Thank you for standing by, and welcome to the Seadrill's Second Quarter Earnings Conference Call. [Operator Instructions] Thank you. I would now like to turn the call over to Lydia Mabry, Director of Investor Relations. You may begin.

Thank you, operator. Welcome to Seadrill's second quarter 2024 earnings call. Today's call will feature prepared remarks from Simon Johnson, our President and Chief Executive Officer; Samir Ali, Executive Vice President and Chief Commercial Officer; and Grant Creed, Executive Vice President and Chief Financial Officer. Also joining is Marcel Wieggers, Senior Vice President of Operations. Today’s call may include forward-looking statements that involve risks and uncertainty. Actual results may differ materially. No one should assume these forward-looking statements remain valid later in the quarter or year, and we assume no obligations to update. Our latest Forms 20-F and 6-K filed with the U.S. Securities and Exchange Commission provide a more detailed discussion of our forward-looking statements and the risk factors affecting our business. During the call, we may also refer to non-GAAP measures. Our earnings release filed with the SEC and available on our website, includes reconciliations to the nearest corresponding GAAP measures. Our use of the term EBITDA on today's call corresponds with the term adjusted EBITDA as defined in our earnings release. Now, let me turn the call to Simon.

Thank you for joining us on today's call. The second quarter Seadrill delivered EBITDA of $133 million on $375 million of total operating revenues for an EBITDA margin of 35.5%. Seadrill had a strong first half of the year with a combined $257 million in EBITDA. However, we are lowering our second half expectations based on revised estimates for contract start dates for the two rigs we're moving to Brazil and uncommitted near-term availability on other rigs within our fleet. We entered 2024 knowing it would be a transition year. We've operated fewer rigs while preparing units for long-term contracts and performing necessary calendar-based maintenance on several others. We've acknowledged our willingness to incur idle time early in the cycle as we sought to reprice, relocate and reintegrate rigs. This was exemplified by the West Polaris, which we moved from a third-party managed contract in India, where it operated alone to a market rate term contract in Brazil, where we operate at scale. Like our peers, we've encountered white space for some of our units with near-term availability. Specifically the Sevan Louisiana, West Phoenix and West Capella. We're seeing indications of limited contracting options and intensifying competition that will impact on these rigs and possibly others into 2025. The emergence of more volatility, inherent in the oilfield services subsector further enforces the importance of through-cycle resiliency. To achieve durable earnings and cash flow across cycles, one, scale matters, two, balance sheet strength matters, three, management discipline matters, and four, most importantly, safe, efficient, responsible drilling operations matter. At Seadrill, we achieve basin scale by concentrating a highly standardized rig fleet in advantaged geographies, primarily across the Golden Triangle. We maintain a prudent balance sheet that allows us to invest in maximizing the useful life, competitiveness and performance of the rigs…

Thanks, Simon. Trying to anticipate what our clients are going to do when is becoming more difficult. For example, global floater contract awards through the first half of this year were half of what they were over the same period last year, adjusting for an unusual tenure contract. Then, in late July, an IOC and an NOC launched multi-rig tenders within what seemed like hours of each other. Though the market balance supports continued rate progression, uncertainty on the timing of demand and the competitive response to that follows can contribute to idle time and day rate dispersion. Drilling contractors are card players that never really get to deal. We can only play the hand in front of us. More challenging still is we are not alone at the table. We must anticipate and where appropriate respond with what other players may do with the cards they have. Certain markets feel different than others right now. Let's walk around the world reviewing the demand and outlook and contracting activity within each. Starting with our primary focus area, the Golden Triangle. Brazil remains the single most important deepwater market. Expect the number of floating rigs there to remain flat around 30. Though operators in the region appear to have expansionary ambitions that could yield incremental additions over time. About seven rigs will roll off in the next 18 months. And there are two open tenders for up to seven units of varying specification that would keep the market in balance. As industry participants are aware, we have three rigs contracted with Petrobras through 2025. So these new tenders line up well with our scheduled completion dates. We've begun dialogue on these rigs for future work both in and outside of Brazil and we anticipate being able to provide an update on…

