Seadrill Ltd (Hamilton) (SDRL) 2024 Q4 法說會逐字稿

Good morning and thank you for standing by.

My name is Kelvin, and I will be your conference operator today.

At this time, I would like to welcome everyone to the Seadrill's fourth quarter in full year 2024 earnings call.

(Operator Instructions)

Thank you.

I would now like to turn the call over to Kevin Smith, Vice President of corporate finance and head of investor relations.

Please go ahead.

Welcome to Seadrill's fourth quarter and full year 2024 earnings call.

I'm Kevin Smith, Vice President of corporate finance and investor relations.

I'm joined today by Simon Johnson; our President and Chief Executive Officer, Samir Ali; executive Vice President and Chief Commercial Officer, and Grant Creed; executive Vice President and Chief Financial Officer.

Our call will include forward-looking statements that involve risk and uncertainty.

Actual results may differ materially.

No one should assume these forward-looking statements remain valid and later in the quarter or year, and we assume no obligation to update them.

Our filings with the US Securities and Exchange Commission provide a more detailed discussion of our forward-looking statements and the risk factors affecting our business.

During the call, we will also reference non-gap measures.

Our earnings release furnished to the SEC and available on our website, includes reconciliations with the nearest corresponding GAAP measures.

Our use of the term EBITDA on today's call corresponds with the term adjusted EBITDA as defined in our earnings release.

I'll now turn the call over to Simon.

Hello and thank you for joining us on our quarterly conference call.

Today I'll cover recent achievements, market outlook, and operational updates.

Samir will then discuss our commercial activity and outlook, and Grant will review our financial results in 2025 guidance.

In 2024, we delivered against our ever to guidance range, returned over $500 million in capital to shareholders, added $1.3 billion in contracted backlog, and divested non-core assets for cash proceeds of approximately $400 million.

Our share repurchase program has returned a total of $792 million to shareholders through the end of the year.

During the fourth quarter, we repurchased $100 million of shares and have reduced our issued share count by 22% since the commencement of the program in September 2023.

In December we announced two long-term contract awards in Brazil, commencing in 2026, adding $1 billion in backlog, and we sold the jack up rig, West Prospero for cash proceeds of $45 million monetizing a non-core asset that had been cod stacked for eight years at a favorable valuation compared to recent sales by our peers.

This marks the completion of our exit from the benign jack up market.

Moving to market outlook.

As we consider the current landscape, demand deferral is showing up in near-term rig availability, leading to a softening market in 2025 with some trade rivals offering lower day rates.

Our view is unchanged.

Depleting resources require investment and deep water provides some of the most advantaged and profitable projects with the lowest carbon emissions intensity.

We expect future demand to increase, but visibility is unclear.

We've preached about volatility on many previous occasions and believe we remain well positioned to navigate the downside and capitalize on the upside.

We have a strong balance sheet and our marketed fleet is 75% contracted the calendar year 2025.

We also benefit from $3 billion in durable contract cover that extends meaningfully through 2028 and into 2029.

Turning to operations, starting in Brazil, the Wester Riga and West Polaris commenced their initial contracts with Petrobras on December 20 and February 18, respectively.

The Wester Riga commencement date was consistent with previous guidance, while the West Polaris was impacted by the commissioning and testing of upgraded systems.

In connection with the West Polaris contract commencement, we're pleased to have delivered the first next generation.

Managed pressure drilling system to petrobras, which enhances key elements of NPD.

We're already seeing strong interest from multiple clients for this time saving technology as Serill continues its thought leadership in managed pressure drilling.

We've also upgraded the power management and dynamic positioning system on the rig, closing the GAAP with seventh generation drill ship capabilities.

The West Taus incurred 50 days of downtime during the first quarter responding to regulatory matters.

This marks the sixth regulatory delay for a drilling rig in Brazil in the last six months.

We are working closely with our clients and industry bodies to understand and navigate new regulatory expectations.

In the US Gulf, the West Neptune continues to deliver after 10 years of continuous partnership with LLO and is fully contracted into 2026.

The recommenced drilling on February 16 following the completion of its SPS and upgrades.

The timeline was impacted by vendor issues and adverse weather.

I want to emphasize that we don't take the challenges encountered and the inconvenience to our customer lightly, and our teams are addressing these issues.

The West Valor continues to build on its Perun track record following reintegration into our fleet and drilled its most recent wells significantly ahead of schedule.

Given the exceptional operational delivery, the rig secured additional work at a strong rate.

