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Hello, everyone. Thank you for joining us, and welcome to the Seadrill Second Quarter 2026 Earnings Call. [Operator Instructions] I will now hand the conference over to Kevin Smith. Please go ahead.

Hello, and welcome to Seadrill's Second Quarter 2026 Earnings Call. I'm Kevin Smith, Vice President of Corporate Finance and Investor Relations, and I'm joined today by Samir Ali, President and Chief Executive Officer; Grant Creed, Executive Vice President and Chief Financial Officer; and Jacob Taylor, Vice President, Commercial. Our call will include forward-looking statements that involve risks and uncertainty. Actual results may differ materially. No one should assume these forward-looking statements remain valid later in the quarter or year and we assume no obligation to update them, except as required by securities laws. Our filings with the U.S. 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-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 Samir.

Thanks, Kevin. Welcome, everyone. Thank you for joining us. I'll begin with our second quarter highlights, including continued progress against our core priorities and our recent contracting successes. I'll then discuss the market backdrop and regional outlook before turning the call over to Grant to review our financial results and updated full year 2026 guidance.

Second quarter financial performance was very strong, exceeding expectations. We delivered EBITDA of $144 million, underpinning our decision to raise full year revenue and EBITDA guidance. This marks our second guidance increase this year. The quarter also reflected continued execution against our core priorities: delivering safe, reliable operations, generating free cash flow and capturing the upside ahead of us.

Let's start with our first priority, safe and reliable operations. We delivered another solid quarter, achieving economic utilization of 96%. We also successfully completed the West Telus reacceptance on schedule and on budget. Seadrill's One Team culture met all client expectations and the rig has been successfully operating since mid-June. This is an important milestone, it marks a second of 3 rigs to off legacy day rate contracts and begin generating revenue at substantially higher rates.

Safety remains our top priority. We are proud of the progress we've made but we are never satisfied with sending still. By continuing to invest in training, knowledge sharing and leadership development, we are building an even stronger organization for the future. I want to take this moment to remind our dedicated crews. Everyone has stopwork Authority and no task is worth compromising our high safety standards.

Priority 2, free cash flow generation remain on track to generate meaningful free cash flow in the second half of 2026. With that visibility, we resumed shareholder returns during the second quarter, opportunistically repurchasing $20 million of shares under our repurchase program during the last week of June.

Priority three, capturing the upside. Our recent contracting success strengthens 2027 revenue visibility and demonstrate Seadrill's ability to capture the upside ahead of us.

Since our May call, we have added approximately $200 million of backlog, including new contracts and contract extensions on 3 rigs in the U.S. Gulf and Malaysia. In the U.S. Gulf, the West Telus secured a 12-month contract with Telus beginning in June 2027 in direct continuation of its current program. The award adds approximately $161 million to backlog excluding additional services and reflects the strength of our operational execution and customer relationships. We are pleased to extend our partnership with Telus and thank the crew of the West Vela for their superior performance that is the foundation for what's next.

Staying in the U.S. Gulf, the Sevan Louisiana has worked steadily throughout the year. The rig is expected to wrap up its current program with Walter Oil & Gas later this week. -- following the successful completion of earlier campaigns with Guardian and log in July. We also want to recognize Harbor and log for their continued trust in Seadrill. Earlier this year, Harbor and Log extended the West Neptune once again and selected the West Vela for a 270-day campaign beginning later this year. Harbor also contracted the Sevan Louisiana for a short campaign at the end of July, meaning they will have had all of Seadrill's U.S. Gulf fleet under contract in 2026.

We appreciate their confidence and remain focused on delivering safe, efficient and reliable operations across every rig. And in Malaysia, our customer recently exercised a priced option for approximately 75 days on the West Capella, extending operations into the second half of 2027.

Turning to the broader market. The current tender pipeline points to a materially tighter environment in 2027. If these tenders convert into awards as expected, we believe drillship utilization could reach the mid-90% range by next year. Collectively, developments across strategic reserves, offshore investment and exploration activity support our view of growing demand for deepwater rigs. The U.S. Energy Information Administration's latest outlook shows OECD inventories falling to their lowest levels since at least 2003 as supply disruptions accelerate stock draws. Oil managers have also highlighted tightening supply conditions, with Chevron, knowing that supply crunch can soon be felt globally and ExxonMobil noting that the U.S. is approaching unheard of inventory levels.

Wood Mackenzie forecast offshore project FIDs to rise to $165 billion in 2027, representing a 132% increase from 2025, underscoring the strength of the offshore cycle. Further, we continue to see offshore exploration activity gaining momentum, driven by structurally higher oil price, energy security coming back into vogue, slowing non-OPEC production growth and operators need to rebuild reserve bases. Equinor validated this theme in its Capital Markets Day in June, guiding to an international exploration budget for the first time. and highlighting plan to step up exploration along the Atlantic margin supported by its view that oil and gas demand will remain higher for longer.

Recent exploration announcements also reinforce this momentum with Total Energy's securing offshore exploration agreements in Egypt and Syria, chevron signing an early exploration deal after Guinea, Exxon applying for new exploration permits after Guyana, and Repsol entering into an exploration agreement in Venezuela.

Moving to the outlook for key regions where Seadrill operates. The U.S. Gulf remains in transition with several doses expected to become available before year-end. Seadrill is ahead of the curve by recently securing a 365-day contract at leading-edge day rates for the West Vela, bringing total year-to-date backlog added in the region to nearly $0.5 billion. The West Neptune is already contracted into late 2027 and is well positioned for attractive follow-on opportunities. We remain confident that the supply-demand balance of drillships in the region will improve in 2027.

Our semisubmersible, the Sevan Louisiana is also favorably positioned as market conditions in the U.S. Gulf strengthen into 2027. While we have a strong track record of winning programs with short lead times, visibility for the balance of 2026 remains limited. We will continue to manage the asset with commercial discipline while preserving flexibility.

Turning to Brazil. Brazil remains well contracted in 1 of the industry's most important deepwater geographies. Recent multiyear awards and extensions reinforce our view that Brazil remains a core source of drillship demand through the end of the decade. 25 drillships are currently contracted in the region, with only 3 expected to become available before the end of 2027 if options on a couple of rigs are exercised.

A recent Petrobras prequalification exercise may be an indication of tendering activity to come. We expect Brazil to remain balanced and competitive with opportunities favoring rigs that align closely with customer needs and basin requirements. Following the completion of the West Carina contract at the end of June, we mobilized the rig outside of Brazil, consistent with typical post-contract process in the country. We are in advanced discussions for follow-on opportunities and remain confident in our ability to secure work commencing in the first half of 2027.

In Southeast Asia, a region we have repeatedly identified as a source of growing demand momentum is building. A recent leading-edge fixture awarded for work commencing in mid-2028 is a positive data point. Customers' willingness to secure assets at leading-edge rates for future work is an indicator that the balance of supply and demand is expected to tuck-in. With limited drillship availability in the region, the West Capella is in a strong position to capture potential upside. In West Africa, and particularly Angola, the Sonadrill joint venture continues to demonstrate the strength of our local partnership and the reliability of our operations, with all 3 rigs delivering technical uptime above 99% during the second quarter.

Our near-term commercial focus is on the West Gemini, which is due to roll off contract later this year. While the rig is well positioned for fee to work in Angola, we continue to market it across West Africa. We expect upcoming FIDs and tenders in countries such as Angola, Ghana, Cote d'Ivoire, Nigeria and Namibia to absorb a meaningful share of available rig capacity.

Bringing it all together, the broader deepwater market continues to tighten, supported by improving market fundamentals, rising offshore investment and exploration momentum. We remain encouraged by the outlook across our key regions and believe Seadrill is entering 2027 from a position of strength well positioned to capitalize on the opportunities ahead. With that, I'll hand it over to Grant.

Thanks, Samir. I'll now discuss our second quarter to 2026 financial results. recap the refinancing completed in June and then provide an update on our outlook for the balance of the year. Seadrill delivered strong second quarter financial performance, with total operating revenues of $449 million and adjusted EBITDA of $144 million.

The quarter-on-quarter increase was primarily driven by more operating days and an improving average day rate. In Malaysia and Brazil, the West Capella and West Jupiter contributed full quarters of revenue after commencing their new programs in late March.

While increased activity on the Sevan Louisiana and the U.S. Gulf also supported revenue growth. This was partially offset by the impact of fewer operating days for the West Tellus which underwent reacceptance testing before commencing its contract in Brazil as planned late in the second quarter.

Importantly, both the West Jupiter and West Tellus even contracts are materially higher day rates, representing a meaningful step-up in revenue of roughly $400,000 per day between the 2 rigs compared with their prior contracts. Repricing these legacy contracts has long been a strategic objective and is now strengthening the cash generation from our active fleet as we move into the second half of the year and into 2027. Also contributing to second quarter revenue was an uplift in management contract revenues, reflecting an increase in the daily management fee sea drillers for providing management, operational and technical support to Sonadrill.

The increase was applied retroactively from January 1, 2026. And now moving to operating expenses, which were $377 million in the second quarter, up $43 million from the prior quarter. The increase was primarily attributable to the West Capella and West Jupiter returning to operations for the full quarter. Resulting EBITDA was $144 million a sequential increase of $47 million compared to the prior quarter, with an EBITDA margin, excluding reimbursables, of 33.5%.

And now turning to the balance sheet and cash flow statements. I'll start by providing a recap of the refinancing completed in June. The refinancing strengthens our financial flexibility, extends debt maturities further into the next decade and reinforces our commitment to maintaining a resilient through-cycle capital structure. Seadrill issued $700 million of 6.75% senior notes due in 2034 and used part of the proceeds to redeem $575 million of 8 3/8% senior secured second lien notes due 2030. We also increased the revolving credit facility from $225 million to $300 million and extended the maturity by 3 years to 2031. We ended the quarter with total cash of $360 million, a $31 million increase from the prior quarter.

The net proceeds from the refinancing as well as a $30 million lump sum receipt for mobilization revenue related to the West Jupiter contract in Brazil were partially offset by $57 million of capital expenditures, a $16 million final payment for a legal judgment related to the Sonadrill joint venture, as previously disclosed in 2025, an accelerated interest payments of $20 million relating to the redemption of the old notes, and a build in accounts receivable primarily related to the commencement of West Jupiter and West Capella contracts plus timing of receipts across the remainder of the fleet.

Notably, we are entering a stronger phase of cash generation, major project-related outflows are now behind us. With cash benefits from the West Capella, West Jupiter and West Telus contracts ahead of us, we expect cash flow to strengthen through the second half of the year, including the anticipated collection of the West Tellus mobilization fee in the third quarter.

Seadrill remains focused on 3 financial priorities to enhance long-term shareholder value, generating free cash flow, disciplined capital deployments and maintaining a robust balance sheet. On June 22, the Board of Directors authorized an extension of the $208 million remaining on the share repurchase program through the end of the current calendar year. And during the last week of June, we repurchased $20 million worth of shares.

And now turning to our outlook for the remainder of the year. strong project execution and higher-than-anticipated utilization have driven the increase in the revenue and EBITDA guidance ranges set out in our press release. We now anticipate operating revenues of $1.5 billion to $1.55 billion, and that excludes $50 million of reimbursable revenues and EBITDA of $420 million to $450 million.

Our updated guidance ranges reflect 2 factors for the second half of the year, assumed utilization for the Sevan Louisiana which was fully contracted in the second quarter that has less visibility for the remainder of 2026 and the timing of repair and maintenance expenses, which we expect to be higher of the balance of the year.

Our EBITDA guidance includes a noncash net expense of $30 million related to the amortization and mobilization costs and revenues, of which $16 million has been recognized through the end of the second quarter. Full year capital expenditure guidance range maintained at $200 million to $240 million.

With 3 major projects delivered on time and on budget, a strengthened balance sheet and a supportive commercial backdrop, Seadrill is well positioned to generate meaningful free cash flow in the second half of the year and create long-term shareholder value. And with that, I'll hand back to Samir for his closing remarks.

Thanks, Grant. For Seadrill, the message is straightforward. Our commercial approach remains centered on winning direct continuation work and maximizing the total economic value of contracts. In the U.S. Gulf, we secured work for the West Vela at leading-edge day rates despite near-term oversupply. In Brazil, West Africa and Southeast Asia, our fleet remains well positioned for both established and emerging sources of deepwater demand.

Across the rest of the world, the demand outlook continues to support our conviction that available high-specification floaters will become increasingly scarce as the cycle progresses. Taken together, Seadrill is well positioned to create long-term shareholder value through disciplined contracting, free cash flow generation and a relentless focus on safe and reliable operations. With that, I'll hand the call over for questions.

[Operator Instructions]

Your first question from the line of Doug Becker with Capital One Securities. Please go ahead, your line is now open.

Thank you. Samir you extended the share repurchase program through December. We actually saw the restart of buybacks with about 20 million shares in the second quarter. Just how would you frame the scale and the pace of buybacks once we see the free cash flow inflection in the second half of the year?

Sure Doug, I'll start and I'll hand over to Grant. Holistically, our job at Seadrill as a management team is to maximize free cash flow. So every contract we look at, everything we're doing around here, we are hyper focused on generating as much free cash flow as possible, but Grant can kind of speak through the mechanics of how we're thinking about it.

Yes. Doug. And just to add to that, look, when we think about the thing we look at is our cash position. And of course, we had a very healthy cash position in June, and that was further supported by a successful refinancing those executed in June. Then we look at forecast cash going forward. And as we discussed on our prepared remarks, we're at this inflection point that we've been looking for some time, primarily related to the repricing off of legacy contracts and spot rate contracts. .

So we're starting to enjoy the step up in earnings, and we saw during Q2 as expected, we had some working capital build, but that's going to be behind us from the Q3 onwards. So we're looking healthy in that perspective. And then deploying the capital is all about assessing the alternatives through a disciplined and deliberate lens and then when the share price started trading in the 30s in June, it became apparent to us that a buyback was going to be a very accretive use of that capital. So that's a little bit of insight as to how we approach the buybacks. And yes, I hope that helps.

