sdrl-20260331

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2026

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __ to __

Commission file number: 001-39327


SEADRILL LIMITED
(Exact name of Registrant as specified in its charter)


Bermuda						98-1834031
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)


4425 Westway Park Blvd., Suite 170, Houston, Texas, United States of America			77041
(Address of principal executive offices)			(Zip Code)


+1	(713)	329-1150
(Registrant's telephone number, including area code)

Securities registered or to be registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol

Name of each exchange on which registered

Common Shares, par value $0.01 per share

SDRL

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.


☒ Yes			☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).


☒ Yes			☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.


Large accelerated filer ☒			Accelerated filer ☐


Non-accelerated filer ☐			Smaller reporting company ☐


			Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).


☐ Yes			☒ No

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.


☒ Yes			☐ No

As of May 6, 2026, 62,530,508 common shares of the registrant were outstanding.

SEADRILL LIMITED

INDEX TO FORM 10-Q

FOR THE QUARTER ENDED MARCH 31, 2026

PART I - FINANCIAL INFORMATION

ITEM 1.

FINANCIAL STATEMENTS.

Condensed Consolidated Statements of Operations for the three months ended March 31, 2026 and 2025

Condensed Consolidated Balance Sheets as of March 31, 2026 and December 31, 2025

Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2026 and 2025

Condensed Consolidated Statements of Equity for the three months ended March 31, 2026 and 2025

Notes to the unaudited Condensed Consolidated Financial Statements

ITEM 2.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

ITEM 4.

CONTROLS AND PROCEDURES.

PART II - OTHER INFORMATION

ITEM 1.

LEGAL PROCEEDINGS.

ITEM 1A.

RISK FACTORS.

ITEM 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

ITEM 3.

DEFAULTS UPON SENIOR SECURITIES.

ITEM 4.

MINE SAFETY DISCLOSURES.

ITEM 5.

OTHER INFORMATION.

ITEM 6.

EXHIBITS.

SIGNATURES

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). All statements other than statements of historical facts included in this Quarterly Report on Form 10-Q, including, without limitation, those regarding the Company's outlook, plans, strategies, business prospects, financial performance, operations, litigation, rig activity and changes and trends in its business and the markets in which it operates, are forward-looking statements. These forward-looking statements can often, but not necessarily, be identified by the use of forward-looking terminology, including the terms "assumes", "projects", "forecasts", "estimates", "expects", "anticipates", "believes", "plans", "intends", "may", "might", "will", "would", "can", "could", "should" or, in each case, their negative, or other variations or comparable terminology. These statements are based on management's current plans, expectations, assumptions and beliefs concerning future events impacting the Company and therefore involve a number of risks, uncertainties and assumptions that could cause actual results to differ materially from those expressed or implied in the forward-looking statements. Important factors that could cause actual results to differ materially from those in the forward-looking statements include, but are not limited to: those described under Part I, Item 1A. "Risk Factors" in the Company's Annual Report on Form 10-K for the year ended December 31, 2025, filed with the United States ("U.S.") Securities and Exchange Commission (the "SEC") on February 26, 2026 (the "2025 10-K"), offshore drilling market conditions including supply and demand, dayrates, customer drilling programs and effects of new or reactivated rigs on the market, contract awards and rig mobilizations, contract backlog, dry-docking and other costs of maintenance, special periodic surveys, upgrades and regulatory work for the drilling units in the Company's fleet, the performance of the drilling units in the Company's fleet, delay in payment or disputes with customers, the Company's ability to successfully employ its drilling units, procure or have access to financing, ability to comply with loan covenants, fluctuations in the international price of oil, international financial market conditions, U.S. trade policy and tariffs and worldwide reactions thereto, inflation, changes in governmental regulations that affect the Company or the operations of the Company's fleet, increased competition in the offshore drilling industry, the review of competition authorities, the impact of global economic conditions and global health threats, pandemics and epidemics, our ability to maintain relationships with suppliers, customers, employees and other third parties, our ability to maintain adequate financing to support our business plans, our ability to successfully complete and realize the intended benefits of any mergers, acquisitions and divestitures, and the impact of other strategic transactions, our liquidity and the adequacy of cash flows to satisfy our obligations, future activity under and in respect of the Company's share repurchase program, our ability to satisfy (or timely cure any noncompliance with) the continued listing requirements of the New York Stock Exchange, the cancellation of drilling contracts currently included in reported contract backlog, losses on impairment of long-lived fixed assets, shipyard, construction and other delays, the results of meetings of our shareholders, political and other uncertainties, including those related to the conflicts in Ukraine and the Middle East (including the current conflict in Iran), and any related sanctions, the effect and results of litigation, regulatory matters, settlements, audits, assessments and contingencies, including any litigation related to acquisitions or dispositions, the concentration of our revenues in certain geographical jurisdictions, limitations on insurance coverage, our ability to attract and retain skilled personnel on commercially reasonable terms, the level of expected capital expenditures, our expected financing of such capital expenditures and the timing and cost of completion of capital projects, fluctuations in interest rates or exchange rates and currency devaluations relating to foreign or U.S. monetary policy, tax matters, changes in tax laws, treaties and regulations, tax assessments and liabilities for tax issues, legal and regulatory matters in the jurisdictions in which we operate, customs and environmental matters, the potential impacts on our business resulting from decarbonization and emissions legislation and regulations, the impact on our business from climate change generally, the occurrence of cybersecurity incidents, attacks or other breaches to our information technology systems, including our rig operating systems, and other important factors described from time to time in the reports filed or furnished by us with the SEC. The foregoing risks and uncertainties are inherently subject to significant business, economic, competitive, regulatory and other risks and uncertainties, many of which are difficult to predict and beyond our control. In many cases, we cannot predict the risks and uncertainties that could cause our actual results to differ materially from those indicated by the forward-looking statements. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those indicated. All subsequent written and oral forward-looking statements attributable to us or to any person(s) acting on our behalf are expressly qualified in their entirety by reference to these risks and uncertainties. You should not place undue reliance on forward-looking statements. Each forward-looking statement speaks only as of the date of the particular statement. We expressly disclaim any obligations or undertaking to release publicly any updates or revisions to any forward-looking statement to reflect any change in our expectations or beliefs with regard to the statement or any change in events, conditions or circumstances on which any forward-looking statement is based, except as required by securities laws.

Investors should note that we announce material financial information in SEC filings, press releases and public conference calls. Based on guidance from the SEC, we may use the Investors section of our website (www.seadrill.com) to communicate with investors and we intend to post presentations and fleet status reports there, among other things. It is possible that the financial and other information posted there could be deemed to be material information. The information on our website is not part of, and is not incorporated into, this Quarterly Report on Form 10-Q. Furthermore, references to our website URLs are intended to be inactive textual references only.

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements.

