Good day, ladies and gentlemen, and welcome to the Seadrill Limited Q3 results conference call. Today’s conference is being recorded. At this time, I would like to turn the conference over to Mr. John Roach. Please go ahead, sir.

Thank you, and good afternoon, everybody. Welcome to Seadrill and North Atlantic Drilling’s third quarter earnings conference call. I want to thank you all for joining us today. With me today in the room, we have our chief executive officer, Per Wullf; our chief financial officer, Rune Magnus Lundetrae; our chief accounting officer, Robert Hingley-Wilson, and representing North Atlantic Drilling is their chief executive officer, Alf Ragnar Lovdal. Before we do get started today, I’d like to remind everyone, as I’m sure everybody is aware, that much of the discussion today will not be based on historical fact, but rather consist of forward looking statements that are subject to uncertainty. We articulate some of the key items on page 2 of our presentation, as you can all see in the webcast. For additional information, and to view our SEC filings, please visit our website at www.seadrill.com. And with that, I’d like to turn the call over to our CEO, Mr. Per Wullf, to take you through the third quarter earnings highlights and market outlook. Per?

Thank you, John, and welcome everyone to Seadrill’s third quarter earnings call. I’m pleased to report that we had another quarter of safe and efficient operation, and I would like to thank all our employees offshore and their onshore counterparts for making that possible. I’ll start today by covering some of our third quarter highlights and market outlook, then turn things over to Rune Magnus for a review of our financial position and Alf Ragnar for North Atlantic Drilling’s highlights. We’ll then open things up to all of you for questions. Third quarter EBITDA of $653 million was in line with second quarter EBITDA. Third quarter is our first full quarter excluding the tender rig business that was sold to SapuraKencana. This resulted in EBITDA being $30 million lower quarter over quarter. The consolidation of Sevan Drilling during the quarter nearly offset this decrease. In addition to the acquisition of Sevan, the delivery of jackup rigs AOD II and the West Tucana into the fleet positively impacted results, leading to quarter over quarter EBITDA reduction with unplanned downtime on West Tellus and West Aquarius and five-year classing for the West Polaris and the Sirius. We continue to execute well on planned maintenance with our [continuous classing philosophy and complete lease maintenance exercises in less time than planned and on all low budgets]. For the remainder of the year, we only have the West Capella scheduled for five-year classing. During the fourth quarter, we will have more rigs entering the fleet. The West Auriga, West Vela, West Tellus will significantly impact our results going into the end of the year along with some potential long term jackup contracts. Year to date, we have successfully taken delivery of four floaters, seven jackups, and two tender rigs. In spite of [unintelligible] and unplanned…

Thank you, Per, and thanks, everyone for joining our call today. Clearly, Seadrill has had a successful year operationally, and the same can be said for the financial side of the business. We have deployed roughly $5 billion in investment this year, and have been able to fund this investment at very attractive levels. Since the last quarterly report in August 2013, we have secured $2.25 billion in new financing commitments. We successfully closed a $500 million unsecured bond issue maturing in 2020 in the U.S. market, and also secured a $1.75 billion credit facility for Sevan Drilling, saving approximately $30 million annually over their independently arranged financing plans. Also, North Atlantic Drilling completed their inaugural Norwegian bond issuance, raising approximately $250 million, further advancing the strategy of NADL becoming an independently financed entity. During the remainder of the fourth quarter, we expect to refinance the loan for the West Eminence and West Eclipse and continue our discussions on ECA financing for a newbuild program in 2014 and 2015. Just some high level financial performance highlights. We reported a third quarter EBITDA of $663 million against $665 million in the previous quarter. Earnings per share came in at $0.61 a share against $3.68 in the second quarter. Operating profit came in at $471 million against $507 million in the second quarter. Cash flow from operating activities was $1.2 billion in this quarter against $248 million in the second. Strong cash flow generation and profitability, as well as the additional backlog and funding in the quarter, have led us to increase dividends per share by $0.04 to $0.95 per share for the third quarter. We are very pleased with the performance this quarter, and as I will discuss in more detail later, we expect the fourth quarter to show a significant…

