Trading balances to Seadrill and its subsidiaries are unsecured, generally bear interest at a rate equal to LIBOR plus approximately 4% per annum, and are intended to be settled in the ordinary course of business.
(k)
$109.5 million Vendor financing loan - On May 17, 2013, the Company borrowed from Seadrill $109.5 million as vendor financing to fund the acquisition of the T-15 . The loan bears interest at a rate of LIBOR plus a margin of 5% and matures in May 2016.

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(l)
Discount loan notes:
•
$229.9 million discount note - On December 13, 2013, as part of the acquisition of the West Sirius , Seadrill Capricorn Holdings issued a zero coupon discount note from Seadrill for $229.9 million . The note was repayable in June 2015 and upon maturity, the Company was due to pay $238.5 million to Seadrill. This note was repaid in full in February 2014 with proceeds from the Senior Secured Credit Facilities.
•
$70.0 million discount note - On December 13, 2013, as part of the acquisition of the West Sirius , the Company issued a zero coupon discount note from Seadrill for $70.0 million . The note was repayable in June 2015 and upon maturity, the Company was due to pay $72.6 million to Seadrill.This note was repaid in full in February 2014 with proceeds from the Senior Secured Credit Facilities.
•
$100.0 million discount note - On March 21, 2014, as part of the acquisition of the West Auriga , Seadrill Capricorn Holdings issued a zero coupon discount note to Seadrill in an initial amount of $100.0 million . The note was repayable in September 2015 and upon maturity, the Company was due to pay $103.7 million to Seadrill. This note was repaid in June 2014 with proceeds from the Senior Secured Credit Facilities.
(m)
Deferred consideration to related party - On the acquisition of the West Vela the Company recognized a long term deferred consideration balance of $61.7 million and a long term contingent consideration balance of $49.5 million . The short term portion of these are $12.0 million and $13.8 million respectively, which are presented within Other related party payables on the Balance Sheet. Refer to Note 3 for more information.
(n)
Derivatives with Seadrill - Interest rate swaps - As of December 31, 2014 , the Company was party to interest rate swap agreements with Seadrill for a combined outstanding principal amount of approximately $690.1 million at rates between 1.10%  per annum and 1.93%  per annum. The swap agreements mature between July 2018 and December 2020 . The net loss recognized on the Company’s interest rate swaps for the year ended December 31, 2014, was $41.6 million (year ended December 31, 2013 : gain of $49.9 million ). Refer to Note 15 for further information.

Amendment to Contribution and Sale Agreement
On June 30, 2013, the Company and certain of its subsidiaries entered into an agreement with Seadrill and certain of its subsidiaries to amend the Contribution and Sale Agreement that was entered into with Seadrill at the time of the IPO . This amendment was made in order to convert certain related party payables to equity. Pursuant to that amendment, as of June 30, 2013, the Company's accounts and those of Seadrill were adjusted to reflect a net capital contribution in the amount of $20.0 million by Seadrill to Seadrill Operating LP and a net capital contribution in the amount of $20.5 million by Seadrill to Seadrill Capricorn Holdings LLC. No additional units were issued to Seadrill in connection with either of these contributions.

T-15 Acquisition
On May 17, 2013, pursuant to a Purchase and Sale Agreement, dated May 7, 2013, between Seadrill Limited and Seadrill Partners Operating LLC, Seadrill Partners Operating LLC acquired from Seadrill a 100% ownership interest in the entities that own and operate the tender rig T-15 . This transaction was deemed to be a reorganization of entities under common control. As a result, the Company’s financial statements have been retroactively adjusted in accordance with US GAAP as if Seadrill Partners had acquired the entities that own and operate the T-15 for the entire period that the entities have been under the common control of Seadrill Limited. Refer to Note 3 for more information.

T-16 Acquisition
On October 18, 2013, pursuant to a Purchase and Sale Agreement, dated October 11, 2013, by and among Seadrill Limited, Seadrill Partners LLC and Seadrill Partners Operating LLC, acquired from Seadrill a 100% ownership interest in the entity that owns the tender rig  T-16 . This transaction was deemed to be a reorganization of entities under common control. As a result, the Company’s financial statements have been retroactively adjusted in accordance with US GAAP as if Seadrill Partners had acquired the entity that owns the T-16 for the entire period that the entities have been under the common control of Seadrill Limited. As consideration for the purchase, the Company issued 3,310,622 common units to Seadrill in a private placement transaction. Refer to Note 3 for more information.

West Leo and West Sirius Acquisition
On December 13, 2013, the Company completed the acquisition of the companies that own and operate the West Sirius and West Leo . The West Sirius was acquired by Seadrill Capricorn Holdings LLC ( 51% owned by the Company) and the West Leo was acquired by Seadrill Operating LP ( 30% owned by the Company). These transactions were deemed to be a reorganization of entities under common control. As a result, the Company’s financial statements have been retroactively adjusted in accordance with US GAAP as if Seadrill Partners had acquired the entities that own and operated the West Sirius and West Leo for the entire period that the entities have been under the common control of Seadrill Limited. In order to finance the acquisitions, the Company issued 11,200,000 common units to the public and 3,394,916 common units to Seadrill, and a further 1,680,000 units to the underwriters, issued in connection with the exercise of the underwriters’ option to purchase additional common units. Refer to Note 3 for more information.


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West Auriga Acquisition
In March 2014, pursuant to a Contribution, Purchase and Sale Agreement, dated as of March 11, 2014, by and among the Company, Seadrill, Seadrill Capricorn Holdings LLC and Seadrill Americas Inc., Seadrill Capricorn Holdings LLC acquired the entities that own and operate the drillship West Auriga from Seadrill, which has been accounted for as a business combination. Seadrill has agreed to indemnify the Company, Seadrill Capricorn Holdings LLC and Seadrill Auriga Hungary Kft. against any liability they may incur under the credit facility financing the West Auriga in respect of debt that is related to other rigs owned by Seadrill that are financed under the same credit facility as the West Auriga . In order to fund the Company’s portion of the purchase price of the West Auriga acquisition, on March 17, 2014, the Company sold an aggregate of (i) 11,960,000 common units to the public at a price of $30.60 per unit and (ii) 1,633,987 common units to Seadrill at a price of $30.60 per unit, pursuant to a Unit Purchase Agreement, dated March 12, 2014, between the Company and Seadrill. Refer to Note 3 for more information.

Purchase of additional limited partner interest in Seadrill Operating LP
On July 21, 2014, the Company completed the purchase of an additional 28% limited partner interest in Seadrill Operating LP, an existing controlled subsidiary of the Company, from Seadrill for $372.8 million , pursuant to a Limited Partner Interest Purchase Agreement, dated as of July 17, 2014, between the Company and Seadrill. As a result of this acquisition, the Company’s ownership interest in Seadrill Operating LP increased from 30% to 58% .

West Vela Acquisition
On November 4, 2014, pursuant to a Contribution, Purchase and Sale Agreement, dated as of November 4, 2014, by and among Seadrill, the Company, Seadrill Capricorn Holdings LLC and Seadrill Americas Inc., Seadrill Capricorn Holdings LLC acquired the entities that own and operate the drillship West Vela from Seadrill which has been accounted for as a business combination. Seadrill has agreed to indemnify the Company, Seadrill Capricorn Holdings LLC and Seadrill Vela Hungary Kft. against any liability they may incur under the credit facility financing the West Vela in respect of debt that is related to other rigs owned by Seadrill that are financed under the same credit facility as the West Vela . Refer to Note 3 for more information.

Other indemnifications and guarantees
Tax indemnifications
Under the Omnibus Agreement and Sale and Purchase agreements relating to acquisitions from Seadrill subsequent to IPO, Seadrill has agreed to indemnify the Company against any tax liabilities arising from the operation of the assets contributed or sold to the Company prior to the time they were contributed or sold.
Environmental and other indemnifications
Under the Omnibus Agreement and Sale and Purchase agreements relating to acquisitions from Seadrill subsequent to IPO, Seadrill has agreed to indemnify the Company for a period of five years against certain environmental and toxic tort liabilities with respect to the assets that Seadrill contributed or sold to the Company to the extent arising prior to the time they were contributed or sold. However, claims are subject to a deductible of $0.5 million and an aggregate cap of $10 million .
In addition, pursuant to the Omnibus Agreement, Seadrill agreed to indemnify the Company for any defects in title to the assets contributed or sold to the Company and any failure to obtain, prior to October 14, 2012, certain consents and permits necessary to conduct the Company’s business, which liabilities arise within three years after the closing of the IPO on October 24, 2012 .

Note 15 – Risk management and financial instruments
The Company is exposed to various market risks, including interest rate, foreign currency exchange and concentration of credit risks. The Company may enter into a variety of derivative instruments and contracts to maintain the desired level of exposure arising from these risks.
Interest rate risk
The Company’s exposure to interest rate risk relates mainly to its floating interest rate debt and balances of surplus funds placed with financial institutions. This exposure is managed through the use of interest rate swaps and other derivative arrangements. The Company’s objective is to obtain the most favorable interest rate borrowings available without increasing its foreign currency exposure. Surplus funds are used to repay revolving credit tranches, or placed in accounts and deposits with reputable financial institutions in order to maximize returns, whilst providing the Company with flexibility to meet all requirements for working capital and capital investments. The extent to which the Company utilizes interest rate swaps derivatives to manage its interest rate risk is determined by the net debt exposure and its views on future interest rates.
Interest rate swap agreements
For the period up to the date of the IPO, and also for the periods up to the date of acquisition for the dropdown companies, the Company was allocated a proportion of Seadrill’s loss on interest rate swaps, based on its share of floating interest rate debt. For the period after the IPO, the Company entered into its own interest rate swap agreements with Seadrill.
At December 31, 2014 , the Company had interest rate swap agreements with Seadrill for an outstanding principal of $690.1 million ( December 31, 2013 : $2,067.8 million ) swapping floating rate for an average fixed rate of 1.23% per annum. The combined total fair value of the interest rate outstanding as at December 31, 2014 amounted to a gross and net asset of $6.0 million ( December 31, 2013 : gross and net asset of $42.4 million ). This is classified within related party receivables in the Company's balance sheet as of December 31, 2014 ( December 31, 2013 : within related

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party receivables ). These agreements do not qualify for hedge accounting, and accordingly any changes in the fair values of the swap agreements are included in the consolidated statement of operations under Gain/(loss) on derivative financial instruments. The loss recognized for 2014 was $41.6 million ( 2013 : gain of $49.9 million , 2012 loss of $32.9 million ).
At December 31, 2014 , the Company had interest rate swap agreements with external parties for a combined outstanding principal of $2,881.7 million , ( December 31, 2013 : $ 0 million ) swapping floating rate for an average fixed rate of 2.49%  per annum. The overall effect of these swaps is to fix the interest rate on $2,881.7 million of floating rate debt at a weighted average interest rate of 1.23%  per annum. The combined total fair value of the interest rate outstanding as at December 31, 2014 amounted to a gross and net liability of $56.1 million ( December 31, 2013 : nil ). This is classified within other current liabilities in the Company's balance sheet as of December 31, 2014 . These agreements do not qualify for hedge accounting, and accordingly any changes in the fair values of the swap agreements are included in the consolidated statement of operations under Gain/(loss) on derivative financial instruments. The net loss recognized for 2014 was $83.3 million ( 2013 : nil , 2012 : nil ).

The Company’s interest rate swap agreements as at December 31, 2014 , were as follows:
 
Outstanding principal as at December 31, 2014
 
Receive rate
Pay rate
Expiry of contract
(In US$ millions)
 
 
 
 
431.3

(1), (2)
3 month LIBOR
1.10%
July 2, 2018
100.0

(2)
3 month LIBOR
1.36%
October 29, 2019
80.4

(1), (2)
3 month LIBOR
1.11%
June 19, 2020
78.4

(1), (2)
3 month LIBOR
1.93%
December 21, 2020
2,881.7

(1)
3 month LIBOR
 2.45% to 2.52%
February 21, 2021

(1) The outstanding principal of these amortizing swaps falls with each capital repayment of the underlying loans.
(2) Related party interest rate swap agreements.

The counterparties to the above interest rate swap agreements are Seadrill and various banks. The Company believes the counterparties to be creditworthy.

Foreign currency risk
The Company and all of its subsidiaries use the U.S. Dollar as their functional currency because the majority of their revenues and expenses are denominated in U.S. Dollars. Accordingly, the Company's reporting currency is U.S. Dollars. The Company does, however, earn revenue and incur expenses in Canadian Dollars, Euros and Nigerian Naira and there is a risk that currency fluctuations could have an adverse effect on the value of the Company's cash flows.

Concentration of credit risk
The Company has financial assets which expose the Company to credit risk arising from possible default by a counterparty. The Company considers the counterparties to be creditworthy and does not expect any significant loss to result from non-performance by such counterparties. The Company in the normal course of business does not demand collateral from its counterparties.


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Fair Values
The carrying value and estimated fair value of the Company’s financial assets and liabilities as of December 31, 2014 and December 31, 2013 are as follows:
 
December 31, 2014
 
December 31, 2013
(In US$ millions)
Fair Value
 
Carrying Value
 
Fair Value
 
Carrying Value
Cash and cash equivalents
242.7

 
242.7

 
89.7

 
89.7

Revolving credit facility with Seadrill
—

 
—

 
125.9

 
125.9

Current portion of long-term debt
76.5

 
76.5

 
—

 
—

Current portion of long-term debt to related party
40.4

 
40.4

 
108.3

 
108.3

Long-term debt
3,227.4

 
3,227.4

 
—

 
—

Long-term portion of debt to related party
306.1

 
306.1

 
1,826.4

 
1,826.4

Related party loan notes
—

 
—

 
299.9

 
299.9

Related party deferred and contingent consideration
137.0

 
137.0

 
—

 
—

The carrying value of cash and cash equivalents, which are highly liquid, is a reasonable estimate of fair value and categorized at level 1 on the fair value measurement hierarchy.
The fair value of the $100 million revolving credit facility with Seadrill is considered to be equal to the carrying value, as the facility bears an interest of LIBOR plus a margin of 5.0% , with a commitment fee of 40% of the margin, which is concluded to be on arm's length terms. This is therefore categorized at level 2 on the fair value measurement hierarchy.

The fair value of the current and long-term portion of floating rate debt (consisting of external debt, rig financing agreements with Seadrill and vendor financing agreements with Seadrill) are estimated to be equal to the carrying value since they bear variable interest rates, which are reset on a quarterly basis, except for the T-15 and T-16 Rig Facilities which are reset on a semi-annual basis. This debt is not freely tradable and cannot be purchased by the Company at prices other than the outstanding balance plus accrued interest. This is categorized at level 2 on the fair value measurement hierarchy.

The fair value of the related party discount notes is estimated to be equal to the carrying value. This debt was not freely tradable and could not be purchased by the Company at prices other than specified in the loan note agreements. The loan notes however were redeemable at a values that are concluded to be on arm's length terms, with an implicit rate of interest of 3.735% . This is categorized at level 2 on the fair value measurement hierarchy.

The fair value of the related party deferred and contingent consideration relating to the purchase of the West Vela is estimated to be equal to the carrying value since the liabilities have been calculated using the estimated future cash outflows discounted back to the present value. These liabilities are considered to be on arm's length terms. This is categorized at level 2 on the fair value measurement hierarchy.
Financial instruments that are measured at fair value on a recurring basis:
 
 
Fair value measurements
at reporting date using
 
Total fair value as at December 31, 2014
Quoted Prices
in Active
Markets for
Identical Assets
Significant
Other
Observable
Inputs
Significant
Unobservable
Inputs
(In US$ millions)
 
(Level 1)
(Level 2)
(Level 3)
Current assets:
 
 
 
 
Derivative instruments - Interest rate swap contracts (related party)
6.0

—

6.0

—

Total assets
6.0

—

6.0

—

 
 
 
 
 
Current liabilities:
 
 
 
 
Derivative instruments - Interest rate swap contracts
(56.1
)
—

(56.1
)
—

Total liabilities
(56.1
)
—

(56.1
)
—


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Fair value measurements
at reporting date using
 
Total fair value as at December 31, 2013
Quoted Prices
in Active
Markets for
Identical Assets
Significant
Other
Observable
Inputs
Significant
Unobservable
Inputs
(In US$ millions)
 
(Level 1)
(Level 2)
(Level 3)
Current liabilities:
 
 
 
 
Derivative instruments - Interest rate swap contracts (related party)
(42.4
)
—

(42.4
)
—

Total liabilities
(42.4
)
—

(42.4
)
—


US GAAP emphasizes that fair value is a market-based measurement, not an entity-specific measurement, and should be determined based on the assumptions that market participants would use in pricing the asset or liability. As a basis for considering market participant assumptions in fair value measurements, US GAAP establishes a fair value hierarchy that distinguishes between market participant assumptions based on market data obtained from sources independent of the reporting entity (observable inputs that are classified within levels one and two of the hierarchy) and the reporting entity’s own assumptions about market participant assumptions (unobservable inputs classified within level three of the hierarchy).
Level one input utilizes unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access. Level two inputs are inputs other than quoted prices included in level one that are observable for the asset or liability, either directly or indirectly. Level two inputs may include quoted prices for similar assets and liabilities in active markets, as well as inputs that are observable for the asset or liability, other than quoted prices, such as interest rates, foreign exchange rates and yield curves that are observable at commonly quoted intervals. Level three inputs are unobservable inputs for the asset or liability, which are typically based on an entity’s own assumptions, as there is little, if any, related market activity. In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the asset or liability.
The fair values of interest rate swaps are calculated using well-established independent valuation techniques applied to contracted cash flows and LIBOR interest rates as of December 31, 2014 and December 31, 2013 .

Retained risk
Physical Damage Insurance
Seadrill has purchased hull and machinery insurance to cover for physical damage to its drilling units and those of the Company and charges the Company for the associated cost for its respective rigs. The Company retains the risk for the deductibles relating to physical damage insurance on the Company’s fleet. The deductible is currently a maximum of $5 million per occurrence.
The Company has elected to place an insurance policy for physical damage to rigs and equipment caused by named windstorms in the U.S. Gulf of Mexico with a Combined Single Limit of $100 million in the annual aggregate, which includes loss of hire. The policy covers the 2014 windstorm season from April 1, 2014 to May 1, 2015 .The Company is negotiating the renewal of the insurance policy for physical damage to rigs and equipment caused by named windstorms in the U.S Gulf of Mexico with a Combined Single Limit of $100 million in the annual aggregate, which includes loss of hire. If renewed, the policy will cover the 2015 windstorm season from May 1, 2015 to March 31, 2016 .

Loss of Hire Insurance
With the exception of T-15 and T-16 , Seadrill purchases insurance to cover for loss of revenue in the event of extensive downtime caused by physical damage to its drilling units, where such damage is covered under the Seadrill’s physical damage insurance, and charges the Company for the cost related to the Company’s fleet.
The loss of hire insurance has a deductible period of 60 days after the occurrence of physical damage. Thereafter, insurance policies according to which OPCO is compensated for loss of revenue are limited to 290 days per event and aggregated per year. The daily indemnity is approximately 75% of the contracted dayrate. OPCO retains the risk related to loss of hire during the initial 60 day period, as well as any loss of hire exceeding the number of days permitted under insurance policy.

Protection and Indemnity Insurance
Seadrill purchases Protection and Indemnity insurance and Excess liability insurance for personal injury liability for crew claims, non-crew claims and third-party property damage including oil pollution from the drilling units to cover claims of up to $250 million per event and in the aggregate for the West Vencedor, T-15 and T-16, up to $400 million per event and in the aggregate for the West Aquarius, West Capella and West Leo , up to $750 million per event and in the aggregate for each of the West Capricorn,West Sirius, West Auriga and West Vela.

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OPCO retains the risk for the deductible of up to $0.5 million per occurrence relating to protection and indemnity insurance.

Concentration of Risk
There is a concentration of credit risk with respect to cash and cash equivalents as most of the amounts are deposited with Nordea Bank Finland Plc and Danske Bank A/S. The Company considers these risks to be remote.
In the years ended December 31, 2014 , 2013 , and 2012 the Company's contract revenues were attributable to the following customers:
 
2014
 
2013
 
2012
BP
41.5
%
 
35.0
%
 
28.9
%
ExxonMobil *
26.4
%
 
14.5
%
 
23.6
%
Tullow
17.4
%
 
18.8
%
 
13.9
%
Chevron
14.7
%
 
12.1
%
 
9.4
%
Total
—
%
 
19.6
%
 
24.2
%
Total
100.0
%
 
100.0
%
 
100.0
%
* During 2014 and 2013 the ExxonMobil drilling contract was assigned to Hibernia Management and Development Co. Ltd and Statoil Canada Ltd.
Note 16 – Commitments and contingencies
Legal Proceedings
From time to time we are a party, as plaintiff or defendant, to lawsuits in various jurisdictions in the ordinary course of business or in connection with our acquisition or disposal activities. We believe that the resolution of such claims will not have a material impact individually or in the aggregate on our operations or financial condition. Our best estimate of the outcome of the various disputes has been reflected in our financial statements as of December 31, 2014 .

Pledged Assets
The book value of assets pledged under mortgage and overdraft facilities at December 31, 2014 and 2013 was $4,953.4 million , and $3,442.6 million , respectively.

Purchase Commitments
At December 31, 2014 and 2013 the Company had no contractual purchase commitments.

Guarantees
At December 31, 2014 the Company has issued guarantees in favor of third parties as follows, which is the maximum potential future payment for each type of guarantee:
(in US$ millions)
December 31, 2014
 
December 31, 2013
Guarantees to customers of the Company's own performance
370.0

 
530.0

Guarantee in favor of banks
515.5

 
103.4

Total
885.5

 
633.4



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Note 17 – Earnings per unit and cash distributions
The calculations of basic and diluted earnings per unit are presented below. Earnings per unit information has not been presented for any period prior to the Company’s IPO as the information is not comparable due to the change in the Company’s structure and the basis of preparation of the financial statements as described in Note 1.
 
(in US $ millions, except per unit data)
Year ended December 31, 2014
 
Year ended December 31, 2013
Net income attributable to:
 
 
 
Common unitholders
$
109.2

 
$
56.4

Subordinated unitholders
29.0

 
30.2

Seadrill member interest (1)
—

 
57.8

Net income attributable to Seadrill Partners LLC owners
$
138.2

 
$
144.4

 
 
 
 
Weighted average units outstanding (basic and diluted) (in thousands):
 
 
 
Common unitholders
62,374

 
26,266

Subordinated unitholders
16,543

 
16,543

 
 
 
 
Earnings per unit (basic and diluted):
 
 
 
Common unitholders
$
1.75

 
$
2.15

Subordinated unitholders
$
1.75

 
$
1.83

 
 
 
 
Cash distributions declared and paid in the period per unit (2)
$
1.6025

 
$
1.2325

 
 
 
 
Subsequent event: Cash distributions declared and paid relating to the period per unit (3) :
$
0.5675

 
$
0.4450

(1)
Pre-acquisition net income from entities acquired from Seadrill in common control transactions during 2013 (See Note 3), has been allocated to the Seadrill member interest. The Seadrill member interest, and its rights to the Incentive distribution rights, is owned by the predecessor owner of acquired entities, Seadrill Limited. Included within the amount allocated to the Seadrill member interest in 2013 is $0.5 million allocated to the Incentive distribution rights.
(2)
Refers to the cash distributions relating to the period declared and paid during the year.
(3)
Refers to the cash distribution relating to the period, declared and paid subsequent to the year-end.
Earnings per unit is calculated using the two-class method where undistributed earnings are allocated to the various member interests. The net income attributable to the common and subordinated unitholders and the holders of the incentive distribution rights is calculated as if all net income was distributed according to the terms of the distribution guidelines set forth in the First Amended and Restated Operating Agreement of the Company (the “Operating Agreement”), regardless of whether those earnings could be distributed. The Operating Agreement does not provide for the distribution of net income; rather, it provides for the distribution of available cash, which is a contractually defined term that generally means all cash on hand at the end of the quarter after establishment of cash reserves determined by the Company’s board of directors to provide for the proper conduct of the Company’s business including reserves for maintenance and replacement capital expenditure and anticipated credit needs. Therefore the earnings per unit is not indicative of potential cash distributions that may be made based on historic or future earnings. Unlike available cash, net income is affected by non-cash items, such as depreciation and amortization, unrealized gains or losses on non-designated derivative instruments and foreign currency translation gains (losses).
Under the Operating Agreement, during the subordination period, the common units will have the right to receive distributions of available cash from operating surplus in an amount equal to the minimum quarterly distribution of $0.3875 per unit per quarter, plus any arrearages in the payment of minimum quarterly distribution on the common units from prior quarters, before any distributions of available cash from operating surplus may be made on the subordinated units.
The amount of the minimum quarterly distribution is $0.3875 per unit or $1.55 per unit on an annualized basis and is made in the following manner, during the subordination period:
•
First, to the common unitholders, pro-rata, until the Company distributes for each outstanding common unit an amount equal to the minimum quarterly distribution for that quarter;
•
Second, to the common unitholders, pro-rata, until the Company distributes for each outstanding common an amount equal to any arrearages in payment of the minimum quarterly distribution on the common units for prior quarters during the subordination period; and
•
Third, to the subordinated units, pro-rata, the Company distributes for each subordinated unit an amount equal to the minimum quarterly distribution for that quarter;

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In addition, Seadrill Member currently holds all of the incentive distribution rights in the Company. Incentive distribution rights represent the right to receive an increasing percentage of the quarterly distributions of cash available from operating surplus after the minimum quarterly distribution and target distribution levels have been achieved.
If for any quarter:
•
The Company has distributed available cash from operating surplus to the common and subordinated unitholders in an amount equal to the minimum quarterly distribution; and
•
The Company has distributed available cash from operating surplus on outstanding common units in an amount necessary to eliminate any cumulative arrearages in payment of the minimum quarterly distribution;
then, the Company will distribute any additional available cash from operating surplus for that quarter among the unitholders in the following manner:
•
first, 100.0% to all unitholders, until each unitholder receives a total of $0.4456 per unit for that quarter (the “first target distribution”);
•
second, 85% to all unitholders, pro rata, and 15.0% to the holders of the incentive distribution rights, pro rata, until each unitholder receives a total of $0.4844 per unit for that quarter (the “second target distribution”);
•
third, 75.0% to all unitholders, pro rata, and 25.0% to the holders of the incentive distribution rights, pro rata, until each unitholder receives a total of $0.5813 per unit for that quarter (the “third target distribution”); and
•
thereafter, 50.0% to all unitholders, and 50.0% to the holders of the incentive distribution rights, pro rata.
The percentage interests set forth above assumes that the Company does not issue additional classes of equity securities.

Note 18 - Supplementary cash flow information

The table below summarizes the non-cash investing and financing activities relating to the periods presented:

(In US$ millions)
2014
 
2013
 
2012
Purchase of West Auriga, issuance of loan note to related party (1)
100.0

 
—

 
—

Purchase of West Vela, deferred consideration payable to related party (2)
73.7

 
—

 
—

Purchase of West Vela, contingent consideration payable to related party (2)
65.7

 
—

 
—

Capital injection due to forgiveness of related party payables
—

 
40.5

 
—


1.
The purchase of the West Auriga was financed by the issuance of a discount loan note: refer to Note 3 - Business acquisitions
2.
The purchase of the West Vela was financed partly by deferred and contingent consideration: refer to Note 3 - Business acquisitions

Note 19 – Subsequent Events

Distribution declared

On January 27, 2015 , the Company declared a distribution for the fourth quarter of 2014 of $0.5675 per unit, which was paid on February 13, 2015 to unitholders of record on February 6, 2015 .

Amendment and extension of the West Vencedor loan agreement
On April 14, 2015 the related party loan agreement with Seadrill for the West Vencedor was amended with a new maturity date of June 25, 2018 . Prior to the extension and amendment of the loan agreement for the West Vencedor the remaining balance of the loan was due in 2015 . Under the extension associated with the amendment, the loan will bear interest at a rate equal to LIBOR plus a margin of 2.25% , and provide for a guarantee fee of 1.4% and a balloon payment of $20.6 million amount due at maturity. Repayments of principal of $4.1 million will be due quarterly.
Subsequent to the amendment the portion of the loan due within 12 months of the balance sheet date is equal to $20.6 million while the long-term portion is equal to $57.6 million . Accordingly the Company's balance sheet as at December 31, 2014 has been conformed to reflect this revised profile.
The extension of the maturity date of the loan was granted in return for additional security which includes pledging the West Vencedor , as well as the assignment of earnings and insurances.


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Notice of termination for the West Sirius contract and extension of the West Capricorn contract
On March 30, 2015 the Company received a notice of termination from BP Exploration & Production Inc. ("BP") for the contract for the West Sirius which will be effective after having completed the current well and demobilization, which the Company estimates to be by early May 2015. 
Commencing April 1, 2015 , the dayrate and term for the West Sirius and West Capricorn contracts were swapped. The West Sirius dayrate was decreased by $40,000 per day and the term was decreased by two years to expire in July 2017 while the dayrate for the West Capricorn was increased by $40,000 per day and the term was extended by two years to expire in July 2019 . Amortized payments from BP for the West Capricorn for items such as mobilization and upgrades will continue on the original schedule ending in July 2017 .  In accordance with the cancellation provisions in the West Sirius contract, the Company will receive payments of up to $297,000 per day from BP over the remaining contract term, now expiring in July 2017 .





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Table of Contents

SIGNATURES
The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this Annual Report on its behalf.
 
 
 
SEADRILL PARTNERS LLC
(Registrant)
 
 
 
 
Date: April 21, 2015
 
 
 
 
 
 
 
 
 
By:
/s/ Graham Robjohns
 
 
Name:
Graham Robjohns
 
 
Title:
Chief Executive Officer of Seadrill Partners LLC
(Principal Executive Officer of Seadrill Partners LLC)




EXHIBIT 1.2.1*



Execution Copy

AMENDMENT NO. 1 TO FIRST AMENDED AND RESTATED operating AGREEMENT OF seadrill partners llc

THIS AMENDMENT NO. 1, dated as of February 23, 2015 (this “ Amendment ”), to the First Amended and Restated Operating Agreement of Seadrill Partners LLC, a Marshall Islands limited liability company (the “ Company ”), dated as of October 24, 2012 (the “ LLC Agreement ”), is entered into at the direction of the Board of Directors of the Company pursuant to authority granted to it in Section 13.1(d)(i) of the LLC Agreement and is executed by a duly authorized person of the Company. Capitalized terms used but not defined herein are used as defined in the LLC Agreement.

WHEREAS , Section 13.1(d)(i) of the LLC Agreement provides that the Board of Directors of the Company, without the approval of the Non-Seadrill Members or the Seadrill Member, may amend any provision of the LLC Agreement to reflect a change that the Board of Directors determines does not adversely affect the Non-Seadrill Members (including any particular class of Membership Interests as compared to other classes of Membership Interests) in any material respect; and

WHEREAS , acting pursuant to the power and authority granted to it under Section 13.1(d)(i) of the LLC Agreement, the Board of Directors has determined that the following amendment to the LLC Agreement does not adversely affect the Non-Seadrill Members (including any particular class of Membership Interests) in any material respect.

NOW, THEREFORE , it is agreed as follows:

1.
Amendment to the LLC Agreement . The LLC Agreement is hereby amended as follows:

1.1
The following sentence shall be inserted at the end of Section 11.5 of the LLC Agreement:

“For the avoidance of doubt, the death, retirement, resignation, expulsion, bankruptcy or dissolution of a Non-Seadrill Member or the occurrence of any other event which terminates the continued membership of a Non-Seadrill Member in the Company shall not cause a dissolution of the Company, and the Company shall continue after any such event.”

2.      Miscellaneous .

2.1
This Amendment shall be effective as of October 24, 2012. All other provisions of the LLC Agreement are hereby ratified and confirmed in all respects.

2.2
This Amendment shall be construed in accordance with and governed by the laws of the Republic of the Marshall Islands, without regard to the principles of conflicts of law.

2.3
Each provision of this Amendment shall be considered severable and if for any reason any provision or provisions herein are determined to be invalid, unenforceable or illegal under any existing or future law, such invalidity, unenforceability or illegality shall not impair the operation of or affect those portions of this Amendment that are valid, enforceable and legal.






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IN WITNESS WHEREOF, this Amendment has been executed as of the date first written above.

SEADRILL PARTNERS LLC

By: /s/ Graham Robjohns         
Name: Graham Robjohns
Title: CEO




EXHIBIT 4.37

PROMISSORY DISCOUNT NOTE

$103,735,000     MARCH 21, 2014
FOR VALUE RECEIVED , the undersigned, SEADRILL CAPRICORN HOLDINGS LLC , a Marshall Islands limited liability company (the “ Issuer ”), hereby promises to pay to SEADRILL LIMITED , a Bermuda company (the “ Holder ”), at the Payment Office (as defined below) the sum of $ $103,735,000 (the “ Redemption Amount ”) on September 21, 2015 (the “ Final Maturity Date ”), in accordance with the terms and provisions hereinafter set forth.
The terms and provisions of this promissory discount note (this “ Note ”) are as follows:

ARTICLE I
DEFINITIONS; CONSTRUCTION
Section 1.1      Definitions
The following terms used herein shall have the meanings herein specified (to be equally applicable to both the singular and plural forms of the terms defined):
“ Business Day ” shall mean a day other than a Saturday, Sunday or other day on which commercial banks in New York, New York are authorized or required by law to close.
“ Capital Lease Obligations ” shall mean, with respect to any Person, the obligations of such Person to pay rent or other amounts under any lease of (or other arrangement conveying the right to use) real or personal property, or a combination thereof, which obligations are required to be classified and accounted for as capital leases on a balance sheet of such Person under GAAP; and, for the purposes of this Note, the amount of such obligations at any time shall be the capitalized amount thereof at such time determined in accordance with GAAP.
“ CPSA ” means the Contribution, Purchase and Sale Agreement, dated as of March 11, 2014, among the Issuer, the Holder, Seadrill Partners LLC, and Seadrill Americas Inc., providing for, among other things, the purchase by the Issuer from the Holder of the Purchased Equity, as such agreement may be amended or otherwise modified from time to time.
“ Default ” means any of the events specified in Article V , whether or not any requirement for the giving of notice, the lapse of time, or both, has been satisfied.
“ Default Interest Rate ” shall mean LIBOR plus an additional 2% per annum.
“ Dollars ” and “ $ ” shall mean the lawful currency of the United States of America.
“ Event of Default ” shall mean any of the events specified in Article V , provided that any requirement for the giving of notice, the lapse of time, or both, has been satisfied.
“ Excluded Taxes ” shall mean, with respect to the Holder, taxes imposed on or measured by its overall net income, franchise taxes, and any branch profits or similar tax imposed on it by any jurisdiction.
“ Final Maturity Date ” shall have the meaning assigned to such term in the opening paragraph of this Note.
“ GAAP ” shall mean United States generally accepted accounting principles applied on a consistent basis.
“ Governmental Authority ” shall mean any nation or government, any state or other political subdivision thereof and any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government.
“ Guarantee Obligation ” shall mean as to any Person (the “ guaranteeing person ”), any obligation of (a) the guaranteeing person or (b) another Person (including, without limitation, any bank under any letter of credit), if to induce the creation of such obligation of such other Person the guaranteeing person has issued a reimbursement, counterindemnity or similar obligation, in

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either case guaranteeing or in effect guaranteeing any Indebtedness, leases, dividends or other obligations (the “ primary obligations ”) of any other third Person (the “ primary obligor ”) in any manner, whether directly or indirectly; provided, however , that the term Guarantee Obligation shall not include endorsements of instruments for deposit or collection in the ordinary course of business. The amount of any Guarantee Obligation of any guaranteeing person shall be deemed to be the lower of (a) an amount equal to the stated or determinable amount of the primary obligation in respect of which such Guarantee Obligation is made and (b) the maximum amount for which such guaranteeing person may be liable pursuant to the terms of the instrument embodying such Guarantee Obligation, unless such primary obligation and the maximum amount for which such guaranteeing person may be liable are not stated or determinable, in which case the amount of such Guarantee Obligation shall be such guaranteeing person’s maximum reasonably anticipated liability in respect thereof as determined by the Issuer in good faith.
“ Hedge Agreements ” shall mean all interest rate or currency swaps, caps or collar agreements, foreign exchange agreements, commodity contracts or similar arrangements entered into by the Issuer or its Subsidiaries providing for protection against fluctuations in interest rates, currency exchange rates, commodity prices or the exchange of nominal interest obligations, either generally or under specific contingencies.
“ Holder ” shall have the meaning assigned to such term in the opening paragraph of this Note.
“ Holder Indemnitee ” shall mean Holder and each of the directors, officers, employees, agents, trustees, representatives, attorneys, consultants and advisors of or to Holder.
“ Indebtedness ” shall mean of any Person at any date, without duplication, (a) all indebtedness of such Person for borrowed money, (b) all obligations of such Person for the deferred purchase price of Property or services (other than trade payables incurred in the ordinary course of such Person’s business), (c) all obligations of such Person evidenced by notes, bonds, debentures or other similar instruments, (d) all indebtedness created or arising under any conditional sale or other title retention agreement with respect to property or assets acquired by such Person (even though the rights and remedies of the seller or Holder under such agreement in the event of default are limited to repossession or sale of such property or assets), (e) all Capital Lease Obligations of such Person, (f) all obligations of such Person, contingent or otherwise, as an account party or applicant under acceptance, letter of credit or similar facilities, (g) all obligations of such Person, contingent or otherwise, to purchase, redeem, retire or otherwise acquire for value any equity interests of such Person, (h) all Guarantee Obligations of such Person in respect of obligations of the kind referred to in clauses (a) through (g) above; (i) all obligations of the kind referred to in clauses (a) through (h) above secured by (or for which the holder of such obligation has an existing right, contingent or otherwise, to be secured by) any Lien on property (including, without limitation, accounts and contract rights) owned by such Person, whether or not such Person has assumed or become liable for the payment of such obligation and (j) all obligations of such Person in respect of Hedge Agreements.
“ Issuer ” shall have the meaning assigned to such term in the opening paragraph of this Note.
“ Issuer Affiliate ” shall mean the Issuer and each Subsidiary thereof.
“ LIBOR ” shall mean, with respect to the Loan, the three (3) month LIBOR rate published in the Wall Street Journal two (2) Business Days before, as applicable, the Final Maturity Date and each day occurring every three months after the Final Maturity Date.
“ Lien ” shall mean any mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or other), charge or other security interest or any preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever (including, without limitation, any conditional sale or other title retention agreement and any capital lease having substantially the same economic effect as any of the foregoing).
“ Material Adverse Effect ” shall mean a material adverse effect on (a) the business, assets, liabilities, operations or condition (financial or otherwise) of the Issuer and its Subsidiaries taken as a whole, (b) the ability of the Issuer to perform its obligations under this Note, or (c) the ability of the Holder to enforce this Note.
“ Note ” shall have the meaning assigned to such term in the second paragraph of this Note.
“ Obligations ” shall mean, with respect to the Issuer, the unpaid amounts in respect of this Note and all other obligations and liabilities of the Issuer to the Holder, whether direct or indirect, absolute or contingent, due or to become due, or now existing or hereafter incurred, which may arise under, out of, or in connection with, this Note.
“ Payment Office ” shall mean the office of the Holder located at Par-la-Ville Place, 14 Par-la-Ville Road, Hamilton HM08, Bermuda, or such other location as to which the Holder shall have given written notice to the Issuer.
“ Person ” shall mean an individual, partnership, corporation, limited liability company, business trust, joint stock company, trust, unincorporated association, joint venture, Governmental Authority or other entity of whatever nature.

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“ Prepayment Date ” shall have the meaning set forth in the Section 2.3 of this Note.
“ Purchased Equity ” means all of the issued and outstanding equity interests in Seadrill Auriga Hungary Kft., a Hungarian limited liability company.
“ Redemption Amount ” shall have the meaning assigned to such term in the opening paragraph of this Note.
“ Subsidiary ” shall mean as to any Person, a corporation, partnership, limited liability company or other entity of which shares of stock or other ownership interests having ordinary voting power (other than stock or such other ownership interests having such power only by reason of the happening of a contingency) to elect a majority of the board of directors or other managers of such corporation, partnership or other entity are at the time owned, or the management of which is otherwise controlled, directly or indirectly through one or more intermediaries, or both, by such Person.
“ Taxes ” shall mean all present or future taxes, levies, imposts, duties, deductions, withholdings (including backup withholding), assessments, fees or other charges imposed by any Governmental Authority, including any interest, additions to tax or penalties applicable thereto, provided that “Taxes” shall not include Excluded Taxes.
Section 1.2      Other Definitional Provisions
(a)    Unless otherwise specified therein, all terms defined in this Note shall have the defined meanings when used in any certificate or other document made or delivered pursuant hereto.
(b)    The words “ hereof ”, “ herein ” and “ hereunder ” and words of similar import when used in this Note shall refer to this Note as a whole and not to any particular provision of this Note, and Section, Schedule and Exhibit references are to this Note unless otherwise specified.
(c)    The meanings given to terms defined herein shall be equally applicable to both the singular and plural forms of such terms.
(d)    The term “Holder” shall include, without limitation, its successors.
Section 1.3      Accounting Terms and Principles
Except as set forth below, all accounting terms not specifically defined herein shall be construed in conformity with GAAP and all accounting determinations required to be made pursuant hereto shall, unless expressly otherwise provided herein, be made in conformity with GAAP.
ARTICLE II
FINANCIAL TERMS OF THIS NOTE
Section 2.1      Issue
This Note is issued for an initial issue amount of $100,000,000 on the date hereof in partial satisfaction of the purchase price under the CPSA for the purchase by the Issuer from the Holder of the Purchased Equity.
Section 2.2      Payment on Final Maturity Date
On the Final Maturity Date, the Issuer shall pay this Note in full by paying the Redemption Amount together with all other sums, if any, then owing under this Note. If any such amount is not paid on the Final Maturity Date, the amount not paid shall bear interest at a rate per annum equal to the Default Interest Rate accruing on a day to day basis until paid. All such default interest shall be payable on demand.
Section 2.3      Prepayment
The Issuer may, by giving not less than three (3) Business Day’s prior written notice to the Holder, prepay this Note on any date prior to the Final Maturity Date (such date, the “ Prepayment Date ”) by paying the Redemption Amount together with all other sums, if any, then owing under this Note (which, for the avoidance of doubt, shall not take into account the early prepayment). The foregoing shall not limit the freedom of the Issuer and the Holder to negotiate early prepayment of this Note for an amount less than the Redemption Amount, taking into account prevailing market conditions at the time of the proposed early prepayment.
Section 2.4      Cancellation of Note Upon Full Payment
If this Note is fully paid or prepaid pursuant to this Section 2, it shall be immediately cancelled.

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Section 2.5      Payments Generally
(a)    All payments by the Issuer to the Holder hereunder shall be made to the Holder at the Payment Office in immediately available funds without setoff or counterclaim.  If any payment hereunder shall be due on a day that is not a Business Day, the date for payment shall be extended to the next succeeding Business Day. 
(b)    All payments hereunder shall be made in Dollars. If any sum due from the Issuer under this Note or any order or judgment given or made in relation hereto has to be converted from the currency (the “first currency”) in which the same is payable hereunder or under such order or judgment into another currency (the “second currency”) for the purpose of (i) making or filing a claim or proof against the Issuer, (ii) obtaining an order or judgment in any court or other tribunal or (iii) enforcing any order or judgment given or made in relation hereto, the Issuer shall indemnify and hold harmless the Holder from and against any loss suffered as a result of any discrepancy between (a) the rate of exchange used for such purpose to convert the sum in question from the first currency into the second currency and (b) the rate or rates of exchange at which the Holder may in the ordinary course of business purchase the first currency with the second currency upon receipt of a sum paid to it in satisfaction, in whole or in part, of any such order, judgment, claim or proof. The obligations to pay the amounts contemplated by this Section 2.5 shall be independent of and in addition to the other obligations of the Issuer hereunder.
Section 2.6      Taxes
Any and all payments by the Issuer under this Note shall be made free and clear of and without deduction for any and all present or future Taxes. If any Taxes shall be required by law to be deducted from or in respect of any sum payable under this Note to the Holder, then the Issuer shall be entitled to make such deduction or withholding and shall timely pay the full amount deducted or withheld to the relevant Governmental Authority in accordance with applicable law and the sum payable by the Issuer shall be increased as necessary so that after such deduction or withholding has been made (including such deductions and withholdings of Taxes applicable to additional sums payable under this Section) the Holder receives an amount equal to the sum it would have received had no such deduction or withholding been made.
Section 2.7      Subordination
This Note shall rank pari passu with all other ordinary debt of the Issuer, but shall be subordinated in all respects to, and rank after, the Issuer's obligations under the Guarantee provided by Issuer under the two USD 275,000,000 Amended and Restated Senior Term Loan and Revolving Credit Facility Agreements (and related Amended and Restated Common Terms Agreement), each dated 10 October 2012 made between (1) the Holder, as borrower, (2) the rig owners and internal charterers set out at Schedule 2 thereto, as joint and several guarantors, (3) the banks and financial institutions set out at Schedule 1 thereto, together with their assignees and transferees, (4) DNB Bank ASA, as agent, and (5) the various other parties thereto.
Section 2.8     Limited Recourse
The recourse of the Holder to the Issuer in respect of any amounts owing under this Note is limited to the Purchased Equity and any amounts that are paid to or recovered by the Issuer under or in relation to the Purchased Equity (the “Recourse Amounts” ). The Holder agrees that it will look solely to the Recourse Amounts for the payment and discharge of amounts owing in respect of any amounts owing under this Note. The Holder shall have no recourse under any obligation, covenant or agreement under this Note against the Issuer except to the extent of Recourse Amounts.

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ARTICLE III
REPRESENTATIONS AND WARRANTIES
To induce the Holder to accept this Note, the Issuer represents and warrants to the Holder on the date hereof that:
Section 3.1      Corporate Existence; Compliance with Law
The Issuer and each of its Subsidiaries (a) is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization, (b) has the limited partnership, limited liability company, corporate or other power and authority, and the legal right, to own and operate its property and assets, to lease the property and assets it operates as lessee and to conduct the business in which it is currently engaged, and (c) is in compliance with all requirements of applicable law except, to the extent that the failure to comply therewith could not, in the aggregate, reasonably be expected to have a Material Adverse Effect.
Section 3.2      Power; Authorization; Enforceable Obligations
(a)    The Issuer has the power and authority, and the legal right, to make, deliver and perform this Note. The Issuer has taken all necessary action to authorize the execution, delivery and performance of this Note.
(b)    No consent or authorization of, filing with, notice to or other act by or in respect of, any Governmental Authority or any other Person is required to be obtained by the Issuer in connection with (i) the issuance of this Note, (ii) the execution, delivery, validity or enforceability of this Note, or (iii) the performance of this Note, except, in each case, for routine consents, authorizations, filings and notices required to be made in the ordinary course of business.
(c)    This Note has been duly executed and delivered on behalf of the Issuer.
(d)    This Note constitutes the legal, valid and binding obligation of the Issuer, enforceable against the Issuer in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors’ rights generally and by general equitable principles (whether enforcement is sought by proceedings in equity or at law).
Section 3.3      No Legal Bar
The execution, delivery and performance of this Note by the Issuer and the use of the proceeds of this Note will not violate any applicable law or any material agreement of the Issuer and will not result in, or require, the creation or imposition of any Lien on any of its properties or revenues pursuant to any requirement of applicable law or any such agreement.
Section 3.4      No Material Litigation
No litigation, investigation or proceeding of or before any arbitrator or Governmental Authority is pending or, to the knowledge of the Issuer, threatened by or against the Issuer or any Issuer Affiliate, or against any of its or their respective properties or revenues (a) with respect to this Note or any of the transactions contemplated hereby, or (b) that could reasonably be expected to have a Material Adverse Effect.
Section 3.5      No Default
No Default or Event of Default has occurred and is continuing.

ARTICLE IV
COVENANTS
Section 4.1      Delivery of Financial Information
The Issuer will deliver to the Holder such financial or other information in respect of its business and financial status as the Holder may reasonably require including, but not limited to, copies of its unaudited quarterly financial statements and of its audited annual financial statements.
Section 4.2      Notice of Default
The Issuer shall promptly give notice to the Holder of the occurrence of any Default or Event of Default within five (5) Business Days after the Issuer knows or has reason to know thereof.

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Section 4.3      Conduct of Business and Maintenance of Existence, etc
The Issuer will (a) (i) preserve, renew and keep in full force and effect its corporate or other existence and (ii) take all reasonable action to maintain all rights, privileges and franchises necessary or desirable in the normal conduct of its business, to the extent that failure to do so could not reasonably be expected to have a Material Adverse Effect; and (b) comply with all agreements and requirements of applicable law, except to the extent that failure to comply therewith could not, in the aggregate, reasonably be expected to have a Material Adverse Effect.
ARTICLE V
EVENTS OF DEFAULT
Section 5.1      Events of Default
If any of the following events shall occur and be continuing:
(a)    The Issuer shall fail to pay this Note on the Final Maturity Date in accordance with the terms hereof; or
(b)    Any representation or warranty made or deemed made by the Issuer herein or that is contained in any certificate, document or financial or other statement furnished by it at any time under or in connection with this Note shall prove to have been inaccurate in any material respect on or as of the date made or deemed made or furnished; or
(c)    The Issuer shall default in the observance or performance of any other agreement contained in this Note to be performed by it (other than as provided in clause (a) of this Section 5.1 ), and such default shall continue unremedied for a period of 30 days after the earlier of (i) the date on which an officer of the Issuer becomes aware of such failure and (ii) the date on which written notice thereof shall have been given to the Issuer by the Holder; or
(d)    (i) The Issuer or any Issuer Affiliate shall fail to make any payment on any Indebtedness (other than the Obligations) of the Issuer or any such Issuer Affiliate or on any Guarantee Obligation in respect of Indebtedness of any other Person, and, in each case, such failure relates to Indebtedness having a principal amount of $25,000,000 or more, when the same becomes due and payable (whether by scheduled maturity, required prepayment, acceleration, demand or otherwise) and the effect of such failure is to accelerate the maturity of such Indebtedness, (ii) any other event shall occur or condition shall exist under any agreement or instrument relating to any such Indebtedness, if the effect of such event or condition is to accelerate the maturity of such Indebtedness, (iii) any other event shall occur or condition shall exist under any agreement or instrument relating to any such Indebtedness, if the effect of such event or condition is to permit the acceleration of the maturity of such Indebtedness or (iv) any such Indebtedness shall become or be declared to be due and payable, or be required to be prepaid or repurchased (other than by a regularly scheduled required prepayment), prior to the stated maturity thereof; or
(e)    (i) The Issuer shall commence any case, proceeding or other action (A) under any existing or future law of any jurisdiction, domestic or foreign, relating to bankruptcy, insolvency, reorganization or relief of debtors, seeking to have an order for relief entered with respect to it, or seeking to adjudicate it a bankrupt or insolvent, or seeking reorganization, arrangement, adjustment, winding up, liquidation, dissolution, composition or other relief with respect to it or its debts, or (B) seeking appointment of a receiver, trustee, custodian, conservator or other similar official for it or for all or any substantial part of its assets, or the Issuer shall make a general assignment for the benefit of its creditors; or (ii) there shall be commenced against the Issuer any case, proceeding or other action of a nature referred to in clause (i) above that (A) results in the entry of an order for relief or any such adjudication or appointment or (B) remains undismissed, undischarged or unbonded for a period of sixty (60) days; or (iii) there shall be commenced against the Issuer any case, proceeding or other action seeking issuance of a warrant of attachment, execution, distraint or similar process against all or any substantial part of its assets that results in the entry of an order for any such relief that shall not have been vacated, discharged, or stayed or bonded pending appeal within sixty (60) days from the entry thereof; or (iv) the Issuer shall take any action in furtherance of, or indicating its consent to, approval of, or acquiescence in, any of the acts set forth in clause (i) , (ii) , or (iii) above; or (v) the Issuer shall generally not, or shall be unable to, or shall admit in writing its inability to, pay its debts as they become due;
then, and in any such event, (A) if such event is an Event of Default specified in clause (i) or (ii) of paragraph (e) above, (i) this Note, the Redemption Amount and all other amounts owing under this Note shall immediately become due and payable, and (B) if such event is any other Event of Default, the Holder may, by notice to the Issuer, declare this Note, the Redemption Amount and all other amounts owing under this Note to be due and payable forthwith, whereupon the same shall immediately become due and payable.

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ARTICLE VI
MISCELLANEOUS
Section 6.1      Notices.
All notices, demands, requests, consents and other communications provided for in this Note shall be given in writing, and addressed to the party to be notified as follows:
To the Issuer:
Seadrill Capricorn Holdings LLC
Building 11, 2nd Floor
Chiswick Business Park
566 Chiswick High Road
London W4 6YS
United Kingdom
Attn: Mr. Graham Robjohns

To the Holder:
Seadrill Limited
Par-la-Ville Place
14 Par-la-Ville Road
Hamilton HM08
Bermuda
Attn: Georgina Sousa, Secretary

Either party hereto may change its address, telephone number or facsimile number for notices and other communications hereunder by notice to the other party.  All such notices and other communications shall, when transmitted by overnight delivery, or faxed, be effective when delivered for overnight (next-day) delivery, or transmitted in legible form by facsimile machine, respectively, or if mailed, upon the third Business Day after the date deposited into the mail or if delivered, upon delivery.
Section 6.2      Waiver; Amendments
No amendment or waiver of any provision of this Note nor consent to any departure by the Issuer therefrom shall in any event be effective unless the same shall be in writing and (x) in the case of any such waiver or consent, signed by the Holder and (y) in the case of any other amendment, by the Holder and the Issuer, and then any such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given.
Section 6.3      Expenses; Indemnification
(a)    The Issuer shall be obligated to pay all out-of-pocket costs and expenses (including, without limitation, but limited to the reasonable fees, charges and disbursements of outside counsel for the Holder) incurred by the Holder in connection with the enforcement or protection of its rights in connection with this Note, including its rights under this Section 6.3 , including all such out-of-pocket expenses incurred during any workout, restructuring or negotiations in respect of this Note.
(b)    The Issuer shall indemnify each Holder Indemnitee against, and hold each Holder Indemnitee harmless from, any and all losses, claims, damages, liabilities and related expenses (including the fees, charges and disbursements of any counsel for any Holder Indemnitee) incurred by any Holder Indemnitee or asserted against any Holder Indemnitee by any third party or by the Issuer arising out of, in connection with, or as a result of (i) the execution or delivery of this Note or any agreement or instrument contemplated hereby, the performance by the parties hereto of their respective obligations hereunder or under this Note or the consummation of the transactions contemplated hereby, or (ii) any actual or prospective claim, litigation, investigation or proceeding relating to any of the foregoing, whether based on contract, tort or any other theory, whether brought by a third party or by the Issuer, and regardless of whether any Holder Indemnitee is a party thereto, provided that such indemnity shall not, as to any Holder Indemnitee, be available to the extent that such losses, claims, damages, liabilities or related expenses (x) are determined by a court of competent jurisdiction by final judgment to have resulted from the gross negligence or willful misconduct of such Holder Indemnitee or (y) result from a claim brought by the Issuer against any Holder Indemnitee for breach in bad faith of such Holder Indemnitee’s obligations hereunder, if the Issuer has obtained a final judgment in its favor on such claim as determined by a court of competent jurisdiction.

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(c)    The Issuer shall pay, and hold the Holder harmless from and against, any and all present and future stamp, documentary, and other similar taxes with respect to this Note, any collateral described herein, or any payments due hereunder, and save the Holder harmless from and against any and all liabilities with respect to or resulting from any delay or omission to pay such taxes.
(d)    To the extent permitted by applicable law, each party shall not assert, and hereby waives, any claim against any Holder Indemnitee or the other party, on any theory of liability, for special, indirect, consequential or punitive damages (as opposed to actual or direct damages) arising out of, in connection with or as a result of, this Note or any agreement or instrument contemplated hereby, the transactions contemplated therein, or the use of proceeds thereof.
(e)    All amounts due under this Section 6.3 shall be payable promptly after written demand therefor.
Section 6.4      Successors and Assigns
The provisions of this Note shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns permitted hereby, except that the Issuer may not assign or otherwise transfer any of its rights or obligations hereunder, and the Holder may not assign or otherwise transfer any of its rights or obligations hereunder or under this Note without the prior written consent of the Issuer.  Any other attempted assignment or transfer by any party hereto shall be null and void.  Nothing in this Note, expressed or implied, shall be construed to confer upon any Person (other than the parties hereto, their respective successors and assigns permitted hereby and, to the extent expressly contemplated hereby, each Holder Indemnitee) any legal or equitable right, remedy or claim under or by reason of this Note.
Section 6.5      Governing Law
This Note and the rights and obligations of the parties hereto and thereto shall be governed by, and construed and interpreted in accordance with, the law of the State of New York.
Section 6.6      Survival
All covenants, agreements, representations and warranties made by the Issuer in this Note and in the certificates or other instruments delivered in connection with or pursuant to this Note shall be considered to have been relied upon by the Holder and shall survive the execution and delivery of this Note.  The provisions of Section 6.3 shall survive and remain in full force and effect regardless of the consummation of the transactions contemplated hereby, the repayment of this Note, or the termination of this Note or any provision hereof. 
Section 6.7      Severability
Any provision of this Note held to be illegal, invalid or unenforceable in any jurisdiction, shall, as to such jurisdiction, be ineffective to the extent of such illegality, invalidity or unenforceability without affecting the legality, validity or enforceability of the remaining provisions hereof or thereof; and the illegality, invalidity or unenforceability of a particular provision in a particular jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.
Section 6.8      Acceptance
By its acceptance of this Note, the Holder agrees to be bound by the terms and provisions of this Note applicable to it.
[ Signature Pages Follow ]


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IN WITNESS WHEREOF , the Issuer has caused this Note to be duly executed as of the day and year first above written.
 
