Seadrill Limited — Interim / Quarterly Report 2016

Aug 25, 2016

SEVAN DRILLING LIMITED

INTERIM FINANCIAL REPORT SECOND QUARTER AND HALF YEAR 2016

Highlights Second Quarter 2016

• Operating revenue in Q2 2016 was USD 61.5 million (Q2 2015 USD 99.4 million).
• EBITDA in Q2 2016 was USD 29.1 million (Q2 2015 USD 52.1 million).
• Net loss in Q2 2016 was USD 7.4 million (Q2 2015 profit of USD 13.7 million).
• On April 14, 2016 Sevan Developer exercised the second six-month option of the delivery deferral agreement with Cosco Shipyard, which extends the deferral period to October 15, 2016.
• On April 29, 2016 the Company announced the extension of the revolving credit facility ("RCF") with Seadrill Limited to December 31, 2017 and amendments to certain covenants in its bank facility.

Subsequent Events

• On August 25, 2016 Birgitte Ringstad Vartdal and Svend Anton Maier resigned as Directors of the Company. Per Wullf was appointed Chairman and Georgina Sousa was appointed as Director.

Unaudited figures in USD million, except where noted	Q2 2016	Q1 2016	Q2 2015	YTD 2016	YTD 2015
Operating revenue	61.5	52.8	99.4	114.3	182.5
(1) EBITDA	29.1	12.7	52.1	41.8	90.4
Operating profit/(loss)	12.5	(4.7)	33.0	7.8	52.8
Net financial items	(18.5)	(16.8)	(17.3)	(35.3)	(34.7)
Net (loss)/profit	(7.4)	(20.4)	13.7	(27.8)	15.9
EPS - basic and diluted (USD)	(0.25)	(0.69)	0.46	(0.94)	0.53
Company performance:
Available days (2)	224	276	273	500	543
Technical Utilization (3)	98.6%	93.9%	94.6%	97.1%	89.8%
Economic Utilization (4)	98.6%	83.4%	95.1%	93.5%	88.8%

• (1) EBITDA equals net profit/loss adding back net financial items, tax income/expense, depreciation and amortization expense and impairment expense
• (2) Available Days are the total number of operating rig calendar days in the period. A rig is operating when accepted by the customer.
• (3) Technical Utilization is the actual number of revenue earning days divided by Available Days. A revenue earning day is defined as a day on which a rig earns its day rate after commencement of operations.
• (4) Economic Utilization is total operating revenue, excluding bonuses, divided by total potential charter revenue for the period.

Financial performance summary

For the three months ended June 30, 2016

Operating revenue

Operating revenue was USD 61.5 million compared to USD 99.4 million in Q2 2015. The decrease in revenue is primarily due to the Sevan Driller being idle until it commenced a well service program at a lower rate during the quarter and Sevan Brasil at a reduced day rate for the full quarter. The Sevan Louisiana achieved a Q2 2016 technical utilization of 96.9% (93.8% in Q2 2015), Sevan Brasil technical utilization while operating under contract was 99.5% (98.9% in Q2 2015) and Sevan Driller technical utilization while on contract was 99.4% (91.0% in Q2 2015)

Total Operating expenses

Total operating expense was USD 49.0 million compared to USD 66.4 million in Q2 2015. Vessel operating expenses were USD 27.8 million compared to USD 43.2 million in Q2 2015. The decrease is mainly attributable to Sevan Driller being idle for part of the quarter and lower operating costs due to continued cost saving initiatives across the fleet. General and administrative costs were USD 3.8 million compared to USD 3.9 million in Q2 2015. Depreciation expenses were USD 16.6 million compared to USD 19.1 million in Q2 2015.

Net financial items

Net financial items amounted to USD 18.5 million in Q2 2016 compared to USD 17.3 million in Q2 2015. Interest and commitment fees on the Revolving Credit Facility ("RCF") with Seadrill increased by USD 1.4 million. Interest expenses on the secured bank loan facility decreased by USD 0.1 million.

Net loss for Q2 2016 was USD 7.4 million compared to a net profit of USD 13.7 million in Q2 2015.

