Seadrill's Q3 2025: Contradictions Emerge on Day Rates, Rig Utilization, Brazil's Regulatory Environment, and Client Preferences

Date of Call: November 6, 2025

Financials Results

• Revenue: $363.0M in Q3, down $14M sequentially; contract drilling revenues $280M, down $8M QoQ; management contract revenues $63M, down $2M QoQ; reimbursable revenues $11M, down $5M QoQ

Guidance:

• Adjusted EBITDA narrowed to $330M–$360M for the year (includes $33M noncash net expense related to mobilization amortization; $24M recognized through Sept 30).
• Updated operating revenue range of $1.36B–$1.39B (excludes $50M of reimbursables).
• Full-year capital expenditures narrowed to $280M–$300M; expect capex and long-term maintenance to trend lower in 2026.
• Maintains liquidity of ~ $600M and gross debt of $625M with maturities through 2030.

Business Commentary:

* Contract Awards and Market Outlook: - Seadrill added over $300 million to its backlog since the last update, securing new contracts across 5 rigs. - The company's total contracted backlog is approximately $2.5 billion. -

This growth is attributed to the company's strategy to build backlog coverage through 2026, focusing on maximizing utilization and operational excellence.

• Regional Performance and Contracts:
• In Angola, all 3 rigs in the Sonadrill joint venture secured extensions, with combined awards contributing over 3 years of backlog.
• In the U.S. Gulf, 2 of Seadrill's 3 rigs secured new contracts, adding a firm term of 195 days.

• The company's strong customer relationships and operational performance drove these contract successes.

• Financial Performance and Guidance:

• Third-quarter operating revenues were $363 million, down $14 million from the previous quarter.
• Adjusted EBITDA was $86 million, a $20 million sequential decrease.
• Guidance for the remainder of 2025 was narrowed to an adjusted EBITDA range of $330 million to $360 million.

• The decrease in revenues and adjusted EBITDA is partly due to fewer operating days for certain rigs and lower economic utilization.

• Market Recovery Insights:

• Seadrill highlights signs of a constructive pace of contracting and increased global tendering activity.
• There is a growing consensus on the need for renewed investment in offshore projects to offset production declines.
• The company expects to see an uptick in global tendering activity, leading to increased contracted utilization and day rate progression into 2027.

Sentiment Analysis:

Overall Tone: Positive

• Management highlighted adding over $300M to backlog across 5 rigs, near-perfect technical uptime >99.7% on Sonadrill JV rigs, and constructive market momentum (increased tendering, FIDs and expected utilization gains into late‑2026/2027). Guidance was tightened rather than lowered, and management emphasized strategic positioning to capture a supply–demand inflection.

Q&A:

• Question from Edward Kim (Barclays Bank PLC): Do you expect negative data points coming out of Brazil and is it fair to characterize some softness in West Africa and Brazil but resilience in the U.S. Gulf?
  Response: U.S. Gulf pricing is resilient and achievable (illustrated by Vela contracts); Golden Triangle rates tracking in high‑$3ks to low‑$4ks range with potential near‑term weakness in some West Africa pockets; focus is on filling gaps at attractive near‑term rates.

• Question from Edward Kim (Barclays Bank PLC): On Asia, which countries or operators are you most excited about over the next 12–18 months?
  Response: Asia demand is bubbling in India, Malaysia and Indonesia with multiple operators active (referenced ENI/ONDC/PTTEP); West Capella (MPD/dual‑activity) is well positioned for those opportunities.

• Question from Fredrik Stene (Clarksons Platou Securities AS): For the Capella and Carina, what are your current thoughts about potential downtime next year?
  Response: There is first‑half 2026 exposure but management is actively contracting to minimize downtime; both Capella and Carina are MPD/dual‑activity seventh‑generation assets with flexibility to stay in Brazil or be redeployed elsewhere.

• Question from Fredrik Stene (Clarksons Platou Securities AS): If you win work in Brazil, are there extension options on the Carina under the current contract to limit downtime?
  Response: Extensions may be possible but closing the calendar gap is challenging; if the gap can't be closed, remaining in Brazil may become less attractive and redeployment would be considered.

• Question from Benjamin Sommers (BTIG, LLC): How has cost deceleration on the Capella evolved and what would reactivation cost look like?
  Response: Capella is stacked at an intermediate preservation cost—above the $7k–$8k/day cold‑bookend but well below warm‑stack levels; reactivation costs vary by opportunity and are case‑specific (management indicated a broad, modest range rather than a single figure).

• Question from Benjamin Sommers (BTIG, LLC): When do you see a day‑rate inflection point and where will momentum show first?
  Response: Management expects utilization to firm in 2H‑2026 with day‑rate inflection following into 2027 — utilization leads, rates are a fast follower.

• Question from Doug Becker (Capital One Securities, Inc.): How are conversations with Petrobras on cost reductions progressing, and is blend‑and‑extend on the table?
  Response: Early, constructive talks; management is seeking win‑win outcomes and is open to blend‑and‑extend where it makes commercial sense and preserves backlog visibility.

• Question from Doug Becker (Capital One Securities, Inc.): Economic utilization slipped in Q3 — any rigs or regions to call out and how will utilization trend?
  Response: A single Brazil rig had a design‑related equipment failure causing downtime and incremental costs; excluding that incident technical uptime across the fleet was strong (97.6%); management views the event as one‑off and expects utilization to improve as contracting progresses.