While some like to focus on specifications, it is increasingly clear to us that our customers prefer performance.

Well, we've incurred an uncharacteristically high amount of non-revenue days to begin 2025.

This is not reflective of our historical performance, and all of the contributing units are back in operation.

Before moving on, I'd like to take a moment to recognize the West Jupiter, which was awarded 2024 Rig of the Year within our fleet.

The award is a testament to outstanding performance against numerous QHSE operational and financial metrics.

We ended 2024 with a total recordable incident frequency rate that was nearly 20% below the IADC average, and our safety performance is trending favorably to begin 2025.

I want to thank our offshore crews for continuing to improve outcomes in this fundamental aspect of their business.

Finally, I wanted to comment on a few legal matters.

In January, Seadrill received notices from Petrobras asserting penalties against the Seadrill subsidiary in Brazil.

The alleged penalties arise from contracts awarded in relation to the SESHE Brazil project dating back to 2012.

Under this contract, three drill ships were to be constructed by SESHE and operated by Seadrill for Petrobras.

The construction of these rigs was never completed.

SESHE has since been declared bankrupt, and Petrobras' actions during the Operation Car Wash scandal were a contributing factor to the failure of SESHE .

SESHE recently filed a lawsuit directly against Petrobras relating to the collapse of the project.

We understand that Petrobras issued similar notices to multiple local Brazilian drilling contractors and the European pier who also participated in the SESHE project.

The amount claimed by Petrobras is approximately $213 million in delayed penalties with potential for further assessments over the remaining term of the drilling contracts for the three se drill ships.

These contracts limit aggregate penalties to 10% of the total estimated contract value as defined in the contract.

Petrobras indicated it may attempt to set off its claims against certain amounts payable to our subsidiary under existing contracts for five of our drill ships operating in Brazil, but has not done so today.

We're engaged in discussions with our clients to suspend the penalties.

We are evaluating all options including potential counterclaims against petrol price.

This matter is in its early stages, and we intend to vigorously defend our position.

Earlier this month, the Norwegian court awarded the owner of the Hercules a rig that we managed from 2008 to 2022 $48 million inclusive of penalties and interest relating to our redelivery of the rig.

We disagree with the court's findings and will appeal the decision.

As we move into 2025, Seadrill will continue to be a flexible and agile organization that can quickly pivot during periods of market volatility.

We have demonstrated that we will act decisively on stacking decisions, as evidenced by the cold stacking of the West Phoenix, and we endeavor to remain disciplined stewards of shareholder capital with a continuous focus on optimization of our cost base.

We have a proud record of executing on our declared objectives.

For that, I'll turn the call over to Samir.

Thanks Simon.

I'll start by reviewing our recent contracting activity before providing an update on the market.

Seadrill has captured a disproportionate share of the global backlog awarded since our last earnings call, securing approximately 65% of the backlog awarded to the four largest publicly traded offshore drillers, while only representing 18% of the drill ship fleet operated by this group.

This is an incredible achievement given the contracting environment over the past few months.

In the US Gulf, the Westella is currently working for Tauss and drilled its most recent well ahead of schedule, which would have led to a contract completion in July.

Due to the exceptional operating performance, the rig secured 40 days of incremental work and 20 million of backlog, keeping the rig operating into September.

We remained very optimistic that the rig will book additional work given its proven track record.

The Savo, Louisiana secured additional work with Walter Oil and Gas, keeping the rig working until June.

And in Brazil, the West Jupiter and the West Teuss were each awarded three-year contracts with Petrobras commencing in 2026.

These fixtures provide incremental backlog of $1 billion and a mobilization fee exceeding $70 million.

Importantly, these awards provide visibility into our earnings in 2026 and beyond.

Moving to the market.

We continue to see a slow pace of contracting in 2025, tied to capital discipline and supply chain constraints.

We were the first to suggest the potential for whitespace, and we continue to think it will persist through this year and into 2026.

There are around 30 floaters available, forthcoming available globally in 2025 without a firm contract.

While many of these rigs will find follow-on opportunities, the absence of visible demand continues to soften the market.

Droser marketed utilization, a measure of market tightness, now hovers in the mid 80s, down from the high 90s in 2023.

We believe it will continue to trend lower throughout the year as more assets become available.

Fortunately, we are relatively insulated.

We benefit from having approximately 75% of available rig days contracted across our marketed fleet in 2025, and we are working to book contracts for the remaining capacity.

I'll now briefly touch on the outlook for the rigs with availability for the remainder of the year, starting with the Savon, Louisiana.

