UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

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Form 6-K

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REPORT OF FOREIGN PRIVATE ISSUER

PURSUANT TO RULE 13a-16 OR 15d-16
UNDER THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2015

Commission File Number 001-35704

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Seadrill Partners LLC

(Exact name of Registrant as specified in its Charter)

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2 ^nd Floor, Building 11

Chiswick Business Park

566 Chiswick High Road
London, W4 5YS

United Kingdom

(Address of principal executive office)

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Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.     Form 20-F   x         Form 40-F   ¨

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101 (b)(1).     Yes   ¨         No   x

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101 (b)(7).     Yes   ¨          No   x

Seadrill Partners LLC

Report on Form 6-K For the quarterly period ended March 31, 2015

INDEX

IMPORTANT INFORMATION REGARDING FORWARD-LOOKING STATEMENTS

This Report on Form 6-K for the quarterly period ended March 31, 2015 contains certain “forward-looking statements” (as such term is defined in Section 21E of the Securities Exchange Act of 1934, as amended) concerning future events and the operations, performance and financial condition of Seadrill Partners LLC (“Seadrill Partners,” the “Company,” “we,” “us”), including statements concerning plans and objectives of the Company's 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. 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 report and are not intended to give any assurance as to future results.

Forward-looking statements appear in a number of places in this report and include statements with respect to, among other things:

Forward-looking statements in this 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. 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 Report on Form 6-K 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.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

You should read the following discussion of our financial condition and results of operations in conjunction with the interim Financial Statements presented in this report, as well as the historical Consolidated and Combined Carve-Out Financial Statements and related notes of Seadrill Partners LLC included in our annual report on Form 20-F filed with the SEC on April 21, 2015 (the "20-F"). Among other things, those financial statements include more detailed information regarding the basis of presentation for the following information. The unaudited Consolidated Financial Statements of Seadrill Partners included in this report have been prepared in accordance with United States generally accepted accounting principles (US GAAP) and are presented in US Dollars.

Overview

Seadrill Partners is a growth-oriented limited liability company formed by Seadrill Limited ("Seadrill") to own, operate and acquire offshore drilling units. Our drilling units, except for the West Sirius and the West Vencedor,

are under long-term contracts with major oil companies such as Chevron, BP and ExxonMobil, and with large independents such as Tullow. The Company's contracted drilling units have charters with an average remaining term of 3.2 years as of June 30, 2015 .

We own (i) a 58% limited partner interest in Seadrill Operating LP ("Seadrill Operating"), as well as the non-economic general partner interest in Seadrill Operating through our 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% limited liability company interest in Seadrill Partners Operating LLC.

Seadrill Operating LP, Seadrill Capricorn Holdings LLC and Seadrill Partners Operating LLC are collectively referred to as “OPCO”.

Seadrill owns the remaining interests in OPCO. As of June 30, 2015 , Seadrill owned 46.6% of the outstanding combined common and subordinated units of the Company, as well as Seadrill Member LLC, which owns a non-economic limited liability interest in the Company and all of our incentive distribution rights

The Company's fleet as of March 31, 2015 consisted of four semi-submersible drilling rigs, three drillships and three tender rigs, as follows:

Recent Developments

Acquisition of the West Polaris

On June 16, 2015, Seadrill Operating entered into an agreement with Seadrill to acquire all of the shares of Seadrill Polaris Ltd. (“Seadrill Polaris”), the entity that owns and operates the drillship the West Polaris (the “Polaris Acquisition”) from Seadrill. The Polaris Acquisition was completed on June 19, 2015.

The West Polaris is a 6th generation, dynamically positioned drillship delivered from the Samsung shipyard in 2008. The West Polaris is expected to carry out operations in Angola until the end of its contract with ExxonMobil in March 2018.

The implied purchase price of the Polaris Acquisition is $590 million, less $336 million of debt outstanding under the existing facility financing the West Polaris . Seadrill Operating will fund the balance of the purchase price with $204 million in cash and a seller’s credit of $50 million due in 2021 that carries an interest rate of 6.5% per annum.

