Seadrill Limited (SDRL) 5 Apr 232022 Q4 Earnings call transcript

Hello, everyone, and welcome to Seadrill's Q4 2022 earnings call and webcast. My name is David Warwick, and I'm the Director of Investor Relations for the company. I'd like to start by introducing you to the Seadrill team on today's conference call. Simon Johnson, President and Chief Executive Officer; Grant Creed, EVP and Chief Financial Officer; Leif Nelson, EVP and Chief Operating and Technology Officer; and Samir Ali, EVP and Chief Commercial Officer.

I will shortly hand you over to Simon who will take you through an overview of the Q4 highlights as well as touch on some of our corporate and commercial success over the quarter. some you performance financial guidance against back Simon take quarter over before then our to XXXX summarizing and our for will through outlook. performance our the handing strategy Grant and remarks, closing previously set

we'll Following from industry- inviting and the be questions analysts. sell-side formal presentation,

To line. you the participate session, via session that the ask Q&A the in we join conference call

presentation you a are is of tuning webcast in This this link, you copy our will webcast call access to that website. not of made the replay section will those being Relations able website available For the be Seadrill a Investor of on via of after. via shortly be the recorded, the and call conference

based of Before we we the not the and and historical Simply Slide are be made will performance and business risks are commence, statements certain put, cause to could are X. facts. and on are and statements to I statement actual results upon would differ related Such you to uncertainties. factors current which notify materially. subject disclaimer expectations assumptions many forward-looking referring that to There company like to therefore

please refer earlier to the time the this disclaimer report read and information, after this further to For earnings take QX the call released morning.

will On Simon. over I you that note, to hand

Thank everyone. our you results. Welcome, for XXXX joining discussing our presentation QX virtual

XX with a briefly with scheduled like transaction manner. step remarks. connection shortened a we to press as the as that our for February month's this to Aquadrill, most XXXX today's we've Therefore, outlined from that, critical acquisition prepared postpone release I'd clarify QX earnings time, reporting in outset, just the At over made in chose closing for expeditious of in our release filings our in

year Now, was October, but located lower Arabia, paid to of lien and balance of in few we in and closed anticipated the Fourth remarks. Saudi at of line which with almost million some figures previous guided activity. jackups is for relation the quarters, Full this expectations the closed, our than debt more topics we've significantly our $XXX for revenues In EBITDA the on quarter. provide were top allowed these seven topline was to sale our under in EBITDA prepared XXXX range. in million facility. Grant $XXX for us a Kingdom liquidity quarter and deleverage transaction our down sheet. in his increase the Since which will color operating second

of Saudi quarter, we you companies also closing rig of the as During closed is team a efforts seen, in which presents contributions the sale the we deal. and market. our both for transact the and hallmark to The employees Seadrill I in the the common like we We're this to Aquadrill this days acquisition about just thank prospects management jackups, have will acquire very and signed familiar ability our becoming an brand. but of excited efficiently to accretive we're not today's And would point their closed agreement The history. with only did very given transaction. ago, business quickly

our Petrobras and operations with December West operating operations active begin operation to Tellus the in with are which West have in total expected in Turning environment units harsh Brazil units, we floaters former January imminently, respectively. have to to commenced XX the deepwater Jupiter the its Among in taking West the the XX. operation and now Eastern and fleet Capella including Africa Aquadrill offshore

other manage on benign-environment behalf owners. jackups bareboat Additionally, charter that have venture joint Gulfdrill to three of operating other units on our and number of we a we

existing time are units managers based control as at intention by of with as these but to take is the former presently appropriate units customers rigs. the these utilizing Seadrill, reminder, the of managed services Aquadrill well a an As not on the our discussions

utilization high final with quarter fleet. XXXX, operational across good the during delivered performance we of Finally, the technical

