HAMILTON, Bermuda–(BUSINESS WIRE)–November 27, 2023 — Seadrill Limited (“Seadrill” or the “Company”) (NYSE & OSE: SDRL) today reported its third quarter 2023 results, which reflect strong performance across the fleet as the Company continues to deliver safe and efficient drilling operations around the globe.
President and Chief Executive Officer, Simon Johnson, commented, “We delivered another strong quarter for our stakeholders, and today we announce an increase in our full year 2023 Adjusted EBITDA guidance. We have secured an extension for the West Neptune with LLOG and been awarded a short-term campaign by QuarterNorth Energy for the West Vela. This will mark the return to Seadrill of the second of four drillships that we acquired earlier this year. We remain on track with synergy capture arising from the Aquadrill transaction.
“In September, we initiated our $250 million share repurchase program and have made excellent progress to date. In our view, the price level at which we have executed the buyback is highly accretive. Market fundamentals remain robust and our positive view on the length and durability of this upcycle is unchanged. With this in mind and considering our strong financial position, Seadrill’s board of directors has authorized a further $250 million in share repurchases, taking the aggregate to $500 million. This enables us to continue to return capital to our shareholders that cannot be allocated more efficiently within the business.”
The Company generated $414 million in total operating revenues in the third quarter of 2023, consistent with the prior quarter. During the quarter, the Company operated an average of 12 rigs(2) at an economic utilization of 93%, compared to an average of 13 rigs, working at an economic utilization of 93% in the second quarter of 2023. This activity translated into contract revenues of $324 million, a decrease of $5 million, or 2%, from the prior quarter, primarily due to planned out-of-service days on the West Phoenix and the Sevan Louisiana. In addition, the Company generated $68 million in management contract revenues, largely related to the rigs managed under its 50:50 joint venture with Sonangol E.P., and $22 million in reimbursable and other revenues.
The Company incurred $304 million in operating expenses, a decrease of $4 million, or 1%, from the prior quarter, primarily due to one-time merger and integration-related expenses in the prior quarter.
Adjusted EBITDA was $151 million for the third quarter, a decrease of $8 million, or 5%, from the prior quarter. Adjusted EBITDA Margin was 36.5% for the third quarter.
Net cash provided by operating activities totaled $112 million in the third quarter of 2023, compared to $20 million in the prior quarter which was adversely impacted by one-off working capital movements. Long-term maintenance costs of $33 million, included within operating activities, and $28 million of capital upgrades resulted in total capital expenditures of $61 million, as the Company incurred expenditures for upcoming special periodic surveys, including on associated long-lead items.
On September 12, 2023, the Company initiated a share repurchase program for the repurchase of up to $250 million of the Company’s common shares in the open market on the Oslo Stock Exchange and the New York Stock Exchange. As of November 24, 2023, the Company had repurchased 5 million of its own shares at an average price of $42.76 per share, equating to $213 million.
Furthermore, Seadrill’s Board of Directors has increased the Company’s aggregate share repurchase authorization, allowing the Company to repurchase up to an additional $250 million of its outstanding common shares. Such increase takes the aggregate authorization to $500 million. The additional $250 million authorization does not have a fixed expiration, and may be modified, suspended, or discontinued at any time. The Company is under no obligation to purchase any shares in respect of the additional repurchase authorization. Shares may be repurchased at any time and from time to time in respect of the authorization in open market purchases, privately negotiated purchases, block trades, tender offers, accelerated share repurchase transactions or other derivative transactions, through the purchase of call options or the sale of put options, or otherwise, or by any combination of the foregoing. The manner, timing, pricing and amount of any repurchases will be subject to the discretion of the Company and may be based upon a number of factors, including market conditions, the Company’s financial position and capital requirements, financial conditions, competing uses for cash, the restrictions in the Company’s credit agreements and other factors.
During the quarter, the Company refinanced its secured debt, issuing $575 million in aggregate principal amount of 8.375% senior secured second lien notes due 2030 (the “Notes”) and establishing a $225 million senior secured five-year revolving credit facility with an accordion feature of up to an additional $100 million. The refinancing reduces the Company’s cost of capital and removes certain restrictive covenants, allowing the Company greater flexibility to act on accretive opportunities that maximize shareholder value. As of September 30, 2023, the Company had gross principal debt of $625 million, comprising (i) the Notes and (ii) $50 million in senior unsecured convertible notes. Cash and cash equivalents was $869 million, including $32 million in restricted cash.
As of September 30, 2023, Seadrill’s Order Backlog(3) stood at $2.3 billion, including approximately $76 million of contract additions on the West Neptune in the U.S. Gulf of Mexico during the quarter. Following the quarter-end, the Company secured a short-term campaign for the West Vela in the U.S. Gulf of Mexico with QuarterNorth Energy. This contract is expected to commence after the rig finishes with Beacon Offshore in the first half of 2024 and transitions to Seadrill from the current third-party manager. As of November 27, 2023, the Company’s Order Backlog stands at $2.2 billion.
In July, the Company completed the sale of its three tender-assist units to certain affiliates of Energy Drilling Pte. Ltd. for aggregate cash proceeds of $84 million.
Full year 2023 guidance for total revenues is expected in the range of $1,495 million to $1,515 million and Adjusted EBITDA within the range of $485 million to $505 million. The revised guidance range for total revenues and Adjusted EBITDA is above the range previously communicated for full year 2023. Refer to Appendix II for a reconciliation of Adjusted EBITDA to Operating Profit. Capital expenditures and long-term maintenance is expected to be within the range of $185 million to $205 million. The revised guidance range for capital expenditures is below the range previously communicated for full year 2023.
