Sign in
SL

Seadrill Ltd (SDRL)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 delivered total operating revenues of $335M, Adjusted EBITDA of $73M (21.8% margin), and a net loss of $14M as new Petrobras contracts commenced and economic utilization lagged due to Brazil-related downtime; 2025 guidance was maintained across revenue, EBITDA, and capex ranges .
  • Versus S&P Global consensus, results were a miss: EPS -$0.23 vs $0.34*, EBITDA $73M vs $79.2M*, and Revenue (ex-reimbursables) $320M vs $329.6M*; the company cited lower economic utilization and teething issues on West Auriga and West Polaris as primary drivers .
  • Backlog stood at ~$2.8B with durable coverage extending meaningfully through 2028; cash was $430M and gross principal debt $625M, supporting flexibility amid near-term market softness .
  • Management highlighted improving April utilization, disciplined stacking, and contract conversations likely converting in 2H25–2026; catalysts include incremental U.S. Gulf awards (e.g., later confirmed in Q2 for West Vela and Sevan Louisiana) and Brazil tenders into late 2026 .

What Went Well and What Went Wrong

What Went Well

  • New Petrobras contracts commenced on West Auriga (Dec-20, 2024) and West Polaris (Feb-18, 2025), lifting operating days and contract revenues sequentially (+$44M QoQ to $248M) .
  • Cash of $430M and ~$2.8B backlog provide durable coverage through 2028–2029, underpinning maintained FY25 guidance despite near-term volatility .
  • “We remain focused on adding to our durable backlog...actively engaged with customers for opportunities starting in the next 12 months,” CEO Simon Johnson noted, emphasizing a floater-focused strategy in resilient deepwater basins .

What Went Wrong

  • Economic utilization fell to 83.9% due to Brazil-related downtime (West Tellus regulatory matters; Auriga/Polaris commissioning), pressuring profitability and leading to a net loss of $14M .
  • Free Cash Flow was negative $72M, reflecting mobilization/prep spend (Auriga/Polaris) and working capital movements tied to additional operating days .
  • Management acknowledged macro volatility, OPEC supply increases, and client caution disrupting near-term demand; “we don't know how long this climate will persist,” with disciplined stacking to avoid burning cash .

Financial Results

P&L and EPS vs Prior Periods

MetricQ1 2024Q4 2024Q1 2025
Total Operating Revenues ($M)$367 $289 $335
Contract Revenues ($M)$275 $204 $248
Adjusted EBITDA ($M)—$28 $73
Adjusted EBITDA Margin (%)—9.7% 21.8%
Net (Loss)/Income ($M)$60 $101 $(14)
Diluted EPS ($)$0.81 $1.54 $(0.23)

Revenue Composition

Revenue Component ($M)Q1 2024Q4 2024Q1 2025
Contract Revenues$275 $204 $248
Reimbursable Revenues$20 $15 $15
Management Contract Revenues$58 $62 $61
Leasing Revenues$11 $8 $8
Other Revenues$3 $0 $3
Total Operating Revenues$367 $289 $335

KPIs and Balance Sheet

KPIQ4 2024Q1 2025
Average # of Rigs on Contract8 9
Average Contractual Dayrates ($K)289 323
Economic Utilization (%)93.0% 83.9%
Backlog ($B)~$3.0 ~$2.8
Cash & Equivalents ($M)$505 $430
Gross Principal Debt ($M)$625 $625
Free Cash Flow ($M)$(31) $(72)

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Total Operating Revenues ($M)FY 2025$1,300–$1,360 (excludes $35 reimbursables) $1,300–$1,360 (excludes $35 reimbursables) Maintained
Adjusted EBITDA ($M)FY 2025$320–$380 $320–$380 Maintained
Capital Expenditures ($M)FY 2025$250–$300 $250–$300 Maintained

Notes:

  • Revenue guidance explicitly excludes reimbursable revenues of $35M .
  • Management reiterated inability to reconcile forward Adjusted EBITDA to GAAP net income due to unavailable components .
  • Initial tariff impact assessment was contemplated within guidance ranges, per CFO remarks .