SEADRILL CAPRICORN HOLDINGS LLC,
as Issuer


 
By:
 /s/ Robert Hingley-Wilson
 
 
Name: Robert Hingley-Wilson
 


Title: Director


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EXHIBIT 4.39














CONTRIBUTION, PURCHASE AND SALE AGREEMENT

US 3018053v.13

Dated as of November 4, 2014







TABLE OF CONTENTS

ARTICLE I

DEFINITIONS
Section 1.1
Definitions    2
ARTICLE II

THE CONTRIBUTIONS, PURCHASES AND SALES
Section 2.1
Issuance of Capricorn Holdings Units to the Company in Exchange for Cash     6
Section 2.2
Issuance of Capricorn Holdings Units to Seadrill in Exchange for Cash    7
Section 2.3
Purchase and Sale of 100% Interest in Seadrill Gulf Vela    7
Section 2.4
Purchase and Sale of 100% Interest in Seadrill Vela Hungary    7
Section 2.5
Transfer of West Vela Acquisition Receivable    7
Section 2.6
Closing    7
Section 2.7
Working Capital Purchase Price Adjustment    7
Section 2.8
Satisfaction of Intercompany Receivables    7
Section 2.9
Set-Off    8
Section 2.10
Withholding Taxes    8
Section 2.11
West Vela BOP Charges    8
ARTICLE III

REPRESENTATIONS AND WARRANTIES OF SEADRILL
Section 3.1
Representations and Warranties    8
ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Section 4.1
Representations and Warranties    13
ARTICLE V

REPRESENTATIONS AND WARRANTIES OF CAPRICORN HOLDINGS
Section 5.1
Representations and Warranties    14
ARTICLE VI

PRE-CLOSING MATTERS
Section 6.1
Covenants of Seadrill Prior to the Closing Date    15
Section 6.2
Covenant of the Company Prior to the Closing Date    16
Section 6.3
Covenant of Capricorn Holdings Prior to the Closing Date    17

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ARTICLE VII

CONDITIONS OF CLOSING
Section 7.1
Conditions of the Parties    17
Section 7.2
Conditions of Seadrill and Seadrill Americas    17
Section 7.3
Conditions of the Company and Capricorn Holdings    18
ARTICLE VIII

TERMINATION, AMENDMENT AND WAIVER
Section 8.1
Termination of this Agreement    19
Section 8.2
Amendments and Waivers    19
ARTICLE IX

INDEMNIFICATION
Section 9.1
Indemnification by Seadrill and Seadrill Americas    19
Section 9.2
Limitations Regarding Indemnification    20
Section 9.3
Indemnification by the Company and Capricorn Holdings    20
Section 9.4
Indemnification by Seadrill for Certain Liabilities Arising under Rig Financing Agreements    21
ARTICLE X

FURTHER ASSURANCES
Section 10.1
Further Assurances    21
Section 10.2
Power of Attorney    21
ARTICLE XI

MISCELLANEOUS
Section 11.1
Survival of Representations and Warranties    22
Section 11.2
Headings; References, Interpretation    23
Section 11.3
Successors and Assigns    23
Section 11.4
No Third Party Rights    23
Section 11.5
Counterparts    23
Section 11.6
Governing Law    23
Section 11.7
Severability    23
Section 11.8
Deed; Bill of Sale; Assignment    24
Section 11.9
Integration    24

Schedule A    Insurance Policies
Schedule B    Vessel Registration and Classification

Exhibit A        Form of Letter Agreement

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CONTRIBUTION, PURCHASE AND SALE AGREEMENT
This CONTRIBUTION, PURCHASE AND SALE AGREEMENT (this “ Agreement ”), dated as of November 4, 2014 is made by and among Seadrill Limited, a Bermuda exempted company (“ Seadrill ”), Seadrill Partners LLC, a Marshall Islands limited liability company (the “ Company ”), Seadrill Capricorn Holdings LLC, a Marshall Islands limited liability company (“ Capricorn Holdings ”), and Seadrill Americas Inc., a Texas corporation (“ Seadrill Americas ”). The above-named entities are sometimes referred to in this Agreement each as a “ Party ” and collectively as the “ Parties .”
RECITALS
WHEREAS , the Company owns 15,300 units, representing a 51% limited liability company interest in Capricorn Holdings, and Seadrill owns 14,700 units, representing a 49% limited liability company interest in Capricorn Holdings;
WHEREAS, Seadrill Vela Hungary Kft., a Hungarian limited liability company (“ Seadrill Vela Hungary ”), is the record owner of the drillship, the West Vela ;
WHEREAS, Seadrill is the record owner of all of the equity interests in Seadrill Vela Hungary;
WHEREAS, Seadrill Americas is the record owner of all of the equity interests in Seadrill Gulf Operations Vela LLC, a Delaware limited liability company (“ Seadrill Gulf Vela ”);
WHEREAS, the West Vela is subject to a contract for offshore drilling services, dated October 10, 2012, between Seadrill Deepwater Contracting Ltd., a Bermuda exempted company (“ Seadrill Deepwater Contracting ”), and BP Exploration and Production Inc., a Delaware corporation (“ BP ”), as amended by Amendment No. 1, dated March 26, 2014, Amendment No. 2, dated May 5, 2014, and Amendment No. 3, dated May 6, 2014, and on February 15, 2013, Seadrill Deepwater Contracting entered into an Assignment Agreement whereby it transferred its rights and obligations under such drilling contract to Seadrill Gulf Vela (the resulting drilling contract following such assignment and novation, the “ West Vela Drilling Contract ”);
WHEREAS , Seadrill Vela Hungary and Seadrill Gulf Vela are party to a bareboat charter, dated June 13, 2013 (the “ West Vela Bareboat Charter ”); and
WHEREAS , pursuant to this Agreement, each of the following will occur on the Closing Date (as defined in Section 2.6 ):
1.
The Company will contribute to Capricorn Holdings $238,177,082 in exchange for 5,100 units representing limited liability company interests in Capricorn Holdings;
2.
Seadrill will contribute to Capricorn Holdings $228,836,805 in exchange for 4,900 units, representing limited liability company interests in Capricorn Holdings;
3.
Seadrill Americas will sell and transfer to Capricorn Holdings, and Capricorn Holdings will purchase from Seadrill Americas, 100% of the outstanding membership interests in Seadrill Gulf Vela, in exchange for $128,227,891 in cash;
4.
Seadrill will sell and transfer to Capricorn Holdings, and Capricorn Holdings will purchase from Seadrill, 100% of the ownership interests in Seadrill Vela Hungary, in exchange for (i) $338,785,996 in cash, (ii) the payment (computed in accordance with Section 2.4 ) of an amount equal to $40,000.00 per day multiplied by the applicable percentage of the day rate actually received for each day after Closing under the West Vela Drilling Contract through the remaining term, without options, of the West Vela Drilling Contract as in effect on the date of this Agreement (the “ Day Rate Earn Out ”)

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and (iii) all amounts payable as the “Amortized Rig Rate Charge”, as defined and determined in Articles 10.5 through 10.8 of Section 5 of the West Vela Drilling Contract (the “ Amortized Charge Earn Out ”, and, together with the Day Rate Earn Out, the “ Earn Out ”); and
5.
Seadrill will transfer to Capricorn Holdings the receivable associated with the intercompany debt in the amount of approximately $188 million currently owed by Seadrill Vela Hungary to Seadrill in relation to the original acquisition of the West Vela (the “ West Vela Acquisition Receivable ”).
AGREEMENT
NOW THEREFORE, in consideration of the foregoing and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, and intending to be legally bound hereby, the Parties hereby agree as follows:
Article I

DEFINITIONS
Section 1.1      Definitions
. The following defined terms will have the meanings given below:
“ 1934 Act Filings ” means the filings made with the Securities and Exchange Commission under the Securities Exchange Act of 1934 by Seadrill or the Company, as the case may be.
“ Agreement ” means this Contribution, Purchase and Sale Agreement.
“ Amortized Charge Earn Out ” has the meaning set forth in the Recitals of this Agreement.
“ BP ” has the meaning set forth in the Recitals of this Agreement.
“ Capricorn Holdings ” has the meaning set forth in the Recitals of this Agreement.
“ Capricorn Holdings Operating Agreement ” has the meaning set forth in Section 5.1(c) .
“ Closing Date ” has the meaning set forth in Section 2.6 .
“ Company ” has the meaning set forth in the opening paragraph of this Agreement.
“ Company Attorney-in-Fact ” has the meaning set forth in Section 10.2(a) .
“ Company Indemnitees ” has the meaning set forth in Section 9.1 of this Agreement.
“ Company Indemnitors ” has the meaning set forth in Section 9.3 of this Agreement.
“ Covered Assets ” has the meaning set forth in Section 9.1(b) .
“ Covered Environmental Losses ” means all Losses suffered or incurred by the Company or Capricorn Holdings by reason of, arising out of or resulting from:
(a)    any violation or correction of violation of Environmental Laws with regard to the ownership or operation by Seadrill, Seadrill Americas or Seadrill Vela Hungary of the Covered Assets; or

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(b)    any event or condition relating to environmental or human health and safety matters, in each case, associated with the ownership or operation by Seadrill, Seadrill Americas or Seadrill Hungary Vela of the Covered Assets (including, without limitation, the presence of Hazardous Substances on, under, about or migrating to or from the Covered Assets or the disposal or release of, or exposure to, Hazardous Substances generated by or otherwise related to operation of the Covered Assets), including, without limitation, the reasonable and documented cost and expense of (i) any investigation, assessment, evaluation, monitoring, containment, cleanup, repair, restoration, remediation or other corrective action required or necessary under Environmental Laws, (ii) the preparation and implementation of any closure, remedial, corrective action or other plans required or necessary under Environmental Laws and (iii) any environmental or toxic tort (including, without limitation, personal injury or property damage claims) pre-trial, trial or appellate legal or litigation support work,
but only to the extent that such violation complained of under clause (a), or such events or conditions included in clause (b), occurred before the Closing Date; and, provided that in no event shall Losses to the extent arising from a change in any Environmental Law after the Closing Date be deemed “Covered Environmental Losses.”
“ Day Rate Earn Out ” has the meaning set forth in the Recitals of this Agreement.
“ Earn Out ” has the meaning set forth in the Recitals of this Agreement.
“ Encumbrance ” means any mortgage, maritime or other lien, charge, assignment, adverse claim, hypothecation, restriction, option, covenant, voting trust arrangement, adverse claim, condition, encumbrance or right, whether fixed or floating, on, or any security interest in, any property whether real, personal or mixed, tangible or intangible, any pledge or hypothecation of any property, any deposit arrangement, priority, conditional sale agreement, other title retention agreement or equipment trust, capital lease or other security arrangements of any kind.
“ Environmental Laws ” means all international, federal, state, foreign and local laws, statutes, rules, regulations, treaties, conventions, orders, judgments and ordinances having the force and effect of law and relating to protection of natural resources, health and safety and the environment, each in effect and as amended through the Closing Date.
“ Financing Agreements ” means collectively the (1) Amended and Restated Revolving Loan Agreement dated August 31, 2013 between Seadrill Operating, Seadrill Capricorn Holdings and Seadrill Partners Operating LLC, as borrowers, and Seadrill, as lender, as amended, (2) Credit Agreement, dated as of February 21, 2014 as amended and restated as of June 26, 2014, among Seadrill Operating LP, Seadrill Partners Finco LLC and Seadrill Capricorn Holdings LLC, as Borrowers, Deutsche Bank AG New York Branch, as administrative agent, and the banks and financial institutions named therein as lenders, (3)  $440,000,000 Senior Secured Credit Facility Agreement dated December 4, 2012, as amended, among Seadrill, as Borrower, the subsidiaries of Seadrill named therein as guarantors, and the banks and financial institutions named therein as lenders, and (4) the Rig Financing Agreements.
“ Governmental Authority ” means any domestic or foreign government, including federal, provincial, state, municipal, county or regional government or governmental or regulatory authority, domestic or foreign, and includes any department, commission, bureau, board, administrative agency or regulatory body of any of the foregoing and any multinational or supranational organization.
“ Hazardous Substances ” means (a) each substance defined, designated or classified as a hazardous waste, hazardous substance, hazardous material, solid waste, contaminant or toxic substance under Environmental Laws; (b) petroleum and petroleum products, including crude oil and any fractions thereof; (c) natural gas, synthetic gas and any mixtures thereof; (d) any radioactive material; and (e) any asbestos‑containing materials in a friable condition.

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“ Insolvency Event ” means, with respect to any Person, that any of the following actions has occurred in relation to it:
(a)    an order has been made or an effective resolution passed or other proceedings or actions taken (including the presentation of a petition) with a view to its administration, bankruptcy, winding-up, liquidation or dissolution; or
(b)    it has had a receiver, administrative receiver, manager or administrator appointed over all or any substantial part of its undertaking or assets; or
(c)    any event has occurred or situation arisen in any jurisdiction that has a substantially similar effect to any of the foregoing.
“ Law ” has the meaning set forth in Section 3.1(c) .
“ Losses ” means, with respect to any matter, all losses, claims, damages, liabilities, deficiencies, costs, expenses (including all costs of investigation, legal and other professional fees and disbursements, interest, penalties and amounts paid in settlement) or diminution of value, whether or not involving a claim from a third party, however specifically excluding consequential, special and indirect losses, loss of profit and loss of opportunity.
“ Person ” means an individual, legal personal representative, corporation, body corporate, firm, limited liability company, partnership, trust, trustee, syndicate, joint venture, unincorporated organization or governmental authority.
“ Party ” or “ Parties ” has the meaning set forth in the opening paragraph of this Agreement.
“ Rig Financing Agreements ” means the West Vela Credit Facility and any documents related thereto.
“ Rig Financing Indemnitees ” has the meaning set forth in Section 9.4 .
“ Seadrill ” has the meaning set forth in the opening paragraph of this Agreement.
“ Seadrill Americas ” has the meaning set forth in the opening paragraph of this Agreement.
“ Seadrill Attorney-in-Fact ” has the meaning set forth in Section 10.2(b) .
“ Seadrill Deepwater Contracting ” has the meaning set forth in the Recitals of this Agreement.
“ Seadrill Gulf Vela ” has the meaning set forth in the Recitals of this Agreement.
“ Seadrill Indemnitees ” has the meaning set forth in Section 9.3 of this Agreement.
“ Seadrill Indemnitors ” has the meaning set forth in Section 9.1 of this Agreement.
“ Seadrill Vela Hungary ” has the meaning set forth in the Recitals of this Agreement.
“ Taxes ” means all income, franchise, business, property, sales, use, goods and services or value added, withholding, excise, alternate minimum capital, transfer, excise, customs, anti-dumping, countervail, net worth, stamp, registration, payroll, employment, health, education, business, school, property, local improvement, development and occupation taxes, surtaxes, duties, levies, imposts, rates, fees, assessments, dues and charges and other taxes required to be reported upon or paid to any governmental authority and all interest and penalties thereon.

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“ Transferred Subsidiaries ” means, collectively, Seadrill Gulf Vela and Seadrill Vela Hungary.
“ Transferred Subsidiary Contracts ” has the meaning set forth in Section 3.1(p) of this Agreement.
“ West Vela Acquisition Receivable ” has the meaning set forth in the Recitals of this Agreement.
“ West Vela Bareboat Charter ” has the meaning set forth in the Recitals of this Agreement.
“ West Vela BOP Charges ” has the meaning set forth in Section 2.11 of this Agreement.
“ West Vela Credit Facility ” means the $1.45 billion Senior Secured Credit Facility dated March 20, 2013, as amended by two accession letters dated March 28, 2013, between, among others, (i) Seadrill Vela Hungary and Seadrill Tellus Ltd. as borrowers, (ii) Seadrill as guarantor, (iii) Seadrill Gulf Vela as intragroup charterer and guarantor, (iv) the banks and financial institutions listed therein as lenders and (iv) ING Bank N.V. as agent.
“ West Vela Drilling Contract ” has the meaning set forth in the Recitals of this Agreement.
“ West Vela Purchase Price ” has the meaning set forth in Section 2.4 of this Agreement.
“ West Vela WC Purchase Price Adjustment ” has the meaning set forth in Section 2.7(a) of this Agreement.
Article II

THE CONTRIBUTIONS, PURCHASES AND SALES
On the Closing Date, the Parties agree that the following transactions shall be completed in the order set forth below.
Section 2.1      Issuance of Capricorn Holdings Units to the Company in Exchange for Cash
. Capricorn Holdings shall issue to the Company 5,100 units, representing limited liability company interests in Capricorn Holdings, in exchange for a contribution of $238,177,082 in cash.
Section 2.2      Issuance of Capricorn Holdings Units to Seadrill in Exchange for Cash
. Capricorn Holdings shall issue to Seadrill 4,900 units, representing limited liability company interests in Capricorn Holdings, in exchange for a contribution of $228,836,805 in cash.
Section 2.3      Purchase and Sale of 100% Interest in Seadrill Gulf Vela
. Seadrill Americas shall sell and transfer to Capricorn Holdings, and Capricorn Holdings shall purchase from Seadrill Americas, 100% of the outstanding membership interests in Seadrill Gulf Vela, in exchange for $128,227,891 in cash.
Section 2.4      Purchase and Sale of 100% Interest in Seadrill Vela Hungary
. Seadrill shall sell and transfer to Capricorn Holdings, and Capricorn Holdings shall purchase from Seadrill, 100% of the ownership interests in Seadrill Vela Hungary, in exchange for (i) $338,785,996 in cash and (ii) payment of the Earn Out (collectively, the “ West Vela Purchase Price ”). The Earn Out shall be due and payable by Capricorn Holdings to Seadrill within 30 days following the end of each calendar quarter with respect to all Earn Out amounts actually received under the West Vela Drilling Contract during such calendar quarter. The Day Rate Earn Out shall be

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calculated for any given period by multiplying $40,000.00 by the applicable day rate percentage set forth in Table 14.1A, Item B of Article 14 of Section 5 of the West Vela Drilling Contract. No contract day rate escalation provisions shall be applied in relation to the $40,000.00 basis for calculating the Day Rate Earn Out.
Section 2.5      Transfer of West Vela Acquisition Receivable
. Seadrill shall transfer to Capricorn Holdings the West Vela Acquisition Receivable.
Section 2.6      Closing
. On the terms and subject to the conditions of this Agreement, the contributions, purchases, transfers, sales and equity issuances set forth in Section 2.1 through Section 2.5 shall take place within 30 days of after the date hereof, or on such other date as may be agreed upon by the Parties (the “ Closing Date ”).
Section 2.7      Working Capital Purchase Price Adjustment
.
(a)      The West Vela Purchase Price shall be increased or decreased by an amount equal to the amount by which all net working capital (excluding inventory and debt) reflected on the books and records as of the Closing Date of the Transferred Subsidiaries either exceeds or is less than $5,000,000 (the “ West Vela WC Purchase Price Adjustment ”).
(b)      Within 30 days following the Closing Date, Seadrill and the Company shall agree on the amount of the West Vela WC Purchase Price Adjustment pursuant to Section 2.7(a) , and Seadrill and the Company shall make settlement of the West Vela WC Purchase Price Adjustment within 30 days thereafter.
Section 2.8      Satisfaction of Intercompany Receivables
. Seadrill hereby agrees that, with the exception of the debt related to the West Vela Acquisition Receivable, which is being transferred to Capricorn Holdings pursuant to Section 2.5 , at or prior to Closing, Seadrill shall arrange for the extinguishment of the obligations of Seadrill Gulf Vela and Seadrill Vela Hungary, by settlement or any other manner in Seadrill’s sole discretion, in relation to all amounts payable to Seadrill and its subsidiaries by Seadrill Gulf Vela and Seadrill Vela Hungary.
Section 2.9      Set-Off
. On the Closing Date, Capricorn Holdings may set off the amount owed by Seadrill to Capricorn Holdings pursuant to Section 2.2 against the cash liability of Capricorn Holdings to Seadrill to Section 2.4(i) . Any exercise by Capricorn Holdings of its rights under this clause shall not limit or affect any other rights or remedies available to any party under this Agreement or otherwise.
Section 2.10      Withholding Taxes
. Capricorn Holdings may reduce any payment of the West Vela Purchase Price, including the Earn Out and any West Vela WC Purchase Price Adjustment, for any applicable withholding taxes (without gross up) and Seadrill shall indemnify Capricorn Holdings and any of its applicable withholding agents for any withholding taxes required to be or have been withheld or deducted from a payment to Seadrill with respect to the West Vela Purchase Price, including the Earn Out and any West Vela WC Purchase Price Adjustment.

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Section 2.11      West Vela BOP Charges
. Seadrill hereby agrees that it shall be responsible for payment of any amounts currently owed, or arising after the date hereof, in connection with the purchase, receipt, and commissioning of the spare blowout preventer for the West Vela (the “ West Vela BOP Charges ”).
Article III

REPRESENTATIONS AND WARRANTIES OF SEADRILL
Section 3.1      Representations and Warranties
. Seadrill hereby represents and warrants to the Company, as of the date hereof and as of the Closing Date, as to itself and as to Seadrill Americas, each of the Transferred Subsidiaries and the West Vela , as the case may, be that:
(a)      Each of Seadrill, Seadrill Americas and the Transferred Subsidiaries has been duly formed or incorporated and is validly existing and in good standing under the laws of its respective jurisdiction of formation or incorporation and has all requisite power and authority to operate its assets and conduct its business as it is now being conducted and, in the case of Seadrill, as described in its 1934 Act Filings. No Insolvency Event has occurred with respect to Seadrill, Seadrill Americas or the Transferred Subsidiaries and no events or circumstances have arisen that entitle or could entitle any person to take any action, appoint any person, commence proceedings or obtain any order instigating an Insolvency Event;
(b)      Each of Seadrill and Seadrill Americas has the full right, power and authority to enter into this Agreement and to perform its obligations hereunder. The execution and delivery of this Agreement by Seadrill and Seadrill Americas and the execution and delivery of all documents, instruments and agreements required to be executed and delivered by Seadrill, Seadrill Americas and each of the Transferred Subsidiaries pursuant to this Agreement in connection with the completion of the transactions contemplated by this Agreement, have been duly authorized by all necessary action on the part of Seadrill, Seadrill Americas and each of the Transferred Subsidiaries party hereto or thereto, and this Agreement has been duly executed and delivered by Seadrill and Seadrill Americas and constitutes a legal, valid and binding obligation of Seadrill and Seadrill Americas, enforceable in accordance with its terms, except as may be limited by bankruptcy, insolvency, liquidation, reorganization, reconstruction and other similar laws of general application affecting the enforceability of remedies and rights of creditors and except that equitable remedies such as specific performance and injunction are in the discretion of a court;
(c)      The execution, delivery and performance by Seadrill, Seadrill Americas and each of the Transferred Subsidiaries, as applicable, of this Agreement and the transactions contemplated hereunder will not conflict with or result in any violation of or constitute a breach of any of the terms or provisions of, or result in the acceleration of any obligation under, or constitute a default under any provision of: (i) Seadrill’s, Seadrill Americas’ or the Transferred Subsidiaries’ articles of association, articles of incorporation or bylaws or certificate of formation or limited liability company agreement or other organizational documents; (ii) any lien, encumbrance, security interest, pledge, mortgage, charge, other claim, bond, indenture, agreement, contract, franchise license, permit or other instrument or obligation to which Seadrill, Seadrill Americas or any of the Transferred

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Subsidiaries is a party or is subject or by which any of Seadrill’s, Seadrill Americas’ or any of the Transferred Subsidiaries’ assets or properties may be bound; (iii) any applicable laws, statutes, ordinances, rules or regulations promulgated by a governmental authority, orders of a governmental authority, judicial decisions, decisions of arbitrators or determinations of any governmental authority or court (“ Laws ”); or (iv) the West Vela Drilling Contract or any material provision of any material contract to which Seadrill, Seadrill Americas or any of the Transferred Subsidiaries is a party or by which the assets of Seadrill, Seadrill Americas or any of the Transferred Subsidiaries are bound;
(d)      Except as have already been obtained or that will be obtained in the ordinary course of business, no consent, permit, approval or authorization of, notice or declaration to or filing with any Governmental Authority or any other person, including those related to any Environmental Laws or regulations, is required in connection with the execution and delivery by Seadrill and Seadrill Americas of this Agreement or the consummation by Seadrill, Seadrill Americas and each of the Transferred Subsidiaries of the transactions contemplated hereunder, and any consents required for the transfer or assignment of the West Vela Drilling Contract have been duly obtained;
(e)      As of the date hereof, (i) Seadrill owns, directly or indirectly, all of the outstanding equity interests of Seadrill Vela Hungary and has good and marketable title thereto, free and clear of any and all Encumbrances, other than those arising under the Rig Financing Agreements and applicable securities laws and (ii) Seadrill Americas owns all of the outstanding equity interests of Seadrill Gulf Vela and has good and marketable title thereto free and clear of any and all Encumbrances except for applicable securities laws;
(f)      All of the issued and outstanding equity interests of each Transferred Subsidiary have been duly authorized and are validly issued in accordance with the articles of association, articles of incorporation, bylaws, certificate of formation, limited liability company agreement or other organizational documents of such Transferred Subsidiary and are fully paid and non‑assessable;
(g)      There are not outstanding (i) any options, warrants or other rights to purchase any equity interests of any Transferred Subsidiary, (ii) any securities convertible into or exchangeable for equity interests of any Transferred Subsidiary, or (iii) any other commitments of any kind for the issuance of equity interests of any Transferred Subsidiary or options, warrants or other securities of any Transferred Subsidiary;
(h)      There is no outstanding agreement, contract, option, commitment or other right or understanding in favor of, or held by, any person other than the Company to acquire any assets of the Transferred Subsidiaries;
(i)      Correct and complete copies of the organizational documents of each Transferred Subsidiary (as amended to the date of this Agreement), the West Vela Drilling Contract and the West Vela Bareboat Charter have been made available to the Company, and no amendments will be made to any such organizational documents prior to the Closing Date without the prior written consent of the Company (such consent not to be unreasonably withheld);

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(j)      Correct and complete copies of the Rig Financing Agreements have been made available to the Company. Each Rig Financing Agreement is a valid and binding agreement of the Transferred Subsidiaries party thereto, enforceable against each such Transferred Subsidiary in accordance with its terms and, to the knowledge of Seadrill, each of the Rig Financing Agreements is a valid and binding agreement of all other parties thereto enforceable against such parties in accordance with its terms, except as may be limited by bankruptcy, insolvency, liquidation, reorganization, reconstruction and other similar laws of general application affecting the enforceability of remedies and rights of creditors and except that equitable remedies such as specific performance and injunction are in the discretion of a court;
(k)      The West Vela Drilling Contract is a valid and binding agreement of Seadrill Gulf Vela and is enforceable against Seadrill Gulf Vela in accordance with its terms and, to the knowledge of Seadrill, the West Vela Drilling Contract is a valid and binding agreement of all other parties thereto enforceable against such parties in accordance with its terms, except as may be limited by bankruptcy, insolvency, liquidation, reorganization, reconstruction and other similar laws of general application affecting the enforceability of remedies and rights of creditors and except that equitable remedies such as specific performance and injunction are in the discretion of a court;
(l)      Seadrill Gulf Vela has fulfilled all material obligations required pursuant to the West Vela Drilling Contract to have been performed by it prior to the date of this Agreement and has not waived any material rights thereunder; and no material default or breach exists in respect thereof on its part or, to Seadrill’s knowledge, any of the other parties thereto and, to Seadrill’s knowledge, no event has occurred which, after giving of notice or the lapse of time, or both, would constitute such a material default or breach;
(m)      The West Vela Bareboat Charter is a valid and binding agreement of Seadrill Gulf Vela and Seadrill Vela Hungary and is enforceable against Seadrill Gulf Vela and Seadrill Vela Hungary in accordance with its terms, except as may be limited by bankruptcy, insolvency, liquidation, reorganization, reconstruction and other similar laws of general application affecting the enforceability of remedies and rights of creditors and except that equitable remedies such as specific performance and injunction are in the discretion of a court;
(n)      Except for such liabilities, debts obligations, encumbrances, defects, restrictions or claims of a general nature and magnitude that would arise in connection with the operation of a drillship of the same type as the West Vela in the ordinary course of business, there are no liabilities, debts or obligations of, encumbrances, defects or restrictions of any nature, whether absolute, accrued, contingent or otherwise, and whether due or to become due (including any liability for Taxes and interest, penalties and other charges payable with respect to any such liability or obligation) with respect to the Transferred Subsidiaries, or claims against the Transferred Subsidiaries or any of the assets owned by the Transferred Subsidiaries, including the West Vela , other than those arising under or in connection with Rig Financing Agreements, the West Vela Drilling Contract, the West Vela Acquisition Receivable or the West Vela BOP Charges.
(o)      Seadrill has disclosed to the Company all material information on, and about, each of the Transferred Subsidiaries and the West Vela and all such information is true, accurate and not misleading in any material respect. Nothing has been withheld from any materials provided by Seadrill to the Company in connection with the transactions contemplated by this Agreement that would render such information untrue or misleading;
(p)      Seadrill has disclosed to the Company all material contracts and agreements, written or oral, to which any of the Transferred Subsidiaries is a party or by which any of their assets are bound, including the West Vela Drilling Contract, the West Vela Credit Facility and the West Vela Bareboat Charter (the “ Transferred Subsidiary Contracts ”);
(q)      Each of the Transferred Subsidiary Contracts is a valid and binding agreement of the Transferred Subsidiaries party thereto, or Seadrill Americas, as applicable, enforceable against such Transferred Subsidiary or Seadrill Americas, as applicable, in accordance with its terms, and to the knowledge of Seadrill, each of the Transferred Subsidiary Contracts is a valid and binding agreement of all other parties thereto enforceable against such parties in accordance with its terms, except as may be limited by bankruptcy, insolvency, liquidation, reorganization, reconstruction and other similar laws of general application affecting the enforceability of remedies and rights of creditors and except that equitable remedies such as specific performance and injunction are in the discretion of a court;
(r)      Each of the Transferred Subsidiaries or Seadrill Americas, as applicable, has fulfilled all material obligations required pursuant to the Transferred Subsidiary Contracts to which it is a party to have been performed by it prior to the date hereof and has not waived any material rights thereunder;
(s)      There has not occurred any material default on the part of any Transferred Subsidiary or Seadrill Americas under any Transferred Subsidiary Contracts to which it is a party, or to the knowledge of Seadrill, on the part of any other party thereto, nor has any event occurred that with the giving of notice or the lapse of time, or both, would constitute any material default on the part of any Transferred Subsidiary or Seadrill Americas under any of the Transferred Subsidiary Contracts to which it is a party nor, to the knowledge of Seadrill, has any event occurred that with the giving of notice or the lapse of time, or both, would constitute any material default on the part of any other party to any of the Transferred Subsidiary Contracts;
(t)      Seadrill Vela Hungary now has, and at the Closing Date will have, good and marketable title to the West Vela and its equipment, free and clear of any and all Encumbrances, other than applicable securities laws and any intercompany payables that will be extinguished pursuant to Section 2.8 of this Agreement and those arising under the Rig Financing Agreements and permitted encumbrances under the Rig Financing Agreements and arising under the West Vela Acquisition Receivable. As of the date hereof, there is approximately $433.0 million of borrowings outstanding under the West Vela Credit Facility attributable to the West Vela ;
(u)      There is no action, suit or proceeding to which any of the Transferred Subsidiaries is a party (either as a plaintiff or defendant), or to which the West Vela is subject, pending before any court or governmental agency, authority or body or arbitrator; there is no action, suit or proceeding threatened against any of the Transferred Subsidiaries or Seadrill Americas or the West Vela ; and, to the best knowledge of Seadrill, there is no basis for any such action, suit or proceeding;
(v)      None of the Transferred Subsidiaries or Seadrill Americas has been permanently or temporarily enjoined by any order, judgment or decree of any court or any governmental agency, authority or body from engaging in or continuing any conduct or practice in connection with its business, assets or properties;
(w)      There is not in existence any order, judgment or decree of any court or other tribunal or other agency enjoining or requiring any of the Transferred Subsidiaries or Seadrill Americas to take any action of any kind with respect to their respective business, assets or properties;
(x)      None of the Transferred Subsidiaries will be indebted, directly or indirectly, to any person who is an officer, director, stockholder or employee of such Transferred Subsidiary or any spouse, child, or other relative or any affiliate thereof, nor shall any such officer, director, stockholder, employee, relative or affiliate be indebted to such Transferred Subsidiary;
(y)      Seadrill will cause Seadrill Vela Hungary to timely elect to be classified for U.S. federal income tax purposes as an entity disregarded as separate from its owner on a properly-completed Form 8832 filed with the Internal Revenue Service. Seadrill will also cause Seadrill Gulf Vela to timely elect to be classified for U.S. federal income tax purposes as an association taxable as a corporation on a properly-completed Form 8832 filed with the Internal Revenue Service. These elections for Seadrill Vela Hungary and Seadrill Gulf Vela have been or will be made with an effective date prior to the transaction described in Section 2.1 . Once these elections have been made, neither Seadrill, Seadrill Vela Hungary nor Seadrill Gulf Vela will take any action to change the U.S. federal income tax classification of Seadrill Vela Hungary or Seadrill Gulf Vela from that provided in the elections described above;
(z)      None of the Transferred Subsidiaries have any employees. All crew members with respect to the West Vela are provided directly or indirectly by subsidiaries of Seadrill pursuant to services agreements with the Transferred Subsidiaries;
(aa)      A list of the insurance policies relating to the West Vela are set forth on Schedule A hereto, each of which is in full force and effect and, to the knowledge of Seadrill, not subject to being voided or terminated for any reason;
(bb)      The West Vela (i) is adequate and suitable for use by the applicable Transferred Subsidiary in such Transferred Subsidiary’s business as presently conducted by it in all material respects, ordinary wear and tear excepted; (ii) is in good running order and repair; (iii) is in compliance with applicable laws and regulations; (iv) is duly registered under the flag set forth opposite its name on Schedule B hereto; (v) is in compliance in all material respects with the requirements of its present class and classification society as set forth opposite such its name on Schedule B hereto and has the highest classification rating; (vi) has class certificates that are clean and valid and free of recommendations or notations as to class or other requirement of the relevant classification society; and (vii) has been maintained in a proper and efficient manner in accordance with internationally accepted standards for good drillship maintenance, is in good operating order, condition and repair and is seaworthy and all repairs made to the West Vela since its delivery from the shipyard and all known scheduled repairs due to be made and all known deficiencies have been disclosed to the Company;
(cc)      The West Vela is not (i) under arrest or otherwise detained; (ii) other than in the ordinary course of business, in the possession of any Person (other than the West Vela’s master and crew); or (iii) subject to a possessory lien;
(dd)      No blacklisting or boycotting of any type has been applied or currently exists against, or in respect of, the West Vela ; and
(ee)      There are not outstanding any options or other rights to purchase the West Vela .
Article IV

REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Section 4.1      Representations and Warranties
. The Company hereby represents and warrants to Seadrill as of the date hereof and as of the Closing Date:
(a)      The Company has been duly formed and is validly existing and in good standing under the laws of the Republic of the Marshall Islands and has all requisite limited liability company power and authority to own and operate its assets and conduct its business as described in its 1934 Act Filings. No Insolvency Event has occurred with respect to the Company and no events or circumstances have arisen that entitle or could entitle any person to take any action, appoint any person, commence proceedings or obtain any order instigating an Insolvency Event;
(b)      The Company has the full right, power and authority to enter into this Agreement and to perform its obligations hereunder. The execution and delivery of this Agreement and all documents, instruments and agreements required to be executed and delivered by the Company pursuant to this Agreement in connection with the completion of the transactions contemplated by this Agreement, have been duly authorized by all necessary action on its part, and this Agreement has been duly executed and delivered by the Company and constitutes a legal, valid and binding obligation of it, enforceable in accordance with its terms, except as may be limited by bankruptcy, insolvency, liquidation, reorganization, reconstruction and other similar laws of general application affecting the enforceability of remedies and rights of creditors and except that equitable remedies such as specific performance and injunction are in the discretion of a court;
(c)      The execution, delivery and performance by the Company of this Agreement will not conflict with or result in any violation of or constitute a breach of any of the terms or provisions of, or result in the acceleration of any obligation under, or constitute a default under any provision of: (i) its limited liability company agreement; (ii) any lien, encumbrance, security interest, pledge, mortgage, charge, other claim, bond, indenture, agreement, contract, franchise license, permit or other instrument or obligation to which it is a party or is subject or by which any of its assets or properties may be bound, including the Financing Agreements; or (iii) any applicable Laws; and
(d)      Except as have already been obtained or that will be obtained in the ordinary course of business, no consent, permit, approval or authorization of, notice or declaration to or filing with any governmental authority or any other person, including those related to any Environmental Laws or regulations, is required in connection with the execution and delivery by the Company of this Agreement or the consummation by it of the transactions contemplated hereunder.
Article V

REPRESENTATIONS AND WARRANTIES OF CAPRICORN HOLDINGS
Section 5.1      Representations and Warranties
. Capricorn Holdings hereby represents and warrants to Seadrill and the Company as of the date hereof and as of the Closing Date that:
(a)      Capricorn Holdings has been duly formed and is validly existing in good standing under the laws of the Republic of the Marshall Islands and has all requisite limited liability company power and authority to operate its assets and conduct its business as it is now being conducted. No Insolvency Event has occurred with respect to Capricorn Holdings and no events or circumstances have arisen that entitle or could entitle any person to take any action, appoint any person, commence proceedings or obtain any order instigating an Insolvency Event;
(b)      Capricorn Holdings has the full right, power and authority to enter into this Agreement and to perform its obligations hereunder. The execution and delivery of this Agreement and all documents, instruments and agreements required to be executed and delivered by Capricorn Holdings pursuant to this Agreement in connection with the completion of the transactions contemplated by this Agreement, have been duly authorized by all necessary action on its part or on its behalf, and this Agreement has been duly executed and delivered by it and constitutes a legal, valid and binding obligation of it, enforceable in accordance with its terms, except as may be limited by bankruptcy, insolvency, liquidation, reorganization, reconstruction and other similar laws of general application affecting the enforceability of remedies and rights of creditors and except that equitable remedies such as specific performance and injunction are in the discretion of a court;
(c)      The execution, delivery and performance by Capricorn Holdings of this Agreement will not conflict with or result in any violation of or constitute a breach of any of the terms or provisions of, or result in the acceleration of any obligation under, or constitute a default under any provision of: (i) the Limited Liability Company Agreement of Capricorn Holdings, dated as of September 27, 2012 (the “ Capricorn Holdings Operating Agreement ”); (ii) any lien, encumbrance, security interest, pledge, mortgage, charge, other claim, bond, indenture, agreement, contract, franchise license, permit or other instrument or obligation to which it is a party or is subject or by which any of its assets or properties may be bound, including the Financing Agreements; or (iii) any applicable Laws;
(d)      Except as have already been obtained or that will be obtained in the ordinary course of business, no consent, permit, approval or authorization of, notice or declaration to or filing with any governmental authority or any other person, including those related to any Environmental Laws or regulations, is required in connection with the execution and delivery by Capricorn Holdings of this Agreement or the consummation by it of the transactions contemplated hereunder; and
(e)      On the Closing Date, the 10,000 units of Capricorn Holdings to be issued to the Company and Seadrill pursuant to Section 2.1 and Section 2.2 , respectively, will be duly authorized and validly issued in accordance with the Capricorn Holdings Operating Agreement and will be fully paid (to the extent required under the Capricorn Holdings Operating Agreement) and nonassessable (except as such assessability may be affected by Sections 20, 31, 40 and 49 of the Marshall Islands LLC Act, and except as otherwise may be provided in the Capricorn Holdings Operating Agreement).
Article VI

PRE-CLOSING MATTERS
Section 6.1      Covenants of Seadrill Prior to the Closing Date
. From the date of this Agreement to the Closing Date, Seadrill shall cause each of the Transferred Subsidiaries to conduct their business in the usual, regular and ordinary course in substantially the same manner as previously conducted. Seadrill shall not permit any of the Transferred Subsidiaries to enter into any material contracts or other material written or oral agreements prior to the Closing Date, other than such contracts and agreements as have been disclosed to the Company prior to the date of this Agreement, without the prior consent of the Company (such consent not to be unreasonably withheld). In addition, Seadrill shall not permit any of the Transferred Subsidiaries to take any action that would result in any of the conditions to the contributions, purchases, sales and equity issuances set forth in Article II not being satisfied. Furthermore, Seadrill hereby agrees and covenants that it:
(a)      shall cooperate with the Company and use its reasonable best efforts to obtain, at or prior to the Closing Date, any consents required in respect of the transfer of the rights and benefits under each of the Transferred Subsidiary Contracts as a result of the contributions, purchases, sales and equity issuances set forth in Article II of this Agreement;
(b)      shall use its reasonable best efforts to take or cause to be taken promptly all actions and to do or cause to be done all things necessary, proper and advisable to consummate and make effective as promptly as practicable the transactions contemplated by this Agreement and to cooperate with the Company in connection with the foregoing, including using all reasonable best efforts to obtain all necessary consents, approvals and authorizations from any governmental authority and each other Person that are required to consummate the transactions contemplated under this Agreement;
(c)      shall take or cause to be taken all necessary corporate action, steps and proceedings to approve or authorize validly and effectively the contributions, purchases, sales and equity issuances set forth in Article II and the execution, delivery and performance of this Agreement and the other agreements and documents contemplated hereby;
(d)      shall not amend, alter or otherwise modify or permit any amendment, alteration or modification of any material provision of or terminate the West Vela Drilling Contract or the West Vela Bareboat Charter or any other Transferred Subsidiary Contract prior to the Closing Date without the prior written consent of the Company, such consent not to be unreasonably withheld or delayed;
(e)      shall not exercise or permit any exercise of any rights or options contained in the West Vela Drilling Contract, without the prior written consent of the Company, not to be unreasonably withheld or delayed;
(f)      shall observe and perform in a timely manner, all of its covenants and obligations under the Transferred Subsidiary Contracts, if any, and in the case of a default by another party thereto, it shall forthwith advise the Company of such default and shall, if requested by the Company, enforce all of its rights under such Transferred Subsidiary Contracts, as applicable, in respect of such default;
(g)      shall not cause or, to the extent reasonably within its control, permit any Encumbrances to attach to the West Vela other than in connection with the Rig Financing Agreements; and
(h)      shall permit representatives of the Company to make, prior to the Closing Date, at the Company’s risk and expense, such searches, surveys, tests and inspections of the West Vela as the Company may deem desirable; provided , however , that such surveys, tests or inspections shall not damage the West Vela or interfere with the activities of Seadrill or the customer thereon and that the Company shall furnish to Seadrill with evidence that the Company has adequate liability insurance in full force and effect.
Section 6.2      Covenant of the Company Prior to the Closing Date
. The Company hereby agrees and covenants that during the period of time after the date of the Agreement and prior to the Closing Date, the Company shall, in respect of the contributions, purchases, sales and equity issuances to be effected hereunder at the Closing Date, take, or cause to be taken, to the extent not already taken, all necessary limited liability company action, steps and proceedings to approve or authorize validly and effectively the contributions, purchases, sales and equity issuances and the execution, delivery and performance of this Agreement and any other agreements and documents contemplated hereby.
Section 6.3      Covenant of Capricorn Holdings Prior to the Closing Date
. Capricorn Holdings hereby agrees and covenants that during the period of time after the date of the Agreement and prior to the Closing Date, Capricorn Holdings shall, in respect of the contributions, purchases, sales and equity issuances to be effected hereunder at the Closing Date, take, or cause to be taken, to the extent not already taken, all necessary limited liability company action, steps and proceedings to approve or authorize validly and effectively the contributions, purchases, sales and equity issuances and the execution, delivery and performance of this Agreement and any other agreements and documents contemplated hereby.

Article VII

CONDITIONS OF CLOSING
Section 7.1      Conditions of the Parties
. The obligation of the Parties to effect the contributions, purchases, transfers, sales and equity issuances set forth in Article II of this Agreement is subject to the satisfaction (or waiver by each of the Parties) on or prior to the Closing Date of the following conditions:
(a)      Seadrill and the Transferred Subsidiaries, as applicable, shall have received any and all written consents, permits, approvals or authorizations of any Governmental Authority or any other Person (including with respect to the Transferred Subsidiary Contracts and the Rig Financing Agreements) and shall have made any and all notices or declarations to or filing with any Governmental Authority or any other Person, including those related to any Environmental Laws or regulations, required in connection with the execution and delivery of this Agreement or the consummation of the transactions contemplated hereunder;
(b)      No legal or regulatory action or proceeding shall be pending or threatened by any governmental authority to enjoin, restrict or prohibit the transactions contemplated hereunder;
(c)      Seadrill and the Company shall have entered into a letter agreement substantially in the form attached as Exhibit A ;
(d)      Seadrill Gulf Vela and Seadrill Americas shall have entered into an Advisory, Technical and Administrative Services Agreement in a form satisfactory to the parties thereto; and
(e)      The Company and Capricorn Holdings shall have obtained funds in order to consummate the transactions contemplated hereunder.
Section 7.2      Conditions of Seadrill and Seadrill Americas
. The obligations of Seadrill and Seadrill Americas to effect the contributions, purchases, transfers and sales set forth in Article II of this Agreement are subject to the satisfaction (or waiver by each of Seadrill and Seadrill Americas) on or prior to the Closing Date of the following conditions:
(c)      The representations and warranties of each of the Company and Capricorn Holdings made in this Agreement shall be true and correct in all material respects as of the Closing Date as though made at Closing Date, except to the extent such representations and warranties expressly relate to an earlier date (in which case such representations and warranties shall be true and correct in all material respects, on and as of such earlier date);
(d)      Each of the Company and Capricorn Holdings shall have performed or complied in all material respects with all obligations and covenants required by this Agreement to be performed or complied with by them by the Closing Date; and
(e)      All proceedings to be taken in connection with the transactions contemplated by this Agreement and all documents incidental thereto shall be reasonably satisfactory in form and substance to Seadrill and Seadrill Americas and their counsel, and Seadrill and Seadrill Americas shall have received copies of all such documents and other evidence as they may reasonably request in order to establish the consummation of such transactions and the taking of all proceedings in connection therewith.
Section 7.3      Conditions of the Company and Capricorn Holdings
. The obligations of the Company and Capricorn Holdings to effect the contributions, purchases, transfers, sales and equity issuances set forth in Article II of this Agreement are subject to the satisfaction (or waiver by each of the Company and Capricorn Holdings) on or prior to the Closing Date of the following conditions:
(a)      The representations and warranties of Seadrill as to itself and as to Seadrill Americas, each of the Transferred Subsidiaries and the West Vela in this Agreement shall be true and correct in all material respects as of the Closing Date as though made on the Closing Date, except to the extent such representations and warranties expressly relate to an earlier date (in which case such representations and warranties shall be true and correct in all material respects, on and as of such earlier date);
(b)      Each of Seadrill, Seadrill Americas and the Transferred Subsidiaries shall have performed or complied in all material respects with all obligations and covenants required by this Agreement to be performed or complied with by them;
(c)      The results of the searches, surveys, tests and inspections of the West Vela referred to in Section 6.1(h) of this Agreement are reasonably satisfactory to the Company; and
(d)      All proceedings to be taken in connection with the transactions contemplated by this Agreement and all documents incidental thereto shall be reasonably satisfactory in form and substance to the Company and Capricorn Holdings and their counsel, and the Company and Capricorn Holdings shall have received copies of all such documents and other evidence as they or their counsel may reasonably request in order to establish the consummation of such transaction and the taking of all proceedings in connection therewith.
Article VIII

TERMINATION, AMENDMENT AND WAIVER
Section 8.1      Termination of this Agreement
. Notwithstanding anything to the contrary in this Agreement, this Agreement may be terminated and the transactions contemplated by this Agreement abandoned at any time prior to the Closing Date:
(f)      by mutual written consent of Seadrill, Seadrill Americas, the Company and Capricorn Holdings;
(g)      by Seadrill and Seadrill Americas if any of the conditions set forth in Section 7.2 of this Agreement shall have become incapable of fulfillment, and shall not have been waived by Seadrill and Seadrill Americas; or
(h)      by the Company and Capricorn Holdings if any of the conditions set forth in Section 7.3 shall have become incapable of fulfillment, and shall not have been waived by the Company and Capricorn Holdings;
provided , however , that the Parties seeking termination pursuant to clause (b) or (c) is not then in material breach of any of their representations, warranties, covenants or agreements contained in this Agreement.
Section 8.2      Amendments and Waivers
. This Agreement may not be amended except by an instrument in writing signed on behalf of each Party hereto. An instrument in writing by the Company and Capricorn Holdings, on the one hand, or Seadrill and Seadrill Americas, on the other hand, may waive compliance by the other with any term or provision of this Agreement that such other Party was or is obligated to comply with or perform.
Article IX

INDEMNIFICATION
Section 9.1      Indemnification by Seadrill and Seadrill Americas
. Subject to the provisions of Section 9.2 , following the Closing Date, Seadrill and Seadrill Americas (the “ Seadrill Indemnitors ”) shall be liable for, and shall indemnify, defend and hold harmless the Company and Capricorn Holdings and their respective officers, directors, employees, agents and representatives (the “ Company Indemnitees ”) from and against:
(e)      any Losses suffered or incurred by such Company Indemnitee by reason of, arising out of or otherwise in respect of any inaccuracy in, breach of any representation or warranty, or a failure to perform or observe fully any covenant, agreement or obligation of Seadrill or Seadrill Americas in or under this Agreement or in or under any document, instrument or agreement delivered pursuant to this Agreement by Seadrill or Seadrill Americas;
(f)      any Covered Environmental Losses relating to the Transferred Subsidiaries or the West Vela prior to or at the Closing Date (the “ Covered Assets ”) to the extent that Seadrill and Seadrill Americas are notified by the Company and Capricorn Holdings of any such Covered Environmental Losses within five (5) years after the Closing Date;
(g)      any Losses (other than Covered Environmental Losses) suffered or incurred by such Company Indemnitees in relation to the West Vela for periods prior to the Closing;
(h)      all federal, state, foreign and local income tax liabilities attributable to the operation of the Covered Assets prior to the Closing Date, including any such income tax liabilities of Seadrill and Seadrill Americas that may result from the consummation of the transactions contemplated by this Agreement, but excluding any federal, state, foreign and local income taxes reserved on the books of the Transferred Subsidiaries on the Closing Date; and
(i)      any fees, expenses or other payments incurred or owed by Seadrill or Seadrill Americas to any brokers, financial advisors or comparable other persons retained or employed by it in connection with the transactions contemplated by this Agreement.
Section 9.2      Limitations Regarding Indemnification
.
(a)      The aggregate liability of Seadrill and Seadrill Americas under Section 9.1 shall not exceed $450,000,000.
(b)      All obligations of any party to indemnify, hold harmless pursuant to this Agreement, shall apply irrespective of cause and notwithstanding the negligence (whether sole, concurrent, joint, active or passive) or breach of duty (whether statutory, contractual or otherwise), gross negligence or willful misconduct, or the unseaworthiness of any vessel or unairworthiness of any aircraft or is the result of any pre-existing condition, of the indemnified Party or any other entity or party; provided, however, that the following claims and all obligations to pay such claims shall be excluded from the obligations to indemnify and hold harmless hereunder: (i) fines and penalties imposed on any indemnitee up to the amount of $10 million; (ii) punitive damages up to the amount of $10 million; and (iii) any and all damages cause by a party’s gross negligence or willful misconduct up to the amount of $10 million.
Section 9.3      Indemnification by the Company and Capricorn Holdings
. Following the Closing Date, the Company and Capricorn Holdings (the “ Company Indemnitors ”) shall be liable for, and shall indemnify, defend and hold harmless Seadrill and Seadrill Americas and their respective officers, directors, employees, agents and representatives (the “ Seadrill Indemnitees ”) from and against any Losses, suffered or incurred by such Seadrill Indemnitee by reason of, arising out of or otherwise in respect of any inaccuracy in, breach of any representation or warranty, or a failure to perform or observe fully any covenant, agreement or obligation of, the Company and Capricorn Holdings in or under this Agreement or in or under any document, instrument or agreement delivered pursuant to this Agreement by the Company and Capricorn Holdings or, to the extent such losses occur after the Closing Date, any Losses arising out of the West Vela Drilling Contract or any violation or correction of violation of Environmental Laws with regard to the ownership or operation by the Company and Capricorn Holdings or Seadrill Vela Hungary of the Covered Assets.
Section 9.4      Indemnification by Seadrill for Certain Liabilities Arising under Rig Financing Agreements
.
Without regard to the limitation set forth in Section 9.2(a) , following the Closing Date, Seadrill shall be liable for, and shall indemnify, defend and hold harmless the Company, Capricorn Holdings and Seadrill Vela Hungary and their respective officers, directors, employees, agents and representatives (the “ Rig Financing Indemnitees ”) from and against any (i) any payments of, or obligations with respect to, principal, interest, fees, costs, expenses, indemnities, or other amounts required to be made by such Rig Financing Indemnitees under the Rig Financing Agreements under or with respect to any loans thereunder other than those made in connection with the West Vela or the Transferred Subsidiaries, and (ii) Losses, suffered or incurred by such Rig Financing Indemnitees by reason of, arising out, of or otherwise in respect of any inaccuracy in, breach of any representation or warranty, or a failure to perform or observe fully any covenant, agreement or obligation, of the Rig Financing Agreements, excluding any such Losses caused by Seadrill Vela Hungary or relating to the ownership or operation by Company, Capricorn Holdings or Seadrill Vela Hungary of the Covered Assets.
Article X

FURTHER ASSURANCES
Section 10.1      Further Assurances
. From time to time after the date of this Agreement, and without any further consideration, the Parties agree to execute, acknowledge and deliver all such additional deeds, assignments, bills of sale, conveyances, instruments, notices, releases, acquittances and other documents, and will do all such other acts and things, all in accordance with applicable Law, as may be necessary or appropriate (a) to more fully to assure that the applicable Parties own all of the properties, rights, titles, interests, estates, remedies, powers and privileges granted by this Agreement, or which are intended to be so granted, (b) to more fully and effectively to vest in the applicable Parties and their respective successors and assigns beneficial and record title to the interests contributed and assigned by this Agreement or intended so to be and (c) to more fully and effectively carry out the purposes and intent of this Agreement.
Section 10.2      Power of Attorney
.
(a)      Each of the Company and Capricorn Holdings hereby constitutes and appoints Georgina Sousa (the “ Company Attorney-in-Fact ”) as its true and lawful attorney-in-fact with full power of substitution for it and in its name, place and stead or otherwise on behalf of each of the Company and Capricorn Holdings and their successors and assigns, and for the benefit of the Company Attorney-in-Fact to demand and receive from time to time the interests contributed, conveyed, purchased, sold or issued pursuant to this Agreement (or intended so to be) and to execute in the name of the Company and Capricorn Holdings and their successors and assigns instruments of conveyance, instruments of further assurance and to give receipts and releases in respect of the same, and from time to time to institute and prosecute in the name of the Company and Capricorn Holdings for the benefit of the Company Attorney-in-Fact, any and all proceedings at law, in equity or otherwise which the Company Attorney-in-Fact may deem proper in order to (i) collect, assert or enforce any claims, rights or titles of any kind in and to the interests contributed, conveyed, assigned, assumed, purchase, sold or issued pursuant to this Agreement, (ii) defend and compromise any and all actions, suits or proceedings in respect of any of the interests contributed, conveyed, assigned, assumed, purchase, sold or issued pursuant to this Agreement (or intended so to be), and (iii) do any and all such acts and things in furtherance of this Agreement as the Company Attorney-in-Fact shall deem advisable. Each of the Company and Capricorn Holdings hereby declares that the appointment hereby made and the powers hereby granted are coupled with an interest and are and shall be irrevocable and perpetual and shall not be terminated by any act of the Company and Capricorn Holdings or their successors or assigns or by operation of law.
(b)      Each of Seadrill and Seadrill Americas hereby constitutes and appoints Georgina Sousa (the “ Seadrill Attorney-in-Fact ”) as its true and lawful attorney in fact with full power of substitution for it and in its name, place and stead or otherwise on behalf of Seadrill and Seadrill Americas and their successors and assigns, and for the benefit of the Seadrill Attorney-in-Fact to demand and receive from time to time the interests contributed, conveyed, purchased, sold or issued pursuant to this Agreement (or intended so to be) and to execute in the name of Seadrill and Seadrill Americas and their successors and assigns instruments of conveyance, instruments of further assurance and to give receipts and releases in respect of the same, and from time to time to institute and prosecute in the name of Seadrill and Seadrill Americas for the benefit of the Seadrill Attorney-in-Fact, any and all proceedings at law, in equity or otherwise which the Seadrill Attorney-in-Fact may deem proper in order to (i) collect, assert or enforce any claims, rights or titles of any kind in and to the interests contributed, conveyed, assigned, assumed, purchase, sold or issued pursuant to this Agreement, (ii) defend and compromise any and all actions, suits or proceedings in respect of any of the interests contributed, conveyed, assigned, assumed, purchase, sold or issued pursuant to this Agreement, and (iii) do any and all such acts and things in furtherance of this Agreement as the Seadrill Attorney-in-Fact shall deem advisable. Each of Seadrill and Seadrill Americas hereby declares that the appointment hereby made and the powers hereby granted are coupled with an interest and are and shall be irrevocable and perpetual and shall not be terminated by any act of Seadrill or Seadrill Americas or their successors or assigns or by operation of law.
Article XI

MISCELLANEOUS
Section 11.1      Survival of Representations and Warranties
. The representations and warranties of Seadrill as to itself and as to Seadrill Americas, each of the Transferred Subsidiaries and the West Vela contained in this Agreement and in or under any documents, instruments and agreements delivered pursuant to this Agreement, will survive the completion of the transactions contemplated hereby regardless of any independent investigations that the Company may make or cause to be made, or knowledge it may have, prior to the date of this Agreement and will continue in full force and effect for a period of one year from the date of this Agreement. At the end of such period, such representations and warranties will terminate, and no claim may be brought by the Company against Seadrill thereafter in respect of such representations and warranties, except for claims that have been asserted by the Company prior to the date of this Agreement.
Section 11.2      Headings; References, Interpretation
. All Article and Section headings in this Agreement are for convenience only and shall not be deemed to control or affect the meaning or construction of any of the provisions hereof. The words “hereof,” “herein” and “hereunder” and words of similar import, when used in this Agreement, shall refer to this Agreement as a whole, including, without limitation, all Schedules attached hereto, and not to any particular provision of this Agreement. All references herein to Articles, Sections and Schedules shall, unless the context requires a different construction, be deemed to be references to the Articles and Sections of this Agreement and the Schedules attached hereto, and all such Schedules attached hereto are hereby incorporated herein and made a part hereof for all purposes. All personal pronouns used in this Agreement, whether used in the masculine, feminine or neuter gender, shall include all other genders, and the singular shall include the plural and vice versa. The use herein of the word “including” following any general statement, term or matter shall not be construed to limit such statement, term or matter to the specific items or matters set forth immediately following such word or to similar items or matters, whether or not non‑limiting language (such as “without limitation,” “but not limited to” or words of similar import) is used with reference thereto, but rather shall be deemed to refer to all other items or matters that could reasonably fall within the broadest possible scope of such general statement, term or matter.
Section 11.3      Successors and Assigns
. This Agreement shall be binding upon and inure to the benefit of the Parties and their respective successors and assigns.
Section 11.4      No Third Party Rights
. Other than the rights of indemnification provided to Capricorn Holdings’ withholding agents pursuant to Section 2.10 and Seadrill Vela Hungary pursuant to Section 9.4 , the provisions of this Agreement are intended to bind the Parties as to each other and are not intended to and do not create rights in any other person or confer upon any other person any benefits, rights or remedies, and no person is or is intended to be a third party beneficiary of any of the provisions of this Agreement.
Section 11.5      Counterparts
. This Agreement may be executed in any number of counterparts with the same effect as if all signatory Parties had signed the same document. All counterparts shall be construed together and shall constitute one and the same instrument. The delivery of an executed counterpart copy of this Agreement by facsimile or electronic transmission in PDF format shall be deemed to be the equivalent of delivery of the originally executed copy thereof.
Section 11.6      Governing Law
. This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York.
Section 11.7      Severability
. If any of the provisions of this Agreement are held by any court of competent jurisdiction to contravene, or to be invalid under, the laws of any governmental body having jurisdiction over the subject matter hereof, such contravention or invalidity shall not invalidate the entire Agreement. Instead, this Agreement shall be construed as if it did not contain the particular provision or provisions held to be invalid and an equitable adjustment shall be made and necessary provision added so as to give effect, as nearly as possible, to the intention of the Parties as expressed in this Agreement at the time of execution of this Agreement.
Section 11.8      Deed; Bill of Sale; Assignment
. To the extent required and permitted by applicable law, this Agreement shall also constitute a “deed,” “bill of sale” or “assignment” of the interests referenced herein.
Section 11.9      Integration
. This Agreement and the instruments referenced herein supersede all previous understandings or agreements among the Parties, whether oral or written, with respect to the subject matter of this Agreement and such instruments. This Agreement and such instruments contain the entire understanding of the Parties with respect to the subject matter hereof and thereof. No understanding, representation, promise or agreement, whether oral or written, is intended to be or shall be included in or form part of this Agreement unless it is contained in a written amendment hereto executed by the Parties after the date of this Agreement.
[THE REMAINDER OF THIS PAGE IS LEFT INTENTIONALLY BLANK]

IN WITNESS WHEREOF, the parties to this Agreement have caused it to be duly executed as of the date first above written.
SEADRILL LIMITED



By:     /s/ Rune Magnus Lundetrae     
Name:     Rune Magnus Lundetrae     
Title:     Attorney-in-fact     


SEADRILL PARTNERS LLC



By:     /s/ Graham Robjohns     
Name:     Graham Robjohns     
Title:     CEO     


SEADRILL CAPRICORN HOLDINGS LLC



By:     /s/ Graham Robjohns     
Name:     Graham Robjohns     
Title:     CEO     


SEADRILL AMERICAS INC.



