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Seadrill Limited (SDRL)
NYSE:SDRL
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Seadrill Limited
(NYSE:SDRL)
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Rating:58Neutral
Price Target:
$47.00
▲(7.11% Upside)
Action:ReiteratedDate:02/27/26
The score is held back primarily by weak 2025 profitability and cash flow (net loss, negative EBITDA, and negative free cash flow), partially offset by a stronger technical uptrend. Earnings call guidance and backlog coverage support a potential 2026–2027 improvement, but valuation is challenging with a very high P/E and no dividend yield provided.
Positive Factors
Strong contracted backlog & revenue coverage
A ~$2.5B contracted backlog with ~90% of 2026 midpoint revenue covered provides durable revenue visibility across the next 12–18 months. This coverage reduces short‑term contracting risk, supports utilization targets and underpins a clearer path to EBITDA and cash‑flow recovery as reactivated contracts commence.
Fleet repricing driving higher dayrates
Material repricing of legacy drillships to multi‑year contracts meaningfully boosts revenue per operating day and leverages fixed costs, creating sustained margin upside as higher‑rate contracts start. Multi‑year contracts lock in improved cash flow profiles and reduce exposure to spot volatility.
Conservative leverage and sizable equity base
Low relative leverage and a sizable equity base give Seadrill financial resilience through drilling cycles. With conservative gross debt levels, the company is better positioned to absorb short periods of cash burn, fund selective reactivations or capex, and avoid urgent refinancing pressure over the next several quarters.
Negative Factors
Weak 2025 cash generation and profitability
Return to negative EBITDA and cash burn in 2025 shows earnings volatility and weak cash conversion. Persistent or recurring cash deficits would pressure liquidity, constrain discretionary investments, and increase reliance on backlog conversion or external financing to fund operations and debt service beyond near‑term horizons.
Stacked low‑spec rigs require material reactivation capital
A portion of the fleet is effectively illiquid without significant capital; high reactivation costs reduce fleet optionality and can dilute returns if contracts don’t cover incremental capex. This structural overhang raises the breakeven utilization and prolongs recovery if demand softens or pricing weakens.
Execution & timing risk from multiple rigs rolling off
Concentrated roll‑offs increase execution risk: simultaneous re‑contracting needs can force competitive pricing or idle time if demand mismatches supply timing. Even with backlog, gaps or softer re‑contracts would create revenue volatility and compress margins across the 6–24 month window.
Seadrill Limited (SDRL) vs. SPDR S&P 500 ETF (SPY)
Market Cap
$2.73B
Dividend YieldN/A
Average Volume (3M)1.02M
Price to Earnings (P/E)―
Beta (1Y)1.12
Revenue Growth-9.31%
EPS Growth-91.57%
CountryUS
Employees3,300
SectorEnergy
Sector Strength52
IndustryOil & Gas Drilling
Share Statistics
EPS (TTM)-0.16
Shares Outstanding62,449,448
10 Day Avg. Volume944,777
30 Day Avg. Volume1,018,368
Financial Highlights & Ratios
PEG Ratio0.23
Price to Book (P/B)0.75
Price to Sales (P/S)1.50
P/FCF Ratio-15.57
Enterprise Value/Market Cap1.10
Enterprise Value/Revenue2.11
Enterprise Value/Gross Profit13.03
Enterprise Value/Ebitda11.58
Forecast
1Y Price Target
$49.20Price Target Upside12.12% Upside
Rating ConsensusHold
Number of Analyst Covering5
EPS Forecast (FY)1.06
Revenue Forecast (FY)$1.40B
Seadrill Limited Business Overview & Revenue Model
Company DescriptionSeadrill Limited provides offshore contract drilling services to the oil and gas industry worldwide. It operates in three segments: Harsh Environment, Floaters, and Jack-ups Rigs. The company owns and operates drillships, semi-submersible rigs, and jack-up rigs for operations in shallow and ultra-deep-water in benign and harsh environments. It offers operation support and management services to third parties, as well as related and non-related companies. As of April 8, 2022, the company owned a fleet of 21 offshore drilling units consisting of two harsh-environment rigs, two benign-environment semi-submersible rigs, six drill-ships, and 11 jack-up rigs. It serves oil super-majors, state-owned national oil companies, and independent oil and gas companies. Seadrill Limited was incorporated in 2005 and is headquartered in London, the United Kingdom.
