Seadrill Limited — First Quarter 2021 Update
Filing: Form 6-K filed May 20, 2021, covering the first-quarter 2021 update. Seadrill is a Bermuda-based offshore drilling contractor operating drillships, jack-ups and semi-submersibles globally.
Business and Operating Context
- Seadrill reported 13 rigs in operation across the Arabian Gulf, the Americas and Norway.
- The company stated that its fleet comprises 43 rigs in total and serves major oil and gas basins worldwide.
- Management characterized the contracting environment as supportive of a market recovery during 2021 and beyond.
Key Financial and Commercial Metrics
- Total backlog: $2.1 billion as of May 20, 2021.
- First-quarter contract additions: West Tellus contract with Shell Brazil contributed approximately $23 million of backlog; West Hercules options exercised by Equinor contributed approximately $34 million.
- Post-quarter-end backlog additions: $374 million, including approximately $354 million from West Saturn’s four-year firm contract with Equinor Brasil Energia.
- The filing does not provide first-quarter revenue, net income, operating cash flow, margins, cash balances, debt balances or liquidity measures.
Material Changes and Contract Activity
- West Tellus received a Shell Brazil contract covering two wells, intervention work and two optional wells, directly following its Petrobras contract.
- Equinor exercised options for West Hercules in Norway.
- West Saturn secured a four-year firm contract, with four one-year options, expected to commence in April 2022.
- West Neptune commenced a one-well firm contract with Talos in May 2021 and subsequently secured a one-well firm Kosmos contract in direct continuation.
- Petrobras notified Seadrill that West Tellus operations will conclude in September 2021, earlier than the previously expected December 2021 completion. The rig is expected to continue directly into the Shell Brazil work.
Restructuring, Outlook and Risks
- Seadrill stated that its financial restructuring was progressing through discussions with all relevant parties.
- Management expects the comprehensive restructuring plan to require a substantial impairment and losses for current shareholders.
- The company stated that existing shareholders are likely to receive minimal recovery for their shares.
- Forward-looking statements concerning restructuring, market recovery, contracts and operating prospects are subject to material risks, uncertainties and assumptions. The company undertook no obligation to update them.
Investor Verification Checklist
- Verify the final terms, timing and implementation of the financial restructuring, including the effect on existing equity holders and creditors.
- Verify the amount and timing of any restructuring-related impairment and losses.
- Confirm backlog conversion, commencement dates and options for the West Saturn, West Neptune, West Tellus and West Hercules contracts.
- Assess the impact of the earlier West Tellus Petrobras completion on utilization, revenue and cash flow.
- Review subsequent financial reporting for revenue, profitability, liquidity, debt maturities and operating cash flow, none of which are provided in this update.