Q3 2025 Seadrill Ltd Earnings Call

Speaker #3: Ladies and gentlemen , thank you for standing by . And welcome to Seadrill . S third Quarter 2025 Earnings Conference Call . At this time , all lines have been placed on mute to prevent any background noise .

Speaker #3: After the speaker's remarks , there will be a question and answer session . If you'd like to ask a question during this time , simply press star , followed by the number one on your telephone keypad .

Speaker #3: If you'd like to withdraw your question , please press star one again . I will now hand the call over to Kevin Smith , Vice President of Corporate finance and investor Relations .

Speaker #3: Sir , please go ahead .

Speaker #4: Welcome to Seadrill third quarter 2020 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 .

Speaker #4: Sameer 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 .

Speaker #4: 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 .

Speaker #4: Our filings with the US Securities and Exchange Commission provide a more detailed discussion of our forward looking statements and the risk factors affecting our business .

Speaker #4: 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 .

Speaker #4: 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 .

Speaker #5: 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 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 .

Speaker #5: 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 .

Speaker #5: 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 .

Speaker #5: Since our last update , we've added over $300 million to our backlog , securing new contracts across five rigs . And what is a very competitive market .

Speaker #5: 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 three rigs in the Seadrill joint venture was a key strategic priority , enhancing the longevity of the partnership and reaffirming our position as the number one drillship operator in Angola .

Speaker #5: The solid gold bongos commenced its new program in August , keeping the rig committed into early 2027 and extending the relationship with our client into its eighth year .

Speaker #5: This show of faith by the customer reflects the results delivered by our offshore crews and onshore teams . Day after day . La Lebanese has been recognized as the Seadrill rig of the quarter , eight times more than any other drillship in our fleet .

Speaker #5: The solid gold Queen Gayla , which has worked for Total Energies since its maiden contract in 2022 , has also won further work on a direct continuation basis and began its new program in early October .

Speaker #5: The Queen Galla 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's E&P in the next few months .

Speaker #5: All three rigs operated through the Seadrill joint venture have delivered exceptional performance year to date , each achieving near perfect technical uptime in excess of 99.7% .

Speaker #5: 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 sonar drills , operations .

Speaker #5: Our teams have demonstrated a commitment to developing local talent , world class performance and crucially , staying at the top of the performance curve .

Speaker #5: 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 US Gulf , the West .

Speaker #5: Valor and seven Louisiana each secured new programs in direct continuation , adding a combined firm term of 195 days . The West Valor was awarded a one well contract with water , Oil and gas , which we anticipate will commence in March 2026 .

Speaker #5: The rig will then return to work for Talos to drill an appraisal well, following the discovery drilled by West Valor in August this year.

Speaker #5: The West Valor 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 .

Speaker #5: A decade of shared experience and technology development allows us to drill and complete wells that were previously considered too challenging . The West Valor remains one of , if not the best performing rig in the US Gulf , routinely executing programs well ahead of schedule and under budget .

Speaker #5: The Savannah , Louisiana , has secured a new contract with water , oil and gas , which is expected to keep the rig working for over two months following the completion of its current assignment with Murphy Oil .

Speaker #5: We're grateful to Walter Oil and Gas for their continued partnership and confidence in our crews and assets . These new contracts reflect the strong collaboration we've built over time .

Speaker #5: Also worth noting the Savannah , 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 .

Speaker #5: We continue to set the standard in collaboration and innovation . Our recent partnership with trendsetter and well intervention activities in the US Gulf is our most recent example .

Speaker #5: We're preparing to install trendsetters equipment on the Savannah , Louisiana , making an already distinctive rig in both design and function even more capable .

Speaker #5: This upgrade gives the rig flexible operating modes across both shallow and deep water environments , opening new markets and enhancing its commercial appeal .

Speaker #5: Staying in the US Gulf , the West Neptune commenced its first well with its newly installed NPD system in October , with log .

Speaker #5: 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 NPD operations .

Speaker #5: The West Polaris is also equipped with this system , and a successfully delivered two NPD wells for Petrobras . So far this year .

Speaker #5: By executing well , 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 .

Speaker #5: Additionally , we continue to actively increase the capabilities of our rigs through time with the addition of advanced technologies such as empty . Turning to the market , we continue to see a constructive pace of contracting and an uptick in global tendering activity .

