Q1 2026 Seadrill Ltd Earnings Call

May 11, 2026

Operator: Thank you for standing by. At this time, I would like to welcome everyone to the Seadrill Q1 2026 Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. Today, we ask that you limit to one question and one follow-up. If you would like to ask a question, simply press star followed by the number 1 on your telephone keypad. If you would like to withdraw your question, press star 1 again. Thank you. I would now like to turn the call over to Kevin Smith. Please proceed.

Operator: Thank you for standing by. At this time, I would like to welcome everyone to the Seadrill First quarter 2026 Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. Today, we ask that you limit to one question and one follow-up. If you would like to ask a question, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again. Thank you. I would now like to turn the call over to Kevin Smith. Please proceed.

Speaker #2: After the speaker's remarks, there will be a question and answer session. Today, we ask that you limit to one question and one follow-up. If you would like to ask a question, simply press star, followed by the number one on your telephone keypad.

Speaker #2: If you would like to withdraw your question, press star one again. Thank you. I would now like to turn the call over to Kevin Smith.

Speaker #2: 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 Samir Ali, President and Chief Executive Officer, Grant Creed, Executive Vice President and Chief Financial Officer, and Jacob Taylor, Vice President Commercial.

Kevin Smith: Hello, welcome to Seadrill's Q1 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, we assume no obligation to update them except as required by securities laws. Our filings with the US Securities and Exchange Commission provide a more detailed discussion of our forward-looking statements and the risk factors affecting our business. During the call, we will also reference non-GAAP measures. Our earnings release, furnished to the SEC and available on our website, includes reconciliations with the nearest corresponding GAAP measures.

Kevin Smith: Hello, 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 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, we assume no obligation to update them except as required by securities laws. Our filings with the US Securities and Exchange Commission provide a more detailed discussion of our forward-looking statements and the risk factors affecting our business. During the call, we will also reference non-GAAP measures. Our earnings release, furnished to the SEC and available on our website, includes reconciliations with the nearest corresponding GAAP measures.

Speaker #2: Our call will include forward-looking statements that involve risks and certainty. 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 #2: 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.

Speaker #2: 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 #2: 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.

Kevin Smith: Our use of the term EBITDA on today's call corresponds with the term adjusted EBITDA as defined in our earnings release. I will now turn the call over to Samir.

Speaker #3: 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.

Samir Ali: Thanks, Kevin. Welcome, everyone, thank you for joining us. I'll begin with Seadrill's key priorities, followed by Q1 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.

Samir Ali: Thanks, Kevin. Welcome, everyone, 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 zero incidents while maximizing uptime. This is supported by an adherence to our procedures, disciplined risk management, and systematically learning from our experiences.

Speaker #3: 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.

Speaker #3: It reflects a fundamentals of our business and the standards we hold ourselves to every day. First and foremost, operational discipline underpins everything we do.

Speaker #3: Our goal is to deliver safe, efficient, and reliable operations across our fleet with a focus on zero incidents, while maximizing uptime. This is supported by an adherence to our procedures, disciplined risk management, and systematically learning from our experiences.

Speaker #3: 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.

Samir Ali: 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.

Samir Ali: 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 two of the associated rigs, an important milestone that strengthens our earnings and cash flow profiles this year.

Speaker #3: 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.

Speaker #3: Third, we are committed to capturing the upside ahead of us. Three legacy dairy contracts roll off in 2026, and we have already re-contracted two of the associated rigs.

Speaker #3: 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 Karina at current market rates combined with our contracting leverage and an improving market positions us for meaningful earnings and free cash flow growth in 2027.

Samir Ali: 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 MC's priorities is reflected in our Q1 performance. Both the West Tellus reacceptance and the West Capella reactivation projects were completed ahead of schedule and on budget, enabling early startup 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 H2 2026.

Samir Ali: 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 MC's priorities is reflected in our first quarter performance. Both the West Tellus reacceptance and the West Capella reactivation projects were completed ahead of schedule and on budget, enabling early startup 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 H2 2026.

Speaker #3: Executing NC's priorities is reflected in our first quarter performance. Both the West Tellus re-acceptance and the West Capella reactivation projects were completed ahead of schedule and on budget.

Speaker #3: Enabling early startup 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.

Speaker #3: 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.