No, that's helpful context. Is the plan to kind of utilize the full remaining share authorization over the course of this year? Or just to be determined based on the parameters you just laid out?

Yes. Look, Doug, it's to be determined. We take those decisions at any point in time, and we'll see how it goes the rest of the year. Yes. Yes. It's a discussion, obviously, we have with our Board on a regular basis. But coming back to it, the management team's focus is maximizing cash flow and then we have an in-depth discussion with the Board of how we want to deploy that capital.

The next question comes from the line of Eddie Kim with Barclays. Please go ahead.

This is the second consecutive quarter where you've raised full year guidance, which is particularly notable as offshore drillers are more commonly known to lower full year guidance than to raise. So could you just talk about what has surprised you to the upside compared to when you first provided full year guidance at the beginning of the year? Is it contracts you secured that you didn't necessarily expect to or better operational performance or cost maybe getting pushed into 2027? Just some more color on the main drivers of the guidance raised in the past 2 quarters would be great.

Thanks. I'd say, first and foremost, operational execution has been great this year. So the operations team has done a fantastic job on executing work. The project we know that those projects are key to determining our results in any year, and we executed those very well for the Jupiter Capella and Tellus. And then on the rig activity side, I'd say Carina ended up working longer than we anticipated at the beginning of the year. And then the -- we call the Louisiana of the show me rig where we don't get too far ahead of ourselves in booking or estimating or forecasting revenue for that rig.

She ended working more in the first half of the year than we anticipated. On the expense side, I think it's more or less in line with how we are seeing expenses, but I would say that repairs and maintenance is skewed to the second half of the year. We see that quite often in our business that the first half of the year, we spent less on represents projects in particular than in the second half.

Understood. And then my follow-up is just more broadly, I mean the outlook you laid out was pretty constructive with drillship utilization potentially reaching the mid-90s by next year, feels like leading edge day rates are now firmly in the mid-400s, as indicated by the most recent contract you signed on the Western Vela well as other contracts industry what? Is there any reason to believe that leading edge rates shouldn't continue to move higher next year off of this current mid-400 level, just given tightness in the market and -- and if it's not, what would you say of the potential headwinds or roadblocks that might prevent that from happening?

Ed. So look, the day rate progression is purely driven by utilization, right? So we continue to expect utilization to improve. I mean it is a global market, and rigs are going to continue to move from kind of Western Hemisphere into Eastern Hemisphere. So that should drive kind of day rate momentum. But the other thing I'd say, at least for Seadrill, we look at it holistically. It's not just day rate, right? It is the full contract value. It is mobilization fees. It's Ts&Cs. How do we make sure that we are maximizing the cash out of that contract, not just -- we don't have a huge ego around here. It's not about getting the highest day rate. It is getting the best potential contract for our rigs. But that's how I'd say we holistically look at it, it's definitely not just day rate driven for us.

The next question is from the line of Fredrik Stene with Clarksons Securities.

Samir and team, congratulations on a very strong operational quarter. I wanted to -- and thanks for actually providing quite detailed commentary on the regions already. But I wanted to be a bit more rig-specific maybe. Obviously, like the West Carina, the Gemini, I'm pretty sure that those are very high on our list in terms of what's getting recontracted. So and you seem relatively positive on the Carina, maybe from the first half of next year. But maybe if you leave those aside and think about the rigs that are rolling off in the second half of next year, have you started progression on new contracts for those rigs?

And I guess in the context of your market view expecting mid-90s utilization for drillships -- how would you also kind of think about locking in short versus long-term work as you work on extending those rigs, weighing visibility versus upside capture. Any color would be very helpful.

Fredrik, Jacob here. I'll go ahead and take that one. us, I mean going back to what Samir said, we are heavily focused on our capital discipline, cash management and swift payback period is the highest priority. Rates will increase as utilization tightens. And the way we look at it right now is if we are successful in securing work for, say, the Carina, then we have assets like the Gemini, potentially even the Auriga to play for the upside. So we'll continue just to monitor the opportunities as they come. But if we start seeing the utilization tighten or squeeze to above 95%. I think it's just inherent that we're going to see rates pushing up to the higher 400s.

Fredrik, the only thing I'd add to that is, look, you saw it with the Vela, we've got direct continuation -- our team's focus is minimizing as many gaps as humanly possible, right? For us, gaps are wasted money in waste of time. So whatever we can do to close those will be very important to us.

All right. Very helpful. And then just maybe 1 quick to Grant as well.

You gave some commentary about the working capital, and there were overarching comments that the second half would be better on free cash flow. I was hoping that given the working capital builds in the second quarter, in particular, as new contracts start up, are you able to kind of help us quantify a bit how you think maybe like the working capital element, in particular, going to be reversed in the second half as things normalize and as you start, or you get some mobilization fee from Petrobras, et cetera?

Yes, sure. I think now you can think of the -- so the build in accounts receivable this quarter was primarily Jupiter and Capella, Remember, they started contracts late March. And so they start collecting revenue then in Q2 -- in Q3 rather. So I think about them then on a normalized working capital rate. So don't expect any sort of reversal or inflow, but I'd consider them at a normal level, so no outflow beyond that. Then on the Telus, I guess, is going to be the interesting rig to look at from a working capital perspective in Q3 because she will then have a working capital build on account able just as we experienced on Jupiter and Capella, but we will also enjoy the mobilization receipt from Petrobras of $40 million in Q3. .

I think as far as we're Gavis concerned, that's the 1 to watch in Q3, really, Fredrik. And once that's behind us, we really then should be on a sort of a normal basis.

All right. Your next question comes from the line of Gregory Lewis with BTIG.

Samir, kind of curious on your views on, I guess, kind of dovetails on Fredrik's question clearly, there's opportunities in Asia for rigs, obviously, all over the world, are West Africa as well, gold Triangle. But as we think about Asia, we think about India, I know the last rig you guys had in India was Polaris, that was the 6-gen rig in the Capella operated in Asia is 6 gen. How do you think about the opportunity set for some gen rigs in Asia, just given that historically, they got part of the world has been maybe a lower on average pricing market for, I guess, we'll call the leading-edge, high-quality drillships.

Yes. So I'd start with our sixth-generation rigs, yes, there are 6, but there are dual activity. The Capella has MPD on it, the Polaris is MPD on it. So I'd say the better than your average sixth-gen rig working in those markets. So yes, there's a bit of a difference, but not as much as you would think. And if we look at the Carina, we've positioned her -- she's currently in Walvis Bay. So she's got access to both Africa and Asia as a potential. And as we look at the Asian market, it's back to look at the whole contract value. Your OpEx is a little lower out there. So can you get still good return.

But I'll let Jacob kind of speak to the opportunity specifically.

I think 1 thing I would add to that is -- in 2024, we saw 1 of our sixth-gen units kind of in a niche position, and we are opportunistic about that and we got a rate of 545,000 a day. And so there could be a scenario where the seventh gens get scooped up early on in this cycle. And what's left are the sixth gens to play for the upside. So we look at both parts of our fleet is opportunity, we're not just focused on kind of the higher end rates for the 710 units.

Okay. Super helpful. And then I realize it's still the middle of 2026. But just since we did kick the back -- the buyback back on, I guess I'll just ask it this way. Are there any kind of -- as we look out in 2027, are there any special surveys that are coming? Are there any kind of rig upgrades we're thinking about kind of on, I guess, you'd say, out of the normal operations that we should be thinking about just as we think about -- as we start to try to kind of pencil in what a CapEx could look like in '27. Not asking for guidance, just asking any special surveys and any kind of rate upgrade type of things.

Yes. Greg, the short answer is no significant SBS projects or reacceptance projects. I think, of course, you look at the rig activity schedule and any rigs that are coming up for new contracts. To the extent the contractor side that has specific requirements. We would have to take that. But like Samir said, we assess our opportunities on an all-in cash basis and would look to be compensated through the terms of that contract. .

Yes, Greg, I would just add Sorry, I would just add that commercially, our strategy is to ensure that if there are any major mobilizations or sizable upgrades to the rigs, then there would be a meaningful mobilization upfront fee that -- from our customers in order to help cover the cost of that.

Your next question comes to the line of Keith Beckmann with Pickering Energy Partners.

I'm just wondering if you guys are seeing I'm just wondering if you guys are seeing any change in customer behavior at all here. As the market starts to look like it's kind of breaking here I mean, are you seeing any customers look to lock in rates further out for longer term sort of maybe what we saw with the bullet year for kind of a year in the Gulf and the mid-28, just any thoughts around that in operator behavior changing?

Not really, to be honest, you're seeing maybe on the margins, you're seeing a bit here and there. You saw a client secured rig in Southeast Asia for a '28 start which is a bit further out there. There are some tenders that are for '28, '29 starts. So maybe on the margins you're seeing it, but would I say it's a wholesale change yet? No. I would say, look, our clients are, probably have some more free cash flow coming into their orders given the higher commodity price. So as they enter budgeting season that maybe puts a wind at their back of, hey, maybe we want to go spend a bit more and kind of develop a few more fields. But I wouldn't say we've seen a wholesale change just yet, but hopefully, it will come.

Perfect. That's very helpful. And then -- my second question, maybe just thinking a little bit longer term here, probably not in the near term, but you guys still kind of have the 2 stacked harsh environments. Semis I believe the Aquarius in the Phoenix and that market has gotten a little bit tighter here, if we continue to see tightness. My question is really just around what could the potential reactivation cost be on those? Do you have any sense of that? And then what would the contract terms kind of need to look like to make that make sense for you guys maybe longer term?

Yes, sure. So I'd say, look, the harsh environment floater space is almost 100% utilized right now, and it's something that we would love to grow our fleet into -- we've got a presence in Norway. We've got 1 asset working there. We've been very deliberate and vocal about our strategy to cluster rigs. So we would love to add a few more rigs into that market. in terms of reactivations for the Phoenix of the Aquarius, look, it's a meaningful number. It's probably over $100 million to reactivate those.

In terms of what we're looking for is a contract that justifies that investment, right? And for us, and this is a bit hyperbole, would I take a short contract to $2 million a day that covers that cost, Absolutely. Right? So it doesn't need to be a long contract. It really comes down to the economics of the whole contract. And is it a mobilization fee? Is it longer term? What's the day rate? We throw all of that into the pot and kind of say, look, does this make economic sense for Seadrill or not?

Your next question comes from the line of Hamed Khorsand with BWS Financial.

Could you just expand on your commentary on the Carina? It looks like you've shifted it to West Africa already. What your expectations are that you've already completed that mobilization?

Yes. I think for the Carina, the reason we shifted over to West Africa is because we feel, based off of our outlook that gives us the closest proximity to near-term work in the regions. So it gives us the flexibility to pursue prospects, both in West Africa and in Southeast Asia because that's where we're seeing the largest amount of demand at the moment. And it's -- it also -- we get synergies from our presence out there in the region already. We're able to continue to maintain that rig and have it ready for the next campaign.

Is there a timing of when we should expect some sort of contract activity there?

Most of the campaigns we're seeing right now in the market are commencing probably in the first half. So there is a bit of a lead time before commencement would happen awards, I would say, within the next quarter or 2.

Next question comes from Noel Parks with Toy Brothers.

On the topic of sort of customer behavior. I just was wondering sort of maybe what negotiations might be like right now when, say, I don't know, you have a customer that wants a rig for, say, midyear next year you've got something coming available 6 months earlier, say, beginning of the year. I'm just kind of wondering what that back and forth looks like when I mean, is that going to just you would get reflected in price for the time difference? Or are situations like that kind of not so common still yet?

Yes, I can go ahead and take that one. So I think for us, going back to what we've said in earlier statements, we're not going to invest in a major mobilization, reactivation or upgrade without a meaningful contribution from the customer. We also look at the cost of having that rig idle, waiting for that opportunity. But it just depends on whether or not it's competing against an alternative prospect. For us, we're not solely focused on day rate. I think the terms and conditions drive a lot of value for our business. And so economic uptime is another lever that is really important with us for us that we like to play with. And I think that with the market tightening -- all of those factors are becoming more and more favorable.

Terrific. I was also wondering, does what you see ahead for the next few years? Is it in any way reminiscent of sort of where we were at any particular prior cycle and just think about sort of seeing tightening ahead after a bit of a slowdown. But then I'm also mindful that this time around, we do have that sort of gradual bounce back in exploration that maybe wasn't there in past cycles. So any thoughts there would be great.

Absolutely. So look, it does feel kind of like the beginnings of up cycles you've seen in the past, kind of the '08 cycle, if you will. I think the fundamental difference this time around is there's not a whole bunch of new builds sitting on the sideline and come back. Right? We are a relatively inelastic supply in an increasing demand environment, right? So it does have some flavors of the previous cycle, but the last cycle, you had a bunch of drillships coming out of the shipyard still kind of from '08 to almost 2013, 2014 rigs were being delivered to kind of help take up some of that demand. That doesn't exist today. Yes, there's a couple of rigs still out there. But the realities are inelastic supply with increasing demand, it feels even better than the last cycle, if you will, in my opinion. .

Your next question comes from Josh Jayne with Daniel Energy Partners.

First 1 is just a bit of a follow-up on Greg's question. I was hoping you could touch on supply chain, how you're seeing the world? Are you seeing any issues getting equipment over the last couple of quarters. Do you see any issues moving forward? And just how are you potentially thinking about inflation in equipment cost or CapEx moving forward? Are you seeing anything material or not at all?

Look, we're seeing some inflection that you would expect, both on labor and material. Obviously, fuel has gone up probably the most, but most of our contracts, we don't take fuel exposure, it's provided by the client. So when we think about it is when we have kind of gaps between schedules back to our contracting strategy of not having us trying to minimize our gap, so we don't have that fuel cost. But the rest of it, look, we're seeing your normal inflation across the board. -- and bring it back to what Jacob was talking about earlier in Ts and Cs, we're trying to pass that on to clients, right? Wherever we can is better the whole contract is kind of how we think about it. And can we pass some of those inflation costs back on to the day rate or into the contract value, if you will.

