Seadrill Limited (SDRL Quick QuoteSDRL - Free Report) entered its third-quarter earnings call with a fuller 2027 drilling schedule and a third consecutive increase to annual guidance. Management emphasized converting contracts into cash over pursuing higher headline day rates.

Executives also addressed uneven regional demand, customer spending discipline and the balance between contract duration and exposure to improving markets.

SDRL Builds Visibility Into 2027

President and CEO Samir Ali said that more than 85% of available drillship days are contracted for 2027. Awards and extensions since August added approximately $800 million in total contract value.

Commercial vice president Jacob Taylor highlighted West Carina's Indonesian assignment, beginning in the first half of 2027. Its firm contract carries approximately $420 million in value and an $85 million mobilization fee, with options for additional work. Asked by a Clarksons Securities analyst, Ali said that the fee has substantial margin, while Taylor confirmed invoicing at contract commencement.

Exercised options extend West Capella's Malaysian program through February 2028 and Sonangol Libongos' Angola assignment into 2030. Seadrill reported approximately $3.3 billion of backlog as of Nov. 3.

Seadrill Lifts Its Full-Year Forecast

Executive vice president and CFO Grant Creed raised the 2026 operating revenue outlook to $1.56-$1.58 billion, excluding $90 million in reimbursable revenues. The previous range was $1.50-$1.55 billion, excluding $50 million in reimbursables.

The adjusted EBITDA target increased to $440-$460 million from $420-$450 million. The capital expenditure and long-term maintenance range narrowed to $210 million-$230 million, preserving its midpoint.

Creed linked the changes to maintenance timing, West Carina preparations and fleet utilization. Third-quarter revenues of $428 million exceeded the $382 million Zacks Consensus Estimate, although fewer operating days lowered revenue sequentially. Reported earnings were $0.22, which beat the $0.2 estimate.

Seadrill Limited Price, Consensus and EPS Surprise

Seadrill Limited price-consensus-eps-surprise-chart | Seadrill Limited Quote

SDRL Turns Backlog Into Cash

Ali stressed the transition from contracted revenue to cash generation. Seadrill produced $179 million of free cash flow and repurchased $22 million of shares, bringing 2026 repurchases to $42 million.

Creed said cash generation benefited from a $41 million West Tellus mobilization fee and a working capital release. Quarter-end cash, including restricted cash, reached $506 million, with net leverage at 0.6 times.

Asked by a Citigroup analyst about capital deployment, Creed described repurchases as opportunistic. He also indicated that 2027 capital spending could resemble 2026 levels, without issuing formal guidance.

Seadrill Prioritizes Total Contract Economics

A Barclays analyst questioned rising industry day rates. Ali said rates were progressing broadly as expected, but emphasized that mobilization fees, ancillary services and total cash generation determine contract attractiveness.

A Citigroup analyst pressed management on securing longer contracts as pricing improves. Ali favored staggered expirations, preserving near-term availability rather than committing the entire fleet for extended periods.

Taylor said that anticipated development activity in 2028 and 2029 could support stronger demand. Ali emphasized that major oil companies remain disciplined, generally contracting rigs for specific drilling programs.

SDRL Navigates Divergent Regional Markets

Taylor described the U.S. Gulf as oversupplied by a few drillships, while West African and Asian demand could absorb departing capacity. West Neptune is contracted into late 2027 and West Vela into mid-2028. Taylor warned of gaps for Sevan Louisiana later in 2027.

Responding to a Pickering Energy Partners analyst, Taylor said that additional rig departures could tighten the U.S. Gulf in 2028. In Brazil, Petrobras contract awards are expected in the first half of 2027, while West Auriga becomes available late that year.

A BTIG analyst examined reactivating stacked harsh-environment rigs. Ali mentioned that Seadrill is marketing Aquarius and Phoenix, but prefers customers to fund their substantial reactivation costs.

Seadrill Maintains Its Operating Priorities

Ali repeatedly emphasized safe operations, contract discipline and free cash flow. Third-quarter economic utilization was 94.5%, reinforcing management's focus on reliable execution.

Creed cautioned that repairs and maintenance typically rise in the fourth quarter, with additional work planned for West Carina before its next contract. Management remains focused on fleet preparation while preserving cash generation.

SDRL's Zacks Rank and Style Scores

SDRL carries a Zacks Rank #3 (Hold). Its Momentum Score of A indicates favorable price-trend characteristics, while a Value Score of D and Growth Score of F indicate weaker readings in those styles.

The VGM Score of D reflects the combined assessment, contrasting with strong standalone momentum. Zacks' framework favors stocks with Zacks Rank #1 (Strong Buy) or Zacks Rank #2 (Buy), alongside A or B Style Scores. SDRL's Zacks Rank can change as earnings estimates are revised following the reported results. You can see the complete list of today’s Zacks #1 Rank stocks here.