For the six months ended June 30, 2016

Operating revenue

Operating revenue was USD 114.3 million for the six months ended June 30, 2016 compared to USD 182.5 million for the comparative period in 2015. The decrease in revenue is primarily due to the Sevan Driller being idle until it commenced a well service program at a lower rate during the second quarter and Sevan Brasil at a reduced day rate for the first half of 2016.

Total Operating expenses

Total operating expense was USD 106.5 million compared to USD 129.7 million in th comparative period in 2015. Vessel operating expenses decreased by USD 22.5 million primarily due to Sevan Driller being idle for most of the first half of 2016 in addition to lower operating costs due to continued cost saving initiatives across the fleet. General and administrative costs increased by USD 1.4 million due additional corporate activities part of which are reflected through higher costs from external advisers and in management services.

Net financial items

Net financial items amounted to USD 35.3 million compared for the six months ended June 30, 2016 compared to USD 34.7 million in 2015. Interest and commitment fees on the Revolving Credit Facility ("RCF") with Seadrill increased by USD 1.1 million.

Net loss was USD 27.8 million for the six months ended June 30, 2016 compared to a net profit of USD 15.9 million for the comparative period in 2015.

Balance sheet

Cash and cash equivalents amounted to USD 31.6 million as of June 30, 2016 compared to USD 42.4 million as of December 31, 2015. During Q2 2016, interest and principal payments under the debt facility and RCF were USD 13.9 million and USD 105.0 million, respectively. As of June 30, 2016, USD 160.0 million was drawn on the RCF after repayments were made in the quarter.

Sevan Drilling Limited ("Sevan Drilling") is preparing its accounts on the assumption that the company is a going concern. Liquidity remains sensitive to performance of the rigs under their contracts, the continued availability of the RCF and other market conditions.

Operations performance summary

In Q2 2016, the Sevan Drilling rigs achieved technical utilization of 98.6% and economic utilization of 98.6%. The Sevan Brasil achieved technical utilization of 99.5% working for Petroleo Brasileiro S.A. ("Petrobras") in Brazil.

The Sevan Louisiana achieved 96.9% working for LLOG Bluewater Holdings LLC ("LLOG"). In April 2016, LLOG cancelled the 365 day extension that was previously agreed in November 2014. The contract expires in May 2017.

The Sevan Driller achieved 99.4% working for Shell do Brasil ("Shell") in Brazil. The rig concluded Shell's well service program on July 23, and is mobilizing to the Cosco shipyard in Qidong, China. The rig will continue to be marketed while in its idle period.

The Sevan Developer remained ready for delivery (warm stacked) at the Cosco shipyard in China. In April 2016, the second six-month option period to extend the deferral period to October 15, 2016 was exercised. The final delivery installment has been amended to USD 474.3 million, representing 90% of the USD 526.0 million contract price. In Q2 2016 Cosco refunded 5%, or USD 26.3 million, of the contract value plus interest. Sevan Developer continues to be marketed for an acceptable drilling contract where financing can be obtained to allow delivery.

At August 24, 2016 the fleet's contracted backlog revenue is USD 267 million, excluding option and extension periods.

Other items

During the second quarter of 2015, Sevan Drilling initiated an internal investigation regarding activities involving an agent under the Company's drilling contracts with Petrobras in Brazil. These contracts were entered into prior to the separation from the Sevan Marine Group and the subsequent listing in May 2011. The Company continues its investigation into the activities dating back to the separation from Sevan Marine. Reference is made to Note 10 of the interim financial statements for further details.

Outlook

Oil prices appear to be stabilizing in the \$40-\$50 range and there is a sense of optimism from the industry that we have seen the worst of this down cycle. Field production decline curves continue to accelerate and oil companies are beginning to see the impacts of spending cuts over the last two years. There is a growing realization that this level of investment is not sustainable and capital will be required to slow decline curves and grow production at some point.

In spite of an apparent shift in market sentiment, offshore drilling lags behind the cycle and remains challenging. There is an active spot market for short term work, however there continues to be multiple rigs bidding for opportunities and a significant supply overhang. Although scrapping and stacking activity is addressing some of this overhang, it will likely take 12-18 months after the bottom of the cycle for rates to improve materially.

