Seadrill Q2 2025 Earnings Report

Seadrill EPS Results

• Actual EPS: -$0.68
• Consensus EPS: $0.68
• Beat/Miss: Missed by -$1.36
• One Year Ago EPS: N/A

Seadrill Revenue Results

• Actual Revenue: $377.00 million
• Expected Revenue: $365.73 million
• Beat/Miss: Beat by +$11.27 million
• YoY Revenue Growth: N/A

Seadrill Announcement Details

• Quarter: Q2 2025
• Date: 8/6/2025
• Time: After Market Closes
• Conference Call Date: Thursday, August 7, 2025
• Conference Call Time: 9:00AM ET

Seadrill (NYSE:SDRL), trading on the New York Stock Exchange under the symbol SDRL, is a leading provider of offshore drilling services to the global oil and gas industry. The company specializes in the design, construction, deployment and operation of mobile offshore drilling units, serving major exploration and production companies with turnkey drilling solutions.

Seadrill’s fleet comprises ultra-deepwater drillships, semi-submersible rigs and high-specification jack-up units capable of operating in some of the world’s most challenging offshore environments. In addition to drilling operations, the company offers project management, engineering support and asset integrity services to optimize well delivery and enhance operational efficiency.

Established in 2005 by Shirish Patel and shipping magnate John Fredriksen, Seadrill is headquartered in Hamilton, Bermuda. The company underwent a comprehensive financial restructuring in 2017–2018 to strengthen its capital structure and emerge with a streamlined balance sheet. Today, Seadrill continues to invest in fleet modernization and technological innovation to meet evolving industry demands.

Seadrill operates across key offshore basins, including the Gulf of Mexico, the North Sea, West Africa, Brazil, the Middle East and Asia Pacific. The business is overseen by a board chaired by John Fredriksen and managed by an experienced executive team with deep expertise in offshore drilling, safety and project execution.

Seadrill Q2 2025 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Seadrill delivered $106 million in adjusted EBITDA and achieved a 29% adjusted EBITDA margin in Q2 2025, demonstrating strong operational performance.
• Positive Sentiment: Two new contracts were secured for the West Vallor and the Savannah Louisiana rigs, both commencing in late 2025, helping minimize gaps between projects.
• Positive Sentiment: Management expects a market recovery in late 2026 driven by increased exploration, higher offshore FIDs, and tightening deepwater rig supply.
• Negative Sentiment: The company recorded a $51 million accrual for an unfavorable legal judgment tied to its Sonadrill joint venture, impacting adjusted EBITDA.
• Positive Sentiment: Seadrill maintained full‐year 2025 adjusted EBITDA guidance of $320 million to $380 million and ended Q2 with $419 million in cash and the lowest net leverage in its peer group.

Presentation

[Operator]

My name is Gil, and I will be your conference operator today. At this time, I would like to welcome everyone to the Seadrill Second Quarter twenty twenty five Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. It is now my pleasure to turn today's call over to Mr. Kevin Smith, Vice President of Corporate Finance and Investor Relations. Please go ahead.

[Kevin Smith, VP - Corporate Finance and IR at Seadrill]

Welcome to Seadrill's second quarter twenty twenty five earnings call. I'm Kevin Smith, Vice President of Corporate Finance and Investor Relations, and I'm joined today by Simon Johnson, President and Chief Executive Officer Samira Lee, Executive Vice President and Chief Commercial Officer and Grant Creed, Executive Vice President and Chief Financial Officer. Our call will include forward looking statements that involve risks and uncertainty. Actual results may differ materially. No one should assume these forward looking statements remain valid later in the quarter or year and we assume no obligation to update them except as required by securities law.

[Kevin Smith, VP - Corporate Finance and IR at Seadrill]

Our filings with the U. S. Securities and Exchange Commission provide a more detailed discussion of our forward looking statements and the risk factors affecting our business. During the call, we will also reference non GAAP measures. Our earnings release furnished to the SEC and available on our website includes reconciliations with the nearest corresponding GAAP measures.

[Kevin Smith, VP - Corporate Finance and IR at Seadrill]

Our use of the term EBITDA on today's call corresponds with the term adjusted EBITDA as defined in our earnings release. I'll now turn the call over to Simon.

[Simon Johnson, President & CEO at Seadrill]

Hello, and thank you for joining us on our call. Today, I'll touch on our quarterly performance before moving to contracting updates, some company updates and the market. Sameer will then discuss our commercial outlook in detail, and Grant will review our quarterly financial results and full year guidance. In the second quarter, Seadrill delivered adjusted EBITDA of $106,000,000 and an adjusted EBITDA margin, excluding reimbursables, of 29%. Two of the active customer dialogues discussed on the previous earnings call have been successfully converted into new contracts.

[Simon Johnson, President & CEO at Seadrill]

These fixtures underscore the strength of our commercial team in a competitive environment. The West Vallor was awarded a two well contract with TELUS Energy beginning mid November with an estimated term of ninety days, and the Savan, Louisiana commenced a well intervention contract with Murphy Oil in early August and is expected to work into November. This will be our first campaign for Murphy, and we are thankful that they've entrusted the work to us. Importantly, these fixtures commenced in the 2025, thereby minimizing costly gaps between contracts. Discussions around the three rigs in our Sonangol, Libongos, Sonangol, Quengala and West Gemini remain very positive, and we expect material progress on contract fixtures in the near future.

[Simon Johnson, President & CEO at Seadrill]

In all areas where we operate, our unwavering commitment to operational excellence is what enables us to deliver best in class service to our valued customers resulting in long term partnerships. The 2025 marked an extraordinary fifteen years of operation for the West Gemini and Angola, during which the rig worked primarily for Total Energies. Throughout this time, we have consistently set the standard by delivering sustained operational and safety performance, achieving 97% uptime and a TRIR of 0.13 over the last decade. Total remains a critically important customer, and we thank them for their long contractual commitment to the rig. Driven by our commitment to leading edge innovation and continuous improvement, Seadrill has established the West Minerva real time operations center at our office in Houston.

