Seadrill Limited Price & Performance (SDRL)

During the call, we will also reference non GAAP 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 and 2025 guidance. In 2024, we delivered against our EBITDA guidance range returned over $500,000,000 in capital to shareholders and $1,300,000,000 in contracted backlog and divested non core assets for cash proceeds of approximately $400,000,000 Our share repurchase program has returned total of $792,000,000 to shareholders through the end of the year. During the fourth quarter, we repurchased $100,000,000 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 $1,000,000,000 in backlog. And we sold jackup rig West Prosperi for cash proceeds of $45,000,000 monetizing a non core asset that have been cold stacked [indiscernible] at a favorable valuation compared to recent sales by our peers. This marks the completion of our exit from the benign jackup 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 deepwater 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 for calendar year 2025. We also benefit from $3,000,000,000 in durable contract cover that extends meaningfully through 2028 and into 2029. Turning to operations. Starting in Brazil, the West Rio and West Polaris commenced their initial contracts with Petrobras on December 20 and February 2018 respectively.

The West Auriga 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 MPD. We're already seeing strong interest from multiple clients for this time saving technology. Ascedral continues its thought leadership in managed pressure drilling. We've also upgraded the power management and dynamic positioning system on the REIT closing the gap with seventh generation drillship capabilities. The West Talos incurred fifty days of downtime during the first quarter responding to regulatory matters. This marks the sixth regulatory delay for Seadrill 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 U. S. Gulf, the West Neptune continues to deliver after ten years of continuous partnership with El Log and is fully contracted into 2026.

The rig 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 their inconvenience to our customer lightly our teams are addressing these issues.

The West Valley continues to build on its Peruvian track record for a 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 our customers prefer performance. While we've incurred an uncharacteristically high amount of non revenue days to begin 2025, This is not reflective of our historical performance. 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 twenty twenty four 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, Cedar will receive notices from Petrobras asserting penalties against Seadrill subsidiary in Brazil Seadrill.

The alleged penalties arise from contracts awarded in relation to the Sache Brazil project dating back to 2012. Under this contract, three drillships to be constructed by Sachet and operated by Seadrill for Petrobras Seadrill. The construction of these rigs was never completed. Sachet has since been declared bankrupt and Petrobras' actions during the operation Car Wash scandal were a contributing factor to the failure of Sachet. Sachet recently filed a lawsuit directly against Petrobras relating to the collapse [indiscernible] We understand that Petrobras issued similar notice to multiple local Brazilian drilling contractors and the European peer who also participated in the Sache project. The amount claimed by Petrobras is approximately $213,000,000 in delayed penalties. With potential for further assessments over the remaining term of Seadrill drilling contracts for the three Sachet Seadrill ships. These contracts limit aggregate penalties to 10% of the total estimated contract value as defined in the contract. Petrobras indicated that it may attempt to set up its claims against certain amounts payable to our subsidiary under existing contracts for five of our drillships 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 counter claims against Petrobras.

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 02/2008 to 2022, dollars 48,000,000 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. With that, I'll turn the call over to Sameer. 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 Seadrill drillers while only representing 18% of the drillship fleet operated by this group. This is an incredible achievement given the contracting environment over the past few months.

In The U. S. Gulf, the West fella is currently working for Talos Seadrill 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 forty days of incremental work $20,000,000 of backlog. Keeping the rig operating into September. We remain very optimistic the rig will book additional work given its proven track record. The Savant Louisiana secured additional work [indiscernible] and in Brazil.

The West Jupiter and the Westellus were each awarded three year contract These fixtures provide incremental backlog of $1,000,000,000 and a mobilization fee exceeding $70,000,000 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 white space we continue to think it will persist through this year and into 2026. There are around 30 floaters available or coming 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. Droshipped 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 with the remaining capacity. [indiscernible] I'll now briefly touch on the outlook for the rigs with availability for the remainder of the year. Starting with the Savant Louisiana. As we have previously indicated, recent contracts suitable for the rig specification have been both short in their lead times and duration. However, we are in advanced dialogue to the rig working when it becomes available in June.

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

The rig remains one of the few MPD equipped assets in Southeast Asia. Now 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 Sonodrille joint venture.

West Gemini, the Kingela and the Livongos 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 advantage 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 and West Africa more broadly. As we navigate this market, we are focused on securing work we have uncommitted capacity and will remain disciplined in managing our fleet.

Although demand has shifted to the right, it reinforced our conviction in the durability of the current cycle. We are pleased to report $3,000,000,000 in backlog, and a $700,000,000 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 it to Graham.

Thanks, Srianj.