The majority of customer conversations in the marketplace continue to relate to "blend and extend" arrangements. In some instances, rates are being negotiated lower without extending the contract term with cancellation as the alternative. Robust contract terms are increasingly important and many customers are keeping a watchful eye on performance metrics in an effort to find grounds to terminate.

In July, the Sevan Driller completed Shell's well intervention program in Brazil. The rig is mobilizing to the Cosco shipyard in China, which is competitive on costs during the idle period. Additionally, we will have access to Cosco resources should an upgrade to the bilge keel become required for securing new employment. Extending the keel further improves the motion characteristics of the rig on the well location and is incorporated in the design of the fleet, except Sevan Driller. With the keel upgrade and the current oil storage capacity of 150,000 barrels, the Sevan Driller provides a versatile solution to oil companies looking to achieve more efficient operations.

The Sevan Developer delivery deferral period was extended in April 2016 by six months to October 2016, USD 26.3 million plus associated costs was refunded, and the final delivery installment was amended to 90% of the contract price. The Company continues to market the rig for an acceptable drilling contract while the delivery period is deferred.

During the second quarter the revolving credit facility was extended through 2017 and certain covenants measured at the Seadrill consolidated level were amended, as the first part of a broader plan to refinance and recapitalize the business. By resetting these of covenants (at Seadrill consolidated level) a more stable platform has been established to pursue and conclude negotiations with our stakeholders.

We have met our milestone obligations as they have become due and we remain in constructive discussions with our banks around a long term solution that will bridge us to a recovery in the industry. We continue to expect this process will conclude by the year end.

Due to other commitments, geographic locations and cost saving initiatives it has been agreed that Birgitte Ringstad Vartdal and Svend Anton Maier will resign as Directors of the Company effective August 25, 2016. Per Wullf has been appointed Chairman of the Board and Georgina Sousa has been appointed as Director. Ms. Sousa has served as our company secretary since 2014. She is the Head of Corporate Administration for Frontline Ltd., and a director and company secretary of Frontline 2012 Ltd., Seadrill Limited, North Atlantic Drilling Ltd., and Ship Finance International Limited.

The Board of Sevan Drilling expresses their appreciation to Ms. Vartdal and Mr. Maier for their contributions, and welcomes Ms. Sousa to the Board.

25 August 2016 The Board of Directors Sevan Drilling Limited Hamilton, Bermuda

Questions should be directed to Sevan Drilling Management AS represented by: Scott McReaken, Chief Executive Officer

Interim and Preliminary 2016 financial statements

Consolidated Statement of profit of loss

		Three months ended June 30,		Six months ended June 30,
Unaudited figures in USD million	Note	2016	2015	2016	2015
Operating revenue		61.5	99.4	114.3	182.5
Operating expense		(27.8)	(43.2)	(61.5)	(84.0)
General & administrative expense		(3.8)	(3.9)	(9.4)	(8.0)
Depreciation and amortization	4	(16.6)	(19.1)	(34.0)	(37.6)
Foreign exchange loss related to operations		(0.8)	(0.2)	(1.6)	(0.1)
Total operating expense		(49.0)	(66.4)	(106.5)	(129.7)
Operating profit		12.5	33.0	7.8	52.8
Financial expense	5	(18.5)	(17.3)	(35.3)	(34.7)
Net financial items		(18.5)	(17.3)	(35.3)	(34.7)
(Loss)/profit before tax		(6.0)	15.7	(27.5)	18.1
Tax expense		(1.4)	(2.0)	(0.3)	(2.2)
Net (loss)/profit		(7.4)	13.7	(27.8)	15.9
Attributable to:
Equity holders of the Company		(7.4)	13.7	(27.8)	15.9

Earnings per share for (loss)/profit attributable to the equity holders of the Company during the period (USD per share):

Basic and diluted	(0.25)	0.46	(0.94)	0.53

Consolidated Statement of Comprehensive Income

		Three months ended June 30,		Six months ended June 30,
Unaudited figures in USD million	Note	2016	2015	2016	2015
Net (loss)/profit		(7.4)	13.7	(27.8)	15.9
Items that may be reclassified to profit or loss
Foreign currency translation		—	—	—	(0.1)
Total Comprehensive (loss)/profit		(7.4)	13.7	(27.8)	15.8
Attributable to:
Equity holders of the Company		(7.4)	13.7	(27.8)	15.8

