Seadrill Limited

Good morning and thank you for standing by. My name is Kelvin and I will be your conference operator today. At this time, I would like to welcome everyone to the CDRIL's fourth quarter and full year 2024 earnings 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. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, please press the pound key or star two. Thank you. I would now like to turn the call over to Kevin Smith, Vice President of Corporate Finance and Head of Investor Relations. Please go ahead.

Welcome to CEDRIL's fourth quarter and full year 2024 earnings call. I'm Kevin Smith, Vice President of Corporate Finance and Investor Relations. I'm joined today by Simon Johnson, our President and Chief Executive Officer, Samira Lee, Executive Vice President and Chief Commercial Officer, and Grant Creed, Executive Vice President and Chief Financial Officer. Our call will include forward-looking statements that involve risk 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 obligation to update them. 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. 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. 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 Simon.

Hello, and thank you for joining us on our quarterly conference call. Today I'll cover recent achievements, market outlook, and operational updates. Samir will then discuss our commercial activity and outlook, and Grant will review our financial results and 2025 guidance. In 2024, we delivered against our EBITDA guidance range, returned over $500 million in capital to shareholders, added $1.3 billion in contracted backlog, and divested non-core assets for cash proceeds of approximately $400 million. Our share repurchase program has returned a total of $792 million to shareholders through the end of the year. During the fourth quarter, we repurchased $100 million of shares and have reduced our issued share count by 22% since the commencement of the program in September 2023. In December, we announced two long-term contract awards in Brazil, commencing in 2026, adding $1 billion in backlog. and we sold the Jackup rig, West Prosperoy, for cash proceeds of $45 million, monetizing a non-core asset that had been cold stacked for eight years at a favorable valuation compared to recent sales by our peers. This marks the completion of our exit from the benign Jackup market. Moving to market outlook. As we consider the current landscape, demand deferral is showing up in near-term rig availability, leading to a softening market in 2025 with some trade rivals offering lower day rates. Our view is unchanged. Depleting resources require investment and Deepwater provides some of the most advantaged and profitable projects with the lowest carbon emissions intensity. We expect future demand to increase, but visibility is unclear. We've preached about volatility on many previous occasions and believe we remain well positioned to navigate the downside and capitalize on the upside. We have a strong balance sheet, and our marketed fleet is 75% contracted for calendar year 2025. We also benefit from $3 billion in durable contract cover that extends meaningfully through 2028 and into 2029. Turning to operations, starting in Brazil, the West Aria and West Polaris commenced their initial contracts with Petrobras on December 20 and February 18, respectively. The West Auriga commencement date was consistent with previous guidance, while the West Polaris was impacted by the commissioning and testing of upgraded systems. In connection with the West Polaris contract commencement, we're pleased to have delivered the first next-generation managed pressure drilling system to Petrobras, which enhances key elements of MPD. We're already seeing strong interest from multiple clients for this time-saving technology. As CEDRAL continues its thought leadership in managed pressure drilling. We've also upgraded the power management and dynamic positioning system on the rig, closing the gap with seventh generation drill ship capabilities. The West Talus incurred 50 days of downtime during the first quarter, responding to regulatory matters. This marks the sixth regulatory delay for a drilling rig in Brazil in the last six months. We are working closely with our clients and industry bodies to understand and navigate new regulatory expectations. In the US Gulf, the West Neptune continues to deliver after 10 years of continuous partnership with LLOG and is fully contracted into 2026. The rig recommenced drilling on February 16, following the completion of its SPS and upgrades. The timeline was impacted by vendor issues and adverse weather. I want to emphasize that we don't take the challenges encountered and their inconvenience to our customer lightly, and our teams are addressing these issues. The West Vala continues to build on its Peruvian track record following reintegration into our fleet and drilled its most recent wells significantly ahead of schedule. Given the exceptional operational delivery, the rig secured additional work at a strong rate. While some like to focus on specifications, it is increasingly clear to us that our customers prefer performance. While we've incurred an uncharacteristically high amount of non-revenue days to begin 2025, This is not reflective of our historical performance, and all of the contributing units are back in operation. Before moving on, I'd like to take a moment to recognize the West Jupiter, which was awarded 2024 Rig of the Year within our fleet. The award is a testament to outstanding performance against numerous QHSE operational and financial metrics. We ended 2024 with a total recordable incident frequency rate that was nearly 20% below the IADC average, and our safety performance is trending favourably to begin 2025. I want to thank our offshore crews for continuing to improve outcomes in this fundamental aspect of their business. Finally, I wanted to comment on a few legal matters. In January, CEDRIL received notices from Petrobras asserting penalties against the CEDRIL subsidiary in Brazil. The alleged penalties arise from contracts awarded in relation to the Seche Brazil project dating back to 2012. Under this contract, three drill ships were to be constructed by Seche and operated by Sea Drill for Petrobras. The construction of these rigs was never completed. Seche has since been declared bankrupt and Petrobras' actions during the Operation Car Wash scandal were a contributing factor to the failure of Seche. Seche recently filed a lawsuit directly against Petrobras relating to the collapse of the project. We understand that Petrobras issued similar notices to multiple local Brazilian drilling contractors and a European peer who also participated in the Seche project. The amount claimed by Petrobras is approximately $213 million in delayed penalties with potential for further assessments over the remaining term of the drilling contracts for the three Seche drill ships. These contracts limit aggregate penalties to 10% of the total estimated contract value as defined in the contract. Petrobras indicated it may attempt to set off its claims against certain amounts payable to our subsidiary under existing contracts for five of our drill ships operating in Brazil, but has not done so today. We're engaged in discussions with our clients to suspend the penalties. We are evaluating all options, including potential counterclaims against Petrobras. This matter is in its early stages and we intend to vigorously defend our position. Earlier this month, the Norwegian Court awarded the owner of the Hercules, a rig that we managed from 2008 to 2022, $48 million inclusive of penalties and interest relating to our re-delivery of the rig. We disagree with the Court's findings and will appeal the decision. As we move into 2025, CEDRAL will continue to be a flexible and agile organization that can quickly pivot during periods of market volatility. We have demonstrated that we will act decisively on stacking decisions, as evidenced by the cold stacking of the West Phoenix, and we endeavor to remain disciplined stewards of shareholder capital with a continuous focus on optimization of our cost base. We have a proud record of executing on our declared objectives. With that, I'll turn the call over to Samir.