Group 1: Company Overview - Seadrill Limited (SDRL) is positioned as a prime acquisition candidate in the consolidating offshore drilling industry, with its CEO indicating openness to a deal [2] - The company owns 16 deepwater drillships, which could significantly influence industry leadership depending on the acquirer [2] - Seadrill trades at just 17% of replacement cost, with an enterprise value (EV) of $2.23 billion, indicating substantial upside potential if rigs are effectively utilized [3] Group 2: Potential Acquirers - Transocean (RIG) is viewed as the most likely acquirer, with management suggesting they could absorb SDRL's assets at minimal incremental cost, potentially creating at least $150 million in annual synergies [2] - Valaris (VAL) is another potential contender, having halted buybacks to preserve cash, which may lead to significant dilution for warrant holders if they pursue Seadrill [3] - Noble is considered an unlikely buyer following its acquisition of Diamond Offshore [3] Group 3: Market Dynamics - The offshore drilling sector is experiencing tight oil supply and a lack of new rig builds, positioning drillers for outsized cash flows [4] - Transocean is currently trading at a 30% premium to peers, reflecting its market leadership and higher-spec assets [4] - Investors face a complex trade-off among Seadrill's acquisition potential, Valaris's dilution risk, Noble's reliable dividends, and Transocean's leverage in the market [4] Group 4: Industry Sentiment - The offshore drilling consolidation story is gaining attention, with a bullish outlook on Seadrill reflecting broader trends in the oilfield services space [5] - The stock price of Precision Drilling Corporation (PDS) has appreciated approximately 33.61% since previous coverage, indicating positive sentiment in the sector [5]

Core Insights - Seadrill Limited (SDRL) has secured new drilling contracts for its drillships West Vela and Sevan Louisiana in the Gulf of America [1][2][7] - The West Vela drillship will undertake a two-well contract with Talos Energy starting in November 2025, with an estimated duration of 90 days [1][7] - The Sevan Louisiana drillship is contracted to drill three wells for Murphy Oil, with work commencing in August 2025 and expected to continue until November 2025 [2][7] Drillship Details - The West Vela drillship features a Samsung 12,000 design, capable of drilling up to 37,500 feet, built in 2013, operating in water depths of 12,000 feet, and accommodating 200 personnel [3] - The Sevan Louisiana drillship has a Sevan 650 design, with a maximum drilling depth of 35,000 feet, also built in 2013, operating in water depths of 10,000 feet, and accommodating 150 personnel [3] Backlog Information - As of August 2025, Seadrill's order backlog stands at approximately $2.5 billion [4] Second Quarter Highlights of Clients - Talos Energy reported total revenues of $424 million and an adjusted loss of 27 cents per share, with production of 93 thousand barrels of oil equivalent per day (Mboe/d) [5] - Murphy Oil posted adjusted net earnings of 27 cents per share and total revenues of $696 million, with production totaling 190 Mboe/d [6]

PART I - FINANCIAL INFORMATION This part presents Seadrill Limited's unaudited condensed consolidated financial statements and management's discussion and analysis [Item 1. Financial Statements](index=5&type=section&id=Item%201.%20Financial%20Statements.) Seadrill's unaudited condensed consolidated financial statements for Q2 and H1 2025 report a net loss, driven by increased operating expenses [Condensed Consolidated Statements of Operations](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) This statement details Seadrill's revenues, expenses, and net income/loss for the reported periods | Metric (in $ millions) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :--------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Total operating revenues | 377 | 375 | 712 | 742 | | Total operating expenses | (371) | (290) | (688) | (593) | | Operating profit | 6 | 288 | 24 | 368 | | Net (loss)/income | (42) | 253 | (56) | 313 | | Basic (LPS)/EPS ($) | (0.68) | 3.61 | (0.91) | 4.41 | | Diluted (LPS)/EPS ($) | (0.68) | 3.49 | (0.91) | 4.27 | - Seadrill experienced a significant shift from **net income** to **net loss** for both the three and six months ended June 30, 2025, compared to the same periods in 2024. **Operating profit** also saw a substantial decline[15](index=15&type=chunk) [Condensed Consolidated Balance Sheets](index=6&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This statement presents Seadrill's assets, liabilities, and equity at specific points in time | Metric (in $ millions) | June 30, 2025 | December 31, 2024 | | :--------------------- | :------------ | :---------------- | | Total assets | 4,070 | 4,156 | | Total current assets | 823 | 928 | | Total liabilities | 1,199 | 1,238 | | Total shareholders' equity | 2,871 | 2,918 | - **Total assets** decreased by **$86 million** from December 31, 2024, to June 30, 2025, primarily due to a reduction in current assets, including **cash and cash equivalents**. **Total liabilities** also decreased, while **shareholders' equity** saw a slight reduction[17](index=17&type=chunk)[18](index=18&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This statement summarizes Seadrill's cash inflows and outflows from operating, investing, and financing activities | Metric (in $ millions) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :--------------------- | :--------------------------- | :--------------------------- | | Net cash (used in)/provided by operating activities | (16) | 108 | | Net cash (used in)/provided by investing activities | (72) | 272 | | Net cash used in financing activities | — | (241) | | Net (decrease)/increase in cash and cash equivalents, including restricted cash | (86) | 134 | | Cash and cash equivalents, including restricted cash, at end of period | 419 | 862 | - The company shifted from generating **$108 million** in **cash from operating activities** in H1 2024 to using **$16 million** in H1 2025. **Investing activities** also shifted from providing **$272 million** to using **$72 million**, largely due to the absence of asset disposals seen in 2024. Overall **cash and cash equivalents** decreased by **$86 million** in H1 2025[20](index=20&type=chunk) [Condensed Consolidated Statements of Equity](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Equity) This statement outlines changes in Seadrill's shareholders' equity over the reported periods | Metric (in $ millions) | June 30, 2025 | December 31, 2024 | | :--------------------- | :------------ | :---------------- | | Total shareholders' equity | 2,871 | 2,918 | | Retained earnings | 891 | 947 | | Shares repurchased (6M) | — | (244) (as of June 30, 2024) | - **Total shareholders' equity** decreased from **$2,918 million** at December 31, 2024, to **$2,871 million** at June 30, 2025, primarily due to **net losses** incurred during the period. No shares were repurchased in H1 2025, contrasting with **$244 million** in repurchases in H1 2024[23](index=23&type=chunk) [Notes to the unaudited Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20the%20unaudited%20Condensed%20Consolidated%20Financial%20Statements) These notes provide essential details and breakdowns for the condensed consolidated financial statements, covering the company's business, revenue recognition, tax impacts, EPS calculations, specific asset and liability components, debt structure, related party transactions, fair value measurements, common share movements, and significant legal commitments and contingencies [Note 1 – General information](index=9&type=section&id=Note%201%20%E2%80%93%20General%20information) This note provides an overview of Seadrill Limited's business and operations - **Seadrill Limited** is a Bermuda-incorporated offshore **drilling contractor** providing worldwide offshore drilling services, primarily owning and operating **drillships** and semi-submersible rigs. The company also provides management services to affiliated entities[26](index=26&type=chunk) [Note 2 - Revenue from contracts with customers](index=9&type=section&id=Note%202%20-%20Revenue%20from%20contracts%20with%20customers) This note details Seadrill's revenue recognition policies and disaggregates revenue by geographic area and major customer | Geographic Area (in $ millions) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :----------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Brazil | 165 | 82 | 286 | 171 | | United States | 106 | 86 | 186 | 180 | | Angola | 84 | 93 | 166 | 170 | | Norway | 22 | 61 | 45 | 115 | | Indonesia | — | 40 | — | 77 | | Other | — | 13 | 29 | 29 | | Total operating revenues | 377 | 375 | 712 | 742 | | Major Customer | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :--------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Petrobras | 37 % | 16 % | 33 % | 17 % | | Sonadrill | 21 % | 23 % | 22 % | 20 % | | Talos | 12 % | — % | 13 % | — % | | LLOG | 11 % | 10 % | — % | 10 % | | Var Energi | — % | 10 % | — % | 9 % | | Other | 19 % | 41 % | 32 % | 44 % | - Brazil became the largest revenue-generating region in Q2 and H1 2025, significantly increasing its contribution compared to 2024. **Petrobras** emerged as the largest customer, accounting for **37%** of revenues in Q2 2025, up from **16%** in Q2 2024[33](index=33&type=chunk) [Note 3 – Taxation](index=10&type=section&id=Note%203%20%E2%80%93%20Taxation) This note explains Seadrill's income tax expense and related tax positions | Metric (in $ millions) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :--------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Income tax expense | (29) | (3) | (44) | (13) | - **Income tax expense** increased significantly in Q2 2025 and H1 2025 compared to the prior year periods, primarily due to changes in the mix of pre-tax income and loss among tax jurisdictions and the recognition of a tax benefit in 2024[34](index=34&type=chunk)[35](index=35&type=chunk) [Note 4 – Loss/Earnings per share](index=10&type=section&id=Note%204%20%E2%80%93%20Loss%2FEarnings%20per%20share) This note presents the calculation of basic and diluted loss/earnings per share for the reported periods | Metric (in $) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :-------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Basic (loss)/earnings per share | (0.68) | 3.61 | (0.91) | 4.41 | | Diluted (loss)/earnings per share | (0.68) | 3.49 | (0.91) | 4.27 | - The company reported a basic and diluted **loss per share** of **$0.68** for Q2 2025 and **$0.91** for H1 2025, a reversal from positive EPS in the prior year periods. For 2025, potentially dilutive instruments were anti-dilutive and thus not included in the diluted EPS calculation[40](index=40&type=chunk) [Note 5 – Restricted cash](index=11&type=section&id=Note%205%20%E2%80%93%20Restricted%20cash) This note provides details on Seadrill's restricted cash balances | Metric (in $ millions) | June 30, 2025 | December 31, 2024 | | :--------------------- | :------------ | :---------------- | | Cash held in escrow | 23 | 23 | | Other | 3 | 4 | | Total restricted cash | 26 | 27 | - **Total restricted cash** remained stable at **$26 million** as of June 30, 2025, with the majority held in escrow[41](index=41&type=chunk) [Note 6 - Other current assets](index=11&type=section&id=Note%206%20-%20Other%20current%20assets) This note details the components of Seadrill's other current assets | Metric (in $ millions) | June 30, 2025 | December 31, 2024 | | :--------------------- | :------------ | :---------------- | | Taxes receivable | 42 | 55 | | Prepaid expenses | 58 | 57 | | Deferred contracts costs | 73 | 83 | | Pre-funding of MSA manager arrangements | 12 | 13 | | Other | 27 | 22 | | Total other current assets | 212 | 230 | - **Other current assets** decreased by **$18 million** to **$212 million** as of June 30, 2025, primarily due to a reduction in taxes receivable and deferred contracts costs[42](index=42&type=chunk) [Note 7 – Equity method investments](index=11&type=section&id=Note%207%20%E2%80%93%20Equity%20method%20investments) This note provides information on Seadrill's investments accounted for under the equity method | Metric (in $ millions) | June 30, 2025 | December 31, 2024 | | :--------------------- | :------------ | :---------------- | | Sonadrill | 82 | 68 | | Total equity method investments | 82 | 68 | - The carrying value of **equity method investments**, primarily **Sonadrill**, increased by **$14 million** to **$82 million** as of June 30, 2025[43](index=43&type=chunk) [Note 8 - Other current and non-current liabilities](index=12&type=section&id=Note%208%20-%20Other%20current%20and%20non-current%20liabilities) This note details the components of Seadrill's other current and non-current liabilities | Metric (in $ millions) | June 30, 2025 | December 31, 2024 | | :--------------------- | :------------ | :---------------- | | **Other current liabilities:** | | | | Accrued expenses | 188 | 183 | | Contract liabilities | 68 | 63 | | Unfavorable drilling contracts | 10 | 19 | | Total other current liabilities | 368 | 383 | | **Other non-current liabilities:** | | | | Uncertain tax positions | 58 | 55 | | Contract liabilities | 55 | 48 | | Total other non-current liabilities | 134 | 116 | - **Total other current liabilities** decreased by **$15 million** to **$368 million**, mainly due to a reduction in employee withheld taxes and **unfavorable drilling contracts**. **Total other non-current liabilities** increased by **$18 million** to **$134 million**, driven by higher uncertain tax positions and contract liabilities[45](index=45&type=chunk)[46](index=46&type=chunk) - **Unfavorable drilling contracts** decreased from **$22 million** at January 1, 2025, to **$10 million** at June 30, 2025, with a weighted average remaining amortization for unfavorable contracts of nine months[47](index=47&type=chunk)[48](index=48&type=chunk) [Note 9 – Debt](index=13&type=section&id=Note%209%20%E2%80%93%20Debt) This note provides details on Seadrill's outstanding debt facilities and their terms | Metric (in $ millions) | June 30, 2025 | December 31, 2024 | | :--------------------- | :------------ | :---------------- | | $575 million secured bond | 575 | 575 | | Unsecured senior convertible bond | 50 | 50 | | Total principal debt | 625 | 625 | | Total debt (net of premium/costs) | 612 | 610 | - **Total principal debt** remained stable at **$625 million**, consisting of a **$575 million secured bond** due August 2030 and a **$50 million unsecured senior convertible bond** due August 2028. The company also has a **$225 million** Senior Secured **Revolving Credit Facility**, undrawn as of June 30, 2025[50](index=50&type=chunk)[51](index=51&type=chunk)[52](index=52&type=chunk)[53](index=53&type=chunk) [Note 10 – Related party transactions](index=13&type=section&id=Note%2010%20%E2%80%93%20Related%20party%20transactions) This note describes Seadrill's transactions with related parties - **Sonadrill** joint venture is identified as the major related party. **Related party operating revenues** totaled **$79 million** for Q2 2025 and **$158 million** for H1 2025, primarily from management fees, reimbursable revenues, and **leasing revenues**[54](index=54&type=chunk)[55](index=55&type=chunk) | Related Party Revenue (in $ millions) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :----------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Management fees revenues | 62 | 62 | 120 | 117 | | Reimbursable revenues | 6 | 3 | 16 | 7 | | Leasing revenues | 8 | 26 | 16 | 37 | | Total related party operating revenues | 79 | 96 | 158 | 172 | - **Leasing revenues** from related parties decreased significantly due to the disposal of Gulfdrill rigs in June 2024[58](index=58&type=chunk) [Note 11 – Fair value of financial instruments](index=14&type=section&id=Note%2011%20%E2%80%93%20Fair%20value%20of%20financial%20instruments) This note provides fair value measurements for Seadrill's financial instruments | Financial Instrument (in $ millions) | June 30, 2025 Fair Value | June 30, 2025 Carrying Value | December 31, 2024 Fair Value | December 31, 2024 Carrying Value | | :--------------------------------- | :----------------------- | :--------------------------- | :--------------------------- | :------------------------------- | | $575 million secured bond (Level 1) | 585 | 562 | 587 | 560 | | Unsecured senior convertible bond - debt component (Level 3) | 57 | 50 | 56 | 50 | - The **fair value** of the **$575 million secured bond** (Level 1) was **$585 million**, slightly above its **carrying value** of **$562 million** as of June 30, 2025. The unsecured senior convertible bond's debt component (Level 3) had a **fair value** of **$57 million** against a **carrying value** of **$50 million**[60](index=60&type=chunk) [Note 12 – Common shares](index=14&type=section&id=Note%2012%20%E2%80%93%20Common%20shares) This note details movements in Seadrill's common shares | Metric | December 31, 2024 | March 31, 2025 | June 30, 2025 | | :----- | :---------------- | :------------- | :------------ | | Shares Issued | 62,154,422 | 62,163,028 | 62,225,301 | | Par value per share ($) | 0.01 | 0.01 | 0.01 | - The number of issued and fully paid **common shares** increased slightly from **62,154,422** at December 31, 2024, to **62,225,301** at June 30, 2025, primarily due to the vesting of restricted stock units[64](index=64&type=chunk) [Note 13 – Commitments and contingencies](index=14&type=section&id=Note%2013%20%E2%80%93%20Commitments%20and%20contingencies) This note outlines Seadrill's significant legal commitments and contingencies - **Seadrill** is involved in several **legal proceedings**, including a judgment against it for approximately **$37 million** plus interest and legal costs related to the redelivery of the West Hercules rig, which the