Interim financial statements (continued)

Consolidated Balance Sheet
Unaudited figures in USD million	Note	As at June 30, 2016	As at December 31, 2015
ASSETS
Drilling rigs	4	1,506.8	1,565.5
Other fixed assets	4	0.4	0.6
Other non-current assets	6	2.6	14.7
Total non-current assets		1,509.8	1,580.8
Inventories		50.5	51.3
Trade and other receivables	7	61.0	79.2
Cash and cash equivalents		31.6	42.4
Total current assets		143.1	172.9
Total assets		1,652.9	1,753.7
EQUITY
Share capital	1	3.0	3.0
Share premium		713.5	713.5
Other equity		(338.4)	(310.6)
Total equity		378.1	405.9
LIABILITIES
Non-current portion of bank borrowings	5	868.6	937.7
Non-current loan from related party	5	160.0	—
Other non-current liabilities		—	1.7
Total non-current liabilities		1,028.6	939.4
Trade and other payables		30.8	38.0
Current portion of bank borrowings	5	133.9	134.6
Current portion of loan from related party	5	—	170.0
Other current liabilities	8,9	81.5	65.8
Total current liabilities		246.2	408.4
Total liabilities		1,274.8	1,347.8
Total equity and liabilities		1,652.9	1,753.7

Interim financial statements (continued)

Consolidated Statement of Changes in Equity

Unaudited figures in USD million	Share Capital	Share Premium	General Reserve	Equity Settled Employee Benefits Reserve	Retained Earnings	Total Equity
Equity as at January 1, 2015	108.6	666.0	280.0	2.4	(499.3)	557.7
Net loss	—	—	—	—	(151.8)	(151.8)
Foreign currency translation	—	—	—	—	—	—
Capital decrease of Sevan Drilling ASA	(108.5)	—	—	—	108.5	—
Parent Migration	2.9	47.5	(280.0)	—	229.6	—
Equity as at December 31, 2015	3.0	713.5	—	2.4	(313.0)	405.9
Equity as at January 1, 2016	3.0	713.5	—	2.4	(313.0)	405.9
Net loss	—	—	—	—	(27.8)	(27.8)
Equity as at June 30, 2016	3.0	713.5	—	2.4	(340.8)	378.1

Interim financial statements (continued)

Consolidated Cash Flow Statement

Unaudited figures in USD million	Note	Six months ended June 30, 2016	Six months ended June 30, 2015
Cash flows from operating activities
Cash from operations		70.2	61.1
Interest paid	5	(25.4)	(22.9)
Net cash generated from operating activities		44.8	38.2
Cash flows from investment activities
Purchases of property, plant and equipment and other non current assets		(2.4)	(11.9)
Refund of yard installment		29.0	—
Net cash flow used in investment activities		26.6	(11.9)
Cash flows from financing activities
Proceeds from interest-bearing debt	5	60.0	45.0
Repayment of interest-bearing debt	5	(140.0)	(70.0)
Debt fees paid		(2.8)	—
Net cash flow generated used in financing activities		(82.8)	(25.0)
Net cash flow for the period		(11.4)	1.3
Foreign Exchange on Cash and Cash Equivalents		0.6	—
Cash balance at beginning of period		42.4	30.2
Cash balance at end of period		31.6	31.5

Notes to the Interim and Preliminary 2016 financial statements

Note 1 - Organization and basis of preparation

General information - Sevan Drilling Limited

Sevan Drilling Limited (the "Company") and its subsidiaries (the Company and the subsidiaries collectively referred to as the "Group") is an international offshore drilling contractor specializing in the ultra-deepwater segment.

Sevan Drilling Limited was incorporated in Bermuda under the Companies Act on December 20, 2013 as an exempted company limited by shares. Its shares of common stock have been listed under the symbol "SEVDR" on the Oslo Stock Exchange (Oslo Børs).