Our at technical utilization utilization was recorded XX%, XX%. while stood economic at

the recent few a days of closed Aquadrill, was acquisition of notable months Moving I onto which mentioned. we slide, event our most ago, next previously the just as

As a result, assist our we've one tender units and semi-sub, added three environment to four drillships, fleet. harsh

Aquadrill the ultra-deepwater of become ultra-deep Aquadrill water the and more of deployed day rig Seadrill environment capacity and seven in With fleet addition where in trends do prevailing in to continue encouraged by harsh sale jackups has to Kingdom rates. be the in with segments. we attractive exposed of our rig the more Saudi the The market particular, the provide assets,

is require not Importantly, rig on lengthy and does this capacity costly the reactivations. water and

we immediate Aquadrill positioned and believe integrating uniquely shared that so history given Seadrill. into seamlessly to Our focus we are is do of business, our the on

cements significant to critical Seadrill to with driller very We to move it our as it enhances outlook, offshore integration the in meaningful the shareholders industry-leading arising expect our synergies flow the are acquisition the the value management an scale. to that free keen we quickly deliver from with team order firmly believe And time. cash And realize and transaction. through

the XXXX turbulent supply. of experienced underinvestment years through X. for the touching continue despite favorable an has for energy. The oil new to remain and inflection Slide continued industry, broader conditions offshore the market XXXX conditions market light and The in see global developments gas financial on of supplies we positive point energy brought fundamentals was right to drilling in sector. crisis Now on drilling offshore across and

for from benefited and profits time principally the energy have [EMPs] high some shareholders. return to now prices chosen to

a seeing which drilling their allocation. modern greenfield expansionary an seeing being activity fleet. Seadrill's a beneficiary. Furthermore, we IOCs we budgets the offshore indicated have capital the prominent activities emerging to developing hands for are approach towards into preference However, with in plays of high-end Several well of large are clear trend now equipment

demand utilization namely and Brazil rate Seadrill's geographies is Africa, high evident particularly in to pushed is Strong levels. West being key where

over believe to decade, critical we momentum positive be XXXX through lack continued key of a the of that the available fleet last rigs, a a the of is market's component and driver, demand trajectory beyond. supply While rationalization and of function

water in in owners. utilization benign drillships. segment floater in have per range. positive as remains units units Sales segment. XX% standing to the the two the have improving Several demand-supply ultra-deep The outlook the this months, by and We see the day harsh of consistently segment, market, further we rates, marketed now $XXX,XXX already with day illustrated for Norwegian outcomes around $XXX,XXX balance for left tightening edge leading critical rig coming for

Seadrill peers opportunities. consistent with portfolio, the to in fleet and the profile. about a to With rig we our We're are coming positioned relative concentrated expanded its excited more to and market intend new reposition capitalize on well years

you, to Grant. now you QX I'll hand in Over financial the over talk to detail. more through Grant results to

and again us you Thank welcome joining you, to of today. all Simon,

was upgrades commenced campaign of expectations primarily in driven than with of We're range. to but early year XXXX. of line revenue Full completed in EBITDA EBITDA year guided the the upcoming CapEx end million Fourth and with report time billion for top the of is Tellus, at the its ranges. lower delighted XXXX within guidance previous by which $XXX Petrobras were long-term the West guided for for that $XX full million idle and January $XXX of million $X.X quarter which also previous quarter,

presented XX of have operating the business are And benefit Results Canada Fewer subsequently and general up jackups operations that in from on I from We face the rig geography. West Hercules, October quarter of not following jackup comment October. of of full Saudi the demobilized operating which business until did related to a statement. results completion days sale for operations of the concluded in in as Saudi income the Norway. a P&L respect the to discontinued its

expect significantly benefit in again first final from four quarter on of the year my as all of in in From a respect EBITDA regarding this P&L, drillships comment the contract we quarter Brazil. full of improve operations to we