SEADRILL LIMITED

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)


	Three months ended March 31,
(In $ millions, except per share data)	2026	2025
Operating revenues
Contract revenues	277	248
Reimbursable revenues (1)	10	15
Management contract revenues (1)	63	61
Leasing revenues (1)	8	8
Other revenues	—	3
Total operating revenues	358	335
Operating expenses
Vessel and rig operating expenses	(181)	(179)
Reimbursable expenses	(10)	(15)
Depreciation and amortization	(71)	(55)
Management contract expenses	(46)	(45)
Selling, general and administrative expenses	(25)	(23)
Merger and integration related expenses	(1)	—
Total operating expenses	(334)	(317)




Operating profit	24	18
Financial and other non-operating items
Interest income	2	4
Interest expense	(15)	(15)
Equity in earnings of equity method investment (net of tax)	4	8
Other financial and non-operating items	1	(14)
Total financial and other non-operating items, net	(8)	(17)
Profit before income taxes	16	1
Income tax expense	(23)	(15)
Net loss	(7)	(14)
Basic LPS ($)	(0.11)	(0.23)
Diluted LPS ($)	(0.11)	(0.23)

(1) Includes revenue from related parties of $75 million and $79 million, for the three months ended March 31, 2026 and March 31, 2025, respectively. Refer to Note 10 - "Related party transactions" for further details.

The accompanying notes form an integral part of these unaudited Condensed Consolidated Financial Statements.

SEADRILL LIMITED

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)


(In $ millions, except share data)	March 31, 2026	December 31, 2025
ASSETS
Current assets
Cash and cash equivalents	304	339
Restricted cash	25	26
Accounts receivables, net	214	162
Amounts due from related parties, net	7	—
Other current assets	261	231
Total current assets	811	758
Non-current assets
Equity method investment	62	58
Drilling units, net of accumulated depreciation of 754 as of March 31, 2026 (December 31, 2025: 682)	2,950	2,969
Deferred tax assets	29	44
Equipment	15	8
Other non-current assets	125	110
Total non-current assets	3,181	3,189
Total assets	3,992	3,947
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Trade accounts payable	80	61
Other current liabilities	337	313
Total current liabilities	417	374
Non-current liabilities
Long-term debt	614	613
Deferred tax liabilities	16	14
Other non-current liabilities	94	88
Total non-current liabilities	724	715
Commitments and contingencies (see Note 13)
Shareholders' equity
Common shares of par value $0.01 per share: 375,000,000 shares authorized as of March 31, 2026 (December 31, 2025: 375,000,000) and 62,449,447 issued as of March 31, 2026 (December 31, 2025: 62,374,171)	1	1
Additional paid-in capital	1,986	1,986
Accumulated other comprehensive income	1	1
Retained earnings	863	870
Total shareholders' equity	2,851	2,858
Total liabilities and shareholders' equity	3,992	3,947

The accompanying notes form an integral part of these unaudited Condensed Consolidated Financial Statements.

SEADRILL LIMITED

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


	Three months ended March 31,
(In $ millions)		2026	2025
Cash flows from operating activities
Net loss		(7)	(14)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		71	55

Equity in earnings of equity method investment (net of tax)		(4)	(8)
Deferred tax expense		17	3
Unrealized gain on foreign exchange		—	(1)
Amortization of bond issuance costs		1	1
Share based compensation expense		1	4
Other		—	12
Other cash movements in operating activities
Additions to long-term maintenance		(38)	(54)
Changes in operating assets and liabilities
Accounts receivable, net		(52)	42
Trade accounts payable		11	(35)
Prepaid expenses		2	(2)
Deferred revenue		(10)	(9)
Deferred contract costs		(35)	6
Related party receivables		(7)	—
Other assets		(12)	(2)
Other liabilities		40	(25)
Net cash used in operating activities		(22)	(27)
Cash flows from investing activities
Additions to drilling units and equipment		(13)	(45)
Other		—	(4)


Net cash used in investing activities		(13)	(49)
Cash flows from financing activities


Taxes withheld on employee stock transactions		(1)	—

Net cash used in financing activities		(1)	—
Effect of exchange rate changes on cash		—	1
Net decrease in cash and cash equivalents, including restricted cash		(36)	(75)
Cash and cash equivalents, including restricted cash, at beginning of the period		365	505
Cash and cash equivalents, including restricted cash, at the end of period		329	430

The accompanying notes form an integral part of these unaudited Condensed Consolidated Financial Statements.

SEADRILL LIMITED

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
(Unaudited)


(In $ millions)	Common shares	Additional paid-in capital	Accumulated other comprehensive income	Retained earnings	Total shareholders' equity
Balance as of January 1, 2026	1	1,986	1	870	2,858
Share based compensation	—	1	—	—	1
Shares withheld for taxes on equity transactions	—	(1)	—	—	(1)
Net loss	—	—	—	(7)	(7)
Balance as of March 31, 2026	1	1,986	1	863	2,851


(In $ millions)	Common shares	Additional paid-in capital	Accumulated other comprehensive income	Retained earnings	Total shareholders' equity
Balance as of January 1, 2025	1	1,969	1	947	2,918
Share based compensation	—	4	—	—	4
Net loss	—	—	—	(14)	(14)
Balance as of March 31, 2025	1	1,973	1	933	2,908

The accompanying notes form an integral part of these unaudited Condensed Consolidated Financial Statements.

SEADRILL LIMITED

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 1 – General information

Seadrill Limited (along with any one or more of its consolidated subsidiaries, or to all such entities, referred to as "Seadrill", "we", "us", "our", and "the Company") is incorporated in Bermuda. We are an offshore drilling contractor providing worldwide offshore drilling services to the oil and gas industry. Our primary business is the ownership and operation of drillships and semi-submersible rigs for operations in shallow to ultra-deepwater areas in both benign and harsh environments. We contract our drilling units to drill wells for our customers on a dayrate basis. Our customers include oil super-majors, state-owned national oil companies and independent oil and gas companies. In addition, we provide management services to certain affiliated entities.

Basis of presentation

The accompanying unaudited Condensed Consolidated Financial Statements of Seadrill Limited have been prepared in accordance with accounting principles generally accepted in the U.S. ("U.S. GAAP") for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X of the SEC. Accordingly, pursuant to such rules and regulations, they do not include all disclosures required by U.S. GAAP for annual financial statements. In the opinion of management, the unaudited Condensed Consolidated Financial Statements includes all adjustments (consisting of normal recurring adjustments) necessary for a fair statement of financial position, results of operations and cash flows for the interim periods.

Results of operations for interim periods are not necessarily indicative of results of operations for the respective full years, or any future period. The accompanying unaudited Condensed Consolidated Financial Statements and related notes should be read in conjunction with our 2025 10-K.

Significant accounting policies

Refer to Note 2 - "Accounting policies" of our Consolidated Financial Statements from our 2025 10-K for additional information related to our significant accounting policies.