Samir Ali: 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 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 US Gulf, industry-leading performance continues to translate into follow-on work. In April, the West Neptune and West Vela each secured new contracts with LLOG, adding approximately $260 million to our backlog. We are pleased to expand our relationship with LLOG, now a subsidiary of Harbour Energy, and look forward to supporting their ambitions to establish a leading position in the US Gulf with a second drillship now unlocking valuable resources.

Speaker #3: Our performance is driven by your collaboration and operational discipline. And your continued efforts strengthen Seadrill's position as a leader in deep water drilling. Turning to our contract awards, since our last call, we have added approximately $860 million to our backlog.

Speaker #3: 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.

Speaker #3: We are pleased to expand our relationship with LOG, now a subsidiary of Harbor Energy, and look forward to supporting their ambitions to establish a leading position in the U.S.

Speaker #3: Gulf for the second drillship now unlocking valuable resources. Last quarter, we noted that seven drillships were expected to roll off contract in the U.S.

Samir Ali: Last quarter, we noted that 7 drillships were expected to roll off contract in the US Gulf before year-end. Removing whitespace 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 dayrate momentum. In Angola, the Sonangol Quenguela 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.

Speaker #3: Gulf before year-end. Removing Whitespace for both of our drill ships in the region significantly improves revenue visibility and reduces idle time in 2026 for Seadrill.

Speaker #3: 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 for upward day rate momentum.

Speaker #3: In Angola, the Songol-Kingila had a seven well-priced option exercised, committing the rig into mid-2028. Lastly, in Brazil, the West Polaris was awarded a three-year extension with Petros in direct continuation of the current program.

Speaker #3: 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 Petros contracts.

Samir Ali: 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 of 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 Arabias over the next decade.

Speaker #3: In addition, we now anticipate the West Karina will remain on contract until mid-June. We continue to see a strong demand pipeline driven by growing deep water exploration, as operators intensify efforts to secure future growth.

Speaker #3: There's a clear shift amongst majors and large independents towards allocating incremental capital to deep water. Addressing the exploration under investment of the past decade and offsetting production declines.

Speaker #3: 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.

Speaker #3: He described the loss as the equivalent of five Saturday Arabias over the next decade. Similarly, ConocoPhillips CEO noted that the peak and shale output has helped shape their strategy of targeting major new conventional discoveries.

Samir Ali: 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 US 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.

Speaker #3: This decline coupled with recent exploration successes from E&I in Indonesia, Egypt, and Libya Petros in Brazil and Colombia and Oxi in the U.S. Gulf, to name just a few, further strengthens our thesis that a new exploration cycle is emerging.

Speaker #3: 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 seven years amid sanctions on Russian crude.

Speaker #3: The Iran conflict has further intensified this focus. Reinforcing the need for domestically anchored supply. Where deep water will be the beneficiary. With production shortfalls already in the hundreds of millions of barrels, and pressure to rebuild strategic reserves, deep water resources are becoming increasingly attractive and even better positioned for development.

Speaker #3: Energy security is back in vogue. In summary, sentiment has improved since our last call. Demand in Brazil has crystallized, with several multi-year extensions recently awarded.

Samir Ali: Energy security is back in vogue. In summary, sentiment has improved since our last call. Demand in Brazil has crystallized, with several multi-year extensions recently awarded. Despite a softer 2026 in the US 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.

Speaker #3: Despite a softer 26 in the U.S. Gulf, we've contracted both of our drill ships 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.

Speaker #3: 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.

Speaker #3: With that, I'll hand the call over to Grant.

Speaker #4: 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.

Grant Creed: Thanks, Samir. I will now walk through our Q1 2026 financial results before providing an update on our outlook for the balance of the year. Q1 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 contract with Petrobras in late March. The West Capella was successfully reactivated and commenced operations late in the quarter, 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.

Grant Creed: Thanks, Samir. I will 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 contract with Petrobras in late March. The West Capella was successfully reactivated and commenced operations late in the quarter, 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.

Speaker #4: During the quarter, the West Jupiter underwent reacceptance testing and began its new contracts with Petros in late March. The West Capella was successfully reactivated and commenced operations late in the quarter, and the West Telus entered reacceptance testing following the completion of its contract in mid-March.

Speaker #4: 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.

Speaker #4: This offset the impact of fewer operating days for the West Jupiter, and fewer operating days for the Savannah, Louisiana, which had a short gap between programs.

Grant Creed: 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 Q1, 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.

Grant Creed: 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 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.

Speaker #4: 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.

Speaker #4: 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.