By:     /s/ Rune Magnus Lundetrae     
Name:     Rune Magnus Lundetrae     
Title:     Attorney-in-fact     


SCHEDULE A
INSURANCE POLICIES

Type
Insurer
Policy Number
Effective Date(s)
Hull & Machinery, Hull Interest and Freight Interest
Marsh AS
21933/14
July 1, 2014 through June 30, 2015
War Risk
The Norwegian Shipowners’ Mutual War Risks Insurance Association
2014 11890 35 1
January 1, 2014 through December 31, 2014
Hull & Machinery, Hull Interest and Freight Interest
Lloyd & Partners Limited
PE1409806
PE1409813
July 1, 2014 through July 1, 2015
Comprehensive General Liability and P&I
Gard P. & I. (Bermuda) Ltd.
307.740
February 20, 2014 through February 20, 2015
Bunker Oil Pollution Damage
Safeguard Guarantee Company Ltd.
B 37605
February 20, 2014 through February 20, 2015


SCHEDULE B

VESSEL REGISTRATION AND CLASSIFICATION

Rig Name
Registered Flag
Classification Society
West Vela
Panama
American Bureau of Shipping


9





EXHIBIT A
FORM OF LETTER AGREEMENT

[Attached.]

EXHIBIT A TO
CONTRIBUTION, PURCHASE AND SALE AGREEMENT






[Seadrill Partners LLC letterhead]

November 4, 2014

Seadrill Partners LLC
2nd Floor, Building 11
Chiswick Business Park
566 Chiswick High Road
London W4 5YS

Seadrill Limited
Par-la-Ville Place, 4th Floor
14 Par-la-Ville Road
Hamilton HM 08 Bermuda

Reference is made to (i) the Contribution, Purchase and Sale Agreement, dated as of November 4, 2014 (the “ Agreement ”), by and among Seadrill Limited, a Bermuda exempted company (“ Seadrill ”), Seadrill Partners LLC, a Marshall Islands limited liability company (the “ Company ”), Seadrill Capricorn Holdings LLC, a Marshall Islands limited liability company (“ Capricorn Holdings ”), and Seadrill Americas Inc., a Texas corporation (“ Seadrill Americas ”) and (ii) the On Demand Guarantee, dated November 4, 2014, between the Company and ING Bank N.V. (the “ Guarantee ”). Capitalized terms used in this letter agreement and not otherwise defined herein will have the meanings ascribed to them in the Agreement.


The undersigned parties hereby agree that:

1.
In exercising its rights to amend the Rig Financing Agreements as agent for the Obligors (as defined in the West Vela Credit Facility) pursuant to Section 2.3 of the West Vela Credit Facility, Seadrill will act reasonably and in good faith, considering the interests of the Company, Capricorn Holdings and Seadrill Vela Hungary, and, if reasonably practicable, Seadrill will consult with the Company prior to entering into any such amendments;

2.
Subject to the rights of the lenders to require payment of all obligations under the West Vela Credit Facility prior to any claims for contribution among the guarantors, in the event that (a) the Company is required to make any payment pursuant to its guarantee obligations set forth in Section 2 of the Guarantee or (b) Seadrill is required to make any payment pursuant to its guarantee obligations set forth in Section 18.1 of the West Vela Credit Facility, Seadrill and the Company agree that (i) Seadrill shall pay, be liable for and reimburse to the Company all amounts not attributable to the tranches under the West Vela Credit Facility which relate to the Covered Assets and (ii) Seadrill and the Company shall cause Capricorn Holdings to pay all amounts attributable to the tranches under the West Vela Credit Facility which relate to the Covered Assets, and each of Seadrill and the Company shall pay, be liable for and contribute such amounts to Capricorn Holdings, in proportion to their ownership of Capricorn Holdings, as may be necessary for Capricorn Holdings to make such payment;


EXHIBIT A TO
CONTRIBUTION, PURCHASE AND SALE AGREEMENT





3.
In the event that the Company, Capricorn Holdings or Seadrill Vela Hungary inform Seadrill of their intent to sell or refinance the Covered Assets, Seadrill will exercise commercially reasonable efforts in good faith to refinance the drillship West Tellus . In the event that Seadrill informs the Company of its intent to sell or refinance the West Tellus , then the Company will exercise commercially reasonable efforts in good faith to refinance the Covered Assets; and

4.
Seadrill and the Company each agree to cause their controlled affiliates to comply with the terms of the Rig Financing Agreements, and to exercise their best efforts to promptly cure any breach of representation, warranty, covenant or other obligation under the Rig Financing Agreements.
    
Please acknowledge your acceptance and agreement of this letter agreement by signing in the space provided below. Upon your execution of this letter agreement (or counterpart copies hereof), this letter agreement shall become binding on the parties hereto.

[Remainder of page intentionally left blank]


EXHIBIT A TO
CONTRIBUTION, PURCHASE AND SALE AGREEMENT





Very truly yours,
    
SEADRILL PARTNERS LLC

By:_____________________________
Name:________________________
Title: ________________________
    


EXHIBIT A TO
CONTRIBUTION, PURCHASE AND SALE AGREEMENT





Acknowledged and agreed:

SEADRILL LIMITED

By:_____________________________
Name:_________________________
Title: _________________________



















EXHIBIT A TO
CONTRIBUTION, PURCHASE AND SALE AGREEMENT


EXHIBIT 4.40

SECOND AMENDMENT AND RESTATEMENT AGREEMENT
dated 4 November 2014
to the
USD 1,450,000,000
SENIOR SECURED CREDIT FACILITY AGREEMENT
originally dated 20 March 2013 and as previously amended pursuant to two accession letters each dated 28 March 2013, a first amendment and restatement agreement dated 21 March 2014, two amendment letters dated 26 June 2014 and 15 October 2014, respectively
for
Seadrill Tellus Ltd.
and
Seadrill Vela Hungary Kft.
as Borrowers

Seadrill Limited
as Parent

The companies named therein
as Guarantors

Provided by
 
The Banks and financial institutions named herein
as Lenders

Arranged by
ING Bank N.V
as Agent, K-sure Agent, Commercial Coordinator and Commercial Bookrunner
and

HSBC Bank plc
as ECA Coordinator and ECA Bookrunner

www.bahr.no


5179885/1        1 (156)




CONTENTS
Clause
Page
1. DEFINITIONS AND INTERPRETATIONS      4
2. CONDITIONS PRECEDENT     5
3. REPRESENTATIONS AND WARRANTIES     5
4. AMENDED FACILITY AGREEMENT     6
5. CONTINUING OBLIGATIONS     6
6. COSTS AND EXPENSES     7
7. MISCELLANEOUS     7
8. GOVERNING LAW     7

Schedule 1 CONDITIONS PRECEDENT
Schedule 2 AMENDED AND RESTATED FACILITY AGREEMENT



5179885/1        2 (156)



THIS SECOND AMENDMENT AND RESTATEMENT AGREEMENT is dated 4 November 2014 and made between:
(1)
Seadrill Tellus Ltd. , organisation number 45260 of Par-la-Ville Place, 14 Par-la-Ville Road, Hamilton, HM08, Bermuda and Seadrill Vela Hungary Kft. , organisation number 13-09-162740 of 2724 Ujlengyel, Petofi Sandor utca 40, Hungary, as joint and several borrowers (each a “ Borrower” , collectively the “ Borrowers” );
(2)
Seadrill Limited , of Par-la-Ville Place, 14 Par-la-Ville Road, Hamilton, HM08, Bermuda, organisation number 36832, as parent and guarantor (the “ Parent ” and/or a “ Guarantor” );
(3)
The companies listed as Intra-Group Charterers or otherwise identified as Guarantors in Schedule 2 ( Guarantors and Drillships ) to the Amended Facility Agreement, and Seadrill Capricorn Holdings LLC (“ Seadrill Capricorn ”), as set out in Schedule 2 hereto, as joint and several guarantors (each a “ Guarantor ”, together with the Parent, the “ Guarantors ”) all being wholly or partially owned Subsidiaries of the Parent (together with the Borrowers, the “ Obligors ”);
(4)
The banks and financial institutions listed as Commercial Lenders in Schedule 1 ( Lenders and Commitments ) of the Original Facility Agreement, as the original commercial lenders (each a “ Commercial Lender ” together, the “ Commercial Lenders ”);
(5)
The banks and financial institutions listed as K-sure Lenders in Schedule 1 ( Lenders and Commitments ) of the Original Facility Agreement, as the original K-sure lenders (together, the “ K-sure Lenders ”);
(6)
Citibank Europe PLC of Citibank Europe Plc, 1, North wall Quay, Dublin 1, Ireland, organisation number 132781 and the other bank or financial institutions designated as GIEK lenders (the “ GIEK Lender ”);
(7)
Citibank N.A., London Branch as GIEK guarantee holder on behalf of the GIEK Lender (the "GIEK Guarantee Holder" ) ;
(8)
The Export-Import Bank of Korea of 38 Eunhaeng-ro (16-1, Yeouido-dong), Yeongdeungpo-gu, Seoul 150-996, Republic of Korea, organisation number 111235-0000158 (“ KEXIM” );
(9)
ING Bank N.V. of Bijlmerplein 888, 1102 MG Amsterdam, The Netherlands, organisation number 33031431 as facility agent, security agent, documentation agent, commercial coordinator and commercial bookrunner and ING Bank N.V., Seoul Branch, 15th Floor, Hungkuk Life Insurance Building, 226, Shinmunro 1-ga, Chongro-ku, Seoul 110-061, Korea as K-sure agent (together the “ Agent ”);
(10)
The banks and financial institutions listed as Mandated Lead Arrangers in Schedule 1 ( Lenders and Commitments ) of the Original Facility Agreement, as mandated lead arrangers (the “ Mandated Lead Arrangers ”); and
(11)
The banks and financial institutions listed in Schedule 1 ( Lenders and Commitments ) of the Original Facility Agreement, as lead arrangers (the “ Lead Arrangers ”).
WHEREAS:
(A)
Pursuant to the senior secured credit facility agreement originally dated 20 March 2013, as amended, inter alia, by an amendment and restatement agreement dated 21 March 2014, two amendment letters dated 26 June 2014 and 15 October 2014, respectively, and entered into by, inter alia, each of Seadrill Auriga Ltd., (as later substituted by Seadrill Auriga Hungary Kft. pursuant to an accession letter dated 28 March

5179885/1        3 (156)



2013 and thereafter released from its obligations under the Finance Documents), Seadrill Tellus Ltd. and Seadrill Vela Ltd. (as later substituted by Seadrill Vela Hungary Kft. pursuant to an accession letter dated 28 March 2013), as Borrowers, Seadrill Limited as Parent, the Guarantors named therein, the Commercial Lenders named therein, the K-sure Lenders named therein and the GIEK Lender named therein, the Lenders as defined therein made available to the Borrowers a USD 1,450,000,000 senior secured credit facility pursuant to the terms of the said agreement.
(B)
The Parent has requested that the ownership of Seadrill Gulf Operations Vela LLC (" Seadrill Gulf Vela ") and Seadrill Vela Hungary Kft. (the " Vela Borrower ") be transferred from Seadrill Americas Inc. and the Parent respectively to Seadrill Capricorn Holdings LLC, a Marshall Islands incorporated limited liability company which is 100% owned by the Parent and Seadrill Partners LLC collectively (the “ Transfer ”).
(C)
Seadrill Capricorn Holdings LLC will accede to the Amended Facility Agreement as a Guarantor.
(D)
In relation to the Transfer, the Borrowers have requested the consent of the Finance Parties in respect of Clause 23.11 ( Mergers and demergers ), and Clause 23.17 ( Disposals ), and have requested that such change of ownership is reflected in the Facility Agreement, inter alia in Clause 20.17 ( Ownership ) and Clause 23.23 ( Ownership ).
(E)
The drillship “West Tellus” is currently not employed under any Satisfactory Drilling Contract, and as a consequence, the Borrowers request that the requirement in Clause 22.6 ( Debt Service Cover Ratio ) is waived in respect of Seadrill Tellus Ltd. until the earlier of 12 months after the “West Tellus” is employed under a Satisfactory Drilling Contract or May 29 2016.
(F)
Subject to the terms and conditions of this Second Amendment and Restatement Agreement, the Lenders have consented to amending the Original Facility Agreement as set out in Schedule 2 ( Form of Amended and Restated Facility Agreement ).
NOW THEREFORE , it is hereby agreed as follows:

5179885/1        4 (156)



DEFINITIONS AND INTERPRETATIONS
Definitions
In this Agreement, unless the context otherwise requires:
“ Amended Facility Agreement ” means the Original Facility Agreement, as amended and restated by this Agreement in the form set out in Schedule 2 ( Amended and Restated Facility Agreement ).
“ Effective Time ” means the date defined as such in Clause 2 of this Second Amendment and Restatement Agreement.
“ Original Facility Agreement ” means the USD 1,450,000,000 senior secured credit facility agreement originally dated 20 March 2013, as amended by two accession letters, each dated 28 March 2013, as further amended by a first amendment and restatement agreement dated 21 March 2014, and further by an amendment letter dated 26 June 2014 and an amendment letter dated 15 October 2014.
“ Seadrill Partners LLC Guarantee ” means a separate guarantee provided by Seadrill Partners LLC in favour of the Finance Parties, whereby Seadrill Partners LLC guarantees for the obligations of Seadrill Vela Hungary Kft. under the Tranches relating to the “West Vela”, limited to the amount of USD 497,500,000.
“ Second Amendment and Restatement Agreement ” means this agreement.
“ Share Charges ” means the first priority charges over all the shares, equity interest or membership interest (as applicable) of the Vela Borrower and Seadrill Gulf Vela to be granted by Seadrill Capricorn, replacing the share charges provided by the Parent and Seadrill Americas Inc. as security for the Obligors' obligations under the Finance Documents in form and substance satisfactory to the Agent (on behalf of the Finance Parties).
Incorporation of defined terms and Clauses
Unless the context otherwise requires, a term defined in the Original Facility Agreement has the same meaning when used in this Second Amendment and Restatement Agreement.
The principles of construction set out in the Original Facility Agreement shall have effect as if set out in this Second Amendment and Restatement Agreement.
In this Second Amendment and Restatement Agreement any reference to a “Clause” or a “Schedule” is, unless the context otherwise requires, a reference to a Clause of or a Schedule to this Second Amendment and Restatement Agreement
CONDITIONS PRECEDENT
The provisions of Clause 4 ( Amended Facility Agreement ) shall be effective from the time the Agent notifies the Borrowers, the Guarantors and the Lenders that it has received all the documents and other evidence listed Schedule 1 ( Conditions Precedent ), of this Second Amendment and Restatement Agreement, each in a form and substance satisfactory to the Agent (the " Effective Time ") acting on behalf of the Lenders. The Agent shall notify the Borrowers, the Lenders and the Guarantors promptly upon being so satisfied.
REPRESENTATIONS AND WARRANTIES
Each of the Obligors makes the representations and warranties set out in Clause 20 ( Representations and warranties ) of the Original Facility Agreement by reference to the facts and circumstances then existing:
on the date of this Second Amendment and Restatement Agreement; and
on the Effective Time,
as if references in Clause 20 ( Representations and warranties ) of the Original Facility Agreement were instead to this Second Amendment and Restatement Agreement and, on the Effective Time, to the Amended Facility Agreement.
AMENDED FACILITY AGREEMENT
With effect from the Effective Time, the Original Facility Agreement shall be amended in the form as set out in Schedule 2 ( Amended and Restated Facility Agreement ) hereto, and the Finance Parties consents to the amendments as reflected therein.
WAIVER OF REQUIREMENT FOR DEBT SERVICE COVER RATIO
The Finance Parties agree that until the earlier of 12 months after the “West Tellus” is employed under a Satisfactory Drilling Contract or May 29 2016, Clause 22.6 ( Debt Service Cover Ratio ) shall be waived in respect of Seadrill Tellus Ltd.
RELEASE OF SECURITY
With effect from the Effective Time, the following security shall be released:
A quota pledge agreement provided by Seadrill Limited in favour of the Agent in respect of all quotas (shares) in Seadrill Vela Hungary kft.
A membership interest pledge provided by Seadrill Americas Inc. in favour of the Agent in respect of all membership interests (shares) in Seadrill Gulf Operations Vela LLC.
All costs associated with such release shall be for the Borrowers’ costs, who shall take all actions necessary to effect such release in order to allow for new corresponding security to be efficiently taken by the Agent.
CONTINUING OBLIGATIONS
Continuing obligations and effect
The provisions of the Original Facility Agreement and the other Finance Documents (including, but not limited to each and all the securities provided and/or created by each of the Obligors in favour of the Finance Parties under such documents) shall, save as amended by this Second Amendment and Restatement Agreement, continue in full force and effect. All references in the Original Facility Agreement to "this Agreement", "hereof", "hereby", "hereto" and the like shall mean the Amended Facility Agreement.
Continuing security
Each Obligor confirms, agrees and undertakes, that each and all the securities (including, but not limited to guarantees) provided and/or created by each of the Obligors in favour of the Finance Parties under the Original Facility Agreement and the other Finance Documents shall, save as supplemented or amended by this Second Amendment Agreement, continue in full force and effect as security for the Obligors' obligations and liabilities under the Amended Facility Agreement and the other Finance Documents.
COSTS AND EXPENSES
The provisions of Clause 17 ( Costs and expenses ) of the Original Facility Agreement shall be incorporated into this Second Amendment and Restatement Agreement as if set out in full in this Second Amendment and Restatement Agreement and as if references in those clauses to "this Agreement" are references to this Second Amendment and Restatement Agreement.
MISCELLANEOUS
Incorporation of terms
The provisions of Clauses 34.1 ( Partial invalidity ), 34.2 ( Remedies and waivers ), 34.5 ( Process Agent ), Clause 34.7 ( Counterparts ) and Clause 36.2 ( Jurisdiction ) of the Original Facility Agreement shall be incorporated into this Second Amendment and Restatement Agreement as if set out in full in this Second Amendment and Restatement Agreement and as if references in those clauses to “this Agreement” and/or the “the Finance Documents” are references to this Second Amendment and Restatement Agreement.
Additional Finance Document
This Agreement shall constitute a “Finance Document” for the purposes of the Amended Facility Agreement.

5179885/1        5 (156)



GOVERNING LAW
This Agreement shall be governed by Norwegian law and the legal venue shall be as stated in the Amended Facility Agreement.
*    *    *

5179885/1        6 (156)



SIGNATORIES:
The Parent:

Seadrill Limited

By: /s/ Amy Lindemann                         
Name: Amy Lindemann
Title: Attorney-in-Fact


The Borrowers:
 
 
 
Seadrill Tellus Ltd.

By: /s/ Amy Lindemann                         
Name: Amy Lindemann
Title: Attorney-in-Fact


Seadrill Vela Hungary Kft.

By: /s/ Amy Lindemann                         
Name: Amy Lindemann
Title: Attorney-in-Fact


The Intra Group Charterers and Guarantors:


Seadrill Capricorn Holdings LLC

By: /s/ Amy Lindemann                         
Name: Amy Lindemann
Title: Attorney-in-Fact


 
 
 
 
 
 
Seadrill Gulf Operations Vela LLC

By: /s/ Amy Lindemann                         
Name: Amy Lindemann

5179885/1        7 (156)



Title: Attorney-in-Fact

The Agent, Commercial Coordinator, Commercial Bookrunner, K-Sure Lender, Commercial Lender and Mandated Lead Arranger:
ING Bank N.V .

By: /s/ Ragnhild Steigberg                     
Name: Ragnhild Steigberg
Title: Attorney in Fact

The K-sure Agent. K-sure Lender and Mandated Lead Arranger :

ING Bank N.V., Seoul Branch

By: /s/ Ragnhild Steigberg                     
Name: Ragnhild Steigberg
Title: Attorney in Fact

The ECA Coordinator, ECA Bookrunner, K-sure Lender and Mandated Lead Arranger:

HSBC Bank plc

By: /s/ Ragnhild Steigberg                     
Name: Ragnhild Steigberg
Title: Attorney in Fact


The GIEK Lenders:

Citibank Europe PLC
as Mandated Lead Arranger


By: /s/ Ragnhild Steigberg                     
Name: Ragnhild Steigberg
Title: Attorney in Fact





5179885/1        8 (156)




KEXIM

By: /s/ Ragnhild Steigberg                     
Name: Ragnhild Steigberg
Title: Attorney in Fact
 
 
 
The K-sure Lenders:

Credit Suisse AG
as Mandated Lead Arranger

By: /s/ Ragnhild Steigberg                     
Name: Ragnhild Steigberg
Title: Attorney in Fact


The Bank of Tokyo-Mitsubishi UFJ, Ltd.
as Mandated Lead Arranger

By: /s/ Ragnhild Steigberg                     
Name: Ragnhild Steigberg
Title: Attorney in Fact


The Commercial Lenders:

ABN AMRO Bank N.V., Oslo Branch
as Lead Arranger

By: /s/ Ragnhild Steigberg                     
Name: Ragnhild Steigberg
Title: Attorney in Fact
 
BNP Paribas SA
as Lead Arranger

By: /s/ Ragnhild Steigberg                     
Name: Ragnhild Steigberg
Title: Attorney in Fact

Norddeutsche Landesbank Girozentrale
as Mandated Lead Arranger

By: /s/ Ragnhild Steigberg                     

5179885/1        9 (156)



Name: Ragnhild Steigberg
Title: Attorney in Fact

Standard Chartered Bank
as Mandated Lead Arranger

By: /s/ Taimur Baig                               
Name: Taimur Baig
Title: Executive Director



The Commercial Lenders and K-sure Lenders

KfW IPEX-Bank GmbH
as Mandated Lead Arranger

By: /s/ Ragnhild Steigberg                     
Name: Ragnhild Steigberg
Title: Attorney in Fact

Sumitomo Mitsui Banking Corporation
as Mandated Lead Arranger

By: /s/ Ragnhild Steigberg                     
Name: Ragnhild Steigberg
Title: Attorney in Fact



The GIEK Guarantee Holder:

Citibank N.A., London Branch


By: /s/ Ragnhild Steigberg                     
Name: Ragnhild Steigberg
Title: Attorney in Fact

 
 

5179885/1        10 (156)



Sumitomo Mitsui Trust Bank, Limited


By: /s/ Ragnhild Steigberg                       Name: Ragnhild Steigberg
Title: Attorney in Fact

Kommunal Landspensjonskasse

By: /s/ Ragnhild Steigberg                     
Name: Ragnhild Steigberg
Title: Attorney in Fact
Schedule 1
CONDITIONS PRECEDENT
1.
In respect of the each Obligor:
(a)
Company Certificate or equivalent;
(b)
Certificate of Incorporation, Articles of Association, Memorandum or equivalent documents;
(c)
resolutions passed at a board meeting (or a shareholders meeting if required by lawyers of the Agent in the relevant jurisdiction), evidencing:
(i)
the approval of the terms of, and the transactions contemplated by, this Agreement; and
(ii)
the authorisation of its appropriate officer or officers or other representatives to execute this Agreement on its behalf;
(d)
(unless granted directly by the board pursuant to the resolutions referred to in item (c) above) powers of attorney to its representative(s) for the execution of the relevant Finance Documents (as required by lawyers of the Agent in the relevant jurisdiction); and
(e)
specimen signatures of the person(s) authorised in the resolutions described in items a) and b) above, together with such identification any Lender may reasonably require to satisfy “know-your-customer” requirement applicable to such Obligor.
2.
Authorisations
Evidence that all approvals, authorisations and consents required by any government or other authorities for the Obligors and if applicable its subsidiaries to enter into and perform their obligations under any of the Finance Documents shall have been obtained and remain in effect, and all applicable waiting periods shall have expired without any action being taken by any competent authority which, in the opinion of the Agent, restrains, prevents or imposes materially adverse conditions upon the Obligors to enter into and perform their obligations under the Finance Documents.
3.
Finance Documents
Each of the Finance Documents, duly signed by all the relevant parties thereto together with evidence that the security created thereunder is legally perfected on first priority in accordance with the terms of the Finance Documents and applicable laws including, but not limited to;
(a)
The Second Amendment and Restatement Agreement;
(b)
The Share Charges;
(c)
The Seadrill Partners LLC Guarantee;
(d)
Any other Finance Document; and
(e)
such other amendments to any Security Documents or filings of this Second Amendment and Restatement Agreement as will be necessary in order to verify that the Security Documents remain in full force and effect.
4.
Miscellaneous
(a)
Evidence that the Borrower has paid, or will pay on the Effective Time, all fees payable in accordance with this Second Amendment and Restatement Agreement;
(b)
A statement from the Borrower that no Event of Default has occurred as of the Effective Time;
(c)
Evidence that the Transfer has been carried out; and
(d)
Any other documents as reasonably requested by the Agent.
5.
Legal Opinions:

(a)
Legal opinion in form and substance satisfactory to the Lenders from Conyers relating to Bermuda law issues.
(b)
Legal opinion in form and substance satisfactory to the Lenders from Allen & Overy relating to Hungary law issues.
(c)
Legal opinion in form and substance satisfactory to the Lenders from Holland & Knight LLP relating to New York, USA and Marshall Islands law issues.
(d)
Legal opinion in form and substance satisfactory to the Lenders from Holland & Knight LLP relating to Delaware law issues.
(e)
Legal opinion in form and substance satisfactory to the Lenders from BA-HR relating to Norwegian law issues.
(f)
Any such other favourable legal opinions in form and substance satisfactory to the Lenders from lawyers appointed by the Agent on matters concerning a relevant jurisdiction.
SCHEDULE 2     
AMENDED AND RESTATED FACILITY AGREEMENT

USD 1,450,000,000
SECOND AMENDED AND RESTATED
SENIOR SECURED CREDIT FACILITY AGREEMENT
originally dated 20 March 2013, as previously amended by two accession letters each dated 28 March 2013, a first amendment and restatement agreement dated 21 March 2014, and two amendment letters dated 26 June 2014 and 15 October 2014, respectively and as further amended and restated as of the Effective Time.
for
Seadrill Tellus Ltd.
and
Seadrill Vela Hungary Kft.
as Borrowers
Seadrill Limited  
as Parent
The companies named herein  
as Guarantors
Provided by
The Banks and financial institutions named herein  
as Lenders
Arranged by
ING Bank N.V.  
as Agent, K-sure Agent, Commercial Coordinator and Commercial Bookrunner
and
HSBC Bank plc
as ECA Coordinator and ECA Bookrunner

www.bahr.no

 
 
 
 
 
CONTENTS

5179885/1        11 (156)



Clause
Page
1. DEFINITIONS AND INTERPRETATION     5
2. THE FACILITY     25
3. PURPOSE     27
4. CONDITIONS PRECEDENT     27
5. UTILISATION     29
6. REPAYMENT AND REDUCTIONS     30
7. VOLUNTARY PREPAYMENT AND CANCELLATION     30
8. MANDATORY PREPAYMENT AND CANCELLATION     32
9. INTEREST     35
10. INTEREST PERIODS     36
11. CHANGES TO THE CALCULATION OF INTEREST     37
12. FEES     38
13. TAX GROSS-UP AND INDEMNITIES     40
14. INCREASED COSTS     43
15. OTHER INDEMNITIES     44
16. MITIGATION BY THE LENDERS     45
17. COSTS AND EXPENSES     46
18. GUARANTEE AND INDEMNITY     47
19. SECURITY     51
20. REPRESENTATIONS AND WARRANTIES     53
21. INFORMATION UNDERTAKINGS     58
22. FINANCIAL COVENANTS     61

5179885/1        12 (156)



23. GENERAL UNDERTAKINGS     62
24. DRILLSHIP COVENANTS     68
25. EVENTS OF DEFAULT     73
26. RECOURSE REQUIREMENTS AND RIGHT OF SUBROGATION     76
27. CHANGES TO THE PARTIES     78
28. ROLE OF THE AGENT     81
29. SHARING AMONG THE FINANCE PARTIES     92
30. PAYMENT MECHANICS     93
31. SET-OFF     96
32. NOTICES     96
33. CALCULATIONS     99
34. MISCELLANEOUS     99
35. GOVERNING LAW AND ENFORCEMENT     102

Schedule 1 Lenders and Initial Commitments
Schedule 2 Guarantors and Drillships
Schedule 3 Conditions Precedent (All conditions previously fulfilled)
Schedule 4 Form of Utilisation Request
Schedule 5 Form of Compliance Certificate
Sch edule 6 Form of Transfer Certificate
Schedule 7 Repayments
Schedule 8 Corporate Structure
Schedule 9 Mandatory Cost Formula
Schedule 10 List of Norwegian Suppliers and Contracts







5179885/1        13 (156)




THIS SECOND AMENDED AND RESTATED SENIOR SECURED CREDIT FACILITY AGREEMENT IS EFFECTIVE AS OF THE EFFECTIVE TIME (AS DEFINED HEREIN) AND MADE BETWEEN:

(1)
Seadrill Tellus Ltd. , organisation number 45260 of Par-la-Ville Place, 14 Par-la-Ville Road, Hamilton, HM08, Bermuda and Seadrill Vela Hungary Kft. , organisation number 13-09-162740 of 2724 Ujlengyel, Petofi Sandor utca 40, Hungary, as joint and several borrowers (each a “ Borrower” , collectively the “ Borrowers” );
(2)
Seadrill Limited , of Par-la-Ville Place, 14 Par-la-Ville Road, Hamilton, HM08, Bermuda, organisation number 36832, as parent and guarantor (the “ Parent ” and/or a “ Guarantor” );
(3)
The companies listed as Intra-Group Charterers or otherwise identified as Guarantors in Schedule 2 ( Guarantors and Drillships ) hereto, including Seadrill Capricorn Holdings LLC (“ Seadrill Capricorn ”), as joint and several guarantors (each a “ Guarantor ”, together with the Parent, the “ Guarantors ”) all being wholly or partially owned Subsidiaries of the Parent;
(4)
The banks and financial institutions listed as Commercial Lenders in Schedule 1 ( Lenders and Initial Commitments ) hereto, as the original commercial lenders (each a “ Commercial Lender” together, the “ Commercial Lenders ”);
(5)
The banks and financial institutions listed as K-sure Lenders in Schedule 1 ( Lenders and Initial Commitments ) hereto, as the original K-sure lenders (together, the “K-sure Lenders” );
(6)
Citibank Europe PLC of Citibank Europe Plc, 1, North wall Quay, Dublin 1, Ireland, organisation number 132781 and the other bank or financial institutions designated as GIEK lenders (the “ GIEK Lender ”);
(7)
Citibank N.A., London Branch as GIEK guarantee holder on behalf of the GIEK Lender (the "GIEK Guarantee Holder" ) ;
(8)
The Export-Import Bank of Korea of 38 Eunhaeng-ro (16-1, Yeouido-dong), Yeongdeungpo-gu, Seoul 150-996, Republic of Korea, organisation number 111235-0000158 (“ KEXIM” );
(9)
ING Bank N.V. of Bijlmerplein 888, 1102 MG Amsterdam, The Netherlands, organisation number 33031431 as facility agent, security agent, documentation agent, commercial coordinator commercial and bookrunner and ING Bank N.V., Seoul Branch, 15th Floor, Hungkuk Life Insurance Building, 226, Shinmunro 1-ga, Chongro-ku, Seoul 110-061, Korea as K-sure agent (together the “ Agent ”);
(10)
HSBC Bank plc of 8 Canada Square, Level 18, London E14 5HQ, United Kingdom, organisation number 14259 to act as ECA coordinator and ECA bookrunner;
(11)
The banks and financial institutions listed as Mandated Lead Arrangers in Schedule 1 ( Lenders and Initial Commitments ) hereto, as mandated lead arrangers (the “ Mandated Lead Arrangers ”); and
(12)
The banks and financial institutions listed in Schedule 1 ( Lenders and Initial Commitments ) hereto, as lead arrangers (the “ Lead Arrangers ”).
IT IS AGREED AS FOLLOWS
DEFINITIONS AND INTERPRETATION
Definitions
In this Agreement, unless the context otherwise requires:
“ Accounting Principles ” means, for the Parent, generally accepted accounting principles in the United States of America (US GAAP) and for any of the other Obligors or its Subsidiaries, generally accepted accounting principles in the jurisdiction of incorporation of that Obligor or its Subsidiaries.
“ Affiliate ” means, in relation to any person, a Subsidiary of that person or a Holding Company of that person or any other Subsidiary of that Holding Company.
“ Agreement ” means this senior secured credit facility agreement, as it may be amended, restated, supplemented and varied from time to time, including its Schedules and any Transfer Certificate.
“ Applicable Margin ” means;
11(a)
the Commercial Margin for the Commercial Facility;
11(b)
the GIEK Lender Margin for the GIEK Lender Facility;
11(c)
the KEXIM Margin for the KEXIM Facility; or
11(d)
the K-sure Lenders Margin for the K-sure Facility;
as the context may require.
“ Approved Brokers ” means the ship broker/consultancy firms RS Platou, Fearnleys and IHS Petrodata or such other reputable and independent consultancy or ship broker firm approved by the Agent, (such consent not to be unreasonably withheld or delayed).
“ Assignment of Earnings Accounts ” means an assignment agreement, (or, for companies in Norway (where direct assignment agreements are not permitted by law), sub-assignment agreements), collateral to this Agreement for the first priority assignment of the Earnings Accounts , to be made between the relevant Obligors and the Agent (on behalf of the Finance Parties) as security for the Obligors’ obligations under the Finance Documents, in form and substance satisfactory to the Agent (on behalf of the Finance Parties).
“ Assignment of Earnings ” means an assignment agreement, (or, for companies in Norway (where direct assignment agreements are not permitted by law), sub-assignment agreements), collateral to this Agreement for the first priority assignment of the Earnings, to be made between the relevant Borrower and Intra-Group Charterer and the Agent (on behalf of the Finance Parties) as security for the Obligors’ obligations under the Finance Documents, in form and substance satisfactory to the Agent (on behalf of the Finance Parties).
“ Assignment of Insurances ” means an assignment agreement, (or, for companies in Norway (where direct assignment agreements are not permitted by law), sub-assignment agreements), collateral to this Agreement for the first priority assignment of the Insurances to be made between the relevant Obligors and the Agent (on behalf of the Finance Parties) as security for the Obligors’ obligations under the Finance Documents, in form and substance satisfactory to the Agent (on behalf of the Finance Parties).
“ Auditors ” means well reputable and internationally recognised accountancy firms acceptable to the Required Lenders such as PriceWaterhouseCoopers, Deloitte Touche Tohmatsu, EY and KPMG or such other firm approved in advance by the Required Lenders (such approval not to be unreasonably withheld or delayed).
“ Authorisation ” means an authorisation, consent, approval, resolution, licence, exemption, filing, notarisation or registration.
“ Availability Period ” means the period starting on Closing Date and ending on 31 October 2013.
“ Available Commitment ” means a Lender’s Commitment less:
19(a)
the amount of its participation in any outstanding Loans; and
19(b)
in relation to any proposed Loan the amount of its participation in the Loan that is due to be made on or before the proposed Utilisation Date.
“ Base Case Model ” means the financial model and statements including profit and loss, balance sheet and cash flow projections reflecting the forecasted consolidated financial conditions of the Group for at least five (5) years following Closing Date, after giving effect to the transactions contemplated by this Agreement, prepared and approved by an authorised officer of the Parent, each in form and substance satisfactory to the Agent addressed to, and/or capable of being relied upon by the Finance Parties.
“ Break Costs ” means the amount (if any) by which:
21(a)
the interest (excluding the Applicable Margin) which a Lender should have received for the period from the date of receipt of all or part of its participation in the Loan or Unpaid Sum to the last day of the current Interest Period in respect of the Loan or Unpaid Sum, had the principal amount or Unpaid Sum been paid on the last day of that Interest Period; exceeds
21(b)
the amount which that Lender would be able to obtain by placing an amount equal to the principal amount or Unpaid Sum received by it on deposit with a leading bank in the relevant interbank market for a period starting on the Business Day following receipt or recovery and ending on the last day of the current Interest Period
as further described in Clause 11.3 ( Break Costs ).
“ Business Day ” means a day (other than a Saturday or a Sunday) on which banks are open for business in Amsterdam, London, New York, Oslo, Paris, Seoul and Singapore (or any other relevant place of payment under Clause 30 ( Payment mechanics )).
“ Cash ” means
24(a)
cash in hand legally and beneficially owned by a member of the Group; and
24(b)
cash deposits legally and beneficially owned by a member of the Group and which are deposited with (i) a Mandated Lead Arranger (ii) any other deposit taking institution having a rating of at least A from Standard & Poor’s Ratings Group or the equivalent with any other principal credit rating agency in the United States of America or Europe or (iii) any other bank or financial institution approved by the Agent which in each case:
24(i)
is free from any Security Interest, other than pursuant to the Security Documents;
24(ii)
is otherwise at the free and unrestricted disposal of the relevant member of the Group by which it is owned; and
24(iii)
in the case of cash in hand or cash deposits held by a member of the Group other than the Borrowers, is (in the opinion of the Agent, upon such documents and evidence as the Agent may require the Borrowers to provide in order to form the basis of such opinion) capable or, upon the occurrence of an Event of Default under this Agreement, would become capable of being paid without restriction to the Borrowers within five (5) Business Days of its request or demand therefore either by way of a dividend or by way of a repayment of principal (or the payment of interest thereon) in respect of an intercompany loan from the Borrowers to that Subsidiary.
“Cash Distributions from Investments” means aggregate cash received by the Parent, by way of dividends, in respect of its ownership interests in companies which the Parent does not control, but over which it exerts significant influence, as set out in the Compliance Certifcate. For the purpose of this definition, the terms “control” and “significant influence” shall have the meanings attributed to such terms under US GAAP.
“ Cash Equivalent ” means at any time:
26(a)
any investment in marketable debt obligations issued or guaranteed by (i) a government or (ii) an instrumentality or agency of a government and in respect of (i) and (ii) having a credit rating of either A-1 or higher by Standard & Poor’s Rating Group Services or the equivalent with any other principal credit rating agency in the United States of America or Europe, maturing within one year after the relevant date of calculation and not convertible or exchangeable to any other security;
26(b)
commercial paper (debt obligations) not convertible or exchangeable to any other security;
26(i)
for which a recognised trading market exists;
26(ii)
issued by an issuer incorporated in the United States of America, the United Kingdom, and Norway;
26(iii)
which matures within one year after the relevant date of calculation; and
26(iv)
which has a credit rating of at least A-1 or higher by Standard & Poor’s Rating Group Services or the equivalent with any other principal credit rating agency in the United States of America or Europe;
26(c)
any investment in money market funds which (i) have a credit rating of either A-1 or higher by Standard & Poor’s Rating Group Services or the equivalent with any other principal credit rating agency in the United States of America or Europe, (ii) which invest substantially all their assets in securities of the types described in paragraphs (a) to (b) above and (iii) can be turned into cash on not more than 5 days’ notice; or
26(d)
any other debt security approved by the Agent (on behalf of the Required Lenders),
in each case, to which any member of the Group is alone (or together with other members of the Group) beneficially entitled at that time and which is not issued or guaranteed by any member of the Group or subject to any Security Interest.
“ Cash Flow Projections ” means,
28(a)
the Base Case Model in agreed form to be delivered by the Parent to the Agent pursuant to Clause 4.1 ( Conditions Precedent to the Closing Date ); and
28(b)
any cash flow projections based in the form of the Base Case Model delivered by the Parent to the Agent pursuant to and for such period as described in Clause 21.1 ( Financial statements ).
in form and substance satisfactory to the Agent.
“ Closing Date” means 20 March 2013.
“ Code” means the US Internal Revenue Code of 1986.
“ Commercial Lenders ” means banks and financial institutions listed as the Commercial Lenders in Schedule 1 ( Lenders and Initial Commitments ) and any New Lender, which in each case has not ceased to be a Party in accordance with the terms of this Agreement, but for the avoidance of doubt excluding the ECA Lenders.
“ Commercial Commitments” means USD two hundred and three million (203,000,000).
“ Commercial Facility” means the commercial facility made available under this Agreement as described in Clause 2.1 (d) ( Facilities ).
“ Commercial Margin” means 3.0 per cent per annum.
“ Commitment (s)” means:
36(a)
in relation to a Lender, the amount set opposite its name under the heading “Commitments” in Schedule 1 ( Lenders and Initial Commitments ) and the amount of any other Commitment transferred to it pursuant to Clause 27.3 ( Assignments and transfers by the Lenders ), however in relation to the GIEK Lender such commitment shall always be limited to eighty per cent (80%) of the Norwegian Contracts; and
36(b)
in relation to any New Lender or New GIEK Lender, the amount of any Commitment transferred to it pursuant to Clause 27.3 ( Assignments and transfers by the Lenders ),
to the extent not cancelled, reduced or transferred by it under this Agreement.
“ Compliance Certificate ” means a certificate substantially in the form as set out in Schedule 5 ( Form of Compliance Certificate ) and delivered pursuant to Clause 21.2 ( Compliance Certificate ).
“ Contract Memo” means a memo describing the inter-company charter arrangements and any other time charter arrangement relating to any of the Drillships, provided by the law firm BA-HR DA.
“ Current Assets ” means, on any date, the aggregate value of the assets of the Group (on a consolidated basis), which are treated as current assets in accordance with Accounting Principles but excluding USD one hundred and fifty million (150,000,000) and for the purpose of calculating the Current Ratio, up to twenty per cent (20%) of shares in listed companies owned twenty per cent (20%) or more by any members of the Group shall also be treated as Current Assets based on the average market price during the calendar month prior to any determination of Current Assets.
“ Current Liabilities ” means, on any date, the aggregate amount of all liabilities of the Parent which are treated as current liabilities in accordance with Accounting Principles, but excluding the current portion of the Group’s (on a consolidated basis) long term debt.
“ Current Ratio ” means the ratio of Current Assets to Current Liabilities.
“ Debt Service Cover Ratio” means the ratio of EBITDA of the respective Borrower to debt services (being all finance charges and principal) for the previous period of twelve (12) months of the respective Borrower.
“ Default ” means an Event of Default or any event or circumstance specified in Clause 25 ( Events of Default ) which would (with the expiry of a grace period, the giving of notice, the making of any determination under the Finance Documents or any combination of any of the foregoing) be an Event of Default.
“ Delivery Date ” means the day on which a Drillship was actually delivered from the Yard to the respective Borrower.
“ Drillship ” means each of the 6 th generation SHI S10000 ultra deepwater drillships listed in Schedule 2 ( Guarantors and Drillships ) each of which is owned by the respective Borrower as set out therein as at the time of the respective delivery from the Yard.
“ Earnings ” means all moneys whatsoever which are now, or later become, payable (actually or contingently) to any Obligor and which arise out of the use of or operation of any of the Drillships, including (but not limited to):
46(a)
all freight, hire and passage moneys payable to an Obligor, including (without limitation) payments of any nature under any charter or agreement for the employment, use, possession, management and/or operation of any of the Drillships;
46(b)
any claim under any guarantees related to freight and hire payable to an Obligor as a consequence of the operation of any of the Drillships;
46(c)
compensation payable to an Obligor in the event of any requisition of any of the Drillships or for the use of any of the Drillships by any government authority or other competent authority;
46(d)
remuneration for salvage, towage and other services performed by any of the Drillships payable to an Obligor;
46(e)
demurrage, detention and retention money receivable by an Obligor in relation to any of the Drillships;
46(f)
all moneys which are at any time payable under the Insurances in respect of loss of earnings;
46(g)
if and whenever any of the Drillships is employed on terms whereby any moneys falling within paragraphs a) to f) above are pooled or shared with any other person, that proportion of the net receipts of the relevant pooling or sharing arrangement which is attributable to such Drillship(s); and
46(h)
any other money whatsoever due or to become due to an Obligor from third parties in relation to any of the Drillships, or otherwise.
“ Earnings Account” means each earnings account as described in Clause 23.13 ( Earnings Accounts ), and to which all the Earnings and any proceeds of the Insurances shall be paid.
“ EBITDA ” means (i) the earnings before interest expenses, taxes, depreciation and amortization of the Group on a consolidated basis (except for the calculation of the Debt Service Cover Ratio in which case the EBITDA shall be for the respective Borrower only) and (ii) the Cash Distributions from Investments, each for the previous period of twelve (12) months as such term is defined in accordance with Accounting Principles consistently applied. However, in the event the Parent or a member of the Group acquires rigs or rig owning entities with historical EBITDA available for the rigs’ previous ownership, such EBITDA shall be included for covenant purposes in this Agreement, and if necessary, be annualized to represent a twelve (12) months historical EBITDA. In the event the Parent or a member of the Group acquires rigs or rig owning companies without historical EBITDA available, the Parent is entitled to base a twelve (12) month historical EBITDA calculation on future projected EBITDA only subject to any such new rig having (i) a firm charter contract in place at the time of delivery of the rig with a duration of minimum 12 months and (ii) a firm charter contract in place at the time of such EBITDA calculation, provided the Parent provides the Agent with a detailed calculation of the future projected EBITDA. Further, it is agreed that EBITDA shall include any realized gains and/or losses in respect of the disposal of rigs or the disposal of shares in rig owning companies.
“ ECA Facilities” means the GIEK Lender Facility, the KEXIM-Facility and the K-sure Facility.
“ ECA Lenders” means the GIEK Lender, KEXIM, and the K-sure Lenders.
" Effective Time " means time when the Agent has confirmed that it has received all conditions precedent to be delivered pursuant to the Second Amendment and Restatement Agreement, being ____November 2014.
“ Environmental Approval ” means any permit, licence, consent, approval and other authorisations and the filing of any notification, report or assessment required under any Environmental Law for the operation of the Drillships and for the operation of the business of any member of the Group.
“ Environmental Claim ” means any claim, proceeding or investigation by any party in respect of any Environmental Law or Environmental Approval.
“ Environmental Law ” means any applicable law or regulation which relates to:
54(a)
the pollution or protection of the environment;
54(b)
harm to or the protection of human health;
54(c)
the conditions of the workplace; or
54(d)
any emission or substance capable of causing harm to any living organism or the environment.
“ Equity ” means, on any date, the Group’s (on a consolidated basis) nominal book value of equity treated as equity in accordance with Accounting Principles adjusted for the difference between the Market Value and book value for all drilling units which are consolidated into the Parent's audited consolidated financial statements.
“ Equity Ratio ” means the ratio of Equity to Total Assets.
“ Escrow Utilisation ” means a Utilisation to be made to the Escrow Utilisation Account, and which can be made three (3) days prior to the actually delivery of a Drillship, and which can be released from the Escrow Utilisation Account in accordance with Clause 4.7 ( Conditions for Escrow Utilisation ) (c).
“ Escrow Utilisation Account ” means an account of the Yard as notified by a Borrower requesting a Utilisation to be made.
“ Event of Default ” means any event or circumstance specified as such in Clause 25 ( Events of Default ).
“ Exchange ” means the Oslo Stock Exchange and/or the New York Stock Exchange.
“ Facility ” means the senior secured credit facility, divided into the Commercial Facility, the GIEK Lender Facility, the KEXIM Facility and the K-sure Facility as further described in Clause 2 ( The Facilities ).
“ FATCA” means:
sections 1471 to 1474 of the Code or any associated regulations or other official guidance;
any treaty, law, regulation or other official guidance enacted in any other jurisdiction, or relating to an intergovernmental agreement between the United States of America and any other jurisdiction, which (in either case) facilitates the implementation of paragraph (a) above; or
any agreement pursuant to the implementation of paragraphs (a) or (b) above with the United States of America Internal Revenue Service, the United States of America's government or any governmental or taxation authority in any other jurisdiction.
“ FATCA Application Date” means:
in relation to a "withholdable payment" described in section 1473(1)(A)(i) of the Code (which relates to payments of interest and certain other payments from sources within the United States of America), 1 January 2014;
in relation to a "withholdable payment" described in section 1473(1)(A)(ii) of the Code (which relates to "gross proceeds" from the disposition of property of a type that can produce interest from sources within the United States of America), 1 January 2017; or
in relation to a "passthru payment" described in section 1471(d)(7) of the Code not falling within paragraphs (a) or (b) above, 1 January 2017,
or, in each case, such other date from which such payment may become subject to a deduction or withholding required by FATCA as a result of any change in FATCA after the Closing Date.
“ FATCA Deduction” means a deduction or withholding from a payment under a Finance Document required by FATCA.
“ FATCA Exempt Party” means a Party that is entitled to receive payments free from any FATCA Deduction.
“ FATCA Payment” means either:
the increase in a payment made by an Obligor to a Finance Party under Clause 13.5 ( FATCA Deduction and gross-up by Obligor ) or paragraph (b) of Clause 13.6 ( FATCA Deduction by Finance Party ); or
a payment under paragraph (d) of Clause 13.6 ( FATCA Deduction by Finance Party ).
“ Fee Letters ” means any letters entered into by reference to this Agreement in relation to any fees.
“ Final Maturity Date ” means:
69(a)
for all Tranches collectively in respect of the Commercial Facility; 5 years from the First Utilisation Date.
69(b)
for a Tranche in respect of the GIEK Lender Facility; 12 years from the relevant Utilisation Date for that Tranche.
69(c)
for a Tranche in respect of the K-sure Facility; 12 years from the relevant Utilisation Date for that Tranche.
69(d)
for a Tranche in respect of the KEXIM Facility; 12 years from the relevant Utilisation Date for that Tranche.
“ Finance Documents ” means this Agreement, any Compliance Certificate, any Fee Letters, any Utilisation Request, the Security Documents and any other document (whether creating a Security Interest or not) which is executed at any time by any of the Obligors as security for, or to establish any form of subordination to the Finance Parties under this Agreement or any of the other documents referred to herein or therein and any such other document designated as a “Finance Document” by the Agent and an Obligor.
“ Finance Lease ” means a lease or charterparty which (i) would be classified as a finance lease in accordance with the Accounting Principles of an Obligor or (ii) is required to be classified and accounted for as a liability or asset on the face of the Group’s consolidated balance sheet in accordance with Accounting Principles.
“ Finance Party ” means each of the Agent, the GIEK Guarantee Holder and the Lenders, and to the extent any rights are provided, the term shall also include GIEK and K-sure.
“ Financial Indebtedness ” means any of the following (whether or not the same are required to be classified and accounted for as a liability on the face of the Group’s consolidated balance sheet in accordance with Accounting Principles):
73(a)
moneys borrowed and debit balances at banks or other financial institutions;
73(b)
any acceptance under any acceptance credit or bill discounting facility (or dematerialised equivalent);
73(c)
any note purchase facility or the issue of bonds, notes, debentures, loan stock or any similar instrument;
73(d)
the amount of any liability in respect of Finance Leases;
73(e)
receivables sold or discounted (other than any receivables to the extent they are sold on a non-recourse basis);
73(f)
any derivative transaction (and, when calculating the value of that transaction, only the marked to market value (or, if any actual amount is due as a result of the termination or close-out of that transaction, that amount) shall be taken into account);
73(g)
any counter-indemnity obligation in respect of a guarantee, bond, standby or documentary letter of credit or any other instrument issued by a bank or financial institution in respect of an underlying liability of any entity which is not a member of the Group which liability would fall within one of the other paragraphs of this definition;
73(h)
any amount raised by the issue of redeemable shares which are redeemable (other than at the option of the issuer) before the Final Maturity Date or are otherwise classified as borrowings under the Accounting Principles;
73(i)
any amount of any liability under an advance or deferred purchase agreement if (i) one of the primary reasons behind entering into the agreement is to raise finance or to finance the acquisition or construction of the asset or service in question or (ii) the agreement is in respect of the supply of assets or services and payment is due more than 30 days after the date of supply;
73(j)
any amount raised under any other transaction (including any forward sale or purchase, sale and sale back or sale and leaseback agreement) having the commercial effect of a borrowing or otherwise classified as borrowings under the Accounting Principles; and
73(k)
the amount of any liability in respect of any guarantee for any of the items referred to in paragraphs (a) to (j) above
but shall not include:
74(i)
any borrowings or other such liabilities owed by any member of the Group to another member of the Group as permitted pursuant to the terms of this Agreement.
“ Financial Support ” means loans, guarantees, credits, indemnities or other form of financial support.
“ First Utilisation Date ” means the date, on which the first Utilisation under the Agreement actually occurs, not to be later than the expiry of the Availability Period .
“ Fixed Margin Period ” shall have the meaning ascribed to it in Clause 9.5 ( Fixing of the Margin for the GIEK Lender Facility ).
“ GIEK ” means Garanti-Instituttet for Eksportkreditt of Dronning Maudsgate 15, Vika, N-0122 Oslo, Norway, organisation no. 974 760 908.
“ GIEK Account ” means the account held by GIEK with DNB Bank ASA, with account number 7694.05.63212.
“ GIEK Guarantee ” means the guarantee issued by GIEK to the GIEK Lender's satisfaction pursuant to the Conditions set out in GIEK's offer for buyer's credit guarantee no. 102009 in connection with the GIEK Lender Facility.
" GIEK Guarantee Holder " means Citibank N.A., London Branch.
“ GIEK Lender Commitment ” means USD five hundred and seventy five million (575,000,000) however never to exceed eighty per cent (80%) of the Norwegian Contract Value, neither for the GIEK Lender Facility as a whole or for any Tranche under the GIEK Lender Facility.
“ GIEK Lender Facility ” means the GIEK Lender facility made available under this Agreement as described in Clause 2.1 (Facilities) paragraph (a).
“ GIEK Lender Margin ” means;
for the Fixed Margin Period; 1.2 per cent per annum; or
for the New Fixed Margin Period; as agreed between the GIEK Lender and the Borrowers pursuant to Clause 9.5 ( Fixing of the margin for the GIEK Lender Facility ).
“ Group ” means the Parent and its Subsidiaries from time to time.
“ Guarantees ” means the guarantee(s) and indemnity(ies) provided by the Guarantors pursuant to Clause 18 ( Guarantee and Indemnity ).
“ Guarantee Obligations ” means the obligations of each Guarantor pursuant to Clause 18 ( Guarantee and Indemnity ).
“ Holding Company ” means a company which is defined as the parent company following the principles of the Norwegian Public Companies Act of 1997 No. 45 § 1-3.
“ Hungarian Obligor ” means an Obligor organised and existing under Hungarian law.
“ Insurances ” means all the insurance policies and contracts of insurance including (without limitation) those entered into in order to comply with the terms of Clause 24.3 ( Insurance ) which are from time to time in place or taken out or entered into by or for the benefit of the Obligors (whether in the sole name of the Obligors or in the joint names of the Obligors and any other person) in respect of the Drillships or otherwise in connection with the Drillships and all benefits thereunder (including claims of whatsoever nature and return of premiums).
“ Insurance Report” means an insurance report in form satisfactory to the Agent in respect of the Insurances confirming that such Insurances are placed with such insurers, insurance companies and/or clubs in such amounts, against such risks and in such requirements under Clause 24.3 ( Insurance ) prepared by AoN UK Ltd., or such other reputable insurance advisor approved by the Agent and the Borrowers.
“ Interest Cover Ratio ” means the ratio of the Group’s consolidated EBITDA to interest expenses for the previous period of twelve (12) months.
“ Interest Payment Date ” means the last day of each Interest Period.
“ Interest Period ” means, in relation to a Loan, each of the successive periods determined in accordance with Clause 10.1 ( Selection of Interest Periods ), and, in relation to an Unpaid Sum, each period determined in accordance with Clause 9.3 ( Default interest ).
“ Intra-Group Charterer ” means each Subsidiary named as Intra-Group Charterer pursuant to Schedule 2 ( Guarantors and Drillships ), or as acceded for West Tellus to the Agreement and Finance Documents.
“ Intra-Group Charterparty ” means each of the intra-group charterparties entered into or to be entered into between the relevant Borrower and the relevant Intra-Group Charterer.
“ ISM Code ” means the International Safety Management Code for the Safe Operation of Ships and for Pollution Prevention.
“ ISPS Code ” means the International Ship and Port Facility Security (ISPS) Code as adopted by the International Maritime Organization’s (IMO) Diplomatic Conference of December 2002.
“ KEXIM” means the Export-Import Bank of Korea.
“ KEXIM Commitments” means USD three hundred and thirty six million (336,000,000).
“ KEXIM-Facility” means the KEXIM-facility made available under this Agreement as described in in Clause 2.1 ( Facilities ) paragraph (b).
“ KEXIM Margin” means 3.0 per cent per annum.
“ K-sure” means Korea Trade Insurance Corporation of 2-16 Floors, Seoul Central Building, 136 Seorin Dong, Jongro-ku, Seoul 110-729, Republic of Korea.
“ K-sure Agent ” means ING Bank N.V., Seoul Branch, 15th Floor, Hungkuk Life Insurance Building, 226, Shinmunro 1-ga, Chongro-ku, Seoul 110-061, Korea in its capacity as agent for the K-sure Facility as described in Clause 2.1(c) ( The Facilities ).
“ K-sure Facility” means the K-sure facility made available under this Agreement as described in Clause 2.1 ( Facilities ) paragraph (c).
“ K-sure Insurance Policy” means, in relation to each Drillship, the Medium and Long Term Export Insurance Policy, the General Terms and Conditions of Medium and Long Term Export Insurance (Buyer Credit, Standard) and the special terms and conditions attached thereto issued or, as the context may require, to be issued by K-sure in favour of the K-sure Lenders and satisfactory to the K-sure Lenders, providing political and commercial risks cover in an amount of up to ninety five per cent (95%) of the K-sure Lenders Commitments relevant to that Drillship plus interest accruing thereon.
“ K-sure Lenders” means the banks and financial institutions listed as the K-sure Lenders in Schedule 1 ( Lenders and Initial Commitments ) and any New Lender, which in each case has not ceased to be a Party in accordance with the terms of this Agreement, but for the avoidance of doubt excluding the Commercial Lenders, the GIEK Lender and KEXIM.
“ K-sure Lenders Margin ” means 2.35 per cent per annum.
“ K-sure Lenders Commitments” means USD three hundred and thirty six million (336,000,000).
“ K-sure Premium ” means, in relation to each K-sure Insurance Policy, the full sum payable to K-sure as stipulated in that K-sure Insurance Policy which such sums shall be from time to time adjusted by K-Sure in accordance with the terms of that K-sure Insurance Policy and K-sure's internal regulations and shall be agreed by the Borrowers.
“ Lenders ” means the lenders and financial institutions listed in Schedule 1 ( Lenders and Initial Commitments ), and any New Lender and/ or New GIEK Lender, which in each case has not ceased to be a Party in accordance with the terms of this Agreement.
“ Leverage Ratio ” means the Net Funded Debt divided by EBITDA.
“ LIBOR ” means, in relation to a Loan:
112(a)
The applicable interest settlement rate for the relevant period as displayed on Reuters screen page Libor 01, or Libor 02, as appropriate; or
112(b)
(if Reuters screen page referred to in (a) is not available for the Interest Period of that Loan or other sum) the arithmetic mean of the rates (rounded upwards to four decimal places) as supplied to the Agent at its request quoted by the Reference Banks to leading banks in the London interbank market,
as of 11.00 a.m. (London time) on the Quotation Day for the offering of deposits in USD and for a period comparable to the Interest Period for that Loan or other sum, and if any such rate is below zero, LIBOR will be deemed to be zero.
“ Loan(s )” means the aggregate of all amounts outstanding under this Agreement relating to any of the Facilities from time to time (for the avoidance of doubt not including the GIEK Guarantee or the K-sure Insurance Policy) outstanding or a loan made or to be made under the Facility.
“ Mandatory Cost ” means the percentage rate per annum calculated by the Agent in accordance with Schedule 9 ( Mandatory Cost Formula ).
“ Market Value ” means the fair market value of each of the Drillships, being the average of valuations of the Drillships obtained from two (2) of the Approved Brokers (elected by the Borrower), with or without physical inspection of the Drillships (as the Agent may require) on the basis of a sale for prompt delivery for cash at arm’s length on normal commercial terms as between a willing buyer and a willing seller, on an “as is, where is” basis, free of any existing contract of employment and/or similar arrangement.
“ Material Adverse Effect ” means a material adverse effect on:
117(a)
the financial condition, assets, business or operation of any Obligor or the Group as a whole;
117(b)
the ability of any of the Obligors or the Group as a whole to perform any of their obligations under the Finance Documents; or
117(c)
the validity or enforceability of, or the effectiveness or ranking of any security granted or purporting to be granted pursuant to any of the Finance Documents or the rights or remedies of any Finance Party under any of the Finance Documents.
“ Material Subsidiary ” shall mean any Subsidiary of the Parent owning a drilling unit or any Subsidiary of the Parent which can be deemed a material member of the Group.
“ Minimum Liquidity ” means, as at any date, the aggregate amount of the Group’s (consolidated) Cash and the portion of the Available Commitment, which is available for Utilisation pursuant to Clause 5 ( Utilisation ) at that date as certified to the Agent by the Chief Financial Officer of the Parent.
“ MLP ” means Master Limited Partnership.
“ Mortgages ” means each of the first priority mortgages and any deed of covenants collateral thereto, to be executed by each of the Borrowers against each of the respective Drillships in a Ship Registry in favour of the Agent (on behalf of the Finance Parties) as security for the Obligors’ obligations under the Finance Documents, in form and substance satisfactory to the Agent (on behalf of the Finance Parties).
“ Net Funded Debt ” means on a consolidated basis for the Group all interest-bearing debt (for the avoidance of doubt including guarantees for such debt but avoiding double counting) less Cash and Cash Equivalents but excluding USD one hundred and fifty million (150,000,000).
“ New Fixed Margin Period ” shall have the meaning ascribed to it in Clause 9.5 ( Fixing of the Margin for the GIEK Lender Facility ).
“ New GIEK Lender ” means one or several institutions replacing a GIEK Lender under the GIEK Facility either pursuant to Clause 9.5 ( Fixing the margin for the GIEK Lender Facility ) or an entity that has been consented to by the Borrower (such consent not to be required if an Event of Default has occurred and is continuing and otherwise not to be unreasonably withheld or delayed and which shall be deemed to have been given fifteen (15) Business Days after being sought unless expressly refused within that period), the relevant GIEK Lender and GIEK.
“ New GIEK Lender Margin ” means;
125(a)
For the Fixed Margin Period; up to 1.2 per cent per annum; or
125(b)
For the New Fixed Margin Period; as agreed between the New GIEK Lender and the Borrowers.
“ New Lender ” has the meaning set out in Clause 27 ( Changes to the Parties ).
“ Norwegian Contracts ” means the contracts for delivery of Norwegian equipment and services in relation to the building of the Drillships as more specifically listed in Schedule 10 ( List of Norwegian Suppliers and Contracts ).
“ Norwegian Contract Value ” means the aggregate value of the Norwegian Contracts.
“ Obligors ” means the Borrowers and the Guarantors and an Obligor means any of them.
" Operating Agreement " means the First Amended and Restated Operating Agreement of Seadrill Partners, entered into by Seadrill Member and the Parent, as amended from time to time in accordance with this Agreement.
“ Original Financial Statements ” means the audited consolidated financial statements of the Parent for the financial period ending on 31 December 2011.
“ Party ” means a party to this Agreement (including its successors and permitted transferees).
“ Permitted Encumbrances ” means;
133(a)
liens for current crews' wages and salvage;
133(b)
any ship repairer's or outfitter's possessory lien arising by operation of law and any other liens incurred in the ordinary course of operating such Drillship and not exceeding USD 5,000,000;
133(c)
any lien created pursuant to the Security Documents; and
133(d)
any lien created by Seadrill Capricorn (excluding any liens over the shares in any Borrower or any Intra-Group Charterer).
“ Quarter Date ” means 31 March, 30 June, 30 September and 31 December.
“ Quotation Day ” means the day occurring two (2) Business Days prior to the commencement of an Interest Period, unless market practice differs, in which case the Quotation Day for USD will be determined by the Agent in accordance with market practice (and if quotations would normally be given by leading banks in the market on more than one day, the Quotation Day will be the last of those days).
“ Quiet Enjoyment Letter ” means a letter agreement between the Agent (on behalf of the Finance Parties) and the relevant end-user of a Drillship, to be entered into, if it is required by the relevant end-user pursuant to the relevant drilling contract, regulating the enforcement of a Mortgage on terms acceptable to the Agent (on behalf of the Finance Parties).
“ Reference Banks ” means the principal offices of each of HSBC Bank plc, ING Bank NV, Citibank N.A., London Branch and Norddeutsche Landesbank Girozentrale, or such other banks as appointed by the Agent in consultation with the Borrowers.
“ Required Lenders ” means the Lenders having the aggregate outstanding principal amounts and Available Commitments in excess of sixty six and two thirds per cent (66-2/3%), however, always to include approval from at least one Commercial Lender.
“ Satisfactory Drilling Contract” means the current contract in place for the "West Vela" as further described in Schedule 2 ( Guarantors and Drillships ), and for the "West Tellus" a time charter contract, in form and substance satisfactory to the Lenders, (in their discretion) to any oil company satisfactory to the Required Lenders in their discretion, at a rate of at least USD 500,000 per day with a duration of at least 2 years.
" Seadrill Capricorn " means Seadrill Capricorn Holdings LLC, a limited liability company, being 49 % owned by the Parent and 51 % owned by Seadrill Partners, incorporated under the laws of Marshall Islands with registration number 962179.
“Seadrill Gulf Vela” means Seadrill Gulf Operations Vela LLC, a company incorporated under the laws of Delaware, which is a Guarantor pursuant to this Agreement.
“ Seadrill Member ” means Seadrill Member LLC, a limited liability company, being a wholly owned Subsidiary of the Parent, incorporated under the laws of the Republic of the Marshall Islands with registration number 962165.
“ Seadrill Partners ” means Seadrill Partners LLC, a limited liability company, being a partly owned Subsidiary of the Parent, incorporated under the laws of the Republic of the Marshall Islands with registration number 962166.
“Seadrill Partners Guarantee” means a guarantee provided by Seadrill Partners in favour of the Finance Parties, wherby Seadrill Partners guarantees for the obligations of Seadrill Vela in respect of the Tranches relating to the “West Vela”, limited to the amount of USD 497,500,000.
“Seadrill Vela” means Seadrill Vela Hungary Kft., a company incorporated under the laws of Hungary, which is a Borrower pursuant to this Agreement.
“Second Amendment and Restatement Agreement ” means an amendment and restatement agreement to this Agreement, dated ____ November 2014.
“ Security Documents ” means all or any security documents as may be entered into from time to time pursuant to Clause 19 ( Security ) all to be in form and substance satisfactory to the Agent (on behalf of the Lenders).
“ Security Interest ” means any mortgage, charge (whether fixed or floating), encumbrance, pledge, lien, assignment by way of security, finance lease, sale and repurchase or sale and leaseback arrangement, sale of receivables on a recourse basis or other security interest or any other agreement or arrangement having the effect of conferring security.
“ Security Period ” means the period commencing on the Closing Date and ending the date on which the Agent notifies the Borrowers and the other Finance Parties that:
146(a)
all amounts which have become due for payment by the Borrowers or any other party under the Finance Documents have been paid;
146(b)
no amount is owing or has accrued (without yet having become due for payment) under any of the Finance Documents;
146(c)
the Borrowers have no future or contingent liability under any provision of this Agreement and the other Finance Documents;
146(d)
the Agent and the Required Lenders do not consider that there is a significant risk that any payment or transaction under a Finance Document would be set aside, or would have to be reversed or adjusted, in any present or possible future proceeding relating to a Finance Document or any asset covered (or previously covered) by a Security Interest created by a Finance Document; and
146(e)
there are no Commitments in force.
“ Share Charges ” means the first priority charges over all the shares, equity interest or membership interest (as applicable) of each of the Borrowers and the Intra-Group Charterers provided by the relevant shareholders (provided that such Intra-Group Charterer is a special purpose company) collateral to this Agreement as security for the Obligors’ obligations under the Finance Documents in the form and substance satisfactory to Agent (on behalf of the Finance Parties).
“ Ship Registry ” means the ship registry of Panama and such other ship registry as approved by the Agent.
" Solven t" means, with respect to any person on a particular date, that on such date (a) the present fair salable value of the assets of such person is not less than the amount that will be required to pay the probable liability of such person on its debts as they become absolute and matured, (b) such person does not intend to, and does not believe that it will, incur debts or liabilities beyond such person's ability to pay as such debts and liabilities mature and (c) such person is not engaged in business or a transaction, and is not about to engage in business or a transaction, for which such person's property would be unreasonably small in relation to such business or such transaction.
“ Subsidiary ” means an entity from time to time of which a person:
150(a)
has direct or indirect control; or
150(b)
owns directly or indirectly more than fifty per cent (50%) (votes and/or capital),
for the purpose of paragraph (a), an entity shall be treated as being controlled by a person if that person is able to direct its affairs and/or control the composition of its board of directors or equivalent body.
“ Tax ” means all present and future taxes, levies, imposts, duties, charges, fees, deductions and withholdings, and any restrictions and or conditions resulting in a charge together with interest thereon and penalties in respect thereof and “taxes” and “taxation” shall be construed accordingly.
“ Tax Deduction” means a deduction or withholding for or on account of Tax from a payment under a Finance Document, other than a FATCA Deduction.
“ Tax on Overall Net Income ” means a Tax imposed on a Finance Party by the jurisdiction under the laws of which it is incorporated, or in which it is located or treated as resident for tax purposes, on:
153(a)
the net income, profits or gains of that Finance Party world wide; or
153(b)
such of the net income, profits or gains of that Finance Party as are considered to arise in or relate to or are taxable in that jurisdiction.
“ Total Assets ” means on any date the Group’s (on a consolidated basis) book value of assets which are treated as assets in accordance with Accounting Principles adjusted for the difference between the Market Value and book value for all drilling units which are fully consolidated into the Parent's audited consolidated financial statements.
“ Total Commitments ” means the aggregate of the Commercial Commitments, the GIEK Lender Commitments, the KEXIM Commitments and the K-sure Lenders Commitments, being USD 1,450,000,000 at the Closing Date as that amount may be reduced, cancelled or terminated in accordance with this Agreement, and as further set out in Schedule 1 ( Lenders and Initial Commitments ).
“ Total Loss ” means, in relation to any of the Drillships:
156(a)
the actual, constructive, compromised, agreed, arranged or other total loss of such Drillship; and/or
156(b)
any hijacking, piracy, theft, condemnation, capture, seizure, destruction, abandonment, arrest, expropriation, confiscation, requisition or acquisition of such Drillship, whether for full consideration, a consideration less than its proper value, a nominal consideration or without any consideration, which is effected by any government or official authority or by any person or persons claiming to be or to represent a governmental or official authority (excluding a requisition for hire for a fixed period not exceeding one (1) year without any right to extension) unless it is within one (1) month from the Total Loss Date redelivered to the full control of the relevant Borrower or any of the Guarantors.
“ Total Loss Date ” means:
156(c)
in the case of an actual total loss of any of the Drillship, the date on which it occurred or, if that is unknown, the date when such Drillship was last heard of;
156(d)
in the case of a constructive, compromised, agreed or arranged total loss of any of the Drillships, the earlier of: (i) the date on which a notice of abandonment is given to the insurers (provided a claim for total loss is admitted by such insurers) or, if such insurers do not forthwith admit such a claim, at the date at which either a total loss is subsequently admitted by the insurers or a total loss is subsequently adjudged by a competent court of law or arbitration panel to have occurred or, if earlier, the date falling six (6) months after notice of abandonment of such Drillship was given to the insurers; and (ii) the date of compromise, arrangement or agreement made by or on behalf of the relevant Borrower with the relevant Drillship's insurers in which the insurers agree to treat such Drillship as a total loss; or
156(e)
in the case of any other type of total loss, on the date (or the most likely date) on which it appears to the Agent that the event constituting the total loss occurred.
“ Tranche ” has the meaning ascribed to such term as set out in Clause 2.1 ( Facilities ).
“ Transfer Certificate ” means a certificate substantially in the form as set out in Schedule 6 ( Form of Transfer Certificate ) or any other form agreed between the Agent and the Borrowers.
“ Transfer Date ” means, in respect of a Transfer (as defined in Clause 27.3 ( Assignments and transfers by Lenders )) the later of:
157(a)
the proposed Transfer Date as set out in the Transfer Certificate relating to the Transfer; and
157(b)
the date on which the Agent executes the Transfer Certificate.
“ Unpaid Sum ” means any sum due and payable but unpaid by a Borrower under the Finance Documents.
“ USD ” means the lawful currency of the United States of America.
“ Utilisation ” means the utilisation of a Loan.
“ Utilisation Date ” means the date on which an Utilisation is made.
“ Utilisation Request ” means a notice substantially in the form set out in Schedule 4 ( Form of Utilisation Request ).
“ VAT ” means value added tax.
“ Yard ” means Samsung Heavy Industries Co., Ltd. (Korea).
Construction
In this Agreement, unless the context otherwise requires:
Clause and Schedule headings are for ease of reference only;
words denoting the singular number shall include the plural and vice versa;
references to Clauses and Schedules are references, respectively, to the Clauses and Schedules of this Agreement;
a term used in any other Finance Document or in any notice given under or in connection with any Finance Document has the same meaning in that Finance Document or notice as in this Agreement;
references to a provision of law is a reference to that provision as it may be amended or re-enacted, and to any regulations made by the appropriate authority pursuant to such law;
the “ Agent ”, the " GIEK Guarantee Holder ", any “ Finance Party ”, any “ Lender ”, any “ Obligor ”, any “ Party ”, or any other person shall be construed so as to include its successors in title, permitted assigns and permitted transferees and, in the case of the Agent, any person for the time being appointed as Agent in accordance with the Finance Documents;
references to “ control ” means the power to appoint a majority of the board of directors or to direct the management and policies of an entity, whether through the ownership of voting capital, by contract or otherwise;
“ Finance Document ” or any other agreement or instrument is a reference to that Finance Document or other agreement or instrument as amended, novated, supplemented extended or restated;
references to “ indebtedness ” includes any obligation (whether incurred as principal or as surety) for the payment or repayment of money, whether present or future, actual or contingent;
references to a “ person ” shall include any individual, firm, partnership, joint venture, company, corporation, trust, fund, body, corporate, unincorporated body of persons, or any state or any agency of a state or association (whether or not having separate legal personality);
a Default (other than an Event of Default) is “ continuing ” if it has not been remedied or waived and an Event of Default is “ continuing ” if it has not been remedied or waived.
Hungarian terms
In this Agreement, unless the context otherwise requires, where it relates to a Hungarian entity, a reference to:

