Seadrill Limited (NYSE:SDRL) Q4 2023 Results Conference Call February 29, 2024 10:00 AM ET Company Participants Lydia Mabry - Director of Investor Relations Simon Johnson - President and Chief Executive Officer Grant Creed - Executive Vice President and Chief Financial Officer Samir Ali - Executive Vice President and Chief Commercial Officer Marcel Wieggers - Senior Vice President of Operations Conference Call Participants Frank Galanti - Stifel Greg Lewis - BTIG Fredrik Stene - Clarkson Securities Hamed Kh ...

Core Insights - Seadrill Limited reported a full-year operating profit of $329 million and Adjusted EBITDA of $495 million for 2023, aligning with guidance [2][7] - The company secured significant contracts in Brazil and the U.S. Gulf of Mexico, achieving some of the highest dayrates in the current market cycle [2][10] - Seadrill completed $342 million in share repurchases, representing 11% of its share capital, as part of its ongoing buyback program [2][8] Quarterly Highlights - For Q4 2023, Seadrill reported total operating revenues of $408 million, with contract revenues of $315 million, a slight decrease from the previous quarter [3][5] - Adjusted EBITDA for Q4 2023 was $100 million, down from $151 million in Q3 2023, reflecting a decrease in operating profit to $52 million from $117 million [3][5][29] - The company operated an average of 12 rigs with an economic utilization rate of 92.4% [5][33] Financial Performance - Full-year total operating revenues reached approximately $1.5 billion, a 48% increase from $1.0 billion in the previous year [6][7] - Operating expenses increased to $356 million in Q4 2023, primarily due to provisions, repair and maintenance projects, and personnel costs [5] - Net cash provided by operating activities for Q4 was $140 million, marking a 25% improvement from Q3 [6] Share Repurchase Program - Seadrill initiated a $250 million buyback program in September 2023, which was expanded by an additional $250 million in December 2023 [8] - As of February 27, 2024, the company had repurchased a total of eight million shares at an average price of $43.36 per share [8] Balance Sheet Overview - As of December 31, 2023, Seadrill had gross principal debt of $625 million and cash and cash equivalents of $728 million [9][21] - The company maintains an additional $225 million in available borrowings under its undrawn senior secured revolving credit facility [9] Operational and Commercial Activity - Seadrill's order backlog stood at approximately $2.9 billion as of February 28, 2024, including $1.1 billion in contract additions since November 2023 [10] - Notable contracts secured include $1.1 billion in Brazil and a $74 million contract in the U.S. Gulf of Mexico [11][12]

Group 1 - Seadrill Limited will report its fourth quarter and full year 2023 results on February 28, 2024, after the NYSE closes for trading [1] - A conference call to discuss the results is scheduled for February 29, 2024, at 09:00 CST / 16:00 CET, with participants required to join at least 15 minutes prior [1] - The conference call will be accessible via a live webcast on Seadrill's website, with a replay available afterwards [1] Group 2 - Seadrill is a leading offshore drilling contractor that employs advanced technology to access oil and gas resources in various environments globally [2] - The company operates a high-quality, technologically-advanced fleet that covers all asset classes, enabling operations from shallow to ultra-deepwater locations [2] - Seadrill's experienced crews are capable of conducting operations across diverse geographies [2]

Contract Awards and Extensions - Seadrill Limited announced multiple contract awards and a contract extension for its West Vela and West Capella drillships worth a total of $97.5 million [1] - The West Vela drillship secured a contract with Talos Production in the U.S. Gulf of Mexico valued at approximately $73.5 million, with an estimated duration of 150 days starting in Q3 2024 [1] - The West Capella drillship has a one-well option exercised by Vantage Holdings worth around $24 million, extending operations by approximately two months [2] Drillship Specifications - The West Vela is a seventh-generation ultra-deepwater dual-activity drillship with a maximum drilling capacity of 37,500 feet and operational depth of 12,000 feet [1] - The West Capella is a sixth-generation ultra-deepwater dual-activity drillship with a maximum drilling depth of 37,500 feet and operational depth of 10,000 feet [2] Management Resumption - Seadrill is set to resume management of the West Auriga drillship in Q1 2024, following its release by Diamond Offshore in February 2024, allowing for contract preparations with Petrobras [3] - The resumption will enable Seadrill to achieve synergies from its acquisition of Aquadrill in 2023 [3]