Speaker #4: The movement was attributable to a reduction in vessel and rig operating expenses related to the capitalization of mobilization costs for the West Jupiter, with the cost to be amortized over the three-year contract term.

Speaker #4: 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.

Grant Creed: 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 statements. We ended the quarter with total cash of $329 million. The $35 million use of cash in Q1 included $13 million of CapEx 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.

Grant Creed: 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 statements. We ended the quarter with total cash of $329 million. The $35 million use of cash in first quarter included $13 million of CapEx 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.

Speaker #4: 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.

Speaker #4: 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.

Speaker #4: 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 two quarters relating to lump sum mobilization revenues from Petros, as reimbursement for reacceptance projects for both the West Jupiter and West Telus.

Grant Creed: 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 dayrate revenues from the West Jupiter, West Capella, and West Tellus 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. We have access to $482 million of total liquidity when including available borrowing capacity on our revolving credit facility. Now turning to our outlook for the remainder of the year.

Speaker #4: These receipts, as well as benefiting from incremental day rate revenues from the West Jupiter, West Capella, and West Telus contracts, will mark the inflection point in our cash profile this year.

Speaker #4: 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 evolving credit facility.

Speaker #4: 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 attributed to the timing of repair and maintenance expenses that are expected to occur later in the year.

Grant Creed: 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 commencement of the West Jupiter and West Capella contracts in 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 to 1.48 billion, and that excludes $50 million of reimbursable revenues. Our EBITDA range to $370 to 420 million.

Grant Creed: Q1 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 commencement of the West Jupiter and West Capella contracts in Q1 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 to 1.48 billion, and that excludes $50 million of reimbursable revenues. Our EBITDA range to $370 to 420 million.

Speaker #4: 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.

Speaker #4: For the full year 2026, we are updating our guidance for operating revenues to $1.43 to $1.48 billion. And that excludes $50 million of reimbursable revenues.

Speaker #4: And our EBITDA range to $370 to $420 million. And that EBITDA guidance includes a non-cash net expense of $26 million, related to the amortization of mobilization costs and revenues.

Grant Creed: That EBITDA guidance includes a non-cash 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 Q1. Full year capital expenditure guidance range is maintained at $200 to 240 million. I'll now hand the call back to Samir for his closing remarks.

Grant Creed: That EBITDA guidance includes a non-cash 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 first quarter. Full year capital expenditure guidance range is maintained at $200 to 240 million. I'll now hand the call back to Samir for his closing remarks.

Speaker #4: Of which $7 million has been recognized at the end of the first quarter. Full-year capital expenditure guidance range is maintained at $200 to $240 million.

Speaker #4: I'll now hand the call back to Samir for his closing remarks.

Speaker #3: 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.

Samir Ali: 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 Q1 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 H2 2026 and in 2027. With that, I will now hand the call over for questions.

Samir Ali: 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 H2 2026 and in 2027. With that, I will now hand the call over for questions.

Speaker #3: 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.

Speaker #3: 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.

Speaker #1: At this time, I would like to remind everyone in order to ask a question, press star, then the number one on your telephone keypad.

Speaker #1: And your first question comes from the line of Frederick Steen with Clarkson Securities. Please go ahead.

Operator: Your first question comes from the line of Fredrik Stene with Clarksons Securities. Please go ahead.

Speaker #4: Hi, Samir and team. 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.

Fredrik Stene: Thanks, Samir and team. I hope you are well, and congratulations on a very solid Q1 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. The start of 2026 has been quite, you know, eventful from a geopolitical perspective. My take on this is that, you know, 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. I guess my question is, would you agree with that and any kind of additional commentary you might have around it?

Fredrik Stene: Thanks, Samir and team. 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. The start of 2026 has been quite, you know, eventful from a geopolitical perspective. My take on this is that, you know, 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. I guess my question is, would you agree with that and any kind of additional commentary you might have around it?

Speaker #4: You paint a relatively supportive demand story which I definitely agree with myself, but start of 2026 has been quite eventful from a geopolitical perspective.

Speaker #4: 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 to happening anyway.

Speaker #4: 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, etc., on top of that, how has that changed?

Fredrik Stene: 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? Are we starting to see any impacts of that war into tenders, et cetera, at the moment, or is that too early? Thanks.

Speaker #4: If anything, and are we starting to see any impacts of that war into tenders, etc., at the moment? Or is that too early? Thanks.