The West Polaris is currently contracted with ExxonMobil on a daily rate of $653,000. Under the terms of the acquisition agreement, Seadrill Polaris has agreed to pay Seadrill (a) any dayrate it receives in excess of $450,000 per day, adjusted for daily utilization, through the remaining term, without extension, of the ExxonMobil contract and (b) after the expiration of the term of the existing contract until March 2025, 50% of any such excess dayrate, adjusted for daily utilization.

As part of the acquisition agreement, the $50 million seller’s credit due to Seadrill will be reduced if the average contracted dayrate under any replacement contract is below $450,000 until the seller’s credit’s maturity in 2021. The amount of seller’s credit due will be reduced until Seadrill Partners’ effective dayrate is $450,000 or until the seller’s credit is reduced to zero. Should the average dayrate of the replacement contract be above $450,000, the entire $50 million seller’s credit must be paid to Seadrill upon maturity of the seller’s credit in 2021.

Board of Directors Appointment

On June 26, 2015, Mr. Andrew Cumming was appointed by the remaining elected directors to replace Mr. Bart Veldhuizen as the Class III elected director to serve until the annual meeting of unitholders in 2016.

Mr. Cumming will also serve on the Company's conflicts committee. Mr. Cumming has almost 40 years of experience in banking and risk management. Prior to retirement in 2014, Mr Cumming spent 17 years of his career in a variety of positions at Lloyds Bank, including 7 years as Senior Sanctioning Director and Chief Credit Officer, for Lloyds Banking Group Commercial Banking Division and membership of Risk and Commercial Banking Executive Committees. Mr. Cumming also currently acts as a director of a UK hotels company, Macdonald Hotel Group, and a mortgage company, Bluestone Holdings Group.

Amendment and Restatement of the West Polaris Credit Facility

On June 19, 2015, in connection with the completion of the Polaris Acquisition, Seadrill Polaris Ltd. as borrower, entered into an amendment and restatement of the $420 million term loan facility (the “West Polaris Facility”), relating to the West Polaris, with Seadrill Limited as parent, and the other companies listed therein as guarantors, the banks and financial institutions listed therein as lenders, DNB Bank ASA and Nordea Bank AB, London Branch as bookrunners, the banks and financial institutions named therein as mandated lead arrangers and DNB Bank ASA, as agent. The West Polaris Facility is comprised of a $320 million term loan facility and a $100 million revolving credit facility. The West Polaris Facility matures on January 31, 2018 and bears interest at a rate of LIBOR plus 2.25% plus, in the event the leverage ratio (as defined in the agreement) exceeds 4.50:1, an additional margin ranging from 0.125% to 0.750%. The term loan of the West Polaris Facility is payable on a monthly basis in equal installments of $3 million and a final lump sum payment of $143 million upon maturity.

Appointment of Chief Financial Officer

Effective June 1, 2015, John T. Roche replaced Rune Magnus Lundetrae as Chief Financial Officer of the Company. Mr. Roche is also currently Vice President of Investor Relations for Seadrill and will continue with this responsibility on a part time basis. Prior to joining Seadrill in May 2013, Mr. Roche spent 12 years at Morgan Stanley most recently as an Executive Director in its Investment Banking Division.

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 of March 31, 2015 is equal to $16.5 million while the long-term portion is equal to $53.5 million. Accordingly the Company's balance sheet as at March 31, 2015 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.

    

Contract Backlog

The Company’s contracted drilling units are contracted to customers under charters with an average remaining term of 3.2 years as of June 30, 2015 . The average remaining contract term is calculated as the total days remaining on the contract, assuming full utilization, and divided by the number of contracted rigs which the Company owns. Average remaining contract term also includes, in the case of contracts for which we have received a notice of termination but continue to receive a termination fee, the rigs and the total days remaining on the payment of termination fees. 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 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 June 30, 2015 totals $5.3 billion , and includes $297,000 per day from July 2015 until July 2017 to be received by the Company in accordance with the termination provisions of the West Sirius contract.

Market Overview and Trends

Despite the recovery in the price of oil during the first quarter of 2015, oil companies are continuing to take a cautious approach to capital expenditures and other cost commitments given the severity of the overall oil price decline. We anticipate this cautious approach to continue throughout 2015 and indications are that 2016 is likely to be a challenging year as well.