The Group has three ultra-deepwater drilling rigs in operation (the Sevan Driller, Sevan Brasil, and Sevan Louisiana) and a fourth (the Sevan Developer) waiting delivery. Sevan Brasil is operating under a six-year contract with Petrobras in Brazil expiring in July 2018. Sevan Driller operated under a 60 day well intervention contract with Shell do Brasil, which concluded earning revenue on July 23 and is subsequently mobilizing to the Cosco shipyard in China where it will remain idle. Sevan Louisiana is operating under a three-year contract with LLOG Bluewater Holding LLC ("LLOG") which was extended 365 days in November 2014, cancellable until May 2016. In April 2016, LLOG exercised its right to cancel the contract extension and the contract expires in May 2017. Sevan Developer delivery period has been deferred until October 15, 2016, following agreements concluded in Q4 2014 and recently amended in April 2016. The delivery can be extended for up to two additional periods of six months at the Group's option up to October 2017.

Basis of preparation

The consolidated financial statements include the assets and liabilities of the Company, its majority owned and controlled subsidiaries. All intercompany balances and transactions have been eliminated on consolidation. Effective June 30, 2016 Sevan Drilling ASA was recapitalized as a wholly owned subsidiary of the group and continues to be consolidated.

These consolidated financial statements as at and for the three and six months ended June 30, 2016 (the "Interim Financial Statements") have been prepared in accordance with International Accounting Standard 34 Interim Financial Reporting. They do not include all disclosures that would be required in a complete set of financial statements and should be read in conjunction with the 2015 Annual Report.

The Interim Financial Statements have been prepared on a historical cost basis. The Group's financial instruments consist of cash, trade receivables, trade payables, and bank borrowings measured at amortized cost with variable interest rates. Management believes that the carrying value, excluding financing fees, approximates fair value for all the Group's financial instruments.

The accounting policies adopted in the preparation of the Interim Financial Statements are consistent with those followed in the preparation of the 2015 Annual Report. The Interim Financial Statements are unaudited and were approved by the Board of Directors on August 25, 2016.

Note 2 - Results of the interim period

During the three months ending June 30, 2016, the Group earned USD 61.5 million of revenue from the operation of Sevan Brasil and Sevan Driller in Brazil and Sevan Louisiana in the US Gulf of Mexico.

Total operating expenses for Q2 2016 were USD 49.0 million. Vessel operating expenses in Q2 2016 amounted to USD 27.8 million, which result from rigs operating under contracts. General and administrative costs were USD 3.8 million and depreciation and amortization were USD 16.6 million.

As the Group's revenue and operating expenses are based on contractual day rates, the Group is not exposed to significant fluctuations in revenue and expense as a result of seasonality or cyclicality.

Net financial items in Q2 2016 amounted to USD 18.5 million and included amortization of deferred financing costs, interest expense, and commitment and guarantee fees. The Group performed its obligations under its bank facility and the RCF in Q2 2016.

The Group drew USD 60.0 million and repaid USD 70.0 million under the RCF in Q2 2016, and repaid USD 35.0 million of principal on the current bank facility during the period. The closing cash and cash equivalents were USD 31.6 million at June 30, 2016.

Note 3 - Segment information

Basis of segmentation

The Board of Directors of the Company, which is identified as the chief operating decision maker in the Group ("CODM"), aggregates the rigs into a single reporting unit representing the fleet as a whole.

The CODM evaluates the operating results of each rig but is primarily focused on the results of the overall fleet with a focus on several key metrics at the Group level, including revenue, operating profit, EBITDAand utilization rates.

Note 4 - Property, plant and equipment

The rigs are aggregated for reporting purposes as they all provide the same service, have the same production process, are marketed to the same customer base, are based on the same design/ use the same methods to provide their services and operate in the same regulatory environment. The rigs form a single global fleet and each rig can be redeployed to other locations based on demand.