Thanks, Samir. Before I begin, I want to review some administrative items. Following the recent consolidation of our corporate office in Houston, we are transitioning from a foreign private issuer to a domestic issuer like all the other major international offshore drilling contractors. That means we'll be filing 10-Ks and 10-Qs from 2025 onward, which should be welcomed by our investor base. We are also voluntarily ending our secondary listing on the Oslo Stock Exchange. The last day of the trading will be on Monday, September 9. And from then on, we'll trade exclusively on the New York Stock Exchange, consistent with efforts to simplify our business. Now let's turn to second quarter performance before moving on to our full year outlook. Second quarter contract drilling revenues were $267 million, $8 million lower than the first quarter. We received no contributions from the Polaris and Auriga in the second quarter as they underwent preparation for upcoming contracts in Brazil compared to the first quarter when they respectively contributed 25 and 60 revenue earning days. This was partially offset by contributions from the Sevan Louisiana, which returned to work in April, completing a short well intervention contract before transitioning to a more traditional drilling contract. Reimbursable revenues were $15 million with a $5 million sequential decline accompanied by a corresponding decline in reimbursable expenses. Updates to our Sonangol joint venture, through which we operate three rigs in Angola, affected both management contract and leasing revenues. First, we received an inflationary increase on the daily management fee we earned for operating the Sonangol rigs, retroactively applied to January 1. This appears on our P&L as management contract revenues and was $65 million in the second quarter. Second, we now own a bareboat charter rate in the West Gemini, which we charter to…

Thank you. [Operator Instructions] Your first question comes from a line of Scott Gruber from Citi. Your line is open.

Yes, good morning.

Good morning, Scott.

Good morning.

I wanted to ask just on the market, it seems that seventh gen rates are really strong here and those will sustain through this soft patch here, based on recent awards and the demand uplift that's come together for late 2025 and 2026. How do you think about rate resiliency on the sixth gen fleet? Obviously, there could be some discounts taken for shorter-term work, but I'm really thinking about the term work for sixth gen rigs. Do you think that is impacted by rates that could be taken on the shorter-term work, or do you think the seventh gen strength helps to hold up the sixth gen rates on term work?

Yes. So, this is Samir. I'd say on the sixth gen rates, at least on our sixth gen drill ships, we've been pretty conscious in where they're placed. So we've got one in Brazil on a long-term contract. We've got one in Southeast Asia that's one of two rigs in the market with MPD, so we think we can capitalize on that and continue to keep rates at good levels. And then one is in our JV venture in Angola, where having that protective mode is helpful. For us, when we look at the rates for those rigs, we've been pretty conscious of how we place them around the world - to ensure that we can still maximize the rate on those rigs.

Got it. Just on the West Phoenix, I appreciate the color. You mentioned that the next opportunity could arise late in 2025. Did I hear that correct? You're essentially going to wait for the next opportunity in Norway. I assume that rig is probably not going to be built outside of the region, or would you look outside?

Yes, no. So, we're focused on Norway, but we'd obviously look at other markets. For us, it's really making sure we can justify the CapEx investment that's required in the rig. We are looking at opportunities in the middle of 2025, but there are other opportunities outside of Norway. But I think, I'd stress the key for us is, if we're going to invest over $100 million in the rig, making sure that we've got a return on that capital.

Appreciate it. I'll turn it back.

Thanks, Scott.

Your next question comes from a line of Ben Nolan from Stifel. Your line is open.

I appreciate it. So, I guess my first question relates to just the competitive landscape. I mean obviously, a smaller competitor is about to be gone. Now, that means that you guys are the little train that could here. Does that change at all how you think about the competitive landscape, how you're positioned, the consolidation that is happening? Just curious, Simon, if things are the same as they were before, or if you think about the world a little bit differently now?

No, Ben, I don't think our posture - is changed by that recent announcement. We were charged by the Board with being agnostic between presenting ourselves as an attractive target for consolidation, and at the same time, doing what we can to maximize growth opportunities for the company. So, we have an attractive fleet. We have a clean balance sheet, good backlog. So we're definitely a potential acquisition target, for a larger peer. But we also believe that we've created a very strong platform for growth. And Seadrill today is a very well-run business, and this is reflecting our earnings results today. We're also disciplined. So when we look at those opportunities for growth, there's certain metrics and thresholds that the opportunities need to meet or exceed. So we have one eye on what we've got, and one eye on what we're trying to build.