During the quarter, the offshore drilling market has seen very little new fixture activity and the new contracts that have materialized are at significantly lower dayrates. Customer conversations have focused on renegotiation of existing contracts, often in exchange for additional duration.

The downturn in the offshore drilling market has continued during the first quarter of 2015 and all signs point to 2015 demand being significantly lower than in 2014. The outlook for activity beyond 2015 is difficult to judge but most oil companies are not looking towards adding rig capacity at this point. It is likely that capacity utilization will drift lower as the year progresses and a significant number of ultra-deepwater rigs are likely to be stacked by the end of 2015.

Although the near term outlook remains challenging, there is visibility of an expected rebalancing of market supply in the next few years when considering the newbuild orderbook and the degree of scrapping that can be expected. As of June 30, 2015, the orderbook stands at approximately 89 units, of which 29 are Sete new builds. At the same time approximately 70 units are rolling off contracts many of which must undergo a 15 or 20 year classing between now and the end of 2017. We believe that there is a high likelihood that a number of these units will be scrapped, potentially leading to limited fleet growth between now and 2018. Thus far, the market has seen 14 rigs scrapped in 2014 and 14 rigs scrapped in 2015. This represents the highest degree of scrapping activity seen since the early 1990's and may likely to accelerate over the next two years.

On the demand side, we believe that the market in the long-term will require ultra-deepwater production to satisfy world hydrocarbon demand. In the short-term, rig owners will continue to face a challenging market where the decision to stack or scrap is being continually evaluated against the limited work available.

Factors Affecting the Comparability of our Current and Future Results

The size of our fleet continues to change. Our consolidated financial statements reflect changes in the size and composition of our fleet due to certain rig deliveries, contract commencement dates and acquisitions. For instance, we acquired the entities that own and operate the drilling units West Auriga in March 2014, the West Vela in November 2014 and West Polaris in June 2015. In addition, in July 2014 we purchased additional limited partner interests in Seadrill Operating. In the future, we may grow through the acquisition of additional drilling units, or further ownership interests in OPCO, as part of our growth strategy.

We do not own all of the interests in OPCO. 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 to us by OPCO and by us to our unitholders, the 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 Seadrill's ownership interest in OPCO are not available for distribution by us.

Basis of presentation

Investments in companies in which the Company directly or indirectly holds more than 50% of the voting control are consolidated in the financial statements. All inter-company balances and transactions are eliminated.

Contract Revenues

Contract revenue increased by $125.3 million , or 48.1% , to $385.9 million , for the three months ended March 31, 2015 , from $260.6 million for the three months ended March 31, 2014 . The increase was primarily due to contract revenues from the West Auriga, which was acquired on March 21, 2014, and contract revenues from the West Vela , which was acquired on November 4, 2014. A decrease in downtime on the West Aquarius also contributed to the higher contract revenues for the three months ended March 31, 2015 .

The following table summarizes our fleet's average daily revenues and economic utilization percentage by drilling unit type for the periods presented:

 

Reimbursable Revenues

Reimbursable revenues decreased by $4.6 million or 31.3% , to $ 10.1 million for the three months ended March 31, 2015 , from $ 14.7 million for the three months ended March 31, 2014 . The decrease was due to lower levels of equipment purchased on behalf of customers in the three months ended March 31, 2015 , for which we were reimbursed.

Other revenues

Other revenues were $4.7 million , for the three months ended March 31, 2015 compared to nil for the three months ended March 31, 2014 . During the three months ended March 31, 2015 , we earned other revenues within our Nigerian service company billed to Seadrill for certain services, including the provision of onshore and offshore personnel, which we provided to Seadrill’s West Jupiter and West Saturn drilling rigs. There were no such services provided in the three months ended March 31, 2014.

Vessel and Rig Operating Expenses

Vessel and rig operating expenses increased by $34.2 million , or 40.6% , to $118.5 million for the three months ended March 31, 2015 , from $84.3 million for the three months ended March 31, 2014 . The increase was primarily due to operating costs related to the West Auriga which was acquired on March 21, 2014, and the West Vela , which was acquired on November 4, 2014. The West Aquarius also contributed to the higher vessel and rig operating expenses for the three months ended March 31, 2015 , due to the high levels of downtime in the comparative period.

