Seadrill(SDRL) - 2024 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - In Q3 2024, Seadrill reported total operating revenues of $354 million, a decrease from$ 375 million in the prior quarter [25] - Adjusted EBITDA for the quarter was $93 million, with an adjusted EBITDA margin of 27.5% [28] - The company increased its full-year adjusted EBITDA guidance to a range of$ 375 million to $395 million, with a midpoint of$ 385 million, reflecting a 13% increase from previous guidance [7][30] Business Line Data and Key Metrics Changes - Contract drilling revenues remained flat at $263 million, supported by the Sevan Louisiana's full quarter contribution at a higher average rate [25] - Management contract revenues declined to$ 62 million, while leasing revenues were $9 million, reflecting adjustments from previous quarters [26] - Total operating expenses rose to$ 307 million from $290 million, driven by increased vessel operating expenses and management contract expenses [27] Market Data and Key Metrics Changes - Drillship marketed utilization has slipped below 90%, currently hovering in the high 80s, indicating a softening market [19] - Seadrill has secured 70% contract utilization for its fleet in 2025, with expectations for improvement as customer discussions convert to contracts [13] Company Strategy and Development Direction - The company aims to operate a floater-focused fleet with strong contract coverage while maintaining a solid balance sheet [11] - Seadrill is focused on optimizing operations and reducing bureaucracy to enhance efficiency and empower senior leaders [15] - The strategy includes refining the fleet and pursuing share repurchase programs, having reduced the issued share count by 19% since September 2023 [18] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the underlying industry fundamentals despite temporary market imbalances [11] - The company is cautious about the competitive landscape in 2025, anticipating increased competition and downward pressure on rates [20] - Management highlighted the importance of cash flow generation over headline day rates when bidding for contracts [45] Other Important Information - Seadrill has integrated Aquadrill drillships into its fleet and successfully navigated complex rig management agreements [10] - The company has maintained a healthy balance sheet and continued its share repurchase program, returning$ 692 million to shareholders by the end of Q3 2024 [29] Q&A Session Summary Question: Outlook for drillships in Brazil - Management emphasized Brazil as a resilient market and expressed optimism about recontracting rigs, noting recent recognition from Petrobras [38] Question: Potential for sixth to seventh gen upgrades - Management indicated that while upgrades are considered, they will only proceed if a return on investment is evident [40][41] Question: Market dynamics and cash margins - Management stated that cash flow generation is prioritized over headline day rates, with a focus on maximizing cash margins [45] Question: Share repurchase plans for 2025 - Management noted that future buybacks will depend on the outlook for contracts and overall financial health [48] Question: Opportunities in Southeast Asia - Management is currently focused on securing work in the region where the Capella is operating, with potential for future relocation [52] Question: Impact of oil prices on customer negotiations - Management highlighted that uncertainty in commodity prices and capital allocation decisions are causing clients to defer contract decisions [60] Question: Plans for operational optimization in 2025 - Management plans to adjust costs and capital programs in real-time to reflect market conditions, emphasizing agility and lean operations [65]