Seadrill Limited (SDRL) Earnings

Management highlights

### Core Company Priorities - **Operational discipline**: Prioritize safe, efficient, reliable operations with a zero-incident goal and maximum fleet uptime. Achieve this through procedural adherence, disciplined risk management, and systematic learning from experience to improve performance quarter-over-quarter. - **Free cash flow focus**: Prioritize winning high-value contracts, convert backlog to cash, deliver projects on time and on budget, and simplify the onshore organization to ensure all spending supports value creation. - **Capture future upside**: Have already recontracted two of three rigs from legacy dairy contracts rolling off in 2026, strengthening 2026 earnings and cash flow. Expect upside from repricing the West Carina at current market rates and growing contracting leverage in an improving market to drive meaningful earnings and free cash flow growth in 2027. ### Q1 2026 Operational Highlights - Completed Westalis reacceptance and West Capella reactivation projects ahead of schedule and on budget, enabling early revenue generation. - Added approximately $860 million in new contract backlog since the last earnings call: - West Neptune and West Vela secured new follow-on contracts with Log (Harbor Energy subsidiary) in the U.S. Gulf, adding $260 million in backlog, eliminating idle time and improving 2026 revenue visibility. - The Songval Kingela in Angola had a seven-well priced option exercised, extending commitments to mid-2028. - West Polaris in Brazil secured a three-year contract extension with Petrobras with no additional CapEx requirements. - West Carina now expects to remain on contract through mid-June 2026. ### Market Update - A new deepwater exploration cycle is emerging, driven by major oil companies and large independents increasing capital allocation to deepwater to offset natural production decline and address a decade of exploration underinvestment. - Geopolitical tensions have intensified global focus on energy security, with import-dependent economies prioritizing domestic deepwater development, further increasing demand for deepwater drilling capacity. - Demand has strengthened in Brazil, with multiple multi-year extensions awarded recently. While 2026 demand in the U.S. Gulf is softer, CEDRAL has successfully contracted all available rigs in the region. Unused capacity is expected to be redeployed to the Atlantic Basin and eastern hemisphere, where demand is growing.

Guidance

- Full year 2026 operating revenue guidance is revised upward to a range of $1.43 to $1.48 billion (excluding $50 million in reimbursable revenues), up from prior guidance driven by better than expected Q1 performance, early contract commencements, and additional operating days for the West Carina. - Full year 2026 adjusted EBITDA guidance is revised upward to a range of $370 to $420 million. This guidance includes $26 million in non-cash net expense for mobilization cost and revenue amortization, $7 million of which was recognized in Q1. - Full year 2026 capital expenditure guidance is maintained at the prior range of $200 to $240 million. - Management confirms expectations for meaningful free cash flow generation inflection starting in the second half of 2026, driven by $70 million in lump sum mobilization revenue receipts from Petrobras and incremental day rate revenue from newly commenced contracts. - Management expresses increased confidence in strong earnings and free cash flow growth for 2027.

Segment performance

CEDRAL reports three core revenue segments for Q1 2026: 1. Contract Drilling: Revenue of $277 million, a $4 million increase quarter-over-quarter. This segment contributed 79.6% of total operating revenue, driven by more operating days, higher day rates for West Bella, and increased fleet economic utilization, offset by fewer operating days for West Jupiter and Savan, Louisiana. 2. Management Contract: Revenue of $63 million, a $2 million decrease quarter-over-quarter, contributing 18.1% of total operating revenue. The decline stems from quarter-over-quarter fluctuations in add-on service timing. 3. Leasing: Revenue held steady at $8 million quarter-over-quarter, contributing 2.3% of total operating revenue. Total operating revenue for Q1 2026 is $348 million. Adjusted EBITDA for the quarter was $97 million, a $9 million sequential increase. Operating expenses totaled $334 million, down $10 million from the prior quarter due to capitalized mobilization costs for West Jupiter, partially offset by higher preparation costs for the West Capella contract.

Risks & headwinds

No specific material new risks or operational failures were discussed in detail during the call. Management noted that all forward-looking statements are inherently uncertain, and actual results may differ materially from projections due to various unstated factors, which are detailed in the company's SEC filings. The only conditional risk discussed is that reactivation of stacked harsh-environment semi-submersible rigs is currently challenged in the near term and will only proceed if clients cover the majority of reactivation costs, aligned with the company's free cash flow focus.

Analyst Q&A

• Q: The pivot toward more exploration and conventional activity instead of M&A for reserve replacement was already expected before recent geopolitical events. Do you agree, and has the Iran conflict changed tender activity or demand timelines? /

  A: Management confirms the exploration pivot was already underway at the start of 2026, with clients already planning new investments in frontier regions before recent events. The Iran conflict has boosted commodity prices, strengthened operator balance sheets, and intensified global focus on energy security, which has accelerated the existing demand trend rather than creating a new shift. Exploration demand is rising, and by nature exploration projects use more rig time than repeat development drilling, increasing incremental industry demand, though an exact quantitative increase cannot be estimated yet.

• Q: How do you expect leading edge drill ship day rates to progress through the end of 2026, given recent market improvements? /

  A: CEDRAL prioritizes free cash flow generation over headline day rates when bidding contracts. Industry has seen its strongest backlog growth since 2012 over the past 3-4 months, with over 7 years of new contracted term awarded. Multiple 2-3 year long-term contracts across Indonesia, Namibia, Nigeria, Suriname, and the U.S. Gulf are expected to be awarded by the end of 2026, which will likely push day rates higher than current levels as demand and utilization improve.

• Q: What is the outlook for the West Carina after its mid-June 2026 contract extension with Petrobras, and what are your free cash flow deployment plans once generation ramps up? /

  A: Management is actively pursuing new opportunities for the West Carina across Brazil, South America, and global markets, with no new contract to announce yet. The company is pleased to have the rig available to capture upside in 2027, which management expects to be a strong year for the market. The top near-term priority is generating free cash flow, and the company will decide on deployment (including potential shareholder returns or M&A) once cash is generated, while noting returning capital to shareholders has been a priority historically.

• Q: Would CEDRAL pursue M&A to increase fleet size to take advantage of rising day rates, and what is the approach to potential deals? /

  A: Management states CEDRAL is already at minimum efficient scale, and will only pursue M&A if the deal is accretive to shareholder value. The company is not seeking to do deals just for the sake of growth, and will also consider asset sales if they maximize shareholder value, with maximizing shareholder return as the core focus for any transaction.