Got you. And then for my second question, Grant, you mentioned it a little bit, but could you maybe go into a little bit more color on what is driving some of the delays on the timing of the Auriga and Polaris?

Well, yes, it's really the supply chain issues, and I guess, Simon, can go into more detail there.

Yes, I mean, essentially what you're dealing with there, is the rigs have, there's some uncertainty in terms of our peers' performance in terms of rig acceptance. So, we're really changing our outlook to recognize the fact that there may be a longer period for the customer acceptance process. The rigs have now left the quayside. We've exited the shipyard, and we're doing load-outs and some sea trials in preparation for the voyage down to Brazil. So most of the major project milestones are behind us. Really now, the sole risk that's outstanding and the main reason that we've judged, we've changed our outlook, relates to, what's been, a substantial growth in that customer acceptance process.

Got you. All right. Appreciate it. Thank you.

Thanks, Ben.

Your next question comes from a line of Fredrik Stene from Clarkson Securities. Your line is open.

Hi, Simon and team. Hope you are well. I have a couple of questions, and first I wanted to touch a bit on the guidance. I think clearly the reduced guidance today will impact estimates for the second half of this year. I think all over the market is taking it relatively okay, given the magnitude of it. But I'm interested to kind of hear a bit more color about if we should, you know, read anything into 2025 based on your reduced guidance for 2024, or do you think, I guess for the Polaris and Auriga it's fine, right, because they start their contract in 2024, they'll still work through 2025. But versus the last quarter and your previous guidance, have anything kind of changed in terms of the opportunities, possible startups, et cetera, for all your rigs that are not yet contracted through 2025?

Well, hi, Fredrik, it's Grant, and I'll start, and maybe the others can add anything. But on the guidance, yes, the majority of that was the rig activity plus then the Auriga/Polaris. And like you say, Auriga/Polaris is really just a timing thing, and that EBITDA then just pushes out into future periods, and will not impact or should not impact 2025, and beyond. I think you'll see that Louisiana is a rig that we look at. So it is lower spec. You see that we are assuming that she's warm frac during the fourth quarter, which means that we have got confidence in her commercial opportunities going forward. But like Samira said, white space and air pockets may continue to be a theme, so we can't discount that if you're looking at 2025. Beyond that, we look at Phoenix, and we talked about the contracting opportunities for her come middle of next year. And then, what I would say beyond those rigs, the rest of our contracting profile actually looks very good. We're approximately 67% contract covered, which on a relative basis is very strong. But maybe I'll hand over to Samir.

So, Fredrik, I'd also add we're 67% contracted through 2025, and if you look at our rollover profile next year, it's our rigs in Angola, where - again we have a strong JV, which we feel pretty confident in. And then we've got an asset in the Gulf of Mexico in the second half of next year. The Gulf of Mexico continues to be a strong market for a dual-activity, dual-BOP rig like the Vela. And then we've got the - Sevan Louisiana, and the Phoenix. And we spoke to the Phoenix that it'd probably be second half of next year at the earliest. And then, with the Sevan she's the little engine that could, so she always ends up finding work here and there. We're still continuing to be optimistic that we think we can secure work, into next year for that rig. But that will be a shorter contracting cycle as it's always been.

Yes, that's very helpful. Second, on your fleet, you were able to close the sale of the JV, I think, slightly earlier than expected. So, it's a nice kind of cash boost getting into the 2Q numbers there. With the Phoenix now potentially being out of work for some time, and a substantial investment needed to take that into play again, how do you view the Auriga and Polaris in terms of pecking order? [Prospero] as well, if you have any comments. But have your attitude towards your cold-stack rigs changed? That is, are you more likely to try to sell them, scrap them, et cetera, now that you still have some gaps to fill on your active fleet?

Yes, so I'd say the Phoenix is still the top priority out of those rigs. And we continue to actively market it. So, we are in active dialogue for work for that rig. So, we may have to stack it in the near term, but for us, we're not giving up on that rig just yet. In terms of asset sales, I'll leave it to Simon to comment on that.