Understood. And then I just wanted to follow up on our risk specific question. So the Louisiana has obviously continued to put together a string together number of short-term opportunities. Could you just -- could you speak to what's embedded in the guidance for the back half of this year surrounding that rig? And then as we think about it longer term, I guess, into '27, are there term opportunities for that rig in your view? Or do you view this as sort of continuing to put together shorter-term programs. I'm just curious how you and we should be thinking about the rig opportunities across '27?

Yes. Sure, Josh. Thanks. And yes, so like I said, in 1 of the answers in the Q&A, I said Louisiana and are working more than we anticipated in the first half of the year. But then I did also mention in my prepared remarks that the rest of this year is a little less clear. And I think as we look at guidance, we still apply the same principle as we typically apply to that rig, which is the same rig, so when we secure the work, we'll start baking it into our Fortigen projections. And so I guess that's a long way of saying it's not really -- we're not booking upside on that rig the remainder of this year. .

But then I'll hand over to Jacob for commentary on '27 and beyond.

Yes. I would just add that it didn't just exceed our expectations. I mean I think it's had 99% economic uptime so far this year. And a lot of that work was captured with a very short lead time -- there is a diverse set of customers in the Gulf of America in new ones, such as Guardian we recently worked with that love the versatility of that asset -- she has a trend center intervention system on board as well. And so it enables her to go to drilling, P&A, intervention, all the likes of it.

And we're having positive dialogue with customers who have some campaigns starting as early as towards the end of this year and then probably some longer-term prospects that are going to be maturing in Q2, Q3 of '27. So I think we're still very optimistic about the capabilities of that rig. Thanks.

There are no further questions at this time. This concludes today's call. Thank you for attending. You may now disconnect.

Thank you for standing by. At this time, I would like to welcome everyone to the Seadrill First Quarter 2026 Conference Call. [Operator Instructions] I would now like to turn the call over to Kevin Smith. Please proceed.

Hello, and welcome to Seadrill's First Quarter 2026 Earnings Call. I'm Kevin Smith, Vice President of Corporate Finance and Investor Relations, and I'm joined today by Samira Lee, President and Chief Executive Officer; Grant Creed, Executive Vice President and Chief Financial Officer; and Jacob Taylor, Vice President, Commercial. Our call will include forward-looking statements that involve risks and uncertainty. Actual results may differ materially. No one should assume these forward-looking statements remain valid later in the quarter or year, and we assume no obligation to update them, except as required by securities laws. Our filings with the U.S. 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-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 Sameer.

Thanks, Kevin. Welcome, everyone, and thank you for joining us. I'll begin with Seadrill's key priorities, followed by first quarter highlights, including recent contract awards and a brief market update. Grant will then review our financial results and speak to our improved full year 2026 guidance before I close with final remarks. Seadrill's priorities continue to be driven by our motto of focus on the drill bit. It reflects the fundamentals of our business and the standards we hold ourselves to every day. First and foremost, operational discipline underpins everything we do. Our goal is to deliver safe, efficient and reliable operations across our fleet with a focus on 0 incidents while maximizing uptime. This is supported by an adherence to our procedures, disciplined risk management and systematically learning from our experiences. By identifying issues early, closing gaps quickly and applying lessons learned across our fleet, we seek to strengthen Seadrill's performance quarter-over-quarter. Next, we are sharpening our focus on free cash flow. This means winning the right contracts and then effectively converting that backlog into cash. It also means delivering projects on time and on budget while continuing to simplify our onshore organization so every dollar spent supports value creation. Third, we are committed to capturing the upside ahead of us. Three legacy dayrate contracts roll off in 2026, and we have already recontracted 2 of the associated rigs, an important milestone that strengthens our earnings and cash flow profiles this year. As we look ahead, we believe the opportunity to reprice the West Carina at current market rates, combined with our contracting leverage in an improving market, positions us for meaningful earnings and free cash flow growth in 2027. Executing against these priorities is reflected in our first quarter performance, but the West Tellus reacceptance and the West Capella reactivation projects were completed ahead of schedule and on budget, enabling early start-up and revenue generation. We delivered a solid quarter, both financially and operationally, with EBITDA of $97 million and strong economic utilization. As a result of this performance, we are raising full year revenue and EBITDA guidance, which Grant will cover in more detail. Importantly, we remain on track for meaningful free cash flow generation starting in the second half of 2026. I want to extend a special thank you to our offshore crews for the tremendous work delivered this quarter. Our performance is driven by your collaboration and operational discipline and your continued efforts to strengthen Seadrill's position as a leader in deepwater drilling. Turning to our contract awards since our last call, we have added approximately $860 million to our backlog. In the U.S. Gulf, industry-leading performance continues to translate into follow-on work. In April, the West Neptune and West Vela each secured new contracts with LOG, adding approximately $260 million to our backlog. We are pleased to expand our relationship with LOG, now a subsidiary of Harbour Energy and look forward to supporting their ambitions to establish a leading position in the U.S. Gulf with a second drillship now unlocking valuable resources. Last quarter, we noted that 7 drillships were expected to roll off contract in the U.S. Gulf before year-end. Removing white space for both of our drillships in the region significantly improves revenue visibility and reduces idle time in 2026 for Seadrill. Both rigs are now positioned to capitalize on improving supply-demand fundamentals in 2027 as other assets find work or leave the region. Ultimately, we believe improving market utilization will drive the potential upward day rate momentum. In Angola, the Sangon-Kingyoa had a 7-well priced option exercised, committing the rig into mid-2028. Lastly, in Brazil, the West Polaris was awarded a 3-year extension with Petrobras in direct continuation of the current program, extending a sixth-generation drillship into the next decade. Consistent with our focus on free cash flow, this extension has no additional CapEx requirements and does not require lengthy acceptance testing normally found in Petrobras contracts. In addition, we now anticipate the West Carina will remain on contract until mid-June. We continue to see a strong demand pipeline driven by growing deepwater exploration as operators intensify efforts to secure future growth. There's a clear shift amongst majors and large independents towards allocating incremental capital to deepwater, addressing the exploration underinvestment over the past decade and offsetting production declines. At an industry conference in March, the largest operators in the world highlighted the reality of production declines and the maturation of onshore plays. Chevron's CEO noted that the natural decline of existing fields as a growing supply challenge. He described the loss as the equivalent of 5 Saudi Arabia over the next decade. Similarly, ConocoPhillips CEO noted that the peak in shale output has helped shape their strategy of targeting major new conventional discoveries. This decline, coupled with recent exploration successes from ENI in Indonesia, Egypt and Libya, Petrobras in Brazil and Colombia and Oxy in the U.S. Gulf to name just a few, further strengthens our thesis that a new exploration cycle is emerging. -- the start of the year, geopolitical tensions pushed import-dependent economies to prioritize energy security with examples such as India's initiative to drill approximately 150 wells over 7 years amid sanctions on Russian crude. The Iran conflict has further intensified this focus, reinforcing the need for domestically anchored supply, where deepwater will be the beneficiary. With production shortfalls already in the hundreds of millions of barrels and pressure to rebuild strategic reserves, deepwater resources are becoming increasingly attractive and even better positioned for development. Energy security is back in vogue. In summary, sentiment has improved since our last call. Demand in Brazil has crystallized with several multiyear extensions recently awarded. Despite a softer '26 in the U.S. Gulf, we've contracted both of our drillships in a highly competitive environment. Going forward, we expect available capacity to be redeployed across the Atlantic Basin towards the Eastern Hemisphere, where demand continues to strengthen. Taken together, rising demand from deepwater exploration and a renewed focus on energy security increases our confidence in an improving 2027 and a firmer commodity backdrop provides an additional tailwind for offshore project economics. With that, I'll hand the call over to Grant.

Thanks, Samir. I'll now walk through our first quarter 2026 financial results before providing an update on our outlook for the balance of the year. First quarter results surpassed expectations due to early contract commencements, solid economic utilization and the timing of operating expenditures. During the quarter, the West Jupiter underwent reacceptance testing and began its new contracts with Petrobras in late March. The West Capella was successfully reactivated and commenced operations late in the quarter, and the West Tellus entered reacceptance testing following the completion of its contract in mid-March. Contract drilling revenues were $277 million, up $4 million quarter-on-quarter. The key drivers were more operating days and higher day rates for the West Vela and higher economic utilization across the fleet with increased uptime driven by strong operational execution. This offset the impact of fewer operating days for the West Jupiter and fewer operating days for the Sevan Louisiana, which had a short gap between programs. Reimbursable revenues decreased, offset by a corresponding movement in reimbursable expenses. Management contract revenues decreased by $2 million to $63 million due to the timing of add-on services, which can fluctuate quarter-on-quarter. Leasing revenues were consistent with the prior quarter at $8 million. Now moving to operating expenses, which were $334 million in the first quarter, down $10 million from the prior quarter. The movement was attributable to a reduction in vessel and rig operating expenses relating to the capitalization of mobilization costs for the West Jupiter with the cost to be amortized over the 3-year contract term. And that was partially offset by higher costs related to the preparation and commencement of the West Capella contract. Resulting EBITDA was $97 million, a sequential increase of $9 million compared to the prior quarter. Turning to the balance sheet and cash flow statement. We ended the quarter with total cash of $329 million. The $35 million use of cash in the first quarter included $13 million of capital expenditures captured in investing activities and $38 million of long-term maintenance recorded in operating activities. As anticipated, our cash position was largely impacted by the reactivation and contract preparations for West Capella, the reacceptance testing for West Jupiter as well as timing of working capital. We are increasingly confident in a return to strong cash flow generation in the middle of 2026. We expect cash receipts totaling approximately $70 million over the next 2 quarters relating to lump sum mobilization revenues from Petrobras as reimbursement for reacceptance projects for both the West Jupiter and West Tellus. These receipts as well as benefiting from incremental day rate revenues from the West Jupiter, West Capella and West Telles contracts will mark the inflection point in our cash profile this year. Overall, our capital structure remains robust. Gross principal debt was $625 million at quarter end with maturities extending through 2030, and we have access to $482 million of total liquidity when including available borrowing capacity on our revolving credit facility. And now turning to our outlook for the remainder of the year. First quarter EBITDA was stronger than anticipated, with a portion of the outperformance attributable to the timing of repair and maintenance expenses that are expected to occur later in the year. We are updating our revenue and EBITDA guidance ranges to reflect project execution as demonstrated by the early commencements of the West Jupiter and West Capella contracts in the first quarter and additional operating days for the West Carina, which is now expected to work through mid-June. For the full year 2026, we are updating our guidance for operating revenues to $1.43 billion to $1.48 billion, and that excludes $50 million of reimbursable revenues and our EBITDA range to $370 million to $420 million. And that EBITDA guidance includes a noncash net expense of $26 million related to the amortization of mobilization costs and revenues, of which $7 million has been recognized at the end of the first quarter. Full year capital expenditure guidance range is maintained at $200 million to $240 million. I'll now hand the call back to Samir for his closing remarks.

Thanks, Grant. In closing, I'd like to reiterate our priorities, safe, reliable operations, free cash flow generation and capturing the upside. We are proud of our performance to start 2026, executing key projects ahead of schedule, adding meaningful backlog, delivering first quarter EBITDA that exceeds expectations and raising our full year revenue and EBITDA guidance. Collectively, these achievements enhance our line of sight to higher earnings and free cash flow in the second half of 2026 and in 2027. With that, I will now hand the call over for questions.

And your first question comes from the line of Fredrik Stein with Clarksons Securities.

I hope you are well and congratulations on a very solid first quarter performance. I wanted to kick it off here with maybe a high-level question. You paint a relatively, I think, supportive demand story, which I definitely agree with myself. But the start of 2026 has been quite eventful from a geopolitical perspective. But my take on this is that the pivot towards more exploration, more conventional oil and gas activity rather than just M&A to replace reserves is something that was on the way of happening anyway. And I guess my question is, would you agree with that and any kind of additional commentary you might have around it? And also with the war in the Middle East now adding some aspects around energy security, et cetera, on top of that, how has that changed, if anything? And are we starting to see any impact of that war into tenders, et cetera, at the moment? Or is that too early?

Yes, absolutely. So I'd say we saw it coming before kind of if you kind of roll the clock back and like January 1, just to pick a date, when we look -- did our forecast and looked out in kind of demand in the world, we saw clients already starting to talk about investing in new regions and going back and finding hydrocarbons through the drill bit. To your point, historically, they bought a lot of their hydrocarbons via M&A. But I think there was that pivot that came of, look, we have to go invest in places like Namibia or Angola or even Mozambique, just to pick a few places. So we saw that coming early this year. And then on top of that, you've now had what's going on in Iran, so -- which has helped commodity prices, obviously, which has added some cash to their balance sheets and allows them to spend. But on top of all of that is you have energy security. So a long way of saying, yes, we saw that demand coming already. And then what you've seen with what happened in Iran has just added fuel to that fire of energy security and a higher commodity price for them to go explore even more.

All right. And as a follow-up to that, if -- and I'm sure there are some stats on this. But if you think about it, the share of exploration drilling versus development drilling over the last, let's say, 5 years, given this new exploration cycle, if you will, are you able to, in some way, quantify how much additional demand that can come from new exploration versus what you've seen historically again over maybe the last 5 years?

It's hard to quantify right now. But historically, if you look at it, exploration, by definition, is a little less efficient than development because you're not doing exploration wells with an eyesight of each other with a development program, you're kind of rinse and repeat on the same field. So exploration, you have one well here or one well there. So by definition, that will take a bit more time and add more incremental demand for our assets and our peers' assets. So hard to quantify exactly how much more demand comes from the exploration, but we definitely see more exploration coming, and that will drive more demand going forward.

Your next question comes from the line of Eddie Kim with Barclays.