Core Insights - Seadrill Limited has announced multiple contract awards totaling approximately $97.5 million, including a significant contract with Talos Production Inc. for the West Vela rig in the U.S. Gulf of Mexico [1] - The West Vela contract is estimated to last 150 days and is expected to commence in the third quarter of 2024, with a total value of approximately $73.5 million [1] - The West Capella rig has had its operations extended by approximately two months, with a contract value of around $24.0 million [1] Contractual Developments - Talos Production Inc. awarded a contract for the West Vela rig, which is expected to start in Q3 2024 [1] - The West Capella rig's operator exercised a one-well option, extending its contract and operations [1] Management Updates - The West Auriga rig will be released in February 2024, allowing Seadrill to resume management and prepare for a contract in Brazil starting in the second half of 2024 [2] - Seadrill's President & CEO expressed satisfaction in extending the contractual relationship with Talos Energy and looks forward to managing the West Auriga again [2] Company Overview - Seadrill is a leading offshore drilling contractor that utilizes advanced technology to unlock oil and gas resources globally [3] - The company operates a high-quality, technologically advanced fleet capable of conducting operations in various environments, from shallow to ultra-deepwater [3]

Company Overview - Seadrill is a leading offshore drilling contractor that utilizes advanced technology to unlock oil and gas resources for clients in various environments [2] - The company operates a high-quality, technologically-advanced fleet that spans all asset classes, enabling operations from shallow to ultra-deepwater environments [2] Annual General Meeting - The Board of Seadrill has confirmed that the Annual General Meeting of Shareholders for the 2024 calendar year will be held in Bermuda on April 17, 2024 [1] - A Notice of Annual General Meeting and Proxy Statement will be distributed closer to the meeting date [1]

Financial Data and Key Metrics Changes - Seadrill reported adjusted EBITDA of $151 million on revenues of $414 million, resulting in a margin of 36.5% [6][20] - Full year 2023 guidance for adjusted EBITDA has been increased to a range of $485 million to $505 million [6][22] - Net income for Q3 was $90 million, or $1.10 per diluted share [20] Business Line Data and Key Metrics Changes - Contract drilling revenues decreased sequentially by $5 million to $324 million due to planned service days [18] - Economic utilization for Q3 was reported at 93% [18] - Additional revenues from management contracts totaled $68 million, primarily from the Sonadrill joint venture [18] Market Data and Key Metrics Changes - The order backlog currently stands at $2.2 billion as of November 27, 2023 [14] - Drillship market utilization remains in the 90s, with leading-edge day rates recently exceeding $500,000 per day [15] - Average lead times to secure drillships have improved to 319 days, a nearly 60% improvement compared to 2020 [16] Company Strategy and Development Direction - The company is focused on exiting non-core asset categories and simplifying its value proposition [7] - Seadrill plans to close its London office and consolidate its corporate headquarters in Houston, Texas, to improve collaboration and cost efficiencies [8][9] - The company is optimistic about the long-term outlook for the offshore drilling market, particularly in South America [10] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the strength of market fundamentals and the potential for improved demand [30] - The company anticipates a significant uptick in earnings as legacy contracts roll off and are replaced with higher day rates [10] - Management acknowledged inflationary pressures on labor costs but aims for 100% pass-through of these costs to clients [46] Other Important Information - Seadrill initiated a $250 million share buyback program, executing 85% of it at an average price of $42.76 per share [6][26] - The Board of Directors has increased the share repurchase authorization to a total of $500 million [6][27] Q&A Session Summary