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Seadrill Ltd (SDRL)·Q3 2025 Earnings Summary

Executive Summary

  • Q3 2025 revenue ex-reimbursables of $352M beat Street ($336.8M); total operating revenues were $363M, adjusted EBITDA was $86M, and diluted EPS was $(0.17). EBITDA and EPS missed consensus, driven by lower economic utilization and one-off downtime in Brazil .
  • Added >$300M to backlog across five rigs; total order backlog stood at ~$2.5B, supported by awards in Angola (Libongos, Quenguela, West Gemini) and the U.S. Gulf (West Vela, Sevan Louisiana) .
  • FY25 guidance narrowed and modestly raised: operating revenues to $1.36–$1.39B (excl. $50M reimbursables), adjusted EBITDA to $330–$360M, capex/long-term maintenance to $280–$300M; management sees capex trending lower in 2026 .
  • Setup into 2026–2027 remains constructive: U.S. Gulf dayrates resilient; near-term softness in West Africa/Brazil; operators signaling renewed deepwater investment; blend-and-extend discussions with Petrobras could optimize portfolio and backlog visibility .

What Went Well and What Went Wrong

What Went Well

  • Backlog growth and execution: “Since our last update, we've added over $300 million to our backlog... securing new contracts across five rigs,” including direct continuations in U.S. Gulf; backlog ~$2.5B .
  • Angola JV momentum: Libongos (525-day program), Quenguela (210-day program), West Gemini (280-day program) extended, with JV rigs delivering >99.7% technical uptime and customer recognition (Rig of the Year/Rig of the Quarter) .
  • Strategic upgrades/technology: Trendsetter partnership to enhance Sevan Louisiana’s well intervention capabilities; MPD systems deployed on West Neptune/West Polaris, positioning fleet competitively across basins .

What Went Wrong

  • Utilization and downtime: Economic utilization slipped sequentially (91.1% vs. 93.4%) and the quarter included a design-related equipment failure in Brazil, increasing costs and reducing uptime .
  • Profitability pressure: Adjusted EBITDA fell to $86M from $106M sequentially amid fewer operating days and lower economic utilization; diluted EPS was $(0.17) vs. Street positive EPS expectation .
  • Competitive/market softness: Near-term rate softness in West Africa/Brazil and white space risk in early 2026; management noted potential challenges in bridging gaps for Carina in Brazil without attractive extensions .

Financial Results

Key Metrics vs Prior Periods and Estimates (Revenue ex-reimbursables for comparability)

MetricQ3 2024Q2 2025Q3 2025
Total Operating Revenues ($M)$354 $377 $363
Total Operating Revenues ex-Reimbursables ($M)$334 [GetEstimates]*$361 $352
Adjusted EBITDA ($M)$91 [GetEstimates]*$106 $86
Adjusted EBITDA Margin ex-Reimbursables (%)—29.4% 24.4%
Diluted EPS ($)$0.49 $(0.68) $(0.17)
Net (Loss)/Income ($M)$32 $(42) $(11)

Values retrieved from S&P Global for cells marked with *.

Revenue Components

Component ($M)Q3 2024Q2 2025Q3 2025
Contract Revenues$263 $288 $280
Management Contract Revenues$62 $65 $63
Reimbursable Revenues$20 $16 $11
Leasing/Other Revenues$9 leasing; $0 other $8 leasing; $0 other $9 leasing; $0 other
Total Operating Revenues$354 $377 $363

KPIs and Balance Sheet

KPI / Balance SheetQ3 2024Q2 2025Q3 2025
Average Rigs on Contract (count)—10 10
Average Contractual Dayrate ($000s)—331 330
Economic Utilization (%)—93.4% 91.1%
Cash & Equivalents ($M)—$419 $428
Gross Principal Debt ($M)—$625 $625
Free Cash Flow ($M)—$(12) $9

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Total Operating RevenuesFY 2025$1,320–$1,380M (excl. $50M reimb.) $1,360–$1,390M (excl. $50M reimb.) Raised/Narrowed
Adjusted EBITDAFY 2025$320–$380M $330–$360M Narrowed (midpoint higher)
Capex & Long-Term MaintenanceFY 2025$250–$300M $280–$300M Narrowed/raised lower bound
Reimbursables (exclusion in revenue guide)FY 2025$50M $50M Maintained
Capex Trend OutlookFY 2026—Expect capex/maintenance trend lower New qualitative color

