Seadrill (SDRL) Q3 2025: Backlog Climbs $300M as Deepwater Demand Inflects Toward 2027
Seadrill’s Q3 saw $300 million in new backlog, extending visibility amid a tightening offshore rig market and rising deepwater investment. Operational excellence in Angola and the US Gulf is anchoring utilization, while leadership signals an inflection in day rates and demand as underinvestment in offshore supply comes to a head. Investors should focus on the company’s ability to bridge near-term contract gaps and capture upside from a multi-year offshore upcycle.
Summary
- Backlog Expansion: $300 million in new awards extends rig commitments and strengthens Seadrill’s position in Angola and the US Gulf.
- Operational Outperformance: Near-perfect uptime and technical upgrades reinforce competitive advantage in key markets.
- Strategic Inflection: Leadership expects offshore activity and day rates to accelerate from late 2026 into 2027.
Performance Analysis
Seadrill’s third quarter reflected both resilience and transitional pressures as the company secured $300 million in new contract backlog, bringing the total to $2.5 billion. While total operating revenues declined sequentially, driven by fewer operating days and lower economic utilization on certain rigs, operating expenses fell 9% quarter-on-quarter due to lower management contract costs. Adjusted EBITDA landed at $86 million, down from the prior quarter, reflecting both contract timing and increased maintenance spend.
The company maintained a robust liquidity profile with $600 million in total liquidity and $428 million in cash, while capex and long-term maintenance payments were weighted toward the quarter due to the West Gemini’s special periodic survey. Management narrowed full-year guidance ranges for both EBITDA and capex, signaling confidence in cost containment and backlog conversion. The operational backdrop was marked by standout technical uptime in Angola and the Gulf, with only isolated downtime events in Brazil weighing on utilization metrics.
- Backlog Visibility: New awards across five rigs, including Angola JV extensions, support cash generation and utilization through 2026–2027.
- Cost Structure Management: Significant reduction in management contract expenses offset higher maintenance, reflecting disciplined cost control.
- Operational Uptime: Angola JV rigs achieved 99.7% technical uptime, underpinning customer trust and repeat business.
Despite near-term softness in select regions, Seadrill’s execution and commercial wins position it well for the anticipated offshore upcycle.
Executive Commentary
"We continue to execute our commercial strategy to build backlog coverage through 2026 and minimize our exposure to contract gaps. We're encouraged by signs that a market recovery is coming into view. 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."
Simon Johnson, President and Chief Executive Officer
"Total operating revenues for the third quarter were $363 million, representing a sequential decrease of $14 million... Adjusted EBITDA was $86 million, a sequential decrease of $20 million from the prior quarter... Full-year capital expenditure guidance range is narrowed to $280 to $300 million, and we expect capital expenditure and long-term maintenance to trend lower in 2026."
Grant Creed, Executive Vice President and Chief Financial Officer
Strategic Positioning
1. Backlog Coverage and Contract Strategy
Seadrill’s focus on minimizing contract gaps and maximizing utilization is evident in its $300 million of new awards and direct continuation contracts in both Angola and the US Gulf. By prioritizing extensions and eliminating idle time, the company is ensuring revenue stability and positioning for incremental upside as market conditions improve.
2. Operational Excellence and Fleet Differentiation
Technical uptime above 99.7% for key Angola JV rigs and successful technology upgrades, such as managed pressure drilling (MPD) systems, reinforce Seadrill’s reputation for reliability and innovation. The Savon Louisiana’s retrofit for well intervention and plug and abandonment expands addressable markets and enhances commercial flexibility.
3. Market Inflection and Deepwater Demand
Leadership sees the offshore sector at an inflection point, with underinvestment in deepwater resources driving renewed exploration and project sanctions. Africa and Asia are highlighted as emerging demand centers, while the US Gulf remains resilient on pricing. Seadrill is strategically positioned to capture this upturn as utilization and day rates are expected to accelerate from late 2026 onward.
4. Regional Flexibility and Asset Mobility
Seadrill’s ability to reposition assets across geographies—notably with the Capella and Carina rigs—provides optionality to capture demand wherever it materializes. Management is proactively managing exposure to near-term “white space” in 2026, aiming to bridge gaps until market tightness returns.
5. Customer Relationships and Local Content
Longstanding partnerships in Angola and the US Gulf are reinforced by customer awards and operational accolades, supporting repeat business and contract extensions. The company’s commitment to developing local talent and delivering for national oil companies underpins its competitive moat in these regions.
Key Considerations
Seadrill’s Q3 results must be viewed through the lens of a cyclical offshore recovery and an industry-wide pivot back to deepwater investment. The company’s ability to secure contracts, manage costs, and deliver operational excellence will be critical as the market transitions from a trough to a multi-year upcycle.
Key Considerations:
- Near-Term Contract Gaps: Exposure to idle time in early 2026 for select rigs remains a risk, though management is actively pursuing new awards.
- Day Rate Trajectory: Leading-edge rates are resilient in the US Gulf but show modest softness in Brazil and West Africa; a broad inflection is expected from late 2026.
- Cost Discipline: Lower management contract expenses and narrowed capex guidance reflect strong financial stewardship.
- Regional Demand Drivers: Africa and Asia are emerging as incremental demand sources, with India, Malaysia, and Indonesia cited as near-term opportunities.
Risks
Seadrill faces risks from potential contract gaps in 2026, regional pricing softness in Brazil and West Africa, and operational downtime events such as equipment failures in Brazil. Competitive dynamics, customer cost pressures, and macro uncertainty around oil demand and project FIDs could also impact backlog conversion and day rate recovery. Management’s ability to bridge near-term white space and sustain operational excellence will be critical to mitigating these risks.
Forward Outlook
For Q4 2025, Seadrill guided to:
- Narrowed adjusted EBITDA range of $330 to $360 million
- Operating revenues of $1.36 to $1.39 billion (excluding $50 million reimbursable)
For full-year 2025, management narrowed guidance:
- Capex of $280 to $300 million, with 2026 capex expected to trend lower
Management highlighted several factors that shape the outlook:
- Market tightness and day rate inflection expected in late 2026 into 2027
- Continued constructive tendering and increased FID activity across major offshore basins
Takeaways
Seadrill is leveraging operational excellence and commercial discipline to extend backlog and weather near-term market softness.
- Backlog Resilience: $300 million in new awards and strong JV performance in Angola reinforce multi-year revenue visibility and customer trust.
- Strategic Asset Flexibility: Proactive rig repositioning and upgrades, especially in the US Gulf and Asia, provide optionality to capture emerging demand.
- Offshore Upcycle Watch: Investors should monitor Seadrill’s progress in bridging 2026 contract gaps and capturing upside as global deepwater investment accelerates into 2027.
Conclusion
Seadrill’s Q3 2025 results show a company executing on backlog expansion, cost discipline, and operational reliability while positioning for a cyclical upturn in offshore drilling. The next 12–18 months will test management’s ability to bridge contract gaps and fully capitalize on the anticipated deepwater resurgence.
Industry Read-Through
Seadrill’s commentary and backlog wins signal a broad-based offshore recovery that is likely to benefit other high-specification drillers and offshore service providers. The pivot back to deepwater, driven by underinvestment and plateaued shale output, is being echoed by supermajors and reflected in rising FID activity. Africa and Asia’s emergence as demand centers, alongside a resilient US Gulf, suggest that global rig utilization and day rates will tighten industry-wide from late 2026, with implications for asset values and capital allocation across the sector.