Release Date: November 13, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Seadrill Ltd (NYSE:SDRL) exceeded expectations with $93 million in adjusted EBITDA, leading to an increase in full-year guidance by 13% to $385 million.
• The company successfully secured additional work for the Svan Louisiana, contributing to the improved financial outlook.
• Seadrill Ltd (NYSE:SDRL) has a strong balance sheet and a significant cash position, providing resilience in a competitive market.
• The company has achieved 70% contract utilization for its fleet in 2025, with expectations for further improvement.
• Seadrill Ltd (NYSE:SDRL) has been recognized for its performance in Brazil, with five rigs working for Petrobras, highlighting its strong market position in a key region.

Negative Points

• The market for drillships is becoming increasingly competitive, with utilization slipping below 90% and expected to trend lower.
• Seadrill Ltd (NYSE:SDRL) faces challenges in securing contracts for some rigs, such as the Svan Louisiana, West Capella, and Sono drillships, due to market uncertainties.
• The company anticipates lower run-rate EBITDA for the fourth quarter due to reduced operating activity and increased OpEx.
• There is a scarcity of immediately available visible opportunities, leading to slow contracting activity and potential downward pressure on rates.
• Seadrill Ltd (NYSE:SDRL) is facing near-term headwinds, including idle time, inflation, and required fleet investment, impacting its operations.

Q & A Highlights

• Warning! GuruFocus has detected 2 Warning Signs with PET.

Q: Can you provide an outlook for your drillships in Brazil, specifically the Jupiter, Corina, and Telus? A: Simon Johnson, CEO: Brazil is a key market for us, and we are optimistic about recontracting our rigs there. We have made meaningful progress with our customer, Petrobras, and are confident in our ability to secure contracts. Brazil remains stable in terms of demand, and we believe our decision to focus on this market is well-timed.

Q: How do you view the potential for upgrading 6th generation drillships to 7th generation capabilities? A: Simon Johnson, CEO: The distinction between 6th and 7th generation is somewhat arbitrary. We are prudent with shareholder capital and will only invest in upgrades if we see a return. Our 6th gen rigs are in markets where additional hookload capacity is not necessary, so we don't see the need for upgrades at this point.

Q: With the market dynamics in 2025, how do you plan to maintain cash margins despite competitive pricing? A: Samir Ali, CCO: We focus on cash generation rather than headline day rates. Each market has different OpEx and CapEx requirements, and we aim to maximize cash flow. We are 70% contracted into next year and are confident in our ability to secure good rates for our assets.

Q: Given the current market conditions, do you see opportunities for asset acquisitions? A: Simon Johnson, CEO: Our balance sheet is poised to respond if the right opportunity presents itself. We have strict metrics for potential acquisitions, and while there's nothing immediate, we are keeping a watchful eye on the market for opportunities that may arise if the period of turbulence extends.

Q: How do you view the geographical spread of your fleet, particularly with the Capella in Southeast Asia? A: Simon Johnson, CEO: We have a strategy of clustering rigs, and while we are currently focusing on opportunities in Southeast Asia, we aim to eventually relocate the Capella to a region where we have a competitive position. We are open to securing work in its current location if it generates meaningful cash flow.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.