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Is SDRL Worth Buying as Cash Flow Improves but Valuation Stretches?
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Key Takeaways
Seadrill's cash-flow outlook improves as higher-rate contracts kick in and major project outflows ease.
SDRL's EPS is projected to rise from 63 cents in 2026 to $2.33 in 2027, despite downward estimate revisions.
SDRL trades above its historical sales valuation, while cost inflation & utilization risks cloud its recovery.
Seadrill Limited (SDRL - Free Report) is entering a better cash-flow phase as higher-rate contracts begin contributing more fully to its active fleet.
The investment case is improving, but the stock’s valuation and lingering operating risks complicate the timing decision. Investors must weigh a stronger 2027 earnings setup against evidence that part of the recovery is already reflected in the shares.
SDRL’s Cash Flow Setup Is Improving
Major project-related outflows for West Capella, West Jupiter and West Tellus are largely behind Seadrill after the rigs were delivered on time and within budget. That removes a meaningful spending burden as higher contractual rates flow through the active fleet.
Expected mobilization receipts in the second half of 2026 should provide additional support. Seadrill ended the second quarter with $360 million in cash, cash equivalents and restricted cash against $750 million of gross principal debt. The company has said it remains on track to generate meaningful free cash flow in the second half.
SDRL’s 2027 Earnings Potential Is the Bull Case
The Zacks Consensus Estimate calls for 2026 earnings of 63 cents per share and 2027 earnings of $2.33 per share. The consensus revenue estimate for 2027 is $1.67 billion, compared with $1.56 billion for 2026.
Image Source: Zacks Investment Research
That step-up depends partly on a tighter deepwater market. Management believes drillship utilization could reach the mid-90% range in 2027 if tenders convert into awards. At the same time, the 2027 earnings estimate has moved 29.6% lower over the past 60 days, underscoring that the recovery path is not linear. Transocean Ltd. (RIG - Free Report) , which specializes in ultra-deepwater and harsh-environment drilling, is another direct participant in that floater cycle.
SDRL Valuation Sends a Mixed Message
Seadrill’s forward 12-month price-to-sales ratio stands at 1.96. That is above its five-year median of 1.66, suggesting the stock already carries a premium to its own longer-term sales valuation.
At the same time, the multiple remains below the drilling subindustry’s 3.29. Noble Corporation plc (NE - Free Report) operates an offshore fleet focused largely on ultra-deepwater and high-specification jackup work, making it a relevant benchmark for sector demand and contracting conditions. The comparison leaves SDRL neither clearly cheap nor obviously expensive on sales.
Execution and Cost Risks Keep SDRL in Check
The recovery is not uniform. Near-term oversupply in the U.S. Gulf and limited visibility for Sevan Louisiana could weigh on second-half 2026 and early 2027 cash flow if work is slower to materialize.
Costs also matter. Seadrill expects higher repairs and maintenance spending during the remainder of 2026, while labor and materials inflation could pressure margins. The company’s prior unplanned downtime makes sustained high utilization essential to converting backlog into the expected cash-flow improvement.
SDRL’s Ratings Favor Patience Over Chasing
The investment case has improved as repriced contracts, better uptime and lower project-related outflows strengthen the cash-flow outlook. The valuation premium to Seadrill’s own history, however, leaves less cushion if utilization or costs disappoint.
Its Momentum Score of A supports the recent trading strength, while the Value Score of D, Growth Score of F and VGM Score of D are less favorable. Together, those signals favor a measured stance while investors watch whether the projected earnings and cash-flow improvement is sustained.
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Is SDRL Worth Buying as Cash Flow Improves but Valuation Stretches?
Key Takeaways
Seadrill Limited (SDRL - Free Report) is entering a better cash-flow phase as higher-rate contracts begin contributing more fully to its active fleet.
The investment case is improving, but the stock’s valuation and lingering operating risks complicate the timing decision. Investors must weigh a stronger 2027 earnings setup against evidence that part of the recovery is already reflected in the shares.
SDRL’s Cash Flow Setup Is Improving
Major project-related outflows for West Capella, West Jupiter and West Tellus are largely behind Seadrill after the rigs were delivered on time and within budget. That removes a meaningful spending burden as higher contractual rates flow through the active fleet.
Expected mobilization receipts in the second half of 2026 should provide additional support. Seadrill ended the second quarter with $360 million in cash, cash equivalents and restricted cash against $750 million of gross principal debt. The company has said it remains on track to generate meaningful free cash flow in the second half.
SDRL’s 2027 Earnings Potential Is the Bull Case
The Zacks Consensus Estimate calls for 2026 earnings of 63 cents per share and 2027 earnings of $2.33 per share. The consensus revenue estimate for 2027 is $1.67 billion, compared with $1.56 billion for 2026.
Image Source: Zacks Investment Research
That step-up depends partly on a tighter deepwater market. Management believes drillship utilization could reach the mid-90% range in 2027 if tenders convert into awards. At the same time, the 2027 earnings estimate has moved 29.6% lower over the past 60 days, underscoring that the recovery path is not linear. Transocean Ltd. (RIG - Free Report) , which specializes in ultra-deepwater and harsh-environment drilling, is another direct participant in that floater cycle.
SDRL Valuation Sends a Mixed Message
Seadrill’s forward 12-month price-to-sales ratio stands at 1.96. That is above its five-year median of 1.66, suggesting the stock already carries a premium to its own longer-term sales valuation.
At the same time, the multiple remains below the drilling subindustry’s 3.29. Noble Corporation plc (NE - Free Report) operates an offshore fleet focused largely on ultra-deepwater and high-specification jackup work, making it a relevant benchmark for sector demand and contracting conditions. The comparison leaves SDRL neither clearly cheap nor obviously expensive on sales.
Execution and Cost Risks Keep SDRL in Check
The recovery is not uniform. Near-term oversupply in the U.S. Gulf and limited visibility for Sevan Louisiana could weigh on second-half 2026 and early 2027 cash flow if work is slower to materialize.
Costs also matter. Seadrill expects higher repairs and maintenance spending during the remainder of 2026, while labor and materials inflation could pressure margins. The company’s prior unplanned downtime makes sustained high utilization essential to converting backlog into the expected cash-flow improvement.
SDRL’s Ratings Favor Patience Over Chasing
The investment case has improved as repriced contracts, better uptime and lower project-related outflows strengthen the cash-flow outlook. The valuation premium to Seadrill’s own history, however, leaves less cushion if utilization or costs disappoint.
SDRL currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.
Its Momentum Score of A supports the recent trading strength, while the Value Score of D, Growth Score of F and VGM Score of D are less favorable. Together, those signals favor a measured stance while investors watch whether the projected earnings and cash-flow improvement is sustained.