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 2025)Previous Mentions (Q2 2025)Current Period (Q3 2025)Trend
Deepwater demand and FIDsExpect doubling of offshore sanctioning in 2026–2027; constructive medium-term WoodMac FIDs rising; multiyear contracts into 2026/27 Majors/NOCs signaling renewed focus; tendering momentum building Strengthening into 2026–2027
U.S. Gulf dayratesCompetitive but resilient; Vela outperforms Near-term headwinds; secured near-term work at strong rates Resilient pricing in U.S. Gulf; high 300s–low 400s in Golden Triangle Resilient vs softer elsewhere
Angola JV (Sonadrill)Active dialogues; SPS for Gemini if contracted Progress amid admin delays; optimistic recontracting Multiple awards; >99.7% uptime; intent to add term Improving backlog and performance
Brazil (Petrobras)Búzios tender; Carina options inside/outside Brazil Legal accrual; mediation context; tendering interest Blend-and-extend discussions; one-off downtime; MPD rollout success Mixed: near-term softness, long-term demand
Technology/MPDFleet MPD experience and training (West Minerva/Academy) IRJ enhancements; MPD becoming must-have MPD systems active on Neptune/Polaris; safety/efficiency benefits Growing differentiation
Tariffs/macroOngoing tariff assessment; volatility noted Macro headwinds acknowledged Energy security narrative; macro headwinds but “fog beginning to lift” Neutral-to-improving tone

Management Commentary

  • “We’ve added over $300 million to our backlog… securing new contracts across five rigs” and are minimizing costly gaps between contracts .
  • “All three rigs operated through the Sonadrill joint venture have delivered exceptional performance… each achieving near-perfect technical uptime in excess of 99.7%” .
  • “We continue to see a constructive pace of contracting and an uptick in global tendering activity” as deepwater returns to center stage .
  • CFO: “Total operating revenues for the third quarter were $363 million… Adjusted EBITDA was $86 million… we are narrowing the adjusted EBITDA range to $330–$360 million” .
  • On Petrobras discussions: “Blend and extend is definitely one of the potential approaches… both sides need to benefit” .

Q&A Highlights

  • Dayrates: U.S. Gulf pricing resilient; Golden Triangle tracking “high 300s, low 400s”; softness in West Africa/Brazil discussed .
  • Brazil portfolio: Early-stage cost optimization talks with Petrobras; blend-and-extend possible; underlying rig demand viewed as robust .
  • Utilization: One-off design-related equipment failure impacted a Brazil rig; ex-incident fleet technical uptime was 97.6% .
  • Asset-specific: Capella stacked; reactivation costs depend on opportunity ($20–$50M range discussed); Carina options in/out of Brazil .
  • Sevan Louisiana upgrades with Trendsetter to switch between drilling and P&A/intervention modes, meeting demand pull in the U.S. Gulf .

Estimates Context

  • Q3 2025 comparison: Revenue ex-reimbursables beat Street; EBITDA and EPS missed. Revenue estimates appear to align with revenue ex-reimbursables (company “ex-reimbursables” $352M vs Street $336.8M). EPS miss driven by lower utilization and one-off downtime; EBITDA miss consistent with sequential decline and operating days .
MetricConsensus (Q3 2025)Actual (Q3 2025)Result
Revenue ex-Reimbursables ($M)336.8*352 Beat
Adjusted EBITDA ($M)95.0*86 Miss
Primary EPS ($)0.314*(0.17) Miss
Net Income Normalized ($M)21.9*(11) Miss

Values retrieved from S&P Global for cells marked with *.

Context vs prior periods:

MetricConsensus (Q2 2025)Actual (Q2 2025)Consensus (Q3 2024)Actual (Q3 2024)
Revenue ex-Reimbursables ($M)363.0*361 322.0*334 [GetEstimates]*
Adjusted EBITDA ($M)109.4*106 58.9*91 [GetEstimates]*
Primary EPS ($)0.632*(0.68) 0.016*0.49

Values retrieved from S&P Global for cells marked with *.

Key Takeaways for Investors

  • Near-term print showed mixed quality: top-line ex-reimbursables beat but EBITDA/EPS missed on utilization and a one-off downtime event; guidance tightening and raised revenue midpoint partially offsets .
  • Backlog additions and U.S. Gulf resilience reduce white space risk, while Angola JV and Brazil tenders underpin medium-term visibility into 2026–2027 .
  • Operational differentiation via MPD and the Trendsetter alliance enhances asset competitiveness and optionality across drilling and intervention/P&A work streams .
  • Blend-and-extend negotiations with Petrobras are a potential portfolio lever to trade value for term and reduce gaps without sacrificing long-run earnings power .
  • Capex and long-term maintenance are expected to trend lower in 2026, supporting improving free cash flow conversion as legacy Brazil contracts reprice higher .
  • Watch catalysts: Sevan Louisiana program commencement/line of sight, West Vela follow-on awards, Capella/Carina contracting outcomes (and any reactivation spend), and pace of Angola term additions .
  • Estimate trajectory should adjust modestly higher for revenue ex-reimbursables; EPS/EBITDA models need to reflect utilization sensitivity and the temporary Brazil downtime impact .