Seadrill Limited Ordinary Shares (Bermuda) NYSE:SDRL

SSeeaaddrriillll LLiimmiitteedd OOrrddiinnaarryy SShhaarreess

((BBeerrmmuuddaa)) NNYYSSEE::SSDDRRLL

Date: 12/01/2011

Symbol: SRDL

Exchange: NYSE

Industry: OIL SERVICES

Sector: Oil & Gas

Recommendation:

Target Price: $60.00

Current Price: $33.52

Summary

• Increased Oil and Gas Spending Globally

• Large and Growing Fleet

• Higher Oil and Gas Prices will drive growth

• Strong growth in sales over the last year

• Dividend Yield will attract institutional

investors

• Low PE for the Industry

Fundamental Data

Market Cap ($B): 13.8

Avg.Vol (10Day): 1,400,000

52 Week High/Low: 17.81 - 35.28

P/E ratio: 11.38

Dividend yield (%): 7.25

ROI: 10.77

ROE: 29.24

Profit Margin (%): 3.37

Operating Margin (%): 13.32

Seadrill Limited Ordinary Shares (Bermuda) NYSE:SDRL Seadrill is a leading offshore deepwater drilling company, aiming to be our customers' most important partner in making oil and gas available in a safe and cost-effective manner. The company operates a versatile fleet of 56 units that comprises drillships, jack-up rigs, semi-submersible rigs and tender rigs for operations in shallow to ultra-deepwater areas in harsh environment and benign environments.

It operates three business segments. The Mobile Units business segment offers services including drilling, completion and maintenance of offshore wells.

The Tender Rigs business segment operates self-erecting tender rigs and semi-submersible tender rigs.

The Well Services business segment provides services using platform drilling, facility engineering, modular rig, well intervention and oilfield technologies.

SeaDrill Limited operates through subsidiaries in Bermuda, Norway, Cayman Islands, British Virgin Islands, Cyprus, Nigeria, Liberia, Hungary, Singapore, Brazil, Hong Kong, Panama, the United Kingdom, Denmark, Malaysia, Brunei and the United States.

SeaDrill’s primary objective is to profitably grow our business to increase long-term distributable cash flow per share to shareholders.

SeaDrill’s business strategy is to focus on modern state-of-the-art offshore drilling units with a main focus on deepwater operations. SeaDrill believe they have one of the most modern fleets in the industry and believe that by combining quality assets and experienced and skilled employees they will be able to provide customers with safe and effective operations, and establish, develop and maintain a position as a preferred provider of offshore drilling services for customers.

SeaDrill believe that a combination of quality assets and highly skilled employees will facilitate the procurement of term contracts and premium dayrates. SeaDrill have grown the company significantly from its incorporation in 2005 and have strong ambitions to continue the growth.

SeaDrill believe that the combination of term contracts and quality assets will provide an opportunity to obtain debt financing for such growth, and allow them to increase the return on invested equity.

The key elements in SeaDrill strategy are as follows:

• commitment to provide customers with safe and effective operations; • combine state-of-the-art mobile drilling units with experienced and skilled employees; • growth through targeted alliances, purchase of newbuildings, mergers and acquisitions; • develop strong position in deepwater and harsh environments; • develop strong position in the tender rig market and pursue further growth in

conventional waters as well as deepwater areas; and • offer a diversified range of well services

Consolidation in the offshore drilling rig industry would improve the pricing and earnings visibility for our services. Such consolidation activities may be in the form of transactions for specific offshore drilling units or companies.

SeaDrill actively look for growth opportunities and intend to take part in the future consolidation of the industry if they determine that potential transactions are in the best interest of shareholders.

Dividend policy and history

Seadrill has an objective to generate competitive returns to its shareholders. This objective will be

supported by frequent distribution of cash dividend. The level of dividend will be guided by

earnings expectations, market prospects, current capital expenditure programs as well as

investment opportunities.

Cash dividend per

share Ex dividend date Payable date

US$ NOK

3Q 2010

0.65 3.88 Dec 16, 2010 Dec 30, 2010

2Q 2010 0.61 3.79 Sep 8, 2010 Sep 24, 2010

1Q 2010 0.60 3.86 Jun 15, 2010 Jul 2, 2010

4Q 2009 0.55 3.21 Mar 15, 2010 Mar 26, 2010

3Q 2009 0.50 2.79 Nov 23, 2009 Dec 7, 2009

Extra ord. 0.30 1.68 Sep 22, 2008 Sep 30, 2008

2Q 2008 0.60 3.32 Sep 4, 2008 Sep 16, 2008

1Q 2008 0.60 3.10 Jun 5, 2008 Jun 18, 2008

4Q 2007 0.25 1.29 Mar 5, 2008 Mar 14, 2008

LATEST NEWS

SeaDrill Limited Acquires Two Semi-submersible Ultra-deepwater Rigs

Monday, 3 Jan 2011 02:45am EST

SeaDrill Limited announced that it has entered into an agreement to acquire the two ultra-

deepwater semi-submersible drilling rigs, Seadragon I and Seadragon II. The total project price

for the two rigs, which are currently under construction at the Jurong Shipyard in Singapore, is

estimated to be approximately USD1.2 billion (including project management for the remaining

construction period, drilling and handling tools, spares, operations preparations and capitalized

interest). Deliveries of the two rigs are expected in the first quarter and fourth quarter 2011,

respectively. Seadrill has secured new bank debt to finance the investment. The principal terms

and conditions have been agreed and the debt will have a seven year tenor and a 13 year

repayment profile. The two rigs will serve as security for the new debt. Furthermore, the first rig

to be completed, Seadragon I, has a five year contract in place. The second unit, Seadragon II, has

currently no employment in place.

