8-K: Seadrill Announces Fourth Quarter and Full Year 2024 Results, Securing $1 Billion in Backlog

Seadrill reports a net income of $446 million and Adjusted EBITDA of $378 million for 2024, bolstered by new contracts and strategic divestments.

Summary

• Seadrill Limited announced its fourth quarter and full year 2024 results on February 26, 2025.
• The company reported a net income of $446 million and an Adjusted EBITDA of $378 million for the full year 2024.
• During the fourth quarter, net income was $101 million and Adjusted EBITDA was $28 million.
• Seadrill secured long-term contracts for West Jupiter and West Tellus, adding $1 billion to its backlog.
• The company exited the benign jack-up market by divesting West Prospero for $45 million in cash proceeds.
• Seadrill finished the quarter with a cash balance of $505 million.
• The company repurchased $100 million of shares during the fourth quarter, bringing total share repurchases to $792 million since September 2023.
• Fourth quarter operating revenues totaled $289 million, a decrease of 18% compared to the prior quarter.
• Contract revenues were $204 million, a sequential decrease of 22%, due to fewer operating days.
• Total operating expenses increased by 5% to $323 million in the fourth quarter.
• As of February 26, 2025, Seadrill's order backlog was approximately $3.0 billion.
• For 2025, approximately 75% of available rig days are contracted across its marketed and managed rig fleet.

Sentiment

Score: 7

Explanation: The report highlights positive financial results for the full year, significant contract wins, and strategic asset management. However, there are some concerns about the decrease in revenues and EBITDA in the fourth quarter, as well as operational downtime. Overall, the sentiment is moderately positive.

Positives

• Seadrill reported a strong net income of $446 million for the full year 2024.
• The company secured $1 billion in new contracts, ensuring utilization into 2029.
• The sale of West Prospero generated $45 million in cash.
• Seadrill has a substantial cash balance of $505 million.
• The company has returned $792 million to shareholders through share repurchases.
• The West Vela secured 40 days of additional work and added approximately $20 million in backlog.
• Seadrill has approximately 75% of available rig days contracted for 2025.

Negatives

• Fourth quarter operating revenues decreased by 18% to $289 million compared to the previous quarter.
• Contract revenues decreased by 22% to $204 million due to fewer operating days.
• Total operating expenses increased by 5% to $323 million in the fourth quarter.
• Adjusted EBITDA decreased from $93 million to $28 million quarter over quarter.
• Free Cash Flow was negative $31 million.
• The West Tellus incurred 50 days of downtime in Q1 2025 due to regulatory matters in Brazil.
• The West Polaris commencement was impacted by the commissioning and testing of upgraded equipment.
• The West Neptune recommenced drilling activities on February 16, 2025, following the completion of the planned survey and upgrades, but the timeline was affected by vendor issues and adverse weather.

Risks

• The company faces risks related to offshore drilling market conditions, including supply and demand and dayrates.
• Fluctuations in the international price of oil could impact Seadrill's financial performance.
• Changes in governmental regulations could affect the company's operations.
• Increased competition in the offshore drilling industry poses a risk.
• Global economic conditions and health threats could impact the company's business.
• The company's ability to maintain relationships with suppliers, customers, and employees is crucial.
• Cybersecurity incidents could disrupt operations.
• Political and other uncertainties, including those related to conflicts in Ukraine and the Middle East, and any related sanctions, could impact the company.

Future Outlook

With a strong balance sheet and durable backlog extending into 2029, Seadrill is well-positioned to navigate market volatility.

Management Comments

• With a strong balance sheet, and durable backlog that extends meaningfully into 2029, we are well-positioned to navigate any market volatility, said President and Chief Executive Officer, Simon Johnson.

Industry Context

Seadrill's performance is indicative of the broader trends in the deepwater oil and gas drilling industry, where securing long-term contracts and managing operational costs are critical for success. The divestment of non-core assets and strategic investments in modern rigs are common strategies among industry players.

Comparison to Industry Standards

• Seadrill's Adjusted EBITDA margin of 27.3% for 2024 is competitive within the offshore drilling industry.
• Transocean, another major player, has reported similar strategic moves in fleet optimization and backlog management.
• The $1 billion backlog addition is a significant achievement, comparable to contract wins announced by Valaris and Noble Corporation.
• The sale of West Prospero at $45 million is considered a favorable valuation compared to recent sales by peers.

Related Party Transactions

• Includes revenue received from related parties of $73 million and $319 million, for the three months and year ended December 31, 2024, respectively, and $79 million and $298 million for the three months and year ended December 31, 2023, respectively.

Stakeholder Impact

• Shareholders benefit from the share repurchase program and the company's strong financial performance.
• Employees are impacted by cost reduction measures, including severance costs.
• Customers benefit from Seadrill's modern fleet and experienced crews.
• Suppliers are affected by the company's operational activities and capital expenditures.
• Creditors are impacted by the company's debt management and cash flow.

Next Steps

• The company will continue to execute its strategy of securing long-term contracts.
• Seadrill will focus on managing operational costs and improving efficiency.
• The company will monitor market conditions and adjust its strategy as needed.
• Seadrill will continue to evaluate opportunities for strategic acquisitions and divestitures.

Key Dates