[Simon Johnson, President & CEO at Seadrill]

This cutting edge facility utilizes advanced analytics and real time data integration to enhance situational awareness, improve decision making and streamline communication across our offshore drilling operations. The positive feedback received from clients of two of the West Minerva reinforces its significant value proposition. Complementing the capabilities of the West Minerva, our Seadrill Academy plays a pivotal role in strengthening Seadrill's performance through world class training and development. As part of the Seadrill Academy, the West Inspiration, our DrillSim six thousand simulator provides immersive scenario based training in drilling and well control. Within the Seadrill Academy, we've successfully developed and implemented a comprehensive managed pressure drilling training course.

[Simon Johnson, President & CEO at Seadrill]

Drawing our experience from drilling over 100 MPD wells, this in house program is specifically designed to provide crews assigned to our eight MPD equipped drillships with the knowledge and hands on skills to continue to set the standard in MPD. This commitment to training and development is a cornerstone of the Seadrill culture. Together, the West Minerva and Seadrill Academy reflects Seadrill's integrated approach to technology, training and performance, a winning model of continuous improvement that both we and our clients are proud of and believe in. Shifting to the broader market outlook, we view the current environment as fleeting. Five key themes point towards a market recovery in late two thousand and twenty six as widely commented on by us and our peers.

[Simon Johnson, President & CEO at Seadrill]

Firstly, customers are focusing on exploration. At a recent conference, Total Energy has reiterated its commitment to drill 15 to 20 exploration wells per year going forward. Meanwhile, BP confirmed increased investment in exploration with a plan to drill 40 wells over the next three years as part of a renewed focus on its core upstream business. This week, an exploration well in the Boomerang block in Brazil's Santos Basin revealed BP's largest hydrocarbon discovery in twenty five years. This significant find will trigger appraisal activities and underscores the potential within legacy basins.

[Simon Johnson, President & CEO at Seadrill]

Brazil's fifth licensing round held in June highlighted a growing interest in frontier exploration and a significant reengagement of the super majors. Notably, 19 of the 34 blocks awarded were situated on the underexplored Equatorial margin play where Exxon and Petrobras have jointly acquired 10 blocks. Chevron, in partnership with CNPC, secured nine blocks signaling Chevron's reentering to Brazil after an eleven year absence. The US Gulf is set for increased exploration activity with the Bureau of Ocean Energy Management holding lease sale two sixty two later this year, the first since December 2023. Recent legislation mandates at least two sales annually from 2026 through 02/1939, an increase from the prior mandate, which only required three sales over five years.

[Simon Johnson, President & CEO at Seadrill]

This expansion is expected to drive more exploration drilling and increased rig demand. Secondly, despite commodity price uncertainty, operators moving forward with offshore project FIDs. Wood Mackenzie forecasts a substantial increase in FIDs from $91,000,000,000 in 2025 to $164,000,000,000 in 2026 and $133,000,000,000 in 2027. These figures represent the highest levels in over a decade and underpin our belief in a market recovery. Thirdly, we're encouraged by recent tendering activity and the opportunities we see developing in coming months, which Sameer will cover in more detail.

[Simon Johnson, President & CEO at Seadrill]

Fourthly, there have been seven multiyear deepwater rig contracts awarded since March with start dates in the second half of twenty twenty six or 2027. These contracts demonstrate customers' long term commitment to deep water even in an uncertain macro environment. And finally, recent transactions leave only one competitive ultra deepwater drillship undelivered in the shipyard. Active drillship supply currently sits at 77 rigs with contracting of just six units needed to reach 95% utilization. The stranded assets are being sold or delivered, and most of the cold stacked drillships cannot be economically reactivated by a rational contractor.

[Simon Johnson, President & CEO at Seadrill]

And with that, I'll turn the call over to Sameer.

[Samir Ali, EVP & Chief Commercial Officer at Seadrill]

Thanks, Simon. As anticipated, twenty twenty five is shaping up to be a year marked by softer utilization and a corresponding increase in competition, placing downward pressure on the near term day rates. Despite the challenging backdrop, we have executed two new contracts. The Savon, Louisiana has secured work in The U. S.

[Samir Ali, EVP & Chief Commercial Officer at Seadrill]

Gulf with Murphy Oil, which will generate earnings and cash flow into November 2025. The rig's unique abilities to operate in shallow water environments in dynamic positioning mode opens up a broader spectrum of work opportunities with new operators. Staying in The U. S. Gulf, the Westfella has secured approximately ninety days of additional work with Talos Energy commencing in November with a break of around one month following the end of the current program.

[Samir Ali, EVP & Chief Commercial Officer at Seadrill]

The rig continues to exceed expectations, enabling us to add term at strong rates at a time when many of our peers are experiencing increased idle periods in The U. S. Gulf. We are aggressively pursuing opportunities to fill our order book for the remainder of 2025 while also focusing on securing contracts for work with the 2026 and 2027 commencement date. As Simon mentioned, we are beginning to see evidence to support our view that an increase in activity is likely and frankly necessary to support energy demand through the rest of the decade and beyond.

[Samir Ali, EVP & Chief Commercial Officer at Seadrill]

Paradoxically, market conditions are objectively better and subjectively worse. The current trend of declining utilization exists in the same environment where we have a tightening of supply of rigs and the need for significant oil and gas investment to meet growing energy demand. Rystad is forecasting a step change in customer spending from land to sea in 2026 where offshore CapEx will exceed onshore CapEx for the first time in a decade. The economics of offshore exploration are increasingly attractive and we anticipate an inflow of capital into this market. When compared to 2025, deepwater spending is expected to increase over 80% and over 130% in 2026 and 2027 respectively.

