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Seadrill Ltd (SDRL)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 2025 delivered total operating revenues of $377M and Adjusted EBITDA of $106M, with Adjusted EBITDA margin excluding reimbursables improving to 29.4% from 22.8% in Q1; diluted loss per share was $(0.68) as a $51M legal accrual drove higher operating expenses .
  • Versus S&P Global consensus, revenue modestly beat ($377M vs $363.0M*), Adjusted EBITDA was slightly below ($106M vs $109.4M*), and EPS missed materially (reported $(0.68) vs $0.632*), implying near-term estimate resets on profitability despite stronger activity conversion and utilization .
  • Full-year 2025 guidance maintained for Adjusted EBITDA ($320–$380M) and capex ($250–$300M), with operating revenue range raised to $1.32–$1.38B (excl. $50M reimbursables), supported by contract awards for West Vela (Talos) and Sevan Louisiana (Murphy) .
  • Management emphasized disciplined contracting, improving utilization (93% vs 84% in Q1) and backlog of ~$2.5B as of Aug 6, while framing 2025 as a trough ahead of recovery in late 2026–2027; catalysts include Brazil tenders, Angola JV fixtures, and well-intervention opportunities that minimize idle gaps .

What Went Well and What Went Wrong

What Went Well

  • Economic utilization improved to 93.4% (from 83.9% in Q1) and average contractual dayrates increased to $331K/day, driving higher contract revenues and Adjusted EBITDA .
  • New contracts converted: West Vela secured ~90 days with Talos starting mid-November; Sevan Louisiana began a three-well intervention campaign with Murphy in August, expanding customer base and bridging near-term gaps .
  • CEO highlighted operational excellence and technology investments (West Minerva real-time ops center, Seadrill Academy MPD training), reinforcing differentiation and client satisfaction: “our unwavering commitment to operational excellence… enables us to deliver best-in-class service” .

What Went Wrong

  • A $51M unfavorable legal judgment (Sonadrill fees claim) raised management contract expenses, contributing to a net loss of $42M and diluted LPS of $(0.68) despite stronger topline .
  • Working capital headwinds (receivables build, settlement of prior project costs) limited operating cash flow to $11M and resulted in negative Free Cash Flow of $(12)M in Q2 .
  • Near-term U.S. Gulf market remains competitive with temporary oversupply and softer utilization, pressuring dayrates; management expects a recovery into 2026–2027 but notes operators’ caution amid macro volatility and tariffs uncertainty .

Financial Results

Summary vs prior periods and consensus

MetricQ2 2024Q1 2025Q2 2025Consensus (Q2 2025)
Total Operating Revenues ($USD Millions)$375 $335 $377 $363.0*
Contract Revenues ($USD Millions)$267 $248 $288 —
Adjusted EBITDA ($USD Millions)—$73 $106 $109.4*
Adj. EBITDA Margin excl. Reimbursables (%)—22.8% 29.4% —
Net (Loss)/Income ($USD Millions)$253 $(14) $(42) —
Diluted EPS ($)$3.49 $(0.23) $(0.68) $0.632*

Notes: Asterisks denote S&P Global consensus values. Values retrieved from S&P Global.

Revenue components (“segment” breakdown)

Revenue Component ($USD Millions)Q2 2024Q1 2025Q2 2025
Contract Revenues$267 $248 $288
Reimbursable Revenues$15 $15 $16
Management Contract Revenues$65 $61 $65
Leasing Revenues$26 $8 $8
Other Revenues$2 $3 —
Total Operating Revenues$375 $335 $377

KPIs and balance sheet liquidity

KPI / BalanceQ1 2025Q2 2025
Average Rigs on Contract (count)9 10
Avg. Contractual Dayrate ($000/day)323 331
Economic Utilization (%)83.9% 93.4%
Cash & Cash Equivalents ($USD Millions)$404 $393 (plus $26 restricted cash)
Gross Principal Debt ($USD Millions)$611 $625
Net Debt ($USD Millions)—$206
Net Leverage (Net Debt / TTM Adj. EBITDA)—0.77

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Total Operating Revenues (excl. reimbursables)FY 2025$1,300–$1,360M, excl. $35M reimbursables $1,320–$1,380M, excl. $50M reimbursables Raised topline range and reimbursables
Adjusted EBITDAFY 2025$320–$380M $320–$380M Maintained
Capital ExpendituresFY 2025$250–$300M $250–$300M Maintained
Mobilization Amortization (non-cash net expense)FY 2025—~$33M included, ~$14M recognized through Q2 New disclosure
Dividends / BuybacksFY 2025Active buybacks in FY 2024 Watching brief; focus on cash conservation; returns subject to stability and cash flow uplift from Brazil repricing Pause / conditional

