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Seadrill has announced two new drillship contracts: The West Capella secured a one-well contract in South Korea worth $32 million, starting in December 2024. The West Neptune secured a six-month contract extension in the U.S. Gulf of Mexico valued at $86 million, starting in the third quarter of 2025.
Positive
Securing new contracts for two drillships demonstrates Seadrill's ability to maintain and expand its market presence.
The contract awards indicate growing demand for Seadrill's drilling services, enhancing revenue potential.
Upgrading the West Neptune with managed pressure drilling technologies showcases Seadrill's commitment to innovation and modernization.
Negative
Long durations for the contracts may pose potential risks due to market volatility and changing economic conditions.
Dependence on specific regions like South Korea and the U.S. Gulf of Mexico may expose Seadrill to geopolitical and regulatory uncertainties.
Insights
The recent announcement by Seadrill of securing contracts for two of its drillships represents a positive development for the company's financials, primarily due to the significant contract values and the strategic enhancements to their fleet. The single-well contract in South Korea for the West Capella, at roughly $32 million for an estimated 40-day duration, reflects a strong daily rate that suggests robust demand for deepwater drilling services in the region. This is further bolstered by the sizable mobilization fee, which covers the costs of relocating the drillship to the site, underpinning the company's negotiation capabilities. The six-month extension of the West Neptune's tenure in the U.S. Gulf of Mexico, valuing approximately $86 million, not only extends Seadrill's revenue stream but also solidifies its presence in a key market. Notably, the upgrade to Managed Pressure Drilling (MPD) capacities is a strategic move to enhance the rig's competitiveness. MPD is a high-demand tool that allows for more precise pressure control during the drilling process, which can reduce risks and increase efficiency. Enhancing a tenth rig to accommodate MPD illustrates Seadrill's commitment to investing in technology that addresses modern drilling challenges and client needs.
From a financial perspective, the contracts signify a near-term revenue influx and a longer-term operational extension for Seadrill. Specifically, the upfront mobilization fee for the West Capella will likely provide a quick cash infusion, improving the company's liquidity and potentially bolstering investor confidence. The extension for the West Neptune with its notable contract value fortifies the company's backlog, providing more predictable revenue and aiding in financial planning. Investors should note the clear revenue enhancement from these contracts against the backdrop of operational costs, including the capital expenditure for MPD upgrades. The long lead times until the commencement of these contracts also offer Seadrill the opportunity to manage its scheduling and avoid downtime. However, investors should also consider the inherent risks of the energy sector, such as volatile oil prices, geopolitical factors and operational risks, which could affect Seadrill's contract execution and, by extension, its financial outcomes. Presently, these contracts appear to be a positive development for Seadrill's financial health, contributing to a more stable outlook for the company.
HAMILTON, Bermuda--(BUSINESS WIRE)--
Seadrill Limited (“Seadrill” or the “Company”) (NYSE & OSE: SDRL) today announced contract awards for two drillships.
The West Capella secured a one-well contract in South Korea, with an estimated duration of 40 days, valued at approximately $32 million, including a mobilization fee of approximately $10 million and excluding fees for additional services. The contract is expected to commence in December 2024.
The West Neptune secured a six-month contract extension with an independent operator in the U.S. Gulf of Mexico, expected to start in the third quarter of 2025 in direct continuation of its current contract. The estimated contract value of approximately $86 million excludes fees for additional services, including managed pressure drilling (“MPD”). Seadrill will upgrade the West Neptune with MPD capabilities during planned out-of-service periods, making itthe tenth rig in the Company’s fleet with MPD or MPD-equivalent technologies.
About Seadrill
Seadrill is a leading offshore drilling contractor utilizing advanced technology to unlock oil and gas resources for clients across harsh and benign locations around the globe. Seadrill’s high-quality, technologically-advanced fleet spans all asset classes allowing its experienced crews to conduct operations across geographies, from shallow to ultra-deepwater environments.
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, and changes and trends in its business and the markets in which it operates, are forward-looking statements. These forward-looking statements can often, but not necessarily, be identified by the use of forward-looking terminology, including the terms “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. These statements are based upon 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, which speak only as of the date they are made. Important factors that could cause actual results to differ materially from those in the forward-looking statements include, but are not limited to, offshore drilling market conditions, including supply and demand, dayrates, fluctuations in the price of oil, international financial market conditions, changes in governmental regulations that affect the Company or the operations of the Company’s fleet, the review of competition authorities and other factors described from time to time in the reports filed or furnished by the Company with the U.S. Securities and Exchange Commission (“SEC”). The Company undertakes no obligation to update any forward-looking statement to reflect events or circumstances after the date on which such statement is made or to reflect the occurrence of unanticipated events. New factors emerge from time to time, and it is not possible for the Company to predict all of these factors. Further, the Company cannot assess the impact of each such factor on its business or the extent to which any factor, or combination of factors, may cause actual results to be materially different from those contained in any forward-looking statement. Consequently, no forward-looking statement can be guaranteed. When considering these forward-looking statements, you should also keep in mind the risks described from time to time in the Company’s filings with the SEC, including its Annual Report on Form 20-F for the year ended December 31, 2023, filed with the SEC on March 27, 2024, and subsequent reports on Form 6-K.
This information is subject to disclosure requirements pursuant to section 5-12 of the Norwegian Securities Trading Act.