Thank you, Rune Magnus. Operational results for the company in the third quarter was solid, with an economic utilization of 96%. We are pleased to see that we are back on track, delivering industry leading uptime, increasing both our operational top line and bottom line. On the financing side, the company has successfully placed a five-year, $1.5 billion [unintelligible] bond in the Nordic market. The bond was used to pay down on the revolving credit facilities, including the $335 million [revolver]. By issuing this bond, the company has opened up the Nordic bond market as an issuer. We are quite pleased with the terms we achieved, and also that this five-year bond is replacing debt which would have matured in the first quarter of 2015. Also, as announced on October 11 this year, the company has moved forward the U.S. listing plan, and we filed our first amended registration statement to the SEC on November 8. We expect to receive the SEC’s comments in early December, and plan to respond to those before Christmas. The timing for the launch of the IPO will depend on the level and number of comments from the SEC. However, we are aiming to be in a position to launch in the first quarter of 2014. The company generated an EBITDA of $144 million in the third quarter, an increase of $12 million compared to last quarter. During the quarter, the company achieved an average economic utilization for the fleet of 96%, compared to 92% in the previous quarter. The utilization for the second quarter was impacted with the 21 days of effective [unintelligible] due to West Phoenix [unintelligible]. Net loss for financial items amounts to $22 million compared to $15 million in the previous quarter. The increase is mainly due to loss on financial…

Thank you. And operator, we’d just like to now turn things over to the question and answer session. But before we do, I’d just like to remind everyone, if we could keep questions to one question and one follow up, it would be much appreciated. Also, if there’s any model calibration questions, I’m happy to catch up with you offline. But for this forum, let’s keep it more on the thematic side. Operator, if we could turn it over to questions, please?

[Operator instructions.] We will take our first question from Frederik Lunde of Carnegie. Please go ahead sir.

My question was on the market outlook. You’ve taken a fairly bullish view on the market despite the signs of slowdown, and it seems like the slowdown is caused by a focus on cash preservation from your clients. So my question is really, what gives you the confidence that this is a short term issue? And the second, how are you responding and planning for this? You mentioned you are highgrading the fleet, but also your balance sheet has fairly high leverage compared to most peers. And you do have a very high dividend payout. So what’s your thinking over the next three or four years?

Well, if we look at the market, Seadrill, and we are in a very strategic situation, we decided years ago that we would try to avoid too many mergers, but grow organically, and we’ll really benefit from that going forward, because we have a new fleet. And I’m sure you’re talking about the ultradeepwater market right now. If you look at our backlog, we have a lot of years secured. Yes, it will be a little bit bumpy in 2014, but we have three rigs, as I mentioned, coming into 2014. The last one in December, but the two ones coming in May and June, we are actually in advanced talks with these two new units for term contracts. So I just can’t say any more right now. So we have a pretty good [stomach] feeling, and then when we have that, we simply want to address it. I don’t know whether you have further comments on it, Rune?

I think, you asked about the dividend level. I think, as we always say, it’s set on the back of a combination of our funding outlook and our ability to raise funding. It’s based on general market outlook. I think Per touched on it. It’s based on operational performance, and all of the backlog. I think what I think has gone a little bit unnoticed today is that we added $1.8 billion to our backlog today, and I think it’s just put us in a very strong position and our visibility has improved significantly over the next two to three years, actually. So I don’t share your concern in terms of the strength of the balance sheet over the next two, three, four years.

So is it fair to say that you have a positive market outlook, and also plan for continued strong outlook in your financial planning?

Yes. We actually plan for that, and we can see it’s there. We have new units. We don’t have five generation units. So we are in a very unique position at Seadrill.

Just one final question, if I may, on that aspect. You were planning to sell North Atlantic Drilling. But [unintelligible] as a strategic consideration, given the fleet age? Or did you see that as related more to the outlook for that specific market niche?

When you say we plan to sell NADL, I think you’re putting words in our mouth. We said we had some discussion with a partner who wanted to have a strategic discussion with us. Those talks didn’t lead anywhere, and that’s why we are back to the listing process now, where we expect to receive comments shortly, and then file our second [F1] in the next two or three weeks, and then be listed in January. So I think that’s the plan on NADL.

We will move to our next question, from Ole Slorer from Morgan Stanley. Please go ahead.

Could you give us any more color on the ultradeepwater rigs that are available in the 2014 for contracting? Are they with individual oil companies? You mentioned the more flexible contracting approach. Are they a consortium of oil companies? Where do you stand in your negotiation? Are you awaiting government signatures? Or are you starting from scratch trying to put something together.

