Business Overview and History
Seadrill Limited (SDRL) has established itself as a prominent player in the offshore drilling industry, offering a fleet of state-of-the-art rigs and expertise in delivering safe, efficient, and reliable operations. As the company navigates the challenges of a dynamic market, its strategic investments, diversified customer base, and commitment to innovation have positioned it as a resilient force in the energy sector.
Seadrill Limited was incorporated in Bermuda in 2005, growing to become a leading offshore drilling contractor providing worldwide offshore drilling services to the oil and gas industry. The company's primary focus is the ownership and operation of drillships and semi-submersible rigs for shallow to ultra-deepwater drilling in both benign and harsh environments.
Seadrill's history has been marked by significant events and challenges. In July 2018, the predecessor company, also known as Seadrill Limited, was listed on both the New York Stock Exchange and the Oslo Stock Exchange. However, in June 2020, it was delisted from the NYSE and began trading on the OTC Pink Market. A major milestone for the company was its comprehensive restructuring and emergence from Chapter 11 bankruptcy proceedings on February 22, 2022. This process allowed Seadrill to establish a new entity with a strengthened balance sheet and capital structure. Following this restructuring, the current Seadrill Limited was incorporated, and its shares were relisted on the NYSE in October 2022.
The company faced significant challenges during the 2020 global pandemic, which had a substantial impact on the offshore drilling industry. Seadrill had to contend with a significant reduction in oil and gas prices, leading to a reevaluation of its operational and financial strategies. Throughout its history, the company has also navigated dynamic regulatory environments in various jurisdictions, requiring adaptability to changing rules and interpretations.
Despite these challenges, Seadrill has maintained its commitment to providing high-quality offshore drilling services to a diverse customer base, including oil super-majors, state-owned national oil companies, and independent oil and gas companies. The company's modern fleet, experienced crews, and advanced technologies have been key factors in its ability to safely and efficiently deliver drilling services worldwide.
In 2023, the company completed the acquisition of Aquadrill LLC, adding four drillships, one semi-submersible, and three tender-assist units to its portfolio. This move strengthened Seadrill's presence in the global offshore drilling market and diversified its asset base.
Financial Performance and Liquidity
Seadrill's financial performance has demonstrated resilience, even amidst industry challenges. In the fiscal year 2024, the company reported revenue of $1.39 billion and net income of $446 million, reflecting its ability to navigate market volatility. The company's adjusted EBITDA for the same period was $378 million, exceeding its guidance range and showcasing effective cost management. Annual operating cash flow stood at $88 million, while free cash flow was -$69 million.
For the fourth quarter of 2024, Seadrill reported revenue of $289 million, net income of $101 million, quarterly operating cash flow of $7 million, and quarterly free cash flow of -$94 million. The decrease in revenue and operating cash flow compared to the prior quarter was primarily due to fewer operating days for rigs undergoing contract preparations and maintenance, as well as the cold stacking of the West Phoenix. The increase in net income was driven by gains on asset disposals.
Seadrill's balance sheet remains robust, with a cash balance of $478 million as of December 31, 2024, and a net debt position of $132 million. The company's current ratio stands at 1.85, indicating a strong liquidity position to support its operations and future investments. Seadrill's debt-to-equity ratio of 0.21 suggests a prudent capital structure, further enhancing its financial flexibility. The company also has a $225 million Senior Secured Revolving Credit Facility, which was fully available as of December 31, 2024.
Looking ahead to 2025, Seadrill has provided guidance for total operating revenues between $1.3 billion and $1.36 billion, excluding $35 million in reimbursable revenues. The company expects adjusted EBITDA in the range of $320 million to $380 million, which includes a non-cash net mobilization expense of $27 million. Full-year capital expenditures are projected to be in the range of $250 million to $300 million, including some rollover CapEx from 2024 and $20 million of long lead items for recent contract awards. It's worth noting that operational issues in Q1 2025 are expected to adversely impact the first-quarter and full-year 2025 EBITDA by approximately $55 million.