Speaker #5: Yeah, absolutely. Afternoon, Frederick. So I'd say we started coming before kind of if you kind of roll the clock back in January 1st, just to pick a date, when we look and did our forecast and looked out and 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.

Samir Ali: Yeah, absolutely. Afternoon, Fredrik. You know, I'd say we saw it coming before. If you kind of roll the clock back to, like, 1 January, just to pick a date, when we look and did our forecast and looked out and kind of demand in the world, we saw clients already starting to, you know, talk about investing in new regions and going back and finding hydrocarbons through the drill bit. To your point, you know, historically, they've bought a lot of their hydrocarbons via M&A, I think there was that pivot that came of, look, we have to go invest in, you know, places like Namibia or Angola or even Mozambique.

Speaker #5: To your point, historically, they've 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.

Speaker #5: 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.

Samir Ali: Just to pick a few places. We saw that coming early this year, and then on top of that, you've now had the, what's going on in Iran. You know, which has helped commodity prices, obviously, which has, you know, added some cash to their balance sheets and allowed them to spend. On top of all of that is you have energy security. You know, long way of saying, yes, we saw that, you know, demand coming already, and then what you've seen with what happened in Iran has just added fuel to that fire of, you know, energy security and a higher commodity price for them to go explore even more.

Speaker #5: So, which has helped commodity prices, obviously, which has added some cash to their balance sheets and allowed them to spend. But on top of all of that is you have energy security.

Speaker #5: So, 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.

Speaker #3: All right. Thank you. And as a follow-up to that, if and I'm sure there are some stats on this, but if you think about the share of exploration drilling versus development drilling over the last, let's say, five 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 five years?

Fredrik Stene: All right, thank you. As a follow-up to that, if, and I am sure there are some stats on this, if you think about both 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 have seen historically again, over the, maybe the last, 5 years?

Speaker #5: Yeah, 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.

Samir Ali: You know, it's hard to quantify right now, but, you know, historically, if you look at it, exploration by definition is a little less efficient than development because, you know, you're not doing exploration wells, you know, with an eyesight of each other. With a development program, you kind of rinse and repeat on the same field. Exploration, you know, you have one well here, one well there. By definition, that will take a bit more time and add more incremental demand for, you know, our assets and our peers' assets. You know, 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.

Speaker #5: You're kind of rinse and repeat on the same field. So, exploration—you have one well here, one well there. So, by definition, that will take a bit more time.

Speaker #5: 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.

Speaker #5: And that will drive more demand going forward.

Speaker #3: All right. I appreciate all the comments. And I'll leave it at that for now. Thank you very much.

Fredrik Stene: All right. I appreciate all the comments and I'll leave it at that for now. Thank you very much.

Speaker #5: Thanks, Frederick.

Samir Ali: Thanks, Fredrik.

Speaker #1: Your next question comes from the line of Eddie Kim with Barclays. Please go ahead.

Operator: Your next question comes from the line of Eddie Kim with Barclays. Please go ahead.

Speaker #4: Hi, good morning. So obviously, the world has changed since your last earnings call three months ago. Just wanted to ask if you could remind us how you see the trajectory or the progression of leading-edge pricing?

Eddie Kim: Hi, good morning. 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. We're kinda still in the low 400s today for leading-edge drill ships. 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.

Speaker #4: Which I assume is probably improved since three months ago. But we're kind of still in the low 400s today for leading-edge drill ships. Do you suspect we'll see the end of this year?

Speaker #4: 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.

Speaker #5: Sure. I'll start on the 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.

Samir Ali: Sure. I'll start, and then I'll hand it over to Jacob to provide some more color. You know, when we look at day rates, right, Eddie, for us, it's about free cash flow generation, right? You know, when we look at, you know, internally on bidding stuff, it's part, obviously day rate matters, but it's how much free cash flow can you generate off that contract? I would just frame it that way of how we think about day rates, at least at Seadrill. You know, as we look forward, demand continues to improve, and utilization is kind of picking up across the world. That should lead to day rate progression as we move into 2026 and then to 2027. I'll let Jacob speak a little more on that.

Speaker #5: 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?

Speaker #5: 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.

Speaker #5: 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.

Speaker #5: But I'll let Jacob speak a little more on that.

Speaker #3: Hi, Eddie. I think if we look back over the last three to four months, we've had this strongest backlog cycle we've had since 2012.

