Seadrill(SDRL) - 2025 Q2 - Quarterly Report

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 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 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] Condensed Consolidated Balance Sheets 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][18] Condensed Consolidated Statements of Cash Flows 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] Condensed Consolidated Statements of Equity 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] Notes to the unaudited Condensed Consolidated Financial Statements 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 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] Note 2 - Revenue from contracts with customers 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] Note 3 – Taxation 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][35] Note 4 – Loss/Earnings per share 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] Note 5 – Restricted cash 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] Note 6 - Other current assets 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] Note 7 – Equity method investments 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] Note 8 - Other current and non-current liabilities 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][46] - 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][48] Note 9 – Debt 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][51][52][53] Note 10 – Related party transactions 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][55] | 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] Note 11 – Fair value of financial instruments 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 $50 million[60] Note 12 – Common shares This note details movements in Seadrill's common shares | Metric | December 31, 2024 | March 31, 2025 | June 30, 2025 | | :----- | :---------------- | :------------- | :------------ | | Shares Issued | 62,154,422 | 62,163,028 | 62,225,301 | | Par value per share ($) | 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] Note 13 – Commitments and contingencies 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] - 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] - 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] - 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] - 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] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management analyzes Seadrill's Q2 and H1 2025 financial condition, highlighting declining profit, reduced backlog, and challenging market conditions Our Business 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][79] Significant Developments 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] Contract Backlog 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 ($739 million)[82][83] Business Environment This section analyzes the market conditions and trends affecting Seadrill's offshore drilling business | Metric | Jun-2025 | Dec-2024 | | :----- | :------- | :------- | | Average Brent oil price ($/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][88] | 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][91][88] Results of operations 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] Results for the three months ended June 30, 2025 and June 30, 2024 This section provides a detailed analysis of Seadrill's financial performance for the three months ended June 30, 2025 and 2024 Operating revenues 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][97][98][100][101][103][105][107][108] Operating expenses 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][112][113][114][115] Other operating items 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] Interest expense 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][120] Financial and non-operating items 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][122][124] Income tax expense 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] Results for the six months ended June 30, 2025 and June 30, 2024 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] Operating revenues 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][130][131][132][133][134][135][136] Operating expenses 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][143][144][145][146][147] Other operating items 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][150] Interest expense 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][152] Financial and non-operating items 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][154][155][156] Income tax expense 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] Liquidity and Capital Resources 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 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][159] - 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] 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][168] - 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] - 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][172] Borrowing Activities 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] Collateral package 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][176] Financial covenants 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][184] Critical Accounting Estimates 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] Item 3. Quantitative and Qualitative Disclosures About Market Risk 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] Item 4. Controls and Procedures 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 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] Changes in Internal Control over Financial Reporting 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] PART II - OTHER INFORMATION This part includes other required information such as legal proceedings, risk factors, and exhibits Item 1. Legal Proceedings 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] Item 1A. Risk Factors 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] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 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] Item 3. Defaults Upon Senior Securities This item is not applicable to Seadrill for the reported period - This item is not applicable[190] Item 4. Mine Safety Disclosures This item is not applicable to Seadrill for the reported period - This item is not applicable[191] Item 5. Other Information 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] Item 6. Exhibits 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] 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]