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1. Company Snapshot

1.a. Company Description

Seadrill Limited provides offshore contract drilling services to the oil and gas industry worldwide.It operates in three segments: Harsh Environment, Floaters, and Jack-ups Rigs.The company owns and operates drillships, semi-submersible rigs, and jack-up rigs for operations in shallow and ultra-deep-water in benign and harsh environments.


It offers operation support and management services to third parties, as well as related and non-related companies.As of April 8, 2022, the company owned a fleet of 21 offshore drilling units consisting of two harsh-environment rigs, two benign-environment semi-submersible rigs, six drill-ships, and 11 jack-up rigs.It serves oil super-majors, state-owned national oil companies, and independent oil and gas companies.


Seadrill Limited was incorporated in 2005 and is headquartered in London, the United Kingdom.

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1.b. Last Insights on SDRL

Seadrill Limited's recent performance was negatively driven by the absence of a significant earnings release in the past 3 months. However, the company's exploration of opportunities to acquire assets and engage in mergers may indicate a potential shift in its business strategy. Additionally, the recent collaboration with Oil States International to enhance offshore managed pressure drilling operations may not have had a significant impact on the company's recent performance. Furthermore, the lack of recent news on the company's financial performance and the absence of a significant earnings release in the past 3 months may have contributed to the negative sentiment.

1.c. Company Highlights

2. Seadrill Delivers Solid Q1 2025 Earnings Amid Market Uncertainty

Seadrill reported a strong financial performance in Q1 2025, with operating revenues of $335 million, marking a $46 million increase from Q4 2024. This growth was driven by additional operating days, reflecting improved utilization across its fleet. The company posted an adjusted EBITDA of $73 million, up significantly from $28 million in the previous quarter, signaling better operational efficiency. Notably, the company exceeded analyst estimates for EPS, reporting $0.69 compared to the consensus estimate of $0.61. Simon Johnson, CEO, highlighted the company's strong balance sheet, with $430 million in cash and a $2.8 billion backlog, underscoring its financial stability.

Publication Date: May -12

📋 Highlights
  • Q1 EBITDA Performance: - Seadrill reported Q1 EBITDA of $73 million, up from $28 million in Q4, driven by higher operating days and improved economic utilization of 84%.
  • Market Outlook: - Despite OPEC supply increases and client caution, Seadrill remains optimistic about deepwater demand, with offshore sanctioning activity expected to rise in 2026-2027.
  • Financial Position: - The company holds $430 million in cash and a $2.8 billion backlog, with ongoing mediation with Petrobras showing constructive progress.
  • Commercial Updates: - Seadrill is well-positioned in Brazil with six rigs, including the West Carina, and expects a rebound in African floater demand by 2027.
  • Full-Year Guidance: - Seadrill maintains its guidance, expecting $1.3-$1.36 billion in operating revenues and $320-$380 million in adjusted EBITDA for the year.

Market Outlook and Commercial Performance

Despite market uncertainty driven by OPEC supply increases and client caution, Seadrill remains optimistic about deepwater demand, particularly in 2026-2027. Samir Ali, CCO, emphasized opportunities in key regions, including the US Gulf, where the West Vela rig demonstrated exceptional performance. In Brazil, Seadrill is well-positioned with six rigs, including the West Carina, as Petrobras issued a multiyear tender. However, challenges persist in regions like Africa, where floater demand is expected to rebound in 2027. The company is balancing near-term contracting with maintaining operating leverage, avoiding low-priced long-term contracts to position for better market dynamics in late 2026.

Financial Position and Future Guidance

Seadrill maintained its full-year guidance, with total operating revenues expected to range between $1.3-$1.36 billion and adjusted EBITDA between $320-$380 million. The company holds $430 million in cash and $625 million in gross debt, with a 2030 maturity, providing flexibility for future investments. Grant Creed, CFO, noted that vessel and rig operating expenses increased due to higher activity, but the company is disciplined in managing costs while pursuing profitable opportunities. Seadrill is prepared to cold stack rigs quickly if market support for long-term opportunities isn't present, particularly for sixth-generation rigs.

Valuation and Investor Sentiment

Seadrill currently trades at a P/E ratio of 3.51 and an EV/EBITDA of 4.42, suggesting a relatively attractive valuation given its strong backlog and cash position. The company's ROIC of 14.55% and ROE of 15.09% indicate efficient capital deployment and profitable operations. However, the negative free cash flow yield of -4.56% reflects ongoing investments in fleet maintenance and strategic opportunities. Analysts estimate an 18.5% revenue growth for next year, supported by emerging opportunities in West Africa and the Asia-Pacific region. Despite market volatility, Seadrill's focus on performance and differentiation positions it well for long-term growth.

