Seadrill NYSE: SDRL raised its full-year 2026 revenue and EBITDA outlook after reporting second-quarter results that President and Chief Executive Officer Samir Ali said exceeded expectations, supported by higher operating activity, improved day rates and execution on major rig projects.
The offshore drilling contractor reported second-quarter operating revenue of $449 million and adjusted EBITDA of $144 million. Economic utilization was 96% during the quarter, while EBITDA margin excluding reimbursable revenue was 33.5%.
Ali said the company’s performance supported its second increase to full-year guidance this year. Seadrill now expects 2026 operating revenue of $1.5 billion to $1.55 billion, excluding $50 million of reimbursable revenue, and EBITDA of $420 million to $450 million. The company maintained capital expenditure guidance of $200 million to $240 million.
Higher-Day-Rate Contracts Support Results
Executive Vice President and Chief Financial Officer Grant Creed said the sequential revenue improvement reflected more operating days and a rising average day rate. The West Capella in Malaysia and West Jupiter in Brazil contributed full quarters of revenue after beginning new programs late in the first quarter, while increased activity from the Sevan Louisiana in the U.S. Gulf also supported results.
The West Tellus had fewer operating days during the quarter as it underwent planned reacceptance testing before starting its Brazil contract late in the quarter. Ali said the reacceptance was completed on schedule and on budget, with the rig operating since mid-June.
Creed said the West Jupiter and West Tellus have now begun contracts at materially higher day rates than their prior agreements. Together, the two rigs represent a revenue increase of roughly $400,000 per day compared with their legacy contracts.
Operating expenses were $377 million in the second quarter, up $43 million from the prior quarter, primarily because the West Capella and West Jupiter returned to operations for the full quarter. Seadrill also reported higher management-contract revenue from its Sonadrill joint venture after an increase in daily management fees was applied retroactively to Jan. 1.
Backlog Grows With U.S. Gulf and Malaysia Awards
Since its May earnings call, Seadrill added about $200 million of backlog through new contracts and extensions involving three rigs in the U.S. Gulf and Malaysia.
- The West Vela secured a 12-month direct-continuation contract with Talos beginning in June 2027. The award adds about $161 million of backlog, excluding additional services.
- Harbour and LLOG extended the West Neptune and selected the West Vela for a 270-day campaign beginning later in 2026.
- The Sevan Louisiana was contracted by Harbour for a short campaign at the end of July after completing work for Walter Oil & Gas, Guardian and LLOG.
- In Malaysia, a customer exercised a priced option of about 75 days for the West Capella, extending operations into the second half of 2027.
Ali said the West Vela contract brought Seadrill’s year-to-date backlog additions in the U.S. Gulf to nearly $500 million. The West Neptune is contracted into late 2027, while the Sevan Louisiana has less visibility for the rest of 2026 despite working steadily during the first half of the year.
During the question-and-answer session, Creed said Seadrill was not assuming additional second-half work for the Sevan Louisiana in its outlook. However, Vice President Commercial Jacob Taylor said the company is in positive discussions regarding campaigns that could begin late this year, as well as longer-term prospects that could mature in the second and third quarters of 2027.
Cash Flow Outlook and Share Repurchases
Seadrill ended the quarter with $360 million in cash, up $31 million from the prior quarter. The company completed a refinancing in June, issuing $700 million of 6.75% senior notes due 2034 and using a portion of the proceeds to redeem $575 million of 8.375% senior secured second-lien notes due 2030. It also expanded its revolving credit facility to $300 million from $225 million and extended the facility’s maturity to 2031.
Creed said cash generation is expected to improve in the second half as major project-related spending declines and the company receives contributions from the West Capella, West Jupiter and West Tellus contracts. Seadrill expects to collect a $40 million mobilization payment from Petrobras for the West Tellus in the third quarter.
The company repurchased $20 million of shares during the final week of June after its board extended the remaining $208 million authorization under its buyback program through the end of 2026. Creed said the timing and scale of any further repurchases will be determined based on the company’s cash position, expected cash generation and alternative capital-allocation opportunities.
Management Sees Tighter Deepwater Market in 2027
Ali said Seadrill expects the tender pipeline to result in a materially tighter drillship market in 2027, with utilization potentially reaching the mid-90% range if tenders convert into awards. He cited rising offshore investment, exploration activity and limited availability of high-specification floaters as support for the company’s outlook.
In Brazil, Seadrill said 25 drillships are currently contracted, with only three expected to become available before the end of 2027 if options on certain rigs are exercised. The West Carina completed its Brazil contract at the end of June and has been mobilized to Walvis Bay, Namibia, where Seadrill believes it can pursue opportunities in both West Africa and Southeast Asia. Taylor said the company expects potential awards for the rig within the next one or two quarters, with most identified campaigns beginning in the first half of 2027.
In West Africa, the Sonadrill joint venture’s three rigs delivered technical uptime above 99% in the second quarter, according to Ali. The West Gemini is due to roll off contract later this year and is being marketed in Angola and elsewhere in West Africa.
Ali also said Seadrill sees growing opportunities in Southeast Asia, where the West Capella is positioned to benefit from limited drillship availability. The company said it continues to prioritize direct-continuation work, minimizing idle periods between contracts and assessing the total economics of contracts rather than day rates alone.
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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