Seadrill NYSE: SDRL reported first-quarter 2026 results that exceeded its expectations, citing early contract starts, strong operational execution and improved fleet utilization, while raising its full-year revenue and EBITDA guidance.
President and CEO Samir Ali said the company remains focused on “safe, efficient, and reliable operations,” free cash flow generation and capturing improved market opportunities as legacy contracts roll off. He said Seadrill completed both the West Tellus reacceptance and West Capella reactivation projects ahead of schedule and on budget, enabling earlier revenue generation.
“We delivered a solid quarter, both financially and operationally, with EBITDA of $97 million and strong economic utilization,” Ali said. He added that Seadrill remains “on track for meaningful free cash flow generation starting in the second half of 2026.”
First-quarter revenue rises as utilization improves
Executive Vice President and CFO Grant Creed said first-quarter contract drilling revenues were $277 million, up $4 million from the prior quarter. The increase was driven by more operating days and higher day rates for the West Vela, along with higher economic utilization across the fleet. Those gains offset fewer operating days for the West Jupiter and Sevan Louisiana.
Management contract revenues declined by $2 million to $63 million due to the timing of add-on services, while leasing revenues were flat at $8 million. Operating expenses were $334 million, down $10 million from the previous quarter, primarily due to the capitalization of West Jupiter mobilization costs, partially offset by costs tied to the West Capella contract preparation and start-up.
Adjusted EBITDA, referred to as EBITDA on the call, was $97 million, up $9 million sequentially.
Seadrill ended the quarter with total cash of $329 million. Creed said the company used $35 million of cash in the quarter, including $13 million of capital expenditures and $38 million of long-term maintenance recorded in operating activities. He said the cash position was affected by the West Capella reactivation, West Jupiter reacceptance testing and working capital timing.
Gross principal debt stood at $625 million at quarter-end, with maturities extending through 2030. Including available borrowing capacity under its revolving credit facility, Seadrill had total liquidity of $482 million.
Seadrill raises 2026 guidance
Creed said Seadrill is increasing its full-year 2026 guidance to reflect strong project execution, early starts for West Jupiter and West Capella, and additional operating days for West Carina, which is now expected to remain on contract through mid-June.
- Operating revenue guidance: $1.43 billion to $1.48 billion, excluding $50 million of reimbursable revenues.
- EBITDA guidance: $370 million to $420 million.
- Capital expenditure guidance: Maintained at $200 million to $240 million.
The EBITDA guidance includes a $26 million non-cash net expense related to amortization of mobilization costs and revenues, of which $7 million was recognized by the end of the first quarter.
Creed said Seadrill expects about $70 million in cash receipts over the next two quarters from lump-sum mobilization revenues from Petrobras tied to reimbursement for West Jupiter and West Tellus reacceptance projects. He said those receipts, along with incremental dayrate revenue from West Jupiter, West Capella and West Tellus, should mark an inflection point in Seadrill’s cash profile this year.
Backlog grows with new contracts in Gulf of Mexico, Angola and Brazil
Ali said Seadrill added approximately $860 million to backlog since its previous earnings call. In the U.S. Gulf, West Neptune and West Vela each secured new contracts with LLOG in April, adding about $260 million of backlog. Ali said the contracts reduce idle time in 2026 and improve revenue visibility for Seadrill’s two drillships in the region.
In Angola, the Sonangol Quenguela had a seven-well priced option exercised, committing the rig into mid-2028. In Brazil, West Polaris received a three-year extension with Petrobras in direct continuation of its current program. Ali said the extension requires no additional capital expenditures and does not involve the lengthy acceptance testing typical of Petrobras contracts.
Ali also said West Carina is now expected to remain on contract until mid-June. During the question-and-answer portion of the call, he said Seadrill is pursuing opportunities for the rig in Brazil, South America and other markets, but had nothing to announce.
Vice President, Commercial Jacob Taylor said Seadrill sees value in having West Carina available as the company looks toward 2027. “We like the idea of having the Carina available to us for playing the upside going into 2027, which we feel is gonna be a strong year,” Taylor said.
Management cites improving deepwater market
Ali said Seadrill sees a strong demand pipeline driven by deepwater exploration and renewed attention to energy security. He pointed to what he described as a shift among majors and large independents toward allocating incremental capital to deepwater, following a decade of exploration underinvestment and amid production declines.
He said demand in Brazil has crystallized with several multiyear extensions awarded, while the U.S. Gulf remains softer in 2026. Looking ahead, he said Seadrill expects available capacity to move across the Atlantic Basin toward the Eastern Hemisphere, where demand is strengthening.
In response to a question from Fredrik Stene of Clarksons Securities, Ali said Seadrill had already seen customers discussing investment in new regions and exploration before geopolitical developments this year. He said events involving Iran had added to commodity prices and reinforced energy security considerations.
Asked by Eddie Kim of Barclays about dayrates, Ali said Seadrill evaluates contracts based on free cash flow generation, not just headline pricing. Taylor said the industry has seen the strongest backlog cycle since 2012 over the past several months, with more than 71 years of contracted term awarded across the industry. He cited potential opportunities in Indonesia, Namibia, Nigeria, Suriname and the U.S. Gulf, with two- to three-year contracts expected to be awarded before the end of 2026.
Capital allocation and fleet strategy
On mergers and acquisitions, Ali said Seadrill is at “minimum efficient scale” and would consider transactions only if they are accretive and financially sensible. “Our job is to make sure we maximize shareholder return,” he said.
Asked by Keith Beckmann of Pickering Energy Partners about future cash deployment, Creed said management’s immediate priority is generating cash and that decisions about distribution would come later. He noted that Seadrill has demonstrated in the past that returning capital to shareholders is important.
Ali also addressed the possibility of reactivating stacked rigs. He said Seadrill has two harsh-environment semisubmersibles that are the most likely candidates, but the company would not fund reactivation from its own balance sheet. “A client will have to fund that reactivation,” he said.
Ali closed the call by reiterating Seadrill’s focus on safe operations, free cash flow and capturing market upside. He said the company’s first-quarter performance, recent backlog additions and higher guidance improve its visibility into stronger earnings and free cash flow in the second half of 2026 and into 2027.
About Seadrill NYSE: SDRL
Seadrill Limited, trading on the New York Stock Exchange under the symbol SDRL, is a leading provider of offshore drilling services to the global oil and gas industry. The company specializes in the design, construction, deployment and operation of mobile offshore drilling units, serving major exploration and production companies with turnkey drilling solutions.
Seadrill’s fleet comprises ultra-deepwater drillships, semi-submersible rigs and high-specification jack-up units capable of operating in some of the world’s most challenging offshore environments.
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