Amortization of favorable contracts

Amortization of favorable contracts increased to $11.2 million for the three months ended March 31, 2015 from nil for the three months ended March 31, 2014 . The increase was due to the favorable contracts recognized on the acquisition 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 decreased by $5.1 million , or 35.7% , to $9.2 million for the three months ended March 31, 2015 , from $14.3 million for the three months ended March 31, 2014 . The decrease was due to lower levels of equipment purchased on behalf of customers in the three months ended March 31, 2015 compared to the same period in 2014.

Depreciation and Amortization

Depreciation and amortization expenses increased by $17.8 million , or 44.8% , to $57.5 million for the three months ended March 31, 2015 , from $39.7 million for the three months ended March 31, 2014 . The increase was primarily driven by the acquisition of the West Auriga and West Vela .

General and Administrative Expenses

General and administrative expenses increased by $0.2 million , or 1.5% , to $13.6 million for the three months ended March 31, 2015 , from $13.4 million for the three months ended March 31, 2014 . The increase was due to higher administrative management fees charged by Seadrill due to the increased size of the Company's fleet, largely offset by reductions in recharges due to cost efficiencies achieved by Seadrill.

Interest Expense

Interest expense increased by $23.4 million , or 81.8% , to $52.0 million for the three months ended March 31, 2015 , from $28.6 million for the three months ended March 31, 2014 . The increase was primarily due to the increase in 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 our new Amended Senior Secured Credit Facilities entered initially into February 2014 consisting of a $100 million revolving credit facility and $1.8 billion term loan and subsequently amended to borrow a further $1.1 billion in June 2014.

Total other financial items increased by $6.3 million to a loss of $53.5 million in the three months ended March 31, 2015 , compared to a loss of $47.2 million for the three months ended March 31, 2014 . The change was primarily driven by a net loss from derivative instruments of $51.9 million in the three months ended March 31, 2015 compared to a loss of $49.2 million in the three months ended March 31, 2014 , due to changes in the fair value of interest rate swaps held in relation to variable rate debt. As of March 31, 2015 , $3,560.7 million ,which represents 98.4% of the total interest bearing debt obligations of the Company (excluding deferred consideration payable) had associated interest rate swap agreements. As of December 31, 2014 , $3,571.8 million , which represented 97.8% of the total interest bearing debt obligations, had associated interest rate swap agreements. Foreign currency exchange loss increased by $3.7 million in the three months ended March 31, 2015 compared to a gain in the three months ended March 31, 2014 of $1.1 million . The change was primarily driven by the receipt of revenue denominated in Euros and Canadian Dollars.

Income Taxes

Income tax expense for the three months ended March 31, 2015 increased by $10.3 million to $14.3 million compared to $4.0 million for the three months ended March 31, 2014 . The $10.3 million increase in income tax expense for the three months ended March 31, 2015 compared to the same period in 2014 was due to increased taxable profits from the acquisition of the West Vela in November 2014 and an increase in effective tax rate to 16.8% for the three months ended March 31, 2015 from 8.4% for the same period in 2014.  The increase was primarily due to an increase in the relative components of estimated 2015 earnings, excluding discrete items, generated in different tax jurisdictions and the effect of new tax requirements in Nigeria.

Net income attributable to Seadrill Partners LLC members

Net income attributable to Seadrill Partners LLC members increased by $18.4 million , or 92.9% , from $19.8 million for the three months ended March 31, 2014 , to $38.2 million for the three months ended March 31, 2015 . This was due to a 61.9% increase in net income and a reduction in the proportion of income attributable to non-controlling

interest as a result of the Company's purchase of an additional 28% limited partner interest in Seadrill Operating on July 21, 2014.

Net income attributable to the non-controlling interest

Net income attributable to non-controlling interest increased by $8.7 million , or 36.3% , to $32.7 million primarily due to an increase in net income for the three months ended March 31, 2015 as compared to the three months ended March 31, 2014 . The increase was partially offset by the reduction in non-controlling interest as a result of the acquisition of limited partner interests in Seadrill Operating LP by Seadrill Partners in July 2014.

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 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.