Jacob Taylor: Hi, Eddie. I think if we look back over the last, you know, 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. That was predicated on a market that, you know, was materializing before the war broke out. I think that this is just going to bring momentum, you know, and a windfall of cash to some of our customers who are gonna continue to invest going forward. What we have going forward is we have opportunities within Indonesia, Namibia, Nigeria, Suriname, US Gulf, with long-term contracts anywhere from 2 to 3 years that we expect to be awarded here before the end of 2026.

Speaker #3: 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.

Speaker #3: And I think that this is just going to bring momentum, with a windfall of cash to some of our customers, who are going to continue to invest going forward.

Speaker #3: And this what we have going forward is we have opportunities within Indonesia, Namibia, Nigeria, Suriname, US Gulf with long-term contracts anywhere from two to three years that we expect to be awarded here before the end of '26.

Speaker #3: So I think that that definitely creates a opportunity for rates to be pushed up further than they are today.

Jacob Taylor: I think that that definitely, you know, creates an opportunity for rates to be pushed up further than they are today.

Speaker #4: Great. Thanks for that. 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.

Eddie Kim: Great. Thanks for that. 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? 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.

Speaker #4: Are there sort of obvious acquisitions of one-off drill ships 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?

Speaker #5: Yeah, 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 Jones into do a deal just because we just for the sake of it.

Samir Ali: Yeah, I'd say we're at minimum efficient scale. Our focus is on, you know, if we're gonna do M&A, making sure it's an accretive deal. For us, we're not, you know, jonesing to do a deal just because we, you know, just for the sake of it. If it makes financial sense, absolutely, we'd look at it. We'd look at it on the other side as well, right? We are a public company. Our job is to make sure we maximize shareholder return, and that is gonna be the focus.

Speaker #5: If it makes financial sense, absolutely, we'd look at it. And we'd look at it on the other side as well, right? So we are a public company.

Speaker #5: Our job is to make sure we maximize shareholder return, and that is going to be the focus.

Eddie Kim: Understood. Right. Thanks for the color. I'll turn it back.

Speaker #3: Understood. Thanks for the call. I'll turn it back.

Speaker #1: Your next question comes from the line of Keith Beckman with Pickering Energy Partners. Please go ahead.

Operator: Your next question comes from the line of Keith Beckman with Pickering Energy Partners. Please go ahead.

Keith Beckman: Hey, thanks for taking my question. Congrats on the quarter, guys.

Speaker #4: Hey, thanks for taking my question. Congrats on the quarter, guys.

Speaker #5: Thanks, Keith.

Samir Ali: Thanks, Keith.

Speaker #4: 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.

Keith Beckman: I just wanted to hit a little bit more on free cash flow, around, you know, I think that you guys thinking about working capital, you know, you kinda talked about the $70 million, that you guys expect to be paid back through the rest of the year. 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? Then maybe also hit on.

Speaker #4: 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?

Speaker #4: 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 potentially M&A, similar to what Eddie was just talking about?

Keith Beckman: Whenever you get all this free cash flow, how do you plan to deploy it? Is that the buyback or kinda or potentially M&A similar to what Eddie was just talking about?

Speaker #5: Yeah, thanks, Keith. You did 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.

Grant Creed: Yeah. Thanks, Keith. You're 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. You know, 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 West Capella and the reacceptance of West Jupiter. Of course, Q2, we have the reacceptance of West Tellus as a headwind. 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 West Jupiter and West Tellus. Importantly, the West Jupiter and West Tellus move off of legacy contracts and legacy dayrates.

Speaker #5: And of course, cash flow wasn't the strongest Q1. And there was entirely as anticipated, given the fact that we were going through reactivation of Capella and the reacceptance of Jupiter.

Speaker #5: And of course, Q2, we had 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.

Speaker #5: And then importantly, the Jupiter and Telus move off of legacy contracts and legacy day rates. So we're lower rates onto market rates in Brazil.

Grant Creed: There were lower rates onto market rates in Brazil, and that's gonna be really instrumental to that free cash flow generation starting in the middle of the year. 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 number one priority. How we distribute that, we'll take a decision at that point in time, and that's, yeah. I don't wanna get ahead of ourselves there. You know, we've demonstrated in the past that returning capital to shareholders is extremely important to us. You know, that's a data point to look at. Yeah. Don't wanna get ahead of it on how and what we do.

Speaker #5: 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.

Speaker #5: Look, as a management team, to be honest, we're focused on generating the cash. And that's our number one priority. How we distribute that will take a decision at that point in time.

