Seadrill and Petrobras Unite for Major $498 Million Deal

Seadrill Secures Major Contract with Petrobras

HAMILTON, Bermuda - Seadrill Limited (NYSE: SDRL), an offshore drilling contractor with a market capitalization of $2.46 billion and a trading price of $37.31, has successfully won a crucial contract with Brazilian oil giant Petrobras for its ultra-deepwater drillship, West Tellus. This significant agreement emerged from a highly competitive tender process and involves operations in Petrobras' Santos Basin fields, specifically the Sépia and Atapu sites.

Highlights of the Contract

The contract duration is set for 1,095 days, approximately three years, commencing in the first quarter of 2026. Estimated contributions from this contract alone are expected to bolster Seadrill's order backlog by around $498 million, complementing its current annual revenue of $1.47 billion. Notably, this figure excludes the mobilization fee of $41 million, but does encompass additional services required for the contract execution.

Petrobras, a significant player in the global petroleum industry, will deploy the West Tellus in its shared fields, holding a 65.7% stake in Atapu and a 55.3% stake in Sépia, where it also serves as the operator. This collaboration underscores a strategic partnership poised for future growth and mutual benefit.

Implications for Seadrill

Simon Johnson, Seadrill's President and CEO, emphasized the importance of this contract, highlighting its role in strengthening the relationship with a key client. According to Johnson, this contract not only represents a considerable addition to the company's backlog but is also anticipated to have a positive impact on earnings and free cash flow starting in 2026.

Seadrill's Financial Performance

In a recent update regarding its financial performance, Seadrill reported optimism for the third quarter of 2024. The company surpassed EBITDA expectations with an adjusted figure of $93 million and raised its full-year EBITDA projection by 13%, targeting a midpoint of $385 million. Despite a drop in operating revenues to $354 million due to the completion of certain contracts, Seadrill's overall financial health remains strong.

Shareholder Returns

The company has actively continued its share repurchase program, returning $692 million to its shareholders since September 2023. Management remains focused on generating robust cash flow; however, they have also acknowledged potential hurdles in their re-contracting efforts expected during early to mid-2025.

Future Endeavors in Offshore Drilling

Seadrill is committed to optimizing operations in 2025, emphasizing the importance of maintaining strong contract coverage. The company has made notable progress on its projects in Brazil, particularly with the West Auriga and West Polaris rigs, which are set to commence operations soon. This commitment illustrates Seadrill's confidence in the sustained viability and growth of the offshore sector.

Frequently Asked Questions

What is the significance of the contract with Petrobras?

The contract signifies a deepened relationship between Seadrill and Petrobras, adding substantial revenue and strengthening Seadrill's operational capacity in Brazil.

How long will the contract last?

The contract is for 1,095 days, equivalent to approximately three years, and can be extended by up to 305 days.

How does this contract impact Seadrill's finances?

This agreement is expected to contribute around $498 million to Seadrill's order backlog and influence earnings positively starting in 2026.

What are Seadrill's recent performance updates?

Seadrill has reported significant EBITDA growth, exceeding expectations and raising its full-year estimates, despite some decline in operating revenues.

What are Seadrill's future plans?

The company plans to optimize its operations in 2025 while continuing to focus on contract coverage and executing on its current projects in Brazil.

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