a “ Security Interest” includes zálog, jelzálog, óvadék, kezesség (készfizető kezesség), (engedményezés and tulajdon átruházása, vételi (visszavásárlási) jog alapítása or tulajdonjog fenntartása provided that the aim of the contract is to provide security);
a “ winding up” , “ administration” or “ dissolution” includes csőd, felszámolás, végelszámolás, megszűntnek nyilvánítás and kényszertörlési eljárás;
a “ receiver” , “ administrator” , “ administrative receiver” , “ compulsory manager” or “ similar officer” includes vagyonfelügyelő , ideiglenes vagyonfelügyelő, felszámoló , felügyelőbiztos, végelszámoló and végrehajtó ;
a “ moratorium” includes ideiglenes fizetési haladék, fizetési haladék and moratórium;
“expropriation” , “ attachment” , “ sequestration” , “ distress” , “ execution” or “ any analogous process” includes ideiglenes intézkedés and all forms of bírósági végrehajtás (including foglalás , zár alá vétel and biztosítási intézkedés ) and kisajátítás ; and
“constitutional documents” includes társasági szerződés, alapító okirat, alapszabály, szervezeti és működési szabályzat, igazgatóság ügyrendje and felügyelő bizottság ügyrendje.
K-sure
Each Party agrees that (i) K-sure shall not have any obligations or liabilities under this Agreement unless and until it becomes a New Lender in accordance with Clause 27 ( Changes to the Parties ) (ii) K-sure shall be a third party beneficiary of the terms of this Agreement and the rights expressed to be for its benefit or exercisable by it under this Agreement and (iii) this Agreement may not be amended to limit, modify or eliminate any rights of K-sure without its prior written consent, save as per in accordance with Clause 34.3 ( Amendments, consents and waivers ).
THE FACILITIES
Facilities
Subject to the terms of this Agreement, the Lenders make available to the Borrowers, during the Availability Period, the following credit facilities for Utilisation in the aggregate principal amount of up to the Total Commitments, each a “ Facility” , collectively the “ Facilities” :
a term loan facility in an amount equal to the GIEK Lender Commitments granted by the GIEK Lender (the “ GIEK Lender Facility ”) conditional upon the issue of the GIEK Guarantee;
a term loan facility in an amount equal to the KEXIM Commitments granted by KEXIM (the “ KEXIM Facility ”);
a term loan facility in an amount equal to the K-sure Lenders Commitments granted by the K-sure Lenders (the “ K-sure Facility ”) conditional upon the issue of the K-sure Insurance Policy; and
a term loan facility in an amount equal to the Commercial Commitments granted by the Commercial Lenders (the “ Commercial Facility” ).
Each Facility shall be divided into three equal tranches (each a “ Tranche ”), each Tranche to be equal to thirty three and one third per cent (33 ⅓ %) of the relevant Facility. Each Tranche shall be allocated to a Drillship.
Finance Parties’ rights and obligations
The obligations of each Finance Party under the Finance Documents are several. Failure by a Finance Party to perform its obligations under the Finance Documents does not affect the obligations of any other Finance Party under the Finance Documents. No Finance Party is responsible for the obligations of any other Finance Party under the Finance Documents.
The rights of each Finance Party under or in connection with the Finance Documents are separate and independent rights and any debt arising under the Finance Documents to a Finance Party from any of the Obligors shall be a separate and independent debt. A Finance Party may, except as otherwise stated in the Finance Documents, separately enforce its rights under the Finance Documents.
Parent's Authority
Each Obligor (other than the Parent), by its execution of this Agreement, irrevocably authorises the Parent to act on its behalf as its agent in relation to the Finance Documents and authorises:
the Parent, on its behalf, to supply all information concerning itself, its financial condition and otherwise to the Finance Parties as contemplated under this Agreement and to give all notices and instruction to be given by such Obligor under the Finance Documents, to execute, on its behalf, any Finance Document and to enter into any agreement and amendment in connection with the Finance Documents (however fundamental and notwithstanding any increase in obligations of or other effect on an Obligor) including confirmation of guarantee obligations in connection with any amendment or consent in relation to the Facility, without further reference to or the consent of such Obligor, and each Obligor shall be obliged to confirm such authority in writing upon the request of the Agent; and
each Finance Party to give any notice, demand or other communication to be given to or served on such Obligor pursuant to the Finance Documents to the Parent on its behalf, and in each such case such Obligor will be bound thereby (and shall be deemed to have given/received notice thereof) as though such Obligor itself had been given such notice and instructions, executed such agreement or received any such notice, demand or other communication.

5179885/1        14 (156)



Every act, omission, agreement, undertaking, waiver, notice or other communication given or made by the Parent under this Agreement, or in connection with this Agreement (whether or not known to any Obligor) shall be binding for all purposes on all other Obligors as if the other Obligors had expressly made, given or concurred with the same. In the event of any conflict between any notice or other communication of the Parent and any other Obligor, the choice of the Parent shall prevail.
PURPOSE
Purpose
Each Borrower shall apply all amounts utilised to them hereunder to finance (i) in part, the Norwegian content provided pursuant to the Norwegian Contracts and (ii) the remaining capital expenditures related to the Drillships upon delivery from the Yard.
Monitoring
Without prejudice to the obligations of the Borrowers under this Clause 3, no Finance Party is bound to monitor or verify the application of any amount borrowed pursuant to this Agreement.
CONDITIONS PRECEDENT
Conditions precedent for the Closing Date
The Finance Parties’ obligations under this Agreement will only become effective once the Agent has received all the documents and other evidence listed in Schedule 3 ( Conditions Precedent ) Part I ( Conditions Precedent to the Closing Date ), in form and substance satisfactory to the Agent (acting on the instructions from the Lenders). The Agent shall notify the Obligors and the other Finance Parties promptly upon being so satisfied.
Conditions precedent for each Utilisation Date
The Lenders will only be obliged to comply with Clause 5.4 ( Lenders’ participation ), if on the date of the proposed Utilisation Date, the Agent has received originals or certified copies of all of the documents and other evidence listed in Schedule 3 Part II ( Conditions Precedent for each Utilisation), which shall be delivered five (5) Business Days prior to the proposed Utilisation Date at the latest (other than the documents which the Agent has confirmed in writing may be delivered at the Utilisation Date at the latest and subject to agreed closing mechanism), in form and substance satisfactory to the Agent.
As soon as possible and in any event no later than at the relevant Utilisation Date, and before any funds held in the Escrow Utilisation Account can be released, the Agent shall receive originals or certified copies of all of the documents and other evidence listed in Schedule 3 Part III ( Closing Documents Utilisation Date ), in form and substance satisfactory to the Agent.
Further conditions precedent
The Lenders will only be obliged to comply with Clause 5.4 ( Lenders’ participation ) if on the date of a Utilisation Request and on the proposed Utilisation Date:
no Default is continuing or would result from the proposed Utilisation; and
the representations and warranties contained in Clause 20 ( Representations and warranties ) deemed to be repeated on those dates are true and correct in all material respects.
the Agent has not received any notice from K-sure requesting the K-sure Lenders to suspend the making of all or part of the Loan and/or the K-sure Lenders are not required by the terms of the K-sure Insurance Policy to suspend the make of all or part of the Loan(s).
Conditions subsequent
It shall be a condition subsequent to the Lenders making the Loans and Commitments available within the relevant timeline as specified in Schedule 3 Part III ( Conditions Subsequent ) that the Agent has received originals or certified copies of all of the documents and other evidence listed in Schedule 3 Part III ( Conditions Subsequent ) in form and substance satisfactory to the Agent (acting on the instructions from the Required Lenders).
GIEK Lender conditions precedent
The Borrowers may not deliver a Utilisation Request unless the GIEK Lender has received evidence of the Norwegian Contracts, and evidence that the GIEK Lender Commitment will not exceed 80% of the Norwegian Contract Value.
The GIEK Lender will only be obliged to comply with Clause 5.4 ( Lenders’ participation ) if on the date of a Utilisation Request and on the proposed Utilisation Date there shall not have been such changes in national or international monetary, financial, political or economic conditions or exchange controls or exchange rates as would in the GIEK Lender's reasonable view be likely to materially prejudice disbursement hereunder.
K-sure Lenders conditions precedent
The K-sure Lenders will only be obliged to comply with Clause 5.4 ( Lenders' participation ) if on or before the proposed Utilisation Date:
K-sure has received payment in full of the K-sure Premium relating to the K-sure Insurance Policy in respect of the relevant Drillship from the Borrowers; and
the Agent has not received any notice from K-sure requesting the K-sure Lenders to suspend the making of the K-sure Facility and/or the K-sure Lenders are not required by the terms of any of the K-sure Insurance Policy to suspend the making of the K-sure Facility, which notice can be provided from K-sure as a consequence of, inter alia, any materially adverse change which has occurred in the financial or credit status of any Obligor.
Conditions for Escrow Utilisation
If required by a Borrower for it to comply with a relevant building contract for any of the Drillships, that Borrower may request an Escrow Utilisation provided that the conditions referred to in Schedule 3 Part II ( Conditions Precedent to a Utilisation Date ) have been met, and provided that it can evidence, to the satisfaction of the Agent (on behalf of the Required Lenders and KEXIM), that the conditions referred to in Schedule 3 Part III ( Closing documents Utilisation Date ) and Clauses 4.3 ( Further conditions precedent ) 4.5 ( GIEK Lender conditions precedent ) and 4.6 ( K-sure Lenders conditions precedent ) will all, at the relevant Utilisation Date (being the date when the funds are released from the Escrow Utilisation Account) at the latest, be fulfilled in form and substance satisfactory to the Agent (on behalf of the Required Lenders, and always to include KEXIM).
The funds disbursed to the Escrow Utilisation Account in the Escrow Utilisation can be released from the Escrow Account upon the conditions referred to in Schedule 3 Part III ( Closing documents Utilisation Date ), Clauses 4.3 ( Further conditions precedent ), 4.5 ( GIEK Lender conditions precedent ) and 4.6 ( K-sure Lenders conditions precedent ) having been met (subject to a closing mechanism agreed between the Agent (acting on behalf of the Required Lenders, and always to include KEXIM) and the Borrowers).
Waiver of conditions precedent and conditions subsequent
The conditions specified in this Clause 4 are solely for the benefit of the Finance Parties and may be waived on their behalf in whole or in part and with or without conditions by the Agent (acting on the instructions of the Required Lenders unless it is a non-material matter of administrative or technical character where the Agent may act in its sole discretion), save for conditions which are comprised by Clause 34.3.2 ( Exceptions ) which will be subject to consent from all the Lenders. The Finance Parties shall be notified by the Agent of a waiver granted pursuant to this Clause.
UTILISATION
Delivery of a Utilisation Request
A Borrower may utilise the Facility by delivering to the Agent a duly completed Utilisation Request no later than 10:00 hours (Amsterdam time) five (5) Business Days prior to the proposed Utilisation Date.
Completion of a Utilisation Request
A Utilisation Request is irrevocable and will not be regarded as having been duly completed unless:
it specifies to which Facility and to which Drillship it relates;
the proposed Utilisation Date is a Business Day within the Availability Period;
the Utilisation is proposed for all the Tranches in respect of the relevant Drillship;
the amount of the proposed Utilisation (together with the Loans outstanding) is not more than available pursuant to Clause 2.1 ( Facilities );
the currency specified is USD; and
the proposed Interest Period complies with Clause 10 ( Interest Periods ).
Availability
Any amount of the Total Commitments not utilised by the expiry of the applicable Availability Period shall automatically be cancelled at close of business in Amsterdam on such date and the Facility Amount shall be reduced accordingly.
Only one single Utilisation may be made of each Tranche.
No Loans may subsequently be re-borrowed once repaid.
Lenders’ participation
Upon receipt of a Utilisation Request, the Agent shall notify each Lender of the details of the requested Loan and the amount of each Lender’s participation in the relevant Loan. If the conditions set out in this Agreement have been met, each Lender shall no later than 11:00 hours (Amsterdam time) on the relevant Utilisation Date make available to the Agent for the account of the relevant Borrower an amount equal to its participation in the Loan to be advanced pursuant to the relevant Utilisation Request.
REPAYMENT AND REDUCTIONS
Scheduled Repayments
The relevant Borrower shall repay each Tranche made to it by consecutive quarterly repayments based on a 12 year profile as set out in Schedule 7 ( Repayments ).
The first repayment of the Tranche utilised on the First Utilisation Date shall occur three (3) months from the First Utilisation Date.
In respect of all the Tranches relating to the last two Drillships, the first repayment of such Tranches shall be no later than three (3) months from the relevant Utilisation Date of such Tranches or earlier, so that the repayment in respect of such Tranches occur on the same date as the next repayment in respect of the Tranches utilised on the First Utilisation Date.
All repayments shall be allocated pro rata between the Facilities.
Final repayment
On the Final Maturity Date of a Tranche the relevant Borrower shall repay that Tranche in full, together with all other sums due and outstanding under the Finance Documents in respect of such Tranche at such date (if any).
VOLUNTARY PREPAYMENT AND CANCELLATION
Voluntary prepayment
Subject to Clause 7.3.6 (Application) below, and subject to approval from the ECA Lenders, K-sure and/or GIEK (as relevant) a Borrower may, by giving the Agent not less than thirty (30) calendar days prior written notice, prepay the whole or any part of the Facility (but if in part, in a minimum amount of USD five million (5,000,000) or in integral multiples of USD five million (5,000,000) across the Facilities).
The Borrowers may not make any prepayment of a Tranche relating to only one Drillship, unless the remaining Tranche relates to a Drillship which is employed on a Satisfactory Drilling Contract.
Voluntary cancellation
A Borrower may, by giving the Agent not less than thirty (30) calendar days prior written notice, permanently reduce, cancel or terminate all or part of the unutilised portions of the Facility, including the respective Tranches (but if in part, in a minimum amount of USD five million (5,000,000) or in integral multiples of USD five million (5,000,000)).
If a Borrower reduces, cancels or terminates one or more Tranches pursuant to paragraph (a) above, all other Tranches relating to the same Drillship or Drillships shall be reduced, cancelled or terminated with the same pro rata amount.
Terms and conditions for voluntary prepayments and cancellation
Irrevocable notice
A Borrower may not prepay or cancel all or part of the Loans except as expressly provided in this Agreement.
Any notice of prepayment or cancellation by a Borrower under this Clause 7 shall be irrevocable and, unless a contrary indication appears in this Agreement, shall specify the date upon which the prepayment or cancellation is to be made and the amount of the prepayment or cancellation.
Additional payments
Upon any reduction of the Commitments under this Clause 7, the Borrowers shall repay the Loans by an amount sufficient to ensure that the total aggregate amount of the Loans shall constitute no more than the amount of the Available Commitment following the relevant reduction, such repayment to be made no later than on the day that the relevant reduction becomes effective.
Any prepayment under this Agreement shall be made together with accrued interest on the amount prepaid.
Any amount prepaid under the Commercial Facility, the GIEK Lender Facility and the K-sure Facility shall be made together with Break Cost pursuant to Clause 11.3 ( Break Costs ) below, without premium or penalty.
Any amount prepaid under the KEXIM Facility shall be made together with a prepayment fee of zero point five per cent (0.5%) of the principal amount prepaid under the KEXIM Facility.
No reinstatement
No amount of the Commitments cancelled or repaid under this Clause 7 may subsequently be reinstated. A Borrower may not utilise any part of a Facility which has been cancelled or any of a Facility which has been prepaid under this Clause 7.
Cancellation of GIEK Guarantee and K-sure Insurance Policy
The GIEK Guarantee will be cancelled to the extent that the GIEK Lender Facility is repaid and/or to the extent that the GIEK Lender Facility is cancelled pursuant to this Clause 7.
The K-sure Insurance Policy will be cancelled to the extent that the K-sure Facility is repaid and/or to the extent that the K-sure Facility is cancelled pursuant to this Clause 7.
Forwarding of notice of prepayment and cancellation
If the Agent receives a notice under this Clause 7 it shall promptly forward a copy of that notice to the Lenders and to K-sure and/or GIEK (as relevant).
Application
Any voluntary cancellation and prepayment made pursuant to this Clause 7 shall be applied pro rata between each Facility and pro rata against the scheduled repayments under each Tranche.
Amended Repayment Schedule
Upon any prepayment or cancellation the Agent shall, if applicable, replace Schedule 7 ( Repayments ) with an amended and new repayment and reduction schedule reflecting the correct scheduled amounts and provide a copy to the Borrowers and the Lenders thereof.
MANDATORY PREPAYMENT AND CANCELLATION
Total Loss or sale
If a Drillship is sold or otherwise is disposed of in whole or in part ( except in relation to a sale in accordance with clause 27.2 (Accession by an Acceding Borrower and Guarantor ), or suffers a Total Loss, the relevant Tranches pertaining to that Drillship shall be cancelled and any amount outstanding under such Tranches shall, in the case of a Total Loss, be prepaid in accordance with Clause 24.12 ( Total Loss ), or in the case of a sale or disposal, on the date upon which the sale or disposal of such Drillship is completed.
Illegality
If it becomes unlawful under any law, regulation, treaty or of any directive of any monetary authority (whether or not having the force of law) in any applicable jurisdiction for a Lender to perform any of its obligations as contemplated by this Agreement or to fund or maintain its participation in the Loan:
that Lender shall promptly notify the Agent upon becoming aware of that event;
the Agent shall promptly notify the Borrowers (specifying the obligations the performance of which is thereby rendered unlawful and the law giving rise to the same) upon receipt of notification in accordance with paragraph (a) above;
upon the Agent notifying the Borrowers, the Commitment of that Lender will be immediately reduced to zero and cancelled; and
the Borrowers shall repay that Lender’s participation in the Loans on the last day of the Interest Period occurring after the Agent has notified the Borrowers or, if earlier, the date specified by the Lender in the notice delivered to the Agent (being no earlier than the last day of any applicable grace period permitted by law).
Minimum Market Value
Upon non-compliance with Clause 24.1 ( Minimum Market Value) , the Facility shall be repaid in accordance with Clause 8.9 ( Terms and conditions for mandatory prepayments and cancellation ) on the date falling 60 days after such breach by an amount equal to the amount which is required for the Borrowers to become compliant with Clause 24.1 ( Minimum Market Value ) again.
Change of control
If
any person, other than Hemen Holding Limited (and/or one or more companies controlled more than fifty per cent (50%) by the John Fredriksen Family), or group of persons acting in concert, obtains more than fifty per cent (50%) of the voting rights or share capital or otherwise control the appointment of members of the board of directors of the Parent, unless the new controlling shareholder(s) is/are acceptable to Agent (on behalf of the Lenders); or
Hemen Holding Limited (and/or one or more companies controlled more than fifty per cent (50%) by the John Fredriksen Family) ceases to own a minimum of twenty per cent (20%) or more of the voting rights or share capital or otherwise control the appointment of members of the board of directors of the Parent, unless a prior written consent from the Agent (on behalf of the Lenders) has been given;
the Total Commitments shall be automatically cancelled and all Loans and other amounts outstanding under the Finance Documents shall be prepaid within 60 days thereafter after which the GIEK Guarantee and the K-Sure Insurance Policy shall also be automatically cancelled.
For the purpose of this Clause 8.4 the following definition shall apply:
“ John Fredriksen Family ” shall mean John Fredriksen, his direct lineal descendants, the personal estate of any of the aforementioned persons and any trust created for the benefit of one or more of the aforementioned persons and their estates.
Cessation of the GIEK Guarantee or the K-sure Insurance Policy
If, for any reason whatsoever, the GIEK Guarantee or the K-sure Insurance Policy are repudiated, ceases to be legally valid and binding or have full force and effect, the GIEK Lender and/or the K-sure Lenders (as applicable) may cancel the GIEK Lender Facility and/or the K-sure Facility (as applicable) secured by the GIEK Guarantee or K-sure Insurance Policy (respectively) and declare the outstanding amounts under the relevant Facility, together with accrued interests and all other amounts accrued or outstanding owing to the GIEK Lender and/or the K-sure Lenders (as applicable) thereunder immediately due and payable.
Expiry of Commercial Facility
Unless the Commercial Facility has been refinanced on commercially sustainable terms, and with such lenders as acceptable to the GIEK Lender, GIEK, KEXIM and K-sure, by no later than on the Final Maturity Date of the Commercial Facility, then all outstanding amounts under this Agreement, (including all accrued outstanding interest and other indebtedness thereto), shall be repaid on the Final Maturity Date of the Commercial Facility.
Failure to agree on the GIEK Lender Margin
If the Borrowers and the GIEK Lender fail to agree on a new GIEK Lender Margin, and the GIEK Lender Facility is repaid in accordance with paragraph b) of Clause 9.5 ( Fixing of the margin for the GIEK Lender Facility ), then all outstanding amounts under this Agreement, (including all accrued outstanding interest and other indebtedness thereto), shall be repaid on the date that the GIEK Lender Facility is cancelled and repaid pursuant to Clause 9.5 ( Fixing of the margin for the GIEK Lender Facility ).
Reduction of Norwegian Contract Value
If, for any reason, the Norwegian Contract Value is reduced after the disbursement of a Tranche under the GIEK Lender Facility, the relevant Tranche under the GIEK Lender Facility shall be repaid to such extent that it does not exceed the GIEK Lender Commitment.
Terms and conditions for mandatory prepayments and cancellation
Application
Unless otherwise specified in Clause 8.1 ( Total Loss or sale ), all mandatory prepayments and/or cancellations (as the case may be) made under this Clause 8 shall be applied pro rata between the Facilities and pro rata against the scheduled repayments under each Tranche.
Upon any such prepayments and/or cancellations, the Agent shall, if applicable, replace Schedule 7 ( Repayments ) with an amended and new repayment schedule reflecting the correct scheduled amounts and provide a copy to the Borrowers and the Lenders thereof.
Additional payments
Upon any reduction of the Commitments under this Clause 8, the Borrowers shall repay the Loans outstanding by an amount sufficient to ensure that the total aggregate amount of the Loans shall constitute no more than the amount of the Available Commitment following the relevant reduction, such repayment to be made no later than on the day that the relevant reduction becomes effective. Any such prepayments shall be applied pro rata between the Lenders.
Any prepayment under this Agreement shall be made together with accrued interest on the amount prepaid.
Any amount prepaid under the Commercial Facility, the GIEK Lender Facility and the K-sure Facility shall be made together with Break Costs pursuant to Clause 11.3 ( Break Costs ) below, without premium or penalty.
Any amount prepaid under the KEXIM Facility shall be made together with a prepayment fee of zero point five per cent (0.5%) of the principal amount prepaid under the KEXIM Facility.
No reinstatement
No amount of the Commitments cancelled or repaid under this Clause 8 may subsequently be reinstated. A Borrower may not utilise any part of a Facility which has been cancelled or any of a Facility which has been prepaid under this Clause 8.
Cancellation of GIEK Guarantee and K-sure Insurance Policy
The GIEK Guarantee will be cancelled to the extent that the GIEK Lender Facility is repaid and/or to the extent that the GIEK Lender Facility is cancelled pursuant to this Clause 8.
The K-sure Insurance Policy will be cancelled to the extent that the K-sure Facility is repaid and/or to the extent that the K-sure Facility is cancelled pursuant to this Clause 8.
Forwarding of notice of prepayment and cancellation
If the Agent receives a notice under this Clause 8 it shall promptly forward a copy of that notice to the Lenders, to K-sure and/or GIEK (as relevant) and the Borrowers.
INTEREST
Calculation of interest
The rate of interest for the Loan for each Interest Period is the percentage rate per annum which is the aggregate of:
the Applicable Margin;
LIBOR; and
Mandatory Cost (if any).
Effective interest pursuant to the Norwegian Financial Agreement Act of 1999 No. 46 has been calculated by the Agent as set out in a separate notice from the Agent to the Borrowers.
Payment of interest
The Borrowers shall pay accrued interest on each Loan on each Interest Payment Date, however, if an Interest Period is longer than three (3) months, in quarterly intervals after the first day of such Interest Period.
Default interest
If an Obligor fails to pay any amount payable by it under the Finance Documents on its due date, interest shall accrue on the overdue amount from the due date and up to the date of actual payment (both before and after judgment) at a rate determined by the Agent to be two per cent (2.00%) higher than the rate which would have been payable if the overdue amount had, during the period of non-payment, constituted a Loan in the currency of the overdue amount for successive Interest Periods, each of a duration selected by the Agent (acting reasonably). Any interest accruing under this Clause 9.3 shall be immediately payable by the Obligors on demand by the Agent. Default interest (if unpaid) arising on an overdue amount will be compounded with the overdue amount at the end of each Interest Period applicable to that overdue amount but will remain immediately due and payable.
Notification of rates of interest
The Agent shall promptly notify the Lenders and the Borrowers of the determination of a rate of interest under this Agreement.
Fixing of the margin for the GIEK Lender Facility
a)
The GIEK Lender Margin is fixed for a period of five (5) years from the First Utilisation Date (the “Fixed Margin Period” ).
b)
The Borrowers may from the date falling between forty (40) and sixty (60) Business Days prior to the Interest Payment Date falling nearest, and prior to, the expiry of the Fixed Margin Period (the “ Margin Review Date” ), request that the GIEK Lender gives an offer to the Borrowers for a fixed Margin (the “ New Fixed Margin Offer ”) for an additional period to be agreed between the GIEK Lender and the Borrowers (the “ New Fixed Margin Period ”). The GIEK Lender shall, within ten (10) Business Days of receipt of such request give a New Fixed Margin Offer to the Borrowers. No later than ten (10) Business Days of receipt of the New Fixed Margin Offer, the Borrowers may accept or reject the New Fixed Margin Offer. If the Borrowers do not request the GIEK Lender to give a New Fixed Margin Offer or do not accept the New Fixed Margin Offer in accordance with the conditions of this Clause 9.5, the GIEK Lender Commitment shall be cancelled and any amount outstanding under the GIEK Lender Facility together with the GIEK Lender's proportionate part of all Outstanding Indebtedness shall be due and payable by the Borrowers on the last day of the relevant GIEK Lender Fixed Margin Period either by cash or through loans from the New GIEK Lender.
INTEREST PERIODS
Selection of Interest Periods
A Borrower may, subject to (d) and (e) below, select an Interest Period for a Loan in a Utilisation Request.
Each Utilisation Request for selection of an Interest Period is irrevocable and must be received by the Agent not later than 10:00 hours (Amsterdam time) five (5) Business Days before the commencement of that Interest Period.
If a Borrower fails to deliver a Utilisation Request to the Agent in accordance with paragraph b) above, the relevant Interest Period will be three (3) months.
For the ECA Facilities, the relevant Borrower and the relevant ECA Lender may only agree on Interest Period of three (3) months.
For the Commercial Facility, a Borrower may select an Interest Period of three (3) or six (6) months, or such other period as the Agent may, with the consent of the Required Lenders, agree with the Borrowers.
An Interest Period for a Loan shall not extend beyond the Final Maturity Date, but shall be shortened so that it ends on the Final Maturity Date.
An Interest Period for the maturity part of a Loan shall not extend beyond the first subsequent scheduled repayment date after the Utilisation Date of such Loan, but shall be shortened so that it ends on such scheduled repayment date.
Each Interest Period for a Loan shall start on the relevant Utilisation Date or (if already made) on the last day of its preceding Interest Period.
Non-Business Day
If an Interest Period would otherwise end on a day which is not a Business Day, that Interest Period will instead end on the next Business Day in that calendar month (if there is one) or the preceding Business Day (if there is not).
Notification of Interest Periods
The Agent will promptly notify the Borrowers and the Lenders of the Interest Periods determined in accordance with this Clause 10.
CHANGES TO THE CALCULATION OF INTEREST
Market disruption
If a Market Disruption Event occurs in relation to the Loan for any Interest Period, then the rate of interest on each Lender’s share of the Loan for the Interest Period shall be the rate per annum which is the sum of:
the Applicable Margin;
any Mandatory Costs; and
the rate notified to the Agent by that Lender as soon as practicable and in any event before interest is due to be paid in respect of that Interest Period, to be that which expresses as a percentage rate per annum the cost to that Lender of funding its participation in the Loan from whatever source it may reasonably select.
In this Agreement, “ Market Disruption Event ” means:
at or about 11:00 hours (London time) on the Quotation Day for the relevant Interest Period LIBOR is not available; or
before close of business in London on the Quotation Day for the relevant Interest Period, the Agent receives notifications from a Lender or Lenders (whose participations in the Loan exceed fifty per cent (50%) of the Loan) that the cost to it or them of obtaining matching deposits in the London interbank market would be in excess of LIBOR.
Alternative basis of interest or funding
If a Market Disruption Event occurs and the Agent or the Borrowers so requires, the Agent and the Borrowers shall enter into negotiations (for a period of not more than thirty (30) days) with a view to agreeing a substitute basis for determining the rate of interest instead of LIBOR. Any alternative basis agreed pursuant to this Clause 11.2 shall, with the prior consent of all the Lenders and the Borrower, be binding on all Parties.
Break Costs
A Borrower shall, within three (3) Business Days of demand by a Lender, pay to that Lender (excluding KEXIM) its Break Costs attributable to all or any part of the Loan or Unpaid Sum being paid by that Borrower on a day other than the last day of an Interest Period for the Loan or Unpaid Sum.
Each Lender shall, as soon as reasonably practicable after a demand by the Agent, provide a certificate confirming the amount of its Break Cost for any Interest Period in which they accrue.
FEES
Commitment fee Lenders
Each Borrower shall pay to the Agent (for distribution among the Lenders) a commitment fee of forty per cent (40%) of the relevant Applicable Margin for each Facility on the Available Commitment of each Lender accruing from the Closing Date and up until the earlier of (i) the expiry of the Availability Period and (ii) the date on which the Facility has been fully utilised. The commitment fee shall be payable quarterly in arrears on each Quarter Date and on the last day of the Availability Period or such other date upon which the Facility is fully drawn or cancelled in whole.
Fees payable in respect of the GIEK Guarantee
The Borrowers shall pay to the Agent (for the account of GIEK) a guarantee premium at the rate of one point five per cent (1.5%) per annum on the outstanding amount of the GIEK Guarantee for the period from the issue of the GIEK Guarantee until it has been cancelled or has expired.
The Borrowers shall pay to the Agent (for distribution to GIEK) a commitment fee of forty per cent (40%) of the guarantee premium as set out in paragraph (a) above calculated on the Available Commitment of the GIEK Lender accruing from the Closing Date and up until the earlier of (i) the expiry of the Availability Period and (ii) the date on which the Facility has been fully utilised. The commitment fee shall be payable quarterly in arrears on each Quarter Date and on the last day of the Availability Period or such other date upon which the Facility is fully drawn or cancelled in whole.
The guarantee premium payable to GIEK pursuant to paragraph (b) above shall be payable on each Interest Payment Date (as set out in Clause 9.2 ( Payment of interest )) (or such shorter period as shall end on the expiration date for the GIEK Guarantee) starting on the date of issue of the GIEK Guarantee, and shall be paid to the GIEK Account within two days after having been paid to the Agent, with the guarantee number to be included on the transfer.
If any one of the Applicable Margins, any commitment fees or other fees are increased, GIEK shall have the right to increase its premium or commitment fee set out in paragraph (a) and (b) above, or any of its other fees that correspond to the increased fees. If any one of the Applicable Margins, commitment fees or other fees are decreased, GIEK shall have the right to decrease its premium, commitment fee or other fees.
K-sure Premium
The Borrowers shall be responsible and shall bear the cost of the K-sure premium of each K-sure Insurance Policy and shall pay to the Agent (for the account of K-sure) the K-Sure Premium prior to the First Utilisation Date.
Each Borrower
and each K-sure Lender acknowledges and agrees that the amounts of any K-sure Premium will be solely determined by K-sure and that no K-sure Lender is in any way involved in the calculation or payment of any part of any K-sure Premium;
agrees that its obligation to pay all K-sure Premium or any part of any K-sure Premium shall be an absolute and unconditional obligation and, without limitation, shall not be affected by any failure by the Borrowers or either one of the Borrowers to draw down funds under this Agreement or the prepayment or acceleration of the whole or any part of the K-sure Lenders Commitments;
acknowledges that it shall pay an amount equivalent to all K-sure Premium (including default interest under the K-sure Insurance Policy) to K-sure on the relevant due date, and no K-sure Premium will be refundable in whole or in part in any circumstances, unless otherwise provided in the K-sure Insurance Policy;
agrees that if, for any reason whatsoever, any additional premium is or becomes payable to K-sure in respect of the K-sure Insurance Policy, the Borrowers shall promptly pay such additional premium in full and the Borrowers shall fully cooperate with the Agent on its reasonable request to take all steps necessary on the part of the Borrowers to ensure that each K-sure Insurance Policy remains in full force and effect throughout the Security Period; and
shall indemnify K-sure in relation to any costs or expenses (including legal fees) suffered or incurred by K-sure in connection with any transfer to K-sure undertaken pursuant to Clause 27.3 ( Assignments and transfers by the Lenders ) or in connection with any review by K-sure of or in relation to any Event of Default and/or amendment or supplement to any of the Finance Documents and/or a request for a consent or approval from K-sure.
If the Borrowers have paid all K-sure Premium under the K-sure Insurance Policy, the Finance Parties shall pay to the Borrower any K-sure insurance premium refunded by K-sure and received by that Finance Party (if any).
KEXIM prepayment fee
Any amount prepaid under the KEXIM Facility shall be made together with a prepayment fee of zero point five per cent (0.5%) of the principal amount prepaid under the KEXIM Facility, as set out in Clauses 7.3.2 ( Additional payments ) and 8.9.2 ( Additional payments ).
Other fees
The Borrowers shall pay such other fees as set out in the Fee Letters.
TAX GROSS-UP AND INDEMNITIES
Taxes
No withholding
All payments by the Obligors under the Finance Documents shall be made free and clear of and without deduction or withholding for or on account of any Tax or any other governmental or public payment imposed by the laws of any jurisdiction from which or through which such payment is made, unless a Tax Deduction or withholding is required by law.
Tax gross-up
The relevant Obligor shall promptly upon becoming aware that it must make a Tax Deduction or withholding (or that there is any change in the rate or the basis of a Tax Deduction or withholding) notify the Agent accordingly. Similarly, a Lender shall notify the Agent on becoming so aware in respect of a payment payable to that Lender. If the Agent receives such notification from a Lender it shall notify the Borrowers and that Lender.
If a Tax Deduction or withholding is required by law to be made by an Obligor:
the amount of the payment due from the Obligor shall be increased to an amount which (after making any Tax Deduction or withholding) leaves an amount equal to the payment which would have been due if no Tax Deduction or withholding had been required; and
the Obligor shall make that Tax Deduction or withholding within the time allowed and in the minimum amount required by law.
Within thirty (30) days of making either a Tax Deduction or withholding or any payment required in connection with that Tax Deduction or withholding, the Obligor shall deliver to the Agent for the Finance Party entitled to the payment evidence reasonably satisfactory to that Finance Party that the Tax Deduction or withholding has been made and (as applicable) any appropriate payment paid to the relevant taxing authority.
Tax indemnity
The Borrowers shall (within three (3) Business Days of demand by the Agent) pay to the Agent for the account of the relevant Finance Party an amount equal to the loss, liability or cost which a Finance Party determines will be or has been (directly or indirectly) suffered for or on account of any Tax by such Finance Party in respect of a Finance Document, save for any Tax on Overall Net Income assessed on a Finance Party or to the extent such loss, liability or cost is compensated under Clause 13.1.2 ( Tax gross-up ), Clause 13.5 ( FATCA Deduction and gross-up by Obligor ) or under Clause 13.6(d) ( FATCA Deduction by a Finance Party ).
VAT
All amounts set out, or expressed to be payable under a Finance Document by any Party to a Finance Document shall be deemed to be exclusive of any VAT. If VAT is chargeable, the Borrowers shall pay to the Agent for the account of such Finance Party (in addition to the amount required pursuant to the Finance Documents) an amount equal to such VAT.
FATCA Information
Subject to paragraph (c) below, each Party shall, within ten (10) Business Days of a reasonable request by another Party:
confirm to that other Party whether it is:
a FATCA Exempt Party; or
not a FATCA Exempt Party; and
supply to that other Party such forms, documentation and other information relating to its status under FATCA (including its applicable "passthru payment percentage" or other information required under the US Treasury Regulations or other official guidance including intergovernmental agreements) as that other Party reasonably requests for the purposes of that other Party's compliance with FATCA.
If a Party confirms to another Party pursuant to 13.4(a)(i) above that it is a FATCA Exempt Party and it subsequently becomes aware that it is not, or has ceased to be a FATCA Exempt Party, that Party shall notify that other Party reasonably promptly.
Paragraph (a) above shall not oblige any Finance Party to do anything which would or might in its reasonable opinion constitute a breach of:
any law or regulation;
any fiduciary duty; or
any duty of confidentiality.
If a Party fails to confirm its status or to supply forms, documentation or other information requested in accordance with paragraph (a) above (including, for the avoidance of doubt, where paragraph (b) above applies), then:
if that Party failed to confirm whether it is (and/or remains) a FATCA Exempt Party then such Party shall be treated for the purposes of the Finance Documents as if it is not a FATCA Exempt Party; and
if that Party failed to confirm its applicable "passthru payment percentage" then such Party shall be treated for the purposes of the Finance Documents (and payments made thereunder) as if its applicable "passthru payment percentage" is 100%,
until (in each case) such time as the Party in question provides the requested confirmation, forms, documentation or other information.
FATCA Deduction and gross-up by Obligor
If an Obligor is required to make a FATCA Deduction, that Obligor shall make that FATCA Deduction and any payment required in connection with that FATCA Deduction within the time allowed and in the minimum amount required by FATCA.
If a FATCA Deduction is required to be made by an Obligor, the amount of the payment due from that Obligor shall be increased to an amount which (after making any FATCA Deduction) leaves an amount equal to the payment which would have been due if no FATCA Deduction had been required.
The Parent shall promptly upon becoming aware that an Obligor must make a FATCA Deduction (or that there is any change in the rate or the basis of a FATCA Deduction) notify the Agent accordingly. Similarly, a Finance Party shall notify the Agent on becoming so aware in respect of a payment payable to that Finance Party. If the Agent receives such notification from a Finance Party it shall notify the Parent and that Obligor.
Within thirty days of making either a FATCA Deduction or any payment required in connection with that FATCA Deduction, the Obligor making that FATCA Deduction or payment shall deliver to the Agent for the Finance Party entitled to the payment evidence reasonably satisfactory to that Finance Party that the FATCA Deduction has been made or (as applicable) any appropriate payment paid to the relevant governmental and taxation authority.
FATCA Deduction by a Finance Party
Each Finance Party may make any FATCA Deduction it is required by FATCA to make, and any payment required in connection with that FATCA Deduction, and no Finance Party shall be required to increase any payment in respect of which it makes such a FATCA Deduction or otherwise compensate the recipient of the payment for that FATCA Deduction. A Finance Party which becomes aware that it must make a FATCA Deduction in respect of a payment to another Party (or that there is any change in the rate or the basis of such FATCA Deduction) shall notify that Party and the Agent.
If the Agent is required to make a FATCA Deduction in respect of a payment to a Finance Party under Clause 30.2 ( Distributions by the Agent ) which relates to a payment by an Obligor, the amount of the payment due from that Obligor shall be increased to an amount which (after the Agent has made such FATCA Deduction), leaves the Agent with an amount equal to the payment which would have been made by the Agent if no FATCA Deduction had been required. The Agent will not be obliged to pay or advance such amount before actually receiving the increased amount from the relevant Obligor.
The Agent shall promptly upon becoming aware that it must make a FATCA Deduction in respect of a payment to a Finance Party under Clause 30.2 ( Distributions by the Agent ) which relates to a payment by an Obligor (or that there is any change in the rate or the basis of such a FATCA Deduction) notify the relevant Obligor and the relevant Finance Party.
An Obligor shall (within three Business Days of demand by the Agent) pay to a Finance Party an amount equal to the loss, liability or cost which that Finance Party determines will be or has been (directly or indirectly) suffered by that Finance Party as a result of another Finance Party making a FATCA Deduction in respect of a payment due to it under a Finance Document. This paragraph shall not apply to the extent a loss, liability or cost is compensated for by an increased payment under paragraph (b) above.
A Finance Party making, or intending to make, a claim under paragraph (d) above shall promptly notify the Agent of the FATCA Deduction which will give, or has given, rise to the claim, following which the Agent shall notify the Borrowers.
INCREASED COSTS
Increased Costs
The Borrowers shall, upon demand from the Agent, pay for the account of a Finance Party the amount of any Increased Cost incurred by that Finance Party or any of its affiliates as a result of (i) the introduction of or any change in (or in the interpretation, administration or application of) any law, regulation or treaty or any directive of any monetary authority (whether or not having the force of law) (including, but not limited to any laws and regulations implementing new or modified capital adequacy requirements) or (ii) compliance with any law or regulation made after the Closing Date.
In this Agreement, the term “Increased Costs” means:
a reduction in the rate of return from the Facility or on a Finance Party’s (or its affiliate’s) overall capital;
an additional or increased cost; or    
a reduction of any amount due and payable under any Finance Document,
which is incurred or suffered by a Finance Party or any of its affiliates to the extent that it is attributable to that Finance Party having entered into its Commitments or Guarantee Commitments or funding or performing its obligations under any Finance Document.
A Finance Party intending to make a claim pursuant to this Clause 14.1 shall notify the Agent of the event giving rise to the claim, following which the Agent shall promptly notify the Borrowers. Each Finance Party shall as soon as practicable after a demand by the Agent, provide a confirmation showing the amount of its Increased Costs.
Exceptions
Clause 14.1 ( Increased Costs ) does not apply to the extent any Increased Cost is:
attributable to a Tax Deduction or withholding required by law to be made by a Borrower, and compensated for by Clause 13.1.2 ( Tax gross-up ) or Clause 13.2 ( Tax Indemnity ); or
attributable to a FATCA Deduction required to be made by an Obligor or a Finance Party, and compensated for by paragraph 13.6(d) of Clause 13.6 ( FATCA Deduction by a Finance Party ); or
attributable to gross negligence or the wilful breach by the relevant Finance Party or its affiliates of any law or regulation.
OTHER INDEMNITIES
Currency indemnity
If any sum due from an Obligor under the Finance Documents (a “ Sum ”), or any order, judgement or award given or made in relation to a Sum, has to be converted from the currency (the “ First Currency ”) in which that Sum is payable into another currency (the “ Second Currency ”) for the purpose of:
making or filing a claim or proof against a Borrower; or
obtaining or enforcing an order, judgement or award in relation to any litigation or arbitration proceedings,
the relevant Borrower shall as an independent obligation, within three (3) Business Days of demand, indemnify each Finance Party to whom that Sum is due against any cost, loss or liability arising out of or as a result of the conversion including any discrepancy between (A) the rate of exchange used to convert that Sum from the First Currency into the Second Currency and (B) the rate or rates of exchange available to that person at the time of its receipt of that Sum.
Each of the Obligors waives any right it may have in any jurisdiction to pay any amount under the Finance Documents in a currency other than that in which it is expressed to be payable.
General indemnities
A Borrower shall within three (3) Business Days of demand, indemnify each Finance Party against any documented costs, loss or liability incurred by that Finance Party as a result of:
the occurrence of any Event of Default;
any Environmental Claim;
a failure by an Obligor to pay any amount due under the Finance Documents on its due date, including without limitation, any cost, loss or liability arising as a result of Clause 29 ( Sharing among the Finance Parties );
the funding, or making arrangements to fund, its participation in the Loan requested by a Borrower in a Utilisation Request but not made by reason of the operation of any one or more of the provisions of this Agreement (other than by reason of gross negligence or wilful misconduct by that Lender alone); or
a Loan (or part thereof) not being prepaid in accordance with a notice of prepayment given by a Borrower.
Indemnity to Finance Parties
The Borrowers shall promptly indemnify the Agent or any other Finance Party against any documented cost, loss or liability incurred by the Agent or any other Finance Party (acting reasonably) as a result of;
investigating any event which it reasonably believes is a possible Event of Default; or
acting or verifying any notice, request or instruction by a Party which it reasonably believes to be genuine, correct or appropriately authorised.
MITIGATION BY THE LENDERS
Mitigation
Without in any way limiting the obligations of the Borrowers hereunder, each Finance Party shall, in consultation with the Borrowers, take all reasonable steps for a period of fifteen (15) Business Days to mitigate any circumstances which arise and which would result in any amount becoming payable under or pursuant to, or cancelled pursuant to, any of:
Clause 8.2 ( Illegality );
Clause 13 ( Tax gross-up and indemnities ); and
Clause 14 ( Increased Costs ),
including (but not limited to) transferring its rights and obligations under the Finance Documents to another affiliate.
A Finance Party is not obliged to take any steps under this Clause 16.1 if, in the opinion of that Finance Party (acting reasonably), to do so might be prejudicial to it.
Replacement of a Lender
Subject to the consent of K-sure (for the K-sure Lenders) and GIEK (for the GIEK Lender), the Borrowers shall have the right, in the absence of a Default or Event of Default, to replace any Lender that charges a material amount in excess of that being charged by the other Lenders with respect to contingencies described in;
Clause 13 ( Tax gross-up and indemnities ); and /or
Clause 14 ( Increased Costs ).
Indemnity
The Borrowers shall indemnify each Finance Party for all documented costs and expenses reasonably incurred by that Finance Party as a result of steps taken by it under Clause 16.1 ( Mitigation ) and 16.2 ( Replacement of a Lender ), as well as any Break Costs payable pursuant to Clause 11.2 ( Break Costs ) or any prepayment fee payable to KEXIM in accordance with Clause 12.3 ( KEXIM prepayment fee ).
COSTS AND EXPENSES
Transaction expenses
The Borrowers shall promptly on demand pay to the Agent the amount of all documented costs and expenses (including legal fees) reasonably incurred by any of the Finance Parties in connection with the negotiation, preparation, printing, perfection, execution, registration and syndication of:
this Agreement and any other documents referred to in this Agreement; and
any other Finance Documents executed after the Closing Date.
Amendment and enforcement costs, etc
The Borrowers shall, within three (3) Business Days of demand, reimburse the Agent or another Finance Party for the amount of all costs and expenses (including legal fees) incurred by it in connection with:
the granting of any release, waiver or consent under the Finance Documents;
any amendment or variation of any of the Finance Documents; and/or
the preservation, protection, enforcement or maintenance of, or attempt to preserve or enforce, any of the rights of the Finance Parties under the Finance Documents.
GUARANTEE AND INDEMNITY
Guarantee and indemnity
Each Guarantor hereby irrevocably and unconditionally jointly and severally:
guarantees to each Finance Party, as and for its own debt and not merely as surety, the due and punctual observance and performance by each Obligor of all of that Obligor’s obligations under the Finance Documents;
undertakes with each Finance Party that whenever an Obligor does not pay any amount when due under or in connection with any Finance Document, such Guarantor shall immediately on demand by the Agent pay that amount as if it were the principal obligor; and
undertakes to indemnify each Finance Party immediately on first demand against any cost, loss or liability suffered by that Finance Party if any obligation guaranteed by such Guarantor is or becomes unenforceable, invalid or illegal. The amount of the cost, loss or liability shall be equal to the amount which that Finance Party would otherwise have been entitled to recover.
Continuing guarantee
The Guarantee Obligations are continuing guarantee obligations and will extend to the ultimate balance of all amounts payable by any Obligor under the Finance Documents, regardless of any intermediate payment or discharge in whole or in part.
Maximum liability
Notwithstanding anything to the contrary in this Agreement or any Finance Documents including this Clause 18, the total and aggregate liability of each Guarantor hereunder shall be limited to USD one billion, six hundred and sixty seven million, five hundred thousand (1,667,500,000) (principal amount plus a headroom of fifteen per cent (15%)), in addition to any interest and costs.
Number of claims
There is no limit on the number of claims that may be made by the Agent (on behalf of the Finance Parties) under this Agreement.
Survival of Guarantor’s liability
A Guarantor’s liability to the Finance Parties under this Clause 18 shall not be discharged, impaired or otherwise affected by reason of any of the following events or circumstances (regardless of whether any such events or circumstances occur with or without such Guarantor’s knowledge or consent):
any time, waiver, consent, forbearance or other indulgence given or agreed by the Finance Parties with any Obligor in respect of any of the Obligor’s obligations under the Finance Documents; or
any defence, legal limitation, disability or incapacity of any Obligor related to the Finance Documents; or
any amendments to or variations of the Finance Documents agreed by the Finance Parties with any Obligor; or
the liquidation, bankruptcy or dissolution (or proceedings analogous thereto) of any Obligor; or
any other circumstance which might otherwise constitute a defence available to, or discharge of, a Guarantor.
Waiver of rights
Each Guarantor specifically waives all rights under the provisions of the Norwegian Financial Agreements Act 1999 (as amended) not being mandatory provisions, including (but not limited to) the following provisions (the main contents of the relevant provisions being as indicated in the brackets):
§ 63 (1) – (2) (to be notified of any Event of Default hereunder and to be kept informed thereof);
§ 63 (3) (to be notified of any extension granted to a Borrower in payment of principal and/or interest);
§ 63 (4) (to be notified of a Borrower’s bankruptcy proceedings or debt reorganisation proceedings and/or any application for the latter);
§ 65 (3) (that the consent of a Guarantor is required for the Guarantor to be bound by amendments to the Finance Documents that may be detrimental to its interest);
§ 67 (2) (about reduction of a Guarantor’s liabilities hereunder since no such reduction shall apply as long as any amount is outstanding under the Finance Documents);
§ 67 (4) (that a Guarantor’s liabilities hereunder shall lapse after ten (10) years, as that Guarantor shall remain liable hereunder as long as any amount is outstanding under any of the Finance Documents);
§ 70 (as no Guarantor shall have any right of subrogation into the rights of the Finance Parties under the Finance Documents until and unless the Finance Parties shall have received all amounts due or to become due to them under the Finance Documents);
§ 71 (as the Finance Parties shall have no liability first to make demand upon or seek to enforce remedies against a Borrower or any other security provided in respect of any Borrower’s liabilities under the Finance Documents before demanding payment under or seeking to enforce the Guarantee Obligations of a Guarantor hereunder);
§ 72 (as all interest and default interest due under any of the Finance Documents shall be secured by the Guarantee Obligations of a Guarantor hereunder);
§ 73 (1) – (2) (as all costs and expenses related to an Event of Default under this Agreement shall be secured by the Guarantee Obligations of a Guarantor hereunder); and
§ 74 (1) – (2) (as a Guarantor shall not make any claim against a Borrower for payment until and unless the Finance Parties first shall have received all amounts due or to become due to them under the Finance Documents).
Deferral of Guarantor’s rights
Each of the Guarantors undertakes to the Finance Parties that for as long as any of the Finance Documents is effective:
following receipt by it of a notice from the Agent of the occurrence of any Event of Default which is unremedied, none of the Guarantors will make demand for or claim payment of any moneys due to that Guarantor from any Obligor, or exercise any other right or remedy to which any of the Guarantors are entitled in respect of such moneys unless and until all moneys owing or due and payable by any Obligor to the Finance Parties under the Finance Documents have been irrevocably paid in full;
if an Obligor shall become the subject of an insolvency proceeding or shall be wound up or liquidated, the Guarantors shall not (unless so instructed by the Agent and then only on condition that the Guarantor holds the benefit of any claim in such insolvency or liquidation to pay any amounts recovered thereunder to the Agent) make any claim in such insolvency, winding-up or liquidation until all moneys owing or due and payable by any Obligor to the Finance Parties under the Finance Documents have been irrevocably paid in full;
if a Guarantor, in breach of paragraphs a) and/or b) above receives or recovers any money pursuant to any such exercise, claim or proof as therein referred to, such money shall be held by such Guarantor in custody for the Agent and immediately be paid to the Agent so as for the Agent to apply the same as if they were moneys received or recovered by the Agent under this Agreement; and
the Guarantors have not taken nor will they take from any Obligor any Security Interest whatsoever for the moneys hereby guaranteed.
Enforcement
No Finance Party shall be obliged before taking steps to enforce the Guarantee Obligations of any of the Guarantors under this Agreement:
to obtain judgement against any Obligor or any third party in any court or other tribunal;
to make or file any claim in a bankruptcy or liquidation of any Obligor or any third party; or
to take any action whatsoever against any Obligor or any third party under the Finance Documents, except giving notice of any payment due hereunder,
and each of the Guarantors hereby waives all such formalities or rights to which it would otherwise be entitled or which the Finance Parties would otherwise first be required to satisfy or fulfil before proceeding or making any demand against the Guarantors hereunder, except as required hereunder or by law.
Any release, discharge or settlement between a Guarantor and the Finance Parties (or any of them) in relation to any Finance Document shall be conditional upon no payment made by any Borrower to the Finance Parties hereunder or thereunder being void, set aside or ordered to be refunded pursuant to any enactment or law relating to breach of duty by any person, bankruptcy, liquidation, administration, protection from creditors generally or insolvency or for any other reason whatsoever. If any payment is void or at any time so set aside or ordered to be refunded, the Finance Parties shall be entitled subsequently to enforce the Guarantee Obligations of a Guarantor hereunder as if such release, discharge or settlement had not occurred and any such payment had not been made.
Additional security
This Guarantee is in addition to and is not in any way prejudiced by any other guarantee or security now or subsequently held by any Finance Party.
Guarantee and indemnity of the Borrowers
The Borrowers, as joint and several Borrowers, hereby guarantee on the same terms, limitations and conditions as the Guarantors under this Clause 18.
Limitation of Guarantee Obligations
Notwithstanding any other provision of this Clause 18 ( Guarantee and Indemnity ), and without limiting the generality of the foregoing, the guarantee, indemnity and other obligations of each Obligor hereunder shall extend to all amounts that constitute part of the Guarantee Obligations and would be owed by any other Obligor to any Finance Party under or in respect of the Finance Documents but for the fact that they are unenforceable or not allowable due to the existence of a bankruptcy, insolvency, reorganization or similar proceeding involving such other Obligor.
Each Obligor, and by its acceptance of this Agreement, each Finance Party, hereby confirms that it is the intention of all parties that this Agreement and the obligations of each Obligor hereunder do not constitute a fraudulent transfer or conveyance for purpose of Insolvency Law (as hereinafter defined), any fraudulent conveyance act, fraudulent transfer act or any similar foreign law to the extent applicable to this Agreement and the obligations of the Obligors hereunder. To effectuate the foregoing intention, the Finance Parties and each Guarantor hereby irrevocably agree that the obligations of each Obligor under this Agreement and the other Finance Documents to which it is a party at any time shall be limited to the maximum amount as will result in the obligations of such Obligor hereunder and thereunder not constituting a fraudulent transfer or conveyance. For the purpose hereof, " Insolvency Law " means the law described in this paragraph or any law relating to any proceeding of the type referred to in Clause 25.6 ( Insolvency ) and Clause 25.7 ( Insolvency proceeding ) of this Agreement or any similar foreign law for the relief of debtors applicable to such Obligor.
Contribution Agreement
Each Obligor hereby unconditionally and irrevocably agrees that in the event any payment shall be required to be made to any Finance Party under this Agreement, any other Finance Document or any other guarantee, such Obligor will contribute, to the maximum extent permitted by law, such amounts to each other Obligor and each other guarantor so as to maximize the aggregate amount paid to the Finance Parties under or in respect of the Finance Documents.