Speaker #5: And that's—yeah, 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.

Speaker #5: And so that's a data point to look at. But yeah, don't want to get ahead of it on how and what we do. We just want to focus on generating it for now.

Grant Creed: We just wanna focus on generating it for now.

Speaker #4: Keith, just to put a pin 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.

Samir Ali: Keith, just to put a pin on that, our job as a management team is to maximize free cash flow generation. That's what this team is gonna be focused on.

Speaker #5: Perfect. That's awesome. And then my second question just wanted to check in and see potentially what the outlook you guys have done a really good job contracting several the two Gulf Rigs in particular.

Keith Beckman: Perfect. That's awesome. My second question, just wanted to check in and see, potentially what the outlook, you know, you guys have done a really good job, contracting, several, like the two Gulf rigs, in particular. Just thinking about the Karina, maybe what's the outlook on it, after the extension you received in June, with Petrobras?

Speaker #5: But just thinking about the Karina, maybe what's the outlook on it after the extension it received in June with Petrobras? Yeah, so for the Karina, we are finishing up the well currently with Petrobras.

Samir Ali: Yeah. You know, for the Karina, you know, we are finishing up the well currently with Petrobras. You know, we've said that it's probably mid-June. After that, you know, 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. Nothing to announce at this point, but we've got till mid-June, and we are pursuing opportunities actively.

Speaker #5: 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.

Speaker #5: And we will chase opportunities around the world for that asset. So nothing to announce at this point. But we've got till mid-June. And we are pursuing opportunities actively.

Speaker #3: 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.

Jacob Taylor: I think one thing I would add to that is, you know, we have been successful in recently contracting some of our seventh-generation rigs and covering that white space in 2026 and in 2027. We like the idea of, you know, having the West Carina available to us for playing the upside going into 2027, which we feel is gonna be a strong year.

Speaker #3: 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.

Speaker #5: I really appreciate it. I'll turn it back.

Keith Beckman: I really appreciate it. I'll turn it back.

Speaker #1: Your next question comes from Greg Lewis with BTIG. Please go ahead.

Operator: Your next question comes from the line of Greg Lewis with BTIG. Please go ahead.

Speaker #6: Yeah, hey, thank you, and good morning. Good afternoon. Thanks for taking my question. You know, Samir, I'd like to talk a little bit about—excuse me for my soft voice today.

Greg Lewis: Yeah. Hey, thank you and good morning, good afternoon. Thanks for taking my question. You know, Samir, I'd like to talk a little bit about, excuse me 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 sticks at the bottom more recently. You know, 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. Really my question is, you have the rig rolling off in Brazil. You mentioned the Karina.

Speaker #6: 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.

Speaker #6: 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 whole is pretty positive.

Speaker #6: So really, my question is, you have the rig rolling off in Brazil. You mentioned the Karina. You mentioned there are potential opportunities—whether that's with, you didn't specifically say it's with IOC—or maybe I'm wondering, as we look at the outlook for Brazil rigs, I guess there's two questions.

Greg Lewis: 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, you know, as we look at the outlook for Brazil rigs, I guess there's two questions. One is, what is the opportunity for IOCs? It seems to be that there's this growing consensus that, or at least there was a growing consensus that Petrobras was gonna shed 2 to 3 rigs. Could we be in an environment in 2027 maybe where Petrobras isn't as net negative from where they are today?

Speaker #6: One is, what is the opportunity for IOCs? And it seems to be that there's this growing consensus that, or at least there was a growing consensus that Petrobras was going to shed two to three rigs.

Speaker #6: Could we be in an environment in '27, maybe, where Petrobras isn't as net negative from where they are today?

Samir Ali: Look, I think it's possible, Petrobras, you know, they're incredible acquirers of rigs, just given their size in the market. You know, 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. You know, I wouldn't say that it's likely, but it's definitely possible that you could see that situation. 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.

Speaker #5: 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 three to four rigs, kind of if you roll the clock forward a year from now.

Speaker #5: 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.

Speaker #5: 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.

Speaker #5: 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.

Speaker #5: 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.

Samir Ali: As we look forward, as Jacob mentioned, we're quite happy that we've got the West Carina to redeploy into a higher dayrate.

Speaker #4: Okay, super helpful. Thanks.

Greg Lewis: Okay. Super helpful. Thanks.

Operator: Your next question comes from the line of Hamed Khorsand with BWS Financial. Please go ahead.

