Form 4: Seadrill CFO's Equity Transactions & RSU Vesting

Seadrill's EVP & CFO, Grant R. Creed, reported acquisitions of common shares and restricted stock units, alongside dispositions for tax purposes, following the certification of performance metrics.

Summary

• Grant R. Creed, Executive Vice President & CFO of Seadrill Ltd, reported transactions involving common shares and restricted stock units (RSUs).
• On December 31, 2025, 15,037 common shares were acquired, increasing direct beneficial ownership.
• Concurrently, 4,847 common shares were disposed of at $34.6 per share, likely for tax withholding purposes.
• Following these transactions, Mr. Creed directly beneficially owned 46,162 common shares.
• On March 18, 2025, the Joint Nomination and Remuneration Committee certified the achievement of the 2023 Award Free Cash Flow (FCF) Metric for the 2024 Measurement Period at 113.67%.
• This certification led to the acquisition of 5,449 RSUs related to the 2023 Award and 4,105 RSUs related to the 2024 Award, both tied to the 2024 Measurement Period.
• On December 31, 2025, 9,588 RSUs from the 2023 Award (2023 Measurement Period) and 5,449 RSUs from the 2023 Award (2024 Measurement Period) vested and converted, resulting in 0 derivative securities beneficially owned for these specific grants.

Sentiment

Score: 7

Explanation: The filing indicates positive performance metric achievement leading to executive compensation vesting, which is generally a good sign for the company's operational execution. The transactions themselves are routine for executive compensation.

Positives

• The company's Joint Nomination and Remuneration Committee certified the achievement of the 2023 Award Free Cash Flow (FCF) Metric for the 2024 Measurement Period at 113.67%, exceeding the target.
• The achievement of performance metrics led to the vesting of restricted stock units for the Executive Vice President & CFO, indicating successful operational performance in the relevant period.

Negatives

• A disposition of 4,847 common shares occurred at a price of $34.6, likely for tax withholding purposes upon the vesting of restricted stock units, which reduces the executive's direct shareholding.

Risks

• The vesting of earned restricted stock units is subject to the reporting person's continued employment through specific dates (December 31, 2025, for 2023 Award; December 31, 2026, for 2024 Award), posing a risk of forfeiture if employment ceases.

Future Outlook

The future outlook indicates that additional performance-based restricted stock units (from the 2024 Award) are subject to the achievement of annual free cash flow metrics for 2025 and 2026, with vesting contingent on continued employment through December 31, 2026.

Management Comments

• On March 18, 2025, the Committee certified achievement of the 2023 Award FCF Metric for the 2024 Measurement Period at 113.67%.
• On March 18, 2025, the Committee certified achievement of the 2024 Award FCF Metric for the 2024 Measurement Period at 113.67%.

Industry Context

This filing reflects a standard practice in executive compensation within the offshore drilling industry, where a significant portion of executive pay is tied to performance-based equity awards like restricted stock units. Tying compensation to metrics such as Free Cash Flow (FCF) aligns executive incentives with shareholder value creation, a common trend across capital-intensive industries.

Comparison to Industry Standards

• The use of performance-based restricted stock units (RSUs) with metrics like Total Shareholder Return (TSR) and Free Cash Flow (FCF) is a common and accepted practice for executive compensation in the energy and offshore drilling sectors, aligning executive incentives with long-term company performance and shareholder interests.
• The FCF metric achievement at 113.67% for the 2024 Measurement Period suggests strong operational performance relative to internal targets, which is generally viewed positively compared to peers who might struggle to meet such targets.
• The disposition of shares for tax withholding upon vesting is a standard procedure and does not indicate any unusual activity compared to compensation practices at comparable companies like Valaris plc (VAL), Transocean Ltd. (RIG), or Noble Corporation plc (NE).

Stakeholder Impact

• Shareholders: The achievement of Free Cash Flow metrics above target for the 2024 Measurement Period suggests strong operational performance, which is positive for shareholder value. The executive's increased direct ownership (net of tax sales) aligns interests.
• Employees: The executive's compensation structure, tied to performance, could set a precedent or reflect the company's overall performance culture.
• Management: The Executive Vice President & CFO has successfully met performance targets, leading to the vesting of a significant portion of their equity compensation.

Next Steps

• Continued employment of the reporting person through December 31, 2026, is required for the vesting of remaining 2024 Award restricted stock units.
• Future annual measurements of the 2024 Award FCF Metric for the years ending December 31, 2025, and December 31, 2026, will determine further RSU vesting.

Key Dates

Recommendation

This Form 4 details routine executive compensation transactions, including the vesting of restricted stock units based on achieved performance metrics and subsequent share dispositions for tax purposes. It does not present new information that would significantly alter the investment thesis for Seadrill Ltd, thus a 'hold' recommendation is appropriate.

Keywords

Seadrill, SDRL, Form 4, insider transaction, executive compensation, restricted stock units, RSU, common shares, free cash flow, FCF, Grant R. Creed