company intends to appeal[67](index=67&type=chunk) - A High Court judgment on July 11, 2025, ruled in favor of a claimant for fees related to the **Sonadrill** joint venture, with an estimated liability for **Seadrill** of up to **$53 million**, excluding legal fees. An accrual of **$51 million** was recognized in Q2 2025[69](index=69&type=chunk) - **Petrobras** is asserting **delay penalties** of approximately **$213 million** against **Seadrill Brazil** related to uncompleted drillships from the Sete Brazil Project, with potential for further penalties. Mediation is ongoing, and **Petrobras** has committed not to exercise set-off rights during this period[71](index=71&type=chunk) - **Seadrill Brazil** faces a **tax audit** for years 2009 and 2010, with an appellate court ruling in favor of tax authorities for approximately **$75 million**. An appeal has been admitted by higher courts. Additional open cases for 2012, 2016, and 2017 amount to approximately **$80 million**[72](index=72&type=chunk) - The company has issued **performance guarantees** for **Sonadrill**, capped at **$1.1 billion**, but has not recognized liabilities as it does not consider it probable that the guarantees will be called[75](index=75&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=17&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management analyzes Seadrill's Q2 and H1 2025 financial condition, highlighting declining profit, reduced backlog, and challenging market conditions [Our Business](index=17&type=section&id=Our%20Business) This section provides an overview of Seadrill's offshore drilling operations and fleet - **Seadrill** is an offshore **drilling contractor** operating **15 drilling rigs** (**9 operating**, **1 undergoing survey**, **1 undergoing repairs**, **4 stacked**) as of June 30, 2025. The operating fleet includes eight floaters (seven 7th gen drillships, one 6th gen drillship) and one harsh environment jackup. The company also manages two 7th generation drillships for **Sonangol EP**[78](index=78&type=chunk)[79](index=79&type=chunk) [Significant Developments](index=17&type=section&id=Significant%20Developments) This section highlights key developments impacting Seadrill's business and operations - Ongoing and proposed changes to **U.S. global trade policy**, including potential tariffs, are causing volatility and uncertainty in global markets, with potential impacts on **Seadrill's** business and operations[80](index=80&type=chunk) [Contract Backlog](index=17&type=section&id=Contract%20Backlog) This section details Seadrill's contract backlog, indicating future revenue streams | Metric (in $ millions) | June 30, 2025 | December 31, 2024 | | :--------------------- | :------------ | :---------------- | | Drilling contracts | 2,537 | 3,034 | | Other | 68 | 146 | | Total contract backlog | 2,605 | 3,180 | - **Total contract backlog** decreased by **$575 million** to **$2,605 million** as of June 30, 2025, from **$3,180 million** at December 31, 2024. The majority of the backlog is expected to be realized in 2026 (**$816 million**) and 2027 (**$739 million**)[82](index=82&type=chunk)[83](index=83&type=chunk) [Business Environment](index=18&type=section&id=Business%20Environment) This section analyzes the market conditions and trends affecting Seadrill's offshore drilling business | Metric | Jun-2025 | Dec-2024 | | :----- | :------- | :------- | | Average Brent oil price ($/bbl) | 70 | 80 | - The average **Brent oil price** decreased to **$70/bbl** in H1 2025 from **$80/bbl** in 2024, driven by global oil production growth and slower demand. This has led to continued deferral of offshore capital expenditures and contracting[87](index=87&type=chunk)[88](index=88&type=chunk) | Metric | Jun-2025 | Dec-2024 | | :-------------------------- | :------- | :------- | | **Contracted rigs:** | | | | Benign environment floater | 106 | 110 | | Harsh environment floater | 20 | 22 | | Harsh environment jackup | 27 | 28 | | **Marketed utilization:** | | | | Benign environment floater | 84 % | 87 % | | Harsh environment floater | 87 % | 94 % | | Harsh environment jackup | 94 % | 96 % | - **Marketed utilization** for benign environment floaters, harsh environment floaters, and jackups decreased in H1 2025 compared to 2024, primarily due to fewer contracted units and long lead times for new projects. The market is experiencing softer utilization and increased competition, with a recovery anticipated in late 2026[90](index=90&type=chunk)[91](index=91&type=chunk)[88](index=88&type=chunk) [Results of operations](index=18&type=section&id=Results%20of%20operations) Seadrill's financial results for Q2 and H1 2025 show a significant decline in profitability compared to 2024, primarily due to increased operating expenses, particularly management contract expenses related to a legal judgment, and the absence of substantial gains from asset disposals | Metric (in $ millions) | 2025 | 2024 | Change | Change % | | :--------------------- | :--- | :--- | :----- | :------- | | Operating revenues | 377 | 375 | 2 | 1 % | | Operating expenses | (371) | (290) | (81) | 28 % | | Other operating items | — | 203 | (203) | (100) % | | Operating profit | 6 | 288 | (282) | (98)% | | Net (loss)/income | (42) | 253 | (295) | (117)% | - **Operating profit** decreased by **98%** to **$6 million** in Q2 2025 from **$288 million** in Q2 2024. **Net income** swung to a **net loss** of **$42 million** in Q2 2025 from a profit of **$253 million** in Q2 2024, a **117%** decrease[92](index=92&type=chunk) [Results for the three months ended June 30, 2025 and June 30, 2024](index=18&type=section&id=Results%20for%20the%20three%20months%20ended%20June%2030,%202025%20and%20June%2030,%202024) This section provides a detailed analysis of Seadrill's financial performance for the three months ended June 30, 2025 and 2024 [Operating revenues](index=19&type=section&id=Operating%20revenues%20(3M)) This section analyzes the components and changes in Seadrill's operating revenues | Revenue Type (in $ millions) | 2025 | 2024 | Change | Change % | | :--------------------------- | :--- | :--- | :----- | :------- | | Contract revenues | 288 | 267 | 21 | 8 % | | Reimbursable revenues | 16 | 15 | 1 | 7 % | | Management contract revenues | 65 | 65 | — | — % | | Leasing revenues | 8 | 26 | (18) | (69) % | | Other revenues | — | 2 | (2) | (100) % | | Total operating revenues | 377 | 375 | 2 | 1 % | - **Total operating revenues** remained stable at **$377 million** in Q2 2025. **Contract revenues** increased by **$21 million** (**8%**) due to higher **average contractual dayrates** (**$331k** vs **$289k** YoY) and increased deferred mobilization revenue amortization, despite fewer operating days for some rigs. **Leasing revenues** decreased by **$18 million** (**69%**) due to the disposal of Gulfdrill rigs in June 2024[94](index=94&type=chunk)[97](index=97&type=chunk)[98](index=98&type=chunk)[100](index=100&type=chunk)[101](index=101&type=chunk)[103](index=103&type=chunk)[105](index=105&type=chunk)[107](index=107&type=chunk)[108](index=108&type=chunk) [Operating expenses](index=20&type=section&id=Operating%20expenses%20(3M)) This section analyzes the components and changes in Seadrill's operating expenses | Expense Type (in $ millions) | 2025 | 2024 | Change | Change % | | :--------------------------- | :--- | :--- | :----- | :------- | | Vessel and rig operating expenses | (180) | (165) | (15) | 9 % | | Depreciation and amortization | (56) | (43) | (13) | 30 % | | Management contract expenses | (93) | (41) | (52) | 127 % | | Selling, general and administrative expenses | (26) | (24) | (2) | 8 % | | Total operating expenses | (371) | (290) | (81) | 28 % | - **Total operating expenses** increased by **$81 million** (**28%**) to **$371 million** in Q2 2025. **Management contract expenses** surged by **$52 million** (**127%**) due to an estimated **$51 million** increase in contingency accrual related to an unfavorable court judgment for **Sonadrill** joint venture fees. **Vessel and rig operating expenses** increased by **$15 million** (**9%**) due to new rig operations in Brazil and higher repair costs, partially offset by stacked rigs and lower managed service fees[110](index=110&type=chunk)[112](index=112&type=chunk)[113](index=113&type=chunk)[114](index=114&type=chunk)[115](index=115&type=chunk) [Other operating items](index=21&type=section&id=Other%20operating%20items%20(3M)) This section details other non-recurring or significant operating items impacting profitability | Item (in $ millions) | 2025 | 2024 | Change | Change % | | :------------------- | :--- | :--- | :----- | :------- | | Gain on disposals | — | 203 | (203) | (100)% | | Total other operating items | — | 203 | (203) | (100)% | - The absence of a **$203 million gain on disposals** in Q2 2025 (from the sale of Gulfdrill jackup units and equity interest in Q2 2024) significantly impacted the **Operating profit** comparison[118](index=118&type=chunk) [Interest