UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DCD.C. 20549


FORM 20-F


[_]☐ REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR 12(g) OF THE
SECURITIES EXCHANGE ACT OF 1934


OR


[X]☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934


For the fiscal year ended December 31, 20192021
OR


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


For the transition period from ____ to ____


OR


[_]☐ SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934


Date of event requiring this shell company report:


Commission file number: 333-224459

001-39327
SEADRILL LIMITED
(Exact name of Registrant as specified in its charter)
Bermuda
(Jurisdiction of incorporation or organization)
Par-la-Ville

Park Place, 4th Floor, 1455 Par-la-Ville Road, Hamilton HM 08,11, Bermuda
(Address of principal executive offices)
Colleen SimmonsKaren Crowe
Par-la-VillePark Place, 1455 Par-la-Ville Road, Hamilton HM 08,11, Bermuda
Tel: +1 (441) 295-9500, Fax: +1 (441) 295-3494242-1500
(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact PersonPerson)
Securities registered or to be registered pursuant to Section 12(b) of the Act:
Title of classTrading SymbolName of exchange on which registered
Title of classNoneTrading SymbolNoneName of exchange on which registeredNone
Common stock $0.10 par valueSDRLNew York Stock Exchange


Securities registered or to be registered pursuant to Section 12(g) of the Act:  None
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: NoneCommon shares $0.01 par value


Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report:





As ofat December 31, 2019,2021, there were 100,234,973100,384,435 common shares, par value $0.10 per share, of the Registrant’s common stockshares issued and outstanding.
Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
[_]☐ Yes[X]☒ No
If this report is an annual report or transition report, indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.
[_]☐ Yes[X]☒ No
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.
[X]☒ 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 the files).
[X]☒ Yes[_]☐ No


Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer  [_]☐Accelerated filer  [X]☐
Non-accelerated filer   [_]☒Emerging growth company  [_]☐
If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, 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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐
Indicate by check mark which basis of accounting the Registrant has used to prepare the financial statements included in this filing:
[X]☒  U.S. GAAP
[_]☐  International Financial Reporting Standards as issued by the International Accounting Standards Board
[_]☐  Other
If ”Other”“Other” has been checked in response to the previous question, indicate by check mark which

financial statement item the Registrant has elected to follow.
[_]☐  Item 17
[_]☐  Item 18


If this is an annual report, indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
☐  Yes☒  No

(APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS)
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


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Page
[_]  Yes[X]  No



TABLE OF CONTENTS
Page
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
PART 1I
ITEM 1.
1
ITEM 2.
1
ITEM 3
1
ITEM 4.
28
ITEM 4A4A.
4037
ITEM 5.
4138
ITEM 6.
6555
ITEM 7.
6959
ITEM 8
6960
ITEM 9.
7060
ITEM 10.
7061
ITEM 11.
8374
ITEM 12.
8475
PART II
ITEM 13.
8575
ITEM 14.
8575
ITEM 15
8575
ITEM 16.
8676
ITEM 16A.
8676
ITEM 16B.
8676
ITEM 16C.
8676
ITEM 16D.
8677
ITEM 16E.
8677
ITEM 16F.
8677
ITEM 16G.
8777
ITEM 16H.
8777
ITEM 16I.
77
PART III
PART III
ITEM 17.
8877
ITEM 18.
8878
ITEM 19.
8979


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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS


We desire to take advantage of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, or the PSLRA, and are including this cautionary statement in connection therewith. The PSLRA provides safe harbor protections for forward-looking statements to encourage companies to provide prospective information about their business.

Forward-looking statements include statements concerning plans, objectives, goals, strategies, future events or performance, and underlying assumptions and other statements, which are other than statements of historical or present facts or conditions.


This annual report and any other written or oral statements made by us or on our behalf may include forward-looking statements whichthat reflect ourthe Company's current views with respect to future events and financial and operational performance. The words “believe,” “anticipate,” “intend,” “estimate,” “forecast,” “project,” “plan,” “potential,” “may,” “should,” “expect”All statements other than statements of historical facts included in the annual report, including, but not limited to, statements relating to the Company's financial position, the risks specific to the Company's business, the strengths of the Company, business strategy and similar expressions identifythe implementation of strategic initiatives, as well as other statements relating to the Company's future business development and financial performance, 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.

The forward-looking statements in this document are based upon various assumptions, many of which are based, in turn, upon further assumptions, including, without limitation, management’s examination of historical operating trends, data contained in our records and other data available from third parties. Although we believe that these assumptions were reasonable when made, because these assumptions are inherently subject to significant uncertainties and contingencies that are difficult or impossible to predict and are beyond our control, we cannot assure you that we will achieve or accomplish these expectations, beliefs or projections.
 
In addition to these important factors and matters discussed elsewhere in this annual report, and in the documents incorporated by reference to this report, important factors that, in our view, could cause actual results to differ materially from those discussed in the forward-looking statements include:


the impact of active negotiations with our lenders to obtain certain amendments to our credit facilities and related contingency planning efforts, the outcome of which is uncertain;
•our ability to maintain relationships with suppliers, customers, employees and other third parties following our emergence from the Chapter 11 proceedings;Proceedings;
•our ability to maintain and obtain adequate financing to support our business plans following our emergence from the Chapter 11;11 Proceedings;
•factors related to the offshore drilling market, including volatility and changes in oil and gas prices and the state of the global economy on market outlook for our various geographical operating sectors and classes of rigs;
•the impact of global economic conditions, including potential trade wars;
•supply and demand for drilling units, changes in new technology and competitive pressure on utilization rates and dayrates;
•customer contracts, including contract backlog, contract commencements, contract terminations, contract option exercises, contract revenues, contract awards and rig mobilizations;
•the repudiation, nullification, modification or renegotiation of drilling contracts;
•delays in payments by, or disputes with, our customers under our drilling contracts;contracts or the outcome of litigation, legal proceedings, investigations or other claims or contract disputes;
•fluctuations in the market value of our drilling units and the amount of debt we can incur under certain covenants in our debt financing agreements;
•potential additional asset impairments;
•our liquidity and the adequacy of cash flowflows for our obligations;
our•downtime and other risks associated with offshore rig operations and ability to successfully employ our drilling units;
our ability to procure or have access to financing;
•our expected debt levels;
•the impact of the operating and financial restrictions imposed by covenants in our debt agreements;
our ability to satisfy our obligations, including certain covenants, under our debt agreements and, if needed, to raise new capital or refinance our existing indebtedness;
•the ability of our affiliated or related companies to service their debt requirements and comply with the provisions contained in their loan agreements;
•credit risks of our key customers;
•political and other uncertainties, including political unrest, risks of terrorist acts, war and civil disturbances, public health threats, piracy, corruption, significant governmental influence over many aspects of local economies, or the seizure, nationalization or expropriation of property or equipment;
the impact of global economic conditions, including potential trade wars and global health threats, such as the coronavirus, or COVID-19, outbreak on us, our customers and suppliers;
•the concentration of our revenues in certain geographical jurisdictions;
•limitations on insurance coverage, such as war risk coverage, in certain regions;
•any inability to repatriate income or capital;
•the operation and maintenance of our drilling units, including complications associated with repairing and replacing equipment in remote locations and maintenance costs incurred while idle;
•newbuildings, upgrades, shipyard and other capital projects, including the completion, delivery and commencement of operation dates;

•import-export quotas;

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•wage and price controls and the imposition of trade barriers;
the recruitment•our ability to attract and retention of personnel;retain skilled personnel on commercially reasonable terms, whether due to labor regulations, unionization, or otherwise;
•internal control risk due to significant employee reductions;
•regulatory or financial requirements to comply with foreign bureaucratic actions, including potential limitations on drilling activity, changing taxation policies, the impact of global climate change or air emissions and other forms of government regulation and economic conditions that are beyond our control;
•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 USU.S. monetary policy;
•future losses generated from investments in associated companies or receivable balances held with associated companies;
•tax matters, changes in tax laws, treaties and regulations, tax assessments and liabilities for tax issues, including those associated with our activities in Bermuda, Brazil, Norway, the United Kingdom, the United Arab Emirates, Nigeria, Mexico, and the United States;
•legal and regulatory matters, including the results and effects of legal proceedings, and the outcome and effects of internal and governmental investigations;
•hazards inherent in the drilling industry and marine operations causing personal injury or loss of life, severe damage to or destruction of property and equipment, pollution or environmental damage, claims by governmental authorities, third parties or customers and the suspension of operations;
•customs and environmental matters;matters and potential impacts on our business resulting from climate-change or greenhouse gas legislation or regulations, and the impact on our business from climate-change related physical changes or changes in weather pattern;
•the occurrence of cybersecurity incidents, attacks or other breaches to our information technology systems, including our rig operating systems;
•other important factors described from time to time in the reports filed or furnished by us with the SEC.


We caution readers of this report on Form 20-F not to place undue reliance on these forward-looking statements, which speak to circumstances only as at their dates. We undertake no obligation to update any forward-looking statement or statements to reflect events or circumstances after the date on which such statement is made or to reflect the occurrence of unanticipated events. New factors emerge from time to time, and it is not possible for us to predict all of these factors. Further, we cannot assess the impact of each such factor on our business or the extent to which any factor, or combination of factors, may cause actual results to be materially different from those contained in any forward-looking statement.



We qualify all of our forward-looking statements by these cautionary statements. See Item 3.D - "Risk Factors". You should read this report and the documents that we have filed as exhibits to this report completely and with the understanding that our actual future results may be materially different from our expectations.

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PART 1.I.
 
ITEM 1.IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
ITEM 1.IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
 
Not applicable.
 
ITEM 2.OFFER STATISTICS AND EXPECTED TIMETABLE
ITEM 2.OFFER STATISTICS AND EXPECTED TIMETABLE
 
Not applicable.
 
ITEM 3.KEY INFORMATION

ITEM 3. KEY INFORMATION

Except where the context otherwise requires or where otherwise indicated, the terms “Seadrill”, “the Group”, “we”, “us”, “our”, “the Company” and “our Business” refer to either Seadrill Limited, any one or more of its consolidated subsidiaries, or to all such entities, and, for periods before emergence from Chapter 11 Proceedings on July 2, 2018, to Old Seadrill Limited, any one or more of its consolidated subsidiaries, or to all such entities.
References to the term “Successor” refers to the financial position and results of operations of Seadrill after July 2, 2018.February 22, 2022. This is also applicable to terms “Seadrill”, “the Group”, “we”, “us”, “our”, “the Company” or “our Business” in context of events after emergence from Chapter 11 Proceedings on July 2, 2018. References to the term "the 2018 Successor period" refers to the period from July 2, 2018 to December 31, 2018. References to the term "the year ended 2019" refers to the year ended December 31, 2019.February 22, 2022.
References to the term “Predecessor” refers to the financial position and results of operations of Seadrill prior to, and including, July 1, 2018.February 22, 2022. This is also applicable to terms “Seadrill”, “the Group”, “we”, “us”, “our”, “the Company” or “our Business” in context of events before emergence from our Chapter 11 Proceedings on July 2, 2018. References to the term "the 2018 Predecessor period" refers to the period from January 1, 2018 to July 1, 2018 and references to the term "the year ended 2017" refers to the year ended December 31, 2017.February 22, 2022.
Unless otherwise indicated or the context otherwise requires, references in this report to the terms below have the following meanings:
•“AOD” means Asia Offshore Drilling Limited, aan exempted company limited by shares incorporated under the Lawslaws of Bermuda with registration number 44712.
•"Archer" means Archer Limited, a global oilfield service company that specializes in drilling and well services. We haveOur held for sale subsidiary, NSNCo, has a 15.7% ownership interest in the company.
•“Bankruptcy Court” means the United States Bankruptcy Court for the District of South Texas Victoria Division;
“Centerbridge” means Centerbridge Credit Partners L.P. and certain of its affiliates;
•“Chapter 11 Proceedings” means reorganization proceedings under Chapter 11 of Title 11 of the United States Code.
“Commitment Parties” means each commitment party to the Investment Agreement;
•“Companies Act” means the Companies Act 1981 of Bermuda, as amended from time to time;
•“Debtors” means Seadrill Limited and certain of its subsidiaries which filed voluntary petitions for reorganization under Chapter 11 of the United States Bankruptcy Code in the Bankruptcy Court on September 12, 2017;Court;
•“Effective Date” means the date of the Debtors’ emergence from bankruptcy proceedings in accordance with the terms and conditions of the Plan;Plan on February 22, 2022;
•“Employee Incentive Plan”Euronext Expand” means the employee incentive plan that was implemented by Seadrill pursuant to the termsNorwegian Euronext Expand market of the Plan which will, among other things, reserve an aggregate of 10 percent of the Common Shares, on a fully diluted, fully distributed basis, for grants made from time to time to employees of Seadrill and its subsidiaries and otherwise contain terms and conditions (including with respect to participants, allocation, structure, and timing of issuance) generally consistent with those prevailing in the market at the discretion of the board of directors of Seadrill;Oslo Stock Exchange;
•“Exchange Act” means the Securities Exchange Act of 1934, as amended;
•"Fintech" means Fintech Investment Limited, our joint venture partner for SeaMex;
“Global Settlement” refers to the settlement announced by the Debtors on February 26, 2018 with an ad-hoc group of unsecured bond holders, the official committee of unsecured creditors and other major creditors. This is described under the heading “The Reorganization—Introduction”;
•"Gulf Drilling International" or "GDI" refers to our joint venture partner for Gulfdrill;
•"Gulfdrill" means Gulfdrill LLC, a limited liability company formed under the companies regulations of Qatar with QFC number 00770;
"Heirs Holdings" refers to HH Global Alliance Investments Limited, a company registered in Nigeria that owns a non-controlling interest in one of our subsidiaries, Seadrill Nigeria Offshore Limited.
•“Hemen” means Hemen Holding Limited, a Cyprus holding company with registration number HE87804 and Hemen Investments Limited, a Cyprus holding company with registration number HE371665;

“Investment Agreement” means the investment agreement described under the heading “Introduction to the Reorganization” in Item 4A;
•"Mermaid" means Mermaid International Ventures, who used to have a 33.76% ownership interest in AOD;
•"NODL" means: Northern Drilling Ltd, listed on the Oslo Stock Exchange under the trading symbol "NODL";
•"NOL" means Northern Ocean Ltd, listed on the Norwegian Over The Counter under the trading symbol "NOL";
•"Northern Drilling" means both NODL and NOL;
•“NSNCo” means Seadrill New Finance Limited, aan exempted company limited by shares incorporated under the Lawslaws of Bermuda with registration number 53541, formed in connection with the ReorganizationPrevious Chapter 11 Proceedings and the issuer of the Senior Secured Notes;
•“NSNCo Plan” means the Chapter 11 Plan of Reorganization filed with the Bankruptcy Court on January 11, 2022, and confirmed by the Bankruptcy Court on January 12, 2022;
•“NYSE” means the New York Stock Exchange;
•“Old Seadrill Limited” or the “Predecessor Company” means Seadrill Limited, aan exempted company limited by shares incorporated under the Lawslaws of Bermuda with registration number 36832. Old Seadrill Limited was the parent company of Seadrill prior to its emergence from bankruptcy;bankruptcy in 2018;
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•“OSE” means the Oslo Stock Exchange;
•“Plan” means the Second Amended Joint Chapter 11 Plan (as modified) of Reorganization, what was filed with the Bankruptcy Court on February 26, 2018July 18, 2021 and confirmed by the Bankruptcy Court on April 17, 2018;October 26, 2021;
•“Previous Chapter 11 Proceedings” mean the Chapter 11 cases commenced on September 12, 2017 in the United States Bankruptcy Court of the Southern District of Texas;
•“Reorganization” means the transactions described under the heading “Chapter 11 Reorganization” in Item 4A and those transactions contemplated by the Plan;
“RSA” means the restructuring support and lock-up agreement that the Debtors entered with a group of bank lenders, bondholders, certain other stakeholders and new investors on September 12, 2017. This is described under the heading “Introduction to the Reorganization” in Item 4A;
•“Sapura Energy” means Sapura Energy Berhad. We previously held an investment in Sapura Energy. Sapura Energy is also our joint venture partner for Seabras Sapura;
•“Seabras Sapura” refers to our joint venture with Sapura Energy. We refer to our investments in Seabras Sapura Participacoes SA and Seabras Sapura Holding GmbH together as “Seabras Sapura”;.
“Seadrill Limited” or the “Successor Company” means Seadrill Limited (formerly known as “New SDRL Limited”), a company incorporated under the Laws of Bermuda with registration number 53439. Seadrill Limited has been the parent company of Seadrill since its emergence from bankruptcy;
“Seadrill Common Shares” or the "Shares” means common shares, par value $0.10 per share, of Seadrill Limited;
•“Seadrill Partners” means Seadrill Partners, LLC, a limited liability company formed under the Laws of the Republic of The Marshall Islands with registration number 962166;
•“SeaMex” means SeaMex Limited, a limited liability company formed under the Laws of Bermuda with registration number 48115;
•“Senior Secured Notes” means the Senior Secured Notes issued by NSNCo in connection with the Reorganization;Previous Chapter 11 Proceedings, as amended by the NSNCo Plan;
•"Ship Finance"Shares" means common shares, par value $0.01 per share, of Seadrill Limited;
•"SFL" means SFL Corporation Ltd, formerly Ship Finance International Limited;
•"Ship Finance VIE"SFL SPVs" refer to the consolidated entities that have sale and leaseback arrangements withlegal subsidiaries of SFL Corporation Ltd forthat own the semi-submersible rigs West Taurus and West Hercules and the jack-up rig West Linus;
Linus. These companies were consolidated by Seadrill until December 15, 2020;
•"Sonadrill" refers to Sonadrill Holding Ltd, a limited liability company registered in England with registration number 11922814; and
"Sonangol" refers to Sonangol EP, our joint venture partner for Sonadrill.


Throughout the report we refer to customers, suppliers and other key partners by the names they are commonly known by instead of their full legal names.


References in this annual report to “Total,” “Petrobras,” “ExxonMobil,” “LLOG,”“Total”, “Petrobras”, “ExxonMobil”, “LLOG”, “Saudi Aramco,”Aramco”, “ConocoPhillips” and “Equinor” refer to our key customers Total S.A., Petroleo Brasileiro S.A., Exxon Mobil Corporation, LLOG Exploration Company LLC, Saudi Arabian Oil Company, ConocoPhillips and Equinor ASA, respectively.

References in this annual report to “Cosco,” “Samsung,” “DSME,” “Dalian,” “Jurong,” and “HSHI” refer to the shipyards Cosco (Qidong) Offshore Co. Limited, Samsung Heavy Industries, Daewoo Shipbuilding & Marine Engineering, Dalian Shipbuilding Industry Offshore Co., Ltd., Jurong Shipyard Pte Ltd., and Hyundai Samho Heavy Industries Co. Ltd., respectively.


Unless otherwise indicated, all references to “US$” and “$” in this annual report are to, and amounts are presented in, US dollars. All references to “€” are to euros, all references to “£” or “GBP” are to pounds sterling, all references to “NOK” are to Norwegian krone and all references to “SEK” are to Swedish krona.



A.SELECTED FINANCIAL DATA
A.SELECTED FINANCIAL DATA
Our selected Statement of Operations and other financial data with respect to the fiscal yearyears ended December 31, 2019, the 2018 Successor period, the 2018 Predecessor period2021, 2020 and the fiscal year ended December 31, 20172019 and our selected balance sheet data as ofat December 31, 20192021 and 20182020 have been derived from our Consolidated Financial Statements included in Item 18 of this annual report, or the Consolidated Financial Statements, which have been prepared in accordance U.S. GAAP.
Our selected Statement of Operations and other financial data for the fiscal years ended December 31, 2016 and 2015 and our selected balance sheet data as of December 31, 2017, 2016 and 2015 have been derived from the Consolidated Financial Statements that are not included herein.
The following table should be read in conjunction with “ITEM 5. OperatingItem 5 - “Operating and Financial Review and Prospects” and ourthe Consolidated Financial Statements and notes thereto, which are included herein. Our Consolidated Financial Statements are maintained in U.S. dollars. We refer you to the notes to ourthe Consolidated Financial Statements for a discussion of the basis on which ourthe Consolidated Financial Statements are prepared, and we draw your attention to the statement regarding the application of Fresh Startfresh start accounting as described in Note 1 - "General information" of ourto the Consolidated Financial Statements included herein.

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The below table summarizes certain line items from the consolidated statementsConsolidated Statements of operationsOperations for the last fivethree fiscal years.
 Successor  Predecessor
(In millions of U.S. dollars except common share and per share data)Year ended December 31,
2019
 Period from July 2, 2018 through December 31, 2018
  Period from January 1, 2018 through July 1, 2018
 Year ended December 31,
2017
 Year ended December 31,
2016
 Year ended December 31,
2015
             
Statement of Operations Data:            
Total operating revenues1,388
 541
  712
 2,088
 3,169
 4,335
Net operating (loss)/ income(295) (175)  (613) (728) 1,026
 1,019
Net loss(1,222) (605)  (3,885) (3,102) (155) (635)
Loss per share, basic(12.18) (6.02)  (7.71) (5.89) (0.36) (1.29)
Loss per share, diluted(12.18) (6.02)  (7.71) (5.89) (0.36) (1.29)
(In $ millions except common share and per share data)Year ended December 31, 2021Year ended December 31, 2020Year ended December 31, 2019
Statement of Operations Data: 
Total operating revenues1,008 1,059 1,388 
Net operating loss(157)(4,482)(295)
Loss from continuing operations(592)(4,448)(720)
Income/(loss) from discontinued operations5 (215)(502)
Net loss(587)(4,663)(1,222)
Basic/diluted loss per share from continuing operations(5.90)(44.29)(7.16)
Basic/diluted loss per share(5.85)(46.43)(12.18)
The below table summarizes certain line items from the consolidated balance sheets for the last fivethree fiscal years.
(In $ millions except common share and per share data)(In $ millions except common share and per share data)December 31,
202120202019
Balance Sheet Data (at end of period):Balance Sheet Data (at end of period):  
Cash and cash equivalents, including restricted cashCash and cash equivalents, including restricted cash535 659 1,305 
Drilling unitsDrilling units1,777 2,120 6,401 
Successor  Predecessor
(In millions of U.S. dollars except common share and per share data)As of December 31,  As of December 31,
2019
 2018
  2017
 2016
 2015
          
Balance Sheet Data (at end of period):          
Cash and cash equivalents1,357
 1,542
  1,255
 1,368
 1,044
Drilling units6,401
 6,659
  13,216
 14,276
 14,930
Newbuildings—
 —
  248
 1,531
 1,479
Investment in associated companies389
 800
  1,473
 2,168
 2,592
Investment in associated companies27 24 24 
Assets held for saleAssets held for sale1,103 685 1,001 
Total assets9,279
 10,848
  17,982
 21,666
 23,439
Total assets3,879 3,961 9,279 
Long-term debt (including current portion) (1)
6,623
 6,914
  8,699
 9,514
 10,543
Long-term debt (including current portion)Long-term debt (including current portion)— 5,662 6,147 
Liabilities associated with assets held for saleLiabilities associated with assets held for sale948 546 503 
Common share capital10
 10
  1,008
 1,008
 985
Common share capital10 10 10 
Total equity1,793
 3,035
  6,959
 10,063
 10,068
Total (deficit)/equityTotal (deficit)/equity(3,716)(3,140)1,793 
Common shares outstanding (in millions)100
 100
  505
 504
 493
Common shares outstanding (in millions)100 100 100 
Weighted average common shares outstanding (in millions)100
 100
  505
 501
 493
Weighted average common shares outstanding (in millions)100 100 100 
(1)
Includes $7,705 million of debt classified as liabilities subject to compromise in 2017.
The below table summarizes certain line items from the consolidated cashflow statements for the last fivethree fiscal years.

(In $ millions)Year ended December 31, 2021Year ended December 31, 2020Year ended December 31, 2019
Statement of Cash Flows data: 
Operating cash flows(154)(420)(256)
Investing cash flows37 (32)(26)
Financing cash flows— (163)(367)

B.CAPITALIZATION AND INDEBTEDNESS
 Successor  Predecessor
(In millions of U.S. dollars except common share and per share data)Year ended December 31,
2019
 Period from July 2, 2018 through December 31, 2018
  Period from January 1, 2018 through July 1, 2018
 Year ended December 31,
2017
 Year ended December 31,
2016
 Year ended December 31,
2015
             
Statement of Cash Flows data:            
Operating cash flows(256) (26)  (213) 399
 1,184
 1,788
Investing cash flows(26) 61
  149
 358
 354
 (165)
Financing cash flows(367) (208)  887
 (846) (1,405) (1,370)
Capital expenditure (1)
(162) (98)  (127) (150) (231) (1,041)
(1) Capital expenditures include additions to drilling units and equipment, additions to newbuildings, as well as payments for long-term maintenance.

B.CAPITALIZATION AND INDEBTEDNESS
 
Not applicable.


C.REASONS FOR THE OFFER AND USE OF PROCEEDS

C.REASONS FOR THE OFFER AND USE OF PROCEEDS

Not applicable.

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D.RISK FACTORS


Our assets are primarily engaged in offshore contract drilling for the oil and gas industry in benign and harsh environments worldwide, including ultra-deepwater environments. The following risks principally relate to the industry in which we operate and our business in general. Other risks relate principally to the market for and ownership of our securities and our emergence from bankruptcy. The occurrence of any of the events described in this section could materially and negatively affect our business, financial condition, operating results, cash available for the payment of dividends or the trading price of our common shares.Shares. Unless otherwise indicated, all information concerning our business and our assets is as of December 31, 2019.2021. The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also impair our business operations.


SUMMARY OF RISK FACTORS

Risks Relating to Our Emergence from Bankruptcy
• We recently emerged from bankruptcy, which may adversely affect our business and relationships.
•     Our actual financial results after emergence from bankruptcy may not be comparable to our historical financial information as a result of the implementation of the Plan and the transactions contemplated thereby.
•    Because our Consolidated Financial Statements will reflect fresh start accounting adjustments made upon emergence from bankruptcy, financial information in our future financial statements will not be comparable to Seadrill’s financial information from prior periods.
•     We may be subject to claims that were not discharged in the bankruptcy proceedings, which could have a material adverse effect on our operating results and profitability.
•     Upon emergence from bankruptcy, the composition of our board of directors changed significantly.

Risks Relating to Our Company and Industry

•    The success and growth of our business depend on the level of activity in the offshore oil and gas industry generally, and the drilling industry specifically, which are both highly competitive and cyclical, with intense price competition and volatility.
•    Historical downturns in activity in the oil and gas drilling industry has had an adverse impact on our business and operating results, and any future downturn or volatile market conditions is likely to adversely impact our business and operating results.
•     Our customers may seek to cancel or renegotiate their contracts to include unfavorable terms such as unprofitable rates, particularly in the circumstance that operations are suspended or interrupted.
•     Our contract backlog for our fleet of drilling units may not be realized.
•     We may not be able to renew or obtain new and favorable contracts for our drilling units whose contracts have expired or have been terminated.
•     The market value of our drilling units may decrease.
•     Our business and operations involve numerous operating hazards, and in the current market we are increasingly required to take additional contractual risk in our customer contracts and we may not be able to procure insurance to adequately cover potential losses.
•     We rely on a small number of customers and our operating results could be materially adversely affected if any of our major customers fail to compensate us for our services or if we lose a significant customer contract.
•     Some of our drilling contracts contain fixed terms and day-rates, and consequently we may not fully recoup our costs in the event of a rise in expenses, including reactivation, operating and maintenance costs.
•     We may be unable to obtain, maintain, and/or renew permits necessary for our operations or experience delays in obtaining such permits including the class certifications of rigs.
•     The international nature of our operations involves additional risks including foreign government intervention in relevant markets, for example in Brazil.
•     Compliance with, and breach of, the complex laws and regulations governing international trade could be costly, expose us to liability and adversely affect our operations.
•     We are subject to complex environmental laws and regulations that can adversely affect the cost, manner or feasibility of doing business.
•     Failure to comply with international anti-corruption legislation, including the U.S. Foreign Corrupt Practices Act 1977 or the U.K. Bribery Act 2010, could result in fines, criminal penalties, damage to our reputation and drilling contract terminations.
•     If our drilling units are located in or connected to countries that are subject to, or targeted by, economic sanctions, export restrictions, or other operating restrictions imposed by the United States, the United Kingdom, European Union or other governments, our reputation and the market for our debt and Shares could be adversely affected.
•     We have suffered, and may continue to suffer, losses through our investments in other companies in the offshore drilling and oilfield services industry, which could have a material adverse effect on our business, financial condition, operating results and cash flows.
•     Our ability to operate our drilling units in the U.S. Gulf of Mexico could be impaired by governmental regulation, particularly in the aftermath of the moratorium on offshore drilling in the U.S. Gulf of Mexico, and regulations adopted as a result of the investigation into the Macondo well blowout.
•     Failure to obtain or retain highly skilled personnel, and to ensure they have the correct visas and permits to work in the locations in which they are required, could adversely affect our operations.
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•     Labor costs and our operating restrictions that apply could increase following collective bargaining negotiations and changes in labor laws and regulations.
•     Climate change and the regulation of greenhouse gases could have a negative impact on our business.
•     Our drilling contracts with national oil companies may expose us to greater risks than we normally assume in drilling contracts with non-governmental customers.
•     The coronavirus, or COVID-19, pandemic has affected and may materially adversely affect, and any future outbreak of any other highly infectious or contagious diseases may materially adversely affect, our operations and our financial performance and condition, operating results and cash flows.

Risks Relating to Our Shareholders
•The price of the Shares may be volatile or may decline regardless of our operating performance, and investors may not be able to resell the Shares at or above their initial purchase price.
•     The market price of our Shares has fluctuated widely and may fluctuate widely in the future.
•     Substantial sales of or trading in the Shares could occur, which could cause the share price to be adversely affected.
•     We may pay little or no dividends on the Shares.
•     U.S. tax authorities may treat us as a “passive foreign investment company” for U.S. federal income tax purposes, which may have adverse tax consequences for U.S. shareholders.
•     Because we are a foreign corporation, you may not have the same rights that a shareholder in a U.S. corporation may have.
•     We are not listed on any U.S. national securities exchange, which could affect the ability of U.S. shareholders to resell their Shares or affect liquidity or price.
•     Our Bye-Laws limit shareholders’ ability to bring legal action against its officers and directors.
•     Investors with Shares registered in a nominee account will need to exercise voting rights through their nominee.

General Risk Factors
•The economic effects of “Brexit” may affect relationships with existing and future customers and could have an adverse impact on our business and operating results.
•     We may recognize impairments on long-lived assets, including goodwill and other intangible assets, or recognize impairments on our equity method investments.
•     Interest rate fluctuations could affect our earnings and cash flows.
•     The transition away from LIBOR may adversely affect our cost to obtain financing and cause our debt service obligations to increase significantly.
•     Fluctuations in exchange rates and the non-convertibility of currencies could result in losses to us.
•     A change in tax laws in any country in which we operate could result in higher tax expense.
•     A loss of a major tax dispute or a successful tax challenge to our operating structure, intercompany pricing policies or the taxable presence of our subsidiaries in certain countries could result in higher taxes on our worldwide earnings, which could result in a significant negative impact on our earnings and cash flows from operations.
• Legislation enacted in Bermuda as to Economic Substance many affect our operations.
•     We may be subject to litigation, arbitration, other proceedings and regulatory investigations that could have an adverse effect on us.
•     If we fail to comply with requirements relating to internal control over financial reporting our business could be harmed and our Share price could decline.
•     Data protection and regulations related to privacy, data protection and information security could increase our costs, and our failure to comply could result in fines, sanctions or other penalties, which could materially and adversely affect our operating results, as well as have an impact on our reputation.

Risks related to Our Emergence from Bankruptcy

We recently emerged from bankruptcy, which may adversely affect our business and relationships. We cannot be certain that the bankruptcy proceeding will not adversely affect our operations going forward.
We operated in bankruptcy from February 7, 2021 (with respect to certain of our subsidiaries) or February 10, 2021 to February 22, 2022. It is possible that our having filed for bankruptcy and our recent emergence from bankruptcy may adversely affect our business and relationships with customers, vendors, contractors or employees. Due to uncertainties, many risks exist, including the following:
• key customers may terminate their relationships with us or require additional financial assurances or enhanced performance from us;
• our ability to renew existing contracts and compete for new business may be adversely affected;
• our ability to attract, motivate and/or retain key executives may be adversely affected; and
• competitors may take business away from us, and our ability to attract and retain customers may be negatively impacted.
The occurrence of one or more of these events could have a material and adverse effect on our operations, financial condition and reputation. We cannot assure you that having been subject to bankruptcy protection will not adversely affect our operations in the future.

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Our actual financial results may differ substantially from the projected financial information prepared for the bankruptcy proceedings.
In connection with the disclosure statement we filed with the Bankruptcy Court, and the hearing to consider confirmation of the Plan, we prepared projected financial information to demonstrate to the Bankruptcy Court the feasibility of the Plan and our ability to continue operations upon our emergence from bankruptcy. Those projections were prepared solely for the purpose of bankruptcy proceedings and have not been, and will not be, updated on an ongoing basis and should not be relied upon by investors. At the time they were prepared, the projections reflected numerous assumptions concerning our anticipated future performance with respect to prevailing and anticipated market and economic conditions that were and remain beyond our control and that may not materialize. Projections are inherently subject to substantial and numerous uncertainties and to a wide variety of significant business, economic and competitive risks and the assumptions underlying the projections and/or valuation estimates may prove to be wrong in material respects. Actual results may vary significantly from those contemplated by the projections. As a result, investors should not rely on these projections.
Because our Consolidated Financial Statements will reflect fresh start accounting adjustments made upon emergence from bankruptcy, financial information in our future financial statements will not be comparable to Seadrill’s financial information from prior periods.
Upon emergence from Chapter 11 Proceedings, on February 22, 2022, we adopted fresh start accounting in accordance with the provisions set forth in ASC 852, Reorganizations. Adopting fresh start accounting results in a new financial reporting entity with no retained earnings or deficits brought forward. Upon the adoption of fresh start accounting, our assets and liabilities were recorded at their fair values which differ materially from the recorded values of our assets and liabilities as reflected in the Predecessor historical Consolidated Balance Sheets. Thus, our future Consolidated Balance Sheets and Statements of Operations will not be comparable in many respects to Consolidated Balance Sheets and Statements of Operations data for periods prior to adoption of fresh start accounting. You will not be able to compare information reflecting our post-emergence Consolidated Financial Statements to information for periods prior to emergence from bankruptcy, without adjusting for fresh start accounting. The lack of comparable historical information may discourage investors from purchasing our Shares. Additionally, the financial information contained in this annual report on Form 20-F may not be indicative of future financial information.
We may be subject to claims that were not discharged in the bankruptcy proceedings, which could have a material adverse effect on our operating results and profitability.
Substantially all the material claims against the Debtors that arose prior to the date of the bankruptcy filing were addressed during the Chapter 11 Proceedings or were resolved in connection with the Plan and the order of the Bankruptcy Court confirming the Plan. However, we may be subject to claims that were not discharged in the Chapter 11 Proceedings. Circumstances in which claims and other obligations that arose prior to the bankruptcy filing that were not discharged primarily relate to certain actions by governmental units under police power authority, where we have agreed to preserve a claimant’s claims, as well as, potentially, instances where a claimant had inadequate notice of the bankruptcy filing. In addition, except in limited circumstances, claims against non-debtor subsidiaries, are generally not subject to discharge under the Bankruptcy Code. To the extent any pre-filing liability remains, the ultimate resolution of such claims and other obligations may have a material adverse effect on our operating results, profitability and financial condition.
Upon emergence from bankruptcy, the composition of our board of directors changed significantly.
The composition of our board of directors changed significantly upon emergence from bankruptcy. Our new board is comprised of the following members: Julie Johnson Robertson, Mark McCollum, Karen Dyrskjot Boesen, Jean Cahuzac, Jan Kjaervik, Andrew Schultz and Paul Smith. While we expect to engage in an orderly transition process as we integrate newly appointed board members, our new board of directors may change views on strategic initiatives and a range of issues that will determine the future of the Company. As a result, the future strategy and plans of the Company may differ materially from those of the past.

Risks Relating to Our Company and Industry

The success and growth of our business depend on the level of activity in the offshore oil and gas industry generally, and the drilling industry specifically, which are both highly competitive and cyclical, with intense price competition.competition and volatility.
Our business depends on the level of oil and gas exploration, development and production in offshore areas worldwide that is influenced by oil and gas prices and market expectations of potential changes in these prices.
Oil and gas prices are extremely volatile and are affected by numerous factors beyond our control, including, but not limited to, the following:
• worldwide production of, and demand for, oil and gas and geographical dislocations in supply and demand;
• the cost of exploring for, developing, producing and delivering oil and gas;
• expectations regarding future energy prices and production;
• advances in exploration, development and production technology;
• the ability or willingness of the Organization of the Petroleum Exporting Countries, or OPEC, and other non-member nations, including Russia, to set and maintain levels of production and pricing;
• the decision of OPEC or other non-member nations to abandon production quotas and/or member-country quota compliance within OPEC agreements;
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• the level of production in non-OPEC countries;
• international sanctions on oil-producing countries, or the lifting of such sanctions;
• export licensing requirements impacting the ability to export equipment to or from certain countries;
• government regulations, including restrictions on offshore transportation of oil and natural gas;
• local and international political, economic and weather conditions;
• domestic and foreign tax policies;
• the development and exploitation of alternative fuels and unconventional hydrocarbon production, including shale;
• worldwide economic and financial problems and the corresponding decline in the demand for oil and gas and, consequently, our services;
• the policies of various governments regarding exploration and development of their oil and gas reserves, accidents, severe weather, natural disasters and other similar incidents relating to the oil and gas industry; and
• the worldwide political and military environment, including uncertainty or instability resulting from an escalation or additional outbreak of armed hostilities or other crises in the Middle East, Eastern Europe or other geographic areas or further acts of terrorism in the United States, Europe or elsewhere.

Decreases in oil and gas prices for an extended period of time, or market expectations of potential decreases in these prices, have in the past been shown to negatively affectedaffect us and could continue to negatively affect our future performance. Although
As an example of the market experiencedvolatility in oil prices, Brent fell to $9 a stabilizationbarrel in April 2020 before a recovery in oil and gas prices toward the end of 2020 and through 2021, with Brent reaching $78 a barrel on December 31, 2021, and increasing to over $100 in 2019,2022. However, there is no guarantee that thisthe oil and gas price recovery will remain stable going forwardbe sustained. Prices can continue to fluctuate and prices can significantly fluctuatethere may be longer periods of lower prices. The supply of rigs in the future. Moreover, in March 2020, members of OPEC and Russia failed to reach an agreement to extend their previously agreed oil production cuts. Consequently, Saudi Arabiamarket has, announced a significant reduction in its export prices and Russia has announced that all agreed oil production cuts between members of OPEC and Russia will expire on April 1, 2020. Asas a result of these announcements, the pricelonger periods of oil fell approximately 20% on March 9, 2020. We cannot anticipate whether or when this dispute will be resolved and production returned to normalized levels. In the absence of a resolution, oil prices could remain at current levels, or decline further, for an extended period of time. Any perceived or actual further reductionsignificant fluctuations in oil and gas prices, couldcontinued to outweigh the demand. This trend may continue, and therefore have a material adversedamping effect on our business, financial conditionutilization levels and results of operations.

dayrates.
Continued periods of low demand can cause excess rig supply and intensify competition in our industry, which often results in drilling rigs, particularly older and less technologically-advanced drilling rigs, being idle for long periods of time. We cannot predict the future level of demand for drilling rigs or future condition of the oil and gas industry with any degree of certainty. Any future decrease in exploration, development or production expenditures by oil and gas companies could further reduce our revenues and materially harm our business.


In addition to oil and gas prices, the offshore drilling industry is influenced by additional factors, which could reduce demand for our services and adversely affect our business, including, but not limited to, the following:

• the availability and quality of competing offshore drilling units;
• the availability of debt financing on reasonable terms;
• the level of costs for associated offshore oilfield and construction services;
• oil and gas transportation costs;
• the level of rig operating costs, including crew and maintenance;
• the discovery of new oil and gas reserves;
• the political and military environment of oil and gas reserve jurisdictions; and
• regulatory restrictions on offshore drilling.

The offshore drilling industry is highly competitive and fragmented and includes several large companies that compete in many of the markets we serve, as well as numerous small companies that compete with us on a local basis. Offshore drilling contracts are generally awarded on a competitive bid basis or through privately negotiated transactions. In determining which qualified drilling contractor is awarded a contract, the key factors are pricing, rig availability, rig location, the condition and integrity of equipment, the rig’s and/or the drilling contractor’s record of operating efficiency, including high operating uptime, technical specifications, safety performance record, crew experience, reputation, industry standing and customer relations. Our operations may be adversely affected if our current competitors or new market entrants introduce new drilling rigs with better features, performance, prices or other characteristics compared to our drilling rigs, or expand into service areas where we operate.
Competitive pressures and other factors may result in significant price competition, particularly during industry downturns, which could have a material adverse effect on our operating results of operations and financial condition.

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Historical downturns in activity in the oil and gas drilling industry has had an adverse impact on our business and operating results, of operations, and any future downturn or volatile market conditions is likely to adversely impact our business and results of operations.operating results.
The oil and gas drilling industry is cyclical but has been in a prolonged downcycledown cycle since 2014. The price2014 and uncertainty remains around the timing and speed of Brent crude fell from $115 per barrelany increase in June 2014oil demand, although various industry forecasts anticipate oil demand to a low of $30 per barrelrecover to pre-pandemic levels in January 2016. As at December 31, 2019, the price of Brent crude was approximately $68 per barrel. After OPEC and Russia failed to agree on recent production cuts, however, Brent crude reached a low of $22 per barrel on March 30, 2020.2022.
If we are unable to secure contracts for our drilling units upon the expiration of our existing contracts, we may stack our units. When idled or stacked, drilling units do not earn revenues, but continue to require cash expenditures for crews, fuel, insurance, berthing and associated items. As of December 31, 2019,2021, we had two0 “warm stacked” units,, which means the rig is kept operational and ready for redeployment, and maintains most of its crew, 1610 “cold stacked” units (2 of which are future contracted), which means the rig is stored in a harbor, shipyard or a designated offshore area, and the crew is reassigned to an active rig or dismissed. Without new drilling contracts or additional financing being available when needed or available only on unfavorable terms, we willmay be unable to meet our obligations as they come due or we may be unable to enhance our existing business, complete additional drilling unit acquisitions or otherwise take advantage of business opportunities as they arise.

During volatile market conditions or expected downturns, our customers may also seek to cancel or renegotiate our contracts for various reasons, including adverse conditions, resulting in lower dayrates.revenue. Our inability, or the inability of our customers to perform, under our or their contractual obligations may have a material adverse effect on our financial position, operating results of operations and cash flows.

From time to time, we are approached by potential buyers for the outright purchase of some of our drilling units, businesses, or other fixed assets. We may determine that such a sale would be in our best interests and agree to sell certain drilling units or other assets. Such a sale could have an impact on short-term liquidity and net income. We may recognize a gain or loss on disposal depending on whether the fair value of the consideration received is higher or lower than the carrying value of the asset.

We do not know when the market for offshore drilling units may recover, or the nature or extent of any future recovery. There can be no assurance that the current demand for drilling rigs will not further decline in future periods. A future decline in demand for drilling rigs would adversely affect our financial position, operating results and cash flows.

AnA continuing economic downturn could have a material adverse effect on our revenue, profitability and financial position.
We depend on our customers’ willingness and ability to fund operating and capital expenditures to explore, develop and produce oil and gas, and to purchase drilling and related equipment. There has historically been a strong link between the development of the world economy and the demand for energy, including oil and gas. The world economy is currently facing a number of challenges. Concerns persist regarding the debt burden of certain European countries and their ability to meet future financial obligations and the overall stability of the euro. Further, the COVID-19 outbreak that began in December 2019 was declared a global pandemic on March 11, 2020 by the World Health Organization. The COVID-19 outbreak has had numerous effects on the global economy and could causehas caused a global economic downturn. While effective vaccination campaigns have supported economic recovery, existing outbreaks and associated restrictions still have an impact on the world economy. A renewed period of adverse development in the outlook for the financial stability of European countries, or market perceptions concerning these and related issues, could reduce the overall demand for oil and natural gas and for our services and thereby could affect our financial position, operating results of operations and cash available for distribution. In addition, turmoil and hostilities in the Ukraine, Korea, the Middle East, North Africa and other geographic areas and countries are adding to the overall risk picture.
Negative developments in worldwide financial and economic conditions could further cause our ability to access the capital markets to be severely restricted at a time when we would like, or need, to access such markets, which could impact our ability to react to changing economic and

business conditions. Worldwide economic conditions have in the past impacted, and could in the future impact, lenders willingness to provide credit facilities to our customers, causing them to fail to meet their obligations to us.
A portion of the credit under our secured credit facilities is provided by European banking institutions. If economic conditions in Europe preclude or limit financing from these banking institutions, we may not be able to obtain financing from other institutions on terms that are acceptable to us, or at all, even if conditions outside Europe remain favorable for lending.
An extended period of adverse development in the outlook for the world economy could also reduce the overall demand for oil and gas and for our services. Such changes could adversely affect our operating results of operations and cash flows beyond what might be offset by the simultaneous impact of possibly higher oil and gas prices.
Our business is capital intensive and, to the extent we do not generate sufficient cash from operations, we may need to raise additional funds through public or private debt or equity offerings to fund our capital expenditures. Our ability to access the capital markets may be limited by the terms of our secured credit facilities, our financial condition at the time, by changes in laws and regulations or interpretations thereof and by adverse market conditions resulting from, among other things, general economic conditions and contingencies and uncertainties that are beyond our control. An extended period of deterioration in outlook for the world economy could reduce the overall demand for our services and could also adversely affect our ability to obtain financing on terms acceptable to us or at all.
Any reductions in drilling activity by our customers may not be uniform across different geographic regions. Locations where costs of drilling and production are relatively higher, such as Arctic or deepwater locations, may be subject to greater reductions in activity. Such reductions in high cost regions may lead to the relocation of drilling units, concentrating drilling units in regions with relatively fewer reductions in activity leading to greater competition.
If our lenders and other debt holders are not confident that we are able to employ our assets, we may be unable to secure replacement or additional financing, or amendments to our existing debt documents,secured credit facilities, on terms acceptable to us or at all.

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We are in ongoing negotiations with our lenders to obtain certain amendments to our credit facilities, and the outcome of our amendment request process and our related contingency planning efforts is uncertain and could adversely affect our business and liquidity.

We are currently engaged in discussions with our secured lenders regarding potential amendments to our credit facilities to provide operational flexibility and additional near-term liquidity by, among other things, converting certain interest payments under our credit facilities to payment-in-kind (“PIK”) interest and deferring certain scheduled amortization payments (or increasing the aggregate amount of such payments that may be converted to loans payable at the final scheduled maturity date of the relevant facility pursuant to the amortization conversion election provisions contained in the facility agreements). We have also requested that our lenders consent to an extension of the periods during which we are first required to comply with the net leverage and debt service coverage financial covenants in our facility agreements because we currently anticipate that we will not be able to meet these requirements when such covenants begin to be tested at the end of Q1 2021.

We cannot guarantee that we will be able to obtain our lenders' consent with respect to any of our amendment requests on acceptable terms or at all. Any amendment to our credit facilities that we enter into may contain more restrictive covenants or other terms that could further exacerbate certain risks associated with our leveraged capital structure. If we are unable to obtain some or all of our requested amendments on acceptable terms or at all, we may not be able to satisfy our financial obligations under our credit facilities, which may result in possible defaults on and acceleration of such indebtedness, and we may exacerbate, and/or be unable to manage or mitigate, certain risks associated with our leveraged capital structure. If our amendment requests relating to our net leverage and debt service coverage financial covenants are not successful, then non-compliance with such covenants could trigger certain increases to our interest expense obligations in certain future periods when such covenants begin to be tested at the end of Q1 2021 (potentially further exacerbating, among other things, liquidity-related risks) and/or, with respect to covenant test dates occurring after 2021, lead to a default under the terms of those facility agreements under certain circumstances. We have also forecasted that we will not be able to meet the requirements under our ongoing liquidity financial covenant contained in the facility agreements during certain periods occurring after the twelve-month period following the date of this report. If our amendment requests for certain liquidity enhancing measures are not successful, including with respect to the conversion of certain interest payments to PIK and the deferral of certain scheduled amortization payments then there is an increased risk that we will breach these liquidly requirements sooner than currently anticipated after such twelve-month period following the date of this report. Failure to comply with such liquidity requirements could result in a default under the terms of our facility agreements if we are unable to obtain a waiver or amendment from our lenders for such non-compliance. For more information, please see “-We may not have sufficient liquidity to meet our obligations as they fall due or have the ability to raise new capital or refinance or amend existing indebtedness on acceptable terms” and “-The covenants in our debt agreements impose operating and financial restrictions on us that could significantly impact our ability to operate our business and a breach of which could result in a default under the terms of these agreements, which could accelerate our repayment of funds that we have borrowed.”

There is inherent uncertainty in the outcome of this amendment request process, and therefore we are also preparing certain contingency plans in the event a consensual agreement is not reached with respect to one or more of our amendment requests.


WeWe may not have sufficient liquidity to meet our obligations as they fall due or have the ability to raise new capital or refinance existing indebtedness on acceptable terms, all of which could adversely affect our business and financial condition.
As at December 31, 2019, we had $6,759 million in principal amount of interest-bearing debt (excluding related party debt of $314 million). This includes our 12% (4% payable in cash and 8% PIK secured notes due 2025 (the “Senior Secured Notes”) issued in connection with our Chapter 11 Proceedings, of which $476 million in principal (including capitalized PIK interest) amount was outstanding as at December 31, 2019. Our debt is secured by, among other things, liens on our drilling units, investments in affiliates and available cash. As at December 31, 2019, we had $5,662 million in principal amount of debt outstanding under our secured credit facilities, which will start to mature in 2022.
Our substantial indebtedness could have significant adverse consequences for an investment in us and on our business, financial condition and future prospects, including the following:
• we may not be able to satisfy our financial obligations under our indebtedness and our contractual and commercial commitments, which may result in possible defaults on and acceleration of such indebtedness;commitments;
• we may not be able to obtain financing in the future for working capital, capital expenditures, acquisitions, debt service requirements or other purposes;
• less leveraged competitors could have a competitive advantage because they have lower debt service requirements and, as a result, we may not be better positioned to withstand economic downturns;
• we may be less able to take advantage of significant business opportunities and to react to changes in market or industry conditions than our competitors and our management'smanagement’s discretion in operating our business may be limited; and
• other factors described below.

Our outstanding indebtedness and potential future indebtedness could adversely affect our business (including future prospects) and liquidity position, since a substantial portion of our cash flow from operations will be dedicated to the payment of interest and principal and will not be available for other purposes. Similarly, the fact that our debt is secured by our assets means that we are restricted in our ability to use these assets or their proceeds for debt service or other corporate purposes.
Our debt service is anticipated to be primarily comprised of interest through at least Q1 2021 because our facility agreements contain certain provisions that allow us to elect to defer and convert up to $500 million in the aggregate of scheduled amortization payments under certain of our credit facilities.We have already elected to use a portion of this capacity with respect to the first scheduled amortization installments under our credit facilities occurring in Q1 2020. We intend to continue exercising this option for each subsequent scheduled amortization payment date until such capacity is fully utilized; however, we cannot guarantee that we will be able to satisfy the conditions set forth in the facility agreements in order to be able to do so. Please also see “-We are in ongoing negotiations with our lenders to obtain certain amendments to our credit facilities, and the outcome of our amendment request process and our related contingency planning efforts is uncertain and could adversely affect our business and liquidity.” Furthermore, any exercise of the amortization conversion election described above and the terms of any amendments to our facility agreements could ultimately have the effect of increasing our total debt service costs for these credit facilities, which could further exacerbate certain risks associated with our substantial leverage.
We also have provided guarantees over certain debt facilities of our affiliates and related companies. If our affiliates or related companies are unable to meet their obligations under such facilities, the lenders could look to us to meet such liabilities. For more information, please see “-We have suffered, and may continue to suffer, losses through our investments in other companies in the offshore drilling and oilfield services industry, which could have a material adverse effect on our business, financial condition, results of operations and cash flows.”
Our ability to meet our debt service obligations and to fund planned expenditures will be dependent upon, among other things, our future performance, which will be subject to, and our substantial indebtedness may make us more vulnerable to, prevailing economic conditions (including increases in interest rates), industry cycles, other industry conditions, and financial, business, regulatory and other factors affecting our operations, many of which are beyond our control. Our future cash flows may be insufficient to meet all our debt obligations and contractual commitments, and any insufficiency could negatively impact our business. To the extent that we are unable to repay our indebtedness as it becomes due or at maturity (including as a result of any acceleration thereof), we may need to refinance or restructure our debt, raise new debt, reduce or delay capital expenditures, sell assets, repay the debt with the proceeds from equity offerings, or take other actions. We cannot assure you that any of these actions could be effected on satisfactory terms, if at all, or that they would yield sufficient funds to make required payments on our outstanding indebtedness and to fund our other liquidity needs. Also, the terms of existing or future debt agreements may restrict us from pursuing any of these actions. Furthermore, reducing or delaying capital expenditures or selling assets could impair future cash flows and our ability to service our debt in the future.
If for any reason we are unable to meet our debt service and repayment obligations under our debt agreements,secured credit facilities, we would be in default under the terms of the agreements governing such indebtedness,facilities, which may allow creditorsour lenders at that time to declare all such indebtedness then outstanding to be immediately due and payable. This would likelymay in turn trigger cross-acceleration or cross-default rights amongunder certain of our other debt agreements. Under these circumstances, if the amounts outstanding under our existing and future credit facilities or other debt agreements were to be accelerated, or were the subject of foreclosure actions, we cannot assure you that our assets would be sufficient to repay in full the money owed to our lenders or to our other debt holders.creditors. Furthermore, if our assets are foreclosed upon, we will not have any income-producing assets left, and, as such, we may not be able to generate any cash flow in the future.