SECURITY
Security
The Obligors’ obligations and liabilities under the Finance Documents, including (without limitation) the Borrowers' obligation to repay the Facility together with all unpaid interest, default interest, commissions, charges, expenses and any other derived liability whatsoever of the Obligors towards the Finance Parties in connection with the Finance Documents (the " Secured Obligations "), shall at any and all times until all amounts due to the Finance Parties hereunder have been paid and/or repaid in full, be secured by the guarantee and indemnity granted by the Guarantors and the Borrowers pursuant to Clause 18 and additionally be cross collateralised as follows;
the Mortgages (including any deeds of covenants), subject however to contractually agreed Quiet Enjoyment Letters (where required under a drilling contract with a third party);
the Assignment of Earnings;
the Assignment of Earnings Accounts;
the Assignment of Insurances;
the Seadrill Partners Guarantee; and
the Share Charges.
Each of the Obligors undertakes to ensure that the above Security Documents are being duly executed by the parties thereto in favour of the Agent (on behalf of the Finance Parties) in form and substance satisfactory to the Agent (on behalf of the Finance Parties) on or prior to the Effective Time, legally valid and in full force and effect with first priority, and to execute or procure the execution of such further documentation as the Agent may reasonably require in order for the relevant Finance Parties to maintain the security position envisaged hereunder.
In addition to the security set out above, the GIEK Lender Facility shall be secured by the GIEK Guarantee and the K-sure Facility by the K-sure Insurance Policy.
Any changes to the Assignment of Earnings may be made only with the consent of the Required Lenders, always to include KEXIM.
Agent as holder of Security Interest under Hungarian law
In this Clause:
‘ Agent Claim’ has the meaning given to it in paragraph (b) below.
‘ Finance Party Claim ’ means any amount which an Obligor owes to a Finance Party under or in connection with the Secured Finance Documents; and
‘ Secured Finance Documents ’ means the Finance Documents, the GIEK Guarantee and the K-sure Insurance Policy.
Each Obligor must pay the Agent, as an independent and separate creditor, an amount equal to each Finance Party Claim on its due date (the “ Agent Claim ”).
Each Agent Claim is created on the understanding that the Agent must:
share the proceeds of each Agent Claim with the other Finance Parties; and
pay those proceeds to the Finance Parties, in accordance with their respective interests in the amounts outstanding under the Secured Finance Documents.
The Agent may enforce performance of any Agent Claim in its own name as an independent and separate right. This includes any suit, execution, enforcement of security, recovery of guarantees and applications for and voting in respect of any kind of insolvency proceeding.
Each Finance Party must, at the request of the Agent, perform any act required in connection with the enforcement of any Agent Claim. This includes joining in any proceedings as co-claimant with the Agent.
Unless the Agent fails to enforce an Agent Claim within a reasonable time after its due date, a Finance Party may not take any action to enforce the corresponding Finance Party Claim unless it is requested to do so by the Agent.
Each Obligor irrevocably and unconditionally waives any right it may have to require a Finance Party to join in any proceedings as co-claimant with the Agent in respect of any Agent Claim.
Discharge by an Obligor of a Finance Party Claim will discharge the corresponding Agent Claim in the same amount, and discharge by an Obligor of an Agent Claim will discharge the corresponding Finance Party Claim in the same amount.
The aggregate amount of the Agent Claims will never exceed the aggregate amount of Finance Party Claims.
A defect affecting an Agent Claim against an Obligor will not affect any Finance Party Claim. A defect affecting a Finance Party Claim against an Obligor will not affect any Agent Claim.
If the Agent returns to any Obligor, whether in any kind of insolvency proceedings or otherwise, any recovery in respect of which it has made a payment to a Finance Party, that Finance Party must repay an amount equal to that recovery to the Agent and the Agent Claim as well as the corresponding Finance Party Claim shall be reinstated to an amount as if such recovery had not taken place.
This Clause 19.2 ( Agent as holder of Security Interest under Hungarian law ) applies for the purpose of determining the secured liabilities in the Security Documents governed by Hungarian law.
REPRESENTATIONS AND WARRANTIES
Each of the Obligors represents and warrants to each Finance Party as set out below. Representations and warranties relating to a Drillship and a Borrower in its capacity as Drillship owner will be applicable from or in connection with the delivery of the relevant Drillship.
Status
Each Obligor is a limited liability company, duly incorporated, organised and validly existing under the laws of their jurisdiction of incorporation as set out in Schedule 8 ( Corporate Structure ) and registration and have the power to own their assets and carry on their business as they are currently being conducted.
Binding obligations
Subject to (b) below, the Finance Documents to which any Obligors are a party constitute legal, valid, binding and enforceable obligations, and each Security Document creates the security interests which that Security Document purports to create and those security interests are legal, valid, binding and enforceable first priority securities and no registration, filing, payment of tax or fees or other formalities are necessary or desired to render the Finance Documents enforceable in accordance with their terms against the Obligors, save for any UCC (Uniform Commercial Code) filings or the registration of the Mortgages with the relevant Ship Registry which shall be completed on or before the Utilisation Date of the Facility (and the registration of the relevant Security Documents (if any) with the relevant Company Register of the Obligors which shall be completed within the applicable time limit in each relevant jurisdiction).
Finance Documents which according to this Agreement are not deemed to be delivered until the relevant Utilisation Date, will be in compliance with (a) above from that Utilisation Date.
No conflict with other obligations
The entry into and performance by it of, and the transactions contemplated by, the Finance Documents to which it is a party do not and will not conflict with:
any law or regulation or any order or decree of any judicial or official agency or court;
any constitutional documents of such Obligor;
the Satisfactory Drilling Contracts; or
any agreement or document to which it is a party or by which it is bound.
Power and authority
It has the power to enter into, perform and deliver, and has taken all necessary corporate actions to authorise its entry into and delivery of, performance, validity and enforceability of the Finance Documents to which it is a party and the transactions contemplated by those Finance Documents.
Authorisations and consents
All authorisations, approvals, consents and other matters, official or otherwise, required (i) in connection with the entering into, performance, validity and enforceability of the Finance Documents and the transactions contemplated hereby and thereby and (ii) for it to carry on its business as currently being conducted have been obtained or effected and are in full force and effect.
Taxes
It has complied with all taxation laws in all jurisdictions where it is subject to taxation and has paid all Taxes and other amounts due to governments and other public bodies. No claims are being asserted against it with respect to any Taxes or other payments due to public or governmental bodies save as disclosed to the Lenders pursuant to Clause 23.4 ( Taxation ). It is not required to make any withholdings or deductions for or on account of Tax from any payment it may make under any of the Finance Documents.
No Default
No Event of Default, Default or any prepayment event pursuant to Clause 8 ( Mandatory Prepayment and Cancellation ) is existing or might reasonably be expected to result from the making of the Utilisation or the entry into and performance of or any transaction contemplated by any of the Finance Documents. No other event or circumstance is outstanding which (in the reasonable opinion of the Agent or the Required Lenders) constitutes a default or (with the expiry of a grace period, giving of notice or the making of any determination or the fulfilment of any other applicable conditions or any combination of the foregoing) might constitute a default under any Satisfactory Drilling Contract, Intra-Group Charterparty, other agreement or instrument which is binding on it or any of its Subsidiaries (if any) or to which its (or any of its Subsidiaries’ (if any)) assets are subject and which has or might have a Material Adverse Effect.
No misleading information
Any factual information, documents, exhibits or reports relating to the Obligors and their respective Subsidiaries and which have been furnished to the Finance Parties by or on behalf of the Obligors are complete and correct in all material respects and do not contain any misstatement of fact or omit to state a fact making such information, exhibits or reports misleading in any material respect or no omission to disclose any off-balance sheet liabilities or other information, documents or agreements which if disclosed could reasonably be expected to affect the decision of a Finance Party to enter into a Finance Document.
Original Financial Statements
Complete and correct . The Original Financial Statements and the financial information most recently delivered to the Agent or the Lenders pursuant to Clause 21 ( Information Undertakings ), save as disclosed to an Exchange, fairly and accurately represent the assets, liabilities and the financial condition of the Obligors and their respective Subsidiaries at the day that they were drawn up and have been prepared in accordance with Accounting Principles consistently applied.
No undisclosed liabilities . As of the date of the Original Financial Statements and the financial information most recently delivered to the Agent or the Lenders pursuant to Clause 21 ( Information Undertakings ), none of the Obligors or any of its Subsidiaries had any material liabilities, direct or indirect, actual or contingent, and there is no material, unrealised or anticipated losses from any unfavourable commitments not disclosed by or reserved against in the Original Financial Statements, the most recent delivered financial information or in the notes thereto (save as disclosed to the Exchange).
No material change . Since the date of the Original Financial Statements and the financial information most recently delivered to the Agent or the Lenders pursuant to Clause 21 ( Information Undertakings ), there has been no material adverse change in the business, operations, assets or condition (financial or otherwise) of any Obligor or its Subsidiaries which might have a Material Adverse Effect.
Pari passu ranking
Its payment obligations under the Finance Documents rank at least pari passu with the claims of all its other unsecured and unsubordinated creditors, except for obligations preferred by mandatory law applying to companies generally.
No proceedings pending or threatened
No litigation, judgment, order, injunction, restraint, arbitration or administrative proceedings (private or public) of or before any court, arbitral body or agency, which if adversely determined, might reasonably be expected to have a Material Adverse Effect, have been started or are pending or (to the best of its knowledge and belief) have been threatened against it.
No existing Security Interest
Save as described in Clause 19 ( Security ), as from the First Utilisation Date, no Security Interest exists over all or any of the present or future revenues or assets of such Obligor relating to assets being the subject of the Security Documents and all of the Obligors’ rights, title and interest are freely assignable and chargeable in the manner contemplated by the Security Documents.
No immunity
The execution and delivery by it of each Finance Document to which it is a party constitute, and its exercise of its rights and performance of its obligations under each Finance Document will constitute, private and commercial acts performed for private and commercial purposes, and it will not (except for bankruptcy or any similar proceedings) be entitled to claim for itself or any or all of its assets immunity from suit, execution, attachment or other legal process in any proceedings taken in relation to any Finance Document.
No winding-up
It has not taken any corporate action nor have any other steps been taken or legal proceedings been started or threatened against it for its reorganisation, winding-up, dissolution or administration or for the appointment of a receiver, administrator, administrative receiver, trustee or similar officer of it or any or all of its assets.
No breach of laws
It has not (and none of its Subsidiaries have) breached any law or regulation which breach (in the opinion of the Agent or the Required Lenders) has or is reasonably likely to have a Material Adverse Effect.
No labour disputes are current or, to the best of its knowledge and belief (having made due and careful enquiry), threatened against any member of the Group which have or are reasonably likely to have a Material Adverse Effect.
It has not utilised any of the assets financed under the GIEK Guarantee in a way that would be in conflict with Norwegian legislation or secondary law.
Environmental laws
Each Obligor is in compliance with Clause 23.3 ( Environmental Compliance ) and to the best of its knowledge and belief (having made due and careful enquiry) no circumstances have occurred which would prevent such compliance in a manner or to an extent which (in the opinion of the Agent or the Required Lenders) has or is reasonably likely to have a Material Adverse Effect.
No Environmental Claim and no other event or circumstances is outstanding which (with the expiry of a grace period, giving of notice or the making of any determination or the fulfilment of any other applicable conditions or any combination of the foregoing) might constitute an Environmental Claim has been commenced or is pending (to the best of its knowledge and belief (having made due and careful enquiry)) is threatened against any member of the Group where that claim has or is reasonably likely, if determined against that member of the Group, which (in the opinion of the Agent or the Required Lenders) have or are reasonably likely to have a Material Adverse Effect.
Ownership
The Parent owns one hundred per cent (100%) of the shares and ownership interest (directly or indirectly) in Seadrill Tellus Ltd. and the Intra-Group Charterers (except for Seadrill Gulf Vela) as described in Schedule 8 ( Corporate Structure ) hereto; and
Seadrill Capricorn owns one hundred per cent (100%) of the shares and ownership interest (directly) in each of Seadrill Vela and Seadrill Gulf Vela as described in Schedule 8 ( Corporate Structure ) hereto.
The Drillships
Each Drillship is (or will be at the time of delivery, as the case may be):
in the absolute ownership of the relevant Borrower described in Schedule 2 ( Guarantors and Drillships ) hereto free and clear of all encumbrances (other than current crew wages and the relevant Mortgage) and, the respective Borrower will be the sole, legal and beneficial owner of such Drillsihp;
registered in the name of the relevant Borrower as described in Schedule 2 ( Guarantors and Drillships ) with a Ship Registry;
operationally seaworthy in every way and fit for service; and
classed with a classification society acceptable to the Required Lenders, free of all overdue requirements and recommendations.
No money laundering
It is acting for its own account in relation to the Facility and in relation to the performance and the discharge of its obligations and liabilities under the Finance Documents and the transactions and other arrangements effected or contemplated by the Finance Documents to which an Obligor is a party, and the foregoing will not involve or lead to contravention of any law, official requirement or other regulatory measure or procedure implemented to combat money laundering (as defined in Article 1 of the Directive (2001/97/EC of the European Parliament of 4 December 2001) including, but not limited to Directive 2005/60/EC amending Council Directive 91/308/EEC).
Corrupt practices
It has observed, and to the best of its knowledge and belief, parties acting on its behalf have observed in the course of acting for it, all applicable laws and regulations relating to bribery or corrupt practices.
FATCA
No Borrower is resident for tax purposes in the United States of America. No Obligor is a "foreign financial institution" ("FFI") as defined in Section 1471(d)(4) of the Code and United States Treasury Regulations Section 1.1471-5(d)-(e). No payment by any Obligor under the Finance Documents will be from sources within the United States of America for United States federal income tax purposes. Each Borrower is a FATCA Exempt Party with respect to Earnings payable to that Borrower.
Non-Conflict
Each Borrower agrees and acknowledges that any claim or defence that it may have or hold in respect of the Drillship contract with the Yard to which it is a party or any dispute arising in connection with that Drillship contract between the parties thereto, shall not affect its payment obligations under the Finance Documents.
Solvency
Each Guarantor acknowledges that it will receive substantial direct and indirect benefits from the financing arrangements contemplated by the Finance Documents.
Each Obligor is, and immediately upon giving effect to the transactions contemplated by the Finance Documents will be, Solvent.
Repetition
The representations and warranties set out in this Clause 20 are deemed to be made by each of the Obligors on the Closing Date and shall be deemed to be repeated:
on the date of a Utilisation Request;
on each Utilisation Date;
on the first day of each Interest Period; and
in each Compliance Certificate forwarded to the Agent pursuant to Clause 21.2 ( Compliance Certificate ) (or, if no such Compliance Certificate is forwarded, on each day such certificate should have been forwarded to the Agent at the latest).
INFORMATION UNDERTAKINGS
The Parent and the Borrowers give the undertakings set out in this Clause 21 to each Finance Party and such undertakings shall remain in force throughout the Security Period;
Financial statements
The Parent shall supply to the Agent in sufficient copies for all of the Lenders as soon as the same become available, but in any event within one hundred and eighty (180) days after the end of each of the Obligors’ financial year respectively;
the audited consolidated financial statements for the Group; and
the audited (to the extent applicable) annual unconsolidated accounts for that financial year of each of the Borrowers.
The Parent and each Borrower shall provide to the Agent as soon as reasonable practicable, but in any event within seventy (70) days after each relevant Quarter Date, the unaudited consolidated accounts of the Group for that financial quarter and the unaudited unconsolidated financial statements for each Borrower for that financial quarter;
The Parent shall provide to the Agent as soon as reasonably practicable and in any event within seventy (70) days after each Quarter Date, copies of the Group’s consolidated Cash Flow Projections for the following five (5) calendar years after such dates; and
any other information in respect of the business, properties or condition, financial or otherwise, of the Parent and the Borrowers or any of their Subsidiaries as the Agent or any of the Lenders may from time to time reasonably request.
Compliance Certificate
The Parent shall supply to the Agent, with each set of financial statements delivered pursuant to Clause 21.1 ( Financial statements ), a Compliance Certificate signed by an authorised officer of the Parent setting out (in reasonable detail) inter alia computations as to compliance with Clause 22 ( Financial Covenants ) as at the date at which those financial statements were drawn up together with any relevant supporting documentation enabling the Lenders to determine and monitor the Parent and the Borrowers' compliance with Clause 22 ( Financial Covenants ), Clause 8.3 ( Minimum Market Value ) and Clause 24.3 ( Insurances ), together with confirmation that the Drillships are employed on the Satisfactory Drilling Contracts.
Requirements as to financial statements
The Parent shall procure that each set of financial statements delivered pursuant to Clause 21.1 ( Financial statements ) consist of balance sheets, profit and loss statements and cash flow analysis and is prepared using Accounting Principles, accounting practices and financial reference periods consistent with those applied in the preparation of the Original Financial Statements for each of the Obligors, as the case may be, unless, in relation to any set of financial statements, it notifies the Agent that there has been a change in Accounting Principles, the accounting practices or reference periods and its Auditors deliver to the Agent:
a description of any change necessary for those financial statements to reflect Accounting Principles, accounting practices and reference periods upon which the Original Financial Statements were prepared; and
sufficient information, in form and substance as may be reasonably required by the Agent, to enable the Lenders to determine whether Clause 22 ( Financial Covenants ) has been complied with and make an accurate comparison between the financial position indicated in those financial statements and the Original Financial Statements.
Any reference in this Agreement to those financial statements shall be construed as a reference to those financial statements as adjusted to reflect the basis upon which the Original Financial Statements were prepared.
Information - miscellaneous
The Parent and the Borrowers shall notify the Agent and/or supply to the Agent (in sufficient copies for all the Lenders, if the Agent so requests)
all documents dispatched by the Parent (and by each of the Obligors, to the extent requested by the Agent) to its shareholders, or to or from its creditors generally at the same time as they are dispatched;
immediately upon becoming aware of them; breaches of contracts, the details of any litigation, judgment, order, injunction, restraint, arbitration or administrative proceedings which are current, threatened, alleged or pending against any of the Obligors and which (in the opinion of the Agent or the Required Lenders) might, if adversely determined, be reasonably expected to have a Material Adverse Effect;
immediately such further information regarding the business, properties, assets and operations (financial or otherwise) of the Obligors and its Subsidiaries as any Finance Party (through the Agent) may reasonably request;
all filings with or report forwarded to any Exchange; and
such updates or forecasts as the Agent may reasonably request.
Notification of Default
The Parent and the Borrowers shall notify the Agent of any Default (and the steps, if any, being taken to remedy it) promptly upon becoming aware of its occurrence.
Notification of Environmental Claims
The Parent and the Borrowers shall inform the Agent in writing as soon as reasonably practicable upon becoming aware of the same:
if any material Environmental Claim has been commenced or (to the best of the Obligors’ knowledge and belief) is threatened against any of the Obligors or any of the Drillships; and
of any incident, event, fact or circumstances which will or are reasonably likely to result in any material Environmental Claim being commenced or threatened against any of the Obligors, or any of the Drillships.
Information of new contracts
The Parent and the Borrowers shall provide the Agent with information on any new employment contract in respect of a Drillship five (5) days prior to entering into any such contract.
The Parent and the Borrowers shall procure, prior to entering into any new employment contract in respect of a Drillship, that a Contract Memo for that employment contract is sent to the Agent.
“Know your customer” checks
If:
the introduction of or any change in (or in the interpretation, administration or application of) any law or regulation made after the Closing Date;
any change in the status of an Obligor after the Closing Date; or
a proposed assignment or transfer by a Lender of any of its rights and obligations under this Agreement to a party that is not a Lender prior to such assignment or transfer,
obliges the Agent or any Lender (or, in the case of any prospective new Lender) to comply with “know your customer” or similar identification procedures in circumstances where the necessary information is not already available to it, each Obligor shall promptly upon the request of the Agent or any Lender supply, or procure the supply of, such documentation and other evidence as is reasonably requested by the Agent (for itself or on behalf of any Lender) or any Lender (for itself or, in the case of any prospective new Lender, on behalf of any prospective new Lender) in order for the Agent, such Lender or, in the case of any prospective new Lender, any prospective new Lender to carry out and be satisfied it has complied with all necessary “know your customer” or other similar checks under all applicable laws and regulations pursuant to the transactions contemplated in the Finance Documents.
Each Lender shall promptly upon the request of the Agent supply, or procure the supply of, such documentation and other evidence as is reasonably requested by the Agent (for itself) in order for the Agent to carry out and be satisfied it has complied with all necessary “know your customer” or other similar checks under all applicable laws and regulations pursuant to the transactions contemplated in the Finance Documents.
FINANCIAL COVENANTS
The financial covenants in this Clause 22 are granted in favour of each Finance Party by the Parent and the Borrowers and such financial covenants shall remain in force throughout the Security Period and to be tested quarterly.
Minimum Liquidity
The Parent will procure that the Minimum Liquidity of the Group will not fall below USD one hundred and fifty million (150,000,000).
Leverage Ratio
The Parent will procure that the Leverage Ratio of the Group will not exceed 4.5 : 1.
Interest Cover Ratio
The Parent will procure that the Group’s Interest Cover Ratio shall be minimum 2.5 : 1.
Current Ratio
The Parent will procure that the Group's Current Ratio is minimum 1:1.
Equity Ratio
The Parent will procure that the Group’s Equity Ratio shall not be less than 30 per cent.
Debt Service Cover Ratio
The Parent will procure, and the Borrowers will undertake, that each Borrowers' Debt Service Cover Ratio shall not be less than 1.15:1.
Financial testing
The financial covenants set out in this Clause 22 shall be calculated in accordance with Accounting Principles and tested by reference to the latest financial statements (whether audited or unaudited) and each Compliance Certificate, and presented to the Agent in satisfactory form and substance. Testing of the Debt Service Cover Ratio shall be made first time eighteen (18) months after the Delivery Date of the relevant Drillship.
GENERAL UNDERTAKINGS
Each Obligor gives the undertakings set out in this Clause 23 to each Finance Party and such undertakings shall remain in force throughout the Security Period. Undertakings relating to a Drillship will be applicable from delivery of the relevant Drillship.
Authorisations etc.
Each of the Obligors shall promptly:
obtain, comply and do all that is necessary to maintain in full force and effect; and
supply certified copies to the Agent (if so requested) of,
any authorisation, consent, approval, resolution, licence, exemption, filing, notarisation or registration required under any law or regulation of its jurisdiction of incorporation to enable it to perform its obligations under the Finance Documents and to ensure the legality, validity, enforceability or admissibility in evidence in its jurisdiction of incorporation of any Finance Document.
Compliance with laws
Each of the Obligors shall, and shall procure that each member of the Group will, comply in all respects with all laws and regulations and constitutional documents to which it and the Drillships may be subject, where failure to do so, in the opinion of the Agent or the Required Lenders, has or is reasonably likely to have a Material Adverse Effect.
Environmental compliance
Each Obligor shall (and shall ensure that each member of the Group will):
comply with all Environmental Law;
obtain, maintain and ensure compliance with all requisite Environmental Approvals; and
implement procedures to monitor compliance with and to prevent liability under any Environmental Law,
where failure to do so, (in the opinion of the Agent) has or is reasonably likely to have a Material Adverse Effect.
Taxation
Each Obligor shall (and the Parent shall ensure that each member of the Group will) pay and discharge all Taxes imposed upon it or its assets within the time period allowed without incurring penalties unless and only to the extent that:
such payment is being contested in good faith;
adequate reserves are being maintained for those Taxes and the costs required to contest them which have been disclosed in its latest financial statements delivered to the Agent under Clause 21.1 ( Financial statements ); and
such payment can be lawfully withheld and failure to pay those Taxes does not (in the opinion of the Agent or the Required Lenders) have or is not reasonably likely to have a Material Adverse Effect
None of the Obligors may change its residence for Tax purposes.
Pari passu ranking
Each of the Obligors shall ensure that its obligations under the Finance Documents do and will rank at least pari passu with all its other present and future unsecured and unsubordinated obligations, except for those obligations which are preferred by mandatory law applying to companies generally in the jurisdictions of their incorporation or in the jurisdiction in the ports of calls.
Title
Each Borrower shall, and the Parent shall procure that all Intra-Group Charterers shall (to the extent applicable), hold full legal title to and own the entire beneficial interest in the Drillships, any Satisfactory Drilling Contract, the Intra-Group Charterparties, the Insurances and their Earnings, free of any Security Interest and other interests and rights of every kind, except for those created by the Finance Documents and as set out in Clause 23.7 ( Negative pledge ).
Negative pledge
None of the Obligors shall create any Security Interest other than Permitted Encumbrances related to any asset subject to any of the Security Documents under the Facility.
None of the Borrowers shall create or permit to subsist any Security Interest save for Permitted Encumbrances over any of its present or future undertakings, property, assets, rights or revenues (whether secured by the Security Documents or not).
No lien, encumbrance, pledge or other obligations will be granted or created in respect of the share capital of the Intra-Group Charterers.
None of the Obligors shall dispose of or encumber any employment contract in respect of the Drillships unless consented to by the Agent (acting on behalf of all Lenders).
Change of business and constitutional documents
Except with the prior written consent of the Agent, the Obligors will not, and the Parent shall ensure that no other member of the Group will, cease to carry on or make any change in all or any part of its business and activities as conducted as of the Closing Date, or carry on any other business, except for similar related business as presently conducted. No Obligor will change the place of its jurisdiction or its organisation without the prior written consent of the Agent.
The Parent shall procure that none of the material terms of the Operating Agreement are amended, terminated, or waived without the prior written consent of the Agent (on behalf of the Required Lenders).
Finance Documents
The Obligors shall perform all of their obligations under the Finance Documents at all times in the manner and upon the terms set out therein.
Undertaking to procure subordination of additional debt
Subject to Clause 23.7 ( Negative pledge ), the Obligors undertake to procure (in terms acceptable to the Required Lenders) the subordination, in point of payment and priority, of any Financial Indebtedness, which is secured by such assets subject to the Security Documents, of any member of the Group created on or after the Closing Date, to any debt created pursuant to this Agreement.
Mergers and demergers
Except with the prior written consent of the Required Lenders, the Obligors will not, and shall procure that no other member of the Group will (i) enter into any merger or consolidation with any other company unless with another Group member and (a) each Obligor will survive as a separate legal entity remaining bound in all respects by its obligations and liabilities under the Finance Documents and (b) the Borrowers will continue to be special purpose companies, owning only their relevant Drillships or (ii) demerge itself into any two or more companies.
None of the Obligors (except for Seadrill Limited) shall undergo any restructuring.
Financial year
Except with the prior written consent of the Required Lenders, the Obligors will not, and shall procure that no other member of the Group will, alter its financial year end.
Earnings Accounts
Each Borrower and Intra-Group Charterer shall open and maintain for the duration of the Facility one Earnings Account each in its name and shall procure that all Earnings (excluding service income for manning, services and procurement, etc. held with separate third party contractors for the purpose of optimizing the fiscal structure of the drilling operations) are paid to the Earnings Account.
The amounts in the Earnings Accounts shall be freely available to the Borrowers and/or the Intra-Group Charterers (as applicable) subject always to (i) any such amount being applied in accordance with the provisions of this Agreement and (ii) no Default has occurred and is continuing and no notice has been given to any Borrower or Intra-Group Charterer by the Agent that such amounts shall not be freely available.
Each relevant Obligor shall provide available statements regarding its Earnings Account upon request from the Agent.
Dividends
The Parent may
pay dividends (or make any other distributions to its shareholders),
buy-back its own common stock and/or
make new material investments in any company, shares, common stock or enter into any kind of new forward contracts (including total return swaps),
only to the extent that
no Default is continuing or would result from the proposed transaction, and
after giving effect to such transaction, the Parent and its Subsidiaries are in compliance with the Financial Covenants set out in Clause 22 ( Financial Covenants ) of this Agreement.
To the extent the Parent has issued preference capital, any mandatory yield (interest) payments on such preference capital shall not be treated as dividend (or other distribution to its shareholders) for the purpose of this Clause 23.14.
If an Event of Default has occurred and is continuing, Seadrill Vela and Seadrill Gulf Vela may not pay dividends (or make any other distributions to its shareholders) or buy-back its own common stock.
Restrictions on indebtedness
None of the Borrowers or Intra-Group Charterers shall incur, create or permit to subsist any Financial Indebtedness.
The restrictions in paragraph (a) above do not apply to;
Financial Indebtedness incurred pursuant to the Finance Documents;
intercompany loans and advances on the conditions that the loans or advances are subordinated and unsecured in a form and substance satisfactory to the Agent; or
Financial Indebtedness incurred by an Intra-Group Charterer by way of guarantees provided by such Intra-Group Charterer in relation to any financing of a vessel or rig in the Group.
For the avoidance of doubt, the restrictions on Financial Indebtedness in Clause 23.15 (a) shall not apply to Seadrill Capricorn, unless it becomes or accedes to the position of a Borrower or an Intra-Group Charterer.
Transactions with Affiliates
Each Obligor shall (and shall procure that each Subsidiary will) procure that all transactions entered into with an Affiliate are made on market terms and otherwise on arm’s length terms.
Disposals
Subject to Clause 8 ( Mandatory Prepayment and Cancellation ), no Obligor shall:
enter into a single transaction or series of transactions (whether related or not and whether voluntary or involuntary) to sell, lease out, transfer, or otherwise dispose of any Drillship, Satisfactory Drilling Contract or other asset being the subject of a Security Interest pursuant to the Security Documents or the whole or a substantial part of its other assets, without the prior written consent of the Agent; or
enter into any transaction to sell, lease, transfer or otherwise dispose of any of its assets other than made on market value and arm’s length terms.

Financial Support
None of the Borrowers shall provide, procure, create or permit to subsist any Financial Support (including contingent support) other than:
Financial Support permitted pursuant to the Finance Documents; or
Financial Support consented to by the Required Lenders.
Centre of Main Interest
None of the Obligors shall change its centre of main interest or establishment to another jurisdiction without obtaining the prior written consent from the Required Lenders.
Assignment of contracts
If an Event of Default has occurred and is continuing the Obligors will, upon the Agent's request, make its best endeavours to have assigned the rights and obligations under contracts pertaining to the Drillships (with members of the Group as well as ultimate charterers) or any of them to one or several parties nominated by the Agent.
Sale or Total Loss of a Drillship
The Obligors will ensure that a Drillship is not sold in whole or in part without prior written notice to the Agent, and in the event of such sale or in the event of a Total Loss, make such prepayment as provided for in Clause 8.1 ( Total Loss or sale ) and comply with Clause 24.12 ( Total Loss ) .
Investment Restrictions
Subject to Clause 23.14(a) (ii) and (iii) ( Dividends Parent ) and subject to paragraph (b) below, the Parent shall not, and shall ensure that no member of the Group (excluding the Borrowers) shall make any investments and acquisitions unless;
after giving effect to any such investment, the Parent and its Subsidiaries are in pro forma ("pro forma" meaning that the calculation of the financial covenants shall take into account any effect of the investment or acquisition made) compliance (evidenced by adjusted financial calculations taking into account any effect of the investment or acquisition made) with the Financial Covenants set out in Clause 22 ( Financial Covenants ) of this Agreement; and
no Default is continuing or would result from the proposed investment and acquisition.
None of the Borrowers shall make any further investments or acquisitions, except for any capital expenditure or investments related to ordinary upgrade or maintenance work of the Drillships as permitted for alterations pursuant to Clause 24.4 ( Alteration to the Drillships ).
Ownership
The Parent shall own directly one hundred per cent (100%) of the interest (votes and capital) of Seadrill Member;
Seadrill Partners and the Parent shall collectively control Seadrill Capricorn by owning one hundred per cent (100%) of the shares (vote and capital) in Seadrill Capricorn;
Seadrill Member shall solely continue to be “the Seadrill Member”;
Seadrill Capricorn shall own directly one hundred per cent (100%) of the shares (vote and capital) of Seadrill Vela and of Seadrill Gulf Vela; and
the other Obligors (except for Seadrill Capricorn, Seadrill Vela and Seadrill Gulf Vela) shall be one hundred per cent (100%) owned (votes and capital) Subsidiaries of the Parent.
The Drillships shall be owned by the respective Borrower as set out in Schedule 2 ( Guarantors and Drillships ).
Subject to paragraphs (a) to (g) above, immediately upon a change to the ownership structure as set out in Schedule 8 ( Corporate Structure ), the Parent shall advise the Agent of such change.
Corrupt Practices
Each Obligor shall act in compliance with all applicable laws and regulations relating to bribery and corrupt practices and shall use all reasonable endeavours to procure that any person acting on its behalf acts in such manner in the course of acting for it.
Listing
The Parent shall maintain its listing at an Exchange.
GIEK Guarantee and K-sure Insurance Policy
The Borrowers shall at all times comply with the terms and conditions contained in the GIEK Guarantee and the K-sure Insurance Policy, incorporated herein by reference as if said conditions in the GIEK Guarantee and the K-sure Insurance Policy were set out in full in this Agreement.
The Borrowers shall, for as long as any amount is outstanding under the GIEK Lender Facility and/or the K-sure Facility, procure that its obligations and liabilities hereunder in respect of such Facilities are secured by the GIEK Guarantee and the K-sure Insurance Policy (as applicable) satisfactory to the GIEK Lender and the K-sure Lenders respectively (in their sole discretion).
DRILLSHIP COVENANTS
The Obligors give the undertakings set out in this Clause 24 to each Finance Party and such undertakings shall remain in force throughout the Security Period.
Minimum Market Value
The Obligors will procure that the Market Value of all the Drillships that have been delivered is (i) at least one hundred and twenty five per cent (125%) of the sum of the Loans from the Closing Date and up until the third anniversary thereafter and (ii) at least one hundred and forty per cent (140%) from the third anniversary of the Closing Date and up until the relevant Final Maturity Date.
Market Valuation of the Drillships
Each Borrower shall (at its own expense) (i) arrange for the Market Value of each of the Drillships to be determined and valued for the purpose of every Compliance Certificate to be delivered to the Agent pursuant to Clause 21.2 ( Compliance Certificate ) for the financial quarters ending 30 June and 31 December each year and (ii), if an Event of Default has occurred and is continuing, upon the Agent’s request, arrange for the Market Value of each of the Drillships to be determined.
Insurance
Each Obligor shall maintain or ensure that each of the Drillships are insured against such risks, including the following risks; Hull and Machinery, Protection & Indemnity (including an adequate club cover for pollution liability as normally adopted by the industry for similar Drillships), Hull Interest and/or Freight Interest and War Risk (including piracy, terrorism and confiscation) insurances, in such amounts and currencies, on such terms (applying the terms of the Norwegian Marine Insurance Plan of 1996, version 2010 (as amended from time to time) and applicable after 1 July 2013 Nordic Marine Insurance Plan of 2013, (as amended from time to time)) and with such insurers and placed through insurance brokers as the Agent shall approve as appropriate for an internationally reputable major drilling contractor (such approval not to be unreasonably withheld). The Borrowers shall seek the approval of the Agent, on behalf of the Lenders, prior to placing any insurances through any captive vehicle
The insured value of each of the Drillships shall at all times be at least equal to or higher than the Market Value of each of the Drillships. The aggregate insured value of the Drillships (after their respective deliveries), shall at all times be at least equal to the higher of the aggregate Market Values of the Drillships and one hundred and twenty per cent (120.00%) of the outstanding Loans.
The value of the Hull and Machinery insurance shall cover at least eighty per cent (80.00%) of the Market Value of each of the Drillships and the aggregate insured values in the hull and machinery insurances of the Drillships, shall at all times be at least equal to the outstanding Loans.
The Borrowers shall procure that the Agent (on behalf of the Finance Parties) is noted as first priority mortgagee and sole loss payee in the insurance contracts, together with the confirmation from the underwriters to the Agent that the notice of assignment with regards to the Insurances and the loss payable clauses (with a monetary threshold of USD twenty five million (25,000,000)) are noted in the insurance contracts and that standard letters of undertaking confirming this are executed by the insurers, always provided that the evidence thereof is in form and substance satisfactory to the Agent (on behalf of the Finance Parties). The Borrowers shall provide the Agent with details of terms and conditions of the insurances and break down of insurers.
Not later than seven (7) days prior to the expiry date of the relevant Insurances, the Borrowers shall procure the delivery to the Agent of a certificate from the insurance broker(s) or the Insurers, confirming that the Insurances referred to in paragraph a) have been renewed and taken out in respect of the Drillships with insured values as required by paragraph b), that such Insurances are in full force and effect and that the Agent (on behalf of the Finance Parties) have been noted as first priority mortgagee by the relevant insurers.
The Agent will effect, at the Borrowers' expense and for the exclusive benefit of the Lenders, mortgagees’ interest insurance and mortgagees' additional perils and pollution insurance on such terms as the Agent may approve, covering (100%) of the Loan.
If any of the Insurances referred to in paragraph a) form part of a fleet cover, the Borrowers shall procure that the insurers shall undertake to the Agent that they shall neither set-off against any claims in respect of any of the Drillships any premiums due in respect of other Drillships under such fleet cover or any premiums due for other insurances, nor cancel this Insurance for reason of non-payment of premiums for other drillships, ships or rigs under such fleet cover or of premiums for such other insurances, and shall undertake to issue a separate policy in respect of each of the Drillships if and when so requested by the Agent.
The Borrowers shall procure that the Drillships always are employed in conformity with the terms of the instruments of Insurances (including any warranties expressed or implied therein) and comply with such requirements as to extra premium or otherwise as the insurers may prescribe.
The Borrowers will not make any material change to the Insurances described under paragraph a) and b) above without the prior written consent of the Agent (on behalf of the Lenders).
Each of the Insurances shall be reviewed, at the cost of the Borrower, by the Lender’s insurance advisor on an annual basis on each date on which the Insurances are due for renewal if so required by the Agent.