So obviously, the world has changed since your last earnings call 3 months ago. Just wanted to ask if you could remind us on how you see the trajectory or the progression of leading edge pricing, which I assume is probably improved since 3 months ago. But we're kind of still in the low 400s today for leading-edge drillships. Do you suspect we'll see contract announcements maybe by the end of this year in the mid-400s or even the high 400s. Just any thoughts there based on the customer conversations you're having today would be great. Sure. I'll start and then I'll hand it over to Jacob to provide some more color. So when we look at day rates, right, Eddie, for us, it's about free cash flow generation, right? So when we look at internally on bidding stuff, it's part yet obviously, day rate matters, but it's how much free cash flow can you generate off that contract. So I would just frame it that way of how we think about day rates, at least at Seadrill. And as we look forward, demand continues to improve and utilization is kind of picking up across the world. So that should lead to day rate progression as we move into 2026 and into 2027. But I'll let Jacob speak a little more on that.

Eddie, I think if we look back over the last 3 to 4 months, we've had the strongest backlog cycle we've had since 2012. I think we've had over 71 years of contracted term being awarded throughout the industry. And that was predicated on a market that was materializing before the war broke out. And I think that this is just going to bring momentum and a windfall of cash to some of our customers who are going to continue to invest going forward. And this -- what we have going forward is we have opportunities within Indonesia, Namibia, Nigeria, Suriname, U.S. Gulf with long-term contracts anywhere from 2 to 3 years that we expect to be awarded here before the end of '26. So I think that, that definitely creates an opportunity for rates to be pushed up further than they are today.

Great.

My follow-up is just on potential M&A and perhaps increasing the size of your fleet. It would seem that having more rigs and rig availability in this rising pricing environment would be a good thing. Are there sort of obvious acquisitions of one-off drillships out there or even larger corporate M&A? And just curious on your willingness to increase the size of your fleet or if you're comfortable with the size of your fleet at this stage? Yes, I'd say we're at minimum efficient scale. Our focus is on -- if we're going to do M&A, making sure it's an accretive deal. So for us, we're not juning to do a deal just because we -- just for the sake of it, if it makes financial sense, absolutely, we'd look at it. And we look at it on the other side as well, right? So we are a public company. Our job is to make sure we maximize shareholder return, and that is going to be the focus.

Your next question comes from the line of Keith Beckman with Pickering Energy Partners.

Congrats on the quarter, guys. I just wanted to hit a little bit more on free cash flow around -- I think that you guys -- thinking about working capital, you kind of talked about the $70 million that you guys expect to be paid back through the rest of the year. And then 2027 should also -- we're thinking should be a really strong free cash flow year for you. Can you maybe talk about how you're thinking about free cash flow conversion through the balance of that? And then maybe also hit on whenever you get all this free cash flow, how do you plan to deploy it? Is that the buyback or kind of like -- or potentially M&A similar to what Eddie was just talking about?

Yes. Thanks, Keith. You dead right. We've been looking to this inflection point for some time and looking to it with great enthusiasm, and it's now upon us. And of course, cash flow wasn't the strongest Q1, and that was entirely as anticipated given the fact that we were going through reactivation of Capella and the reacceptance of Jupiter. And of course, Q2, we have the reacceptance of TELUS as well as a headwind. But then on the tail side, we have lump sum mobilizations, which I mentioned in my prepared remarks of $70 million due to us from Petrobras in respect of Jupiter and TELUS. And then importantly, the Jupiter and TELUS move off of legacy contracts and legacy day rates that were lower rates on to market rates in Brazil, and that's going to be really instrumental to that free cash flow generation starting in the middle of the year. And then moving forward, your question around what we do with that cash. Look, as a management team, to be honest, we're focused on generating the cash, and that's our #1 priority. How we distribute that, we'll take a decision at that point in time. And that's -- yes, so I don't want to get ahead of ourselves there. We've demonstrated in the past that returning capital to shareholders is extremely important to us. And so that's a data point to look at. But yes, I don't want to get ahead of it on how and what we do. We just want to focus on generating it for now.

Keith, just to put in on that. Our job as a management team is to maximize free cash flow generation. And that's what this team is going to be focused on.

Perfect. That's awesome. And then my second question, I just wanted to check in and see potentially what the outlook -- you guys have done a really good job contracting several -- like the 2 Gulf rigs in particular. But just thinking about the Karina, maybe what's the outlook on it after the extension it received in June with Petrobras?

Yes. So for the Karina, we are finishing up the well currently with Petrobras. We've said that it's probably mid-June. After that, we are chasing opportunities both inside of Brazil, in South America and other markets. These are mobile rigs, and we will chase opportunities around the world for that asset. So nothing to announce at this point, but we've got until mid-June, and we are pursuing opportunities actively.

I think one thing I would add to that is we have been successful in recently contracting some of our seventh gen rigs and covering that white space in '26 and '27. And we like the idea of having the Karina available to us for playing the upside going into '27, which we feel is going to be a strong year.

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

Sameer, I'd like to talk a little bit about -- for my soft voice today. The outlook in Brazil and kind of some of the things that we're starting to hear was, if you go back in time, Petrobras has clearly been very opportunistic in how it's contracted rigs and the fixed at the bottom, more recently, the outlook for -- it sounds like when we listen to these calls, you included, the outlook for the industry, the floater industry as a whole is pretty positive. So really, my question is you have the rig rolling off in Brazil. You mentioned the Karina. You mentioned there's potential opportunities, whether that's with -- you didn't specifically say it's with IOC or maybe Petrobras. Really, what I'm wondering is, as we look at the outlook for Brazil rigs, I guess there's 2 questions. One is, what is the opportunity for IOCs? And it seems to be that there's growing consensus that -- or at least there was a growing consensus that Petrobras was going to shed 2 to 3 rigs. Could we be in an environment in '27, maybe where Petrobras isn't as net negative from where they are today?

Look, I think it's possible, but Petrobras, they are incredible acquirers of rigs just given their size in the market. We still believe that they're probably net down 3 to 4 rigs kind of if you roll the clock forward a year from now. Could some of those get picked up by IOCs? Absolutely, right? The IOCs are starting to ramp up. But -- so I wouldn't say that it's likely, but it's definitely possible that you could see that situation. But I think overall, what we are seeing in the market is that demand is continuing to increase, right? I think Petrobras probably is back in the market later this year or next year. I think there will be other demand pulls from West Africa and from Southeast Asia. So as we look forward, as Jacob mentioned, we're quite happy that we've got the Karina to redeploy into a higher day rate.

Your next question comes from the line of Hamed Khorsand with BWS Financial.

Was there any update on the Gemini?

Nothing specific that we mentioned, but the rig continues to perform quite well for -- in Angola, and we think that there's more room in that JV and kind of more demand as we look into 2027 in Angola and across West Africa. So we remain cautiously optimistic about the ability to continue finding work for the Gemini.

And is it too early to talk about bringing stacked ships back online?

Look, as we look at our stacked fleet, we've got 2 harsh environment semis that are probably the most likely candidates to reactivate. We would look to reactivate them for the right contract. There is a cost of capital a between what our cost of capital and our clients' cost of capital is. If they're willing to fund a large portion of that reactivation, would we look at it? Absolutely. As we look back, we think the harsh environment market continues to tighten just like the rest of the floater market. And there's probably going to be a need for those assets. But in the near term, I think it's a bit challenged. But longer term, we could absolutely look at reactivating them. But I think the key there is, given the focus on free cash flow, we are not going to fund that on our balance sheet. A client will have to fund that reactivation.

And your next question comes from the line of Noel Parks with Tuohy Brothers.

One thing I was thinking about is if we sort of look at the current really encouraging environment fundamentally now for offshore and sort of contrast it with the last big rally in the sector sort of 2023 into 2024. I just wonder, is it possible to sort of contrast maybe the relative capabilities of the global fleet just in terms of efficiency, technical upgrades and so forth that could sort of help make an argument for not just sort of reachieving the levels we had before, but even more robust cycle kind of maybe even above and beyond what we're seeing with the exploratory boost?

Look, if I look at our fleet, we're -- we've continued to invest in making sure that they're at the leading edge of technological upgrades and competitive. Do I think there's more efficiency to be had? Potentially, but I don't think there's a step change in efficiency that's coming with the current technology we have, right? For us, we -- there's probably a bit more to do, but I wouldn't say that you're going to get a 40% or 50% increase in efficiency from here.

Got you. And I wonder if you just had any further thoughts. You mentioned, of course, the trend of -- general trend of equipment moving out of the Atlantic Basin and moving east. And I just wonder on the customer side, as they look to, again, what costs might look like in the cycle heading up from here, do they -- the ones that are multi-basin in their drilling, is there any degree of sort of regional arbitrage they're looking at sort of like a project maybe a little bit less upside, keeping a rig in region or being able to hang on to a rig in anticipation of something maybe a larger program that they're looking to for next year versus just going totally on near-term economics as far as making the regional choices?

Yes. Look, I think when you speak to our clients, they view their portfolio the same way you would rationally and they're going to allocate capital where it makes the most sense for them. We have talked to certain clients that have said, look, we're pulling capital away from a particular market and investing in the Gulf, for example, the U.S. Gulf. We have talked to certain clients that are ramping up their investments in Southeast Asia. So I think it really is client-specific and where their acreage sits and how ready to develop those programs are. But when we do speak to the kind of the bigger international oil companies, a lot of them do seem to be shifting capital to Southeast Asia and West Africa. It really does feel like there's a demand pull there, but by no means does that mean that that's the only place we're seeing demand improve.

There are no further questions at this time. Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.

Thank you for standing by. My name is Rebecca, and I will be your conference operator today. At this time, I would like to welcome everyone to the Seadrill Fourth Quarter 2025 Earnings Call. [Operator Instructions]

I will now turn the call over to Kevin Smith, Vice President of Corporate Finance and Investor Relations. Please go ahead.

Welcome to Seadrill's Fourth Quarter 2025 Earnings Call. I'm Kevin Smith, Vice President of Corporate Finance and Investor Relations; and I'm joined today by Simon Johnson, 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 risks and uncertainty. Actual results may differ materially. No one should assume these forward-looking statements remain valid later in the quarter or year, and we assume no obligation to update them, except as required by securities laws.

Our filings with the U.S. 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-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.

Thanks, Kevin. Hello, and thank you for joining us for today's call. I'll begin by recapping our 2025 achievements before moving to the broader market outlook.

Following my remarks, Samir will discuss recent contracting successes and our commercial outlook. Grant will then review fourth quarter and full year 2025 financial results before providing guidance for 2026.

For full year 2025, we delivered EBITDA of $353 million, exceeding the midpoint of the original guidance range in what proved to be a very challenging market. Safety is the foundation of everything we do. And in 2025, Seadrill raised the bar again.

We achieved the best safety performance in our history as measured by total recordable incident rate, delivering 50% better than the IADC offshore industry benchmark.

That kind of margin is not accidental. It's the product of rigorous standards, elite crews and uncompromising operational discipline. That operational discipline does not stop at safety.

It translates directly into performance. In 2025, we did not simply perform well, we separated ourselves from the pack. The West Neptune reinforced its best-in-class reputation by delivering a record-breaking 6 zone completion for LLOG in the U.S. Gulf, completing the program in 11 days and exceeding the prior benchmark by an impressive 60%. That level of execution is why the rig is now entering its second decade under continuous contract.

Following Harbour Energy's acquisition of LLOG, we look forward to extending what has already been an exceptional long-term partnership built on performance. Additionally, West Polaris and West Neptune delivered highly complex NPD programs using state-of-the-art integrated riser joint technology, which translated into more than 12 hours saved during rig up and rig down per well and meaningful economic value for our customers.

With over 100 MPD wells drilled, our crews operate further up the learning curve than most in the industry. The West Elara and ConocoPhillips Supplier of the Year Award for their focus on execution, recognition that reflects not just performance metrics, but the consistency and reliability that sophisticated operators demand.

Meanwhile, the West Tellus reached an outstanding milestone, 400 consecutive days of BOP subsea deployment while delivering 5 wells offshore Brazil. This marks the second longest deployment in our fleet history, demonstrating the durability of both our equipment and our crews in a demanding deepwater environment.

This superior performance has already extended into 2026. In January, the Sevan Louisiana successfully executed 2 well interventions using Trendsetter's innovative Trident system, its first deployment in the U.S. Gulf. This advanced technology is broadening the rig's market potential, attracting attention from customers who appreciate its operational flexibility and its proven effectiveness in both shallow and deepwater environments.

Our strategic partnership with Trendsetter has resulted in a truly differentiated offering that will continue to deliver advantages for both companies well into the future.

None of this performance is coincidental. Throughout 2025, we invested deliberately in our people through ongoing professional development opportunities. We expanded course offerings at the Seadrill Academy in Dubai, operational discipline and technical services workshops around the world and launched our first safety leadership assessment program.

We conducted training in simulated environments that replicate our equipment and procedures, resulting in a cycle of self-improvement and advancement in our operational practice. Our customers consistently reference the quality of our crews, their can-do attitude and their focus on well site performance over centralized bureaucracy. This is what operating at the top of the performance curve looks like, technical capability matched by disciplined execution.

Commercially, in a competitive market, we maximize utilization across our high-specification fleet. Our backlog profile provides strong revenue visibility into 2026, growing coverage into 2027 and substantial contracting leverage in an improving market. The West Capella's return to operations in the second quarter of 2026 represents a significant enhancement to Seadrill's forward earnings trajectory.

The 14-month award from long-standing customer, PTTEP, reflects confidence in the rig's consistent performance throughout its many years in service and reinforces our competitive position in a region experiencing growing energy consumption and offshore activity.

Turning to the broader market. The current macro environment is the most favorable in recent memory. After a subdued 2025, the ultra-deepwater market entered 2026 with renewed strength. Tightening supply and increasing visibility point towards an even more robust 2027 as day rates, utilization and contract durations gain positive momentum.