$XXX Now Saudi unrestricted by cash onto of We respect business. quarter due amortization old Hercules. the assets $XX to the of revenues of million jackup Other sheet. of to had combination of the at in receipt contracts, the of proceeds high receivable, sale on fees on favorable hand the some management demobilization end, of the from West largely collections relatively respect and received JV due of in decreased a balance million

liabilities to P&L and Jupiter, relation in to which prepayments, This explain Saturn, shortly. detail in debt mobilization contract and both recognized more Long-term the in and term. is was relation decreased, balance partially Carina, income recorded I'll sheet in the over revenue primarily the which offset by on as

as to no closed the related Saudi balance the classified QX in were the for on business These And were balance sale sale and after sheet sheet. the on held finally, longer October. liabilities assets

Looking a bit at more our in profile detail. debt

the Since following Saudi end QX, by been debt very we've sale You'll the $XXX almost see proactive it reduced we've stack business. of million. the managing of that our

of was prepayment at $XXX mandatory million in the which closing a in prepayment of followed a by $XXX made voluntary million of November. October we the First, sale,

Post the approximately reduced $XXX change second from April. facility our in period, to $XXX relatively $XXX made no debt expensive debt two the respectively. prepayments to have $XX total lien and million voluntary or convertible XX% million first we as million of February million and bond, told, prepayments All further million. at these lien by March stood $XXX of With

on we at will guidance full this XXXX point be providing year Lastly, not time. the financials, in

future. we financial consolidated issue Aquadrill intend priority and in this guidance near providing the is Our includes that the to business,

now With Simon that, line back the for hand to the I'll open we before Q&A.

Thanks, Grant.

have, on the slide this previously. many spoken events course, We of of about

won't on individually. touch So them I all of

extremely that like of several and successful began of home. our proud Chapter XX Now same clients. nimble I'd concluded decisive time an from that returning XXXX operationally for with am the our was demonstrated We've through are execution we've while I year initiatives ended delivering that and with announcement of the to how active results, our flight the we our It strategic emergence organization. at Aquadrill reiterate

and if days We after back And for operations, just and and started of the this I'd both Brazil drillships offshore Energy of topic February. with operational didn't the be workforce Aquadrill divestment getting closing year our commend remiss four time-consuming in I projects. ago in the capital Paratus and stake generation our in seventh large fashion our onshore similar on in

We on rig where most we segments are in increasing concentration the company, making shareholders. realize our can simpler, value our for markets Seadrill a streamlined the more

continue realized. we'll growth a accretive ahead, and non-core to prices can be and/or focus, monitor Looking near-term outstanding debt opportunities for market attractive assets the where divestment refinancing of will be

active to shareholders be the of business. intend We will our player continue and excellence and, in ever, as industry our at an our maximize safety forefront for operational value we to with

please. that, With I'll up for back our you Q&A, open lines hand the we Operator, to conclude presentation.

[Operator Greg Thank you. Instructions] Lewis, BTIG.

for good you question. Yes, everybody, thank taking afternoon, and thank you my and

it couple last believe weeks, prepared remarks, the of the tax UK you was momentum going Simon, of it I briefly whether out North moved rig positive they're or touched been like windfall your to the a in Sea. the market Sea or announcing it has seems the in it North like on there outside Norwegian look has the at but to two over some looks

your that color Aquadrill thinking you're how how another Just year? back market harsh thinking that of rig, next And more you're you kind you Do on thinking maybe end in really year? a thoughts, curious it really about you're this have can post the about acquisition. just realizing bit the on and how about of market provide little weather

I'm to Greg. bet, you Yes, talk that. to happy

fleet I rig Aquarius. into Aquadrill environment harsh our of obviously mean, yes, delivers the in another the form So,

being that time a segment. some for are we saying about sub-desirable scale been market in concerned have that We

critical a So good which obviously that thing. -- to getting mass, us closer we're gives is