How the Company Makes MoneySeadrill generates revenue primarily through the provision of drilling services under long-term contracts with major oil and gas companies. The company's revenue model is largely based on day-rate contracts, where clients pay a fixed daily rate for the use of its drilling rigs and associated services. Key revenue streams include drilling contracts, project management services, and ancillary services such as maintenance and logistical support. Significant partnerships with major industry players, along with strategic alliances in various regions, enhance Seadrill's market presence and contribute to its earnings. Additionally, the company's focus on maintaining a modern and efficient fleet helps optimize operational costs and improve profitability.
Seadrill Limited Earnings Call Summary
Earnings Call Date:Feb 25, 2026
(Q4-2025)
| % Change Since: |
Next Earnings Date:May 27, 2026
Earnings Call Sentiment Positive
The call emphasized strong operational performance, record safety, meaningful backlog additions and clear guidance for a 2026–2027 earnings and cash flow improvement driven by repriced contracts, rig reactivations and reduced capital spend. Short-term headwinds were acknowledged: a challenging 2025 market, Q4 cash outflows including a $43 million legal payment, stacked low-spec assets with high reactivation costs, and near-term availability/contracting risk for several rigs. On balance, the positives—EBITDA outperformance, backlog growth (+$0.5B to ~$2.5B), 90% revenue coverage at midpoint for 2026, committed utilization at 88% and a visible path to stronger free cash flow in H2 2026—outweigh the near-term negatives.Q4-2025 Updates
Positive Updates
Record Safety and Operational Excellence
Seadrill achieved its best safety performance in company history with total recordable incident rate 50% better than the IADC offshore industry benchmark. Operational milestones include West Neptune completing a record 6-zone completion in 11 days (60% faster than prior benchmark), West Tellus achieving 400 consecutive days of BOP subsea deployment (second longest in fleet history), over 100 MPD wells drilled fleetwide, West Elara winning ConocoPhillips Supplier of the Year, and Sevan Louisiana executing first U.S. Gulf deployment of Trendsetter's Trident intervention system.
Full Year 2025 Financial Results — EBITDA Beat
Full year 2025 adjusted EBITDA was $353 million, exceeding the midpoint of prior guidance. Fourth quarter EBITDA was $88 million. Q4 total operating revenues were $362 million (essentially flat vs prior quarter: down $1 million), contract drilling revenues were $273 million (sequential decrease of $7 million, ~2.5%), reimbursable revenues rose $5 million to $16 million, total operating expenses for Q4 were $344 million (sequential +$7 million, ~+2.1%), and SG&A was flat at $27 million.
Backlog Growth and Recent Contract Awards
Seadrill added $0.5 billion to contracted backlog, bringing it to approximately $2.5 billion (implying ~25% growth vs prior balance). Notable awards/extensions: West Capella 14-month PTTEP award contributing ~$152 million (≈440 days) starting Q2 2026; West Neptune 4-month extension adding $48 million; TotalEnergies exercised option in Angola (Sonangol Quenguela) into Feb 2027; Equinor exercised option on West Saturn through Oct 2027; West Carina extended to April 2026; West Talara secured a 450-day accommodation contract. Management reports committed drillship utilization at 88% and ~90% of the midpoint of 2026 revenue guidance is covered by firm backlog.
2026 Guidance and Clear Path to Cash Flow Inflection
Full year 2026 guidance: total operating revenues $1.4–1.45 billion (excludes $50 million reimbursables) and EBITDA $350–400 million (includes $26 million noncash amortization/mobilization). CapEx and long-term maintenance guidance $200–240 million, a material step down from prior two years. Management expects Q1 2026 to be lower, a step-up in Q2 when reactivated contracts commence, and a meaningful inflection to stronger earnings and free cash flow in H2 2026 and into 2027.
Fleet Repricing and Earnings Leverage
Management disclosed repricing of legacy assets: West Jupiter and West Tellus are being repriced to 3-year contracts at day rates roughly $200,000 per day higher than before, with the benefit expected to amplify in H2 2026 and into 2027—providing direct upside to earnings and cash flow as contracts commence.
