Seadrill Limited — Third Quarter 2021 Market Update
Filing: Form 6-K filed November 29, 2021, covering the third quarter ended September 30, 2021. Seadrill is an offshore drilling contractor with 37 owned or operated rigs.
Business Context and Backlog
- Seadrill signed contracts contributing $145 million to backlog during the quarter.
- Total backlog was $2.1 billion as of September 30, 2021.
- Key awards included contracts for West Gemini, West Neptune, West Hercules and West Tellus across Angola, the U.S. Gulf of Mexico, Canada and Norway.
- Post-period awards added more than $0.5 billion to backlog, including two three-year fixed-term Petrobras contracts for West Carina and West Tellus in Brazil with total contract value of $549 million.
Financial Position and Restructuring
- On October 26, 2021, the U.S. Bankruptcy Court approved Seadrill’s Plan of Reorganization.
- The plan provides $350 million of new financing and reduces liabilities by $4.9 billion, to approximately $0.7 billion.
- Customer, trade and employee claims are expected to remain unaffected.
- Existing shareholders are expected to retain 0.25% of the post-emergence entity.
- Completion of the reorganization was expected in early 2022.
- The filing does not provide quarterly revenue, profit, operating cash flow, margin, cash balance, or detailed debt and liquidity metrics.
Material Changes Versus the Prior Comparable Period
- The filing is a market update and does not present comparative income statement or cash flow information.
- The most material developments were continued backlog additions and progress toward emergence from Chapter 11.
- On November 17, 2021, Seadrill announced a new independent seven-member board for the successor company, including Julie Johnson Robertson as chair and Mark McCollum as chair of the Audit and Risk Committee.
Outlook, Commentary and Risks
- Management stated that offshore drilling market conditions were improving but that further asset rationalization and industry consolidation were needed.
- Several contract commencements were scheduled from late 2021 through September 2022, including West Gemini, Sevan Louisiana, West Hercules, West Carina and West Tellus.
- Completion of the restructuring, execution of the new financing, and contract commencements remain subject to applicable conditions and timing.
- Forward-looking statements are subject to risks involving market conditions, restructuring efforts, business trends, customer activity and other factors that could cause actual results to differ materially.
Key Facts for Investors to Verify
- Whether the Chapter 11 plan emerged on schedule and on the stated financing and liability-reduction terms.
- The final post-reorganization ownership dilution and capitalization.
- Actual backlog conversion, utilization, day rates and contract commencement dates.
- Cash balances, liquidity requirements, debt obligations and quarterly operating performance, which are not provided in this filing.
- Execution and economics of the $549 million Petrobras contracts and other post-period backlog awards.