SEADRILL Ltd (SDRL): what the price assumes

boothcheck covers SEADRILL Ltd (SDRL) but does not put one priced-in number on it: here the defensible answer is the evidence rather than a point estimate. boothcheck publishes no house fair value, target price, or buy/sell rating. Narrative composed 2026-06-28.

Generated: 2026-09-26 · Exported: 2026-09-27 · Source: https://boothcheck.com/report/SDRL

Headline

What The Price Assumes (Inversion)

The assumption today's price embeds, recovered by inverting the valuation.

The operating-margin figure is value-band context at year 11: derived from the framework's value band, a separate calculation — not part of the priced-in solve.

How unusual the bet is: n/a

Valuation X-Ray

Asset, earnings-power and peer-multiple models all land far below the price; ONLY the growth-DCF reaches it. The bet is durable compounding the static frames structurally cannot price (a moat/durability premium).

How the valuation models price the stock relative to the market price. Price/FV above 1.0 means the market pays more than that lens defends (expensive); at or below 1.0 the lens can defend the price.

Families that justify the price: Growth Families that call it expensive: Asset, Earnings, Relative

The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 7.6%); the inversion above states its own rate.

Per-Model Detail (n=10)

Solvency

Bullet Takeaways

• Seadrill runs a focused fleet of high-spec ultra-deepwater drillships that earned average dayrates of $343,000 at 94.6% utilization in Q1 2026, with a $3.1 billion backlog extending revenue visibility into 2028.
• The company is still unprofitable, posting a Q1 2026 net loss of $7 million with interest coverage under 1.0 times, so reported earnings have not yet validated the backlog the price is crediting.
• Watch the FY2026 guidance Seadrill just raised (revenue of $1.43 billion to $1.48 billion, adjusted EBITDA of $370 million to $420 million) and the buyback pace under the $500 million program extended to year-end 2026.

Bull Case

Start with the balance sheet, because for a business that drowned in debt once already, that is where the confidence shows up first. Seadrill carries about $614 million of gross debt against roughly $304 million of liquid assets, leaving net debt near $310 million. That is modest for a company whose contract backlog reached $3.1 billion in the first quarter of 2026. The board read the same balance sheet and acted on it, extending its $500 million share repurchase program to year-end 2026 with about $208 million still authorized as of mid-June. A management team buying its own stock is making a specific statement: it believes the per-share value of the fleet exceeds where the market prices it.

The fleet is the bet, and the fleet is high-spec. Seadrill concentrates on ultra-deepwater drillships, the part of the offshore market where supply is tight and customers pay up. The first quarter showed it: rigs on contract earned average contractual dayrates of $343,000 and ran at 94.6% economic utilization, up from 84% a year earlier. The peer disclosures describe the same structural shift. Helmerich & Payne's latest 10-K notes that customers "increasingly demand the services of newer, higher specification drilling rigs, as well as new and improved technology" and that this "results in a bifurcation of the drilling fleet". Seadrill sits on the favored side of that split, and the dayrate trajectory is the evidence.

The forward visibility is what separates this cycle from the last one. New contract awards across Brazil, Angola, and the Gulf of Mexico stretched revenue coverage into late 2026, through 2027, and into parts of 2028. On the strength of that, management lifted full-year revenue guidance to a range of $1.43 billion to $1.48 billion and raised the adjusted EBITDA view to $370 million to $420 million from $350 million to $400 million. The price already credits a long runway: at today's level the market is paying roughly 36 times company-wide operating income, which embeds operating growth held near its self-funding ceiling for close to nine years. The bull case is that a tight ultra-deepwater market with multi-year backlog is exactly the setup where that kind of persistence has a chance to hold.

Bear Case

The structural truth a holder has to sit with is that Seadrill is still a money-losing company. The first quarter of 2026 narrowed the loss but did not erase it: a net loss of $7 million, diluted EPS of negative $0.11. Trailing operating income is thin, somewhere between $53 million on the EDGAR quarterly read and $74 million on the record basis, and interest coverage sits at 0.9 times. That last figure is the one to dwell on. Operating profit does not currently cover the interest bill. The backlog is real and the dayrates are rising, but the income statement has not yet caught up to the story the contracts tell.

That gap is what makes the priced-in assumption demanding. At today's price the market pays about 36 times company-wide operating income, which requires operating growth to hold near its self-funding ceiling for roughly nine years. Of comparable fast-growers, only about 17% sustained that pace for that long. Offshore drilling is the wrong industry to assume nine years of uninterrupted persistence in. It is among the most cyclical businesses in energy, geared directly to customer capital budgets, which in turn ride oil prices. Helmerich & Payne's 10-K states the mechanism plainly: "expectations about future prices and price volatility are generally more important for determining a customer's future spending levels". A softer oil tape, and the rig demand that lifted dayrates to $343,000 can reverse faster than a multi-year contract book suggests.

Backlog is also not a guarantee, and the peers say so in their own filings. Patterson-UTI warns that contract drilling backlog "may continue to decline, as fixed-term drilling contract coverage over time may not be offset by new contracts or may be reduced by price adjustments to existing contracts". The same risk applies offshore. The valuation lens that flags the most caution here is the peer-multiple read: the price sits about 1.4 times where comparable drilling-cohort multiples land. The earnings-power and asset lenses are more forgiving, but they lean on a normalized profit Seadrill has not yet demonstrated on a trailing basis. The bet is that the cycle stays favorable long enough for reported earnings to validate the backlog. If it does not, the cheapness against book value is cheap for a reason.

