(Idea) Seadrill
Seadrill Ltd. (SDRL) was originally founded in 2005 by shipping magnate John Fredriksen. The company launched an acquisition binge after its founding, racking up $10 billion in debt. Only sustained high dayrates could have successfully funded its debt load.
Eventually, SDRL’s pro-cyclical capital allocation did it in. Falling oil prices in 2014 caused dayrates to collapse. SDRL entered bankruptcy in 2017. It had $14 billion in debt at the time.
The bankruptcy process eliminated approximately $4.7 billion in debt, all but wiped out shareholders, and handed control of the company to creditors.
After SDRL exited bankruptcy, the offshore drilling market failed to recover as U.S. shale production growth reduced interest in global offshore exploration and development. Dayrates remained low, causing SDRL to burn cash.
The Covid downturn in 2020 was too much for the company. In 2021, it entered its second bankruptcy. Its second restructuring eliminated $4 billion in debt and wiped out equity holders. The company also sold assets, including seven jackup rigs operating in Saudi Arabia.
SDRL emerged from its second bankruptcy in much better financial condition. When it exited in October 2022, its assets were valued at $4.9 billion against total liabilities of $540 million. Its long-term debt of $496 million was offset by $524 million of cash.
Strategic Pivot Toward Floaters
SDRL shares began trading in public markets in October 2022. At the time, the company boasted the youngest fleet in the offshore industry, with a fleet comprised of six drillships, three semi-submersible rigs, and five jackup rigs.
Management wasted no time pursuing its longstanding goal of enhancing SDRL’s cash flow profile.
SDRL’s first major strategic move as a newly public company was to use its stock as currency in an acquisition. On December 22, it announced its acquisition of drillship operator Aquadrill in an all-stock deal valued at $958 million. SDRL issued 30.6 million shares, with its shares selling at $31.25. The company emerged from the acquisition with a fleet of 12 floaters, seven of which are seventh-generation drillships.
SDRL’s next major strategic move further enhanced its long-term cash flow profile. In June 2024, the company sold three jackup rigs acquired in the Aquadrill acquisition and its 50% equity interest in the joint venture in Qatar that operated them for $338 million. SDRL sold its last jackup in January 2025 for $45 million.
After its jackup dispositions, SDRL’s fleet is concentrated in modern, high-specification floating drillships and semi-submersible rigs. Its active fleet consists of 11 drillships, one benign-environment semi-submersible rig, and one harsh-environment rig. Six of the 11 active drillships are sixth-generation drillships, and seven are higher-spec seventh-generation drillships.
If the current cyclical upturn follows the course of previous upturns, drillship demand is likely to increase faster than other rig categories.