[Samir Ali, EVP & Chief Commercial Officer at Seadrill]

If realized, this level of investment would extend the durability of the cycle and help address any temporary dislocations between rig supply and demand. Our analysis indicates that drillship utilization will demonstrably improve in late twenty twenty six and 2027. Positioning our high specification floater fleet at the heart of the deepwater market allows us to capitalize as spending is redirected towards offshore basins. In Brazil, which hosts the largest concentration of deepwater rigs, we anticipate demand to remain robust. The recent FID of the Gato De Mato project, Equinor's RFI for an additional rig on the Bacalao Field and Petrobras' Mero and Buzios tenders give us confidence Brazil will remain the key deepwater destination for some time.

[Samir Ali, EVP & Chief Commercial Officer at Seadrill]

This is complemented by a notable uptick in interest by the supermajors. During the recent offshore bid round, over $180,000,000 in signing bonuses were paid. For context, this is more than double compared to the last round held in 2023. Seadrill is a leading operator in Brazil with six drillships currently working in the country. Our strong track record, deep customer relationships and local presence position us well.

[Samir Ali, EVP & Chief Commercial Officer at Seadrill]

Of our fleet, only the West Carina has near term availability and we are actively exploring opportunities both inside and outside Brazil for this unit. Here in The U. S. Gulf, we maintain our view that around four to five rigs are expected to be marketed and available at year end creating a temporary oversupply. Despite these headwinds, we have secured near term work for the Westfella, which is a testament to the exceptional operational performance delivered by our crews.

[Samir Ali, EVP & Chief Commercial Officer at Seadrill]

We anticipate demand will improve in 2026 and again in 2027 with idle rigs being reabsorbed and stronger utilization supporting rate progression. Regarding our fleet, we are in active dialogue with multiple customers for work with the 2026 start date for the West Velha and West Neptune. To finish our overview of the Golden Triangle, West Africa remains a significant source of incremental growth with at least six long term drillship opportunities targeting 2026 and 2027 commencement dates. Securing term work for rigs in Angola remains a key strategic priority for the Sonadrill joint venture as we look to enhance the longevity of the partnership. Discussions for all three rigs remains constructive and we look forward to providing an update in due course.

[Samir Ali, EVP & Chief Commercial Officer at Seadrill]

Outside of the Golden Triangle, Norway remains a region in balance, whilst East Africa and Asia Pacific are showing tangible signs of incremental demand. We are currently tracking opportunities that could absorb over twenty two years of drillship demand with programs commencing in 2026 and 2027. The West Capella is engaged in a competitive tender process for term work in Asia and we are tracking at least 13 active programs across Mozambique, Australia and Southeast Asia with startups in the next two to three years. In summary, we see the potential for strong market recovery in late twenty twenty six and 2027. While the precise timing of customer demand remains uncertain, the underlying need for exploration and reserve replacement is clear.

[Samir Ali, EVP & Chief Commercial Officer at Seadrill]

Our fleet is underpinned by a solid foundation of backlog extending into 2028. And as market fundamentals improve, we remain confident in our ability to maximize earnings and cash flow for each rig. And with that, I'll hand it over to Grant.

[Grant Creed, EVP & CFO at Seadrill]

Thanks, Samir. I'll now walk through our second quarter financial results before providing an update on our full year 2025 guidance. Total operating revenues for the second quarter were $377,000,000 representing a sequential increase of $42,000,000 This improvement was driven almost entirely by higher contract drilling revenues. Both the West Neptune and West Polaris benefited from sequential increases in operating days as the Neptune completed its scheduled SBS and upgrades, while the Polaris commenced its contract with Petrobras in mid February.

[Grant Creed, EVP & CFO at Seadrill]

These items were partially offset by reduced operating days for the West Capella, which completed its contract in the prior quarter. In addition, economic utilization improved to 93%, up from 84% in the first quarter. The marked increase in revenue conversion was driven by the West Auriga and West Polaris, which result teething issues following the commencement of their inaugural long term drilling contracts in Brazil, as well as the West Telus, which resumed operations in February. Finally, management contract revenues increased CAD4 million quarter on quarter to CAD65 million reflecting an agreed upon inflationary increase for the daily management fee Seadrill earns for providing management, operational and technical support to ThunderDrill. The increase was retroactively applied from 01/01/2025.

[Grant Creed, EVP & CFO at Seadrill]

Turning to expenses, total operating expenses for the second quarter were $371,000,000 up from $317,000,000 in the prior quarter. This increase was driven primarily by a $51,000,000 accrual recorded in management contract expenses related to an unfavorable legal judgment associated with the establishment of the Sonadrill joint venture dating back to 2018. As previously disclosed, approximately $10,000,000 of the total liability pertains to 2025 and impacts current year adjusted EBITDA and the remainder relates to prior periods. Adjusted EBITDA was $106,000,000 up 33,000,000 from the prior quarter. And adjusted EBITDA margin excluding reimbursable was 29.5%.

[Grant Creed, EVP & CFO at Seadrill]

Moving to the balance sheet and cash flow statement, we continue to maintain a robust balance sheet with ample liquidity and the lowest net leverage in our peer group. At the end of the second quarter, gross principal debt remained $625,000,000 with maturities extending through 02/1930. We held $419,000,000 in cash, which included $26,000,000 of restricted cash. Net cash flow from operations during the second quarter was $11,000,000 and includes unfavorable working capital movements of CAD66 million driven by an increase in trade receivables for the West Neptune, West Telus and West Polaris as well as settlements of project costs incurred in prior periods related to the West Auriga and West Polaris contract preparations and the West Neptune special periodic survey and upgrades. Payments for capital additions captured within investing activities were $23,000,000 Now moving on to our full year outlook.

[Grant Creed, EVP & CFO at Seadrill]

We maintain the adjusted EBITDA range of $320,000,000 to $380,000,000 and that's based on an updated range for operating revenues of $1,320,000,000 to $1,380,000,000 which excludes $50,000,000 of reimbursable revenues. Adjusted EBITDA guidance includes a non cash net expense of $33,000,000 related to the amortization of mobilization costs and revenues, of which $14,000,000 has been recognized through June 30. Full year capital expenditure guidance range is also maintained at $250,000,000 to $300,000,000 And with that, I'll hand back to Simon for his closing remarks.