The covenants inunder our debt agreementssecured credit facilities impose operating and financial restrictions on us that could significantly impact our ability to operate our business and a breach of which could result in a default under the terms of these agreements, which could accelerate our repayment of funds that we have borrowed.
OurThe terms of our secured credit facility agreements and the indenture governing the Senior Secured Notesfacilities impose, and future financial obligations may impose, operating and financial restrictions on us. These restrictions may prohibit or otherwise limit our ability to fund our operations or capital needs or to undertake certain other business activities or transactions without consent of the requisite debt holders, which in turn may adversely affect our financial condition. These restrictions include:include but are not limited to:
• executing other financing arrangements;arrangements or incurring other indebtedness;
• incurring or guaranteeing additional indebtedness;
• creating or permitting liens on our assets;
• selling our drilling units or the shares of our subsidiaries;
• making investments;investments or acquisitions;
• changing the general nature of our business;
• a prohibition on paying dividends to our shareholders orand restrictions on making other types of restricted payments;
• changing the management and/or ownership of the drilling units; and
• making certain capital expenditures.
These restrictions may affect our ability to compete effectively with our competitors to the extent that they are subject to less onerous restrictions. The interests of our lenders and other debt holders may be different from oursthe Company’s and we may not be able to obtain their consent when beneficial for our business, which may impact our performance or our ability to obtain replacement or additional financing.financing and/or make certain investments or acquisitions in the future. In addition, the profile of our debt holderslenders has changed since emergence from the Chapter 11 Proceedings, with the replacement of certain relationship banks by debt holderslenders whose focus may be shorter-termdifferent in nature or different.nature. The new profile of our debt holderslenders may make it more difficult for us to obtain lender consents from our debt holders when beneficial to our business or otherwise obtain waivers or other consents or approvals which may be required from time to obtain replacement or additional financing.time.
The different rankingsWhile our lenders under our secured credit facilities benefit from and share in the capital structure of our lenders and other debt holders and the collateral arrangements which they benefit from in relation to different assets and the consequential complex intercreditor arrangements that exist mean that thesame security, their interests of our debt holders willmay not alwaysnecessarily be aligned, whichand they may therefore have different views on some or all matters. This may make it more difficult for us to obtain theirlender consents when beneficial to our business or otherwise obtain waivers or other consents or approvals which may be necessary from time to obtain replacement or additional financing.time.
Following emergence from Chapter 11 Proceedings on the Effective Date, with exception of minimum liquidity requirements, we are exempt from financial covenants until Q1 2021.September 30, 2023. Thereafter, in addition to minimum liquidity requirements, we are required to maintain and satisfy certain financial ratios and covenants relating to gross and net leverage and debt service coverage.leverage. Breach of financial covenants may result in a default under the terms of these agreements, which could accelerate our repayment of funds that we have borrowed.
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The time that we spent subject to Chapter 11 Proceedings has utilized some of the period for which we were able to negotiate financial covenant flexibility and reduced the period available for the Group to operate outside of Chapter 11 Proceedings to reach a position of compliance withduring which the financial covenants when they do apply.
We currently anticipate that we will not be able to meet the net leverage and debt service financial coverage covenants in our debt agreements when they begin to apply in 2021. We are in discussions with our lenders to either obtain a waiver or amendment of these financial covenant requirements. If we are unable to comply with the net leverage and debt service coverage covenants in our debt agreements between Q1 2021 and Q4 2021, this will lead to an interest margin increase of up to 100 bps in the form of PIK interest; however, this does not constitute an event of default. Thereafter, if we are unable to comply with any of these restrictions and covenants, and we are unable to obtain a waiver or amendment from our lenders for such non-compliance, a default could occur under the terms of those debt agreements. We have also forecasted that we will not be able to meet the requirements under our ongoing liquidity financial covenant contained in the facility agreements during certain periods occurring after the twelve-month period following the date of this report. If our amendment requests for certain liquidity enhancing measures are not successful, including with respect to the conversion of certain interest payments to PIK and the deferral of certain scheduled amortization payments then there is an increased risk that we will breach these liquidly requirements sooner than currently anticipated after such twelve-month period following the date of this report. Failure to comply with such liquidity requirements could result in a default under the terms of our facility agreements if we are unable to obtain a waiver or amendment from our lenders for such non-compliance. Any future debt agreement or amendment to any existing debt agreement we enter into may contain similar or more restrictive operating and financial covenants. We cannot guarantee that we would be able to obtain our lenders' waiver or consent with respect to any such non-compliance on acceptable terms or at all. If a default occurs under these agreements, lenders could terminate their commitments to lend, accelerate the outstanding loans, declare all amounts borrowed due and payable and/or exercise other enforcement rights. Events beyond our control, including changes in the economic and business conditions in the markets in which we operate, may affect our ability to comply with these financial ratios and other covenants.
Our debt agreements contain cross-default provisions (or, in certain instances, cross-acceleration provisions), meaning that if we are in default under one of our debt agreements, amounts outstanding under our other debt agreements may also be in default, accelerated and become due and payable. Our drilling units also serve as security under certain of our debt agreements. If our lenders were to foreclose their liens on our drilling units in the event of a default, this may impair our ability to continue our operations or generate any cash flow in the future. As at December 31, 2019, we had $6,759 million of interest-bearing debt secured by, among other things, liens on our drilling units.
If any of the aforementioned events occurs, our assets may be insufficient to repay all our outstanding indebtedness in full, and we may be unable to find alternative financing. Even if we could obtain alternative financing, that financing might not be on terms that we consider favorable or acceptable. Moreover, in connection with any further waivers of or amendments to our credit facilities that we may obtain, our lenders may impose additional operating and financial restrictions on us or modify the terms of our existing credit facilities. Any of these events may further restrict our ability to pay dividends, repurchase our common shares, make capital expenditures or incur additional indebtedness.

In addition, the failure of certain of our affiliated or related companies to service their debt requirements and comply with the provisions contained in their debt agreements may lead to an event of default under such agreements, which may have a material adverse effect on us. If a default occurs under the debt agreements of certain of our affiliated or related companies, the lenders and our other debt holders could accelerate the outstanding borrowings and declare all amounts outstanding due and payable. In this case, if such entities are unable to obtain a waiver or an amendment to the applicable provisions of the debt agreements, or do not have enough cash on hand to repay the outstanding borrowings, the lenders and other secured debt holders may, among other things, foreclose their liens on the drilling units and other assets securing the loans and other secured debt, if applicable, or seek repayment of such debt from such entities.disapplied.
Certain of our affiliated or related companies may be unable to service their debt requirements and comply with the provisions contained
in their loandebt agreements.
The failure of certain of the Company’s affiliated or related companies to service their debt requirements and comply with the provisions contained in their debt agreements may lead to an event of default under such agreements, which may have a material adverse effect on the Group. Such affiliated and related companies include (i) Asia Offshore Drilling (“AOD”), (ii) certain subsidiaries of SFL Corporation Ltd (“Ship Finance”), and (iii) certain subsidiaries of Seabras Sapura.Seadrill.
If a default occurs under the debt agreements of our affiliated or related companies, the lenders and other debt holders could accelerate the outstanding borrowings and declare all amounts outstanding due and payable. In this case, if such entities are unable to obtain a waiver or an amendment to the applicable provisions of the debt agreements, or do not have enough cash on hand to repay the outstanding borrowings, the lenders and other secured debt holders may, among other things, foreclose their liens on the drilling units and other assets securing the loans and other secured debt, if applicable, or seek repayment of such debt from such entities.
We have provided guarantees over certain debt facilities of our affiliates and related companies. If our affiliates or related companies are unable to meet their obligations outlined above, the lenders could look to us to meet such liabilities. Some examples are outlined in the following paragraphs. If any of these events occur, we may not be able to satisfy our obligations under the guarantees or support agreements described above. For more information, please see “-We may not have sufficient liquidity to meet our obligations as they fall due or have the ability to raise new capital or refinance existing indebtedness on acceptable terms, all of which could adversely affect our business and financial condition.”

We have provided guarantees over AOD’s $210 million senior secured debt as we have in respect of the bank facilities of other members of the Group and may not have sufficient funds to repay lenders in full if they seek to enforce the guarantees.
We have an outstanding financial guarantee over one of Seabras Sapura’s senior secured credit facility agreements that was used to partially fund the acquisition of the pipe-laying support vessel Sapura Esmeralda. As a condition to the lenders making the loan available to Seabras Sapura, we provided a sponsor guarantee, on a joint and several basis with our joint venture partner, Sapura Energy. The total amount guaranteed by the joint venture partners as at December 31, 2019 was $146 million. If Seabras Sapura is unable to meet its obligations under the above references credit facilities, the lenders could look to us to meet such liabilities.
We also consolidate certain subsidiaries of Ship Finance into our Consolidated Financial Statements as variable interest entities or VIEs. To the extent that the VIEs default under their indebtedness and their debt becomes classified as current in their financial statements, we would in turn mark such indebtedness as current in our Consolidated Financial Statements. The characterization of the indebtedness in our Consolidated Financial Statements as current may, among other things, adversely impact our compliance with the covenants contained in our existing and future debt agreements.
Our debt agreements also contain cross-default and cross-acceleration provisions that may be triggered if we fail to comply with our obligations under the guarantees or support agreements described above. Such cross-defaults and cross-accelerations, as applicable, could result in the acceleration of the maturity of the debt under our agreements and our lenders or other secured debt holders may foreclose upon any collateral securing that debt, including our drilling units and other assets, even if such default was subsequently cured. In the event of such acceleration and foreclosure, we will not have sufficient funds or other assets to satisfy all our obligations.
A number of our affiliates or related companies are joint ventures, to which we may have funding obligations. Our partners in these joint ventures may have different objectives or strategies or different financial positions from us and this may affect how these joint ventures perform, how they are supported, their compliance with the financing and contractual arrangements to which they are subject and our interests in and cash flows from them. In addition, affiliates or related companies that we do not control may take actions that we would not have taken or fail to take action which we would have taken.

The occurrence of any of the events described above would have a material adverse effect on our business and may impair our ability to continue as a going concern.
If Mermaid International Ventures exercises its Put Option, we may be required to issue Seadrill common shares, which would dilute our shareholders’ current ownership interests.
In connection with the bankruptcy process, our Predecessor executed a Transaction Support Agreement (“TSA”) on April 4, 2018 with a minority shareholder, Mermaid International Ventures (“Mermaid”), of one of our subsidiaries, Asia Offshore Drilling Limited (“AOD”). The purpose of the TSA was to obtain unanimous approval of the AOD board of directors (which included Mermaid) in order for AOD to become a party to the TSA and participate in the Predecessor’s broader debt restructuring under its Chapter 11 reorganization.
The TSA provides a framework for a monetization event for Mermaid in the form of an option to sell the shares it owns in AOD to Seadrill for fair value subject to a $125 million price ceiling (“Put Option”). The Put Option generates a redemption feature for the non-controlling interest

held by Mermaid that is outside the control of Seadrill. The rights under the Put Option may be exercised through September 30, 2020, subject to certain limited short-term extensions. Consideration from Seadrill, should Mermaid exercise the Put Option, is up to $50 million in cash, with the remainder (if any) in Seadrill common shares. Refer to Note 27 - “Redeemable non-controlling interest” to the Consolidated Finance Statements included herein for further information.
The Put Option process formally will commence, if at all, when Mermaid issues a notice requesting a valuation of Mermaid’s AOD shares (the “Valuation Notice”) agreed upon by Seadrill and Mermaid or, if needed, a valuation of the AOD shares determined by an expert appointed by an arbitrator. After receipt of the requested valuation, Mermaid may issue a notice to Seadrill that Mermaid is exercising its Option Right (the “Option Notice”). Seadrill must purchase Mermaid’s shares in AOD no later than fifteen calendar days from receipt of the Option Notice.
The table below illustrates the estimated value of Mermaid’s AOD shares assuming a range of possible rig values, including drilling contracts:
Value per drilling unit, including drilling contract (in millions)$60 $70 $80 $90 $100
Estimated value of Mermaid's AOD shares (33.76% of estimated value of AOD equity in total) (in millions)$20 $30 $40 $50 $60
The value ultimately agreed upon by Seadrill and Mermaid or, if needed, the valuation of the shares determined by an expert appointed by an arbitrator may differ from the values reflected in the table above. Any obligation to Mermaid to issue Seadrill common shares will increase the number of our common shares issued and outstanding, which may depress the price of our common shares and cause our shareholders to experience dilution in their respective percentage ownership in us.

Furthermore, any issuance of shares to Mermaid could result in significant ownership of Seadrill by one entity, which could increase uncertainty regarding the future direction of the Company.  A significant shareholder may make it difficult to approve certain transactions even if they are supported by other shareholders, which may have an adverse effect on the trading price of our common shares.  These factors could have a material adverse effect on us.

Our customers may seek to cancel or renegotiate their contracts to include unfavorable terms such as unprofitable rates, particularly in the circumstance that operations are suspended or interrupted.
During current or worsened market conditions, some of our customers may seek to terminate their agreements with us. Some of our customers have the right to terminate their drilling contracts without cause upon the payment of an early termination fee. The general principle is that such early termination fee shall compensate us for lost revenues less operating expenses for the remaining contract period; however, in some cases, such payments may not fully compensate us for the loss of the drilling contract.
Under certain circumstances our contracts may permit customers to terminate contracts early without the payment of any termination fees, as a result of non-performance, periods of downtime or impaired performance caused by equipment or operational issues, or sustained periods of downtime due to force majeure events beyond our control. In addition, national oil company customers may have special termination rights by law. During periods of challenging market conditions, we may be subject to an increased risk of our customers seeking to repudiate their contracts, including through claims of non-performance. Our customers may seek to renegotiate their contracts with us using various techniques, including threatening breaches of contract and applying commercial pressure, resulting in lower dayratesrevenue or the cancellation of contracts with or without any applicable early termination payments.
Reduced dayrates in our customer contracts and cancellation of drilling contracts (with or without early termination payments) may adversely affect our financial performance and lead to reduced revenues from operations.
Our contract backlog for our fleet of drilling units may not be realized.
As ofat December 31, 2019,2021, our contract backlog was approximately $2.5 billion.$2.2 billion, excluding the backlog attributable to the West Linus which was returned to SFL in early 2022. The contract backlog presented in this annual report on Form 20-F and our other public disclosures is only an estimate. The actual amount of revenues earned and the actual periods during which revenues are earned will be different from the contract backlog projections due to various factors, including shipyard and maintenance projects, downtime and other events within or beyond our control. In addition, we or our customers may seek to cancel or renegotiate our contracts for various reasons, including adverse conditions, such as the current environment, resulting in lower dayrates.revenue. In some instances, there is an optioncontracts provide for a customer to terminate a drilling contract prematurely for convenience on payment of an early termination fee. However, this fee may not adequately compensate us for the loss of this drilling contract. Our inability, or the inability of our customers, to perform under our or theirmeet contractual obligations may have a material adverse effect on our financial position, operating results of operations and cash flows.

We may not be able to renew or obtain new and favorable contracts for our drilling units whose contracts have expired or have been terminated.
During the previous period of high utilization and high dayrates, which we now believe ended in early 2014, industry participants ordered the construction of new drilling units, which resulted in an over-supply and caused, in conjunction with deteriorating industry conditions, a subsequent decline in utilization and dayrates when the new drilling units entered the market. A relatively large number of the drilling units currently under construction have not been contracted for future work, and a number of units in the existing worldwide fleet are currently off-contract.
As at December 31, 2019,2021, we had 17 current or future contracted14 owned operating units, zero warm-stacked units and 18 idle units (of which10 cold-stacked units. The five SeaMex rigs are included within our discontinued operations held for sale and have been classified as managed rigs. Of the 14 operating and two are "warm stacked" and 16 are "cold stacked"). Of thefuture contracted units we expect fiveseven to become available in 2020, three in 2021,2022 and nine thereafter. Our ability to renew contracts

or obtain new contracts will depend on our customers and prevailing market conditions, which may vary among different geographic regions and types of drilling units.
The over-supply of drilling units will be exacerbated by the entry of newbuild rigs into the market, many of which are without firm drilling contracts. The supply of available uncontracted units has intensifiedmay intensify price competition as scheduled delivery dates occur and contracts terminate without renewal, reducing dayrates as the active fleet grows. Customers may opt to contract older rigs in order to reduce costs which could adversely affect our ability to obtain new drilling contracts due to our newer fleet.
In addition, as our fleet of drilling units becomes older, any competitive advantage of having a modern fleet may be reduced to the extent that we are unable to acquire newer units or enter into newbuilding contracts as a result of financial constraints. For as long as there is an oversupply of drilling rigs, it may be more difficult for older rigs to secure extensions or new contract awards.
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If we are unable to secure contracts for our drilling units upon the expiration of our existing contracts, we may continue to idle or stack our units. When idled or stacked, drilling units do not earn revenues, but continue to require cash expenditures for crews, fuel, insurance, berthing and associated items. As at December 31, 20192021 we had 180 units either “warm stacked,” which means the rig is kept operational and ready for redeployment, and maintains most of its crew, orand 10 units “cold stacked,” which means the rig is stored in a harbor, shipyard or a designated offshore area, and the crew is reassigned to an active rig or dismissed. Please see “- Our“Some of our drilling contracts contain fixed terms and day-rates, and consequently we may not fully recoup our costs in the event of a rise in expenses, including operating and maintenance costs”costs” for more information.
If we are not able to obtain new contracts in direct continuation of existing contracts, or if new contracts are entered into at dayrates substantially below the existing dayrates or on terms otherwise less favorable compared to existing contract terms, our revenues and profitability could be adversely affected. We may also be required to accept more risk in areas other than price to secure a contract and we may be unable to push this risk down to other contractors or be unable or unwilling at competitive prices to insure against this risk, which will mean the risk will have to be managed by applying other controls. This could lead to us being unable to meet our liabilities in the event of a catastrophic event on one of our rigs. Any of the events described above could impair our ability to generate sufficient cash flow to meet our debt service obligations, capital expenditure and other obligations. For more information, please see “-We may not have sufficient liquidity to meet our obligations as they fall due or have the ability to raise new capital or refinance existing indebtedness on acceptable terms, all of which could adversely affect our business and financial condition.”
The market value of our drilling units may decrease.
The market values of drilling units have been trending lower as a result of the continued decline in the price of oil, which has impacted the spending plans of our customers and utilization of the global fleet. If the offshore drilling industry suffers further adverse developments in the future, the fair market value of our drilling units may decrease further. Upon emergence from the Chapter 11 Proceedings, our assets, including drilling units, were recognized at fair value. The fair market value of the drilling units that we currently own, or may acquire in the future, may increase or decrease depending on a number of factors, including:
• the general economic and market conditions affecting the offshore contract drilling industry, including competition from other offshore contract drilling companies;
• the types, sizes and ages of drilling units;
• the supply and demand for drilling units;
• the costs of newbuild drilling units;
• the prevailing level of drilling services contract dayrates;
• governmental or other regulations; and
• technological advances.
If drilling unit values fall significantly, we may have to record an impairment adjustment in our Consolidated Financial Statements, which could adversely affect our financial results and condition. Additionally, if we sell one or more of our drilling units at a time when drilling unit prices have fallen and before we have recorded an impairment adjustment to our Consolidated Financial Statements, the sale price may be less than the drilling unit’s carrying value in our Consolidated Financial Statements, resulting in a loss on disposal and a reduction in earnings and cause us to breach the covenants in our finance agreements. For more information, see “-The current downturn“Historical downturns in activity in the oil and gas drilling industry has had and is likely to continue to have an adverse impact on our business and operating results, of operations.and any future downturn or volatile market conditions is likely to adversely impact our business and operating results”.
Our business and operations involve numerous operating hazards, and in the current market we are increasingly required to take additional contractual risk in our customer contracts and we may not be able to procure insurance to adequately cover potential losses.
Our operations are subject to hazards inherent in the drilling industry, such as blowouts, reservoir damage, loss of production, loss of well control, lost or stuck drill strings, equipment defects, punch-throughs, cratering, fires, explosions and pollution. Contract drilling and well servicing requires the use of heavy equipment and exposure to hazardous conditions, which may subject us to liability claims by employees, customers andand/or third parties. These hazards can cause personal injury or loss of life, severe damage to or destruction of property and equipment, pollution or environmental or natural resource damage, claims by third parties and/or customers, investigations and other proceedings by regulatory authorities which may involve fines and other sanctions, and suspension of operations. Our offshore fleet is also subject to hazards inherent in marine operations, either while on-site or during mobilization, such as capsizing, sinking, grounding, collision, damage from severe weather (which may be more acute in certain areas where we operate) and marine life infestations. Operations may also be suspended because of machinery breakdowns, abnormal drilling conditions, failure of subcontractors to perform or supply goods or services or personnel shortages. We customarily provide contract indemnityindemnification to our customers for claims that could be asserted by us relating to damage to or loss of our equipment, including rigs and claims that could be asserted by us or our employees relating to personal injury or loss of life.

Damage to the environment or natural resources could also result from our operations, particularly through spillage of fuel, lubricants or other chemicals and substances used in drilling operations or extensive uncontrolled fires. We may also be subject to property, environmental, natural resource, personal injury, and other damagelegal claims and/or injunctions by private parties, including oil and gas companies.companies, as well as administrative, civil, and/or criminal penalties or injunctions by government authorities.
Our insurance policies and contractual rights to indemnityindemnification may not adequately cover losses, and we do not have insurance coverage or rights to indemnity for all risks. Consistent with standard industry practice, our customers generally assume, and indemnify us against certain risks, for example, well control and subsurface risks, and we generally assume, and indemnify against, above surface risks (including spills and other events occurring on our rigs). Subsurface risks indemnified by our customers generally include risks associated with the loss of control of a well, such as blowout or cratering or uncontrolled well-flow, the cost to regain control of or re-drill the well and associated pollution. However, there can be no assurances that these customers will be willing or financially abletome third indemnification obligations to indemnify us against these risks under our contracts.regardless of the agreed contractual position. The terms of our drilling contracts vary based on negotiation, applicable local laws and regulations and other factors, and in some cases, customers may seek to cap indemnities or narrow the scope of their coverage, reducing our level of contractual protection.protection and in turn exposing us to additional risks against which it may not be adequately insured.
In addition, a court, arbitrator, or other dispute resolution body may decidedetermine that certain indemnities or other terms in our current or future contracts are not enforceable. For example, in a decision in a case related to the fire and explosion that took place on the unaffiliated Deepwater Horizon Mobile Offshore Drilling Unit in the Gulf of Mexico in April 2010, or the Deepwater Horizon Incident (to which we were not a party), a U.S. District Court invalidated certain contractual indemnities under a drilling contract governed by U.S. law. Further, pollution
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and environmental risks generally are not totally insurable. If a significant accident or other event occurs that is not fully covered by our insurance or an enforceable or recoverable indemnity from a customer, the occurrence could adversely affect our performance.
The amount recoverable under insurance, if any, may also be less than the related impact on enterprise value after a loss or not cover all potential consequences of an incident and include annual aggregate policy limits. As a result, we retain the risk through self-insurance for any losses in excess of these limits. Any such lack of reimbursement or suffering of loss in excess of such limits may cause us to incur substantial costs.
We couldmay decide to retain more risk through self-insurance in the future. This self-insurance results in a higher risk of losses, which could be material, which are not covered by third-party insurance contracts. Specifically, we have at times in the past and have currently elected to self-insure for physical damage to rigs and equipment caused by named windstorms in the U.S. Gulf of Mexico due to the substantial costsexcessive cost associated with such coverage. Althoughcoverage and the mobility of the relevant rigs to avoid these windstorms. If we currently insure a limited part of this windstorm risk pursuantcontinue to a policy for physical damage to rigs and equipment caused by named windstorms in the U.S. Gulf of Mexico with a combined single limit of $100 million in the annual aggregate, this policy is subject to certain exclusions and limitations and may not be sufficient to cover future losses caused by such storms. In addition, if we elect to self-insure such risks again in the future and such windstorms cause significant damage to any rig and equipment we have in the U.S. Gulf of Mexico, it could have a material adverse effect on our financial position, operating results of operations and cash flows.
No assurance can be made that we will be able to maintain adequate insurance in the future at rates that we consider reasonable, or that we will be able to obtain insurance against certain risks.
We rely on a small number of customers and our operating results of operations could be materially adversely affected if any of our major customers fail to compensate us for our services.services or if we lose a significant customer contract.
Our contract drilling business is subject to the risks associated with having a limited number of customers for our services. For the twelve monthsyear ended December 31, 2019,2021, our five largest customers, Total,ConocoPhillips, Equinor, Saudi Aramco, Northern Drilling, ConocoPhillipsLundin and Equinor,Sonadrill accounted for approximately 67%60% of our revenues. In addition, mergers and acquisitions, or other forms of consolidation among oil and gas exploration and production companies will further reduce the number of available customers, which would increase the ability of potential customers to achieve pricing terms favorable to them. Our operating results of operations could be materially adversely affected if any of our major customers fail to compensate us for our services or take actions outlined above. Please see “-Our“Our customers may seek to cancel or renegotiate their contracts to include unfavorable terms such as unprofitable rates, particularly in the circumstance that operations are suspended or interrupted”interrupted” above for more information.
We are subject to risks of loss resulting from non-payment or non-performance by our customers and certain other third parties. Some of these customers and other parties may be highly leveraged and subject to their own operating and regulatory risks. If any key customers or other parties default on their obligations to us, our financial results and condition could be adversely affected. Any material non-payment or non-performance by these entities, other key customers or certain other third parties could adversely affect our financial position, operating results of operations and cash flows.
OurSome of our drilling contracts contain fixed terms and day-rates,dayrates, and consequently we may not fully recoup our costs in the event of a rise in expenses, including reactivation, operating and maintenance costs.
Our operating costs are generally related to the number of units in operation and the cost level in each country or region where the units are located. A significant portion of our operating costs may be fixed over the short term.

The majoritySome of our contracts have dayrates that are fixed over the contract term. To mitigate the effects of inflation on revenues from term contracts, most of our long-term contracts include escalation provisions. These provisions allow us to adjust the dayrates based on stipulated external cost indices, including wages, insurance and maintenance costs.indices. However, actual cost increases may result from events or conditions that do not cause correlative changes to the applicable indices.indices, or relate to the indices at all. Furthermore, certain indices are updated semi-annually,annually, and therefore may be outdated at the time of adjustment. The adjustments are typically performed on a semi-annual oran annual basis. For these reasons, the timing and amount awarded as a result of such adjustments may differ from our actual cost increases, which could adversely affect our financial performance. Some of our long-term contracts contain rate adjustment provisions based on market dayrate fluctuations rather than cost increases. In such contracts, the dayrate could be adjusted lowerdownward during a period when operating or other costs of operation rise,are rising, which could adversely affect our financial performance. In addition, our contracts typically contain provisions for either fixed or dayrate compensation during mobilization. These rates may not fully cover our costs of mobilization, and mobilization may be delayed, increasing our costs, without additional compensation from the customer, for reasons beyond or within our control.
In connection with new assignments, we mightWe may incur varying levels of expenses relating to preparation for operations under ain connection with new contract. Expenses may vary based on a number of factorsassignments, including, but not limited to, the scope and length of suchthe required preparations, whether the relevant unit is idle or stacked and reactivation is required, and the duration of the contractual period over which such expenditures are amortized.
Equipment maintenance costs fluctuate depending upon the type of activity that the unit is performing and the age and condition of the equipment, as well as the applicable environmental, safety and maritime regulations and standards. Our operating expenses and maintenance costs depend on a variety of factors, including crew costs, provisions, equipment, insurance, maintenance and repairs, and shipyard costs, many of which are beyond our control.
In situations where our drilling units incur idle time between assignments, the opportunityany ability to reduce the size of our crews on those drilling units is limited, as the crews will be engaged in preparing the unit for its next contract. When a unit faces longer idle periods, reductions in costs may not be immediate as some of the crew may be required to prepare drilling units for stacking and maintenance in the stacking period. Should units be idle for a longer period, we will seek to redeploy crew members who are not required to maintain the drilling unit to active rigs, to the fullest extent possible. However, there can be no assurance that we will be successful in reducing our costs in such cases.
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Operating and maintenance costs will not necessarily fluctuate in proportion to changes in operating revenues. Operating revenues may fluctuate as a function of changes in supply of offshore drilling units and demand for contract drilling services. This could adversely affect our revenue from operations. For more information please see “-The“The success and growth of our business depend on the level of activity in the offshore oil and gas industry generally, and the drilling industry specifically, which are both highly competitive and cyclical, with intense price competition and volatility” “-Our, “Our customers may seek to cancel or renegotiate their contracts to include unfavorable terms such as unprofitable rates, particularly in the circumstance that operations are suspended or interrupted”interrupted” and “-Our“Our contract backlog for our fleet of drilling units may not be realized.realized”.
Consolidation of suppliers and governmental regulation of suppliers may increase the cost of obtaining supplies or restrict our ability to obtain needed supplies.
We rely on certain third parties to provide supplies and services necessary forto operate our offshore drillingand onshore operations, including, but not limited to, drilling equipment suppliers, satellite and other electronic data and telecommunications providers, catering suppliers and machinery suppliers. Recent mergers have reducedThere has been a reduction in the number of available suppliers in certain sectors, resulting in fewer alternatives for sourcing key supplies. With respect to certain items, such as blow-out preventers or “BOPs”"BOPs" and drilling packages, we are dependent on the original equipment manufacturer for repair and replacement of the item or its spare parts. Such consolidation combined with a high volume of drilling units under construction, may result in a shortage of supplies and services, thereby increasing the cost of supplies and/or potentially inhibiting the ability of suppliers to deliver on time. These cost increases or delays could have a material adverse effect on our operating results of operations, resultingand result in rig downtime, and delays in the repair and maintenance of our drilling rigs.

The COVID-19 pandemic has had an impact on most of our Supply Chain including challenges sourcing materials due to limited supply / restrictions in countries various areas leading to escalating costs and delivery times going out. Logistics is still challenging due to continued country restrictions, port congestion, and new regulatory country and client requirements.
Due to an increasing number of companies in the oil and gas drilling industry entering into Chapter 11 proceedings, or similar bankruptcy proceedings, there have been continued challenges with suppliers. Some suppliers have refused to support drilling companies due to the financial impact that multiple drilling companies have encountered with the Chapter 11 process. Drilling companies have faced suppliers reluctant to enter into agreements, more upfront demand for payment, increased costs as suppliers look to recover losses that they have incurred during past few years and their sub-tier suppliers seeing raw material cost escalations that are being passed up through the supply chain. There has been lower stocking and inventory levels with our core suppliers due to market uncertainty over the past 18 months, and many companies, having made lay-offs during the pandemic, are now short staffed and struggling to fill those positions with experienced workers.
We may be unable to obtain, maintain, and/or renew permits necessary for our operations or experience delays in obtaining such permits including the class certifications of rigs.
The operation of our drilling units will require certain governmental approvals, the number and prerequisites of which cannot be determined until we identify the jurisdictions in which we will operate on securing contracts for the drilling units. Depending on the jurisdiction, these governmental approvals may involve public hearings and costly undertakings on our part. We may not obtain such approvals or such approvals may not be obtained in a timely manner. If we fail to secure the necessary approvals or permits in a timely manner, our customers may have the right to terminate or seek to renegotiate their drilling contracts to our detriment.
Every offshore drilling unit is a registered marine vessel and must be “classed” by a classification society to fly a flag. The classification society certifies that the drilling unit is “in-class,” signifying that such drilling unit has been built and maintained in accordance with the rules of the classification society and complies with applicable rules and regulations of the drilling unit’s country of registry and the international conventions of which that country is a member. In addition, where surveys are required by international conventions and corresponding laws and ordinances of a flag state, the classification society will undertake them on application or by official order, acting on behalf of the authorities concerned. Our drilling units are certified as being “in class” by the American Bureau of Shipping, or ABS, Det Norske Veritas and Germanisher Lloyd, or DNV GL, and the relevant national authorities in the countries in which our drilling units operate. If any drilling unit loses its flag status, does not maintain its class, and/or fails any periodical survey or special survey and/or fails to satisfy any laws of the country of operation, the drilling unit will be unable to carry on operations and will be unemployable and uninsurable, which could cause us to be in violation of certain covenants in certain of our debt agreements.secured credit facilities. Any such inability to carry on operations or be employed could have a material adverse impact on the resultsoperating results.
Certain jurisdictions in which we operate may impose flagging requirements for vessels operating in that jurisdiction. We received notification from the Transport General Authority of operations. Please see “Item 8. Financial Information-Legal Proceedings-Seabras Sapura joint venture”Saudi Arabia in October 2020 requiring all rigs operating in Saudi Arabian territorial waters to be registered under the Saudi Arabian flag by March 2021. Registration under the Saudi flag requires the rig owning entity to be at least 51% owned by a local entity, which may have significant adverse implications on the cost of operating the rigs in the Kingdom. In February 2021, the Transport General Authority granted a three-year grace period to comply with this requirement to all affected shipping companies in the Kingdom. Whilst we will be able to rely on the extension for more information.the time being and continue to operate in the Kingdom provided current operating licenses are renewed in the normal course, we are assessing the impact of any future requirement to register under the flag of Saudi Arabia (including the local ownership requirements) on our ability to win future contracts in the Kingdom, and intend to continue to contest the requirement to register our rigs in the Kingdom. The situation in Saudi Arabia is difficult to predict and any inability to carry out operations in Saudi Arabia or any other jurisdiction as a result of our inability to comply with applicable laws and regulations might have an adverse effect on our operating results.

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The international nature of our operations involves additional risks including foreign government intervention in relevant markets, for example in Brazil.Brazil or Angola.
We operate in various regions throughout the world. As a result of our international operations, we may be exposed to political and other uncertainties, particularly in less developed jurisdictions, including risks of:
• terrorist acts, armed hostilities, war and civil disturbances;
• acts of piracy, which have historically affected ocean-going vessels;
• abduction, kidnapping and hostage situations;
• significant governmental influence over many aspects of local economies;
• the seizure, nationalization or expropriation of property or equipment;
• uncertainty of outcome in foreign court proceedings;
• the repudiation, nullification, modification or renegotiation of contracts;
• limitations on insurance coverage, such as war risk coverage, in certain areas;
• political unrest;
• foreign and U.S. monetary policy and foreign currency fluctuations and devaluations;
• the inability to repatriate income or capital;
• complications associated with repairing and replacing equipment in remote locations;
• import-export quotas, wage and price controls, and the imposition of trade barriers;
• U.S., U.K., European Union and foreign sanctions or trade embargoes;
• receiving a request to participate in an unsanctioned foreign boycott under U.S. law;
• compliance with various jurisdictional regulatory or financial requirements;
• compliance with and changes to taxation;
• interacting and contracting with government-controlled organizations;
• other forms of government regulation and economic conditions that are beyond our control;
• legal and economic systems that are not as mature or predictable as those in more developed countries, which may lead to greater uncertainty in legal and economic matters; and
• government corruption.

In addition, international contract drilling operations are subject to various laws and regulations of the countries in which we operate, including laws and regulations relating to:
• the equipping and operation of drilling units;
• exchange rates or exchange controls;
• the repatriation of foreign earnings;
• oil and gas exploration and development;
• the taxation of offshore earnings and the earnings of expatriate personnel; and
• the use and compensation of local employees and suppliers by foreign contractors.

Some foreign governments favor or effectively require (i) the awarding of drilling contracts to local contractors or to drilling rigs owned by their own citizens, (ii) the use of a local agent or (iii) foreign contractors to employ citizens of, or purchase supplies from, a particular jurisdiction. These practices may adversely affect our ability to compete in those regions. It is difficult to predict what government regulations may be enacted in the future that could adversely affect the international drilling industry. The actions of foreign governments, including initiatives by OPEC, may adversely affect our ability to compete. Failure to comply with applicable laws and regulations, including those relating to sanctions and export restrictions, may subject us to criminal sanctions or civil remedies, including fines, the denial of export privileges, injunctions or seizures of assets.
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In the years ended December 31, 2021, 2020 and 2019, 201812%, 5%, and 2017, 10%, 22% and 17%, respectively, of our revenues were derived from our Brazilian operations. The Brazilian government frequently intervenes in the Brazilian economy and occasionally makes significant changes in policy and regulations. The Brazilian government’s actions to control inflation and other policies and regulations have often involved, among other measures, changes in interest rates, changes in tax policies, changes in legislation, wage controls, price controls, currency devaluations, capital controls and limits on imports of goods and services. Changes to fiscal and monetary policy, the regulatory environment of our industry, and legislation could impact our performance.

The Brazilian markets have experienced heightened volatility in recent years due to the uncertainties derived from the ongoing investigations being conducted by the Office of the Brazilian Federal Prosecutor, the Brazilian Federal Police, the Brazilian Securities Commission (Comissão de Valores Mobiliários), the Securities and Exchange Commission, the U.S. Department of Justice, and other Brazilian and foreign public authorities, including the largest such investigation known as Lava Jato,, and the impact that such investigations have on the Brazilian economy and political environment. Numerous elected officials, public servants and executives and other personnel of large and state-owned companies have been subject to investigation, arrest, criminal charges and other proceedings in connection with allegations of political corruption, including the acceptance of bribes by means of kickbacks on contracts granted by the government to several infrastructure, oil and gas and construction companies, among others. The profits of these kickbacks allegedly financed the political campaigns of political parties that were unaccounted for or not publicly disclosed and served to personally enrich the recipients of the bribery scheme. Individuals who have had commercial arrangements with us have been identified in the Lava Jato investigations and the investigations by the Brazilian authorities are ongoing. On September 23, 2020, Seadrill’s subsidiary Seadrill Serviços de Petroleo, Ltda was served with a search and seizure warrant from the Federal Police in Rio de Janeiro, Brazil as part of the phase of Operation Lava Jato relating to individuals formally associated with Seadrill Serviços. The outcome of certain of these investigations is uncertain, but they have already had an adverse impact on the business, image and reputation of the implicated companies, and on the general market perception of the Brazilian economy. We cannot predict whether such allegations will lead to further political and economic instability or whether new allegations against government officials or executives will arise in the future. We also cannot predict the outcome of any such allegations on the Brazilian economy, and the Lava Jato investigation including its recent phases, could adversely affect our business and operations. In addition, conservative presidential candidate Jair Bolsonaro assumed office on January 1, 2019. Uncertainty about the ability of the Bolsonaro administration to adopt and implement new policies may reduce investor and market confidence and we are unable to predict the political and economic direction of Brazil in coming years.
These and other developments in Brazil’s political conditions, economy and government policies may, directly or indirectly, adversely affect our business, financial condition and results of operations.operating results.
Compliance with, and breach of, the complex laws and regulations governing international trade could be costly, expose us to liability and adversely affect our operations.
Our business in the offshore drilling industry is affected by laws and regulations relating to the energy industry and the environment in the geographic areas where we operate.
Accordingly, we are directly affected by the adoption of laws and regulations that, for economic, environmental or other policy reasons, curtail exploration and development drilling for oil and gas. For example, on December 20,offshore drilling in certain areas, including arctic areas, has been curtailed and, in certain cases, prohibited because of concerns over protecting the environment. In 2015 and 2016, the United States President invokedissued three Presidential Memoranda and an Executive Order withdrawing certain areas of the Outer Continental Shelf in the Atlantic Coast, Alaska, and Arctic from mineral leasing under Section 12(a) of the Outer Continental Shelf Land Act. Canada issued a lawsimilar ban on new drilling in Canadian Arctic waters in December 2016. President Trump issued Executive Order 13795 on April 28, 2017, directing the Department of the Interior to banreconsider prior actions to limit or regulate offshore oil and gas drilling in large areasdevelopment and revoking the 2015 and 2016 withdrawals. On January 20, 2021, President Biden issued an Executive Order revoking Executive Order 13795 and reinstating the 2015 and 2016 withdrawals. In addition, environmental groups have challenged numerous lease sales offered by the Department of the ArcticInterior under the 2017-2022 five-year lease program and the Atlantic Seaboard. While the current administration has since attempted to lift the ban and open certain of those areas to oil and gas drilling, the President’s legal authority to do so has been challenged and asthat litigation remains pending. As a result, it is difficult to predict if and when such areas may be made available for future exploration activities. A ban on new drilling in Canadian Arctic waters was announced simultaneously. WeGiven the long-term trend towards increasing regulation, we may be required to make significant capital expenditures or operational changes to comply with governmental laws and regulations. It is also possible that these laws and regulations may, in the future, add significantly to our operating costs or significantly limit drilling activity.
Import activities are governed by unique customs laws and regulations in each of the countries of operation. Moreover, many countries, including the United States, control the export and re-export of certain goods, services and technology and impose related export recordkeeping and reporting obligations.
The laws and regulations concerning import activity, export recordkeeping and reporting, export control and economic sanctions are complex and constantly changing. These laws and regulations may be enacted, amended, enforced or interpreted in a manner materially impacting our operations. Shipments can be delayed and denied export or entry for a variety of reasons, some of which are outside our control and some of which may result from the failure to comply with existing legal and regulatory regimes. Shipping delays or denials could cause unscheduled operational downtime. Any failure to comply with applicable legal and regulatory trading obligations could also result in criminal and civil penalties and sanctions, such as fines, imprisonment, debarment from government contracts, the seizure of shipments, and the loss of import and export privileges.
Offshore drilling in certain areas, including arctic areas, has been curtailed and, in certain cases, prohibited because of concerns over protecting the environment.
New laws or other governmental actions that prohibit or restrict offshore drilling or impose additional environmental protection requirements that result in increased costs to the oil and gas industry, in general, or to the offshore drilling industry, in particular, could adversely affect our performance.
The amendment or modification of existing laws and regulations or the adoption of new laws and regulations curtailing or further regulating exploratory or development drilling and production of oil and gas could have a material adverse effect on our business, operating results of operations or financial condition. Future earnings may be negatively affected by compliance with any such new legislation or regulations.

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We are subject to complex environmental laws and regulations that can adversely affect the cost, manner or feasibility of doing business.
Our operations are subject to numerous international, national, state and local laws and regulations, treaties and conventions in force in international waters and the jurisdictions in which our drilling units operate or are registered, which can significantly affect the ownership and operation of our drilling units. These requirements include, but are not limited to:
• conventions under the auspices of the United Nation’s International Maritime Organization (“IMO”);
• the International Convention for the Prevention of Pollution from Ships of 1973, as from time to time amended (“MARPOL”);
• the International Convention on Civil Liability for Oil Pollution Damage of 1969, as from time to time amended (“CLC”);
• the International Convention on Civil Liability for Bunker Oil Pollution Damage (the “Bunker Convention”), the International Convention for the Safety of Life at Sea of 1974, as from time to time amended (“SOLAS”);
• the International Safety Management Code for the Safe Operation of Ships and for Pollution Prevention (the “ISM Code”);
• the IMO International Convention on Load Lines of 1966, as from time to time amended, the International Convention for the Control and Management of Ships’ Ballast Water and Sediments in February 2004 (the “BWM Convention”);
• EU Directive 2013/30 on the Safety of Offshore Oil and Gas Operations;
• the U.S. Oil Pollution Act of 1990 (“OPA”);
• requirements of the U.S. Coast Guard (“USCG”);
• requirements of the U.S. Environment Protection Agency (“EPA”);
• the U.S. Comprehensive Environmental Response;
Response, Compensation and Liability Act (“CERCLA”);
• the U.S. Maritime Transportation Security Act of 2002 (“MTSA”); and
• the U.S. Outer Continental Shelf Lands Act (“OCSLA”); and
• certain regulations of the EU.

Compliance with such laws, regulations and standards, where applicable, may require installation of costly equipment or implementation of operational changes and may affect the resale value or useful lifetime of our drilling units. These costs could have a material adverse effect on our business, operating results, of operations, cash flows and financial condition. A failure to comply with applicable laws and regulations may result in administrative and civil penalties, criminal sanctions or the suspension or termination of our operations. Because such conventions, laws, and regulations are often revised, we cannot predict the ultimate cost of complying with them or the impact thereof on the resale prices or useful lives of our rigs. Additional conventions, laws and regulations may be adopted which could limit our ability to do business or increase the cost of our doing business and which may materially adversely affect our operations.
EnvironmentalCertain environmental laws often impose strict, joint and several liability for the remediation of spills and releases of oil and hazardous substances, which could subject us to liability without regard to whether we were negligent or at fault. Under OPA, for example, owners, operators and bareboat charterers are jointly and severally strictly liable for the discharge of oil within the 200-mile exclusive economic zone around the United States. An oil or chemical spill, for which we are deemed a responsible party, could result in us incurring significant liability, including fines, penalties, criminal liability and remediation or cleanup costs forand natural resource damages under other federal, state and local laws, as well as third-party damages, which could have a material adverse effect on our business, financial condition, operating results of operations and cash flows. Furthermore, the 2010 explosion of the Deepwater Horizon well and the subsequent release of oil into the Gulf of Mexico, or other similar events, may result in furtherFuture increased regulation of the shipping industry, andor modifications to statutory liability schemes thus exposingcould, expose us to further potential financial risk in the event of any such oil or chemical spill.
We and, in certain circumstances, our customers are required by various governmental and quasi-governmental agencies to obtain certain permits, licenses and certificates with respect to our operations, and satisfy insurance and financial responsibility requirements for potential oil (including marine fuel) spills and other pollution incidents. Although we have arranged insurance to cover certain environmental risks, such insurance is subject to exclusions and other limits, and there can be no assurance that such insurance will be sufficient to cover all such risks or that any claims will not have a material adverse effect on our business, operating results, of operations, cash flows and financial condition.
Although our drilling units are separately owned by our subsidiaries, under certain circumstances a parent company and all of the unit-owning affiliates in a group under common control engaged in a joint venture could be held liable for damages or debts owed by one of the affiliates, including liabilities for oil spills under OPA or other environmental laws. Therefore, it is possible that we could be subject to liability upon a judgment against us or any one of our subsidiaries.
Our drilling units could cause the release of oil or hazardous substances. Any releases may be large in quantity, above our permitted limits or occur in protected or sensitive areas where the public, interestenvironmental groups or governmental authorities have special interests. Any releases of oil or hazardous substances could result in fines and other costs to us, such as costs to upgrade our drilling rigs, clean up the releases and comply with more stringent requirements in our discharge permits, as well as subject us to third party claims for damages, including natural resource damages. Moreover, these releases may result in our customers or governmental authorities suspending or terminating our operations in the affected area, which could have a material adverse effect on our business, operating results of operations and financial condition.
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If we are able to obtain from our customers some degree of contractual indemnification against pollution and environmental damages in our contracts, such indemnification may not be enforceable in all instances or the customer may not be financially able to comply with its indemnity obligations in all cases, and we may not be able to obtain such indemnification agreements in the future. In addition, a court may decide that certain indemnities in our current or future contracts are not enforceable.

The insurance coverage we currently hold may not be available in the future, or we may not obtain certain insurance coverage. Even if insurance is available and we have obtained the coverage, it may not be adequate to cover our liabilities, may not be available on satisfactory terms and/or subject to high premiums, or our insurance underwriters may be unable to pay compensation if a significant claim should occur. Any of these scenarios could have a material adverse effect on our business, operating results of operations and financial condition.
Failure to comply with international anti-corruption legislation, including the U.S. Foreign Corrupt Practices Act 1977 or the U.K. Bribery Act 2010, could result in fines, criminal penalties, damage to our reputation and drilling contract terminations.

We currently operate, and historically have operated, our drilling units in a number of countries throughout the world, including some with developing economies. We interact with government regulators, licensors, port authorities and other government entities and officials. Also, our business interaction with national oil companies as well as state or government-owned shipbuilding enterprises and financing agencies puts us in contact with persons who may be considered to be “foreign officials” under the U.S. Foreign Corrupt Practices Act of 1977 or the FCPA and the Bribery Act 2010 of the United Kingdom or the U.K. Bribery Act.

In order to effectively compete in some foreign jurisdictions, we utilize local agents and/or establish entities with local operators or strategic partners. All of these activities may involve interaction by our agents with government officials. Even though some of our agents and partners may not themselves be subject to the FCPA, the U.K. Bribery Act or other anti-bribery laws to which we may be subject, if our agents or partners make improper payments to government officials or other persons in connection with engagements or partnerships with us, we could be investigated and potentially found liable for violations of such anti-bribery laws and could incur civil and criminal penalties and other sanctions, which could have a material adverse effect on our business and results of operation.

We are subject to the risk that we or our affiliated companies or their respective officers, directors, employees and agents may take actions determined to be in violation of anti-corruption laws, including the FCPA and the U.K. Bribery Act. Any such violation could result in substantial fines, disgorgement, sanctions, civil and/or criminal penalties, curtailment of operations in certain jurisdictions, and might adversely affect our business, operating results of operations or financial condition. In addition, actual or alleged violations could damage our reputation and ability to do business. Furthermore, detecting, investigating and resolving actual or alleged violations is expensive and can consume significant time and attention of our senior management.

If our drilling units are located in or connected to countries that are subject to, or targeted by, economic sanctions, export restrictions, or other operating restrictions imposed by the United States, the United Kingdom, European Union or other governments, our reputation and the market for our debt and common sharesShares could be adversely affected.

The U.S., the U.K., European Union or and other governments may impose economic sanctions against certain countries, persons and other entities that restrict or prohibit transactions involving such countries, persons and entities. U.S. sanctions in particular are targeted against countries (such as Russia, Venezuela, Iran and others) that are heavily involved in the petroleum and petrochemical industries, which includes drilling activities. U.S., U.K., European Union and other economic sanctions change frequently and enforcement of economic sanctions worldwide is increasing.

In 2010, the United States enacted the Comprehensive Iran Sanctions Accountability and Divestment Act, or CISADA, which expanded the scope of the former Iran Sanctions Act. Among other things, CISADA expands the application of sanctions to non-U.S. companies such as ours and introduced limits on such companies and persons that do business or trade with Iran when such activities relate to the investment, supply or export of refined petroleum or petroleum products. On August 10, 2012,, the U.S. signed into law the Iran Threat Reduction and Syria Human Rights Act of 2012, or the Iran Threat Reduction Act, which places further restrictions on the ability of non-U.S. companies to do business or trade with Iran and Syria. Perhaps the most significant provision in the Iran Threat Reduction Act is that prohibitions in the existing Iran sanctions applicable to U.S. persons will now apply to any foreign entity owned or controlled by a U.S. person. Another major provision in the Iran Threat Reduction Act is that issuers of securities must disclose in their annual and quarterly reports filed with the Commission after February 6, 2013 if the issuer or “any affiliate” has “knowingly” engaged in certain activities involving Iran during the timeframe covered by the report. At this time, we are not aware of any activities conducted by us or by any affiliate, which is likely to trigger such a disclosure requirement. On January 2, 2013,, the U.S. signed into law the Iran Freedom and Counter-Proliferation Act of 2012 (“IFCA”), as a part of the National Defense Authorization Act for Fiscal Year 2013. Among other measures, IFCA authorizes broad sanctions on certain activities related to Iran’s energy, shipping, and shipbuilding sectors.

On July 14, 2015,, the P5+1 and the European Union (“E.U.”), at that time including the U.K., announced that they reached a landmark agreement with Iran titled the Joint Comprehensive Plan of Action Regarding the Islamic Republic of Iran’s Nuclear Program, or the JCPOA, to significantly restrict Iran’s ability to develop and produce nuclear weapons for 10 years while simultaneously easing sanctions directed toward non-U.S. persons for conduct involving Iran, but taking place outside of U.S. jurisdiction and not involving U.S. persons. On January 16, 2016,, or the Implementation Day, the United States joined the E.U. and the U.N. in lifting a significant number of their nuclear-related sanctions on Iran following an announcement by the International Atomic Energy Agency, or the IAEA, that Iran had satisfied its respective obligations under the JCPOA.

On May 8, 2018,, the U.S. announced that it would be withdrawing from the JCPOA. On August 6, 2018, the U.S. issued Executive Order 13846 which reimposed certain sanctions on Iran effective as of that date and set the reimposition of additional sanctions on Iran effective November 5, 2018. On November 5, 2018,. On November 5, 2018, following a wind-down period, the U.S. completed the reimposition of nuclear-related sanctions
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against Iran that it had previously lifted in connection with the JCPOA. Since that time the U.S. has issued additional Executive Orders imposing sanctions with respect to Iran.


The Office of Foreign Assets Control (“OFAC”) acted several times over the past year2019 and 2018 to add Iranian individuals and entities to its list of Specially Designated Nationals whose assets are blocked and with whom U.S. persons are generally prohibited from dealing, including re-adding on November 5, 2018,, hundreds of individuals and entities that had previously been delisted in connection with the JCPOA. Further, OFAC issued sanctions on specific sectors of the Iranian economy, including the iron, steel, aluminum, and copper sectors (May 8, 2019), the construction, mining, manufacturing, or textiles sectors (January 10, 2020), and the financial sector (October 8, 2020). These sector-wide sanctions also authorize the imposition of secondary sanctions on non-U.S. persons and non-U.S. financial institutions who engage in certain dealings in those sectors, including the potential designation of such persons or financial institutions themselves.



In August 2017, the U.S. passed the “Countering America’s Adversaries Through Sanctions Act” (Public Law 115-44) (“CAATSA”), which authorizes imposition of new sanctions on Iran, Russia, and North Korea. The CAATSA sanctions with respect to Russia create heightened sanctions risks for companies operating in the oil and gas sector, including companies that are based outside of the United States. OFAC sanctions targeting Venezuela have likewise increased in the past year, and any new sanctions targeting Venezuela could further restrict our ability to do business in such country. On January 28, 2019,, OFAC added the Venezuelan state-owned oil company, Petróleos de Venezuela, S.A. (“PdVSA”), to its List of Specially Designated Nationals and Blocked Persons, increasing the sanctions risk for companies operating in the oil sector. Subsequently, on August 5, 2019,, the U.S. issued Executive Order 13884 which further increased sanctions on Venezuela and blocked the entire Government of Venezuela. OFAC has also imposed sanctions on non-Venezuelan firms for operating in Venezuela. On February 18, 2020, OFAC imposed sanctions on Switzerland-based firm Rosneft Trading S.A., due to its operations in the oil sector of Venezuela. On November 30, 2020, OFAC imposed sanctions on the Chinese state owned entity China National Electronics Imports and Export Corporation for providing support to Venezuela government entities. OFAC has since imposed sanctions on additional individuals and entities in a variety of countries involved in the petroleum and petrochemical industries.


In addition to the sanctions against Iran, Russia, and Venezuela, subject to certain limited exceptions, U.S. law continues to restrict U.S. owned or controlled entities from doing business with Cuba and various U.S. sanctions have certain other extraterritorial effects that need to be considered by non-U.S. companies. Moreover, any U.S. persons who serve as officers, directors or employees of our subsidiaries would be fully subject to U.S. sanctions. It should also be noted that other governments are more frequently implementing and enforcing sanctions regimes.


On December 14, 2020, the United States Department of State rescinded its designation of Sudan as a state sponsor of terror. Though U.S. comprehensive sanctions on Sudan had previously been lifted in 2017, certain sanctions and export requirements on Sudan remained. The removal of Sudan’s status as a state sponsor of terror has not immediately resulted in a change in sanctions or export restrictions, though OFAC and the U.S. Department of Commerce may engage in a rule making process that will result in certain export license exceptions being applicable for exports to Sudan.

On December 18, 2020, the U.S. Department of Commerce Bureau of Industry and Security (“BIS”) designated a number of Chinese parties on the Entity List, including parties involved in the offshore drilling and maritime industries such as China Communications Construction Company Ltd. Most items subject to the Export Administration Regulations (“EAR”) now require a license to export or reexport to such parties. On January 14, 2021, BIS added Chinese National Offshore Oil Corporation to the Entity List. On December 23, 2020, BIS also established a Military End User List (“MEUL”) and designated over 100 parties from China and Russia on the MEUL, including those in the offshore drilling and maritime industries. BIS has since designated additional persons in China and Russia on the MEUL. Certain items subject to the EAR require a license from BIS to export or reexport to such parties.