Speaker #5: Building momentum for a market recovery as we move from 2026 into 2027 . Seadrill is consistently highlighted . The industry's underinvestment in offshore and the need for renewed , sustained spending to offset production declines and meet future energy demand .

Speaker #5: Our view has been validated . Oil majors are calling for renewed focus on expiration and investment to avoid a future supply crunch , and there is a growing consensus that US shale production has plateaued .

Speaker #5: 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 new spending on exploration and production on the Norwegian continental shelf .

Speaker #5: Equinor plans to drill 175 exploration wells by 2030 . Varanasi is targeting an average 15 exploration wells annually over the next four years , and Aker BP intends to drill 10 to 15 exploration wells per year , going forward .

Speaker #5: We agree with oxy CEO Vicki Hollub , who said , quote , when you have the best discovery that has been made in the past couple of decades , i.e. Guyana producing only enough to cover one third of the demand in one year , that is a big issue , unquote .

Speaker #5: The renewed focus on deepwater is becoming clear as the industry faces the realities of prolonged underinvestment and the constraints of short cycle supply .

Speaker #5: 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 .

Speaker #5: 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 .

Speaker #5: Deep is once again at the center of meeting the world's energy needs . With that , I'll turn the call over to Samir .

Speaker #6: Thanks , Simon , and good day everyone . To recap , since our last earnings release , we've added over 300 million in backlog , bringing Seadrill total contracted backlog to approximately 2.5 billion .

Speaker #6: We've made strong commercial progress , securing new work across five rigs , eliminating idle time while focusing on cash generation . Starting with Angola .

Speaker #6: All three rigs in the Seadrill joint venture have been extended . The Senegal Congella has been awarded a 210 day program , with total energies , which will keep the rig working into mid 2026 .

Speaker #6: We remain confident that the rig will secure more work in the near future . The Senegal and Bongos began a 525 day program in August , filling its schedule into 2027 .

Speaker #6: 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 .

Speaker #6: Combined , these three awards solidify our leading position in Angola in the US Gulf , two of our three rigs secured new contracts in direct continuation of existing operations .

Speaker #6: The West Fella was awarded a contract with water , Oil and gas . Drilling is expected to commence in March 2026 , with an estimated duration of 65 days and a total contract value of $28 million .

Speaker #6: Excluding MPD . Following this program , the rig will return to work for Talos to drill an appraisal well . The Savannah , Louisiana has secured a short program also with Walther Oil and Gas , expected to last around 70 days , starting immediately after it concludes .

Speaker #6: The current work with Murphy . Collectively , these awards contribute over three years of backlog , reinforcing the effectiveness of our contracting strategy and the robustness of our customer relationships .

Speaker #6: 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 .

Speaker #6: 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 .

Speaker #6: 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 .

Speaker #6: Conventional oil fields now account for only 77% of global oil output , down from 97% in 2000 . Emphasizing the need for new offshore projects .

Speaker #6: At the same time , the IEA has halved its forecast for US renewable energy growth by 2030 , with signals that hydrocarbons will remain a central part of global energy supply for longer than previously expected .

Speaker #6: 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 .

Speaker #6: Operators are sanctioning major offshore projects with attractive economics and robust break even 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 , Guadeloupe project in the US Gulf , with six development wells and additional phases under review .

Speaker #6: Eni's 7.2 billion coral North 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 .

Speaker #6: Petrobras secured approval for its first equatorial margin well since 2013 , part of a plan for 15 wells and 3 billion investment through 2029 .

Speaker #6: Also in Brazil, Ecuador has expanded its pre-salt position through its acquisition of two new blocks, highlighting its continued commitment to the pre-salt sector and renewed global interest in Brazil's offshore resources.

Speaker #6: Spurred by BP's recent Boomerang 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 five years .

Speaker #6: Earlier this week , shell finalized an agreement to return to Angola following a 25 year absence , securing exploration rights for four new deepwater blocks and investing 1 billion in the project .

Speaker #6: 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 real commitments .

Speaker #6: 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 .

Speaker #6: 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 .

Speaker #6: With that , I'll hand it over to grant .

Speaker #5: Thanks , Samia .

Speaker #7: 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 .

Speaker #7: Contract drilling revenues declined by $8 million to $280 million. The decrease is attributable to fewer operating days for West Valor and Savannah, Louisiana, and lower economic utilization compared to the prior quarter.