The International Energy Agency's annual World Energy outlook now projects that oil and gas demand will grow through 2050, a notable reversal from prior expectations of a near-term peak. Declining production from existing fields and rising consumption is forecast to quickly absorb any near-term oversupply.

In fact, the market will require roughly 25 million barrels per day of new production by 2035 just to remain in balance. Growing oil demand, operators pivoting back towards deepwater and mounting confidence in the next exploration wave all indicate the beginning of an upcycle.

For several quarters, we have consistently highlighted that operators have prioritized shareholder returns over reserve replacement. The impact of underinvestment is becoming increasingly evident and that narrative is beginning to flip.

Amid projections of growing oil and gas demand and the lagging energy transition, the longevity of reserves is becoming a focal point for oil majors and the sell side.

The Financial Times last week reported that oil and gas super majors are undergoing increasing pressure to spell out their growth plans after years focused on shareholder returns and capital discipline. They are now facing growing calls to explain the visibility of future production and where the new barrels will come from.

It seems that concerns about short-term supply imbalances have receded in the wake of a far bigger problem. Momentum behind the strategic pivot to deepwater continues to build.

Just last week, Eni announced significant new discoveries in Namibia and Cote d'Ivoire, underscoring the growing scale of opportunity in frontier offshore basins. Importantly, this trend extends beyond the majors.

The government of India, for instance, has outlined plans to drill 150 wells over the next 7 years, activity that could necessitate up to 5 additional floaters.

We've highlighted growing deepwater exploration from the majors and activity has accelerated as they intensify efforts to secure future growth. Shell recently acknowledged the need to rebuild its exploration pipeline after reserves fell to the lowest level since 2013.

We can already see this in action with Shell signing a joint study agreement for exploration blocks in Indonesia, marking the return following the 2023 exit.

Chevron plans to increase annual exploration spending by roughly 50% over coming years with 10 to 15 exploration wells in the U.S. Gulf and 20 exploration wells in West Africa during the next 3 to 5 years. Chevron also signed an agreement for offshore exploration in Syria and acquired 4 blocks offshore Greece earlier this month.

Petrobras is returning to Namibia after acquiring an interest in the block in the Luderitz Basin and Libya recently awarded blocks under its first lease sale in 17 years. The need for new reserves and sustained production growth is increasingly urgent.

Exploration is back and it's scaling. And with that, I'll turn the call over to Samir.

Thanks, Simon, and good day to everyone. I'll walk through our recent contracting activity before sharing our thoughts on the commercial landscape for the year ahead. Despite a competitive environment in 2025, the value of contracts we secured has grown every quarter over the last 12 months.

Our disciplined approach to fleet management, minimizing idle time and securing contracts that maximize our assets' technical capabilities has established a solid foundation as the balance between global offshore rig supply and customer demand becomes increasingly constrained.

Since our last earnings update, we've added $0.5 billion to our contracted backlog, which currently stands at approximately $2.5 billion.

In the U.S. Gulf, Seadrill continues to be a preferred contractor. Our skilled teams consistently deliver high performance, earning repeat work and recognition. In December, the West Neptune secured a 4-month extension with LLOG, securing the rig schedule into September and adding $48 million to contracted backlog.

As Simon mentioned earlier, we look forward to deepening our partnership with LLOG under its new ownership, building on over a decade of productive collaboration and shared success.

Staying in the region, the Sevan Louisiana has been awarded a well intervention program with 2 different customers. We are pleased to report on the successful deployment of the Trendsetter Trident well intervention system on our campaign with Walter Oil and Gas.

After completing the work with Walter, we are eager to demonstrate the Sevan's continued versatility through upcoming work with a large IOC.

Outside the U.S. Gulf, Seadrill has been actively securing several contracts over the last 3 months. In Angola, TotalEnergies exercised a priced option to commit to Sonangol Quenguela for an additional 10 months into February 2027.

In Norway, Equinor awarded the West Talara a 450-day accommodation contract after we reached a mutual agreement with ConocoPhillips to make the rig available.

In Brazil, the West Carina extended its current contract with Petrobras through April 2026. Also in Brazil, Equinor exercised a priced option on the West Saturn, keeping the rig working through October 2027.

Lastly, the West Capella was successful in a competitive tender with PTTEP in Malaysia. The program is anticipated to commence in the second quarter of 2026, contributing $152 million to contracted backlog over an estimated period of 440 days.

More importantly, the reactivation of the West Capella strengthens Seadrill's earnings potential in 2026 and 2027, reaffirming our presence in Southeast Asia, one of the most exciting geographies for deepwater demand. This award reflects our disciplined approach to reactivations, deploying capital selectively, where we see strong customer commitments and attractive return potential.

Turning to our outlook. We maintain our confidence in deepwater demand in '26 with even more optimism looking into 2027. The offshore drilling industry operates on a simple principle, utilization drives day rates. With committed drillship utilization currently at 88% and sideline capacity unlikely to enter the market, supply constraints are likely to intensify as demand continues to rise.

Although some market softness may persist in certain geographies during parts of the year, the sheer number of opportunities and the durations of programs are increasing, particularly in high-growth regions such as Africa and Southeast Asia. Seadrill is well positioned to capitalize on that opportunity set.

At present, 90% of the midpoint of our 2026 revenue range is covered by firm backlog and we are having ongoing conversations regarding the rigs that have near-term availability. In the U.S. Gulf, recent day rates have remained stable in the low 400s.

And despite some near-term softness, we anticipate rates will remain in this range. 7 drillships, including the West Neptune and the West Vela are set to become available in 2026.

Importantly, for our rigs, both are contracted in the first half of the year, allowing us time to secure work in the second half of the year. With several long-term opportunities in undersupplied geographies, we expect some rigs will be bid outside of the region and may leave the U.S. Gulf.

Nevertheless, short lead times in the U.S. Gulf means demand can recover swiftly. Our assets in the region demonstrate outstanding technical performance. As Simon pointed out, the West Neptune has consistently set new records.

The West Vela has a reputation for completing projects ahead of schedule and under budget and the Sevan Louisiana is drawing increasing interest from clients who appreciate its unique capabilities and strong results in niche applications. All 3 rigs are at the top of the performance curve and are very well placed to fill their schedules in 2026 and 2027 in the U.S. Gulf or in other regions.

Moving to Brazil. IOCs have begun to consume rig capacity. Recent awards from Shell and BP and an ongoing tender with Equinor are positive developments that help mitigate current uncertainty around NOC plans.

The West Carina, our seventh generation drillship equipped with MPD and dual BOV capabilities is set to finish its current contract at the end of April. We continue to actively market the rig for opportunities with customers in Brazil and outside the country for a wide range of projects starting in the second half of '26 and early '27.

In West Africa, our final rig with availability in 2026 is the West Gemini, which is currently operating under the Sonadrill joint venture. As noted in the previous quarters, recent contracting awards for all 3 rigs within the JV reinforced its stability and our market-leading position in Angola.

The West Gemini has promising prospects to secure additional work through the joint venture, both in Angola and across Africa beginning in late '26 and early 2027.

The outlook for global deepwater demand is becoming clearer and leading indicators support this perspective. Market research by Westwood shows the number of subsea tree installations has increased for 5 consecutive quarters.

They also forecast that floater utilization rates will recover, reaching 91% in 2026 and 96% in 2027. Additionally, there are 44 years' worth of outsetting floater requirements with commencements across Africa and Asia alone.

Ongoing industry consolidation continues to support a more rational supply environment, reinforcing on the sustainable pricing improvements. And as ever, market research does not capture opportunities resulting from direct negotiations.

The foundation for 2026 has been laid. In particular, the benefit of repricing legacy contracts for the West Jupiter, West Tellus and West Saturn will be felt in the second half of the year and even more so in 2027.

This should set the stage for a meaningful increase in earnings and free cash flow. For Seadrill's fleet, we are not just predicting increasing day rates, we are already securing them. And with that, I'll hand it over to Grant.

Thanks, Samir. I'll now walk through our fourth quarter and full year 2025 performance before providing our outlook for 2026. For the fourth quarter of 2025, total operating revenues were $362 million compared to $363 million in the prior quarter.

Contract drilling revenues were $273 million, a sequential decrease of $7 million, driven by fewer operating days for the West Vela, which commenced a new contract in mid-November. This impact was partially offset by additional operating days for the Sevan Louisiana.

Reimbursable revenues, which increased $5 million during the fourth quarter to $16 million, partially offset the decrease in contract drilling revenues.

Total operating expenses for the fourth quarter were $344 million, a sequential increase of $7 million, mostly due to a rise in depreciation and amortization costs associated with the capitalization of recently completed SBS and capital projects. SG&A was flat quarter-on-quarter at $27 million.

Resulting fourth quarter EBITDA was $88 million, bringing full year 2025 EBITDA to $353 million, exceeding the midpoint of the guidance range previously provided.

Turning to the balance sheet. We ended the year with a total cash balance of $365 million, which includes $26 million in restricted cash. The $63 million use of cash during the fourth quarter was primarily related to 3 items; a $43 million payment for the unfavorable legal judgment related to the Sonadrill joint venture as previously disclosed in 2025; accelerated capital and long-term maintenance expenditure, which was $69 million in the fourth quarter as we brought forward spend relating to contract preparations for the West Jupiter and West Tellus and a new contract for the West Capella.

And finally, the timing of accounts payable disbursements. Overall, we continue to maintain a robust balance sheet with total liquidity of $524 million. And at the end of the fourth quarter, gross principal debt was $625 million with maturities extending through 2030.

Moving on to our outlook for the year ahead. For full year 2026, we anticipate total operating revenues of $1.4 billion to $1.45 billion and that excludes $50 million of reimbursable revenues, and EBITDA of $350 million to $400 million. And that EBITDA guidance includes a noncash expense of $26 million related to amortization and mobilization costs and revenues.

In terms of timing of this EBITDA generation, we expect Q1 to be lower than subsequent quarters as the West Jupiter, West Tellus and West Capella undergo new contract preparations. We then expect a step-up in Q2 following the commencement of these contracts.

As a reminder, both the West Jupiter and West Tellus are repricing to 3-year contracts at day rates roughly $200,000 per day higher than before, amplifying the benefit of the West Capella resuming operations.

Full year capital expenditure and long-term maintenance guidance range is $200 million to $240 million, a significant step down from the previous 2 years. We expect an inflection to strong cash flow generation in the middle of this year after the West Jupiter, West Tellus and West Capella commenced contracts and the associated CapEx for contract readiness and working capital investments are behind us.

In summary, Seadrill has built a solid foundation and is now well positioned for future earnings and cash flow expansion. The combination of an expanded working fleet, the repricing of legacy day rates, which are already embedded in backlog and declining capital expenditures significantly enhances the earnings and cash flow potential of the company in the second half of 2026 and into 2027.

Improving market conditions as widely predicted by industry participants are a catalyst for further earnings growth.

And with that, I'll hand the call back to Simon for his closing remarks.

Thank you, Grant. We delivered against our EBITDA target in 2025 while achieving record safety performance, setting operational records and investing in our people to widen that gap. We see a clear path to meaningful earnings and free cash flow expansion in the second half of 2026 and growing into 2027.

Our commercial execution and backlog visibility provide a solid foundation, while our substantial contracting leverage and improving market conditions positions us to capture rate upside as the cycle accelerates.

We have long maintained that consolidation is healthy for our industry and view the recently announced combination of 2 of our peers as further evidence of an increasingly durable market structure. Our clients agree on the need for resilient, well-funded drilling companies that consistently perform at the highest level through time.

Following the latest industry consolidation, Seadrill will be the third largest deepwater driller in the world and we see a gap between our fleet and the smaller drillers behind us.

Against this backdrop, we believe Seadrill continues to represent a compelling value opportunity. Our share price has appreciated more than 50% over the last 3 months, yet continues to trade at a meaningful discount to the U.S. listed offshore driller peer group on both forward earnings multiples and implied steel values.

To close, I would like to thank our valued customers, partners and shareholders for your continued confidence. To our dedicated employees, particularly our offshore crews, thank you for your enormous efforts over the past year.

Every success we achieved happened because of your teamwork and commitment to operational discipline, following procedures, using our tools and doing every job the right way every time. We delivered in a challenging market. We are setting the standard in deepwater drilling and we are positioned to lead as the cycle strengthens.

I'll now hand the call over for questions. Operator?

[Operator Instructions] Your first question comes from the line of Eddie Kim with Barclays.

Simon, you highlighted a more robust 2027 in your prepared remarks with day rates, utilization and contract durations gaining positive momentum. Leading-edge day rates for top-tier drillships right now are in the low $400s range.

Do you expect that as the market begins to tighten, we could see day rates on contract announcements sometime next year returning back to that sort of mid-$400s level? Or do you think that's looking more like a 2028 event?

Look, Eddie, I think you're going to see some rate movement now based on the data that we're seeing in the market, both the number of tenders, the capacity that's already been booked up with contracts starting in '27. I would expect our rates in excess of those levels, to be perfectly honest. You may see that in '26, in fact.

That's not to say it's going to be a smooth path. I think as those people who have existing white space seek to fill the front ends or the back ends of their projects they committed to, you may see a broader range of fixtures. But I think based on the data we're seeing, and Samir can go into some greater detail, I think the rates will be at higher rates than the ones you talked about.

So we're seeing demand increase and supply is inelastic. So as utilization continues to improve, we should see day rates continue to climb. But I think it will be dependent on the geography. You'll see certain geographies move before others. But directionally, it feels like utilization is going to improve as we enter into '27 and definitely into 2028.

Got it. That's great to hear. My follow-up is on the Petrobras blend and extends. I'm a bit surprised we haven't seen the conclusion of these negotiations from either yourself or your peers. When do you expect these negotiations are going to conclude?

And is the likely result of these blend and extend negotiations currently reflected in the full year guidance you've provided? Or would that represent an incremental impact?

Well, look, Eddie, we continue to have really positive discussions with Petrobras, but we don't control the timing there. So the way I would describe it is that I think it's working through the system I wouldn't see anything untoward.