Positive Industry Tailwinds and Market Signals
Management highlighted an improving ultra-deepwater market entering 2026: IEA now projects oil & gas demand growth through 2050; Westwood forecasts floater utilization rising to 91% in 2026 and 96% in 2027; subsea tree installations have increased for five consecutive quarters. Share price appreciation of over 50% in the last three months was noted, with stock still trading at a discount to peers on forward multiples.
Negative Updates
Q4 Cash Outflows and Legal Payment
Seadrill used $63 million of cash in Q4 primarily related to a $43 million payment for an unfavorable legal judgment tied to the Sonadrill joint venture, accelerated capital and long-term maintenance spending (noted $69 million of CapEx/LTM activity in Q4 to prepare rigs) and timing of accounts payable disbursements. Year-end cash balance was $365 million (including $26 million restricted) with total liquidity of $524 million and gross principal debt of $625 million maturing through 2030.
Challenging and Competitive 2025 Market
Management described 2025 as a very challenging market. Contracting remained competitive, certain geographies showed near-term softness, and day rates were described as stable but uncertain (recently in the low $400ks/day for top-tier rigs). Management expects Q1 2026 EBITDA to be lower as several rigs undergo contract preparations.
Stacked Assets and High Reactivation Costs
Several stacked/low-spec rigs (Aquarius, Phoenix, Eclipse) remain inactive and would require material capital to reactivate. West Eclipse in particular is low-spec and has a lower likelihood of reactivation. Management is seeking customer contribution or sufficiently attractive contracts before committing to expensive reactivations.
Availability & Timing Risk for Several Rigs
Seven drillships (including West Neptune and West Vela) were noted as becoming available in 2026, creating potential competition for work; while some are contracted for H1, several rigs (Vela, Neptune, Carina, and others) will roll off and require new contracts—introducing execution and timing risk for revenue coverage beyond current backlog.
Legacy Legal and JV Exposure
The $43 million unfavorable legal judgment related to the Sonadrill joint venture highlights residual legal and legacy risks that have an immediate cash impact and underscore ongoing JV-related exposure.
Company Guidance
Seadrill guided full-year 2026 total operating revenues of $1.40–$1.45 billion (excludes ~$50 million of reimbursables) and adjusted EBITDA of $350–$400 million (which includes a $26 million non‑cash amortization/mobilization expense), noting Q1 will be lower with a step‑up in Q2 as the West Jupiter, West Tellus and West Capella commence contracts; management said ~90% of the midpoint of 2026 revenue is covered by firm backlog, contracted backlog stands at ≈$2.5 billion after adding $0.5 billion (including $152 million from West Capella’s ~440‑day award and $48 million from a 4‑month West Neptune extension), full‑year CapEx and long‑term maintenance are guided to $200–$240 million, and an inflection to strong cash generation is expected mid‑2026; liquidity and balance‑sheet metrics include $365 million of cash (incl. $26 million restricted), $524 million total liquidity and $625 million gross principal debt (maturities through 2030), while market indicators cited committed drillship utilization at 88% and Westwood forecasts floater utilization of 91% in 2026 and 96% in 2027—with repricing tailwinds such as West Jupiter and West Tellus being repriced to three‑year contracts at roughly $200,000/day higher than prior rates.Seadrill Limited Financial Statement Overview
Summary
Financials are mixed: the balance sheet is relatively conservative (debt-to-equity ~0.21 and stable debt near ~$0.6B), but 2025 profitability and cash generation weakened sharply with a return to net loss, negative EBITDA, and negative operating/free cash flow, highlighting cyclicality and inconsistent earnings quality.Income Statement