That’s a lot of things in one go. But if you just take the rates first, when you look at the ultradeepwater rates, we actually stipulate that we have a stable rate structure -- it is stable. When we negotiate, in line with what we said earlier, we have, depending on where you are in the world, and that’s because of overrating cost, we have rates at between 550 and 650. And we maintain that, and we can see it. We have a slower pace in approving it because you are in different places of the world. You see that. But rate-wise, we maintain the ultradeepwater between 550 and 650. And also, we stipulate, in Brazil, it goes a little bit slower, or when the negotiation has prolonged, but again, there, we are very close to 600, I would say, or above 600, when we negotiate these contracts. This is a matter of getting it finalized, and we are a whole row of contractors actually securing these contracts going forward. They go out in ’15, and we are talking three-year extensions of these contracts. But we are confident that we’ll keep rates close to the 600 mark on these units we have over there as well.

That’s great. That’s the way we see it as well. But talking about Mexico for a second, you put some very long contracts on rigs into Mexico. Traditionally, PEMEX has always had 30-day break clauses in these contracts. Can you shed light on these break clauses in your jackup extensions?

We’re probably not good at bragging about it, with the way we do it, but a couple of years ago, we took the decision that we wanted more [legs] and just being in the Far East on jackups. And you saw that we moved to the Middle East, and we positioned us well there with a number of units. And we actually really get economy of scale down there. And it’s superb for us, also, for partnering up, or what have you, in these areas. We did the same with Mexico now, and we’ve just announced that we have the agreement in place. And we do it for a number of things. First of all, we have actually delivered a really high uptime on our deepwater unit, where we have operating for a rig over there, [unintelligible] has been operating up there for two years. And through negotiations and talk with PEMEX, we now have five jackups going in there, and we told it to the market already in August that it was ongoing, and we are getting there. And again, this is a strategic move for us, where we can come in and we can sit with a number of rigs for a number of years. In this case, 30 rig years. We really can drive economy of scale, we can get a proper local content in place, and we actually get another leg like we have a leg sitting in Brazil. We could have another leg sitting in Mexico going forward. And it’s a superb opening for us having both jackups over there… Think of this as new jackups coming in there, in 30 years. We already have one deepwater unit in there, and I’m sure we’ll see more deepwater units in there, and some of them shipped to Seadrill, actually.

And I appreciate you’re breaking into that market. My question was, I’m sorry, if not clear in the [6-year] contracts, can those contracts be terminated earlier? Or are they firm contracts?

No, we don’t want termination in our contracts. So in other words, this is not standard [unintelligible].

Exactly. So you could, in [unintelligible] your jackups?

Well, we couldn’t call it 30-year contract if they could be terminated. We’d have to call them six year contracts.

We will move to our next question, which is from Mike Urban of Deutsche Bank. Please go ahead.

I wanted to stick with Mexico for a second. It looks like a great opportunity. I agree that it makes a lot of sense moving into that market. Given the scale of the operation that you have there, I think you could certainly argue that you will have critical mass. Is that something you might like to build on? Is that a market where you would get bigger if the opportunity was there? Or is this a good level of exposure for you right now?

This could easily grow. We go in now with five units. The first one coming in around Christmas, will be ready to [unintelligible] day rate, third week in January or something like that. And then the last one, the five, will be at the end of the second quarter or something like that. Get that stable, and then we can easily add more units to that model. Because the way we work these things is on really standout terms. We have a light contract, exactly the same contract wording and what have you. So we could expand easily there and you’ll probably notice that we bought the Prospector 3. Because we said we knew we could go from a fourth to a fifth unit. That is the strength of Seadrill, that we can move extremely fast when we have to. And that was the reason why we bought the Prospector 3, is that we could go from a four-unit thing to a five-unit thing. And when you run an operation down there, and you have it up and running, you can easily have another four or five units down there. That would not be a problem at all. That’s a matter of having a good process in place.

And do you anticipate having any floater opportunities? Or is that still a little bit further down the line as some of the changes in Mexico and within PEMEX take hold?

[unintelligible] in, and see what happens. Actually, we’re out of units, if you notice. We don’t have any more jackups right now, so we need to find more jackups before we receive more units in there, because we have a little bit of time before our next series of jackups are coming out.

And the deepwater side?

The deepwater side, we can’t really say anything right now. We have a fantastic relationship with PEMEX and [Pegasus]. It’s one of our Americas rigs, and we have really done well there introducing these high-spec units into Mexico on that [unintelligible] side, and it would be natural to move deepwater units in there going forward.

Our next question comes from Lukas Daul of ABG. Please go ahead.

I was wondering, a lot of your peers are talking about challenges on the newbuilds in terms of final delivery driven by supplier [unintelligible], etc. How do you see your newbuilding program coming in in 2014 and 2015 given those challenges, and how are you fighting that off?

