Seadrill 2025 Q2 Earnings Severe Loss Despite Revenue Growth

Seadrill (NYSE: SDRL) reported its Q2 2025 earnings on August 6, 2025, posting a significant net loss, despite a modest revenue increase. The results fell far below expectations, with the company’s earnings plummeting to a loss of $0.68 per share, a dramatic reversal from the prior year's $3.61 profit. Seadrill did not provide updated guidance but expressed optimism about future market conditions and contract activity.

Revenue
Seadrill’s Q2 2025 revenue rose 1.1% year-over-year to $377 million. This increase was driven primarily by contract revenues, which climbed to $288 million, bolstered by improved economic utilization and more operating days for key rigs like the West Polaris and West Neptune. Management contract revenues also rose to $65 million, reflecting a higher daily management fee from an agreement with Sonadrill. Leasing and reimbursable revenues contributed $8 million and $16 million, respectively, rounding out the total operating revenue for the quarter.

Earnings/Net Income
Seadrill swung to a net loss of $42 million for Q2 2025, a stark contrast to the $253 million net income in the same period the prior year. The loss per share of $0.68 marked a 118.8% deterioration from the $3.61 profit in 2024 Q2. Despite the revenue increase, rising operating expenses, including a $51 million management contract expense from an unfavorable legal judgment, significantly impacted profitability. The earnings decline was pronounced and indicates a challenging operating environment.

Price Action
The stock experienced a muted price reaction in the short term, with SDRL down 0.54% during the latest trading day and 0.44% for the week, while showing a 1.54% gain month-to-date. However, long-term strategies tied to post-earnings performance have been unprofitable. A strategy of buying shares following a revenue increase in the past three years had a negative CAGR of -0.84%, a maximum drawdown of 0.00%, and a poor Sharpe ratio of -0.02. Additionally, it underperformed the benchmark by 69.10% with a volatility of 43.60%, signaling high risk and low reward.

Post Earnings Price Action Review
The recent earnings report did not stimulate a positive market reaction, and historical performance suggests caution for investors. The strategy of buying shares after a revenue increase quarter-over-quarter on the earnings release date has resulted in negative returns over the past three years. This strategy had a negative CAGR of -0.84%, with no drawdown but an unimpressive Sharpe ratio of -0.02, indicating poor risk-adjusted returns. The underperformance against the benchmark was significant, with an excess return of -69.10% and a volatility of 43.60%. These figures highlight the strategy's unattractive risk profile and its inability to deliver consistent gains.

CEO Commentary
President and CEO Simon Johnson expressed optimism about the company’s future, noting the conversion of prior customer discussions into new contracts, particularly for the West Vela and Sevan Louisiana. He emphasized the West Vela’s strong performance in a competitive market and the Sevan Louisiana contract’s potential to expand work opportunities. Johnson also reiterated Seadrill’s disciplined contracting approach, robust balance sheet, and operational excellence as key drivers for long-term shareholder value as market conditions improve.

Guidance
Seadrill did not provide specific financial guidance for the remainder of 2025 but expressed confidence in its future fixtures and improving market conditions. The CEO highlighted the company’s anticipation of material progress on additional contracts and expected activity for the Sevan Louisiana and West Vela rigs in the coming months.

Additional News
Seadrill announced the award of two significant drilling contracts in the U.S. Gulf. The West Vela secured a two-well contract with Talos Energy, expected to begin in mid-November 2025, while the Sevan Louisiana received a three-well contract from Murphy Oil, commencing in August 2025. As of August 6, 2025, the company’s order backlog stood at approximately $2.5 billion, reflecting a robust pipeline of upcoming work. Seadrill also reported ending the quarter with $419 million in cash and a net leverage ratio of 0.77. The company will host a conference call on August 7, 2025, at 08:00 CT to discuss its results in further detail.