Note 2 - Revenue from contracts with customers

The following table provides information about receivables and contract liabilities from our contracts with customers, as of the dates presented:


(In $ millions)	March 31, 2026	December 31, 2025
Accounts receivable, net	214	162
Current contract liabilities (classified within other current liabilities)	(70)	(58)
Non-current contract liabilities (classified within other non-current liabilities)	(43)	(36)

Changes in the contract liabilities balances during the three months ended March 31, 2026 are as follows:


(In $ millions)						Contract Liabilities
Contract liabilities as of January 1, 2026						(94)
Amortization of revenue included in the January 1, 2026 contract liability balance						19
Additional contract liabilities recognized, excluding amounts recognized as revenue						(38)
Contract liabilities as of March 31, 2026						(113)

Revenues are attributed to geographical locations based on the country of operations for drilling activities, i.e., the country where the revenues are generated. The following table presents our revenues by geographic area:


	Three months ended March 31,
(In $ millions)	2026	2025
Brazil	146	121
United States	103	81
Angola	77	81
Norway	32	23
Other (1)	—	29
Total operating revenues	358	335

(1) "Other" represents countries in which we operate that individually had revenues representing less than 10% of total operating revenues earned for any of the periods presented.

SEADRILL LIMITED

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

We had the following customers with revenues greater than 10% of total operating revenues in any of the periods presented:


	Three months ended March 31,
	2026		2025
Petrobras	34	%	29	%
Sonadrill	21	%	24	%
LLOG	12	%	6	%
Talos	5	%	13	%
Other	28	%	28	%

Note 3 – Taxation

For the three months ended March 31, 2026, income tax expense was $23 million, compared to income tax expense of $15 million for the three months ended March 31, 2025.

The increase in tax expense for the three months ended March 31, 2026, relative to the three months ended March 31, 2025, primarily reflects changes in the Company's mix of pre-tax income and loss among tax jurisdictions and lower utilization of tax loss carryforwards.

On July 4, 2025, the U.S. enacted the One Big Beautiful Bill Act ("OBBBA"). The OBBBA includes many tax provisions, such as the permanent extension of certain expiring provisions of the Tax Cuts and Jobs Act and provisions allowing accelerated tax deduction for qualified property. The legislation does not have a material impact to our unaudited Condensed Consolidated Financial Statements.

Note 4 – Loss per share

The computation of basic loss per share ("LPS") is based on the weighted average number of common shares of the Company, par value $0.01 per share (the "Shares"), outstanding during the period. Diluted LPS includes the effect of the assumed conversion of potentially dilutive instruments related to the effect of the unsecured senior convertible bond and share based compensation. Refer to Note 9 – "Debt" for further details on the unsecured senior convertible bond.

The components of the numerator for the calculation of basic and diluted LPS were as follows:


	Three months ended March 31,
(In $ millions)	2026	2025
Net loss available to stockholders	(7)	(14)
Effect of dilution (interest on unsecured senior convertible bond)	1	1
Diluted loss available to stockholders	(6)	(13)

The components of the denominator for the calculation of basic and diluted LPS were as follows:


	Three months ended March 31,
(In millions)	2026	2025
Basic loss per share:
Weighted average number of common shares outstanding	62	62
Diluted loss per share:
Effect of dilution	3	3
Weighted average number of common shares outstanding adjusted for the effects of dilution	65	65

The basic and diluted LPS were as follows:


	Three months ended March 31,
(In $)	2026	2025
Basic loss per share	(0.11)	(0.23)
Diluted loss per share (1)	(0.11)	(0.23)

(1) For the three months ended March 31, 2026 and March 31, 2025, the effect of including all potentially dilutive instruments in the calculation resulted in decreased loss per share, which is anti-dilutive. As a result, the basic and diluted loss per share are equal.

Note 5 – Restricted cash

Restricted cash as of March 31, 2026 and December 31, 2025 was as follows:



(In $ millions)	March 31, 2026	December 31, 2025

Cash held in escrow	23	23

Other	2	3
Total restricted cash	25	26

SEADRILL LIMITED

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 6 - Other current assets

As of March 31, 2026 and December 31, 2025, other current assets included the following:


(In $ millions)	March 31, 2026	December 31, 2025
Prepaid expenses	58	61
Deferred contract costs	100	80
Taxes receivable	54	52
Other	49	38
Total other current assets	261	231

Note 7 – Equity method investment

As of March 31, 2026 and December 31, 2025, the carrying value of our equity method investment was as follows:


(In $ millions)	March 31, 2026	December 31, 2025
Sonadrill	62	58
Total equity method investment	62	58

Note 8 - Other current and non-current liabilities

Other current liabilities

As of March 31, 2026 and December 31, 2025, other current liabilities included the following:


(In $ millions)	March 31, 2026	December 31, 2025
Accrued expenses	169	137
Contract liabilities	70	58
Employee withheld taxes, social security and vacation payments	38	47
Taxes payable	39	35
Accrued interest expense	9	21
Unfavorable drilling contracts	2	3

Other liabilities	10	12
Total other current liabilities	337	313

The amortization of unfavorable drilling contracts is recognized in the unaudited Condensed Consolidated Statements of Operations as "Depreciation and amortization". The weighted average remaining amortization for unfavorable contracts is three months.

Other non-current liabilities

As of March 31, 2026 and December 31, 2025, other non-current liabilities included the following:


(In $ millions)	March 31, 2026	December 31, 2025
Uncertain tax positions	22	22
Contract liabilities	43	36
Lease liabilities	17	18

Other liabilities	12	12
Total other non-current liabilities	94	88

SEADRILL LIMITED

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 9 – Debt

The table below sets out our debt agreements as of March 31, 2026 and December 31, 2025:



(In $ millions)	March 31, 2026	December 31, 2025
Secured debt:
$575 million secured bond	575	575
Total secured debt	575	575
Unsecured bond:
Unsecured senior convertible bond	50	50
Total unsecured bond	50	50
Total principal debt	625	625
Debt premium:
Premium on bond issuance	1	1
Total debt premium	1	1
Less: bond issuance costs	(12)	(13)
Total debt	614	613

$575 million secured bond

In July 2023, Seadrill Finance Limited ("Seadrill Finance") issued $500 million in aggregate principal amount of 8.375% Senior Secured Second Lien Notes due 2030 in an offering conducted pursuant to Rule 144A and Regulation S under the Securities Act. In August 2023, Seadrill Finance issued an additional $75 million in aggregate principal amount of 8.375% Senior Secured Second Lien Notes due 2030 (the "Incremental Notes"), maturing on August 1, 2030 (together the "Notes"). The Incremental Notes were issued at 100.75% of par.