Question: Broader market outlook and idle time between contracts - Management noted that while there may be short-term fluctuations, the fundamentals remain strong and day rates are approaching pre-downturn levels [30][31] Question: Opportunities for the Sevan Louisiana rig - Management indicated that the rig is being marketed globally and they aim to maximize value, potentially relocating it if necessary [33][34] Question: Preliminary thoughts on 2024 EBITDA estimates - Management refrained from providing specific guidance for 2024, citing the need for more clarity on revenue and cost items [37] Question: Clarification on the $45 million contract backlog - Management confirmed that the contract is well-based, but specifics on the day rate were not disclosed [38][39] Question: Update on jack-up fleet sale discussions - Management stated that there has been strong interest in the jack-up market, but they are not in a rush to sell and are waiting for favorable pricing [42][43] Question: Cost pressures and pass-through mechanisms - Management acknowledged inflationary pressures on labor costs and expressed a goal of achieving full pass-through of these costs to clients [45][46] Question: Update on the West Phoenix rig - Management confirmed that the rig is being actively marketed for opportunities in Norway and other markets [53]

[Management's Discussion and Analysis of Financial Condition and Results of Operations](index=4&type=section&id=Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) [Overview](index=4&type=section&id=Overview) Seadrill operates a fleet of 19 drilling rigs, with 16 operational and three cold stacked, and manages seven third-party rigs - As of September 30, 2023, Seadrill's owned fleet consists of **19 rigs**: **16** are operating (including rigs leased to joint ventures) and **3** are cold stacked[10](index=10&type=chunk) - The company's operating fleet includes **eleven floaters**, **two harsh environment units**, and **three jackups**[10](index=10&type=chunk) - In addition to its owned fleet, Seadrill provides management services for **seven third-party rigs**[10](index=10&type=chunk) [Significant Developments since January 1, 2023](index=4&type=section&id=Significant%20Developments%20since%20January%201%2C%202023) Seadrill completed the Aquadrill acquisition, refinanced debt, disposed of non-core assets, and initiated a share repurchase program since January 2023 - Completed the acquisition of Aquadrill on April 3, 2023, adding **four drillships**, **one semi-submersible**, and **three tender-assist units** to its fleet[15](index=15&type=chunk) - Executed a major debt refinancing in July 2023 by issuing **$575 million** in Senior Secured Second Lien Notes due 2030, using the proceeds to prepay existing first and second lien facilities[17](index=17&type=chunk)[81](index=81&type=chunk) - Disposed of **three tender-assist units** acquired from Aquadrill for an aggregate price of **$84 million**, completing the sale on July 28, 2023[16](index=16&type=chunk) - Authorized a share repurchase program of up to **$250 million** in August 2023, which was subsequently increased to a total of **$500 million**[18](index=18&type=chunk) - Announced a proposal to consolidate corporate offices in Houston and close the London office by March 31, 2024[20](index=20&type=chunk) [Contract Backlog](index=6&type=section&id=Contract%20Backlog) Seadrill's contract backlog totaled **$2,306 million** as of September 30, 2023, primarily from drilling contracts, with most revenues expected in 2024 Contract Backlog Comparison (in $ millions) | Category | September 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Drilling contracts | 1,832 | 1,925 | | Other | 474 | 390 | | **Total contract backlog** | **2,306** | **2,315** | Projected Backlog Realization as of Sep 30, 2023 (in $ millions) | Period | Drilling Contracts | Other | Total | | :--- | :--- | :--- | :--- | | Remainder of 2023 | 324 | 68 | 392 | | 2024 | 797 | 281 | 1,078 | | 2025 | 474 | 119 | 593 | | Thereafter | 237 | 6 | 243 | | **Total** | **1,832** | **474** | **2,306** | [Market Overview and Trends](index=6&type=section&id=Market%20Overview%20and%20Trends) The offshore drilling market continues to recover, with harsh environment floater utilization at 93% and benign environment drillship utilization above 90% Average Brent Oil Price ($/bbl) | Period | Dec-2020 | Dec-2021 | Dec-2022 | Sep-2023 | | :--- | :--- | :--- | :--- | | Average Price | 42 | 71 | 101 | 82 | Floater Marketed