Release Date: February 26, 2025

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

Positive Points

Seadrill Ltd (NYSE:SDRL) returned over $500 million in capital to shareholders in 2024. The company added $1.3 billion in contracted backlog and divested non-core assets for $400 million. Seadrill Ltd (NYSE:SDRL) has a strong balance sheet with $3 billion in durable contract cover extending through 2028 and into 2029. The company secured two long-term contract awards in Brazil, adding $1 billion in backlog. Seadrill Ltd (NYSE:SDRL) has a share repurchase program that returned $792 million to shareholders, reducing issued share count by 22%.

Negative Points

The market is softening in 2025 with some trade rivals offering lower day rates. Seadrill Ltd (NYSE:SDRL) experienced 50 days of downtime for the West Taus due to regulatory matters in Brazil. The company is facing a $213 million claim from Petrobras related to past contracts. Fourth quarter results were adversely impacted by a reduction in operating days and planned out of service time. Seadrill Ltd (NYSE:SDRL) incurred an uncharacteristically high amount of non-revenue days at the beginning of 2025.

Q & A Highlights

Q: Can you provide details on the 50 days of downtime for the West Tala in Q1? Was it due to an incident or regulatory changes? A: Simon Johnson, CEO: The downtime was due to the regulator's interpretation of existing rules, not a change in the rules themselves. We are working with clients and regulatory bodies to navigate these expectations.

Q: Regarding the Petrobras claim related to the Secche rigs, is the $213 million claim new, and have there been similar claims in the past? A: Simon Johnson, CEO: The claim is new, and we were surprised by it. The contracts limit penalties to 10% of the contract value. We are in the early stages of understanding the claim and exploring all possible defenses.

Q: How would you characterize the tone of client discussions regarding project economics and contracting activity for 2025 and beyond? A: Simon Johnson, CEO: We are seeing more exploration activity, with about 30% of our rigs currently drilling exploration wells. The immediate outlook for 2025 is unclear, but we expect improvement in 2026 as deferred demand intersects with major projects.

Q: Can you provide guidance on operating expenses for 2025, particularly for rigs without clear work like the Capella? A: Grant Creed, CFO: We will be disciplined with rigs like the Capella, stacking them if no work is secured. Stacking costs are around $6-10 million initially, with a daily run rate of approximately $5,000.

Story Continues

Q: With the current market uncertainty, how does Seadrill view its position regarding potential M&A or strategic initiatives? A: Simon Johnson, CEO: We are proponents of industry consolidation, but any deal-making requires market stability. Currently, the focus is on running our business efficiently amid uncertainty.

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

This article first appeared on GuruFocus.

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