Founder, BWS Financial Inc

Hamed Khorsand

Founder

Independent Stock Specific Research

BWS Financial Inc

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Equity Bottom-Up

<ul>
<li>SDRL enters the second quarter with drill ships undergoing special surveys and day rates slowly creeping higher. </li>
<li>The drill ship market has experienced an increase in day rates on the expectation stacked ships eventually become available. We do not believe this will ever be the case</li>
<li>We are leaving our 2024 earnings model unchanged and raising our 2025 adjusted EBITDA outlook to $677 million from $615 million</li>
</ul>


SDRL enters the second quarter with drill ships undergoing special surveys and day rates slowly creeping higher. 
The drill ship market has experienced an increase in day rates on the expectation stacked ships eventually become available. We do not believe this will ever be the case
We are leaving our 2024 earnings model unchanged and raising our 2025 adjusted EBITDA outlook to $677 million from $615 million


<ul>
<li>SDRL ended 2023 with in line results as the Company readies for a year filled with maintenance. The commentary surrounding market conditions has not changed greatly since third quarter results.</li>
<li>There is still a lack of new supply but being able to match available supply to operators’ demand calendar has become challenging</li>
<li>SDRL reported fourth quarter 2023 revenue of $408 million and operating income of $52 million, which were both in line with our estimate.</li>
</ul>


SDRL ended 2023 with in line results as the Company readies for a year filled with maintenance. The commentary surrounding market conditions has not changed greatly since third quarter results.
There is still a lack of new supply but being able to match available supply to operators’ demand calendar has become challenging
SDRL reported fourth quarter 2023 revenue of $408 million and operating income of $52 million, which were both in line with our estimate.


<ul>
<li>SDRL reported third quarter results exceeding expectations and announcing slight extensions to when near-term contracts would expire.</li>
<li>There had been minimal news from SDRL to expect contract extensions. SDRL’s peers had been reporting a slowing in contract activity.</li>
<li>The free cash flow SDRL is generating is being used for stock buy backs with the authorization doubled to a total of $500 million.</li>
</ul>


SDRL reported third quarter results exceeding expectations and announcing slight extensions to when near-term contracts would expire.
There had been minimal news from SDRL to expect contract extensions. SDRL’s peers had been reporting a slowing in contract activity.
The free cash flow SDRL is generating is being used for stock buy backs with the authorization doubled to a total of $500 million.


<ul>
<li>There has been little change in day rates since Seadrill (SDRL) reported second quarter results with the Company having two vessels with contracts expiring next month</li>
<li>The only news flow since SDRL reported second quarter results has been about the Company regularly buying back stock</li>
<li>The two vessels with contracts expiring are currently in different geographies</li>
</ul>


There has been little change in day rates since Seadrill (SDRL) reported second quarter results with the Company having two vessels with contracts expiring next month
The only news flow since SDRL reported second quarter results has been about the Company regularly buying back stock
The two vessels with contracts expiring are currently in different geographies


<ul>
<li>SDRL reporting second quarter results provided greater insight on the contribution of Aquadrill to SDRL’s financials and sets the course for how the business could benefit from current day rates</li>
<li>SDRL has two drill ships set for contract expiration at year end and another two more vessels expected off contract by end of 2024, not including those with contract options</li>
<li>Our new price target of $62 from $50 values SDRL in line with its peers even though SDRL is not levered</li>
</ul>


SDRL reporting second quarter results provided greater insight on the contribution of Aquadrill to SDRL’s financials and sets the course for how the business could benefit from current day rates
SDRL has two drill ships set for contract expiration at year end and another two more vessels expected off contract by end of 2024, not including those with contract options
Our new price target of $62 from $50 values SDRL in line with its peers even though SDRL is not levered


United Kingdom

Seadrill Ltd. provides offshore deepwater drilling. The Company operates a fleet for operations in shallow to ultra-deepwater areas in harsh and benign environments. Seadrill's fleet includes semi-submersible rigs, deepwater drillships, jack-ups, semi-tender rigs, and tender rigs.

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Seadrill Ltd (SDRL NO)

SDRL: Tighter Outlook, PT to $80

Our price target is now $80 from $62 to reflect our 2025 adjusted EBITDA outlook. We are basing our forecast on tighter supply expecting drill...

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SDRL: Navigating Thru Maintenance

SDRL has several vessels undergoing maintenance this year before their next contracts eroding the possibility of adjusted EBITDA growth. We do not...

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SDRL: Attractive Value, PT to $62

Day rates continue to support our investment thesis for adjusted EBITDA rising in 2024 and more so in 2025. SDRL has an unlevered balance sheet...

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