Good morning and welcome to the Seadrill Limited Q1 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded. I would like to now turn the conference over to John Roche, Vice President of Investor Relations. Please go ahead.

Thank you. And welcome, everyone, to Seadrill Limited's Q1 2019 quarterly conference call. Before we get started, I'd like to remind everyone that much of the discussion today will not be based on historical fact, but rather consist of forward-looking statements that are subject to uncertainty. Included on page 2 of the presentation is a comprehensive list covering our forward-looking statements that can also be found on our website seadrill.com. So moving on to the agenda. With us in the room today are Anton Dibowitz, our CEO; Mark Morris, our CFO; also Matt Lyne, our Chief Commercial Officer; and Leif Nelson, our Chief Operating Officer. In our prepared remarks, you'll hear from Anton and Mark. Anton will cover off the highlights for the quarter and provide you all with our views on the market. Mark will then provide a review of the financial performance for the quarter. And then we'll open up the lines so you can take some questions from the entire team. And with that, I'd like to turn the call over to Anton.

Thanks, John. And welcome to everyone to our first quarter earnings call. Before I go into the highlights for the quarter, I'd like to touch on some of the market dynamics that we're seeing today. We are firm believers that the offshore barrel is important to meet market demand and that the fundamentals of our business are sound. Oil prices are well within the range where offshore projects are profitable and we expect this to translate into increasing amounts of capital being deployed into offshore. To be clear, this is not yet a healthy market with respect to day rates, but what we can see is that the macro indicators are pointing to a continued recovery going forward. There are three main areas that demonstrate the improving market fundamentals. First, upstream spending. After four consecutive years of decline, we're expecting an increase in offshore spending in 2019, while our onshore spending is expected to decline, driven by investors' demand for greater capital discipline and returns. As importantly as overall offshore spending, offshore exploration, which is an important driver for our business is increasing. The expectations of oil in the $65 to $75 a barrel range is expected to result in offshore spending growing at a faster pace than onshore over the next few years. Second, contracting activity. Tendering and fixture activity is improving. The harsh environment floater market was the first to begin recovering, but we are now seeing an increase in other segments as well. While, the shape of the recovery is outside of our control, I can tell you that we're having more and better customer conversations, both in open tenders and direct negotiations. We're also beginning to see an improvement in commercial terms, with customers showing their willingness to pay for mobilizations and share in capital projects…

Thank you, Anton, and good morning or good afternoon wherever you are. I will briefly pull out the highlights from the financial quarter before providing guidance for the second quarter. Turning to the financial highlights. Of our 35 rigs 16 were working on average through the quarter comprising of eight floaters and eight jack-ups. Contract revenues were largely flat with $8 million of lost revenue due to downtime-related issues and the lower day rates in the West Callisto following a contract extension being offset by revenue from the West Carina commencing operations. Overall, operating revenue decreased by $10 million, primarily due to higher reimbursable revenues related to the West Mira mobilization. EBITDA was in line with the previous quarter, although there were a number of – a number of offsetting movements as I just highlighted, plus the impacts of the final installment of an overdue receivable we referred to on the last earnings call. Finally, our EBITDA of $72 million was higher than the $60 million guidance we gave, primarily due to timing of spend related to moving stacked rigs to lower-cost locations. Moving on to the balance sheet. As always there are a number of moving parts here and I'm just going to draw out the main ones. In current assets, the 5% movement mainly reflects lower operating cash flow for the quarter, a reduction in restricted cash following a $32 million payment to settle PIK interest, a decrease in marketable securities related to the carrying value of Seadrill Partners common units and the mark-to-market valuation of our interest rate caps. The main movements in non-current assets are the normal depreciation on our drilling units and a decrease in investments in associated companies, primarily related to the amortization of basis differences. Moving on to the liabilities side. Current debt…

Before we open up for Q&A, I wanted to add just one more item. As many of you in the call would be aware, Mark will be leaving us in the middle of the year and as a result this will be how -- his last quarterly earnings call or at least at Seadrill. I'd like to take this opportunity to thank Mark for his significant contribution to Seadrill over the past four years. He's been a valued member of the team, instrumental in our restructuring and without a doubt he leaves Seadrill a much better place than when he joined us. And we all wish him well on his future endeavors. With respect to his replacement, we have selected a candidate and are in the final stages of getting him onboard and we look forward to sharing that with you in the next few weeks. John?

Great. Before we open up for Q&A, I'd just like to request that please limit questions to one question and one follow-up to allow everyone to have a chance to participate, So, why don't I turn it over to the operator to assemble the queue?

We will now begin the question-and-answer session. [Operator Instructions] The first question comes from Lukas Daul with ABG. Please go ahead.

Thank you. Good afternoon guys.

Good afternoon Lukas.

Anton a question on the market, I think that the fundamentals are certainly moving in the right direction, although it is not being appreciated by the equity markets as of now but could you sort of at least walk us through your thoughts on how you see the sort of recovery developing in terms of utilization and rates? Because I think that one of the reasons is that expectations are maybe not aligned with the dynamics of the industry. So, if you could share some of your thoughts on that I think it would be greatly appreciated.