[Simon Johnson, President & CEO at Seadrill]

In summary, we are pleased with the momentum we've built through recent contract awards. We remain actively engaged in constructive dialogues with customers for additional opportunities. As we look towards 2026, we're focused on maximizing profitability and minimizing gaps between contracts. With our backlog profile and disciplined approach to contracting, we remain well positioned to deliver long term shareholder value as the market improves. Through leading edge innovations and our relentless pursuit of operational excellence, we will continue delivering safe, efficient and reliable operations for our customers every day.

[Simon Johnson, President & CEO at Seadrill]

With that, I'll now hand the call over to questions. Operator?

[Operator]

You. Okay. So your first question comes from the line of Frederic Steen with Clarkson Securities. Your line is open.

[Fredrik Stene, Head of Research at Clarksons Securities]

Hey, Simon and team. Hope you are well and having a good morning so far.

[Samir Ali, EVP & Chief Commercial Officer at Seadrill]

So Morning, Frederic.

[Fredrik Stene, Head of Research at Clarksons Securities]

I wanted to morning. Morning. So I wanted to to touch upon the, you know, contracting opportunities that that you're mentioning and maybe even more so in the written reports. You did have the Bella and the Louisiana contract today, but I also got the impression that there is more in store in the relatively near future. And just looking at the fleet roll off, I would be inclined to think that this potentially relates to the SomaDrill rigs, potentially relates to the ongoing Buzios tender, for example.

[Fredrik Stene, Head of Research at Clarksons Securities]

So any more color you can give on that would be super helpful, also maybe some Buzios specifics. And as an overarching question around this, based on the discussions that you're currently having, do you have a pipeline of potential work for all your rigs that is non stacked rigs going forward?

[Samir Ali, EVP & Chief Commercial Officer at Seadrill]

Hey, Frederic. There's, I guess, a few questions on there. So I'll start with the Angola one. So as some of you may be aware, there's been a bit of political unrest in Angola, which has candidly added some delays to administrative process there and delayed approvals. But we remain quite optimistic in our abilities to recontract our Angola fleet.

[Samir Ali, EVP & Chief Commercial Officer at Seadrill]

We're in advanced dialogue on all three assets. So for us that is a market that we continue to believe we have a competitive position in and should be able to announce something hopefully in the near future. But again, it takes some time. I'd also say, if you look at that market, you've seen some assets leave, which again positions gives us confidence that we are at the top of the pecking order there of getting new contracts. You had asked about Brazil a little bit.

[Samir Ali, EVP & Chief Commercial Officer at Seadrill]

I can't get into it specifically, but we've done a pretty good job of contracting our fleet in Brazil. We have six rigs down there. Of the six, we have the Carina that's really the one with availability. And I'd say we feel pretty good where we're positioned. You've got opportunities both with Petrobras, which are in the public domain, but you've also got some super majors that are also looking for assets in Brazil and outside of Brazil as well.

[Samir Ali, EVP & Chief Commercial Officer at Seadrill]

So for us, we are marketing the rig in multiple regions across the world. And then kind of to close out, you'd asked about of our fleet that's not stacked. So yes, we have candidly active dialogue on all of those assets. So for us, we feel we said it in the prepared remarks, and we continue to believe that 2026 and into 2027 is when we start seeing the recovery in the market. We think we're approaching the bottom, which could be later this year, early next year, but and then we kind of start recovering into 2026 into 2027.

[Simon Johnson, President & CEO at Seadrill]

And just to add, Frederic, to Sameer's comments, so I think that we're increasingly confident that the market is going improve through 2026. The work is starting to appear in tendering activity and some of those long dated FIDs that have been awarded of late. Twenty twenty five is a nice fight, but we've demonstrated our ability to win work that our peers haven't been able to put a glove on. So we're quite pleased with the progress of contracting and we'll just continue to work diligently. The best advertisement that we have for us is the performance of our rigs, most notably the West Vallor and the Savant, Louisiana.

[Simon Johnson, President & CEO at Seadrill]

Those rigs are winning these contracts by virtue of performance they provide every day to our client base. And I'm ecstatic with what the guys in the rigs have been able to deliver to the clients.

[Fredrik Stene, Head of Research at Clarksons Securities]

Alright. That's super helpful. And then just a super short follow-up to my one question is, are there any rigs for which we should expect prolonged idle time in between contracts?

[Simon Johnson, President & CEO at Seadrill]

Look, think we're every endeavor to ensure that we don't create our own white space. We do have a couple of small gaps that we spoke to with the Louisiana in the near term. But I think the marketing team has really taken up the bat and ensuring that we endeavor to keep the rigs working and that we build backlog that's in continuous in direct continuation of existing contractual commitments. And so far, I've been really pleased with what the guys have been able to deliver there. So we'll see how it goes.

[Simon Johnson, President & CEO at Seadrill]

It's a competitive environment, but it's an improving one. And so I'm really confident with what we've delivered and how things will pan out going forward. Anything to add, Sameer? Yep.

[Fredrik Stene, Head of Research at Clarksons Securities]

No. All right. Thank you so much. Have a good day.

[Simon Johnson, President & CEO at Seadrill]

Thanks, Frederic. Thank you.

[Operator]

Your next question comes from the line of David Smith with Pickering Energy Partners. Your line is open.

[David Smith, Director at Pickering Energy Partners]

Hey, good morning. Thanks for taking my question.

[Simon Johnson, President & CEO at Seadrill]

Good morning, Dave. Dave?

