Release Date: August 06, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Seadrill Ltd (SDRL, Financial) delivered a strong EBITDA of $133 million for the second quarter, with an EBITDA margin of 35.5%.
- The company maintains a strong balance sheet with a net cash position of $237 million at the end of the quarter.
- Seadrill Ltd (SDRL) completed a $500 million share buyback program and initiated another $500 million program, reducing the issued share count by over 15%.
- Five of Seadrill Ltd (SDRL)'s rigs achieved nearly 100% uptime during the quarter, demonstrating operational efficiency.
- The company remains confident in the long-term position of the deepwater drilling industry, with expectations of burgeoning demand in the future.
Negative Points
- Seadrill Ltd (SDRL) lowered its second-half expectations due to revised estimates for contract start dates and uncommitted near-term availability of rigs.
- The company faces limited contracting options and intensifying competition, impacting some rigs and potentially others into 2025.
- There is a slower conversion of demand to contract awards, expected to persist into 2025, affecting revenue projections.
- Seadrill Ltd (SDRL) is experiencing delays in the start dates for the Auriga and Polaris rigs due to unexpected scope and vendor delays.
- The company anticipates idle time for some rigs, such as the Sevan Louisiana and West Phoenix, due to a softer outlook for speculative rig contracting.
Q & A Highlights
Q: How do you view rate resiliency for 6th generation rigs compared to 7th generation rigs?
A: Samir Ali, Executive Vice President and Chief Commercial Officer, explained that Seadrill has strategically placed its 6th generation rigs to maintain strong rates. One is in Brazil on a long-term contract, another in Southeast Asia with Managed Pressure Drilling (MPD) capabilities, and one in a joint venture in Angola. This strategic placement helps maximize rates for these rigs.
Q: What is the outlook for the West Phoenix rig, and are there plans to bid it outside of Norway?
A: Samir Ali stated that while the focus is on Norway, Seadrill is open to opportunities outside the region. The key is ensuring any investment in the rig justifies the capital expenditure. Opportunities are being explored for mid-2025, both within and outside Norway.
Q: How does the recent industry consolidation affect Seadrill's competitive landscape and strategy?
A: Simon Johnson, President and CEO, mentioned that Seadrill's strategy remains unchanged despite industry consolidation. The company is positioned as both an attractive acquisition target and a platform for growth, with a strong fleet, clean balance sheet, and good backlog.
Q: What are the reasons behind the delays in the Auriga and Polaris rig start dates?
A: Grant Creed, Chief Restructuring Officer, attributed the delays to supply chain issues and extended customer acceptance processes. Simon Johnson added that while major project milestones are complete, the customer acceptance process has grown, impacting the timeline.
Q: How does Seadrill view its cold-stacked rigs, and are there plans to sell or scrap them?
A: Simon Johnson indicated that Seadrill is looking for substantial client contributions to reactivation costs and a strong contracting outlook for cold-stacked units. The focus is on the existing working fleet, with the West Prospero identified as a potential sale candidate due to its non-core status.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