And for is working currently as moment rig anyone. the too as the much its at capacity not empty in

units policy think public helpful more the government has the expanded important the by we in that as UK balance been shift from markets. but the the European sector latitudes, think not marking we NCS market certainly, as in the an term. see relation generally I southern has We in Western to see So certain in the rig the NCS that of in our that of been shift to near the

fore think contribution Australia, the to that bit from little development on like think, countries But they're demand think now. important outlook. near that other a a most as the balance more been of being the of movement going ideas of sort catalyst sensible of has to units powerful to stale the term and as I near-term I are of a to supply that or in make the I that's some there's don't Namibia, sort impact depressed market of the Canada, what those brought

where That's healthier changing a balance rapidly supply. and one to between there's much demand available

it go Aquarius on do to think we're to back to have bring exposed. reactivation So we for favorably work. the We

Our view is to the that client. that reactivation be funded by will need

And a those attributes be prudence pretty that rig say, we market of into in So that we're the we're opportunities. setting the I putting how that of strictly financial going rig. back makes to terms threshold in observing high as approach

shipyards? then acquisition, but looks maybe it couple currently opportunities great. more looking are potentially around thinking has thinking still it been more rig a maybe of newbuilds way, how there are come and and/or shipyards to that's rigs And probably maybe manage Aquadrill at stranded like the on with about from transaction Seadrill additional you right to or or week, two out the those potential for so one side a that haven't not about is that the Okay, those for closed, whether there positioning the I'm some of started potential are traditional realizing the even again, growth, realizing, you M&A company synergies that

what say the make a wide-ranging to Well, being might not management critically the if taken sort approach rig in in what participating the past. rig we probably management what a through path I we've money builds, how of is more core be would think, we certainly, done the as we those for there's would do. we've new to a feature business, Yes. of I in of interested of But opportunities ownership assets. It's

asset think more people I stranded fewer units. starts and the available depleted, as fewer obviously and there's chasing more inventory getting

very, as think, generally, think getting I now. about inventory tight So the you supply it's very

our acquiring contract acquiring until that I up now, balance we've as whereas long to stranded an would we we pretty I confidence sheets on level high unit. think have think of mind that principally asset ability focused a a been have as open to So of

So questions Greg. I sort answered of in your reverse there,

a additionally us for acquisition more think near-term of sort just on our lot I options obviously gives top and that, capacity as lot the But more also, a of Aquadrill customers well.

and to interesting we're how us at phase things So space moment, the really the for are with generally. market pleased developing getting the is in super

other Grant, QX. XXX% Yes, one you know have that I how question did we're we the see be want to on but going mentioned in you agree. to I granular is I any step-up don't [indiscernible] mean, space] going QX? versus give can in just basis you do any you incremental see on think maybe roughly how guidance a of kind us confusion. isn't there so we're percentage maybe or to How many QX [ramp there

give to of firm reluctant I'm respect. anything Greg, in sort you that

I say mentioned is, what I prepared now Brazil can rigs in the think the I as remarks, are on contract.

simple run now a models. as It's go to [starting] their know So not extremely what than you on business are rigs quite contract.

I think each rates day the has rigs. of on the market idea a generally good the of

you'll So get to I close. think able pretty be

Thank much great. you very Okay, the for time.

Greg. the questions, for Thanks

Clarksons Stene, Fredrik Securities.

Simon Steven, that if Hey, transaction team, first congratulations And you're in and and you, here. on foremost. listening to as goes the well

great it's think I to see consolidation.

term, in second I'll of -- would try short questions, reducing the said structure question of but structure I that, guess, several you lien near at briefly your capital back the have that I and you to on guess, could I into sense. you make the particularly piece, kind simpler grouping here. it maybe My or keep look

well. So point at have leverage at are that how and you able necessarily look specifics, not level look you if share, an like, as idea to ideal you would you least at but that think this any could of

Yes.

