Seadrill Limited — Management Reports 2017

Dec 16, 2017

Seadrill Limited

Strictly Private & Confidential

December 2017 Business Plan Update

Subject to the disclosures, assumptions and qualifications set out in this presentation including, without limitation, the disclaimer set forth on page 2

December 2017

Disclaimer

We have prepared this document solely for informational purposes. You should not definitively rely upon it or use it to form the definitive basis for any decision, contract, commitment or action whatsoever, with respect to any proposed transaction or otherwise.

The information contained herein includes certain statements, estimates and projections with respect to our anticipated future performance and anticipated industry trends. Such statements, estimates and projections reflect various assumptions concerning anticipated results and industry trends, which assumptions may or may not prove to be correct. Actual results and trends may vary materially and adversely from the projections contained herein. Neither we nor any of our affiliates, or our or their respective officers, employees, advisors or agents, make any representation or warranty, express or implied, in relation to the accuracy or completeness of the information contained in this document or any oral information provided in connection herewith, or any data it generates and accept no responsibility, obligation or liability (whether direct or indirect, in contract, tort or otherwise) in relation to any of such information. We and our affiliates and our and their respective officers, employees, advisors and agents expressly disclaim any and all liability which may be based on this document and any errors therein or omissions therefrom. Neither we nor any of our affiliates, or our or their respective officers, employees, advisors or agents, make any representation or warranty, express or implied, that any transaction has been or may be effected on the terms or in the manner stated in this document, or as to the achievement or reasonableness of future projections, management targets, estimates, prospects or returns, if any. Any views or terms contained herein are preliminary only, and are based on financial, economic, market and other conditions prevailing as of the date of this document or as at the date stated in respect of that information and are therefore subject to change. We undertake no obligation or responsibility to update any of the information contained in this document. Past performance does not guarantee or predict future performance.

This document and the information contained herein do not constitute an offer to sell or the solicitation of an offer to buy any security, commodity or instrument or related derivative, nor do they constitute an offer or commitment to lend, syndicate or arrange a financing, underwrite or purchase or act as an agent or advisor or in any other capacity with respect to any transaction, or commit capital, or to participate in any trading strategies, and do not constitute legal, regulatory, accounting or tax advice to the recipient. We recommend that the recipient seek independent third party legal, regulatory, accounting and tax advice regarding the contents of this document. This document does not constitute and should not be considered as any form of financial opinion or recommendation by us or any of our affiliates. This document is not a research report and was not prepared by the research department of Seadrill Limited or any of its affiliates.

Table of Contents

• Executive Summary
• Updated Business Plan
• Updated Components
• 1. Q3 Actuals
• 1. Movement in the USD LIBOR Swap Curve
• 1. Fearnley December 2017 Update
• 1. 2018 Budget, Rollover Cost and Other Assumptions

• Appendix

Cleansing Presentation Case vs December Delayed Dayrate Case

Executive Summary

The Business Plan, which forms the basis for the Recapitalisation Plan being negotiated with our creditors, has been updated to reflect:

Q3 Actuals

• Movement in the USD LIBOR swap curve
• Revised Fearnley dayrate and utilisation assumptions (taken from the Fearnley December 2017 Addendum Report)
• The 2018 budget, revised rollover cost and other assumptions
• The updated Business Plan (the "Updated Business Plan") over the period 2017-2022 see revenues lower by \$1,407 million, EBITDA lower by \$499 million and cash flow (UFCF) lower by \$604 million compared to the presentation published on 12 September 2017 (the "Cleansing Presentation")(1)
• The Updated Business Plan does not draw on either IHCo cash or on the \$500 million Amortisation Conversion Election

