Seadrill CEO on Q2: ‘We Delivered Strong Results’

(OE) Offshore drilling rig contractor Seadrill said Tuesday it had generated $414 million in total operating revenues, a sequential increase of $148 million, or 56%, benefitting from contracted rigs acquired as part of the Aquadrill transaction, completed on April 3, 2023.

Adjusted EBITDA nearly doubled from $85 million in the prior quarter to $159 million, or 38.4% of Adjusted EBITDA Margin. Net income was $94 million, or $1.16 per diluted share.

During the quarter, Seadrill operated an average of 13 rigs that contributed to contract revenues at an average day rate of $276 thousand and economic utilization of 93%, compared to an average of nine rigs in the first quarter. 

This translated into contract revenues of $329 million, an increase of $143 million, or 77%, from the prior quarter, primarily due to a greater number of total operating days reflecting contracted Aquadrill rigs now included in Seadrill’s results.

In addition, Seadrill generated $66 million in management contract revenues, largely related to the rigs Seadrill manages under its 50:50 joint venture with Sonangol, and $19 million in reimbursable and other revenues.

Seadrill now owns 12 benign deepwater floaters, beyond the two it manages as part of a 50:50 joint venture with Sonangol; three harsh-environment rigs; and four jackups, three of which it plans to sell consistent with ongoing fleet refinement.

‘Strong Results’

“We delivered strong results this quarter, and the full year continues to be in line with previous guidance. This quarter, we executed decisively on strategic initiatives that simplify and strengthen our organization,” said President and Chief Executive Officer, Simon Johnson.

“We established greater scale with the closing of the Aquadrill acquisition. We continued to refine our fleet through value-accretive asset divestitures, completing the sale of three tender-assist units at attractive valuations and announcing intentions to sell our jackup fleet in Qatar. We also strengthened our financial position, refinancing our secured debt at competitive rates to reduce our cost of capital and improve our strategic flexibility.”

Seadrill’s Board of Directors has authorized a share repurchase program that allows the company to repurchase up to $250 million of its outstanding common shares. The $250 million authorization does not have a fixed expiration, and may be modified, suspended, or discontinued at any time, the company said.

Johnson said: “We remain committed to prioritizing a conservative capital structure, a refined fleet, and a disciplined, value- accretive approach to growth. Our new repurchase authorization will allow us to evaluate opportunities to return capital to shareholders when available and prudent, driving further value creation.”

At quarter-end, Seadrill had total debt of $355 million and $539 million in cash and cash equivalents, including $127 million in restricted cash. 

After the quarter, Seadrill refinanced its secured debt, issuing $575 million in aggregate principal amount of 8.375% senior secured second lien notes due 2030 and establishing a $225 million senior secured five-year revolving credit facility with an accordion feature of up to a further $100 million. 

“Importantly, the refinancing removes certain restrictive covenants, allowing the company greater flexibility to act on accretive opportunities that maximize shareholder value,” Seadrill added.

Focus on Floater Segment

Throughout the last year, Seadrill said it had focused increasingly on the floater segment, through continued accretive acquisitions and divestitures, believing that this part of the rig market would produce the most growth and value for shareholders. 

The company announced the potential sale of three jackup rigs and related interest in its 50:50 joint venture with Gulf Drilling International (“GDI”) and completed the sale of its three tender-assist units to certain affiliates of Energy Drilling Pte. Ltd. (“Edrill”) for aggregate cash proceeds of approximately $85 million at the end of July.

At quarter-end, Seadrill’s order backlog stood at $2.6 billion, reflecting approximately $203 million of contract additions.

During the quarter,  Seadrill secured multi-well contract extensions against existing agreements for two drillships, the Sonangol Quenguela and the West Gemini, operating in Angola through the Company’s 50:50 joint venture with Sonangol. 

These exercised options will start in direct continuation of the rigs’ existing contracts, committing the Sonangol Quenguela through January 2025 and the West Gemini through May 2025. Additionally, the operator of the West Capella rig exercised a one-well option, extending its operations by approximately two months.

Two of Seadrill’s jack-up rigs, the West Castor and the West Tucana, received contract extensions for continued operations offshore Qatar through the Company’s 50:50 joint venture with GDI. As of August 15, 2023, the company’s order backlog stands at $2.4 billion.

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