Seadrill Limited — 2021 Form 20-F
Reporting period: Fiscal year ended December 31, 2021. This is an annual report, not a standalone Q4 filing; the text does not provide clear quarterly financial results. The 2021 statements are predecessor-period U.S. GAAP results. Seadrill emerged from Chapter 11 on February 22, 2022, after year-end; fresh start accounting means post-emergence results will not be directly comparable.
Business context and financial performance
Seadrill provides offshore drilling services worldwide, principally on a dayrate basis. At year-end it owned 24 rigs, leased three, and managed nine. The filing reports continuing operations separately from NSNCo and SeaMex, which were classified as held for sale and discontinued operations.
| Metric ($ millions, except per-share data) | 2021 | 2020 | Change |
|---|---|---|---|
| Operating revenue | 1,008 | 1,059 | Down 5% |
| Operating loss | (157) | (4,482) | Improved; 2020 included $4,087 impairment |
| Loss from continuing operations | (592) | (4,448) | Improved |
| Net loss, including discontinued operations | (587) | (4,663) | Improved |
| Basic loss per share | (5.85) | (46.43) | Improved |
| Operating cash flow | (154) | (420) | Lower cash outflow |
| Capital expenditure, including long-term maintenance | 93 | 148 | Down 37% |
Revenue was 1,008 million; the operating loss was about 15.6% of revenue. The filing does not provide a directly comparable EBITDA figure. Contract revenue rose to $764 million from $703 million, while management revenue fell to $177 million from $289 million, reflecting fewer or changed third-party management arrangements. Vessel and rig operating expenses increased to $676 million from $606 million, partly due to personnel and lease costs; depreciation fell to $155 million from $346 million following prior impairments.
At December 31, 2021, cash and cash equivalents were $312 million and restricted cash was $223 million. Total assets were $3.879 billion, including $1.103 billion of assets held for sale. External debt of $5.662 billion was classified as liabilities subject to compromise; the company also reported a $3.716 billion total deficit. These year-end balances predate the restructuring and should not be confused with post-emergence debt and liquidity.
Material changes and restructuring
- Offshore drilling revenue declined modestly, but the operating loss narrowed sharply from 2020, primarily because the prior-year impairment charge was much larger. Seadrill recorded a further $152 million impairment on West Hercules in 2021.
- Owned rigs declined from 31 to 24, primarily through the disposal program. Seven rigs were sold in 2021; additional rig sales followed in 2022.
- Year-end contract backlog was approximately $2.268 billion, versus $1.857 billion in 2020. It included $684 million expected in 2022. Subsequent amendments to the West Linus lease reduced backlog by $459 million.
- After year-end, the Chapter 11 restructuring reduced external credit-facility obligations from $5.662 billion to $683 million of reinstated debt, raised $350 million of additional liquidity, and substantially eliminated specified SFL lease obligations. Post-emergence total debt was $908 million: $683 million reinstated facility, $175 million drawn term loan, and $50 million convertible note.
- At emergence, Seadrill reported $486 million cash, of which $335 million was unrestricted, plus $125 million undrawn revolving credit capacity. Management stated these sources provided $460 million of liquidity and expected cash and operating revenues to fund debt service and working capital for the following 12 months.
Outlook, risks and unusual items
Management described improving offshore activity and utilization during 2021, with recovery uneven by rig type and region. It noted stronger drillship demand and dayrates in some markets, while benign jack-up dayrates remained constrained and harsh-environment utilization improvements could be challenging. The filing gives no formal earnings or revenue guidance.
- Key risks include cyclical oil and gas spending, rig oversupply, dayrate pressure, contract cancellations or renegotiations, downtime, and reliance on a concentrated customer base. The five largest customers accounted for approximately 60% of 2021 revenue.
- Operating cash flow remained negative. Restricted cash was not freely available for general use, and the year-end balance sheet reflected bankruptcy claims and substantial liabilities subject to compromise.
- Post-emergence financing carries material costs and restrictions: the reinstated facility bears 5% cash interest plus 7.5% pay-if-you-can interest over SOFR; the new-money facility bears a 7% margin over SOFR. Financial covenant flexibility, apart from minimum liquidity requirements, was stated to run through September 30, 2023, after which leverage covenants apply.
- Other material exposures include uncertain tax positions of $85 million, accrued tax interest and penalties of $19 million, and contested assessments disclosed in Brazil ($124 million), Nigeria ($171 million), Kuwait ($12 million), and Mexico ($95 million). These are disputed claims, not stated as probable losses.
- Seadrill had $550 million of customer performance guarantees for Northern Ocean and Sonadrill at year-end; it had not recognized liabilities because management did not consider a call probable. It also disclosed a $127 million guarantee relating to Seabras Sapura debt within discontinued operations.
- Unusual 2021 items included $310 million of net reorganization expense, $152 million of impairment, $47 million of gains on asset disposals, and $54 million of other operating income, including a $22 million war-insurance rebate and $27 million of pre-petition liability write-offs.
- Brazilian Lava Jato-related inquiries, various legal proceedings, COVID-related operational and supply-chain disruption, environmental regulation, sanctions, customer credit risk, and the transition from LIBOR were identified as risks. Management reported disclosure controls and internal control over financial reporting as effective at December 31, 2021; the auditor did not provide an internal-controls attestation.
Important facts for investors to verify
- Reconcile the 2021 predecessor results with post-emergence reporting and fresh start accounting, and review the final fair-value adjustments.
- Confirm actual post-emergence unrestricted liquidity, debt balances, interest payments, covenant headroom, and use of the revolving credit facility.
- Track backlog conversion, including the West Linus reduction, contract commencements, rig utilization, dayrates, and reactivation costs.
- Monitor outcomes and cash implications of the disclosed tax assessments, Lava Jato investigation, guarantees, and other contingencies.
- Assess whether operating cash flow turns positive and whether asset disposals and fleet changes support sustainable liquidity.