Alteration to the Drillships
Each Obligor shall ensure that no Drillship is materially altered except as necessary in the ordinary course of business and upon prior written notice to the Agent, and then only if and to the extent such alternation is carried out in accordance with the terms of the contractual obligations pertaining to the said Drillship existing at the Closing Date.
Trading, Classification and repairs
The Obligors shall keep or shall procure that:
the Drillships are kept in a good, safe and efficient condition and state of repair consistent with prudent ownership and management practice;
that the Drillships maintain their class at the highest level with Det Norske Veritas, Lloyd's Register, American Bureau of Shipping or another classification society approved by the Required Lenders, free of any overdue recommendations and qualifications;
they comply with the laws, regulations (statutory or otherwise), constitutional documents and international conventions applicable to the classification society, the Ship Registry, the Obligors (ownership, operation, management and business ) and to the Drillships in any jurisdiction in which any of the Drillships or the Obligors may operate from time to time;
none of the Drillships enter the territorial waters (12 mile limit) of the United States of America unless (i) it is an emergency situation, (ii) if no Event of Default has occurred and is continuing, upon obtaining the prior written consent from the Agent, or (iii) if an Event of Default has occurred and is continuing, upon obtaining the prior written consent of the Lenders; and
they provide the Agent of evidence of such compliance upon request from the Agent.
Notification of certain events relating to a Drillship
The Parent and the Borrowers shall immediately notify the Agent of:
any accident to any of the Drillships involving repairs where the costs will or are likely to exceed USD twenty five million (25,000,000) (or the equivalent amount in any other currency);
any requirement or recommendation made by any insurer or classification society or by any competent authority which is not, or cannot be, immediately complied with;
any exercise or purported exercise of any capture, seizure, arrest or lien on any of the assets secured by the Security Documents; and
any occurrence as a result of which any of the Drillships has become or is, by the passing of time or otherwise, likely to become a Total Loss.
Operation of the Drillships
Each Obligor shall comply, and procure that any charter and manager complies in all material respects with all Environmental Laws and all other laws or regulations relating to the Drillships, their ownership, operation and management or to the business of the Obligor and shall not employ any of the Drillships nor allow their employment:
in any manner contrary to law or regulation in any relevant jurisdiction; and
in the event of hostilities in any part of the world (whether war is declared or not), in any zone which is declared a war zone by any government or by the war risk insurers of any of the Drillships unless the relevant Borrower has (at its expense) effected any special, additional or modified insurance cover which shall be necessary or customary for good ship owners trading Drillships within the territorial waters of such country at such time and has provided evidence of such cover to the Agent.
ISM Code, ISPS Code etc.
Each Borrower shall comply and shall procure that a charter and/or manager comply with the ISM Code, ISPS Code, Marpol and any other international maritime safety regulation relevant to the operation and maintenance of the Drillships and provides copies of certificates evidencing such compliance to the Agent upon written request thereof.
Inspections and class records
Each Borrower shall permit, and shall procure that any charterers and/or managers permit, one person appointed by the Agent to inspect upon the Agent giving prior written notice each of the Drillships once a year, as long as such inspection does not interfere with the operation of the Drillships (unless there is an Event of Default which is continuing, in which case, the foregoing restriction shall not apply). Such inspection shall be for the account of the Borrowers.
The Drillship Owners shall instruct the classification society to send to the Agent, following a written request from the Agent, copies of all class records held by the classification society in relation to the Drillships.
Surveys
Each Borrower shall submit to or cause the Drillships to be submitted to such periodic or other surveys as may be required for classification purposes and to ensure full compliance with regulations of the Ship Registry of the Drillships and if consented to by the Agent pursuant to Clause 24.13 ( Ship Registry, name and flag ) such parallel Ship Registry of the Drillship.
Arrest
The Obligors shall promptly pay and discharge:
all liabilities which give or may give rise to maritime or possessory liens on or claims enforceable against any of the Security Interests each Security Document creates or purports to create;
all tolls, taxes, dues, fines, penalties and other amounts charged in respect of any of the Security Interests each Security Document creates or purports to create; and
all other outgoings whatsoever in respect of any of the Security Interests each Security Document creates or purports to create,
and forthwith upon receiving a notice of arrest of any of the Drillships, or their detention in exercise or purported exercise of any lien or claim, the Borrower shall procure its release by providing bail or providing the provision of security or otherwise as the circumstances may require.
Total Loss
In the event that any of the Drillships shall suffer a Total Loss, the Obligors shall as soon as possible and in any event within ninety (90) days after the Total Loss Date, obtain and present to the Agent, a written confirmation from the relevant insurers that the claim relating to the Total Loss has been accepted in full, and the insurance proceeds shall be paid to the Agent for application in accordance with Clause 8.1 ( Total Loss or sale ).
Ship Registry, name and flag
The Borrowers shall:
procure that each of the Drillships are registered in the name of the respective Borrower as described in Schedule 2 ( Guarantors and Drillships ) hereto in the relevant Ship Registry; and
not change Ship Registry, name or flag of any of the Drillships or parallel register a Drillship in any Ship Registry without the prior written consent of the Required Lenders (such consent not to be unreasonably withheld or delayed). If such change would be to a ship registry, flag or parallel registry which is not generally recognised by the oil industry, then such change is subject to the prior written consent of all Lenders. The Agent may determine whether a register or flag is "generally recognised", upon consultation with the Lenders, and the Agent may pursuant to Clause 28.13 ( Rights and discretions of the Agent ), rely upon the advice of experts and/or advisors appoints by it to make such determination).
Management
A company being a wholly owned Subsidiary of the Parent shall continue to perform management services in respect of the Drillships and neither a material change nor any other adverse change (having an adverse effect on the Finance Parties' rights and/or obligations under the Finance Documents) to such existing management shall be made without the prior written consent of the Agent (not to be unreasonably withheld or delayed).
EVENTS OF DEFAULT
Each of the events or circumstances set out in this Clause 25 is an Event of Default.
Non-payment
Any of the Obligors does not pay on the due date any amount payable pursuant to a Finance Document at the place and in the currency in which it is expressed to be payable unless:
its failure to pay is caused by administrative or technical error affecting the transfer of funds despite timely payment instructions by the Obligor; and
payment is made within three (3) Business Days of its due date.
Financial Covenants and Insurance
Any requirement in Clause 22 ( Financial Covenants ) and/or Clause 24.3 ( Insurance ) is not satisfied.
Other obligations
Any of the Obligors does not comply with any provision of the Finance Documents (other than those referred to in Clause 25.1 ( Non-payment ) and Clause 25.2 ( Financial Covenants and Insurance )); and
No Event of Default under (a) above will occur if the failure to comply is (in the reasonable opinion of the Agent) capable of remedy and is remedied within thirty (30) calendar days of the earlier of the Agent giving notice to the Borrowers or the Borrowers becoming aware of the failure to comply.
Misrepresentations
Any representation, warranty or statement made or deemed to be made by any of the Obligors in the Finance Documents or any other document delivered by or on behalf of the Obligors under or in connection with any of the Finance Documents is or proves to have been incorrect or misleading in any material respect when made or deemed to be made.
Cross default
Any Financial Indebtedness of any Obligor or any member of the Group is not paid when due nor within any originally applicable grace period;
any Financial Indebtedness of any Obligor or any member of the Group is declared to be or otherwise becomes due and payable prior to its specified maturity as a result of an event of default (however described);
any commitment for any Financial Indebtedness of any Obligor or any member of the Group is cancelled or suspended by a creditor of any Obligor as a result of an event of default (however described); or
any creditor of any Obligor or any member of the Group is entitled to declare any Financial Indebtedness of any Obligor or any member of the Group due and payable prior to its specified maturity as a result of an event of default (however described)
in circumstances where the aggregate amount of all such Financial Indebtedness referred to in all or any of sub-clauses (a) to (d) is at least USD twenty five million (25,000,000) (or its equivalent in other currencies).
Insolvency
Any of the Obligors or any other Material Subsidiary is unable or admits inability to pay its debts as they fall due, suspends making payments on any of its debts or, by reason of actual or anticipated financial difficulties, commences negotiations with one or more of its creditors with a view to rescheduling any of its indebtedness.
The value of the assets of any of the Obligors or any other Material Subsidiary is less than its liabilities (taking into account contingent and prospective liabilities).
A moratorium is declared in respect of any indebtedness of any of the Obligors or any other Material Subsidiary.
Insolvency proceedings
Any corporate action, legal proceedings or other procedure or step is taken in relation to:
the suspension of payments, a moratorium of any indebtedness, winding-up, dissolution, administration or reorganisation (by way of voluntary arrangement, scheme or arrangement or otherwise) of any Obligor or any other Material Subsidiary;
a composition, compromise, assignment or arrangement with any creditor of any Obligor or any other Material Subsidiary;
the appointment of a liquidator, receiver, administrative receiver, administrator or other similar officer in respect of any Obligor or any other Material Subsidiary; or
enforcement of any Security Interest over any assets of any Obligor or any other Material Subsidiary.
Creditor’s process
Any maritime lien or other lien (not being a Permitted Encumbrances), expropriation, injunction restraint, arrest attachment, sequestration, distress or execution affects any asset secured by the Security Documents or undertakings, property, assets, rights or revenues (not secured by the Security Documents) of any Obligor, including the Satisfactory Drilling Contract, and is not discharged within thirty (30) days after any Obligor becoming aware of the same unless the Finance Parties have been provided with additional security in such form and substance and for such amounts as the Finance Parties may require.
Unlawfulness and invalidity
It is or becomes unlawful or impossible for any Obligor and/or any of the parties to any of the Security Documents to perform any of their respective obligations under the Finance Documents or for the Agent or any Lender to exercise any right or power vested to it under the Finance Documents.
Cessation of business
Any Obligor (whether by one or a series of transactions) suspends, changes or ceases to carry on (or threatens to suspend, change or cease to carry on) all or a material part of its business.
Material adverse change
Any event or series of events occur which, in the reasonable opinion of the Required Lenders has or may have a Material Adverse Effect.
Authorisation and consents
Any authorisation, licence, consent, permission or approval required in connection with the entering into, validity, enforcement, completion or performance of any of the Finance Documents or any transactions contemplated thereby is revoked, terminated or modified or otherwise cease to be in full force and effect.
Loss of Property
Any substantial part of an Obligor’s and/or of a Material Subsidiary of the Parent's business or assets is destroyed, abandoned, seized, appropriated or forfeited or the authority or ability of any member of the Group to conduct its business is limited or wholly or substantially curtailed by any seizure, expropriation, nationalisation, intervention, restriction or other action by or on behalf of any governmental, regulatory or other authority or other person in relation to any member of the Group or any of its assets which in the opinion of the Agent or the Required Lenders has or could reasonably be expected to have, if adversely determined, a Material Adverse Effect.
Litigation
There is current, pending or threatened any claims, litigation, arbitration or administrative proceedings against any Obligor which in the opinion of the Agent or the Required Lenders has or could reasonably be expected to have, if adversely determined, a Material Adverse Effect.
Failure to comply with final judgment
Any of the Obligors fails within five (5) Business Days after becoming obliged to do so to comply with or pay any sum in an amount exceeding USD twenty million (20,000,000) (or the equivalent in any other currencies) due from it under any final judgement or any final order (being one against which there is no right of appeal or if a right of appeal exists the time limit for making such appeal has expired and no appeal has been dismissed) made or given by any court of competent jurisdiction, provided, however, that such event shall not be deemed to constitute an Event of Default if the Obligor is entitled to insurance cover for the whole of such sum and the relevant insurers have confirmed liability and undertaken to make payment of the whole of such sum in writing to the person(s) entitled to payment and it is likely (in the reasonable opinion of the Required Lenders) that the insurers will be able to make such payment within thirty (30) days.
Acceleration
Upon the occurrence of an Event of Default which is continuing, the Agent may, and shall if so directed by the Required Lenders, by written notice to the Borrowers:
cancel the Total Commitments whereupon they shall immediately be cancelled;
declare that all or part of the Loan together with accrued interest, and all other amounts accrued or outstanding under the Finance Documents, be either immediately due and payable and/or payable upon demand, whereupon they shall become either immediately due and payable or payable on demand;
start enforcement in respect of the Security Interests established by the Security Documents; and/or
take any other action, with or without notice to the Borrowers, exercise any other right or pursue any other remedy conferred upon the Agent or the Finance Parties by any of the Finance Documents or by any applicable law or regulation or otherwise as a consequence of such Event of Default.
RECOURSE REQUIREMENTS AND RIGHT OF SUBROGATION
Payment from GIEK and K-sure
GIEK and K-sure shall be irrevocably and unconditionally authorised by the Borrowers upon the occurrence of an Event of Default to pay any amounts demanded by the GIEK Lender under the GIEK Guarantee or by the K-sure Lenders under the K-sure Insurance Policy forthwith, without any reference or further authorisation from the Borrowers and, save for manifest error, without being under any duty or obligation to enquire into the justification or validity thereof and/or dispute whether any claims or demands under the GIEK Guarantee or the K-sure Insurance Policy are properly or validly made, and notwithstanding that the Borrowers may dispute the validity of any such claim or demand, GIEK and K-sure may accept any claim or demand under the GIEK Guarantee or K-sure Insurance Policy as binding upon GIEK and K-sure as conclusive evidence that they are liable to pay any such amount.
Right of subrogation only, rights of GIEK, New GIEK Lender and K-sure
GIEK and K-sure will when amounts have been paid under the GIEK Guarantee and/or the K-sure Insurance Policy (as applicable), automatically and without any notice or formalities of any kind whatsoever, have the right of subrogation into the rights of the GIEK Lender and the K-sure Lenders (respectively) under the Finance Documents in such proportion as have been paid by GIEK and/or K-sure under the GIEK Guarantee and/or the K-sure Insurance Policy respectively, and always subject to the terms of this Agreement. GIEK and/or K-sure shall by such subrogation have the same rights as relevant thereunder as if the Finance Documents were executed directly in favour of GIEK and/or K-sure as security for the rights of GIEK and/or K-sure against the Obligors, after having honoured claims under the GIEK Guarantee and/or the K-sure Insurance Policy, respectively. Each of the Obligors waives any right to dispute or delay a subrogation of the rights under the Finance Documents to GIEK and K-sure effectuated pursuant to the terms of this Agreement, and each of the Obligors undertakes to sign and execute any documents required by GIEK and K-sure in connection with a subrogation as aforesaid, and/or enforcement of the Finance Documents.
Without prejudice to the generality of the foregoing paragraph (a), to the extent that it is required to do so by K-sure pursuant to the terms of the K-sure Insurance Policy, the existing K-sure Lender shall cause a transfer or assignment to K-sure (by means of a Transfer Certificate or such other comparable instrument as may be required by K-sure) in respect of such part of its K-sure Lenders Commitment or (as the case may be) its portion of the relevant Tranche as is equal to the amount simultaneously paid to it by K-sure under the K-sure Insurance Policy.
GIEK and K-sure shall have the right to enforce and to enjoy the benefit of the rights given to them under this Agreement.
Until the Agent has been notified by the GIEK Lender and/or GIEK or the K-sure Lenders and/or K-sure (as the case may be) that GIEK and/ or K-sure (as the case may be) has subrogated into the rights of the GIEK Lender and/or the K-sure lenders (respectively), it shall be entitled to continue to make any payments to the GIEK Lender and the K-sure Lenders (as the case may be) as if the GIEK Lender and/or the K-sure Lenders were still entitled to such payments.
The New GIEK Lender shall, upon satisfaction in full of all amounts due to the GIEK Lender, automatically and without any notice or formalities of any kind whatsoever, have the right of subrogation into the rights of the GIEK Lender under the Finance Documents. Each of the Obligors waives any right to dispute or delay a subrogation of the rights under the Finance Documents to the New GIEK Lender effectuated pursuant to the terms of this Agreement, and each of the Obligors undertakes to sign and execute any document required by the New GIEK Lender in connection with a subrogation as aforesaid, and/or enforcement of the Finance Documents.
CHANGES TO THE PARTIES
No assignment by the Obligors
None of the Obligors may assign or transfer or cause or permit to be assumed any part of, or any interest in, its rights and/or obligations under the Finance Documents.
Assignment by the Obligors in relation to a proposed MLP structure
The Borrowers may request that the Group enters into an MLP structure for certain of the companies and assets of the Group, and the Finance Parties shall consider such request in their sole discretion, without any obligation to consent to such request.
Assignments and transfers by the Lenders
A Lender (the “ Existing Lender ”) may, at any time assign, transfer or have assumed its rights or obligations under the Finance Documents (a “Transfer ”), to:
another Existing Lender, or an Affiliate of an Existing Lender;
a central bank or federal reserve;
subject to the consent (such consent not to be unreasonably withheld) of K-sure (with respect to the K-sure Lenders), to another bank or financial institution or to a trust, fund or other entity which is regularly engaged in or established for the purpose of making, purchasing or investing in loans, securities or other financial assets (the “ New Lender ”), subject to (i) the prior consent of the Borrowers and the Agent (such consents not to be unreasonably withheld or delayed and which shall be deemed to have been given fifteen (15) Business Days after being sought unless expressly refused within that period) and (ii) the transfer being in an amount of minimum USD fifteen million (15,000,000);
to any New Lender (as defined above in (c)) if (i) an Event of Default has occurred and is continuing or (ii) to the extent that such transfer or assignment is in connection with the implementation of any securitisation, covered bond program or any similar or equivalent transaction;
to any New GIEK Lender; or
K-sure, if or when K-sure pays out under the K-sure Insurance Policy.
Any assignment and transfer made by any of the Lenders shall be made by way of an assignment and transfer, and shall not constitute a novation.
Assignment or transfer fee
Unless the Agent otherwise agrees and excluding an assignment or transfer to an Affiliate of a Lender, the New Lender (or New GIEK Lender, as applicable) shall, on the date upon which an assignment or transfer takes place pay to the Agent (for its own account) a fee of USD three thousand (3,000).
Additional requirements for transfer by GIEK Lender
Notwithstanding anything to the contrary in this Agreement, and with no prejudice to the other provisions relating to Transfers hereunder, the Agent shall only be obliged to execute a Transfer Certificate in relation to a Transfer by the GIEK Lender once:
it is satisfied it has complied with all necessary "know your customer" or other similar checks under all applicable laws and regulations in relation to the transfer to the transferee; and
the transferee has paid to the Agent for its own account the transfer fee set out in Clause 27.4 ( Assignment or transfer fee ).
Limitations of responsibility of Existing Lenders
The Obligors’ performance
Unless expressly agreed to the contrary, an Existing Lender makes no representation or warranty and assumes no responsibility to the New Lender, or any New GIEK Lender for:
the legality, validity, effectiveness, adequacy or enforceability of the Finance Documents or any other documents;
the financial condition of the Obligors;
the performance and observance by any of the Obligors of its obligations under the Finance Documents or any other documents; or
the accuracy of any statements (whether written or oral) made in or in connection with the Finance Documents or any other document.
New Lender’s and New GIEK Lender's own credit appraisal
Each New Lender and New GIEK Lender confirms to the Existing Lender and the other Finance Parties that it:
has made (and will continue to make) its own independent investigation and assessment of the financial condition and affairs of the Obligors and their related entities in connection with its participation in this Agreement and has not relied exclusively on any information provided to it by the Existing Lender in connection with any Finance Document; and
will continue to make its own independent appraisal of the creditworthiness of the Obligors and their related entities whilst any amount is or may be outstanding under the Finance Documents or any Commitment is in force.
Re-transfer to an Existing Lender
Nothing in any Finance Document obliges an Existing Lender to:
accept a re-transfer from a New Lender or a New GIEK Lender of any of the rights and obligations assigned or transferred under this Clause 27; or
support any losses directly or indirectly incurred by the New Lender or New GIEK Lender by reason of the non-performance by any Borrower of its obligations under the Finance Documents or otherwise.
Procedure for transfer
Any Transfer shall be effected as follows:
the Existing Lender must notify the Agent of its intention to Transfer all or part of its rights and obligations by delivering a duly completed Transfer Certificate to the Agent duly executed by the Existing Lender and the New Lender (or New GIEK Lender, as the case may be);
subject to Clause 27.3 ( Assignments and transfers by the Lenders ), the Agent shall as soon as reasonably possible after receipt of a Transfer Certificate execute the Transfer Certificate and deliver a copy of the same to each of the Existing Lender and the New Lender (or New GIEK Lender, as the case may be); and
subject to Clause 27.3 ( Assignments and transfers by the Lenders ), the Transfer shall become effective on the Transfer Date.
Effects of the Transfer
On the Transfer Date:
to the extent that in the Transfer Certificate the Existing Lender seeks to transfer its rights and obligations under the Finance Documents, the Obligors and the Existing Lender shall be released from further obligations to one another under the Finance Documents and their respective rights against one another under the Finance Documents shall be cancelled (the “ Discharged Rights and Obligations ”), but the existing obligations owed by the Obligors under the Finance Documents shall not be released;
the Obligors and the New Lender or the New GIEK Lender shall assume obligations towards one another and/or acquire rights against one another which differ from the Discharged Rights and Obligations only insofar as the Obligors and the New Lender or the New GIEK Lender have assumed and/or acquired the same instead of the Obligors and the Existing Lender;
the Agent, the New Lender or the New GIEK Lender and the other Lenders shall acquire the same rights and assume the same obligations between themselves as they would have acquired and assumed had the New Lender or the New GIEK Lender been an original Lender hereunder with the rights and/or obligations acquired or assumed by it as a result of the Transfer and to that extent the Agent and the Existing Lender shall each be released from further obligations to each other under the Finance Documents; and
the New Lender or the New GIEK Lender shall become a Party as a “ Lender ”.
Further assurances
Each of the Obligors undertakes to procure that in relation to any Transfer, each of the Obligors shall (at its own cost) at the request of the Agent execute such documents as may in the discretion of the Agent be necessary to ensure that the New Lender or any new GIEK Lender attains the benefit of the Finance Documents.
Disclosure of information
Any Lender may disclose:
to any of its Affiliates, branches, subsidiaries, its parent company, head office or regional office (together the “ Permitted Parties ”) and a potential assignee;
to whom that Lender enters into (or may potentially enter into) any sub-participation in relation to, or any other transaction under which payments are to be made by reference to, including a central bank or federal reserve, this Agreement or any of the Obligors;
to auditors or professional advisers or service providers employed in the normal course of a Permitted Party’s business who are under a duty of confidentiality to the Permitted Parties;
to any rating agency, insurer or insurance broker of, or direct or indirect provider of credit protection to any Permitted Party (including for the avoidance of doubt, K-sure and GIEK); and
to whom, to the extent that, information is required to be disclosed by (i) any law or applicable court or (ii) any governmental, supervisory or regulatory body with jurisdiction over the Permitted Party,
such information about the Obligors and the Finance Documents as that Lender shall consider appropriate, provided that such disclosure shall, except if an Event of Default has occurred or is occurring, be subject to the prior written approval by the Borrowers if such potential assignee is not an affiliate of any of the Lenders.
ROLE OF THE AGENT
Appointment and authorisation of the Agent
Each Finance Party appoints the Agent to act as its agent under and in connection with the Finance Documents (including, but not limited to the Security Documents).
Each Finance Party authorises the Agent to exercise the rights, powers, authorities and discretions specifically given to the Agent under or in connection with the Finance Documents together with any other incidental rights, powers, authorities and discretions.
Each other Finance Party hereby further designates, appoints and transfers to the Agent the respective rights of each other Finance Party to receive, hold, administer and enforce the Mortgages covering the Drillships, or any one of them, as trustee mortgagee on behalf of the Finance Parties, and to take such action as trustee mortgagee and to exercise such powers and discretion respecting the Mortgages as are delegated to a ship mortgagee under such Mortgages or by applicable law, together with such powers and discretion that are reasonably incidental thereto. The Agent, as trustee mortgagee hereby declares that it accepts the trust hereby created for the limited purpose of holding the Mortgages and exercising remedies thereunder and agrees to perform such trust for the sole use and benefit of the Finance Parties on the terms set forth herein and upon execution and delivery of each respective Mortgage. In its capacity as trustee mortgagee, the Agent is entitled to all of the protections and indemnities of the Agent.
Duties of the Agent
The Agent shall not have any duties or responsibilities except those expressly set forth in the Finance Documents, and the Agent’s duties under the Finance Documents are solely mechanical and administrative in nature. The Agent shall:
promptly forward to a Party the original or a copy of any document which is delivered to it in its capacity as Agent for the attention of that Party by another Party;
supply the other Finance Parties with all material information which the Agent, in its capacity as Agent, receives from the Obligors;
if it receives notice from a Party referring to this Agreement, describing a Default and stating that the circumstance is a Default, promptly notify the Finance Parties; and
if the Agent is aware of any non-payment of any principal, interest, commitment fee or other fee payable to a Finance Party (other than the Agent or the Arranger) it shall promptly notify the other Finance Parties.
The Agent further agrees to act as security agent on behalf of the Lenders under and in connection with the Security Documents, hereunder in connection with the signing, execution and enforcement of the Security Documents.
Particular duties of the Agent in respect of GIEK and K-sure
The Agent shall:
calculate and inform the Borrowers of interest and instalments, guarantee and insurance premiums and all amounts and sums due to the GIEK or K-sure pursuant to any Finance Document, the GIEK Guarantee, the K-sure Insurance Policy or the Fee Letters, receive (on behalf of the GIEK Lender, GIEK and K-sure) and make payments to GIEK and K-sure of such amounts and sums (to the extent actually received by the Agent);
supply GIEK and K-sure with financial information which the Agent has received in accordance with Clause 21.1 ( Financial statements ) and 21.2 ( Compliance Certificate );
if it deems so appropriate, provide to GIEK and K-sure with any requests received from any Obligor;
supply the GIEK and K-sure with any information that the Agent considers to be material, and which the Agent receives in its capacity as Agent from an Obligor or any security providers under the Security Documents;
inform the GIEK and K-sure of any Event of Default or other non-compliance by any Obligor in respect to Clause 6 ( Repayment and Reduction ), Clause 9.2 ( Payment of interest ), Clause 21.1 ( Financial statements ), Clause 21.2 ( Compliance Certificate )and 24.3 ( Insurance ) paragraph (e); and
unless otherwise instructed by the Required Lenders, request from the relevant Obligor that non-compliance with the provisions set out in sub clause (e) above be immediately remedied (if capable of remedy).
The Agent assumes no responsibility and neither the Agent nor any of its officers, directors, employees or agents shall be liable to GIEK or K-sure for any action taken or omitted to be taken hereunder or in connection with this Agreement unless caused in respect of gross negligence or wilful misconduct.
Consent solicitation with GIEK
Upon the Agent receiving a request from an Obligor to which the GIEK shall vote, the Agent shall forward such request to the GIEK Lender and GIEK.
Upon the GIEK Lender and GIEK having received a copy of a request as set out in paragraph (a) above, the GIEK Lender through the GIEK Guarantee Holder shall liaise with GIEK and take instructions from GIEK with respect to exercising its voting rights under this Agreement and relay such instructions to the GIEK Lender, unless with respect to matters relating to funding, in which the GIEK Lender can exercise its voting rights without taking instructions from GIEK.
Upon GIEK providing its instructions to the GIEK Lender (through the GIEK Guarantee Holder) pursuant to paragraph (b) above, the GIEK Lender shall ensure that a copy of those instructions are forwarded to the Agent (either directly or through the GIEK Guarantee Holder), such copy to be sent solely for information purposes, and shall not be relied upon by the Agent.
After having received instructions from GIEK pursuant to paragraph (b) above to the extent such instructions are required, the GIEK Lender or the GIEK Lender through the GIEK Guarantee Holder shall inform the Agent on how the GIEK Lender's voting rights shall be exercised. The Agent may rely on any voting result received by the GIEK Guarantee Holder without any further duty to inquire on the voting result.
Neither the Agent nor the GIEK Guarantee Holder shall have any obligation to any GIEK Lender to assess whether GIEK's consent is required.
Consent solicitation with K-sure
Upon the K-sure Agent receiving a request from an Obligor to which the K-sure Lenders shall vote, the K-sure Agent shall forward such request to the K-sure Lenders and K-sure.
Upon the K-sure Lenders and K-sure having received a copy of a request as set out in paragraph (a) above, the K-sure Lenders (or the K-sure Agent on their behalf) shall liaise with K-sure and take instructions from K-sure with respect exercising their voting rights under this Agreement.
Upon K-sure providing its written instructions to the K-sure Lenders (or the K-sure Agent on their behalf) pursuant to paragraph (b) above, the K-sure Lenders shall ensure that a copy of those instructions are forwarded to the K-sure Agent, such copy to be sent solely for information purposes, and shall not be relied upon by the K-sure Agent.
After having received instructions from K-sure pursuant to paragraph (b) above to the extent such instructions are required, the K-sure Lenders shall send a written notice to the K-sure Agent on how the K-sure Lenders' voting rights shall be exercised (a copy of which shall be provided to K-sure).
Each K-sure Lender shall only be entitled to provide one vote in respect of its K-sure Lenders Commitment.
The K-sure Agent shall not have any obligation to assess whether K-sure's consent is required.
Rights and discretions of the K-sure Agent
The K-sure Agent may rely on:
any representation, notice or document believed by it to be genuine, correct and appropriately authorised; and
any statement made by a director, authorised signatory or employee of any person regarding any matters which may reasonably be assumed to be within its knowledge or within its power to verify.
The K-sure Agent may assume (unless it has received notice to the contrary in its capacity as agent for the other K-sure Lenders) that:
no Default has occurred (unless it has actual knowledge of a Default arising under Clause 25 ( Events of Default ); and
any right, power, authority or discretion vested in any Party or the other K-sure Lenders has not been exercised.
The K-sure Agent may engage, pay for and rely on the advice or services of any lawyers, accountants, surveyors or other experts.
The K-sure Agent may disclose to any other Party any information it reasonably believes it has received as agent under this Agreement.
Notwithstanding any other provision of any Finance Document to the contrary, the K-sure Agent is not obliged to do or omit to do anything if it would or might in its reasonable opinion constitute a breach of any law or regulation or a breach of a fiduciary duty or duty of confidentiality.
K-sure’s instructions
Unless a contrary indication appears in a Finance Document, the K-sure Agent shall:
exercise each right, power, authority or discretion vested in it in accordance with any instructions given to it by K-sure (or, if so instructed by K-sure, refrain from exercising any right, power, authority or discretion vested in it); and
not be liable for any act (or omission) if it acts (or refrains from taking any action) in accordance with an instruction of K-sure.
Unless a contrary indication appears in a Finance Document, any instructions given by K-sure, to the extent such instructions are required pursuant to the K-sure Insurance Policy, will be binding on all the K-sure Lenders.
In the absence of instructions from K-sure when the same are called for hereunder, the K-sure Agent may act (or refrain from taking action) as it considers to be in the best interest of the K-sure Lenders.
The K-sure Agent is not authorised to act on behalf of any K-sure Lenders (without first obtaining that K-sure Lender’s consent) in any legal or arbitration proceedings relating to any Finance Document. This paragraph (d) shall not apply to any legal or arbitration proceeding relating to the perfection, preservation or protection of rights under the Security Documents or the enforcement of the Security created under the Security Documents.
Responsibility for documentation for the K-sure Agent
The K-sure Agent shall not be:
responsible for the adequacy, accuracy and/or completeness of any information (whether oral or written) supplied by the Obligors or any of their Affiliates or any other person given in connection with any Finance Document; or
responsible for the legality, validity, effectiveness, adequacy or enforceability of any Finance Document or any other agreement, arrangement or document entered into, made or executed in anticipation of or in connection with any Finance Document.
Exclusion of liability for the K-Sure Agent
Without limiting paragraph (b) below, the K-sure Agent will not be liable for any action taken by it under or in connection with any Finance Document, unless directly caused by its gross negligence or wilful misconduct.
The K-sure Agent will not be liable for any delay (or any related consequences) in crediting an account with an amount required under the Finance Documents to be paid by the K-sure Agent if the K-sure Agent has taken all necessary steps as soon as reasonably practicable to comply with the regulations or operating procedures of any recognised clearing or settlement system used by the K-sure Agent for that purpose.
Nothing in this Agreement shall oblige the K-sure Agent to carry out any “know your customer” or other checks in relation to any person on behalf of any K-sure Lenders and each K-sure Lender confirms to the K-sure Agent that it is solely responsible for any such checks it is required to carry out and that it may not rely on any statement in relation to such checks made by the K-sure Agent.
Relationship - Agent
The relationship between the Agent and the other Finance Parties is that of agent and principal only. Nothing in this Agreement shall be construed as to constitute the Agent or the Finance Parties as trustee or fiduciary or a trust for any other person, and neither the Agent nor the Finance Parties shall be bound to account to any Finance Party for any sum or the profit element of any sum received by it for its own account.
Relationship – GIEK Guarantee Holder
Nothing in this Agreement shall be construed as to constitute the GIEK Guarantee Holder as trustee or fiduciary for any other person, and the GIEK Guarantee Holder shall not be bound to account to any Finance Party for any sum or the profit element of any sum received by it for its own account.
Business with the Obligors
The Agent and the GIEK Guarantee Holder may accept deposits from, lend money to and generally engage in any kind of banking or other business with the Obligors.
Rights and discretions of the Agent
The Agent may rely on:
any representation, notice or document received by a Party believed by it to be genuine, correct and appropriately authorised; and
any statement made by a director, authorised signatory or employee of any person regarding any matters which may reasonably be assumed to be within his knowledge or within his power to verify.
The Agent may assume (unless it has received notice to the contrary in its capacity as Agent for the Lenders) that:
no Event of Default has occurred (unless it has actual knowledge of an Event of Default under Clause 25.1 ( Non-payment )); and
any right, power, authority or discretion vested in any Party or the Required Lenders has not been exercised.
The Agent may engage, pay for and rely on the advice or services of any lawyers, accountants, surveyors or other experts.
The Agent may act in relation to the Finance Documents through its personnel and agents.
The Agent may disclose to any other Party any information it reasonably believes it has received as agent under this Agreement.
Notwithstanding any other provision of any Finance Document to the contrary, the Agent is not obliged to do or omit to do anything if it would or might in its reasonable opinion constitute a breach of any law or regulation or a breach of duty of confidentiality or render it liable to any person.
Required Lenders’ instructions
Unless a contrary indication appears in a Finance Document, the Agent shall (i) exercise any right, power, authority or discretion vested in it as Agent in accordance with any instructions given to it by the Required Lenders (or, if so instructed by the Required Lenders, refrain from exercising any right, power, authority or discretion vested in it as Agent) and (ii) not be liable for any act (or omission) if it acts in accordance with an instruction of the Required Lenders.
Unless a contrary indication appears in a Finance Document, any instructions given by the Required Lenders will be binding on all the Finance Parties.
The Agent may refrain from acting in accordance with the instructions of the Required Lenders (or, if appropriate, the Lenders) until it has received such security as it may require for any cost, loss or liability (together with any associated VAT) which it may incur in complying with the instructions.
In the absence of instructions from the Required Lenders (or, if appropriate, the Lenders) the Agent may act (or refrain from acting) as it considers to be in the best interest of the Lenders.
The Agent is not authorised to act on behalf of a Lender (without first obtaining that Lender’s consent) in any legal or arbitration proceedings relating to any Finance Document.
Responsibility for documentation
The Agent shall keep and hold all Security Documents received and/or executed by the Agent in connection with any of the Finance Documents, including Security Documents executed by the Obligors or other security providers on behalf of the Finance Parties in accordance with normal banking practice, for and on behalf of the Finance Parties.
The Agent:
is not responsible for the adequacy, accuracy and/or completeness of any information (whether oral or written) supplied by the Agent on behalf of a Party, the Obligors or any other person in or in connection with any Finance Document; and
is not responsible for the legality, validity, effectiveness, adequacy or enforceability of any Finance Document or any other agreement, arrangement or document entered into, made in anticipation of or in connection with any Finance Document.
Exclusion of liability
Without limiting paragraph b) below, the Agent will not be liable for any action taken by it under or in connection with any Finance Document, unless directly caused by its gross negligence or wilful misconduct.
No Party (other than the Agent) may take any proceedings against any officer, employee or agent of the Agent in respect of any claim it might have against the Agent or in respect of any act or omission of any kind by that officer, employee or agent in relation to any Finance Document and any officer, employee and agent of the Agent may rely on this Clause 28.
The Agent will not be liable for any delay (or any related consequences) in crediting an account with an amount required under the Finance Documents to be paid by the Agent if the Agent has taken all necessary steps as soon as reasonably practicable to comply with the regulations or operating procedures of any recognised clearing or settlement system used by the Agent for that purpose.
Nothing in this Agreement shall oblige the Agent to carry out any “ know your customer ” or other checks in relation to any person on behalf of any Lender and each Lender confirms to the Agent that it is solely responsible for any such checks it is required to carry out and that it may not rely on any statement in relation to such checks made by the Agent.
Exclusion of liability – GIEK Guarantee Holder
Without limiting litra b) below, the GIEK Guarantee Holder will not be liable to any of the GIEK Lenders for any action taken by it under or in connection with any Finance Document, unless directly caused by its gross negligence or wilful misconduct.
No Party (other than the GIEK Guarantee Holder) may take any proceedings against any officer, employee or agent of the GIEK Guarantee Holder in respect of any claim it might have against the GIEK Guarantee Holder or in respect of any act or omission of any kind by that officer, employee or agent in relation to any Finance Document and any officer, employee and agent of the GIEK Guarantee Holder may rely on this Clause 28.17.
The GIEK Guarantee Holder will not be liable for any delay (or any related consequences) in crediting an account with an amount required under the Finance Documents to be paid by the GIEK Guarantee Holder if the GIEK Guarantee Holder has taken all necessary steps as soon as reasonably practicable to comply with the regulations or operating procedures of any recognised clearing or settlement system used by the GIEK Guarantee Holder for that purpose.
Nothing in this Agreement shall oblige the GIEK Guarantee Holder to carry out any “know your customer” or other checks in relation to any person on behalf of any GIEK Lender and each GIEK Lender confirms to the GIEK Guarantee Holder that it is solely responsible for any such checks it is required to carry out and that it may not rely on any statement in relation to such checks made by the GIEK Guarantee Holder.
Lenders’ indemnity to the Agent
Each Lender shall (in proportion to its share of the Total Commitments or, if the Total Commitments are then reduced to zero, to its share of the Total Commitments immediately prior to their reduction to zero), indemnify the Agent, within ten (10) Business Days of demand, against any cost, loss or liability incurred by the Agent (otherwise than by reason of the Agent’s gross negligence or wilful misconduct) in acting as Agent under the Finance Documents (unless the Agent has been reimbursed by the Borrowers pursuant to a Finance Document).
GIEK Lender’s indemnity to the GIEK Guarantee Holder
Each GIEK Lender shall (in proportion to its share of the GIEK Lender Commitments or, if the GIEK Lender Commitments are then reduced to zero, to its share of the GIEK Commitments immediately prior to their reduction to zero), indemnify the GIEK Guarantee Holder, within three (3) Business Days of demand, against any cost, loss or liability incurred by the GIEK Guarantee Holder (otherwise than by reason of the GIEK Guarantee Holder’s gross negligence or wilful misconduct) in acting as GIEK Guarantee Holder under the Finance Documents (unless the GIEK Guarantee Holder has been reimbursed by the Borrowers pursuant to a Finance Document).
Claims under K-sure Insurance Policy
Unless the K-Sure Agent is disabled or otherwise unable to act on behalf of the K-Sure Lenders, each K-sure Lender acknowledges and agrees that it shall have no entitlement to make any claim or to take any action whatsoever under or in connection with each of the K-sure Insurance Policies except through the K-sure Agent and that all of the rights of the K-sure Lenders under each of the K-sure Insurance Policies shall only be exercised by the K-sure Agent.
Resignation of the Agent
The Agent may resign and appoint one of its affiliates as successor by giving notice to the other Finance Parties and the Borrowers.
Alternatively the Agent may, upon prior written consent of the Borrowers (not to be unreasonably withheld), resign by giving notice to the other Finance Parties and the Borrowers in which case the Required Lenders (after consultation with the Borrowers) may appoint a successor agent.
If the Required Lenders have not appointed a successor agent in accordance with paragraph b) above within thirty (30) days after notice of resignation was given, the Agent (after consultation with the Borrowers) may appoint a successor agent.
The retiring Agent shall, at its own cost, make available to the successor agent such documents and records and provide such assistance as the successor agent may reasonably request for the purposes of performing its functions as agent under the Finance Documents.
The Agent’s resignation notice shall only take effect upon appointment of a successor.
Upon the appointment of a successor, the retiring Agent shall be discharged from any further obligation in respect of the Finance Documents but shall remain entitled to the benefit of this Clause 28. Each successor and each of the other Parties shall have the same rights and obligations amongst themselves as they would have had if such successor had been an original Party.
After consultation with the Borrowers the Required Lenders may, by notice to the Agent, require it to resign in accordance with paragraph b) above. In this event, the Agent shall resign in accordance with paragraph b) above.
The Agent shall resign in accordance with paragraph (b) above (and, to the extent applicable, shall use reasonable endeavours to appoint a successor Agent pursuant to paragraph (c) above) if on or after the date which is three months before the earliest FATCA Application Date relating to any payment to the Agent under the Finance Documents, either:
the Agent fails to respond to a request under Clause 13.4 ( FATCA Information ) and a Lender reasonably believes that the Agent will not be (or will have ceased to be) a FATCA Exempt Party on or after that FATCA Application Date;
the information supplied by the Agent pursuant to Clause 13.4 ( FATCA Information ) indicates that the Agent will not be (or will have ceased to be) a FATCA Exempt Party on or after that FATCA Application Date; or
the Agent notifies the Borrowers and the Lenders that the Agent will not be (or will have ceased to be) a FATCA Exempt Party on or after that FATCA Application Date;
and (in each case) a Lender reasonably believes that a Party will be required to make a FATCA Deduction that would not be required if the Agent were a FATCA Exempt Party, and that Lender, by notice to the Agent, requires it to resign.
Confidentiality
In acting as agent for the Finance Parties the Agent shall be regarded as acting through its agency division which shall be treated as a separate entity from any other of its divisions or departments.
If information is received by another division or department of the Agent, it may be treated as confidential to that division or department and the Agent shall not be deemed to have notice of it.
Credit appraisal by the Lenders
Lenders
Subject to Clause 28.23.2 ( The GIEK Lender and the K-sure Lenders ) below, without affecting the responsibility of the Obligors for information supplied by it or on its behalf in connection with any Finance Document, each Lender confirms to the Agent that it has been, and will continue to be, solely responsible for making its own independent appraisal and investigation of all risks arising under or in connection with any Finance Document, including (without limitation):
the financial condition, status and nature of the Obligors;
the legality, validity, effectiveness, adequacy or enforceability of any Finance Document and any other agreement, arrangement or document entered into, made or executed in anticipation of, under or in connection with any Finance Document; and
whether that Lender has recourse, and the nature and extent of that recourse, against any Party or any of its respective assets under or in connection with any Finance Document, the transactions contemplated by the Finance Documents or any other agreement, arrangement or document, entered into, made or executed in anticipation of, under or in connection with any Finance Document.
The GIEK Lender and the K-sure Lenders
Without affecting the responsibility of the Obligors for information supplied by it or on its behalf in connection with any Finance Document, the GIEK Lender and the K-sure Lenders confirm to the Agent that they have been, and will continue to be, solely responsible for making their own independent appraisal and investigation of all risks arising under or in connection with the GIEK Guarantee and/or the K-sure Insurance Policy (as the case may be).
The GIEK Lender and the K-sure Lenders shall vote and otherwise act in accordance with any instructions received by it from GIEK and K-sure respectively. To the extent that GIEK and K-sure consents to any amendments to the GIEK Guarantee and/or the K-sure Insurance Policy, respectively, the GIEK Lender and the K-sure Lenders shall seek to obtain written confirmations from GIEK and K-sure, respectively, evidencing such consents, such confirmations to be forwarded to the Agent.
Conduct of business of the Finance Parties
No provision of this Agreement will:
interfere with the right of any Finance Party to arrange its affairs (tax or otherwise) in whatever manner it thinks fit;
oblige any Finance Party to investigate or claim any credit, relief, remission or repayment available to it or to the extent, order or manner of any claim; or
oblige any Finance Party to disclose any information relating to its affairs (tax or otherwise) or any computations in respect of Tax.
SHARING AMONG THE FINANCE PARTIES
Payment to Finance Parties
If a Finance Party (a “ Recovering Finance Party ”) receives or recovers any amount from any of the Obligors other than in accordance with Clause 30 ( Payment mechanics ) and applies that amount to a payment due under the Finance Documents then:
the Recovering Finance Party shall promptly, within three (3) Business Days, notify details of the receipt or recovery to the Agent;
the Agent shall determine whether the receipt or recovery is in excess of the amount the Recovering Finance Party would have been paid had the receipt or recovery been received by or made by the Agent and distributed in accordance with Clause 30 ( Payment mechanics ), without taking account of Tax which would be imposed on the Agent in relation to the receipt, recovery or distribution; and
the Recovering Finance Party shall, within three (3) Business Days of demand by the Agent, pay to the Agent an amount (the “ Sharing Payment ”) equal to such receipt or recovery less any amount which the Agent determines may be retained by the Recovering Finance Party as its share of any payment to be made, in accordance with Clause 30.5 ( Partial payments ).
Redistribution of payments
The Agent shall treat the Sharing Payment as if it had been paid by any of the Obligors, as the case may be, and distribute it between the Finance Parties (other than the Recovering Finance Party) in accordance with Clause 30.5 ( Partial payments ).
Recovering Finance Party’s rights
On a distribution by the Agent under Clause 29.2 ( Redistribution of payments ), the Recovering Finance Party will be subrogated to the rights of the Finance Parties which have shared in the redistribution.
If and to the extent that the Recovering Finance Party is not able to rely on its rights under paragraph a) above, the Borrowers shall be liable to the Recovering Finance Party for a debt equal to the Sharing Payment which is immediately due and payable.
Reversal of redistribution
If any part of the Sharing Payment received or recovered by a Recovering Finance Party becomes repayable and is repaid by that Recovering Finance Party, then:
each Finance Party which has received a share of the relevant Sharing Payment pursuant to Clause 29.2 ( Redistribution of payments ) shall, upon request of the Agent, pay to the Agent for the account of that Recovering Finance Party an amount equal to the appropriate part of its share of the Sharing Payment (together with an amount as is necessary to reimburse that Recovering Finance Party for its proportion of any interest on the Sharing Payment which that Recovering Finance Party is required to pay); and
that Recovering Finance Party’s rights of subrogation in respect of any reimbursement shall be cancelled and the Borrowers will be liable to the reimbursing Finance Party for the amount so reimbursed.
Exceptions
This Clause 29 shall not apply to the extent that the Recovering Finance Party would not, after making any payment pursuant to this Clause 29, have a valid and enforceable claim against the relevant Obligor.
A Recovering Finance Party is not obliged to share with any other Finance Party any amount which the Recovering Finance Party has received or recovered as a result of taking legal proceedings, if:
it notified that other Finance Party of the legal proceedings; and
that other Finance Party had an opportunity to participate in those legal or arbitration proceedings but did do so as reasonably practicable having received notice and did not take separate legal or arbitration proceedings.
PAYMENT MECHANICS
Payments to the Agent
All payments by the Obligors or a Lender under the Finance Documents, including but not limited to repayments, interests, guarantee premiums and fees, shall be made:
to the Agent to its account with such office or bank as the Agent may from time to time designate in writing to the relevant Obligor or a Lender for this purpose; and
for value on the due date at such times and in such funds as the Agent may specify to the Party concerned as being customary at the time for settlement of transactions in the relevant currency in the place of payment.

Distributions by the Agent
Each payment received by the Agent under the Finance Documents for another Party shall, subject to Clause 30.3 ( Distributions to the Borrowers ) and 30.4 ( Clawback ), be made available by the Agent as soon as practicable after receipt to the Party entitled to receive payment in accordance with this Agreement, to such account as that Party may notify to the Agent by not less than five (5) Business Days’ notice.
Distributions to the Borrowers
The Agent may (with the consent of the Borrowers or in accordance with Clause 31 ( Set-off )), apply any amount received by it for the Obligors in or towards payment (on the date and in the currency and funds of receipt) of any amount due from the Obligors under the Finance Documents or in or towards purchase of any amount of currency to be so applied.
Clawback
Where a sum is to be paid to the Agent under the Finance Documents for distribution to another Party, the Agent is not obliged to pay that sum to that other Party until it has been able to establish to its satisfaction that it has actually received that sum.
If the Agent pays an amount to another Party and it proves to be the case that the Agent had not actually received that amount, then the Party to whom that amount was paid by the Agent shall on demand refund the same amount to the Agent, together with interest on that amount from the date of payment to the date of receipt by the Agent, calculated by the Agent to reflect its cost of funds.
Partial payments
If the Agent receives a payment that is insufficient to discharge all the amounts then due and payable by an Obligor under the Finance Documents, the Agent shall apply that payment towards the obligations of the Obligor under the Finance Documents in the following order:
firstly, in or towards payment pro rata of any unpaid fees, costs and expenses of the Agent under the Finance Documents;
secondly, in or towards payment pro rata of any accrued interest (including default interest and any guarantee or insurance premiums under the GIEK-Guarantee and/or the K-sure Insurance Policy), fees or commissions due but unpaid under this Agreement;
thirdly, in or towards payment pro rata of any principal due but unpaid and indemnification due but unpaid under this Agreement; and
finally, in or towards payment pro rata of any other sum due but unpaid under the Finance Documents.
Application following an Event of Default
Following an Event of Default all monies received by the Agent shall be applied in the following order:
firstly, in respect of all costs and expenses whatsoever incurred in connection with or incidental to the enforcement of any Security Document, (excluding enforcement of the GIEK Guarantee and the K-sure Insurance);
secondly, in or towards satisfaction of all prior claims (being any claims, liabilities or debts owed or taking priority in respect of such proceeds over the Security Interests constituted by the Security Documents) secured in the Finance Parties’ secured assets;
thirdly, in or towards payment pro rata of any unpaid fees, costs and expenses of the Agent under the Finance Documents, the GIEK Guarantee and the K-sure Insurance Policy;
fourthly, in or towards payment pro rata of any accrued interest (including default interest), fee or commissions due but unpaid under this Agreement;
fifthly, in or towards payment pro rata of any principal due but unpaid and indemnification due but unpaid under this Agreement, including costs relating to the enforcement of the GIEK Guarantee and the K-sure Insurance; and
finally, the balance (if any) to the Borrowers,
provided, however, that any sum received by the K-sure Agent from K-sure in respect of claims under a K-sure Insurance Policy shall be shared amongst the K-sure Lenders only and shall be applied in accordance with the K-sure Insurance Policy.
No set-off by the Obligors
All payments to be made by an Obligor under the Finance Documents shall be calculated and be made without (and free and clear of any deduction for) set-off or counterclaim.
Payment on non-Business Days
Any payment which is due to be made on a day that is not a Business Day shall be made on the next Business Day in the same calendar month (if there is one) or the preceding Business Day (if there is not).
During any extension of the due date for payment of any principal or Unpaid Sum under this Agreement interest is payable on the principal or Unpaid Sum at the rate payable on the original due date.
Currency of account
The Obligors shall pay:
any amount payable under this Agreement, except as otherwise provided for herein, in USD; and
all payments of costs and Taxes in the currency in which the same were incurred.
Exclusion of liability
The Lenders shall not be liable for any failure to perform the whole or any part of this Agreement resulting directly or indirectly from action of any government or governmental or local authority, or any general strike, lockout, boycott and blockade affecting any of the Lenders or their employees.
SET-OFF
A Lender may, to the extent permitted by applicable law, set off any matured obligation due from any Obligor under the Finance Documents (to the extent beneficially owned by that Lender) against any credit balance on any account that Obligor has with that Lender or against any other obligations owed by that Lender to that Obligor, regardless of the place of payment, booking branch or currency of either obligation. If the obligations are in different currencies, the Lender may convert either obligation at a market rate of exchange in its usual course of business for the purpose of the set-off.