Revolving credit facility

On July 27, 2023, Seadrill, along with its subsidiary, Seadrill Finance, entered into a Senior Secured Revolving Credit Agreement (as amended, the "Credit Agreement"), which established a Senior Secured Revolving Credit Facility (the "Revolving Credit Facility"). The commitments under the Revolving Credit Facility, which carries a five-year term, became available for drawdown on July 27, 2023. The Revolving Credit Facility permits borrowings of up to $225 million in revolving credit for working capital and other corporate purposes and includes an "accordion feature" allowing Seadrill to increase this limit by up to an additional $100 million, subject to agreement from the lenders. As of March 31, 2026, it also included a provision for issuing letters of credit up to $50 million. On April 3, 2026, the Company amended the Credit Agreement to increase the letter of credit sub-limit from $50 million to $100 million.

The Revolving Credit Facility incurs interest at a rate equal to a specified margin plus, at Seadrill Finance’s option, either: (i) the Term Secured Overnight Financing Rate ("SOFR") Rate (as defined in the Credit Agreement) plus 0.10%; or (ii) the Daily Simple SOFR (as defined in the Credit Agreement) plus 0.10%. For both the Term SOFR Rate loans and Daily Simple SOFR loans, the applicable margin was 2.75% per annum as of March 31, 2026, and may vary based on Seadrill’s Credit Ratings (as defined in the Credit Agreement), from 2.50% to 3.50% per annum. A commitment fee is incurred under the Revolving Credit Facility on undrawn amounts, at a rate of 0.5% per annum to and including July 27, 2026, 0.75% per annum from and including July 28, 2026 to and including July 27, 2027, and 1.00% per annum thereafter. This facility has not been drawn to date.

During the third quarter of 2025, the Company issued a NOK403 million guarantee ($41 million as of March 31, 2026) under the Revolving Credit Facility related to the SFL Hercules Ltd. claim. As of March 31, 2026, outstanding letters of credit and bank guarantees under the Revolving Credit Facility totaled approximately $47 million, which reduced the Company’s available capacity under the Revolving Credit Facility to $178 million.

For further details, please refer to Note 13 – "Commitments and contingencies".

Unsecured senior convertible bond

The $50 million unsecured senior convertible bond (the "unsecured senior convertible bond"), issued on emergence from Chapter 11, has a maturity of August 2028 and bears interest, payable quarterly in cash, at the Term SOFR (as defined in the Note Purchase Agreement dated as of February 22, 2022, as amended (the "Note Purchase Agreement"), plus 6% on the aggregate principal amount of $50 million. The bond is convertible (in full and not in part) into Shares at a conversion rate of 52.6316 Shares per $1,000 principal amount of the bond, subject to certain adjustments set forth in the Note Purchase Agreement relating to the unsecured senior convertible bond. If not converted, a bullet repayment will become due on the maturity date.

SEADRILL LIMITED

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 10 – Related party transactions

As of March 31, 2026, our major related party is the Sonadrill joint venture, over which we hold significant influence.

Related party revenues

Our related party revenues include the following:


	Three months ended March 31,
(In $ millions)	2026	2025
Management fees revenues (a)	60	58
Add-on services	3	3
Reimbursable revenues (b)	4	10
Leasing revenues (c)	8	8

Total related party operating revenues	75	79

(a) Seadrill provides management and administrative services and operational and technical support services to Sonadrill. These services are charged on a dayrate basis.

(b) Reimbursable revenues primarily relate to Sonadrill project work on the Libongos, Quenguela and West Gemini rigs.

Related party balances

As of March 31, 2026, Seadrill's related party receivable balance due from Sonadrill was $7 million, recorded in "Amounts due from related parties, net" within our unaudited Condensed Consolidated Balance Sheet as of March 31, 2026.

As of December 31, 2025, Sonadrill prepaid management fees of $3 million to Seadrill, which was recorded in "Other current liabilities" within our unaudited Condensed Consolidated Balance Sheet as of December 31, 2025.

Note 11 – Fair value of financial instruments

The carrying values and estimated fair values of certain of our financial instruments as of the dates specified were as follows:


	March 31, 2026		December 31, 2025
(In $ millions)	Fair value	Carrying value	Fair value	Carrying value
Liabilities
$575 million secured bond (Level 1)	595	564	598	563
Unsecured senior convertible bond - debt component (Level 3)	55	50	56	50

Financial instruments categorized as level 1

The fair value of the $575 million secured bond is based on market traded value.

Financial instruments categorized as level 3

The fair value attributed to the unsecured senior convertible bond was bifurcated into two elements: the straight debt component was derived through a discounted cash flow approach, and the conversion option was derived through an option pricing model. The conversion option was recorded in equity at the point the bond was issued and, therefore, has not been included in the table above.

Our cash and cash equivalents, restricted cash, accounts receivable, related party receivables and accounts payable are by their nature short-term. As a result, the carrying values included in our unaudited Condensed Consolidated Balance Sheets approximate fair value.

Note 12 – Common shares

Share capital as of March 31, 2026 and December 31, 2025 was as follows:


	Issued and fully paid share capital
	Shares	Par value per share ($)	$ thousands
As of December 31, 2025	62,374,171	0.01	624
Vesting of restricted stock units	75,276	0.01	—
As of March 31, 2026	62,449,447	0.01	624

SEADRILL LIMITED

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 13 – Commitments and contingencies

We recognize loss contingencies in the unaudited Condensed Consolidated Financial Statements where it is probable that an outflow of economic benefits will be required to settle an obligation and the amount is reasonably estimable. An adverse outcome in a matter described below could have an adverse effect on Seadrill's operating results, cash flows and financial position. Accruals for contingencies and uncertain tax positions related to matters described below, if any, are recorded in "Accrued expenses" within "Other current liabilities" and "Uncertain tax positions" within "Other non-current liabilities", respectively, in the unaudited Condensed Consolidated Balance Sheets.

Legal Proceedings

SFL Hercules Ltd.

In March 2023, Seadrill was served with a claim from SFL Hercules Ltd., filed in the Oslo District Court in Norway, relating to our redelivery of the rig West Hercules to SFL Corporation Ltd. ("SFL") in December 2022. In February 2025, the Oslo District Court delivered a judgment in favor of SFL Hercules Ltd. ordering Seadrill to pay SFL approximately $37 million, plus interest and legal costs of approximately $11 million, based on foreign exchange rates at the time of the judgment. Seadrill intends to vigorously contest the judgment and filed an appeal in March 2025. The appeal proceedings commenced in April 2026, and we expect the court to issue judgment in the second half of 2026. The ultimate amount due, if any, cannot be predicted at this time.

As is customary in Norway, Seadrill issued a guarantee in the amount of NOK574 million in August 2025 (approximately $59 million as of March 31, 2026) to the Norwegian Enforcement Authorities as security for the judgment. The issued guarantee consists of NOK403 million (approximately $41 million as of March 31, 2026) from our Revolving Credit Facility and NOK171 million (approximately $18 million as of March 31, 2026) from our Bilateral Facility (as defined herein).