The Company's operating agreement requires 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 we are required to make to maintain our current fleet, our annual estimated maintenance and replacement capital expenditures are estimated to be $193 million per year as of June 30, 2015 , which is comprised of $75 million for long term maintenance and society classification surveys and $118 million , including financing costs, for replacing our existing rigs at the end of their useful lives.

As of March 31, 2015 , our cash and cash equivalents were $242.0 million , compared to $242.7 million as of December 31, 2014 . In connection with the closing of our IPO, OPCO entered into a five year $300.0 million revolving credit facility with Seadrill as the lender, which we refer to as the sponsor credit facility. This was reduced to $100.0 million following a refinancing in February 2014, when OPCO also entered into a five-year $100.0 million revolving credit facility with a syndicate of external banks. As of March 31, 2015 , the outstanding balance on both of these facilities was zero . The Company believes its current resources, including the potential borrowings under these 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 cash generated from operations, debt, equity financing and borrowings from and leasing arrangements with commercial banks. Because we distribute all of our available cash, we expect that we will rely upon external financing sources, including bank borrowings and the issuance of debt and equity securities, to fund acquisitions and other expansion capital expenditures.

Cash Flows

Net cash provided by operating activities was $153.9 million and $67.5 million for the three months ended March 31, 2015 and 2014 , respectively. The increase is primarily due to higher operating income and improved cash collections from customers during the three months ended March 31, 2015, as compared to the three months ended March 31, 2014.

Net cash used in investing activities was $4.9 million and $689.8 million for the three months ended March 31, 2015 and 2014 , respectively. The change primarily relates to the $672.6 million net cash paid to acquire the entities that own and operate West Auriga from Seadrill during the three months ended March 31, 2014 .

Net cash used in financing activities was $150.8 million and net cash provided by financing activities was $662.7 million during the three months ended March 31, 2015 and 2014 , respectively. For the three months ended March 31, 2015 , net cash used in financing activities of $150.8 million relates primarily to cash distributions of $118.0 million and repayment of long term debt. Net cash provided by financing activities of $662.7 million during the three months ended March 31, 2014 primarily resulted from proceeds from our Senior Secured Credit Facilities of $1,755.6 million, proceeds from the issuance of common units related to the West Auriga acquisition of $401.3 million and proceeds from the issuance of units by Seadrill Capricorn Holdings LLC to Seadrill of $341.5 million. These inflows were partly offset by repayments of long-term related party debt of $1,134 million which was refinanced by the Senior Secured Credit Facilities, repayment of the related party revolving credit facility of $125.9 million,

repayments of related party discount notes of $299.9 million and cash distributions of $271.9 million during the three months ended March 31, 2014.

The outstanding debt as of March 31, 2015 is repayable as follows:

The significant developments relating to the Company's debt subsequent to December 31, 2014 are set forth below.

Rig Financing Agreements

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 initial public offering in October 2012 (“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 and Seadrill Vencedor Ltd., the owner of the West Vencedor , 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 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 West Vencedor Loan Agreement was amended and the maturity date was extended to June 25, 2018. 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 March 31, 2015 the total net book value of the West Vencedor pledged as security was $180.6 million . The outstanding balance under the West Vencedor Loan Agreement due to Seadrill was $70.0 million as of March 31, 2015 ( $78.2 million as of December 31, 2014 ).

On June 19, 2015, in connection with the completion of the Polaris Acquisition, Seadrill Polaris Ltd. as borrower, entered into the West Polaris Facility, with Seadrill Limited as parent, and the other companies listed therein as guarantors, the banks and financial institutions listed therein as lenders, DNB Bank ASA and Nordea Bank AB, London Branch as bookrunners, the banks and financial institutions named therein as mandated lead arrangers and DNB Bank ASA, as agent. The West Polaris Facility is comprised of a $320 million term loan facility and a $100 million revolving credit facility. The West Polaris Facility matures on January 31, 2018 and bears interest at a rate of LIBOR plus 2.25% plus, in the event the leverage ratio (as defined in the agreement) exceeds 4.50:1, an additional margin ranging from 0.125% to 0.750%. The term loan of the West Polaris Facility is payable on a monthly basis in equal installments of $3 million and a final lump sum payment of $143 million upon maturity.