expense](index=21&type=section&id=Interest%20expense%20(3M)) This section analyzes Seadrill's interest expenses on debt facilities | Item (in $ millions) | 2025 | 2024 | Change | Change % | | :------------------- | :--- | :--- | :----- | :------- | | Interest on debt facilities | (13) | (15) | 2 | (13)% | | Total interest expense | (15) | (16) | 1 | (6)% | - **Total interest expense** decreased slightly by **$1 million** (**6%**) to **$15 million** in Q2 2025, with interest on both secured and unsecured debt facilities seeing minor reductions[119](index=119&type=chunk)[120](index=120&type=chunk) [Financial and non-operating items](index=21&type=section&id=Financial%20and%20non-operating%20items%20(3M)) This section details other financial and non-operating income and expenses | Item (in $ millions) | 2025 | 2024 | Change | Change % | | :------------------- | :--- | :--- | :----- | :------- | | Interest income | 3 | 7 | (4) | (57)% | | Equity in earnings/(losses) of equity method investments (net of tax) | 6 | (15) | 21 | (140)% | | Other financial and non-operating items | (13) | (8) | (5) | 63 % | | Total financial and non-operating items | (4) | (16) | 12 | (75)% | - **Equity in earnings of equity method investments** (**Sonadrill**) improved significantly by **$21 million**, shifting from a **$15 million** **net loss** in Q2 2024 to a **$6 million** gain in Q2 2025, driven by lower bareboat charter costs and higher operating dayrates. **Interest income** decreased by **$4 million** due to lower cash balances[121](index=121&type=chunk)[122](index=122&type=chunk)[124](index=124&type=chunk) [Income tax expense](index=23&type=section&id=Income%20tax%20expense%20(3M)) This section analyzes Seadrill's income tax expense for the reported periods | Item (in $ millions) | 2025 | 2024 | Change | Change % | | :------------------- | :--- | :--- | :----- | :------- | | Income tax expense | (29) | (3) | (26) | 867 % | - **Income tax expense** increased by **$26 million** (**867%**) to **$29 million** in Q2 2025, primarily due to changes in the mix of pre-tax income/loss across tax jurisdictions and the recognition of a tax benefit in 2024[127](index=127&type=chunk) [Results for the six months ended June 30, 2025 and June 30, 2024](index=23&type=section&id=Results%20for%20the%20six%20months%20ended%20June%2030,%202025%20and%20June%2030,%202024) This section provides a detailed analysis of Seadrill's financial performance for the six months ended June 30, 2025 and 2024 | Metric (in $ millions) | 2025 | 2024 | Change | Change % | | :--------------------- | :--- | :--- | :----- | :------- | | Operating revenues | 712 | 742 | (30) | (4) % | | Operating expenses | (688) | (593) | (95) | 16 % | | Other operating items | — | 219 | (219) | (100) % | | Operating profit | 24 | 368 | (344) | (93)% | | Net (loss)/income | (56) | 313 | (369) | (118)% | - **Operating profit** decreased by **93%** to **$24 million** in H1 2025 from **$368 million** in H1 2024. **Net income** swung to a **net loss** of **$56 million** in H1 2025 from a profit of **$313 million** in H1 2024, a **118%** decrease[128](index=128&type=chunk) [Operating revenues](index=23&type=section&id=Operating%20revenues%20(6M)) This section analyzes the components and changes in Seadrill's operating revenues | Revenue Type (in $ millions) | 2025 | 2024 | Change | Change % | | :--------------------------- | :--- | :--- | :----- | :------- | | Contract revenues | 536 | 542 | (6) | (1) % | | Reimbursable revenues | 31 | 35 | (4) | (11) % | | Management contract revenues | 126 | 123 | 3 | 2 % | | Leasing revenues | 16 | 37 | (21) | (57) % | | Other revenues | 3 | 5 | (2) | (40) % | | Total operating revenues | 712 | 742 | (30) | (4)% | - **Total operating revenues** decreased by **$30 million** (**4%**) to **$712 million** in H1 2025. **Contract revenues** saw a slight decrease of **$6 million** (**1%**), primarily due to fewer operating days for some rigs (West Phoenix, West Capella, West Neptune) and lower **economic utilization** (**89%** vs **95%** YoY), despite higher **average contractual dayrates** (**$327k** vs **$295k** YoY) and increased deferred mobilization revenue amortization[129](index=129&type=chunk)[130](index=130&type=chunk)[131](index=131&type=chunk)[132](index=132&type=chunk)[133](index=133&type=chunk)[134](index=134&type=chunk)[135](index=135&type=chunk)[136](index=136&type=chunk) [Operating expenses](index=24&type=section&id=Operating%20expenses%20(6M)) This section analyzes the components and changes in Seadrill's operating expenses | Expense Type (in $ millions) | 2025 | 2024 | Change | Change % | | :--------------------------- | :--- | :--- | :----- | :------- | | Vessel and rig operating expenses | (359) | (345) | (14) | 4 % | | Depreciation and amortization | (111) | (81) | (30) | 37 % | | Management contract expenses | (138) | (79) | (59) | 75 % | | Selling, general and administrative expenses | (49) | (49) | — | — % | | Total operating expenses | (688) | (593) | (95) | 16 % | - **Total operating expenses** increased by **$95 million** (**16%**) to **$688 million** in H1 2025. **Management contract expenses** increased by **$59 million** (**75%**) due to estimated damages from the **Sonadrill** legal judgment and higher repairs/maintenance costs. **Depreciation and amortization** increased by **$30 million** (**37%**) due to capital projects on the West Auriga and West Polaris and full amortization of unfavorable contracts in 2024[142](index=142&type=chunk)[143](index=143&type=chunk)[144](index=144&type=chunk)[145](index=145&type=chunk)[146](index=146&type=chunk)[147](index=147&type=chunk) [Other operating items](index=25&type=section&id=Other%20operating%20items%20(6M)) This section details other non-recurring or significant operating items impacting profitability | Item (in $ millions) | 2025 | 2024 | Change | Change % | | :------------------- | :--- | :--- | :----- | :------- | | Gain on disposals | — | 203 | (203) | (100)% | | Other operating income | — | 16 | (16) | (100)% | | Total other operating items | — | 219 | (219) | (100)% | - The absence of a **$203 million gain on disposals** (from Gulfdrill assets in H1 2024) and **$16 million** in **other operating income** (recovery of historical import duties in H1 2024) significantly impacted the H1 2025 results[149](index=149&type=chunk)[150](index=150&type=chunk) [Interest expense](index=25&type=section&id=Interest%20expense%20(6M)) This section analyzes Seadrill's interest expenses on debt facilities | Item (in $ millions) | 2025 | 2024 | Change | Change % | | :------------------- | :--- | :--- | :----- | :------- | | Interest on debt facilities | (27) | (29) | 2 | (7)% | | Total interest expense | (30) | (31) | 1 | (3)% | - **Total interest expense** decreased slightly by **$1 million** (**3%**) to **$30 million** in H1 2025, with interest on debt facilities decreasing by **$2 million**[151](index=151&type=chunk)[152](index=152&type=chunk) [Financial and non-operating items](index=25&type=section&id=Financial%20and%20non-operating%20items%20(6M)) This section details other financial and non-operating income and expenses | Item (in $ millions) | 2025 | 2024 | Change | Change % | | :------------------- | :--- | :--- | :----- | :------- | | Interest income | 7 | 14 | (7) | (50)% | | Equity in earnings/(losses) of equity method investments (net of tax) | 14 | (11) | 25 | (227)% | | Other financial and non-operating items | (27) | (14) | (13) | 93 % | | Total financial and non-operating items | (6) | (11) | 5 | (45)% | - **Equity in earnings of equity method investments** (**Sonadrill**) improved significantly by **$25 million**, shifting from an **$11 million** **net loss** in H1 2024 to a **$14 million** gain in H1 2025, driven by higher operating dayrates. **Interest income** decreased by **$7 million** due to lower cash balances. **Other financial and non-operating items** increased by **$13 million** due to VAT liabilities and a provision related to assets sold in 2023[153](index=153&type=chunk)[154](index=154&type=chunk)[155](index=155&type=chunk)[156](index=156&type=chunk) [Income tax expense](index=26&type=section&id=Income%20tax%20expense%20(6M)) This section analyzes Seadrill's income tax expense for the reported periods - **Income tax expense** increased by **$31 million** in H1 2025 compared to H1 2024, reflecting changes in the mix of pre-tax income/loss among tax jurisdictions and the recognition of a tax benefit in 2024[157](index=157&type=chunk) [Liquidity and Capital Resources](index=26&type=section&id=Liquidity%20and%20Capital%20Resources) Seadrill maintains a capital allocation framework prioritizing a conservative capital structure, strong liquidity, and shareholder returns. As of June 30, 2025, the company had **$618 million** in available liquidity, consisting of unrestricted cash and undrawn revolving credit [Capital allocation framework and Share repurchase