	Property, Plant and Equipment
Unaudited figures in USD million	Construction in process (CIP)	Units in operation (UIO)	Drilling rigs	Other fixed assets	Total fixed assets
As at December 31, 2015
Cost	95.2	2,037.1	2,132.3	9.7	2,142.0
Accumulated impairment	—	(298.1)	(298.1)	—	(298.1)
Accumulated depreciation	—	(268.7)	(268.7)	(9.1)	(277.8)
Net book value	95.2	1,470.3	1,565.5	0.6	1,566.1
As at June 30, 2016
Cost	66.2	2,041.2	2,107.4	9.7	2,117.1
Accumulated impairment	—	(298.1)	(298.1)	—	(298.1)
Accumulated depreciation	—	(302.5)	(302.5)	(9.3)	(311.8)
Net book value	66.2	1,440.6	1,506.8	0.4	1,507.2
Six months ended June 30, 2016
Beginning net book value	95.2	1,470.3	1,565.5	0.6	1,566.1
Additions	—	4.1	4.1	—	4.1
Refund from yard	(29.0)	—	(29.0)	—	(29.0)
Depreciation charge	—	(33.8)	(33.8)	(0.2)	(34.0)
Ending net book value	66.2	1,440.6	1,506.8	0.4	1,507.2

The closing net book values of the Company's drilling units were as follows:

Unaudited figures in USD million	As at June 30, 2016	As at December 31, 2015
Rig net book value
Sevan Driller	401.2	408.0
Sevan Brasil	502.5	511.6
Sevan Louisiana	536.9	550.7
Sevan Developer	66.2	95.2
Total	1,506.8	1,565.5

Sevan Developer - construction in progress

No capitalization of borrowing costs were included in the additions to CIP during Q2 2016 due to the completion of construction of the Sevan Developer.

In October 2014, the Group entered an agreement with Cosco to defer the delivery date for 12 months with options to extend the date for subsequent periods of 6 months until October 2017. At the end of the deferral period and if options to extend are not exercised, the construction contract will terminate and the USD 78.9 million initial

investment will be refunded and the investment impaired. Refund guarantees have been provided for the full deferral period. Delivery will occur if and when a contract that can support financing of the final delivery installment is secured.

In April 2016, the Sevan Developer deferral agreement was extended to October, 15 2016 and as part of the extension, USD 26.3 million was refunded and the delivery installment was amended to USD 473.4 million on exercising the second deferral.

Sevan Drilling Rig VI Pte Ltd has the option to cancel the construction contract on each of the deferred delivery dates. Cosco will, in such case, refund the installments paid under the construction contract. Cosco provided Sevan Drilling Rig VI Pte Ltd security through bank refund guarantees, effective for the 36 month potential deferral period beginning in October 2014.

Sevan Developer will remain in China at the Cosco Shipyard and the Company will continue marketing the rig for an acceptable drilling contract where financing can be obtained to allow delivery.

Impairment Analysis

The Company reviews the carrying amounts of its tangible assets at the end of each reporting period to determine whether there is any indication that those assets may be impaired. The net asset value of the Group exceeded its market capitalization as at June 30, 2016. This is identified as an indicator of impairment of assets. As a result, each of the Group's rigs was, as of June 30, 2016 identified as a cash-generating unit and tested for impairment.

The recoverable values of the rigs were calculated using an income method discounted cash flow. The key assumptions applied for the purpose of impairment testing of rigs in operation include a discount rate and expected future cash flows. To discount the future cash flows, management used a post-tax weighted average cost of capital (WACC) of 10%. Estimated future cash flows are based on the Group's five-year forecast and utilize several assumptions including forecasted operational expense, operational taxes, utilization and day rates. Day rates are based on current contract amounts for the remaining contract term and expected market rates in the rigs' recontract years for forecasts beyond the contracted periods. The Company has assumed long-term day rates based on cyclical averages, but no growth above these expected market rates has been assumed for the remainder of the rig lives beyond the forecast period. No impairment has been recognized as at June 30, 2016.

Based on sensitivity analyses performed, the Company believes that reasonable movements in the key assumptions may result in the recognition of an impairment loss. Thus there is a possibility the Group may recognize impairment in future periods if the facts underlying the key assumptions change over the coming year. An increase in the WACC of 100 basis points to 11% would result in an impairment of approximately USD 40.8 million, and a reduction of expected market rates in the re-contract years of 10% would would result impairment by approximately USD 115.7 million over the whole fleet.