expensive would remove. off it not is than think that to by covenants existing but start it's debt and market I'll we So where complex also only be, like saying like unhelpful the our to contains is that we today, more would

our the been we pros options what and does work I of And front see sort to are review us. of refinancing sense. make a think cons So in doing the of we've some

Norwegian We can't where landing into bond, direct are. details leverage go bond, I the metrics what lenders. have now I US we're and

that. proceeds I that we use Fredrik, this think details But may reluctant and more you of also look give on at I'm what any well at stage, to as be.

that's Yes. No, understandable. very

I out still then quite that in that strategic Greg taken of And be yourself potential of owners with or transaction still soon looking the that put think are its stacked just keen rest. But to are of take on you companies that you that the stuck your all have which now given some the few them I or into peers this upon we're market, seeing a being -- actively on to markets, addition stranded least and have of or work. almost touched think some think to are them are back them I into assets, broader already. assets transactions, with at to

of mechanics work that together, through longer we'll back plateau accelerate assets rate we think think or of directional So Do some kind you of day more churn versus when and you you think all need 'XX, short will play. how bit coming term? those out the do do will regardless the of a into as have put you then -- kind the through you positive those in assets stacked term or also sort momentum 'XX

to the our is that something will level, We're forward the regardless I don't think and what term, just I think at reflective participant in that's principally behavior. drive market of in balance people fixtures the and is fundamentals. the that, expectation demand but on. behavior you firmly may plateau underlying do of a function near what of it's Fredrik, some so with of of see a rates, supply that may view choose necessarily individual it market is

of the couple development the for some there's spread flattening So in here I in next slight months. increase potential of think and rate the

terms see to the that shipyards are those I can two think to on quarter a going they we facing the rigs budgeting tightening we expensive in then capital certain of season into going you're have there get disappearing, and I the camps are those that in be as in who think reactivations, water. supply units can't that work start and end with up of because But they're the stranded next then get to be to and capacity there that long the with

for think I water so in going to And development. are the the rate with on rigs those be of pacesetters terms

to principally back will in work frankly those rate bring to work them them, an And will And against for that terms of that but have structure. them arbitrage arbitrage. units against face and both

got have to peers that yes, thankfully. number rigs I lot a We're of look, So, position there's not think of that our in a reactivate.

fully assets that or the have We we one back we to two much bring right on get the can if not with that terms. swing contracted basis. going do to a speculative market pretty We're commercial

think So we overcome confident development headwinds. in the we're I any near-term market, and that think of will

That's follow-up structures you very as How own six going of addition where, helpful. And of you a your a the the rates were T&Cs day just in have example, changed for other just clients that, versus with contract bit to noticed where up? months in kind to have discussions ago.

ask Well, be think order in I you served. have to to

don't massively offering So what if started they've I I different say know would is terms.

requires the concerned, that plan much of they be they that most really understanding the to In flexible more so further I need of the part and that things that have to people obvious think contractual Ts windows we've I on further nature, far an seen ahead. is that thing on and and intake market. Cs as and are the the adult operating behavior mean

in we're very positively address supply those our focused like concerns operating of kinds nature. But focused protecting protecting currency war things for have margins. country-specific of to costs, against customer controls ask that us, for issues. on certainly in things to and And We're potential and very you the inflation changes chain on and changes with the

a bit more contractual through expand of little than We're that hope far that a other we from sight some the the has to not be time looking players. And It's us that's proven moment commercial in part on that that direct time. asks. of We're will separate exists losing a for bargain. to important

the for on you much completing right. your Thank acquisition. so All again, comments. And, all congratulations

very Thanks day. Fredrik. Have much, a great

Financial. Hamed Khorsand, BWS

Hi.

in behind next And monetize So it them profile had there Seadrill way, of if plan see the you're or assets some to gained any question you've years? strategy I from will looking in the three fit as does Aquadrill? first larger is the any the was, what any you

at Yes, the Hamed. moment. the Absolutely. active Fleet the discussion compositions group from Board management within and

reduced that be are So you as a three we of the assets acquiring to the consider recently well. of rigs. number tender rigs sort in space jackup to what aren't assist Through the we've exposure point our rightly out, Aquadrill I as core time of form through here,

