Seadrill(SDRL) - 2025 Q2 - Quarterly Results

Second Quarter 2025 Performance Overview Executive Summary & Financial Highlights 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] - 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] Detailed Financial and Operational Results 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] - 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] - 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] Financial Position and Cash Flow Balance Sheet and Liquidity 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] - 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][8] Cash Flow Performance 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] - Capital expenditures accounted for $23 million of net cash used in investing activities[6] - Free Cash Flow was negative $12 million[6] Commercial Activity and Order Backlog Order Backlog and Fleet Status 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] - 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] Recent Contract Awards 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] - 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] Company Information and Disclosures About Seadrill 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] Forward-Looking Statements 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] - 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] - 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] Investor Relations and Non-GAAP Measures Disclosure 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][22] - 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] Condensed Consolidated Financial Statements Statements of Operations 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