program](index=26&type=section&id=Capital%20allocation%20framework%20and%20Share%20repurchase%20program) This section outlines Seadrill's strategy for capital allocation and shareholder returns - **Seadrill's capital allocation framework** targets a **net leverage** of less than **1.0x** (current market) and a minimum **cash-on-hand** of **$250 million**. It aims to return at least **50%** of **Free Cash Flow** to shareholders via repurchases or dividends, subject to meeting leverage and liquidity targets[158](index=158&type=chunk)[159](index=159&type=chunk) - No shares were repurchased during Q2 or H1 2025. As of June 30, 2025, **$208 million** remained available under the **$500 million share repurchase program** authorized in June 2024[161](index=161&type=chunk) [Liquidity](index=27&type=section&id=Liquidity) This section details Seadrill's available liquidity and cash flow movements | Metric (in $ millions) | June 30, 2025 | December 31, 2024 | | :--------------------- | :------------ | :---------------- | | Unrestricted cash | 393 | 478 | | Undrawn Revolving Credit Facility | 225 | 225 | | Total available liquidity | 618 | 703 | - **Total available liquidity** decreased to **$618 million** as of June 30, 2025, from **$703 million** at December 31, 2024, primarily due to a reduction in **unrestricted cash**. The company expects current liquidity and revenues to fund anticipated debt service and working capital for the next 12 months[166](index=166&type=chunk)[168](index=168&type=chunk) - **Net cash used in operating activities** was **$16 million** in H1 2025, a **$124 million** decrease from cash provided in H1 2024, mainly due to decreased operating results and increased disbursements for maintenance and contract preparation[170](index=170&type=chunk) - **Net cash used in investing activities** was **$72 million** in H1 2025, compared to **$272 million** provided in H1 2024, reflecting capital expenditures on rigs and spares in 2025 versus significant proceeds from asset disposals in 2024[171](index=171&type=chunk)[172](index=172&type=chunk) [Borrowing Activities](index=27&type=section&id=Borrowing%20Activities) This section provides information on Seadrill's debt instruments and borrowing arrangements | Debt Type (in $ millions) | Principal Value as of June 30, 2025 | Carrying Value as of June 30, 2025 | Maturity Date | | :------------------------ | :---------------------------------- | :--------------------------------- | :------------ | | $575 million secured bond | 575 | 562 | August 2030 | | $50 million senior convertible bond | 50 | 50 | August 2028 | | Total debt | 625 | 612 | | - **Total debt** remained stable at **$625 million**, consisting of a **$575 million secured bond** due August 2030 and a **$50 million unsecured senior convertible bond** due August 2028[174](index=174&type=chunk) [Collateral package](index=28&type=section&id=Collateral%20package) This section describes the assets securing Seadrill's debt facilities - The **$225 million Revolving Credit Facility** is secured by first priority liens on substantially all of the company's rigs and related assets. The **$575 million Notes** are secured by a second priority lien on the same assets[175](index=175&type=chunk)[176](index=176&type=chunk) [Financial covenants](index=28&type=section&id=Financial%20covenants) This section outlines Seadrill's compliance with its debt financial covenants - As of June 30, 2025, **Seadrill** was in compliance with its **financial covenants**, which require an **Interest Coverage Ratio** of not less than **2.50 to 1.00** and a **Consolidated Total Net Leverage Ratio** of not greater than **3.00 to 1.00**[178](index=178&type=chunk)[184](index=184&type=chunk) [Critical Accounting Estimates](index=28&type=section&id=Critical%20Accounting%20Estimates) This section discusses Seadrill's critical accounting policies and estimates - There have been no material changes to the judgments, assumptions, and estimates underlying **Seadrill's critical accounting policies and estimates** as of June 30, 2025[180](index=180&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=28&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) Seadrill is exposed to market risks, including foreign exchange and interest rate risks, which it aims to reduce. No material changes to these market risks were reported compared to the previous annual report - **Seadrill** is exposed to **foreign exchange risk** and **interest rate risk**, and its policy is to reduce these exposures. No material changes to market risks were reported as of June 30, 2025[181](index=181&type=chunk) [Item 4. Controls and Procedures](index=28&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, including the CEO and CFO, concluded that Seadrill's disclosure controls and procedures were effective as of June 30, 2025. No material changes in internal control over financial reporting occurred during the quarter [Disclosure Controls and Procedures](index=28&type=section&id=Disclosure%20Controls%20and%20Procedures) This section reports on the effectiveness of Seadrill's disclosure controls and procedures - The company's management, including the CEO and CFO, evaluated and concluded that **Seadrill's disclosure controls and procedures** were effective as of June 30, 2025[182](index=182&type=chunk) [Changes in Internal Control over Financial Reporting](index=28&type=section&id=Changes%20in%20Internal%20Control%20over%20Financial%20Reporting) This section reports on any material changes in Seadrill's internal control over financial reporting - There were no changes in **internal control over financial reporting** during Q2 2025 that materially affected, or are reasonably likely to materially affect, the company's **internal control over financial reporting**[183](index=183&type=chunk) PART II - OTHER INFORMATION This part includes other required information such as legal proceedings, risk factors, and exhibits [Item 1. Legal Proceedings](index=29&type=section&id=Item%201.%20Legal%20Proceedings) This section cross-references to Note 13 for details on legal proceedings, emphasizing that while the company is involved in various lawsuits, it does not expect them to have a material adverse effect on its financial position, results of operations, or cash flows, though outcomes cannot be predicted with certainty - The company is involved in various **legal proceedings**, as detailed in Note 13, but does not currently expect them to have a material adverse effect on its financial position, operating results, or cash flows[186](index=186&type=chunk) [Item 1A. Risk Factors](index=29&type=section&id=Item%201A.%20Risk%20Factors) There have been no material changes to the risk factors previously disclosed in the company's 2024 10-K - No material changes to the **risk factors** previously disclosed in the 2024 10-K were reported[188](index=188&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=29&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) During Q2 2025, Seadrill did not repurchase any shares, leaving **$208 million** available under its current **$500 million share repurchase program** - No shares were repurchased during Q2 2025, with **$208 million** remaining available under the **$500 million share repurchase program**[189](index=189&type=chunk) [Item 3. Defaults Upon Senior Securities](index=29&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) This item is not applicable to Seadrill for the reported period - This item is not applicable[190](index=190&type=chunk) [Item 4. Mine Safety Disclosures](index=29&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to Seadrill for the reported period - This item is not applicable[191](index=191&type=chunk) [Item 5. Other Information](index=29&type=section&id=Item%205.%20Other%20Information) No director or officer adopted, modified, or terminated a **Rule 10b5-1** or **non-Rule 10b5-1 trading arrangement** during Q2 2025 - No director or officer adopted, modified, or terminated a **Rule 10b5-1** or **non-Rule 10b5-1 trading arrangement** during the three months ended June 30, 2025[192](index=192&type=chunk) [Item 6. Exhibits](index=30&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed as part of the Form 10-Q, including organizational documents, award agreements, certifications, and XBRL documents - The report includes various **exhibits** such as the Certificate of Incorporation, Bye-Laws, PRSU/TRSU Award Agreements, and certifications from the **Principal Executive and Financial Officers**[193](index=193&type=chunk) [SIGNATURES](index=31&type=section&id=SIGNATURES) The report is duly signed on behalf of **Seadrill Limited** by **Grant Creed**, **Executive Vice President and Chief Financial Officer**, on **August 7, 2025** - The report was signed by **Grant Creed**, **Executive Vice President and Chief Financial Officer**, on **August 7, 2025**[197](index=197&type=chunk)