3. NewsRoom

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Seadrill and Oil States Announce Strategic Collaboration to Enhance Offshore Managed Pressure Drilling (MPD) Operations

Sep -17

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Seadrill exploring opportunities to acquire assets and engage in mergers

Sep -12

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Southwest Airlines, Charles Schwab, and More Stocks See Action From Activist Investors

Aug -30

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Seadrill Ltd (NYSE: SDRL) A Bull Case Theory

Aug -26

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SeaDrill Limited (SDRL): Why Is Elliott Management Bullish on This Stock Now?

Aug -09

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Seadrill (SDRL) Surpasses Q2 Earnings and Revenue Estimates

Aug -05

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Seadrill: Q2 Earnings Snapshot

Aug -05

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Transocean (RIG) Reports Q2 Loss, Lags Revenue Estimates

Jul -31

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4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (11.46%)

6. Segments

Contract

Expected Growth: 12%

Seadrill Limited's 12% growth is driven by increasing demand for deepwater drilling services, rising oil prices, and a growing backlog of contracts. Additionally, the company's strategic partnerships, cost-cutting initiatives, and investments in new rigs have improved operational efficiency, contributing to the growth momentum.

Management Contract

Expected Growth: 10%

Seadrill's 10% growth driven by increasing demand for deepwater drilling services, strategic management contracts, and expansion into new markets. Rising oil prices and growing energy demand also contribute to growth. Additionally, Seadrill's cost-cutting initiatives and fleet modernization efforts enhance operational efficiency, further supporting growth.

Other

Expected Growth: 8%

Seadrill's 8% growth in 'Other' segment is driven by increased demand for offshore drilling services, strategic partnerships, and expansion into new markets. Additionally, the company's focus on cost reduction, operational efficiency, and fleet modernization have contributed to improved profitability.

Reimbursable

Expected Growth: 9%

Seadrill's 9% growth is driven by increasing demand for deepwater drilling services, rising oil prices, and a growing backlog of contracts. Additionally, the company's cost-cutting initiatives, fleet modernization, and strategic partnerships have improved operational efficiency and competitiveness, contributing to its growth momentum.

7. Detailed Products

Deepwater Drilling

Seadrill Limited provides deepwater drilling services to oil and gas companies, utilizing its fleet of semi-submersible and drillship rigs to access offshore oil and gas reserves.

Jack-up Drilling

Seadrill Limited offers jack-up drilling services, utilizing its fleet of jack-up rigs to drill wells in shallow water environments.

Tender Drilling

Seadrill Limited provides tender drilling services, utilizing its fleet of tender rigs to drill wells from fixed platforms or other installations.

Well Intervention

Seadrill Limited offers well intervention services, providing a range of services to optimize well performance and extend the life of oil and gas wells.

Project Management

Seadrill Limited provides project management services, overseeing the planning, execution, and delivery of oil and gas projects.

8. Seadrill Limited's Porter Forces

Forces Ranking

Threat Of Substitutes

Seadrill Limited operates in a niche market with high barriers to entry, reducing the threat of substitutes. However, the increasing adoption of renewable energy sources and energy-efficient technologies poses a moderate threat to the company's operations.

Bargaining Power Of Customers

Seadrill Limited's customers, primarily oil and gas companies, have limited bargaining power due to the company's specialized services and high switching costs.

Bargaining Power Of Suppliers

Seadrill Limited relies on a few key suppliers for equipment and services, giving them moderate bargaining power. However, the company's large scale of operations and long-term contracts mitigate this risk.

Threat Of New Entrants

The high capital requirements, specialized expertise, and regulatory hurdles in the offshore drilling industry create significant barriers to entry, reducing the threat of new entrants.

Intensity Of Rivalry

The offshore drilling industry is highly competitive, with several established players competing for a limited number of contracts. Seadrill Limited faces intense rivalry from companies like Transocean and Ensco.

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

Value
Debt Weight 16.93%
Debt Cost 3.95%
Equity Weight 83.07%
Equity Cost 3.95%
WACC 3.95%
Leverage 20.38%

11. Quality Control: Seadrill Limited passed 4 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

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A-Score: 4.2/10

Value: 6.9

Growth: 7.0

Quality: 5.2

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Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

404.8$

Current Price

404.8$

Potential

-0.00%

Expected Cash-Flows