Note 5 - Financing activities

In October 2013, the Group entered into a USD 1,750 million secured bank loan facility with ING as agent for a syndicate of lenders. The facility was composed of a USD 350 million export credit facility provided by GIEK and a USD 1,400 million commercial facility provided by a syndicate of several commercial banks. The commercial facility had two tranches. Tranche A in the amount of USD 1,400 million (USD 200 million GIEK and USD 1,200 million commercial) and Tranche B in the amount of USD 350 million (USD 150 million GIEK and USD 200 million commercial).

Tranche A was drawn in October 2013 and used to, inter alia, refinance existing debt at the time. Tranche B was intended to be used to finance the delivery installment for Sevan Developer, and was cancelled in Q4 2014 as a consequence of the agreement made with Cosco to defer delivery of Sevan Developer. Upon delivery, new financing will have to be secured to cover the final installment. The availability of such financing is expected to depend on a satisfactory drilling contract having been secured for Sevan Developer and lending capacity at the time.

The GIEK tranche is extended to September 2023 and incurs interest on the amounts outstanding at a rate of LIBOR + 2.5%, payable quarterly in arrears. The commercial tranche matures in September 2018 and incurs interest on the amounts outstanding at a rate of LIBOR + 2.9%, payable quarterly in arrears.

The Company's bank facility is guaranteed by Seadrill at a cost of 1.0% per annum on amounts drawn.

Effective December 29, 2014 the Revolving Credit Facility ("RCF") with Seadrill was increased to USD 300 million and on April 28, 2016 it was extended to December 31, 2017. As a result the RCF has been reclassified as a non-current liability in the quarter. The RCF is secured with second priority in the Group's assets and incurs interest on drawn amounts at a rate of LIBOR + 6.0% (+5.5% previously), payable quarterly in arrears. There is a commitment fee of 2.4% (2.2% previously) per annum on the undrawn balance of the RCF.

		Financing Activities
Unaudited figures in USD million	GIEK Tranche	Commercial Tranche	Loan fees	Total bank facility	RCF with Seadrill	Total
As at December 31, 2015
Principal outstanding	151.3	933.6	(12.6)	1,072.3	170.0	1,242.3
Current portion	21.7	118.3	(5.4)	134.6	170.0	304.6
Non-current portion	129.6	815.3	(7.2)	937.7	—	937.7
Undrawn facility (available for utilization)	—	—	—	—	130.0	130.0
Six months ended June 30, 2016
Additional drawdowns	—	—	—	—	60.0	60.0
Additional loan fees			(2.8)	(2.8)		(2.8)
Amortization of deferred financing costs1			3.0	3.0		3.0
Principal repayments	(10.8)	(59.2)	—	(70.0)	(70.0)	(140.0)
Interest payments	(1.1)	(17.6)	—	(18.7)	(6.7)	(25.4)
As at June 30, 2016
Principal outstanding	140.5	874.4	(12.4)	1,002.5	160.0	1,162.5
Current portion	21.7	118.3	(6.1)	133.9	—	133.9
Non-current portion	118.8	756.1	(6.3)	868.6	160.0	1,028.6
Undrawn facility (available for utilization)	—	—	—	—	140.0	140.0

¹Deferred financing costs were recognized on the bank facility as a whole and not allocated to the individual tranches

	Three months ended June 30,		Six months ended June 30,
Unaudited figures in USD million	2016	2015	2016	2015
Financial expense
Interest expense	9.5	9.6	19.1	19.1
Amortization of finance fees	1.5	1.6	3.0	3.5
Interest on RCF, commitment and guarantee fees to Seadrill	7.5	6.1	13.2	12.1
Total	18.5	17.3	35.3	34.7

Note 6 - Other non-current assets

As at June 30, 2016	As at December 31, 2015
0.7	1.4
0.6	12.2
1.3	1.1
2.6	14.7

Note 7 - Trade and other receivables

Unaudited figures in USD million	As at June 30, 2016	As at December 31, 2015
Trade receivables	46.6	67.3
Other receivables	14.4	11.9
Total	61.0	79.2

Note 8 - Other current liabilities

Unaudited figures in USD million	As at June 30, 2016	As at December 31, 2015
Income and gross revenue tax payable	—	0.2
Other taxes payable	5.7	6.0
Related party payable	58.1	45.3
Other current liabilities	17.7	14.3
Total	81.5	65.8

Note 9 - Related party activities

Balances and transactions between the entities within the Group have been eliminated on consolidation and are not disclosed in this note. Details of transactions between the Group and other related parties are disclosed below.