Updated Business Plan

Updated Business Plan – December Financing Case

Key Financials

(\$ in millions)	2017	2018	2019	2020	2021	2022	Total	Delta to Cleansing Deck
Cash Flow Items
Revenue	\$1,892	\$1,159	\$2,152	\$2,662	\$2,939	\$3,192	\$13,997	(\$1,406)
Opex	(\$866)	(\$637)	(\$1,025)	(\$1,107)	(\$1,220)	(\$1,280)	(\$6,134)	\$724
G&A	(\$273)	(\$164)	(\$171)	(\$177)	(\$192)	(\$199)	(\$1,176)	\$183
EBITDA	\$754	\$359	\$956	\$1,378	\$1,527	\$1,713	\$6,687	(\$499)
LTM & Capex	(138)	(296)	(492)	(284)	(233)	(138)	(\$1,580)	(\$52)
Working Capital	(\$127)	\$85	(\$163)	(\$110)	(\$43)	(\$40)	(\$397)	(\$172)
Tax	(\$64)	(\$56)	(\$115)	(\$144)	(\$167)	(\$181)	(\$727)	\$121
Unlevered FCF	425	91	186	841	1,085	1,354	3,982	(\$603)
Debt service	(1,248)	(471)	(462)	(815)	(955)	(1,125)	(5,076)	\$523
New Capital / Other	344	895	40	40	40	40	1,399	\$27
Net Cash Flow	(479)	515	(236)	66	170	269	305	(\$54)
Balance Sheet Items
Bank Debt	\$5,662	\$5,662	\$5,662	\$5,304	\$4,782	\$4,064		\$621
New Secured Capital	-	895	968	1,048	1,135	1,228		(\$25)
Bonds	2,295	-	-	-	-	-
Sale Leaseback	787	689	592	494	397	299
Total Debt	\$8,744	\$7,246	\$7,222	\$6,846	\$6,313	\$5,592		\$597
Cash	890	1,405	1,170	1,236	1,406	1,674		(\$54)
Net Debt	\$7,854	\$5,840	\$6,052	\$5,610	\$4,908	\$3,918		\$650
Credit Statistics
Net Debt / EBITDA	10.4x	16.3x	6.3x	4.1x	3.2x	2.3x		0.4x

1. Amortisation in 2020 is less than the term sheets' 2020 amortisation of \$434mm, which reflects the true-up for amortisation paid after 1 August 2017

Key Metrics – New Business Plan vs Cleansing Deck

UFCF

Updated Business Plan – Cashflow Bridge

Liquidity After Restructuring

(\$mm)

Updated Components Q3 Actual

Q3 Actuals

Key Financials Q3 2017

(\$ in millions)	Q3 Forecast	Q3 Actual	Delta
Cash Flow Items
Revenue	\$440	\$468	\$28
Opex	(205)	(209)	(\$4)
G&A	(\$55)	(\$69)	(\$14)
EBITDA	\$180	\$190	\$10
LTM & Capex	(31)	(47)	(16)
Working Capital	(39)	(172)	(\$133)
Tax	(24)	(7)	\$17
Unlevered FCF	\$85	(\$36)	(\$121)
Debt service	(265)	(265)	(0)
New Capital / Other	42	118	76
Net Cash Flow	(\$138)	(\$184)	(\$45)
Balance Sheet Items
Bank Debt	\$5,662	\$5,662	-
New Secured Capital	-	-	-
Bonds	2,295	2,295	-
Sale Leaseback	811	811	-
Total Debt	\$8,768	\$8,768	\$0
Cash	1,106	1,060	(45)
Net Debt	\$7,662	\$7,708	\$45
Credit Statistics
Net Debt / EBITDA	8.6x	8.6x	0.1x

• Higher EBITDA due to higher uptime, partially offset by higher operating and G&A costs for the quarter relative to forecast
• Forecast assumes flat quarterly G&A of \$55 million, main difference to actual relates to timing of costs incurred (2017 full year actual forecast: \$192 million vs full year forecast of \$220 million)
• Lower working capital due to higher prepaid expenses related to prepetition liability settlements
• Net cashflow reduction of \$45 million

Updated Components LIBOR Curve

Change in LIBOR Curve

• The cleansed business plan at the point of filing used the prevailing LIBOR swap curve at the time
• US interest rates have risen since then as shown above, leading to higher interest expense over the 5-year projection period
• This movement results in an \$86 million decrease in Unlevered Free Cash Flow during the period

Updated Components Fearnley December 2017 Update

• Fearnley released a third addendum report in December 2017 to the original report on the offshore drilling market released in February 2016
• Their updated report indicates weaker market conditions in the short to medium term and a slower recovery:
• Dayrate and utilisation forecasts are lower across the forecasted period
• Full recovery of the drilling market postponed to 2021
• This was largely driven by developments on the demand side as the prolonged downturn is keeping dayrates at the lower end of the range previously predicted
• Following the drop in oil price in late May this year, additional drilling programs were postponed over the summer, leading to a somewhat less bullish demand picture in the near term
• At the same time Fearnley noted that the probability of a future recovery has strengthened, even if timing remains difficult to predict:
• Oil market rebalancing is ongoing with price now stable within the range predicted by Fearnley
• Depletion of current fields is still a growing trend and will not be reversed without significant investment by the oil companies
• US shale has become less of a threat as the long term production volumes achievable even under optimistic assumptions are nowhere near what would be required to replace offshore production
• Offshore drilling costs have been reduced substantially