We next as well. through dates. on that three to have years and And with have stacked staggered units expiration a couple for of JV contract are still the unit go leased we

go ultra-deepwater So basically no our I harsh But original our through been on and assets think in to a shift also we in those the to that to either forward, you as see rush fleet. that can we're are units increasingly, us sell have part have environment the space. focus come a of focused or acquisition

divest to to are going frankly. the only us We're if terms attractive

both to then well. So more we've profile. got be looking we're that at nice opportunities for expansion for But at there, of as opportunities make going to looking clean metric the up we're fleet kind also consistent, to

assets somebody in our one-off where available might not in a sense So make and we'll look be continue basis else's. they around fleet to might or that for on

We space there. have a across lot of the active discussions

say, financial looking will wide-ranging discipline shall and we're and on But around to across constant profile achieve we going outcome. achieving a time we it that have some yes, that take So, less the fleet surveillance forward. transact how more, a to

contracts Aquadrill question develop that that my How other in the you've as the synergies portion moving synergies has? away those you of that biggest from coming And highlighted Okay. was from could those fast management the past. regarding

-- space. relation think knows, MSAs. to right. only that think about The I talked of annually. majority of as group small we've Aquadrill, everyone a $XX in office Look, almost vast I has small the with that's million So Yes, is employees

is $XX million the the are rest related. G&A synergies So that then MSA so or of And $XX million. approximately

managers in existing those expire, with contracts they two year. And take Those the over. realized. MSAs will by be next the some the current next than year continue and slightly more But we'll is are within then cases in time the years' that and case fully until generally a base

Okay. Thank you.

Capital. Instructions] Hummingbird [Operator Matt Polyak,

time. Thanks afternoon, for much taking Hey, good guys. so the

Just to kind go linear wanted the here. of path down logic

obviously, peers of to market talk your the returns and deal the like and you a assets debt puts just secondary and allocating here. is some there close have mind, takes wouldn't that risk capital versus post come the potentially shareholder seems window weigh here? perceived to there's about open stranded you If of Could against sort of that

Yes.

Matt, Okay. maybe let start I off, color. some can then and Grant

the Look, I that days. at a we think the is going we're from contracted key and don't of on understand operating thing us to distract that massively is have delivering to lot [eyeing] fully present, sidelines

committed stage do do trying them -- to point the to obtain at can at that some if there's kind we're look optional it assets. to some for future, sense what is, in foreseeable some or or makes as take to access be if the at to we sector really those any new or not you on So sense makes going building basis, view of new you it stage, the

in there's are not if too stack waiting in bit to to to fully a back XX the think And a market aggressive work. months, the next that come much has case room XX little you're clearly at terms of that having that the say contracted we way looking of forward which capacity last for there's more the months, I the residual behavior end developed spectrum, the no think I

how like in that that's near on a future more look approach. kind your about answer little what might it is might much Does the it very looking think So interesting sporty backwards we a today, Matt? look of bit question, was

pretty was returns not capital guess alluded on buybacks versus or because kind spend well to room there's I guys about you takes dividends obviously both to returns as of and thoughts asking and stranded of really or for shareholder I puts and around shareholder assets heavily. the whether utilizing

room for we look, there's both. think Yes. Well,

promulgating I our proposition value. that to really think around far the an need do there's we're on us grow you'll think that this capital some looking essential firm Board going might selective with year. we get In there of to basis this so going basis, is communicated the We're to market, of the not going we be to the what first. capital to I a wholesale relates Aquadrill pretty we not casing on loudly understands return, part it but in be good where to a to that on we way opportunistic as just think now. we've do out get end the positions And see as conjunction of integration towards able we're

it. you. Got Thank