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 $378,000,000 of adjusted EBITDA. On $1,400,000,000 of revenue. Capital expenditures was $418,000,000 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 $289,000,000 down from $354,000,000 in the prior quarter. The decrease primarily relates to fewer operating days of attributable to the West Neptune which began planned out of service time for upgrades in November, the coal sacking of the West Phoenix following its contract completion in August, and the West Vela and West Capella, which achieved fewer revenue days as we Fourth quarter total operating expenses were $323,000,000 up from $3.00 $7,000,000 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 Aquitrol rigs. The reintegration of these drillships in procedural fleet marks an important milestone for the company. Eliminating costly and complex management fees, and exceeding synergy targets of $70,000,000 per annum ahead of the stated timeline.

SG and A expenses were $31,000,000 a quarter on quarter increase of $4,000,000 pertains to adjustments to year end following a reduction in force completed in November as we continue to take steps to reduce our cost Moving on to the balance sheet and cash flow statements. We continue to maintain a strong balance sheet and sound capital structure. At year end, gross principal debt was $625,000,000 and we held $5.00 $5,000,000 in cash. Including $27,000,000 of restricted cash resulting in a net debt position of $120,000,000 Cash flow from operations was $7,000,000 for the fourth quarter, which includes $94,000,000 of outflows for long term maintenance CapEx, Investing cash flows included capital upgrades of $38,000,000 And notably, we also received $45,000,000 in cash proceeds following the sale of the West Prospero in December. In the fourth quarter, we share repurchases under our current $500,000,000 authorization. Since initiating our share repurchase program September 2023, we have returned a total of $792,000,000 to shareholders through the end of the fourth quarter. Reducing issued shakeout by 22%.

And now on to 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 $55,000,000 Importantly, these matters are now behind us.

We anticipate total operating revenues, the billion dollars which excludes reimbursable revenues of $35,000,000 We anticipate adjusted EBITDA in the range of $3.23 $80,000,000 with full year capital expenditures on a range of $250,000,000 to $300,000,000 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 $1,200,000,000 or approximately 90% of contracted backlog. Any additional backlog that could beyond completion of the recent contracting career would be incremental to the midpoint of guidance.

And we continue to characterize Savannah, 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 of $27,000,000 And finally, turning to CapEx.

The guidance range provided includes some rollover CapEx from 2024 into 2020 and $20,000,000 of long lead items following the recent contract awards for West Jupiter and Westellus 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 our earnings and cash flows beginning in 2026. And 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 Seadrill reintegrated into our fleet the rationalization of our benign jackup 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 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 Seadrill 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.

As we enter the question and answer session, advise that you please limit your input to one question and one follow-up. Your first question comes from the line of David Smith of Pickering Energy Partners. Hey, good morning. Thank you for taking my call. My question Good morning, Doug. Provide on the fifty days of downtime in Q1 for the TELUS?

Mean, was there an incident, a stricter interpretation of existing rules or or something else? And is there anything you're seeing among the other impacted rigs that you could proactively address to minimize potential for additional regulatory NPT Brazil this year.

Yes. Thanks, Dave. Simon here. We did in fact incur fifty days of downtime on the West Telos The rig is back in operation now.

Regulatory environments are by their very nature dynamic through time. So rules haven't changed, but rather the regulations the regulators interpretation of the rules. So we're able to recover quickly, but getting clearance was much more protracted process in terms of the to and fro So we're working with our client and also the regulatory bodies to understand and navigate these new regulatory expectations.

If I could, wanted to circle back to the litigation issues from the prepared remarks. I wanted to make sure I heard right if claim from Petrobras related to the Sate rigs, was that $213,000,000 And if so, I wanted to ask if this is an entirely new claim? Have similar claims related to the Vassette rigs they've come up in the past. Recognizing this was from a very long time ago. So wondering if there's any relevant historical context here.

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

Dave. As mentioned in the prepared comments, there are caps in the drilling contracts that limits penalties to 10% of the contract value Each of the contracts for the three Sacheaux rigs were fifteen year terms and valued around about BRL5 billion per rig. At the time of execution. Because 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 we're in the early stages of understanding where this is and how long it might persist for. Thanks, Todd. Your next question comes from the line of Kurt Hallead of Benchmark. Hey, good morning, everybody.

Good morning, Kurt. So Simon, maybe kind of start with you and if it's reach over to Sameer.

That's great too. So can you give us or can you characterize or how can you characterize the tone and tenure of conversations that you've been having with certain clients with respect to their outlook for project economics and 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 twenty twenty five. Discussions and the tone and tenant related to those. [indiscernible] Simeon can get into the detail. But I think [indiscernible] 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 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 long standing inventory of major projects that have passed FID, and committed to other critical long lead items like FPSOs and trees and surf support equipment.