Utilization | Segment | Dec-2021 | Dec-2022 | Sep-2023 | | :--- | :--- | :--- | :--- | | Harsh environment floater | 77% | 82% | 93% | | Benign environment floater | 80% | 81% | 85% | - Marketed utilization in the harsh environment floater segment has improved considerably due to a slight increase in contracted rigs and a reduction in total supply from attrition[28](index=28&type=chunk) - Improved demand, particularly for drillships, has driven higher utilization in the benign-environment floater segment, with utilization in the US Gulf of Mexico and Brazil trending **above 90%** and **95%**, respectively[29](index=29&type=chunk) [Results of Operations](index=7&type=section&id=Results%20of%20Operations) Q3 2023 operating revenues increased to **$414 million** with a **$117 million** operating profit, driven by the Aquadrill acquisition, larger fleet, and higher dayrates Consolidated Results of Operations (in $ millions) | Metric | Q3 2023 (Successor) | Q3 2022 (Successor) | 9M 2023 (Successor) | | :--- | :--- | :--- | :--- | | Operating revenues | 414 | 269 | 1,094 | | Operating profit | 117 | 20 | 277 | | Net profit | 90 | (16) | 227 | - The acquisition of Aquadrill, completed on April 3, 2023, is a primary driver of the financial results; the merger was accounted for as a business combination, with Aquadrill's assets and liabilities recorded at fair value, using a convenience date of April 1, 2023[30](index=30&type=chunk) [Operating revenues](index=9&type=section&id=Operating%20revenues) Q3 2023 operating revenues increased to **$414 million** from $269 million, driven by more rigs on contract (7 to 12) and a higher average dayrate of **$290,000** Operating Revenues Breakdown (in $ millions) | Revenue Type | Q3 2023 | Q3 2022 | | :--- | :--- | :--- | | Contract revenues | 324 | 187 | | Reimbursable revenues | 11 | 9 | | Management contract revenues | 68 | 63 | | Other revenues | 11 | 10 | | **Total operating revenues** | **414** | **269** | - The average number of rigs on contract increased from **seven** in Q3 2022 to **12** in Q3 2023, mainly due to fleet additions from the Aquadrill acquisition[40](index=40&type=chunk) - The average contractual dayrate rose to **$290,000** in Q3 2023 from **$262,000** in Q3 2022, driven by higher rates on the acquired Aquadrill rigs and new contracts in Brazil[41](index=41&type=chunk) - Economic utilization for rigs on contract decreased slightly to **93%** in Q3 2023 from **96%** in Q3 2022, due to planned downtime on two rigs[42](index=42&type=chunk) [Operating expenses](index=10&type=section&id=Operating%20expenses) Total operating expenses rose to **$304 million** in Q3 2023 from $250 million, primarily due to higher vessel and rig operating expenses from the Aquadrill acquisition Operating Expenses Breakdown (in $ millions) | Expense Type | Q3 2023 | Q3 2022 | | :--- | :--- | :--- | | Vessel and rig operating expenses | (184) | (137) | | Depreciation and amortization | (39) | (38) | | Management contract expenses | (50) | (49) | | Selling, general and administrative | (20) | (18) | | Merger and integration related | (2) | — | | **Total operating expenses** | **(304)** | **(250)** | - The increase in vessel and rig operating expenses was driven by the additions from the Aquadrill acquisition and the reactivation of rigs in Brazil, partially offset by the return of two leased rigs[49](index=49&type=chunk) - Depreciation and amortization remained stable at **$39 million**, as a **$24 million** increase in depreciation from the Aquadrill rigs was offset by a **$23 million** change in amortization of intangible contract assets and liabilities[50](index=50&type=chunk)[52](index=52&type=chunk) [Interest expense](index=11&type=section&id=Interest%20expense) Interest expense significantly decreased to **$15 million** in Q3 2023 from $33 million, a direct result of the July 2023 debt refinancing Interest Expense on Debt Facilities (in $ millions) | Debt Facility | Q3 2023 | Q3 2022 | | :--- | :--- | :--- | | $575 million bond in issue | (9) | — | | First-lien senior secured | (2) | (4) | | Second lien senior secured | (1) | (27) | | Unsecured convertible bond | (1) | (1) | | **Total** | **(13)** | **(32)** | - The decrease in interest expense is primarily due to the refinancing of the second lien facility, which carried a higher interest rate, with the new **$575 million** bond[59](index=59&type=chunk)[60](index=60&type=chunk) [Other income and expense](index=12&type=section&id=Other%20income%20and%20expense) Total