Due to the conflict between Russia and Ukraine, starting in February 2022, the United States, European Union, United Kingdom, and other governments (i) designated multiple individuals and entities in Russia and Belarus with ties to those governments and/or financial sectors on their respective sanctions- and export-restricted party lists, (ii) imposed comprehensive sanctions on the so-called Donetsk and Luhansk regions of Ukraine, and (iii) imposed export controls on the export, reexport, and transfer to Russia and Belarus of certain items in the maritime and other sectors.

From time to time, we may enter into drilling contracts with countries or government-controlled entities that are subject to sanctions, export restrictions and embargoes imposed by the U.S. government and/or identified by the U.S. government as state sponsors of terrorism where entering into such contracts would not violate U.S. law, or may enter into drilling contracts involving operations in countries or with government-controlled entities that are subject to sanctions and embargoes imposed by the U.S. government and/or identified by the U.S. government as state sponsors of terrorism. However, this could negatively affect our ability to obtain investors. In some cases, U.S. investors would be prohibited from investing in an arrangement in which the proceeds could directly or indirectly be transferred to or may benefit a sanctioned entity. Moreover, even in cases where the investment would not violate U.S. law, potential investors could view such drilling contracts negatively, which could adversely affect our reputation and the market for our shares.Shares. We do not currently have any drilling contracts or plans to initiate any drilling contracts involving operations in countries or with government-controlled entities that are subject to sanctions and embargoes imposed by the U.S. government and/or identified by the U.S. government as state sponsors of terrorism.

Certain parties with whom we have entered into contracts may be or may be affiliated with persons or entities that are, the subject of sanctions imposed by the United States, the U.K., the E.U. or other international bodies as a result of the annexation of Crimea by Russia in March 2014 and the subsequent conflict in easternbetween Russia and Ukraine from 2014 through 2022, or malicious cyber-enabled activities. If we determine that such sanctions require us to terminate existing contracts or if we are found to be in violation of such applicable sanctions, our operating results of operations may be adversely affected, or we may suffer reputational harm. Such sanctions may prevent us from performing some or all of our obligations under any potential drilling contracts with Rosneft, which could impact our future revenue, contract backlog and operating results, of operations, and adversely affect our business reputation. We may also lose business opportunities to companies that are not required to comply with these sanctions.
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As stated above, we believe that we are in compliance with all applicable economic sanctions and embargo laws and regulations and intend to maintain such compliance. However, there can be no assurance that we will be in compliance in the future, particularly as the scope of certain laws may be unclear and may be subject to changing interpretations. Rapid changes in the scope of global sanctions may also make it more difficult for us to remain in compliance. Any violation of applicable economic sanctions could result in civil or criminal penalties, fines, enforcement actions, legal costs, reputational damage, or other penalties and could result in some investors deciding, or being required, to divest their interest, or not to invest, in our shares.Shares. Additionally, some investors may decide to divest their interest, or not to invest, in our sharesShares simply because we may do business with companies that do business in sanctioned countries. Moreover, our drilling contracts may violate applicableindirectly involve persons subject to sanctions and embargo laws and regulations as a result of actions that do not involve us, or our drilling rigs, and even if those violationsdealings are lawful, it could in turn negatively affect our reputation. Investor perception of the value of our sharesShares may also be adversely affected by the consequences of war, the effects of terrorism, civil unrest and governmental actions in these and surrounding countries.
The economic effects of “Brexit” may affect relationships with existing and future customers and could have an adverse impact on our business and results of operations.

On June 23, 2016, the U.K. held a referendum in which voters approved an exit from the E.U., commonly referred to as “Brexit,” and negotiations remain ongoing to determine the future terms of the U.K.’s relationship with the E.U. The formal notification to the European Council required under Article 50 of the Treaty on European Union was made on March 29, 2017, triggering a two-year period during which the terms of exit are to be negotiated. This period has been extended on several occasions, most recently to January 31, 2020. The Withdrawal Agreement Bill was passed by the U.K. House of Commons on January 9, 2020 and, subject to scrutiny by the U.K. House of Lords, the Withdrawal Agreement Bill approved an 11-month transition period starting on January 31, 2020 in which the U.K. will cease to be a member of the E.U., but will continue to follow the E.U.’s rules and contribute to its budget. In the event a full trade deal is not reached between the U.K. and E.U. by the December 31, 2020 deadline and there is no further extension, trade relations between the U.K. and the E.U. will be governed by any terms agreed within this period or by the World Trade Organization Rules. The impact on our business as a result of Brexit will depend, in part, on the outcome of tariff, trade, regulatory and other negotiations and on the ultimate manner and timing of the U.K.’s withdrawal from the E.U.
As a result of the referendum, the global markets and currencies have been adversely impacted, including a sharp decline in the value of the U.K. pounds sterling as compared to the U.S. dollar. A potential devaluation of the local currencies of our international customers relative to the U.S. dollar may impair the purchasing power of our international customers and could cause international customers to decrease drilling contracts or cancel drilling contracts completely.
Brexit may also lead to legal uncertainty and potentially divergent laws and regulations as the U.K. determines which E.U. laws to retain, and those laws and regulations may be cumbersome, difficult or costly in terms of compliance. Any of these effects of Brexit, among others, could adversely affect our business and results of operations.


We have suffered, and may continue to suffer, losses through our investments in other companies in the offshore drilling and oilfield services industry, which could have a material adverse effect on our business, financial condition, operating results of operations and cash flows.
We currently hold investments in several other companies in our industry that own/operate offshore drilling rigs with similar characteristics to our fleet of rigs or deliver various other oilfield services. These investments include equity interests in Seadrill Partners,Sonadrill, Gulfdrill and Paratus Energy Services Limited, which owns SeaMex Sonadrill, Gulfdrill,and holds equity interests in Archer and Seabras Sapura. In addition, we have provided subordinated loans to Seamex and Seabras SapuraSeaMex and have various intercompany arrangements with Seadrill Partners, Seamex,SeaMex, Sonadrill and Gulfdrill. These arrangements include management and administrative services agreements pursuant to which we provide Seadrill Partners, SeamexSeaMex and Sonadrill with certain management and administrative services charged primarily on a cost-plus mark-up basis.
As at December 31, 2019,2021, the carrying value of our equity investments held by continuing operations in these companies was $400$27 million. In addition, we had loan and trade receivables due from related parties with a carrying value of $704$28 million. Please see Note 15 – Marketable securities, Note 18 – Investment17 - “Investment in associated companies,companies”, and Note 3127 – Related“Related party transactions for further details.transactions” to the Consolidated Financial Statements included herein.
The market value of our equity interest in these companies has been, and may continue to be, volatile and has fluctuated, and may continue to fluctuate, in response to changes in oil and gas prices and activity levels in the offshore oil and gas industry. If we sell our equity interest in an investment at a time when the value of such investment has fallen, we may incur a loss on the sale or an impairment loss being recognized, ultimately leading to a reduction in earnings. Furthermore, Seadrill Partners ceased paying distributions in January 2020, and our
Following an acquisition of 50% of the remaining equity interest in claims against,SeaMex on November 2, 2021, SeaMex was consolidated and contractual arrangements withno longer an associate of Seadrill. From this date the NSNCo group was classified as a discontinued operation and the results from SeaMex were included in this grouping.
We no longer hold any equity interests in Aquadrill, formerly Seadrill Partners may be impaired to the extent Seadrill Partnersor SDLP. On May 24, 2021, Aquadrill emerged from Chapter 11 after successfully completing their reorganization. Existing equity interests in SDLP were canceled, released, and extinguished. As a result, SDLP is unable to refinance its significant debt obligationsno longer an associate or seeks to restructure them in or outrelated party of court.Seadrill.
In current market conditions, we may consider entering into joint venture arrangements where each joint venture partner bareboat charters their rigs into the joint venture entity. Through such a structure, we would seek to manage and operate all joint venture rigs and enable the Group to access additional markets, increase presence in a particular market or secure drilling contracts from counterparties who may only be willing to grant those drilling contracts pursuant to or as part of implementing a joint venture with us. However, any financial return from drilling contracts entered into in respect of our rig will be diluted to the shareholding percentage we hold in the joint venture entity and financial success of the joint venture will depend on the management fee rates we are able to agree with our joint venture partner.
During the years ended December 31, 20192021, 2020 and 20172019 we recognized impairment charges of $302nil for 2021 and 2020 and $6 million and $841 million in 2019 respectively relating to certain of our investments due to declining dayrates and future market expectations for dayrates in the sector. Please see “Note 11 - Impairment loss on investments in associated companies to our Consolidated Financial Statements” for more information.
We may recognize impairments on long-lived assets, including goodwill and other intangible assets, or recognize impairments on our equity method investments.
As described in the risk factor above, we have previously recognized impairments on our marketable securities and investments in associated companies.
If any of our strategic equity investments decline in value and remain below cost for an extended period, we may be required to write down our investment. We have a 35% interest in the common units of Seadrill Partners, which was delisted from the NYSE on December 11, 2019. To the extent Seadrill Partners is unable to refinance its significant debt obligations, which include debt maturities in the second half of 2020 and the first quarter of 2021, or seeks to restructure them in or out of court, our equity interest in, claims against, and contractual arrangements with Seadrill Partners may be impaired. Any such impairment would negatively impact the value of our business, our operations, and/or liquidity.
Our ability to operate our drilling units in the U.S. Gulf of Mexico could be impaired by governmental regulation, particularly in the aftermath of the moratorium on offshore drilling in the U.S. Gulf of Mexico, and new regulations adopted as a result of the investigation into the Macondo well blowout.
In the aftermath of the Deepwater Horizon Incident (in which we were not involved), various governmental agencies, including the U.S. Department of the Interior, U.S. Bureau of Safety and Environmental Enforcement or the BSEE and its predecessor,(“BSEE”), the U.S. Bureau of Ocean Energy Management or BOEM,(“BOEM”), and the U.S. Occupational Safety and Health Administration (“OSHA”), issued new and revised regulations and guidelines governing safetyenvironmental protection, public and environmental management, occupational injuriesworker health and illnesses,safety, financial assurance requirements, inspection programs and other well control measuremeasures relating to our drilling rigs.
In order to obtain drilling permits, operators must submit applications that demonstrate compliance with the enhanced regulations, which require independent third-party inspections, certification of well design and well control equipment and emergency response plans in the event of a blowout, among other requirements. Operators have previously had, and may in the future have, difficulties obtaining drilling permits in the U.S. Gulf of Mexico.
In addition, the oil and gas industry has adopted new equipment and operating standards, such as the American Petroleum Institute Standard 53 relating to the design, maintenance, installation and testing of well control equipment. Current and pending regulations, guidelines and standards for safety, environmental and financial assurance such as the above and any other new guidelines or standards the U.S. government or industry may issue (including relating to the Deepwater Horizon Incident or the other catastrophic events involving pollution from oil exploration and development activities) or any
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other steps the U.S. government or industry may take relating to our business activities, could disrupt or delay operations, increase the cost of operations, increase out-of-service time or reduce the area of operations for drilling rigs in U.S. and non-U.S. offshore areas.

As new standards and procedures are being integrated into the existing framework of offshore regulatory programs, there may be increased costs associated with regulatory compliance and delays in obtaining permits for other operations such as re-completions, workovers and abandonment activities.
We are not able to predict the likelihood, nature or extent of additional rulemaking or when the interim rules, or any future rules, could become final. The current and future regulatory environment in the U.S. Gulf of Mexico could impact the demand for drilling units in the U.S. Gulf of Mexico in terms of overall number of rigs in operations and the technical specification required for offshore rigs to operate in the U.S. Gulf of Mexico. Additional governmental regulations concerning licensing, taxation, equipment specifications, training requirements or other matters could increase the costs of our operations, and escalating costs borne by our customers, along with permitting delays, could reduce exploration and development activity in the U.S. Gulf of Mexico and, therefore, reduce demand for our services. In addition, insurance costs across the industry have increased as a result of the Deepwater Horizon Incident and, in the future, certain insurance coverage is likely to become more costly, and may become less available or not available at all. We cannot predict the potential impact of new regulations that may be forthcoming, nor can we predict if implementation of additional regulations might subject us to increased costs of operating and/or a reduction in the area of operation in the U.S. Gulf of Mexico. As such, our cash flowflows and financial position could be adversely affected if our ultra-deepwater semi-submersible drilling rigs and ultra-deepwater drillships operating in the U.S. Gulf of Mexico were subject to the risks mentioned above.
In addition, hurricanes, which may increase in frequency and severity as a result of climate change, have from time to time caused damage to a number of drilling units and production facilities unaffiliated to us in the Gulf of Mexico. The BOEM and the BSEE, have in recent years issued more stringent guidelines for tie-downs on drilling units and permanent equipment and facilities attached to outer continental shelf production platforms, moored drilling unit fitness, as well as other guidelines and regulations in an attempt to increase the likelihood of the survival of offshore drilling units during a hurricane. Implementation of new guidelines or regulations that may apply to our drilling units may subject us to increased costs and limit the operational capabilities of our drilling units.
Failure to obtain or retain highly skilled personnel, and to ensure they have the correct visas and permits to work in the locations in which they are required, could adversely affect our operations.
We require highly skilled personnel in the right locations to operate and provide technical services and support for our business.
Competition for skilled and other labor required for our drilling operations has increased in recent years as the number of rigs activated or added to worldwide fleets has increased, and this may continue to rise. Notwithstanding the general downturn in the drilling industry, in some regions, such as Brazil and Western Africa, the limited availability of qualified personnel in combination with local regulations focusing on crew composition, are expected to further increase the demand for qualified offshore drilling crews, which may increase our costs. These factors could further create and intensify upward pressure on wages and make it more difficult for us to staff and service our rigs. Such developments could adversely affect our financial results and cash flow.flows. Furthermore, as a result of any increased competition for qualified personnel, or as a result of our Chapter 11 Proceedings, we may experience a reduction in the experience level of our personnel, which could lead to higher downtime and more operating incidents.
Our ability to operate worldwide, depends on our ability to obtain the necessary visas and work permits for our personnel to travel in and out of, and to work in, the jurisdictions in which we operate. Governmental actions in some of the jurisdictions in which we operate may make it difficult for us to move our personnel in and out of these jurisdictions by delaying or withholding the approval of these permits. If we are not able to obtain visas and work permits for the employees we need for operating our rigs on a timely basis, or for third-party technicians needed for maintenance or repairs, we might not be able to perform our obligations under our drilling contracts, which could allow our customers to cancel the contracts. Please see “-Our“Our customers may seek to cancel or renegotiate their contracts to include unfavorable terms such as unprofitable rates, particularly in the circumstance that operations are suspended or interrupted”interrupted” for more information.
Labor costs and our operating restrictions that apply could increase following collective bargaining negotiations and changes in labor laws and regulations.
Some of our employees are represented by collective bargaining agreements. The majority of these employees work in Brazil Mexico, Nigeria, Norway and the United Kingdom.Norway. In addition, some of our contracted labor works under collective bargaining agreements. As part of the legal obligations in some of these agreements, we are required to contribute certain amounts to retirement funds and pension plans and are restricted in our ability to dismiss employees. In addition, many of these represented individuals are working under agreements that are subject to salary negotiation. These negotiations could result in higher personnel costs, other increased costs or increased operating restrictions that could adversely affect our financial performance.
Interest rate fluctuations could affect our earnings and cash flow.
In order to finance our growth, we have incurred significant amounts of debt. Our secured credit facilities have floating interest rates. As such, following our emergence from Chapter 11 Proceedings, significant movements in interest rates could have an adverse effect on our earnings and cash flow. We had previously managed our exposure to interest rate fluctuations through interest rate swaps that effectively fixed a part of our floating rate debt obligations. These swaps were terminated on September 13, 2017 as a result of entering Chapter 11. However, on May 11, 2018 we entered into an agreement to hedge part of our interest rate risk, through the purchase of an interest rate cap. Please see “ITEM 11 - Quantitative and qualitative disclosures about market risk” for further details of our use of derivatives to mitigate exposures to interest rate risk.
As of December 31, 2019, the total outstanding principal amount of our floating rate debt amounted to $5,662 million. We have entered into interest rate cap agreements to cap the interest rate for $4,500 million of this debt.

If we are unable to effectively manage our interest rate exposure through interest rate derivatives in the future, any increase in market interest rates would increase our interest rate exposure and debt service obligations, which would exacerbate the risks associated with our leveraged capital structure.
In addition, in July 2017 the United Kingdom Financial Conduct Authority (the “FCA”), announced that it would phase out LIBOR as a benchmark by the end of 2021. It is unclear whether new methods of calculating LIBOR will be established such that it continues to exist after 2021. Most of our credit and loan facilities are linked to LIBOR. When LIBOR ceases to exist, we may need to amend our credit and loan facilities based on a new standard that is established, if any. Uncertainty as to the nature of LIBOR’s phase-out and alternative reference rates or disruption in the financial market could also have a material adverse effect on our financial condition, results of operations and cash flows.

Fluctuations in exchange rates and the non-convertibility of currencies could result in losses to us.
As a result of our international operations, we are exposed to fluctuations in foreign exchange rates due to revenues being received and operating expenses paid in currencies other than U.S. dollars. Accordingly, we may experience currency exchange losses if we have not adequately hedged our exposure to a foreign currency, or if revenues are received in currencies that are not readily convertible. As our foreign exchange exposure primarily relates to foreign denominated cash and working capital balances, and we do not currently expect these exposures to cause a significant amount of fluctuations to our net income, we do not currently hedge our foreign currency exchange exposure. Although the effect of fluctuations in currency exchange rates caused by our international operations generally has not had a material impact on our overall operating results, it is no guarantee that our future operating results will be adversely impacted by fluctuations in currency exchange rates. We may also be unable to collect revenues because of a shortage of convertible currency available in the country of operation, controls over currency exchange or controls over the repatriation of income or capital.
We use the U.S. dollar as our functional currency because the majority of our revenues and expenses are denominated in U.S. dollars. Accordingly, our reporting currency is also U.S. dollars. We do, however, earn revenues and incur expenses in other currencies such as Norwegian kroner, U.K. pounds sterling, Brazilian real, Nigerian naira and Angolan Kwanza and there is a risk that currency fluctuations could have an adverse effect on our statements of operations and cash flows. In addition, Brexit, or similar events in other jurisdictions, can impact global markets, which may have an adverse impact on our business and operations as a result of changes in currency, exchange rates, tariffs, treaties and other regulatory matters.
A change in tax laws in any country in which we operate could result in higher tax expense.
We conduct our operations through various subsidiaries in countries throughout the world. Tax laws, regulations and treaties are highly complex and subject to interpretation. Consequently, we are subject to changing tax laws, regulations and treaties in and between the countries in which we operate, including treaties between the United States and other nations. Our income tax expense is based upon our interpretation of the tax laws in effect in various countries at the time that the expense was incurred. A change in these tax laws, regulations or treaties, including those in and involving the United States, or in the interpretation thereof, or in the valuation of our deferred tax assets, which is beyond our control, could result in a materially higher tax expense or a higher effective tax rate on our worldwide earnings.
In addition, the United States enacted major tax reform legislation in December 2017. This is likely to continue to have a material impact on the amount of overall U.S. tax expense of the Group due to reduced effective tax deductions for certain payments our U.S. operating companies make to non-U.S. rig owners and other group and affiliated companies.
A loss of a major tax dispute or a successful tax challenge to our operating structure, intercompany pricing policies or the taxable presence of our subsidiaries in certain countries could result in a higher taxes on our worldwide earnings, which could result in a significant negative impact on our earnings and cash flows from operations.
Our tax returns are subject to review and examination. We do not recognize the benefit of income tax positions we believe are more likely than not to be disallowed upon challenge by a tax authority. If any tax authority successfully challenges our operational structure, intercompany pricing policies or the taxable presence of our subsidiaries in certain countries; or if the terms of certain Double Tax Treaties are interpreted in a manner that is adverse to our structure; or if we lose a material tax dispute in any country, our taxes on our worldwide earnings could increase substantially and our earnings and cash flows from operations could be materially adversely affected. For additional information on tax assessments and claims issued, refer to Note 12 - “Taxation” of the Consolidated Financial Statements included within this report.

A change in laws and regulations in any country in which we operate could have a negative impact on our business
During 2017, the E.U. Economic and Financial Affairs Council released a list of non-cooperative jurisdictions for tax purposes. The stated aim of the list, and accompanying report, was to promote good governance worldwide in order to maximize efforts to prevent tax fraud and tax evasion. Bermuda was not on the list of non-cooperative jurisdictions, but did feature in the report as having committed to address concerns relating to economic substance by December 31, 2018. In accordance with that commitment, Bermuda enacted the Economic Substance Act 2018 (the “ESA”) in December 2018. The ESA requires each registered entity to maintain a substantial economic presence in Bermuda and provides that a registered entity that carries on a relevant activity complies with economic substance requirements if (i) it is directed and managed in Bermuda, (ii) its core income-generating activities (as may be further prescribed) are undertaken in Bermuda with respect to the relevant activity, (iii) it maintains adequate physical presence in Bermuda, (iv) it has adequate full time employees in Bermuda with suitable qualifications and (v) it incurs adequate operating expenditure in Bermuda in relation to the relevant activity. A registered entity that carries on a relevant activity is obliged under the ESA to file a declaration with the Bermuda Registrar of Companies on an annual basis containing certain information. At present, the impact of the ESA is still unclear and it is difficult to predict the nature and effect of these requirements on the Company and its subsidiaries incorporated in Bermuda. We have undertaken an evaluation and continue to monitor the potential effect ESA will have on the Company and its Bermuda subsidiaries. For additional information on litigation matters that we are currently involved in, please see “ITEM 8. Financial Information-A. Consolidated Statements and Other Financial Information-Legal Proceedings.”
Climate change and the regulation of greenhouse gases could have a negative impact on our business.
Due to concern over the risk of climate change, a number of countries, the E.U. and the IMO have adopted, or are considering the adoption of, regulatory frameworks to reduce greenhouse gas emissions in the shipping industry. For example, ships (including rigs and drillships) must comply with IMO and E.U. regulations relating to the collection and reporting of data relating to greenhouse gas emissions. In April 2018, the IMO adopted a strategy to, among other things, reduce the 2008 level of greenhouse gas emissions from the shipping industry by 50% by the year 2050.
Other governmental bodies such as the United States Environmental Protection Agency and the State of California also may regulatebegin regulating greenhouse gas emissions from shipping sources in the future. Thefuture, but the future of such regulations is difficult to predict because the requirements continue to evolve.predict.
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Compliance with existing regulations and changes in laws, regulations and obligations relating to climate change could increase our costs to operate and maintain our assets, and might also require us to install new emission controls, acquire allowances or pay taxes related to our greenhouse gas emissions, or administer and manage a greenhouse gas emissions program. Any passage of climate control legislation or other regulatory initiatives by the IMO, the E.U., the United States or other countriesjurisdictions in which we operate, or any treaty or agreement adopted at the international level, to succeedsuch as the Kyoto Protocol or Glasgow Climate Pact, which restricts emissions of greenhouse gases could require us to make significant financial expenditures which we cannot predict with certainty at this time.
Additionally, adverse effects upon the oil and gas industry relating to climate change, including growing public concern about the environmental impact of climate change, may also adversely affect demand for our services. For example, increased regulation of greenhouse gases or other concerns relating to climate change may reduce the demand for oil and gas in the future or create greater incentives for the use of alternative energy sources. In addition, parties concerned about the potential effects of climate change have directed their attention at sources of funding for energy companies, which has resulted in certain financial institutions, funds and other sources of capital, restricting or eliminating their investment in or lending to oil and gas activities. Any material adverse effect on the oil and gas industry relating to climate change concerns could have a significant adverse financial and operational impact on our business and operations.
Finally, the impacts of severe weather, such as hurricanes, monsoons and other catastrophic storms, resulting from climate change could cause damage to our equipment and disruption to our operations and cause other financial and operational impacts, including impacts on our major customers.

Acts of terrorism, piracy, cyber-attack, political and social unrest could affect the markets for drilling services, which may have a material and adverse effect on our results of operations.operating results.
Acts of terrorism, piracy, and political and social unrest, brought about by world political events or otherwise, have caused instability in the world’s financial and insurance markets in the past and may occur in the future. Such acts could be directed against companies such as ours. Our drilling operations could also be targeted by acts of sabotage carried out by environmental activist groups.
We rely on information technology systems and networks in our operations and administration of our business. Our drilling operations or other business operations could be targeted by individuals or groups seeking to sabotage or disrupt our information technology systems and networks, or to steal data. A successful cyber-attack could materially disrupt our operations, including the safety of our operations, or lead to an unauthorized release of information or alteration of information on our systems. Any such attack or other breach of our information technology systems could have a material adverse effect on our business and results of operations.operating results.
In addition, acts of terrorism and social unrest could lead to increased volatility in prices for crude oil and natural gas and could affect the markets for drilling services and result in lower dayrates. Insurance premiums could also increase and coverage may be unavailable in the future. Increased insurance costs or increased costs of compliance with applicable regulations may have a material adverse effect on our results of operations.operating results.

Our drilling contracts with national oil companies may expose us to greater risks than we normally assume in drilling contracts with non-governmental customers.
We currently own and operate rigs that are contracted with national oil companies. The terms of these contracts are often non-negotiable and may expose us to greater commercial, political and operational risks than we assume in other contracts, such as exposure to materially greater environmental liability, personal injury and other claims for damages (including consequential damages), or the risk that the contract may be subject to litigation, arbitration, other proceedings and regulatory investigationsterminated by our customer without cause on short-term notice, contractually or by governmental action, under certain conditions that couldmay not provide us with an early termination payment. We can provide no assurance that the increased risk exposure will not have an adverse effectimpact on us.
We are currently involved in various litigation and arbitration matters, and we anticipateour future operations or that we will be involved in dispute matters from timenot increase the number of rigs contracted to time in the future. The operating and other hazards inherent in our business expose us to disputes, including personal injury disputes, environmental and climate change litigation,national oil companies with commensurate additional contractual disputes with customers, intellectual property and patent disputes, tax or securities disputes, regulatory investigations and maritime lawsuits, including the possible arrest of our drilling units. We cannot predict, with certainty, the outcome or effect of any claim or other dispute matters, or a combination of these. If we are involved in any future disputes, or if our positions concerning current disputes are found to be incorrect, there may be an adverse effect on our business, financial position, results of operations and available cash, because of potential negative outcomes, the costs associated with asserting our claims or defending such lawsuits or proceedings, and the diversion of management’s attention to these matters.
We may also be subject to significant legal costs in defending these actions, which we may or may not be able to recoup depending on the results of such claim. For additional information on litigation matters that we are currently involved in, please see Note 34 - “Commitments and Contingencies” to the Consolidated Financial Statements included within this report.risks.
We cannot guarantee that the use of our drilling units will not infringe the intellectual property rights of others.
The majority of the intellectual property rights relating to our drilling units and related equipment are owned by our suppliers. In the event that one of our suppliers becomes involved in a dispute over an infringement of intellectual property rights relating to equipment owned by us, we may lose access to repair services or replacement parts or could be required to cease using some equipment. In addition, our competitors may assert claims for infringement of intellectual property rights related to certain equipment on our drilling units and we may be required to stop using such equipment and/or pay damages and royalties for the use of such equipment. The consequences of these technology disputes involving our suppliers or competitors could adversely affect our financial results and operations. We have indemnity provisions in some of our supply contracts to give us some protection from the supplier against intellectual property lawsuits. However, we cannot make any assurances that these suppliers will have sufficient financial standing to honor their indemnity obligations or guarantee that the indemnities will fully protect us from the adverse consequences of such technology disputes. We also have provisions in some of our client contracts to require the client to share some of these risks on a limited basis, but we cannot provide assurance that these provisions will fully protect us from the adverse consequences of such technology disputes. For information on certain intellectual property litigation that we are currently involved in, please see Note 34- “Commitments30 – Commitments and Contingencies”contingencies to the Consolidated Financial Statements included withinherein.


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The novel coronavirus, or COVID-19, pandemic has affected and may materially adversely affect, and any future outbreak of any other highly infectious or contagious diseases may materially adversely affect, our operations and our financial performance and condition, operating results and cash flows.

The COVID-19 pandemic has affected, and may materially adversely affect, our business and financial and operating results. The severity, magnitude and duration of the COVID-19 pandemic is uncertain, rapidly changing and hard to predict. In the future, COVID-19 or another similar pandemic could negatively impact our business in numerous ways, including, but not limited to, the following:
•our revenue may be reduced if the pandemic results in an economic downturn or recession that leads to a prolonged decrease in the demand for natural gas, NGLs and oil;
•our operations may be disrupted or impaired, if a significant portion of our employees or contractors are unable to work due to illness or if field operations are suspended or temporarily shut-down or restricted due to control measures designed to contain the pandemic; and
•the disruption and instability in the financial markets and the uncertainty in the general business environment may affect our ability to raise capital.
To the extent the COVID-19 pandemic adversely affects our business and financial results, it may also have the effect of heightening many of the other risks set forth herein, such as those relating to our financial performance, our ability to access capital and credit markets, our credit ratings and debt obligations. The rapid development and fluidity of this report.
Wesituation precludes any prediction as to the ultimate adverse impact of COVID-19 on our business, which will depend on directors who are associated with affiliated companies, which may create conflicts of interest.
Our largest shareholder is Hemen Holding Limited, or Hemen. Three of our directors also serve as directors of other companies affiliated with Hemen. Our directors owe fiduciary duties to both usnumerous evolving factors and other related parties and may have conflicts of interest in matters involving or affecting us and our customers. Please see “ITEM 6. Directors, Senior management and Employees - C. Board Practices” for more information.
We have agreed to market certain rigs of our affiliated entity, NOL, which may create conflicts of interest.

We executed an agreement with NODL for the commercial management of certain of the rigs acquired by our affiliated entity, NODL, which subsequently novated its rights and obligations to NOL.

To date, we have entered into drilling contracts in respect of certain NOL units directly with customers with back-to-back arrangements in place between us and NOL to allocate risk and liability back to NOL commensurate with the structure. Ultimately, we are exposed to the creditworthiness of NOL, to the extent that we have an exposure to the customer under the drilling contract and seek recovery under the back-to-back arrangements. We earn an incentivized management fee from NOL that is intended to reward us for the services we provide and the risksfuture developments that we are exposednot able to predict, including the length of time that the pandemic continues, its effect on the demand for natural gas, NGLs and oil, the response of the overall economy and the financial markets as well as providing a rightthe effect of first refusalgovernmental actions taken in response to the pandemic.

Risks relating to Our Shareholders

Our primary listing with respect to our Shares is currently Euronext Expand, which could affect the ability of U.S. shareholders to resell their Shares or may effect liquidity or price.

Our primary listing with respect to our Shares is currently Euronext Expand, and our Shares are not currently listed for purchasetrading on any U.S. national securities exchange. Thus, U.S. holders of our Shares may be required to trade such Shares outside the U.S. The absence of an active U.S. trading market could decrease the liquidity or price of the unit. We currently have stacked rigs that were available but not competitiveShares held by U.S. holders.

A delisting of our Shares from a technicalEuronext Expand could negatively impact us.

A delisting of our Shares from Euronext Expand could negatively impact us because it could (i) reduce the liquidity and market price of our Shares, (ii) reduce the number of investors willing to hold or cost perspective with the NOL units that secured drilling contracts through us.

We may be restricted from granting long-term contracts as a result of the Omnibus Agreement with Seadrill Partners.
We have entered into an omnibus agreement with Seadrill Partners, or the Omnibus Agreement, in connection with its initial public offering,acquire our Shares, which may restrictcould negatively impact our ability to among other things, acquire, own, operate or contract for certain drilling units operatingraise equity financing, (iii) limit our ability to offer and sell freely tradable securities, including under drilling contracts of fiveU.S. State securities laws, thereby preventing us from accessing the public capital markets, (iv) impair our ability to provide equity incentives to our employees, and (v) lead to a default under one or more years, unless we offerof our credit facilities under certain circumstances.

Certain of our new credit facilities include a covenant requiring our Shares to sell such drilling unitsbe listed on the OSE and/or the NYSE subject to Seadrill Partners. These restrictions could harm our business and adversely affect our financial position and results of operations and ability to implement our growth strategy. For additional information, please see “ITEM 7. Major Shareholders and Related Party Transactions - B. Related Party Transactions-Seadrill Partners-Omnibus Agreement with Seadrill Partners.”
If we fail to comply with requirements relating to internal control over financial reporting our business could be harmed and our common stock price could decline.
Rules adopted by the Securities and Exchange Commission pursuant to Section 404satisfaction of the Sarbanes-Oxley Act of 2002 require that we assess our internal control over financial reporting annually. The rules governing the standards that must be met for management to assess its internal control over financial reporting are complex. They require significant documentation, testing, and possible remediation of any significant deficiencies in and / or material weaknesses of internal controls in order to meet the detailed standards under these rules. Although we have evaluated our internal control over financial reporting as effective as of December 31, 2019, in future fiscal years, we may encounter unanticipated delays or problems in assessing our internal control over financial reporting as effective or in completing our assessments by the required dates. In addition, we cannot assure you that our independent registered public accountants will attest that internal control over financial reporting is effective in future fiscal years.

applicable listing requirements. If we are unable to maintain effective internal controls over financial reportingsatisfy such covenant, we could be in default under such facilities. Given the cross-default and disclosure controls, investors may lose confidencecross-acceleration provisions in our reported financial information, which could lead to a decline in the price of common shares, limit our ability to access the capital markets in the future, and require us to incur additional costs to improve our internal control over financial reporting and disclosure control systems and procedures. Further, if lenders and other debt financing sources lose confidenceagreements, we could be in default under those other debt agreements as well, with the reliabilityresult that some or all of our financial statements, itindebtedness could have a material adverse effect on our ability to secure replacement or additional financing, or amendments to existing debt documents, on terms acceptable to us or at all.
Public health threats, such asbe declared immediately due and payable (or accelerated after the recent coronavirus, or COVID-19, outbreak could have an adverse effect on our operations and financial results.
Public health threats, such as Ebola, influenza, the Zika virus, forms of Coronavirus such as SARS or COVID-19, and other highly communicable diseases or viruses, outbreaks of which have from time to time occurred in various parts of the world in which we operate, could adversely impact our operations, and the operations of our customers. For example, the recent outbreak of COVID- 19 has been declared by the World Health Organization as a pandemic and has spread across the globe to many countries in which we do business and is impacting worldwide economic activity. Public health threats in any area, including areas where we do not operate, could disrupt international transportation and supply chains. Our crews generally work on a rotation basis, with a substantial portion relying on international air transport for rotation. Although we have not had significant issues to date as a result of COVID-19, any disruptions could impact the cost of rotating our crews, and possibly impact our ability to maintain a full crew on all rigs at a given time. In addition, it is not possible at this time to estimate the impact that COVID-19 could have on our business. The continued spread of COVID-19, the measures taken by the governments of countries affected, actions taken to protect employees, and the impact of the pandemic on various business activities in affected countries and any other public health threats and related consequences could adversely affect our financial condition, results of operations and cash flows.
Data protection and regulations related to privacy, data protection and information security could increase our costs, and our failure to comply could result in fines, sanctions or other penalties, which could materially and adversely affect our results of operations, as well as have an impact on our reputation.
We are subject to regulations related to privacy, data protection and information security in the jurisdictions in which we do business. As privacy, data protection and information security laws are interpreted and applied, compliance costs may increase, particularly in the context of ensuring that adequate data protection and data transfer mechanisms are in place.
In recent years, there has been increasing regulatory enforcement and litigation activity in the areas of privacy, data protection and information security in the U.S. and in various countries in which we operate. In addition, legislators and/or regulators in the U.S., the E.U. and other jurisdictions in which we operate are increasingly adopting or revising privacy, data protection and information security laws that could create compliance uncertainty and could increase our costs or require us to change our business practices in a manner adverse to our business. For example, the E.U. and U.S. Privacy Shield framework was designed to serve as an appropriate safeguard in relation to international transfers of personal data from the EEA to the U.S. However, this self-certification faces a number of legal challenges and is subject to annual review. This has resulted in some uncertainty and obligations to look at other appropriate safeguards to protect the security and confidentiality of personal data in the context of cross-border data transfers. Moreover, compliance with current or future privacy, data protection and information security laws could significantly impact our current and planned privacy, data protection and information security related practices, our collection, use, sharing, retention and safeguarding of consumer and/or employee information, and some of our current or planned business activities. Our failure to comply with privacy, data protection and information security laws could result in fines, sanctions or other penalties, which could materially and adversely affect our results of operations and overall business, as well as have an impact on our reputation. For example, the General Data Protection Regulations (EU) 2016/679 (the “GDPR”), as supplemented by any national laws (such as in the U.K., the Data Protection Act 2018) and further implemented through binding guidance from the European Data Protection Board, came into effect on May 25, 2018. The GDPR expanded the scope of the EU data protection law to all foreign companies processing personal data of EEA individuals and imposed a stricter data protection compliance regime, including the introduction of administrative fines for non-compliance up to 4% of global total annual worldwide turnover or €20 million (whichever is higher), depending on the type and severity of the breach, as well as the right to compensation for financial or non-financial damages claimed by any individuals under Article 82 GDPR and the reputational damages that our business may be facing as a resultexpiration of any personal data breach or violation of the GDPR.applicable grace period), and we may not have sufficient assets available to satisfy our obligations.


Risks Relating to Our Common Shareholders

The price of the Shares may be volatile or may decline regardless of our operating performance, and investors may not be able to resell the Shares at or above their initial purchase price.
The market price for the Shares may be volatile and may fluctuate significantly in response to a number of factors, most of which we cannot control, including, among others:
• announcements concerning the offshore drilling market, including changes in oil and gas prices and the state of the global economy onand market outlook for our various geographical operating sectors and classes of rigs;
• fluctuations in the market value of our drilling units and the amount of debt we can incur under certain covenants in its current and future debt financing agreements;
• general and industry-specific economic conditions;
• changes in financial estimates or recommendations by securities analysts or failure to meet analysts’ performance expectations;
• additions or departures of key members of management;
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• any increased indebtedness we incur in the future;
• speculation or reports by the press or investment community with respect to Seadrill or Seadrill Partners, or the industry in general;
• announcements by us or our competitors of significant contracts, acquisitions, dispositions, strategic partnerships, joint ventures or capital commitments;
• changes or proposed changes in laws or regulations affecting the oil and gas industry or enforcement of these laws and regulations, or announcements relating to these matters; and
• general market, political and economic conditions, including any such conditions and local conditions in the markets in which we operate.
These and other factors may lower the market price of the Shares, regardless of our actual operating performance. In the event of a drop in the market price of the Shares, investors could lose a substantial part or all of itstheir investment in the Shares. In addition, the stock markets have experienced extreme price and volume fluctuations that have affected and continue to affect the market prices of equity securities of many companies. Shareholders may initiate securities class action litigation following periods of market volatility. If we were to become involved in securities litigation, we could incur substantial costs and our resources and the attention of management could be diverted from the business, which could have a negative effect on the operating results of operations and thus the price for the Shares.
The market price of our common sharesShares has fluctuated widely and may fluctuate widely in the future.
The market price of our common sharesShares has fluctuated widely and may continue to do so as a result of many factors, such as actual or anticipated fluctuations in our operating results, the outcome of our amendmentany consent or negotiations with our lenders under our secured credit facilities, changes in financial estimates by securities analysts, economic and regulatory trends, general market conditions, rumors and other factors, many of which are beyond our control. Further, there may be no continuing active or liquid public market for our common shares.Shares. If an active trading market for our common sharesShares does not continue, the price of our common sharesShares may be more volatile and it may be more difficult and time consuming to complete a transaction in our common shares,Shares, which could have an adverse effect on the realized price of our common shares.Shares. In addition, an adverse development in the market price for our common sharesShares could negatively affect our ability to issue new equity to fund our activities.
If we cannot meet the continued listing requirements of the NYSE and/or the OSE, such stock exchange may delist our common share.
On March 26, 2020, we received written notification from the NYSE that we are not in compliance with the continued listing standard set forth in Section 802.01C of the NYSE Listed Company Manual (“Section 802.01C”). As of March 24, 2020, the average closing price of our common share was less than $1.00 per share over a consecutive 30 trading-day period (the “Notice”).
Pursuant to Section 802.01C, we can regain compliance with the minimum share price requirement if, during the six-month cure period following receipt of the Notice, on the last trading-day of any calendar month, Seadrill common share has a closing share price and a 30 trading-day average closing share price of at least $1.00.  In the event that at the expiration of the six-month cure period, both a $1.00 closing share price on the last trading day of the cure period and a $1.00 average closing share price over the 30 trading-day period ending on the last trading day of the cure period are not attained, the NYSE will commence suspension and delisting procedures with respect to Seadrill’s common share.  We intend to inform the NYSE that we will cure the price condition, if necessary, by seeking shareholder approval of a share consolidation no later than our next annual meeting, and implementing such action, if necessary, promptly after shareholder approval. In this instance, the price condition will be deemed cured if the price promptly exceeds $1.00 per share, and the price remains above the level for at least the following 30 trading days. The NYSE has confirmed that the six-month cure period requirement does not apply if we decide to take an action that requires shareholder approval, as long as the action is implemented promptly after the annual general meeting.

The NYSE’s continued listing standards also provide that a listed company will be considered to be below compliance if its average closing share price reaches an "abnormally low" level or if market capitalization over a consecutive 30 trading-day period is less than $15 million (which rule is currently waived until June 30, 2020). If our average market capitalization over a consecutive 30 trading-day period falls below $15 million thereafter or reaches an abnormally low level, the NYSE will initiate suspension and delisting procedures.

Further, in the event that we file for or announce an intention to file for bankruptcy protection, the NYSE continued listing standards permit the NYSE, in its sole discretion, to seek immediate suspension and delisting of our securities.


Our common share also has a secondary listing on the OSE. If our common share ceases to be listed on the NYSE, the OSE listing would change to be a primary listing, subject to our compliance with continued listing standards.

A delisting of our common share from the NYSE and/or the OSE could negatively impact us because it could: (i) reduce the liquidity and market price of our common share, (ii) reduce the number of investors willing to hold or acquire our common share, which could negatively impact our ability to raise equity financing, (iii) limit our ability offer and sell freely tradable securities, thereby preventing us from accessing the public capital markets, (iv) impair our ability to provide equity incentives to our employees and (v) lead to a default under one or more of our credit facilities under certain circumstances. Certain of our credit facilities include a covenant requiring our common share to be listed on the NYSE or the OSE or, in certain cases another internationally recognized stock exchange; thus, if our common share were to be delisted from both the NYSE and the OSE and not listed on another internationally recognized exchange permitted under such credit facilities, we could be in default under such facilities. Given the cross-default and cross-acceleration provisions in our other debt agreements, we could be in default under those other debt agreements as well, with the result that some or all of our indebtedness could be declared immediately due and payable (or accelerated after the expiration of any applicable grace period), and we may not have sufficient assets available to satisfy our obligations.

Receipt of the Notice by Seadrill, on the other hand, is not a violation of the terms of, and does not constitute a default or event of default under, any of our debt obligations, and is not anticipated to impact the Company’s current discussions with our secured lenders regarding potential amendments to our credit facilities. The Notice also has no immediate impact on the listing of Seadrill’s common share, which will continue to be listed and traded on the NYSE during the applicable cure period under the symbol “SDRL,” subject to our compliance with other continued listing requirements set forth in the NYSE Listed Company Manual but will have an added designation of “.BC” to indicate the status of the common shares as below compliance with the NYSE continued listing standards.  The “.BC” indicator will be removed at such time as Seadrill is deemed compliant.
The issuance of share-based awards may dilute investors’ holding of the Shares.
An aggregate of 11.1 million5.5% of the Shares are reserved for issuance for grant to our employees pursuant to awards to be made under the EmployeeManagement Incentive Plan in accordance with the Plan. The exercise of equity awards, including any share options that we may grant in the future, could have an adverse effect on the market for the Shares, including the price that an investor could obtain for their Shares. Investors may experience dilution in the net tangible book value of their investment upon the exercise of any share options that may be granted or issued pursuant to themanagement or employee incentive planplans in the future.
Substantial sales of or trading in the Shares could occur, which could cause the share price to be adversely affected.
A limited number of holdersshareholders own a substantial portion of the Shares, which may be traded on the NYSE or the OSE if such Shares are freely tradable or covered by an effective registration statement. Certain Shares became freely tradable immediately following the Debtors’ emergence from Chapter 11 Proceedings and up to 76,359,119 of our common shares may be sold pursuant to a resale registration statement that we are required to maintain pursuant to a registration rights agreement with certain investors. Some of the creditors who received Shares in connection with the Plan may sell these shares for any number of reasons.
We cannot predict what effect, if any, future sales of the Shares, or the availability of Shares for future sales, will have on their market price. Sales of substantial amounts of the Shares in the public market, or the perception that such sales could occur, may adversely affect the market price of the Shares, making it more difficult for holders to sell their Shares at a time and price that they deem appropriate. In addition, investment firms that are party to certain put and call agreements may hedge their positions by trading the Shares. The sale of significant amounts of the Shares, substantial trading in the Shares, hedging activities or the perception in the market that any of these activities will occur, may adversely affect the market price of the Shares. Sales of the Shares could also impair our ability to raise capital, should we wish to do so, which may cause the shareShare price to decline.
We may pay little or no dividends on the Shares.
The payment of any future dividends to the Company’s shareholders will depend on decisions that will be made by the Board of Directors and will depend on then existing conditions, including the Company’s operating results, financial conditions, contractual and financing restrictions, corporate law restrictions, capital agreements, the applicable laws of Bermuda and business prospects. The Company may pay little or no dividends for the foreseeable future.
In addition, since we are a holding company with no material assets other than the shares of our subsidiaries through which we conduct our operations, our ability to pay dividends will depend on our subsidiaries distributing to us their earnings and cash flow.flows. Furthermore, the terms of our debt documents maysecured credit facilities prohibit or otherwise limit our and certain of our subsidiaries’ ability to pay dividends and distributions without consent of the requisite debt holders. For more information, see “-The“The covenants inunder our debt agreementssecured credit facilities impose operating and financial restrictions on us that could significantly impact our ability to operate our business and a breach of which could result in a default under the terms of these agreements, which could accelerate our repayment of funds that we have borrowed.”We suspended the payment of dividends in November 2014, and we cannot predict when, or if, dividends will be paid in the future.
U.S. tax authorities may treat us as a “passive foreign investment company” for U.S. federal income tax purposes, which may have adverse tax consequences for U.S. shareholders.
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A foreign corporation will be treated as a “passive foreign investment company” or PFIC, for U.S. federal income tax purposes if either (1) at least 75% of its gross income for any taxable year consists of certain types of “passive income” or (2) at least 50% of the average value of the corporation’s assets produce or are held for the production of those types of “passive income.” For purposes of these tests, “passive income” includes dividends, interest and gains from the sale or exchange of investment property, and rents and royalties other than rents and royalties that are received from unrelated parties in connection with the active conduct of a trade or business. For the purposes of these tests, income derived from the performance of services does not constitute “passive income.” As discussed further below, U.S. shareholders of a PFIC are

subject to certain adverse U.S. federal income tax consequences including a disadvantageous U.S. federal income tax regime with respect to distributions they receive from the PFIC and the gain, if any, they derive from the sale or other disposition of their shares in the PFIC.
Based on the current and anticipated valuation of our assets, including goodwill, and composition of our income and assets, we intend to take the position that we will not be treated as a PFIC for U.S. federal income tax purposes for our current taxable year or in the foreseeable future. Our position is based on valuations and projections regarding our assets and income. While we believe these valuations and projections to be accurate, such valuations and projections may not continue to be accurate. Moreover, the determination as to whether we are a PFIC for any taxable year is based on the application of complex U.S. federal income tax rules, which are subject to differing interpretations, and is not determinable until after the end of such taxable year. Further, we have not sought a ruling from the United States Internal Revenue Service, or IRS, on this matter, the IRS or a court could disagree with our position. In addition, although we intend to conduct our affairs in a manner to avoid, to the extent possible, being classified as a PFIC with respect to any taxable year, the nature of our operations may change in the future, and if so, we may not be able to avoid PFIC status in the future.
If the IRS were to find that we are or have been a PFIC for any taxable year, our U.S. shareholders may face adverse U.S. federal income tax consequences. Under the PFIC rules, unless those shareholders make an election available under the United States Internal Revenue Code of 1986, as amended, or the Code (which election could itself have adverse consequences for such shareholders, as discussed below under “Item 10. Additional Information-E.Item 10 - “Additional Information - E. Taxation”), such shareholders would be liable to pay U.S. federal income tax at the then prevailing income tax rates on ordinary income plus interest upon excess distributions and upon any gain from the disposition of the common shares,Shares, as if the excess distribution or gain had been recognized ratably over the shareholder’s holding period of the common shares.Shares. In the event that our shareholders face adverse U.S. federal income tax consequences as a result of investing in shares of our common stock,Shares, this could adversely affect our ability to raise additional capital through the equity markets. See “ITEM 10. AdditionalItem 10 - “Additional Information - E. Taxation” for a more comprehensive discussion of the U.S. federal income tax consequences to U.S. shareholders if we are treated as a PFIC.
Investors are encouraged to consult their own tax advisers concerning the overall tax consequences of the ownership and disposition of the common sharesShares arising in an investor’s particular situation under U.S. federal, state, local or foreign law.
Because we are a foreign corporation, you may not have the same rights that a shareholder in a U.S. corporation may have.
We are incorporated under the laws of Bermuda, and substantially all of our assets are located outside of the United States. In addition, the majority of our directors and officers generally are or will be non-residents of the United States, and all or a substantial portion of the assets of these non-residents are located outside the United States. As a result, it may be difficult or impossible for you to effect service of process on these individuals in the United States or to enforce in the United States judgments obtained in U.S. courts against us or our directors and officers based on the civil liability provisions of applicable U.S. securities laws.
In addition, you should not assume that courts in the countries in which we are incorporated or where our assets are located (1) would enforce judgments of U.S. courts obtained in actions against us based upon the civil liability provisions of applicable U.S. securities laws or (2) would enforce, in original actions, liabilities against us based on those laws.
We are permitted to adopt certain home country practices in relation to corporate governance, which may afford you less protection.

As a foreign private issuer, we are permitted to adopt certain home country practices in relation to corporate governance matters that differ significantly from the NYSE corporate governance listing standards. These practices may afford less protection to shareholders than they would enjoy if we complied fully with corporate governance listing standards.

As a foreign private issuer listed on the NYSE, we are subject to corporate governance listing standards of the NYSE. However, rules permit a foreign private issuer like us to follow the corporate governance practices of its home country. Certain corporate governance practices in Bermuda, which is our home country, may differ significantly from corporate governance listing standards. Concurrently, we comply with certain NYSE corporate governance listing standards by following certain home country practices. Therefore, our shareholders may be afforded less protection than they otherwise would have under corporate governance listing standards applicable to U.S. domestic issuers.

Certain shareholders have the right to appoint directors to the Board of Directors and their interests may not coincide with other investors’ interests.
Provided that certain circumstances exist, certain of our shareholders are entitled to appoint directors to the Board of Directors pursuant to the Bye-Laws. For example, Hemen currently is entitled to appoint four directors (including the Chairman) to the Board of Directors, two of which must be independent directors and unrelated to Hemen. Each independent director is required to satisfy the independence rules under the United States Securities Exchange Act of 1934 (the “U.S. Securities Exchange Act”), the NYSE and the OSE. As a result of these appointment rights, Hemen, Centerbridge and the Commitment Parties are able to influence the composition of the Board of Directors and Hemen may consequently have influence with respect to the Company’s management, business plans and policies, including the appointment and removal of its officers. The interests of Hemen, Centerbridge and the Commitment Parties may not coincide with other investors’ interests, and their director designees may make decisions other investors disagree with. Please see Section 15.14.2.2 “Election and removal of Directors” for more information on the director appointment procedure.