Sonadrill fees claim

In March 2023, Seadrill was served with a claim from an individual (the "Claimant") filed in the High Court of Justice, Business and Property Courts of England and Wales, King's Bench Division, Commercial Court (the "High Court"). The Claimant alleged breach of contract and unjust enrichment damages of approximately $72 million related to an alleged failure by the Company to pay the Claimant a fee for services in arranging the Sonadrill joint venture dating back to 2018. The case concluded in March 2025.

In July 2025, the High Court rendered judgment in favor of the Claimant. In October 2025, the High Court ruled on the first tranche of damages for the period prior to October 2024, including interest and legal fees, and Seadrill paid the first tranche of damages of $43 million. The parties are continuing to make submissions to the High Court on the issue of the quantum of damages to be paid for the second tranche of damages incurred subsequent to October 2024; however, Seadrill presently estimates that its aggregate liability following the High Court's judgment, including all interest and legal fees, is unlikely to exceed $61 million, subject to finalization of calculations relating to second tranche interest. Seadrill's request for permission for an appeal to the Court of Appeal was not granted.

Nigerian Cabotage Act litigation

In November 2015, the Nigerian Maritime Administration and Safety Agency ("NMASA") issued a detention in respect of the rig West Capella for failure to comply with requirements of the Coastal and Inland Shipping (Cabotage) Act 2003 (the "Cabotage Act"), specifically, failure to pay a Cabotage fee of 2% on contract revenue. While the named party is Seadrill Mobile Units Nigeria Ltd (previously an Aquadrill entity, acquired by Seadrill upon the merger of Seadrill and Aquadrill) ("SMUNL"), the matter relates to three rigs: the West Capella, West Saturn and West Jupiter. SMUNL commenced proceedings in May 2016 against the Honourable Minister for Transportation, the Attorney General of the Federation and NMASA with respect to interpretation of the Cabotage Act. In June 2019, the Federal High Court of Nigeria delivered a judgment (1) finding that: (a) Drilling operations fall within the definition of "Coastal Trade" or "Cabotage" under the Cabotage Act and (b) Drilling Rigs fall within the definition of "Vessels" under the Cabotage Act, and (2) directing SMUNL to deduct 2%, or approximately $69 million, of their contract value and remit the same to NMASA. In June 2019, the Court of Appeals sitting in Lagos ("COA") issued a conflicting judgment in Transocean Support Services Nigeria & Ors v NIMASA & Anor, finding drilling units cannot be deemed vessels under the Cabotage Act pending appeal. SMUNL filed an appeal to the COA in July 2019, and applied to the Federal High Court for an injunction pending appeal to prevent enforcement. Due to the volume of cases currently being handled by the COA, the Registry of the COA is yet to schedule the hearing date for the appeal. Although we intend to strongly pursue this appeal, we cannot predict the outcome of this case.

Sete Brazil claim

In or around 2010, Petroleo Brasileiro S.A. ("Petrobras") initiated a project in Brazil to construct a fleet of 28 offshore drilling units to support Petrobras (the "Sete Brazil Project"). A Brazilian company ("Sete Brazil") was formed in Brazil as a vehicle for the Sete Brazil Project. The Sete Brazil Project was unable to obtain financing and none of the 28 offshore drilling units was ever constructed. Sete Brazil was eventually declared bankrupt by the Brazilian courts in December 2024 although that bankruptcy is presently suspended.

In January 2025, Seadrill Brazil received notices from Petrobras asserting "delay penalties" against Seadrill Brazil relating to three drillships to be constructed under the Sete Brazil Project and operated in Brazil by Seadrill Brazil under contracts awarded in 2012. The aggregate amount of the delay penalties claimed by Petrobras as of the date of receipt of the notices was approximately $213 million, with the potential for further delay penalties, which could be significant, to be assessed ratably over the remaining term of the drilling contracts for the three drillships. Petrobras indicated it may exercise set-off rights against certain amounts payable to Seadrill Brazil under its contracts with Petrobras for our five drillships (unrelated to the Sete Brazil Project) that are currently operating in Brazil, revenues related to which are included in our backlog as of March 31, 2026. No set-off right has been exercised to date. The contracts limit aggregate delay penalties to 10% of the total "estimated contract value", as defined in the contracts.

SEADRILL LIMITED

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The Sete Brazil Project contracts also provide an alternative remedy to Petrobras of "compensatory damages" based upon termination of the contracts for which we would have joint and several liability if such damages were awarded to Petrobras. Petrobras could seek delay penalties or compensatory damages but could not seek both under the contracts. We were copied on correspondence between Petrobras and Sete Brazil (and certain of its related companies) in which Petrobras alleged that it is entitled to collect compensatory damages of approximately $825 million from these companies. Petrobras has not indicated to us that they intend to pursue these claims against us or set off these claims against our current drilling contracts. We dispute liability and do not believe any damages are due to Petrobras from us, Sete Brazil or any of its related companies in connection with the Sete Brazil Project as either delay penalties or compensatory damages.

Petrobras and Seadrill have agreed to participate in voluntary mediation, and Petrobras has committed to not exercise any set-off rights pending the outcome of the mediation. Petrobras has indicated that the mediation could commence in the third quarter of 2026, but there could be further delays. We cannot predict when the mediation will be completed, or what the outcome may be. Dialogue between the parties is ongoing. We are evaluating our legal options, which may include, among other things, seeking injunctive relief, seeking remedies against Petrobras under Seadrill’s prior U.S. Chapter 11 bankruptcy proceedings, and asserting counterclaims for substantial damages against Petrobras in Brazilian courts. This matter is in its early stages, and we are not able to predict its timing or outcome. In addition, the nature, timing, calculation and ultimate amount of the purported penalties are subject to principles of contract interpretation before Brazilian courts. Seadrill intends to vigorously defend its position and pursue available remedies.

Because we do not believe that it is probable that a loss with respect to the claims alleged by Petrobras has been incurred, and we cannot reasonably estimate the amount of any such loss, were it to be incurred, we have not accrued any amounts in respect thereof in our financial statements.

Brazil tax audit

Seadrill Serviços de Petróleo Ltda ("Seadrill Brazil") has a long-standing dispute with Brazil’s tax authority relating to assessment of income tax, penalties, and interest for years 2009 and 2010 and is litigating the matter in Brazil’s courts. The trial court ruled in favor of Seadrill Brazil, but the Federal Regional Court reversed the lower court decision in September 2023 and upheld the tax authority’s assessment. In the first quarter of 2024, Seadrill Brazil filed an appeal in Brazil’s Superior Court of Justice, and we continue to vigorously defend our position. The ultimate timing and outcome of this litigation cannot be determined. As of March 31, 2026, the assessed income tax, penalties, interest accruing on the asserted tax underpayment, and other amounts the courts potentially may award Brazil’s government, together, totaled approximately $83 million.

In connection with its judicial appeal against the tax authority’s assessment for years 2009 and 2010, Seadrill Brazil has entered into an agreement for an insurance bond of BRL435 million ($83 million as of March 31, 2026).