other income and expense was a net income of **$10 million** in Q3 2023, driven by a **$13 million** gain from associated companies and higher interest income Other Income and Expense Breakdown (in $ millions) | Item | Q3 2023 | Q3 2022 | | :--- | :--- | :--- | | Interest income | 10 | 4 | | Share in results from associated companies | 13 | (1) | | Reorganization items, net | — | (3) | | Other financial items | (13) | (3) | | **Total other income and expense** | **10** | **(3)** | - The gain from associated companies in Q3 2023 relates to profits from the Sonadrill and Gulfdrill joint ventures[64](index=64&type=chunk) - Other financial items in 2023 included a **$10 million** make-whole fee paid for the early repayment of the first lien debt facility[68](index=68&type=chunk) [Liquidity and Capital Resources](index=13&type=section&id=Liquidity%20and%20Capital%20Resources) Liquidity strengthened to **$1,094 million** as of September 30, 2023, driven by cash flow, asset sales, and debt refinancing, including a new **$225 million** RCF - The company announced a new capital allocation framework prioritizing a conservative capital structure (net leverage target < **1.0x**), focused fleet investment, and returning at least **50%** of Free Cash Flow to shareholders via repurchases or dividends[70](index=70&type=chunk) Available Liquidity (in $ millions) | Component | September 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Unrestricted cash | 837 | 480 | | Restricted cash | 32 | 118 | | **Cash and cash equivalents** | **869** | **598** | | Undrawn revolving credit facility | 225 | 125 | | **Total available liquidity** | **1,094** | **723** | Cash Flow Summary - 9M 2023 (in $ millions) | Cash Flow Category | Amount | | :--- | :--- | | Cash flows provided by operating activities | 147 | | Cash flows provided by investing activities | 100 | | Cash flows provided by financing activities | 20 | [Borrowing Activities](index=15&type=section&id=Borrowing%20Activities) In Q3 2023, Seadrill fully refinanced its secured debt with **$575 million** in new bonds and established a new undrawn **$225 million** revolving credit facility Debt Overview as of September 30, 2023 (in $ millions) | Debt Instrument | Principal Value | Carrying Value | Maturity Date | | :--- | :--- | :--- | :--- | | $575 million bond in issue | 575 | 560 | August 2030 | | $50 million senior convertible bond | 50 | 50 | August 2028 | | **Total debt** | **625** | **610** | | - Proceeds from the new notes were used to prepay the existing first lien facility (**$187 million**) and second lien facility (**$123 million**)[81](index=81&type=chunk)[148](index=148&type=chunk) - A new **$225 million**, 5-year Senior Secured Revolving Credit Facility (RCF) was established, which remains undrawn[80](index=80&type=chunk)[83](index=83&type=chunk) - The company received corporate credit ratings of **B1** (Moody's), **B+** (S&P), and **B+** (Fitch), all with a stable outlook[82](index=82&type=chunk) [Interim Financial Statements (unaudited)](index=18&type=section&id=Interim%20Financial%20Statements%20%28unaudited%29) [Consolidated Statements of Operations](index=19&type=section&id=Consolidated%20Statements%20of%20Operations) Q3 2023 unaudited consolidated operations show **$414 million** in revenues and **$90 million** net profit, with diluted EPS of **$1.10** Key Financial Metrics (in $ millions, except per share data) | Metric | Three months ended Sep 30, 2023 | Nine months ended Sep 30, 2023 | | :--- | :--- | :--- | | Total operating revenues | 414 | 1,094 | | Operating profit | 117 | 277 | | Net profit | 90 | 227 | | Diluted EPS ($) | 1.10 | 3.16 | [Consolidated Balance Sheets](index=21&type=section&id=Consolidated%20Balance%20Sheets) Balance sheet strengthened with total assets at **$4,331 million** and equity at **$3,115 million** as of September 30, 2023, reflecting the Aquadrill acquisition and debt refinancing Balance Sheet Summary (in $ millions) | Account | September 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Cash and cash equivalents | 837 | 480 | | Drilling units | 2,822 | 1,668 | | **Total assets** | **4,331** | **2,801** | | Total current liabilities | 358 | 404 | | Long-term debt | 610 | 496 | | **Total liabilities** | **1,216** | **1,099** | | **Total equity** | **3,115** | **1,702** | [Consolidated Statements of Cash Flows](index=22&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) For 9M 2023, Seadrill generated **$147 million** from operations, **$100 