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What Were Seadrill Partners Expenses in 1Q17?

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Expenses

Seadrill Partners’ (SDLP) vessel and rig operating expenses fell 10% to $75.8 million in 1Q17—compared to $84.3 million in 4Q16. Its expenses fell by $33.2 million from $109 million in 1Q16. The expenses included Seadrill Partners’ payment of its offshore crew, insurance costs, repairs and maintenance expenses, and costs related to onshore personnel. In the following chart, you can see that Seadrill Partners’ expense-to-revenue ratio improved to 23.1% in 1Q17—compared to 23.8% in 4Q16 and 24.5% in 1Q16.

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G&A expenses

Seadrill Partners’ G&A (general and administrative) expenses fell to $10.5 million in 1Q17—compared to $13.1 million in 4Q16. The expenses were $3.4 million lower than its G&A expenses of $13.9 million in 1Q16.

Cost reduction

In order to withstand the current industry downturn, Seadrill Partners and other offshore drillers (OIH)—Atwood Oceanics (ATW), Diamond Offshore Drilling (DO), Transocean (RIG), Rowan Companies (RDC), Seadrill (SDRL), and Noble (NE)—had no choice but to reduce their costs as much as possible.

Operating income

Seadrill Partners recorded operating income of $173 million in 1Q17—lower than its operating income of $223 million in 1Q16. However, the operating income is higher than last quarter’s operating income of $164.8 million. Earlier, we learned that the partnership’s revenue fell. Although its costs also fell, its rate of cost decline was higher. Its operating income was higher than the previous quarter.

Operating income is calculated as total operating revenue less total operating expenses, including cash and non-cash items. In the next part, we’ll discuss Seadrill Partners’ income excluding non-cash items and interest.

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