SeaDrill Limited Enters into Contract for Newbuild Tender Rig

Wednesday, 22 Dec 2010 05:57am EST

SeaDrill Limited announced that it has entered into a conditional agreement with BP Trinidad and

Tobago LLC for a firm two-year contract plus further one year option period for the newbuild

semi-tender West Jaya offshore Trinidad and Tobago. Contract value for the firm period is

approximately USD 140 million including a mobilization fee for the transit. In addition, BP will

compensate Seadrill for minor equipment upgrades related to the assignment. West Jaya is

currently under construction at Keppel Shipyard in Singapore and delivery is scheduled for the

end of March 2011. The unit will subsequently commence transit to Trinidad/Tobago and start-up

on the contract with BP is expected early July 2011.

SeaDrill Limited Receives Contract Extension from Brunei Shell Petroleum

Tuesday, 23 Nov 2010 03:19am EST

SeaDrill Limited announced that the Company has been awarded a new contract extension by

Brunei Shell Petroleum for the semi-tender assist rig West Pelaut. The production drilling

assignment has a firm duration of three years, and the contract value is estimated to

approximately USD 131 million. The new contract is scheduled to start in direct continuation of

the current contract with Shell, at the end of the first quarter 2012.

SeaDrill Limited Orders Two Jack-Ups in China for Delivery in 2012 and 2013

Monday, 15 Nov 2010 08:42am EST

SeaDrill Limited announced that it has entered into an agreement for the construction of two jack-

up drilling rigs with Dalian Shipbuilding Industry Offshore Co., Ltd (DSIC) in China. The new

units are scheduled for delivery in the fourth quarter of 2012 and first quarter of 2013

respectively, and total project cost is estimated at USD 380 million, which include project

management, drilling and handling tools, spares and capitalized interest. In addition, SeaDrill has

option agreements for construction of further two similar units with DSIC. The units are based on

the Friede & Goldman JU2000E design, and are suitable for operations worldwide, including the

southern North Sea. The units have the capability to operate in water depths up to 400 feet and

drill to depths of 30,000 feet.

SeaDrill Limited Orders Ultra-Deepwater Drillships for Delivery in 2013

Thursday, 11 Nov 2010 02:10am EST

SeaDrill Limited announced that it has entered into a turnkey contract to build up to four new

ultra-deepwater drillships at the Samsung yard in South Korea. The first two drillships are firmly

ordered with delivery in the first and second quarter of 2013, respectively. Total project price per

rig is estimated to be less than USD 600 million, which includes a turnkey contract with the yard,

project management, drilling and handling tools, spares, capitalized interest and operations

preparations. The contract further includes a fixed price option for further two drillships to be

declared during the first quarter 2011. The decision to add another two ultra-deepwater newbuilds

to the existing fleet is based on the continued strength of the offshore drilling market, the return

that these investments are expected to deliver and the financial flexibility generated by the

Company's contract backlog.

Revenue

Periods 2009 2010

March 696.2 852.9

June 815.8 932.9

September 863.2 1074.7

December 878.9

Note: Units in Millions of U.S. Dollars

Earnings Per Share

Periods 2009 2010

March 0.54692 0.47

June 0.85162 0.77124

September 0.78254 0.78928

December 0.88

Note: Units in U.S. Dollars

Consensus Estimates Analysis

# of Estimates Mean High Low 1 Year Ago

SALES (in millions)

Quarter Ending Mar-11 8 1,134.70 1,288.00 929.47 1,013.30

Quarter Ending Jun-11 7 1,183.37 1,365.00 996.77 1,025.06

Year Ending Dec-11 33 4,669.75 5,450.66 3,933.00 4,150.86

EARNINGS (per share)

Quarter Ending Mar-11 9 0.75 0.86 0.61 0.83

Quarter Ending Jun-11 8 0.82 0.98 0.65 0.84

Year Ending Dec-11 37 3.28 3.96 2.75 3.33

LT Growth Rate (%) 3 3.40 4.80 1.50 10.00

Sales and Earnings Figures in U.S. Dollars (USD)