Yes, I think we've been pretty clear through time, Fredrik, in terms of reactivation opportunities for the cold-stacked units. We're looking for a material contribution to the cost of reactivation from a potential client, and we want a good outlook on the contracting side for that unit, and a good foundation initial contract. So, at the moment, the focus is on the existing working fleet. And I'm getting some term behind some of those units. So, I don't think you're going to see anything change. There really hasn't been a change in our attitude, as to how we might approach opportunities for those units, other than certainly the West Prospero is clearly a non-core asset. Now that we're pivoting to our floater focus. So, I think that was probably a more likely sale candidate than the others.

And that's very helpful. And just a final on the queries on the clips, do you have any current reactivation cost estimates that you can share?

No, we haven't scrubbed in for some time, which I think underlines my confidence in that. We're at an unchanged position there. Yes.

Perfect. Thank you so much, guys. I'll leave it to the next one. Have a good day.

Thanks, Fredrik. Thank you.

Your next question comes from a line of Hamed Khorsand from BWS Financial. Your line is open.

Hi, I just wanted to follow-up on that comment, the question about the consolidation. Do you think that is playing a role here as far as the contract tenders go? Because last quarter and two quarters, the commentary was that day rates aren't budging on the, aren't causing a harm on the tender process. But now we have these pushouts that you and your peers are talking about?

So, I'd say consolidation with our client base, one plus one doesn't equal two. I mean, what ends up happening is sequential, parallel programs become sequential programs for us as an industry. So I think the consolidation that we've seen with our customer base has pushed out some demand. Again, it's not a demand destruction. It's just, it's a reshaping of the demand and it's just pushing it further out.

And do you think that given the timing of the Phoenix being in Norway, is there enough time to generate revenue next year after you complete your maintenance process?

We definitely do. And I'd say, you know, for us, until we feel closer to a contract, we're not going to spend a significant amount of capital on that maintenance and those upgrades. But, if we're targeting programs in the middle of next year, we have enough time to spend the - that complete the upgrades and be ready for them.

Okay. Thank you.

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

Hi, guys. Thanks. Just I guess my question around the Phoenix is a little bit different. I know that the base case is that, maybe the Phoenix can hopefully work in the back half of '25, if it can work in Norway. It seems like the, the high end North Sea floater market's kind of been, it seems like it's a plus or minus rig. So just as we think about that and potential opportunities in, regions where some of its sister rigs have worked in like Namibia, have we kind of cost out what it would take to kind of, you mentioned this hundred plus million dollar number to stay in Norway. Obviously that's a high end gold plated market. Have we kind of costed out what it would cost to, go through the survey and have the rig in a position to work in Namibia? And obviously we're actively bidding the Phoenix, but are we actually looking outside of North Sea, or is it just all roads lead to Norway?

Yes, we are actively looking outside of Norway as well. And we have looked at the costs and I think our threshold is the same. It's kind of, the further you get from Norway, candidly, the cheaper it gets for the Phoenix, but in terms of capital required to maintain her. But at the end of the day, we keep coming back to, we need to find a program that justifies that investment. And if that's in Namibia, that's fine. And that works for us. If it's in Norway, that's also fine. But we, you know, for us, it is that focus on, we do have a large CapEx investment and we need to be able to cover that cost.

Yes 100%. And then just, as we think about Southeast Asia, I mean, I pay a lot more attention to the Golden Triangle than I do there. As we think about, those opportunities, I guess the rigs are rolling off in early Q1. Any kind of broad strokes around the type of work, i.e., are there one plus year tenders in that market or is it, hi if I wanted to be conservative thinking about, opportunities for the Capella, there is going to be, there's going to be work, but there's also going to be pockets of idle time?

So there are some long-term programs, there are some short-term programs in that market. I think the unique thing about the Capella in that market is she's equipped with MPD. She's one of two assets in that market that have MPD. So, we are targeting both of those, obviously a longer term program is preferable if we can secure it for the right return profile. But you are seeing a good mix of, multi-year tenders plus some smaller, one-off wealth opportunities.

Okay. Thank you very much.

Thanks Greg.

[Operator Instructions] Your next question comes from a line of Noel Parks from Tuohy Brothers. Your line is open.

Hi, good morning. A question I had when we see continued capital discipline by operators, I'm just wondering, has that changed the willingness at this point in the cycle or the reluctance for operators to involve more partners in development? I'm just curious whether, as they look at making fewer investments in general, whether you're seeing any impact on the tendency to go more alone, or to try to spread out the risk?