Our bye-lawsBye-Laws limit shareholders’ ability to bring legal action against its officers and directors.
Our bye-lawsBye-Laws contain a broad waiver by the shareholders of any claim or right of action, both individually and on behalf of the Company, against any of our officers or directors. The waiver applies to any action taken by an officer or director, or the failure of an officer or director to take any action, in the performance of his or her duties, except with respect to any matter involving any fraud or dishonesty on the part of the officer or director. This waiver limits the right of shareholders to assert claims against our officers and directors unless the act or failure to act involves fraud or dishonesty.
Investors may not be able to exercise their voting rights forwith Shares registered in a nominee account.account will need to exercise voting rights through their nominee.
Beneficial owners of the Shares that are registered in a nominee account (such as through brokers, dealers or other third parties) may not be able to vote such Shares unless their ownership is re-registered in their names with the Norwegian Central Securities Depository (“(“VPS”) will not be able to exercise voting rights directly, and they will need to receive the voting materials and provide instructions through their nominee prior to the general meetings. We can provide no assurances that beneficial owners of the Shares will receive the notice of a general meeting in time to instruct their nominees to either effect a re-registration of their Sharesaccordingly or otherwise vote their Shares in the manner desired by such beneficial owners.
Risks RelatingGeneral Risk Factors

The economic effects of “Brexit” may affect relationships with existing and future customers and could have an adverse impact on our business and operating results.
On June 23, 2016, the U.K. held a referendum in which voters approved an exit from the E.U., commonly referred to Our Emergenceas “Brexit”. The U.K.’s withdrawal from Bankruptcythe E.U. occurred on January 31, 2020, but the U.K. remained in the E.U.’s customs union and single market for a transition period that expired on December 31, 2020. On December 24, 2020, the U.K. and the E.U. entered into a trade and cooperation agreement (the
Because our Consolidated Financial Statements reflect fresh start accounting adjustments made upon emergence
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“Trade and Cooperation Agreement”), which was applied on a provisional basis from bankruptcy, financial informationJanuary 1, 2021. While the economic integration does not reach the level that existed during the time the U.K. was a member state of the E.U., the Trade and Cooperation Agreement sets out preferential arrangements in our future financial statementsareas such as trade in goods and in services, digital trade and intellectual property. Negotiations between the U.K. and the E.U. are expected to continue in relation to the relationship between the U.K. and the E.U. in certain other areas which are not covered by the Trade and Cooperation Agreement. The long-term effects of Brexit will not be comparable to Seadrill’s financial information from prior periods.depend on the effects of the implementation and application of the Trade and Cooperation Agreement and any other relevant agreements between the United Kingdom and the European Union.
Upon emergence from Chapter 11 Proceedings, on July 2, 2018, we adopted fresh start accounting in accordanceWe face risks associated with the provisions set forthpotential uncertainty and disruptions that may result from Brexit and the implementation and application of the Trade and Cooperation Agreement, including with respect to volatility in ASC 852, Reorganizations. Adopting fresh start accounting results in a new financial reporting entity with no retained earnings or deficits brought forward. Uponexchange rates and interest rates, disruptions to the adoptionfree movement of fresh start accounting,data, goods, services, people and capital between the U.K. and the E.U. and potential material changes to the regulatory regime applicable to our assets and liabilities were recorded at their fair values which differed materially from the recorded values of our assets and liabilities as reflectedoperations in the Predecessor historical Consolidated Balance Sheets. Thus, our Consolidated Balance SheetsU.K. The uncertainty concerning the U.K.’s future legal, political and Statementseconomic relationship with the E.U. could adversely affect political, regulatory, economic or market conditions in the E.U., the U.K. and worldwide and could contribute to instability in global political institutions, regulatory agencies and financial markets. These developments, or the perception that any of Operations are not comparablethem could occur, have had and may continue to have a material adverse effect on global economic conditions and the stability of global financial markets and could significantly reduce global market liquidity and limit the ability of key market participants to operate in many respectscertain financial markets. In particular, it could also lead to Consolidated Balance Sheetsa period of considerable uncertainty in relation to the U.K. financial and Statements of Operations data for periods priorbanking markets, as well as to adoption of fresh start accounting. You will notthe regulatory process in Europe. Asset valuations, currency exchange rates and credit ratings may also be ablesubject to compare information reflecting our post-emergence Consolidated Financial Statements to information for periods prior to emergence from bankruptcy, without adjusting for fresh start accounting. The lack of comparable historical information may discourage investors from purchasing our common shares. Additionally, the financial information contained in this annual report on Form 20-F may not be indicative of future financial information.increased market volatility.
We may be subject to claimsalso face new regulatory costs and challenges as a result of Brexit that were not discharged in the bankruptcy proceedings, which could have a material adverse effect on our operations. For example, as of January 1, 2021, the United Kingdom lost the benefits of global trade agreements negotiated by the E.U. on behalf of its members, which may result in increased trade barriers that could make our doing business in areas that are subject to such global trade agreements more difficult. In addition, Brexit could lead to legal uncertainty and potentially divergent national laws and regulations as the U.K. determines which laws of the European Union to replace or replicate. There may continue to be economic uncertainty surrounding the consequences of Brexit that adversely impact customer confidence resulting in customers reducing their spending budgets on our services, which could materially adversely affect our business, financial condition and operating results.
We may recognize impairments on long-lived assets, including goodwill and other intangible assets, or recognize impairments on our equity method investments.
As described in the risk factor above, we have previously recognized impairments on our marketable securities and investments in associated companies.
If any of our strategic equity investments decline in value and remain below cost for an extended period, we may be required to write down our investment.
Interest rate fluctuations could affect our earnings and cash flows.
In order to finance our growth, we have incurred significant amounts of debt. Our secured credit facilities have floating interest rates. As such, significant movements in interest rates could have an adverse effect on our earnings and cash flows to the extent interest becomes payable. To manage our exposure to interest rate fluctuations through interest rate swaps on May 11, 2018 we entered into an agreement to hedge part of our interest rate risk, through the purchase of an interest rate cap. Please see Item 11 - “Quantitative and qualitative disclosures about market risk” for further details of our use of derivatives to mitigate exposures to interest rate risk.
If we are unable to effectively manage our interest rate exposure through interest rate derivatives in the future, any increase in market interest rates would increase our interest rate exposure and debt service obligations, which would exacerbate the risks associated with our leveraged capital structure.
The transition away from LIBOR may adversely affect our cost to obtain financing and cause our debt service obligations to increase significantly.
Certain of our agreements use LIBOR (as defined below) as a “benchmark” or “reference rate” for establishing various terms. The London Interbank Offered Rate (“LIBOR”) is the subject of recent national, international and other regulatory guidance and proposals for reform. These reforms and other pressures may cause LIBOR to disappear entirely or to perform differently than in the past. The consequences of these developments cannot be entirely predicted, but could include an increase in the cost of our variable rate indebtedness.
On March 5, 2021, ICE Benchmark Administration (“IBA”), the administrator of the London interbank offered rate, and the Financial Conduct Authority (the “FCA”), the regulatory supervisor of IBA, announced in public statements that the final publication or representativeness date for the London interbank offered rate for Dollars for: (a) 1-week and 2-month tenor settings will be December 31, 2021 and (b) overnight, 1-month, 3-month, 6-month and 12-month tenor settings will be June 30, 2023. The Alternative Reference Rates Committee (“ARRC”) has proposed that the Secured Overnight Financing Rate (“SOFR”) is the rate that represents best practice as the alternative to USD-LIBOR for use in derivatives and other financial contracts that are currently indexed to USD-LIBOR. ARRC has proposed a paced market transition plan to SOFR from USD-LIBOR and organizations are currently working on industry-wide and company-specific transition plans as they relate to derivatives and cash markets exposed to USD-LIBOR. There is no guarantee that a transition from LIBOR to an alternative will not result in financial market disruptions, significant increases in benchmark rates or financing costs to borrowers. We also have material contracts that are indexed to USD-LIBOR and we are monitoring this activity and evaluating the related risks.
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Fluctuations in exchange rates and the non-convertibility of currencies could result in losses to us.
As a result of our international operations, we are exposed to fluctuations in foreign exchange rates due to revenues being received and operating expenses paid in currencies other than U.S. dollars. Accordingly, we may experience currency exchange losses if we have not adequately hedged our exposure to a foreign currency, or if revenues are received in currencies that are not readily convertible. There is no guarantee that our future operating results will not be adversely impacted by fluctuations in currency exchange rates. We may also be unable to collect revenues because of a shortage of convertible currency available in the country of operation, controls over currency exchange or controls over the repatriation of income or capital.
We use the U.S. dollar as our functional currency because the majority of our revenues and expenses are denominated in U.S. dollars. Accordingly, our reporting currency is also U.S. dollars. We do, however, earn revenues and incur expenses in other currencies such as Norwegian krone, U.K. pounds sterling, Brazilian real, Nigerian Naira and Angolan Kwanza and there is a risk that currency fluctuations could have an adverse effect on our statements of operations and profitability.cash flows. In addition, Brexit, or similar events in other jurisdictions, can impact global markets, which may have an adverse impact on our business and operations as a result of changes in currency, exchange rates, tariffs, treaties and other regulatory matters.
Substantially allA change in tax laws in any country in which we operate could result in higher tax expense.
We conduct our operations through various subsidiaries in countries throughout the world. Tax laws, regulations and treaties are highly complex and subject to interpretation. Consequently, we are subject to changing tax laws, regulations and treaties in and between the countries in which we operate, including treaties between the United States and other nations. Our income tax expense is based upon our interpretation of the tax laws in effect in various countries at the time that the expense was incurred. A change in these tax laws, regulations or treaties, including those in and involving the United States, or in the interpretation thereof, or in the valuation of our deferred tax assets, which is beyond our control, could result in a materially higher tax expense or a higher effective tax rate on our worldwide earnings.
A loss of a major tax dispute or a successful tax challenge to our operating structure, intercompany pricing policies or the taxable presence of our subsidiaries in certain countries could result in a higher taxes on our worldwide earnings, which could result in a significant negative impact on our earnings and cash flows from operations.
Our tax returns are subject to review and examination. We do not recognize the benefit of income tax positions we believe are more likely than not to be disallowed upon challenge by a tax authority. If any tax authority successfully challenges our operational structure, intercompany pricing policies or the taxable presence of our subsidiaries in certain countries; or if the terms of certain Double Tax Treaties are interpreted in a manner that is adverse to our structure; or if we lose a material tax dispute in any country, our taxes on our worldwide earnings could increase substantially and our earnings and cash flows from operations could be materially adversely affected. For additional information on tax assessments and claims against the Debtors that arose priorissued, refer to Note 12 - “Taxation” to the dateConsolidated Financial Statements included herein.
Legislation enacted in Bermuda as to Economic Substance many affect our operations
Pursuant to the Economic Substance Act 2018 (as amended) and related regulations (the “ESA”), which came into force on January 1, 2019., a registered entity other than an entity which is resident for tax purposes in certain jurisdictions outside Bermuda (“non-resident entity”) that carries on as a business any one or more of the bankruptcy filing“relevant activities” referred to in the ESA must comply with economic substance requirements. The ESA may require in-scope Bermuda entities which are engaged in such “relevant activities” to be directed and managed in Bermuda, have an adequate level of qualified employees in Bermuda, incur an adequate level of annual expenditure in Bermuda, maintain physical offices and premises in Bermuda or perform core income-generating activities in Bermuda. The list of “relevant activities” includes carrying on any one or more of the following activities: banking, insurance, fund management, financing, leasing, headquarters, shipping, distribution and service center, intellectual property and holding entities. An in-scope Bermuda entity that carries on a relevant activity is obliged under the ESA to file a declaration with the Bermuda Registrar of Companies on an annual basis containing certain information. The ESA could affect the manner in which we operate our business, which could adversely affect our business, financial condition and operating results. If we were addressed duringrequired to satisfy economic substance requirements in Bermuda but failed to do so, we could face automatic disclosure to competent authorities in the Chapter 11 Proceedings or were resolvedEuropean Union of the information filed by the entity with the Bermuda Registrar of Companies in connection with the Planeconomic substance requirements and the ordermay also face financial penalties, restriction or regulation of the Bankruptcy Court confirming the Plan. However, weits business activities and/or may be struck off as a registered entity in Bermuda.
We may be subject to claimslitigation, arbitration, other proceedings and regulatory investigations that were not dischargedcould have an adverse effect on us.
We are currently involved in various litigation and arbitration matters, and we anticipate that we will be involved in dispute matters from time to time in the Chapter 11 Proceedings. Circumstancesfuture. The operating and other hazards inherent in whichour business expose us to disputes, including personal injury disputes, worker health and safety matters, environmental and climate change litigation, contractual disputes with customers, intellectual property and patent disputes, tax or securities disputes, regulatory investigations and maritime lawsuits, including the possible arrest of our drilling units. We cannot predict, with certainty, the outcome or effect of any claim or other dispute matters, or a combination of these. If we are involved in any future disputes, or if our positions concerning current disputes are found to be incorrect, there may be an adverse effect on our business, financial position, operating results and available cash, because of potential negative outcomes, the costs associated with asserting our claims or defending such lawsuits or proceedings, and the diversion of management’s attention to these matters.
At the end of 2021, we and our (previously) affiliated entity NOL entered into and closed a settlement agreement in respect of claims and other obligations that arosecontractual arrangements related to the management and operation of the West Mira and the West Bollsta rigs. NOL is controlled by Hemen Holding Limited, or Hemen and prior to the bankruptcy filingemergence from Chapter 11, was considered our related party. Pursuant to that were not discharged primarily relatesettlement agreement, we continue to have certain actionsobligations to NOL mainly in respect of payment of bareboat hire for the West Bollsta and
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demobilization and transition services of the West Bollsta. For additional information on litigation matters that we are currently involved in, please see Item 8 - “Financial Information - A. Consolidated Statements and Other Financial Information - Legal Proceedings.”
If we fail to comply with requirements relating to internal control over financial reporting our business could be harmed and our Share price could decline.
Rules adopted by governmental unitsthe Securities and Exchange Commission pursuant to Section 404 of the Sarbanes-Oxley Act of 2002 require that we assess our internal control over financial reporting annually. The rules governing the standards that must be met for management to assess its internal control over financial reporting are complex. They require significant documentation, testing, and possible remediation of any significant deficiencies in and / or material weaknesses of internal controls in order to meet the detailed standards under police power authority, wherethese rules. Although we have agreedevaluated our internal control over financial reporting as effective as of December 31, 2021, in future fiscal years, we may encounter unanticipated delays or problems in assessing our internal control over financial reporting as effective or in completing our assessments by the required dates, which could lead to preserve a claimant’s claims, as well as, potentially, instances where a claimant had inadequate noticedecline in the price of Shares, limit our ability to access the bankruptcy filing. In addition, exceptcapital markets in limited circumstances, claims against non-debtor subsidiaries, are generally not subjectthe future, and require us to discharge under the Bankruptcy Code. To the extent any pre-filing liability remains, the ultimate resolution of such claimsincur additional costs to improve our internal control over financial reporting and disclosure control systems and procedures. Further, if lenders and other obligations maydebt financing sources lose confidence in the reliability of our financial statements, it could have a material adverse effect on our ability to secure replacement or additional financing, or amendments to our existing secured credit facilities, on terms acceptable to us or at all.
As a non-accelerated filer, we are not required to have our independent registered public accountants audit our internal controls over financial reporting. As such, we cannot assure you that our independent registered public accountants will attest that internal control over financial reporting is effective in future fiscal years.
Without this attestation, investors may lose confidence in our reported financial information, which could lead to a decline in the price of Shares, limit our ability to access the capital markets in the future, and require us to incur additional costs to improve our internal control over financial reporting and disclosure control systems and procedures. Further, if lenders and other debt financing sources lose confidence in the reliability of our financial statements, it could have a material adverse effect on our ability to secure replacement or additional financing, or amendments to our existing secured credit facilities, on terms acceptable to us or at all.
Data protection and regulations related to privacy, data protection and information security could increase our costs, and our failure to comply could result in fines, sanctions or other penalties, which could materially and adversely affect our operating results, as well as have an impact on our reputation.
We are subject to regulations related to privacy, data protection and information security in the jurisdictions in which we do business. As privacy, data protection and information security laws are interpreted and applied, compliance costs may increase, particularly in the context of operations, profitabilityensuring that adequate data protection and data transfer mechanisms are in place.
In recent years, there has been increasing regulatory enforcement and litigation activity in the areas of privacy, data protection and information security in the U.S. and in various countries in which we operate. In addition, legislators and/or regulators in the U.S., the U.K., the E.U. and other jurisdictions in which we operate are increasingly adopting or revising privacy, data protection and information security laws that could create compliance uncertainty and could increase our costs or require us to change our business practices in a manner adverse to our business. For example, the E.U. and U.S. Privacy Shield framework was designed to serve as an appropriate safeguard in relation to international transfers of personal data from the EEA to the U.S. However, this self-certification faces a number of legal challenges and is subject to annual review. This has resulted in some uncertainty and obligations to look at other appropriate safeguards to protect the security and confidentiality of personal data in the context of cross-border data transfers. Moreover, compliance with current or future privacy, data protection and information security laws could significantly impact our current and planned privacy, data protection and information security related practices, our collection, use, sharing, retention and safeguarding of consumer and/or employee information, and some of our current or planned business activities. Our failure to comply with privacy, data protection and information security laws could result in fines, sanctions or other penalties, which could materially and adversely affect our operating results and overall business, as well as have an impact on our reputation. For example, the General Data Protection Regulations (EU) 2016/679 (the “GDPR”), as supplemented by any national laws (such as in the U.K., the Data Protection Act 2018) and further implemented through binding guidance from the European Data Protection Board, came into effect on May 25, 2018. The GDPR expanded the scope of the EU data protection law to all foreign companies processing personal data of EEA individuals and imposed a stricter data protection compliance regime, including the introduction of administrative fines for non-compliance up to 4% of global total annual worldwide turnover or €20 million (whichever is higher), depending on the type and severity of the breach, as well as the right to compensation for financial condition.or non-financial damages claimed by any individuals under Article 82 GDPR and the reputational damages that our business may be facing as a result of any personal data breach or violation of the GDPR.


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ITEM 4.INFORMATION ON THE COMPANY
ITEM 4.INFORMATION ON THE COMPANY
 
A.HISTORY AND DEVELOPMENT OF THE COMPANY
A.HISTORY AND DEVELOPMENT OF THE COMPANY
1) Company Details
Seadrill Limited (formerly(previously known as “New SDRL Limited”"Seadrill 2021 Limited") or the ("(the "Successor Company"") wasis an exempted company limited by shares incorporated under the Lawslaws of Bermuda and in accordance with the Bermuda Companies Act 1981 (the "Bermuda Companies Act"). It was incorporated on October 15, 2021 under the name Seadrill 2021 Limited. On the Effective Date it became the ultimate parent holding company of the Group at which point its name was changed to Seadrill Limited. The Company is registered with the Bermuda Registrar of Companies under registration number 202100496.
From July 2, 2018 to the Effective Date, the ultimate parent holding company of the Group was Seadrill Limited, an exempted company limited by shares incorporated under the laws of Bermuda on March 14, 2018 with registration number 53439. Seadrill Limited has been the parent company of the group of companies collectively known as Seadrill with effect from the Effective Date.
Seadrill Limited is an exempted company limited by shares and is listed under the Symbol "SDRL" on the New York Stock Exchange53439 ("NYSE") and the Oslo Stock Exchange ("OSE"). Its registered offices are located at Par-la-Ville Place, 4th Floor, 14 Par-la-Ville Road, Hamilton HM 08, Bermuda and our telephone number is +1 (441) 295-6935.
Before the Effective Date, Seadrill's parent company was Seadrill Limited ("Old Seadrill Limited" or "Predecessor Company") which was a company incorporated under the Laws of Bermuda on May 10, 2005 with registration number 36832. Old Seadrill Limited was an exempted company limited by shares and" or the "Predecessor").
Old Seadrill Limited was previously listed under the Symbol "SDRL""SDRL" on the NYSE and the OSE. It heldOn June 19, 2020 it delisted from the sameNYSE and has most recently traded on the OTC Pink Market ("OTCPK") under the Symbol "SDRLF". Following the Effective Date, trading of Old Seadrill Limited's shares was suspended on both exchanges.
On April 28, 2022, Seadrill Limited completed a listing of its shares on Euronext Expand. The Company plans to up-list to the main market of the OSE and to obtain a further listing of the Company's shares on the NYSE.
The Company's registered office is at Park Place, 55 Par-la-Ville Road, Hamilton HM 11, Bermuda. Telephone: +1 (441) 242 1500 and fax: +1 (441) 295-3494. The Company's principal executive offices are located at the Group's corporate headquarters (Seadrill Management) in Chiswick Business Park, Building 11, 2nd Floor, 566 Chiswick High Road, London W4 5YS, United Kingdom, and its telephone number as the Successor Company.at this address is +44 (0) 20 881 4700. The Group's website address is www.seadrill.com.
2) Significant Developments for the Period from January 1, 20182021 through and including December 31, 20192021
In this section we have set out important events in the development of our business. This includes information concerning the nature and results of any material reclassification, merger or consolidation of the company or any of its significant subsidiaries; acquisitions or dispositions of material assets other than in the ordinary course of business; any material changes in the mode of conducting the business; material changes in the types of products produced or services rendered; name changes; or the nature and results of any bankruptcy, receivership or similar proceedings with respect to the company or significant subsidiaries. This section covers the period from the beginning of our last full financial year.
a)i. Chapter 11 Reorganization
This section provides an overviewOn February 22, 2022, Seadrill concluded its comprehensive restructuring process and emerged from Chapter 11 bankruptcy protection. The following major changes to Seadrill’s capital structure were achieved through the restructuring:
1.Additional $350 million of liquidity raised;
2.Obligations under external credit facilities decreased from $5,662 million to $683 million of reinstated debt with maturity in 2027;
3.Future obligations under finance lease arrangements in respect of the West Taurus, West Hercules and West Linus substantially eliminated; and
4.Elimination of guarantees previously provided to holders of the senior notes previously issued by the NSNCo group.
Seadrill emerged from bankruptcy with cash of $486 million, of which $335 million was unrestricted and $151 million was restricted. Seadrill also had $125 million undrawn on its new revolving credit facility which together with the unrestricted cash provided $460 million of liquidity to the Successor company. Following emergence, Seadrill had total debt obligations of $908 million. This comprised $683 million outstanding on reinstated credit facilities; $175 million drawn on its new term loan; and a $50 million convertible bond.
In order to substantially eliminate future commitments under capital lease arrangements with SFL, Seadrill rejected the West Taurus lease through the bankruptcy court in early 2021 and negotiated amendments to the leases of West Hercules and West Linus in August 2021 and February 2022, respectively. The amended leases for West Hercules and West Linus are short term and we expect to deliver both rigs back to SFL in 2022. In addition to reducing the lease terms, the lease amendments extinguished Seadrill’s obligations to purchase the units at the end of the leases (amongst other changes).
As part of Seadrill’s wider process, NSNCo, the holding company for investments in SeaMex, Seabras Sapura, and Archer, concluded a separate restructuring process on January 20, 2022. The restructuring was achieved using a pre-packaged Chapter 11 Proceedings,process and had the transactions described hereinfollowing major impacts:
1.Holders of the senior secured notes issued by NSNCo (“notes”, “noteholders”) released Seadrill from all guarantees and those contemplatedsecurities previously provided by Seadrill in respect of the Plan are together referrednotes;
2.Noteholders received a 65% equity interest in NSNCo with Seadrill’s equity interest thereby decreasing to as35%; and
3.Reinstatement in full of the "Reorganization". The Predecessor Company and certainnotes on amended terms.
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4.Related to the NSNCo restructuring, the noteholders also financed a restructuring of the bank debt of the SeaMex joint venture. This enabled NSNCo to subsequently acquire a 100% equity interest in the SeaMex joint venture by way of a credit bid, which was executed on November 2, 2021.
For a detailed description of Seadrill's comprehensive restructuring, please refer to Note 4 - Chapter 11 of the Bankruptcy Code inaccompanying financial statements.
ii. Rig disposal program
Seadrill initiated a program to dispose of long-term cold stacked units. Under this program, all cold stacked units were reviewed to identify units that were unlikely to secure work that offered a satisfactory return on the Bankruptcy Court (the "Debtors"), whereas this section provides an overviewcost of the Debtors' restructuringreactivation. In total ten units were identified for disposal with eight units being sold to date (seven units being sold in 2021, one in January 2022). Five of the units sold to date have been recycled with the remaining three being sold for non-drilling purposes. Sale agreements have been entered for the remaining two units, which will be handed over later in 2022.
The units sold for non-drilling purposes included the West Vigilant, whichwas sold to PT Duta Marina for $7 million in June 2021, the West Freedom was sold to New Fortress Energy Fast LNG Operations LLC for $5 million in July 2021, andWest Orion, which was sold to Far East Offshore Wind Power Engineering for $12 million in November 2021.
The units sold for recycling in 2021 included the West Pegasus, West Alpha, West Eminence and West Navigator which were sold to ROTA Shipping in 2021 for an aggregated amount of $32 million. The West Venture was also sold to Rota Shipping, completing in January 2022, for $7 million.
Proceeds from the above disposals, less any costs to sell, were held on the balance sheet as restricted cash and were repaid to the lenders holding the relevant security following Seadrill's emergence from bankruptcy, reflecting the acceptance of the Second Amended JointChapter 11.
iii. Seadrill Partners global settlement
On May 24, 2021, Aquadrill (formerly Seadrill Partners or "SDLP") emerged from Chapter 11 Plan (as modified), as confirmed by the Bankruptcy Court on 17 April 2018 (the "Plan"), by all classes entitled to vote and the confirmation of the Plan by the Bankruptcy Court and pursuant to which the "Effective Date" (meaning the date of the Debtors' emergence from bankruptcy proceedings in accordance with the terms andafter successfully completing their reorganization. All conditions of the Plan) of the Plan occurred on July 2, 2018. The description in this section is qualified in its entirety by referenceprecedent to the Plan. The terms of the Plan are more detailed than the description providedrestructuring were satisfied or otherwise waived. Existing equity interests in this section, which may have omitted descriptions of items that may be of interest to particular investors. Therefore, please carefully consider the actual provisions of the Plan for more complete information about the transactions to be consummated in connection with the Debtors' emergence from bankruptcy.

i.Introduction to the Reorganization
Prior to filing of the Chapter 11 Proceedings (as defined below), Old Seadrill Limited engaged in extensive discussions with its secured lenders, certain holders of its unsecured bondsSDLP were canceled, released, and potential new money investors regarding the terms of a comprehensive restructuring.
On September 12, 2017, Old Seadrill Limited entered into a restructuring support and lock-up agreement (the "RSA") with a group of bank lenders, bondholders, certain other stakeholders, and new-money providers (collectively, the "Consenting Stakeholders"). Old Seadrill Limited's consolidated subsidiaries North Atlantic Drilling Ltd. ("NADL") and Sevan Drilling, together with certain other of its consolidated subsidiaries also entered into the RSA (together with Old Seadrill Limited the "CompanyParties"). Ship Finance and three of its subsidiaries, which charter three drilling units to the Company Parties, also executed the RSA. In connection with the RSA, the Company Parties entered into the "Investment Agreement" under which Hemen Investments Limited, an affiliate of Old Seadrill Limited's largest shareholder Hemen Holding Ltd. and the Commitment Parties, committed to provide $1.06 billion in new cash commitments, subject to certain terms and conditions (the "Capital Commitment").
On September 12, 2017, to implement the transactions contemplated by the RSA and Investment Agreement, the Debtors commenced prearranged reorganization proceedings (the "Chapter 11 Proceedings") under Chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court for the Southern District of Texas Victoria Division. During the bankruptcy proceedings, the Debtors continued to operate their business as debtors in possession.extinguished. As a result, SDLP is no longer an associate or related party of Seadrill, and we will no longer be providing management services to SDLP, aside from transitional services on two rigs, West Vela and West Capella.
Seadrill and SDLP executed a settlement agreement whereby both parties agreed to waive all claims in respect of pre-filing amounts due. This resulted in a write off of the Reorganization, the Plan equitized approximately $2.4 billion in unsecured bond obligations, more than $1.0 billion in contingent newbuild obligations, substantial unliquidated guarantee obligations, and approximately $250 million in unsecured interest rate and currency swap claims, while extending near term debt maturities, providing the Group with over $1.0 billion in new capital and leaving employee, customer and ordinary trade claims largely unimpaired.
ii.Corporate Reorganization
The Planfully provided for Seadrill Limited to serve as the ultimate parent holding company for Old Seadrill Limited's subsidiaries after the Debtors' emergencepre-filing receivables due from the Chapter 11 Proceedings. Seadrill Limited was initially formed as a wholly-owned subsidiary of Old Seadrill Limited and had not conducted any material operations prior to the Effective Date. Following the Debtors' emergence from bankruptcy, the economic interests in the existing shares of Old Seadrill Limited were extinguished, and Old Seadrill Limited was dissolved under Bermuda law. In accordance with the Plan, the common shares of Seadrill Limited were issued to the parties entitled thereto under the Plan and under the Investment Agreement. As part of the concurrent corporate reorganization, Seadrill Limited became the ultimate parent holding company of Old Seadrill Limited's subsidiaries. The Plan was effective on July 2, 2018, and some of the information provided in this annual report therefore relates to Seadrill prior to the Effective Date.
The corporate reorganization also included: (i) the formation of a new wholly-owned intermediate holding company ("IHCo") as a subsidiary of Seadrill, (ii) and a new wholly-owned intermediate holding company ("RigCo") as a subsidiary of IHCo which holds interests in Seadrill's rig-owning, rig-operating and management entities transferred to RigCo in the corporate reorganization, (iii) the formation of a new wholly-owned intermediate holding company Seadrill New Finance Limited ("NSNCo"), as a subsidiary of IHCo for the purpose of issuing the "Senior Secured Notes" (being the $880 million aggregate principal amount of 12% Senior Secured Notes due 2025 issued by NSNCo in connection with the Reorganization, as further described below) and (iv) the formation of certain new wholly-owned intermediate holding companies as subsidiaries of NSNCo for the purpose of holding interests in certain of the non-consolidated entities transferred to NSNCo by Old Seadrill Limited in the corporate reorganization.
iii.The Plan
The Debtors filed a proposed plan of reorganization and disclosure statement with the Bankruptcy Court on September 12, 2017,SDLP, as well as an $8 million gain on the write-off of payables to SDLP.
iv. Northern Ocean settlement
On December 23, 2021, a disclosure statement relatingsettlement agreement with Northern Ocean became effective extinguishing all outstanding claims between Seadrill and Northern Ocean. The settlement resulted in the write-off of $18 million pre-petition balances owed to Northern Ocean for the proposed planlease of reorganization. Subsequentthe West Bollsta. A further $18 million of post-petition balances owed for the West Bollsta were net settled for no cash against related party receivables due from Northern Ocean. The remaining $132 million of receivables due from Northern Ocean, which had been fully provided for, were written off against the expected credit loss provision.
3) Significant Developments for the Period from January 1, 2020 through and including December 31, 2020
i. Comprehensive Restructuring and Bankruptcy Proceedings
Refer to September 12, 2017, the Debtors negotiated with their various creditors, including an ad hoc group of holders of unsecured bonds (the "Ad Hoc Group") and certain newbuild ship yards with which the Debtors had contractual relationships to build new rigs. On 26 February 2018, the Debtors announced a global settlement with various creditors, including the Ad Hoc Group, the official committee of unsecured creditors (the "Committee") and other major creditors in itsNote 4 - Chapter 11 cases, including Samsungfor full details on our comprehensive restructuring and DSME, twobankruptcy proceedings.
ii. Purchase of AOD non-controlling interest shares
In September 2020, we acquired the minority holding of 33.76% of the Debtors' newbuild shipyards, and an affiliateshare capital of Barclays Bank PLC ("Barclays"), another holderAOD from Mermaid for cash consideration of unsecured bonds. $31 million, giving Seadrill a 100% shareholding in AOD.
iii. Disposal of West Epsilon
In connectionSeptember 2020, we sold the cold-stacked harsh-environment jack-up rig West Epsilon for $12 million with the global settlement, the Debtors entered intoproceeds paid directly to our banks as an amendment to the RSA and an amendment to the Investment Agreement. The amendments to the RSA and Investment Agreement provided for inclusion of the Ad Hoc Group and Barclays into the Capital Commitment as Commitment Parties, increased the Capital Commitment to $1.08 billion, increased recoveries for general unsecured creditors under the Plan, an agreement regarding the allowed claim of the newbuild shipyards and an immediate cessation of all litigation and discovery efforts in relation to the Plan as well as the Debtors' rejection and recognized termination of the newbuild contracts. The Investment Agreement, as amended, provided for certain milestones for the Debtors' restructuring: (1) the Bankruptcy Court entered an order confirming the Plan on April 17, 2018 (the "Confirmation Date") and (2) the effective date of the Plan had to occur within 90 days of the Confirmation Date, and in any event no later than August 8, 2018.early repayment against our external debt.
In connection with the global settlement, on February 26, 2018, the Debtors filed a proposed Second Amended Joint Chapter 11 Plan of Reorganization with the Bankruptcy Court and on April 17, 2018, the Bankruptcy Court entered an order confirming the Second Amended Joint Chapter 11 Plan (as modified) of Reorganization, as amended and supplemented. Reference is made to the Second Amended Joint Chapter 11 Plan (as modified) of Reorganization, in the form confirmed by the Bankruptcy Court, with any further amendments or supplements thereto, as the Plan. The Plan became effective on July 2, 2018. Under the Plan and the terms of the Investment Agreement and the transactions contemplated therein, the Commitment Parties to the Investment Agreement were issued certain common shares of Seadrill Limited and purchased additional common shares of Seadrill Limited in connection with the completion of an equity rights offering to holders of claims against the Debtors. Seadrill Limited also agreed to register its common shares for resale by the selling shareholders.

iv.Rights offering
Pursuant to the Plan and an order of the Bankruptcy Court, a set of rights offering procedures were approved. As a result, eligible holders of general unsecured claims against the Debtors were offered the right to participate in (i) a rights offering of up to $119.4 million in principal amount of the Senior Secured Notes (the "Notes Rights Offering") and the corresponding pro rata portion of 57.5% of common shares in Seadrill Limited were issued to holders who participated in the Notes Rights Offering and (ii) a rights offering of up to $48.1 million in value of common shares in Seadrill Limited (the "Equity Rights Offering").
The Equity Rights Offering was directed to eligible holders of General Unsecured Claims (as defined in the Plan), who either (i) were located in the United States or (ii) were located outside the United States and who satisfied one of the following criteria (a) they were located in a member state of the European Economic Area (EEA); (b) they were located in the United Kingdom and were qualified (i) to make an investment in Seadrill Common Shares under the applicable laws of the EEA (ii) satisfied certain criteria under the laws of the United Kingdom; or (c) were located in a different jurisdiction, and under the laws of that jurisdiction were entitled to subscribe for and purchase the Seadrill Common Shares, in each case without the need for any registration or similar filing by Seadrill Limited. The subscription period for the Equity Rights Offering commenced on May 7, 2018 and ended on 5:00 pm New York City Time on June 8, 2018. The subscription right to participate in the Equity Rights Offering could not be separated from the related General Unsecured Claims, hence the only way to transfer the subscription rights was to transfer the related General Unsecured Claims. The holders of General Unsecured Claims could purchase up to 2.700 Seadrill Common Shares for each USD 1,000 in allowed amount of its claims in aggregate in the Equity Rights Offering. The subscription price for Seadrill Common Shares in the Equity Rights Offering was $8.421 per share. Holders of General Unsecured Claims who were not entitled to participate in the Equity Rights Offering, were eligible to receive a cash payment in the amount of $30 per $1,000 of the allowed amount of their claim.
The Senior Secured Notes and the Seadrill Common Shares were acquired by the Commitment Parties under the Investment Agreement and were reduced to the extent the Note Rights and Equity Rights were exercised in the Notes Rights Offering and the Equity Rights Offering, respectively. The Commitment Parties did not participate in the Notes Rights Offering nor the Equity Rights Offering, in accordance with the terms of the Investment Agreement.
v.Issuance and distribution of the new shares under the Plan and Investment Agreement
The following table sets forth the allocation of common shares issued on the Effective Date, subject to the terms and conditions of the Plan:
    Percentage
Recipient of Common Shares Number of shares
 Prior to dilution by Primary Structuring Fee and the shares reserved under the Employee Incentive Plan
 Prior to dilution by the shares reserved under the Employee Incentive Plan
 Fully diluted
Commitment Parties (in exchange for cash paid pursuant to the Investment Agreement) and Equity Rights Offering Subscribers 23,750,000
 25.00% 23.75% 21.38%
Recipients of Senior Secured Notes (including Commitment Parties and Notes Rights Offering Subscribers) 54,625,000
 57.50% 54.63% 49.16%
Holders of General Unsecured Claims 14,250,000
 15.00% 14.25% 12.82%
Former Holders of Old Seadrill Limited Equity and Seadrill Limited 510(b) Claimants 1,900,000
 2.00% 1.90% 1.71%
Fees to Select Commitment Parties 475,000
 0.50% 0.47% 0.43%
All creditors, excluding Primary Structuring Fee 95,000,000
 100.00% 95.00% 85.50%
Hemen (on account of Primary Structuring Fee) 5,000,000
 -
 5.00% 4.50%
Total, prior to dilution by shares reserved under the Employee Incentive Plan 100,000,000
 -
 100.00% 90.00%
Reserved for the Employee Incentive Plan 11,111,111
 -
 -
 10.00%
Total, fully diluted 111,111,111
 -
 -
 100.00%
vi.Senior Secured Notes
In accordance with the terms and conditions of the Investment Agreement, the Commitment Parties purchased the full principal amount of the Senior Secured Notes for $880 million in cash, less the principal amount purchased by participants in the Notes Rights Offering, and on the Effective Date, NSNCo issued $880 million in principal amount of Senior Secured Notes. As described above, Seadrill Limited issued approximately 57.5% of the common shares in Seadrill (prior to dilution by the Primary Structuring Fee and the shares reserved under the employee incentive plan) on a pro rata basis to the purchasers of the Senior Secured Notes.

In November 2018, we redeemed $121 million of principal and $5 million of accrued interest on our Senior Secured Notes. In April 2019, we repurchased $311 million of principal Senior Secured Notes for $342 million. The $31 million additional cash paid represents the 7% purchase premium and settlement of accrued payment-in-kind and cash interest on the notes prior to purchase.
b) Acquisitions or disposals of material assets
In April 2018, we entered into a settlement and release agreement, subject to Bankruptcy Court approval, with Jurong in respect of the West Rigel. The sale completed, and the proceeds were received on May 9, 2018. Per the terms of the Senior Secured Notes, we were required to redeem a proportion of the principal and interest outstanding on the notes using our share of the West Rigel sale proceeds. We used the proceeds to make a mandatory redemption of $121 million of principal and $5 million of accrued interest on November 1, 2018.
c) Other significant developments
In May 2018, we purchased an interest rate cap for $68 million to mitigate our exposure to future increases in LIBOR on our floating rate debt. The capped rate against the 3-month US LIBOR is 2.87% and covers the period from June 15, 2018 to June 15, 2023. The principal amount covered by the cap as at December 31, 2019 is $4.5 billion.
In July 2018, Seadrill Partners, received approximately $248 million relating to the West Leo early termination litigation award, of which $204 million was recognized as revenue in Seadrill Partners' Statement of Operations for the second quarter ended June 30, 2018. Seadrill Partners is an associated company in which we hold an investment (see ITEM 4C "Organizational Structure").
In October 2018, we completed a transaction that fully extinguished the sponsor guarantees given by Seadrill Limited and Sapura Energy Berhad for the benefit of the lenders of certain debt facilities of the Seabras Sapura joint venture. Seadrill Limited’s guarantee obligations were previously released, discharged and terminated as part of the Chapter 11 proceedings and under the terms of the October 31 transaction, the lenders confirmed that they had no outstanding claims against Seadrill Limited in respect of its guarantees and released and discharged Sapura Energy Berhad’s guarantees. In return for the release and discharge of both sponsors’ guarantees, the lenders under the debt facilities received, amongst other things, cross-collateralization of the debt facilities, a prepayment from the joint venture, an increase in margin and a consent fee.
In November 2018 and January 2019, we recovered a total of $47 million from a $48 million overdue receivable that was fully provided against in the Predecessor company. This was recognized as other operating income in our 2018 and 2019 Successor periods.
In December 2018, we reached an amicable agreement with Transocean over alleged patent infringement of the Transocean dual activity patent. Under the terms of the settlement, Seadrill and Seadrill Partners have entered into a global license agreement with Transocean of the dual activity drilling method on our rigs covering alleged past infringements and future use.
In February 2019, we entered into an agreement to establish a 50:50 joint venture ("Sonadrill") with Sonangol. The joint venture will operate four drillships, focusing on opportunities in Angolan waters. Each of the joint venture parties will bareboat charter two drillships into Sonadrill and we will manage and operate all the units. Seadrill is also responsible for managing the delivery and mobilization to Angolan waters of the two Sonangol drillships, from the shipyard in Korea, under a separate commissioning and mobilization agreement with Sonangol. In October 2019, Seadrill and Sonangol contributed $50 million equity into the joint venture. On October 1, 2019, the first bareboat charter and management agreements for the Sonangol drilling unit, Libongos, became effective. The rig commenced its first drilling contract on October 10, 2019.
Contracts to acquire eight newbuild jack-up rigs from Dalian were terminated between October 2017 and March 2019. In March 2019, the relevant Seadrill contracting parties commenced arbitration proceedings in London for all eight rigs to claim for the return of the paid installments plus interest and further damages for losses. The Seadrill contracting parties have also filed claims for these amounts as part of the Dalian insolvency proceedings in China, which commenced in January 2019. Dalian has stated that it has claims for damages in respect of each of the rigs, but it has not quantified those damages. The arbitrations are currently not progressing by agreement of the parties, pending the insolvency administrator's decision whether to accept or reject the Seadrill contracting parties' claims.
In August 2019, we entered into an agreement to establish a 50:50 joint venture ("Gulfdrill") with Gulf Drilling International ("GDI"), which will provide drilling services in Qatar. GDI has been awarded five long-term drilling contracts in Qatar which it will novate to Gulfdrill. We will lease two of our benign environment jack-up rigs, West Castor and West Telesto, to Gulfdrill for use under these contracts and have secured bareboat charters for a further three rigs from a third-party shipyard. GDI will manage and operate all rigs on behalf of the joint venture. In November 2019 the first rig from the shipyard was delivered and the West Castor commenced its lease.

3)4) Capital expenditures
Our capital expenditures primarily relate to (i) upgrades to our existing drilling units and (ii) costs incurred on major maintenance projects. In the year ended December 31, 2017 we additionally had significant capital expenditure for our newbuilding drilling unit program.
We have summarized capital expenditures for the periods covered by this annual report in the table below.
Summary of capital expendituresYear ended December 31, 2021Year ended December 31, 2020Year ended December 31, 2019
Additions to drilling units and equipment(29)(27)(48)
Payments for long-term maintenance(64)(121)(114)
Total capital expenditure(93)(148)(162)
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(In $ millions)Successor  Predecessor
Summary of capital expendituresYear ended December 31,
2019
 Period from July 2, 2018 through December 31, 2018
  Period from January 1, 2018 through July 1, 2018
 Year ended December 31,
2017
Additions to newbuilding—
 —
  (1) (33)
Additions to drilling units and equipment(48) (27)  (48) (59)
Payments for long-term maintenance(114) (71)  (78) (58)
Total capital expenditure(162) (98)  (127) (150)
4)5) Further information
The SEC maintains an Internetinternet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. You may find additional information on Seadrill on that site. The address of that site is http://www.sec.gov.


B.BUSINESS OVERVIEW

B.BUSINESS OVERVIEW
1) Introduction
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, semi-submersible rigs and jack-up 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. Typically, our customers are oil super-majors, state-owned national oil companies and independent oil and gas companies.
Through a number of acquisitions of companies, second-hand units and newbuildings, we have developed into one of the world's largesta major international offshore drilling contractors. We own 35owned 24 drilling rigs as at December 31, 2021, lease three from our related parties SFL (two) and weNorthern Ocean (one), and manage and operate 20nine rigs on behalf of SeaMex (five), Aquadrill (formerly Seadrill Partners,Partners) (two), and Sonadrill (two). The five SeaMex Sonangol, Sonadrillrigs are included within our discontinued operations held for sale and Northern Drilling.have been classified as managed rigs. We sold the West Venture in January 2022 and the Sevan Brasil and Sevan Driller in April 2022.
We are recognized for providing high quality operations, in some of the most challenging sectors of offshore drilling.drilling. We employee 4,538employ 3,220 employees across the globe. We are incorporated in Bermuda and have worldwide operations based on where activities are conducted in the global oil and gas industry.
We operate through the following segments: (i) floaters;harsh environment; (ii) jack-up rigs;floaters; and (iii) other,jack-up rigs, as further explained below and in 5A - "Operating and Financial Review".
2) Our Fleet
Our relatively modern fleet, is one ofamong the youngest and most modern of allin the industry, is well positioned compared with other major offshore drilling contractors. We currently own adrillers. As of December 31, 2021, our owned fleet of 35was 24 drilling units including sevenwhich included 6 drillships, 126 semi-submersible rigs and 1612 jack-up rigs. We also have an option to purchase one semi-submersible rig. You may findFor additional information on our drilling units and newbuilding in itemnewbuildings refer to Item 4D - "Property, Plant and Equipment".
We categorize the drilling units in our fleet as (i) floaters, (ii) jack-ups and (ii) jack-ups.(iii) harsh environment. This is further explained below.
a) Floaters
Our floaters segment encompasses our drillships and benign environment semi-submersible rigs.
i.
Drillships:
i.Drillships:
Drillships are self-propelled ships equipped for drilling offshore in water depths ranging from 1,000 to 12,000 feet and are positioned over the well through a computer-controlled thruster system. Drillships are suitable for drilling in remote locations because of their mobility and large load-carrying capacity. Depending on country of operation, drillships operate with crews of 50 or more120 to 160 people.
ii.Semi-submersible drilling rigs:
ii.Semi-submersible drilling rigs:
Semi-submersibles are self-propelled drilling rigs consisting of an upper working and living quarters deck connected to a lower hull consisting of columns and pontoons. Such rigs operate in a “semi-submerged” floating position, in which the lower hull is below the waterline and the upper deck protrudes above the surface. The rig is situated over a wellhead location and remains stable for drilling in the semi-submerged floating position, due in part to its wave transparency characteristics at the water line.
Semi-submersible rigs can be either moored or dynamically positioned. Moored semi-submersible rigs are positioned over the wellhead location with anchors and typically operate in water depths ranging up to 1,500 feet. Dynamically positioned semi-submersible rigs are positioned over the wellhead location by a computer-controlled thruster system and typically operate in water depths ranging from 1,000 to 12,000 feet. Depending on country of operation, semi-submersible rigs generally operate with crews of 50 or more110 to 130 people.
b) Jack-Up Rigs
Jack-up rigs are mobile, self-elevating drilling platforms equipped with legs that are lowered to the seabed. A jack-up rig is mobilized to the drill site with a heavy lift vessel or a wet tow. At the drill site, the legs are lowered until they penetrate the sea bed and the hull is elevated to an approximate operational airgap of 50 to 100 feet depending on the expected environmental forces. After completion of the drilling operations, the hull is lowered to floating draft, the legs are raised and the rig can be relocated to another drill site. Jack-ups are generally suitable for water depths of 450 feet or less and operate with crews of 9080 to 120110 people.




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c) Harsh Environment
Harsh environment rigs include both semi-submersibles and jack-ups that have a number of design modifications to be able to handle to weather conditions as seen in the North Sea and Canada. Compared to benign environment rigs, these modifications include increased variable load to reduce the need for resupply, increased air gap to increase wave clearance, increased automation, changes in the geometry of the legs or columns to decrease wind and wave loads, and greater spacing between the legs or columns. Harsh environment rigs tend to be larger, heavier and more expensive to construct than benign environment rigs.
3) Competitive Strengths
We believe that ourOur competitive strengths include:focus on four key areas:
i.One of the largest offshore drilling contractors
i.Scale and age-one of the largest and youngest offshore drilling contractors
Since our inception in 2005, we have developed into one of the world’s largesta large international offshore drilling contractors. Whilecompany, with a significant geographical footprint. All of our rigs were built after 2007 and we are one of the largest offshore drilling companies, we also have one of the youngest rig fleets in our industry, with an average fleet age of approximately 10 years.industry.

ii. Unwavering commitment to safety and the environment.
ii.Commitment to safety and the environment
We believe that the combination of quality drilling units and experienced anda highly skilled employeesworkforce allows us to provide our customers with safe and effectiveefficient operations. Quality assetsAs part of our over-all ESG focus, we behave responsibly towards our shared environment and operational expertise allowcontinue to commit resources to improving our environmental programs with a drive to reduce our overall carbon footprint (“B” ranking awarded by Carbon Disclosure Program in 2021, above average compared to our peer group). Nothing is more important to us than the health, safety and security of our workforce and the communities in which we operate.
During 2021 we continued to establish, develop and maintain a positionprovide additional resources to our workforce to look after their mental health in response to the ongoing COVID-19 pandemic. Also, as a preferred providerresponse to the pandemic, our onshore and offshore personnel have actively participated in the global vaccination campaign. Finally, our teams in several local areas of offshore drilling services for our customers.operations have contributed in different ways to the local community to help battle the ongoing pandemic.
iii.Technologically advanced and young fleet

iii. Technologically advanced fleet
Our drilling units are amongamongst the most technologically advanced in the world. The majority of our rigs were built after 2007, which is among the lowest average fleet age in the industry. Our modern fleet offers superior technical capabilities, resulting in high operational flexibility and reliability are preferred by customers and are winning most available opportunities. We believe, based on ourreliability. Our proven operational track record and fleet composition that we will be better placedpositions us well to secure new drilling contracts than some of our competitorsand continue relationships with older, less advanced rig fleets.existing customers.
iv.
Strong and diverse customer relationships
iv. Trust-based, enduring Customer relationships
We have strong relationships with our customers that we believe are based on trust in our people, operational track record and the quality and reliability of our fleet.assets. Our customersCustomers are oil super-majors, state-owned national oil companies and independent oil and gas companies.
4) Overall Strategy
DuringFrom shallow to ultra-deep water, in both harsh and benign environments, our vision is to set the current challenging period forstandard in offshore drilling, and we deliver this vision through the industry and to maintainfour pillars of our position as a leading offshore driller, our strategy includes being able to deliver in the following key areas:strategy:
i.Best Operations
We are a leading offshore deepwater drilling company and our keyi.Best Operations
Our objective is to deliver the best operations possible - both in terms of utilization and commitment to health, safety and the environment. To do this, we leverage having one of the most modern rig fleets in the industry combined with a motivated, highly skilled and our combination of experienced workforce.
ii.Right rigs
We are organized by asset class – Harsh Environment, Jack-Ups and skilled employees across the organization. Using our strong operational record, we intend to maximize opportunities for new drilling contracts and sustain a competitive cost structure, which we have been pursuing through our multi-year savings program.
ii.Right rigs
Our business model includes both floaters and jack-ups.Floaters. Having the right rigs in these two segments allows us to offer a range of assets to suit the diverse needs of our customer needs, to workcustomers, working in various geographies and water depths, and to positionwhilst positioning ourselves for future growth in the industry.
iii.Strongest relationships
iii.Strongest relationships
We have established strong androbust, long-term relationships with key players in the industry and we will seek to deepen and strengthen these relationships as part of our strategy.further. This involves identifying additional value-adding services for our existing customers and developing long-term, mutually beneficial partnerships. By providingWe strive to provide the best possible service to our customers and be valued partners in their success.
iv.Leading organization
iv.Leading organization
We are proud of our Seadrill culture and we recognize that our business is built on people. As part of our strategy, we aim to recruit, retain, and develop the best people in the industry and to build ana dynamic organization that continually adapts to ever-evolving business needs.
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5) Research and Development
We recognize the significant impact that technology is having on our industry and through adopting new technological advances, improving connectivity and digitizing the way we operate, we have enhanced visibility over monitoring and managing our assets. Innovation remains at the center of our strategy. For instance, research and development has enabled us to implement PLATO, an advanced data analytics platform that monitors rig performance. The ability to draw insight from these large data sets help us to optimize our drilling performance for customers and ensure care and maintenance of our equipment, without compromising on safety.
6) Markets
Our operations are geographically dispersed in oil and gas exploration and development areas throughout the world. We operate in a single, global offshore drilling market, as our drilling rigs are mobile assets and are able to be moved according to prevailing market conditions. We organize our business into the following segments: (i) floaters,harsh environment; (ii) jack-upsfloaters; and (iii) other. You can find an analysisjack-ups. For details of our revenues and fixed assets by operating segment and geography, in refer toNote 6 - "Segment information"to the Consolidated Financial Statements included within this report.herein.
The "floater" and "jack-up" segments are rig types as explained in section two above. Our "other" segment predominantly relates to the provision of management services to third parties and related parties, in which we charge a management fee income for such services. Please refer to Note 31 to the Consolidated Financial Statements included within this report for more information on management and administrative services provided to related parties.
6)7) Seasonality
In general, seasonal factors do not have a significant direct effect on our business. However, we have operations in certain parts of the world where weather conditions during parts of the year could adversely impact the operational utilization of the rigs and our ability to relocate rigs between drilling locations, and as such, limit contract opportunities in the short term. Such adverse weather could include the hurricane season and loop currents for our operations in the Gulf of Mexico, the winter season in offshore Norway, West of the Shetlands and Canada, and the monsoon season in Southeast Asia.
7)8) Customers
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. You can findFor an analysis of our most significant customers, in refer to Note 6 - “Segment information” to the Consolidated Financial Statements included within this report.herein.

