Seadrill Limited — 2022 Form 20-F
Reporting period: Fiscal year ended December 31, 2022; this is an annual report, not a standalone fourth-quarter filing. Seadrill emerged from Chapter 11 on February 22, 2022 and adopted fresh-start accounting. Accordingly, the 2022 financial statements are split between Predecessor (January 1–February 22) and Successor (February 23–December 31) periods and are not directly comparable with each other or prior years.
Business context and key financial metrics
Seadrill provides offshore drilling services worldwide, primarily on a dayrate basis. At year-end it owned 14 rigs and managed seven third-party rigs. It sold seven Saudi Arabian jackups in October 2022, returned two leased rigs to SFL, and reactivated the West Carina and West Jupiter, which began Brazil operations in November and December.
| Metric | 2022 filing data | Comparable context |
|---|---|---|
| Operating revenue | $843 million Successor; $169 million Predecessor | $907 million in 2021. The two 2022 periods sum to $1.012 billion, but restructuring, fresh-start accounting and discontinued-operation classifications limit comparisons. |
| Operating profit/(loss) | $35 million Successor; $37 million Predecessor | 2021 loss of $156 million. Successor operating margin was approximately 4%. |
| Net income/(loss) | $201 million Successor; $3.706 billion Predecessor | Predecessor earnings principally reflect a $3.683 billion net reorganization gain. Successor continuing operations lost $73 million; discontinued operations contributed $274 million, including the jackup-sale gain. |
| Operating cash flow | $65 million Successor; $(56) million Predecessor | $(154) million in 2021. |
| Investing and financing cash flow | Successor: $473 million provided by investing; $448 million used in financing | Investing inflows primarily reflected the Saudi jackup sale; financing outflows principally reflected debt repayments. |
| Cash and liquidity at year-end | $598 million cash and restricted cash, including $480 million unrestricted; $125 million undrawn revolving facility; $723 million total available liquidity | Restricted cash was $118 million. |
| Debt at year-end | $496 million principal; $518 million carrying value including $22 million exit fees | Included $175 million first-lien term debt, $271 million second-lien debt and a $50 million convertible bond. The $125 million revolver was undrawn. |
| Capital spending | $214 million Successor | Primarily rig additions/reactivations and long-term maintenance. |
Material changes and outlook
- Restructuring: Chapter 11 emergence reduced external debt obligations substantially and raised $350 million of additional liquidity. The predecessor’s equity was cancelled and replaced with 49,999,998 successor shares.
- Asset sales and debt reduction: The Saudi jackup sale generated $670 million of consideration received by year-end, $659 million net proceeds and a reported $276 million discontinued-operations gain. Seadrill repaid $442 million of second-lien principal during 2022; it disclosed additional $150 million principal prepayments after year-end.
- Backlog: The detailed table reports $2.315 billion at December 31, 2022, including management-contract and bareboat lease revenue, with $1.026 billion scheduled for 2023. Elsewhere the filing describes backlog as approximately $1.9 billion; the definitions differ, so figures should be reconciled. Backlog is not guaranteed revenue and may be reduced by downtime, lower applicable rates, customer issues or termination.
- Market commentary: Management described an offshore-market recovery and rising utilization/dayrates, particularly for drillships, while noting uncertainty from recession concerns, inflation and supply-chain constraints. The filing gives no quantified company earnings or revenue guidance.
- Debt and liquidity risks: Second-lien debt carries a 12.5% margin over SOFR, comprising cash and pay-if-you-can interest; covenant requirements include minimum liquidity and, after September 30, 2023, leverage tests. The company stated that cash, revolver availability and expected revenues should fund obligations for at least the next 12 months.
- Subsequent events: The Aquadrill merger closed April 3, 2023. Seadrill issued approximately 29.9 million shares, about 37% of post-merger shares, for four drillships, one semi-submersible and three tender-assist rigs. Purchase accounting fair values and any goodwill or bargain gain were not yet finalized when the report was issued.
Risks, contingencies and unusual items
- Customer concentration is significant: the five largest customers accounted for approximately 67% of 2022 revenue. A large portion of revenue also depends on related-party and joint-venture activity.
- Major risks include volatile oil prices and offshore drilling demand, contract cancellations or renegotiations, rig downtime/reactivation cost overruns, inflation, supplier constraints, cyber incidents, skilled-labor availability, environmental regulation and climate-related changes.
- Two post-year-end claims were disclosed: SFL sought approximately $28 million relating to West Hercules redelivery, and an individual sought approximately $72 million relating to arranging the Sonadrill joint venture. Seadrill intends to defend both and could not estimate any loss range.
- Tax authorities have asserted assessments, including approximately $171 million in Nigeria, $114 million in Brazil, $82 million in Mexico, $15 million in Norway and $12 million in Kuwait; these amounts include stated interest and/or penalties where specified. Seadrill contests the assessments. The year-end unrecognized tax benefit was $85 million, excluding interest and penalties.
- The sale of the Saudi business included indemnities and warranties; final consideration and the gain remained subject to adjustments. The company also disclosed a $36 million fair value estimate for sale-related indemnities and warranties in its gain calculation.
- No 2022 impairment charge was recorded for drilling units. The filing highlights that rig values and impairment assessments depend on estimates of utilization, dayrates, costs and contract probabilities.
Investor facts to verify
- Reconcile the $2.315 billion detailed backlog with the separate approximately $1.9 billion disclosure, including the treatment of management and lease revenues.
- Assess normalized operating earnings and cash generation separately from the large bankruptcy-related gain and the Saudi asset-sale gain; do not treat the split 2022 reporting periods as directly comparable.
- Confirm debt balances and cash available after disclosed 2023 prepayments, and review interest costs, minimum-liquidity requirements and leverage-covenant compliance.
- Track the outcome and potential financial exposure of the SFL, Sonadrill-fee and tax matters, plus final Saudi sale adjustments and indemnities.
- Evaluate the Aquadrill merger’s final purchase-price allocation, integration, share dilution and contribution to backlog and cash flow.
Audit and controls: PwC issued an unqualified opinion on the Successor 2022 financial statements and concluded internal control over financial reporting was effective as of December 31, 2022.