But where they've yet to select a rig, So that's I think that's what underpins our optimism and that about peers. But Samir, anything to add? No, I completely agree with Simon I'd say as we look at the market, you're starting to see clients FID programs for starts in '26 and '27. So that demand is starting to swell back up. In terms of economics, Kurt, your question, are economic at the current levels and even significantly lower oil prices or commodity prices. So it's not just the economics of it, it's the getting the long lead times ordered and placed. So we're seeing FPSOs flow lines, wellhead, all the precursor 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.

Got you. And just for your reference, FTI was out earlier today and they talked about high degree of visibility on FID for subsea projects out through 02/1930, 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 EBITDA guy.

Guidance 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 [indiscernible] also if you could just give us a little bit of color on on your expectation for operating expenses for the year? On the On the timing of the EBITDA, look, we don't break it down by quarter because there are a number of factors impacting that. I would say that there's more EBITDA I think like Q1, we're going to wait for a lot of the the Neptune and the Polaris to come back. So Q1 perhaps slightly weaker. Q2, we got a fuller fleet working. And then toward the end of the year, there's some Certainly, we said in the prepared remarks, Capella and Louisiana are show me rigs and so do the extent that we pick up work there, there could be upside. If that helps you.

And then, Cote, what was the other question?

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

Yes. Look, I think OpEx, if you just break it down the key KPI, we look per day operating expenses So, $150,000 per day across the drillship fleet. That includes OpEx overhead, but excluding SG and A overhead, And and excluding any sort of integrated service costs Thanks, Kurt.

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

Please go ahead.

Yes.

Hi. Thank you and good afternoon and thanks for taking my questions.

Great. I guess just following up on Kurt's question 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 where like the Capella, how we should think about you managing that at least in the guidance. And then on another note, 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?

Yes. Thanks, Greg. Look, I'd say, 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 question, stacking costs, looking at a one off cost of circa $6,000,000 to $10,000,000 depending on what region of the world and where it's going to be stacked and then a run rate of approximately $5,000 per day.

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 sixth generation fleet. And the very best sixth gen drillships for example are very pretty much comparable to the latest generation, seventh generation drillships. So 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. I 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 my other question was around Brazil, but maybe I'll ask it a little differently and maybe I'm dating myself. But it's, yeah, right? 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 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 Equinor in Brazil. But it doesn't seem like this is specific to Seadrill Seadrill.

No, not so that's affecting the whole end. [indiscernible] 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 So we understand that their focus can shift through timing. You just need to listen carefully and 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 the current focus areas are and we're well positioned to respond. So 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 Frederic Stein of Clarkson Securities. Please go ahead. [indiscernible] Thanks for the commentary. The guidance and also the additional color on the litigation. I think most of my questions around that has been answered. Already. But given the state that the industry is in right now, where there's high degree of uncertainty around 2025 and 2026. Particularly in the very near term of that. Fleet adjustments as you've done or some of your peers have done. But also the ever recurring question of M and A or other strategic initiatives appear equal as much now as before. So I wanted to get kind of your high level thoughts around where do you see in that landscape right now? Do you think the sell of broadly in equities for drillers have made new rounds of transaction easier or harder to get through? And have you Do you feel like you are a company that could be acquired or that you're company that acquire someone else now that you're technically done streamlining your own fleet by selling off the noncore assets.

Well, look, obviously, we're not going to comment on anything anything specific to us relating to M and A. But like in abstract, what I would say is that I'm a longstanding proponent of industry consolidation. I think there are too many subscale drillers who aren't resilient enough through the business cycle. We are one of the larger guys and we look at the 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 on M and A space generally. At the moment, everyone's focusing on running their businesses as [indiscernible] And seeking to navigate this period of uncertainty.

Yes. That's helpful. And then one quick one, turning back to Brazil and the regulators. A and P, to my understanding, had new leadership last year and there seems to have been a bit more scrutinizing for the last six to nine months as evidenced by the number of rigs that have been incurred downtime on the back of that.

But again, high level [indiscernible] Wouldn't even though NPE is independent, it's hard for me to envision that they can regulate the Brazilian oil industry to death. But obviously, in a new sector, [indiscernible] concern already concerned investors even more concerned So do you think this is A and P trying to 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?

Yes.

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 Seadrill some more to come. I think until that is complete, only then we'll 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 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 and we'll adjust and we'll go back to operation as normal. But at this point, it's too early to tell.

Yes. I mean, that's a good color in any case. I appreciate the comments guys and Thank you.

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

Please go ahead. Yes, I appreciate it. Maybe this is for Graham.

Or Simon, whoever. As it relates to your buyback program, obviously, you guys have been pretty active on that, although 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 share price is lower, we really double down on on buying back shares? Or is there an element of this where just given the uncertainty you need to be a little bit more cautious? Maybe I can start at a high level Ben and then I'll pass to Grant.

