SEADRILL Ltd (SDRL) stock intrinsic value fair value estimate & owner earnings analysis

Seadrill owns and operates a fleet of offshore drilling rigs (drillships, semisubmersibles and jack-ups) that it rents to oil companies on day-rate contracts. Four customers (Petrobras, Sonadrill, Talos and LLOG) supplied about 79% of 2025 revenue. Revenue was $1,502M in 2023, $1,385M in 2024 and $1,437M in 2025 (about $807M in the first half of 2026), but very little of that reaches shareholders. Rigs must be surveyed and recertified every five years, and that cost (included in operating cash flow: $108M in 2023, $261M in 2024, $213M in 2025) sits on top of $100-160M a year of equipment capex, plus roughly $60M a year of interest. How we measured earnings: we start with operating cash flow, strip out swings in working capital, subtract stock compensation and deduct the equipment spending needed to keep the fleet running. On that basis per-share earnings were about $3.05 in 2023, -$0.46 in 2024 and -$1.21 in 2025 (fewer shares each year after large buybacks: 74M, 71M, 65M). 2024 profit of $446M was mostly a $234M gain on rig sales, which is not repeatable and is excluded. Because survey spending is lumpy and 2023 was light, we use the three-year average of about $0.46 per share rather than the median, which would treat two heavy-spend years as permanent. The company emerged from restructuring in 2022, so earlier years describe a different business. Trailing earnings actually worsened in 2025; our base case assumes no growth and simply a return to the three-year average, justified by the survey cycle rather than by any improvement. First-half 2026 operating cash flow was -$40M against -$16M a year earlier despite higher revenue, so we do not lift the level. Base case (about $4.30 per share): earnings hold at about $0.46 per share for ten years, on a contract backlog of $2.1B (about $962M in 2026, $692M in 2027, $353M in 2028, $88M after), and the fleet's record of being re-contracted through cycles; earnings then fade over a further ten years as the rigs age, with nothing named beyond that. Bull (about $18): earnings of about $2.00 per share, roughly two-thirds of 2023's level, if survey and equipment spending eases and existing contracts convert at current day rates, held ten years and then faded. Bear (about -$5.50): 2024-25 conditions (about -$0.85 per share a year) persist through the end of the current backlog in 2028, then the business stops earning; and Petrobras collects the roughly $213M of delay penalties it asserted in January 2025 over three drillships tied to the Sete Brazil project, with the company disputing that claim (Petrobras has separately alleged up to $825M of damages from the project companies, which we do not include). On cash flows alone the bear case means the company would owe more than it earns, by about $5.50 per share; we do not credit resale value of the rigs, and the balance sheet (book equity of $2.9B, $337M cash against $737M debt at mid-2026) makes a loss of that size much less likely than the case itself suggests. Debt rose from $613M to $737M in the first half of 2026. What we left out: any rise in day rates or fleet utilisation, new contracts beyond the signed backlog, and rig resale value. What would make this wrong: a sustained day-rate upturn lifting earnings well above the 2023 level (bull), or Petrobras' claims and heavy survey spending continuing (bear). We could not reconcile the fleet's remaining economic life from the filings, so the fade period is a judgement.