Seadrill Limited ((SDRL)) has held its Q4 earnings call. Read on for the main highlights of the call.
Seadrill Limited’s recent earnings call painted a picture of both achievement and challenge. The company showcased its strong share repurchase program and incremental backlog growth, alongside notable operational successes. However, regulatory challenges in Brazil, litigation risks with Petrobras, and a softening market present hurdles for the future, particularly as the company looks towards 2025.
Strong Share Repurchase Program
Seadrill Limited has demonstrated a robust commitment to returning value to shareholders through its share repurchase program. In the fourth quarter alone, the company repurchased $100 million worth of shares, reducing its issued share count by 22% since the program’s inception in September 2023. To date, a total of $792 million has been returned to shareholders, reflecting the company’s strategic focus on enhancing shareholder value.
Incremental Backlog Growth
The company has secured approximately 65% of the global backlog awarded to the four largest publicly traded offshore drillers, despite only representing 18% of the drillship fleet. This significant achievement underscores Seadrill’s competitive positioning and ability to capture market opportunities effectively.
New Contracts and Revenue Generation
Seadrill Limited announced substantial long-term contract awards in Brazil, set to commence in 2026, which will add $1 billion to its backlog. Additionally, the company has secured further work for its rigs in the US Gulf and Brazil, boosting its revenue generation capabilities.
Exceptional Operational Performance
Operationally, Seadrill has excelled, with the West Vela achieving drilling ahead of schedule and securing additional work at favorable rates. The West Jupiter was also recognized as the 2024 Rig of the Year within the fleet, highlighting the company’s operational excellence.
Safety Performance Improvement
Safety remains a priority for Seadrill, as evidenced by its total recordable incident frequency rate ending 2024 nearly 20% below the IADC average. The company continues to trend favorably in safety performance into 2025, reinforcing its commitment to maintaining high safety standards.
Regulatory Delays in Brazil
Despite its successes, Seadrill faces challenges, particularly with regulatory delays in Brazil. The West Telus experienced 50 days of downtime due to regulatory matters, marking the sixth such delay for a drilling rig in Brazil over the past six months.
Litigation and Penalties
Seadrill has received notices from Petrobras regarding $213 million in penalties related to the Sete Brazil project, with the potential for further assessments. This litigation risk poses a significant financial challenge for the company.
Market Softness and Uncertainty
The market outlook for 2025 appears soft, with demand deferral and competitive pressures leading to lower day rates. Drillship marketed utilization has decreased from the high nineties in 2023 to the mid-eighties, indicating a more challenging market environment.
Operational and Cost Challenges
Seadrill’s fourth-quarter results were impacted by fewer operating days and increased operating expenses. Vendor issues and adverse weather further complicated timelines, presenting operational and cost challenges for the company.
Forward-Looking Guidance
Looking ahead, Seadrill Limited has provided guidance for fiscal year 2025, projecting total operating revenues between $1.3 billion and $1.36 billion, excluding reimbursable revenues. Adjusted EBITDA is expected to range from $320 million to $380 million, with capital expenditures anticipated between $250 million and $300 million. The company maintains a strong balance sheet, with a net debt position of $120 million, and emphasizes its durable contract cover extending through 2028.
In summary, Seadrill Limited’s earnings call reflects a company navigating a complex landscape of achievements and challenges. While the strong share repurchase program and backlog growth are commendable, regulatory hurdles, litigation risks, and market softness present significant obstacles. As Seadrill looks towards 2025, its strategic focus on operational excellence and financial resilience will be crucial in overcoming these challenges.