Yes. Look I'll start with some general comments about the market and -- maybe and then I'll let Matt turn over to kind of what we're seeing in the specific markets. I think overall looking at where the market is quarter-to-quarter can be a little bit deceiving. This is a longer term gain that we see playing out. And what we can see is that obviously it is a quarter-over-quarter and six months over six months it is improving. What we have seen from where we were six months ago, most importantly, as I mentioned the tone of our customer conversations, the discussions about mobilization and CapEx. And what we're seeing in the forward market and we've seen it from fixtures that have been made public as well as the conversations we're having with customers is day rates that are clearly in contango with where the spot market is what it is, but there is a general acknowledgment from contractors and from our customers that a contract starting next year or the year after needs to be at a significantly higher price. We can't control. There are a lot of external factors that are going to affect how the market recovers trade disputes, geopolitical, GDP growth. What we do know is that the fundamentals are there, that the offshore barrels are needed, that exploration is coming back, and that all points to a continued improvement year-over-year as we go through over the next few years. Matt, do you want to address some of the regional markets?

I think if you break it down by the asset classes: The harsh environment has always been very positive for us and you can see the balance there. The jack-up market if you look back to January 2017 on the marketed utilization, we're up over 10% now, which is obviously a positive sign. And that's largely driven by obviously the long-term stacking and unwillingness to reactivate assets; but also the demand in the Middle East which is really important for the high-spec premium fleet owners like ourselves. In the floater market, you're -- we've sort of had a subdued reaction in the recovery by the Golden Triangle. We now see increased activity in both Africa and South America. Although it's taking a little time for those rates to materialize it's certainly looking a lot more warm and fuzzy for 2020 and beyond. And I think probably the biggest factor is we're starting to see longer term development opportunities materialize which really help us with the supply/demand curve.

I'll just add one more thing to your question. What's important for the recovery in the market is having disciplined action from the players in the market. And I think we've been extremely public about how we see the market going forward. An 80% marketed utilization is very close to what historically have been those inflection points and we can already see that happening. And that is -- but that remains dependent on continued discipline and we're certainly going to do it on our part from market players who are not bringing cold stacked rigs back into the market and adding supply before there is a significant strength. If there is discipline in the market then the speed and the pace of the recovery is going to get underway fairly quickly. If there is a continued lack of discipline from market players and supply continues to get added back into the market then it will be a different story. We can only control what we do but we're certainly going to play our part in that.

Okay. And then a unrelated follow-up maybe to Mark, but when it comes to monetization some of your strategic stakes or the stakes that you have in other companies, how are you looking at it in terms of opportunities and in terms of timing? Is that something, which is on the table?

Yeah. I mean I don't think it's any great trade secret that we have a number of co-investments, which we would expect to keep and flourish. There's other drilling investments that we have in SEAMEX and Seadrill Partners. And then there are businesses that are non-core to us but they're still good businesses; Archer, which of course is a spin-out from Seadrill originally; and of course the joint venture we have with Sapura Energy in Seabras. And when we think about how we look at continuing to delever the senior secured notes there are a number of things that we can do. And some of that can come from realizing some of those sales of non-core assets. On timing I think that we're not going to be rushed to do something. It's all about ensuring that we achieve value but that is sort of one of the full processes as well as obviously potentially doing some refinancing within SEAMEX, which could realize a particular credit mix that we have there that -- if refinancing goes on there. So there's a number of activities that are ongoing and we will continue to look at those and make decisions based on timing and the values we can receive is to as and when we retire them or sell them.

Okay. Thank you, Mark good luck in the future.

Thank you very much, Lukas.

The next question comes from Patrick Fitzgerald with Baird. Please go ahead.

Hi, guys. So one question, one follow-up. Could you remind us just what the contracts activity when the Seabras Sapura vessels come off contract and what contracting activity is looking like for those vessels that come off contract in terms of getting new contracts?

So we have two of the vessels that we'll be rolling in 2019. We're just going to see --have to see how that plays out. There are some opportunities down in Brazil. And we're hopeful about the opportunities to extend those, but we'll just have to see how that plays out. The remainder of the vessels are on long-term contracts.

Okay. And to the extent that there is a dividend or refinancing like you talked about that. Yes, just to be clear, that cash would be restricted cash that could be used to retire the secured notes, right?

Yes. Well, I think you need to be careful with the terms restricted and non-restricted because they can apply to slightly different silos of operations. So the way to think about it at the high level is, we've got what I'd call our operating cash that relates to our rigs that we normally would refer to as rig count. And then we have money that really relates to the benefits of the senior secured noteholders. And generally, distribution is only loan repayments, as they come in, go into various accounts that are pledged through the senior secured notes. And depending on which account it is within the senior secured notes, it tells you what we can or can't do with it, but in essence, it's always related to either paying down PIK interests or paying down principal. It's not that that money can go straight into rig counts, the main operating company. There are certain circumstances under which some monies can without getting into sort of technical details here, but generally, the way you think about it is that money sort of lives in its own universe generally, and so distributions and dividends coming in effectively gross up until such time as we net down the senior secured notes.

Okay. Thanks.

Okay.

[Operator Instructions] The next question comes from Michael Alsford with Citi. Please go ahead.

Thanks a lot for taking my question. I've just got one please. I just wondered whether you could help guide on what the investment levels will be in terms of CapEx for this year for the company for the group as a whole. Thank you.

In total CapEx for the full year?

Yes, exactly. Yes, please.

Yes. I mean, we would -- I mean I think there are various things that move around. We don't normally break that number out specifically, but I think sort of if you were talking sort of 150 to 250 is sort of probably what we would have budget that sort of range.

Okay. Thanks so much. And so that would incorporate any sort of incremental spend on rigs plus some maintenance on the ships essentially…?

Yes. On the CapEx, yes.

Lovely. All right. Thank you.

Okay. Thank you.

This concludes our question-and-answer session. I would like to turn the conference back over to John Roche for any closing remarks.

Thank you. And thanks to everyone for joining us today. This concludes our first quarter conference call. Speak to you all in about three-months time.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.