Seadrill 2025 Q1 Earnings Misses Targets as Net Income Declines 127.7%

Seadrill (SDRL) reported its fiscal 2025 Q1 earnings on May 12th, 2025. The company experienced a net income decline, swinging to a net loss of $14 million from a profit of $60 million in Q1 2024. This significant downturn fell short of expected performance. Seadrill maintained its full-year guidance, projecting operating revenues between $1.3 billion and $1.36 billion, with adjusted EBITDA ranging from $320 million to $380 million, indicating confidence in its long-term strategy despite current challenges.

Revenue

For the first quarter of 2025, Seadrill's total revenue dropped by 8.8% year-on-year to $332 million. Within this, contract revenues amounted to $248 million, while reimbursable revenues contributed $15 million. Management contract revenues added $61 million, leasing revenues accounted for $8 million, and other revenues totaled $3 million, leading to overall operating revenues of $335 million.

Earnings/Net Income

Seadrill reported a loss per share of $0.23 in Q1 2025, a stark contrast to the profit of $0.83 per share reported in Q1 2024, marking a significant negative change. This shift to a net loss of $14 million from a $60 million net income in the previous year highlights the challenging quarter.

Price Action

The stock price of Seadrill has edged up 1.78% during the latest trading day, has jumped 9.12% during the most recent full trading week, and has surged 15.88% month-to-date.

Post-Earnings Price Action Review

Investors adopting a strategy of buying Seadrill shares post-revenue drop and holding for 30 days have faced poor outcomes over the past five years. This approach resulted in a return of -20.72%, significantly lagging the benchmark return of 46.84%, with an excess return of -67.56%. The compounded annual growth rate was -8.71%, indicating considerable losses. The strategy exhibited a high maximum drawdown of -67.44% and a Sharpe ratio of -0.20, highlighting substantial risk alongside negative returns, illustrating the challenges associated with this investment strategy.

CEO Commentary

Simon Johnson, President and CEO of Seadrill, emphasized the company's achievement of $73 million in EBITDA despite operational challenges, notably downtime in Brazil. He reiterated the company's commitment to returning utilization levels to normal and expressed optimism about the future demand for deepwater drilling. Johnson highlighted Seadrill's strategic focus on maintaining a robust balance sheet and leveraging high-specification floaters in favorable deepwater markets to drive long-term growth.

Guidance

Seadrill reiterated its full-year guidance, expecting total operating revenues between $1.3 billion and $1.36 billion, excluding $35 million in reimbursable revenues. The company anticipates adjusted EBITDA of $320 million to $380 million and capital expenditures ranging from $250 million to $300 million. While the impact of tariffs remains under review, the company believes any potential effects are encompassed within the current guidance.

Additional News

In recent developments, Seadrill secured a contract for its ultra-deepwater drillship, West Tellus, awarded by Petrobras for operations in Brazil's Santos Basin. This contract, worth approximately $498 million, is set to begin in Q1 2026. Additionally, Seadrill announced the completion of its jack-up rig West Prospero's sale for $45 million. This move aligns with the company's strategy to exit the benign jack-up market by monetizing non-core assets. Furthermore, Seadrill and Oil States International formed a strategic collaboration to enhance offshore Managed Pressure Drilling operations, aiming to improve safety and efficiency in offshore drilling through advanced technology integration.