million** from investing, and **$20 million** from financing, resulting in a **$271 million** cash increase Cash Flow Summary - Nine Months Ended Sep 30, 2023 (in $ millions) | Cash Flow Category | Amount | | :--- | :--- | | Net cash provided by operating activities | 147 | | Net cash provided by investing activities | 100 | | Net cash provided by financing activities | 20 | | **Net increase in cash and cash equivalents** | **271** | [Notes to the Unaudited Consolidated Financial Statements](index=25&type=section&id=Notes%20to%20the%20Unaudited%20Consolidated%20Financial%20Statements) Notes detail the Aquadrill acquisition, revenue concentration, tax disputes, debt refinancing, and the expanded share repurchase program [Note 19 - Business Combinations (Aquadrill Acquisition)](index=42&type=section&id=Note%2019%20-%20Business%20Combinations%20%28Aquadrill%20Acquisition%29) Aquadrill acquisition completed April 3, 2023, for **$1,274 million** (29.9 million shares), with **$1,255 million** in drilling units acquired at fair value - The acquisition of Aquadrill was completed on April 3, 2023, with Aquadrill surviving as a wholly-owned subsidiary of Seadrill[203](index=203&type=chunk) Total Consideration Transferred (in $ millions) | Component | Value | | :--- | :--- | | Consideration issued in Seadrill shares | 1,243 | | Consideration settled by tax withholding | 30 | | Consideration settled in cash | 1 | | **Total consideration transferred** | **1,274** | Preliminary Purchase Price Allocation (in $ millions) | Category | Value | | :--- | :--- | | **Assets acquired:** | | | Drilling units | 1,255 | | Total current assets | 152 | | Other non-current assets | 25 | | **Total assets acquired** | **1,432** | | **Liabilities assumed:** | | | Total current liabilities | 80 | | Total non-current liabilities | 78 | | **Total liabilities assumed** | **158** | | **Net asset acquired** | **1,274** | [Note 11 – Debt](index=34&type=section&id=Note%2011%20%E2%80%93%20Debt) In Q3 2023, Seadrill issued **$575 million** in new bonds to repay existing debt and established a new undrawn **$225 million** revolving credit facility - In July and August 2023, Seadrill issued a total of **$575 million** in 8.375% Senior Secured Second Lien Notes due 2030[148](index=148&type=chunk) - The proceeds were used to prepay the first lien facility (**$187 million**) and the second lien facility (**$123 million**), with a **$10 million** make-whole premium paid on the first lien facility repayment[148](index=148&type=chunk)[149](index=149&type=chunk) - A new **$225 million**, 5-year first lien revolving credit facility was established in July 2023 and remains undrawn[152](index=152&type=chunk) [Note 13 – Common shares](index=36&type=section&id=Note%2013%20%E2%80%93%20Common%20shares) Total shares increased to 79.9 million after 29.9 million for Aquadrill; a **$250 million** share repurchase program was authorized, with 1 million shares repurchased - Issued approximately **29.9 million** shares to Aquadrill unitholders and equity award holders as part of the merger[164](index=164&type=chunk) - A share repurchase program of up to **$250 million** was authorized on August 14, 2023[164](index=164&type=chunk) - By September 2023, approximately **1 million** shares were repurchased at a weighted average price of **$46.58**[164](index=164&type=chunk) [Note 20 – Subsequent events](index=47&type=section&id=Note%2020%20%E2%80%93%20Subsequent%20events) Post-quarter, the Board increased the share repurchase authorization by **$250 million** to **$500 million** total, with an additional 4 million shares repurchased by November 24, 2023 - The Board of Directors increased the total share repurchase authorization to **$500 million**, adding another **$250 million** to the program[218](index=218&type=chunk) - As of November 24, 2023, Seadrill had repurchased approximately **4 million** additional shares at a weighted average price of **$41.63** since the end of Q3[218](index=218&type=chunk)

Seadrill Limited (NYSE:SDRL) Q2 2023 Results Conference Call August 15, 2023 9:00 AM ET Company Participants Lydia Mabry - Director, IR Simon Johnson - President and CEO Grant Creed - EVP and CFO Samir Ali - EVP and Chief Commercial Officer Leif Nelson - Chief Operating and Technology Officer Conference Call Participants Greg Lewis - BTIG Ben Nolan - Stifel Fredrik Stene - Clarkson Securities David Smith - Pickering Energy Partners Eddie Kim - Barclays Hamed Khorsand - BWS Financial Lydia Mabry Welcome to S ...