Speaker #7: 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 .

Speaker #7: Seadrill earnings for providing management , operational and technical support to Seadrill reimbursable revenues decreased 5 million to $11 million , offset by a corresponding decrease in reimbursable expenses .

Speaker #7: 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 sonar drill joint venture .

Speaker #7: 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 .

Speaker #7: Adjusted EBITDA was $86 million , a sequential decrease of 20 million from the prior quarter . Moving to the balance sheet and cash flow statement .

Speaker #7: 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 .

Speaker #7: 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 .

Speaker #7: 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 .

Speaker #7: Moving on to our outlook for the remainder of the current year . We are narrowing the adjusted EBITDA range to 330 to $360 million , and that's based on an updated range for operating revenues of 1.36 to $1.39 billion , and that includes 50 million of reimbursable revenues .

Speaker #7: Adjusted EBITDA guidance includes a non-cash net expense of $33 million related to the amortization of mobilization costs and revenues , of which 24 million has been recognized through September 30th .

Speaker #7: 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.

Speaker #7: I'll now hand the call back to Simon for his closing remarks .

Speaker #5: 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.

Speaker #5: 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 .

Speaker #5: A view the 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 .

Speaker #5: 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 .

Speaker #5: We believe that Seadrill represents compelling value , a view supported by the sell side analysts community . Seadrill holds the highest proportion of buyer recommendations among the four largest US listed offshore drillers , reflecting broad confidence in our long term value creation potential .

Speaker #5: I'll now hand the call over to questions . Operator .

Speaker #4: Welcome to Seadrill third quarter 2020 Earnings Call .

Speaker #3: Thank you , ladies and gentlemen , we will now begin the question and answer session . I would like to remind everyone , for one question , one follow up .

Speaker #3: Should you have a question , please press star followed by the number one on your telephone keypad . If you would like to withdraw your question , please press star one again .

Speaker #3: If you are using a speakerphone , please lift any handset before pressing any keys . Our first question comes from the line of Eddie Kim from Barclays .

Speaker #3: Sir , your line is open .

Speaker #8: Hi . Good morning . Just wanted to ask about what you're seeing in terms of leading edge data rates within the Golden Triangle .

Speaker #8: That two 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 , lower data points in West Africa .

Speaker #8: And I think investors are sort of bracing for for maybe some other negative data points in Brazil here on some upcoming contract announcements .

Speaker #8: So first is do you expect maybe some negative data points coming out of Brazil . And and second , is that sort of a fair characterization of how you're seeing things right now ?

Speaker #8: Maybe some softness in West Africa and Brazil . But resilient in the in the US Gulf ? Any thoughts ? There would be great .

Speaker #9: Sure . So , Eddie , I'd say in the it depends what market you're in . Yeah , I'd say in the US Gulf .

Speaker #9: You've seen what we think we can get and we've shown that we're able to price at those levels . And , you know , the you can do the math on the contracts .

Speaker #9: It gets us in a pretty good spot . If I go to the other places , the Golden Triangle , I think in the near term there is potentially some weakness , but it's not dramatic , right .

Speaker #9: So you're going to see things in those high threes, low fours, I think, kind of is generally where we're tracking across the Golden Triangle.

Speaker #9: 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 .

Speaker #9: And focusing on getting near-term work. We've shown an ability to get those at pretty good rates here in the US Gulf.

Speaker #8: Got it . Great . Thanks for that color . And then my follow up is just on your medium to longer term outlook , which which is very constructive .

Speaker #8: One of the things you said in prepared remarks was that you expect Africa and Asia to be the leading sources of incremental demand .

Speaker #8: We'd heard from some of the some of your peers about incremental demand in Africa , of course , but less so about Asia .

Speaker #8: So could you maybe talk about which which countries or which operators you're most excited about in Asia ? As we look forward over the next 12 to 18 months ?

Speaker #9: Sure . So , you know , 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 .

Speaker #9: You know , the operators are ini , ONGC , Pttep . So you've got , you know , it's not just one operator and one geography .

Speaker #9: It is kind of spread across different parts of Asia . So for us , you know , we are very optimistic about that market in the near term .

Speaker #9: And you know , candidly for us , we've got the West Capella sitting out there . That's a dual activity MPD capable rig .

Speaker #9: So you know we think it's very well positioned in that market .

Speaker #8: Great . Thanks for that color I'll turn it back .