As we have previously indicated, recent contracts suitable for the rig's specification have been both short in their lead times and duration.

However, we are in advanced dialogue to keep the rig working when it becomes available in June.

Next, the West Capella recently finished its highly successful drilling campaign in Korea.

The rig remains one of the few MPD equipped assets in Southeast Asia, and we are pursuing several short-term opportunities starting mid-year.

However, we are prepared to make the hard decisions if we do not have line of sight to additional work.

Moving to the three rigs we operate through our son and roll joint venture, the West Gemini, the Kella, and the Lavongos all become available in 2025.

In Angola, we're already seeing the impacts of competition for capital across customers' global portfolios.

Demand in the country is facing headwinds.

However, due to our advantaged relationship with our JV partner, we believe we have a competitive edge for near-term opportunities.

We see incremental demand in 2026 and beyond as operators return to the country in West Africa more broadly.

As we navigate this market, we're focused on securing work where we have uncommitted capacity and we'll remain disciplined in managing our fleet.

Although demand has shifted to the right, it reinforces our conviction in the durability of the current cycle.

We are pleased to report 3 billion in backlog and a 700 million net increase to our previously reported numbers in the period when many of our peers are experiencing backlog erosion, and with that I'll turn into grant.

Thanks.

I will now summarize our full year results and review fourth quarter performance before providing full year guidance for 2025.

For the full year 2024, we delivered $378 million of adjusted EBITDA on $1.4 billion of revenue.

Capital expenditures was $418 million.

Adjusting for the disposal of the Qatar Jackup fleet, we delivered adjusted EBITDA within the guidance range previously provided.

Turning to fourth quarter performance, as anticipated, results were adversely impacted by a reduction in operating days, planned out of service time and costs associated with contract preparations and upgrades.

Total operating revenues were $289 million down from $354 million in the prior quarter.

The decrease primarily relates to fewer operating days attributable to the West Neptune, which began planned out a service time for upgrades in November, the cold sacking of the West Phoenix following its contract completion in August, and the West Valla and West Capela, which achieved fewer revenue days as we reintegrated and prepared for new contract commencements in October and December respectively.

Fourth quarter, total operating expenses were $323 million up from $307 in the prior quarter.

The sequential increase is largely attributable to increase in merger and integration expenses related to the handover of the final two Ecuador rigs.

The reintegration of these trocious in procedural fleet marks an important milestone for the company, eliminating costly and complex management fees and exceeding synergy targets of $70 million per annum ahead of the state's timeline.

SGNA expenses were $31 million.

The quarter on quarter increase of $4 million pertains to adjustments to year-end accruals and severance costs following a reduction in falls completed in November as we continue to take steps to reduce our cost base.

Moving on to the balance sheet and cash flow statement, we continue to maintain a strong balance sheet and sound capital structure.

At year end, gross principal debt was $625 million and we held $505 million in cash, including $27 million in restricted cash, resulting in a net debt position of $120 million.

Cash flow from operations was $7 million for the fourth quarter, which includes $94 million of outflows for long-term maintenance CapEx.

Investing cash flows included capital upgrades of 38 million.

And notably, we also received $45 million in cash proceeds following the sale of the West Prospero in December.

In the fourth quarter, we continued our share of purchase program, completing $100 million of sharer purchases under our current $500 million authorization.

Since initiating our share of purchase program in September 2023, we have returned a total of $792 million to shareholders through the end of the fourth quarter, reducing issued share count by 22%.

And now onto our outlook for the year ahead.

The operational updates highlighted earlier in the call by Simon will adversely impact first quarter and full year 2025 EBITDA by approximately $55 million.

Importantly, these matters are now behind us.

We anticipate total operating revenues between $1.3 billion and $1.36 billion which excludes reimbursable revenues of $35 million.

We anticipate adjusted EBITDA in the range of $320 to $380 million with full year capital expenditures on a range of $250 to $300 million.

I'd like to take the opportunity to provide some insight into the assumptions underpinning the guidance ranges provided.

First, I'd like to highlight the midpoint of our 2025 revenue guidance includes $1.2 billion, or approximately 90% of contracted backlog.

Any additional back a cappella beyond completion of the recent contract in Korea would be incremental to the midpoint of guidance, and we continue to characterize the Savanne, Louisiana as a show me rig.

Forecasting revenue only when we have clear line of sight.

Additionally, full year 2025 adjusted EBITDA includes a non-cash net mobilization expense of 27 million.