Operational Highlights and Market Positioning
Seadrill's operational excellence has been a key driver of its success. In 2024, the company's total recordable incident frequency rate was nearly 20% below the industry average, reflecting its commitment to safety and environmental stewardship. The company's modern fleet, experienced crews, and advanced technologies have allowed it to deliver consistent and reliable performance for its clients.
As of December 31, 2024, Seadrill owned a total of 15 drilling units, of which 11 were operating, including one leased to the Sonadrill joint venture. One 6th generation drillship was undergoing contract preparations for a contract that commenced during February 2025, and three were cold stacked. The 11 operating units include 10 benign floaters comprising seven 7th generation drillships, two 6th generation drillships and one benign environment semi-submersible, as well as one harsh environment unit comprising a jackup rig. In addition to its owned assets, Seadrill managed two drilling units owned by Sonangol.
Seadrill categorizes its drilling units into three main types: floaters, jackup rigs, and harsh environment units. Floaters include drillships and semi-submersible rigs, capable of operating in water depths ranging from 1,000 to 12,000 feet. Jackup rigs are mobile, self-elevating drilling platforms suitable for water depths of 450 feet or less. Harsh environment rigs, which include both semi-submersibles and jackup rigs, have design modifications to handle more severe weather conditions as seen in regions like the North Sea, Southern Africa, Australia, and Canada.
The company's largest customers, each contributing more than 10% of total revenues, were Sonadrill and Petrobras, accounting for approximately 40% of total revenues in aggregate for the year ended December 31, 2024. Seadrill's operations are geographically dispersed, with a significant portion of its revenues derived from the United States, Brazil, and Angola, which collectively accounted for approximately 76% of total revenues in 2024.
Looking ahead, Seadrill continues to navigate the market landscape with strategic precision. In 2024, the company secured long-term contracts for its West Jupiter and West Tellus drillships with Petrobras in Brazil, adding $1 billion to its backlog and providing visibility into future earnings. Additionally, the company's decision to exit the benign jack-up market through the divestment of the West Prospero rig aligns with its strategy of optimizing its fleet and focusing on its core deepwater operations.
Despite the near-term softness in the market, Seadrill remains cautiously optimistic about the long-term outlook for the offshore drilling industry. The company's significant contract backlog, valued at $3 billion as of December 31, 2024, and its ability to secure new long-term contracts, underscores its strong market positioning. Furthermore, the anticipated increase in deepwater exploration and development activities, driven by the depletion of existing resources and the industry's focus on lower-carbon energy sources, bodes well for Seadrill's future growth.
Risks and Challenges
While Seadrill has demonstrated resilience, the company is not immune to the inherent risks and challenges faced by the offshore drilling industry. Fluctuations in oil and gas prices, global economic conditions, and increased competition can impact the company's financial performance and contract opportunities. Additionally, regulatory changes, such as stricter environmental regulations, can pose operational and compliance challenges.
The company's international operations also expose it to geopolitical risks, currency fluctuations, and potential disruptions in key regions. Seadrill's ability to effectively manage these risks and adapt to market changes will be critical to its long-term success.
The offshore drilling industry is highly competitive and cyclical, with intense price competition and volatility. While Seadrill expects future demand to increase, visibility remains unclear. However, the company notes that deepwater provides some of the most advantaged and profitable projects with the lowest carbon emissions intensity, which aligns with its strategic focus.
Conclusion
Seadrill Limited has established itself as a formidable player in the offshore drilling industry, leveraging its modern fleet, experienced workforce, and commitment to innovation. Despite the volatility in the market, the company's strategic initiatives, diversified customer base, and strong financial position have positioned it to navigate the challenges and capitalize on the industry's long-term growth prospects. As Seadrill continues to execute its strategic plan, it remains well-poised to set the standard in deepwater oil and gas drilling, delivering value to its shareholders and contributing to the global energy landscape.