Operating Assumptions Variance: Floaters					Operating Assumptions Variance: BE JU
	2018	2019	2020	2021	2022
Uncontracted Dayrate						Uncontracted Dayrate
Jun 2017	\$224	\$315	\$420	\$435	\$435
Dec 2017	\$224	\$322	\$394	\$406	\$428
Delta	-	7	(\$26)	(\$29)	(\$7)
%	-	2%	(6%)	(7%)	(2%)
Total Floater Utilisation						Total BE JU Utilisation
Jun 2017	77%	87%	89%	91%	91%
Dec 2017	58%	76%	83%	89%	92%
Delta	(19%)	(11%)	(6%)	(2%)	1%

Operating Assumptions Variance: HE JU

	2018	2019	2020	2021	2022
Uncontracted Dayrate
Jun 2017	\$137	\$158	\$215	\$243	\$243
Dec 2017	\$169	\$197	\$236	\$253	\$263
Delta	\$32	\$39	\$2	\$10	\$20
%	23%	25%	1%	4%	8%
Total HE JU Utilisation
Jun 2017	67%	90%	90%	90%	90%
Dec 2017	78%	79%	88%	86%	83%
Delta	11%	(11%)	(2%)	(4%)	(7%)

	2018	2019	2020	2021	2022
Uncontracted Dayrate
Jun 2017	\$90	\$97	\$112	\$118	\$125
Dec 2017	\$67	\$84	\$94	\$103	\$111
Delta	(\$23)	(\$13)	(\$18)	(\$15)	(\$14)
%	(26%)	(14%)	(16%)	(13%)	(11%)
Total BE JU Utilisation
Jun 2017	85%	89%	90%	89%	88%
Dec 2017	68%	74%	87%	90%	90%
Delta	(17%)	(15%)	(3%)	1%	3%

Comments

• Floater and BE JU dayrates and utilisation revised downward
• Floater and BE JU market fully rebalanced by 2021 vs 2020 previously
• HE JU market dayrate assumptions improved throughout the forecast period although 2019+ utilisation assumptions reduced

Updated Components Impact of Budget & Rollover Assumptions

2018 Budget Update Impact

Key Financials 2018

(\$ in millions)	2018 Fearnley	2018 Budget	Delta
Cash Flow Items
Revenue	\$1,426	\$1,159	(267)
Opex	(846)	(\$637)	209
G&A	(220)	(\$164)	56
EBITDA	\$360	\$359	(1)
LTM & Capex	(220)	(296)	(76)
Working Capital	39	\$85	46
Tax	(76)	(\$56)	20
Unlevered FCF	\$102	91	(11)
Debt service	(482)	(471)	11
New Capital / Other	943	895	(48)
Net Cash Flow	564	515	(49)
Balance Sheet Items (as of Q4 18)
Bank Debt	\$5,662	\$5,662	-
New Secured Capital	913	895	(18)
Bonds	-	-	-
Sale Leaseback	689	689	-
Total Debt	\$7,264	\$7,246	(18)
Cash	1,454	1,405	(49)
Net Debt	\$5,810	\$5,841	31
Credit Statistics
Net Debt / EBITDA	16.2x	16.3	0.1x

• Lower EBITDA due to fewer assumed operating units relative to Fearnley 2018 forecast, partially offset by reduced operating costs and G&A
• Higher LTM and capex primarily due to SPS classings and rig upgrades either for marketability or customer specific requirements
• Lower cash tax and higher working capital release due to lower projected revenue for the year
• Reduced debt service and New Secured Capital outstanding due to timing adjustment for the effective date (NSN issuance)

Rollover Cost Assumptions – Opex

The Cleansing Presentation assumed rollover opex per rig of \$130k/d in 2018, followed by a ramp-up of costs in line with the shape of Fearnley's market utilisation assumptions. Normalisation was assumed to occur in 2020

	2018	2019	2020	2021	2022
Opex	130k/d	135k/d	146k/d	152k/d	158k/d
Ramp up %	4%	4%	8%	4%	4%

