Seadrill Ltd. Q1 FY2025 earnings call

• Simon recognized two rigs that received customer endorsements: Sonangol Quenguela was awarded 2024 Rig of the Year by TotalEnergies, and West Vela received a 2024 Supplier Recognition Award from ConocoPhillips.
• First quarter EBITDA was $73 million, economic utilization was 84% but impacted by rigs in Brazil with downtime and teething issues, but April showed improvement.
• Market overview: Global macro uncertainty and OPEC's supply increases affect commodity prices, impacting customer confidence, but active dialogue with clients for opportunities in second half of 2025 and 2026.
• Samir discussed commercial outlook: US Gulf has rigs rolling off contract, but region expected to return to balance; Africa sees reduced floater demand but optimism in medium/long term; Brazil has multiyear tenders and demand from other operators.
• Grant reviewed Q1 financial results: Operating revenues up, expenses down, adjusted EBITDA up, and maintained full year guidance.

In the first quarter, Seadrill delivered EBITDA of $73 million. Total operating revenues were $335 million, an increase of $46 million from the prior quarter. Contract earning revenues were up $44 million sequentially to $248 million due to additional operating days. Total operating expenses were $317 million, down from $323 million in the prior quarter. Adjusted EBITDA was $73 million, up from $28 million in the prior quarter. At the end of the first quarter, gross principal debt was $625 million, and cash held was $430 million including $26 million of restricted cash.

• Maintained full year guidance: total operating revenues of $1.3 billion to $1.36 billion (excluding reimbursable revenues of $35 million).
• Adjusted EBITDA in the range of $320 million to $380 million.
• Full year capital expenditures in the range of $250 to $300 million.
• Initial review of tariffs' impact ongoing, but any impact contemplated by current guidance ranges.

• Global macro uncertainty and OPEC's decision to accelerate supply increases weighing on commodity prices and customer confidence.
• Downtime and teething issues with rigs in Brazil impacting utilization.
• Volatility in the market affecting near-term customer investment and contract negotiations.

Q: One of your competitors recently committed four deepwater rigs to contracts with incentives. Asked if seen shift to performance-based metrics and if operators are anchoring negotiations around lower base rates.

A: Performance-based contracts have been around, not a massive shift, and for right client/rig open to it.

Q: Costs to stack Capella, average daily cost while stacked, and reactivation costs.

A: Proactively reducing costs, still in ramp down mode, dynamic so can't give exact now.

Q: Decision process between stacking vs keeping rig warm, impact on other stacked rigs.

A: Active dialogue with customers for opportunities, disciplined about removing supply if no profitable work, won't burn cash long, believe rigs competitive, only long-term cold stack rigs contemplated for removal.

Q: How much of midpoint guidance is covered on ‘25.

A: Not getting into midpoint, fleet status with Louisiana and Vela driving where land in range.

Q: Color on Vela and bifurcation between sixth- and seventh-gen floaters.

A: Vela is best-performing in Gulf, in active dialogue for fourth quarter and into Q1 2026, confident in filling schedule due to performance.

Q: Opportunities in ‘26 in West Africa and Asia.

A: Most programs in West Africa second half of ‘26, some shorter term in near term; Asia has mix of shorter term and longer term work, balance near term coverage with operating leverage.

Q: Likelihood of contracts in second half of ‘25 and confidence.

A: Dynamic market, volatile, but confident on some assets, not cold stacking those rigs indicates see benefit in marketplace, disciplined in reducing costs.

Q: Need to compete on price.

A: Performance still matters, can't be terribly outside recent pricing, will continue to sell performance and differentiation where clients willing to pay for it.