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NOTICES
Communication in writing
Any communication to be made under or in connection with the Finance Documents shall be made in writing and, unless otherwise stated, may be made by telefax or letter. Any such notice or communication addressed as provided in Clause 32.2 ( Addresses ) will be deemed to be given or made as follows:
if by letter, when delivered at the address of the relevant Party;
if by telefax, when received
However, a notice given in accordance with the above but received on a day which is not a Business Day or after 16:00 hours in the place of receipt will only be deemed to be given at 9:00 hours on the next Business Day in that place.
Addresses
Any communication or document to be made under or in connection with the Finance Documents shall be made or delivered to the address and telefax number of each Party and marked for the attention of the department or persons set out below and, in case of any New Lender or New GIEK Lender, to the address notified to the Agent:
If to the Agent:        ING Bank N.V.
Agency Department
Att Martin Preuss / Judith Budhoo
Location code AMP H.02.007
P.O. Box 1800
1000 BV Amsterdam
The Netherlands

Tel no. +31 20 563 5306 / +31 20 563 4788
Fax no. +31 20 565 8226
Email: agency.services.ams@ingbank.com/ martin.preuss@ingbank.com/ judith budhoo@ingbank.com


If to the Borrowers:        Seadrill Limited
    c/o Seadrill Management Ltd.
    2 nd Floor Building 11
Chiswick Business Park
566 Chiswick High Road
London W4 5YS
United Kingdom
Att: Jonas Ytreland
E-mail: jonas.ytreland@seadrill.com
Tel no: +44 (0) 20 8811 4700
Fax no: + 44 (0) 20 88 11 47 01

If to GIEK:     GIEK (Guarantor)
Att of Jan Inge Roald
Dronning Maudsgt. 15
0122 Oslo

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Tel No:    22 87 62 00
Fax No:    22 83 24 45
Email:    Jan.inge.roald@giek.no

If to the GIEK Guarantee
Holder:                Citibank N.A., London Branch
25 Canada Square, London E14 5LB, for the attention of Guido Musso/Davide Alessandrini (Export Agency Finance - CTS), (email: guido.musso@citi.com, davide.alessandrini@citi.com, tarvinder.singh.basi@citi.com, kiran.deoram.matondkar@citi.com),

If to K-sure:
Korea Trade Insurance Corporation
2-16 Floors, Seoul Central Building
136 Seorin Dong, Jongro-ku
Seoul 110-729, Republic of Korea,
Att: Moon-Gouk Chae/ Hongik KIM/ Sejun NOH
Tel No: + 82 51 630 5434
Fax No: + 82 51 630 5455

If to K-sure Agent:
ING Bank N.V., Seoul Branch
15th Floor, Hungkuk Life Insurance Building
226, Shinmunro 1-ga, Chongro-ku,
Seoul 110-061, Korea

Attn: James Kim/ Jieun Kang/ sunyoung Moon
Tel no.: +82 2 317 1817/ 1811-2
Fax no.: +82 2 317 1881

E-mail: james.kim@asia.ing.com / jieun.kang@asia.ing.com / sunyoung.moon@asia.ing.com

or any substitute address and/or telefax number and/or marked for such other attention as the Party may notify to the Agent (or the Agent may notify the other Parties if a change is made by the Agent) by not less than five (5) Business Days’ prior notice.
Communication with the Obligors
All communication from or to any of the Obligors shall be sent through the Agent and the Agent may direct any information to any of the Obligors by communication to the Borrowers.
Language
Communication to be given by one Party to another under the Finance Documents shall be given in the English language or, if not in English and if so required by the Agent, be accompanied by a certified English translation and, in this case, the English translation shall prevail unless the document is a statutory or other official document.
Electronic communication
Any communication to be made between the Agent, a Finance Party and an Obligor under or in connection with the Finance Documents, the GIEK Guarantee or the K-sure Insurance Policy may be made by electronic mail or other electronic means, including by way of publication on recognised web-page to which all Finance Parties have been granted access, if the Agent, the relevant Finance Party and the relevant Obligor (as the case may be):

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agree that, unless and until notified to the contrary, this is to be an accepted form of communication;
notify each other in writing of their electronic mail address and/or any other information required to enable the sending and receipt of information by that means; and
notify each other of any change to their address or any other such information supplied by them.
Any electronic communication made between the Agent, a Lender and an Obligor will be effective only when actually received in readable form and in the case of any electronic communication made by a Lender or an Obligor to the Agent only if it is addressed in such a manner as the Agent shall specify for this purpose.
For the purpose of the Finance Documents, an electronic communication will be treated as being in writing. Each Party may rely without further inquiry on the senders' due authorisation in connection with any e-mail messages it receives on behalf of the other Party. Each Party shall also, subject to the terms and conditions of this Agreement, be authorised to communicate by e-mail with any third parties who may be involved in this transaction or affected by the Finance Documents. Each Party confirms that it is aware of the fact that information by way of electronic exchange is transmitted unencrypted over a publicly accessible network, and that it acknowledges all the risks connected therewith (including but not limited to the fact that a bank relation (as such terms is used in the context of Swiss banking secrecy legislation) could be identified).
CALCULATIONS
All sums falling due by way of interest, fees and commissions under the Finance Documents accrue from day-to-day and shall be calculated on the basis of the actual number of days elapsed and a calendar year of 360 days. The calculations made by the Agent of any interest rate or any amount payable pursuant to this Agreement shall be conclusive and binding upon the Borrowers in the absence of any manifest error.
MISCELLANEOUS
Partial invalidity
If, at any time, any provision of the Finance Documents is or becomes illegal, invalid or unenforceable in any respect under any law of any jurisdiction, neither the legality, validity or enforceability of the remaining provisions nor the legality, validity or enforceability of such provisions under any law of any other jurisdiction will in any way be affected or impaired.
Remedies and waivers
No failure to exercise, nor any delay in exercising on the part of any Finance Party, any right or remedy under the Finance Documents shall operate as a waiver, nor shall any single or partial exercise of any right or remedy prevent any further or other exercise or the exercise of any other right or remedy. The rights and remedies provided in this Agreement are cumulative and not exclusive of any rights or remedies provided by law.
Amendments, consents and waivers
Required consents
Subject to Clause 34.3.2 ( Exceptions ), any term of the Finance Documents may be amended, consented to or waived only with the written consent of the Required Lenders, the Obligors and any such amendment will be binding on all Parties.
Subject to Clause 34.3.2 ( Exceptions ) any matter requiring approval (including the approval of any form of document) may be approved by the Agent acting on instructions of the Required Lenders.
The Agent may effect, on behalf of any Finance Party, any amendment or waiver or give any approval permitted by this Clause 34.3.
Exceptions
Any requirement for approval (including the approval of the form of any document) by the Finance Parties or by all Lenders or an amendment to or waiver that has the effect of changing or which relates to:
the definition of “Required Lenders”;
an extension of the date of any payment of any amount under the Finance Documents;
a reduction in the Applicable Margin (provided that the consent will only be required by all affected Lenders depending on which Applicable Margin that is reduced) or a reduction in the amount of any payment of principal, interest, fees or commission payable;
an increase in or extension of any Lenders’ Commitment;
a term of the Finance Documents which expressly requires the consent of all the Lenders or of the Finance Parties;
a proposed substitution or replacement of any of the Obligors;
release of any Guarantors, any Guarantees provided by the Guarantors pursuant to this Agreement, the Guarantee Obligations or any Security Interest under any Security Document; and/or
this Clause 34.3,
shall not be made without the prior written consent of all the Lenders.
Subject to approval from GIEK and K-sure (as relevant), the Borrowers shall (for their own cost) have the right, in the absence of a Default or Event of Default, to replace any Lender that refuses to consent to certain amendments or waivers of this Agreement which expressly require the consent of such Lender and which have been approved by the Required Lenders, with a New Lender or a New GIEK Lender (if relevant).
If any Lender fails to respond to a request for a consent, waiver, amendment of or in relation to any of the terms of any Finance Documents (other than an amendment or waiver referred to in paragraphs (i) and (iv) above) or another vote required by the Lenders under the terms of this Agreement within 15 Business Days (unless the Borrowers and the Agent agree to a longer time period in relation to any request) of that request being made, its Commitment and/or participation shall not be included for the purpose of calculating the Total Commitments when ascertaining whether any relevant percentage (including, for the avoidance of doubt, unanimity) of Total Commitments and/or participations has been obtained to approve that request.
An amendment or waiver which relates to the rights or obligations of the Agent may not be effected without the written consent of the Agent.
Disclosure of information and confidentiality
Each of the Finance Parties may disclose to each other or to their professional advisers any kind of information which the Finance Parties have acquired under or in connection with any Finance Document. The Parties are obliged to keep confidential all information in respect of the terms and conditions of this Agreement. This confidentiality obligation shall not apply to any information which:
is publicised by a Party as required by applicable laws and regulations;
has entered the public domain or is publicly known, provided that such information is not made publicly known by the receiving Party of such information; or
was or becomes, as the Party is able to demonstrate by supporting documents, available to such Party on a non-confidential basis prior to the disclosure thereof;
the GIEK Lender is obliged to provide to GIEK pursuant to the GIEK Guarantee;
the K-sure Lenders or the Agent are obliged to provide to K-sure pursuant to the K-sure Insurance Policy; or
is deemed by K-sure, GIEK and/or the GIEK Lender to be key information regarding a Borrower or the Guarantors and the transactions contemplated by the Finance Documents or any documents referred to therein and which may be published by K-sure, GIEK and/or the GIEK Lender pursuant to the conditions of the GIEK Guarantee.
Process Agent
Each Obligor hereby irrevocably:
appoints Seadrill Management AS (the " Process Agent ") as its agent for the service of process and/or any other writ, notice, order or judgment in respect of this Agreement and/or the matters arising herefrom.
agrees that failure by such process agent to notify the Agent of the process will not invalidate the proceedings concerned.
If any process agent appointed pursuant to this Clause 34.5 ( Process Agent ) (or any successor thereto) shall cease to exist for any reason where process may be served, the Obligor will forthwith appoint another process agent with an office in Norway where process may be served and will forthwith notify the Agent thereof.
Conflict
In case of conflict between the Security Documents and this Agreement, the provisions of this Agreement shall prevail, provided however that this will not in any way be interpreted or applied to prejudice the legality, validity or enforceability of any Security Document.
Counterparts
Each Finance Document may be executed in any number of counterparts and this has the same effect as if the signatures on the counterparts were on a single copy of the Finance Document.
K-SURE
Conflict and K-sure Insurance Policy override
Without limiting in any manner the rights of the Lenders under the Facilities (other than the K-sure Facility), and subject and without prejudice to any amendments, consents or waivers as may be given, consented or agreed to by the Agent which is contrary to or inconsistent with any vote exercised by the K-sure Lenders (acting on the instructions of K-sure);
in case of any conflict between the Finance Documents and the K-sure Insurance Policy, the K-sure Insurance Policy shall prevail, and to the extent of such conflict or inconsistency, none of the K-sure Lenders or the K-sure Agent shall assert to K-sure, the terms of the relevant Finance Documents; and
nothing in this Agreement or any Finance Document shall permit or oblige any K-sure Lender or the K-sure Agent to act (or omit to act) in a manner that is inconsistent with any requirement of K-sure under or in connection with the K-sure Insurance Policy.
Demand under K-sure Insurance Policy
Notwithstanding any other terms as set forth in herein and the other Finance Documents, the K-sure Agent shall only make a written demand to K-sure under the K-sure Insurance Policy after the K-sure Agent has first made a written demand for payment of the relevant amount of the Guarantee Obligations to the Guarantors pursuant to Clause 18 ( Guarantee and indemnity ) hereof.
Prior consultation with K-sure
Each Borrower acknowledges that the K-sure Agent may, under the terms of the K-sure Insurance Policy be required:
to consult with K-sure, prior to the exercise of certain decisions under the Finance Documents (including the exercise of such voting rights in relation to any substantial amendment to any Finance Documents); and
to follow certain instructions given by K-sure.
Each K-sure Lender will be deemed to have acted reasonably if it has acted on the instructions of the K-sure Agent (given by K-sure to the K-sure Agent in accordance with the terms of a K-sure Insurance Policy) in the making of any such decision or the taking or refraining to take any action under any Finance Document to which it is a party.
Notification
The Borrowers will deliver a notice to the K-sure Agent promptly after it becomes aware of the occurrence of any political or commercial risk covered by a K-sure Insurance Policy and will:
pay any additional premium payable to K-sure in relation to the K-sure Insurance Policy; and
co-operate with the K-sure Agent on its reasonable request to take all steps necessary on the part of the Borrowers to ensure that the K-sure Insurance Policy remain in full force and effect throughout the Security Period which shall include providing the K-sure Agent with any information relating to any material commercial facts which could result in a Material Adverse Effect.
In addition, the Borrowers shall promptly supply to the K-sure Agent with copies of all financial or other information reasonably required by the K-sure Agent to satisfy any request for information made by K-sure pursuant to a K-sure Insurance Policy.
The Borrowers agree that it shall be reasonable for the K-sure Agent to make a request under this Clause if it is required to do so as a condition to maintaining a K-sure Insurance Policy in full force and effect.
Indemnity to the K-sure Agent in its capacity as K-sure Agent for K-sure and the K-Sure Lenders
Before the K-sure Agent commences any legal proceedings or otherwise incurs any costs (including, but not limited to legal costs) in acting in its capacity as K-sure Agent on behalf of K-sure or the K-sure Lenders, theK-sure Agent shall have received sufficient means, or assurance satisfactory to it that such sufficient means will be provided upon demand, from the K-sure Lenders or K-sure, respectively.
Application of Clauses 28.16 ( Exclusion of liability ) and 28.18
( Lenders' indemnity to the Agent ) to K-sure
The provisions of Clauses 28.16 ( Exclusion of liability ) and 28.18 ( Lenders' indemnity to the Agent ) of this Agreement including (without limitation) the indemnity provisions therein shall be deemed repeated and shall apply in respect of K-sure in this Agreement as if each reference to the Agent were a reference to K-sure.
GOVERNING LAW AND ENFORCEMENT
Governing law
This Agreement shall be governed by Norwegian law.
Jurisdiction
For the benefit of each Finance Party, each of the Obligors agrees that the courts of Oslo, Norway have jurisdiction to settle any dispute arising out of or in connection with the Finance Documents including a dispute regarding the existence, validity or termination of this Agreement, and each of the Obligors accordingly submits to the non-exclusive jurisdiction of the Oslo District Court ( Oslo tingrett ).
Nothing in this Clause 36.2 shall limit the right of the Finance Parties to commence proceedings against any of the Obligors in any other court of competent jurisdiction. To the extent permitted by law, the Finance Parties may take concurrent proceedings in any number of jurisdictions.

* * *




SCHEDULE 3     
LENDERS AND INITIAL COMMITMENTS
Name of initial Lenders:
Commercial Commitment
GIEK Lender Commitment
KEXIM Commitment
K-sure Lenders Commitment
Commercial Lenders:
 
 
 
 
ING Bank N.V.
(Mandated Lead Arranger)

USD 50,000,000
 
 
 
ABN AMRO Bank N.V., Oslo Branch
(Lead Arranger)
USD 24,250,000
 
 
 
BNP Paribas SA
(Lead Arranger)
USD 24,250,000
 
 
 
KfW IPEX-Bank GmbH
(Mandated Lead Arranger)
USD 11,750,000
 
 
 
Norddeutsche Landesbank Girozentrale
(Mandated Lead Arranger)
USD 36,750,000
 
 
 
Sumitomo Mitsui Banking Corporation
(Mandated Lead Arranger)
USD 19,250,000
 
 
 
Standard Chartered Bank
(Mandated Lead Arranger)
USD 36,750,000
 
 
 
The GIEK Lender:
 
 
 
 
Citibank Europe Plc
(Mandated Lead Arranger)
 
USD 575,000,000
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
K-sure Lenders:
 
 
 
 
HSBC Bank plc
(Mandated Lead Arranger)
 
 
 
USD 61,200,000
ING Bank N.V., Seoul Branch
(Mandated Lead Arranger)
 
 
 
USD 30,000,000
Credit Suisse AG
(Mandated Lead Arranger)
 
 
 
USD 61,200,000
The Bank of Tokyo-Mitsubishi UFJ, Ltd.
(Mandated Lead Arranger)
 
 
 
USD 61,200,000
Sumitomo Mitsui Banking Corporation
(Mandated Lead Arranger)
 
 
 
USD 61,200,000
KfW IPEX-Bank GmbH
(Mandated Lead Arranger)
 
 
 
USD 61,200,000
KEXIM:
 
 
 
 
The Export-Import Bank of Korea
(Mandated Lead Arranger)
 
 
USD 336,000,000
 
Total:
USD 203,000,000
USD 575,000,000
USD 336,000,000
USD 336,000,000
Names of acceded Lenders
 
 
 
 
Cerulean Investments LP
(Commercial Lender)
 
 
 
 
Kommunal Landspensjonskasse
(GIEK Lender)
 
 
 
 
Sumitomo Trust Bank, Limited
(GIEK Lender)
 
 
 
 

Aggregate Commitments per Facility

Commercial Facility
GIEK Lender Facility
KEXIM Facility
K-sure Facility
Total Commitment
USD 203,000,000
USD 575,000,000
USD 336,000,000
USD 336,000,000
USD 1,450,000,000



Aggregate Commitments allocated to the Tranches for each Drillship
Facility
 
Tranches relating to West Vela
Tranches relating to West Tellus
Commercial Facility
 
67.666.667
67.666.667
GIEK Lender Facility
 
191.666.667
191.666.667
KEXIM Facility
 
112.000.000
112.000.000
K-sure Facility
 
112.000.000
112.000.000
Total
 
USD 483.333.333
USD 483.333.333

SCHEDULE 4     
GUARANTORS AND DRILLSHIPS
DRILLSHIP
Name, type and IMO number
GUARANTORS
Drillship owner, Intra-Group Charterer
Charter Contracts
(Existing and next contract)
Structure, contract date, duration, dayrate in USD and options
End-user
Built and Ship Registry
Average Market Value in USD
West Vela
Drillship Owner (Borrower):   Seadrill Vela Hungary Kft.
Intra-Group Charterer:
Seadrill Gulf Operations Vela LLC (USA)
Existing contract:

Dayrate: USD 565,000

Effective: 10 October 2012

Expiration: January 2021
Next contract: [•]
Existing contract:
BP Exploration & Production Inc.
Next contract: [•]
Delivered from Samsung Heavy Industries (Korea) June 2013
Panama flag
USD 675,000,000
(RS Platou: USD 650,000,000
Fearnleys: USD 700,000,000)
West Tellus
Drillship Owner (Borrower):   Seadrill Tellus Ltd.  
Intra-Group Charterer:
To be agreed.
Existing contract:

Dayrate: USD 580,000
Effective: 5 June 2013
Expiration: Estimated to 180 days following start-up date (start up between September and December 2013)
Next contract: [•]
Existing contract:
Chevron China Energy Company


Next contract: [•]
Delivered from Samsung Heavy Industries (Korea) October 2013
Panama flag
USD 675,000,000
(RS Platou: USD 650,000,000
Fearnleys: USD 700,000,000)
Total:
 
 
 
 
 
Other Guarantors: Seadrill Capricorn LLC and Seadrill Limited



SCHEDULE 5     
CONDITIONS PRECEDENT (ALL CONDITIONS PREVIOUSLY FULFILLED)
Part I     
(Conditions Precedent to the Closing Date)
1.
CORPORATE AUTHORISATION
In respect of each Obligor:
(g)
Company certificate (or similar);
(h)
Articles of Association, Certificate of Incorporation and By-laws;
(i)
Updated Good Standing Certificate (or similar);
(j)
Resolutions passed at a board meeting of the relevant Obligor evidencing:
(i)
the approval of the terms of, and the transactions contemplated by, the Finance Documents to which it is a party; and
(ii)
the authorisation of its appropriate officer or officers or other representatives to execute the Finance Documents and any other documents necessary for the transactions contemplated by the Finance Documents, on its behalf; and
(iii)
attaching certified true copies of valid proof of identity in respect of the persons signing on behalf of the Borrower
(k)
Power of Attorney (notarised and legalised if requested by the Agent); and
(l)
Directors Certificate, including, but not limited to specimen signatures of each person signing on behalf of the relevant Obligor and confirmations on solvency both before and after the incurrence of the indebtedness under the Finance Documents.
2.
AUTHORISATIONS
Evidence that all approvals, authorisations and consents required by any government, other authorities or third parties for the Obligors and if applicable its subsidiaries to enter into and perform their obligations under any of the Finance Documents shall have been obtained and remain in effect, and all applicable waiting periods shall have expired without any action being taken by any competent authority which, in the opinion of the Agent, restrains, prevents or imposes materially adverse conditions upon the Obligors to enter into and perform their obligations under the Finance Documents.
3.
FINANCE DOCUMENTS
(a)
This Agreement;
(b)
The Share Charges;
(c)
The Fee Letters;
(d)
Agreed form of all other Security Documents; and
(e)
Any other Finance Documents except those that will be delivered pursuant to Part II (Conditions precedent for each Utilisation Date) and Part III (Closing Documents Utilisation Date) of this Schedule 3.
4.
SPECIFIC GIEK LENDER/GIEK DOCUMENTS
(a)
The offer for the GIEK Guarantee;
(b)
If not included in the offer for the GIEK Guarantee, a written confirmation from GIEK that it will accept any amendments or consents consented to by the Required Lenders, even if such amendments or consents have not been consented to by the GIEK Lender (acting on the instructions of GIEK);
(c)
Written confirmation from the lawfirm BA-HR acting for the Agent addressed to the GIEK Lender confirming that all GIEK’s conditions as set out in the GIEK Guarantee have been included in the Finance Documents; and
(d)
Confirmation from ING to GIEK regarding ING's final hold.
5.
SPECIFIC K-SURE LENDERS/ K-SURE REQUIREMENTS
(a)
A copy of any documents, authorisations, opinions or assurances as may be required by K-sure.
6.
LEGAL OPINIONS
(a)
Agreed form legal opinion from Norwegian law counsel relating to Norwegian law matters and agreed form legal opinion from Norwegian law counsel relating to Norwegian law matters;
(b)
Agreed form legal opinion from Bermuda law counsel relating to Bermuda law matters and agreed form legal opinion from Bermuda law counsel relating to Bermuda law matters;
(c)
Agreed form legal opinion from New York counsel relating to New York law matters;
(d)
Agreed form legal opinion from Panama counsel relating to Panama law matters;
(e)
Agreed form legal opinion from Delaware counsel relating to Delaware law matters;
(f)
Agreed form legal opinion from Hungary counsel relating to Hungary law matters;
(g)
Agreed form legal opinion from Texas counsel relating to Texas law matters; and
(h)
Executed or agreed form of legal opinions from any such other relevant legal counsels as the Agent may request.
7.
MISCELLANEOUS
(a)
A declaration from the Parent that as from September 30 2012, nothing shall have occurred that may have a Material Adverse Effect, and that the Borrowers and the Intra-Group Charterers are free of any Financial Indebtedness, except for subordinated intercompany loans.
(b)
Evidence that all fees, costs and expenses referred to in Finance Documents as payable on or prior to the Closing Date, have or will be paid on its due date;
(c)
Any Letter of Acceptance of Appointment by any entity (including the Process Agent) appointed as process agent on behalf of any Obligor pursuant to any of the Finance Documents;
(d)
An effective interest letter;
(e)
The Original Financial statements;
(f)
The Cash Flow Projections;
(g)
New York counsel (H&K) to confirm receipt of original membership interest certificates for the Intra-Group Charterers;
(h)
“Know your customer” documents required by the Lenders; and
(i)
Any other documents as reasonably requested by the Agent.
Part II     
(Conditions Precedent for each Utilisation Date)
1.
CORPORATE AUTHORISATION
Corporate Authorisations only to be delivered to the extent not covered by Part I ( Conditions precedent for the Closing Date ), or if considered outdated for the purpose of any legal opinions.
In respect of each Obligor:
(a)
Company certificate (or similar);
(b)
Articles of Association, Memorandum of Incorporation and By-laws;
(c)
Updated Good Standing Certificate (or similar);
(d)
Resolutions passed at a board meeting of the Borrower evidencing:
(i)
the approval of the terms of, and the transactions contemplated by, the Finance Documents to which it is a party; and
(ii)
the authorisation of its appropriate officer or officers or other representatives to execute the Finance Documents and any other documents necessary for the transactions contemplated by the Finance Documents, on its behalf; and
(iii)
attaching certified true copies of valid proof of identity in respect of the persons signing on behalf of the Borrower
(e)
Power of Attorney (notarised and legalised if requested by the Agent); and
(f)
Directors Certificate, including, but not limited to specimen signatures of each person signing on behalf of the Borrower and confirmations on solvency both before and after the incurrence of the indebtedness under the Finance Documents.
2.
AUTHORISATIONS
Evidence that all approvals, authorisations and consents required by any government or other authorities for the Obligors and if applicable its subsidiaries to enter into and perform their obligations under any of the relevant Finance Documents shall have been obtained and remain in effect, and all applicable waiting periods shall have expired without any action being taken by any competent authority which, in the opinion of the Agent, restrains, prevents or imposes materially adverse conditions upon the Obligors to enter into and perform their obligations under the Finance Documents.
3.
FINANCE DOCUMENTS
The following Security Documents relating to the relevant Borrower and Drillship being delivered, duly signed by all the relevant parties thereto together with evidence of that the security created thereunder is legally perfected on first priority in accordance with the terms of each of the Finance Documents;
(e)
The Assignment of Earnings;
(f)
The Assignment of Earnings Accounts;
(g)
The Assignment of Insurances;
(h)
Signed mortgage and evidence that the Mortgage has been prepositioned with the Panama register; and
(i)
Any other Finance Document to the extent applicable.
4.
SPECIFIC K-SURE REQUIREMENTS
(b)
Evidence satisfactory to the Agent that the full amount of the K-sure Premium payable to K-sure has been paid;
(c)
Evidence that the K-sure Insurance Policy is in full force and effect on each Utilisation Date; and
(d)
A copy of any additional documents, authorisations, opinions or assurances as may be required by K-sure.
5.
SPECIFIC GIEK LENDER/GIEK DOCUMENTS
(i)
Evidence that the GIEK Guarantee is in full force and effect on the Utilisation Date;
(j)
An Exporter's statement covering section 7 and 8 of the GIEK Guarantee.
(k)
Written confirmation from the lawfirm BA-HR DA acting for the Agent addressed to the GIEK Lender that:
164(i)
all conditions precedent for disbursing the relevant Tranche of the GIEK Lender Facility have been fulfilled; and
164(ii)
that all GIEK’s conditions as set out in the GIEK Guarantee have in substance been included in the Finance Documents (in case of any amendments to any Finance Document or the GIEK Guarantee since the last confirmation);
(l)
Satisfaction of any other requirement by GIEK pursuant to the GIEK Guarantee or otherwise required in connection therewith by GIEK or the GIEK Lender.
6.
THE DRILLSHIP
(j)
Results of maritime registry searches with respect to the Drillship, which result shall be acceptable to the Agent;
(k)
Evidence that the Market Value shall be equal to or greater than 125% of the requested amount to be borrowed on the Utilisation Date, based on market valuations not being older than five (5) months;
(l)
Copies of insurance policies/cover notes documenting that insurance cover has been taken out in respect of the Drillship in accordance with Clause 24.3 ( Insurance ) and evidencing that the Agent’s (on behalf of the Finance Parties) Security Interest in the insurance policies have been noted on first priority; and
(m)
The Insurance Report.
7.
MISCELLANEOUS
(a)
The Utilisation Request at least five (5) Business Days prior to the relevant Utilisation Date;
(b)
Evidence that all fees, costs and expenses referred to in Finance Documents as payable on or prior to the relevant Utilisation Date, have or will be paid on its due date;
(c)
A Compliance Certificate confirming that the Parent and the Borrowers are in compliance with the financial covenants as set out in Clause 22 ( Financial Covenants );
(d)
Any Letter of Acceptance of Appointment by any entity (including the Process Agent) appointed as process agent on behalf of any Obligor pursuant to any of the Finance Documents;
(e)
The Intra-Group Charterparty in a form and substance satisfactory to the Agent in respect of the relevant Drillship, and the relevant Satisfactory Drilling Contract;
(f)
The Contract Memo for the Drillship to which the relevant Utilisation relates;
(g)
Any “Know your customer” documents required by the Lenders (if applicable);
(h)
Evidence that the Bermuda share charges and the Hungarian quota pledges, if relevant, has/have been filed with the Bermuda Register of Charges;
(i)
The opening balance for each of the Borrowers, and proof of capitalization for each of the Borrowers;
(j)
Evidence that the New York membership interest pledge(s) and the New York law Assignment of Earnings have been filed with the UUC; and
(k)
Any other documents as reasonably requested by the Agent.
8.
LEGAL OPINIONS
(a)
Executed legal opinion from Norwegian law counsel relating to Norwegian law matters;
(b)
Executed legal opinion from Bermuda law counsel relating to Bermuda law matters;
(c)
Executed legal opinion from New York law counsel relating to New York law matters;
(d)
Executed legal opinion from Delaware law counsel relating to Delaware law matters;
(e)
Executed legal opinion from Korean law counsel relating to Korean law matters;
(f)
Executed legal opinion from Texas counsel relating to Texas law matters; and
(g)
Executed or agreed form legal opinion(s) from any such other relevant legal counsels as the Agent may request.
Part III     
(Closing Documents Utilisation Date)
On the Utilisation Date the Agent shall receive the following documents and the Borrower shall undertake actions pursuant to a closing memo, including perfection of Mortgage and Protocol of Delivery.
(f)
Protocol of Delivery and Acceptance;
(g)
Certificates of ownership and class (with the appropriate notation) from the appropriate authority showing the registered ownership of the Drillship;
(h)
Results of maritime registry searches with respect to the Drillship, which result shall be acceptable to the Agent;
(i)
The relevant Mortgage to be effective;
(j)
Executed legal opinion from Panama counsel relating to the Mortgage;
(k)
Executed legal opinion from Hungary counsel relating to the execution of the mortgage (if not already provided under Part II above); and
(l)
Legal opinion from any such other relevant legal counsels as the Agent may request.
(m)
Receipt of the relevant signed acknowledgement of assignment of intra group charter earnings by the relevant Intra-Group Charterer.
(n)
Receipt of the relevant signed acknowledgment of the assignment of accounts from account bank.

Part IV
(Conditions Subsequent)

As soon as possible, and in any case within three months after the date of the relevant Utilisation, evidence that any and all payments of the Earnings (including by end-users) are instructed to be paid to the Earnings Accounts;
Within five months after the Closing Date, evidence that such payments mentioned in (a) above have been initiated; and
If applicable, as soon as possible, and in any case with in one months after the Closing Date, evidence that the Hungarian share charge(s) have been filed with the Hungarian Court of Registration.

SCHEDULE 6     
FORM OF UTILISATION REQUEST
To:    ING Bank N.V, as Agent
From:    [relevant Borrower]
Date:    [ ]

SEADRILL LIMITED – USD 1,450,000,000 SENIOR SECURED CREDIT FACILITY AGREEMENT ORIGINALLY DATED 20 MARCH 2013, AS AMENDED THEREAFTER (THE “AGREEMENT”)

We refer to Clause 5.1 ( Delivery of a Utilisation Request ) of the Agreement. Terms defined in the Agreement shall have the same meaning when used in this Utilisation Request.
(h)
You are hereby irrevocably notified that we wish to make the following advance for the [Commercial Facility / GIEK Lender Facility/ KEXIM Facility/ K-sure Facility]:
(i)
Proposed Utilisation Date:    [ ]
(j)
Principal Amount:        [    ]
(k)
Interest Period:            [     ]
(l)
The proceeds of the Utilisation shall be credited to [•] [insert name and number of account].
(m)
We confirm that, as of the date hereof (i) each condition specified in Clause 4 ( Conditions Precedent ) of the Agreement is satisfied; (ii) each of the representations and warranties set out in Clause 20 ( Representations and warranties ) of the Agreement is true and correct; and (iii) no event or circumstances has occurred and is continuing which constitute or may constitute a Default or an Event of Default.

Yours sincerely
for and on behalf of
[relevant Borrower]
By: __________________________________
Name:
Title: [authorised officer]    
 

SCHEDULE 7     
FORM OF COMPLIANCE CERTIFICATE

To:    ING Bank N.V, as Agent
From:    Seadrill Limited as Parent and the Borrowers
Date:    [•] [To be delivered no later than hundred and eighty (180)/seventy (70) days after each reporting date]
SEADRILL LIMITED – USD 1,450,000,000 SENIOR SECURED CREDIT FACILITY AGREEMENT ORIGINALLY DATED 20 MARCH 2013 AS AMENDED THEREAFTER (THE “AGREEMENT”)
We refer to the Agreement. Terms defined in the Agreement shall have the same meaning when used in this Compliance Certificate.
We confirm that as at [•] [insert relevant reporting date]:
1.2
Minimum Liquidity
The Minimum Liquidity of the Group was [ ] while the Minimum Liquidity required is USD 150,000,000.
1.3
Leverage Ratio
The Leverage Ratio of the Group was [ ] while the Leverage Ratio is required not to exceed 4.5:1.
1.4
Equity Ratio
The Equity Ratio of the Group was [ ] while the minimum Equity Ratio shall be no less than 30 %.
1.5
Interest Cover Ratio
The Interest Cover Ratio of the Group was [        ] while the Interest Cover Ratio shall be no less than 2.5:1.
1.6
Current Ratio
The Current Ratio of the Group was [ ] while the Current Ratio shall be minimum 1:1.
1.7
Debt Service Cover Ratio
The Debt Service Cover Ratio of each relevant Borrower was [    ] while the Debt Service Cover Ratio shall be no less than 1.15:1 for each of the Borrowers.
1.8
Market Value
The Market Value of each of the Drillships, and the Drillships in aggregate is attached as Appendix 1 hereto while the minimum Market Value shall be equal to or higher than [125%/ 140%] (as applicable) of the sum of the outstanding Loans.
1.9
Insurance
We confirm that each of the Drillships is insured against such risks and in such amounts as set out in Appendix 2 hereto.
1.10
Cash Distributions from Investments
Cash Distributions from Investments are as set out in Appendix 3 hereto.
1.11
No Default
We confirm that, as of the date hereof (i) each of the representations and warranties set out in Clause 20 ( Representations and warranties ) of the Agreement is true and correct, and (ii) no event or circumstances has occurred and is continuing which constitute or may constitute a Default and/or an Event of Default.
Yours sincerely
for and on behalf of
Seadrill Limited and the Borrowers

By:___________________________
Name:
Title: [authorised officer]    
 

Appendix 1 – Market Value
Drillship
Valuation from [Approved Broker]
Valuation from [Approved Broker]
Average Market Value
West Tellus
 
 
 
West Vela
 
 
 



Appendix 2 - Insurance
Drillship
Hull & Machinery
Freight Interest
Hull Interest
P&I
War risk
Insured Amount
MAPP
West Tellus

 
 
 
 
 
 
 
West Vela

 
 
 
 
 
 
 


Appendix 3 – Cash Distributions from Investments
SCHEDULE 8     
FORM OF TRANSFER CERTIFICATE

To:    ING Bank N.V, as Agent
From:    [•] (the ” Existing Lender ”) and [•] (the ” New Lender ”)
Date:    [•]
SEADRILL LIMITED – USD 1,450,000,000 SENIOR SECURED CREDIT FACILITY AGREEMENT ORIGINALLY DATED 20 MARCH 2013 AS AMENDED THEREAFTER (THE “AGREEMENT”)
We refer to the Agreement. Terms defined in the Agreement have the same meaning in this Transfer Certificate unless given a different meaning in this Transfer Certificate.
With reference to Clause 27 ( Changes to the Parties ):
(j)
The Existing Lender, in its capacity as Lender under the Agreement, confirms that it participates with [ ] of the [SPECIFY WHICH FACILITY] being [    ] per cent of the Total Commitments.
(k)
The Existing Lender hereby transfers to the New Lender [    ] per cent of the Total Commitments as specified in the Schedule hereto, and of the equivalent rights and interest in all Finance Documents, and the New Lender hereby accepts such transfer from the Existing Lender in accordance with the terms set out herein and Clause 27 ( Changes to the Parties ) of the Agreement and assumes the same obligations to the other Finance Parties as it would have been under if it was an original Lender.
(l)
The Transfer Date is [    ].
(m)
The New Lender confirms that it has received a copy of the Agreement, together with such other information as it has required in connection with this transaction. The New Lender expressly acknowledges and agrees to the limitations on the Existing Lender’s responsibility set out in Clause 27.6 ( Limitations of responsibility of Existing Lenders ) of the Agreement.
(n)
The New Lender hereby undertakes to the Existing Lender and the Borrowers that it will perform in accordance with the terms and conditions of the Agreement all those obligations which will be assumed by it upon execution of this Transfer Certificate.
(o)
The address, telefax number and attention details for notices, as well as the account details of the New Lender, are set out in the Schedule.
(p)
This Transfer Certificate is governed by Norwegian law, with Oslo District Court (Oslo tingrett) as legal venue.
The Schedule
Commitments/rights and obligations to be transferred
I    Existing Lender:    [ ]        
II    New Lender:        [ ]    
III    Specify which Facility: [ ]
III    Total Commitments of Existing Lender:    USD [ ]        
IV    Aggregate amount transferred:        USD [ ]        
V    Total Commitments of New Lender:    USD [ ]        
VI    Transfer Date:    [ ]
Administrative Details / Payment Instructions of New Lender
Notices to New Lender:
[ ]
[ ]
Att:        [ ]
Telefax no:     + [ ]
[Insert relevant office address, telefax number and attention details for notices and payments to the New Lender.]
Account details of New Lender: [Insert relevant account details of the New Lender.]
Existing Lender:                New Lender:
[•]                        [•]
By: __________________________________    By: ________________________________
Name:                        Name:
Title:                        Title:
This Transfer Certificate is accepted and agreed by the Agent and the Transfer Date is confirmed as [].
Agent:                        
ING Bank N.V.
By: __________________________________
Name:                        

5179885/1        18 (156)





5179885/1        19 (156)



SCHEDULE 9     
REPAYMENTS
#
Date
West Vela
 
 
West Tellus
 
 
 
 
Total
 
 
Installment Rig 2
O/S Rig 2
 
Installment Rig 3
O/S Rig 3
 
 
Installment
966,666,667
 
 
 
483,333,333
 
 
483,333,333
 
 
 
 
1
31-May-13
-
483,333,333
 
-
483,333,333
 
 
-
966,666,667
2
31-Aug-13
10,069,444
473,263,889
 
-
483,333,333
 
 
10,069,444
956,597,223
3
30-Nov-13
10,069,444
463,194,445
 
10,069,444
473,263,889
 
 
20,138,888
936,458,335
4
28-Feb-14
10,069,444
453,125,001
 
10,069,444
463,194,445
 
 
20,138,888
916,319,447
5
31-May-14
10,069,444
443,055,557
 
10,069,444
453,125,001
 
 
20,138,888
896,180,559
6
31-Aug-14
10,069,444
432,986,113
 
10,069,444
443,055,557
 
 
20,138,888
876,041,671
7
30-Nov-14
10,069,444
422,916,669
 
10,069,444
432,986,113
 
 
20,138,888
855,902,783
8
28-Feb-15
10,069,444
412,847,225
 
10,069,444
422,916,669
 
 
20,138,888
835,763,895
9
31-May-15
10,069,444
402,777,781
 
10,069,444
412,847,225
 
 
20,138,888
815,625,007
10
31-Aug-15
10,069,444
392,708,337
 
10,069,444
402,777,781
 
 
20,138,888
795,486,119
11
30-Nov-15
10,069,444
382,638,893
 
10,069,444
392,708,337
 
 
20,138,888
775,347,231
12
29-Feb-16
10,069,444
372,569,449
 
10,069,444
382,638,893
 
 
20,138,888
755,208,343
13
31-May-16
10,069,444
362,500,005
 
10,069,444
372,569,449
 
 
20,138,888
735,069,455
14
31-Aug-16
10,069,444
352,430,561
 
10,069,444
362,500,005
 
 
20,138,888
714,930,567
15
30-Nov-16
10,069,444
342,361,117
 
10,069,444
352,430,561
 
 
20,138,888
694,791,679
16
28-Feb-17
10,069,444
332,291,673
 
10,069,444
342,361,117
 
 
20,138,888
674,652,791
17
31-May-17
10,069,444
322,222,229
 
10,069,444
332,291,673
 
 
20,138,888
654,513,903
18
31-Aug-17
10,069,444
312,152,785
 
10,069,444
322,222,229
 
 
20,138,888
634,375,015
19
30-Nov-17
10,069,444
302,083,341
 
10,069,444
312,152,785
 
 
20,138,888
614,236,127
20
28-Feb-18
50,951,393
251,131,949
 
52,361,115
259,791,671
 
 
103,312,507
510,923,620
21
31-May-18
8,659,722
242,472,227
 
8,659,722
251,131,949
 
 
17,319,444
493,604,176

5179885/1        20 (156)



22
31-Aug-18
8,659,722
233,812,505
 
8,659,722
242,472,227
 
 
17,319,444
476,284,732
23
30-Nov-18
8,659,722
225,152,783
 
8,659,722
233,812,505
 
 
17,319,444
458,965,288
24
28-Feb-19
8,659,722
216,493,061
 
8,659,722
225,152,783
 
 
17,319,444
441,645,844
25
31-May-19
8,659,722
207,833,339
 
8,659,722
216,493,061
 
 
17,319,444
424,326,400
26
31-Aug-19
8,659,722
199,173,617
 
8,659,722
207,833,339
 
 
17,319,444
407,006,956
27
30-Nov-19
8,659,722
190,513,895
 
8,659,722
199,173,617
 
 
17,319,444
389,687,512
28
29-Feb-20
8,659,722
181,854,173
 
8,659,722
190,513,895
 
 
17,319,444
372,368,068
29
31-May-20
8,659,722
173,194,451
 
8,659,722
181,854,173
 
 
17,319,444
355,048,624
30
31-Aug-20
8,659,722
164,534,729
 
8,659,722
173,194,451
 
 
17,319,444
337,729,180
31
30-Nov-20
8,659,722
155,875,007
 
8,659,722
164,534,729
 
 
17,319,444
320,409,736
32
28-Feb-21
8,659,722
147,215,285
 
8,659,722
155,875,007
 
 
17,319,444
303,090,292
33
31-May-21
8,659,722
138,555,563
 
8,659,722
147,215,285
 
 
17,319,444
285,770,848
34
31-Aug-21
8,659,722
129,895,841
 
8,659,722
138,555,563
 
 
17,319,444
268,451,404
35
30-Nov-21
8,659,722
121,236,119
 
8,659,722
129,895,841
 
 
17,319,444
251,131,960
36
28-Feb-22
8,659,722
112,576,397
 
8,659,722
121,236,119
 
 
17,319,444
233,812,516
37
31-May-22
8,659,722
103,916,675
 
8,659,722
112,576,397
 
 
17,319,444
216,493,072
38
31-Aug-22
8,659,722
95,256,953
 
8,659,722
103,916,675
 
 
17,319,444
199,173,628
39
30-Nov-22
8,659,722
86,597,231
 
8,659,722
95,256,953
 
 
17,319,444
181,854,184
40
28-Feb-23
8,659,722
77,937,509
 
8,659,722
86,597,231
 
 
17,319,444
164,534,740
41
31-May-23
8,659,722
69,277,787
 
8,659,722
77,937,509
 
 
17,319,444
147,215,296
42
31-Aug-23
8,659,722
60,618,065
 
8,659,722
69,277,787
 
 
17,319,444
129,895,852
43
30-Nov-23
8,659,722
51,958,343
 
8,659,722
60,618,065
 
 
17,319,444
112,576,408
44
29-Feb-24
8,659,722
43,298,621
 
8,659,722
51,958,343
 
 
17,319,444
95,256,964
45
31-May-24
8,659,722
34,638,899
 
8,659,722
43,298,621
 
 
17,319,444
77,937,520
46
31-Aug-24
8,659,722
25,979,177
 
8,659,722
34,638,899
 
 
17,319,444
60,618,076
47
30-Nov-24
8,659,722
17,319,455
 
8,659,722
25,979,177
 
 
17,319,444
43,298,632
48
28-Feb-25
8,659,722
8,659,733
 
8,659,722
17,319,455
 
 
17,319,444
25,979,188
49
31-May-25
8,659,733
-
 
8,659,722
8,659,733
 
 
17,319,455
8,659,733
50
31-Aug-25
-
-
 
8,659,733
-
 
 
8,659,733
-

5179885/1        21 (156)




#
West Vela Tranches
Installment
GIEK Lender Facility
191,666,667
Installment
Kexim Facility
112,000,000
Installment
K-Sure Facility
112,000,000
Installment
Commercial Facility
67,666,667
Installment
Total
483,333,333
1
31-Aug-13
3,993,056
187,673,611
2,333,333
109,666,667
2,333,333
109,666,667
1,409,722
66,256,945
10,069,444
473,263,889
2
30-Nov-13
3,993,056
183,680,555
2,333,333
107,333,334
2,333,333
107,333,334
1,409,722
64,847,223
10,069,444
463,194,445
3
28-Feb-14
3,993,056
179,687,499
2,333,333
105,000,001
2,333,333
105,000,001
1,409,722
63,437,501
10,069,444
453,125,001
4
31-May-14
3,993,056
175,694,443
2,333,333
102,666,668
2,333,333
102,666,668
1,409,722
62,027,779
10,069,444
443,055,557
5
31-Aug-14
3,993,056
171,701,387
2,333,333
100,333,335
2,333,333
100,333,335
1,409,722
60,618,057
10,069,444
432,986,113
6
30-Nov-14
3,993,056
167,708,331
2,333,333
98,000,002
2,333,333
98,000,002
1,409,722
59,208,335
10,069,444
422,916,669
7
28-Feb-15
3,993,056
163,715,275
2,333,333
95,666,669
2,333,333
95,666,669
1,409,722
57,798,613
10,069,444
412,847,225
8
31-May-15
3,993,056
159,722,219
2,333,333
93,333,336
2,333,333
93,333,336
1,409,722
56,388,891
10,069,444
402,777,781
9
31-Aug-15
3,993,056
155,729,163
2,333,333
91,000,003
2,333,333
91,000,003
1,409,722
54,979,169
10,069,444
392,708,337
10
30-Nov-15
3,993,056
151,736,107
2,333,333
88,666,670
2,333,333
88,666,670
1,409,722
53,569,447
10,069,444
382,638,893
11
29-Feb-16
3,993,056
147,743,051
2,333,333
86,333,337
2,333,333
86,333,337
1,409,722
52,159,725
10,069,444
372,569,449
12
31-May-16
3,993,056
143,749,995
2,333,333
84,000,004
2,333,333
84,000,004
1,409,722
50,750,003
10,069,444
362,500,005
13
31-Aug-16
3,993,056
139,756,939
2,333,333
81,666,671
2,333,333
81,666,671
1,409,722
49,340,281
10,069,444
352,430,561
14
30-Nov-16
3,993,056
135,763,883
2,333,333
79,333,338
2,333,333
79,333,338
1,409,722
47,930,559
10,069,444
342,361,117
15
28-Feb-17
3,993,056
131,770,827
2,333,333
77,000,005
2,333,333
77,000,005
1,409,722
46,520,837
10,069,444
332,291,673
16
31-May-17
3,993,056
127,777,771
2,333,333
74,666,672
2,333,333
74,666,672
1,409,722
45,111,115
10,069,444
322,222,229
17
31-Aug-17
3,993,056
123,784,715
2,333,333
72,333,339
2,333,333
72,333,339
1,409,722
43,701,393
10,069,444
312,152,785
18
30-Nov-17
3,993,056
119,791,659
2,333,333
70,000,006
2,333,333
70,000,006
1,409,722
42,291,671
10,069,444
302,083,341
19
28-Feb-18
3,993,056
115,798,603
2,333,333
67,666,673
2,333,333
67,666,673
42,291,671
0
50,951,393
251,131,949
20
31-May-18
3,993,056
111,805,547
2,333,333
65,333,340
2,333,333
65,333,340
 
 
8,659,722
242,472,227
21
31-Aug-18
3,993,056
107,812,491
2,333,333
63,000,007
2,333,333
63,000,007
 
 
8,659,722
233,812,505
22
30-Nov-18
3,993,056
103,819,435
2,333,333
60,666,674
2,333,333
60,666,674
 
 
8,659,722
225,152,783
23
28-Feb-19
3,993,056
99,826,379
2,333,333
58,333,341
2,333,333
58,333,341
 
 
8,659,722
216,493,061
24
31-May-19
3,993,056
95,833,323
2,333,333
56,000,008
2,333,333
56,000,008
 
 
8,659,722
207,833,339
25
31-Aug-19
3,993,056
91,840,267
2,333,333
53,666,675
2,333,333
53,666,675
 
 
8,659,722
199,173,617
26
30-Nov-19
3,993,056
87,847,211
2,333,333
51,333,342
2,333,333
51,333,342
 
 
8,659,722
190,513,895
27
29-Feb-20
3,993,056
83,854,155
2,333,333
49,000,009
2,333,333
49,000,009
 
 
8,659,722
181,854,173
28
31-May-20
3,993,056
79,861,099
2,333,333
46,666,676
2,333,333
46,666,676
 
 
8,659,722
173,194,451
29
31-Aug-20
3,993,056
75,868,043
2,333,333
44,333,343
2,333,333
44,333,343
 
 
8,659,722
164,534,729
30
30-Nov-20
3,993,056
71,874,987
2,333,333
42,000,010
2,333,333
42,000,010
 
 
8,659,722
155,875,007
31
28-Feb-21
3,993,056
67,881,931
2,333,333
39,666,677
2,333,333
39,666,677
 
 
8,659,722
147,215,285

5179885/1        22 (156)



32
31-May-21
3,993,056
63,888,875
2,333,333
37,333,344
2,333,333
37,333,344
 
 
8,659,722
138,555,563
33
31-Aug-21
3,993,056
59,895,819
2,333,333
35,000,011
2,333,333
35,000,011
 
 
8,659,722
129,895,841
34
30-Nov-21
3,993,056
55,902,763
2,333,333
32,666,678
2,333,333
32,666,678
 
 
8,659,722
121,236,119
35
28-Feb-22
3,993,056
51,909,707
2,333,333
30,333,345
2,333,333
30,333,345
 
 
8,659,722
112,576,397
36
31-May-22
3,993,056
47,916,651
2,333,333
28,000,012
2,333,333
28,000,012
 
 
8,659,722
103,916,675
37
31-Aug-22
3,993,056
43,923,595
2,333,333
25,666,679
2,333,333
25,666,679
 
 
8,659,722
95,256,953
38
30-Nov-22
3,993,056
39,930,539
2,333,333
23,333,346
2,333,333
23,333,346
 
 
8,659,722
86,597,231
39
28-Feb-23
3,993,056
35,937,483
2,333,333
21,000,013
2,333,333
21,000,013
 
 
8,659,722
77,937,509
40
31-May-23
3,993,056
31,944,427
2,333,333
18,666,680
2,333,333
18,666,680
 
 
8,659,722
69,277,787
41
31-Aug-23
3,993,056
27,951,371
2,333,333
16,333,347
2,333,333
16,333,347
 
 
8,659,722
60,618,065
42
30-Nov-23
3,993,056
23,958,315
2,333,333
14,000,014
2,333,333
14,000,014
 
 
8,659,722
51,958,343
43
29-Feb-24
3,993,056
19,965,259
2,333,333
11,666,681
2,333,333
11,666,681
 
 
8,659,722
43,298,621
44
31-May-24
3,993,056
15,972,203
2,333,333
9,333,348
2,333,333
9,333,348
 
 
8,659,722
34,638,899
45
31-Aug-24
3,993,056
11,979,147
2,333,333
7,000,015
2,333,333
7,000,015
 
 
8,659,722
25,979,177
46
30-Nov-24
3,993,056
7,986,091
2,333,333
4,666,682
2,333,333
4,666,682
 
 
8,659,722
17,319,455
47
28-Feb-25
3,993,056
3,993,035
2,333,333
2,333,349
2,333,333
2,333,349
 
 
8,659,722
8,659,733
48
31-May-25
3,993,035
-
2,333,349
-
2,333,349
-
 
 
8,659,733
-

5179885/1        23 (156)




#
West Tellus Tranches
Installment
GIEK Lender Facility
191,666,667
Installment
Kexim Facility
112,000,000
Installment
K-Sure Facility
112,000,000
Installment
Commercial Facility
67,666,667
Installment
Total
483,333,333
1
30-Nov-13
3,993,056
187,673,611
2,333,333
109,666,667
2,333,333
109,666,667
1,409,722
66,256,945
10,069,444
473,263,889
2
28-Feb-14
3,993,056
183,680,555
2,333,333
107,333,334
2,333,333
107,333,334
1,409,722
64,847,223
10,069,444
463,194,445
3
31-May-14
3,993,056
179,687,499
2,333,333
105,000,001
2,333,333
105,000,001
1,409,722
63,437,501
10,069,444
453,125,001
4
31-Aug-14
3,993,056
175,694,443
2,333,333
102,666,668
2,333,333
102,666,668
1,409,722
62,027,779
10,069,444
443,055,557
5
30-Nov-14
3,993,056
171,701,387
2,333,333
100,333,335
2,333,333
100,333,335
1,409,722
60,618,057
10,069,444
432,986,113
6
28-Feb-15
3,993,056
167,708,331
2,333,333
98,000,002
2,333,333
98,000,002
1,409,722
59,208,335
10,069,444
422,916,669
7
31-May-15
3,993,056
163,715,275
2,333,333
95,666,669
2,333,333
95,666,669
1,409,722
57,798,613
10,069,444
412,847,225
8
31-Aug-15
3,993,056
159,722,219
2,333,333
93,333,336
2,333,333
93,333,336
1,409,722
56,388,891
10,069,444
402,777,781
9
30-Nov-15
3,993,056
155,729,163
2,333,333
91,000,003
2,333,333
91,000,003
1,409,722
54,979,169
10,069,444
392,708,337
10
29-Feb-16
3,993,056
151,736,107
2,333,333
88,666,670
2,333,333
88,666,670
1,409,722
53,569,447
10,069,444
382,638,893
11
31-May-16
3,993,056
147,743,051
2,333,333
86,333,337
2,333,333
86,333,337
1,409,722
52,159,725
10,069,444
372,569,449
12
31-Aug-16
3,993,056
143,749,995
2,333,333
84,000,004
2,333,333
84,000,004
1,409,722
50,750,003
10,069,444
362,500,005
13
30-Nov-16
3,993,056
139,756,939
2,333,333
81,666,671
2,333,333
81,666,671
1,409,722
49,340,281
10,069,444
352,430,561
14
28-Feb-17
3,993,056
135,763,883
2,333,333
79,333,338
2,333,333
79,333,338
1,409,722
47,930,559
10,069,444
342,361,117
15
31-May-17
3,993,056
131,770,827
2,333,333
77,000,005
2,333,333
77,000,005
1,409,722
46,520,837
10,069,444
332,291,673
16
31-Aug-17
3,993,056
127,777,771
2,333,333
74,666,672
2,333,333
74,666,672
1,409,722
45,111,115
10,069,444
322,222,229
17
30-Nov-17
3,993,056
123,784,715
2,333,333
72,333,339
2,333,333
72,333,339
1,409,722
43,701,393
10,069,444
312,152,785
18
28-Feb-18
3,993,056
119,791,659
2,333,333
70,000,006
2,333,333
70,000,006
43,701,393
-
52,361,115
259,791,671
19
31-May-18
3,993,056
115,798,603
2,333,333
67,666,673
2,333,333
67,666,673
 
 
8,659,722
251,131,949
20
31-Aug-18
3,993,056
111,805,547
2,333,333
65,333,340
2,333,333
65,333,340
 
 
8,659,722
242,472,227
21
30-Nov-18
3,993,056
107,812,491
2,333,333
63,000,007
2,333,333
63,000,007
 
 
8,659,722
233,812,505
22
28-Feb-19
3,993,056
103,819,435
2,333,333
60,666,674
2,333,333
60,666,674
 
 
8,659,722
225,152,783
23
31-May-19
3,993,056
99,826,379
2,333,333
58,333,341
2,333,333
58,333,341
 
 
8,659,722
216,493,061
24
31-Aug-19
3,993,056
95,833,323
2,333,333
56,000,008
2,333,333
56,000,008
 
 
8,659,722
207,833,339
25
30-Nov-19
3,993,056
91,840,267
2,333,333
53,666,675
2,333,333
53,666,675
 
 
8,659,722
199,173,617
26
29-Feb-20
3,993,056
87,847,211
2,333,333
51,333,342
2,333,333
51,333,342
 
 
8,659,722
190,513,895
27
31-May-20
3,993,056
83,854,155
2,333,333
49,000,009
2,333,333
49,000,009
 
 
8,659,722
181,854,173
28
31-Aug-20
3,993,056
79,861,099
2,333,333
46,666,676
2,333,333
46,666,676
 
 
8,659,722
173,194,451
29
30-Nov-20
3,993,056
75,868,043
2,333,333
44,333,343
2,333,333
44,333,343
 
 
8,659,722
164,534,729
30
28-Feb-21
3,993,056
71,874,987
2,333,333
42,000,010
2,333,333
42,000,010
 
 
8,659,722
155,875,007
31
31-May-21
3,993,056
67,881,931
2,333,333
39,666,677
2,333,333
39,666,677
 
 
8,659,722
147,215,285
32
31-Aug-21
3,993,056
63,888,875
2,333,333
37,333,344
2,333,333
37,333,344
 
 
8,659,722
138,555,563

5179885/1        24 (156)



33
30-Nov-21
3,993,056
59,895,819
2,333,333
35,000,011
2,333,333
35,000,011
 
 
8,659,722
129,895,841
34
28-Feb-22
3,993,056
55,902,763
2,333,333
32,666,678
2,333,333
32,666,678
 
 
8,659,722
121,236,119
35
31-May-22
3,993,056
51,909,707
2,333,333
30,333,345
2,333,333
30,333,345
 
 
8,659,722
112,576,397
36
31-Aug-22
3,993,056
47,916,651
2,333,333
28,000,012
2,333,333
28,000,012
 
 
8,659,722
103,916,675
37
30-Nov-22
3,993,056
43,923,595
2,333,333
25,666,679
2,333,333
25,666,679
 
 
8,659,722
95,256,953
38
28-Feb-23
3,993,056
39,930,539
2,333,333
23,333,346
2,333,333
23,333,346
 
 
8,659,722
86,597,231
39
31-May-23
3,993,056
35,937,483
2,333,333
21,000,013
2,333,333
21,000,013
 
 
8,659,722
77,937,509
40
31-Aug-23
3,993,056
31,944,427
2,333,333
18,666,680
2,333,333
18,666,680
 
 
8,659,722
69,277,787
41
30-Nov-23
3,993,056
27,951,371
2,333,333
16,333,347
2,333,333
16,333,347
 
 
8,659,722
60,618,065
42
29-Feb-24
3,993,056
23,958,315
2,333,333
14,000,014
2,333,333
14,000,014
 
 
8,659,722
51,958,343
43
31-May-24
3,993,056
19,965,259
2,333,333
11,666,681
2,333,333
11,666,681
 
 
8,659,722
43,298,621
44
31-Aug-24
3,993,056
15,972,203
2,333,333
9,333,348
2,333,333
9,333,348
 
 
8,659,722
34,638,899
45
30-Nov-24
3,993,056
11,979,147
2,333,333
7,000,015
2,333,333
7,000,015
 
 
8,659,722
25,979,177
46
28-Feb-25
3,993,056
7,986,091
2,333,333
4,666,682
2,333,333
4,666,682
 
 
8,659,722
17,319,455
47
31-May-25
3,993,056
3,993,035
2,333,333
2,333,349
2,333,333
2,333,349
 
 
8,659,722
8,659,733
48
21-Aug-25
3,993,035
-
2,333,349
-
2,333,349
-
 
 
8,659,733
-



SCHEDULE 10     
CORPORATE STRUCTURE

        
West Vela
Swiss Branch
West Tellus
Common
IDRs
51%
49%
Common Sub.
Public
Seadrill Capricorn Holdings LLC
(MI/UK)

Seadrill Vela
Hungary Kft
(Hungary)
Seadrill Gulf Operations Vela LLC (Delaware)
Seadrill Partners LLC («MLP»)
(MI/UK)
Seadrill Tellus Ltd
Seadrill Member LLC (Marshall Islands)
Seadrill Limited (Bermuda)


5179885/1        25 (156)






#5179858/1    26 (157)


SCHEDULE 11     
MANDATORY COST FORMULA
2.
The Mandatory Cost is an addition to the interest rate to compensate Lenders for the cost of compliance with (a) the requirements of the Bank of England and/or the relevant Financial Services Authority (or, in either case, any other authority which replaces all or any of its functions) or (b) the requirements of the European Central Bank
3.
On the first day of each Interest Period (or as soon as possible thereafter) the Agent shall calculate, as a percentage rate, a rate (the Additional Cost Rate) for each Lender, in accordance with the paragraphs set out below. The Mandatory Cost will be calculated by the Agent as a weighted average of the Lenders’ Additional Cost Rates (weighted in proportion to the percentage participation of each Lender in the relevant Loan) and will be expressed as a percentage rate per annum.
4.
The Additional Cost Rate for any Lender lending from a facility office in the European Economic Area will be the percentage notified by that Lender to the Agent. This percentage will be certified by that Lender in its notice to the Agent to be its reasonable determination of the cost (expressed as a percentage of that Lender’s participation in all Loans made from that facility office) of complying with the relevant minimum reserve requirements in respect of Loans made from that facility office.
5.
The Additional Cost Rate for any Lender lending from a facility office in the United Kingdom will be calculated by the Agent as follows:
E   x 0.01  
300
Per cent. Per annum

Where:
E    is designed to compensate Lenders for amounts payable under the Fees Rules and is calculated by the Agent as being the average of the most recent rates of charge supplied by the Reference Banks to the Agent pursuant to paragraph 7 below and expressed in pounds per £1,000,000.
6.
For the purposes of this Schedule:
Eligible Liabilities and Special Deposits have the meanings given to them from time to time under or pursuant to the Bank of England Act 1998 or (as may be appropriate) by the Bank of England;
Fees Rules means the rules on periodic fees contained in the FSA Supervision Manual or such other law or regulation as may be in force from time to time in respect of the payment of fees for the acceptance of deposits;
Fee Tariff s means the fee tariffs specified in the Fees Rules under the activity group A.1 Deposit acceptors (ignoring any minimum fee or zero rated fee required pursuant to the Fees Rules but taking into account any applicable discount rate); and
Tariff Base has the meaning given to it in, and will be calculated in accordance with, the Fees Rules.
7.
If requested by the Agent, each Reference Bank shall, as soon as practicable after publication by the Financial Services Authority, supply to the Agent, the rate of charge payable by that Reference Bank to the Financial Services Authority pursuant to the Fees Rules in respect of the relevant financial year of

#5179858/1    27 (157)


the Financial Services Authority (calculated for this purpose by that Reference Bank as being the average of the Fee Tariffs applicable to that Reference Bank for that financial year) and expressed in pounds per £1,000,000 of the Tariff Base of that Reference Bank.
8.
Each Lender shall supply any information required by the Agent for the purpose of calculating its Additional Cost Rate. In particular, but without limitation, each Lender shall supply the following information on or prior to the date on which it becomes a Lender:
(a)
the jurisdiction of its facility office; and
(b)
any other information that the Agent may reasonably require for such purpose.
Each Lender shall promptly notify the Agent of any change to the information provided by it pursuant to this paragraph.
9.
The rates of charge of each Reference Bank for the purpose of E above shall be determined by the Agent based upon the information supplied to it pursuant to paragraphs 6 and 7 above and on the assumption that, unless a Lender notifies the Agent to the contrary, each Lender’s obligations in relation to cash ratio deposits and Special Deposits are the same as those of a typical bank from its jurisdiction of incorporation with a facility office in the same jurisdiction as its facility office.
10.
The Agent shall have no liability to any person if such determination results in an Additional Cost Rate which over or under compensates any Lender and shall be entitled to assume that the information provided by any Lender or Reference Bank pursuant to paragraphs 3, 6 and 7 above is true and correct in all respects.
11.
The Agent shall distribute the additional amounts received as a result of the Mandatory Cost to the Lenders on the basis of the Additional Cost Rate for each Lender based on the information provided by each Lender and each Reference Bank pursuant to paragraphs 3, 6 and 7 above.
12.
Any determination by the Agent pursuant to this Schedule in relation to a formula, the Mandatory Cost, an Additional Cost Rate or any amount payable to a Lender shall, in the absence of manifest error, be conclusive and binding on all parties.
13.
The Agent may from time to time, after consultation with the Borrower and the Lenders, determine and notify to all parties any amendments which are required to be made to this Schedule in order to comply with any change in law, regulation or any requirements from time to time imposed by the Bank of England, the Financial Services Authority or the European Central Bank (or, in any case, any other authority which replaces all or any of its functions) and any such determination shall, in the absence of manifest error, be conclusive and binding on all Parties.

