Seadrill Limited’s Earnings Call: Mixed Sentiments and Future Optimism

Seadrill Limited ((SDRL)) has held its Q3 earnings call. Read on for the main highlights of the call.

Seadrill Limited’s recent earnings call presented a mixed sentiment, reflecting both optimism and challenges. The company showcased robust operational performance and secured significant new contracts, bolstering its backlog. However, it also faced hurdles such as decreased revenues, technical downtime, and competitive pricing pressures in certain markets. Despite these challenges, the overall market outlook remains positive, with an anticipated recovery in the coming years.

Increased Backlog and Contract Wins

Seadrill has successfully added over $300 million to its backlog, elevating the total contracted backlog to approximately $2.5 billion. This achievement was made possible by securing new contracts across five rigs, reinforcing the company’s strong market position.

Strong Performance in Angola

The Sonadrill joint venture in Angola has been a highlight, with all three rigs securing new work. Notably, the Sonangol Libongos and Sonangol Quenguela have entered into substantial programs, reaffirming Seadrill’s status as the leading drillship operator in Angola.

Operational Excellence in the U.S. Gulf

Seadrill’s rigs in the U.S. Gulf, including the West Vela and Sevan Louisiana, have demonstrated exceptional operational performance. The West Vela, in particular, achieved near-perfect technical uptime, showcasing the company’s commitment to operational excellence.

Technological Advancements

Seadrill continues to innovate, with the West Neptune commencing operations with a new Managed Pressure Drilling system. Additionally, the Sevan Louisiana is undergoing upgrades to enhance its capabilities, highlighting Seadrill’s dedication to incorporating advanced technologies.

Positive Market Outlook

Seadrill is optimistic about the market’s future, observing constructive contracting momentum and increased global tendering activity. This positive trend supports a broad-based market recovery anticipated to unfold in 2026 and 2027.

Decreased Operating Revenues and EBITDA

The company reported a sequential decrease in total operating revenues to $363 million and adjusted EBITDA to $86 million. This decline highlights the financial challenges faced during the quarter.

Technical Downtime in Brazil

Seadrill encountered operational downtime in Brazil due to a design-related equipment failure on one of its rigs, impacting economic utilization for the quarter.

Competitive Pricing Pressure

The company acknowledges potential softness in day rates in regions like West Africa and Brazil, indicating a competitive market environment that could affect profitability.

Idle Rig Concerns

Seadrill faces challenges in securing continuous work for some rigs, with the West Capella remaining idle and potential contract gaps for others like the Carina.

Forward-Looking Guidance

Seadrill’s updated guidance for the fiscal year emphasizes building backlog coverage through 2026, with recent contract awards significantly contributing to this goal. The company narrowed its full-year adjusted EBITDA guidance and expects operating revenues to range between $1.36 billion and $1.39 billion. Capital expenditure guidance was refined, with expectations for reduced spending in 2026. Seadrill remains optimistic about increased contracted utilization and day rate progression from 2026 into 2027.

In summary, Seadrill Limited’s earnings call reflects a balanced sentiment, with strong operational achievements and new contracts offset by financial and operational challenges. The company remains optimistic about the future, with a positive market outlook and strategic plans to enhance its backlog and operational capabilities.