Seadrill has guaranteed the bank facility referred to in Note 5. Seadrill is also providing the RCF (in the amount of USD 300 million) of which USD 160 million was outstanding as of June 30, 2016. Seadrill charged the Group interest on the RCF and guarantee and commitment fees in a total amount of USD 7.5 million and USD 13.2 million during the three and six months ended June 30, 2016 respectively.

As a consequence of being responsible for the day-to-day operation of the Group's rigs, Seadrill entities incur direct costs on behalf of the Group. Seadrill also provides management support and administrative services to the Group. The total fees charged for operating and management services were USD 4.7 million and USD 11.4 million for the three and six months ended June 30, 2016.

The Group had a total current liability (including the commitment, guarantee and management fees mentioned above) of USD 58.1 million to Seadrill as at June 30, 2016 (compared to USD 45.3 million as at December 31, 2015).

Effective August 17, 2015, Sevan Drilling Management AS seconded Scott McReaken to North Atlantic Management AS on a part time basis assigned to the position of Chief Financial Officer which includes the provision of such services to North Atlantic Drilling Ltd. The Group has a total current asset with North Atlantic Drilling of USD 0.5 million. Total charges in the year were USD 0.3 million.

Seadrill Limited issued a guarantee for the obligations under the well intervention program contract for the Sevan Driller. The guarantee is capped at USD 20.0 million maturing in July 2016 on conclusion of the contract.

Note 10 - Contingencies

In 2011, Sevan Drilling was separated out from the 100% ownership of Sevan Marine ASA and listed separately on the Oslo Stock Exchange. On October 16, 2015, Sevan Marine ASA issued an Oslo Stock Exchange notice advising that its Board had received a report from external counsel it had engaged to investigate allegations of improper conduct related to historical contracts with Petrobras. Sevan Marine handed over the report to the Norwegian National Authority for Investigation and Prosecution of Economic and Environmental Crime ("ØKOKRIM"). The report concluded that it was more likely than not that illegal conduct had occurred, in the form of improper payments to obtain business, when Petrobras awarded contracts to subsidiaries of Sevan Marine ASA between 2005-2008.

Against this background, the Company reports that Sevan Drilling ASAhas been accused of breaches of Sections 276 a and 276 b of the Norwegian Criminal Code in respect of payments made in connection with the performance during 2012 to 2015 of drilling contracts originally awarded by Petrobras to subsidiaries of Sevan Marine ASA in the period between 2005-2008. In connection with the accusation, ØKOKRIM has performed a search and seizure in the Company's offices. The Company is co-operating with the authorities in identifying and making available all documents, which the authorities consider relevant.

The Company has also voluntarily approached the Brazilian authorities with regard to these matters. The Company's own investigation into these matters in ongoing but to date has uncovered no evidence of improper conduct by the Company.

We cannot predict the scope or ultimate outcome of the ØKOKRIM investigation. We also cannot predict whether any other governmental authority will seek to investigate this matter, or if a proceeding were opened, the scope or ultimate outcome of any such investigation. As a result no loss contingency has been recognized in the Company's consolidated financial statements.

Note 11 - Events after balance sheet date

The Group has evaluated subsequent events after the balance sheet date through the date the accompanying Consolidated Financial Statements became available to be issued.

On August 25, 2016 Birgitte Ringstad Vartdal and Svend Anton Maier resigned as Directors of the Company. Per Wullf was appointed Chairman and Georgina Sousa was appointed as Director.

Responsibility statement

We confirm, to the best of our knowledge, that these interim consolidated financial statements for the period 1 January to 30 June 2016, have been prepared in accordance with IAS 34 - Interim Financial Reporting, and give a true and fair view of the Group's assets, liabilities, financial position and profit or loss as a whole. We also confirm, to the best of our knowledge, that the Interim Financial Reporting includes a fair review of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements, a description of the principal risks and uncertainties for the remaining six months of the financial year, and major related parties transactions.

25 August 2016 The Board of Directors Sevan Drilling Limited Hamilton, Bermuda