(1) The Company's interest commitment on long-term debt is calculated based on the applicable interest rate of the loan agreements and the associated interest rate swap rates.

(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 balances of 2.0%  per annum and 0.5% per annum respectively.

(3) The Company recognized deferred consideration payable as a result of the purchase of the entities that own and operate the West Vela from Seadrill on November 4, 2014. The payment of these amounts are contingent on the amount of contract revenue and mobilization revenue received from the customer. For further information on the nature of these payments please see Note 3- Business Combinations to the Company's Consolidated and Combined Carve-Out Financial Statements for the year ended December 31, 2014 included in the Company's 20-F.

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 generally placed in fixed deposits with reputable financial institutions, yielding higher returns than are available on overnight deposits in banks. Such deposits generally have short-term maturities, in order to provide 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 March 31, 2015 , the Company was party to interest rate swap agreements with Seadrill and third parties for a combined outstanding principal amount of approximately $3,560.7 million at floating rates between 1.10% per annum and 2.52% per annum. The swap agreements mature between July 2018 and February 2021 . The loss recognized on our interest rate swaps for the three months ended March 31, 2015 , was $51.9 million .

As of March 31, 2015 , the Company's total exposure to floating interest rate fluctuations on our outstanding debt was $56.8 million , compared to $78.6 million as at December 31, 2014 . An increase or decrease in short-term interest rates of 100 bps would thus increase or decrease, respectively, our interest expense by approximately $0.6 million on an annual basis as of March 31, 2015 , as compared to $0.8 million in 2014 .

The fair values of our interest rate swaps as of March 31, 2015 and December 31, 2014 were as follows:

 

For further disclosure of the fair value of the derivatives and debt obligations outstanding as of March 31, 2015 , please read Note 6 and Note 7 of the Unaudited Consolidated Financial Statements included elsewhere in this Form 6-K.

Foreign Currency Fluctuation Risks

The Company and all of its subsidiaries use the US Dollar as their functional currency because the majority of their revenues and expenses are denominated in US Dollars. The Company's reporting currency is also US 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.

The Company is exposed to some extent to foreign currency risk 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. In June 2015, the drilling contract for the West Vencedor was completed. As a result of the completion of the drilling contract of the West Vencedor , the foreign currency risk associated with the Euros is expected to be minimal in the short-term and nil thereafter. Please refer to Note 12 to the Unaudited Consolidated Financial Statements included herein. Due to the operations of the West Aquarius in Canada, a portion of the Company's revenues and expenses are denominated in Canadian Dollars. The impact of a 10% appreciation or depreciation in the exchange rate of the Canadian Dollar against the US Dollar would not have a material impact on the Company.

The Company's foreign currency risk arises from:

The Company does not use foreign currency forward contracts or other derivative instruments related to foreign currency exchange risk.

Credit Risk

The Company has financial assets which expose the Company to credit risk arising from possible default by a counterparty. The Company considers its 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.

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.

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 drilling units. 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 $5.0 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 US Gulf of Mexico with a Combined Single Limit of $ 100.0 million in the annual aggregate, which includes loss of hire. The policy covers the 2015 windstorm season from May 1, 2015 to April 30, 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 and those of the Company, 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 $250.0 million per event and in the aggregate for the West Vencedor, T-15 and T-16, up to $400.0 million per event and in the aggregate for the West Aquarius, West Capella and West Leo , and up to $750.0 million per event and in the aggregate for each of the West Auriga, West Vela, West Capricorn and the West Sirius . Effective June 1, 2015, the protection and indemnity insurance for the West Sirius was reduced to $500 million .

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

Critical Accounting Estimates

The preparation of the Consolidated 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. The basis of preparation and significant accounting policies are disclosed in Note 1 “General Information” and Note 2 “Accounting Policies” of the notes to the Company's Consolidated and Combined Carve-Out Financial Statements for the year ended December 31, 2014 included in the 20-F.

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 unaudited Consolidated Financial Statements.

See accompanying notes that are an integral part of these unaudited Consolidated Financial Statements.

 

See accompanying notes that are an integral part of these unaudited Consolidated Financial Statements.

See accompanying notes that are an integral part of these unaudited Consolidated Financial Statements.

SEADRILL PARTNERS LLC