Valuation

Today's price is making a duration bet. Inverted, it pays about 36 times company-wide operating income, which is the market assuming operating growth holds near its self-funding ceiling for roughly nine years. That is a long persistence to underwrite in offshore drilling, and the historical base rate is sobering: only about 17% of comparable fast-growers kept that pace for that long. The label on the priced-in assumption is elevated, above what the trailing fundamentals comfortably support.

The methods disagree in a revealing pattern. The asset-value lens lands right at the price: book value per share is $43.86, modestly above today's $38.44 (June 28, 2026), and the convergence-based excess-return read sits within a few percent of the price. The earnings-power lens is the most generous, valuing normalized operating profit well above the price, but it does that by averaging four years of operating income and adding back one-time charges, which credits a through-cycle profit the current trailing year does not show. The peer-multiple lens is the only one that calls the price stretched, reading it at roughly 1.4 times where the drilling cohort trades. So the price is supported by what the company owns and by a normalized earnings level, while the live comparison to peers says it is paying ahead. The caveat on the peer cohort matters: the comparison set leans on onshore drillers and pressure pumpers rather than pure ultra-deepwater names, so treat the relative read as directional.

Solvency bounds the downside without removing the risk. Net debt of about $310 million against operating income puts leverage near 5.9 times pre-tax operating income, and the company is still burning cash on a trailing basis with interest coverage under 1.0 times. The offset is the backlog and the liquidity: $3.1 billion of contracted revenue and roughly $304 million in liquid assets give the company time for reported earnings to catch the dayrate cycle. What an investor underwrites at this price is that they do, before the cycle turns.

Catalysts

The first quarter of 2026 reset the trajectory. Seadrill reported revenue of $358 million and an adjusted EBITDA of $97 million, narrowed the net loss to $7 million, and raised both the revenue and EBITDA outlook for the year. The driver was operational: economic utilization climbed to 94.6% from 84% a year earlier and average dayrates reached $343,000, with new awards in Brazil, Angola, and the Gulf of Mexico lifting contract backlog to $3.1 billion. The contract additions extend revenue coverage into late 2026, throughout 2027, and into 2028, which is the visibility the market rewards in a cyclical driller.

Capital return is the second thread. On June 22, 2026 the board extended the existing $500 million share repurchase program from a June 25 expiry to December 31, 2026, with about $208 million still available as of June 19. Sentiment on the sell side leans constructive, with at least one published Buy rating, though the range of targets is wide enough that the cautious reader should weight the contract data over the price calls. The next earnings print is the event that matters: it shows whether the higher dayrates and utilization are converting into the reported profit the valuation already assumes.

Peer Cohorts (Per Segment, With Filing Citations)

Core business (reported)

• NE (Noble Corporation plc)
• FY2025 10-K: …the failure of actual results to reflect the assumptions we use to estimate backlog for certain contracts, could have a material adverse effect on our business, financial condition, and results of operations. A substantial portion of our business is dependent on several of our customers as well as dependent on…
• FY2025 10-K: …gas to consistently remain at or above a level that encourages our customers to expand their capital spending, the inability of our customers to access capital on economically advantageous terms, including as a result of the heightened focus on climate change by investors and regulators, a global recession, reduced…
• HP (Helmerich & Payne, Inc.)
• FY2025 10-K: …various stages of commercial testing. Markets and Competition Our business largely depends on the level of capital spending by oil and gas companies for exploration and production activities. The level of capital spending has traditionally been correlated to oil and gas prices. Oil and gas prices can be volatile at…
• FY2025 10-K: …to maintain our pricing and to increase our pricing as costs increase to offset rising costs and capital expenditures could adversely affect our rig utilization and profit margins. Various factors within our industry could cause there to be substantially more drilling rigs available than necessary to meet demand even…
• PTEN (PATTERSON UTI ENERGY INC)
• FY2025 10-K: , have incurred losses during the downturn periods. We cannot predict either the future level of demand for our oil and natural gas services or future conditions in the oil and natural gas service businesses. In addition to the dependence on oil and natural gas prices and demand for our services, we are highly…
• FY2025 10-K: …rate that is sufficient to offset rising costs, including capital expenditures, without adversely affecting our activity. The inability to maintain our pricing and to increase our pricing as costs, including capital expenditures, increase could have a material adverse effect on our business, financial condition, cash…

Methodology Note

• Priced-in inversion: the valuation is inverted on the current price to recover the operating-income growth, duration, and steady-state margin the price embeds (ROE for financials, FFO growth for REITs).
• Valuation x-ray: the valuation models, grouped into four families (asset, earnings, relative, growth). Each model is expressed as a price/FV ratio (distance from price), not a point fair-value estimate. The spread across families is the disagreement.
• Solvency: net cash/debt, net-debt-to-NOPAT, interest coverage, and share-count CAGR from EDGAR financials (net debt / FFO and fixed-charge coverage for REITs; regulatory-capital framing for financials).
• Peer cohorts: per-segment comparables with deep-linkable SEC filing citations.

Fundamentals sourced from SEC EDGAR filings. Current price from Databento. The priced-in inversion and valuation x-ray are computed by the boothcheck engine; narrative composed by AI from the structured data.