Additionally, Seadrill Brazil has brought administrative appeals against assessments of additional income tax, indirect taxes, penalties, and interest for years 2012, 2016, and 2017. The assessments for these subsequent years raise issues similar to those that are the subject of the disputed assessments for 2009 and 2010, but the 2012 assessment involves other factual and legal issues as well. The timing and outcome of these administrative appeals and of any subsequent judicial review cannot be determined. As of March 31, 2026, the assessed taxes, penalties, and interest for 2012, 2016, and 2017 totaled, in aggregate, approximately $89 million.

Other matters

Other tax audits and disputed assessments of income and other taxes, including applicable penalties and interest, remain outstanding as of March 31, 2026 and continue to be monitored and evaluated by the Company. These tax audit and assessment claims are attributable principally to Ghana, Mexico, Norway, and the United States. We continue to vigorously defend our tax positions and currently consider the ultimate resolution of tax audit and assessment claims will not have a material adverse effect on our financial position, operating results and cash flows.

We operate in various countries in the world. We recognize uncertain tax positions if the weight of available evidence indicates that it is more likely than not that the position will be sustained on audit by relevant tax authorities, including resolution of related appeals or litigation processes, if any. While we believe we have the required support for the positions taken on our tax returns, we cannot predict with certainty as to the ultimate outcome of any existing or future assessments.

Other material disputes or litigation

In addition to the foregoing, from time to time we are a named defendant or party in certain other lawsuits, claims or proceedings arising in the ordinary course of business or in connection with our acquisition and disposal activities. Although the outcome of such lawsuits or other proceedings cannot be predicted with certainty, and the amount of any liability that could arise with respect to such lawsuits or other proceedings cannot be predicted accurately, we currently do not expect these other matters to have a material adverse effect on our financial position, operating results and cash flows.

Guarantees

We have issued performance guarantees for potential liabilities that may result from drilling activities under current or previous managed rig arrangements with Sonadrill. As of March 31, 2026, we had not recognized any liabilities for these guarantees as we do not consider it probable that the guarantees will be called. The guarantees provided on behalf of Sonadrill have been capped at $1.1 billion, in the aggregate, across the three rigs operating in the joint venture on two active and two historic contracts.

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in conjunction with the unaudited Condensed Consolidated Financial Statements and related notes included in Part I, Item 1. "Financial Statements" of this Quarterly Report on Form 10-Q, as well as the Consolidated Financial Statements and related notes included in our 2025 10-K.

The following discussion and analysis contains forward-looking statements that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of certain factors, including those set forth under "Risk Factors" in Part I, Item 1A. of our 2025 10-K and "Forward-Looking Statements" in this Quarterly Report on Form 10-Q.

Our Business

We are an offshore drilling contractor providing worldwide offshore drilling services to the oil and gas industry. Our primary business is the ownership and operation of drillships and semi-submersible rigs for operations in shallow to ultra-deepwater in both benign and harsh environments. We contract our drilling units to drill wells for our customers on a dayrate basis. Our customers include oil super-majors, state-owned national oil companies and independent oil and gas companies. In addition, we provide management services to certain affiliated entities.

As of March 31, 2026, we owned a total of 15 drilling rigs. In addition to our owned assets, as of March 31, 2026, we managed two 7th generation drillships owned by Sonangol EP.

Significant Developments

Oil price volatility

The price of oil has experienced increased volatility and has risen in response to the ongoing conflicts in the Middle East, including the current conflict in Iran, which started on February 28, 2026, and the unprecedented closure of the Strait of Hormuz. The Brent oil price was $71 per barrel on February 27, 2026 and increased to an average price of approximately $103 per barrel for the month of March 2026. We continue to evaluate and monitor the impacts of the recent oil price volatility and the ongoing conflicts in the Middle East on our business and operations; however, it is not possible to predict the long-term impact, if any, of the disruptions to commodity prices, global energy supplies, energy markets and economic conditions, on our business and operations.

U.S. global trade policy changes

Ongoing and recently proposed changes to U.S. global trade policy, along with potential international retaliatory measures, have continued to cause high volatility in global markets and uncertainty around short- and long-term economic impacts in the U.S., including concerns over inflation, recession and slowing growth. We continue to evaluate and monitor the potential impacts of these changes and measures, including the imposition of tariffs and ongoing legal challenges to such tariffs, on our business and operations; however, it is not possible to predict the impact, if any, of any changes or proposed changes to the U.S. global trade policy, or any international retaliatory measures, on our business and operations.

Contract Backlog

Contract backlog includes all firm contracts at the contractual operating dayrate multiplied by the number of days remaining in the firm contract period. For contracts which include a market indexed rate mechanism, we utilize the current applicable dayrate multiplied by the number of days remaining in the firm contract period. Contract backlog includes management contract revenues and leasing revenues from bareboat charter arrangements, denoted as "other" in the tables below. Contract backlog excludes revenues for mobilization, demobilization and contract preparation or other incentive provisions and excludes backlog relating to non-consolidated entities.

The contract backlog for our fleet was as follows as of the dates specified:


(In $ millions)	March 31, 2026	December 31, 2025
Drilling contracts	2,142	2,095
Other	339	285
Total contract backlog	2,481	2,380

Our contract backlog includes only firm commitments represented by signed drilling contracts. The full contractual operating dayrate may differ from the actual dayrate we ultimately receive. For example, an alternative contractual dayrate, such as a waiting‑on‑weather rate, repair rate, standby rate or force majeure rate, may apply under certain circumstances. The contractual operating dayrate may also differ from the actual dayrate we ultimately receive because of several other factors, including rig downtime or suspension of operations. In certain contracts, the dayrate may be reduced to zero if, for example, repairs extend beyond a stated period.

We estimate the March 31, 2026 contract backlog to be realized over the following periods:


(In $ millions)		Year ending December 31,
Contract backlog	Total	2026 (1)	2027	2028	Thereafter
Drilling contracts	2,142	844	862	339	97
Other	339	177	102	60	—
Total	2,481	1,021	964	399	97

(1) Remainder of 2026.

The actual amount of revenues earned and the actual periods during which revenues are earned will differ from the amounts and periods shown in the tables above due to various factors, including shipyard and maintenance, surveys, upgrades and regulatory projects, unplanned downtime and other factors that result in a lower applicable dayrate than the full contractual operating dayrate. Additional factors that could affect the amount and timing of actual revenue to be recognized include customer liquidity issues and contract terminations, which are available to our customers under certain circumstances.

Business Environment

The table below shows the average oil price for the three months ended March 31, 2026 and year ended December 31, 2025. The Brent oil price as of May 6, 2026 was $101/bbl.


	March 31, 2026	December 31, 2025
Average Brent oil price ($/bbl)	78	68

Source: Bloomberg

In recent years, oil prices have generally remained at levels that support offshore exploration and development activity, where global rig demand has been steady. This level of demand was sustained by the combination of commodity prices, heightened focus on energy security, and relative attractiveness of offshore plays with respect to both cost and carbon emissions. Recently, however, the ongoing conflict in Iran and the unprecedented closure of the Strait of Hormuz have caused significant disruption in the normal flow of oil, refined petroleum products, and related commodities, resulting in higher oil prices.