Speaker #3: Thank you . Our next question comes from the line of Frederik Stein from Clarkson Securities . Sir , your line is open .

Speaker #10: Hey , Simon . Team , congratulations on the new quarter contracts . I wanted to touch . I wanted to touch . Specifically on the Capella and the Carina and Samir .

Speaker #10: You mentioned it briefly . Now , in the end , there for the Capella , but clearly Capella idol already . Carina is .

Speaker #10: Is rolling off early 2026 . What are your current thoughts about potential downtime , etc. next year for for those two rigs specifically ?

Speaker #5: Well , perhaps I can kick off first . Fredrik and then I'll pass to Samir for a bit of color , but I think , you know , as Samir foreshadowed in the previous question , his team has done a really good job and an incrementally adding term through time .

Speaker #5: And we do , in fact , have these three rigs that have first half exposure . But we are continuing to make progress on the contracting front .

Speaker #5: And when we have news on that , we can share that with you . But , you know , it's really the first half of next year .

Speaker #5: I think , where we have concern and we expect that the market will start tightening in the second half and and we've done a good job .

Speaker #5: We believe may minimizing our exposure . To that weak period of the market . But Samir , perhaps you can add some color .

Speaker #9: Sure . So , you know , back to if I look at the South Asia region , you know , the Carina or the Capella .

Speaker #9: I beg your pardon ? Is is well placed within their back . MPD dual activity . So , you know , optimistic that we'll be able to announce something here shortly , but nothing to announce today .

Speaker #9: You know , if you look at the the Carina . I beg your pardon ? We have the ability to keep her working in Brazil .

Speaker #9: 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 .

Speaker #9: Its got MPD . We could easily retrofit with a second Bop . So that rig , you know , it comes off early next year .

Speaker #9: We've got the ability to potentially keep her in Brazil . Or we could move that rig to a different region as well . So for us we have some flexibility with the Carina as we look forward .

Speaker #10: Just to follow up on that , Samir , and thank you for the color under the assumption that , you know , you potentially win something in Brazil since there are a couple of unresolved tenders there going on already .

Speaker #10: I think they call for late 26 , early 2027 , 27 startups . In the case that you would , you know , get an award from from something there .

Speaker #10: Are there any , you know , extension options on the green under the current contract that would limit . Downtime in between because Petrobas tend to have certain clauses that can make contract extensions possible .

Speaker #9: Yeah . So you know , what I'd say is , if we're not able to close that gap , it does make potential work in 27 .

Speaker #9: In Brazil , less attractive from from our perspective . But , you know , it will be challenging to to close that gap .

Speaker #9: 2026 , as we've mentioned , is going to be there is white space in the calendar and it is a competitive market in Brazil .

Speaker #9: So it will be a challenge . But I'd say , you know , come back to if we can't close that gap , it does make it less attractive for us to stay in Brazil .

Speaker #10: All right . That's very helpful . Thank you both . And have a good day .

Speaker #5: Thanks , Frederik .

Speaker #3: Thank you . Our next question comes from the line of Ben Sommers from BT . Sir , please go ahead .

Speaker #11: Hi . Good morning , and thank you for taking my questions . So first to touch on the Capella a little bit more .

Speaker #11: Just curious kind of how the cost deceleration on this rig has gone over the past few quarters . And then , you know , given the line of sight of potential where kind of what would reactivation cost look like for that rig ?

Speaker #11: Thank you .

Speaker #9: Look , on the cost side , we .

Speaker #7: Haven't been too explicit .

Speaker #9: On that . Bearing in mind it's in active .

Speaker #7: Tender tenders . I'd say , you know , we've .

Speaker #9: Said it's stacked .

Speaker #7: Up . It's it's more .

Speaker #9: Than the, you know, we've said the eclipse.

Speaker #7: For example , is the 7 to $8000 a day range . That's one bookend . I'd say it's it's more than that . Keeping it live for for tendering .

Speaker #7: But but less than the typical warm stack that people talk about . The $80,000 a day somewhere in between .

Speaker #9: On reactivation .

Speaker #7: 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 it's kind of reluctant to throw numbers out there .

Speaker #7: You know , think of it as a range somewhere between , you know it's going to be more than 20 , less than 50 depending on , you know , what opportunity we're reactivating for .

