Strong start for Seadrill in 2023 with almost fully employed rig fleet

Offshore drilling contractor Seadrill has managed to enhance its operational and financial performance in the first quarter of 2023. With the offshore drilling upcycle in full swing, the Bermuda-headquartered rig owner believes it is well-positioned to take advantage of the improvements in the market, aided by its recent acquisition of Aquadrill.

As the tightening of the offshore drilling market brings further growth opportunities to the surface, all rig owners are envisioning higher feet utilisation and day rates in the future, as confirmed by Seadrill’s rivals: Borr Drilling, Shelf Drilling, Diamond Offshore, Noble, Transocean, Valaris,  Vantage Drilling, and Dolphin Drilling.

With new growth opportunities at its fingertips thanks to the comeback of the oil and gas boom to tackle energy security concerns, Seadrill added approximately $39 million of order backlog during 1Q 2023, bringing the total to approximately $2.2 billion. This addition is related to the West Neptune drillship securing a three-month extension with LLOG Exploration Offshore (LLOG) in the U.S. Gulf of Mexico in direct continuation of the existing term.

The company’s total adjusted EBITDA was $85 million in 1Q 2023, a significant increase compared to $39 million in 4Q 2022, primarily due to higher operating days overall across the fleet, including the firm’s four drillships operating offshore Brazil, and the West Neptune rig working at a higher day rate with  LLOG.

Seadrill’s total operating revenues increased by 17 per cent in 1Q 2023 to $266 million, compared to $228 million in 4Q 2022. As a result, the firm claims that it recorded a strong operational performance with technical utilisation of 96 per cent.

Simon Johnson, President & CEO of Seadrill, commented: “Seadrill has started 2023 strongly, with a near-fully utilised fleet and the closing of our Aquadrill acquisition in April. We are pleased with our operational and financial performance as we move through the year, with our technical utilisation at 96 per cent and our operating revenues and adjusted EBITDA substantially increasing quarter-on-quarter..”

Furthermore, Seadrill made a voluntary payment of $118 million – inclusive of principal, accrued interest and exit fee – under its secured second lien debt facility in February 2023 and made a further voluntary payment of $44 million in March 2023.

However, February provided to be a busy month for Seadrill, as the company also completed the sale of its 35 per cent shareholding in Paratus Energy Services (PES), formerly Seadrill New Finance, and certain other interests for total consideration of $44 million. In connection with this sale, the company issued PES and SeaMex with a termination notice in respect of the master service agreements under which it provides management services. The terminations will take effect from 12 July 2023, and 10 September  2023, respectively.

On the other hand, the all-stock acquisition of Aquadrill was completed in April 2023, at which point the latter became a wholly-owned subsidiary of Seadrill. Thanks to this acquisition, the rig owner added $470 million in order backlog. 

Moreover, Gulfdrill LLC, a 50:50 joint venture between Seadrill and Gulf Drilling International, was awarded contract extensions by an undisclosed operator for three jack-up rigs working in Qatar. In line with this, the West Castor jack-up rig, which is bareboat chartered to Gulfdrill by Seadrill, received a contract extension, together with the two jack-up rigs that are bareboat chartered to Gulfdrill by a third-party shipyard.

Seadrill outlines that the total contract value of the three extensions is approximately $343 million and the rigs will be kept busy until 2026. According to the company, the bareboat charter rates payable in connection with the associated extension periods represent a significant increase relative to the existing rates. Seadrill’s order backlog as of 23 May 2023 is $2.6 billion.

“We have a confident posture and remain constructive about this developing upcycle. Seadrill has an enhanced fleet following our acquisition of Aquadrill, which cemented our position as a key player in the offshore drilling sector, and we are highly focused on maximising the value that it can generate for our shareholders,” concluded Johnson.