I don't want to make any predictions about when that will come to pass. But our focus down there in Brazil has been to identify those rigs that are best matched to the requirements of Petrobras in the longer term. And that's what we focused on in terms of blend and extend. But Grant, I'll pass to you for the second one.

Yes. On the guidance, when we put our forecast together, Eddie, we use, of course, a number of assumptions, but we use the best information available to us at the time when putting that together.

Your next question comes from the line of Fredrik Stene with Clarksons Securities.

So I was hoping that you could maybe give a bit more color on how you're thinking about your fleet. As you walked through this in your prepared remarks, the near-term availability is mostly concentrated in the U.S. Gulf.

And it seems like there are possible changes and movement of some of those rigs potentially going to other regions. You mentioned Africa, Southeast Asia as regions to where rigs could potentially go, either yours or somebody else's. So I was wondering, are you able to give a bit more color on how you're kind of strategically positioning these vessels in terms of chasing short-term versus long-term work? Are there any vessels that you would prefer to stay in the Gulf, et cetera?

And as like a sideline question to that, but within the same theme of potential rig movements, you have great exposure to Brazil. Are you considering proactively moving or bidding some of those rigs ending in '27, '28 into other regions just to lower your exposure there? Or are you kind of happy with that? Sorry, that actually turned out to be 2 separate questions, but hopefully [indiscernible].

So Fredrik, I'd say, look, with the U.S. Gulf fleet, we are obviously looking at opportunities both in the U.S. Gulf and outside the U.S. Gulf. They are some of the highest spec rigs out there in the world and some of the best performing rigs in the world.

So for us, it will be -- it's an economic choice. If we can find work in the U.S. Gulf, we'll keep them here, but they are mobile assets. And if we find an economic alternative outside of the country, outside of the U.S. we'd happily move them.

So for us, it really does come down to where do we generate the highest cash flow off of those assets. And we're not married to one geography over the other. But moving rigs is expensive. So look, we'll keep them here. But if we can't find work that makes sense, we will absolutely move them.

I'd say the same thing applies to our fleet in Brazil, right? I mean, we are happy to move rigs around. It is not cheap, but if it makes sense, we will do it. We do have a lot of exposure to Brazil.

So I wouldn't see us sending more rigs down there. Could we move an asset or 2? Potentially. But that's kind of how I classify how we view the market is we'll move them where it makes the most sense.

All right. That's fair. Then I guess this is my follow-up. But on the stacked fleet, Aquaria, Phoenix, Eclipse, do you have any updates on any of those assets since last time?

There's nothing really to share at this time. I mean, the West Eclipse has been long-term stacked down in Namibia. Of the 3 rigs that you mentioned, that's probably the one that's least likelihood of reactivation. That's a low-spec asset, requires material capital investment to reactivate it and it's not terribly competitive in terms of its overall specification.

However, I think the situation is a little bit different for the Phoenix and the Aquarius. They are also burdened with high reactivation costs. We want to be good stewards of our precious capital. And we're just waiting for the right market dynamic.

And most importantly, whereby that large capital investment can be defrayed by a material contribution by the underlying customer. That's a necessary prerequisite to bringing them back to life.

But the harsh environment, in particular, has improved dramatically over the last 12, 18 months. It's been one of the best performing sectors of the rig market. And I think we're still watching and waiting. We just need the right term of work and the right customer with a checkbook to fund the bringing the rig back to work.

The only thing I'd add to that is we're actively marketing those rigs, but it's finding that right opportunity that, to Simon's point, justifies the investment. But we announced a contract for the Elara. So we are in Norway for the foreseeable future.

So for us, we have a shore base and we'd like to add more capacity to kind of cluster more rigs in that region.

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

Simon, everybody, you mentioned the consolidation in the space. I'm kind of curious, I know in the past, you've talked about really a viable company in the offshore space kind of to be a real competitor and have a global presence needing, I think in the past, you've talked about 15 rigs.

I guess my question is around, yes, I mean, hey, your stock has had a tremendous run. It is still at a discount versus maybe some of your peers. Maybe that's scale, maybe that's other reasons. We could debate that all day long.

But I guess my question is, just given the price appreciation and now it looks like you're -- it looks like you are the third largest driller left standing, how do you think about using your equity capital to potentially expand your fleet?

And I know we've seen this in other industries, not necessarily in the offshore drilling industry, but kind of the use for shares for rigs. Just kind of curious, just given that, hey, it is definitely a pyramid structure in the offshore drilling industry where there are a few players at the top and then there are more than a few companies that have 1 or 2, just a few rigs with a small presence, just kind of curious how you're thinking about just given the run-up in the stock, potentially using your equity capital to expand your fleet and what looks like a very attractive time to be expanding the fleet at this point in the cycle?

Yes. Look, we see the cycle as very constructive. And as I mentioned to an earlier question, we think there's going to be day rate development in the months, years ahead. So that's obviously very attractive.

We're also mindful that we've done a lot of hard work over the last couple of years in terms of rightsizing the fleet and putting effort into optimizing the running of the organization.

So obviously, there's been a lot of speculation about what the future might hold following recent [ RigVell ] transaction. The customers and vendors have out consolidated the drillers in recent years.

Despite the capital-intensive nature of our segment, the drillers remain fragmented. So there's definitely work to be done. And there's a sense of inevitability about further consolidation.

I would say that there's a long tail of subscale competitors, but any opportunities for Seadrill will need to be strategically compelling and competitive within our overall capital allocation framework.

So we're constantly surveilling the market, but I think you can really expect us to be disciplined. Our shareholders have been very patient. And as our average daily rate has been improving in '27 and the revenue profile that we expect to benefit from in that year starts to come into focus, we want to make sure that we're careful with the capital that we've got.

We're careful with the equity currency. I think you can anticipate they'll be very disciplined as we look at any opportunities that might appear. Anything to add to that, Grant?

I think that covers it.

Okay. Great. And then I was hoping you could talk -- I'm curious on your thoughts around the recent ONGC tender. I know there's a couple of rigs in country. I believe they contracted a drillship earlier this month.

But really, I mean, you were one of the last international contract drillers there with the Polaris, which I guess, when that rig kind of left, that was kind of the start of the current weakness that we've been seeing in the market.

Just kind of curious, any thoughts around the timing of those tenders? Is that -- I believe it's 3 drillships and 2 semis. Is that firm? Just kind of when do you -- and more importantly, when do we actually think we could actually see some progress from ONGC in awarding those tenders, i.e., when are bids potentially due for that to give them time to digest those and come back with awards?

Yes. Great question, Greg. Let me start off and then Samir can jump into the granularity. But I think the Indian market has been very quiet in recent years. So this was a surprise news to us. I think it's really positive.

I think it's an example of work programs that hadn't been previously anticipated coming to the fore. It's not the only place where we're seeing activity pop up that was not expected. But certainly, the sheer number of rigs that they're talking about across ONGC and Oil India is obviously of tremendous interest.

We like operating in India. There's a great cost structure there. And we think that the local energy demand picture is compelling, frankly. So we intend to participate. But Samir can talk a little bit about the specific opportunities.

Yes. So look, we were one of the first to come out saying Southeast Asia, I'll include India, and that was a market -- growth market. And I think the ONGC tender's more just emblematic of the demand we're seeing out there, right?

There is an upswell of demand coming from not just ONGC, but there's other operators that we're expecting will launch here shortly or have launched. So it's more of a broad-based demand. And I think that's the key for us is ONGC will absorb 3 ships potentially and 2 semis.

In terms of timing, it could be late this year, early next year, but we'll figure that out as we go through the process. But more, I think that the key is it is an upswelling of demand and it's not in one particular country. It's not just India. It's not just Indonesia. You are seeing demand across the board in that part of the world.

Your next question comes from the line of Keith Beckmann with Pickering Energy Partners.

Similar to kind of what we've been hearing here, we've seen some large tenders show up recently as well as some increased contracting over the last month here, which has been positive to see within the space. I just wanted to get an idea of if in customer conversations, are you starting to see operators get a little bit more aggressive on locking up capacity in '27 and beyond over the last months here?

It's still early days. I think some of them are starting to come around to that. Some of them are still holding out hope. But I think that shift is coming and the tone in the conversations is moving towards looking at capacity in '27, '28, '29 even.

So you do have clients going further and further out and that to us and the terms is increasing as well, right? People are going longer term, which usually means that there is a growing concern that there might not be the supply available that they want.

I think the broader picture, too, is that we see exploration improving in every area, whether it's about new leasing rounds, whether it's about people shooting seismic. Some of the near-term indicators, FIDs are up year-on-year, subsea tree awards are up year-on-year. There's a whole picture of improvement here that's supportive and exciting.

Awesome. That's great to hear. And then my second question, well, hit on a little bit already. I just wanted to get an idea on for the second half '26 here, what's -- I think you guys said 90% contracted at the midpoint of revenues. What's kind of the maybe outlook between the Vela and Neptune and Carina, the ones that are rolling off here and then maybe even throw in Louisiana as well since it keeps finding ways to win work?

Yes. So look, we have active dialogue on all of those rigs. And I think that's the important part. So for us, we've got to turn those conversations into contracts. And we've made some reasonable assumptions on what we can do there.

But I think for us, it was a, let's see what we can do, but we have active dialogue on all 4 of the assets, some in the U.S. Gulf, some outside of the U.S. Gulf, just given most of those rigs sit here in the U.S.

Your next question comes from the line of Hamed Khorsand with BWS Financial.

So the first question is just on your outlook. Obviously, there's been a lot more activity there. But that was also the case in the prior years at the starting point that you would see some sort of pickup by the end of '26, early '27.

Is there certainty that these tenders would close in time that you could foster some sort of revenue and EBITDA improvement as the year closes? Or is this more just tentative industry talk right now?

Yes. So I'd say the difference here is the real tenders that are in market. Some of them candidly may fall away, but there's also the direct negotiations that we're having with particular clients and I'm sure my peers are having with their clients.

So when you take all that into balance, it seems like it is different this time around. And the other thing is we're not reliant on one country or one region. It is broad-based across the world.

You're seeing demand in parts of Asia, in West Africa, East Africa. So it is -- we're not relying on one country. We're not relying on one client. So it does feel like if you take the tenders that we know of right now, plus direct conversations we're having and even if some of them fall away, you still should expect utilization to increase, which will drive day rates.

And then given this backdrop, what's the conversation here about redeploying your capital to share buybacks?

Yes, Hamed, look, of course, I can't comment with specifics here, but just point back to the capital allocation, which Simon referenced earlier, our framework that we are out there publicly. It talks about having a minimum level of cash of $250 million, net leverage of 1x and then returning no less than 50% of our free cash flow during the year.

And so after we have paid for maintenance CapEx, the remaining cash that we have generated, we look at what's going to generate the highest returns for us, whether that's buying discrete assets or buying our own stock and/or returning capital to shareholders via dividends.

We'll review all those and we continuously review all those. I think it's fair to say that with this inflection that I was referring to in my prepared remarks, inflection middle of this year as we move off legacy day rates, we have the Capella resuming operations. We have the Jupiter and Tellus reacceptance projects behind us and the working capital investments behind us, we will be inflecting to cash flow-positive in quite some significant way. And so that question will become certainly more relevant as we go forward.

Your last and final question comes from the line of Noel Parks with Tuohy Brothers.

I've been thinking about -- it has been a long 18 months here and seeing the stock rebound has been great, rewarding the patience that you observed has definitely been good for investors. And I guess I'm just trying to get a sense on maybe the trajectory on pricing.

And thinking as an example, if you have a customer that is -- needs to talk about a contract renewal or extension where it's pretty obvious that they're going to hang on to the rig, just wondering what the discussion is like there? Are they totally open to realities of pricing upside?

Are they open to pricing, but looking for longer term? I just wonder what's sort of that -- those stable relationships, how those guys are coming to the table these days?

I'd say each one of them is unique and kind of has their own dance that we have to go through. Some of them are always willing to give you a bit more term for a better day rate. Some are, look, I've got a 1-, 2-, 3-well program, and this is the rate I'm willing to pay and they'll pay a bit of a premium for the flexibility. So unfortunately, there's not a one-size-fits-all for our client base.

But I think overall, we're having those conversations of, look, this is the new reality. Utilization is starting to improve. We do have a few other alternatives. So we're able to kind of push rates where we can.

But I'd be cautious to say also that it really depends on what part of the market you're in, in terms of geography and what the utilization is of kind of assets in that geography.

I think it's also worth adding, Noel, that if you go back to where we were 12, 18 months ago in the similar sort of day rate paradigm, broadly speaking, you didn't have any problem getting access to a rig if you needed one. You contrast that with the situation that we see developing, emerging at the moment and it's quite different.

There's a reduced field of competition for the tenders that we're participating in, certainly starting at the end of the year. And I think that's what's driving our confidence. We just think there's a fundamentally different lead time that the customers are having to observe.

And I think your point is well made that it's probably going to drive better conversations with existing clients looking to extend rather than to seek to place capacity outside of existing contracts.

Right. Interesting. I was listening to a producer recently talk about the service environment. And it seemed they were, I wouldn't say unconcerned about their ability to secure a rig if they have some exploratory success. But they also didn't sound like they really were considering the possibility, as you said, of reduced response to tender, which I think of as people beginning to all rush to crowding through the same door at the same time.

Do you have anything under negotiation that you think will attract some real attention when contract terms get announced either near-term or longer-term?

So we're not going to go into specific contracting right now, but we are starting to see more tenders come, especially for second half of this year, really into '27, where the demand is increasing. I think you'll see some movement of rigs potentially from the U.S. Gulf into those markets, into those regions. So overall, we are seeing movement of rigs from one region to another.

Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may disconnect.

Ladies and gentlemen, thank you for standing by, and welcome to Seadrill's Third Quarter 2025 Earnings Conference Call. [Operator Instructions]

I will now hand the call over to Kevin Smith, Vice President of Corporate Finance and Investor Relations. Sir, please go ahead.