8)9) Drilling contracts
In general, we contract our drilling units to oil and gas companies to provide offshore drilling services at an agreed dayrate for a fixed contract term or on a well completion basis. Dayrates can vary, depending on the type of drilling unit and its capabilities, contract length, geographical location, operating expenses, taxes and other factors such as prevailing economic conditions. We do not provide "turnkey" or other risk-based drilling services to the customer. Instead, we provide a drilling unit and rig crews and charge the customer a fixed amount per day regardless of the number of days needed to drill the well. The customer bears substantially all the ancillary costs of constructing the well and supporting drilling operations, as well as most of the economic risk relative to the success of the well.
Where operations are interrupted or restricted due to equipment breakdown or operational failures, we do not generally receive dayrate compensation for the period of the interruption in excess of contractual allowances. Furthermore, the dayrate we receive can be reduced in instances of interrupted or suspended service due to, among other things, repairs, upgrades, weather, maintenance, force majeure or requested suspension of services by the customer and other operating factors.
However, contracts normally allow for compensation when factors beyond our control, including weather conditions, influence the drilling operations and, in some cases, for compensation when we perform planned maintenance activities. In some of our contracts, we are entitled to cost escalation to compensate for industry specific cost increases as reflected in publicly available cost indexes.
We may receive lump sum or dayrate based fees for the mobilization of equipment and personnel or for capital additions and upgrades prior to the start of drilling services. In some cases, we may also receive lump sum or dayrate based fees for demobilization upon completion of a drilling contract.
Our contracts may generally be terminated by the customer in the event the drilling unit is destroyed or lost or if drilling operations are suspended for an extended period because of a breakdown of major rig equipment, "force majeure" or upon the occurrence of other specified conditions. Some contracts include provisions that allow the customer to terminate the contract without cause for a specified early termination fee.
A drilling unit may be "stacked" if it has no contract in place. Drilling units may be either warm stacked or cold stacked. When a rig is warm stacked, the rig is idle but can deploy quickly if an operator requires its services. Cold stacking a rig involves reducing the crew to just a few key individuals or removal of the entire crew and storing the rig in a harbor, shipyard or designated area offshore.
9)10) Competition
The offshore drilling industry is highly competitive, with market participants ranging from large multinational companies to small locally-owned companies. The demand for offshore drilling services is driven by oil and gas companies’ exploration and development drilling programs. These drilling programs are affected by oil and gas companies’ expectations regarding oil and gas prices, anticipated production levels, worldwide demand for oil and gas products, the availability of quality drilling prospects, exploration success, availability of qualified rigs and operating personnel, relative production costs, availability and lead time requirements for drilling and production equipment, the stage of reservoir development and political and regulatory environments.
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Oil and gas prices are volatile, which has historically led to significant fluctuations in expenditures by our customers for drilling services. Variations in market conditions during cycles impact us in different ways, depending primarily on the length of drilling contracts in different regions.
Offshore drilling contracts are generally awarded on a competitive bid basis or through privately negotiated transactions. In determining which qualified drilling contractor is awarded a contract, the key factors are pricing, rig availability, technical specification, rig location, condition and integrity of equipment, their record of operating efficiency, safety performance record, crew experience, reputation and industry standing and customer relations.
Furthermore, competition for offshore drilling rigs is generally on a global basis, as rigs are highly mobile. However, the cost associated with mobilizing rigs between regions is sometimes substantial, as entering a new region could necessitate upgrades of the unit and its equipment to specific regional requirements. In particular, for rigs to operate in harsh environments, such as offshore Norway and Canada, as opposed to benign environments, such as the Gulf of Mexico, West Africa, Brazil and Southeast Asia, more demanding weather conditions would require more costly investment in the outfitting and maintenance of the drilling units.
For further information on current market conditions and global offshore drilling fleet, please see “Itemrefer to Item 5D - Trend Information.”"Trend Information".
10)11) Risk of Loss and Insurance
Our operations are subject to hazards inherent in the drilling of oil and gas wells, including blowouts and well fires, which could cause personal injury, suspend drilling operations, or seriously damage or destroy the equipment involved. Offshore drilling contractors are also subject to hazards particular to marine operations, including capsizing, grounding, collision and loss or damage from severe weather. Our rig insurance package policy provides insurance coverage for physical damage to our rigs, loss of hire for our working rigs and third-party liability.
i.Physical Damage Insurance
i.Physical Damage Insurance
We purchase hull and machinery insurance to cover for physical damage to our drilling rigs. We retain the risk, through self-insurance, for the deductibles relating to physical damage insurance on our drilling unit fleet; currently, a maximum of $5 million per occurrence.

ii.Loss of Hire Insurance
ii.Loss of Hire Insurance
We also have insurance to cover loss of revenue for our operational rigs (floaters and harsh environment jack-ups, only)not benign environment jack-ups) in the event of extensive downtime caused by physical damage, where such damage is covered under our physical damage insurance. The loss of hire insurance has a deductible period of up to 60 days after the occurrence of physical damage. Thereafter we are compensated for loss of revenue up to 290 days per event and aggregated per year. The daily indemnity will vary from 75% to 100% of the contracted dayrate. We retain the risk related to loss of hire during the initial 60-day period, as well as any loss of hire exceeding the number of days permitted under the insurance policy. If the repair period for any physical damage exceeds the number of days permitted under the loss of hire policy, we will be responsible for the loss of revenue in such a period.
iii.Protection and Indemnity Insurance
iii.Protection and Indemnity Insurance
We also purchase Protection and Indemnity insurance (P&I) and excess liability insurance for personal injury liability for crew claims, non-crew claims and third-party property damage including oil pollution from the drilling rigs to cover claims of up to $500 million and $900$700 million in the United States per event and in the aggregate. We retain the risk for the deductible of up to $25,000 per occurrence relating to protection and indemnity insurance or up to $500,000 for claims made in the United States.
iv.Windstorm Insurance
We have elected to place an insurance policy for physical damage to rigs and equipment caused by named windstorms in the U.S. Gulf of Mexico with a Combined Single Limit of $100 million in the annual aggregate, which includes loss of hire. We intend to renew our policy to insure a limited part of this windstorm risk for a further period starting May 1, 2020 through April 30, 2021.
11)12) Environmental and Other Regulations in the Offshore Drilling Industry
Our operations are subject to numerous laws and regulations in the form of international treaties and maritime regimes, flag state requirements, national environmental laws and regulations, navigation and operating permits requirements, local content requirements, and other national, state and local laws and regulations in force in the jurisdictions in which our drilling units operate or are registered, which can significantly affect the ownership and operation of our drilling units. See “Item 3. KeyFor details of environmental laws and regulations affecting our operations, refer to Item 3 - "Key Information – D. Risk Factors – Risks Relating to Our Company and Industry – Governmental laws and regulations, including environmental laws and regulations, may add to our costs, expose to us liability, or limit our drilling activity.”activity".
i.Flag State Requirements
i.Flag State Requirements
All our drilling units are subject to regulatory requirements of the flag state where the drilling unit is registered. The flag state requirements are international maritime requirements and, in some cases, further interpolated by the flag state itself. These include engineering, safety and other requirements related to the maritime industry. In addition, each of our drilling units must be “classed” by a classification society. The classification society certifies that the drilling rig is “in-class,” signifying that such drilling rig has been built and maintained in accordance with the rules of the classification society and complies with applicable rules and regulations of the flag state and the international conventions of which that country is a member. Maintenance of class certification requires expenditure of substantial sums and can require taking a drilling unit out of service from time to time for repairs or modifications to meet class requirements.  Our drilling units must generally undergo class surveys annually and a renewal survey once every five years. In addition, for some of the internationally-required class certifications, such as the Code for the Construction and Equipment of Mobile Offshore Drilling Units (the “MODU Code”) certificate, the classification society will act on a flag state’s behalf. The Classification Society can also act on behalf of the Flag State for survey and issue of International Certification. Port States can also impose stricter regimes than the Flag State when the drilling unit is operating in their territorial waters.
ii.International Maritime Regimes
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ii.International Maritime Regimes
Applicable international maritime regime requirements include, but are not limited to, the International Convention for the Prevention of Pollution from Ships (“MARPOL”), the International Convention on Civil Liability for Oil Pollution Damage of 1969 (the “CLC”), the International Convention on Civil Liability for Bunker Oil Pollution Damage of 2001 (ratified in 2008), or the Bunker Convention, the International Convention for the Safety of Life at Sea of 1974 (“SOLAS”), the International Safety Management Code for the Safe Operation of Ships and for Pollution Prevention, or the ISM Code, MODU Code, and the International Convention for the Control and Management of Ships’ Ballast Water and Sediments in February 2004 (the “BWM Convention”).BMW Convention.  These various conventions regulate air emissions and other discharges to the environment from our drilling units worldwide, and we may incur costs to comply with these regimes and continue to comply with these regimes as they may be amended in the future. In addition, these conventions impose liability for certain discharges, including strict liability in some cases. SeeFor details of these laws and regulations, refer to Item 3 “Key- "Key Information - D. Risk Factors - Risks Relating to Our Company and Industry - We are subject to complex environmental laws and regulations that can adversely affect the cost, manner or feasibility of doing business.”business".
The BWM Convention calls for a phased introduction of mandatory ballast water exchange requirements (beginning in 2009), to be replaced in time with a requirement for mandatory ballast water treatment. The BWM Convention entered into force on September 8, 2017. Under its requirements, only ballast water treatment will be accepted from the next International Oil Pollution Prevention renewal survey (after September 8, September 2019). All Seadrill units considered in operational status are in full compliance with the staged implementation of the BWM Convention by International Maritime Organization guidelines.
As of January 1, 2020, MARPOL Annex VI, Regulation 14, requires the sulphur content of any fuel used on board ships to be limited to 0.5% m/m (percent by mass). The fuel we use is compliant to these regulations. Ships must either burn compliant fuel, or use an exhaust gas cleaning system, which have fittingiii.Environmental Laws and upkeep costs.Regulations


iii.Environmental Laws and Regulations
Applicable environmental laws and regulations include the U.S. Oil Pollution Act of 1990, ("OPA"), the Comprehensive Environmental Response, Compensation and Liability Act, ("CERCLA"), the U.S. Clean Water Act, ("CWA"), the U.S. Clean Air Act, ("CAA"), the U.S. Outer Continental Shelf Lands Act ("OCSLA"), the U.S. Maritime Transportation Security Act of 2002 (“MTSA"”), European Union regulations, including the EU Directive 2013/30 on the Safety of Offshore Oil and Gas Operations, and Brazil’s National Environmental Policy Law (6938/81), Environmental Crimes Law (9605/98) and Federal Law (9966/2000) relating to pollution in Brazilian waters. These laws govern the discharge of materials into the environment or otherwise relate to environmental protection.pollution or protection of the environment and natural resources. In certain circumstances, these laws may impose strict, joint and several liability, rendering us liable for environmental and natural resource damages without regard to negligence or fault on our part. Implementation of new environmental laws or regulations that may apply to ultra-deepwater drilling units may subject us to increased costs or limit the operational capabilities of our drilling units and could materially and adversely affect our operations and financial condition. SeeFor details of these laws and regulations, refer to Item 3 “Key- "Key Information - D. Risk Factors - Risks Relating to Our Company and Industry - We are subject to complex environmental laws and regulations that can adversely affect the cost, manner or feasibility of doing business.”business".
iv.Safety Requirements
iv.Safety Requirements
Our operations are subject to special safety regulations relating to drilling and to the oil and gas industry in many of the countries where we operate. The United States undertook substantial revision of safety regulations applicable to our industry following the 2010 Deepwater Horizon Incident, in which we were not involved. Other countries also have undertaken or are undertaking a review of their safety regulations related to our industry. These safety regulations may impact our operations and financial results by adding to the costs of exploring for, developing and producing oil and gas in offshore settings. For instance, in 2016, the BSEE published a final rule that sets more stringent design requirements and operational procedures for critical well control equipment used in offshore oil and gas drilling and separately announced a risk-based inspection program for offshore facilities. Also, in 2016, BOEM issued a final Notice to Lessees and Operators imposing more stringent supplemental bonding procedures for the decommissioning of offshore wells, platforms and pipelines. These regulations, which may result in additional costs for us, have since become the subject of additional review and possible revision by BSEE and BOEM and, as a result, we cannot predict their impact on our future operations. The EU also has undertaken a significant revision of its safety requirements for offshore oil and gas activities through the issue of the EU Directive 2013/30 on the Safety of Offshore Oil and Gas Operations. These other future safety and environmental laws and regulations regarding offshore oil and gas exploration and development may increase the cost of our operations, lead our customers to not pursue certain offshore opportunities and result in additional downtime for our drilling units. In addition, if material spill events similar to the Deepwater Horizon Incident were to occur in the future, or if other environmental or safety issues were to cause significant public concern, the United States or other countries could elect to, again, issue directives to cease drilling activities in certain geographic areas for lengthy periods of time.
v.Navigation and Operating Permit Requirements
v.Navigation and Operating Permit Requirements
Numerous governmental agencies issue regulations to implement and enforce the laws of the applicable jurisdiction, which often involve lengthy permitting procedures, impose difficult and costly compliance measures, particularly in ecologically sensitive areas, and subject operators to substantial administrative, civil and criminal penalties or may result in injunctive relief for failure to comply. Some of these laws contain criminal sanctions in addition to civil penalties.
vi.Local Content Requirements
vi.Local Content Requirements
Governments in some countries have become increasingly active in local content requirements on the ownership of drilling companies, local content requirements for equipment utilized in our operations, and other aspects of the oil and gas industries in their countries. These regulations include requirements for participation of local investors in our local operating subsidiaries in countries such as Angola and Nigeria. There are currently also local content requirements in relation to drilling unit contracts in which we are participating in Brazil, although Brazil recently lessened local content requirements for future projects. Although these requirements have not had a material impact on our operations in the past, they could have a material impact on our earnings, operations and financial condition in the future.
vii.Other Laws and Regulations
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vii.Other Laws and Regulations
In addition to the requirements described above, our international operations in the offshore drilling segment are subject to various other international conventions and laws and regulations in countries in which we operate, including laws and regulations relating to the importation of, and operation of, drilling units and equipment, currency conversions and repatriation, oil and gas exploration and development, taxation of offshore earnings and earnings of expatriate personnel, the use of local employees and suppliers by foreign contractors and duties on the importation and exportation of drilling units and other equipment. There is no assurance that compliance with current laws and regulations or amended or newly adopted laws and regulations can be maintained in the future or that future expenditures required to comply with all such laws and regulations in the future will not be material.


C.ORGANIZATIONAL STRUCTURE

C.ORGANIZATIONAL STRUCTURE
1) Consolidated Subsidiaries
A full list of our significant management, operating and rig-owning subsidiaries is shown in Exhibit 8.1. All subsidiaries are, indirectly or directly, wholly-owned by us, except as follows:

i.
Asia Offshore Drilling ("AOD")
We have a 66.24% interest in Asia Offshore Drilling, a group comprised of Asia Offshore Rig 1 Ltd, Asia Offshore Rig 2 Ltd, and Asia Offshore Rig 3 Ltd which own the benign environment jack-up rigs AOD 1, AOD 2 and AOD 3. The remaining 33.76% interest is owned by Mermaid Maritime Public Company Limited ("Mermaid").
ii.Ship Finance Variable Interest Entities
Between 2007 and 2013 we entered into sale and leaseback arrangements for the semi-submersible rigs West Taurus and West Hercules and the jack-up rig West Linus. The counterparty to these arrangements was SFL Corporation Ltd ("Ship Finance"), who is a related party because our largest shareholder, Hemen, has a significant interest in both us and Ship Finance. Ship Finance incorporated SFL Deepwater Ltd, SFL Hercules Ltd, and SFL Linus Ltd for the sole purpose of owning and leasing the drilling units. Whilst these companies are wholly-owned subsidiaries of Ship Finance, we consolidate them under the variable interest entity model because we are the primary beneficiary of the entities.
iii.Seadrill Nigeria Operations Limited
HH Global Alliance Investments Limited ("Heirs Holdings"), an unrelated party registered in Nigeria, owns a non-controlling interest in one of our subsidiaries, Seadrill Nigeria Operations Limited, which holds a 10% interest in our drillship West Jupiter and previously supported the West Jupiter's operations whilst it was under contract with Total in Nigeria. In February 2020, we paid $11 million to Heirs Holdings for an option to buy the non-controlling interest at any point in the future for a $1 purchase price.us.
2) Investments in Non-Consolidated Entities
In addition to owning and operating our offshore drilling units through our subsidiaries, we also from time to time, makehave investments in other offshore drilling and oil services companies. We currently have the followingBelow are our significant equity investments:
i.Seadrill Partners
Seadrill Partners is a Marshall Islands limited liability company that owns four drillships, four semi-submersible rigs and three tender rigs. Seadrill Partners focuses on owning and operating offshore drilling rigs under long-term contracts with major oil companies. As of February 29, 2020, we own 46.6% of the outstanding limited liability interests of Seadrill Partners, which includes 35% of the outstanding common units and 100% of its subordinated units. We also own significant non-controlling interests in most of the operating and rig-owning subsidiaries of Seadrill Partners. Seadrill Partners’ common units were traded on the NYSE under the symbol “SDLP”, before being suspended from trading on the exchange in August 2019 as the market capitalization decreased below $15 million for a period of 30 consecutive days. On December 23, 2019, the common units were delisted from the NYSE.i. Gulfdrill
ii.SeaMex
SeaMexGulfdrill is a joint venture that operates five premium jack-ups in Qatar with Qatargas. We have a 50% ownership stake in Gulfdrill. The remaining 50% interest is owned by Gulf Drilling International ("GDI"), who manages all five rigs. We lease three of our jack-up rigs to the joint venture (West Castor, West Telesto, and West Tucana), with the additional two units being leased from a third party shipyard. The Company only leases the rigs into Gulfdrill and all costs are incurred by Gulfdrill.
ii. Sonadrill
Sonadrill is a joint venture that operates drillships focusing on opportunities in Angolan waters. We have a 50% ownership stake in Sonadrill. The remaining 50% interest is owned by Sonangol. Both Seadrill and Sonangol agreed to bareboat two units each into the joint venture with Seadrill due to manage the two Sonangol owned drillships. On October 1, 2019, the first bareboat and management agreements for the Sonangol drilling unit, Libongos, became effective. The rig commenced its first drilling contract on October 10, 2019. The Libongos iscurrently operating in Angola while the Quenguela is contracted to start with Total in early 2022. The two committed Seadrill rigs will be leased to the joint venture when required; to date no contracts have been secured for these rigs.
For further information on our investments in non-consolidated entities, refer to Note 17 - "Investment in associated companies" to the Consolidated Financial Statements included herein.
3) Discontinued Operations
i.Paratus Energy Services Ltd (formerly NSNCo)
As of December 31, 2021, NSNCo, now Paratus Energy Services Ltd, owned investments in SeaMex (100%), Seabras Sapura (50%) and Archer (15.7%). These are described in further detail in points ii., iii., and iv. below.
On October 26, 2021, NSNCo and its subsidiaries were classified as a discontinued operation following the Bankruptcy Court's approval of a proposed sale of 65% of Seadrill's equity interest in NSNCo to its lenders. The sale was conducted through the use of a pre-packaged Chapter 11 bankruptcy process which completed on January 20, 2022. Following the sale in early 2022, NSNCo was renamed Paratus Energy Services Ltd, and was deconsolidated from the Seadrill group with the residual 35% interest being reflected as an equity method investment.
Please refer to the NSNCo restructuring described in Note 4 - Chapter 11 to the accompanying financial statements for further details.
ii. SeaMex
SeaMex is a drilling contractor that owns and operates five jack-up drilling units located in Mexico under contract with Pemex. As of February 29, 2020, we haveSeaMex was a 50% ownership stake in SeaMex. Theowned joint venture until November, 2 2021, when NSNCo acquired the remaining 50% interest is owned by an investment fund controlled by Fintech Investment Limited, ("Fintech").
iii.Archer
Archer isin SeaMex through a global oilfield service company that specializesrestructuring arrangement resulting in drillingSeaMex being consolidated, as a discontinued operation, into NSNCo and well services. As of February 29, 2020 we own 15.7% of the outstanding common shares of Archer. We also own a convertible loan note that has a conversion right into equity of Archer.Seadrill.
iv.Seabras Sapura
iii. Seabras Sapura
Seabras Sapura is a group of related companies that own and operate six pipe-laying service vessels in Brazil. As of February 29, 2020, we haveNSNCo has a 50% ownership stake in each of these companies. The remaining 50% interest is owned by Sapura Energy Berhad ("Sapura Energy").Energy.
v. Gulfdrilliv. Archer
GulfdrillArcher is a joint ventureglobal oilfield service company that will managespecializes in drilling and operate five premium jack-ups in Qatar with Qatargas. Aswell services. NSNCo owns 15.7% of February 29, 2020, we havethe outstanding common shares of Archer and convertible loan note that has a 50% ownership stake in Gulfdrill. The remaining 50% interest is owned by Gulf Drilling International ("GDI"). We will lease twoconversion right into equity of our jack-up rigs to the joint venture, with the additional three units being leased from a third party shipyard. In November 2019 the first rig from the shipyard was delivered and the West Castor commenced its lease.Archer.


vi. Sonadrill
35


Sonadrill is a joint venture that will operate four drillships focusing on opportunities in Angolan waters. As of February 29, 2020, we have a 50% ownership stake in Sonadrill. The remaining 50% interest is owned by Sonangol EP ("Sonangol"). Both Seadrill and Sonangol will bareboat two units into the joint venture. On October 1, 2019, the first bareboat and management agreements for the Sonangol drilling unit, Libongos, became effective. The rig commenced its first drilling contract on October 10, 2019.D.PROPERTY, PLANT AND EQUIPMENT
You can find further information on our investments in non-consolidated entities in Note 18 to the Consolidated Financial Statements included in this report.

D.PROPERTY, PLANT AND EQUIPMENT
In this section, we provide details of our major categories of property, plant and equipment. We have categorized our assets as (i) drilling units (ii) newbuildings and (iii)(ii) office and equipment. You can find further information in the notes to the Consolidated Financial Statements included in this report. Please refer to Note 19 for information on newbuildings, Note 20 for informationFor details on drilling units and equipment refer to Note 21 for information on office 18 - "Drilling units"and equipment.Note 19 - "Equipment", respectively, to the Consolidated Financial Statements included herein.
1) Drilling units
The following tables, presented as ofat December 31, 2019,2021, provide certain specifications for our operational drilling rigs. Unless otherwise noted, the stated location of each rig indicates either the current drilling location, if the rig is operating, or the next operating location, if the rig is mobilizing for a new contract.
a) Drillships (7)
Owned fleet
UnitYear built Water depth (feet) Drilling depth (feet) Location as at December 31, 2019 Estimated month of rig availability
West Navigator2000 7,500 35,000 Norway available
West Gemini2010 10,000 35,000 Angola March 2021
West Tellus2013 12,000 40,000 Brazil November 2021
West Neptune2014 12,000 40,000 USA December 2020
West Jupiter2014 12,000 40,000 Spain available
West Saturn2014 12,000 40,000 Trinidad & Tobago available
West Carina2015 12,000 40,000 Malaysia July 2020
(i) Harsh Environment
b)Harsh Environment Semi-submersible Rigs (12)rigs (two)
UnitYear builtWater depth (feet)Drilling depth (feet)Location as at December 31, 2021Estimated month of rig availability
West Venture20002,600 30,000 NorwaySold January 2022
West Phoenix200810,000 30,000 NorwayNovember 2023
UnitYear built Water depth (feet) Drilling depth (feet) Location as at December 31, 2019 Estimated month of rig availability
West Alpha1986 2,000 23,000 Norway available
West Venture2000 2,600 30,000 Norway available
West Phoenix2008 10,000 30,000 Norway October 2023
West Hercules (i)
2008 10,000 35,000 Norway March 2021
West Taurus (i)
2008 10,000 35,000 Norway available
West Eminence2009 10,000 30,000 Spain available
West Orion2010 10,000 35,000 Malaysia available
West Pegasus2011 10,000 35,000 Norway available
West Eclipse2011 10,000 40,000 Namibia available
Sevan Driller2009 10,000 40,000 Indonesia available
Sevan Brasil2012 10,000 40,000 Aruba available
Sevan Louisiana2013 10,000 40,000 USA June 2020

c)Harsh Environment Jack-up Rigs (16)(one)
UnitYear builtWater depth (feet)Drilling depth (feet)Location as at December 31, 2021Estimated month of rig availability
West Elara2011450 40,000 NorwayMarch 2028
(ii) Floaters
Benign Environment Semi-submersible rigs (four)
UnitYear builtWater depth (feet)Drilling depth (feet)Location as at December 31, 2021Estimated month of rig availability
Sevan Driller*200910,000 40,000 IndonesiaSold April 2022
West Eclipse201110,000 40,000 Walvis Bayavailable
Sevan Brasil*201210,000 40,000 ArubaSold April 2022
Sevan Louisiana201310,000 40,000 USANovember 2022
Drillships (six)
UnitYear builtWater depth (feet)Drilling depth (feet)Location as at December 31, 2021Estimated month of rig availability
West Gemini201010,000 35,000 AngolaMay 2022
West Tellus201312,000 40,000 BrazilAugust 2025
West Neptune201412,000 40,000 USAJanuary 2023
West Jupiter201412,000 40,000 SpainOctober 2025
West Saturn201412,000 40,000 BrazilJune 2026
West Carina201512,000 40,000 Sri LankaAugust 2025
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UnitYear built Water depth (feet) Drilling depth (feet) Location as at December 31, 2019 Estimated month of rig availability
West Epsilon1993 400 30,000 Norway available
West Prospero2007 400 30,000 Malaysia available
West Vigilant2008 350 30,000 Malaysia available
West Ariel2008 400 30,000 United Arab Emirates available
West Freedom2009 350 30,000 Colombia available
West Cressida2009 375 30,000 Thailand available
West Callisto2010 400 30,000 Saudi Arabia December 2022
West Leda2010 375 30,000 Malaysia available
West Elara2011 450 40,000 Norway September 2027
West Castor2013 400 30,000 Suriname March 2023
West Telesto2013 400 30,000 Malaysia May 2023
West Tucana2013 400 30,000 Qatar April 2020
AOD I (ii)
2013 400 30,000 Saudi Arabia July 2022
AOD II (ii)
2013 400 30,000 Saudi Arabia May 2023
AOD III (ii)
2013 400 30,000 Saudi Arabia January 2023
West Linus (i)
2014 450 40,000 Norway December 2028
(iii) Jack-ups
OurBenign Environment Jack-up Rigs (eleven)
UnitYear builtWater depth (feet)Drilling depth (feet)Location as at December 31, 2021Estimated month of rig availability
West Prospero2007400 30,000 Malaysiaavailable
West Ariel2008400 30,000 United Arab Emiratesavailable
West Cressida2009375 30,000 Malaysiaavailable
West Callisto2010400 30,000 Saudi ArabiaNovember 2022
West Leda2010375 30,000 Malaysiaavailable
AOD I2013400 30,000 Saudi ArabiaJune 2022
AOD II2013400 30,000 Saudi ArabiaApril 2024
AOD III2013400 30,000 Saudi ArabiaDecember 2022
West Castor2013400 30,000 QatarAugust 2023
West Tucana2013400 30,000 QatarMay 2024
West Telesto2013400 30,000 QatarMay 2025
In addition to the above owned fleet, we also lease three harsh environment rigs in the North Sea - the West Linus and West Hercules, which are leased from SFL and under contract with ConocoPhillips and Equinor, and the West Bollsta, which is leased from Northern Ocean. The SFL leased rigs are expected to be handed back to SFL in 2022. The West Bollsta completed operations with Lundin in February 2022 and the rig will shortly return to Northern Ocean.
The five SeaMex rigs are included within our discontinued operations held for sale and have been classified as managed rigs.
The drilling units have beenwere pledged as collateral forunder our borrowing facilities. Please refersenior secured debt held as subject to compromise at December 31, 2021. On emergence, the drilling units will be pledged as collateral under the new debt agreements.
Rig Disposal Program
Starting in 2020 and up to December 31, 2021, we have sold eight of our cold stacked units through our rig disposal program. Following the sale of the West Epsilon in 2020, we sold seven further rigs in 2021 (West Vigilant, West Freedom, West Pegasus, West Alpha, West Orion, West Eminence and West Navigator).
We sold the West Venture in January 2022 and the Sevan Brasil and Sevan Driller in April 2022. Refer toNote 2234 – Subsequent events to the Consolidated Financial Statements included in this reportherein for further details.
As of December 31, 2019, we wholly-owned all the drilling rigs in our fleet noted in the tables above, except as follows:
i.
The jack-up rig West Linus and the semi-submersible rigs West Hercules and West Taurus are owned by wholly-owned subsidiaries of Ship Finance and leased to us under capital leases. We consolidate the Ship Finance rig owning entities for these rigs under the variable interest model. Please see Note 35 to the Consolidated Financial Statements included in this report for further details of these arrangements.
ii.
We own a 66.23% interest in the jack-up rigs AOD I, AOD II and AOD III. Please see ITEM 4C "Organizational Structure" for further details.
2) Newbuildings
In addition to the drilling units above, we have an option to acquire the semi-submersible rig Sevan Developer. The following table sets out details of this rig.
UnitRig type Water depth (feet) Drilling depth (feet) Area of location Status
Sevan DeveloperSemi-submersible 10,000 40,000 Cosco Shipyard (China) Under construction
The option to purchase the Sevan Developer expires on June 30, 2020. The rig will remain in China at the Cosco Shipyard during which time we retain the right to market the rig and acquire the rig at the original contracted amount. The termination agreement gives Cosco a right to terminate the contract at any time.
3) Office and Equipment
We lease offices and other properties in several locations including Stavanger and Oslo in Norway, Singapore, Houston in the United States, Rio de Janeiro in Brazil, Dubai in the United Arab Emirates and Aberdeen, Liverpool and London in the United Kingdom. Our Consolidated Balance Sheet includes office equipment, IT equipment and leasehold improvements held in these locations.


ITEM 4A.UNRESOLVED STAFF COMMENTS

ITEM 4A.UNRESOLVED STAFF COMMENTS
None.

37

ITEM 5.OPERATING AND FINANCIAL REVIEW

Table ofContents
ITEM 5.OPERATING AND FINANCIAL REVIEW AND PROSPECTS
In this section, we present management’s discussion and analysis of results of operations and financial condition. It should be read in conjunction with our Consolidated Financial Statements and accompanying notes thereto included herein. You should also carefully read the following sections of this annual report entitled “Cautionary Statement Regarding Forward-Looking Statements,” ITEMItem 3 - "Key Information—Information - A. Selected Financial Data", ITEMItem 3 - "Key Information—“Key Information - D. Risk Factors” and ITEMItem 4 - "Information on the Company”Company".
Our Consolidated Financial Statements have been prepared in accordance with U.S. GAAP and are presented in U.S. dollars unless otherwise indicated. We refer you to the notes to ourthe Consolidated Financial Statements for a discussion of the basis on which ourthe Consolidated Financial Statements are prepared.
1) Introduction
We are an offshore drilling contractor providing worldwide offshore drilling services to the oil and gas industry. For a detailed description of our business please read ITEMItem 4B - "Business Overview".
2) Discontinued operations
As set out in Note 4 - Chapter 11 Reorganization and Applicationproceedings to these financial statements, the Company concluded a comprehensive restructuring of Fresh Start Accounting
Inits balance sheet on February 22, 2022. As part of this section we have provided a summarized descriptionrestructuring process, the Company disposed of our Chapter 11 Reorganization below, together with an overview65% of Fresh Start Accounting which we appliedits equity interest in NSNCo on emergence from Chapter 11January 20, 2022. Prior to year end, on JulyNovember 2, 2018. Please read ITEM 4A - "History and Development2021, NSNCo completed the acquisition of the Company" forresidual 50% equity interest in SeaMex Ltd, a detailed descriptioncompany that it had previously held as a joint venture with Fintech. The agreed sale of the Chapter 11 Reorganization.
i.Chapter 11 Reorganization
Prior to the filing65% of Chapter 11 Proceedings (as defined below), we were engaged in extensive discussions with our secured lenders, certain holders of our unsecured bonds and potential new money investors regardingNSNCo meant that the terms of a comprehensive restructuring. The objectives of the restructuring were to build a bridge to a recovery and achieve a sustainable capital structure. To achieve this, we had proposed an extension to our bank maturities, reduced debt amortization payments, amendments to financial covenants and raising of new capital.
On September 12, 2017, Old Seadrill Limited, certain of its subsidiaries (together "the Company Parties") and certain Ship Finance companies entered into a restructuring support and lock-up agreement ("RSA") with a group of bank lenders, bondholders, certain other stakeholders, and new-money providers. In connection with the RSA, the Company Parties entered into an "Investment Agreement" under which Hemen Investments Limited, an affiliate of Old Seadrill Limited's largest shareholder Hemen Holding Ltd. and certain other commitment parties, committed to provide $1.06 billion in new cash commitments, subject to certain terms and conditions (the "Capital Commitment").
On September 12, 2017, to implement the transactions contemplated by the RSA and Investment Agreement, Old Seadrill Limited and certain of its subsidiaries (the "Debtors") commenced prearranged reorganization proceedings (the "Chapter 11 Proceedings") under Chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court for the Southern District of Texas Victoria Division. During the bankruptcy proceedings, the Debtors continued to operate the business as debtors in possession.
After September 12, 2017, the Debtors negotiated with their various creditors and on February 26, 2018 announced a "Global Settlement", following which there were amendments to the RSA and Investment Agreement. These amendments provided for, amongst other things, the inclusion of certain other creditors as Commitment Parties, an increase of the Capital Commitment to $1.08 billion, increased recoveries for general unsecured creditors under the Plan and an agreement regarding allowed claims from certain newbuild shipyards.
On February 26, 2018, the Debtors filed a proposed Second Amended Joint Chapter 11 Plan of Reorganization (the "Plan") with the Bankruptcy Court. The Plan was confirmed by the Bankruptcy Court on April 17, 2018. The Plan became effective and the Debtors emerged from Chapter 11 Proceedings on July 2, 2018 (the "Effective Date").
The Plan extinguished approximately $2.4 billion in unsecured bond obligations, more than $1.0 billion in contingent newbuild obligations, substantial unliquidated guarantee obligations, and approximately $250 million in unsecured interest rate and currency swap claims, while extending near term debt maturities, providing Seadrill with over $1.0 billion in new capital and leaving employee, customer and ordinary trade claims largely unimpaired.
ii.Application of Fresh Start Accounting
Upon emergence from Chapter 11 bankruptcy on July 2, 2018, we adopted fresh start accounting in accordance with the provisions set forth in ASC 852, Reorganizations. Adopting fresh start accounting resulted in a new financial reporting entity with no retained earnings or deficits brought forward. Upon the adoption of fresh start accounting, our assets and liabilities were recordedclassified as held-for-sale as at their fair values which differ materially from the recorded values of our assetsDecember 31, 2021 and liabilitiesits results were reported as reflected"discontinued operations" in the Predecessor historical Consolidated Balance Sheets.statement of operations. The effectscomparative periods of the Planconsolidated financial statements were adjusted for this classification and the application of fresh start accounting were applied as of July 2, 2018 and the new basis of our assets and liabilities are reflected in our Consolidated Balance Sheet as of December 31, 2018 and the related adjustments thereto were recordedall balances presented in the Consolidated Statementremainder of Operations of the Predecessor as "Reorganization items" during the 2018 Predecessor period.


Accordingly, our Consolidated Financial Statementsthis filing represent those for periods after July 2, 2018 are not and will not be comparable to the Predecessor Consolidated Financial Statements prior to July 1, 2018. Our Consolidated Financial Statements and related footnotes are presented with a black line division which delineates the lack of comparability between amounts presented on July 2, 2018 and dates prior. Our financial results for future periods following the application of fresh start accounting will be different from historical trends and the differences may be material.
Refer to Note 5 – Fresh Start Accountingto our Consolidated Financial Statements included herein.continuing operations unless otherwise indicated.
3) Changes to our fleet
The below table shows the number of operationalowned drilling units included in our fleet for each of the periods covered by this report.
Drilling units ownedDecember 31, 2021December 31, 2020December 31, 2019
Harsh environment floaters244
Harsh environment jack-up rigs112
Total harsh environment rigs356
Drillships666
Semi-submersible rigs477
Total floaters101313
Jack-up rigs111313
Total drilling units (1)
243132
(1) We sold the West Venture in January 2022 and both the Sevan Driller and the Sevan Brasil in April 2022 from the above fleet. See Note 34 – Subsequent events to the Consolidated Financial Statements included herein for further details.
  Successor  Predecessor
Operational drilling units December 31, 2019 December 31, 2018  December 31, 2017
Drillships 7 7  7
Semi-submersible rigs 12 12  12
Total floaters 19 19  19
Jack-up rigs 16 16  16
Total operational units 35 35  35
The reduction in our owned fleet is driven by sales under our rig disposal program. For further information, refer to Item 4D - "Property, Plant and Equipment".
The below table shows the number of newbuildingsmanaged/leased drilling units included in our fleet for each of the periods covered by this report.report:
Drilling units managed/leasedDecember 31, 2021December 31, 2020December 31, 2019
Managed rigs
Floater41010
Jack up / Tender588
Total managed rigs91818
Leased
Harsh environment - floaters243
Harsh environment - Jack-up111
Total drilling units354
  Successor  Predecessor
Number of units December 31, 2019
 December 31, 2018
  December 31, 2017
Drillships —
 —
  4
Semi-submersible rigs 1 1  2
Total floaters 1 1  6
Jack-up rigs —
 2  8
Total operational units 1 3  14
Drillships decreased by fourThe decrease in managed rigs during 20182021 was due to the rejection and termination of the newbuild contracts for the West Dorado, West Draco, West Aquilanine Aquadrill management contracts. Rigs under Seadrill's management remained unchanged between 2019 and the West Libra2020.
The decrease in accordance with the Global Settlement (described above). In return, the counterparties to these contracts, Samsung Heavy Industries Co., Ltd. ("Samsung") and Daewoo Shipbuilding & Marine Engineering Co., Ltd ("DSME"), received an allowed claim and became Commitment Partiesleased rigs during 2021 was due to the Investment Agreement. At December 31, 2017, we recorded a liabilityredelivery of $1,064 million for the allowed claimWest Mira to Northern Ocean and impairment of $696 million against the newbuild assets we had previously recorded for those rigs.
On May 9, 2018, the semi-submersible newbuild, West Rigel, was soldTaurus to SLF Corporation. Leased rigs increased by Jurong Shipyard Pte Ltd. ("Jurong") and we received a share of proceeds totaling $126 million. We recorded a $2 million loss on disposal for this transaction at December 31, 2017.
Jack-up newbuild rigs decreased by six during 2018one unit in 2020 due to terminationsthe new lease agreement with Northern Ocean relating to the West Bollsta.
38
Table of Newbuild contracts between usContents
There are no newbuildings for 2021 and the Dalian Shipyard. The contracts for the remaining two jack-up rigs from the Dalian shipyard, the West Dione and West Mimas, were terminated in February 2019 and April 2019, respectively. Please refer to Note 34 - Commitments and Contingencies for further details.
2020. We havehad an option, which expired on June 30, 2020 and was not exercised, to acquire the semi-submersible rig Sevan Developer. The option to purchase the Sevan Developer expires on June 30, 2020.
Please read "ITEM 4D. - Property, Plant and Equipment" for further information on our operational drilling units and newbuilds at December 31, 2019.
4) Contract backlog
Order BacklogContract backlog includes all firm contracts at the maximum 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. Order BacklogContract backlog excludes revenues for mobilization, demobilization and contract preparation or other incentive provisions and excludes backlog relating to Non-Consolidated Entities.non-consolidated entities. Contract backlog excludes management contract revenue from Seadrill Partners, SeaMex, Sonadrill and Northern Ocean, some of which are on rolling contracts.

The contract backlog for our fleet was as follows as at the dates specified:
(In $ millions)
Contract backlogDecember 31, 2021December 31, 2020December 31, 2019
Harsh environment (1)
810 1,476 1,805 
Floaters1,309 132 364 
Jack-ups149 249 375 
Total2,268 1,857 2,544 
(1) Subsequent to period end, backlog was reduced by $459 million related to the negotiated amendment to the West Linus lease with SFL. The rig is now expected to be delivered back to SFL in 2022, at which point Seadrill will no longer be the operator of the drilling contract.
(In $ millions) Successor  Predecessor
Contract backlog December 31, 2019
December 31, 2018
  December 31, 2017
Floaters 803
630
  870
Jack-ups 1,741
1,457
  1,659
Total 2,544
2,087
  2,529
Our contract backlog includes only firm commitments represented by signed drilling contracts. The full contractual operating dayrate may differ to 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 to the actual dayrate we ultimately receive because of several other factors, including rig downtime or suspension of operations. In certain contracts, the dayratedayrate may be reduced to zero if, for example, repairs extend beyond a stated period.
We project our December 31, 20192021 contract backlog to unwind over the following periods.
(In $ millions)   Successor
Contract backlog Total
 2020
 2021
 2022
 Thereafter
Floaters 803
 425
 136
 131
 111
Jack-ups 1,741
 296
 287
 270
 888
Total 2,544
 721
 423
 401
 999
(In $ millions)
Contract backlogTotal202220232024Thereafter
Harsh environment810 313 191 72 234 
Floaters1,309 264 356 352 337 
Jack-ups149 107 33 9 — 
Total2,268 684 580 433 571 
The actual amounts 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 projects, unplanned downtime and other factors that result in lower applicable dayrates 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.


A.RESULTS OF OPERATIONS
The year ended 2019, the 2018 Successor period, the 2018 Predecessor period and the year ended 2017
The tables included below set out financial information for the periods presented. The 2018 Successor period and the 2018 Predecessor period are distinct reporting periods because of the application of fresh start accounting upon emergence from Chapter 11 bankruptcy on July 2, 2018. These periods may not be comparable to each other or prior periods. We have therefore not made comparisons between accounting measures in non-comparable periods. We have made comparisons for non-accounting driven performance indicators, where applicable.
39
  Successor  Predecessor
(In $ millions) Year ended December 31, 2019
 Period from July 2, 2018 through December 31, 2018
  Period from January 1, 2018 through July 1, 2018
 Year ended December 31, 2017
Operating revenues 1,388
 541
  712
 2,088
Operating expenses (1,722) (737)  (918) (1,902)
Other operating items 39
 21
  (407) (914)
Operating loss (295) (175)  (613) (728)
Interest expense (487) (261)  (38) (285)
Reorganization items —
 (9)  (3,365) (1,337)
Other income and expense (479) (152)  161
 (686)
Loss before income taxes (1,261) (597)  (3,855) (3,036)
Income tax benefit / (expense) 39
 (8)  (30) (66)
Net loss (1,222) (605)  (3,885) (3,102)
Table ofContents
A.RESULTS OF OPERATIONS
(In $ millions)Year ended December 31, 2021Year ended December 31, 2020Year ended December 31, 2019
Operating revenues1,008 1,059 1,388 
Operating expenses(1,114)(1,457)(1,722)
Other operating items(51)(4,084)39 
Operating loss(157)(4,482)(295)
Interest expense(109)(409)(421)
Reorganization items, net(310)— — 
Other financial and non-operating items(11)447 (44)
Loss before income taxes(587)(4,444)(760)
Income tax (expense)/benefit(5)(4)40 
Income/(loss) from discontinued operations5 (215)(502)
Net loss(587)(4,663)(1,222)
1) Operating revenues
Total operating revenues consist of contract revenues, reimbursable revenues, management contract revenues and other revenues. We have analyzed operating revenues between these categories in the table below:
  Successor  Predecessor
(In $ millions) Year ended December 31, 2019
 Period from July 2, 2018 through December 31, 2018
  Period from January 1, 2018 through July 1, 2018
 Year ended December 31, 2017
Contract revenues 997
 469
  619
 1,888
Reimbursable revenues 264
 26
  21
 38
Other revenues 127
 46
  72
 162
Operating revenues 1,388
 541
  712
 2,088
(In $ millions)Year ended December 31, 2021Year ended December 31, 2020Year ended December 31, 2019
Contract revenues (a)
764 703 997 
Reimbursable revenues (b)
35 37 41 
Management contract revenue (c)
177 289 338 
Other revenues (d)
32 30 12 
Total operating revenues1,008 1,059 1,388 
a) Contract revenues
Contract revenues represent the revenues that we earn from contracting our drilling units to customers, primarily on a dayrate basis. Contract revenue relates to Seadrill's owned units as well as harsh-environment rigs that have been leased from SFL and Northern Ocean. We have analyzed contract revenues by segment in the table below.
(In $ millions)Year ended December 31, 2021Year ended December 31, 2020Year ended December 31, 2019
Harsh environment437 376 313 
Floaters226 210 477 
Jack-ups101 117 207 
Contract revenues764 703 997 
  Successor  Predecessor
(In $ millions) Year ended December 31, 2019
 Period from July 2, 2018 through December 31, 2018
  Period from January 1, 2018 through July 1, 2018
 Year ended December 31, 2017
Floaters 644
 307
  437
 1,283
Jack-ups 353
 162
  182
 605
Contract revenues 997
 469
  619
 1,888

Contract revenues are primarily 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.below.
i.Average number of rigs on contract






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Table ofContents
i.Average number of owned or leased rigs on contract
We calculate the average number of rigs onon contract by dividing the aggregate days our rigs were on contract during the reporting period by the number of days in that reporting period. The average number of rigs on contract for the periods covered is set out in the below table:
Year ended December 31, 2021Year ended December 31, 2020Year ended December 31, 2019
Harsh environment4 4 4 
Floaters3 3 5 
Jack-ups4 3 7 
Average number of rigs on contract11 10 16 
  Successor  Predecessor
(Number) Year ended December 31, 2019
 Period from July 2, 2018 through December 31, 2018
  Period from January 1, 2018 through July 1, 2018
 Year ended December 31, 2017
Floaters 7
 7
  10
 8
Jack-ups 9
 8
  8
 11
Average number of rigs on contract 16
 15
  18
 19
Harsh Environment
The average number of harsh environment rigs remained at four on contract in the periods presented. We have five units that operated during the year (West Elara, West Linus, West Phoenix, West Hercules and West Bollsta), of which the West Phoenix was idle until August 2021. The West Venture, a cold stacked harsh environment unit, was sold in January 2022 and we anticipate that the three leased rigs, West Hercules, West Linus and West Bollsta will be returned to their owners in 2022, leaving two units in our go-forward fleet.
Floaters
TheThere has been no change in the average number of floaters on contract forbetween 2021 and 2020, although we have benefited from improved activity during the year ended 2019 wassecond half of 2021 and had five floaters operating at the same as for the 2018 Successor period. The end of year. In addition, our two cold stacked drillships, West Jupiter and West Carina, and are being reactivated for operation in Brazil following the signing of two long terms contracts with Petrobras. We sold two of the remaining long-term cold stacked units (Sevan Louisiana both operatedBrasil and Sevan Driller) in 2019 after periods of being idle. This was offset byApril 2022. We are marketing the remaining unit (West Gemini being idle between August and November 2019 andEclipse) but would reactivate her if suitable work is secured that would provide an appropriate investment return on the West Saturn completing its contract with Equinor in October 2019.reactivation cost.
The average number of floaters on contract decreased by threetwo between the 2018 Predecessor period2020 and the 2018 Successor period2019 primarily due to the West CarinaJupiter and Sevan Brazil West Saturn completing their contracts with Petrobras in Brazil and the West Eclipse completing its contract with ExxonMobil in Angola.2019.
Jack-ups
The average number of floatersjack-up rigs on contract increased by two betweenpresented above excludes three rigs leased to Gulfdrill (West Castor, West Telesto and West Tucana) as the year ended 2017 and the 2018 Predecessor period primarily due to the reactivation of the West Hercules which started workcharter revenue on those leases are included in the North Sea in April 2018 and the West Saturn commencing a new contract with Equinor in Brazil in February 2018.
Jack-ups
"Other revenue"(discussed below). The average number of jack-ups on contract increased by one between 2021 and 2020 primarily due to the year ended 2019 and the 2018 Successor period. The West Castor returnedAOD II returning to operations with Saudi Aramco following a suspension in March 2019 after2020. The remaining four long-term cold stack jack-ups are being warm stacked since July 2018marketed and the West Tucana had a full year of operations after its reactivation in October 2018. This was offset by a period of idle time on the West Cressida during the first half of 2019.would be reactivated if suitable work is secured.
The average number of jack-ups on contract was unchanged between the 2018 Predecessor period and the 2018 Successor period as the West Cressida and West Tucana started work on new contracts in July 2018 and October 2018 which was offset by West Castor completing its contract in June 2018.
The average number of jack-ups on contract decreased by threefour between the year ended 20172020 and the 2018 Predecessor period2019 primarily due to the West Tucana,Telesto and West Cressida and West ArielCastor completing their contracts in 20172019 and early 2018.being leased to Gulfdrill in 2020, the suspension of the AOD II contract with Saudi Aramco in 2020, and the West Tucana completing its contract in 2020.
ii.Average contractual dayrates
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. We have set out the average contractual dayrates for the periods presented in the below table:
(In $ thousands)Year ended December 31, 2021Year ended December 31, 2020Year ended December 31, 2019
Harsh environment263 242 215 
Floaters199 196 247 
Jack-ups78 80 79 
Harsh Environment
The average contractual dayrate for harsh environment rigs increased by $21k per day between the years ended December 31, 2021 and 2020, primarily due to higher dayrates on new contracts and clients for the West Phoenix and West Hercules. This was partly offset by lower dayrates on the West Bollsta's new contractas well as the West Linus, and West Elara earning lower market-indexed rates on their long-term contracts.
The average contractual dayrate for harsh environment rigs increased by $27k per day between the years ended December 31, 2020 and 2019, primarily due to the West Phoenix operating at higher dayrates and due to the West Linus and West Elara earning higher market-indexed rates on their long-term contracts with ConocoPhillips.


41
  Successor  Predecessor
(In $ thousands) Year ended December 31, 2019
 Period from July 2, 2018 through December 31, 2018
  Period from January 1, 2018 through July 1, 2018
 Year ended December 31, 2017
Floaters 245
 231
  279
 395
Jack-ups 106
 106
  131
 150
Table ofContents
Floaters
The average contractual dayrate for floaters increased by $14k$3k per day between the yearyears ended 2019December 31, 2021 and 2018 Successor period.2020. This was primarily due to the West Phoenix Saturn ,which was previously warm stacked, and West Hercules Sevan Louisiana both operating at higher dayrates in 2019 compared to 2018.2021. This was partially offset by the West Carina being cold stacked and the West Neptune and West Tellus operating at lower dayrates in 2021.

The average contractual dayrate for floaters decreased by $48k$51k per day between the 2018 Predecessoryears ended December 31, 2020 and 2018 Successor periods2019. This was primarily due to the West Carina and West Eclipse Jupiter completinga legacy contracts for Petrobras and ExxonMobil, respectively in July 2018.
The average contractual dayrate for floaters decreasedcontract at the end of 2019. This was partly offset by $116k per day between the year ended 2017 and the 2018 Predecessor period primarily due to the completion of legacy contracts on the West Neptune and West Gemini with LLOG and Total respectively, which were replaced with lower dayrate contracts.
Jack-ups
The average contractual dayrate for jack-ups for the year ended 2019 was the same as for the 2018 Successor period. The West Elara earnedSevan Louisiana operating at a higher dayrate on its contract with ConocoPhillips when it movedin 2020 compared to a market-indexed rate. However, thiswas offset by the West Callisto and AOD 1 securing long-term extensions at lower dayrates with Saudi Aramco.2019.
Jack-ups
The average contractual dayrate for jack-ups decreased by $25k$2k per day between 2018 Predecessorthe years ended December 31, 2021 and 2018 Successor periods2020. This was primarily due toa decrease in the West Elara and West Linus securing long-term contracts dayrate on the AOD II with ConocoPhillips atSaudi Aramco on extension of contract in 2021. This was partly offset by AOD III earning a lowerhigher dayrate for an interim period and the West Castor completing its contract.on their contract, also with Saudi Aramco.
The average contractual dayrate for jack-ups decreasedincreased by $19k$1k per day between the yearyears ended 2017December 31, 2020 and the 2018 Predecessor period2019. This was primarily due to two rigs on lower rates being stacked in 2020 and the West Elara movingCallisto being on higher day rates in 2020. This was off-set by the suspension of the AOD II's contract in 2020 and AOD III operating on a higher dayrate in 2019 compared to 2020 after it secured a long-term extension at a lower dayrate with ConocoPhillips in Norway and the West Tucana and West Ariel completing legacy contracts.Saudi Aramco.
iii.Economic utilization for rigs on contract
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 contractual operating rate, such as planned downtime for maintenance. In such situations, economic utilization reduces below 100%.
Economic utilization for each of the periods presented in this report is set out in the below table:
Year ended December 31, 2021Year ended December 31, 2020Year ended December 31, 2019
Harsh environment93 %92 %90 %
Floaters84 %88 %92 %
Jack-ups96 %98 %96 %
  Successor  Predecessor
(Percentage) Year ended December 31, 2019
 Period from July 2, 2018 through December 31, 2018
  Period from January 1, 2018 through July 1, 2018
 Year ended December 31, 2017
Floaters 92% 95%  95% 97%
Jack-ups 96% 99%  98% 98%
Economic utilization for harsh environment increased by 1% in 2021 primarily due to 2020 downtime on the West Bollsta. Economic utilization for floaters decreased by 4% primarily due to 2021 downtime on West Saturn, West Tellus and Sevan Louisiana relating to malfunctioning subsea equipment. Economic utilization for jack-ups decreased by 2% primarily due to the AOD II earning a reactivation rate for a period at the point it returned to operations following its contract suspension during the first half of the year, compounded by the West Callisto planned special periodic survey.
The economic utilization for floaters has decreased for the year endedharsh environment rigs increased by 2% from 2019 to 92%. This was2020, primarily due to 2019 downtime on the West Phoenix, West Hercules and West Linus relating to malfunctioning subsea equipment. Economic utilization for floaters decreased by 4% in 2020 primarily due to the operational downtimeunplanned BOP on the Sevan LouisianaWest Tellus. Economic utilization for jack-ups increased by 2% in early 2019 and planned maintenance activities2020 primarily due to improvements on the West Neptune and West Tellus in the second half of the year.
Economic utilization has remained in the range of 95% to 99% for each of the other periods presented in this report.Castor.
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.
Reimbursablec) Management contract revenue
We have analyzed management contract revenues forby segment in the yeartable below.
(In $ millions)Year ended December 31, 2021Year ended December 31, 2020Year ended December 31, 2019
Harsh environment29 129 184 
Floaters125 126 119 
Jack-ups12 17 13 
Other11 17 22 
Management contract revenue177 289 338 
42
Table ofContents
Harsh environment management contract revenues decreased between the years ended December 31, 2021, 2020 and 2019 included revenue of $167 million fordue to a contractlower recharge to performNorthern Ocean relating to the West Bollsta as the first mobilization ofproject completed in 2020, and from early 2021 when we stopped providing management services to West Mira. This was partly offset by higher management fees charged to Sonadrill in 2021 relating to the West MiraQuenguela and West Bollsta for Northern Drilling and $56 million for a contractthe Libongos, which returned to perform the first mobilization of the Libongos and Quenguela for Sonangol.operations after being suspended in 2020.


c)d) Other revenues
Other revenues include the following:
(In $ millions)Year ended December 31, 2021Year ended December 31, 2020Year ended December 31, 2019
Leasing revenues (i)
26 19 1 
Early termination fees (ii)
6 11 11 
Other revenues32 30 12 
  Successor  Predecessor
(In $ millions) Year ended December 31,
2019
 Period from July 2, 2018 through December 31, 2018
  Period from January 1, 2018 through July 1, 2018
 Year ended December 31, 2017
Related party management fees (i)
 109
 46
  43
 110
Other management fees (ii)
 6
 —
  —
 1
Leasing revenues (iii)
 1
 —
  —
 —
Amortization of unfavorable contracts (iv)
 —
 —
  21
 43
Early termination fees (v)
 11
 —
  8
 8
Other revenues 127
 46
  72
 162
i.Leasing revenues
i.
Related party management fees
Related party revenues represent income from managementLease revenue increased between the years ended December 31, 2021 and technical support services provided2020 due to Seadrill Partners, SeaMex, Sonadrillhigher charter fees for West Tucana which commenced operations in November 2020. Lease revenue increased between the years ended December 31, 2020 and Northern Drilling.
ii.Other management fees
Revenue from management services provided2019 due to third parties.
iii.Leasing revenues
Revenue earned on the charter of the West Castor, West Telesto and West Tucana being leased to Gulfdrill.
iv.Amortization of unfavorable contracts
We recognize an intangible asset or liability if we acquire a drilling contractii.Early termination fees
Early termination fees were received for the West Bollsta in a business combination2021, the West Gemini in 2020, and the contract had a dayrate that was above or below market rates at the time of the business combination. For the periods before emergence from Chapter 11 we classified the amortization of these intangible assets or liabilities within other revenues. Post-emergenceWest Jupiter and after the application of fresh start accounting, we have applied a new accounting policy which classifies amortization of these intangible assets and liabilities within operating expenses.
v.Early termination fees
The termination fee revenueWest Castor in the year ended 2019 relates to the fees recognized for the West Jupiter and West Castor, the 2018 Predecessor period and the year ended 2017 included early termination fee revenue for the West Pegasus and West Hercules, respectively.