[David Smith, Director at Pickering Energy Partners]

If if I recall correctly, you previously didn't sound keen on, you know, putting in capital into idle assets without, you know, strong line of sight for contracting. And and, Sameer, I appreciate your comments about the you know, being in advanced dialogue, on, yeah, in in the Angola, market. But I just wanted to make sure, you know, thinking about the the prior comments about not investing in the rigs, in idle rigs, is it fair to think that you probably wouldn't start the SPS for the Gemini unless you had pretty strong visibility for future work?

[Simon Johnson, President & CEO at Seadrill]

Yes, that's correct, Dave. Generally speaking, we're reluctant to engage in work that isn't that is discretionary ultimately without a firm contract behind it. I think Sameer gave a really good indication of where we're at with those rigs that are looking at work down in Angola. So at the same time, we don't want to extend unnecessarily idle periods while we're waiting for final approval. So I think what we have done there with Gemini is we offloaded a lot of equipment, operator equipment in Angola before we moved to Namibia, and we've essentially been standing by.

[Simon Johnson, President & CEO at Seadrill]

We have done a little bit of work, but it's not of a material quantum. And we hope, as Sameer said, to have some good news on the contracting front. And at the same time, we'll press the button on going full forward with the survey work and contract preparation that will be required for that work.

[David Smith, Director at Pickering Energy Partners]

I really appreciate that color. Just a little bit bigger picture one, if I may. And and previous cycles, I think we've we've typically seen, you know, loader contract lead times kinda go in the same direction as as utilization and and backlog. But, you know, the past four or five months, we've we've seen operators locking in in multiyear contracts with lead times of, you know, twelve, fifteen, you know, twenty four months. Even though near term demand looks soft and, you know, the rig count has been trending lower, it it's creating some multi, you know, order gaps in between contracts, which is, you know, seems fairly uncommon versus prior cycles.

[David Smith, Director at Pickering Energy Partners]

One of the few reasons that I can think of, you know, for for the change in operator behavior compared to prior cycles, you know, maybe operators are seeing the same thing that that, contractors have been saying. The demand outlook in late twenty six and '27 is strong. The market could be tight, better to lock in the rigs they need now. But maybe I'm missing a better explanation. So I was curious for your thoughts.

[Simon Johnson, President & CEO at Seadrill]

Dave, let me start and then Sameer can add some color. But no, we see it the same way you do. We think that there's an improving dynamic. We're clearly in a bit of a trough at the moment. We've talked about how the markets developed and what unique features this business cycle versus previous, and one of those has been the lack of visibility.

[Simon Johnson, President & CEO at Seadrill]

But yes, we believe fundamentally that those people who are going long and long now are doing so because they believe it will confer an advantage with what's coming ahead. When we think about that and when we think about our exposure to market, a lot of people are concerned about our ability to recontract. We're relatively calm in terms of what lies in front of us, and we see our near term exposure to the market as evidence of operating leverage relative to our peers. And certainly, Sameer and I have had a lot of high minded conversations about the importance of not going long and low. And I think some of these longer term fixtures that have been brought to market recently, I think they were greeted by spectators and market participants with great interest and applause. We were certainly glad to see those rigs receive that work. But it will be interesting to see whether those fixtures stand the test of time and whether they'll come to be seen as being such good fixtures in the future. Like I said, we believe now is not the time to go long and long.

[Samir Ali, EVP & Chief Commercial Officer at Seadrill]

Dave, the only thing I'd add to that is for us, we've been very, very focused on making sure we add to the white space that exists today in 2025 and into early twenty twenty six. And candidly, we're getting the rates our peers are getting for work that starts late twenty six, early twenty seven, but we're getting it for near term work. So for us, minimizing those gaps between contracts is absolutely paramount. And that's where we've been very focused on making sure that we have as much direct continuation work as we can get.

[David Smith, Director at Pickering Energy Partners]

That's great. Thank you very much. I'll turn it back.

[Simon Johnson, President & CEO at Seadrill]

Thanks, Doug.

[Operator]

Your next question comes from the line of Charles Olson with Friendly Securities. Your line is open.

[Truls Olsen, Head of Research at Fearnley Securities]

Thank you. Hi, guys.

[Simon Johnson, President & CEO at Seadrill]

Good morning, Trus.

[Truls Olsen, Head of Research at Fearnley Securities]

A couple of questions from me. And this goes back to perhaps earlier calls. But anyways, and sorry if you'd already been through this, but my line broke here for a while. But you spoke about the CJ70 market in Norway Konica Philips in demand. How is that? Any color on updates on that front?

[Simon Johnson, President & CEO at Seadrill]

Not much to share with you, to be honest, Truls. We haven't heard anything more from Conoco. Discussions to date have indicated that the well program will take the rig into late twenty twenty six. We recently received rig of the year from Conoco for the service delivered by the West Alara. So we know the rig is performing well, but we're no sort of we're no further forward in terms of understanding what their long term plans are for their jackup fleet in Norway.

[Truls Olsen, Head of Research at Fearnley Securities]

Okay. Understood. And then another topic is the such claim and that voluntary mediation, which you entered into. Any updates and color you can share on that one?

[Simon Johnson, President & CEO at Seadrill]

Yes, sure. Look, we don't really have a material update since what we shared with the market on the first quarter earnings call. We continue to have constructive discussions with Petrobras, and we're preparing for mediation process as we previously disclosed, which is in its very early stages. Some of our peers who are part of the same process seem to be a little bit further forward than we are, But we expect to have some feedback on the mediation in early July, but that hasn't been the case. It's not affecting our day to day operations or any future contracting opportunities for that matter.

[Simon Johnson, President & CEO at Seadrill]

This is a really complex legal matter that relates to a project that dates back over a decade. And given that it's in Brazil and it's part of a much larger dispute between Seche and Petrobras, we expect it to run for some time before we get a clear idea as to how it might be resolved. Importantly, it hasn't stopped us from bidding for additional work with Petrobras and make specific sort of reference to the West Carina there. We're a strategic contractor for Petrobras. We've got five rigs under contract to them and as I say, an outstanding tender at present.

