Seadrill Announces Sale of Jack-Up West Prospero

Rhea-AI Summary

Seadrill (NYSE: SDRL) has announced the completion of the sale of its jack-up rig West Prospero for $45 million in cash proceeds. The rig had been stacked (inactive) since 2016. According to CEO Simon Johnson, this sale aligns with the company's strategic goal to exit the benign jack-up market and represents the successful monetization of a non-core asset.

Positive

• Received $45 million in cash proceeds from rig sale
• Successfully executed strategic exit from benign jack-up market
• Monetized a non-productive asset that had been inactive since 2016

Negative

• Reduction in total asset base through rig disposal

Insights

Financial Analyst

The $45 million sale of the stacked West Prospero represents a strategic move to optimize Seadrill's fleet and strengthen its balance sheet. For a company with a $2.3 billion market cap, while the sale amount isn't transformative, it eliminates maintenance costs for a non-productive asset and provides additional liquidity. The transaction aligns with the broader industry trend of offshore drilling contractors streamlining their fleets to focus on high-specification assets in harsh environment operations.

The exit from the benign jack-up market is particularly noteworthy as it allows Seadrill to concentrate resources on more profitable segments. Benign environment jack-ups typically command lower day rates and face intense competition from newer, more efficient rigs, especially in regions like Southeast Asia and the Middle East. The decision to divest a rig that has been idle since 2016 demonstrates prudent capital allocation and operational efficiency improvements.

Market Research Analyst

The timing of this sale is strategic given the current market dynamics in the offshore drilling sector. While jack-up utilization rates have been improving globally, the benign environment segment remains oversupplied. The ability to secure $45 million for a seven-year-stacked rig indicates recovering asset values in the offshore drilling market. This transaction provides empirical evidence of improving second-hand rig valuations and potential liquidity in the offshore drilling asset market.

For investors, this divestment signals management's commitment to portfolio optimization and capital discipline. The elimination of stacking costs and maintenance expenses for an idle asset will positively impact operating margins. The cash injection, while modest relative to Seadrill's enterprise value, strengthens the company's position to pursue opportunities in the premium harsh-environment segment where day rates and barriers to entry are significantly higher.

HAMILTON, Bermuda--(BUSINESS WIRE)-- Seadrill Limited ("Seadrill" or the "Company") (NYSE: SDRL) today announced that it has completed the sale of the jack-up rig West Prospero for cash proceeds of $45 million.

“With the sale of the West Prospero, we have monetized a non-core asset that has been stacked since 2016 and successfully executed on our strategy to exit the benign jack-up market,” said President and Chief Executive Officer, Simon Johnson.

About Seadrill

Seadrill is setting the standard in deepwater oil and gas drilling. With its modern fleet, experienced crews, and advanced technologies, Seadrill safely, efficiently, and responsibly unlocks oil and gas resources for national, integrated, and independent oil companies. For further information, visit www.seadrill.com.

Forward-Looking Statements

This news release includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements other than statements of historical facts included in this news release, including, without limitation, those regarding the Company’s plans, strategies, business prospects and rig activity, including with respect to backlog and contract commencement dates and durations, impact on earnings and free cash flow and changes and trends in its business and the markets in which it operates, are forward-looking statements. These statements may include words such as “assumes”, “projects”, “forecasts”, “estimates”, “expects”, “anticipates”, “believes”, “plans”, “intends”, “may”, “might”, “will”, “would”, “can”, “could”, “should” or, in each case, their negative, or other variations or comparable terminology in connection with any discussion of the timing or nature of future operating or financial performance or other events. These statements are based on management’s current plans, expectations, assumptions and beliefs concerning future events impacting the Company and therefore involve a number of risks, uncertainties and assumptions that could cause actual results to differ materially from those expressed or implied in the forward-looking statements. Important factors that could cause actual results to differ materially from those in the forward-looking statements include, but are not limited to: those described under Item 3D “Risk Factors” in the Company’s Annual Report on Form 20-F for the year ended December 31, 2023, filed with the U.S. Securities and Exchange Commission (“SEC”) on March 27, 2024, offshore drilling market conditions, including supply and demand, day rates, customer drilling programs and effects of new or reactivated rigs on the market, fluctuations in the international price of oil, international financial market conditions, inflation, changes in governmental regulations that affect the Company or the operations of the Company’s fleet, the review of competition authorities, the impact of global economic conditions and global health threats, pandemics and epidemics, political and other uncertainties, including those related to the conflicts in Ukraine and the Middle East, and any related sanctions, fluctuations in interest rates or exchange rates and currency devaluations relating to foreign or U.S. monetary policy, tax matters, changes in tax laws, treaties and regulations, legal and regulatory matters in the jurisdictions in which we operate, customs and environmental matters, the potential impacts on our business resulting from decarbonization and emissions legislation and regulations, the impact on our business from climate-change generally, the occurrence of cybersecurity incidents, attacks or other breaches to our information technology systems, including our rig operating systems, and other important factors described from time to time in the reports filed or furnished by us with the SEC.

The foregoing risks and uncertainties are beyond our ability to control, and in many cases, we cannot predict the risks and uncertainties that could cause our actual results to differ materially from those indicated by the forward-looking statements. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those indicated. All subsequent written and oral forward-looking statements attributable to us or to persons acting on our behalf are expressly qualified in their entirety by reference to these risks and uncertainties. You should not place undue reliance on forward-looking statements. Each forward-looking statement speaks only as of the date of the particular statement. We expressly disclaim any obligations or undertaking to release publicly any updates or revisions to any forward-looking statement to reflect any change in our expectations or beliefs with regard to the statement or any change in events, conditions or circumstances on which any forward-looking statement is based, except as required by law.

Investors should note that we announce material financial information in SEC filings, press releases and public conference calls. Based on guidance from the SEC, we may use the Investors section of our website (www.seadrill.com) to communicate with investors. It is possible that the financial and other information posted there could be deemed to be material information. The information on our website is not part of, and is not incorporated into, this news release.

View source version on businesswire.com: https://www.businesswire.com/news/home/20241227268598/en/

Kevin Smith

Vice President – Corporate Finance and Investor Relations

ir@seadrill.com

Source: Seadrill Limited

FAQ

How much did Seadrill (SDRL) sell the West Prospero jack-up rig for?

Seadrill sold the West Prospero jack-up rig for $45 million in cash proceeds.

When was the West Prospero rig last active before SDRL's sale?

The West Prospero rig had been stacked (inactive) since 2016 before its sale.

Why did Seadrill (SDRL) sell the West Prospero rig?

Seadrill sold the West Prospero as part of its strategy to exit the benign jack-up market and monetize non-core assets.

What is Seadrill's (SDRL) strategic direction regarding the jack-up market?

Seadrill is strategically exiting the benign jack-up market, as evidenced by the sale of the West Prospero rig.