2019.
2) Operating expenses
Total operating expenses include vessel and rig operating expenses, amortization of intangibles, reimbursable expenses, management contract expense, depreciation of drilling units and equipment, and selling, general and administrative expenses. We have analyzed operating expenses between these categories in the table below:
(In $ millions)Year ended December 31, 2021Year ended December 31, 2020Year ended December 31, 2019
Vessel and rig operating expenses (i)
(676)(606)(726)
Depreciation (ii)
(155)(346)(426)
Amortization of intangibles (iii)
— (1)(134)
Reimbursable expenses(32)(34)(39)
Selling, general and administrative expenses (iv)
(77)(80)(95)
Management contract expense (v)
(174)(390)(302)
Operating expenses(1,114)(1,457)(1,722)
  Successor  Predecessor
(In $ millions) Year ended December 31, 2019
 Period from July 2, 2018 through December 31, 2018
  Period from January 1, 2018 through July 1, 2018
 Year ended December 31, 2017
Vessel and rig operating expenses (i)
 (770) (357)  (407) (792)
Depreciation (ii)
 (426) (236)  (391) (798)
Amortization of intangibles (iii)
 (134) (58)  —
 —
Reimbursable expenses (262) (24)  (20) (35)
Selling, general and administrative expenses (iv)
 (130) (62)  (100) (277)
Operating expenses (1,722) (737)  (918) (1,902)
i.Vessel and rig operating expenses
i.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 and expenses for repairrepairs and maintenance and onshore support costs.
For periods prior to emergence from Chapter 11 we classified certain operational support and information technology related costs incurred by our support functions within selling, general and administrative expenses. As part of fresh start accounting and for periods after emergence we classified these costs within vessel and rig operating expenses. Vessel and rig operating expenses for the 2018 Predecessor and Successor periods are therefore not comparable.maintenance.
We have analyzed vessel and rig operating expenses by segment in the table below:


Successor

Predecessor
(In $ millions)
Year ended December 31, 2019

Period from July 2, 2018 through December 31, 2018


Period from January 1, 2018 through July 1, 2018

Year ended December 31, 2017
(In $ millions)Year ended December 31, 2021Year ended December 31, 2020Year ended December 31, 2019
Harsh environmentHarsh environment373 250 243 
Floaters
493

223


239

480
Floaters231 272 342 
Jack-ups
221

119


158

286
Jack-ups72 84 141 
Other
56

15


10

26
Vessel and rig operating expenses
770

357


407

792
Vessel and rig operating expenses676 606 726 
Vessel and rig expenses for jack-ups in the 2018 Predecessor period included a bad debt expense of $48 million relating to an overdue receivable. This receivable was not recognized as part of fresh start accounting in the 2018 Successor period. We subsequently recovered $21 million on November 27, 2018 and a further $26 million on January 10, 2019 which is recognizable on receipt within "other operating income" (see section 3 below).
Excluding the effect of the one-time items discussed above, 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.
We have analyzed the average number
43
Table of rigs by status and segment over the reporting period in the table below:Contents


 Successor  Predecessor
(In $ millions) Year ended December 31, 2019

Period from July 2, 2018 through December 31, 2018
  Period from January 1, 2018 through July 1, 2018

Year ended December 31, 2017
Floaters         
Operating 7
 7
  10
 8
Warm stacked 2
 3
  —
 2
Cold stacked 10
 9
  9
 9
Average number of Floaters 19
 19
  19
 19
Jack ups         
Operating 9
 8
  8
 11
Warm stacked 1
 1
  3
 —
Cold stacked 6
 7
  5
 5
Average number of Jack-ups 16
 16
  16
 16
For detail on the movement in operating rigs in each period presented, please refer to the above section 1 a) - "i. Average number of owned or leased rigs on contract".
Harsh environment rigs incurred higher costs in 2021 despite the amount of rigs on contract being consistent with the prior year. This was largely due to higher personnel costs combined with increased lease expense on the West Bollsta. This was partially offset by the sale of West Navigator, West Alpha and West Eminence, for which we no longer incur rig maintenance costs. The numberincrease in costs in 2020 compared to 2019 was due to increased personnel and COVID-19 related costs which was partly offset by the disposal of the cold stacked floaters was consistent West Epsilon in 2020.
Operating expenses on floater rigs decreased in 2021 mainly driven by the sale of the West Orion, West Pegasus and West Eclipse, along with two warm stacked rigs being transitioned to a cold stacked status. Warm stacked rigs generally incur higher expenditure due to the anticipation of new operations, thus maintaining some functions that are usually paused when a rig is cold stacked. Operating expenses in 2020 decreased from 2019 due to the West Neptune and Sevan Louisiana moving from an operating to warm stacked status.
Jack up rigs saw a decrease in expenses for the year ended 2017,December 31, 2021 due to the 2018 predecessor periodsale of West Vigilant and the 2018 successor periods. The number increased by oneWest Freedom, along with an additional rig leased to Gulfdrill, as leased rigs typically incur minimal operational expenses. There are now three rigs being leased to Gulfdrill; West Telesto, West Tucana and West Castor. Operating expenses were lower in 2020 than 2019 due to a decrease in the year ended 2019 as the West Eclipse went from warm stack to cold stack.
The number of cold stacked jack-upoperating rigs was consistent between the year ended 2017as well as rigs being leased to Gulfdrill.
ii.Depreciation of drilling units and 2018 predecessor periods. During the 2018 successor the West Ariel went from warm stack to cold stack. The number of cold stacked rigs decreased by one between the 2018 successor period and the year ended 2019 as the West Tucana became operational.equipment
ii.Depreciation of drilling units and equipment
We record depreciation expense to reduce the carrying value of drilling unit and equipment balances to their residual value over their expected remaining useful economic lives. We reduced
Depreciation decreased in 2021 compared to 2020 as a result of the carrying valueimpairments recognized on our drilling fleet in both March and December 2020, compounded by a further impairment of drilling unit and equipment balances when we (i) applied fresh start accountingthe West Hercules in June 2021. See Note 11 – "Loss on emergenceimpairment of long-lived assets" to the Consolidated Financial Statements included herein for more information.
Similarly depreciation decreased in 2020 from Chapter 11 and (ii) recorded long-lived asset2019 due to the impairments against the West Alpha, West Navigator and West Epsilon at June 30, 2018. The depreciation expense for the 2018 Successor period is therefore based onrecognized 2020 that resulting in lower carrying values of our drilling units and equipment, andon which the depreciation charge is not comparable to the levelbased.
iii.Amortization of depreciation expense recorded in the Predecessor periods.intangibles
iii.Amortization of intangibles
For periods before emergence from the previous Chapter 11 Proceedings we recognized intangible assets or liabilities only where we acquired a drilling contract in a business combination. The accounting policy we applied in the Predecessor was to classify amortization for such contracts within other revenues. On emergence from Chapter 11 and application of fresh start accounting, we recognized intangible assets and liabilities for favorable and unfavorable drilling contracts at fair value. We amortize these assets and liabilities over the remaining contract period and classifyreport the amortization under operating expenses.
iv.Selling, general and administrative expenses
Amortization reduced in 2021 and 2020, after completion of favorable contracts and an impairment recognized against the Seadrill Partners management contracts in 2020. See Note 16 - "Other assets" to the Consolidated Financial Statements included herein for more information.
iv.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. Legal and professional fees incurred for our Chapter 11 reorganization post-petition were classified under reorganization items.
As discussed in section 2 above, we changed the classification of certain support function costs for periods after emergence. Selling, general and administrative expenses decreased in both 2021 and 2020 primarily due to lower legal and consultancy fees and a reduction in corporate office expenses.
v.Management contract expense
Management contract expense includes costs incurred in providing management and operational services on behalf third parties. We have analyzed management contract expenses in the table below:
(In $ millions)Year ended December 31, 2021Year ended December 31, 2020Year ended December 31, 2019
Management contract expense(30)(92)(79)
Reimbursable expenses(108)(156)(223)
Expected credit losses(36)(142)— 
Total management contract expense(174)(390)(302)
The decrease in management contract expense from 2020 to 2021 is due to the termination of the Wintershall contract with Northern Ocean and termination of services to Aquadrill. This was partly offset by an increase in fees charged to Sonadrill for the Libongos and Quenguela.
The 2020 increase in management contract expense was due to increased fees charged to Sonadrill for the successor periods is therefore not comparableLibongos, which went on contract in October 2019, partially offset by a decrease in reimbursable expenses billed to Sonadrill.
Refer to Note 5 – "Current expected credit losses" to the levelConsolidated Financial Statements included herein for more information regarding expected credit losses.

44
Table of expense recorded in the predecessor periods.Contents
3) Other operating items
Other operating items include impairmentslosses on impairment of long-lived assets lossand intangibles, gains on sale of assets and other operating income. We have analyzed other operating items between these categories in the below table:

(In $ millions)Year ended December 31, 2021Year ended December 31, 2020Year ended December 31, 2019
Loss on impairment of long-lived assets (i)
(152)(4,087)— 
Loss on impairment of intangible (ii)
— (21)— 
Gain on sale of assets (iii)
47 15 — 
Other operating income (iv)
54 9 39 
Other operating items(51)(4,084)39 
i.Impairment of long-lived assets
  Successor  Predecessor
(In $ millions) Year ended December 31, 2019
 Period from July 2, 2018 through December 31, 2018
  Period from January 1, 2018 through July 1, 2018

Year ended December 31, 2017
Loss on impairment of long-lived assets (i)
 —
 —
  (414) (696)
Loss on sale of assets (ii)
 —
 —
  —
 (245)
Other operating income (iii)
 39
 21
  7
 27
Other operating items 39
 21
  (407) (914)
i.Impairment of long-lived assets
InThe West Hercules was impaired in 2021 following an amendment to the year ended 2017, as partterms of the leasing arrangements with SFL.
In 2020, impairment charges of $4.1 billion was booked against our rigs, reflecting our view that challenging market conditions were likely to persist for a sustained period and that certain of our cold stacked units were unlikely to return to the working fleet. We impaired all long-term cold stacked units in full and all other drillships and benign environment semi-submersible rigs were written down to their estimated fair market value.
ii. Impairment of intangible
In 2020 we impaired Seadrill Partners' management contracts after Seadrill Partners voluntarily entered into Chapter 11 re-organization, we terminated the newbuild contracts for the drillships West Draco, West Dorado, West Aquila and West Libra and the shipyards, Samsung and DSME, received an allowed claim. As a result, we recorded a $696 million non-cash impairment charge against the newbuild assets for these rigs. We also recorded a reorganization expense of $1,064 million for the allowed claim (see section 5 below).on December 1, 2020.
In the 2018 Predecessor period, we determined that the continuing downturn in the offshore drilling market was an indicator of impairment on certain assets. Following an assessment of recoverability, we recorded an impairment charge of $414 million against three of our older rigs.
ii. Lossiii. Gain on sale of assets
The lossgain on sale of assets for the year ended 2017in 2021 was due to the sale of the West Triton, Vigilant,West Mischief Pegasus, West Freedom, West Alpha, West Orion, West Eminenceand West Resolute Navigator. These disposal were part of our rig disposal program; refer to Shelf Drilling, recognizing a lossItem 4D for further details.
The gain on disposalsale of $166 million,assets in 2020 was due to the sale of the West Epsilon and the derecognitionsale of spare parts on the Sevan Developer, following renegotiated terms with Cosco which deemed us West Telesto to have lost control of the asset, resulting in a $75 million loss.our Gulfdrill joint venture partner, GDI.
iii.iv. Other operating income
The below table summarizes the main components of other operating income for the periods presented.
 (In $ millions)
Year ended December 31, 2021Year ended December 31, 2020Year ended December 31, 2019
Pre-petition liabilities write-off (i)
27 — — 
Loss of hire insurance settlement (ii)
2 9 10 
Receipt of overdue receivable (iii)
— — 26 
Settlement with shipyard— — 3 
Others (iv)
25 — — 
Other operating income54 9 39 
  Successor  Predecessor
 (In $ millions)
 Year ended December 31,
2019
 Period from July 2, 2018 through December 31, 2018
  Period from January 1, 2018 through July 1, 2018
 Year ended December 31, 2017
Loss of hire insurance settlement (i)
 10
 —
  —
 —
Receipt of overdue receivable (ii)
 26
 21
  —
 —
Contingent consideration (iii)
 —
 —
  7
 27
Settlement with shipyard 3
 —
  —
 —
Other operating items 39
 21
  7
 27
i.Pre-petition liabilities write-off
i. Write-off of pre-petition lease liabilities due to Northern Ocean for the West Bollsta of $19 million and pre-petition liabilities to Aquadrill (formerly Seadrill Partners) of $8 million as a consequence of global settlement agreements with Northern Ocean and Aquadrill becoming effective
ii.Loss of hire insurance settlement
SettlementThe 2021 insurance gain relates to excess recovery on the physical damage claimed on the Sevan Louisiana. The 2020 gain relates to the settlement of a claim on our loss of hire insurance policy following an incident on the Sevan Louisiana.
ii. iii.Receipt of overdue receivablereceivables
Receipt of overdue receivables in 2019 which had not been recognized as an asset as part of fresh start accounting.
iii. Contingent considerationiv.Others
Amounts recognized for contingent consideration Primarily relates to a $22 million rebate of previously incurred war insurance premiums from the salesThe Norwegian Shipowners' Mutual War Risks Insurance Association ("DNK").
45
Table of the West Vela and West Polaris to Seadrill Partners in 2014 and 2015. On emergence from Chapter 11 we recognized receivables equal to the fair value of expected future cash flows under these arrangements and have therefore not recognized further income in the 2018 Successor period and year ended 2019.Contents
4) Interest expense
We have analyzed interest expense into the following components:

 (In $ millions)
Year ended December 31, 2021Year ended December 31, 2020Year ended December 31, 2019
Cash and payment-in-kind interest on debt facilities (i)
(25)(266)(374)
Interest on SFL Leases (ii)
(84)(12)— 
Unwind of discount debt— (44)(47)
Write off discount debt (iii)
— (87)— 
Interest expense(109)(409)(421)
i.Cash and payment-in-kind interest on debt facilities
  Successor  Predecessor
 (In $ millions)
 Year ended December 31,
2019
 Period from July 2, 2018 through December 31, 2018
  Period from January 1, 2018 through July 1, 2018
 Year ended December 31, 2017
Cash and payment-in-kind interest on debt facilities (i)
 (440) (237)  (37) (286)
Unwind of discount debt (ii)
 (47) (24)  —
 —
Loan fee amortization (iii)
 —
 —
  (1) (27)
Capitalized interest (iv)
 —
 —
  —
 28
Interest expense (487) (261)  (38) (285)
i.Cash and payment-in-kind interest on debt facilities
We incur cash and payment-in-kind interest on our debt facilities. This is summarized in the table below.
 (In $ millions)
Year ended December 31, 2021Year ended December 31, 2020Year ended December 31, 2019
Senior credit facilities and unsecured bonds(25)(239)(327)
Debt of consolidated Variable Interest Entities— (27)(47)
Cash and payment-in-kind interest on debt facilities(25)(266)(374)
  Successor  Predecessor
 (In $ millions)
 Year ended December 31,
2019
 Period from July 2, 2018 through December 31, 2018
  Period from January 1, 2018 through July 1, 2018
 Year ended December 31, 2017
Senior credit facilities and unsecured bonds (327) (162)  (116) (320)
Less: adequate protection payments —
 —
  104
 81
Senior Secured Notes (66) (50)  —
 —
Debt of consolidated variable interest entities (47) (25)  (25) (47)
Cash and payment-in-kind interest (440) (237)  (37) (286)
We are charged interest on ourOur senior credit facilities incurred interest at LIBOR plus a margin. For periods after July 2, 2018, this margin increased by one percentage point following the emergence from Chapter 11. There has also been an increase in LIBOR rates, which when combined with the additional post-emergence margin, has led to an increased effective interest rate on our senior credit facilities in the year ended 2019.
During the period we were inPrevious Chapter 11 (September 12, 2017 to July 1, 2018),Proceedings. On February 7, 2021, after filing for Chapter 11, we recorded contractual interest payments against debt held as subject to compromise ("adequate protectionprotections payments") as a reduction to debt in the ConsolidatedConsolidation Balance Sheetsheet and not as an expense to the Consolidated Statement of Operations. We then expensedFor further information on our bankruptcy proceedings refer to Note 4 - Chapter 11of our Consolidated Financial Statements included herein.
ii.Interest on SFL Leases
In the adequate protection paymentsfourth quarter of 2020 we deconsolidated the Ship Finance SPVs as we are no longer primary beneficiary of the variable interest entities. Following the deconsolidation, we recognized the liability, and related interest expense, between Seadrill and the SPVs that was previously eliminated on emergence from Chapter 11 (classified under reorganization items - see section 5 below)consolidation.
On emergence from Chapter 11 we issued $880 millioniii.Write off of Senior Secured Notes. We incur 4% cash interestdiscount on debt
In September 2020 and 8% payment-in-kind interest on these notes. On November 14, 2018 and April 10, 2019December 2020, there were two redemptions. After the two redemptions there was a remaining $476 million principal outstanding on the notes, which includes $18 millionnon-payments of accrued payment-in-kind interest on our Senior Secured Notes which was compounded on July 15, 2019 and additional notes were issued.
Our Consolidated Balance Sheet includes approximately $0.6 billionsecured credit facilities that constituted an event of debt facilities held by subsidiariescross-default. The event of Ship Finance that we consolidate as variable interest entities. Our interestdefault resulted in the expense includes the interest incurred by these entities on those facilities.
ii.Unwind of discount on debt
On emergence from Chapter 11 and application of fresh start accounting, we recorded a discount against our debt to reduce its carrying value to equal its fair value. Theunamortized debt discount is unwound over the remaining terms of the debt facilities.
iii.Loan fee amortization
We amortize loan issuance costs over the expected term of the associated debt facility. We expensed capitalized loan issuance costs for debt subject to compromise when we filed for Chapter 11 on September 12, 2017. No new debt facilities have been entered into since emerging from Chapter 11.
iv.Capitalized interest
We capitalize the interest cost incurred to finance Newbuilds. This ceased when we filed for Chapter 11 on September 12, 2017. No Newbuild finance has been entered into since emerging from Chapter 11.

$87 million.
5) Reorganization items, net
We have analyzed reorganization items, net into the following components:
(In $ millions)Year ended December 31, 2021Year ended December 31, 2020Year ended December 31, 2019
Advisory and professional fees after filing (i)
(127)— — 
Remeasurement of terminated lease to allowable claim (ii)
(186)— — 
Interest income on surplus cash invested (iii)
3 — — 
Total reorganization items, net(310)——
  Successor  Predecessor
(In $ millions) Year ended December 31, 2019
 Period from July 2, 2018 through December 31, 2018
  Period from January 1, 2018 through July 1, 2018
 Year ended December 31, 2017
Professional and advisory fees —
 (9)  (187) (66)
New investor commitment fees —
 —
  —
 (53)
Gain on liabilities subject to compromise —
 —
  2,958
 —
Fresh start valuation adjustments —
 —
  (6,142) —
Loss on Newbuilding global settlement claim —
 —
  —
 (1,064)
Loss on other pre-petition allowed claims —
 —
  —
 (3)
Write-off of debt issuance costs —
 —
  —
 (66)
Reversal of credit risk on derivatives —
 —
  —
 (89)
Interest income on surplus cash invested —
 —
  6
 4
Total reorganization items, net —
 (9)  (3,365) (1,337)
i.Advisory and professional fees
PriorExpenses and income directly associated with the Chapter 11 cases are reported separately in the income statement as reorganization items, net as required by Accounting Standards Codification 852, Reorganizations.
ii.Remeasurement of terminated lease to allowable claim
The West Taurus lease was rejected through the Chapter 11 proceedings and the rig was handed back to SLF in early 2021 resulting in the loss recognized, being the difference between the outstanding liability held at fair value and its expected claim value. The liability will be discharged on emergence from Chapter 11,bankruptcy and SFL will receive a pro-rated share of the $0.25 million which has been set aside for such claims.
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iii.Interest income on surplus cash invested
Interest income on surplus cash across the group reclassified to reorganization items, included professional and advisory fees for post-petition Chapter 11 expenses, adjustments to the carrying value of liabilities subject to compromise to their estimated allowed claims amount, gains on liabilities subject to compromise, fresh start adjustments and interest income generated from surplus cash invested. We have also classified professional and advisory fees that we incurred post-emergence, but relate to our Chapter 11 filing, within reorganization items.
You can find additional detail on reorganization itemsnet in Note 4to the Consolidated Financial Statements included within this report.accordance with US GAAP bankruptcy accounting guidance.
6) Other incomefinancial and expensenon-operating items
We have analyzed other income and expense into the following components:
(In $ millions)Year ended December 31, 2021Year ended December 31, 2020Year ended December 31, 2019
Interest income (i)
1 9 35 
Share in results from associated companies (net of tax) (ii)
3 — (22)
Loss on impairment of investments (iii)— — (6)
Loss on derivative financial instruments (iv)
— (3)(37)
Fair value measurement on deconsolidation of VIE (v)
— 509 — 
Foreign exchange loss (vi)
(4)(23)(11)
Other financial items (vi)
(11)(45)(3)
Other financial and non-operating items(11)447 (44)
  Successor  Predecessor
(In $ millions) Year ended December 31, 2019
 Period from July 2, 2018 through December 31, 2018
  Period from January 1, 2018 through July 1, 2018
 Year ended December 31, 2017
Interest income (i)
 69
 40
  19
 60
Share in results from associated companies (ii)
 (115) (90)  149
 174
Impairment of investments (iii)
 (302) —
  —
 (841)
(Loss)/ gain on derivative financial instruments (iv)
 (37) (31)  (4) 11
(Loss)/gain on debt extinguishment (v)
 (22) —
  —
 19
Impairment of convertible bond from related party (vi)
 (11) —
  —
 —
Foreign exchange loss (vii)
 (11) (4)  —
 (65)
Loss on marketable securities (viii)
 (46) (64)  (3) —
Other financial items (ix)
 (4) (3)  —
 (44)
Other income and expense (479) (152)  161
 (686)
i.Interest Income
i.Interest Income
Interest income relates to interest earned on cash deposits and other financial assets. During the period we wereInterest income decreased in Chapter 11 (September 12, 2017 to July 1, 2018), we classifiedboth 2021 and 2020 as a result of a decrease in cash deposits and a fall in interest income on cash held by filed entities within reorganization items. This totaled $6 millionrates.
ii.Share of results in the 2018 Predecessor period and $4 million for the year ended 2017.associated companies (net of tax)

ii.Share of results in associated companies
Share of results in associated companies represents our share of earnings or losses in our investments accounted under the equity method. We reduced the carrying value of our equity method investments when we applied fresh start accounting on emergence from Chapter 11. This led to the recognition of basis differences between the book value of the drilling unit or pipe laying service vessel and contract intangible balances recorded in the balance sheets of our equity method investees and the implied value of those assets reflected in the equity method investments recorded in our Consolidated Balance Sheet. We unwind these basis differences over the lives of the associated assets and liabilities when calculating our share of results of the equity method investments. Therefore, the share of results in associated companies for the 2018 Successor period is not comparable to the share of results in associated companies recorded in the Predecessor company.
We have analyzed our share of results in associated companies by equity method investment below:
  Successor  Predecessor
(In $ millions) Year ended December 31, 2019
 Period from July 2, 2018 through December 31, 2018
  Period from January 1, 2018 through July 1, 2018
 Year ended December 31, 2017
Seadrill Partners (124) (102)  99
 104
Seamex (19) (12)  4
 —
Sonadrill (1) —
  —
 —
Seabras Sapura 29
 24
  46
 80
Archer —
 —
  —
 (10)
Share of results from associated companies (115) (90)  149
 174
The share of results from associated companies for the year ended 2019 reflectsin 2021 and 2020 reflect a share in after-tax profits offrom our investmentsinvestment in Seabras Sapura joint ventureSonadrill partly offset by a share of losses from our investment in our investments in Seadrill Partners, SeaMex and Sonadrill. This includes a net expense for the unwind of basis differences of $71 million. The results of Seadrill Partners included an income tax benefit of $36 million, which was primarily due to the release of an uncertain tax position related to US tax reform.
Gulfdrill. The share in after tax loss of associated companies for the 2018 Successor period2019 reflects a share in after-tax profits of our investments in Seabras Sapura joint venture offset by a share of losses in our investments in Seadrill Partners and SeaMex. This includes a net expense for the unwind of basis differences of $57 million. The results of Seadrill Partners included an income tax expense of $87 million, which was primarily due to an uncertain tax position related to US tax reform.

The share in after-tax profit for 2018 Predecessor period reflected our share of the after-tax profit of each of our equity method investments. Our share in the after-tax profit of Seadrill Partners included the benefit of a litigation ruling in the favor of Seadrill Partners. Seadrill Partners recorded net income totaling approximately $220 million in June 2018 for this ruling.
The share of results from associated companies for the year ended 2017 reflected our share of the net income from Seadrill Partners, and Seabras Sapura, offset by our share of the loss of Archer. From April 2017 onwards, we reclassified our investment in Archer from an equity method investment to an investment in marketable security. Please see Note 15 of the enclosed financial statements for further details on this transaction.Sonadrill.
iii. ImpairmentLoss of investmentsimpairment of investment
On September 6, 2019, Seadrill Partners announced its suspension from trading on the NYSE. This was considered an other than temporary impairment indicator which led to an impairment review being performed in respect of the Seadrill investment in Seadrill Partners. The result of this exercise was a total impairment charge of $302$6 million across the investments we hold in Seadrill Partners.

As at December 31, 2017, the carrying value of the Seadrill Partners subordinated units was found to exceed the fair value by $82 million, and the carrying value of the direct ownership interests in Seadrill Partners was found to exceed the fair value by $723 million. Additionally, the carrying value of the investment in SeaMex was found to exceed the fair value by $36 million. The fair value was derived using a discounted cash flow model. We recorded these impairments within “Loss on impairment of investments” in the Consolidated Statement of Operations.
iv. (Loss)/ gainLoss on derivative financial instruments
On May 11, 2018, we bought an interest rate cap from Citigroup for $68 million. The interest rate cap mitigates our exposure to future increases in LIBOR over 2.87% from our floating bank debt. We also have a conversion option on a bond issued to us by Archer Limited (Refer to vi.).Limited. We record both of these assets at fair value.

No fair value movement on the derivative on the interest cap in the year end December 31,2021. The loss on derivatives in the year ended December 31, 2020 was a fair value loss on the interest rate cap of $3 million due to a decrease in forward interest rates.
The loss on derivatives in the year ended December 31, 2019 of $37 million comprised a fair value loss on our interest rate cap derivatives due to a decrease in forward interest rates.

v. Fair value measurement on deconsolidation of VIE

The loss on derivatives in the 2018 Successor period of $31 million comprised a fair value loss of $22 million on our interest rate cap derivatives and a $9 million fair value loss on the conversion option associated with a convertible bond we hold in Archer. The fair value loss on the interest rate cap was caused by a decrease in forward interest rates. The fair value loss on the Archer conversion option was caused by a decrease in Archer's share price.
The loss on derivatives in the 2018 Predecessor period of $4 million comprised a fair value loss of $6 million on our interest rate cap derivatives offset by a $2 million fair value gain on the conversation option on the Archer convertible bond.
The gain on derivatives inIn the year ended 2017December 31, 2020 a non-cash gain of $11$509 million related to net gains onarose following the deconsolidation of Ship Finance SPVs, which were previously consolidated by Seadrill under the variable interest rate swap and cross currency swap agreements that we previously used to mitigate exposures to interest rate risk and foreign exchange risk on our debt prior to filing for Chapter 11.
v. Net loss/ gain on debt extinguishment
On April 10, 2019, we repurchased $311 millionmodel. The Ship Finance SPVs are the legal owners of the Senior Secured Notes issued on emergence at a 7% premium. The premium paid was recognized as a loss on debt extinguishment.
On April 26, 2017, we converted $146 million, including accrued interestWest Taurus, West Hercules, and fees,West Linus, which were leased to Seadrill under capital lease arrangements. Following certain events in subordinated loans provided to Archer into a $45 million subordinated convertible bond. We recognized a gain on debt extinguishment equal to the difference betweenperiod, Seadrill removed the assets and liabilities of the Ship Finance SPVs from the Company's consolidated balance sheet and recorded liabilities in respect of the three leases in their place. As the fair value of the convertible loan we received andlease liabilities was lower than the previous carrying valuevalues of the loan, accrued interest and fees that were extinguished. This was a gain of $19 million.
vi. Impairment of convertible bond from related party
At December 2019, we re-assessed the fair value of the convertible bond issued to us by Archer, who were in the process of refinancing their debt facilities. For the purposes of the valuation, we assumed that the maturity date of the bond would be pushed out to 2024, as we anticipatedliabilities, this would be required in order for Archer to refinance their bank borrowings to which the Seadrill bond is subordinate. The extension of the maturity date on the bond led to a significant decrease in the bond’s fair value, which resulted in an other-than-temporary impairment against our investment in the bond.a large non-cash gain.
vii.vi. Foreign exchange loss
Foreign exchange gains and losses relate to exchange differences on the settlement or revaluation of monetary balances denominated in currencies other than the US Dollar. Prior to filing for Chapter 11 on September 12, 2017, ourU.S. dollar.
The foreign exchange exposure wasmovement is primarily driven by NOK and SEK denominated unsecured bonds. These bonds were no longer revalued after we filed for Chapter 11 and were extinguished through the Chapter 11 restructuring.
Incollateral placed with BTG Pactual in May 2019, we placed a total of 330 million Brazilian Reais of collateral with BTG bank under a letter of credit arrangement, which generated $3of 330 million foreign exchange loss in the year ended 2019.Brazilian Reais.
viii. Loss on marketable securities
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The loss on marketable securities in the year ended 2019, the 2018 Successor and 2018 Predecessor periods reflect the changes in mark to market movements in our investments in Seadrill Partners common units and our Archer shares.
We did not record a gain or loss on our investments in marketable securities, within income and expense, for the year-ended 2017. This was because, for all periods before we adopted ASU 2016-10 on January 1, 2018, we recorded fair value gains and losses on marketable securities in other comprehensive income until they were realized.
ix.vii. Other financial items
Other financial items for the year ended 2017December 31, 2020 primarily comprised pre-petition professional and advisory fees related to our comprehensive restructuring and provisions for expected credit losses against related party loans receivable. The decrease in 2021 is primarily due to moving these restructuring cost to reorganization (afteritems, net in February 2021 following filing for Chapter 11 we classified such costs as reorganization items - see section 5 above).11.
7) Income tax expenseexpense/benefit
Income tax expenseexpense/benefit 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.

Income tax for the year ended December 31, 2021 remained consistent with the prior year at $5 million (December 31, 2020: $4 million). The $40 million tax benefit recognized in 2019 was primarily due to the reversal of uncertain tax positions in the US.

B.LIQUIDITY AND CAPITAL RESOURCES

B.LIQUIDITY AND CAPITAL RESOURCES
1) IntroductionEmergence from Bankruptcy
We operate in a capital-intensive industry. We have historically funded acquisitions of drilling unitsOn February 22, 2022, Seadrill completed its comprehensive restructuring and investments in associated companies through a combination of debt and equity issuances andemerged from cash generated from operations. Although we restructured our debt through the Chapter 11 bankruptcy protection. Please refer to Note 4 - "Chapter 11" of the accompanying financial statements for further details.
In our report at June 30, 2021, we reported a substantial doubt as to our ability to continue as a going concern as a result of the fact that we were in Chapter 11 and there was a degree of inherent risk associated with being in bankruptcy and whether the Plan of Reorganization would be confirmed. Having now emerged from Chapter 11 and with access to exit financing, we remain a highly leveraged company with outstanding borrowingsbelieve that cash on our external debt facilities totaling $6,759 million, which will start to mature in 2022 and $314 million under loan agreements with related parties as of December 31, 2019.

Our liquidity requirements relate to servicing and repaying our debt, making capital investments, funding working capital requirements and maintaining adequate cash reserves to mitigate the effects of fluctuations in operating cash flows. Most of ourhand, contract and other revenues are received between 30will generate sufficient cash flow to fund our anticipated debt service and 60 days in arrears, and most of our operating costs are paid monthly. We have historically relied on our cash generated from operations to meet our short-term liquidity needs. We believe our current resources, available cash and cash from operations will be sufficient to meet our working capital requirements and other obligationsfor the next twelve months. Therefore, there is no longer a substantial doubt over our ability to continue as they fall duea going concern for at least the next twelve months following the date of this report.
Our debt agreements contain cross-default provisions (or, in certain instances, cross-acceleration provisions), meaning that if we are in default under one of our debt agreements, amounts outstanding under our other debt agreements may also be in default, accelerated and become due and payable. In addition, we have provided guarantees over certain debt facilities of our affiliates and related companies, and the lenders under such facilities could look to us to meet such liabilities if such affiliates and related companies are unable to meet their obligations. If any of these events occur, we may not be able to satisfy our obligations and our ability to continue our operations or generate any cash flow in the future could be impaired.
Since the fourth quarter of 2019, we have been engaged in discussions with our secured lenders regarding potential amendments to our credit facilities to provide operational flexibility and additional near-term liquidity by, among other things, converting certain interest payments under our credit facilities to payment-in-kind (“PIK”) interest and deferring certain scheduled amortization payments (or increasing the aggregate amount of such payments that may be converted to loans payable at the final scheduled maturity dateissue of the relevant facility pursuant to the amortization conversion election provisions containedfinancial statements.
Financial information in the facility agreements). Our debt service is anticipated to be primarily comprisedthis report has been prepared on a going concern basis of interest through at least Q1 2021 because our facility agreements contain certain provisions that allow us to elect to defer and convert up to $500 million in the aggregate of scheduled amortization payments under certain of our credit facilities. We have already elected to use a portion of this capacity with respect to the first scheduled amortization installments under our credit facilities occurring in Q1 2020. We intend to continue exercising this option for each subsequent scheduled amortization payment date until such capacity is fully utilized; however, we cannot guaranteeaccounting, which presumes that we will be able to satisfy the conditions set forthrealize our assets and discharge our liabilities in the facility agreementsnormal course of business as they come due. Financial information in orderthis report does not reflect the adjustments to the carrying values of assets, liabilities and the reported expenses and balance sheet classifications that would be ablenecessary if we were unable to do so. We have also requested thatrealize our lenders consent to an extension of the periods before which we are required to comply with the net leverageassets and debt service coverage financial covenants insettle our facility agreements because we currently anticipate that we will not be able to meet these requirements when such covenants begin to be tested at the end of Q1 2021. We have also forecasted that we will not be able to meet the requirements under our ongoing liquidity financial covenant containedliabilities as a going concern in the facility agreements during certain periods occurring after the twelve-month period following the datenormal course of this report. If our amendment requests for certainoperations. Such adjustments could be material.
2) Liquidity
Seadrill Limited's short-term liquidity enhancing measures are not successful, including with respectrequirements relate to the conversionservicing debt by way of certainamortization, repayments and interest payments, to PIK and the deferralfunding working capital requirements. Sources of certain scheduled amortization payments then there is an increased risk that we will breach these liquidly requirements sooner than currently anticipated after such twelve-month period following the date of this report. Failure to comply with such liquidity requirements could result in a default under the terms of our facility agreements if we are unable to obtain a waiver or amendmentinclude existing cash balances, short-term investments and contract and other revenues. The Company has historically relied on cash generated from our lenders for such non-compliance.
Although lender discussions are well advanced and significant progress has been made, until such time as an agreement is reached, uncertainty remains and therefore we are also preparing certain contingency plans. The Company's business operations remain unaffected by these amendment negotiations and related contingency planning efforts, and the Company expects to meet its ongoing customer and business counterparty obligationsshort-term liquidity needs. However, as they become due.
Our funding and treasury activities are conducteda result of the downturn in accordance with our corporate policies,the offshore industry, the Company has been required to obtain additional financing to support its liquidity needs. We achieved this through the Chapter 11 Proceedings, which aim to maximize returns while maintaining appropriate liquidity for our operating requirements. Cash and cash equivalents are held mainlyis described in U.S. dollars, with lesser amounts held in Norwegian Kroner, Brazilian Reais and Great British Pounds.
This section discusses the most important factors affecting our liquidity and capital resources.
2) LiquidityNote 4 - "Chapter 11".
Our level of liquidity fluctuates depending on a number of factors. These include, among others, our contract backlog, economic utilization achieved, timing of accounts receivable collection, and timing of payments for operating costs and other obligations. Our liquidity comprises cash and cash equivalents. The below tables show cash and restricted cash balances for each period presented.
 Successor  Predecessor
(In $ millions) As at December 31, 2019
 As at December 31, 2018
  As at July 1, 2018
(In $ millions)Year ended December 31, 2021Year ended December 31, 2020Year ended December 31, 2019
Unrestricted cash 1,115
 1,542
  1,599
Unrestricted cash312 491 1,087 
Restricted cash 242
 461
  578
Restricted cash223 168 218 
Cash and cash equivalents, including restricted 1,357
 2,003
  2,177
Cash and cash equivalents, including restricted535 659 1,305 
We have shown our sources and uses of cash by category of cash flowflows in the below table.table:

(In $ millions)Year ended December 31, 2021Year ended December 31, 2020Year ended December 31, 2019
Net cash used in operating activities (a)
(154)(420)(256)
Net cash provided by/(used in) investing activities (b)
37 (32)(26)
Net cash used in financing activities (c)
— (163)(367)
Effect of exchange rate changes in cash and cash equivalents(2)(19)3 
Change in period(119)(634)(646)
48
  Successor  Predecessor
(In $ millions) Year ended December 31, 2019
 Period from July 2, 2018 through December 31, 2018
  Period from January 1, 2018 through July 1, 2018
Cash flows from operating activities (a)
 (256) (26)  (213)
Cash flows from investing activities (b)
 (26) 61
  149
Cash flows from financing activities (c)
 (367) (208)  887
Effect of exchange rate changes in cash and cash equivalents 3
 (1)  (5)
Change in period (646) (174)  818
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This reconciles to the total cash and cash equivalents, including restricted, which is as follows:
  Successor  Predecessor
(In $ millions) Year ended December 31, 2019
 Period from July 2, 2018 through December 31, 2018
  Period from January 1, 2018 through July 1, 2018
Opening cash and cash equivalents, included restricted 2,003
 2,177
  1,359
Change in period (646) (174)  818
Closing cash and cash equivalents, included restricted 1,357
 2,003
  2,177
(In $ millions)Year ended December 31, 2021Year ended December 31, 2020Year ended December 31, 2019
Opening cash and cash equivalents, including restricted cash723 1,357 2,003 
Opening cash and cash equivalents, including restricted cash - continuing operations659 1,305 1,632 
Opening cash and cash equivalents, including restricted cash - discontinued operations64 52 371 
Change in period - continuing operations(124)(646)(327)
Change in period - discontinued operations5 12 (319)
Closing cash and cash equivalents, including restricted cash604 723 1,357 
Closing cash and cash equivalents, including restricted cash - continuing operations535 659 1,305 
Closing cash and cash equivalents, including restricted cash - discontinued operations69 64 52 
a) Cash flows fromNet cash used in operating activities
Cash flows fromNet cash used in operating activities include cash receipts from customers, cash paid to employees and suppliers (except for capital expenditure), interest and dividends received (except for returns of capital), interest paid, income taxes paid and other operating cash payments and receipts.
We calculate net cash flows fromused in operating activities using the indirect method as summarized in the below table.table:
(In $ millions)Year ended December 31, 2021Year ended December 31, 2020Year ended December 31, 2019
Net loss(587)(4,663)(1,222)
Net operating income/(loss) adjustments related to discontinued operations (1)
(23)191 469 
Adjustments to reconcile net loss to net cash provided by operating activities (2)
550 4,212 597 
Net loss after adjustments(60)(260)(156)
Payments for long-term maintenance(64)(121)(114)
Repayments made under lease arrangements(46)— — 
Changes in operating assets and liabilities16 (39)14 
Net cash used in operating activities(154)(420)(256)
  Successor  Predecessor
(In $ millions) Year ended December 31, 2019
 Period from July 2, 2018 through December 31, 2018
  Period from January 1, 2018 through July 1, 2018
Net loss (1,222) (605)  (3,885)
Adjustments to reconcile net loss to net cash provided by operating activities (1)
 1,070
 477
  3,808
Net loss after adjustments (152) (128)  (77)
Payments for long-term maintenance (114) (71)

(78)
Distributions received from associated companies 11
 32


17
Settlement of payment-in-kind interest on Senior Secured Notes (39) —
  —
Changes in operating assets and liabilities 38
 141
  (75)
Cash flows from operating activities (256) (26)  (213)
(1) Relates to adjustments made to the net income/loss of discontinued operations to reconcile to operating cash flows from discontinued operations. The adjustments are made up of adjustments to reconcile net loss to net cash used in operating activities, other cash movements in operating activities, and changes in operating assets and liabilities, net of effect of acquisitions and disposals.
(1)
(2) Includes depreciation, amortization, gain on sale of assets, share of results from associated companies, loss on impairment of long-lived assets, investments, intangible assets and convertible note from related party, unrealized losses on derivatives and marketable securities, unrealized foreign exchange loss, non-cash reorganization items, payment-in-kind interest, fair value measurement on deconsolidation of VIE, amortization of discount on debt, changes in allowance for credit losses, deferred tax benefit and other non-cash items shown under the sub-heading "adjustments to reconcile net loss to net cash provided by operating activities" in the Consolidated Statements of Cash Flows presented in the Consolidated Financial Statements included in this report.
Includes depreciation, amortization, share of results of joint ventures and associates, impairment of investments, unrealized gains and losses on derivatives, unrealized gains and losses on marketable securities, deferred tax expense and other non-cash items shown under the sub-heading "adjustments to reconcile net loss to net cash provided by operating activities" in the Consolidated Statements of Cash Flows presented in the Consolidated Financial Statements included in this report.
Market conditions in the offshore drilling industry in recent years have led to materially lower levels of spending for offshore exploration and development. This has negatively affected our revenues, profitability and operating cash flows. During the year ended December 31, 2019, the 2018 Successor period2021, 2020 and the 2018 Predecessor period,2019, our cash flows from operating activities were negative, as cash receipts from customers were insufficient to cover operating costs, payments for long-term maintenance of our rigs, interest paymentscosts incurred for our comprehensive restructuring, and tax payments.
b) Cash flows fromNet cash provided by/used in investing activities
Cash flows fromNet cash provided by/used in investing activities include purchases and sales of newbuildings, drilling units and equipment, investments in non-consolidated entities and cash receipts from loans granted to related parties.

Net cash flows fromprovided by investing activities for the year ended December 31, 2021 was comprised primarily of proceeds from disposal of assets, partly offset by capital expenditures.
Net cash used in investing activities for the year ended December 31, 2020 were primarily capital expenditures and a related party loan granted. Along with this there was also a decrease in the cash due to the deconsolidation of the Ship Finance SPVs. This is offset by contingent consideration payments from Seadrill Partners and loan repayments received from our joint venture, Seabras Sapura.
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Net cash used in investing activities for the year ended December 31, 2019 were primarily generated by capital expenditures and a capital contribution into the Sonadrill joint venture. This is offset by contingent consideration payments from Seadrill Partners and loan repayments received from our joint venture, Seabras Sapura.
c) Net cash flows from investing activities for the 2018 Successor period were primarily generated by loan repayments from our joint venture Seabras Sapura, contingent consideration payments from Sapura Energy from the sale of our Tender Rig businessused in 2014, and contingent consideration payments from Seadrill Partners from sale of the drillship West Vela in 2015. These cash inflows were partly offset by capital expenditures.
Net cash flows from investing activities for the 2018 Predecessor period were driven by our share of proceeds from the sale of the West Rigel, contingent consideration payments from Seadrill Partners from the sale of the drillship West Vela and West Polaris in 2015, and related party loan repayments from Seadrill Partners. These cash inflows were partly offset by capital expenditures.
c) Cash flows from financing activities
Cash flows fromNet cash used in financing activities include proceeds from the issuance of new equity, proceeds from issuing debt and repayments of debt and payment of debt issuance costs.
Net cash flows fromused in financing activities for the year ended 2019December 31, 2021 were nil.
Net cash used in financing activities for the year ended December 31, 2020 were driven by debt repayments and purchase of redeemable non-controlling interest.
Net cash used in financing activities for the 2018 Successor periodyear ended December 31, 2019 were driven by redemptions of Senior Secured Notes and debt repayments within our Ship Finance VIEs.
Net cash flows from financing activities for the 2018 Predecessor period were mainly driven by proceeds from issue of Senior Secured Notes and new equity on emergence from Chapter 11, offset by repayments of debt contained within our Ship Finance VIEs and debt fees paid on our senior credit facilities.SPVs.
3) Information on our borrowings
AsAn overview of our debt as at December 31, 2019, wethe Effective Date, divided into (i) secured credit facilities and (ii) unsecured senior convertible notes, is presented in the table below:
(In $ millions)As at the Effective dateMaturity date
Secured credit facilities
$683 million facility683June 2027
$300 million facility (a)175December 2026
Total secured credit facilities858
Unsecured
$50 million convertible note50August 2028
Total debt908
Capitalized debt issuance costs and fresh start adjustments— 
Total net debt908
(a) Under the $300 million facility, Seadrill has access to the $125 million revolving credit facility in addition to the $175 million term loan facility, which was not drawn down at the Effective Date (nor has it been drawn to date).

Prior to consummation of the Reorganization, Seadrill had total outstanding borrowings under our external debt$5,662 million of senior secured credit facilities. Under the Plan on the Effective Date, these facilities were in part reinstated in the form of $6,759 million. This includedthe $683 million senior secured credit facility debt(as further described below), in part equitized through issuance of $5,662new shares, and in part settled in cash (specifically in respect to the AOD credit facility).

Secured credit facilities and unsecured convertible note
$300 Million New Money Facility
In February 2022 as part of the Reorganization, Seadrill entered into a $300 million borrowingssuper senior secured credit facility with a syndicate of lenders secured on our Senior Secured Notesa first lien basis. The facility has a maturity of $476December 15, 2026 and consists of a $175 million term loan facility and debt held by consolidated variablea $125 million revolving credit facility ("RCF"). The term loan facility bears interest entitiesat a margin of approximately $621 million. 7% per annum plus the SOFR (and any applicable credit adjustment spread). The RCF bears interest at a margin of 7% per annum plus the SOFR (and any applicable credit adjustment spread), and a commitment fee of 2.8% per annum is payable in respect to any undrawn portion of the RCF commitment.

$683 Million Reinstated Facility

In additionFebruary 2022 as part of the Reorganization, Seadrill entered into a senior secured credit facility with a syndicate of lenders to our externalpartially reinstate the existing facilities in an aggregate amount of $683 million secured on a second lien basis. The facility bears interest at a total margin of 12.5% per annum plus the SOFR (and any applicable credit adjustment spread), and it has a maturity of June, 15 2027. The above-mentioned margin comprises two components: 5% cash interest; and 7.5% pay-if-you-can ("PIYC") interest, whereby Seadrill either pays the PIYC interest in cash or the equivalent amount is capitalized as principal outstanding (dependent on certain conditions set out in the facility agreement).
$50 Million Convertible Note
In February 2022 as part of the Reorganization, the Company issued $50 million of aggregate principal amount of an unsecured senior convertible note to Hemen Holdings Ltd., with a final maturity in August 2028 (the "Convertible Note"). The notes bear interest of 6% per annum plus 3-month US LIBOR, which is payable quarterly in cash. The Convertible Note is convertible into the Conversion Shares in an amount equal to 5% of the fully-diluted ordinary shares.


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Covenants contained in the Company's debt facilities we had interest bearing debt of $314 million
Seadrill is subject to certain financial covenants and certain non-financial covenants under loan agreements with related parties.
Our creditour financing documentation, which govern the above-mentioned secured facilities, which will startbeing the Reinstated Facility and the New Money Facility. These non-financial covenants include, but are not limited to, mature in 2022, amortize over a period, with a balloon payment at maturity. Our credit facilities are secured by, among other things, liens on our drilling units. Our credit facility agreements containunits and other assets (such as earnings, company shares and intercompany receivables), certain restrictions on additional indebtedness and investments or acquisitions, and certain restrictions on the payment of dividends. The Convertible Note and the Group’s secured Reinstated Facility and New Money Facility include cross-default provisions, meaning that if we defaulted and amounts became due and payablewhereby, in certain circumstances, a default under one of our credit agreements, this would trigger a cross-defaultgiven facility might result in ourdefaults under other facilities so that amounts outstanding under our other credit facility agreements become due and payable and capable of being accelerated.facilities.
The Senior Secured Notes are secured by, among other things, our investments in Seadrill Partners, SeaMex, Seabras Sapura and Archer.
Please refer to Note 22 – "Debt" in the Consolidated Financial Statements included in this report for additional information on our debt facilities as of December 31, 2019.
4) Capital commitmentsC.RESEARCH AND DEVELOPMENT, PATENTS AND LICENSES, ETC.
We expect to incur capital expenditures for purchases in the ordinary course of business.

C.RESEARCH AND DEVELOPMENT, PATENTS AND LICENSES, ETC.


We recognize the significant impact that technology is having on our industry and through adopting new technological advances,technologies, improving connectivity and digitizing the way we operate, we have enhanced visibility overprocesses associated with monitoring and managing our assets. Innovation remains at the centerheart of our strategy. Forbusiness model - for instance, research and development has enabled us to implement PLATO, an advanced data analytics platform that monitors rig performance. The ability to draw insight from these large data sets helphelps us to optimize our drilling performance for customersCustomers and ensure care and maintenance of our equipment, without compromising on safety.


We focus on technologies that will help us to improve results both financially and operationally. Our previously mentioned PLATO platform has expanded to include drilling performance, condition-based maintenance and monitoring, client data provision services and will soon include environmental monitoring to support our ESG and sustainability initiatives and goals. We continue to drive safety onboard our rigs and within the industry and have invested in the development of a cutting-edge red-zone management tool – Vision IQ which along with our other technologies earned industry recognition and awards in 2020.
D.TREND INFORMATION



D.TREND INFORMATION

The below table show the average oil price over the period 20152017 to 2019.2021. The Brent oil price at February 29, 2020March 31, 2022 was $51.$108.

201720182019 20202021
Average Brent oil price ($/bbl)55 71 64 42 71 

  2015
 2016
 2017
 2018
 2019
Average Brent oil price ($/bbl) 54
 45
 55
 71
 64


Although we saw a stabilization inBrent prices stabilize between 2018-2019, the oil and gas marketprice plummeted in 2019, recent developments have created2020 creating significant uncertainty on the industry’s trajectory for 2020. The global impacts surrounding the COVID-19 outbreak are rapidly evolvingOil and increasingly dynamic.Gas. In addition, recent actions by certain members ofgeneral, production cuts agreed between OPEC and its partnersnon-OPEC members as well as effective vaccination campaigns have resultedhad a positive impact on the industry. Oil demand demonstrated robust recovery in a substantial decline2021 and, based on various industry forecasts, may achieve the pre-pandemic levels in 2022. However, uncertainty related to the pricemarket balance and timing of Brent oil, with a low of $22 per barrel on March 30, 2020. We expect this volatility to continue and if the price of oil declines further and/ordemand recovery remains, at a low price for an extended period there could be a material adverse effect on our business, financial condition, and results of operations.

largely driven by future COVID-19 variants.
The below table shows the global number of rigs on contract and marketed utilization atfor the year ended December 31, 20192021, and for each of the four preceding years.
20172018201920202021
Contracted rigs
Harsh environment jack-up (1)
26 28 32 26 28 
Harsh environment floater30 31 35 25 25 
Benign environment floater120 116 119 107 106 
Benign environment jack-up (1)
128 140 171 175 174 
Marketed utilization
Harsh environment jack-up (1)
76 %85 %94 %75 %80 %
Harsh environment floater83 %85 %87 %77 %77 %
Benign environment floater71 %73 %77 %77 %80 %
Benign environment jack-up (1)
70 %75 %85 %82 %81 %
  2015
 2016
 2017
 2018
 2019
Contracted rigs          
Harsh environment floater 45
 35
 30
 31
 35
Benign environment floater 196
 139
 120
 116
 119
Jack-up 1
 180
 152
 154
 168
 204
Marketed utilization          
Harsh environment floater 93% 81% 83% 85% 87%
Benign environment floater 83% 71% 71% 73% 77%
Jack-up 1
 83% 70% 70% 74% 86%
1 Jack-up rigs(1) Rigs with water depth greater than 350 feet.

feet
Floater
During 2019Marketed utilization in 2021 trended above pre-COVID-19 levels driven by improved demand following low levels in 2020. The improved utilization levels has also been supported by the recycling campaigns of drillers, several of whom have completed comprehensive balance sheet restructuring processes, which has gone some way to assist the supply demand imbalance however, continued capital discipline will be critical to the continued recovery of this market. The drillship market is recovering at a faster rate than semi-submersibles with drillship
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utilization above 90% at 31 December 2021 compared to 70% for semi-submersible (benign-environment floater figures in the above table include both categories). Consequently we have seen a greater improvement in dayrates for drillships than semi-submersibles.
Jack-up
Marketed utilization in the benign jack-up segment remained consistent through 2021. While incremental demand came to market in 2021 this was balanced out by additional supply that was added to the market consequently there was an increaselimited improvement in dayrates. Discipline in adding supply to the market will be critical to improved market trends through 2022.
Harsh Environment
Marketed utilization was consistent year on year in the number of opportunities for floatersharsh environment floater segment due to a better supply and net floater supply continued to decline whichdemand balance. Harsh environment jack up utilization improved utilization. Whilst we saw an overall improvement tothrough 2021 closing the year at 85%. However, with limited incremental demand in 2022 improvements in marketed utilization the subs-segments continued to recover at varying rates. The harsh environment trended ahead due to high demand for high specification units relative to their supply. There was still excess supply of benign environment units which slowed the recovery in this market. However, we saw pockets of strength for high-end ultra deepwater drillships with marketed utilization trending aheadboth segments will be challenging in this sub-segment.2022.


Jack-up
There were positive trends in the jack-up market with utilization and dayrates improving. The market preference for premium units continued, resulting in a bifurcation of rates and utilization for these assets. The demand and rates for premium assets led to newbuild units entering the market. As newer rigs with high specifications enter the jack-up market, this will lead to the accelerated attrition of older units.E.     CRITICAL ACCOUNTING ESTIMATES


E.OFF-BALANCE SHEET ARRANGEMENTS
We had no off-balance sheet arrangements as at December 31, 2019 or 2018.


F.TABULAR DISCLOSURE OF CONTRACTUAL OBLIGATIONS
At December 31, 2019, we had the following contractual obligations and commitments:
  Payment due by period
  Year Ended December 31,
(In $ millions) 2020
 2021 - 2022
 2023 - 2024
 Thereafter
 Total
Interest-bearing debt (1) (2) (3)
 343
 1,553
 4,387
 476
 6,759
Related party interest-bearing debt —
 —
 —
 314
 314
Total debt repayments 343
 1,553
 4,387
 790
 7,073
Pension obligations (4)
 4
 4
 5
 13
 26
Operating lease obligations 17
 25
 2
 1
 45
Total contractual obligations 364
 1,582
 4,394
 804
 7,144
(1)
Debt principal repayments, excluding cash and payment-in-kind interest.
(2)
The above table assumes that we will make amortization payments on our secured credit facilities from June 2020. Per the terms of our senior secured credit facilities, we can elect to defer up to $500m of such amortization payments until 2021 through the initiation of new loans. In December 2019, we made the election to defer $63 million of balances that would have otherwise have fallen due in March 2020. This leaves a remaining $437 million to be deferred in future periods. If we defer the remaining balance then the amounts due in 2020 will reduce to $48 million and the amounts due in 2021 will reduce to $1,412 million.
(3)
Our secured credit facilities are subject to a minimum liquidity requirement for the Group, which is measured at RigCo Group level. If breached, this would cause our debt obligations to become due prior to their contractual maturities. Refer to Note 22 - "Debt" of our Consolidated Financial Statements included herein for further information.
(4)
Pension obligations are the forecasted employer’s contributions to our defined benefit plans, expected to be made over the next ten years.