Speaker #11: Awesome . Thank you . Super helpful . And then as I look kind of in the back half of 26 , I know we have some availabilities in the Gulf and elsewhere .

Speaker #11: I guess , you know , 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 , you know , notable momentum , momentum in leading edge rates ?

Speaker #9: Yeah . So I think our thesis is that , you know , second half of 2026 and into 27 is kind of where we start seeing the inflection in the market .

Speaker #9: You'll see utilization pick up first, and I think day rates will be a fast follower after that. So if our thesis is correct, as we enter next year, or sorry, into 2027, we should start seeing that momentum build.

Speaker #11: Awesome . Thanks for taking my questions .

Speaker #9: Thank you .

Speaker #3: Thank you. Our next question comes from the line of Doug Becker from Capital One. Please go ahead.

Speaker #12: Thank you . I'm 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 ?

Speaker #9: Yeah .

Speaker #5: Morning , Doug . Yeah . Look , I think at this stage we're very early in those conversations with Petrobras . I think there's a couple of important points .

Speaker #5: And 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 .

Speaker #5: Both sides need to benefit from the discussions . We are certainly looking to trade value rather than give unilateral discounts and blend and extend is definitely one of the , you know , the potential approaches .

Speaker #5: So we're open to that . We're you know , it makes sense in terms of our contract portfolio and the visibility of backlog and so on and so forth .

Speaker #5: Petrobras , you know , as you know , is a very important customer for us . We've had a long term relationship in what's an international market .

Speaker #5: And , you know , 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 .

Speaker #5: In 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 , etc.

Speaker #5: , that's not going to have any impact on the underlying rig demand . We believe that continues to be robust on a , you know , on a many years ahead .

Speaker #5: Look , outlook . So , yeah , I mean , we're entering into those discussions with with good faith . And and we think there is a possibility of both sides obtaining advantage through , you know , Frank discussion of of opportunities .

Speaker #5: .

Speaker #12: 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 .

Speaker #12: Just any rigs or regions to call out? And how do you see economic utilization trending going forward?

Speaker #5: Yeah , it was a little bit disappointing on the on the cost side . There . And there's a reason for that , which there's some comments in the press release in the Q that we filed , but we can add a little bit more color to .

Speaker #5: And I'm joined here today by Marcel Viggers , who's our senior vice president of operations , who can talk about one of the operational incidents that occurred during the quarter that as sort of led to a departure from what our regular run rate is .

Speaker #13: Hello . Hello , Doug . So during the quarter , one of our operating in Brazil experienced a downtime event caused by design related equipment failure .

Speaker #13: This issue resulted in operational downtime and additional cost to rectify same and implement corrective measures . Learning from that event , we shared this our fleet to prevent reoccurrence .

Speaker #13: Of course , but in addition , we also proactively communicated these insights to our industry peers who operate similar equipment to help them to mitigate this risk .

Speaker #13: 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 time of 97.6% .

Speaker #14: Yeah .

Speaker #5: So we think it's a one off .

Speaker #14: Doug . Yep , yep .

Speaker #12: Thank you .

Speaker #3: Thank you . Our next question comes from the line of Josh Jain from Daniel Energy Partners . Please go ahead .

Speaker #15: Thanks . Good morning . Thanks for taking my questions . First one is just on the Louisiana upgrades . You talked about . I assume you wouldn't do those without line of sight into something further .

Speaker #15: So maybe you could just talk about those upgrades a bit more and how they changed the outlook for the rig . Maybe over the course of the next 12 months or so ?

Speaker #14: Yeah , in the Gulf of Mexico , there's , a , you know , a that market's been quite dynamic in the semi-submersible segment .

Speaker #5: And a number of our competitors have retired rigs there recently . And and what we're finding that we need to do in order to keep the Louisiana continuously busy , which we've been very successful in doing that .

Speaker #5: 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 .

Speaker #5: 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 .

Speaker #5: The ability to switch between drilling mode and well intervention . And a mode . And the way and as I say , that requires some discrete modifications to the rig .

Speaker #5: But most importantly , as you correctly allude to Josh , it requires us to have confidence in that that market segment . And its prospectivity .

Speaker #5: But we'll have some more color to what I'm sure .

Speaker #9: Yeah . So yeah , I'd say we're definitely getting more demand pull in this region , especially in the US Gulf with this combination of the Louisiana and the trendsetter system .

Speaker #9: Given the 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 .