Obviously, there's a bit of uncertainty in the market. Certainly, 3.25%, we'll see if that picks [indiscernible] So cash conservation is obviously at the front of our minds. That said, and as points you make, the shares are trading very attractive levels relative to what we believe to be our intrinsic value. So have an outstanding facility of around about $2.00 $8,000,000 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. [indiscernible] to add some color to that.

Yes. Look, I think you got it right, Simon.

I think what I'd add, talked about our finance policy on other calls, which at a high level is sound balance sheets comfortable liquidity projections and a net leverage target of 1x is kind of first step in the hurdle and then to the extent we got cash at the bottom of the waterfall looking at accretive 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 continuously checking in and evaluating at regular points in time. Going forward, Okay. I appreciate that.

And 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 moving back more towards traditional oil and gas. I don't know Simon, if you could just sort of of understanding that these things take time to play out, but as you are seeing likes of I think the most recent was BP talking about reemphasizing traditional oil and gas, How long does that take or how long does it take before it drives actually business for you guys in terms of that focus? Any Any thoughts there?

Yes, 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 we'll only intensify given the actions of people like BP here in recent days. There's also a lot of people talking about the change in the U. S. 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 deepwater reservoirs relative to land because that's where the volumes and the flow rates are. So I think it's it's good for our business, but in particular, by shift in investment patterns is particularly good for the offshore deepwater business. [indiscernible] All right. Well, I appreciate it. Thank you.

Cheers, Ben. Thank you. Your next question comes from the line of Noel Parks of Tuohy Brothers.

Please go ahead. Good morning. I apologize if you touched on this already, but I just wondered from the customer standpoint, it does seem that 2025 experience has made pretty clear that In fundamental terms, they're just not afraid of kind of kicking the can down the road and coping with wherever prices might be assuming that we have a rebound in activity end of this year, end of twenty six and end of twenty seven.

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 on 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, they They've already said that they're planning to come back to market pretty quickly. 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 that, there are FID projects You're seeing this upswell of demand coming in 2026 and 2027. That's layering on top of the base blade 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 eighteen to twenty four months.

Great. And, two is a great, 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 around their future planning.

Is there any sense that Maybe customers are looking to go more top of the line with With the drillships there doing for slightly higher risk projects or or attempting to be maybe a little bit more conservative and maybe not be so demanding of the latest features and so forth?

Yes. Look, I think some good headlines on the exploration piece Well, that A and P and So that was a real focus of what they were saying to people making applications. Pre salt production in Brazil declines from 02/1930. So they have a lot of work to do to fill the Ullage that that will be created from those natural decline curves. The reason I mentioned Brazil is that they obviously the biggest player in the deepwater market And what they're seeing, what they're experiencing is true for all the IOCs and the smaller players around the place. So 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 in to translate into activity, but we are starting to see that as I mentioned 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 ten years. So 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 going to be a bit of a tricky year.

Great. Thanks a lot for the perspective.

Pleasure. Thank you. Thanks for the question. Next question comes from the line of Josh Jayne of Daniel Energy Partners.

Please go ahead.

Thanks. Good morning. I just really had one company's specific question that I wanted to dive into. So when you look back at 2024 in totality, you guys executed on a number of initiatives, just between the asset sales and simplifying the structure of the company, bought back a lot of stock. I think obviously, the answer would be everyone wants to contract more rigs Seadrill days, but maybe just as you look into 2025, what are the main things that you're focused on internally as a company on executing the year to best position the company going forward?

Well, I think a number one priority at Seadrill is always improving our safety performance.

We had a pleasing turnaround year in twenty 'twenty four 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 coal face. On how we might improve outcomes in 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. For people who have 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 Seadrill. So we're committed to having an agile efficient organization And 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 Steve, what is the true possibility of the Capella and Vela being re contracted this year?

And specific to Capella, when would you think that you would make a decision to stacking it for the time being? Sure. I'd say if we look at the Capella and my remarks, I mentioned we are chasing multiple opportunities that start middle of this year to late or second half of this year. So we are still chasing those. If we don't see clear line of sight of being able to achieve one of those, I think we will take the steps necessary So it is an evolving situation, but it's not going to take us months or quarters to figure out. We're going to figure that out here in the next weeks to days. So that is already happening. In terms of the Vela, we were able to add forty days on the existing program. Which is a great achievement. We were able to conquer that well pretty quickly. So it gave us the ability to add more term. I 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 additional work for that, Rick.

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'll call it dispute with Petrobras what happened twelve years ago? No relation whatsoever to what's going on with the dispute with Petrobras.

That rig [indiscernible] 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 [indiscernible] But beyond Petrobras, you have other clients and we do have some short one well, two well opportunities to fill gaps in Brazil. We're not limiting ourselves just to the Brazilian market with the Carina. Right? She is a true seventh generation rig Just keep 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.

Thanks.

There are no further questions at this time. With that, ladies and gentlemen, that concludes your conference call.

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