The price of Brent oil averaged $78 per barrel during the three months ended March 31, 2026 up from $68 per barrel in 2025, driven primarily by ongoing conflicts in the Middle East that disrupted global oil supply during the first quarter of 2026.

Uncertainty persists in the market, particularly in light of concerns over global economic conditions (including the current conflict in Iran), government trade policies and output increases by the Organization of the Petroleum Exporting Countries and other major international producers. This has led to the continued deferral of offshore capital expenditures and could have a negative impact on near-term future demand for offshore drilling services. In addition, inflationary pressures may impact the cost base in our industry, including personnel costs and the prices of goods and services required to reactivate or operate rigs.

As global tendering activity accelerates, we see signs that point towards a market recovery in 2027. In addition, we believe oil majors are calling for renewed focus on large-scale exploration and investment, and there is also growing consensus that U.S. shale production is plateauing. As a result, with projections of growing oil and gas demand and the lagging energy transition, operators are pivoting back towards deepwater exploration in order to replace reserves and sustain production growth.

The table below shows the global number of rigs on contract and marketed utilization for the three months ended March 31, 2026 and year ended December 31, 2025:


	March 31, 2026		December 31, 2025
Contracted rigs
Benign environment floater	107		108
Harsh environment floater	22		21
Harsh environment jackup	26		28
Marketed utilization
Benign environment floater	87	%	87	%
Harsh environment floater	92	%	90	%
Harsh environment jackup	97	%	97	%

Source: RigLogix

Global benign-environment floaters

Marketed utilization and the number of contracted rigs remained relatively consistent in the three months ended March 31, 2026 compared to the year ended December 31, 2025.

Global harsh environment units

Marketed utilization for harsh environment floaters improved in the three months ended March 31, 2026 compared to the year ended December 31, 2025, whereas utilization for harsh environment jackups remained consistent over the same periods, reflecting continued demand for high-specification assets.

Results of operations

Results for the three months ended March 31, 2026 and March 31, 2025

The tables included below set out financial information for the three months ended March 31, 2026 and March 31, 2025:


	Three months ended March 31,
(In $ millions, except percentages)	2026	2025	Change	Change %
Operating revenues	358	335	23	7	%
Operating expenses	(334)	(317)	(17)	5	%

Operating profit	24	18	6	33	%
Interest expense	(15)	(15)	—	—	%
Financial and non-operating items	7	(2)	9	(450)	%
Profit before income taxes	16	1	15	1500	%
Income tax expense	(23)	(15)	(8)	53	%
Net loss	(7)	(14)	7	(50)	%

1) Operating revenues

Operating revenues consist of contract revenues, reimbursable revenues, management contract revenues, leasing revenues and other revenues.


	Three months ended March 31,
(In $ millions, except percentages)	2026	2025	Change	Change %
Contract revenues (a)	277	248	29	12	%
Reimbursable revenues (b)	10	15	(5)	(33)	%
Management contract revenues	63	61	2	3	%
Leasing revenues	8	8	—	—	%
Other revenues	—	3	(3)	(100)	%
Total operating revenues	358	335	23	7	%

a) Contract revenues

Contract revenues represent the revenues we earn from contracting our drilling units to customers, primarily on a dayrate basis, and are predominately driven by the average number of rigs under contract during a period, the average dayrates earned and economic utilization achieved by those rigs under contract. We have set out movements in these key indicators of performance in the sections below.

i.Average number of rigs on contract

We calculate the average number of rigs on contract by dividing the aggregate days our rigs (excluding managed rigs) were on contract during the reporting period by the number of days in that reporting period.

The average number of rigs on contract remained consistent at nine in each of the three months ended March 31, 2026 and 2025; however, there was a decrease in the total days on contract resulting in lower contract revenues of $11 million in the three months ended March 31, 2026 compared to the three months ended March 31, 2025.

The decrease was primarily driven by fewer operating days on the West Jupiter, West Capella and Sevan Louisiana, which were undergoing contract preparation activities during the three months ended March 31, 2026 for contracts that started during March 2026 in Brazil, Malaysia and the U.S. Gulf of America, respectively, compared to the three months ended March 31, 2025, during which the rigs were operating for more days. The decrease was partially offset by the West Neptune and West Polaris, operating throughout the three months ended March 31, 2026, compared to being partially contracted during the three months ended March 31, 2025.

ii.Average contractual dayrates

We calculate the average contractual dayrate by dividing the aggregate contractual dayrates during a reporting period by the aggregate number of days for the reporting period.

The average contractual dayrate earned during the three months ended March 31, 2026 was $343 thousand compared to $323 thousand during the three months ended March 31, 2025, resulting in a $5 million increase in contract revenues in the three months ended March 31, 2026 compared to the three months ended March 31, 2025.

The increase was driven by higher dayrates for the West Jupiter, West Auriga, West Polaris, West Tellus and West Carina operating in Brazil, the West Neptune operating in the U.S. Gulf of America, and the West Elara operating in Norway during the three months ended March 31, 2026, compared to the three months ended March 31, 2025. These impacts were partially offset by lower dayrates for the West Vela and Sevan Louisiana operating in the U.S. Gulf of America during the three months ended March 31, 2026, compared to the three months ended March 31, 2025.

iii.Economic utilization for rigs on contract

We define economic utilization as dayrate revenue earned during the period, excluding bonuses, divided by the contractual operating dayrate multiplied by the number of days on contract in the period. If a drilling unit earns its full operating dayrate throughout a reporting period, its economic utilization would be 100%. However, there are many situations that give rise to a dayrate being earned that is less than the contractual operating rate, such as planned downtime for maintenance. In such situations, economic utilization reduces below 100%.

The economic utilization for the three months ended March 31, 2026 was 95%, compared to 84% for the three months ended March 31, 2025, resulting in a $36 million increase in contract revenues in the three months ended March 31, 2026 compared to the three months ended March 31, 2025. The increase was primarily due to improved economic utilization on the West Tellus, West Polaris, West Auriga and Sevan Louisiana during the three months ended March 31, 2026 compared to the three months ended March 31, 2025.

iv.Deferred mobilization revenues

We receive fees for the mobilization of our rigs, where the associated revenue is recognized ratably over the expected term of the related drilling contract. As a result, we record a contract liability for mobilization fees received, which is amortized ratably to contract revenues as services are rendered over the initial term of the related drilling contract.

The amortization of deferred mobilization revenues decreased by $1 million during the three months ended March 31, 2026, compared to the three months ended March 31, 2025. The decrease was primarily attributable to mobilization fees received on the West Capella recognized during the first quarter of 2025.

b) Reimbursable revenues

We generally receive reimbursements from our customers for the purchase of supplies, equipment, personnel and other services provided at their request in accordance with a drilling contract. We classify such revenues as reimbursable revenues.