Financial Data and Key Metrics Changes - Seadrill reported adjusted EBITDA of $106 million for Q2 2025, with an adjusted EBITDA margin of 29% [6][29] - Total operating revenues for Q2 were $377 million, a sequential increase of $42 million, primarily driven by higher contract drilling revenues [27] - Economic utilization improved to 93%, up from 84% in the previous quarter [28] Business Line Data and Key Metrics Changes - The West Vallor secured a two-well contract with TELUS Energy, while the Savan, Louisiana commenced a well intervention contract with Murphy Oil [7] - Management contract revenues increased to CAD 65 million, reflecting an inflationary increase for the daily management fee [28] Market Data and Key Metrics Changes - The market is expected to recover in late 2026, driven by increased exploration activities and significant investments in offshore projects [11][14] - Wood Mackenzie forecasts a substantial increase in FIDs from $91 billion in 2025 to $164 billion in 2026 [14] - Recent legislation mandates at least two lease sales annually from 2026, increasing exploration drilling and rig demand [13] Company Strategy and Development Direction - Seadrill is focused on maximizing profitability and minimizing gaps between contracts, with a disciplined approach to contracting [32] - The company is actively pursuing opportunities to fill its order book for 2025 while also securing contracts for 2026 and 2027 [20] - The establishment of the West Minerva real-time operations center aims to enhance operational efficiency and decision-making [9] Management's Comments on Operating Environment and Future Outlook - Management views the current market conditions as a trough, with expectations of recovery starting in late 2026 [21][22] - There is a tightening supply of rigs, and operators are increasingly moving towards offshore investments [21] - The company remains optimistic about securing contracts in Angola and Brazil, despite some political and administrative delays [39][40] Other Important Information - Seadrill maintains a robust balance sheet with gross principal debt of $625 million and cash holdings of $419 million [30] - The company is in active dialogue with multiple customers for work starting in 2026 [25] Q&A Session Summary Question: Contracting opportunities and future work - Management expressed optimism about recontracting in Angola despite political unrest, with advanced dialogues on three assets [39] - The company has secured near-term work for the Westfella and is actively marketing rigs globally [40] Question: Capital investment in idle rigs - Management confirmed reluctance to invest in idle rigs without strong visibility for future work, particularly regarding the Gemini rig [50] Question: Market dynamics and operator behavior - Management acknowledged that operators are locking in multiyear contracts due to anticipated demand in late 2026 and 2027 [56] Question: Well intervention market outlook - Management sees potential for well intervention work to grow, particularly with the Savant Louisiana rig, which has unique capabilities [76] Question: Share buyback strategy - Management indicated that stability in the economy and a favorable oil price outlook are key factors for considering share buybacks [102]

Contract Overview - Seadrill's West Auriga has a contract with Petrobras in Brazil, running from December 2024 to December 2027, valued at approximately $577 million, including mobilization and additional services[9] - West Carina is contracted with Petrobras in Brazil from November 2022 to January 2026, with a dayrate of $262,000[9] - West Jupiter has a contract with Petrobras in Brazil from December 2022 to November 2025, with a dayrate of $261,600, and a total contract value at signing was approximately $525 million, including mobilization and additional services, with a follow-on contract from March 2026 to March 2029[9] - West Polaris is contracted with Petrobras in Brazil from February 2025 to February 2028, with a total contract value at signing of approximately $518 million, including mobilization and additional services[9] - West Tellus has a contract with Petrobras in Brazil from January 2023 to February 2026, with a dayrate of $246,100, and a total contract value at signing was approximately $539 million, including mobilization and additional services, with a follow-on contract from June 2026 to June 2029[9] - West Neptune is contracted with LLOG in the U S Gulf from May 2025 to November 2025, with a total contract value of approximately $86 million, excluding additional services, for an approximate 180-day duration, with a follow-on contract from November 2025 to May 2026[9] Harsh Environment & Joint Venture Rigs - West Elara is operating in Norway under a market-indexed rate with ConocoPhillips, with the contract running from May 2018 to March 2028[10] - West Gemini, managed by Seadrill through the Sonadrill joint venture, is operating in Angola with TotalEnergies from November 2024 to June 2025, with a dayrate of $404,800, and experienced an out-of-service period of approximately 60 days due to SPS, commencing in June[10] Stacked Rigs - West Capella is currently stacked in Malaysia[10]

Second Quarter 2025 Performance Overview [Executive Summary & Financial Highlights](index=1&type=section&id=1.1%20Executive%20Summary%20%26%20Financial%20Highlights) Seadrill Limited reported increased total operating revenues and Adjusted EBITDA for Q2 2025, despite an expanded net loss, securing new contracts and expressing confidence in market improvement 2025 Q2 Financial Highlights | Figures in USD million, unless otherwise indicated | Three months ended June 30, 2025 | Three months ended March 31, 2025 | | :--------------------------------- | :------------------------------- | :------------------------------ | | Total operating revenues | 377 | 335 | | Contract revenues | 288 | 248 | | Net loss | (42) | (14) | | Adjusted EBITDA | 106 | 73 | | Adjusted EBITDA margin excluding Reimbursables | 29.4 % | 22.8 % | | Diluted loss per share ($) | (0.68) | (0.23) | - President and CEO Simon Johnson noted that active client dialogues are converting into new contracts, with awards for West Vela and Sevan Louisiana expanding the client base and anticipating substantial progress on other fixtures soon, expressing confidence in delivering long-term shareholder value as the market improves[2](index=2&type=chunk) - The company reported a **net loss of $42 million** and **Adjusted EBITDA of $106 million**, holding **$419 million in cash** with a **net leverage ratio of 0.77** at the end of Q2[5](index=5&type=chunk) [Detailed Financial and Operational Results](index=1&type=section&id=1.2%20Detailed%20Financial%20and%20Operational%20Results) Total operating revenues for Q2 2025 increased by $42 million quarter-over-quarter to $377 million, driven by higher contract revenues, but net loss expanded due to a significant increase in management contract expenses from an unfavorable legal judgment - Total operating revenues for Q2 2025 increased by **$42 million** quarter-over-quarter to **$377 million**, with contract revenues rising by **$40 million** to **$288 million**, primarily due to increased economic utilization and operating days for West Polaris and West Neptune[3](index=3&type=chunk) - Management contract revenues increased by **$4 million** quarter-over-quarter to **$65 million**, reflecting higher daily management fees for Sonadrill, effective retroactively to January 1, 2025[3](index=3&type=chunk) - Total operating expenses increased by **$54 million** to **$371 million** in Q2 2025, mainly due to a **$51 million** recognition of management contract expenses from an unfavorable legal judgment, resulting in a **net loss of $42 million** and **Adjusted EBITDA of $106 million**[4](index=4&type=chunk) Financial Position and Cash Flow [Balance Sheet and Liquidity](index=2&type=section&id=2.1%20Balance%20Sheet%20and%20Liquidity) Seadrill's balance sheet at quarter-end shows sufficient cash reserves, but net debt and net leverage ratio remain key areas of focus - As of quarter-end, Seadrill's total principal debt was **$625 million**, with cash and cash equivalents (including **$26 million** in restricted cash) totaling **$419 million**, resulting in a **net debt position of $206 million**[6](index=6&type=chunk) - The **net leverage ratio was 0.77**, calculated as net debt (excluding **$26 million** restricted cash) of **$232 million** divided by Adjusted EBITDA of **$300 million** for the twelve months ended June 30, 2025[5](index=5&type=chunk)[8](index=8&type=chunk) [Cash Flow Performance](index=2&type=section&id=2.2%20Cash%20Flow%20Performance) In Q2 2025, the company generated positive net cash from operating activities, but investment activities and free cash flow were negative, primarily due to increased accounts receivable and capital expenditures - Net cash provided by operating activities in Q2 2025 was **$11 million**, including **$44 million** in capitalized long-term maintenance, negatively impacted by an increase in accounts