Company Overview - As of June 30, 2023, Seadrill owned a total of 22 drilling rigs, with 17 operating and 5 cold stacked[9]. - Seadrill's operating units include eleven floaters, two harsh environment units, three jackups, and one tender-assist unit[9]. - The company manages seven rigs owned by third parties, including five owned by SeaMex Holdings Ltd.[116]. Acquisitions and Disposals - Seadrill completed the acquisition of Aquadrill on April 3, 2023, acquiring four drillships, one semi-submersible, and three tender-assist units[14]. - The three tender-assist units acquired from Aquadrill were classified as held for sale, with the disposal completed on July 28, 2023[9]. - The company disposed of its 35% shareholding in Paratus Energy Services for total consideration of $44 million, closing the sale on February 24, 2023[12]. - Following the disposal of Paratus Energy Services Ltd. on March 14, 2023, the Master Services Agreement with Seadrill Management Ltd. was terminated on July 12, 2023, with no material impact on financial results anticipated[116]. Financial Performance - Seadrill reported operating revenues of $414 million for the three months ended June 30, 2023, compared to $253 million for the same period in 2022, representing a 63.7% increase[33]. - Total operating revenues for the three months ended June 30, 2023, were $414 million, compared to $253 million for the same period in 2022, representing a 63.5% increase[102]. - Contract revenues for the six months ended June 30, 2023, reached $515 million, up from $248 million in the same period of 2022, indicating a 107.3% growth[102]. - Operating profit for the three months ended June 30, 2023, was $109 million, significantly higher than the $25 million reported in the same period of 2022[102]. - Net profit for the six months ended June 30, 2023, was $137 million, compared to a loss of $32 million in the same period of 2022[105]. - Basic EPS for continuing operations was $1.18 for the three months ended June 30, 2023, compared to a loss of $0.72 in the same period of 2022[102]. Debt and Financing - During the six months ended June 30, 2023, Seadrill made total prepayments of $163 million under its secured second lien debt facility, including $155 million in debt principal[13]. - Seadrill issued $500 million in Senior Secured Second Lien Notes at 8.375% due 2030, followed by an additional $75 million issuance in August 2023[16]. - The company aims to maintain a net leverage target of not more than 1.0x and a minimum cash-on-hand of $250 million to ensure liquidity[17]. - The company incurred $167 million in cash used in financing activities for the six months ended June 30, 2023[69]. - Cash used in financing activities for the six months ended June 30, 2023, was $167 million, primarily due to debt principal payments of $154 million and exit fees of $8 million[72]. Market Conditions - Seadrill's management emphasizes the importance of monitoring market conditions, including oil and gas price volatility, in assessing future performance[5]. - The average Brent oil price for June 2023 was $80 per barrel, reflecting a recovery in the industry post-pandemic[22]. - Marketed utilization for harsh environment floaters improved to 93% in June 2023, up from 82% in December 2022[23]. Cash Flow and Liquidity - The company reported available liquidity of $664 million as of June 30, 2023, consisting of $539 million in cash and cash equivalents and $125 million in undrawn revolving credit[66]. - Cash flows provided by operating activities amounted to $35 million for the six months ended June 30, 2023, driven by customer revenues and receipts from Sonadrill[70]. - Cash flows provided by investing activities were $66 million for the six months ended June 30, 2023, primarily due to net proceeds from the disposal of PES and cash received from the Aquadrill acquisition[71]. Assets and Liabilities - Total assets increased to $4,037 million as of June 30, 2023, up from $2,801 million at December 31, 2022, representing a 44% growth[108]. - Long-term debt reduced to $345 million from $496 million, a decrease of 30%[108]. - Total current liabilities decreased to $354 million from $404 million, a reduction of 12%[108]. - The carrying amount of drilling units as of June 30, 2023, was $2.7 billion, representing 91% of non-current assets[84]. Tax and Regulatory Matters - The company is contesting tax assessments from various jurisdictions, including Brazil, Norway, Nigeria, Kuwait, Mexico, and Ghana, totaling approximately $427 million[197]. - Seadrill's uncertain tax positions are estimated and presented within other current liabilities, with significant judgment required in determining tax liabilities across various jurisdictions[90]. Accounting and Reporting - Seadrill's financial statements are prepared in accordance with US GAAP and presented in US Dollars[8]. - The company confirmed that the financial statements for the period ended June 30, 2023, were prepared in accordance with US GAAP and provide a true and fair view of its financial position[97]. - Fresh Start accounting was adopted, resulting in a new entity for financial reporting purposes with no beginning retained earnings as of the Effective Date[145].