Seadrill Limited — Form 6-K Summary
Filing date: April 5, 2023. The filing reports fourth-quarter 2022 results for the three months ended December 31, 2022, and includes unaudited 2022 financial statements. Seadrill is an offshore drilling company listed on the NYSE and Oslo Stock Exchange. Because Seadrill emerged from restructuring in February 2022, certain annual comparisons are between successor and predecessor periods and may not be directly comparable.
Financial and Operating Highlights
| Metric | Q4 2022 | Q3 2022 | Change |
|---|---|---|---|
| Total operating revenue | $228 million | $269 million | Down 15% |
| Adjusted EBITDA, continuing operations | $39 million | $57 million | Down 32% |
| Adjusted EBITDA margin, continuing operations | 17.1% | 21.2% | Down 4.1 percentage points |
| Total Adjusted EBITDA | $41 million | $71 million | Down 42% |
| Operating loss | $7 million | $20 million profit | Declined $27 million |
| Net profit, continuing and discontinued operations | $249 million | $16 million loss | Benefited from disposal gain |
Adjusted EBITDA is a non-GAAP measure. The company reported full-year 2022 Total Adjusted EBITDA of $265 million, at the top end of its 2022 guidance range.
- Operating cash flow was $76 million, compared with cash used of $32 million in Q3.
- Investing cash flow was $627 million, primarily reflecting $659 million of net proceeds from the Jackup Sale and lower capital expenditure outflows.
- Financing cash flow was negative $464 million, primarily due to mandatory and voluntary Second Lien Facility repayments.
- Cash and cash equivalents increased to $480 million at December 31, 2022, from $224 million at September 30. Restricted cash was $118 million, producing total cash including restricted cash of $598 million.
- Total assets were $2.801 billion and total equity was $1.702 billion at year-end. Non-current liabilities declined to $695 million from $1.111 billion, mainly because of debt repayments.
- Reported debt included $22 million due within one year and $496 million of long-term debt. The filing does not provide a single consolidated gross-debt figure beyond these balance-sheet classifications.
- Technical utilization was 95% and economic utilization was 91% for the owned fleet. The owned fleet comprised 11 operating units, one future-contracted unit, two idle units, and two cold-stacked units.
Material Changes Versus the Prior Comparable Period
- Revenue and profitability declined sequentially because of fewer rig operating days, West Tellus upgrade downtime, West Hercules demobilization, and the absence of a full quarter of results from rigs sold in the Jackup Sale.
- Results were partly supported by new contracts for West Carina, West Jupiter, and West Saturn in Brazil, as well as a one-time inventory sale.
- Net income was substantially affected by a $272 million income contribution from discontinued operations, primarily an accounting gain on the sale of the KSA Business. Continuing operations generated a $23 million loss in Q4.
- Seadrill completed the sale of seven Saudi Arabian jackup-rig entities on October 18, 2022. The transaction generated approximately $659 million of net proceeds and triggered a $204 million mandatory Second Lien Facility payment. Seadrill also made a $269 million voluntary payment in November.
- Order Backlog increased by approximately $187 million during Q4 and stood at approximately $2.3 billion at December 31, 2022. It increased to approximately $2.6 billion for the combined company by April 5, 2023.
- Seadrill completed the all-stock acquisition of Aquadrill LLC on April 3, 2023. Aquadrill became a wholly owned subsidiary, creating a combined fleet of 29 owned and managed units.
Outlook, Commentary, Risks and Unusual Items
Management expressed optimism about offshore drilling fundamentals, citing increasing exploration and production spending, limited rig supply, improving ultra-deepwater utilization and day rates, and expected demand exceeding supply during 2023 and 2024. Management identified Brazil and West Africa as important areas of expected activity and stated that the expanded fleet following the Aquadrill acquisition positions Seadrill for additional opportunities.
- Seadrill made additional Second Lien Facility payments of $118 million on February 10, 2023, and $44 million on March 15, 2023.
- Seadrill completed the sale of its 35% interest in Paratus Energy Services Limited on February 24, 2023. The company did not expect a material accounting gain or loss on closing and will cease providing related management services during 2023.
- Restricted cash included $74 million collateral for a Brazilian tax case, $23 million in escrow, and $10 million supporting performance bonds and similar guarantees.
- Management’s outlook is subject to offshore drilling demand, day rates, customer programs, contract awards, rig mobilization and performance, maintenance and shipyard costs, liquidity, financing access, debt covenants, oil prices, inflation, interest and foreign-exchange rates, regulatory and tax matters, litigation, geopolitical developments, cybersecurity, climate regulation, and successful integration of Aquadrill.
- The filing identifies potential exposure under indemnities provided in connection with the Jackup Sale, but does not provide a clear quantified amount.
- Cold-stacked West Eclipse and West Prospero were being marketed, with reactivation dependent on securing suitable work and achieving acceptable investment returns.
Investor Verification Points
- Verify the post-Aquadrill pro forma fleet, backlog, revenue contribution, integration costs, and ownership dilution from the all-stock acquisition.
- Reconcile continuing-operations results with Total Adjusted EBITDA and confirm the appropriate treatment of discontinued KSA operations and other non-GAAP adjustments.
- Confirm the outstanding Second Lien Facility balance, repayment schedule, interest costs, covenants, and liquidity after the February and March 2023 repayments.
- Assess the sustainability of operating cash flow excluding Jackup Sale proceeds, deferred revenue inflows, demobilization collections, and other working-capital effects.
- Review the $74 million Brazilian tax-case collateral and any indemnity or contingent liabilities arising from the Jackup Sale.
- Evaluate backlog quality, contract duration, day-rate exposure, customer concentration, and the risk of cancellations or delayed mobilizations.
- Confirm the effect of terminating the Paratus and SeaMex management service agreements on future management-contract revenue.