For the three months ended March 31, 2026 and the three months ended March 31, 2025, reimbursable revenues primarily related to rigs managed for the Sonadrill joint venture for long-term maintenance projects on the Libongos and Quenguela, along with reimbursable revenues related to services provided across various customers.

The $5 million decrease in the three months ended March 31, 2026 compared to the three months ended March 31, 2025 was primarily due to reduced reimbursable services provided to the West Gemini and Quenguela during the first quarter of 2026, compared to the first quarter of 2025.

2) Operating expenses

Total operating expenses include vessel and rig operating expenses, reimbursable expenses, depreciation of drilling units and equipment, amortization of intangibles, management contract expenses, selling, general and administrative expenses, and merger and integration related expenses.


	Three months ended March 31,
(In $ millions, except percentages)	2026	2025	Change	Change %
Vessel and rig operating expenses (a)	(181)	(179)	(2)	1	%
Reimbursable expenses	(10)	(15)	5	(33)	%
Depreciation and amortization (b)	(71)	(55)	(16)	29	%
Management contract expenses	(46)	(45)	(1)	2	%
Selling, general and administrative expenses (c)	(25)	(23)	(2)	9	%
Merger and integration related expenses	(1)	—	(1)	100	%
Total operating expenses	(334)	(317)	(17)	5	%

a) Vessel and rig operating expenses

Vessel and rig operating expenses represent the costs we incur to operate a drilling unit that is either in operation or stacked. This includes the remuneration of offshore crews, rig supplies, expenses for repair and maintenance, onshore support costs, and the amortization of deferred mobilization costs. Vessel and rig operating expenses are mainly driven by rig activity. On average, we incur higher vessel and rig operating expenses when a rig is operating compared to when it is stacked. For stacked rigs, we incur higher vessel and rig expenses for warm stacked rigs compared to cold stacked rigs. We incur one-time costs for activities such as preservation and severance when we cold stack a rig. We also incur significant costs when re-activating a rig from cold stack, a proportion of which is expensed as incurred.

Vessel and rig operating expenses increased by $2 million during the three months ended March 31, 2026 compared to the three months ended March 31, 2025. During the three months ended March 31, 2026, there was an $9 million increase in vessel and rig operating expenses compared to the three months ended March 31, 2025, primarily related to the West Polaris commencing operations in February 2025 in Brazil, along with higher repair and maintenance costs across the fleet. This was partially offset by a $7 million decrease in vessel and rig operating expenses during the three months ended March 31, 2026, attributable to lower deferred mobilization costs related to contracts in Brazil completing during the first quarter of 2026.

b) Depreciation and amortization

The $16 million increase in depreciation and amortization for the three months ended March 31, 2026 compared to the three months ended March 31, 2025 is mainly attributable to long-term maintenance and capital projects across the fleet, and unfavorable contracts being fully amortized during 2025.

Depreciation of drilling units and equipment

Depreciation increased by $11 million in the three months ended March 31, 2026 compared to the three months ended March 31, 2025, mainly attributable to long-term maintenance and capital projects across the fleet, primarily related to West Neptune, West Gemini and Sevan Louisiana during the second half of 2025.

Amortization of intangibles

Amortization increased by $5 million during the three months ended March 31, 2026 compared to the three months ended March 31, 2025, mainly attributable to unfavorable contracts recorded as liabilities being fully amortized during 2025 related to the West Tellus, West Jupiter and West Carina.

c) Selling, general and administrative expenses

Selling, general and administrative expenses include the cost of our corporate and regional offices, certain legal and professional fees as well as the remuneration and other compensation of our officers, directors and employees engaged in central management and administration activities.

Selling, general and administrative expense increased by $2 million during the three months ended March 31, 2026 compared to the three months ended March 31, 2025, primarily due to personnel costs and professional fees.

3) Interest expense


	Three months ended March 31,
(In $ millions, except percentages)	2026	2025	Change	Change %
Interest on debt facilities (a)	(14)	(14)	—	—	%
Other	(1)	(1)	—	—	%
Total interest expense	(15)	(15)	—	—	%

a) Interest on debt facilities

We incur interest on our debt facilities as summarized below:


	Three months ended March 31,
(In $ millions, except percentages)	2026	2025	Change	Change %
$575 million secured bond	(13)	(12)	(1)	8	%
Unsecured senior convertible bond	(1)	(2)	1	(50)	%
Total interest on debt facilities	(14)	(14)	—	—	%

4) Financial and non-operating items


	Three months ended March 31,
(In $ millions, except percentages)	2026	2025	Change	Change %
Interest income	2	4	(2)	(50)	%
Equity in earnings of equity method investment (net of tax) (a)	4	8	(4)	(50)	%
Other financial and non-operating items (b)	1	(14)	15	(107)	%
Total financial and non-operating items	7	(2)	9	(450)	%

a) Equity in earnings of equity method investment (net of tax)

The earnings during the three months ended March 31, 2026 and the three months ended March 31, 2025 related to Seadrill's proportion of earnings from Sonadrill.

The decrease in earnings of $4 million for the three months ended March 31, 2026 compared to the three months ended March 31, 2025 was primarily driven by lower operating dayrates for Libongos and West Gemini, partially offset by an increased dayrate for Quenguela, operating in Angola during the three months ended March 31, 2026, compared to the three months ended March 31, 2025.

b) Other financial and non-operating items

Other financial and non-operating items improved by $15 million during the three months ended March 31, 2026 compared to the three months ended March 31, 2025, primarily driven by a provision recognized during the three months ended March 31, 2025 related to assets sold, which did not recur during the three months ended March 31, 2026.

5) Income tax expense

Income tax expense consists of taxes currently payable and changes in deferred tax assets and liabilities related to our ownership and operation of drilling units and may vary significantly depending on jurisdictions and contractual arrangements. In most cases, the calculation of taxes is based on net income or deemed income, the latter generally being a function of gross revenue.

The $8 million increase in tax expense during the three months ended March 31, 2026 compared to the three months ended March 31, 2025 primarily reflects changes in the Company's mix of pre-tax income and loss among tax jurisdictions, as well as lower utilization of tax loss carryforwards in the three months ended March 31, 2026.

Liquidity and Capital Resources

1) Capital allocation framework and Share repurchase program

In July 2023, in connection with the issuance of the Notes, Seadrill announced capital allocation principles designed to prioritize a conservative capital structure and liquidity position, focused capital investment in its fleet, and returns to shareholders. Within this framework, Seadrill intends to maintain a net leverage target of less than 1.0x under current market conditions, with a maximum through-cycle net leverage target of less than 2.0x. Seadrill also intends to maintain a strong liquidity position to provide resilience even in a downturn scenario by establishing a target minimum cash-on-hand of $250 million. Further, Seadrill intends to

SEC Form 10-Q filed by Seadrill Limited