Earnings Call Themes & Trends

TopicQ3 2024 (Q-2)Q4 2024 (Q-1)Q1 2025 (Current)Trend
Macro/offshore demand & cycleMarket softening in 2025; disciplined capital, focus on cash margins Soft market with lower day rates; 75% of 2025 days contracted; backlog +$700M Volatility and OPEC supply weigh on price; active dialogues for 2H25–2026 Near-term soft, improving into 2026
Brazil regulatoryNoted acceptance processes ongoing for Auriga/Polaris West Tellus 50 days downtime due to regulatory interpretation; broader industry impact Lower utilization principally impacted by Brazil; mediation on Petrobras penalty notices Regulatory scrutiny elevated
U.S. Gulf (GoM)Louisiana flexible; Vela/Neptune strong ops; GoM clustering strategy Neptune SPS complete; Vela added 40 days; Louisiana into June Vela “best performing rig,” dialogues for 4Q25–Q1’26; Louisiana short-cycle awards Performance-led contracting
Technology/MPDFleet reintegration; NPD adoption plan Delivered next-gen MPD system on West Polaris; DP upgrades Vela equipped with MPD; tech differentiation emphasized Ongoing capability upgrades
Stacking/disciplinePhoenix stacked; avoid burning OpEx; decisive actions Disciplined stacking; Capella decision in “weeks to days” Warm vs cold stack ramp-down; unlikely to warm-stack 6 months Cost discipline intensifying
Tariffs/macro policy——Tariffs under review; impact within guidance Managed within plan
ExplorationLow but emerging; operators reallocating portfolios ~30% rigs drilling exploration; FIDs for 2026–27 building Exploration still small but rising; AMP focus in Brazil Gradual uptick

Management Commentary

  • “Our strategy to operate a floater-focused fleet at the heart of the deepwater market positions Seadrill well to navigate near-term volatility…adding to our durable backlog, which extends meaningfully through 2028” — Simon Johnson, CEO .
  • “Economic utilization…was principally impacted by 3 of our rigs in Brazil…we’ve already seen a material improvement in the month of April” — Simon Johnson .
  • “We are maintaining our full year guidance…Adjusted EBITDA in the range of $320 million to $380 million…capex $250 million to $300 million” — Grant Creed, CFO .
  • “The West Vela…drilled a high impact well, 35% below budget and 1 month ahead of schedule…we feel confident in our ability to secure more work” — Samir Ali, CCO .
  • “Petrobras and Seadrill have agreed to participate in voluntary mediation…[Petrobras] committed to not exercise any set-off rights, pending the outcome” — Simon Johnson .

Q&A Highlights

  • Performance-based contracts: Management open to larger performance components with the right client/rig; not seeing a massive industry shift despite peer examples .
  • Stacking decisions/costs: Disciplined approach; proactive cost reductions; warm-stack periods will be short; stacking costs roughly one-off $6–$10M and ~$5K/day run-rate (guidance color provided prior quarter) .
  • Vela opportunity set: Active dialogues for late-2025/early-2026; rig differentiated by performance and specs (dual activity, dual BOP, MPD) .
  • Asia/Southeast Asia pipeline: Mix of shorter-duration near-term work in 2025 and longer-term tenor into 2H26; Capella stacked in Malaysia with client discussions .
  • Contracting likelihood in 2H25: Volatile and dynamic market; management continues marketing Capella/Louisiana/Gemini, avoiding cold-stack where visibility exists .

Estimates Context

MetricQ1 2024 Consensus*Q1 2024 ActualQ4 2024 Consensus*Q4 2024 ActualQ1 2025 Consensus*Q1 2025 Actual
Primary EPS ($)0.668*0.81 -0.389*1.54 0.335*-0.23
Revenue ($M)371.5*367 296.8*274 329.6*320
EBITDA ($M)106.1*—33.9*28 79.2*73

Notes:

  • SPGI “Revenue” actual appears to reflect total operating revenues excluding reimbursables (Q1 2025 actual $320M), while Seadrill’s press release reports total operating revenues of $335M .
  • Q1 2025 was a miss vs consensus on EPS, revenue (ex-reimbursables), and EBITDA; the company cited lower economic utilization and commissioning-related downtime as drivers .
  • Values retrieved from S&P Global.*

Key Takeaways for Investors

  • Near-term softness persists: Q1 utilization impact in Brazil and commissioning issues weighed on earnings; April utilization improved and Q2 showed sequential EBITDA uplift, reinforcing operational normalization trajectory .
  • Guidance intact: FY25 revenue ($1.3–$1.36B, excl. $35M reimbursables), EBITDA ($320–$380M), capex ($250–$300M) maintained; watch contracting outcomes for Sevan Louisiana and Capella to determine placement within ranges .
  • Backlog durability: ~$2.8B backlog (Q1), with visibility through 2028–2029 and Brazil tenders into late 2026; subsequent Q2 awards in GoM validate conversion of dialogues to contracts .
  • Discipline on capacity: Management will rapidly stack where profitable work lacks visibility to preserve cash; expect limited warm-stack bridging and decisive actions to avoid OpEx burn .
  • Technology/performance edge: MPD upgrades (West Polaris) and best-in-class execution (West Vela) differentiate in competitive tenders, supporting premium positioning .
  • Regulatory/legal watch: Brazil regulatory interpretations have increased downtime risk; Petrobras penalty notices in voluntary mediation with no set-off rights exercised pending outcome — a key headline risk to monitor .
  • Trading setup: Q1 miss vs consensus and maintained guidance suggest estimate recalibration near term; contract awards and utilization recovery are the likely positive catalysts, while Brazil regulatory and spot-market pricing in GoM remain watch points .