Seadrill Limited Navigates Mixed Earnings Call with Optimism

Seadrill Limited ((SDRL)) has held its Q1 earnings call. Read on for the main highlights of the call.

Seadrill Limited’s recent earnings call presented a mixed sentiment, highlighting both achievements and challenges. The company celebrated endorsements and maintained a robust financial position, yet faced hurdles such as reduced economic utilization and market uncertainties. Despite these challenges, Seadrill remains optimistic about future opportunities.

Recognition of Outstanding Service

Seadrill’s commitment to excellence was recognized with two significant endorsements. The Sonangol Quenguela was awarded the 2024 Rig of the Year by TotalEnergies, while the West Vela received the 2024 Supplier Recognition Award from ConocoPhillips. These accolades underscore Seadrill’s dedication to delivering high-quality service in the industry.

Strong Financial Position

Seadrill closed the first quarter with a solid financial footing, boasting $430 million in cash and a backlog of $2.8 billion extending through 2028 and into 2029. This strong financial position provides a foundation for future growth and stability, even amidst market uncertainties.

Increased Operating Revenues

The company reported total operating revenues of $335 million for Q1, marking a $46 million increase from the previous quarter. This growth was primarily driven by an increase in contract-earning revenues, which rose by $44 million due to additional operating days.

Positive Market Outlook

Seadrill remains optimistic about the market outlook, engaging in active dialogue with clients for opportunities commencing in the latter half of 2025 and 2026. The company anticipates multiple contract awards in the coming months, signaling confidence in future growth.

Improved Utilization in April

Despite a dip in economic utilization to 84% in Q1 due to issues in Brazil, Seadrill reported a material improvement in utilization in April. This improvement reflects the company’s efforts to address operational challenges and enhance performance.

Economic Utilization Below Standard

Economic utilization for the first quarter was below standard at 84%, impacted by downtime for three rigs in Brazil. The issues were primarily related to regulatory matters and initial operational challenges, which the company is actively addressing.

Challenges in Market Conditions

Seadrill is navigating a challenging market environment characterized by global macro uncertainty and OPEC’s accelerated supply increases. These factors are affecting commodity prices and client investment confidence, leading to disruptions in demand.

Stacked Rig and Competitive Pressure

The West Capella is currently stacked in Malaysia, facing competitive pressure from other rigs. Seadrill is engaged in ongoing discussions for potential opportunities to deploy this rig, highlighting the competitive nature of the market.

Uncertain Demand in Key Regions

The deferral of work in Africa has led to reduced floater demand in 2025, although Seadrill expects growth to rebound in 2027 and beyond. The company is closely monitoring these regional dynamics to adapt its strategies accordingly.

Petrobras Contract Mediation

Seadrill is currently involved in voluntary mediation with Petrobras regarding delay penalty notices related to the Sete matter. The outcomes of these discussions remain uncertain, but the company is committed to resolving the issue amicably.

Forward-Looking Guidance

Looking ahead, Seadrill provided guidance for the full year, expecting total operating revenues to range between $1.3 billion and $1.36 billion, excluding reimbursable revenues. Adjusted EBITDA is projected to be between $320 million and $380 million, with capital expenditures anticipated between $250 million and $300 million. Despite global macro uncertainties, Seadrill remains confident in the demand for deepwater drilling and anticipates multiple contract awards in the near future.

In summary, Seadrill Limited’s earnings call reflected a mixed sentiment, balancing notable achievements with market challenges. The company remains committed to leveraging its strong financial position and industry recognition to navigate uncertainties and capitalize on future opportunities.