The 2018 budget update shows an average opex per rig of \$125k/d. The rampup from that point has been amended to reflect a normalised market in 2021 per Fearnley's December update

	2018	2019	2020	2021	2022
Opex	125k/d	130k/d	135k/d	146k/d	152k/d
Ramp up %	-	4%	4%	8%	4%

The Cleansing Presentation had a flat G&A assumption throughout the forecast of \$220 million per annum

	2018	2019	2020	2021	2022
G&A	\$220m	\$220m	\$220m	\$220m	\$220m
Ramp up %	-	-	-	-	-

The Updated Business Plan 2018 budget update shows G&A of \$164 million, down from \$192 million forecasted for 2017, given cost reductions achieved. Roll-over G&A costs are assumed to move in line with opex assumptions

	2018	2019	2020	2021	2022
G&A	\$164m	\$171m	\$177m	\$192m	\$199m
Ramp up %	-	4%	4%	8%	4%

Management Fees Related to SDLP and SeaMex

• Seadrill provides management services to SDLP and SeaMex
• The fees charged by SDRL represent their respective allocations in G&A and certain onshore-related opex costs and are split as follows:

	2018 Budget/Reported	SDLP/SeaMex Related	2018 SDRL Net
Opex	\$636.7 million	\$14.7 million	\$622.0 million
G&A	\$164.0 million	\$34.8 million	\$129.1 million
Total Operating Costs	\$800.7 million	\$49.5 million	\$751.1 million

These fees are included in the December update, but were not included in the previous cleansing deck

The Cleansing Presentation's LTM & Capex per unit (excluding 5-year SPSs) assumptions were:

Asset Class	LTM	Capex
Floaters	US\$4.0m	US\$2.0m
Jack-ups	US\$1.5m	US\$0.5m

The December revision reflects the Company's actual experience over the past 3 years, which we believe is a better benchmark

Asset Class	LTM	Capex
Floaters	US\$4.0m	US\$1.0m
Jack-ups	US\$0.8m	US\$0.5m

Key Metrics – New Business Plan vs Cleansing Deck

UFCF

Liquidity After Restructuring

(\$mm)

Cash Hazards and Opportunities

	Hazards	Opportunities	Entity Affected / Beneficiary
Newbuilds guarantee settlement	TBD	-	RigCo
Working capital buffer	-	+\$50 million	RigCo
Support for JV's	-\$40 million	-	RigCo
Seadrill Partners distributions(1)	-\$40 million p.a.	-	IHCo
Sapura deferred consideration(2,3)	-	+\$95 million	RigCo / NSNCo
Seabras Sapura J.V. dividends	-	+\$40 million p.a.	NSNCo

1. Includes distributions from subsidiaries of Seadrill Partners to Seadrill Partners that are then up-streamed and distributions from Seadrill Ltd's direct stake in the subsidiaries of Seadrill Partners

2. As of September 30, 2017

3. NSNCo benefits post-closing, subject to a minimum outstanding balance of \$55m

Summary of the Business Plan Update

• In conducting its annual budgeting process, the Company has updated its Business Plan to reflect its 2018 budget and updated dayrate and utilisation projections
• While dayrates and utilisation are generally lower than the Cleansing Presentation throughout the projection period, the forecast anticipates a return to a normalised market by 2021
• The impact of lower dayrates and utilisation is partially offset by improved operating expense and SG&A
• Although there is a \$603 million reduction in UFCF over the forecast period, RigCo does not need to receive cash from IHCo or exercise the Amortisation Conversion Election

Appendix December Delayed Dayrate

Variance Analysis – December Delayed Dayrate Case

Operating Assumptions Variance: Floaters Operating Assumptions: HE Jack-ups 2017 2018 2019 2020 2021 2022 Total Utilisation Rate Jun 2017 Financing 51% 77% 87% 89% 91% 91% Jun 2017 Delayed Dayrate 51% 77% 87% 89% 91% 91% Dec 2017 Financing 51% 58% 76% 83% 89% 92% Dec 2017 Delayed Dayrate 51% 58% 76% 83% 89% 92% Annual Uncontracted Dayrate Jun 2017 Financing \$180 \$268 \$363 \$420 \$435 \$435 Jun 2017 Delayed Dayrate \$180 \$224 \$316 \$420 \$435 \$435 Dec 2017 Financing Case \$180 \$224 \$322 \$394 \$406 \$428 Dec 2017 Delayed Dayrate \$180 \$202 \$273 \$394 \$406 \$428 2017 2018 2019 2020 2021 2022 Total Utilisation Rate Jun 2017 Financing 67% 67% 90% 90% 90% 90% Jun 2017 Delayed Dayrate 67% 67% 90% 90% 90% 90% Dec 2017 Financing 67% 78% 79% 88% 86% 83% Dec 2017 Delayed Dayrate 67% 78% 79% 88% 86% 83% Annual Uncontracted Dayrate Jun 2017 Financing \$133 \$141 \$175 \$215 \$243 \$243 Jun 2017 Delayed Dayrate \$133 \$137 \$158 \$215 \$243 \$243 Dec 2017 Financing \$133 \$169 \$197 \$236 \$253 \$263