And finally, turning to CapEx, the guidance range provided includes some rollover CapEx from 2024 into 2025.

And $20 million of long lead items following the recent contract awards for West Jupiter and West Telus ahead of their 2026 contract commencements.

The actions we have taken to date provide a solid platform to protect against market volatility.

We closed 2024 with a robust balance sheet and strong cash position.

Recent contract awards have added durable backlog at favorable margins that will benefit earnings and cash flows beginning in 2026.

With that back to you, Simon.

Thanks Grant.

In closing, we are proud of what Seadrill accomplished in 2024.

It was a year in which we saw four drill ships reintegrated into our fleet.

The rationalization of our benign jack up assets, including the sale of the Qatar rigs and the West Prospero, and the delisting of our shares on the Oslo Stock Exchange.

We have executed our strategy to be a pure play floater company with the right rigs in the right regions.

We've increased our net backlog by delivering superior performance and operational innovations, and we have robust backlog, both in terms of total amount and profile through time.

We remain focused on delivering safe and efficient operations to our customers and look forward to 2026 when we'll see the benefit of contract repricing.

Thank you to our dedicated employees onshore and offshore, for your commitment to excellence that continues to drive us forward.

Thank you to all of our valued customers, trade partners and shareholders for your continued support.

With that, we'll open the line for questions operator.

Thank you.

Ladies and gentlemen, we will now begin the question and answer session.

(Operator Instructions)

Your first question comes from the line of David Smith of Pickering Energy Partners.

Please go ahead.

Hey, good morning and thank you for taking my call, my question. [Good morning. Okay], [it's, Dave, yeah, Dave Smith], any color you can provide on the 50 days of downtime in Q1 for the tell us.

I mean, was there an incident, a stricter interpretation of existing rules or something else?

And is there any theme you're seeing among the other impacted rigs that you could proactively address to minimize potential for additional regulatory NPT in Brazil this year?

Yeah, thanks, Dave.

Yeah, it's Simon here.

Yeah, we did in fact incur 50 days of downtime on the West Tala.

The rig's back in operation now.

The regulatory environments are, by their very nature dynamic through time.

So the rules haven't changed, but rather the regulations, the regulator's interpretation of the rules, so we were able to recover quickly, but getting clearance was a much more protracted process in terms of the to and fro.

So, we're working with our clients and also the regulatory bodies to understand and navigate these new regulatory expectations.

Okay, appreciate that.

And if I could, wanted to circle back to the litigation issues from the prepared remarks.

I wanted to make sure I heard right if that claim from Petrobras related to the settee rigs, was that 213 million?

And if so, I wanted to ask if this is, an entirely new claim, have similar claims related to the settee rigs, come up in the past.

Just recognizing this was from a very long time ago, so wondering if there's any relevant, historical historical context here.

Well, we were as surprised as you are, Dave.

As mentioned in the prepared comments, there are caps in the drilling contracts that limits the penalties to 10% of the contract value.

Each of the contracts for the three sachet rigs were for 15-year terms and valued around about 5 billion reos per rig at the time of execution.

Because of the ongoing nature of the dispute, we can't provide any more additional information at this time.

We're in the early stages of understanding what it means, and we intend to look at all possible defenses to these claims, including, wherever that might take us.

So, yeah, we're in the early stages of understanding where this is and how long it might persist.

Alright, I appreciate the color.

I'll turn it back.

Thanks, Dave.

Your next question comes from the line of Kurt Halyard of Benchmark.

Please go ahead.

Hey, good morning.

Everybody.

Good morning, Kurt.

So Simon, maybe kind of start with you and if it carries over to to Samir, that's great too, so can you give us, or can you characterize or how can you characterize, the tone and tenor of conversations that you've been having, with certain clients, with respect to, their outlook for project economics and in connection with that, right, there's been recent discussion from some of your peers about an acceleration in contracting activity, particularly as we get, into the middle of 2025.

And those are for projects that are supposed to start either '25 and then more so in '26 and '27, but very much curious in terms of how you characterize the nature of the discussions and the tone and tenor related to those.

Yeah, sure.

Well, perhaps let me start and then see we can get into the detail.

But I think an interesting feature of recent conversations and activities in fact is that we're seeing more exploration on a relative basis.

We did a bit of a straw poll recently and around about 30% of our rigs are currently drilling exploration wells.

That's a big change from recent years, and I think that's a significant factor to bake into how you might see the market going forward.

And the immediate outlook for 2025 is a bit cloudy.

We don't know yet how long the weakness is going to persist.