Valuation Ratios

Company Industry Sector S&P 500

P/E Ratio (TTM) 11.38 26.33 13.93 18.01

P/E High - Last 5 Yrs. 27.86 27.06 24.22 49.84

P/E Low - Last 5 Yrs. 8.85 7.82 13.21 12.87

Beta 1.29 0.98 0.85 1.32

Price to Sales (TTM) 3.65 2.81 4.66 2.19

Price to Book (MRQ) 3.01 2.33 1.47 2.91

Price to Tangible Book (MRQ) 4.70 3.13 2.59 7.72

Price to Cash Flow (TTM) 7.79 7.51 9.56 11.04

Price to Free Cash Flow (TTM) -- 15.29 12.74 51.31

Dividends


Dividend Yield 7.25 3.48 1.68 1.58

Dividend Yield - 5 Year Avg. -- 0.17 1.59 2.54

Dividend 5 Year Growth Rate -- 4.78 8.28 -7.79

Payout Ratio(TTM) 62.61 33.49 13.39 38.11

Growth Rates


Sales (MRQ) vs Qtr. 1 Yr. Ago 24.50 10.39 20.95 9.39

Sales (TTM) vs TTM 1 Yr. Ago 26.60 8.99 21.53 9.21

Sales - 5 Yr. Growth Rate 248.11 127.03 14.59 9.94

EPS (MRQ) vs Qtr. 1 Yr. Ago 0.86 -40.79 135.40 4.80

EPS (TTM) vs TTM 1 Yr. Ago 792.41 -- -- --

EPS - 5 Yr. Growth Rate -- 21.04 10.05 6.68

Capital Spending - 5 Yr. Growth Rate 67.94 46.32 18.12 4.67

Financial Strength


Quick Ratio (MRQ) -- 1.13 0.65 0.65

Current Ratio (MRQ) 0.82 1.71 0.82 0.97

LT Debt to Equity (MRQ) 172.32 89.41 17.40 121.28

Total Debt to Equity (MRQ) 210.20 110.34 23.04 178.35

Interest Coverage (TTM) -- 3.05 2.70 16.17

Profitability Ratios


Gross Margin (TTM) 57.83 46.57 24.63 31.59

Gross Margin - 5 Yr. Avg. -- 20.07 27.34 28.43

EBITD Margin (TTM) 52.78 -- -- --

EBITD - 5 Yr. Avg -- 19.08 19.85 18.01

Operating Margin (TTM) 40.85 30.63 7.16 --

Operating Margin - 5 Yr. Avg. -- 14.10 14.71 16.24

Pre-Tax Margin (TTM) 38.21 29.68 7.63 14.43

Pre-Tax Margin - 5 Yr. Avg. -- 15.09 15.54 15.86

Net Profit Margin (TTM) 34.89 25.19 4.35 10.71

Net Profit Margin - 5 Yr. Avg. -- 11.08 10.19 11.63

Effective Tax Rate (TTM) 8.69 16.29 16.74 53.46

Effecitve Tax Rate - 5 Yr. Avg. -- 14.12 23.79 25.18

Efficiency


Revenue/Employee (TTM) 2,926,769 18,761,993 44,331,586 664,364

Net Income/Employee (TTM) 1,021,090 4,424,412 2,792,819 82,286

Receivable Turnover (TTM) 6.65 5.30 7.33 9.63

Inventory Turnover (TTM) -- 13.78 3.29 6.59

Asset Turnover (TTM) 0.24 0.50 0.33 0.54

Management Effectiveness


Return on Assets (TTM) 8.54 9.58 2.69 5.83

Return on Assets - 5 Yr. Avg. -- 6.13 8.79 5.59

Return on Investment (TTM) 10.77 12.47 3.46 7.48

Return on Investment - 5 Yr. Avg. -- 7.97 11.42 7.22

Return on Equity (TTM) 29.24 22.76 4.50 17.35

Return on Equity - 5 Yr. Avg. -- 11.17 16.60 8.63

Contact Detail:

Chutinush Taksinapinunt

Business Development Director

Heffernan Capital Management

Email: [email protected]

Chutinush Taksinapinunt holds a Bachelor of Business Administrators degree Majoring in Finance and Banking. Chutinush Taksinapinunt is an experienced market maker and Portfolio Manager, having worked with some of Thailand’s largest Securities Company and Financial Institutions.

Price Estimate by Shayne Heffernan PhD

Shayne Heffernan of Ebeling Heffernan holds a PhD in Economics serves as CEO of Heffernan Holdings Inc and Co Founder of Ebeling Heffernan www.ebeling-heffernan.com

Bangkok

Suite 53 Athenee Tower 63 Wireless Road, Lumpini, Pathumwan, Bangkok 10330 THAILAND Tel: +66 2 126 8000 Fax: +66 2 126 8080

New York

347 5th Avenue, Suite 1402-508 Ny, NY 10016 Tel: +1 646-403-9881 Fax: +1 646-403-8014

Singapore

3 Raffles Place #07-01 Bharat Building Singapore 048617 Tel: +65 6329 6408Fax: +65 6329 9699

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Seadrill Limited Ordinary Shares (Bermuda) NYSE:SDRL