Seadrill Q2 2026 Earnings Call Summary

1Key Financial Results and Metrics

Total Operating Revenues:: $449 million

Adjusted EBITDA:: $144 million, a sequential increase of $47 million from the previous quarter.

EBITDA Margin:: 33.5% (excluding reimbursables).

Free Cash Flow:: Expected to be meaningful in the second half of 2026.

Cash Position:: Ended the quarter with $360 million in cash, up $31 million from the prior quarter.

Share Repurchase:: $20 million worth of shares repurchased in June; remaining authorization of $208 million extended through the end of the year.

2Strategic Updates and Business Highlights

Operational Performance:: Achieved economic utilization of 96%. Successful reacceptance of the West Tellus rig, which is now generating revenue at higher rates.

Contracting Success:: Added approximately $200 million in backlog since the last earnings call, including a 12-month contract for the West Vela valued at about $161 million.

Market Outlook:: Positive trends in offshore drilling, with expectations for drillship utilization to reach mid-90% by 2027. Increased offshore investment and exploration activity noted.

Regional Strengths:: Strong positioning in the U.S. Gulf, Brazil, and Southeast Asia, with ongoing discussions for future contracts in these regions.

3Forward Guidance and Outlook

Updated Full-Year Guidance::

Operating Revenues:: Expected to be between $1.5 billion and $1.55 billion (excluding $50 million in reimbursable revenues).

EBITDA:: Anticipated to be between $420 million and $450 million.

Capital Expenditure Guidance:: Maintained at $200 million to $240 million.

Future Cash Flow:: Expected to strengthen in the second half of 2026, aided by new contracts and the collection of mobilization fees.

4Bad News, Challenges, or Points of Concern

Limited Visibility for 2026:: While the second half is expected to improve, there is less visibility for the Sevan Louisiana rig's utilization for the remainder of the year.

Increased Operating Expenses:: Operating expenses rose to $377 million, up $43 million from the prior quarter, primarily due to the return of rigs to operations.

Potential Headwinds:: Repairs and maintenance expenses expected to be higher in the latter half of the year, which could impact cash flow.

5Notable Q&A Insights

Share Buybacks:: Management is focused on maximizing free cash flow before determining the pace of buybacks. The decision will depend on cash position and market conditions.

Guidance Surprises:: Better-than-expected operational execution and longer-than-anticipated rig activity contributed to the upward revision of guidance.

Customer Behavior:: No significant changes in customer behavior noted yet, although there are indications of increased spending as clients prepare for budgeting season.

Rig-Specific Opportunities:: The Sevan Louisiana is expected to see continued short-term contracts, with potential longer-term opportunities emerging in 2027.

Supply Chain and Inflation:: Some inflation observed in labor and material costs, but Seadrill is working to pass these costs onto clients through contract terms. Overall, Seadrill's Q2 2026 results reflect strong operational performance and a positive outlook for the offshore drilling market, despite some challenges related to visibility and rising expenses.