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 2024, Q1 2025)Current Period (Q2 2025)Trend
Market cycle / utilization2025 softness; backlog ~$3.0B; Brazil contracts secured; Neptune delays due to vendors/weather 2025 viewed as trough; recovery seen in late 2026–2027; 7 deepwater multi-year awards starting 2H26/2027 Improving medium-term outlook
MPD/Technology differentiationMPD capabilities and upgrades referenced; Neptune SPS 8 drillships equipped with MPD; West Minerva real-time ops center; training academy; MPD becoming “must-have” in U.S. Gulf Strengthening tech edge
Tariffs/macro cautionInitial tariff impact review; clients cautious amid price volatility Seeking stability around tariffs before capital returns; macro remains a watch item Ongoing macro watch
Brazil tenders & repricingBuzios tender; long-term contracts for Jupiter/Tellus adding $1B backlog Active Brazil tenders; repricing uplift from legacy contracts to hit P&L from Q2 2026 Positive earnings leverage
Angola JV (Sonadrill) / legal accrualMediation with Petrobras on legacy Sachet matter; constructive dialogue $51M accrual tied to unfavorable judgment; Angola fixtures progressing despite political delays Legal headwind; contracting progressing
U.S. Gulf dynamicsCompetitive environment; Louisiana bridging with intervention; Vela operational standout Temporary oversupply near year-end; secured short-gap work; options likely at higher rates Navigating near-term softness
Capital returns$100M buybacks in Q4; cumulative $792M since Sep-2023 Return of capital to resume with stability and cash flow uplift (Brazil repricing) Conditional resumption

Management Commentary

  • “With our disciplined approach to contracting, robust balance sheet and relentless focus on setting the standard in our operations, we remain confident in delivering long-term shareholder value as the market improves.” — Simon Johnson, CEO .
  • “Adjusted EBITDA was $106,000,000… economic utilization improved to 93%, up from 84% in the first quarter.” — Grant Creed, CFO .
  • “The West Vela… continues to exceed expectations, enabling us to add term at strong rates at a time when many of our peers are experiencing increased idle periods in the U.S. Gulf.” — Samir Ali, CCO .
  • “Now is not the time to go long and low… we intend to keep our fleet well positioned to benefit [from recovery in late ’26].” — Simon Johnson .
  • “We’re looking for certainty and stability… around tariffs… and a good oil price outlook… before you see us get very active [on buybacks].” — Simon Johnson .

Q&A Highlights

  • Contracting pipeline and Angola: Advanced dialogues for all three Angola JV rigs; political unrest has delayed approvals but rigs remain competitively placed; Gemini survey work contingent on firm contracting .
  • U.S. Gulf intervention market: Sevan Louisiana’s intervention work provides cash-positive utilization between drilling programs; potential deeper equipment partnerships to optimize well intervention .
  • Dayrates and options: Near-term Gulf rates holding up; options on Vela likely at higher levels than November start, supporting earnings resilience .
  • Stacked rigs strategy: Aquarius/Phoenix have life in harsh environments; Eclipse may be repurposed; recycling decisions remain disciplined and opportunity-driven .
  • Capital returns timing: Buybacks tied to stability and EBITDA/cash flow uplift from repricing legacy Brazil contracts (uplift starts Q2 2026) .

Estimates Context

MetricQ2 2025 ConsensusQ2 2025 Actual
Revenue ($USD Millions)$363.0*$377
Adjusted EBITDA ($USD Millions)$109.4*$106
Primary EPS ($)$0.632*$(0.68) diluted LPS
  • Number of estimates: EPS (5*), Revenue (5*) for Q2 2025. Values retrieved from S&P Global.
  • Implication: Revenue a modest beat; Adjusted EBITDA a slight miss; EPS a significant miss—driven by a $51M legal accrual and higher operating expenses—suggests consensus EPS and margin forecasts likely to be revised lower near term .

Key Takeaways for Investors

  • Q2 showed strong operational momentum (utilization, dayrates, contract conversions) but legal accruals and working capital limited profitability and cash generation; watch for receivables normalization and accrual resolution to drive EPS recovery .
  • Guidance constructive: topline raised; EBITDA/capex maintained—backed by Brazil repricing (starting Q2 2026) and ongoing tender activity—supporting medium-term margin expansion and cash flow growth .
  • Contracting discipline remains central: near-term U.S. Gulf oversupply addressed via short-gap work and intervention; management avoiding “long and low” commitments to preserve operating leverage into 2026–2027 .
  • Technology differentiation (MPD, real-time ops center, training academy) underpins win rates and premium pricing, especially in U.S. Gulf and Brazil; expect MPD requirement to broaden over next five years .
  • Backlog and liquidity: ~$2.5B backlog, $419M cash, $625M debt and net leverage 0.77 provide resilience; returns of capital to resume upon macro stability and Brazil uplift realization .
  • Near-term trading: Stock sensitive to Angola JV fixtures, Brazil tender outcomes, and U.S. Gulf contract additions; headline catalysts include announced awards and any resolution of legal/mediation matters .
  • Estimate path: Expect EPS/margin consensus recalibration given Q2 miss; revenue trajectory supported by utilization and dayrates; monitoring of SG&A/management contract expenses and legal items critical .