I believe that it's time bound and that once we get into 2026, we'll see a rapid improvement as the deferred demand starts to intersect with a longstanding inventory of major projects that have passed FID and and committed to, other critical long lead items like FPSOs and trees and and surf support equipment, but where they've yet to select a rig.

So you know that's, I think that's what underpins our optimism and that of our peers, but Samir, anything to add?

Yeah, I completely agree with Simon and I'd say, as we look at the market, you're starting to see clients FID programs for starts in '26 and '27, so you know that demand is starting to swell back up, in terms of economics, Kurt your question.

Was are economic at current levels and even significantly lower oil prices, right, or commodity prices.

So I think it's not just the economics of it, it's the getting the long lead times ordered and kind of place, so we're seeing FPSOs, flow lines, wellheads, all the precursors to the things that we, a client would need to drill a well are kind of in flight now and you're starting to see the FIDs follow it.

Gotcha.

And just for your reference, FTI was out earlier today and they talked about a high degree of visibility on FID for sub projects out through 2030, which I have to imagine there's still a number of those projects that are yet to be kind of drilled or so on, so I would think that's a positive commentary, with respect to your business as well.

Now.

Separately for grant, Ken, I appreciate the revenue and and Eva got it numbers for the year.

I was hoping that you could give a little bit of color maybe around the progression, first half versus second half, how you would weight that, dynamic and also if you just give us a little bit of color on your expectation for operating expenses for the year.

On the timing of the EBITDA, look, we don't break down by court because there are a number of factors impacting that.

I would say that.

There's more even, I think like Q1, we're going to wait for a lot of the the the Neptune and the Polaris to come back.

So Q1 perhaps slightly weaker.

Q2 we've got a fuller fleet working and then toward the end of the year there's some uncertainty we said in the prepared remarks cappella and Louisiana are foamy rigs, quote unquote, and and so to the extent that we pick up work there could be upside.

If that helps you, and then Kurt, what was the other question?

It was, yeah.

Just so you, I just, give us a general sense of what we should be or what you guys are thinking in terms of operating expense on a full year basis.

Yeah, look, I think, if you just break it down, the key KPI, we look at per day operating expenses, circle 150k per day, across the drill ship fleet.

That includes, OpEx overhead, but excluding SGNA overhead and excluding any sort of integrated service costs.

Okay, great, thanks guys appreciate it.

Thanks Kurt.

Your next question comes from the line of Greg Lewis BTIG.

Please go ahead.

Yeah, hi, thank you and good afternoon and thanks for taking my questions.

Greg, I guess just following up on Kurt's question as we think about the Opex, and I guess this is a two part question, so I apologize, as we think about the Opex budget that you have for 2025, how should we think about, a rig that Maybe doesn't have a line of sight on work like the cappella, how we should think about, you managing that at least in the guidance and then on another note.

It it seems like other companies have kind of looked at some of their, non-core rigs and decided to, retire those, not that we're going to retire, any rigs this year.

Maybe we will, maybe we won't, but as we think about, any kind of color you can give us around the, if we looked at the non, the stacked fleet, like what's that?

Quarterly or annual run rate on the cost of those stacked vessels.

Yeah, thanks, Greg.

Look, I'd say, for cappella as an example, we're going to be disciplined then to the extent we don't have clear work we're going to stack that and then to get to the crux of your questions stacking costs, you're looking at a one-off cost of circle $6 million to $10 million depending on what region of the world and where it's going to be stacked, and then a run rate of approximately $5,000 Dollars per day.

Yeah.

In relation to the quality of the assets and Greg, what I'd say is that there's been a lot of speculation around the durability of sixth generation rigs and, there's a broad spectrum of capability across the sixthth generation fleet, and the very best six gen drill ships, for example, are very pretty much comparable to the latest generation, seventh generation drill ships.

So we have three units in that category the Polaris, the Gemini, and the Capella.

But they're rigs that are equipped with dual derricks, and they have room for a second BOP.

They can take MPD, and we have an ability to upgrade certain aspects of their dynamic positioning system as we mentioned earlier too.

So, I think the concern about, what the future is for that class of rig, I think is much less of a factor for our fleet than it is for some of our competitors.

Okay, great.

And then and then my other question was around Brazil but but maybe I'll ask it a little differently and maybe I'm dating myself, but it's, yeah, right, it's, I mean, I feel like we've seen this before where it seems like AMP is, I don't know what's going on, but it seems like they are being more diligent around rig working.

I don't even know how to frame it.