Well, when we build units, we build a series of units. We don’t have all kinds of different units, and that’s an advantage to us, and can actually plan around the way we get our deliverables. When you look at our deepwater site, we have three drill ships coming in, and it’s just the same as we’re taking Auriga, Vela, and Tellus in this year as part of our 13 units we have taken in this year. We just have to take another three drill ships next year. They are all on [bucket], and they are all plant deliverable. As I said, it will take May, June, and then December. That’s the next three drill ships. So they are right on target. And we want them to come on target. So there we don’t see an effect or challenge at all. We went in early with our subcontractor on the BP side and what have you to make sure that we actually - and you can do that, because we have a large portion of units that are actually not going to be delayed. A few [unintelligible] and what have you, like you have seen some of our competitors. [unintelligible] that consideration, and we are going to deliver on time with these three rigs. When it comes to the jackups, we of course have Linus coming next year, and the first day in the window for that rig, because we have it on heavy lift, is 15th of January, and that rig will be ready and will be delivered from the yard at that time. Whether we take delivery in December or the beginning of January doesn’t matter really, because the first day we can put it on the heavy lift is the 15th of January. So that rig is on schedule with regard to the heavy lift, and it will go directly into operation up in Norway, because that rig is actually complete and ready to go. And so that’s the North Sea side, and on the jackups, all our learnings we have had up in China, and that’s where we have all our newbuild jackups coming from right now are from [unintelligible], all our learnings have gone into the next series of units coming in, and I’m positive that they will come out on time.

And you’re bullish on the market? You are saying that the newbuilding prices have dropped? They’re moving up a little bit? And you still view the speculative newbuilding as being the best way to create attractive returns? Are you going to engage in other newbuilding from now on?

We will going forward. I’m sure we will. We see there is a need for further newbuildings in the market. We’ll definitely not go into any five generations or what have you, and take them over, if we can avoid it. Newbuild, that is a way forward for us. I don’t think we said that it was a higher rate going forward on the deepwater units in 2014. We have an increasing rate on our jackup. We see that. And then we see a stable rate between 550 and 650 on our units we’re going to secure next year, depending on whether it’s West Africa or it’s over on the other side of the triangle.

I think you can expect to see the same pattern going forward as you saw this year, where we very clearly said that we needed to see some additional backlog. We need to be comfortable around the funding, and then of course continue to have a positive long term use. And then you can see us continue to invest. But we run a responsible ship here. So I think it’s important that we lock in more backlog and secure funding, and then you can see us invest. And that will guide the timing. And that’s what we did this year when we got the Sapura transaction, we got a few more contracts, and then we made the commitment in July.

Our next question comes from Andreas Stubsrud of Pareto. Please go ahead.

On the Prospector acquisition, I think you mentioned or stated that it would cost $250 million all inclusive, and my estimate is it’s a $35 million EBITDA. That’s a payback of a little bit more than seven. Is that a level we should expect going forward? Usually you get much lower EBITDA payback than that? Are you happy with that one?

No, I think you’re right that it’s a slightly higher payback, but what we also thought about in that particular transaction is that it gave us an opportunity to get more rigs into Mexico. And I think the term of that contract offset the return in that particular case. But I think we expect the payback actually to continue to come down, i.e., higher day rates, continue to climb upwards. But I think this is a special deal, and I think it has a great strategic importance to Seadrill, because we get a solid presence in Mexico and can continue to develop the relationship with PEMEX that hopefully can add more units, whether that is with or without legs.

And also the fact that we can maintain one more jackup 2000 out in the far east, because we are simply sold out, and it’s a less [unintelligible] of units going to Mexico, and we can now maintain her out for quite some interesting work we have ongoing and dialog we have ongoing in the far east.

And then my follow up is completely unrelated. In your report today, you’re saying that Sevan Drilling maybe would propose that some shareholder loan will be [unintelligible] into equity. But I just don’t understand. Usually, you’re not allergic to high debt level. So I don’t think the debt level is very high in Sevan Drilling. So I’m just very confused about this wording in your report, page nine, today. Can you comment on that, Rune Magnus?

All I would say is that when we put that loan together with Sevan, the assumption was that we put up $100 million in an RCF, towards the banks. Then, as Sevan communicated in their call this morning, they identified a funding gap. That funding gap was absolutely necessary for the funds to be released, to take delivery of Luciana. And we guaranteed that gap, but we would not commit to how that gap was going to be filled. So that is our position on it. And we haven’t said that it will be that source or this source, but we have said we’re not going to issue a blank check to anyone, Sevan included.

It’s just a comment, that they will not increase, for example, that you will borrow $220 million to Sevan Drilling. That’s kind of the comment.