#5179858/1    28 (157)


SCHEDULE 12     
LIST OF NORWEGIAN SUPPLIERS AND CONTRACTS
West Vela
Equipment
Supplier Name
Contract Value (Million)
Contract Value
(USD Million)
Contract Signing Date
DEP
NOV
 
USD 217.6
12-Nov-10
Fiber Optic Cable
Draka Cable
NOK 0.95
USD 0.17
04-Dec-11
General service air compressor
TAMROTOR
EUR 0.17
USD 0.24
04-Jan-11
IAS/DPS
Kongsberg
NOK 29.50
USD 5.0
17-Dec-10
EPS
ABB
EUR 8.5
USD 11.3
17-Jan-11
Life boat/ Rescue boat / Davits
Norsafe A.S
NOK 7.99
USD 1.4
18-Mar-11
Helicopter Refueling System
Helifuel A.S
NOK 1.80
USD 0.3
25-Apr-11

West Tellus
Equipment
Supplier Name
Contract Value (Million)
Contract Value
(USD Million)
Contract Signing Date
DEP
NOV
 
USD 225.4
28-Apr-11
Fiber Optic Cable
Draka Cable
NOK 0.95
USD 0.17
 
General service air compressor
TAMROTOR
EUR 0.17
USD 0.25
13-May-11
IAS/DPS
Kongsberg
NOK 29.70
USD 5.6
17-Nov-11
EPS
ABB
EUR 8.6
USD 12.5
03-Jun-11
Life boat/ Rescue boat / Davits
Norsafe A.S
NOK 7.99
USD 1.5
25-May-11
Helicopter Refueling System
Helifuel A.S
NOK 1.69
USD 0.3
25-Aug-11
    


#5179858/1    29 (157)

Exhibit 4.41

EXECUTION VERSION















ON DEMAND GUARANTEE AND INDEMNITY

between
Seadrill Partners LLC
(as Guarantor)
and
ING Bank N.V.
(as Agent)

Advokatfirmaet BAHR DA

www.bahr.no




THIS ON DEMAND GUARANTEE AND INDEMNITY is granted on 4 November 2014 by:

(1)
Seadrill Partners LLC, organisation number 962166, incorporated under the laws of the Marshall Islands (the "Guarantor"), in favour of:
(2)
ING Bank N.V., of Bijlmerplein 888, 1102 MG Amsterdam, The Netherlands, organisation number 33031431 as Agent for itself and the other Finance Parties (the "Agent").
BACKGROUND:
(A)
Seadrill Vela Hungary Kft. (the "Principal Debtor"), Seadrill Tellus Ltd., the Agent, and certain other Obligors and Finance Parties, have entered into a USD 1,450,000,000 Senior Secured Credit Facilities Agreement originally dated 20 March 2013, as amended thereafter, latest by a Second Amendment and Restatement Agreement dated November 4 2014, (the "Facility Agreement") a copy of which is attached hereto as Schedule 1;
(B)
pursuant to clause 19 (Security) of the Facility Agreement, it is a condition that the Guarantor provides this irrevocable and unconditional on demand guarantee and indemnity (Nw. selvskyldnerkausjon) in favour of the Finance Parties (the "Guarantee"); and
(C)
the Guarantor has agreed to provide the Guarantee.
THE UNDERSIGNED HEREBY AGREE AS FOLLOWS:
1.    INTERPRETATION
Capitalised terms used herein shall, save as expressly defined herein, have the same meaning as ascribed thereto in the Facility Agreement.
2.    GUARANTEE
The Guarantor irrevocably and unconditionally:
(a)
guarantees to the Agent on behalf of itself and the other Finance Parties, as for its own debt as principal obligor and not merely as surety, the punctual performance by the Principal Debtor of all the Principal Debtor's obligations to repay the tranches under the Facility Agreement which relate to the drillship "West Vela", together with any interest, fees and costs associated therewith (the "Secured Obligations");
(b)
undertakes with the Agent that whenever the Principal Debtor does not pay any amount when due under or in connection with the Secured Obligations, the Guarantor shall immediately on demand pay that amount as if it was the principal obligor; and
(c)
undertakes to indemnify the Agent immediately on demand against any cost, loss or liability suffered by the Agent or any Finance Party if any obligation guaranteed by the Guarantor is or becomes unenforceable, invalid or illegal. The amount of the cost, loss or liability shall be equal to the amount which that Agent and/or the Finance Parties would otherwise have been entitled to recover.
3.    MAXIMUM LIABILITY












#5180076/1    2 (6)



The liability of the Guarantor hereunder shall be limited to USD 497,500,000 plus interest and costs, which is the principal amount of the Tranches relating to the "West Vela" as of the date of this Guarantee with a headroom of 15%.

4.    CONTINUING SECURITY, MULTIPLE DRAWINGS
4.1     This Guarantee shall remain in full force and effect from the date hereof and until the date
when all amounts outstanding under the Tranches relating to the "West Vela" have been irrevocably satisfied.
4.2     Multiple drawings can be made under this Guarantee subject to the maximum amount
stated in Clause 3.
5.    WAIVER OF RIGHTS AND DEFENCES
5.1     The obligations of the Principal Debtor pursuant to the Facility Agreement are and will be
secured to the extent set out in the Facility Agreement. If and to the extent applicable, the provisions of (and/or principles derived from) the Norwegian Financial Contracts Act 1999 (the "FCA") § 62 to and including S 74 shall not apply to this Guarantee.
5.2    The Guarantor may not:
(a)
require that the Agent, following the occurrence of an Event of Default which is continuing under the Facility Agreement, first make demand upon or seek to enforce remedies against the Principal Debtor in respect of the amounts outstanding under the Facility Agreement before demanding payment or seeking to enforce this Guarantee;
(b)
assert that its liability under this Guarantee has been impacted because of a failure to give notice of any kind whatsoever;
(c)
exercise any rights of subrogation into the rights of the Agent under the Facility Agreement or any security issued or made pursuant to the Facility Agreement until and unless the Agent has received all amounts due or to become due to it under the Facility Agreement;
(d)
claim reimbursement from the Principal Debtor for payments made hereunder until and unless the Agent has received all amounts due or to become due to it under the Facility Agreement and the obligations of the Agent to make further amounts available under the Facility Agreement has been irrevocably terminated; and
(e)
require that additional security be provided or maintained.
5.3     The Agent is entitled to amend, supplement, release or waive any security provided for the
obligations of the Principal Debtor under the Facility Agreement or any third party relationship including (but not limited to) any rescission, waiver, amendment or modification of any term or provision thereof without the Guarantor's consent (save for any amendments to this Guarantee).
6.    RELATION TO OTHER SECURITY
6.1     The Guarantor's obligations under this Guarantee will not be affected in any way
whatsoever by the existence or non-existence of any other guarantee, indemnity, suretyship or similar instrument or by any collateral or security interest provided by a third party for the obligations of the Principal Debtor under the Facility Agreement.











115180076/1    3 (6)



7.    DEFAULT INTEREST

If the Guarantor fails to pay any amount duly demanded hereunder, default interest shall accrue on such amount from the date of the demand and up to the date of actual payment (both before or after judgment) at a rate which is equal to the statutory default interest rate determined by the Norwegian Ministry of Finance from time to time pursuant to the Act on Default Interest (Nw: forsinkelsesrenteloven).
8.    LIMITED RECOURSE AFTER PAYMENT
Following payment of an amount demanded hereunder, the Guarantor waives any right to assert that all or parts of such amount should be repaid to the Guarantor because of:
(a)
the Principal Debtor's winding up or dissolution or its administration, provisional liquidation or any administration having a similar effect;
(b)
any obligation of the Principal Debtor under the Facility Agreement or any transaction relating to the Facility Agreement being or becoming void, voidable or otherwise unenforceable in accordance with its terms; or
(c)
any legal limitation, disability or incapacity of or affecting the Principal Debtor.
9.    REPRESENTATIONS AND WARRANTIES
The Guarantor hereby represents and warrants to the Agent that:
(a)
it is a limited liability company, duly incorporated and validly existing and registered under the laws of the Marshall Islands;
(b)
it possesses the capacity to sue or be sued in its own name and is not immune from legal proceedings being initiated against it;
(c)
it has the corporate power and authority to execute and deliver this Guarantee and to carry out its terms and provisions, and that all corporate or other action required to authorise the execution and delivery of the same by it and the performance by it of its obligations hereunder has been duly taken;
(d)
this Guarantee constitutes the valid, binding and enforceable obligations of the Guarantor;
(e)
the claims of the Agent against the Guarantor under this Guarantee rank at least part passu with the claims of all of the Guarantor's other unsubordinated unsecured creditors save those whose claims are preferred by bankruptcy, insolvency, liquidation or other similar laws of general application;
(f)
any and all amounts payable by the Guarantor under this Guarantee may be made free and clear of and without deduction for or on account of any taxes; and
(g)
no stamp or registration duty or similar taxes or charges are payable in Norway or elsewhere in respect of this Guarantee or would be payable upon enforcement of this Guarantee, apart from minor court fees.














1/5180076/1    4 16)



10.    COVENANTS

The Guarantor undertakes for the benefit of the Agent that, unless the Agent has given its prior written consent to the contrary, it will:
(a)
promptly inform the Agent about any event which may adversely affect its ability to fully perform its obligations under this Guarantee; and
(b)
ensure that its obligations to the Agent will rank at least pari passu with all its other unsecured and unsubordinated obligations.
11.    NOTICES
Any notice or other communication hereunder shall be made in accordance with clause 32 (Notices) of the Facility Agreement. The Agent may communicate with the Guarantor through the Principal Debtor.
12.    ASSIGNMENT

The Agent shall be entitled to assign this Guarantee without the consent of the Guarantor.     13.    GOVERNING LAW AND JURISDICTION
(a)
This Guarantee shall be governed by and construed in accordance with Norwegian law.
(b)
The Guarantor hereby irrevocably submits to the jurisdiction of the Norwegian courts, the venue to be Oslo District Court.
(c)
The submission to the jurisdiction of the Norwegian courts shall not limit the right of the Agent to take any legal action or proceedings against the Guarantor in any court which may otherwise exercise jurisdiction over the Guarantor or any of its assets.


as Guarantor    as Agent


By: /s/ Amy Lindemann         By: /s/ Ragnhild Steigberg         
Name: Amy Lindemann        Name: Ragnhild Steigberg
Title: Attorney-in-Fact            Title: Attorney in Fact
Company: Seadrill Partners LLC    Company: ING Bank N.V.














715180076/1    5 {6)



SCHEDULE 1


FACILITY AGREEMENT
















































/15180076/1    6 (6)




Exhibit 4.42

Seadrill Management Ltd.
Building 11, 2 nd Floor
Chiswick Business Park
566 Chiswick High Road
London W4 5YS
Telephone +44 (0) 20 8811 4700


August 28, 2014



Seadrill Vencedor Ltd.
Par-la-Ville Place
14 Par-la-Ville Road
Hamilton HM08
Bermuda


Re:
Loan Agreement dated 28 September 2012 between Seadrill Limited and Seadrill Vencedor Ltd. (the “Loan Agreement”)

To the Board of Directors of Seadrill Vencedor Ltd.


We refer to the above cited Loan Agreement which relates to the senior secured credit facility agreement dated 11 June 2010 which facility is secured by the drilling unit West Vencedor (the "Bank Facility").

This letter is to inform you that Seadrill Limited, as borrower, has elected to repay in full the amounts outstanding under the Bank Facility. Pursuant to the Loan Agreement, you are not obliged to repay the Loan Agreement at this time notwithstanding payment in full of the Bank Facility by Seadrill on a voluntary basis.

Pursuant to Clause 7.3 of the Loan Agreement, on behalf of Seadrill Limited you are hereby notified and instructed to continue making payments pursuant to the terms of the Loan Agreement, in the same amounts and at the same dates as specified in the Bank Facility and the Loan Agreement, as if the Bank Facility remained in place. Such payments should be made directly to Seadrill Limited, rather than to the agent bank.

All other terms of the Loan Agreement shall remain in force

Please acknowledge receipt and agreement with the terms set forth in this notice by signing and returning a copy of this letter to us.


Sincerely,



/s/ Rune Magnus Lundetrae
Rune Magnus Lundetrae
Chief Financial Officer
Seadrill Management Ltd.

Acknowledged and Agreed:
SEADRILL VENCEDOR LTD.










By:                     
Name:                 
Title:                 
                

Cc: Mr. Graham Robjohns, CEO Seadrill Partners LLC

























































SCHEDULE 1

The Borrower (and, where relevant, the Borrower’s parent company or any intra-group charterer for the West Vencedor) shall grant the following security in favour of the Lender in respect of the West Vencedor:

(a)
a first priority perfected mortgage (including any deed of covenant);

(b)
a share charge over all the shares of the Borrower;

(c)
an assignment of earnings;

(d)
an assignment of earnings accounts;

(e)
an assignment of insurances; and

(f)
any notices, filings or similar required to perfect the above.







Exhibit 4.43


Seadrill Limited
Par-la-Ville Place
14 Par-la-Ville Road
Hamilton HM08
Bermuda


April 14 , 2015


Seadrill Vencedor Ltd.
Par-la-Ville Place
14 Par-la-Ville Road
Hamilton HM08
Bermuda

To :    The Board of Directors of Seadrill Vencedor Ltd.

Re:
Loan Agreement dated 28 September 2012 and made between Seadrill Limited (the “ Lender ”) and Seadrill Vencedor Ltd. (the “ Borrower ”) (the “ Loan Agreement ”)

We refer to a USD 1.2bn senior secured credit facility agreement dated 11 June 2010 (as amended from time to time) and made between Seadrill Limited as borrower (but Lender under the Loan Agreement), Seadrill Vencedor Ltd. as guarantor (but Borrower under the Loan Agreement) together with the other subsidiaries of Seadrill Limited listed therein as guarantors, Nordea Bank Norge ASA as agent (the “ Agent ”) and the banks and financial institutions named therein as lenders (the “ Bank Facility ”).

Pursuant to the Loan Agreement, the Borrower agreed to pay directly to the Agent the amounts of the principal outstanding under the Bank Facility that is attributable to the West Vencedor (a drilling unit owned by the Borrower), based on the aggregate market value of the drilling units secured by the Bank Facility, together with the corresponding part of any interest, fees, costs and expenses. Such pro rata share attributable to the West Vencedor is 12.3457% of the total outstanding obligations under the Bank Facility (the “ Vencedor Portion ”).

Reference is also made to a letter agreement dated 28 August 2014 and made between the Lender and the Borrower whereby the Lender notified the Borrower that it had elected to repay in full the amounts outstanding under the Bank Facility and the Borrower agreed to continue making payments of the Vencedor Portion pursuant to the Loan Agreement, in the same amounts and on the same dates as specified in the Bank Facility and the Loan Agreement, as if the Bank Facility remained in place, but such payments to be made to the Lender (Seadrill Limited) rather than to the Agent (the “ Letter Agreement ”).

The repayment of the Bank Facility by the Lender and subsequent Letter Agreement therefore created an intra-group loan from the Lender to the Borrower for the outstanding amount of the Vencedor Portion that was repaid by the Lender. Such amount is payable to the Lender on the same terms of the Bank Facility (the “ Intra-Group Loan ”).

The purpose of this letter is to inform you that the final maturity date of the Intra-Group Loan pursuant to the terms of the Bank Facility is 25 June 2015 and to request your agreement to extend the final maturity date by 3 years, thereby making the final maturity date of the Intra-Group Loan 25 June 2018 (the “ Extension ”). The Extension shall be deemed effective on the date the Borrower acknowledges this letter and accepts the terms herein (the “ Effective Date ”).

In return for the Extension, the Borrower’s obligations and liabilities under the Intra-Group Loan shall at any and all times until all amounts due to the Lender under the Intra-Group Loan have been paid and/or repaid in full, be secured by the security listed in Schedule 1 hereto (the “ Security ”). The Borrower undertakes to (and, where relevant, undertakes to procure the Borrower’s parent company or any intra-group charterer for the West Vencedor shall) ensure that the documents relevant to the Security are duly executed in favour of the Lender within one month of the Effective Date, or such later date as notified by the Lender.

All other terms of the Loan Agreement and Letter Agreement and the relevant terms of the Bank Facility shall remain in force.






Please acknowledge receipt and agreement with the terms set forth in this notice by signing and returning a copy of this letter to us.


Sincerely,



/s/ Rune Magnus Lundetrae

SEADRILL LIMITED

By: Rune Magnus Lundetrae
Title: Attorney-in-Fact




Acknowledged and Agreed on 14 April 2015:



/s/ James Clancy

SEADRILL VENCEDOR LTD.

By: James Clancy    
Title: Attorney-in-Fact
                

Cc: Mr. Graham Robjohns, CEO Seadrill Partners LLC


































SCHEDULE 1

The Borrower (and, where relevant, the Borrower’s parent company or any intra-group charterer for the West Vencedor) shall grant the following security in favour of the Lender in respect of the West Vencedor:

(a)
a first priority perfected mortgage (including any deed of covenant);

(b)
a share charge over all the shares of the Borrower;

(c)
an assignment of earnings;

(d)
an assignment of earnings accounts;

(e)
an assignment of insurances; and

(f)
any notices, filings or similar required to perfect the above.






EXHIBIT 4.7.5









ADVISORY, TECHNICAL AND ADMINISTRATIVE SERVICES AGREEMENT



between



Seadrill Americas Inc.



and



Seadrill Gulf Operations Auriga LLC





CONTENTS
Clause      Page
1.
Services and effective date    1
2.
Services    1
3.
General conditions    2
4.
Compensation    3
5.
Indemnity    3
6.
Confidentiality    4
7.
Term and termination    5
8.
Default    5
9.
Force majeure    5
10.
Notices    6
11.
Miscellaneous    6
12.
Governing law and arbitration    7






THIS ADVISORY, TECHNICAL AND ADMINISTRATIVE SERVICES AGREEMENT (the “ Agreement ”) is made on as of the Effective Date set forth below.

BETWEEN :
(1)
Seadrill Americas, Inc., a Texas corporation (the “ Contractor ”)
and
(2)
Seadrill Gulf Operations Auriga LLC , a Delaware limited liability company (the “ Company ”)
(hereinafter jointly referred to as the “ Parties ” and, individually, as a “ Party ”).
WHEREAS , the Company is a majority owned indirect subsidiary of Seadrill Partners LLC, (“ Seadrill Partners ”); and
WHEREAS , the Company wishes to engage the Contractor to provide such advisory, technical and administrative services to the Company on the terms set out herein;

NOW THEREFORE , the Parties have agreed as follows:
1.
Services and effective date
1.
The Contractor shall provide the advisory, technical and general administrative services specified in this Agreement (the “ Services ”) to the Company subject to the terms and conditions set forth in this Agreement, as may be requested by the Company from time to time.
2.
The effective date of this Agreement shall be March 21, 2014.

2.
Services
1.
The Contractor shall provide the following Services to the Company:
1.
Operations Services
(a)
The Contractor shall develop standards for the technical operation of the Company’s vessels (the “ Vessels ”) and a policy in this respect.
(b)
The Contractor shall assist in the supervision of the activities of third party contractors employed by the Company in respect of certain elements of the technical management of the Vessels and, in particular:
(i)
look for similarities between the services utilized by other vessel owning companies in the Seadrill Group and potential for improvements or savings in this respect; the “ Seadrill Group ” means Seadrill Limited or any subsidiary thereof, except the Company and its subsidiaries;
(ii)
develop and implement strategies for the long term maintenance of the Vessels;
(iii)
supervise and co‑ordinate the policies in relation to emergency events;
(iv)
promote the most economical ways of operating the Vessels without compromising the safety of any Vessel or its crew;



(v)
minimize the environmental impact of the operation of the Vessels without compromising the safety of the Vessel or its crew; and
(vi)
ensure compliance with industry-based best practice “norms.”
(c)
The Contractor shall, on a regular basis, provide audits of contractors of technical services and equipment and crewing services, such audits to include physical inspections.
(d)
The Contractor shall provide assistance in purchasing materials and supplies for the Vessels and endeavor to achieve competitive terms from adequate suppliers.
2.
Technical Supervision
The Contractor shall, throughout the term of this Agreement, provide Services in relation to the technical management of the Vessels. In particular the Contractor shall provide the following Services:
(a)
The Contractor shall follow up with regard to the requirements of classification societies and any relevant national authorities and provide assistance to the Company in ensuring that the Vessels comply with all recognized safety standards at any time.
(b)
The Contractor shall maintain good relations with Shipping Registries where the Vessels are or are intended to be registered.
(c)
The Contractor shall assist the Company in ensuring that the Vessels comply with contractual, technical and other commitments.
(d)
The Contractor shall regularly visit the Vessels and ensure that the standard of maintenance is kept at an acceptable level, that the crewing is adequate and that the operation is professional and satisfactory in every respect.
3.
Accidents-Contingency Plans
The Contractor shall assist the Company in handling all accidents involving the Vessels in the course of operations. In particular, the Contractor shall establish a crisis management procedure, shall assist the Company in the development of a local crisis management procedure, and shall provide other advice and assistance in connection with crisis response, including crisis communications assistance.
4.
General Administrative Services
The Contractor shall provide such general administrative services as may be required or specifically requested by the Company including accounting services, access to and consolidation of information in the Seadrill Group enterprise resource planning systems, and advice and assistance in the general administration and management of the business, subject to Section 7 hereof.
3.
General conditions
1.
The Contractor shall, in performing its duties hereunder, serve the Company in good faith. In providing the Services hereunder, the Contractor shall:
(a)
protect and promote the Company’s interests;
(b)
observe all applicable laws and regulations relevant to the Vessel’s and the Company’s activities; and
(c)
always act in accordance with good and professional management practice.



2.
The Contractor shall be entitled to provide Services to other companies or entities.
Such entities can either be other companies in the Seadrill Group or third party entities.
3.
All discounts, commissions and other benefits received by the Contractor and/or its employees from third parties as a consequence of the provision of Services hereunder shall be disclosed and credited to the Company.
4.
The Company shall, at any time upon request, be provided with any information from the accounts and records of the Contractor which is relevant and reasonably required for the performance of its obligations vis‑à‑vis the Company hereunder.
Such information shall be provided to such persons as shall be specifically authorized by the Company. Representatives of the Company’s auditor shall, in relation to the audit of the Company’s accounts, always be considered authorized.
5.
The Contractor shall, upon request, provide the Company with copies of all documents relevant to the Company in its possession and otherwise compile such facts and records on the basis of such documents as shall, from time to time, be requested by the Company.
4.
Compensation
1.
Each calendar quarter, the Company agrees to reimburse the Contractor for all costs and expenses reasonably incurred by the Contractor (the “ Costs and Expenses ”) in connection with the provision of the Services by the Contractor to the Company for such calendar quarter.
2.
The Company shall pay to the Contractor a management fee as set forth in Schedule I attached hereto (the “Services Fee” ), subject to Section 4.4.
3.
The Services Fee shall be payable by the Company on a quarterly basis. Within 30 days following the end of each calendar quarter, the Contractor shall prepare a statement of Costs and Expenses incurred in providing the Services, setting forth the basis for calculation in such detail as reasonably requested. The Contractor shall then deliver an invoice to the Company for such costs together with the corresponding Services Fee. The Company shall pay undisputed charges within 30 days of receipt of the Contractor’s invoice.
4.
The Company shall pay the Services Fee to the Contractor less any applicable withholding taxes.
5.
The Parties shall review the Services Fee each year as of January 1, and the Contractor shall have the right to propose reasonable adjustments to the Services Fee. In no event shall the Services Fee exceed the amounts charged by the Contractor to its affiliates wholly owned by Seadrill Limited.
5.
Indemnity
1.
The Contractor shall be under no responsibility or liability for any loss or damage, whether loss of profits or otherwise, to the Company arising out of any act or omission involving any error of judgment or any negligence on the part of the Contractor or any of its officers, employees, agents and subcontractors in connection with the performance of the Services under this Agreement, unless the acts or omissions leading to a loss or damage are caused by fraud, gross negligence or willful misconduct on the part of the Contractor, its officers, employees or agents or subcontractors.
Notwithstanding anything to the contrary, unless the acts or omissions leading to a loss or damage are caused by or due to the fraud of the Contractor or its officers, employees, agents or subcontractors, the Contractor shall not, under any circumstances whatsoever, be liable to compensate the Company for any loss or damage in excess of ten (10) times the annual Services Fee.
2.
The Company agrees to indemnify and keep the Contractor and its sub‑contractors, together with its sub‑contractors’ officers and employees, indemnified against any and all liabilities, costs, claims, demands, proceedings, charges, actions, suits or expenses of whatsoever kind or character that may



be incurred or suffered by any of them howsoever arising (other than by reason of fraud, gross negligence or willful misconduct on the part of the Contractor or any of its officers, employees, agents and subcontractors) in connection with the provision of the Services or the performance of the Services hereunder.
The Contractor shall not be required to take any legal action on behalf of the Company unless being fully indemnified (to its reasonable satisfaction) for all costs and liabilities likely to be incurred or suffered by it as a consequence thereof.
3.
The indemnities provided by the Company hereunder shall cover all reasonable costs and expenses payable or incurred by the Contractor in connection with any claims.
4.
To the extent the Contractor is entitled to claim any indemnity in respect of amounts paid or discharged by the Contractor pursuant to this Agreement, these indemnities shall take effect as an obligation of the Company to reimburse the Contractor for making such payment or effecting such discharge.
5.
The indemnification provided by this clause shall not be deemed exclusive of any other rights to which those seeking indemnification may be entitled under any statute, agreement, the organizational documents of the Company or otherwise, and shall continue after the termination of this Agreement.
6.
Confidentiality
1.
All Confidential Information developed by the Company or furnished to the Contractor or any of its employees, directors or sub‑contractors pursuant to this Agreement shall be the property of the Company, and shall be kept confidential by the Contractor, both during and after the term of this Agreement.
(a)
For the purpose of this clause, “ Confidential Information ” shall mean information relating to the business of the Company as well as all know‑how of which the Contractor becomes aware or generates in the course of or in connection with the performance of its obligations hereunder.
(b)
The provisions of this clause shall not apply to Confidential Information which:
(i)
is required to be disclosed by law or court order; or
(ii)
has become public knowledge otherwise than as a result of the conduct of the Contractor.
(c)
The Company shall be entitled to any equitable remedy available at law or equity, including specific performance, against a breach by the Contractor of this obligation.
2.
All Confidential Information developed by the Contractor furnished to the Company or any of its employees, directors or sub‑contractors pursuant to this Agreement shall be the property of the Contractor, and shall be kept confidential by the Company, both during and after the term of Agreement.
(a)
For the purpose of this clause, “Confidential Information” shall mean information relating to the business of the Contractor as well as all know‑how of which the Company becomes aware or generates in the course of or in connection with the performance of its obligations hereunder.
(b)
The provisions of this clause shall not apply to Confidential Information which:
(i)
is required to be disclosed by law or court order; or
(ii)
has become public knowledge otherwise than as a result of the conduct of the Company.
(c)
The Contractor shall be entitled to any equitable remedy available at law or equity, including specific performance, against a breach by the company of this obligation.



7.
Term and termination
1.
This Agreement shall have an initial term of five (5) years unless terminated:
(a)
by the Board of Directors of the Company upon 90 days’ written notice for any reason in its sole discretion or pursuant to Section 8.1 hereof; or
(b)
by the Contractor upon 90 days’ written notice if:
(i)
there is a Change of Control of the Company or Seadrill Partners;
(ii)
a receiver is appointed for all or substantially all of the property of the Company;
(iii)
an order is made to wind up the Company;
(iv)
a final judgment, order or decree which materially and adversely affects the ability of the Company to perform under this Agreement shall have been obtained or entered against the Company, and such judgment, order or decree shall not have been vacated, discharged or stayed; or
(v)
the Company makes a general assignment for the benefit of its creditors, files a petition in bankruptcy or for liquidation, is adjudged insolvent or bankrupt, commences any proceeding for a reorganization or arrangement of debts, dissolution or liquidation.
2.
Upon termination of this agreement, the Manager shall surrender to the Company any and all books, records, documents and other property in the possession or control of the Manager relating to this Agreement and to the business, finance, technology, trademark or affairs of the Company and its subsidiaries, and except as required by law, shall not retain any copies of the same.
8.
Default
1.
Notwithstanding Section 7.1(a), if the Contractor shall, by any act or omission, be in breach of any material obligation under this Agreement and such breach shall continue for a period of 14 days after written notice thereof has been given by the Company to the Contractor, the Company shall have the right to terminate this Agreement with immediate effect by notice to the Contractor.
The right to terminate this Agreement shall be in addition to and without prejudice to any other rights which the Company may have against the Contractor hereunder.
9.
Force majeure
Neither Party shall incur liability of any kind or nature whatsoever in relation to the other Party in the event of a failure to perform any of its obligations hereunder directly or indirectly caused by circumstances beyond the relevant Party’s reasonable control, such as war or war‑like activities, government orders, riots, civil commotion, strike, lock‑out or similar actions, an act of God, peril of the sea or any other similar cause.



10.
Notices
All correspondence or notices required or permitted to be given under this Agreement shall be given in English and sent by mail, telefax, electronic mail or delivered by hand at the following addresses:

If to the Company :
Seadrill Gulf Operations Auriga LLC
11025 Equity Drive, Suite 150
Houston
Texas 77041
Attn: President

If to the Contractor :
Seadrill Americas Inc.
11025 Equity Drive
Suite 150
Houston, Texas 77041, USA
Telefax: + 1 713.329.1179
Attn: President

or such other address or telefax number as either Party may designate to the other Party in writing.
11.
Miscellaneous
1.
The Contractor shall not be entitled to assign its rights and/or obligations under this Agreement unless the prior written consent of the Company has been obtained. The Contractor may freely subcontract or sub‑license this Agreement, so long as the Contractor remains liable for performance of the Services and its obligations under this Agreement.
2.
The relationship between the parties is that of independent contractor. Nothing in this Agreement shall be deemed to constitute a partnership or joint venture relationship between the Parties.
3.
No term of this Agreement is enforceable by a person who is not a Party to it, except by the affiliates of the Company and/or the Contractor.
4.
This Agreement shall not be amended, supplemented or modified save by written agreement signed by or on behalf of the Parties.
5.
The failure of either party to enforce any term of this Agreement shall not act as a waiver. Any waiver must be specifically stated as such in writing.



6.
If any provision herein is held to be void or unenforceable, the validity and enforceability of the remaining provisions herein shall remain unaffected and enforceable.
7.
This Agreement shall be binding upon and inure to the benefit of the affiliates of the Company and/or the Contractor.
8.
This Agreement may be executed in one or more signed counterparts, facsimile or otherwise, which shall together form one instrument.
12.
Governing law and arbitration
1.
This Agreement shall be governed by and interpreted in accordance with the law in England and Wales.
2.
Any dispute, controversy or claim arising out of or relating to this Agreement, or the breach, termination or invalidity thereof, shall be settled by arbitration in accordance with the provisions of the Norwegian Arbitration Act 2004.

[SIGNATURE PAGE FOLLOWS]






Signature Page to
Advisory, Technical and Administrative Services Agreement



For and on behalf of    For and on behalf of
SEADRILL AMERICAS INC.     SEADRILL GULF OPERATIONS AURIGA LLC
By: Seadrill Americas, Inc.,
its sole member



/s/ Rune Magnus Lundetræ      /s/ Graham Robjohns     
Signature    Signature


Rune Magnus Lundetræ      Graham Robjohns     
Name with block letters    Name with block letters
Authorized Person





SCHEDULE I

Service Fee

The Services Fee shall be equal to the percentage of the Costs and Expenses for such calendar quarter in relation to the following services as set forth in the table below:

Service Category
Markup
Safety and environment
4.85%
General management
12.00%
Operational management
12.00%
Operations excellence
12.00%
Legal and contracts
12.00%
Technical department
4.85%
Operations and support
4.85%
Operations support maintenance
4.85%
Project organization
4.85%
Supply chain management
4.85%
Warehouse
4.85%
Commercial
4.85%
HR
No markup
Office Admin
No markup
Legal entity finance
No markup
Business finance
No markup
Accounts payable
No markup
Finance function management
No markup
IT
No markup
Tax
No markup
General
No markup





EXHIBIT 4.7.6
















ADVISORY, TECHNICAL AND ADMINISTRATIVE SERVICES AGREEMENT
between
Seadrill Americas Inc.
and
Seadrill Gulf Operations Vela LLC



CONTENTS
Clause    Page
1. SERVICES AND EFFECTIVE DATE    1
2. SERVICES    1
3. GENERAL CONDITIONS     3
4. COMPENSATION    3
5. INDEMNITY    4
6. CONFIDENTIALITY     5
7. TERM AND TERMINATION    5
8. DEFAULT    6
9. FORCE MAJEURE    6
10. NOTICES    6
11. MISCELLANEOUS    7
12. GOVERNING LAW AND ARBITRATION    7



THIS ADVISORY, TECHNICAL AND ADMINISTRATIVE SERVICES AGREEMENT (the “Agreement ”) is made on as of the Effective Date set forth below.
1
BETWEEN:
(1)
Seadrill Americas, Inc., a Texas corporation (the “Contractor ”) and
(2)
Seadrill Gulf Operations Vela LLC, a Delaware limited liability company (the “ Company ”) (hereinafter jointly referred to as the “ Parties ” and, individually, as a “ Party ”).
WHEREAS, the Company wishes to engage the Contractor to provide such advisory, technical and administrative services to the Company on the terms set out herein;
NOW THEREFORE, the Parties have agreed as follows:
1.
SERVICES AND EFFECTIVE DATE
1.1     The Contractor shall provide the advisory, technical and general administrative services
specified in this Agreement (the “ Services ”) to the Company subject to the terms and conditions set forth in this Agreement, as may be requested by the Company from time to time.
1.2     The effective date of this Agreement shall be February 15, 2013.
2.
SERVICES
2.1     The Contractor shall provide the following Services to the Company:
2.1.1    Operations Services
(a)
The Contractor shall develop standards for the technical operation of the Company's vessels (the “Vessels ”) and a policy in this respect
(b)
The Contractor shall assist in the supervision of the activities of third party contractors employed by the Company in respect of certain elements of the technical management of the Vessels and, in particular:
(i)
look for similarities between the services utilized by other vessel owning companies in the Seadrill Group and potential for improvements or savings in this respect; the “ Seadrill Group ” means Seadrill Limited or any subsidiary thereof, except the Company and its subsidiaries;
(ii)
develop and implement strategies for the long term maintenance of the Vessels
(iii)
supervise and co-ordinate the policies in relation to emergency events;



(iv)
promote the most economical ways of operating the Vessels without compromising the safety of any Vessel or its crew;
(v)
minimize the environmental impact of the operation of the Vessels without compromising the safety of the Vessel or its crew: and
(vi)
ensure compliance with industry-based best practice “norms.”
(c)
The Contractor shall, on a regular basis, provide audits of contractors of technical services and equipment and crewing services, such audits to include physical inspections.
(d)
The Contractor shall provide assistance in purchasing materials and supplies for the Vessels and endeavor to achieve competitive terms from adequate suppliers.
2.1.2 Technical Supervision
The Contractor shall, throughout the term of this Agreement, provide Services in relation to the technical management of the Vessels. In particular the Contractor shall provide the following Services:
(a)
The Contractor shall follow up with regard to the requirements of classification societies and any relevant national authorities and provide assistance to the Company in ensuring that the Vessels comply with all recognized safety standards at any time.
(b)
The Contractor shall maintain good relations with Shipping Registries where the Vessels are or are intended to be registered.
(c)
The Contractor shall assist the Company in ensuring that the Vessels comply with contractual, technical and other commitments.
(d)
The Contractor shall regularly visit the Vessels and ensure that the standard of maintenance is kept at an acceptable level, that the crewing is adequate and that the operation is professional and satisfactory in every respect.
2.1.3 Accidents—Contingency Plans
The Contractor shall assist the Company in handling all accidents involving the Vessels in the course of operations. In particular, the Contractor shall establish a crisis management procedure, shall assist the Company in the development of a local crisis management procedure, and shall provide other advice and assistance in connection with crisis response, including crisis communications assistance.
2.1.4 General Administrative Services
The Contractor shall provide such general administrative services as may be required or specifically requested by the Company including accounting services, access to and consolidation of information in the Seadrill Group enterprise resource planning systems, and advice and assistance in the general administration and management of the business, subject to Section 7 hereof.



3.    GENERAL CONDITIONS

3.1     The Contractor shall, in performing its duties hereunder, serve the Company in good
faith. In providing the Services hereunder, the Contractor shall:
(a)
protect and promote the Company's interests;
(b)
observe all applicable laws and regulations relevant to the Vessel's and the Company's activities; and
(c)
always act in accordance with good and professional management practice.
3.2
The Contractor shall be entitled to provide Services to other companies or entities.
Such entities can either be other companies in the Seadrill Group or third party entities.
3.3     All discounts, commissions and other benefits received by the Contractor and/or its
employees from third parties as a consequence of the provision of Services hereunder shall be disclosed and credited to the Company.
3.4     The Company shall, at any time upon request, be provided with any information from the
accounts and records of the Contractor which is relevant and reasonably required for the performance of its obligations vis-a-vis the Company hereunder.
Such information shall be provided to such persons as shall be specifically authorized by the Company. Representatives of the Company's auditor shall, in relation to the audit of the Company's accounts, always be considered authorized.
3.5     The Contractor shall, upon request, provide the Company with copies of all documents
relevant to the Company in its possession and otherwise compile such facts and records on the basis of such documents as shall, from time to time, be requested by the Company.
4. COMPENSATION
4.1     Each calendar quarter, the Company agrees to reimburse the Contractor for all costs and
expenses reasonably incurred by the Contractor (the “ Costs and Expenses ”) in connection with the provision of the Services by the Contractor to the Company for such calendar quarter.
4.2     The Company shall pay to the Contractor a management fee as set forth in Schedule I
attached hereto (the “ Services Fee ”), subject to Section 4.4.
4.3     The Services Fee shall be payable by the Company on a quarterly basis. Within 30 days
following the end of each calendar quarter, the Contractor shall prepare a statement of Costs and Expenses incurred in providing the Services, setting forth the basis for calculation in such detail as reasonably requested. The Contractor shall then deliver an invoice to the Company for such costs together with the corresponding Services Fee. The Company shall pay undisputed charges within 30 days of receipt of the Contractor's invoice.
4.4     The Company shall pay the Services Fee to the Contractor less any applicable
withholding taxes.



4.5     The Parties shall review the Services Fee each year as of January 1, and the Contractor

shall have the right to propose reasonable adjustments to the Services Fee. In no event shall the Services Fee exceed the amounts charged by the Contractor to its affiliates wholly owned by Seadrill Limited.
5.    INDEMNITY
5.1     The Contractor shall be under no responsibility or liability for any loss or damage,
whether loss of profits or otherwise, to the Company arising out of any act or omission involving any error of judgment or any negligence on the part of the Contractor or any of its officers, employees, agents and subcontractors in connection with the performance of the Services under this Agreement, unless the acts or omissions leading to a loss or damage are caused by fraud, gross negligence or willful misconduct on the part of the Contractor, its officers, employees or agents or subcontractors.
Notwithstanding anything to the contrary. unless the acts or omissions leading to a loss or damage are caused by or due to the fraud of the Contractor or its officers, employees, agents or subcontractors, the Contractor shall not, under any circumstances whatsoever, be liable to compensate the Company for any loss or damage in excess of ten (10) times the annual Services Fee.
5.2     The Company agrees to indemnify and keep the Contractor and its sub-contractors,
together with its sub-contractors' officers and employees, indemnified against any and all liabilities, costs, claims, demands, proceedings, charges, actions, suits or expenses of whatsoever kind or character that may be incurred or suffered by any of them howsoever arising (other than by reason of fraud, gross negligence or willful misconduct on the part of the Contractor or any of its officers, employees, agents and subcontractors) in connection with the provision of the Services or the performance of the Services hereunder.
The Contractor shall not be required to take any legal action on behalf of the Company unless being fully indemnified (to its reasonable satisfaction) for all costs and liabilities likely to be incurred or suffered by it as a consequence thereof.
5.3     The indemnities provided by the Company hereunder shall cover all reasonable costs
and expenses payable or incurred by the Contractor in connection with any claims.
5.4     To the extent the Contractor is entitled to claim any indemnity in respect of amounts paid
or discharged by the Contractor pursuant to this Agreement, these indemnities shall take effect as an obligation of the Company to reimburse the Contractor for making such payment or effecting such discharge.
5.5     The indemnification provided by this clause shall not be deemed exclusive of any other
rights to which those seeking indemnification may be entitled under any statute, agreement, the organizational documents of the Company or otherwise, and shall continue after the termination of this Agreement.



6.    CONFIDENTIALITY

6.1     All Confidential Information developed by the Company or furnished to the Contractor or
any of its employees, directors or sub-contractors pursuant to this Agreement shall be the property of the Company, and shall be kept confidential by the Contractor, both during and after the term of this Agreement.
(a)    For the purpose of this clause, “ Confidential Information ” shall mean
information relating to the business of the Company as well as all know-how of which the Contractor becomes aware or generates in the course of or in connection with the performance of its obligations hereunder.
(b)    The provisions of this clause shall not apply to Confidential Information which:
(i)
is required to be disclosed by law or court order; or
(ii)
has become public knowledge otherwise than as a result of the conduct of the Contractor.
(c)    The Company shall be entitled to any equitable remedy available at law or equity,
including specific performance, against a breach by the Contractor of this obligation.
6.2     All Confidential Information developed by the Contractor furnished to the Company or any
of its employees, directors or sub-contractors pursuant to this Agreement shall be the property of the Contractor, and shall be kept confidential by the Company, both during and after the term of Agreement.
(a)    For the purpose of this clause, “Confidential Information” shall mean information
relating to the business of the Contractor as well as all know-how of which the Company becomes aware or generates in the course of or in connection with the performance of its obligations hereunder.
(b)    The provisions of this clause shall not apply to Confidential Information which:
(i)
is required to be disclosed by law or court order; or
(ii)
has become public knowledge otherwise than as a result of the conduct of the Company.
(c)    The Contractor shall be entitled to any equitable remedy available at law or
equity, including specific performance, against a breach by the company of this obligation.
7.    TERM AND TERMINATION
7.1     This Agreement shall have an initial term of five (5) years unless terminated:
(a)
by the Board of Directors of the Company upon 90 days' written notice for any reason in its sole discretion or pursuant to Section 8.1 hereof; or
(b)
by the Contractor upon 90 days' written notice if:
(i)    there is a Change of Control of the Company or Seadrill Partners;



(ii)
a receiver is appointed for all or substantially all of the property of the Company;
6
(iii)
an order is made to wind up the Company;
(iv)
a final judgment, order or decree which materially and adversely affects the ability of the Company to perform under this Agreement shall have been obtained or entered against the Company, and such judgment, order or decree shall not have been vacated, discharged or stayed; or
(v)
the Company makes a general assignment for the benefit of its creditors, files a petition in bankruptcy or for liquidation, is adjudged insolvent or bankrupt, commences any proceeding for a reorganization or arrangement of debts, dissolution or liquidation.
7.2     Upon termination of this agreement, the Manager shall surrender to the Company any
and all books, records, documents and other property in the possession or control of the Manager relating to this Agreement and to the business, finance, technology, trademark or affairs of the Company and its subsidiaries, and except as required by law, shall not retain any copies of the same.
8. DEFAULT
8.1     Notwithstanding Section 7.1(a), if the Contractor shall, by any act or omission, be in
breach of any material obligation under this Agreement and such breach shall continue for a period of 14 days after written notice thereof has been given by the Company to the Contractor, the Company shall have the right to terminate this Agreement with immediate effect by notice to the Contractor.
The right to terminate this Agreement shall be in addition to and without prejudice to any other rights which the Company may have against the Contractor hereunder.
9. FORCE MAJEURE
Neither Party shall incur liability of any kind or nature whatsoever in relation to the other Party in the event of a failure to perform any of its obligations hereunder directly or indirectly caused by circumstances beyond the relevant Party's reasonable control, such as war or war-like activities, government orders, riots, civil commotion, strike, lock-out or similar actions, an act of God, peril of the sea or any other similar cause.
10. NOTICES
All correspondence or notices required or permitted to be given under this Agreement shall be given in English and sent by mail, telefax, electronic mail or delivered by hand at the following addresses:
If to the Company:
Seadrill Gulf Operations Vela LLC 11025 Equity Drive, Suite 150 Houston, Texas 77041
Attn: President



If to the Contractor:

Seadrill Americas Inc.
11025 Equity Drive, Suite 150 Houston, Texas 77041, USA Telefax: + 1 713.329.1179 Attn: President
or such other address or telefax number as either Party may designate to the other Party in writing.
11. MISCELLANEOUS
11.1     The Contractor shall not be entitled to assign its rights and/or obligations under this
Agreement unless the prior written consent of the Company has been obtained. The Contractor may freely subcontract or sub-license this Agreement, so long as the Contractor remains liable for performance of the Services and its obligations under this Agreement.
11.2     The relationship between the parties is that of independent contractor. Nothing in this
Agreement shall be deemed to constitute a partnership or joint venture relationship between the Parties.
11.3     No term of this Agreement is enforceable by a person who is not a Party to it, except by
the affiliates of the Company and/or the Contractor.
11.4     This Agreement shall not be amended, supplemented or modified save by written
agreement signed by or on behalf of the Parties.
11.5     The failure of either party to enforce any term of this Agreement shall not act as a waiver.
Any waiver must be specifically stated as such in writing.
11.6     If any provision herein is held to be void or unenforceable, the validity and enforceability
of the remaining provisions herein shall remain unaffected and enforceable.
11.7     This Agreement shall be binding upon and inure to the benefit of the affiliates of the
Company and/or the Contractor.
11.8     This Agreement may be executed in one or more signed counterparts, facsimile or
otherwise, which shall together form one instrument.
12. GOVERNING LAW AND ARBITRATION
12.1     This Agreement shall be governed by and interpreted in accordance with the law in
England and Wales.
12.2     Any dispute, controversy or claim arising out of or relating to this Agreement, or the
breach, termination or invalidity thereof, shall be settled by arbitration in accordance with the provisions of the Norwegian Arbitration Act 2004.
[SIGNATURE PAGE FOLLOWS]




SIGNATURE PAGE TO

ADVISORY, TECHNICAL AND ADMINISTRATIVE SERVICES AGREEMENT



For and on behalf of    For and on behalf of

SEADRILL AMERICAS INC.    SEADRILL GULF OPERATIONS VELA LLC
By: Seadrill Americas, Inc.,
its sole member


/s/ Iain Hope
/s/ Iain Hope
Signature
Signature
 
 
 
 
IAIN HOPE
IAIN HOPE
Name with block letters
Name with block letters



SCHEDULE I
Service Fee
The Services Fee shall be equal to the percentage of the Costs and Expenses for such calendar quarter in relation to the following services as set forth in the table below:
Service Category
Markup
Safety and environment
4.85%
General management
12.00%
Operational management
12.00%
Operations excellence
12.00%
Legal and contracts
12.00%
Technical department
4.85%
Operations and support
4.85%
Operations support maintenance
4.85%
Project organization
4.85%
Supply chain management
4.85%
Warehouse
4.85%
Commercial
4.85%
HR
No markup
Office Admin
No markup
Legal entity finance
No markup
Business finance
No markup
Accounts payable
No markup
Finance function management
No markup
IT
No markup
Tax
No markup
General
No markup




EXHIBIT 4.8.3


SECOND AMENDMENT TO
REVOLVING LOAN AGREEMENT

dated as of March 1, 2014
among
Seadrill Operating LP,
Seadrill Capricorn Holdings LLC and
Seadrill Partners Operating LLC
as Borrowers

and
Seadrill Limited
as Lender







SECOND AMENDMENT TO REVOLVING LOAN AGREEMENT
THIS SECOND AMENDMENT TO REVOLVING LOAN AGREEMENT (this “ Second Amendment ”) is made and entered into as of March 1, 2014 by and among Seadrill Limited, a Bermuda company (the “ Lender ”), Seadrill Operating LP, a Marshall Islands limited partnership (“ Seadrill Operating ”), Seadrill Capricorn Holdings LLC, a Marshall Islands limited liability company (“ Seadrill Capricorn ”), and Seadrill Partners Operating LLC, a Marshall Islands limited liability company (“ Seadrill Partners Operating ”, and together with Seadrill Operating and Seadrill Capricorn, the “ Borrowers ,” and each, a “ Borrower ”).

W I T N E S S E T H:
WHEREAS , the Lender, Seadrill Operating, and Seadrill Capricorn entered into a Revolving Loan Agreement, dated as of October 24, 2012 (the “ Original Loan Agreement ”), pursuant to which the Lender agreed to make loans to Seadrill Operating and Seadrill Capricorn in an aggregate principal amount of up to $300,000,000 on the terms set forth therein;
WHEREAS , the Parties to the Original Loan Agreement and Seadrill Partners Operating entered into an Amended and Restated Revolving Loan Agreement, dated as of August 31, 2013 (the “ Amended Loan Agreement ”), whereby Seadrill Partners Operating was added as a Borrower under the Loan Agreement;
WHEREAS , the Lender, Seadrill Operating, Seadrill Capricorn, and Seadrill Partners Operating now wish to enter into this Second Amendment to amend the terms of the Amended Loan Agreement for the purpose of reducing the Loan Commitment to $100,000,000 and making corresponding reductions to the Borrower Sublimits under the Amended Loan Agreement.
NOW, THEREFORE , in consideration of the premises and the mutual covenants herein contained, the Borrowers and the Lender agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1      Definitions . Except as expressly set forth herein, all capitalized terms in this Second Amendment shall have the meaning assigned to such terms in the Amended Loan Agreement.
ARTICLE II
REDUCTION OF LOAN COMMITMENT AND BORROWER SUBLIMITS
Section 2.1      Reduction of Loan Commitment . The definition of “Loan Commitment” in Section 1.1 of the Amended Loan Agreement shall be replaced in its entirety by the following:
“ Loan Commitment ” shall mean the obligation of the Lender to make Loans hereunder in an aggregate principal amount at any time outstanding not exceeding $100,000,000.
Section 2.2      Reduction of Borrower Sublimits . The definition of “Borrower Sublimit” in Section 1.1 of the Amended Loan Agreement shall be replaced in its entirety by the following:
“ Borrower Sublimit ” shall mean (a) with respect to Seadrill Operating, $100,000,000, (b) with respect to Seadrill Capricorn, $100,000,000, and (c) with respect to Seadrill Partners Operating, $100,000,000.







ARTICLE III
RATIFICATION OF OTHER TERMS
Section 3.1      Ratification of Other Terms; Confirmation of Outstandings . The Parties hereby (i) reconfirm and ratify all terms and conditions of the Amended Loan Agreement except as expressly amended hereby and (ii) confirm that after giving effect to the amendments contemplated by Article II of this Second Amendment, (x) the aggregate outstanding principal amount of the Loans of all Borrowers does not exceed the Loan Commitment and (y) the aggregate outstanding principal amount of the Loans of each Borrower does not exceed the Loan Commitment of such Borrower
Section 3.2      Governing Law . This Second Amendment shall be governed by and construed in accordance with the law of the State of New York.

[ Signature Page Follows ]








IN WITNESS WHEREOF , the parties hereto have caused this Agreement to be duly executed as of the day and year first above written.
 
SEADRILL OPERATING LP,
as Borrower


 
By:
/s/ Graham Robjohns
Name: Graham Robjohns
Title: Authorized Person
 





 
SEADRILL CAPRICORN HOLDINGS LLC,
as Borrower


 
By:
/s/ Graham Robjohns
Name: Graham Robjohns
Title: Authorized Person
 
 



 
SEADRILL PARTNERS OPERATING LLC,
as Borrower


 
By:
/s/ Graham Robjohns
Name: Graham Robjohns
Title: Authorized Person
 
 



 
SEADRILL LIMITED
as Lender


 
By:
/s/ Rune Magnus Lundetræ
Name: Rune Magnus Lundetræ
Title: Authorized Person









EXHIBIT 8.1
Subsidiaries of the Company
The following table lists the Company’s significant subsidiaries and their purpose that are included in the Consolidated and Combined Carve-out Financial Statements as of December 31, 2014 .
 
Name of the Company
Jurisdiction of 
Incorporation
Principal Activities
Seabras Rig Holdco Ltd
Hungary
Rig owner
Seadrill Auriga Hungary Kft
Hungary
Rig owner
Seadrill Canada Ltd
Canada
Operating company
Seadrill Capricorn Holdings LLC
Marshall Islands
Holding company
Seadrill China Operations Ltd
Luxembourg
Rig owner
Seadrill Deepwater Drillship Ltd
Cayman Islands
Rig owner
Seadrill Ghana Operations Ltd
Bermuda
Operating company
Seadrill Gulf Operations Auriga LLC
U.S.A.
Operating company
Seadrill Gulf Operations Sirius LLC
U.S.A.
Operating company
Seadrill Gulf Operations Vela LLC
U.S.A.
Operating company
Seadrill Hungary Kft
Hungary
Rig owner
Seadrill International Ltd
Hong Kong
Operating company
Seadrill Leo Ltd
Bermuda
Rig owner
Seadrill Mobile Units Ltd
Nigeria
Service company
Seadrill Operating LP
Marshall Islands
Holding company
Seadrill Operating GP LLC
Marshall Islands
Holding company
Seadrill Operating LLC
Marshall Islands
Holding company
Seadrill Partners Operating LLC
Marshall Islands
Holding company
Seadrill T15 Ltd
Bermuda
Rig owner
Seadrill T16 Ltd
Bermuda
Rig owner
Seadrill US Gulf LLC
U.S.A.
Operating company
Seadrill Vela Hungary Kft
Hungary
Rig owner
Seadrill Vencedor Ltd
Bermuda
Rig owner


In addition to the entities listed above, the Consolidated and Combined Carve-out Financial Statements (prior to October 24, 2012 , and for acquired entities prior to dropdown) included allocations and charges from other Seadrill subsidiaries from which the Company is deemed to have received benefit.





EXHIBIT 12.1
CERTIFICATION OF THE PRINCIPAL EXECUTIVE OFFICER
I, Graham Robjohns, certify that:
1. I have reviewed this annual report on Form 20-F of Seadrill Partners;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report;
4. The company's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the company and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the company's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the company's internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the company's internal control over financial reporting; and
5. The company's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company's auditors and the audit committee of the company's board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the company's ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the company's internal control over financial reporting.

Date: April 21, 2015

/s/ Graham Robjohns
Graham Robjohns
Chief Executive Officer






EXHIBIT 12.2
CERTIFICATION OF THE PRINCIPAL FINANCIAL OFFICER
I, Rune Magnus Lundetræ, certify that:
1. I have reviewed this annual report on Form 20-F of Seadrill Partners;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report;
4. The company's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the company and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the company's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the company's internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the company's internal control over financial reporting; and
5. The company's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company's auditors and the audit committee of the company's board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the company's ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the company's internal control over financial reporting.

Date: April 21, 2015

/s/ Rune Magnus Lundetræ
Rune Magnus Lundetræ
Chief Financial Officer





EXHIBIT 13.1
PRINCIPAL EXECUTIVE OFFICER CERTIFICATION
PURSUANT TO 18 U.S.C. SECTION 1350
In connection with this Annual Report of Seadrill Partners (the "Company") on Form 20-F for the year ended December 31, 2014 as filed with the Securities and Exchange Commission (the "SEC") on or about the date hereof (the "Report"), I, Graham Robjohns, Principal Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes- Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
A signed original of this written statement has been provided to the Company and will be retained by the Company and furnished to the SEC or its staff upon request.

Date: April 21, 2015

/s/ Graham Robjohns
Graham Robjohns
Chief Executive Officer





EXHIBIT 13.2
PRINCIPAL FINANCIAL OFFICER CERTIFICATION
PURSUANT TO 18 U.S.C. SECTION 1350
In connection with this Annual Report of Seadrill Partners (the "Company") on Form 20-F for the year ended December 31, 2014 as filed with the Securities and Exchange Commission (the "SEC") on or about the date hereof (the "Report"), I, Rune Magnus Lundetræ, Principal Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
A signed original of this written statement has been provided to the Company and will be retained by the Company and furnished to the SEC or its staff upon request.

Date: April 21, 2015

/s/ Rune Magnus Lundetræ
Rune Magnus Lundetræ
Chief Financial Officer





EXHIBIT 15.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We hereby consent to the incorporation by reference in the Registration Statement on Forms F-3 (No. 333-192053 and No. 333-196286) of Seadrill Partners LLC of our report dated April 21, 2015 relating to the financial statements and the effectiveness of internal control over financial reporting, which appears in this Form 20-F.
/s/PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Uxbridge, United Kingdom
April 21, 2015