Operating Assumptions: BE Jack-ups

	2017	2018	2019	2020	2021	2022
Total Utilisation Rate
Jun 2017 Financing	65%	85%	89%	90%	89%	88%
Jun 2017 Delayed Dayrate	65%	85%	89%	90%	89%	88%
Dec 2017 Financing	65%	68%	74%	87%	90%	90%
Dec 2017 Delayed Dayrate	65%	68%	74%	87%	90%	90%
Annual Uncontracted Dayrate
Jun 2017 Financing	\$84	\$95	\$99	\$112	\$118	\$125
Jun 2017 Delayed Dayrate	\$84	\$90	\$97	\$112	\$118	\$125
Dec 2017 Financing	\$84	\$67	\$84	\$94	\$103	\$111
Dec 2017 Delayed Dayrate	\$84	\$76	\$75	\$94	\$103	\$111

Recovery Delay

Midpoint calculation for 6 month delay

Dec 2017 Delayed Dayrate \$133 \$151 \$183 \$236 \$253 \$263

Cleansing Deck Case vs December Delayed Dayrate Case

Liquidity After Restructuring

(\$mm)

Cleansing Deck Forecast – Delayed Dayrate Updated Business Plan – Delayed Dayrate

December Delayed Dayrate Case – Key Metrics

Key Financials
(\$ in millions)	2017	2018	2019	2020	2021	2022	Total	Delta to Cleansing Deck
Cash Flow Items
Revenue	\$1,892	\$1,159	\$1,916	\$2,662	\$2,939	\$3,192	\$13,762	(\$1,641)
Opex	(\$866)	(\$637)	(\$1,025)	(\$1,107)	(\$1,220)	(\$1,280)	(\$6,134)	\$724
G&A	(\$273)	(\$164)	(\$171)	(\$177)	(\$192)	(\$199)	(\$1,176)	\$183
EBITDA	\$754	\$359	\$721	\$1,378	\$1,527	\$1,713	\$6,451	(\$734)
LTM & Capex	(138)	(296)	(492)	(284)	(233)	(138)	(\$1,580)	(\$52)
Working Capital	(\$127)	\$85	(\$121)	(\$151)	(\$43)	(\$40)	(\$397)	(\$172)
Tax	(\$64)	(\$56)	(\$101)	(\$144)	(\$167)	(\$181)	(\$713)	\$135
Unlevered FCF	425	91	7	799	1,085	1,354	3,761	(\$824)
Debt service	(1,248)	(471)	(462)	(815)	(955)	(959)	(4,910)	\$689
New Capital / Other	344	895	40	40	40	40	1,399	\$27
Net Cash Flow	(479)	515	(415)	25	170	435	250	(\$109)
Balance Sheet Items
Bank Debt	\$5,662	\$5,662	\$5,662	\$5,304	\$4,782	\$4,230		\$787
New Secured Capital	-	895	968	1,048	1,135	1,228		(\$25)
Bonds	2,295	-	-	-	-	-
Sale Leaseback	787	689	592	494	397	299
Total Debt	\$8,744	\$7,246	\$7,222	\$6,846	\$6,313	\$5,758		\$763
Cash	890	1,405	990	1,015	1,184	1,619		(\$109)
Net Debt	\$7,854	\$5,840	\$6,232	\$5,832	\$5,129	\$4,139		\$871
Credit Statistics
Net Debt / EBITDA	10.4x	16.3x	8.6x	4.2x	3.4x	2.4x		0.5x

1. Amortisation in 2020 is less than the term sheets' 2020 amortisation of \$434mm, which reflects the true-up for amortisation paid after 1 August 2017