Welcome to Seadrill's Third Quarter 2025 Earnings Call. I'm Kevin Smith, Vice President of Corporate Finance and Investor Relations. And I'm joined today by Simon Johnson, 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 risks and uncertainty. Actual results may differ materially. No one should assume these forward-looking statements remain valid later in the quarter or year, and we assume no obligation to update them, except as required by securities laws.

Our filings with the U.S. 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-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.

Thanks, Kevin. Hello, and thank you for joining us for today's call. I'll begin with some highlights from this quarter, which demonstrate Seadrill's continued execution of our strategy to build backlog coverage through 2026, maximize utilization of our high-specification fleet and deliver the operational excellence that drives continuity and long-lasting relationships built on trust and performance.

Following my remarks, Samir will provide detail on our contract awards and market outlook. Grant will then review third quarter financial results and provide updated guidance for 2025.

As we navigate a period of fluctuating demand, one aspect of our commercial strategy remains clear: Maximize shareholder value by minimizing costly gaps between contracts. Since our last update, we've added over $300 million to our backlog, securing new contracts across 5 rigs. In what is a very competitive market, our collaborative approach with customers and the exceptional performance by our crews have enabled us to maintain our competitive edge.

In Angola, securing work for the 3 rigs in the Sonadrill joint venture was a key strategic priority, enhancing the longevity of the partnership and reaffirming our position as the #1 drillship operator in Angola.

The Sonangol Libongos commenced its new program in August, keeping the rig committed into early 2027 and extending the relationship with our client into its eighth year. This show of faith by the customer reflects the results delivered by our offshore crews and onshore teams day after day. The Libongos has been recognized as the Seadrill rig of the quarter 8x more than any other drillship in our fleet.

The Sonangol Quenguela, which has worked for TotalEnergies since its maiden contract in 2022, has also won further work on a direct continuation basis and began its new program in early October. The Quenguela was awarded TotalEnergies Rig of the Year for 2024 and has sustained its exceptional operational performance through 2025.

Finally, the Seadrill owned West Gemini recently completed its special periodic survey and is expected to commence a well-based contract with Sonangol E&P in the next few months. All 3 rigs operated through the Sonadrill joint venture have delivered exceptional performance year-to-date, each achieving near perfect technical uptime in excess of 99.7%. This accomplishment reflects our unwavering commitment to deliver industry-leading operational performance.

We sincerely thank our joint venture partner and valued customers for entrusting Seadrill with the management and technical delivery of Sonadrill's operations. Our teams have demonstrated a commitment to developing local talent, world-class performance, and crucially staying at the top of the performance curve. We are proud to contribute to the prosperity of Angola, its communities and stakeholders, building a lasting legacy of responsible development and shared success.

In the U.S. Gulf, the West Vela and Sevan Louisiana each secured new programs in direct continuation, adding a combined firm term of 195 days. The West Vela was awarded a 1-well contract with Walter Oil & Gas, which we anticipate will commence in March 2026. The rig will then return to work for Talos to drill an appraisal well following the discovery drilled by West Vela in August this year.

The West Vela demonstrates our ability to leverage team expertise and performance excellence. 25% of the crew have been with the rig since it left the shipyard in 2013, and it was among the first rigs in our fleet to be equipped with managed pressure drilling. A decade of shared experience in technology development allows us to drill and complete wells that were previously considered too challenging. The West Vela remains one of, if not the best performing rig in the U.S. Gulf, routinely executing programs well ahead of schedule and under budget.

The Sevan Louisiana has secured a new contract with Walter Oil & Gas, which is expected to keep the rig working for over 2 months following the completion of its current assignment with Murphy Oil. We're grateful to Walter Oil & Gas for their continued partnership and confidence in our crews and assets. These new contracts reflect the strong collaboration we've built over time.

Also worth noting, the Sevan Louisiana is expected to finish its current campaign with Murphy Oil ahead of schedule. We appreciate the faith Murphy has placed in Seadrill as a new customer and look forward to building on our partnership as we support their operations going forward.

We continue to set the standard in collaboration and innovation. Our recent partnership with Trendsetter on well intervention activities in the U.S. Gulf is our most recent example. We're preparing to install Trendsetter's equipment on the Sevan Louisiana, making an already distinctive rig in both design and function even more capable. This upgrade gives the rig flexible operating modes across both shallow and deepwater environments, opening new markets and enhancing its commercial appeal.

Staying in the U.S. Gulf, the West Neptune commenced its first well with its newly installed MPD system in October with LLOG. The rig system includes the state-of-the-art Integrated Riser Joint that is set to be the new standard in safer, more efficient and more reliable MPD operations. The West Polaris is also equipped with this system and has successfully delivered 2 MPD wells for Petrobras so far this year.

By executing wells safely, ahead of schedule, and under budget, we built a reputation as a trusted offshore partner in the Golden Triangle and in key markets around the world. Additionally, we continue to actively increase the capabilities of our rigs through time with the addition of advanced technologies such as MPD.

Turning to the market. We continue to see a constructive pace of contracting and an uptick in global tendering activity, building momentum for a market recovery as we move from 2026 into 2027. Seadrill has consistently highlighted the industry's underinvestment in offshore and the need for renewed sustained spending to offset production declines and meet future energy demand. Our view has been validated.

Oil majors are calling for renewed focus on exploration and investment to avoid a future supply crunch, and there is a growing consensus that U.S. shale production has plateaued. At a recent conference, ConocoPhillips emphasized the need to return to large-scale projects and exploration.

Notwithstanding the recent increases in production, Saudi Aramco warned of a looming global oil shortage due to a decade of underinvestment, calling for renewed spending on exploration and production. The Norwegian Continental Shelf, Equinor plans to drill 175 exploration wells by 2030. Var Energi is targeting an average 15 exploration wells annually over the next 4 years, and Aker BP intends to drill 10 to 15 exploration wells per year going forward.

We agree with Oxy CEO, Vicki Hollub, who said, "When you have the best discovery that has been made in the past couple of decades, i.e., Guyana, producing only enough to cover 1/3 of the demand in 1 year, that is a big issue". The renewed focus on deepwater is becoming clear as the industry faces the realities of prolonged underinvestment and the constraints of short-cycle supply.

Capital is flowing back into offshore projects with a steady pace of new FIDs while exploration activity is gaining pace across many geographies and geologies. At the same time, natural gas demand continues to climb, driven by emerging uses such as data centers and the need to support an overstretched power grid. Deepwater is once again at the center of meeting the world's energy needs.

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

Thanks, Simon, and good day, everyone. To recap, since our last earnings release, we've added over $300 million in backlog, bringing Seadrill's total contracted backlog to approximately $2.5 billion. We made strong commercial progress, securing new work across 5 rigs, eliminating idle time while focusing on cash generation.

Starting with Angola, all 3 rigs in the Sonadrill joint venture have been extended. The Sonangol Quenguela has been awarded a 210-day program with TotalEnergies, which will keep the rig working into mid-2026. We remain confident that the rig will secure more work in the near future.

The Sonangol Libongos began a 525-day program in August, filling its schedule into 2027. The West Gemini will start a 280-day contract in the next 1 to 2 months, following the completion of its special periodic survey during the third quarter.

Combined, these 3 awards solidify our leading position in Angola. In the U.S. Gulf, 2 of our 3 rigs secured new contracts in direct continuation of existing operations. The West Vela was awarded a contract with Walter Oil & Gas. Drilling is expected to commence in March 2026 with an estimated duration of 65 days and a total contract value of $28 million, excluding MPD.

Following this program, the rig will return to work for Talos to drill an appraisal well. The Sevan Louisiana has secured a short program also with Walter Oil & Gas, expected to last around 70 days, starting immediately after it concludes the current work with Murphy.

Collectively, these awards contribute over 3 years of backlog, reinforcing the effectiveness of our contracting strategy and the robustness of our customer relationships. Our track record demonstrates an ability to attract new clients while consistently securing additional work with existing partners.

Turning to the market and to build on Simon's remarks, we continue to see constructive contracting momentum and an uptick in global tendering activity, supporting a broad-based recovery. These dynamics lead us to believe that there will be an increase in contracted utilization and meaningful day rate progression as we move from 2026 into 2027.

The International Energy Agency's latest report reinforces what we're hearing in customer discussions. It highlights that nearly 90% of upstream investment since 2019 has gone towards offsetting production declines rather than adding new capacity. Conventional oilfields now account for only 77% of global oil output, down from 97% in 2000, emphasizing the need for new offshore projects.

At the same time, the IEA has halved its forecast for U.S. renewable energy growth by 2030, which signals that hydrocarbons will remain a central part of global energy supply for longer than previously expected. Combined with plateaued shale production, we believe the stage is set for a renewed investment in deepwater development. We're seeing this recognition translate into real investment. Operators are sanctioning major offshore projects with attractive economics and robust breakeven profiles.

Recent final investment decisions include ExxonMobil's $6.8 billion Hammerhead development in Guyana, supporting continued drillship demand in that basin, BP's $5 billion Tiber-Guadalupe project in the U.S. Gulf with 6 development wells and additional phases under review, Eni's $7.2 billion Coral Norte development and TotalEnergies' recently lifting force majeure on its $20 billion greenfield LNG project, both in Mozambique.

Beyond development activity, exploration momentum is also building. In Brazil, Petrobras secured approval for its first equatorial margin well since 2013, part of a plan for 15 wells and $3 billion investment through 2029. Also in Brazil, Equinor has expanded its pre-salt position through its acquisition of 2 new blocks, highlighting its continued commitment to the pre-salt sector and renewed global interest in Brazil's offshore resources, spurred by BP's recent Bumerangue discovery.

In Indonesia, Eni and PETRONAS have created a JV that plans to drill 15 exploration wells and invest over $15 billion in the region over the next 5 years. Earlier this week, Shell finalized an agreement to return to Angola following a 25-year absence, securing exploration rights for 4 new deepwater blocks and investing $1 billion in the project.

More generally, Africa and Asia remain the leading sources of incremental demand. Multiple tenders continue to progress, and we remain optimistic that these will translate into rig commitments in late 2026 and 2027. In addition to activity elsewhere, it is our view that Africa and Asia will be the key geographies, which dictate the balance of supply and demand over the next 18 months.

In summary, the offshore industry is at an inflection point. After nearly a decade of underinvestment, the market is refocusing on offshore as a critical source of future supply, and Seadrill is strategically positioned to capture value from that momentum.

With that, I'll hand it over to Grant.

Thanks, Samir. I'll now walk through our third quarter financial results before providing an update on the remainder of the calendar year. Total operating revenues for the third quarter were $363 million, representing a sequential decrease of $14 million.

Contract drilling revenues declined $8 million to $280 million. The decrease is attributable to fewer operating days for West Vela and Sevan Louisiana and lower economic utilization compared to the prior quarter.

Management contract revenues decreased $2 million quarter-on-quarter to $63 million as the prior quarter included a retrospective catch-up for year-to-date inflationary increases to the daily management fee Seadrill earns for providing management, operational and technical support to Sonadrill. Reimbursable revenues decreased $5 million to $11 million, offset by a corresponding decrease in reimbursable expenses.

Total operating expenses for the third quarter were $337 million, down 9% from the prior quarter. The decrease mostly relates to a $44 million reduction in management contract expenses as the prior quarter included an accrual for historic fees payable pertaining to the Sonadrill joint venture.

This was partially offset by an $11 million increase in vessel and rig operating expenses, largely driven by the timing of repairs and maintenance spend. Adjusted EBITDA was $86 million, a sequential decrease of $20 million from the prior quarter.

Moving to the balance sheet and cash flow statement. We continue to maintain a robust balance sheet with total liquidity of approximately $600 million. At the end of the third quarter, gross principal debt remained at $625 million with maturities extending through 2030.

Total cash increased by $9 million to $428 million, including $26 million of restricted cash. Net cash flow from operations during the third quarter was $28 million and includes $69 million in additions to long-term maintenance. Payments for capital additions captured within investing activities were $19 million.

As mentioned earlier, the West Gemini completed its SPS in September with the associated cash outflows taking place in the third quarter.

Moving on to our outlook for the remainder of the current year. We are narrowing the adjusted EBITDA range to $330 million to $360 million, and that's based on an updated range for operating revenues of $1.36 billion to $1.39 billion, and that excludes $50 million of reimbursable revenues.

Adjusted EBITDA guidance includes a noncash net expense of $33 million related to the amortization of mobilization costs and revenues, of which $24 million has been recognized through September 30. Full year capital expenditure guidance range is narrowed to $280 million to $300 million, and we expect capital expenditure and long-term maintenance to trend lower in 2026.

I'll now hand the call back to Simon for his closing remarks.

Thank you, Grant. In summary, we continue to execute our commercial strategy to build backlog coverage through 2026 and minimize our exposure to contract gaps. We're encouraged by signs that a market recovery is coming into view. We have consistently highlighted the industry's failure to replace deepwater reserves, a view that E&P supermajors are now acknowledging.

A shift in capital allocated towards offshore drilling is well underway with a steady progression of contract awards and an increase in final investment decisions on major offshore projects. At the same time, a renewed focus on energy security amid geopolitical instability further reinforces the strategic importance of offshore resources.

Seadrill is exceptionally well positioned to support long-term demand for energy services and create sustainable shareholder value. We believe that Seadrill represents compelling value, a view supported by the sell-side analyst community. Seadrill holds the highest proportion of buyer recommendations among the 4 largest U.S. listed offshore drillers, reflecting broad confidence in our long-term value creation potential.

I'll now hand the call over for questions. Operator?

[Operator Instructions] Our first question comes from the line of Eddie Kim from Barclays.