As of December 31, 2019 (Successor), $83 million, including penalties and interest, would have a favorable impact to the Company’s effective tax rate if recognized.

Please refer to Note 34 - "Commitments and contingencies” of our Consolidated Financial Statements included herein for further information.



G.CRITICAL ACCOUNTING ESTIMATES
The preparationPreparation of our Consolidated Financial Statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses and relatedthe accompanying disclosures about contingent assets and liabilities. We base these estimates and assumptions on historical experience, available information and assumptions that we believe to be reasonable. Our criticalManagement also needs to exercise judgement in applying the group’s accounting policies. Uncertainty about these assumptions, estimates are important factorsand judgments could result in outcomes that require material adjustments to our financial condition and resultsthe carrying amount of operations, and require us to make subjectiveassets or complex assumptions or judgments about matters that are uncertain.liabilities in future periods. We believe that the following are the critical accounting estimates and assumptions used in the preparation of our Consolidated Financial Statements. In addition, there are other items in our Consolidated Financial Statements that require estimation. Our significant accounting policies are discussed in Note 2 - "Accounting Policies" and Note 5 – "Fresh Start Accounting" to our Consolidated Financial Statements included herein.
1) Drilling UnitsCarrying Value of Rig Assets
Generally, the carrying amount of our drilling units including rigs, vessels and related equipment are recorded at historical cost less accumulated depreciation. However, drilling units acquired through a business combination or remeasured through the application of fresh start accounting are measured at fair value as of the date of acquisition or the date of emergence, respectively. Our drilling units are subject to various estimates, assumptions, and judgments related to capitalized costs, useful lives and residual values, and impairments.
Our estimates, assumptions, and judgments reflect both historical experience and expectations regarding future operations, utilization and performance. At December 31, 2019 (Successor) and December 31, 2018 (Successor),2021, the carrying amount of our drilling units was $6 billion and $7 $1.8 billion, representing 69% and 61%46% of our total assets, respectively.assets.
a) Useful lives and residual value
The cost of our drilling units less estimated residual value is depreciated on a straight-line basis over their estimated remaining useful lives. The estimated useful life of our semi-submersible drilling rigs, drillships and jack-up rigs, when new, is 30 years.
The useful lives of rigs and related equipment are difficult to estimate due to a variety of factors, including technological advances that impact the methods or cost of oil and gas exploration and development, changes in market or economic conditions and changes in laws or regulations affecting the drilling industry. We re-evaluate the remaining useful lives of our drilling units as and when events occur which may directly impact our assessment of their remaining useful lives. This includes changes in the operating condition or functional capability of our rigs as well as market and economic factors. The use of different estimates, assumptions and judgments in establishing estimated useful lives and residual values could result in significantly different carrying values for our drilling units which could materially affect our results of operations.
b) Impairment considerations
The carrying values of our long-lived assets are reviewed for impairment when certain triggering events or changes in circumstances indicate that the carrying amount of an asset may no longer be recoverable. Asset impairment evaluations are, by nature, highly subjective. They involve expectations about future cash flows generated by our assets and reflect management’s assumptions and judgments regarding future industry conditions and their effect on future utilization levels, dayrates and costs. The use of different estimates and assumptions could result in significantly different carrying values of our assets and could materially affect our results of operations. An impairment loss is recorded in the period in which it is determined that the aggregate carrying amount is not recoverable.
With regard to our older drilling units, which have relatively short remaining estimated useful lives, the results of impairment tests are particularly sensitive to management’s assumptions. These assumptions include the likelihood of the unit obtaining a contract upon the expiration of any current contract, and our intention for the drilling unit should no contract be obtained, including warm/cold stacking or scrapping. The use of different assumptions in the future could potentially result in an impairment of older drilling units, which could materially affect our results of operations. If market supply
Impairment recognized and demand conditionsmethodology
In 2020 there was a significant decrease in the ultra-deepwater offshoreprice of oil due to the actions of OPEC and its partners combined with the global impact of the COVID-19 pandemic, with Brent Oil reaching a low of $22 per barrel on March 30, 2020. The impact of these events on the drilling sector do not improve it is likelymarket had an impact on our industry with expected decreases in utilization going forward and downward pressure on dayrates. We therefore concluded that we will be required to impair certainan impairment triggering event had occurred for our drilling units.
c) Impairment recognizedunit fleet in the 2018 Predecessor period
In the 2018 Predecessor period, we determined that the continuing downturn in the offshore drilling market was an indicator of impairment on certain assets. Following an assessment of recoverability, weyear ended December 31, 2020 and recorded an impairment charge of $414 million against three non-modern drilling rigs.$4.1 billion.
DuringThe crude oil price has increased significantly since December, 2020. After the yearglobal impact of this pandemic and with the backdrop of war and other global events, the offshore rig market has experienced a recovery, at least in utilization, in many regions. The price of Brent crude has risen and stabilized at more than $90 over the past several months before increasing to over $100. Additionally, oil companies and rig
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owners have mostly managed to navigate through many of the logistical hurdles posed by the COVID-19 pandemic. Drilling programs that had been postponed have now begun or are back on schedule. As a result, the number of contracted rigs has rebounded, and fleet utilization (jack ups, semi-submersibles and drillships) is nearing March 2020 pre-pandemic levels. Dayrates for some rig types in certain regions, such as for US Gulf of Mexico drillships, have risen dramatically. Conversely, dayrates for rigs in other regions have remained stagnant or only risen modestly. As such, we concluded there were no macro-economic indicators of impairment for our overall fleet in the period ended December 31, 2019,2021.
However, changes to our forecast assumptions regarding the 2018 Successor period andfuture of the year ended December 31, 2017West Hercules, whereby we identified indicatorsexpected it to be more likely than not that the carrying valuerig would be sold or otherwise disposed of our drilling units may not be recoverable. significantly before the end of its previously estimated useful life due to the planned amendment to the bareboat charter in Chapter 11, led us to conclude that an impairment triggering event occurred for the rig.
We assessed recoverability of our drilling unitsthe West Hercules by first evaluating the estimated undiscounted future net cash flows based on a number of assumptions, including projected dayrates, and utilizationsutilization of the units.units, operating costs, maintenance costs, reactivation costs, likelihoods of any required scrapping activity, and applicable tax rates. The estimated undiscounted future net cash flows were foundWest Hercules carrying amount was not deemed to be greater than the carryingrecoverable. Based on a fair value of our drilling units. Asusing a result, we did not need to proceed to assess the discounted cash flows of our drilling units, and no impairment charges were recorded.
Inflow model based on the year ended 2017,same inputs as part ofat year-end, the Chapter 11 re-organization, we terminated the newbuild contracts for the drillships West Draco, West Dorado, West Aquila and West Libra and the shipyards, Samsung and DSME, received an allowed claim. As a result, we recorded a $696Hercules was impaired by $152 million non-cash impairment charge against the newbuild assets for these rigs.




2) Fair Value of Archer Convertible Bond
At each reporting period, we record the Archer bond at fair value in Seadrill’s balance sheet, with any gains or losses being recorded in OCI. At fresh start, the value of the bond was $46 million and at December 2018 the value was $43 million. At December 2019, we re-assessed thedown to its deemed fair value of the convertible bond issued to us by Archer, who were in the process of refinancing their debt facilities. For the purposes of the valuation, we assumed that the maturity date of the bond would be pushed out to 2024, as we anticipated this would be required in order for Archer to refinance their bank borrowings to which the Seadrill bond is subordinate. The extension of the maturity date on the bond led to a significant decrease in the bond’s fair value, which resulted in an other-than-temporary impairment of $11$137 million.
3) Impairment of investments in Seadrill Partners
Seadrill Partners is an international offshore drilling contractor formed in 2012. It has a fleet of 11 drilling units. This comprises 4 drillships, 4 semi-submersible rigs and 3 tender rigs. All the rigs were acquired from Seadrill between 2012 to 2015. Seadrill is responsible for managing, marketing and operating the rigs and charges SDLP a management fee for these services.
Seadrill Partners has issued 3 categories of equity instrument. This includes two classes of stock (“common units” and “subordinated units”) and incentive distribution rights (“IDRs”). The holders of these equity instruments have varying rights to receive distributions from Seadrill Partners. The common units and subordinated units have equal rights to distributed profits, subject to the common units being entitled to a minimum quarterly distribution before the subordinated units may receive a dividend. The holders of the IDRs do not receive a share of the Seadrill Partners distributions until a target distribution level has been achieved. The IDRs receive an increasing share of the distribution once this has been met.
As set out in Note 18 to the accompanying financial statements, we have several investments in Seadrill Partners. These include (i) 100% of the subordinated units (1.6 million units); (ii) 35% of the common units (2.5 million out of 7.5 million total units) and (iii) 100% of the incentive distribution rights. In addition, we have investments in the common stock of 4 operating companies (“OPCOs”) controlled by Seadrill Partners. This includes (i) 42% interest in Seadrill Operating LLP which wholly owns 4 rigs and has a 56% interest in 1 rig; (ii) 49% interest in Seadrill Capricorn LLC which wholly owns 4 rigs and (iii) 39% interest in Seadrill Deepwater Drillship Ltd and 49% interest in Seadrill Mobile Units Ltd which, together, own a 44% interest in 1 rig.
We account for our investment in (i) the subordinated units and (ii) direct investments in Seadrill Partners OPCOs under the equity method. These investments were recorded at fair value when we applied fresh start accounting on July 2, 2018. Each reporting period, we (i) increase (or decrease) the value of these investments for our share of the after-tax profits (or losses) of the entities and (ii) amortize basis differences recorded against the investments on fresh start.
Seadrill Partners common units do not meet the definition of common stock under US GAAP as they are not the lowest class of stock (because they have an additional right to dividends compared to the subordinated units). The incentive distribution rights do not meet the definition of stock. Therefore, neither category of investment is accounted for under the equity method. The common units have a readily ascertainable fair value and are therefore recorded at fair value with gains or losses taken to the Consolidated Statement of Operations. The IDRs do not have a readily ascertainable fair value and are recorded at cost less impairment. The cost of the IDRs represented the fair value of the instruments when we applied fresh start accounting on July 2, 2018.
a) Impairment considerations
Each reporting period, we are required to consider (i) whether there have been any indicators of ’other than temporary impairment’ (“OTTI”) of our equity method investments (subordinated units and direct interests) and (ii) whether there has been an impairment of the IDRs. We record an impairment charge for other-than-temporary declines in fair value when the fair value is not anticipated to recover above the carrying value within a reasonable period after the measurement date, unless there are mitigating factors that indicate impairment may not be required.
b) Impairment recognized in the year ended December 31, 2019
Seadrill Partners primary debt finance comes from a $2.6 billion Term Loan B (“TLB”) which comes due for repayment in February 2021 and will need to be refinanced. There has been a decrease in the share price of Seadrill Partners common units since November 2018 which culminated in the common units being suspended from trading on NYSE in September 2019 as the market capitalization decreased below $15 million for a period of 30 consecutive days. We have interpreted this decrease in share price as both (i) an indicator of OTTI for the subordinated units and direct interests and (ii) an impairment indicator for the IDRs. The evaluation of whether a decline in fair value is “other than temporary” requires a high degree of judgment and the use of different assumptions that could materially affect our earnings.
Having identified an indicator of OTTI, we were required to value our investments in Seadrill Partners to calculate the impairment at September 30, 2019. We calculated the fair value of our investments in Seadrill Partners direct interests and IDRs to be $134 million and nil, compared to pre-impairment book values of $382 million and $54 million respectively. As a result, we recorded an impairment charge of $302 million. We have recognized the impairment of these investments within “Loss on impairment of investments” in our Consolidated Statement of Operations for the year ended December 31, 2019.
We have summarized the carrying value of our investments before and after this impairment review in the below table.

Investment Basis 
September 30, 2019
Post-impairment

 
September 30, 2019
Before-impairment

 As at December 31, 2018
 As at July 2, 2018
Seadrill Partners subsidiaries - Subordinated units Equity method —
 —
 17
 37
Seadrill Partners subsidiaries - Common units Fair value 2
 2
 45
 91
Seadrill Partners subsidiaries - IDRs Cost less impairment —
 54
 54
 54
Seadrill Partners - Direct ownership interests Equity method 134
 382
 479
 575
Total carrying value of our investments 136
 438
 595
 757
We valued our investments in the direct interests using an income approach which discounted future free cashflows (“DCF model”). The cash flows were estimated over the remaining useful economic lives of the underlying assets, but no longer than 30 years in total, and discounted using an estimated market participant weighted average cost of capital of between 11.25-12.25%.
The DCF model derived an enterprise value of the OPCOs, after which associated debt was subtracted to provide equity values. Our DCF model considered a range of scenarios to reflect different potential refinancing outcomes for Seadrill Partners. The key assumptions used in the DCF were derived from significant unobservable inputs based on our best judgments and assumptions available at the time of performing the impairment test.
The underlying assumptions used to model future rig cashflows used a methodology that examined historical data for each rig, considering the rig’s age, rated water depth and other attributes and then assessed its future marketability considering the current and projected market environment at the time of assessment.
Other assumptions, such as operating, maintenance and inspection costs, were estimated using historical data adjusted for known developments and future events that are anticipated by management at the time of the assessment. The probability applied to each scenario was set with reference to the traded price of the TLB at September 30, 2019.
These assumptions are necessarily subjective and are an inherent part of our asset impairment evaluation, and the use of different assumptions could produce results that differ from those reported. Our assumptions involveThese include uncertainties aboutover future demand for our services, dayrates, expenses and other market basedmarket-based future events, and expectations may not be indicative of future outcomes. If actual events differ from these estimates, or to
Altering the extent that these estimates are adjusted in the future, our financial conditiondayrate and results of operations could be affected in the period of any such change of estimate.
We valued our investments in the direct interests using an option pricing model. Theother assumptions used in our cash flow forecasts could have led to significantly different estimated fair values. As a result, the model were derived from both observableassessment as to whether an asset should have been impaired or otherwise was dependent on the timing of assessment and unobservable inputs andmarket expectations at that time. As the long-range outcomes are based on management’s judgments and assumptions available atunpredictable due to this volatility, it is not possible to reasonably quantify the timeimpact of performing the impairment test. The method values different trancheschanges in the capital structureassumptions used in sequence of seniority. We employ significant judgment in developing these estimatesour projected cash flows.
On August 27, 2021, the Bankruptcy Court approved an amendment to the original West Hercules bareboat charter, which removed the call options and assumptions.
c) Impairment recognizedpurchase obligations in the year ended December 31, 2017original charter, leading to the arrangement no longer being accounted for a failed sale leaseback and the remaining $137 million rig carrying value being derecognized (along with the remaining $146 million liability to SFL).
During 2017,We also assessed the deteriorating market conditions in the oil and gas industry, as well as the supply and demand conditions in the industry we operate, were indicators of impairment for our investments in Seadrill Partners. We have determined the length and severityrecoverability of the deteriorationWest Linus at year-end, which was amended to a short-term transition charter subsequent to year-end, in a similar manner to that of market conditionsthe West Hercules. The carrying value was deemed to be representativerecoverable.
Fair Value of an "other than temporary" impairment. We have recognized an impairmentSeaMex
As described in Note 32 - Business Combinations, on November 2, 2021, NSNCo consolidated SeaMex in a business combination. All assets and liabilities acquired were evaluated as of $805 million against these investments within “Loss on impairment of investments”the acquisition date in our Consolidated Statement of Operations for the year ended December 31, 2017.
We derived theaccordance with ASC 805 and recorded at their fair value as of that date.
Accounts receivable, net
SeaMex's current expected credit losses ("CECL") model estimates the allowance using an incomea similar “probability-of-default” model to that of Seadrill's. Refer to Current Expected Credit Losses section below. Management has applied a 1% CECL on the receivable balance after specific reserves.
Drilling Units
The fair value of drilling units was estimated through the discounted cash flow (“DCF”) approach. The DCF approach which discounts future freederives values of rigs from the cash flows or the ‘DCF’ model. The cash flows are estimated overassociated with the remaining useful economic liveslife of the underlying assets but no longer than 30 years in total and discounted using a 9.75% estimated market participant weighted average cost of capital.
The DCF model derived an enterprise value of the investments, after which associated debt was subtracted to provide equity values. The assumptionsrig. Forecasted revenues used in the DCF model wereare derived from significant unobservable inputs (representative of Level 3 inputs for Fair Value Measurement)a "general pool" whereby the rigs will receive a global dayrate assumption and are based on management’s best judgments and assumptions available at the time of performing the impairment test. The underlying assumptions and assigned probabilities of occurrence for utilization and dayrate scenarios were developed using a methodology that examines historical data for each rig, which considers the rig’s age, rated water depth and other attributes and then assesses itscontract probability factor. All future marketability considering the current and projected market environment at the time of assessment. Other assumptions, such as operating, maintenance and inspection costs, are estimated using historical data adjusted for known developments and future events that are anticipated by management at the time of the assessment.
Management’s assumptions are necessarily subjective and are an inherent part of our asset impairment evaluation, and the use of different assumptions could produce results that differ from those reported. Management’s assumptions involve uncertainties about future demand for our services, dayrates, expenses and other future events, and management’s expectations may not be indicative of future outcomes. Significant unanticipated changes to these assumptions could materially alter our analysis in testing an asset for potential impairment.

To assess the investments accounted for using the cost method for impairment, the fair value was determined using a Monte Carlo simulation method, or the Monte Carlo Model. The assumptions used in the Monte Carlo Model were derived from both observable and unobservable inputs and are based on management’s judgments and assumptions available at the time of performing the impairment test. The method considers the cash distribution waterfall, historical volatility, estimated dividend yield and the share price of the common units. We employ significant judgment in developing these estimates and assumptions.
4) Impairment of Investments in SeaMex
SeaMex is a joint venture that owns and operates five jack-up drilling units located in Mexico under contract with Pemex.
a) Impairment considerations
Each reporting period, we are required to consider whether there have been any indicators of ’other than temporary impairment’ (“OTTI”) of our equity method investment. We record an impairment charge for other-than-temporary declines in fair value when the fair value is not anticipated to recover above the carrying value within a reasonable period after the measurement date, unless there are mitigating factors that indicate impairment may not be required.
b) Impairment recognized in the year ended December 31, 2017
During 2017, the deteriorating market conditions in the oil and gas industry, as well as the supply and demand conditions in the industry we operate, were indicators of impairment for our investment in SeaMex. We have determined the length and severity of the deterioration of market conditions to be representative of an "other than temporary" impairment. We have recognized an impairment of $36 million against our investment within “Loss on impairment of investments” in our Consolidated Statement of Operations for the year ended December 31, 2017.
We derived the fair value using an income approach which discounts future free cash flows or the ‘DCF’ model. The cash flows are estimated over the remaining useful economic lives of the underlying assets but no longer than 30 years in total and discounted using a 10.25% estimated market participant weighted average cost of capital.
The DCF model derived an enterprise value of the investments, after which associated debt was subtracted to provide equity values. The assumptions used in the DCF model were derived from significant unobservable inputs (representative of Level 3 inputs for Fair Value Measurement) and are based on management’s best judgments and assumptions available at the time of performing the impairment test. The underlying assumptions and assigned probabilities of occurrence for utilization and dayrate scenarios were developed using a methodology that examines historical data for each rig, which considers the rig’s age, rated water depth and other attributes and then assesses its future marketability considering the current and projected market environment at the time of assessment. Other assumptions, such as operating, maintenance and inspection costs, are estimated using historical data adjusted for known developments and future events that are anticipated by management at the time of the assessment.
Management’s assumptions are necessarily subjective and are an inherent part of our asset impairment evaluation, and the use of different assumptions could produce results that differ from those reported. Management’s assumptions involve uncertainties about future demand for our services, dayrates, expenses and other future events, and management’s expectations may not be indicative of future outcomes. Significant unanticipated changes to these assumptions could materially alter our analysis in testing an asset for potential impairment.
5) Redeemable non-controlling interests
Subsequent to filing bankruptcy petitions, the Predecessor executed a Transaction Support Agreement (“TSA”) on April 4, 2018 with a minority shareholder of one of our subsidiaries, Asia Offshore Drilling Limited (“AOD”). The purpose of the TSA was to provide a framework for a monetization event for the minority shareholder of AOD as well as obtain unanimous approval of the AOD board of directors (which included the minority shareholder) in order for AOD to become a party to the TSA and participate in the Predecessor’s broader debt restructuring under its Chapter 11 reorganization. The TSA executed between the parties provides an option to the holders of non-controlling interest shares to sell the shares it owns to Seadrill Limited subject to a price ceiling ("Put Option"). After the end of the effective period of the Put Option, if the right remains unexercised, Seadrill Limited has the option to purchase the non-controlling interest in AOD at a price subject to the floor price (“Call Option”). The Put Option generates a redemption feature for the non-controlling interest holder that is outside the control of Seadrill Limited.
To calculate the fair value of the non-controlling interest shares, we estimated the fair value of AOD in total and then allocated this between the shares held by us and by those held by the non-controlling interest. We estimated the fair values of AOD in total by adjusting the Consolidated Balance Sheet position of AOD as at each reporting period for an updated fair value of the three drilling units: AOD I, AOD II and AOD III.
We derived the fair value of the three drilling units using a DCF discounted using a weighted average cost of capital ("WACC") range of 11% (2018: 11%)to 14%. Key assumptions used in the DCF include contracted dayrate and derivedutilization forecasts.
Contracts
Management valued the fair valuefavorable intangible drilling contracts by comparing the signed contract rates against the expected rates achievable for the rig type in the market, both adjusted for economic utilization and taxes. The gain or loss on the signed contract compared to the market rates were then discounted using an adjusted WACC of the external debt facilities with a DCF using a weighted average cost of debt of 6% (2018: 6%)14%.

6) Income TaxesUncertain Tax Positions
Seadrill is a Bermuda company that has a number of subsidiaries and affiliates in various jurisdictions. We are not currently required to pay income taxes in Bermuda on ordinary income or capital gains because we qualify as an exemptexempted company. We have received written assurance from the Minister of Finance in Bermuda that we will be exempt from taxation until March 2035. Certain of our subsidiaries operate in other jurisdictions where income taxes are imposed. Consequently, income taxes have been recorded in these jurisdictions when appropriate. Our income tax expense is based on our income, statutory tax rates and tax planning opportunities available to us in the various jurisdictions in which we operate.
We providerecognize liabilities for uncertain tax positions based on a two-step process. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount that is more than 50% likely of being realized upon settlement. While we believe we have appropriate support for the positions taken on our tax returns, we regularly assess the potential outcomes of examinations by tax authorities in determining the adequacy of our provision for income taxes based on the tax laws and rates in effect in the countries in which our operations are conducted and income is earned. The income tax rates and methods of computing taxable income vary substantially between jurisdictions. Our income tax expense is expected to fluctuate from year to year because our operations are conducted in different tax jurisdictions and the amount of pre-tax income fluctuations.taxes.
The determination and evaluation of our annual group income tax provision involves the interpretation of tax laws in the various jurisdictions in which we operate and requires significant judgment and the use of estimates and assumptions regarding significant future events, such as amounts, timing and the character of income, deductions and tax credits. There are certain transactions for which the ultimate tax determination is unclear due to uncertainty in the ordinary course of business. We recognize tax liabilities based on our assessment of whether
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our tax positions are more likely than not sustainable, based solely on the technical merits and considerations of the relevant taxing authorities widely understood administrative practices and precedence. Changes in tax laws (such as the recent US tax reform), regulations, agreements, treaties, foreign currency exchange restrictions or our levels of operations or profitability in each jurisdiction may impact our tax liability materially in any given year.
While our annual tax provision is based on the information available to us at the time, a number of years may elapse before the ultimate tax liabilities in certain tax jurisdictions are determined. Current income tax expense reflects an estimate of our income tax liability for the current year, withholding taxes, changes in prior year tax estimates as tax returns are filed or from tax audit adjustments. Our deferred tax expense or benefit represents the change in the balance of deferred tax assets or liabilities as reflected on the balance sheet. Valuation allowances are determined to reduce deferred tax assets when it is more likely than not that some portion or all of the deferred tax assets will not be realized. To determine the amount of deferred tax assets and liabilities, as well as at the valuation allowances, we must make estimates and certain assumptions regarding future taxable income, including where our drilling units are expected to be deployed, as well as other assumptions related to our future tax position. A change in such estimates and assumptions, along with any changes in tax laws, could require us to adjust the deferred tax assets, liabilities or valuation allowances. In addition, our uncertain tax positions are estimated and presented within other current liabilities, other liabilities, and as reductions to our deferred tax assets within our Consolidated Balance Sheets. ReferFor details on our tax position, refer to Note 12 – "Taxation" to the Consolidated Financial Statements included herein.
Current Expected Credit Losses
We adopted accounting standard update 2016-13 effective January 1, 2020. Under this guidance, we are required to record allowances for the expected future credit losses to be incurred on trade and loan receivable balances.
The CECL model contemplates a broader range of information to estimate expected credit losses over the contractual lifetime of an asset. It also requires to consider the risk of loss even if it is remote. We estimate expected credit losses based on relevant information about past events, including historical experience, current conditions, and reasonable and supportable forecasts of events which may affect the collectability. We estimate the CECL allowance using a “probability-of-default” model, calculated by multiplying the exposure at default by the probability of default by the loss given default by a risk overlay multiplier over the life of the financial instrument (as defined by Accounting Standard Update (“ASU”) 2016-13). Our critical assumptions relate to internal credit ratings and maturities used to determine probability of default, the subordination of debt to determine loss given default and the performance status of the receivable that can impact any management overlay. We determine management risk overlay based on management assessment of defaults, overdue amounts and other observable events that provide information on collection. Our internal credit ratings are based on the Moody’s scorecard approach (based on several quantitative and qualitative factors) and our approach relies on statistical data from Moody’s ‘Default and Ratings Analytics’ to derive the expected credit loss. We monitor the credit quality of receivables by re-assessing credit ratings, assumed maturities and probability-of-default on a quarterly basis. Due to the inherent uncertainty around these judgmental areas, it is at least reasonably possible that a material change in the CECL allowance can occur in the near term. We grouped financial assets with similar risk characteristics based on their contractual terms, historical credit loss pattern, internal and external credit ratings, maturity, collateral type, past due status and other relevant factors.
The CECL model applies to our external trade receivables, related party receivables (See Note 27 – "Related party transactions" to the Consolidated Financial Statements included herein for further information.details) and other financial assets carried at amortized cost. Our external customers are international oil companies, national oil companies and large independent oil companies. These counterparties mostly have investment grade credit ratings. Historically we incurred very low credit losses and observed no significant past due amounts indicating delinquency of payments. Therefore, we have limited credit risk exposure impact based on our assessment of future, current and past conditions. However, we have established an allowance on our loans and trade receivables due from related parties reflecting their lower credit ratings and overdue balances.

Liabilities Subject to Compromise
While in Chapter 11, we distinguished liabilities from those that are liabilities subject to compromise ("LSTC"), being un-/undersecured prepetition liabilities, from those that are not, being fully secured prepetition liabilities and all post-petition liabilities. If there is uncertainty about whether a claim was undersecured, or would be impaired under the Plan of Reorganization, the entire amount of the claim was included within LSTC. Liabilities that were affected by the plan were reported at the amounts expected to be allowed, even if they may be settled for lesser amounts, which inherently requires a degree of estimation.
H.SAFE HARBOR

F.    SAFE HARBOR
 
Forward-looking information discussed in this Item 5 includes assumptions, expectations, projections, intentions and beliefs about future events. These statements are intended as “forward-looking statements.” We caution that assumptions, expectations, projections, intentions and beliefs about future events may and often do vary from actual results and the differences can be material. Please see “Cautionary Statement Regarding Forward-Looking Statements”statement regarding forward-looking statements” in this annual report.

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ITEM 6.DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
ITEM 6.DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
 
A.DIRECTORS AND SENIOR MANAGEMENT
A.DIRECTORS AND SENIOR MANAGEMENT
1) Board of Directors
The Board of Directors consists of seven individuals. The names and positions of the Directors as of February 29, 2020March 31, 2022 are set out in the table below.
below:
NamePosition
Birgitte Ringstad VartdalJulie Johnson RobertsonDirector
Birgit Aagaard-SvendsenDirector
Glen Ole RødlandDirector and ChairmanChair of the Board
Gunnar Winther EliassenMark McCollumDirector
Herman R. FlinderKaren Dyrskjot BoesenDirector
Kjell-Erik ØstdahlJean CahuzacDirector
Peter J. SharpeJan KjaervikDirector
Andrew SchultzDirector
Paul SmithDirector
Certain biographical information about each of our directors is set forth below.
Birgitte R. Vartdal serves asJulie Johnson Robertson is a highly respected leader in the offshore drilling business, and previously one of the highest ranking female chief executives in the energy sector. Ms. Robertson has more than 40 years of experience from various roles in Noble Corporation plc and its predecessor companies, including chair of the board, president and chief executive officer until Ms. Robertson opted to retire at which time she was named executive chairman until her retirement was effective. She holds a Bachelor of Journalism from the University of Texas at Austin and has attended the Advanced Management Program at Harvard Business School. Ms. Robertson is a US citizen and resides in Houston, Texas, US.

Ms. Robertson also currently holds directorships at EDG Resources, Inc (Independent Director), Superior Energy Services (Independent Director) and Spindletop Charities (Nonprofit Board Member).

Mark McCollum has extensive global OFSE experience and is an independent director appointed by Hemen. Ms. VartdalNYSE financial expert who has chaired three public company audit committees. Mr. McCollum has 17-years of experience in the oil and gas industry, having most recently served as Chief Executive OfficerPresident and CEO of Golden Ocean Management AS from May 2016 to November 2019Weatherford International. Mr. McCollum has also held several roles of prominence at Halliburton, including EVP and previously served as Chief Financial Officer of Golden Ocean from June 2010 to April 2016. Ms. VartdalCFO. Mr. McCollum currently servessits on the board of Mowi ASA and as a member of the corporate assembly of Equinor ASA. She also previously served as a director of Sevan Drilling Ltd (formerly Sevan Drilling ASA). In April 2020, Ms. Vartdal will join Statkraft AS as EVP European Wind and Solar.
Ms. Vartdaldirectors for Westlake Chemical Corporation. Mr. McCollum holds a degreeBachelor of Siv.Ing. (MSc)Business Administration from Baylor University, Texas. Mr. McCollum is a US citizen and resides in PhysicsHouston, Texas, US.
Mr. McCollum also currently holds directorships and Mathematics from the Norwegian Universitysenior management positions at McCollum Capital LLC (Partner), Backcast LLC (General Partner), Baylor College of ScienceMedicine (Director), Yellowstone Academy (Director), and Technology (Nw. NTNU) and an MSc in Financial Mathematics from Heriot-Watt University, Scotland.Baylor St. Luke's Medical Center (Director).
Birgit Aagaard-Svendsen was appointed as an independent director on February 27, 2020. Ms. Aagaard-SvendsenKaren Dyrskjot Boesen has previously served as CFO in the shipping company J. Lauritzen A/S and brings more than 2520 years of board experience in public companies.from finance and commercial roles, and more recently general management roles, within the oil & gas industry. Ms. Aagaard-Svendsen has experience in different business segments including more than 25 years in shipping, 15 years related to offshore as well as 16 years of board experience in Danske Bank. Ms. Aagaard-SvendsenBoesen currently serves as Audit Committee Chairman in Aker Solutions AS, DNVGL, Prosafe SE as well as in Westthe group CFO at the Sonnedix Group. She has previously held various CFO roles at TotalEnergies. and A.P. Møller-Mærsk. Ms. Boesen holds a Master of England Ship Owners Mutual Insurance Association. In addition, Ms. Aagaard-Svendsen is the Deputy Chairman of Copenhagen Malmö Port. From 2011 to 2015 she was Chairman of the Danish Committee on Corporate Governance. 
Ms. Aagaard-Svendsen is a constructional engineer (Technical University of Denmark) and has a Graduate DiplomaScience in Business Administration (Copenhagen& Economics from Copenhagen Business School, CBS).School. Ms. Aagaard-Svendsen has on an ongoing basis participated in Postgraduate Studies in Finance and Strategy at Insead, IMD and IESE.
Glen Ole Rødland was appointed Director and Chairman of the Board on November 21, 2019. Mr Rødland is currently Chairman of Prosafe and AqualisBraemar, and has 25 years' experience in shipping, oil and gas and other industries. He has extensive experience as an analyst and in corporate finance from Investment Banking, Private Office and Private Equity, including DnB and Swedbank. Mr. Rødland obtained an MBA and Postgraduate Studies in Finance completed at the Norwegian School of Economics and Business Administration (NHH) and UCLA.
Gunnar Winther Eliassen was appointed as Hemen Director on November 21, 2019. Mr. Eliassen has been employed by Seatankers Consultancy Services since January 2016. Mr. Eliassen also serves as a Director of Seadrill Partners LLC, Golden Close Maritime Corp. Ltd. and Quintana Energy Services Inc. Mr. Eliassen was also a Partner at Pareto Securities In. in New York and Oslo. Mr. Eliassen obtained an MBA in Finance from the Norwegian School of Economics.
Herman R. Flinder was appointed as an independent director on February 27, 2020. Mr. FlinderBoesen is a co-founder of Norse Partners LLCDanish citizen and Energy Investment Management LLC, which manageresides in London, England.
Ms. Boesen also currently holds a portfolio of investments in oil service companies. Mr. Flinder serves on the boards of Noram Drilling Company AS, Panther Fluids Management LLC and Wolf Downhole Motors LLC. Mr. Flinder was previously a managing partner of Fearnley Offshore LLC in Houston and brings to the board 30senior management position at Sonnedix Power Holdings, Ltd. (CFO).
Jean Cahuzac has more than 41 years of experience in the offshore industry, including chartering, salesenergy service industry. Mr. Cahuzac was until recently the CEO of Subsea 7, and purchasehas previously worked for Transocean and corporate development.Schlumberger in operational and management roles. He currently sits on the audit committee at Subsea 7 and is a member of the board at Bourbon Maritime. Mr. Flinder attended the Colorado School of Mines and the University of West Virginia, withCahuzac holds a degree in Geologymechanical engineering from Ecole des Mines, St. Etienne, France, and Engineeringa degree in petroleum engineering from the French Petroleum Institute, Paris, France. Mr. Cahuzac is a French citizen and an MBA.resides in Paris, France.

Mr. Cahuzac also currently holds directorships and senior management positions at EVOLEN (President), Bourbon Maritime SAS (non-executive director) and Subsea 7 S.A. (non-executive director).
Kjell-Erik ØstdahlJan Kjaervik has more than 35 years of experience in financial roles across the banking, energy and maritime sectors. Mr. Kjærvik was most recently Head of Treasury & Risk for A.P. Møller-Mærsk and prior to that he held a similar role at Aker Kværner/Solutions. Mr. Kjærvik currently sits on the board of directors and serves as an independent director appointed by Hemen. Since 2016, Mr. Østdahl has been a senior advisor to Blackstone's Private Equity Energy division in London. Prior to that, between 2014 to 2015, Mr. Østdahl worked in Norway as a senior partner at HitecVision, a private equity investor focused on the upstream oil and gas industry. Prior to that, between 1990 and 2005, and again between 2007 to 2013, Mr. Østdahl worked at Schlumberger and its subsidiary, WesternGeco, including working in France as EVP Operations and Support and Chief Procurement, in the U.K. and Norway as VP Operations, General Manager, Marketing Manager, Business Development Manager and Local Manager and in China and Indonesia as a Field Engineer. Between 2006 and 2007, Mr. Østdahl worked at Statoil as Chief Procurement Officer (Norway). He holdsAudit Committee Chair for Høegh Autoliners, and has previously held various non-executive directorships in, inter alia, Mærsk Supply Service, Mærsk Insurance, Danish Ship Finance and advisory roles including: (a) as Chairman of Sekal (Norway) from 2015 to date, and of Atlantica Tender Drilling (U.S.A) from 2014 to 2016; and (b) asBritannia PI. Mr. Kjærvik holds a board member of the Flux Group (Norway) from 2015 to 2016 and of Wirescan (Norway) from 2014 to 2015. Mr. Østdahl has also agreed to act as a director of Mime, a new independent E&P playerMasters in the North Sea. Mr. Østdahl holds an MSc Electrical Engineering degree from NTNU Norwegian University of Science & Technology, Norway.
Peter J. Sharpe serves as an independent director appointed by Centerbridge. Mr. Sharpe has served as Director of Archer Limited since November 2019. Mr. Sharpe retired from Shell in 2017 after holding a diverse range of Executive Management positions in international locations over a period of 37 years. Mr. Sharpe served as Executive Vice President of Royal Dutch Shell for over 10 years, with responsibility for managing Shell upstream investments in well construction and maintenance globally. Mr. Sharpe brings significant experience in all aspects of upstream development, asset management, and major project delivery. Mr. Sharpe served as Chairman of SWMS Pte Ltd an independent Joint Venture between Shell and CNPC from 2012 to 2017 and as a non-Executive director of Xtreme Drilling and Coil Services Corporation from 2008 to 2014. He brings to the Board expertise in strategic and operational risk management, supply chain management, organizational change and monetization of technology. Mr. Sharpe received a Bachelor of Science degreeEconomics (lic. oec.) from the University of HullSt. Gallen, Switzerland. Mr. Kjærvik is a Norwegian citizen and resides in 1980.Oslo, Norway.
Andrew Schultz is an experienced turnaround investor and executive, as well as a seasoned director with extensive experience in stressed and distressed situations. Mr. Schultz has experience across many industries, including the offshore drilling sector and the E&P sector. Mr. Schultz serves as board chair for Pacific Drilling and as director for Vanguard Natural Resources, in addition to a total of seven other board positions. Mr. Schultz holds a Juris Doctor degree from Fordham University School of Law, New York. Further, he has attended a doctoral program in economic geography (industrial location theory) and other studies in economics and geography at Clark University, Worcester, Massachusetts. Mr. Schultz is a US citizen and resides in New Canaan, Connecticut, US.
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Mr. Schultz also currently holds directorships and senior management positions at Algoma Steel, Inc. (Director and Chairman), Quorum Health, LLC (Director and Chairman), Save A Lot, Inc. (Director and Chairman), M|C Communications Inc. (Chairman), Legacy Cabinets, LLC (Chairman), BBK Worldwide, LLC (Director), NYDJ Apparel, LLC (Chairman and Sole Officer), Innovative Fixture Solutions, LLC (Chairman).
Paul Smith has expertise in capital allocation, capital structure, capital markets, and restructurings across various industries globally, including mining and metals, oil and gas, and steel. Mr. Smith is the founder and principal of Collingwood Capital Partners. Mr. Smith previously worked nine years for Glencore, and has held the position as CFO for Katanga Mining. Mr. Smith currently sits on the board for Trident Royalties. Mr. Smith holds a MA in Modern History from Lincoln College, Oxford University. Mr. Smith is a British citizen and resides in Zug, Switzerland.
Mr. Smith also currently holds directorships and senior management positions at Collingwood Capital Partners AG (Founder & Principal), Trident Royalties Plc (non-executive chairman) and Echion Technologies Limited (non-executive director).
2) Senior Management
Our executive management team consists of the following fourfive employees who are responsible for overseeing the management of our business ("Management"). The Board of Directors has organized the provision of management services through Seadrill Management Ltd. ("Seadrill Management"), a subsidiary incorporated in the United Kingdom. The Board of Directors has defined the scope and terms of the services to be provided by Seadrill Management. The Board of Directors must be consulted on all matters of material importance and/or of an unusual nature and, for such matters, will provide specific authorization to personnel in Seadrill Management to act on its behalf.
The names of the members of Management as of February 29, 2020,March 31, 2022, and their respective positions, are presented in the table below:
NameAgePosition
Simon William Johnson51President and Chief Executive Officer
Grant Russel Creed41Executive Vice President and Chief Financial Officer
Leif Olaf Nelson47Executive Vice President, Chief Operating and Technology Officer
Sandra Faye Redding45Executive Vice President, General Counsel and Chief of Staff
NameAgePosition
Anton Dibowitz48Chief Executive Officer
Stuart Jackson60Chief Financial Officer
Leif Nelson45Chief Operating Officer
Sandra Redding43General Counsel
Anton Dibowitz serves asSimon William Johnson has worked internationally for the past 25 years for a number of publicly listed offshore drilling contractors, including Diamond Offshore, Seadrill, Noble Corporation and Borr Drilling. His early career saw exposure to various rig and shore-based operational roles for MODUs in South East Asia before migrating to more commercially focused roles including Senior Vice President - Marketing and Contracts at Noble Corporation and Chief Executive Officer of SeadrillBorr Drilling. Mr. Johnson has demonstrated strengths in strategy development, investor engagement and relationship management. Mr. Johnson has many years of exposure to board engagements and associated corporate governance and compliance issues. He holds a Bachelor of Commerce (Economics & Finance) from Curtin University and has completed the Advanced Management Program at Harvard Business School. Mr. Johnson holds Australian citizenship and asresides in the Company's Principal Executive Officer. Mr. Dibowitz was appointed Chief Executive Officer of the Group in July 2017. Prior to this Mr. Dibowitz served as Executive Vice President of Seadrill Management since June 2016, and as Chief Commercial Officer since January 2013. He has over 20 years drilling industry experience most recently serving as Vice President of Marketing and prior to that as Commercial Director, Deepwater Western Hemisphere Division. Prior to joining Seadrill, Mr. Dibowitz held various positions within tax, process reengineering and marketing at Transocean Ltd. and Ernst & Young LLP. He is a Certified Public Accountant and a graduate of the University of Texas at Austin where he received a Bachelor's degree in Business Administration, and Master's degrees in Professional Accounting (MPA) and Business Administration (MBA).United Kingdom.
Stuart JacksonGrant Russel Creed serves as the Chief Financial Officer of Seadrill ManagementManagement. Mr. Creed was appointed as Seadrill's Executive Vice President and as the Company’s PrincipalChief Financial Officer in May 2021. Mr. Creed joined the Company in 2013 and Principalhas held various positions including Chief Restructuring Officer, VP Mergers & Acquisitions and VP Corporate and Commercial Finance. Prior to joining Seadrill, he held M&A Transaction Services and Audit positions at Deloitte. He is a chartered accountant and holds a Bachelor of Commerce in Accounting Officer.from the University of Port Elizabeth, South Africa. Mr. Jackson is an experienced finance executive with 20 years' experienceCreed holds dual South African and Australian citizenship and resides in CFO roles at LSE, Nasdaq, OSE and AIM listed companies, including offshore and oil field services experience having served as CFO for Bibby Offshore, CEONA Pte and Acergy SA.the United Kingdom.
Leif Olaf Nelsonhas served as Seadrill Management's Executive Vice President and Chief Operating and Technology Officer since May 2021. Mr. Nelson served as Chief Technology Officer from December 2020, and prior to that Chief Operating Officer sincefrom July 2015. Mr. Nelson has been with the Company since 2011. He has over 18 years'23 years of experience in the drilling industry most recently as the Group's Vice President Operations Performance.industry. Prior to joining Seadrill, Mr. Nelson held various operational positions for Transocean Ltd. Mr. Nelson is a graduate of the Colorado School of Mines and holds a BSc in Petroleum Engineering. Mr. Nelson also sits on the board of the Well Control Institute.Institute and Aquadrill LLC. Mr. Nelson is a US citizen and resides in the United Kingdom.
Sandra Faye Redding was appointed has served as Seadrill Management's Executive Vice President, General Counsel & SVPand Chief of Staff since May 2021, and General Counsel since joining the Group in September 2019. Ms.She is the Company Secretary of Seadrill Limited. Mrs. Redding has approaching 20 years in-house legal experience in the oil &and gas sector, including most recently serving as General Counsel of the Dubai government owned operator Dragon Oil. Ms.Mrs. Redding has alsopreviously worked as in-house counsel to Gaz de France (now Engie) and RWE Dea (now Ineos)INEOS) in the UK North Sea and across their international portfolios. Ms.Mrs. Redding holds a B.Com and an LLB (Hons), both from the University of Queensland, and is qualified to practice as a solicitor in England & Wales and in Queensland, Australia. Mrs. Redding is a British, Australian and New Zealand citizen and resides in the United Kingdom.


B.COMPENSATION

B.COMPENSATION
1) Directors
During the year ended December 31, 20192021 we paid an aggregate $1$0.8 million in directors’ fees to the current members of the Board of Directors, serving as shown in ITEM 6A - "Directors and Senior Management"members for services towards Seadrill Limited (Predecessor).
In addition, certain members
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Table of our current Board of Directors received awards of restricted stock units ("RSUs") under our Employee Incentive Plan in September 2018. For details of these awards please see ITEM 6E - "Share Ownership".Contents
2) Senior Management

management
Senior management compensation currentlyin the year ended December 31, 2021 includes base salary, performance bonusallowances, retirement plan contributions and awards under our Employeepayments arising from the Long-Term Incentive Plan.and Retention Plan granted in prior years. In addition, members of management may participate in our retirement savings plans and are eligible to participate in benefit programs available to our UK workforce generallyin their work locations including medical, life insurance and disability benefits. We believe that the compensation awarded to our management is consistent with that of our peers and similarly situated companies in our industry.


During the year ended December 31, 2019,2021, we paid an aggregate compensation of $8$7 million, inclusive of retirement benefits, to our management, including $3 million attributed to changes insenior management.
All of our senior management team. In addition, we incurred compensation expense in the aggregate amount of $0.1 million for their pension and retirement benefits.

Our management received awards of RSUs in September 2018 and performance shares ("PSUs") in April 2019 under our Employee Incentive Plan. For details of these awards please see ITEM 6E - "Share Ownership".

The Chief Executive Officer, Chief Financial Officer and General CounselCommittee members have termination related payment clauses in their contracts. These relate to terminations in the context of a "Change of Control Event" or terminations agreed due to "Good Reason" other than "Cause". "Cause" is defined as one of the following: Gross misconduct; Serious breach of Contract; UK criminal offence;offense; Fraud & corrupt practices relating to the Bribery Act 2010 and ineligibility to work legally in the UK. All the above contracts are signed by the current incumbents. Other than the listed termination related payment clauses, no employee, including members of Management, has entered into employment agreements which provide for any special benefits upon termination of employment.

C.BOARD PRACTICES

C.BOARD PRACTICES
The Board of Directors is responsible for the overall management of the Company and may exercise all the powers of the Company not reserved to the Company's shareholders by the Bye-Laws or Bermuda law.
1) Terms of office
The Bye-Laws provide that as long as Hemen's ownership interest is equal to or exceeds 5% and its ownership percentage has not previously fallen below 5%, the initial Board of Directors shallwill consist of not more than seven Directors, unless(7) directors, each of whom will serve a 1 year term until the Company's shareholders by Ordinary Resolution (as such termfirst AGM (which is defined in the Bye-Laws) resolve otherwise and Hemen provides its prior written consent thereto. If Hemen's ownership interest falls below 5%, the number of Directors shall be such number as the Company's shareholders by Ordinary Resolution may from time to time determine. The Directors are either appointed by certainheld within 1 month of the Company's shareholders pursuant to appointment rights set out in the Bye-Laws or elected by the Company's shareholders at the annual general meeting or any special general meeting called for that purpose. The Company's shareholders may authorize the Board of Directors to fill any vacancy in their number left unfilled at an annual general meeting or any special general meeting called for that purpose. If there is a vacancyanniversary of the Board of Directors occurring as a result of the death, disability, disqualification or resignation of any Director (other than an Investor Appointed Director (as defined in the Bye-Laws)), the Board of Directors has the power to appoint a Director to fill the vacancy.Plan Effective Date) .
2) Directors' service contracts
The Directors are entitled to one months' notice of termination of their service agreements.
3) Board committees
OurOn February 23, 2022, our Board of Directors has established an Audit Committee, a Compensationand Risk Committee and a ConflictsJoint Nomination and Remuneration Committee, and may create such other committees as the Board of Directors shall determine from time to time. Each of the standing committees of our Board of Directors has the composition and responsibilities described below.
i.Audit committee
i.Audit and Risk committee
The Board of Directors has established an Audit and Risk Committee among the members of the Board of Directors. The Audit and Risk Committee comprises Birgit Aagaard-Svendsen (chair)Mark McCollum (Chair), Birgitte R. VartdalJan Kjærvik (Committee Member), Jean Cahuzac (Committee Member) and Kjell-Erik Østdahl.Karen Dyrskjot Boesen (Committee Member). The Audit and Risk Committee is responsible for overseeing the quality and integrity of the Company's Consolidated Financial Statements and its accounting, auditing and financial reporting practices; the Group'sCompany's compliance with legal and regulatory requirements; the independent auditor's qualifications, independence and performance; and the Group'sCompany's internal audit function.
ii.Compensation committee
The Board of Directors has established a Compensationfunction and internal controls. In addition, the Audit and Risk Committee among the members ofmonitors and makes recommendations to the Board of Directors. The Compensation Committee comprises Peter J. Sharpe (chair), Herman Flinder and Glen Ole Rødland. The Compensation Committee is responsible for establishing and reviewing the executive officer's and senior management's compensation and benefits.
iii.Conflicts committee
The Board of Directors has established a Conflicts Committee among the members of the Board of Directors. The Conflicts Committee comprises Kjell-Erik Østdahl (chair), Birgit Aagaard-Svendsen and Peter J. Sharpe. The primary purpose of the Conflicts Committee is to monitor and make recommendations to the board in relation to potential conflicts of interest between the Company and any of its affiliates or related third parties. The committeeAudit and Risk Committee will also evaluate any conflicts of interest between a director and the Company. The Bye-Laws provide that the Audit and Risk Committee shall have all the powers and authority of the Board with respect to all matters set forth in the Audit and Risk Committee charter.

ii.Joint Nomination and Remuneration committee

The Board of Directors has established a Joint Nomination and Remuneration Committee among the members of the Board of Directors. The Joint Nomination and Remuneration Committee comprises of Julie Johnson Robertson (Chair), Andrew Schultz (Committee Member) and Paul Smith (Committee Member). The Joint Nomination and Remuneration Committee is responsible for (i) overseeing and determining the compensation for executive remuneration, (ii) nominating candidates for the election of Directors, (iii) providing recommendations for the Board remuneration and (iv) succession planning. The Bye-Laws provide that the Joint Nomination and Remuneration Committee shall have all the powers and authority of the Board with respect to all matters set forth in the Joint Nomination and Remuneration Committee charter.
D.EMPLOYEES
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D.EMPLOYEES
The table below shows the development in the numbers of employees (including contracted-in staff) at December 31, 2019, 20182021, 2020 and 2017.2019. Please note that those shown in the "Managed rigs""Other" category below, represent employees who provide services for Sonadrill, Aquadrill (formerly Seadrill Partners,Partners), and Northern DrillingOcean as well as corporate employees.
Employees (including contracted-in staff)As at December 31,
2021		As at December 31,
2020		As at December 31,
2019
Operating segments:   
Harsh environment1,024 1,066 1,037 
Floaters1,269 1,035 1,257 
Jack-up rigs371 294 699 
Other556 780 1,243 
Total employees3,220 3,175 4,236 
Geographical location:
Norway1,092 1,154 994 
North and Central America405 623 1,071 
South America418 423 300 
Rest of Europe211 224 345 
Asia Pacific55 65 492 
Africa and Middle East1,039 686 1,034 
Total employees3,220 3,175 4,236 
Employees of SeaMex (499 total employees as of December 31, 2021), which formed part of Seadrill's consolidated group as of December 31, 2021 but was disposed shortly after the end of the reporting period, are not included in the table above. The movement in numbers between 2021 and Sonadrill.2020 occurred in Africa mainly due to up-manning and preparation for operation of the West Gemini and Quenguela in Angola.
Total employees (including contracted-in staff)As at December 31,
2019
 As at December 31,
2018
  As at December 31,
2017
Operating segments:      
Floaters1,395
 1,598
  1,484
Jack-up rigs1,016
 974
  938
Managed rigs1,497
 1,154
  796
Corporate630
 647
  629
Total employees4,538
 4,373
  3,847
Geographical location:      
Norway994
 737
  510
Rest of Europe345
 390
  235
North and Central America1,071
 978
  614
South America300
 425
  742
Asia Pacific651
 845
  462
Africa and Middle East1,177
 998
  1,284
Total employees4,538
 4,373
  3,847

We employ people in a number of locations globally. In some locations, predominantly Angola, Nigeria, Norway and Brazil,South America, employees and contract labor are represented by collective bargaining agreements.agreements ("CBAs"). As part of the legal obligations in some of these agreements, we are required to contribute certain amounts to retirement and pension funds. In addition, many of these employees are working under agreements that are subject to salary negotiation, which could result in higher personnel costs, other increased costs or increased operating restrictions that could adversely affect our financial performance. We consider our relationships with the various unions to be stable. The CBAs in place relating to Norway's employees have no set expiry and are reviewed every two years. Separate agreements are in place for the Onshore and Offshore populations. The CBA in place relating to South America's employees was successfully renegotiated in September 2021 and is due to expire in August 2022. Due to a volatile economy and rising inflation costs, market trends suggest that it may be necessary to consider a salary readjustment in the next CBA.

The table below shows the percentage of the labor force covered by a CBAs by geographic location, as at December 31, 2021:
E.SHARE OWNERSHIP

Employees (including contracted-in staff)Total employeesEmployees covered by CBAsEmployees covered by CBAs (%)CBA cover expiring within 1 yearCBA cover expiring within 1 year (%)
Geographical location:
Norway1,092 1,092 100 %1,092 100 %
South America418 418 100 %418 100 %
Other1,710 — — %— — %
Total3,220 1,510 47 %1,510 100 %




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E.SHARE OWNERSHIP

As at February 29, 2020,March 31, 2022, members of the Board of Directors and members of Management had the following shareholding in the Company. Also shown are their interests in unvested restricted stock units ("RSUs") and performance shares ("PSUs") awarded to them under the Employee Incentive Plan. The RSU awards were made in September 2018 and the PSU awards were made in April 2019.