But it seems like they're looking to put rigs off higher more so than maybe they have in the last couple of years.

Has there been any change we need to be aware of, at AMP that that maybe is driving this, just simply because it does seem like, and it's not, and I'm delicate to the fact that I think you guys have six rigs with across Brazil and Ecuador and Brazil, and, but it doesn't seem like this is specific to seadrill.

No, it's not it's affecting the whole industry.

There's, been, a handful of rigs that have been affected.

We obviously, listen very carefully to the directions that we get from the regulator, and, we've worked in a lot of regulatory regimes around the world, including highly regulated places like Norway.

So, we understand that their focus can shift through time and you just need to listen carefully and respond positively to that.

So.

There has been some disruption, we'll have to wait and see as to sort of what, where it goes from here.

But, we think we have an understanding of where their current focus areas are and we're well positioned to respond.

So, this is not unique to Brazil.

We see it from time to time and other marketplaces as well.

Okay, super helpful.

Thank you very much.

Thanks, Greg.

Have a great day.

Your next question comes from the line of Frederik Steen of Clarkson Securities.

Please go ahead.

Hey, Simon and team.

I hope you're well.

Thanks for the commentary, the guidance, and also, the additional color on the litigation.

I think most of my questions around that have been answered already.

But, given the state that the industry is in right now, where there's high degrees of uncertainty around 2025 and 2026, particularly in the very near term of that.

Fleet adjustments as as you've done, or some of your peers have done, but also, the ever recurring question of M&A or other strategic initiatives appear, equally as much now as before.

So I wanted to get kind of your high level thought.

Around, where do you see diesel in that landscape right now?

Do you think the sell of broad inequities for drillers have, made new rounds of transactions, easier or harder to get through and have you did you feel like you are a company that could be acquired or that your company that could acquire someone else now that you're effectively done streamlining your own fleet by by selling off the non-crasters?

Thanks, obviously, we're not going to comment on anything, specific to, us relating to M&A, but like in abstract, what I would say is that I'm a long-standing proponent of industry consolidation.

I think there are too many sub-scale drillers who aren't resilient enough through the business cycle.

We're one of the larger guys and, we look at the impact of the revenue disruption we've experienced this quarter.

So 2025 is going to be a difficult year for the industry.

In general, I think everyone's pretty much been impacted to roughly the same degree, but I would expect that we need a period of stability, at whatever market level to allow any deal making to take place without either party feeling disadvantaged.

So, that's what I'd say sort of M&A space generally.

At the moment, everyone's focusing on running their businesses as best they can.

And seeking to navigate this period of uncertainty.

Yeah, no, that's, helpful, and then one quick one turning back to Brazil and the regulators.

AMP, to my understanding, had new leadership last year and they seem to have been a bit more scrutinizing for the last six to nine months as evident by, the number of rates that have been incurred downtime on the back of that.

But again, high level, I wouldn't, even though AMP is independent, it's hard for me to envision that they can, regulate the Brazilian oil industry to death, but obviously you know news like this makes concerned, already concerned investors even more concerned.

So you think this is, AMP.

Trying to, pro prove a point now in the new leadership, or do you think this is the new standard that you have to adhere to, on an ongoing basis and by an extension of that, CapEx requirements, anything kind of changes in terms of the cost to run rigs in Brazil on the back of that, of it.

Yeah, well, what I'd say is that, I think there have been some leadership changes, but we're still waiting confirmation of some key positions as well.

That's awaiting a confirmatory hearing in the Senate in Brazil, I believe.

So, there is, there's still some more to come, I think, until that is complete, only then will be, will we understand, what the way forward looks like.

At the moment, like I said, we've just tried to work with our customers.

We don't deal directly with the regulator.

We stand behind our customers and it's the customers who make the submissions to the regulator.

So, we lack a little bit of intimacy in the process, to be perfectly honest.

But my feeling is that this, I'm hoping this is just a flurry of activity and we'll soon, be, everyone will understand the new areas of focus and we'll adjust and we'll go back to operation as normal.

But at this point it's too early to tell.

Yeah, I, that's a good caller in any case.

I appreciate the comments guys and have a good day.

Thank you.

Your next question comes from the line of Ben Nolan of Stifl.

Please go ahead.

Yeah, I appreciate it, maybe this for Graham, or Simon whoever as it relates to your buyback program, obviously you guys have been pretty active on that, although here we see the share price down a good bit and given your commentary about just sort of the outlook for 2025 and maybe even some of this litigation stuff, at this point still a good balance sheet, do you think about when the share price is lower we really.