Just wanted to ask about what you're seeing in terms of leading-edge day rates within the Golden Triangle. The 2 short-term contracts you just announced for the Vela suggest pricing is fairly resilient in that region. But you previously highlighted an expectation of some lower data points in West Africa. And I think investors are sort of bracing for maybe some other negative data points in Brazil here on some upcoming contract announcements. So first, do you expect maybe some negative data points coming out of Brazil? And second, is that sort of a fair characterization of how you're seeing things right now, so maybe some softness in West Africa and Brazil, but resilient in the U.S. Gulf. Any thoughts there would be great.

Sure. So Eddie, I'd say it depends what market you're in. I'd say in the U.S. Gulf, you've seen what we think we can get, and we've shown that we're able to price at those levels. And you can do the math on the Vela contracts. It gets us in a pretty good spot.

If I go to the other places of the Golden Triangle, I think in the near term, there is potentially some weakness, but it's not dramatic, right? So you're going to see things in those high 3s, low 4s, I think kind of it's generally where we're tracking across the Golden Triangle, but it's really hard to pin down exactly where. But I think for us, we've tried to be very conscious about filling those gaps and focusing on getting near-term work, and we've shown an ability to get those at pretty good rates here in the U.S. Gulf.

And then my follow-up is just on your medium- to longer-term outlook, which is very constructive. One of the things you said in prepared remarks was that you expect Africa and Asia to be the leading sources of incremental demand. We've heard from some of your peers about incremental demand in Africa, of course, but less so about Asia. So could you maybe talk about which countries or which operators you're most excited about in Asia as we look forward over the next 12 to 18 months?

Sure. So in Asia, I'd say, you've got programs in India, Malaysia, Indonesia that are all starting to kind of bubble up to the surface right now. The operators are E&I, ONDC, PTTEP. So you've got to a -- it's not just one operator in one geography. It is kind of spread across different parts of Asia. So for us, we are very optimistic about that market in the near term. And candidly, for us, we've got the West Capella sitting out there that's a dual activity MPD capable rig. So we think it's very well positioned in that market.

Our next question comes from the line of Fredrik Stene from Clarksons Securities.

Congratulations on the new contracts. I wanted to touch specifically on the Capella and the Carina. And Samir, you mentioned it briefly now in the end there for the Capella. But clearly, Capella idle already. Carina is rolling off early 2026. What are your current thoughts about potential downtime, et cetera, next year for those 2 rigs specifically?

Well, perhaps I can kick off first, Fredrik, and then I'll pass to Samir for a bit of color. But I think as Samir foreshadowed in the previous question, this team has done a really good job in incrementally adding term through time. And we do, in fact, have these 3 rigs that have first half exposure, but we are continuing to make progress on the contracting front. And when we have news on that, we can share that with you.

But it's really the first half of next year, I think, where we have concern, and we expect that the market will start tightening in the second half. And we've done a good job, we believe, minimizing our exposure to that weak period of the market. But Samir, perhaps you can add some color.

Sure. So back to -- if I look at the South Asia region, the Carina or the Capella, beg your pardon is well placed within there to MPD dual activity. So optimistic that we'll be able to announce something here shortly, but nothing to announce today. If you look at the Carina, beg your pardon, we have the ability to keep her working in Brazil or we can bid her outside, and we have continued to bid that rig outside of Brazil as well.

That is a true seventh-generation asset. It's got MPD. We could easily retrofit with a second BOP. So that rig, it comes off early next year. We've got the abilities to potentially keep her in Brazil or we can move that rig to a different region as well. So for us, we have some flexibility with the Carina as we look forward.

Just a follow-up on that, Samir. Under the assumption that you potentially win something in Brazil since there are a couple of unresolved tenders there going on already. I think they call for late '26, early 2027 start-ups. In the case that you would get an award from something there, are there any extension options on the Carina under the current contract that would limit downtime in between? Because Petrobras tend to have certain clauses that can make contract extensions possible.

Yes. So what I'd say is, if we're not able to close that gap, it does make potential work in '27 in Brazil less attractive from our perspective. But it will be challenging to close that gap. 2026, as we mentioned, is going to be -- there is white space in the calendar, and it is a competitive market in Brazil. So it will be a challenge, but I'd come back to if we can't close that gap, it does make it less attractive for us to stay in Brazil.

Our next question comes from the line of Ben Sommers from BTIG.

So first, to touch on the Capella a little bit more. Just curious kind of how the cost deceleration on this rig has gone over the past few quarters. And then given the line of sight of potential work, kind of what would reactivation cost look like for that rig?

Look, on the cost side, we haven't been too explicit on that. Bearing in mind, it's in active tenders. I'd say we have said, it's stacked. It's more than the -- we've said the Eclipse, for example, is the $7,000 to $8,000 a day range. That's one bookend. I'd say it's more than that, keeping it live for tendering, but less than the typical warm stack that people talk about, the $80,000 a day, somewhere in between.

On reactivation costs, it really depends on the opportunity we're hunting for. So it does really vary case by case. So there's no one golden rule. And so I'm kind of reluctant to throw numbers out there. If you think of it as a range somewhere between -- it's going to be more than 20, less than 50, depending on what opportunity we're reactivating for.

And then as I look kind of in the back half of '26, I know we have some availabilities in the Gulf and elsewhere. I guess kind of on the day rate comments made earlier, I guess, where do you see timing on a potential kind of day rate inflection point here when we can really start to see some notable momentum in leading-edge rates?

Yes. So I think our thesis is that second half of 2026 and into '27 is kind of where we start seeing the inflection in the market. You'll see utilization pick up first, and I think day rates will be a fast follower after that. So if our thesis is as we enter next year -- or sorry, enter 2027, we should start seeing that momentum build.

Our next question comes from the line of Doug Becker from Capital One.

Curious how you would characterize your conversations with Petrobras about reducing costs? And maybe a little more explicitly, do you see potential for any blend and extend contracts on any of the existing contracts? Or is it really on about reducing costs in other ways?

Doug, yes, look, I think at this stage, we're very early in those conversations with Petrobras. I think there's a couple of important points. We're very encouraged to see Petrobras seeking the expertise in the drillers to help identify efficiencies. I think both Petrobras and ourselves are focused on opportunities that will deliver win-win solutions. Both sides need to benefit from the discussions.

We are certainly looking to trade value rather than give you lateral discounts and blend and extend is definitely one of the potential approaches. So we're open to that where it makes sense in terms of our contract portfolio and the visibility of backlog and so on and so forth.

Petrobras, as you know, is a very important customer for us. We've had a long-term relationship in what's an international market. And ultimately, rigs flow to where the greatest earnings potential is. It's notable that Petrobras have drilled more high-impact exploration wells so far this year and 2025, more so than any other operator in the world. And that's really encouraging for future demand.

So the key point here, I think, is that any cost cutting or blend and extend discussions, et cetera, that's not going to have any impact on the underlying rig demand. We believe that continues to be robust on a many years ahead outlook. So yes, I mean, we're entering into those discussions with good faith, and we think there's a possibility of both sides obtaining advantage through a frank discussion of opportunities.

That sounds encouraging. And then, Simon, you appropriately highlighted the operational performance on a number of rigs. Economic utilization did slip sequentially in the third quarter. Just any rigs or regions to call out? And how do you see economic utilization trending going forward?

Yes, it was a little bit disappointing on the cost side there, and there's a reason for that, which, I mean, there's some comments in the press release and the Q that we filed, but we can add a little bit more color, too. And I'm joined here today with by Marcel Wieggers, who is our Senior Vice President of Operations, who can talk about one of the operational incidents that occurred during the quarter that has sort of led to a departure from what our regular run rate is.

Hello, Doug. So during the quarter, one of our rigs operating in Brazil experienced a downtime event caused by design-related equipment failure. This issue resulted in operational downtime and additional cost to rectify same and implement corrective measures.

Learning from that event, we shared it across our fleet to prevent reoccurrence, of course. But in addition, we also proactively communicated these insights to our industry peers who operate some of our equipment to help them to mitigate this risk of similar failures in their operations. So if you look at our technical uptime for the quarter, if you exclude this rig, all the other rigs operated really well for the quarter with a technical uptime of 97.6%.

Yes. So we think it's a one-off, Doug, yes.

Our next question comes from the line of Josh Jayne from Daniel Energy Partners.

First one was just on the Louisiana upgrades you talked about. I assume you wouldn't do those without line of sight into something further. So maybe you could just talk about those upgrades a bit more and how they change the outlook for the rig maybe over the course of the next 12 months or so.

Yes. In the Gulf of Mexico, there's -- that market has been quite dynamic in the semisubmersible segment. And a number of our competitors have retired rigs there recently. And what we are finding that we need to do in order to keep the Louisiana continuously busy, which we've been very successful in doing that.

We've had to look at a couple of different modes of operation. And in particular, we've been getting quite aggressive in the plug and abandonment and the well intervention market. So what we're doing is we're making some discrete modifications to the rig, and we're setting up through an alliance-style partnership with Trendsetter, the ability to switch between drilling mode and well intervention and P&A mode. And the way -- as I say, that requires some discrete modifications to the rig. But most importantly, as you correctly allude to, Josh, it requires us to have confidence in that market segment and its prospectivity. But Samir will add some more color to what I'm sure.

Yes. So I'd say, we're definitely getting more demand pull in this region, and especially in the U.S. Gulf with this combination of the Sevan Louisiana and the Trendsetter system. Given the Sevan's very unique capabilities, it positions her as a unique tool in this market -- in this region. So for us, we continue to see clients coming and asking for availability on that rig.

And then on the Sonadrill rigs, congrats on the short-term extensions. Could you speak to the further outlook of those rigs? What exactly they're looking for with respect to signing the rigs up longer-term? And when they do get long-term contracts, any thought on the term that they're ultimately looking for?

Yes, absolutely. So I'd say, in my prepared remarks, I kind of alluded to that we feel confident in our abilities to add some more term to the Quenguela's schedule. That remains the case. We're in active dialogue about how do we add more term also with the West Gemini.

I'd say both of those rigs, primary market would be Angola, but the joint venture isn't limited just to Angola. We do have the ability to take those rigs to other parts of Africa as well. So for us, we are focused on keeping the rigs working in Angola, given it's a natural home for them, and you've seen production decline in that market, and there is an active effort by the Angolan government to reverse that production decline. So it's natural to stay there, but it doesn't have to.

Yes. We've seen subdued demand in Angola in recent times, Josh. But I think it's important to remember that 2 of the assets that are operated by the joint venture are directly owned by Sonangol. And when it comes time to be fed, they're ahead of the queue. And we're not concerned at all about long-term contracting opportunities for the rigs and the joint venture going forward.

Our last question comes from the line of Noel Parks from Tuohy Brothers.

As I think about the last few months from last quarter report to maybe a month or so after as we were sort of wrapping up the summer, it does sound like those last couple of months that the generally more optimistic signs you were seeing have really sort of materialized and solidified. And I do recall some inkling of customers maybe being a little bit more willing to commit.

And so I mean, is it just as simple as with the fastest of time, companies have gotten -- have finally just made decisions on their budgets, kept deepwater activity as a high priority. And I was also wondering if maybe looking ahead and contemplating more like Brent with a 6 handle than a 7 handle also made them feel like, yes, time to go back into the deepwater.

Yes. Look, it's a really interesting question, Noel. Look, perhaps what I can do is speak a little bit to the backdrop and then Samir can speak to what we're seeing at an industry level. I think the key thing is that despite some of the near-term macroeconomic headwinds around tariffs, oil supply demand, we are firmly of the view that the fog is beginning to lift.

And we're seeing a lot of data points emerge now, which support our view, which we've been talking about for some time. And definitely, the tone and the tenor of the conversations we're having with customers is improving.

FIDs are progressing, contracts have been awarded. We're seeing the rig days awarded in Q3 as a 7% quarter-on-quarter increase, and we believe that's going to increase again in the final quarter of this year. And that's supported by industry commentators like Westwood. And of course, Seadrill are well placed for a couple of opportunities in that period.

We're at a 3-year trough in '24 for the value of the FIDs, but that's starting to flip now, and we're seeing quarter-on-quarter improvement. Subsea tree installations are forecast to be at the highest level at the end of this year. We know that there's this weak spot that we've spoke to earlier in the call in the first half of '26. But we see strong signs for improvement on a whole range of fronts beyond that.

Investment in green renewable energy has been in constant decline since 2019. And all across the space, the supermajors are clearly stating that there's a return to conventional dispatchable energy. That's where they're spending their capital. But Samir, perhaps you can talk to some of the more focused elements.

Sure. So I'd say that the Red Queen paradox is becoming real for a lot of our clients, right? You've seen reserve replacement ratios at 22% over the last 3 years. The general upswelling of reserve replacement exploration has become kind of the real topic that when we speak to clients, it is becoming a part of their normal daily discussions.

You've seen all the supermajors on their recent earnings calls or public announcements saying, there needs to be more exploration. And that's leading to more rig demand for kind of generally the overall market. And we've tried to position ourselves to capture that upswing that we see coming in late 2026 and into 2027.

And I guess the other thing I was wondering is sort of filling out the picture. I was thinking about the comments from Conoco and from Oxy. And are you also sort of seeing internally inside the bigger players things like signs of them staffing up or you're suddenly meeting with a new manager who wasn't there before or just signs of them reallocating resources to address the deepwater opportunity?

Well, we're seeing a number of different things. I think generally speaking, certainly, the big end of town, I think the supermajors are taking a cold hard look at their cost base generally. But we are definitely seeing certain of those supermajors build out exploration teams that either haven't received funding or have been greatly diminished in recent years.

So I think it's -- there's a double story there. One is that they're focused on being more cost effective and trimming headcount. But certainly, in those areas that speak to new ventures, new opportunities, new exploration activity, that seems to be an area where they are willing to allocate capital.

And we're seeing that. Just overnight, we're seeing the announcement of the Pakistan offshore oil licensing round, ExxonMobil are investing money in Greece. These are all healthy signs of a more normalized balance of expenditure between exploration and production. And that's been -- that's entirely consistent with the thesis that we've been sharing with the market now for several years.

Thank you, everyone. This concludes today's conference. You may now disconnect.