receivable[6](index=6&type=chunk) - Capital expenditures accounted for **$23 million** of net cash used in investing activities[6](index=6&type=chunk) - Free Cash Flow was **negative $12 million**[6](index=6&type=chunk) Commercial Activity and Order Backlog [Order Backlog and Fleet Status](index=2&type=section&id=3.1%20Order%20Backlog%20and%20Fleet%20Status) As of August 6, 2025, Seadrill's order backlog reached approximately $2.5 billion, indicating future revenue visibility - As of August 6, 2025, Seadrill's order backlog was approximately **$2.5 billion**[7](index=7&type=chunk) - The order backlog includes all firm contracts at the contractual operating dayrate multiplied by the remaining contract days, including management contract revenues and bareboat charter revenues, excluding mobilization, demobilization, contract preparation, and other incentive provisions, as well as backlog from non-consolidated entities[8](index=8&type=chunk) [Recent Contract Awards](index=2&type=section&id=3.2%20Recent%20Contract%20Awards) The company recently secured two significant contracts, further solidifying its operations in the US Gulf of Mexico - West Vela secured a two-well contract with Talos Energy in the US Gulf of Mexico, with an estimated duration of **90 days**, expected to commence in mid-November 2025[10](index=10&type=chunk) - Sevan Louisiana secured a three-well contract with Murphy Oil in the US Gulf of Mexico, which began in August 2025 and is expected to run through November 2025[10](index=10&type=chunk) Company Information and Disclosures [About Seadrill](index=2&type=section&id=4.1%20About%20Seadrill) Seadrill sets the standard in deepwater oil and gas drilling, providing services to national, integrated, and independent oil companies with its modern fleet, experienced crews, and advanced technology - Seadrill sets the standard in deepwater oil and gas drilling, safely, efficiently, and responsibly extracting oil and gas resources for national, integrated, and independent oil companies through its modern fleet, experienced crews, and advanced technology[9](index=9&type=chunk) [Forward-Looking Statements](index=3&type=section&id=4.2%20Forward-Looking%20Statements) This press release contains forward-looking statements involving plans, expectations, assumptions, and beliefs about future events, which are subject to inherent risks and uncertainties that could cause actual results to differ materially from expectations - All statements in the press release that are not historical facts, including those regarding company outlook, plans, strategies, business prospects, contract awards, financial performance, operations, litigation, rig activity, and trends in business and market changes, are forward-looking statements[11](index=11&type=chunk) - These statements are based on management's current plans, expectations, assumptions, and beliefs, and involve risks, uncertainties, and assumptions that could cause actual results to differ materially from those expressed or implied in the forward-looking statements[11](index=11&type=chunk) - Important influencing factors include, but are not limited to: offshore drilling market conditions, contract awards and rig mobilizations, contract backlog, maintenance costs, drilling unit performance, customer payment delays or disputes, financing capabilities, oil price fluctuations, international financial market conditions, geopolitical uncertainties, and litigation outcomes[11](index=11&type=chunk) [Investor Relations and Non-GAAP Measures Disclosure](index=2&type=section&id=4.3%20Investor%20Relations%20and%20Non-GAAP%20Measures%20Disclosure) The company disseminates important financial information through SEC filings, press releases, and public conference calls, utilizing its investor website for communication, and provides definitions and reconciliations for non-GAAP financial measures to aid investor understanding of its performance - The company disseminates important financial information through SEC filings, press releases, and public conference calls, and plans to publish presentations and fleet status reports on its investor website (www.seadrill.com)[13](index=13&type=chunk) - Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted EBITDA excluding Reimbursables, and Adjusted EBITDA Margin excluding Reimbursables are non-GAAP financial measures that the company believes help investors assess performance by excluding the impact of depreciation, amortization, income taxes, financial and non-operating items[8](index=8&type=chunk)[22](index=22&type=chunk) - Net leverage ratio is defined as net debt (excluding restricted cash) divided by Adjusted EBITDA for the trailing 12 months, while economic utilization is defined as dayrate revenue earned (excluding bonuses) divided by the contractual operating dayrate multiplied by the contractual days in the period[8](index=8&type=chunk) Condensed Consolidated Financial Statements [Statements of Operations](index=4&type=section&id=5.1%20Statements%20of%20Operations) In Q2 2025, the company's total operating revenues increased year-over-year, but net loss expanded due to a significant rise in management contract expenses Condensed Consolidated Statements of Operations (Unaudited) | (In $ millions, except per share data) | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :----------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Operating revenues | | | | | | Contract revenues | 288 | 267 | 536 | 542 | | Reimbursable revenues | 16 | 15 | 31 | 35 | | Management contract revenues | 65 | 65 | 126 | 123 | | Leasing revenues | 8 | 26 | 16 | 37 | | Other revenues | — | 2 | 3 | 5 | | Total operating revenues | 377 | 375 | 712 | 742 | | Operating expenses | | | | | | Vessel and rig operating expenses | (180) | (165) | (359

Contract Status Overview - The report provides an overview of Seadrill Limited's fleet contract status as of May 12, 2025 [1] - The fleet includes drillships, benign semi-submersibles, and harsh environment rigs [9, 10] - The report contains forward-looking statements subject to risks and uncertainties [2, 3] Drillship and Semi-Submersible Contracts - West Auriga has a contract with Petrobras in Brazil, with a total contract value at signing of approximately $577 million, including mobilization and additional services [9] - West Carina is contracted with Petrobras in Brazil at a dayrate of $252,600 [9] - West Jupiter has a contract with Petrobras in Brazil, with a total contract value at signing of approximately $525 million, including mobilization and additional services [9] - West Polaris has a contract with Petrobras in Brazil, with a total contract value at signing of approximately $518 million, including mobilization and additional services [9] - West Tellus has a contract with Petrobras in Brazil, with a total contract value at signing of approximately $539 million, including mobilization and additional services [10] - West Neptune has a contract with LLOG in the U.S Gulf, with a total contract value of approximately $86 million, excluding additional services, for an approximate 180-day duration [9] - West Gemini is contracted with TotalEnergies in Angola at a dayrate of $404,800 [9] Harsh Environment Rigs - West Elara is contracted with ConocoPhillips in Norway until March 2028 at a market-indexed rate [10]

Financial Performance - Operating revenues for the three months ended March 31, 2025, were $335 million, down 9% from $367 million in the same period of 2024 [91]. - The total operating profit for Q1 2025 was $18 million, a significant decrease of 78% compared to $80 million in Q1 2024 [91]. - Net loss for the three months ended March 31, 2025, was $14 million, compared to a net income of $60 million in the same period of 2024, marking a 123% decline [91]. - Total operating expenses for Q1 2025 were $317 million, an increase of 5% compared to $303 million in Q1 2024 [112]. - Other financial items increased by $8 million in Q1 2025, primarily due to a provision recognized related to assets sold in 2023 [127]. - The income tax expense increased by $5 million in Q1 2025, primarily due to the recognition of a deferred tax benefit in Q1 2024 [129]. Revenue Sources - The average contractual dayrate increased to $323 thousand in Q1 2025 from $300 thousand in Q1 2024, contributing an additional $26 million to contract revenues [99]. - Economic utilization for rigs on contract dropped to 84% in Q1 2025 from 97% in Q1 2024, resulting in a $22 million decrease in contract revenues [102]. - Management contract revenues increased by $3 million in Q1 2025, driven by higher management fees on three managed rigs [107]. - Leasing revenues decreased by $3 million in Q1 2025 due to the disposal of Gulfdrill rigs in June 2024, despite higher charter rates for the West Gemini [110]. Cash Flow and Liquidity - Net cash used in operating activities was $27 million in Q1 2025, a decrease of $56 million compared to net cash provided of $29 million in Q1 