Results are volatile. Revenue rose modestly in 2025 (annual) after declines in 2024, but profitability deteriorated sharply: 2025 moved back to a net loss (-$77M) and negative EBITDA (-$402M) versus strong profitability in 2023–2024. Margins also swung meaningfully across years (including very weak 2020–2021), highlighting a less stable earnings profile and higher operating leverage to the cycle.44
Neutral
Balance Sheet
Leverage is currently conservative, with debt-to-equity around ~0.21 in 2023–2025 and total debt roughly stable near $0.6B, supported by a sizable equity base (~$2.9B). However, the company has a history of balance sheet stress (negative equity in 2020–2021), and returns on equity turned negative in 2025, indicating that while the balance sheet looks improved, performance must stabilize to keep it that way.67
Positive
Cash Flow
Cash generation weakened materially in 2025, with operating cash flow turning slightly negative (-$28M) and free cash flow also negative (-$28M), following mixed conversion in prior years (strong positive free cash flow in 2023, but negative in 2022 and 2024). The recent shift back to cash burn reduces financial flexibility and suggests earnings quality/cash conversion is not yet consistent.38
Negative
| Breakdown | Dec 2025 | Dec 2024 | Dec 2023 | Mar 2023 | Dec 2021 |
|---|---|---|---|---|---|
Income Statement | |||||
| Total Revenue | 1.44B | 1.39B | 1.47B | 936.00M | 907.00M |
| Gross Profit | 173.00M | 293.00M | 565.00M | 281.00M | -38.00M |
| EBITDA | 248.00M | 562.00M | 494.00M | 224.00M | -336.00M |
| Net Income | -77.00M | 446.00M | 300.00M | 3.91B | -587.00M |
Balance Sheet | |||||
| Total Assets | 3.95B | 4.16B | 4.22B | 2.80B | 3.90B |
| Cash, Cash Equivalents and Short-Term Investments | 339.00M | 478.00M | 697.00M | 480.00M | 293.00M |
| Total Debt | 613.00M | 618.00M | 610.00M | 518.00M | 908.00M |
| Total Liabilities | 1.09B | 1.24B | 1.24B | 1.10B | 7.61B |
| Stockholders Equity | 2.86B | 2.92B | 2.98B | 1.70B | -3.72B |
Cash Flow | |||||
| Free Cash Flow | -138.00M | -69.00M | 186.00M | -140.00M | -183.00M |
| Operating Cash Flow | -28.00M | 88.00M | 287.00M | 9.00M | -154.00M |
| Investing Cash Flow | -113.00M | 226.00M | 42.00M | 343.00M | 37.00M |
| Financing Cash Flow | -3.00M | -532.00M | -200.00M | -363.00M | 0.00 |
Seadrill Limited Technical Analysis
Positive
43.88
Price Trends
37.62
Positive
34.24
Positive
31.56
Positive
Market Momentum
2.01
Positive
61.01
Neutral
65.37
Neutral
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For SDRL, the sentiment is Positive. The current price of 43.88 is above the 20-day moving average (MA) of 41.91, above the 50-day MA of 37.62, and above the 200-day MA of 31.56, indicating a bullish trend. The MACD of 2.01 indicates Positive momentum. The RSI at 61.01 is Neutral, neither overbought nor oversold. The STOCH value of 65.37 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for SDRL.
Seadrill Limited Peers Comparison
UnderperformOutperform
Sector (65)
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
75 Outperform | $6.64B | 6.85 | 36.35% | ― | 6.81% | -61.94% | |
67 Neutral | $1.88B | 35.74 | 4.33% | 5.99% | 5.83% | -11.86% | |
65 Neutral | $15.17B | 7.61 | 4.09% | 5.20% | 3.87% | -62.32% | |
65 Neutral | $3.23B | -34.88 | -2.80% | 5.42% | -16.59% | 83.95% | |
65 Neutral | $7.15B | -2.07 | -31.70% | ― | 16.93% | -335.82% | |
58 Neutral | $2.73B | -35.36 | -2.67% | ― | -9.31% | -91.57% | |
54 Neutral | $3.52B | ― | -11.41% | 3.24% | 35.89% | -148.39% |
* Energy Sector Average
SDRL
Seadrill Limited
43.88
20.56
88.16%
HP
Helmerich & Payne
35.22
11.59
49.05%
PTEN
Patterson-UTI
8.51
1.33
18.52%
RIG
Transocean
6.48
3.81
142.70%
BORR
Borr Drilling
6.13
3.81
164.22%
VAL
Valaris
95.85
63.00
191.78%
Glossary
BuyA stock rated as a "Buy" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock is likely to deliver higher returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
HoldA stock rated as a "Hold" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly compelling nor unfavorable for investment. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
SellA stock rated as a "Sell" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock may deliver lower returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.