The comment is we will take it case by case, and we said we were a little bit forced to guarantee another $120 million. As you know, we focus extremely hard on our cash, and when that gap came up, we said we’ll be responsible to the banks and the rest of the Sevan shareholders. But we will not just write a blank check and commit another $120 million in cash, as the first $100 million is.

And our next question comes from Darren Garcia from Guggenheim Securities. Please go ahead.

You know, one of the things I noticed when you guys talk about market balances on the floater side is a recurring theme of rig retirements and potential cold stacking. When you look at your thoughts that the market can still sustain a number of newbuilds, to what extent, and how do we kind of frame the scope or magnitude of what you’re expecting from retirements, possibly from older rigs over the near term?

Well, you see, most of the ultradeepwater rigs, they work actually in the fifth generation water depth. They work in 5,000 to 7,500 feet. And as the market tightens up, as we have spoken about today, these rigs, the ultradeepwater rigs, they will stay there. They’re not going to disappear. The day rates, they are stable at 550 to 650. You’ll see these units actually disappear out of that market and be in even less demanding areas, [unintelligible] and logistic-wise areas, going forward. And you’ll even see some of them being converted into accommodation [unintelligible] or what have you. That’s the nature of the business. It’s not just new and old we’re talking about, but when we have these new deepwater units, they really can work in areas where you have logistic challenges, because they take a lot of load, and they take several BOPs and what have you. You cannot operate these old rigs. So they will lose their efficiency out there in these markets, and they will slowly disappear out. And of course, if the rate comes back up again, then you’ll see some of [unintelligible], it will go up above 650 and what have you, then you will see some of our competitors will start to operate these units again, try to get another couple of years out of them. But it’s a tough business to be in, that’s no doubt.

It sounds like these numbers can kind of happen sooner rather than later. I would imagine that a number of them need a lot of investment too. So that’s interesting to hear what you have to say. Kind of second question, you’re bringing North Atlantic Drilling, but you also have Seadrill Partners. It seems like the yield on Seadrill Partners makes it more attractive as a financing item. So when you’re looking to the IPO of North Atlantic Drilling, that’s not as a capital raising thought process down the road for dropping down to more assets versus Seadrill Partners? How do I want to think about what the preferred vehicle to raise financing may be?

Those two companies are slightly different from Seadrill’s perspective. Seadrill Partners is more an opportunity for us to use as a funding vehicle, but NADL, or North Atlantic Drilling, that’s more a recognition of a market that is significantly different from the rest of the drilling space. It has some very specific characteristics in terms of what type of equipment and how the customers think, and also has a very interesting capital market in that region. So this is more to try to create the growth story on its own, in a market that is, in our view, quite different from the global drilling market, and sort of take advantage of a market where you have lots of several different, smaller drillers operating old equipment and [unintelligible] country.

I’d say North Atlantic Drilling, the North Sea is a niche market, and we don’t compete with the rest of the world.

And for [offsets], our focus is harsh environment and arctic areas, and that’s our only focus, specialized from that. And the rules and regulations, that’s always [unintelligible] from the area.

We’ll take our final question today from Todd Scholl from Wunderlich Securities.

We’ve seen you expand your presence in the Middle East, where we’ve also, in the past couple of weeks, seen a couple of 10-year contracts for some jackup rigs with Saudi Aramco. And I’m just curious, have you guys moved to consider of any of those opportunities, or would you consider opportunity of that length? And if you did, would that potentially be a contract that you could drop a jackup down into a Seadrill Partners with?

The first thing is whether we would go down there. We don’t have any more jackups where we can make a long term commitment in the Middle East as we speak. Unfortunately, we have to wait a little bit before the next series of units are coming. So that part of it will take the time.

What we have seen in Mexico, for example, contract length and a package deal, that I think is pretty unprecedented in this space. And I think it opens up for a possible drop down. But we have said previously that we don’t expect too many jackups to be dropped down, because of the more short term [unintelligible] of those rates. But of course when you see longer term contracts, where you don’t expect the rigs to ever move out of that area or move away from that particular client, that is an interesting opportunity also for the Seadrill Partners story.

And just one last thing, I know we’re not supposed to ask about modeling questions, but I figure this is the last question. I’m just wondering if we could get a point of clarification. You said that fourth quarter EBITDA should be up about 15% year over year over last year. Is that correct?

No, sorry. It’s in excess of 15% over third quarter.

That will conclude the Q&A session. I would now like to turn it back to our speakers for any additional or closing remarks.