[Simon Johnson, President & CEO at Seadrill]

So we'll do what we need to preserve our company's interest. As I said, I think I've said to many people before, I'm not sleepless at night worrying about this issue. Unfortunately, we can't control the pace of resolution. It's going to take some time. We are encouraged that it was Petrobras who proposed the mediation process to the drilling contractors affected, and we just ask everyone to be patient as things develop.

[Simon Johnson, President & CEO at Seadrill]

And we will keep people updated as and when anything material occurs.

[Truls Olsen, Head of Research at Fearnley Securities]

Excellent. Thank you. And given the market outlook, hopefully, you can start to see it even better going forward as well on the other front. But anyways, final element, you talk about near term opportunities and being a competitive market, obviously, with a, call it, positive movement. But anyways, day rates on the Villa and the Luizana, any color you can give relative to call it recent market data points?

[Samir Ali, EVP & Chief Commercial Officer at Seadrill]

Sure. So I'd say with the Bella, my earlier comment was we're getting similar rates to what our peers are getting 2026, early twenty twenty seven. I'd say, but again, we're getting it in 2025 to give you some context of where rates are landing and we're not taking any of the white space that others are willing to accept. For the Savant Louisiana, as Simon mentioned in his prepared remarks, that is intervention work that we're doing right now. So obviously that does come at a different price point.

[Samir Ali, EVP & Chief Commercial Officer at Seadrill]

But for us, it's still cash flow positive and it's EBITDA positive. So for us, it's still good work and we're happy to add it to the Savant schedule.

[Truls Olsen, Head of Research at Fearnley Securities]

Excellent. That's all for me. Thank you.

[Simon Johnson, President & CEO at Seadrill]

Thank you, Charles.

[Operator]

Your next question comes from the line of Greg Lewis with BTIG. Your line is open.

[Gregory Lewis, Managing Director at BTIG]

Yes. Hey, thank you and good morning and thanks for taking my questions everybody. Simon, I'd be kind of curious, right, like kind of what's your view or outlook on the intervention market? Clearly, the Louisiana has had some success. Hey, well intervention is different than drilling, but it is it seems like a viable business, not only in The U.

[Gregory Lewis, Managing Director at BTIG]

S. Gulf Of Mexico, but kind of broader base. We've seen opportunities for Well Intervention, obviously, in the North Sea for years, West Africa, Brazil more recently. Just kind of curious how you're thinking about the well intervention market. Is really this just a one off opportunity for the Louisiana?

[Gregory Lewis, Managing Director at BTIG]

Or could this become something more important to Seadrill over time?

[Simon Johnson, President & CEO at Seadrill]

Look, I think for us, Greg, it's really principally related to achieving continuous utilization on the Savannah, Louisiana schedule. We have been looking at some deeper relationships with providers of critical equipment that allows us to perform that kind of work in a, shall we say, an optimal manner that's equivalent to what you see with a more vertically integrated well intervention specialists. So that's been interesting. But yes, no, really it's about ensuring that the Savanna, Louisiana, which is it's got some unique capabilities in terms of its dynamic positioning ability in shallow water. And also there's a small but really important client base in that transition zone in the Gulf Of Mexico who need to flip between well intervention and conventional drilling work.

[Simon Johnson, President & CEO at Seadrill]

So we're looking at how we can facilitate that with that particular rig, as I say, based on a special water depth capability, but also on its ability to switch between modes of operation. So think speaking more generally about the well intervention market, I think what you say is quite true that it's sort of expanded from what really has been a conversation around plug and abandonment liabilities and mature legacy basins like the North Sea. We're now seeing that there's a much greater appetite for both P and A, but also, shall we say enhanced well intervention in some of the maturing reservoirs in Southern Africa, in Brazil and certainly in the Gulf Of Mexico. There's a relatively small number of vessels worldwide that perform that work. And I think the operators are telling us that they're increasingly frustrated with the high cost of mobilizing units between those quite sort of distant geographies.

[Simon Johnson, President & CEO at Seadrill]

So what we're trying to do is to provide an in basin solution that, whilst it potentially is lower value work than ordinary drilling work, it does allow us to provide visibility on the Savanna, Louisiana schedule, and it fills a much needed gap that the operators have been worried about for some time.

[Gregory Lewis, Managing Director at BTIG]

Yes, 100%. I did have another question. I don't know how much you can talk to it about, but kind of curious on those options on the Vela, typically when we see longer term work at least, the options tend to be at a high price. Any kind of color you can give around those options, those customer options on the Vella? Yes, are those at a higher level than the rig is going to work at in November?

[Grant Creed, EVP & CFO at Seadrill]

So, Greg, we can't go into the exact rate, but I I'll tell you your guess is pretty good.

[Gregory Lewis, Managing Director at BTIG]

Okay. Yeah. No. That's I wasn't looking for a rate. I was looking to understand if, you know, sometime in previous cycles, we've seen options being flat and and other times, we've seen them higher.

[Gregory Lewis, Managing Director at BTIG]

Maybe they're lower sometimes, but no one knows. And then just one other question I had. Some of your competitors, it's actually been impressive how they've looked at maybe some of their noncore assets and just retired them. Realizing that your fleet, you have some rigs that haven't worked in years, some rigs that have worked more recently. And any kind of outlook on maybe some of the more longer term stacked rigs in the fleet and the potential we could see those kind of head off to the scrap yards?

[Simon Johnson, President & CEO at Seadrill]

Yes. So happy to about that, Greg. I mean, there's three rigs in particular with us that fall in that category. There's the West Eclipse, which has been cold stacked now for an excess of five years in Southern Africa. We, from time to time, look at opportunities to remove that rig from the supply and recycle it.