Double down on on buying back shares or or is there an element of this where just given the uncertainty you need to be a little bit more cautious.

Well, maybe I can start at a high level ben and then I'll I'll pass to Grant.

Obviously, there's a bit of uncertainty in the market, certainly through '25, we'll see if that extends into '26.

So, cash conservation is obviously at the front of our minds.

That said, and as the points you make, the shares are trading at very attractive levels relative to what we believe to be our intrinsic values.

So we have an outstanding facility of around about $208 million.

For share repurchases, but we'd need to consult closely with our board before we acted, given the environment.

It's an active discussion through time and we consult on a real-time basis.

But perhaps, Grant, you want to add some color to that.

Yeah, I think you got it right, Simon.

I think what I'd, I've talked about our finance policy on other calls which at a high level is, sound balance sheets, comfortable liquidity projections and a net leverage ratio target of one time.

It's kind of first step in the hurdle and then to the extent we've got cash at the bottom of the waterfall looking at the creative CapEx and or buybacks.

What I'd say is that finance policy, the inputs that go to are not static.

They're continuously evolving, and it's a framework that we are continuously checking in and evaluating at regular points in time, going forward.

Okay, I appreciate that.

And then this is a little bit maybe bigger picture, but it seems as though we're increasingly hearing from particularly oil majors and the likes of deemphasizing some of their alternative energy policies and and moving back more towards traditional oil and gas.

I don't I mean, if you could just sort of understanding that these things take time to play out, but as you are seeing the likes of, I think the most recent was BP talking about reemphasizing traditional oil and gas, how long does that Hey, how long does it take before it in, it drives actually business for you guys in terms of that focus, any thoughts there?

Yeah, look, it's difficult to know.

I mean, I think the calorific value of a barrel of oil has been underappreciated of late, and it's good to see some common sense start to prevail in terms of how our principal customers are allocating capital.

We believe that we're seeing some of that shift, I mean expenditure already, and it'll only intensify, given the actions of people like BP here in in recent days.

There's also a lot of people talking about the change in the US administration.

We believe that the lower 48 drillers are the principal immediate beneficiaries of that, but the offshore drillers, are continuing to benefit from what is a much more powerful and longer term pattern of preferential investment in deep water reservoirs relative to land because that's where the volumes and the flow rates are.

So, I think it's good for our business, but in particular those shift in investment patterns is particularly good for the offshore deep water business.

Yeah.

All right, well I appreciate it thank you.

Cheers, Ben, thank you.

Your next question comes from the line of Noel Parks at Two Wee Brothers.

Please go ahead.

Hi, good morning.

Good morning.

Apologize if you touched on this, already, but, I just wondered.

From the customers standpoint, it does seem that the 2025 experience has been pretty clear that in fundamental terms they're just not afraid of kind of kicking the can down the road and and coping with wherever prices might be, assuming that we have a rebounding activity end of this year in the '26 and the '27, so, in just discussions with them.

Are they simply just kind of blocking and tackling and what's in front of them, or do you see any any signs that if we see say a trend up in day rates that some of them might be inclined to be a little bit more aggressive maybe a little further out contract term.

Sure, this is Samir, I'd say it depends on the client.

Some are blocking and tackling, some of the more nimble clients that can kind of react a little more quickly if they start seeing day rates move upward again that they, they've already said that they're planning to come back to market pretty quickly.

So I think you have the full spectrum there of some clients absolutely blocking tackling.

Some are a little more can get back to the market quickly.

But I think beyond that for us, right, as we talk to our client base, they know they need to start drilling in 2026 and back to back to that, there are FID projects, you're seeing this upswell of demand coming in '26 and '27 that's layering on top of the base load demand that we're already expecting.

So you have a bit of a compounding effect that we're seeing that we're expecting to happen over the next 18 to 24 months.

Great.

And to a degree it's still not huge, but there are signs of the industry dipping its toe a bit more into exploration.

I'm just wondering to the degree you talked to the people around their future planning.

Is there any sense that.

Maybe customers are looking to go more top of the line with the drills they're they're doing for slightly higher risk projects or or attempting to be maybe a little bit more conservative and and maybe not be so so demanding of you know the the latest features and so forth.

Yeah, look, I think some good headlines on the exploration piece, that AMP in Brazil recently emphasized the importance of exploration in their new licensing round.

So that was a real focus of what they were saying to people making applications.

Pre-salt production in Brazil declines from 2030, so they have a lot of work to do to fill the all that will be created from those natural decline curves.