Yes. So you're seeing in certain markets where we've got clients that are trying to farm down a little bit of their exposure, make small, more bets, but smaller bets across the space, which can make it challenging to actually get approvals. I don't think, we're not seeing a ton of the opposite where clients are saying, hi, we want more of it. But you're definitely, at least in the Gulf of Mexico, seeing, where clients are wanting to farm down a little bit of their exposure and spread their bets around, which has made it a little more challenging to kind of secure rigs, or secure contracts for us.

Great. Thanks. And I'm just curious to the degree that, are there any customers you come across in discussions that are maybe particularly price insensitive at this point? You know, year-over-year, it's been a big increase. It doesn't seem like we're vaulting forward in day rate pricing, right at the moment. And so it's, I'm just wondering if there is a subset of clients out there, where the discussion is really not so much about the prices. I don't know if it's availability, scheduling, logistics, or what have you, but any thoughts there?

Yes. So it's a mix, but I wouldn't say there's any client that's super, every client's price sensitive at some point, but I'd say the opposite of, we're not seeing demand destruction because of the rates we're asking, right? Clients aren't saying, oh, we're just going to turn that program off, because the rates are too high. There's other factors out there that are driving their decision. The day rate is a small piece of it, but it truly comes down to, can they get partners or can they get, long lead equipment and some other items not really driven by the day rate itself.

Great. Thanks a lot.

Thank you.

And your final question comes from the line of Josh Jayne from Daniel Energy Partners. Your line is open.

Thanks. Good morning. I just wanted to follow-up on the last line of questioning. I think it was Simon in his prepared remarks talked about characterizing the market as frustrated, but satisfied when talking about where we are today. I was hoping you could discuss what ultimately you think is - going to get the ball rolling further from a contracting standpoint. You just talked about rate and how customers, aren't that rate sensitive. That's not really the big sticking point, but how much is it project timing? How much is it rate? You'd mentioned long lead time items. I was just hoping you could go through all of those factors and just talk about, where we are today and what's ultimately going to get the ball rolling from a contracting standpoint?

Yes. So this is Samir. I'd say, as Simon mentioned in his prepared remarks, if by definition, these guys are producing a consumable resource that can only last for so long, right? You can only defer demand for so long. We are starting to see that already happening. There's strong conversations happening for, second half of next year and into 2026. So we are starting to see that. And part of it too, as I had mentioned, the long lead time equipment, that's starting to loosen itself. Supply chains are starting to come back and clients are being able to get equipment that they need to start bringing some of that demand back. And you're seeing it in wellhead data, you're seeing in some other places that would be leading indicators for clients wanting to, continue drilling. I don't know if you want to add anything.

Yes, I think what I would add is that, [indiscernible] is increasingly becoming an issue in some of the deep water production hubs. That's certainly a factor that we look at. So, while traditionally people have been concerned about reserve replacement ratios, I think, just the outlook of the customer base is a lot more short-term these days. So [indiscernible] facilities, I think, is an important and often a little disgust factor. But, really it gets back to this capital discipline. Our customers are satisfying their shareholders first rather than their own sort of thirst for production. And it's coming to the market in a somewhat staccato fashion.

Thanks. And then just one shorter-term question on Louisiana. You alluded to it earlier in the year. It did some intervention work and then some drilling work. Are there options to sort of stack back-to-back intervention projects for that rig over the next 12 to 24 months? And I'm just curious how you're thinking about that versus using it primarily for drilling work and what the opportunities are there?

So, our focus is always drilling work. I mean, it's more profitable for us, but we're absolutely looking at intervention work as gap fill as well. We're in active dialogue on both, both inside and outside the Gulf of Mexico. So, we are looking at opportunities. I'd say with the intervention work, it tends to pop up faster, even faster than the drilling work for the Louisiana. But we are pursuing both in the near-term and into 2025.

I think you do make a good point there, though. In as much as the important element with that intervention work is and that we have some discretion in the timing, and it needs to come to market in a volume that's interesting. We can prosecute that type of work most effectively when we have a campaign rather than just one or two worlds here and there.

Okay. Thanks very much.

Thanks very much, Josh.

Thanks Josh.

And this concludes today's conference call. Thank you for your participation. You may now disconnect.