Speaker #15: Great . Thanks . And then on the song Drill Rigs , congrats on the short term extensions . Could you speak to the further outlook of those rigs ?

Speaker #15: 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 ?

Speaker #15: Thanks . And then I'll turn it back .

Speaker #9: Yeah , absolutely . So I'd say , you know , in my prepared remarks , I kind of said alluded to that we feel confident in our abilities to add some more term to the schedule that remains the case .

Speaker #9: You know , we're an 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 you know , the joint venture isn't limited just to Angola .

Speaker #9: 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 .

Speaker #9: And you've seen production decline in that market . And there is an active effort by the Angolan government to , you know , reverse that production decline .

Speaker #9: So it's natural to stay there , but it doesn't have to . Yeah .

Speaker #5: We've we've seen subdued demand in Angola in recent times . Josh . But you know , I think it's important to remember that , that two of the assets that are operated by the joint venture are directly owned by Sonangol .

Speaker #5: And when it comes time to be fed , they're at the head of the queue . And we're not concerned at all about long term contracting opportunities for the rigs and the joint venture going forward .

Speaker #15: Understood . Thanks . I'll turn it back .

Speaker #5: Thanks , Josh .

Speaker #16: Thank you .

Speaker #3: Our last question comes from the line of Noel Parkes from Toll Brothers . Please go ahead .

Speaker #17: Hi . Good morning .

Speaker #5: Good morning .

Speaker #18: You know , 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 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 .

Speaker #18: And I do recall some , some inkling of customers maybe being a little bit more willing to commit and so , I mean , is is it just as simple as with the passage of time companies have gotten have finally just made decisions on their budgets , you know , kept deepwater activity as a high priority ?

Speaker #18: And and I was also wondering if , if maybe looking ahead and contemplating more like , you know , Brent with a six handle than a seven handle also made them feel like , yeah , time to time to go back into the Deepwater .

Speaker #5: Yeah . Like I said , really interesting question . Noel . Perhaps what I can do is speak a little bit to the the backdrop and then Samir can speak to what we're seeing at an industry level .

Speaker #5: I think the key thing is that , you know , despite some of the near-term macroeconomic headwinds , you know , around tariffs , oil supply , demand , you know , we are firmly of the view that the fog is beginning to lift .

Speaker #5: And we're seeing a lot of data points emerge now , which support our view , which we've been talking about for some time .

Speaker #5: And definitely the tone and the tenor of the conversations we're having with customers is improving . FIDs are progressing , contracts have been awarded .

Speaker #5: And we're seeing , you know , the Rig days awarded in Q3 , as you know , 7% quarter on quarter increase . And we believe that's going to increase again in the final quarter of this year .

Speaker #5: And that's , you supported by industry commentators like Westwood . And of course , you know , Seadrill are well placed for a couple of opportunities in that in that period .

Speaker #5: We're at a three 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 .

Speaker #5: 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 .

Speaker #5: 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 .

Speaker #5: That's where they're spending their capital . But Samir , perhaps you can talk to some of the more focused elements .

Speaker #9: Sure . So , you know , I'd say that the Red Queen paradox is becoming real for a lot of our clients , right ?

Speaker #9: You've seen reserve replacement ratios at 22% over the last three 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 .

Speaker #9: 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 .

Speaker #9: And we've tried to position ourselves to capture that upswing that we see coming in late 2026 and into 2027 .

Speaker #18: Great . Thanks for thanks for the extra insights and I guess the other thing . I was wondering is sort of filling out the picture .

Speaker #18: I was thinking about the comments from Conoco and from oxy and do are you also sort of seeing internally inside the , the bigger players , the things like signs of them staffing up or you're suddenly meeting with a new manager who wasn't there before or just , you know , signs of of the reallocating resources to , to address the deepwater Opportunity ?

Speaker #5: 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 .

Speaker #5: Generally, 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.

Speaker #5: So , you know , I think it's a you know , there's a there's a double story there . One is that they're focused on being more cost effective and 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 to allocate capital .

Speaker #5: And we're seeing that , you know , just overnight , we're seeing , you know , this announcement of a Pakistan offshore oil licensing round .

Speaker #5: 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 you know , that's entirely consistent with the thesis that we've been sharing with the market now for several years .

Speaker #18: Great . Thanks a lot .

Speaker #5: Thanks , Noel .

Speaker #16: Thank you .