[Simon Johnson, President & CEO at Seadrill]

But we've also received a number of interesting options around repurposing that rig from parties who want to deploy it for non drilling, non oilfield related applications in fact. So the only reason that I think we haven't progressed with that particular rig has just been our interest in sort of this business development opportunity. In terms of the Aquarius and Phoenix, which is stacked in Norway, we don't see any material activity improvement at Norway until mid-twenty six at the earliest. Both rigs require a material capital allocation to put them back to work, both five year SBS work and also just equipment upgrades to continue to work in Norway. But I want to make it quite clear that those rigs have a lot of life left in them.

[Simon Johnson, President & CEO at Seadrill]

We have a history of monetizing rigs at premium and value. So to the extent someone were to show interest in buying those rigs from us or whether there's a trade sale opportunity, that's something we would definitely look at on the merits of the time. But it's important also to remember that harsh environment assets are much more expensive to replace than benign environment deepwater units, especially those with the ability to work in Norway. So I don't think you can expect us doing anything on the recycling front with the Aquarius or the Phoenix anytime soon. They have life in Norway, we believe, albeit not in the immediate future.

[Simon Johnson, President & CEO at Seadrill]

And certainly, they have opportunities in harsh environment markets outside of Norway.

[Operator]

Your next question comes from the line of Hamed Khorsand with BWS Financial. Your line is open.

[Hamed Khorsand, Principal at BWS Financial]

Hi, good morning. So my first question here is that your commentary is now changing 2026 for the market. And I just wanted to understand what your expectations are for day rates given that there's more and more availability as you go into 2026 for these contract opportunities?

[Samir Ali, EVP & Chief Commercial Officer at Seadrill]

Yes. So it's still a competitive environment out there. So but day rates are still holding up pretty well. I'd say a year ago we were looking at five handles in late twenty twenty six. Is that possible? Obviously, it's still there.

[Samir Ali, EVP & Chief Commercial Officer at Seadrill]

But I'd say we're probably slightly lower than that. But rates are still holding up for the most part, especially in The U. S. Gulf.

[Hamed Khorsand, Principal at BWS Financial]

Okay, great. Thank you.

[Samir Ali, EVP & Chief Commercial Officer at Seadrill]

Thanks, Hamed.

[Operator]

Your next question comes from the line of Josh Jain with Daniel Energy Partners. Your line is open.

[Joshua Jayne, Managing Director at Daniel Energy Partners]

Thanks. Good morning. Thanks for taking my questions. Apologies if this was covered in the opening remarks. But could you remind me many of your drillships have MPD?

[Joshua Jayne, Managing Director at Daniel Energy Partners]

How you are thinking about additions moving forward? And maybe just give you the floor to talk about MPD as a competitive advantage as it relates to your fleet today?

[Simon Johnson, President & CEO at Seadrill]

Yes, you bet, Josh. So let me start off and then Sameer can fill in the gaps. So eight of our drillships are equipped with MPD. We also have a jackup that's operated utilizing both MPD and control mudline technology sorry, MPD and the semi in Norway that's also deployed the control mudline technology. So we think that we're a thought leader in this space.

[Simon Johnson, President & CEO at Seadrill]

We've drilled in excess of 100 MPD wells across the company now. And we're one of the few drilling contractors that's utilized every single one of the technologies that's out there today. And in recent year or so, we've been working in close collaboration with Oil States industry to deliver to the industry a new improved IRJ. And both through our collaboration with Oil States and certain other sub vendors, we've been able to affect major improvements in rig up, rig downtimes and also the durability of the bearings that supports the rotating packing elements. So I think MPD is in the process of making that transition from what has been a conventional rental solution delivered by a service company to something that's becoming more integrated into everyday rig operations.

[Simon Johnson, President & CEO at Seadrill]

And that's certainly been our approach. We operate the equipment as if it were ours, even if it's provided through a third party vendor. And as I say, we've been working closely with those same vendors to improve outcomes. We've got a huge amount of interest on the unit that we've deployed down in Brazil with the West Polaris, and we'll be doing an operator demonstration day in conjunction with Oil States here in the next month or so. So really happy with the work that we've done.

[Simon Johnson, President & CEO at Seadrill]

We see this as an important part of what we do, and it's a differentiator relative to some of the other drilling contractors who haven't put as much effort into it as we can. Samir, anything to add?

[Samir Ali, EVP & Chief Commercial Officer at Seadrill]

I'd say commercially, it's becoming more and more important. In The U. S. Gulf, it's almost becoming a must have. So both of our assets in The U.

[Samir Ali, EVP & Chief Commercial Officer at Seadrill]

S. Gulf or both of the drillships in The U. S. Gulf are equipped with it. I'd say in Brazil, it's starting to become more of a requirement.

[Samir Ali, EVP & Chief Commercial Officer at Seadrill]

West Africa is probably of the Golden Triangle probably the third of needing or requiring it. But as we talk to more and more operators, it is becoming a from a nice to have to almost And so I wouldn't be surprised if in five years from now, it's required pretty much everywhere.

[Simon Johnson, President & CEO at Seadrill]

Yeah. I think just one final thought too is it's often in the past being utilized for a given whole section or for a specific technical challenge. But increasingly, it's people are starting to look at it in the light of how it might be used as a performance tool. And I would not be surprised if five years from now that wells are drilled with a closed system from nippling up of the wellhead until completion of the well. That hasn't been something that people have envisaged until in the last year or two.

[Simon Johnson, President & CEO at Seadrill]

So we're excited about the future of the technology. We think it's inherently safer than conventional operations and we're leaning into this.

[Joshua Jayne, Managing Director at Daniel Energy Partners]

Thanks for that. And then as my follow-up, I just wanted to talk through what signs you're ultimately looking for to begin buying back shares again in the market. I think it's pretty understood pretty well understood across the industry sort of soft market is softish from now until the 2026, but then everyone's expecting a pickup at that point. So what signs are you ultimately looking for before you progress again with the buyback? And just how you're thinking about it systematically would be great. And then I'll turn it back. Thanks.