And the reason I mention Brazil is that they are, obviously the biggest player in the deep water market, and what they, what they're seeing, what they're experiencing is true for all the IOCs and indeed the smaller players around the place.

So I think one of the big issues is that the exploration departments of our principal customers, they take time to build and it takes time to generate prospects.

They don't have a magic filing cabinet full of information.

So, it does take a while for intent to translate into activity, but we are starting to see that, as I mentioned earlier, we've got a much larger proportion of our rig fleet now engaged in exploratory work than we've certainly seen over the last 10 years.

So, we, we're quite happy.

We think that's an important theme.

And again, it's one of these many factors that, underpins our optimism about the market, notwithstanding that, '25 is going to be, a bit of a tricky year.

Great, thanks a lot for the perspective.

Pleasure.

Thank you.

Thanks for the question.

Your next question comes from the line of Josh Jane of Daniel Energy Partners.

Please go ahead.

Thanks.

Good morning.

I just really had one, company specific question that I wanted to dive into.

So when you look back at 2024 and in totality, you guys executed on a number of initiatives, just between the asset sales simplifying the structure of the company bought back a lot of stock, like, obviously the answer would be, everyone wants to contract more rigs and drilling days, but.

Maybe just as you look into 2025, what are the what are the main things that you're focused on internally as a company on executing this year to best position the company going forward?

Yeah, well, I think the number one priority at Cedar is always improving our safety performance.

We had a pleasing turnaround year in '24 there, but there's much more work to be done.

So there's a lot of, energy in the organization from the top to the coalface on how we might improve outcomes and that really important aspect of our business.

So that's a focus area.

Obviously, we haven't got off to the best start in terms of our revenue, performance.

So with that we need to keep laser-like focus on the cost base.

So we have a number of initiatives that we're looking at across the business to continually adjust and improve what we do on the cost side, a number of projects in a range of areas.

I think for people who've been in the industry a long time, one thing that you never lose sight of is the importance of being a low cost operator.

And unfortunately, the industry, has had a dubious, History of not doing so well in that regard as the revenue side of things improves.

That's not going to be the case at Seadrill, so we're committed to having an agile, efficient organization and you know we've got a lot of projects that we're looking at right now that we believe can materially improve the cost base from where it is today.

Thank you very much.

I'll turn it back.

Thanks, Josh.

Your next question comes from the line of Hammad Hosan of BWS Financial.

Please go ahead.

Hi, so I just wanted to see what is the true possibility of the Capella and Bella being, recontracted this year and specific to Capella, when would you think that you would make a decision as to, stacking it for the time being?

Sure, I'd say, if we look at the [cappella], in my prepared remarks I mentioned, we are chasing multiple opportunities that start middle of this year to late or second half of this year.

So you know we're still chasing those.

If we don't see a clear line of sight of being able to achieve one of those, I think we will take the steps necessary to to stack the rig.

So it is a evolving situation, but it's not going to take us months or quarters to figure out.

We're we're going to figure that out here in the next, weeks to days.

So that is already happening.

In terms of the [Vella], we were able to add 40 days on the existing program, which is, a great achievement.

We're able to conquer that well pretty quickly.

So, it gave us the ability to add more term at a very good rate.

So, given that performance, we do think that we can continue to market that rig in the Gulf of Mexico and, other places if necessary, but our intention is to keep her in the Gulf, and we're already in active dialogue on additional work for that rig.

Okay.

And then my last question was just, on the Carina in Brazil.

This one did not get an extension.

Is there anything specific to that rig that there was a reason or is that related to your, ongoing, I, I'll call it dispute with Petrobras for, what happened, 12 years ago?

No relation whatsoever to what's going on with the dispute with Petrobras.

That rig, Petrobras only took two rigs that lot, and so we want those two rigs in various lots.

So for us, we are still looking at other clients potentially in Brazil.

Petrobras is obviously an option to keep the rig working.

We do expect that Petrobras will be out for more rigs.

But beyond Petrobras, you have other clients, and we do have some short, 12 opportunities to fill gaps in Brazil, but we're not limiting ourselves just to the Brazilian market with the Carina, right?

She is a true seventh generation rig.

She's cap dual activity, able to take two BOPs on, so we have the ability and the flexibility to market that rig wherever we want in the world.

Okay.

Thank you.

Thanks.

There are no further questions at this time.

With that, ladies and gentlemen, that concludes your conference call.

We thank you for participating. (Operator Instructions)