• Question from Joshua Jayne (Daniel Energy Partners, LLC): On the Sevan Louisiana upgrades with Trendsetter, how do those changes affect the rig's outlook over the next 12 months?
  Response: Upgrades enable quick mode switching between drilling and well‑intervention/P&A via a Trendsetter alliance, increasing the Sevan Louisiana's commercial flexibility and appeal in a growing Gulf P&A/intervention market.

• Question from Joshua Jayne (Daniel Energy Partners, LLC): For the Sonadrill JV rigs, what are you seeking for longer‑term deals and typical term expectations?
  Response: Management is confident in adding term to Quenguela and West Gemini; primary market is Angola but rigs can operate elsewhere in Africa; focus is keeping rigs working in Angola while retaining flexibility to redeploy.

• Question from Noel Parks (Tuohy Brothers Investment Research, Inc.): Are customer commitment decisions and macro signals translating into real contracting momentum and is Brent moving between $60–$70 helping decisions?
  Response: Yes — management cites improving FIDs, quarter‑over‑quarter increases in rig days, and supermajor commentary supporting renewed exploration spend; these data points are lifting customer tone and contracting activity.

• Question from Noel Parks (Tuohy Brothers Investment Research, Inc.): Are you seeing big players staff up or reallocate resources toward deepwater opportunities?
  Response: Yes — while majors are trimming non‑core cost lines, many are rebuilding exploration teams and reallocating capital to new ventures and exploration, consistent with observed renewed activity and licensing rounds.

Contradiction Point 1

Day Rates and Market Outlook

It involves differing perspectives on the day rates and the expected market inflection point, which are crucial for understanding the company's financial outlook and market positioning.

When do you expect a potential day rate inflection point and when can we see notable momentum in leading-edge rates? - Benjamin Sommers(BTIG, LLC, Research Division)

2025Q3: We anticipate an inflection in the market starting in the second half of 2026 and into 2027. Utilization will increase first, followed by day rates. - Samir Ali(Executive VP & Chief Commercial Officer)

What are your expectations for day rates in 2026 given asset availability? - Hamed Khorsand(BWS Financial Inc.)

2025Q2: Day rates are still holding up, with expectations of five handles in late 2026, albeit slightly lower. Rates are competitive but still solid, especially in the U.S. Gulf. - Samir Ali(Executive VP & Chief Commercial Officer)

Contradiction Point 2

Rig Utilization and Operational Performance

It highlights differing statements about the company's operational performance and utilization rates, which directly impact the company's operations and financial health.

Economic utilization declined sequentially in Q3. Were there notable rigs or regions contributing to the decline, and how do you expect utilization to trend moving forward? - Doug Becker(Capital One Securities, Inc., Research Division)

2025Q3: Economic utilization was 94.2% versus 98.2% in the prior quarter, primarily due to an unplanned operational incident on a rig in Brazil impacting operations. - Simon Johnson(President & CEO)

What is the outlook for contracts and utilization compared to the prior year? - Stacy Rasgon(Bernstein Research)

2025Q2: Economic utilization was 98.2% in the second quarter of 2025, in line with guidance. - Simon William Johnson(President & CEO)

Contradiction Point 3

Regulatory Environment in Brazil

It highlights changing interpretations of regulations in Brazil, which can impact operations and financial performance.

What are your thoughts on potential downtime for the Capella and Carina rigs next year? - Fredrik Stene (Clarksons Platou Securities AS, Research Division)

2025Q3: There are concerns for the first half of next year, but we expect market tightness in the second half. Both Capella and Carina have potential opportunities in South Asia. For Capella, there is an active tender process, and Carina might work in Brazil or could be positioned elsewhere. - Simon Johnson(CEO)

Can you explain the cause of the 50 days of downtime for Tellus in Q1? Was it due to an incident, a stricter rule interpretation, or another reason? - David Smith (Pickering Energy Partners)

2024Q4: Simon here. Yes, we did, in fact, incur 50 days of downtime on the West Tellus. The rigs back in operation now, but regulatory environments are dynamic, so the rules haven't changed, but the regulator's interpretation has. We're working with our clients and regulatory bodies to navigate new regulatory expectations. - Simon Johnson(CEO)

Contradiction Point 4

Client Decision-Making and Contracting Preferences

It involves differing perspectives on client behavior and preferences related to day rates and contract terms, which can impact business strategy and financial outcomes.

Which Asian countries or operators are you most excited about? - Edward Kim (Barclays Bank PLC, Research Division)

2025Q3: In Asia, there is potential demand from India, Malaysia, and Indonesia with operators like E&I, ONDC, and PTTEP. We are optimistic about this market, especially with the West Capella, which is MPD-capable and well-positioned. - Samir Ali(CMO)

Are clients delaying higher day rates or being more proactive in contract terms? - Noel Parks (Tuohy Brothers Investment Research, Inc.)

2024Q4: Some are blocking and tackling, others react quickly to day rate changes. Beyond that, clients know drilling is necessary in 2026 and beyond, with FID projects layering demand. - Samir Ali(CMO)

Contradiction Point 5

Outlook for Market Recovery and Demand

It reflects differing views on the timeline and nature of market recovery, which can impact business planning and investor expectations.

When do you expect a potential day rate inflection point and when will we see notable momentum in leading-edge rates? - Benjamin Sommers (BTIG, LLC, Research Division)

2025Q3: We anticipate an inflection in the market starting in the second half of 2026 and into 2027. Utilization will increase first, followed by day rates. - Samir Ali(CMO)

Can you characterize the tone of conversations with clients about their project economics outlook? - Kurt Hallead (Benchmark)

2024Q4: The immediate outlook for 2025 is cloudy, but we believe the weakness is time-bound. We expect deferred demand to increase, and visibility is unclear. - Simon Johnson(CEO)