[Simon Johnson, President & CEO at Seadrill]

Yes, absolutely. So we have a financial policy in place that talks about our ambitions and what our parameters are for return of capital. Of course, as we 2027 comes into the frame and what we anticipate in terms of the cash flow that our operation will deliver, obviously, shareholder returns is at the top of the list of the matters that our Board's been in mind to. So we're definitely encouraged by the way that the market's developed, but we still remain concerned about some of the macro headwinds that we've all seen this last three to six month period. So I think we're looking really for a bit of certainty and stability around things such as the tariff in terms of tariffs and understanding what impact they might have on our business.

[Simon Johnson, President & CEO at Seadrill]

And then I think we will sort of have a close look at sort of what comes out of the bottom of our EBITDA machine. And right now, as we signaled last quarter, our mine is focused on cash conservation, but that could change going forward. It's a bit of a watching brief, but we certainly need to see some stability in the general economy and a good oil price outlook I think before you see us get very active. So anything to add Grant?

[Grant Creed, EVP & CFO at Seadrill]

The only thing I'd add is a big part of our story on cash flow generation is the repricing from our legacy contracts we have in Brazil. We've got three rigs there on contracts that were signed some time ago at the bottom of the market, Jupiter, Telus, Carina. We've now recontracted two of those at substantially higher day rates. And that uplift will kick in from the second quarter of next year and that uplift will flow directly to the bottom line and ultimately cash. And of course, Sameer has talked about the third of those Carina, actively pursuing opportunities in Brazil.

[Grant Creed, EVP & CFO at Seadrill]

So that will be a big key milestone in our cash flow generation story that will be important to capital returns, Josh.

[Joshua Jayne, Managing Director at Daniel Energy Partners]

Understood. Thanks. I'll turn it back.

[Operator]

Your next question comes from the line of Noel Parks with Tuohy Brothers. Your line is open.

[Noel Parks, MD - CleanTech and E&P at Tuohy Brothers Investment Research Inc]

Hi, good morning. Hello, Noel. Just had a couple. I was wondering, as you talk with different operators, is the sort of capital discipline driven risk reward thinking among the customers, is it pretty uniform across customers? Like is it are there differences between regions or between the national oil companies and what the majors and the independents are thinking?

[Noel Parks, MD - CleanTech and E&P at Tuohy Brothers Investment Research Inc]

Just wondering if you have people coming at you with totally different scenarios in mind or if it's pretty uniform.

[Samir Ali, EVP & Chief Commercial Officer at Seadrill]

It's relatively uniform. I'd say the bigger the company, more pressure there is on capital return and giving capital back to shareholders. We do also operate for some small not small, but private companies. And the private companies have their own motivations. But the outcome is still the same in either scenario as you've seen just a deferral of demand.

[Samir Ali, EVP & Chief Commercial Officer at Seadrill]

But at the same breath that they're deferring demand, they will openly acknowledge that this can't happen forever. And there is a tacit acknowledgement of look, we're deferring it now, but we know we're going to have to come back to market and we're going to need that asset to drill wells in late twenty twenty six, early twenty twenty seven. And you're starting to see that already with some of these companies contracting for assets in 2026, 2027 and 2028.

[Simon Johnson, President & CEO at Seadrill]

I think 2025 will prove to be a very grim low point when we're looking back in a couple of years' time. And there's been a pronounced lack of exploration success year to date on relative to historical run rate. We've seen a real low water point in terms of the number of FIDs that have progressed. And I think the point that Sameer makes really needs to be underlined. That's not sustainable given the world's need for cost effective hydrocarbons.

[Simon Johnson, President & CEO at Seadrill]

And I think that you can't just continue to kick the can down the road. And certainly, we're starting to see activity levels now and forecasts around FIDs and project sanctions that are starting to underline that there's going be a lot more drilling demand going forward.

[Noel Parks, MD - CleanTech and E&P at Tuohy Brothers Investment Research Inc]

Right. Right. And you mentioned disappointments on the exploration front. We had a nice exception with BT's discovery at boomerang offshore Brazil. And given the size of that, do you is that enough you think to sort of help a firm or accelerate exploratory interest in the industry?

[Simon Johnson, President & CEO at Seadrill]

I think it's a good start, but I think on a worldwide basis, it's a drop in the ocean in terms of what's needed. It's certainly great that it's BP has had that success because I mean they've recently changed their strategy and redirected their efforts back towards conventional hydrocarbons away from renewables. So we're pleased with that. I think the most important thing is, as we said in the prepared comments, we believe it's going to drive some near term activity in Brazil around appraisal drilling. We don't know too much on exactly the size of the wells reserves.

[Simon Johnson, President & CEO at Seadrill]

It's probably a bit early to make any accurate determination of that. But the aerial extent of the reservoir is enormous and that coupled with the amount of pay that we understand was in the zone that penetrated. That's a really good news story for BP and a good news story for a part of the Santos Basin that a lot of people have written off as played out. So I think we made the point that some of these legacy reservoirs still have a lot of energy left in them. So it's great that BP had this success.

[Noel Parks, MD - CleanTech and E&P at Tuohy Brothers Investment Research Inc]

Great. Thanks for the color. Bye bye.

[Simon Johnson, President & CEO at Seadrill]

Thanks, Noel.

[Operator]

Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect. Have a nice day ahead, everyone.

Participants

Executives

• Kevin Smith, VP - Corporate Finance and IR
• Simon Johnson, President & CEO
• Samir Ali, EVP & Chief Commercial Officer
• Grant Creed, EVP & CFO

Analysts

• Fredrik Stene, Head of Research at Clarksons Securities
• David Smith, Director at Pickering Energy Partners
• Truls Olsen, Head of Research at Fearnley Securities
• Gregory Lewis, Managing Director at BTIG
• Hamed Khorsand, Principal at BWS Financial
• Joshua Jayne, Managing Director at Daniel Energy Partners
• Noel Parks, MD - CleanTech and E&P at Tuohy Brothers Investment Research Inc