Speaker #1: Your next question comes from the line of Hamad Korsand with BWS Financial. Please go ahead.

Hamed Khorsand: Hey, good morning. Was there any update on the Gemini?

Speaker #7: Hey, good morning. Was there any update on the Gemini?

Speaker #5: Nothing specific that we mentioned, but the rig continues to perform quite well for us 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.

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

Speaker #5: So we remain cautiously optimistic about the ability to continue finding work for the Gemini.

Speaker #7: And is it too early to talk about bringing stacked ships back online?

Hamed Khorsand: Is it too early to talk about, you know, bringing stacked ships back online?

Samir Ali: You know, look, as we look at our stacked fleet, we've got 2 harsh environment semis that would probably the most likely candidates to reactivate. We would look to reactivate them for the right contract. You know, there is a cost of capital arc between what, you know, our cost of capital and our client's 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, you know, harsher environment market continues to tighten just like the rest of the floater market. There's probably gonna be a need for those assets. In the near term, I think it's a bit challenged. Longer term, we could absolutely look at reactivating them.

Speaker #5: Look, as we look at our stacked fleet, we've got two harsh environment semis that were probably the most likely candidates to reactivate. We would look to reactivate them for the right contract.

Speaker #5: There is a cost of capital arc between what our cost of capital and our client's cost of capital is. If they're willing to fund a large portion of that reactivation, would we look at it?

Speaker #5: Absolutely. And as we look back, we think that 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.

Speaker #5: 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.

Samir Ali: I think the key there is, given the focus on free cash flow, we are not going to fund that on our balance sheet. That, you know, a client will have to fund that reactivation.

Speaker #5: A client will have to fund that reactivation.

Speaker #7: Okay, thank you.

Hamed Khorsand: Okay. Thank you.

Speaker #1: Again, if you would like to ask a question, press star, then the number one on your telephone keypad. And your next question comes from the line of Noel Parks with TUI Brothers.

Operator: Your next question comes from the line of Noel Parks with Tuohy Brothers. Please go ahead.

Speaker #1: Please go ahead.

Noel Parks: Hello. You know, 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 re-achieving the levels we had before, but you know, even more, even more robust cycle of kind of maybe even above and beyond what we're seeing with the exploratory boost?

Speaker #7: Hello. 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.

Speaker #7: 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 of kind of maybe even above and above what we're seeing with the exploratory boost?

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

Speaker #5: Look, if I look at our fleet, we've continued to invest in making sure that we're at the leading edge of technological upgrades and remain competitive. Do I think there's more efficiency to be had?

Speaker #5: 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, there's probably a bit more to do.

Speaker #5: But I wouldn't say that you're going to get a 40 or 50 percent increase in efficiency from here.

Noel Parks: Gotcha. I wonder if you just had any further thoughts. You had mentioned, of course, the general trend of equipment moving out of the Atlantic basin and moving east. 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 the ones that are multi-basin in their drilling, is there any degree of sort of regional arbitrage they're looking at?

Speaker #7: Gotcha. And I wonder if you just had any further thoughts. You had mentioned, of course, the general trend of equipment moving out of the Atlantic basin and moving east.

Speaker #7: 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 has 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?

Noel Parks: Sort of like, you know, 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, you know, going totally on near-term economics as far as, you know, making the regional choices.

Speaker #7: Versus just going totally on near-term economics as far as making the regional choices?

Speaker #5: Yeah, 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.

Samir Ali: Look, I think when you speak to our clients, they view their portfolio the same way, you know, you would rationally, and they're gonna allocate capital where it makes the most sense for them. You know, 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 US Gulf. We've talked to certain clients that are, you know, ramping up their investments in Southeast Asia. I think it really is client-specific and where their acreage sits and how ready to develop those programs are. You know, when we do speak to the kind of the bigger international oil companies, a lot of them do seem to be shifting capital to, you know, Southeast Asia and West Africa.

Speaker #5: 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.'

Speaker #5: 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.

Speaker #5: But when we do speak to kind of the bigger international oil companies, a lot of them do seem to be shifting capital to Southeast Asia and West Africa.

Speaker #5: It really does feel like there's a demand pull there. But by no means does that mean that's the only place we're seeing demand improve.

Samir Ali: It really does feel like there's a demand pull there, but by no means does that mean that, you know, that's the only place we're seeing demand improve.

Speaker #7: Great. Thanks a lot.

Noel Parks: Great. Thanks a lot.

Operator: 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.