Seadrill Partners LLC. (fka SDLPQ)

[jugs]

Moody's came out with a paper this morning on SDLP and its General Partner, SDRL. The report is not nice. Due to my NDA-required contractual agreement I'm not allowed to do a copy and paste. What I will do, however, is try to encapsulate their thesis which amounts to this:

1. Debt obligations will loom exceedingly large by year end (2016). This is not only due to debts becoming payable in 2017 and 2018, but also because of current and ongoing shipbuilding endeavors.

2. With fourteen ships now under construction, money is being sucked out of earnings faster than can be accommodated.

However--- the ratings agency does recognize that mitigation does exist:

1. Ours is a young fleet with an average age of less than five (5) years. This is outstanding for one of the biggest and best operators in this space.

2. Particulars tied into the plight of SDRL should not be seen as having an umbilical connection to SDLP inasmuch as (we here at...) are minority controlled by Seadrill to the tune of 47% whereas SDLP is majority owned by the rest of us.

3. Existing contractual arrangements we now hold are with top tier companies such as Chevron (according to Moodys).

My hope is that we won't have to face a tender from the GP as has happened over the recent few months with Northern Tier (NTI), an MLP that I co-owned as of a few weeks following its IPO. What had been an incredibly beautiful relationship for several years turned sour overnight and I liquidated my positions. NTI is now being sucked into the GP's fold and will cease to exist as a stand-alone. Terms of the tendering process are not very much to the liking of the retail side and there are class actions now under way.

Hopefully, none of this will befall us here. However, this morning I placed a GTC to buy a thousand units of SDLP at $2.22 just in case. SDRL might just go for the jugular unless the company is somehow able to pull a rabbit or two out of the hat without having to drain blood from us.

Meanwhile, I hope for the best for us all on this board.