2024 [141]. - Available liquidity as of March 31, 2025, was $629 million, consisting of $404 million in unrestricted cash and $225 million in available borrowings [137]. - $49 million cash used in investing activities for Q1 2025 primarily for capital expenditures on West Neptune, West Elara, and West Auriga [142]. - $119 million cash used in financing activities for Q1 2024 related to share repurchases [143]. Debt and Financing - Total debt as of March 31, 2025, is $625 million, with a carrying value of $611 million [144]. - The company entered into a $225 million, 5-year Senior Secured Revolving Credit Agreement in July 2023 [145]. - $575 million notes issued in July 2023, maturing on August 1, 2030, secured by a second priority lien [146]. - The company has $208 million remaining under the $500 million share repurchase program as of March 31, 2025 [133]. Market Conditions - The average Brent oil price for the three months ended March 31, 2025, was $76 per barrel, down from $80 per barrel in 2024 [85]. - The company is exposed to market risks, including foreign exchange and interest rate risks, with no material changes reported as of March 31, 2025 [151]. Compliance and Accounting - As of March 31, 2025, the company was in compliance with financial covenants, including an Interest Coverage Ratio of at least 2.50 to 1.00 [148][152]. - The company made critical accounting estimates affecting reported amounts of assets, liabilities, revenues, and expenses [149]. - There have been no material changes to the judgments, assumptions, and estimates upon which critical accounting policies are based as of March 31, 2025 [150]. Contract Backlog and Rig Utilization - As of March 31, 2025, the total contract backlog was $2,914 million, a decrease from $3,180 million as of December 31, 2024, representing a decline of 8.3% [80]. - The average number of rigs on contract decreased from 10 in Q1 2024 to 9 in Q1 2025, leading to a $42 million decrease in contract revenues [96]. - Vessel and rig operating expenses remained consistent at $179 million in Q1 2025, with a decrease of $33 million attributed to lower managed service agreement fees [114]. - Depreciation and amortization increased by $17 million to $55 million in Q1 2025, primarily due to capital projects on the West Auriga and West Polaris [115]. - Interest income decreased by $3 million to $4 million in Q1 2025, primarily due to a decrease in cash and cash equivalents [125].

Financial Data and Key Metrics Changes - Seadrill reported total operating revenues of $335 million for Q1 2025, an increase of $46 million from the prior quarter [24] - Adjusted EBITDA was $73 million, up from $28 million in the previous quarter [26] - Economic utilization for the quarter was 84%, impacted by downtime in three rigs in Brazil [7][8] Business Line Data and Key Metrics Changes - Contract drilling revenues increased by $44 million sequentially to $248 million due to additional operating days [24] - Total operating expenses decreased to $317 million from $323 million in the prior quarter [25] - Vessel and rig operating expenses rose by $15 million to $179 million due to additional operating days across the fleet [25] Market Data and Key Metrics Changes - Global macro uncertainty and OPEC's decision to increase supply are affecting commodity prices and client investment confidence [8][9] - The U.S. Gulf is expected to see increased competition with up to five rigs rolling off contract before year-end, exerting downward pressure on rates in 2025 [16] - Demand in Africa is projected to decline by two to four rigs in 2025 before rebounding in 2027 and beyond [18] Company Strategy and Development Direction - Seadrill focuses on high specification floaters and deepwater basins, believing that deepwater investments are compelling due to expansive reserves [11][29] - The company aims to prioritize margins and cash flow over utilization for long-term value creation [12][29] - Seadrill maintains a robust balance sheet with $430 million in cash and a backlog of $2.8 billion extending through 2028 and into 2029 [12][26] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in future demand for deepwater drilling despite current market volatility [10][29] - Active dialogues with clients for opportunities in the second half of 2025 and 2026 are ongoing, with expectations for multiple contract awards [9][29] - The company is optimistic about the longevity of demand in Brazil, with Petrobras issuing a multiyear tender for rigs [19][20] Other Important Information - Seadrill is participating in voluntary mediation with Petrobras regarding delayed penalty notices [13] - The company has undertaken an initial review of the impact of tariffs, believing any impact is already reflected in current guidance [28] Q&A Session Summary Question: Shift in client interest towards performance-based contracts - Management noted that performance-based contracts are not new and they are open to larger performance-based contracts for the right clients [34][36] Question: Costs associated with stacking the Capella - Management indicated they are in a ramp-down mode and have not reached a long-term cold stacking rate yet [38] Question: Decision process for stacking versus keeping a rig warm - Management emphasized the importance of being decisive and disciplined about removing supply from the market when necessary [41] Question: Confidence in securing contracts for the second half of 2025 - Management expressed confidence in their contracting outlook, noting that they have not moved to cold stack certain rigs, indicating ongoing market opportunities [61] Question: Need to compete on price - Management stated that performance still matters significantly and they have historically been able to secure leading edge day rates [63][65]

Financial Data and Key Metrics Changes - Seadrill reported total operating revenues of $335 million for Q1 2025, an increase of $46 million from the prior quarter [25] - Adjusted EBITDA was $73 million, up from $28 million in the previous quarter [27] - Economic utilization for the quarter was 84%, impacted by downtime in three rigs in Brazil [7] Business Line Data and Key Metrics Changes - Contract drilling revenues increased by $44 million sequentially to $248 million due to additional operating days [25] - Vessel and rig operating expenses rose by $15 million to $179 million due to increased operating days across the fleet [26] - Management contract expenses decreased by $6 million to $45 million, largely due to timing of project spending [26] Market Data and Key Metrics Changes - Global macro uncertainty and OPEC's decision to increase supply have negatively impacted commodity prices and client investment confidence [8] - Offshore sanctioning activity is forecasted to double in 2026 and 2027 compared to 2025, with a significant portion of projects being economically viable above $50 per barrel [11] Company Strategy and Development Direction - The company aims to prioritize margins and cash flow over utilization to create long-term value for shareholders [12] - Seadrill is focused on high specification floaters and deepwater basins, maintaining a strong balance sheet and durable backlog [30] - The company is actively pursuing opportunities in the second half of 2025 and 2026, despite current market volatility [29] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in future demand for deepwater drilling, citing the need for investment to offset depletion [9] - The company is encouraged by ongoing dialogues with clients for upcoming contract opportunities [8] - Management acknowledged the current market's volatility but remains optimistic about securing contracts for their rigs [61] Other Important Information - Seadrill closed Q1 2025 with cash of $430 million and a backlog of $2.8 billion extending through 2028 and into 2029 [12] - The company is engaged in voluntary mediation with Petrobras regarding delayed penalty notices [13] Q&A Session Summary Question: Shift in client interest towards performance-based contracts - Management noted that performance-based contracts are not new and they are open to such arrangements for the right clients and rigs [36] Question: Costs associated with stacking the Capella rig - Management indicated they are currently reducing costs while pursuing contracting opportunities and have not yet moved to cold stack the rig [38] Question: Decision process for stacking versus keeping a rig warm - Management emphasized the importance of being decisive and disciplined in removing supply from the market when necessary [41] Question: Confidence in securing contracts for the second half of 2025 - Management expressed confidence in their assets and the ongoing market dynamics, indicating they are actively pursuing opportunities [61] Question: Need to compete on price - Management stated that performance remains a key differentiator and they are not feeling pressured to lower prices significantly [63]