NamePositionNumber of Common Shares, par value $0.01 each
Julie Johnson RobertsonDirector and Chair of the Board— 
Mark McCollumDirector— 
Karen Dyrskjot BoesenDirector— 
Jean CahuzacDirector— 
Jan KjaervikDirector— 
Andrew SchultzDirector— 
Paul SmithDirector— 
Simon William JohnsonManagement— 
Grant Russel CreedManagement— 
Leif Olaf NelsonManagement— 
Sandra Faye ReddingManagement— 


NamePositionNumber of $0.10 sharesNumber of unvested PSUsNumber of unvested RSUs
Birgitte Ringstad VartdalDirector1,701—47,457
Birgit Aagaard-SvendsenDirector———
Glen Ole RødlandDirector and Chairman———
Gunnar Winther EliassenDirector10,000——
Herman R. FlinderDirector———
Kjell-Erik ØstdahlDirector1,701—47,457
Peter J. SharpeDirector1,701—47,457
Anton DibowitzManagement15,846297,33960,038
Stuart JacksonManagement—120,218—
Leif NelsonManagement8,80792,67733,417
Sandra ReddingManagement———


ITEM 7.MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

ITEM 7.MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
A.MAJOR SHAREHOLDERS


A.MAJOR SHAREHOLDERS
We had a total of 100,384,435 issued common shares of the Predecessor Company, prior to our emergence from Chapter 11. The authorized share capital of the Company is $3,750,000 divided into 375,000,000 common shares of par value $0.01 each.
Total common shares issued on emergence and outstanding as of February 22, 2022 is 49,999,998. In addition, $50 million of convertible bonds, with margin of LIBOR + 6% and maturity date of August 2028, were issued to Hemen upon emergence. The convertible bonds are convertible into the Conversion Shares in an amount equal to 5% of the fully-diluted ordinary shares.
The following table presents certain information as of February 29, 2020,22, 2022, regarding the ownership of our common shares with respect to eachShareholders who own 5% or more of the Company's issued and outstanding common shares and have an interest in the Company's share capital which is notifiable to the Norwegian Securities Trading Act. As of the date of this annual report, no shareholder, whom we know to beneficially ownother than those set out in the table below holds more than 5% of ourthe issued and outstanding common shares.
 Common Shares Held
ShareholderNumber
 %
Hemen Holding Ltd27,193,826
 27.2%
King Street Capital Management LP6,657,192
 6.7%
We had a total of 100,234,973 common shares outstanding as of February 29, 2020.
 Common Shares Held
ShareholderNumber%
Export Finance Norway8,829,997 17.660
Deutsche Bank4,545,928 9.092
Export-Import Bank of Korea3,811,295 7.623
DNB Bank3,745,642 7.491
Funds managed by Cairn Capital Limited3,681,920 7.364
Korea Trade Insurance Corporation3,589,441 7.179
Nordea Bank3,291,618 6.583
J.P. Morgan Securities3,092,545 6.185
Our major shareholders have the same voting rights as our other shareholders. No corporation or foreign government owns more than 50% of our issued and outstanding common shares. We are not aware of any arrangements, the operation of which may at a subsequent date result in a change in control of Seadrill.


B.RELATED PARTY TRANSACTIONS

B.RELATED PARTY TRANSACTIONS
Please see Note 3127 - "Related Party Transactions" ofparty transactions" to the Consolidated Financial Statements included within this report.herein.


C.INTERESTS OF EXPERTS AND COUNSEL

C.INTERESTS OF EXPERTS AND COUNSEL
Not applicable.


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ITEM 8.FINANCIAL INFORMATION
ITEM 8.FINANCIAL INFORMATION
 
A.CONSOLIDATED STATEMENTS AND OTHER FINANCIAL INFORMATION

A.CONSOLIDATED STATEMENTS AND OTHER FINANCIAL INFORMATION

1) Financial Statements


Please see the section of this Annual Report on Form 20-F entitled ITEMItem 18 - “Financial Statements.”Statements”.
 
2) Legal Proceedings


Please see Note 3430 - "Commitments and Contingencies"contingencies" to the Consolidated Financial Statements included within this report.herein.
3) Dividends
The payment of any future dividends to shareholders will depend upon decisions that will be at the sole discretion of the Board of Directors and will depend on the then existing conditions, including Seadrill's operating results, financial condition, contractual restrictions, corporate law restrictions, capital requirements, the applicable laws of Bermuda and business prospects.
Pursuant to the Bye-Laws, the Board of Directors may declare cash dividends or distributions. The payment of any future dividends to shareholders will depend upon decisions that will be at the sole discretion of the Board of Directors and will depend on the then existing conditions, including the Company's operating results, financial condition, contractual restrictions, corporate law restrictions, capital requirements, the applicable laws of Bermuda and business prospects. Under Bermuda law, a company may not declare or pay a dividend, or make a distribution out of contributed surplus, if there are reasonable grounds for believing that (a) it is, or would after the payment be, unable to pay its liabilities as they become due; or (b) the realizable value of its assets would thereby be less than its liabilities.
Although the Board of Directors may consider the payment of dividends following the Effective Date, there can be no assurance that the Company will pay any dividend, will be paid, or if declared, the amount of such dividend. The terms of our senior credit facilitiesthe Reinstated Facility and the agreements governing our subsidiary NSNCo's indebtedness under the Senior Secured NotesNew Money Facility may restrict ourthe Company's ability to declare or pay dividends.
Further, as Seadrill Limitedthe Company is a holding company with no material assets other than the shares of its subsidiaries through which it conducts its operations, its ability to pay dividends will also depend on the subsidiaries distributing their respective earnings and cash flow.flow to the Company.
Seadrill Limited was incorporated on 14 March 2018October 15, 2021 and has not paid any dividends since its incorporation. Old Seadrill Limited did not pay dividends on its common shares since it suspended dividend distributions on November 26, 2014.


B.SIGNIFICANT CHANGES
B.SIGNIFICANT CHANGES
 
Not applicable.There have been no significant changes since the date of our Consolidated Financial Statements, other than as described in Note 34 - "Subsequent events" to the Consolidated Financial Statements included herein.



ITEM 9.THE OFFER AND LISTING

ITEM 9.THE OFFER AND LISTING
A.OFFER AND LISTING DETAILS


Shares of our
A.    OFFER AND LISTING DETAILS
Our common stock, par value $0.10 per share, have tradedshares are trading on the NYSE since July 3, 2018 and onEuronext Expand, operated by the OSE, since July 26, 2018 under the trading symbol “SDRL”.
The NYSE listing is intended to be our primary listing and the OSE listing is intended to be our secondary listing.
B.B.    PLAN OF DISTRIBUTION

Not applicable.

C.    MARKETS

C.MARKETS

OurTrading in our common shares currently trade on the NYSE and the OSEEuronext Expand commenced on April 28, 2022, under the trading symbol “SDRL.”"SDRL". The Company intends, as soon as reasonably practicable after it satisfies the requirements of listing on the main market of the OSE, to seek an uplisting to the main market of the OSE. In addition, subject to meeting the requirements for such a listing, the Company is in the process of applying for listing on the NYSE. In connection with the NYSE listing, if successful, the Company contemplates that it would change its listing status on Euronext Expand or the OSE, as the case may be, to a secondary listing. As at the date of this Report, the Company has not applied for admission to trading of the shares on any other stock exchange, regulated market or a multi trading facility (MTF) other than as set out herein.


D.D.    SELLING SHAREHOLDERS

Not applicable.

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E.E.    DILUTION

Not applicable.


F.F.    EXPENSES OF THE ISSUE

Not applicable.



ITEM 10.ADDITIONAL INFORMATION
ITEM 10.ADDITIONAL INFORMATION
 
A.SHARE CAPITAL
A.SHARE CAPITAL
Not applicable.


B.MEMORANDUM OF ASSOCIATION AND BYE-LAWS
B.MEMORANDUM OF ASSOCIATION AND BYE-LAWS
The Bye-Laws are referenced in the exhibits to this annual report on Form 20-F and has been incorporated by reference to Exhibit 3.2 of the amended Registration Statement, filed on Form F-1 on July 18, 2018.Statement. Below is a summary of provisions of the Bye-Laws and certain aspects of applicable Bermuda law. The Bye-Laws do not place more stringent conditions for the change of rights of holders than those required by the Bermuda Companies Act.
1) ObjectiveObjects of the Company
The objectiveCompany is an exempted company limited by shares incorporated under the laws of Bermuda, and is registered with the Bermuda Registrar of Companies with registration number 202100496. The Company was incorporated on October 15, 2021 under the name Seadrill 2021 Limited, and its name was changed to Seadrill Limited on February 22, 2022. The Company’s registered office is located at 55 Par La Ville Road, Hamilton, Bermuda HM11. The objects of the Company's business isare unrestricted, meaning thatand the Company has the capacity of a natural person, andperson. The Company can therefore carry out any trade or business which, in the Board of Directors' opinion, can be advantageously carried out by the Company. Moreover, this means that the Company's objectives are not specified in the Bye-Laws.specified. The Company can therefore undertake activities without restriction on its capacity.
On February 17, 2022, the then sole shareholder of the Company adopted the current Bye-laws of the Company with effect from February 22, 2022.
2) Board of Directors
i.Proceedings of the Board of Directors
i.Proceedings of the Board of Directors
The Bye-Laws provide that, subject to the Bermuda Companies Act, the business of the Company shall be managed and conducted by the Board of Directors. Generally, the Board of Directors may exercise the powers of the Company, except to the extent the Bermuda Companies Act or the Bye-Laws reserve such power to the shareholders. Bermuda law permits individual or corporate directors and there is no requirement in the Bye-Laws or under Bermuda law that directors hold any of the Company's shares. There is also no requirement in the Bye-Laws or under Bermuda law that the Directors must retire at a certain age.

The remuneration of the Directors is determined by the shareholders in a general meeting by ordinary resolution.(based on the non-binding recommendation of the Joint Nomination and Remuneration Committee). The Directors may also be reimbursed forpaid all reasonable and documented travel, hotel and incidental expenses properly incurred by them (or, in the case of a director that is a corporation, by their representative or representatives) in attending and returning from meetings of the Board of Directors, meetings of any committee appointed by the Board of Directors or general meetings of the shareholders, or in connection with the Company's business or in discharge of their duties as Directors.Directors generally.
No physical meeting of the Board of Directors may take place in Norway or the United Kingdom. For any meeting of the Board of Directors or any board committee held electronically, a majority of the Directors participating in the meeting (including the Chairman) must be physically located outside Norway or the United Kingdom,Kingdom. Any such meeting must be opened in and originate from Bermuda and if all the Board of Directors must use reasonable endeavors to ensureparticipating in such meeting are not in the same place, they may decide that the meeting is notbeing deemed as taking place wherever any of them is, but under no circumstances can they decide that the meeting is deemed to be heldhave taken place in Norway.Norway or the United Kingdom.
ProvidedPursuant to the Bye-Laws, a Director who discloses a direct or indirect interest in any contract or proposed contract, transaction or arrangement with the Company, as required by Bermuda law such Directoror any applicable law, rules or regulations, is pursuant to the Bye-Lawsnot entitled to vote in respect of any such contract or arrangementproposed contract in which he or she is interestedinterested. Such Director may, at the discretion of the uninterested Directors present at the meeting, attend, and shall be consideredcounted in determining the quorum for the relevant board meeting. The Director must declaremeeting at which the nature of that interest, as required by the Bermuda Companies Act, however, nocontract or proposed contract or arrangement is to be voted on. No such contract or proposed contract, transaction or arrangement will be void or voidable by reason only that such interested Director voted on it or was counted in the quorum of the relevant board meeting. Matters decidedmeeting or signed a written resolution of the Board in respect thereof to achieve unanimity, and such interested Director shall not be liable to account to the Company for any profit realized thereby.
Subject to the Bye-Laws, a resolution put to vote at a board meeting are determinedof the Board of Directors will be carried by a majority of the votes cast. No Director (including the chairman of the Board of Directors (if any)) is entitled to a second or casting vote. In the case of an equality of votes, the motion will be deemedresolution shall fail.
A Director (including the spouse or children of the Director or any company of which such Director, spouse or children own or control more than 20% of the capital or loan debt) cannot borrow from the Company, (except loans made to be lost.Directors who are bona fide employees or former employees pursuant to an employees' share scheme) unless Shareholders holding 90% of the total voting rights have consented to the loan.
ii.Election and removal of Directors
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ii.Election and removal of Directors
The Bye-Laws provide that, provided Hemen's Percentage Interest (as defined therein) is at least 5% (and has not previously fallen below 5%),as of the date of the adoption of the Bye-Laws, the Board of Directors shall not have more thanconsist of seven directors unless(7) Directors. From the shareholders by Ordinary Resolution (as defined infirst annual general meeting of the Bye-Laws) determine otherwise and Hemen provides its prior written consent. InCompany, the event that Hemen's Percentage Interest falls below 5%, theCompany's Board of Directors shall consist of such number of Directors as the Company's shareholders elect or determine at a general meeting, based on the non-binding recommendation of the Joint Nomination and Remuneration Committee.
Only persons who are proposed or nominated in accordance with the Bye-Laws are eligible for election as Directors . Subject to the advance notice requirements set out in the Bye-laws, any shareholder of the Company, the Joint Nomination and Remuneration Committee and the Board may propose or nominate any person for election as a Director.
Any nominee proposal put forth by one or more shareholders of the Company holding at least 10% of the issued and outstanding voting shares of the Company shall be such number asput before the shareholders of the Company by Ordinary Resolution may determinefor consideration and, if deemed appropriate, for election at the respective general meeting provided that (a) the discretion of the Directors, to be exercised in compliance with their fiduciary duties from time to time.time, in relation to whether or not support or recommend such nominee proposal to the shareholders of the Company at such general meeting shall not be in any way fettered, restricted or otherwise prejudiced; and (b) such nominee proposal complies with the Bye-Laws.
Where any person, other than a person proposed for re-election or election as a Director by the Joint Nomination and Remuneration Committee or the Board, is to be proposed for election as a Director, notice must be given to the Company of the intention to propose him and of his willingness to serve as a Director. Where a Director is to be elected:
a.at an annual general meeting, such notice must be given not less than 90 days nor more than 120 days before the anniversary of the last annual general meeting or, in the event the annual general meeting is called for a date that is greater than 30 days before or after such anniversary, the notice must be given not later than 10 days following the earlier of the date on which notice of the annual general meeting was posted to shareholders or the date on which public disclosure of the date of the annual general meeting was made;
a.at a special general meeting, such notice must be given not later than 10 days following the earlier of the date on which notice of the special general meeting was posted to Shareholders or the date on which public disclosure of the date of the special general meeting was made; and
b.such notice must comply with the disclosure requirements set out in the Bye-laws.
Where persons are validly proposed for re-election or election as a Director, such Directors shall be elected or re-elected by a majority of votes cast at the relevant general meeting in accordance with the Bye-Laws. At any general meeting the shareholders may authorize the Board to fill any vacancy in their number left unfilled at a general meeting.
Pursuant to the Bye-Laws, membersprovided that a quorum of Directors remains in office, the Board of Directors are appointed as follows:
a)provided that Hemen's Percentage Interest is equal to or exceeds 10% (and has not previously fallen below 10%), Hemen shall have the right from the Plan Effective Date (as defined in the Bye-Laws) to: (i) appoint two persons as Hemen Directors (as defined in the Bye-Laws), of whom one shall be the Chairman; and (ii) appoint two persons as Independent Nominees (as defined in the Bye-Laws), provided that the other Directors are given reasonable opportunity to meet and consult with Hemen and such Independent Nominees prior to their appointment to the Board of Directors;
b)provided that Hemen's Percentage Interest is equal to or exceeds 5% but is less than 10% (and has not previously fallen below 5%), Hemen shall have the right from the Plan Effective Date to: (a) appoint one person as a Hemen Director, who shall be the Chairman; and (b) appoint two persons as Independent Nominees, provided that the other Directors are given reasonable opportunity to meet and consult with Hemen and such Independent Nominees prior to their appointment to the Board of Directors;
c)Hemen and Centerbridge shall have the right from the Plan Effective Date to appoint one Joint Designee Director (as defined in the Bye-Laws). The New Commitment Parties (as defined in the Bye-Laws) shall have the right to suggest up to three candidates for the position of Joint Designee Director, which candidates will be considered by Hemen, Centerbridge and the Select Commitment Parties when determining the identity of the Joint Designee Director, provided that the New Commitment Parties will provide the names of the suggested candidates to Hemen, Centerbridge and the Select Commitment Parties, not less than 10 Business Days (as defined in the Bye-Laws) in advance of the proposed date of appointment of the Joint Designee Director in accordance with the Bye-Laws. Prior to appointing the Joint Designee Director, Hemen, Centerbridge and the Select Commitment Parties will deliver written notice of the proposed identity of the Joint Designee Director to the Ad Hoc Group (with separate notice to the outside legal counsel of the Ad Hoc Group) and Barclays not less than three Business Days in advance of the proposed date of appointment of the Joint Designee Director, and shall take into consideration any objections raised by the New Commitment Parties as to the identity of the Joint Designee Director. Notwithstanding the foregoing, each of Hemen, and Centerbridge shall not unreasonably withhold its consent to any appointment of such Joint Designee Director.
From and after such time as select shareholder groups cease to have the rightpower to appoint their respective Director(s)any person as a Director to fill a vacancy on the Board of Directors occurring as a result of the removal of a Director in accordance with the Bye-Laws, a Director being prohibited or Independent Nominee, asdisqualified from being a Director by any applicable laws, a Director becoming bankrupt, or making any arrangement or composition with his creditors, a Director becoming of unsound mind or death, or a Director resigning his office by notice to the case may be,Company. The term of office of any Director appointed by the Board to fill such Directorsa vacancy on the Board shall be subject to re-election by Ordinary Resolutionexpire at eachthe next annual general meeting.
A Director may resign by providing notice in writing to the Company of such resignation. A Director otherThe shareholders of the Company representing more than an Investor Appointed Director (as defined in50% of the Bye-Laws), may be removed by the Shareholders invotes cast at a general meeting of the Company that are entitled to vote for the election of Directors may, at any general meeting convened and held in accordance with the Bye-Laws, remove a Director, provided that the notice of any such general meeting of shareholders convened for the purpose of removing a Director contains a statement of the intention so to do and that it is given to the Director concerned. The notice must be served theon such Director not less than 14seven (7) days before the meeting. The Director shall be entitled to attend the meeting and be heard on the motion for his or her removal. An Investor Appointed Director may be removed by written notice delivered to the Company's registered office by the Investor(s) entitled to make the appointment.
The majority of all the Directors when taken together, shall not be resident inany of the following (i) citizens of the United States; (ii) residents of the United States; or (iii) residents of the United Kingdom.

iii.Duties of Directors
iii.Duties of Directors
The Bye-Laws provide that the Company's business is to be managed by the Board of Directors. Under Bermuda common law, members of the board of directors of a Bermuda company owe a fiduciary duty to the company to act in good faith in their dealings with or on behalf of the company and exercise their powers and fulfill the duties of their office honestly. This duty includes the following elements:
•a duty to act in good faith in the best interest of the company;
•a duty not to make a personal profit from opportunities that arise from the officeroffice of director;
•a duty to avoid conflicts of interest; and
•a duty to exercise powers for the purpose for which such powers were intended.
The Bermuda Companies Act imposes a duty on directors and officers of a Bermuda company to act honestly and in good faith with a view to the best interests of the company, and to exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances. In addition, the Bermuda Companies Act imposes various duties on directors and officers of a company with respect to certain matters of management and administration of the company. Directors and officers generally owe fiduciary duties to the company, and not to the company's individual shareholders.
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3) Share rights
The holders of our Common Shares have no pre-emptive, redemption, conversion or sinking fund rights. The holders of Sharesour common shares are entitled to one vote per Shareshare on all matters submitted to a vote ofto the shareholders. Unless a different majority is required by law or by the Bye-Laws, resolutions to be approved by the holders of Shares.shares require approval by a simple majority of votes cast at a meeting at which a quorum is present.
The holders of the our common shares shall, subject to the Bye-Laws, be entitled to such dividends as the Board may from time to time declare in accordance with the Bye-Laws and the Bermuda Companies Act.
In the event of the liquidation,a dissolution or winding up of the Company, whether voluntary or involuntary or for the purpose of a reorganization or otherwise or upon any distribution of capital, the holders of Shares are entitled to share equallythe surplus assets of the Company available for distribution among all Shareholders of Common Shares on a pari passu and ratably in its assets, if any, remaining after the paymentpro rata basis.
i. Variation of all the Company's debts and liabilities, subject to any liquidation preference on any issued and outstanding preference shares.Share rights
i.Variation of share rights
The Bye-Laws provide that, subject to the Bermuda Companies Act, the rights attached to any class of the shares issued, unless otherwise provided for by the terms of issue of the relevant class, may be altered or abrogated either: (i) with the consent in writing of the holders of not less than 75%at least three-fourths of the issued shares of that class;class or (ii) with the sanction of a resolution passed by a majorityat least three-fourths of 75%the issued shares of that class of the votes cast at a general meeting of the relevant class of shareholders at which a quorum consisting of at least two persons holding or representing at least one-third of the issued shares of the relevant class is present. However, if the Company or a class of shareholders only has one shareholder, one shareholder present in person or by proxy shall constitute the necessary quorum, as specified in (i) and (ii). The Bye-Laws specify that the creation or issue of Sharescommon shares ranking equally with existing Sharescommon shares of the Company will not, unless expressly provided by the terms of issue of existing Shares,common shares, vary the rights attached to existing Shares.common shares.
ii.Voting rights
ii. Voting rights
Under Bermuda law, the voting rights of Shareholdersshareholders are regulated by the Bye-laws, except in certain circumstances provided in the Bermuda Companies Act. At any general meeting, every holder of Sharesour common shares present in person and every person holding a valid proxy shall have one vote on a show of hands. On a poll, every such holder of Sharesour common shares present in person or by proxy shall have one vote for every Shareshare held. Unless a different majority is required by law or by the Bye-Laws, resolutions to be approved by the holders of Sharesour common shares require approval by a simple majority of votes cast at a meeting at which a quorum is present.
Except where a greater majority is required by the Bermuda Companies Act or the Bye-Laws, any question proposed for the consideration of the shareholders at a general meeting shall be decided by the affirmative votes of a majority of the votes cast in accordance with the provisions of the Bye-Laws and inBye-Laws. In case of an equality of votes, the chairman of such meeting shall not be entitled to a second or deciding vote and the resolution shall fail.
The Company may purchase its own shares for cancellation or acquire them as Treasury Shares in accordance with the Act on such terms as the Board shall think fit. The Board may exercise all the powers of the Company to purchase or acquire all or any part of its own shares in accordance with the Act.
4) Amendment of the memorandumMemorandum of associationAssociation and Bye-Laws
Bermuda law provides that the memorandum of association of a company may be amended in the manner provided for in the Bermuda Companies Act, i.e. by a resolution passed by its Board and resolution at a general meeting of shareholders. The Bye-laws provide thatPursuant to the Bye-lawsBye-Laws, no bye-law may be rescinded, altered or amended and no new bye-law may be made, save in accordance with the Bermuda Companies Act, and until the same has been approved by a resolution of the Board of Directors but any such amendment shall only become operative to the extent that it has been confirmedand by an Ordinary Resolution (as defined in the Bye-laws). The Bye-Laws provide that as long as Hemen's Percentage Interest (as defined in the Bye-Laws) is at least 5%, Hemen's prior written consent is required for any amendment that would modify or otherwise affect Hemen's right to appoint the Hemen Directors and/or the Independent Nominees (as terms are defined in the Bye-Laws) or the right and powersa resolution of the Hemen Directors and/orShareholders including the Independent Nominees once appointed.affirmative vote of not less than two-thirds of all votes cast at a general meeting.
Under Bermuda law, the holders of an aggregate of not less than 20% in par value of the Company's issued share capital or any class thereof have the right to apply to the Supreme Court of Bermuda for an annulment of any amendment of the memorandum of association adopted by shareholders at any general meeting, other than an amendment which alters or reduces a company's share capital as provided in the Bermuda Companies Act. Where such an application is made, the amendment becomes effective only to the extent that it is confirmed by the Supreme Court of Bermuda. An application for an annulment of an amendment of the memorandum of association must be made within 21 days after the date on which the resolution altering the Company'scompany's memorandum of association is passed and may be made on behalf of persons entitled to make the application or by one or more of their numbers as they may appoint in writing for the purpose. No application may be made by shareholders voting in favor of the amendment.

5) General Meetings of shareholdersShareholders
Under Bermuda law, a company is required to convene at least one general meeting of shareholders in each calendar year (the “annual general meeting”). However, the shareholders of a company may be resolution waive this requirement, either for a specific year or period of time, or indefinitely. When the requirement has been so waived, any shareholder may, on notice to the company, terminate the waiver, in which case an annual general meeting must be called. The annual general meeting of the Company shall be held once in every year at such time and place as the Board of Directors appoints. appoints but in no event shall any such annual general meeting be held in Norway or the United Kingdom.
Pursuant to Bermuda law and the Bye-Laws, the Board of Directors may call for a special general meeting whenever they think fit, and the Board of Directors must call for a special general meeting upon the request of shareholders holding not less than 10% of the paid-up capital of the Company carrying the right to vote at general meetings. Bermuda law also requires that shareholders of a company are given at least five (5) days' advance notice of a special general meeting, unless notice is waived. The Bye-Laws provide that the Board of Directors may convene an annual general meeting or a special general meeting. General meetings of shareholders may notmeeting whenever in their judgement such meeting is necessary, but in no event shall any such special general meeting be held in Norway or the United Kingdom.
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Under the Bye-Laws, at least seventen (10) days' notice of an annual general meeting must be given to each shareholder entitled to attend and vote thereat, stating the date, place and time at which the meeting is to be held. At least seventen (10) days' notice of a special general meeting must be given to each shareholder entitled to attend and vote thereat, stating the date, place and time and the general nature of the business to be considered at the meeting. No business shall be conducted at any annual general meeting or any a special general meeting except for the business set forth in the notice of such meeting provided to each shareholder of the Company. This notice requirement is subject to the ability to hold such meetings on shorter notice if such notice is agreed: (i) in the case of an annual general meeting, by all of the shareholders entitled to attend and vote at such meeting; orand (ii) in the case of a special general meeting, by a majority in number of the shareholders entitledhaving the right to attend and vote at the meeting, being a majority together holding not less than 95% in nominal value of the shares entitledgiving the right to attend and vote at such meeting. Pursuant to the Bye-Laws, the quorum required for a general meeting of shareholders is two or more shareholderspersons present throughout the meeting representing in person or by proxy any issued and entitled to vote (whateveroutstanding voting shares of the number of shares held by them).Company.
The accidental omission to give notice of a general meeting to, or the non-receipt of a notice of a general meeting by, any person entitled to receive notice does not invalidate the proceedings at that meeting.
PursuantThe Bermuda Companies Act provides that, unless otherwise provided in a company's bye-laws, shareholders may take any action by resolution in writing provided that notice of such resolution is circulated, along with a copy of the resolution, to the Bye-Laws, no Shareholder isall shareholders who would be entitled to attend anya meeting and vote on the resolution. Such resolution in writing must be signed by the shareholders of the company who, at the date of the notice, represent such majority of votes as would be required if the resolution had been voted on at a meeting of the shareholders. The Bermuda Companies Act provides that the following actions may not be taken by resolution in writing: (1) the removal of the company's auditors and (2) the removal of a director before the expiration of his or her term of office.
The Bye-Laws provide that anything which may be done by resolution of the Company in general meeting of shareholders unless the Shareholder has delivered to the Company's registered office written notice of its intention to attend and vote in person or by proxy at least 48 hours before the timeresolution of a meeting of any class of the meeting orshareholders may be done by written resolution in accordance with the adjournment thereof.Bye-Laws.
6) Shareholders' proposals
Under Bermuda law, shareholders may, as set forth below and at their own expense (unless the company otherwise resolves), require the company to: (i) give notice to all shareholders entitled to receive notice of the annual general meeting of any resolution that the shareholders may properly move at the next annual general meeting; and/or (ii) circulate to all shareholders entitled to receive notice of any general meeting a statement (of not more than one thousand words) in respect of any matter referred to in the proposed resolution or any business to be conducted at such general meeting. The number of shareholders necessary for such a requisition is either: (i) any number of shareholders representing not less than 5% of the total voting rights of all shareholders entitled to vote at the meeting to which the requisition relates; or (ii) not less than 100 shareholders.
7) Dividend rights
Under Bermuda law, a company may not declare or pay a dividend or make a distribution out of the contributed surplus, if there are reasonable grounds for believing that: (i) the Companycompany is, or would after the payment be, unable to pay its liabilities as they become due; or (ii) that the realizable value of its assets would thereby be less than its liabilities. Under the Bye-Laws, each common share is entitled to dividends if, as and when dividends are declared by the Board of Directors, subject to any preferred dividend right of the holders of any preference shares.
Any cash dividend payable to holders of the shares listed on the NYSE will be paid to Computershare, the Company's transfer agent in the United States for disbursement to those holders. Any cash dividends payable to holders of the Sharesour shares listed on the Euronext Expand or the OSE will be paid to Nordea,Computershare, the Company's transfer agent in Norway for disbursement to those holders.
Pursuant to the Bye-Laws, any dividends, distributions dividend and/or proceedsother moneys payable in respect of a share repurchases which remainhas remained unclaimed for threesix (6) years from the date when it became due for payment shall, if the Board of declaration of such dividend, distribution or proceeds of share repurchases willDirectors so resolve, be forfeited and revertcease to remain owing by the Company.
8) Transfer of Shares
TheSubject to the Bermuda Companies Act and to any restrictions contained in the Bye-Laws and to the provisions of any applicable United States securities law (including, without limitation, the U.S. Securities Act of 1933, as amended, and the rules promulgated thereunder), the shares of the Company are freely transferable. However, the Bye-Laws provide that the Board of Directors may decline to register, and may require any registrar appointed by the Company to decline to register, a transfer of a Shareshare of the Company or any interest therein held through the VPS if such transfer would be likely, in the opinion of the Board of Directors, to result in 50% or more of the issued share capital (or of the votes attaching all issued shares in the Company) being held or owned directly or indirectly by persons resident for tax purposes in Norway. A failure to notify the Company of such correction or change can lead to the Shareholder'sshareholder's entitlement to vote, exercise other rights attaching to the Sharesshares of the Company or interests therein being sold at the best price reasonably obtainable in all the circumstances. Furthermore, if such holding of 50% or more by individuals or legal persons resident for tax purposes in Norway or connected to a Norwegian business activity, the Bye-Laws require the Board of Directors to make an announcement through the OSE,Oslo Børs, and the Board of Directors and the registrar appointed by the Company are then entitled to dispose of Shares or interests therein to bring such holding by an individual or legal person resident for tax purposes in Norway or connected to a Norwegian business below 50%, - the Sharesshares of the Company or interests therein to be sold being firstly those held by holders who failed to comply with the above notification requirement, and thereafter those that were acquired most recently by the Shareholders.shareholders.
Notwithstanding anything else to the contrary in the Bye-Laws, shares that are listed or admitted to trading on an Appointed Stock Exchange (as such is understood under the Bermuda Companies Act) may be transferred in accordance with the rules and regulations of such exchange. All transfers of uncertificated Sharesshares shall be made in accordance with and be subject to the facilities and requirements of the transfer of title to Sharesshares in that class by means of the VPS or any other relevant system concerned and, subject thereto, in accordance with any arrangements made by the Board of Directors in its discretion in accordance with the Bye-Laws.
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The Board of Directors may in its absolute discretion refuse to register the transfer of a Shareshare that is not fully paid. The Board of Directors may also refuse to recognize an instrument of transfer of a Shareshare unless it(i) the instrument is duly stamped and lodged with the Company accompanied by the relevant Shareshare certificate to which it relates (if one has been issued) and such other evidence of the transferor's right to make the transfer as the Board of Directors shallmay reasonably require.require, (ii) the instrument of transfer is in respect of only one class of share and/or (iii) all applicable consents, authorizations and permissions of any governmental body or agency in Bermuda (including the Bermuda Monetary Authority) with respect thereto have been obtained. Pursuant to the Bye-

Laws,Bye-Laws, if the Board of Directors is of the opinion that a transfer may breach any law or requirement of any authority or any stock exchange or quotation system upon which any of the Company's common Sharesshares are listed (from time to time), then registration of the transfer shall be declined until the Board of Directors receives satisfactory evidence that no such breach would occur. Subject to these restrictions and any other restrictions in the Bye-Laws and to the Bermuda Companies Act and applicable United States laws (including, without limitation, the U.S. Securities Act and related regulations), a holder of Shares may transfer the title to all or any of his Shares by completing an instrument of transfer in the usual common form or in such other form as the Board of Directors may approve. The instrument of transfer must be signed by the transferor and, in the case of a Shareshare that is not fully paid, the transferee. The Board of Directors may also implement arrangements in relation to the evidencing of title to and the transfer of uncertified shares.
In accordance with Bermuda law, share certificates are only issued in the names of companies, partnerships or individuals. In the case of a shareholder acting in a special capacity (for example as a trustee), certificates may, at the request of the shareholder, record the capacity in which the shareholder is acting. Notwithstanding such recording of any special capacity, the Company is not bound to investigate or see to the execution of any such trust. The Company will take no notice of any trust applicable to any of the Shares, whether or not the Company has been notified of such trust.
9) Disclosure of material interest
The Bye-Laws provide that, where the requirements of the OSE require any person acquiring or disposing of an interest in the Shares to give notification of such change in interest, such person must immediately notify the registrar appointed by the Company of the acquisition or disposal and of its resulting interest, following which, the registrar appointed by the Company will notify the OSE. If a person fails to provide such notification, the Board of Directors shall require the registrar appointed by the Company to serve the person with notice, requiring compliance with the notification requirements and inform him or her that pending such compliance the registered holder of the Shares shall have suspended its entitlement to vote, exercise other rights attaching to the Shares and receive payment of income or capital.
10) Amalgamations and mergers
The amalgamation or merger of a Bermuda company with another company or corporation (other than certain affiliated companies) requires the amalgamation or merger agreement to be approved by the company's board of directors and by its shareholders. UnlessPursuant to Bermuda law, unless the bye-laws provide otherwise, the approval of 75% of the shareholders voting at such meeting is required to approve the amalgamation or merger agreement, and the quorum for such meeting must be two persons holding or representing more than one-third of the issued shares of the company. The Bye-Laws provide that any such amalgamation or merger must be approved by the affirmative vote of at least (i) a majority of the votes cast at a general meeting of the Company at which the quorum shall be two or more shareholders presentthroughout the meeting and representing in person or by proxy in excess of 25% of the total voting rights of all issued and entitled to vote (whateveroutstanding shares of the number of shares held by them).Company.
Under Bermuda law, in the event of an amalgamation or merger of a Bermuda company with another company or corporation, a shareholder of the Bermuda company who did not vote in favor of the amalgamation or merger and who is not satisfied that fair value has been offered for such shareholder's shares may, within one month of notice of the relevant general meeting of shareholders, apply to the Supreme Court of Bermuda to appraise the fair value of those shares.
11) Shareholder suits
Class actions and derivative actions are generally not available to shareholders under Bermuda law. The Bermuda courts, however, would ordinarily be expected to permit a shareholder to commence an action in the name of a company to remedy a wrong to the company where the act complained of is alleged to be beyond the corporate power of the company or is illegal, or would result in the violation of the company's memorandum of association or Bye-Laws. Furthermore, consideration would be given by a Bermuda court to acts that are alleged to constitute a fraud against the minority shareholders or, for instance, where an act requires the approval of a greater percentage of the company's shareholders than that which actually approved it.
When the affairs of a company are being conducted in a manner which is oppressive or prejudicial to the interests of some part of the shareholders, one or more shareholders may apply to the Supreme Court of Bermuda, which may make such order as it sees fit, including an order regulating the conduct of the company's affairs in the future or ordering the purchase of the shares of any shareholders by other shareholders or by the company.
The Bye-Laws contain a provision by virtue of which the Shareholders waive any claim or right of action that they might have, bothwhether individually and onor by or in the Company's behalf,right of the Company, against any directorDirector or officer of the Company in relation to any action or failure to take action by such director or officer in the performance of his duties with or for the Company or any subsidiary thereof, except in respect of any fraud or dishonesty in relation to the Company which may attach to such Director or officer of such director or officer.the Company.
12) Capitalization of profits and reserves
Pursuant to the Bye-Laws, the Board of Directors may (i) capitalize any amount for the time being standing to the credit of the Company's share premium or other reserve accounts or any amount credited to the Company's profit and loss account or otherwise available for distribution by applying such sum in paying up unissued shares to be allotted as fully paid bonus shares pro-rata (except in connection with the conversion of shares of one class to shares of another class) to the shareholders; or (ii) capitalize any amount for the time being standing to the credit of a reserve account or amounts otherwise available for dividend or distribution by applying such amounts in full, partly paid or nil paid shares of those shareholders who would have been entitled to such sums if they were distributed by way of dividend or distribution.

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13) Access to books and records and dissemination of information
Members of the general public have the right to inspect the public documents of a company available at the office of the Bermuda Registrar of Companies. These documents include the Company's memorandum of association (including its objects and powers) and certain alterations to the Company's memorandum of association. The members of the Company have the additional right to inspect the Bye-Laws, minutes of general meetings and the Company's audited financial statements (unless such requirement is waived in accordance with the Bye-Laws and the Bermuda Companies Act), which must be presented to the annual general meeting. The register of members of the Company is also open to inspection by Shareholders and by members of the general public without charge. Except when the register of members is closed under the provisions of the Bermuda Companies Act, the register of members of a company shall during business hours (subject to such reasonable restrictions as the company may impose so that not less than two hours in each day be allowed for inspection) be open for inspection by members of the general public without charge. A company may on giving notice by advertisement in an appointed newspaper close the register of members for any time or times not exceeding in the whole thirty days in a year.
Subject to the provisions of the Bermuda Companies Act, a company is required to maintain its register of members in Bermuda. A company with its shares listed on an Appointed Stock Exchange or which has had its shares offered to the public pursuant to a prospectus filed in accordance with the Bermuda Companies Act, or which is subject to the rules or regulations of a competent regulatory authority, may keep in any place outside Bermuda, one or more branch registers after giving written notice to the Bermuda Registrar of Companies of the place where each such register is to be kept. Any branch register of members established by the aforementioned is subject to the same rights of inspection as the register of members of the company in Bermuda. Any member of the public may require a copy of the register of members or any part thereof which must be provided within 14 days of a request on payment of the appropriate fee prescribed in the Bermuda Companies Act.
A company is required to keep a register of directors and officers at its registered office and such register must during business hours (subject to such reasonable restrictions as the company may impose, so that not less than two hours in each day be allowed for inspection) be open for inspection by members of the public without charge. Any member of the public may require a copy of the register of directors and officers, or any part of it, on payment of the appropriate fee prescribed in the Bermuda Companies Act. A company is also required to file with the Bermuda Registrar of Companies a list of its directors to be maintained on a register, which register will be available for public inspection subject to such conditions as the Bermuda Registrar of Companies may impose and on payment of such fee as may be prescribed.
Where a company, the shares of which are listed on an Appointed Stock Exchange, sends its summarized financial statements to its members pursuant to section 87A of the Bermuda Companies Act, a copy of the full financial statements (as well as the summarized financial statements) must be made available for inspection by the public at the company's registered office. Bermuda law does not, however, provide a general right for shareholders to inspect or obtain copies of any other corporate records.
Under the Bye-Laws, all shareholders who hold at least 5% of the issued and outstanding voting shares of the Company shall be entitled to receive, upon written request to the Company and, to the extent not already filed by the Company with the Securities Exchange Commission or already made available pursuant to any applicable laws or rules of any relevant exchange: (i) audited consolidated annual financial statements, (ii) unaudited consolidated quarterly financial statements, (iii) unaudited semi-annual Company briefing, (iv) such information and/or documents which are provided to the lenders under the Company’s senior credit facility from time to time (which as of the date hereof is the New First Lien Facility), subject to the relevant shareholders entering into customary confidentiality arrangements and any requirements of any applicable law, and (v) any further information and/or documents which is reasonably required by such Members for regulatory and compliance purposes, subject to customary exemptions which shall include confidentiality, data protection restrictions and any requirements of any applicable laws.
In addition, under the Bye-Laws, requireall shareholders who (i) 7% or more of the issued and outstanding voting shares of the Company as at the Plan Effective Date; or (ii) 10% or more of the issued and outstanding voting shares of the Company at any time after the Plan Effective Date shall be entitled to receive upon written request to the Company a summary of all material information provided to the Board, on the terms set out in the Bye-Laws, provided that the Company provideis satisfied that each of the Investors (as definedsuch shareholder (1) is subject to appropriate confidentiality arrangements; (2) is restricted from dealing in the Bye-Laws) certain financial reportsCompany’s equity securities in accordance with “insider dealing” laws and other information, unless such Investor notifiesregulations pursuant to applicable laws; (3) will not have any “cleansing rights” to require the Company otherwise,to publicly disclose relevant information; and provide certain investors with certain additional inspection rights and access(4) may receive the information pursuant to Management.applicable laws.
14) Winding-up
A company may be wound up by the Bermuda court on application presented by the company itself, its creditors (including contingent or prospective creditors) or its contributories. The Bermuda court has authority to order winding up in a number of specified circumstances including where it is, in the opinion of the Bermuda court, just and equitable to do so.
A company may be wound up voluntarily when the members so resolve in general meeting, or, in the case of a limited duration company, when the period fixed for the duration of the company by its memorandum expires, or the event occurs on the occurrence of which the memorandum provides that the company is to be dissolved. In the case of a voluntary winding up, the company shall, from the commencement of the winding up, cease to carry on its business, except so far as may be required for the beneficial winding up thereof.
Where, on a voluntary winding up, a majority of directors make a statutory declaration of solvency, the winding up will be deemed a "members' voluntary winding up". In any case where such declaration has not been made, the winding up will be deemed a "creditors' voluntary winding up".
In the case of a members' voluntary winding up of a company, the company in general meeting must appoint one or more liquidators within the period prescribed by the Bermuda Companies Act for the purpose of winding up the affairs of the company and distributing its assets. If the liquidator is at any time of the opinion that the company will not be able to pay its debts in full in the period stated in the directors' declaration of solvency, he is obliged to summon a meeting of creditors and lay before the meeting a statement of the assets and liabilities of the company.
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As soon as the affairs of the company are fully wound up via a members' voluntary winding up, the liquidator must make up an account of the winding up, showing how the winding up has been conducted and the property of the company has been disposed of, and thereupon call a general meeting of the company for the purposes of laying before it the account, and giving any explanation thereof. This final general meeting shall be called by advertisement in an appointed newspaper, published at least one month before the meeting. Within one week after the meeting the liquidator shall notify the Bermuda Registrar of Companies that the company has been dissolved and the Registrar shall record that fact in accordance with the Bermuda Companies Act.
In the case of a creditors' voluntary winding up of a company, the company must call a meeting of the creditors of the company to be summoned for the day, or the next day following the day, on which the meeting of the members at which the resolution for voluntary winding up is to be proposed is held. Notice of such meeting of creditors must be sent at the same time as notice is sent to members. In addition, the company must cause a notice to appear in an appointed newspaper on at least two occasions.

The creditors and the members at their respective meetings may nominate a person to be liquidator for the purposes of winding up the affairs of the company and distributing the assets of the company, provided that if the creditors and the members nominate different persons, the person nominated by the creditors shall be the liquidator. If no person is nominated by the creditors, the person (if any) nominated by the members shall be liquidator. The creditors at the creditors' meeting may also appoint a committee of inspection consisting of not more than five persons.
If a creditors' voluntary winding up continues for more than one year, the liquidator is required to summon a general meeting of the company and a meeting of the creditors at the end of each year and must lay before such meetings an account of his acts and dealings and of the conduct of the winding up during the preceding year.
As soon as the affairs of the company are fully wound up via a creditors' voluntary winding up, the liquidator must make up an account of the winding up, showing how the winding up has been conducted and the property of the company has been disposed of, and thereupon call a general meeting of the company and a meeting of the creditors for the purposes of laying the account before the meetings, and giving any explanation thereof. Each such meeting shall be called by advertisement in an appointed newspaper, published at least one month before the meeting. Within one week after the date of the meetings, or if the meetings are not held on the same date, after the date of the later meeting, the liquidator is required to send to the Bermuda Registrar of Companies a copy of the account and make a return to him in accordance with the Bermuda Companies Act. The company will be deemed to be dissolved on the expiration of three months from the registration by the Bermuda Registrar of Companies of the account and the return. However, a Bermuda court may, on the application of the liquidator or of some other person who appears to the court to be interested, make an order deferring the date at which the dissolution of the company is to take effect for such time as the court thinks fit.
15) Indemnification of Directors and officers
Section 98 of the Bermuda Companies Act provides generally that a Bermuda company may indemnify its directors, officers and auditors against any liability which by virtue of any rule of law would otherwise be imposed on them in respect of any negligence, default, breach of duty or breach of trust, except in cases where such liability arises from fraud or dishonesty of which such director, officer or auditor may be guilty in relation to the company. Section 98 further provides that a Bermuda company may indemnify its directors, officers and auditors against any liability incurred by them in defending any proceedings, whether civil or criminal, in which judgment is awarded in their favor or in which they are acquitted or granted relief by the Supreme Court of Bermuda pursuant to section 281 of the Bermuda Companies Act.
The Company has adopted provisions in the Bye-Laws that provide that the Company shall indemnify its officers (which includes any person appointed to any committee by the Board of Directors) and directors of their actions and omissions to the fullest extent permitted by Bermuda law. The Bye-Laws provide that the Shareholders shall waive all claims or rights of action that they might have, individually or in right of the Company, against any of the Company's directors or officers for any act or failure to act in the performance of such director's or officer's duties, except in respect of any fraud or dishonesty of such director or officer. Section 98A of the Bermuda Companies Act permits the Company to purchase and maintain insurance for the benefit of any officer or director in respect of any loss or liability attaching to him in respect of any negligence, default, breach of duty or breach of trust, whether or not the Company may otherwise indemnify such officer or director. We have purchased and maintain a directors’ and officers’ liability policy for such a purpose.
16) Certain provisions of Bermuda law
i.Exchange Control
The Company has been designated by the Bermuda Monetary Authority as a non-resident for Bermuda exchange control purposes. This designation allows the Company to engage in transactions in currencies other than the Bermuda dollar, and there are no restrictions on its ability to transfer funds (other than funds denominated in Bermuda dollars) in and out of Bermuda or to pay dividends to United States residents who are holders of its common shares. The Bermuda Monetary Authority has given its consent for the issue and free transferability of all its common shares from and/or to non-residents and residents of Bermuda for exchange control purposes, provided its shares remain listed on an Appointed Stock Exchange, which includes the OSE and the New York Stock Exchange. Approvals or permissions given by the Bermuda Monetary Authority do not constitute a guarantee by the Bermuda Monetary Authority as to the Company's performance or creditworthiness. Accordingly, in giving such consent or permissions, the Bermuda Monetary Authority shall not be liable for the financial soundness, performance or default of the Company's business or for the correctness of any opinions or statements expressed in this report. Certain issues and transfers of common shares involving persons deemed resident in Bermuda for exchange control purposes require the specific consent of the Bermuda Monetary Authority.
ii.     Compulsory acquisition of shares held by minority Shareholders
An acquiring party is generally able to acquire compulsorily the common shares of a minority shareholder of a Bermuda company in the following ways:
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a.By procedure under the Bermuda Companies Act known as a "scheme of arrangement". A scheme of arrangement could be affectedeffected by obtaining the agreement of the company and of holders of common shares, representing in the aggregate a majority in number and at least 75% in value of the common shareholders present and voting at a court ordered meeting held to consider the scheme of arrangement. The scheme of arrangement must then be sanctioned by the Bermuda Supreme Court. If a scheme of arrangement receives all necessary agreements and sanctions, upon the filing of the court order with the Bermuda Registrar of Companies, all holders of common shares could be compelled to sell their common shares under the terms of the scheme of arrangement.
b. If the acquiring party is a company it may compulsorycompulsorily acquire all the shares of the target company, by acquiring pursuant to a tender offer 90% of the shares or class of shares not already owned by, or by a nominee for, the acquiring party (the offeror), or any of its subsidiaries. If an offeror has, within four months after the making of an offer for all the shares or class of shares not owned by, or by a nominee for, the offeror, or any of its subsidiaries, obtained the approval of the holders of 90% or more of all the shares to which the offer relates, the offeror may, at any time within two months beginning with the date on which the approval was obtained, required by notice any non-tendering shareholder to transfer its shares on the same terms as the original offer. In those circumstances, non-tendering shareholders will be compelled to sell their shares unless the Supreme Court of Bermuda (on application made within a one-month period from the date of the offeror's notice of its intention to acquire such shares) orders otherwise.
c. Where the acquiring party or parties hold not less than 95% of the shares or class of shares of the company, such holder(s) may, pursuant to a notice given to the remaining shareholders or class of shareholders, acquire the shares of such remaining shareholders or class of shareholders. When this notice is given, the acquiring party is entitled and bound to acquire the shares of the remaining shareholders on the terms set out in the notice, unless a remaining shareholder, within one month of receiving such notice, applies to the Supreme Court of Bermuda for an appraisal of the value of their shares. This provision only applies where the acquiring party offers the same terms to all holders of shares whose shares are being acquired.

iii. Economic Substance
17) Certain provisionsPursuant to the Economic Substance Act 2018 (as amended) of Bermuda law
The Company has been designated by the(the "ES Act") that came into force on 1 January 2019, a registered entity other than an entity which is resident for tax purposes in certain jurisdictions outside Bermuda Monetary Authoritythat carries on as a non-resident forbusiness any one or more of the "relevant activities" referred to in the ES Act must comply with economic substance requirements. The ES Act may require in-scope Bermuda exchange control purposes. This designation allows the Companyentities which are engaged in such "relevant activities" to engage in transactions in currencies other than the Bermuda dollar,be directed and there are no restrictions on its ability to transfer funds (other than funds denominatedmanaged in Bermuda, dollars)have an adequate level of qualified employees in Bermuda, incur an adequate level of annual expenditure in Bermuda, maintain physical offices and out ofpremises in Bermuda or to pay dividends to United States residents who are holdersperform core income-generating activities in Bermuda. The list of its common shares."relevant activities" includes carrying on any one or more of: banking, insurance, fund management, financing, leasing, headquarters, shipping, distribution and service center, intellectual property and holding entities. The Bermuda Monetary Authority has given its consent forES Act could affect the issue and free transferability of all its common shares from and/or to non-residents and residents of Bermuda for exchange control purposes, provided its shares remain listed on an Appointed Stock Exchange, which includes the NYSE and the OSE. Approvals or permissions given by the Bermuda Monetary Authority do not constitute a guarantee by the Bermuda Monetary Authority as to the Company's performance or creditworthiness. Accordingly, in giving such consent or permissions, the Bermuda Monetary Authority shall not be liable for the financial soundness, performance or default of the Company's business or for the correctness of any opinions or statements expressed in this report. Certain issues and transfers of common shares involving persons deemed resident in Bermuda for exchange control purposes require the specific consent of the Bermuda Monetary Authority.
In accordance with Bermuda law, share certificates are only issued in the names of companies, partnerships or individuals. In the case of a shareholder acting in a special capacity (for example as a trustee), certificates may, at the request of the shareholder and if the Board of Directors so determines, record the capacitymanner in which the shareholder is acting. Notwithstanding such recordingCompany operates its business, which could adversely affect the Company’s business, financial condition and results of any special capacity, the Company is not bound to investigate or see to the execution of any such trust. Except as ordered by a court of competent jurisdiction or as required by law or the Bye-Laws, the Company will take no notice of any trust applicable to any of its common shares, whether or not it has been notified of such trust.operations.


C.MATERIAL CONTRACTS

C.MATERIAL CONTRACTS
Attached as exhibits to this annual report are the contracts we consider to be both material and not in the ordinary course of business. Other than these contracts, we have no material contracts other than those entered in the ordinary course of business.


D.EXCHANGE CONTROLS
TheD.EXCHANGE CONTROLS
We have been designated by the Bermuda Monetary Authority or the BMA, must give permission for all issuances and transfers of securities of a Bermuda exempted company like ours, unless the proposed transaction is exempted by the BMA’s written general permissions. We have received general permission from the BMA to issue any unissued common shares and for the free transferability of our common shares as long as our common shares are listed on an “appointed stock exchange.” Our common shares are listed on the OSE and the NYSE, each of which is an “appointed stock exchange.” Our common shares may therefore be freely transferred among persons who are residents and non-residents of Bermuda.
Although we are incorporated in Bermuda, we are classified as a non-resident offor Bermuda for exchange control purposes bypurposes. This designation allows us to engage in transactions in currencies other than the BMA. Other than transferring Bermuda Dollars out of Bermuda,dollar, and there are no restrictions on our ability to transfer funds into(other than funds denominated in Bermuda dollars) in and out of Bermuda or to pay dividends to U.S. residents who are holders of Commonour common shares.
The Bermuda Monetary Authority has given its consent for the issue and free transferability of the Shares or otherto and between residents and non-residents of Bermuda whofor exchange control purposes provided that the Shares are holderslisted on Euronext Expand, the OSE and/or the NYSE. Approvals or permissions given by the Bermuda Monetary Authority do not constitute a guarantee by the Bermuda Monetary Authority as to the Company's performance or its creditworthiness. Accordingly, in giving such consent or permissions, the Bermuda Monetary Authority shall not be liable for the financial soundness, performance or default of the Company's business or for the correctness of any opinions or statements expressed in this Prospectus. Certain issues and transfers of Shares involving persons deemed resident in Bermuda for exchange control purposes require the specific consent of the Bermuda Monetary Authority.
At the present time, there is no Bermuda income or profits tax, withholding tax, capital gains tax, capital transfer tax, estate duty or inheritance tax payable by us or by our shareholders in respect of our common sharesshares. We have obtained an assurance from the Minister of Finance of Bermuda under the Exempted Undertakings Tax Protection Act 1966 that, in currency other thanthe event that any legislation is enacted in Bermuda Dollars.
We will take no noticeimposing any tax computed on profits or income, or computed on any capital asset, gain or appreciation or any tax in the nature of any trustestate duty or inheritance tax, such tax shall not, until March 31, 2035, be applicable to us or to any of our operations or to our shares, debentures or other securities whether or not we had notice ofobligations except insofar as such trust.
As an “exempted company,” we are exempt from Bermuda laws which restrict the percentage of share capital that may be held by non-Bermudians, but as an exempted company, we may not participate in certain business transactions including: (i) the acquisition or holding of landtax applies to persons ordinarily resident in Bermuda (except that required for its business and held by way of lease or tenancy for terms of not more than 21 years) without the express authorization of the Bermuda legislature; (ii) the taking of mortgages on land in Bermuda to secure an amount in excess of $50,000 without the consent of the Minister of Economic Development of Bermuda; (iii) the acquisition of any bonds or debentures secured on any land in Bermuda except bonds or debentures issued by the Government of Bermuda or by a public authority in Bermuda; or (iv) the carrying on of business of any kind in Bermuda, except in so far as may be necessary for the carrying on of its business outside Bermuda or under a license granted by the Minister of Economic Development of Bermuda.
 The Bermuda government actively encourages foreign investment in “exempted” entities like us that are based in Bermuda but do not operate in competition with local business. In addition to having no restrictions on the degree of foreign ownership, we are subject neither to taxes on our income or dividends nor to any exchange controls in Bermuda. In addition, there is no capital gains tax in Bermuda, and profits can be accumulatedpayable by us as required, without limitation. There is no income tax treaty between the United States and Bermuda pertaining to the taxationin respect of income other than applicable to insurance enterprises.real property owned or leased by us in Bermuda.



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E.TAXATION
The following is a discussion of the material Bermuda, United States federal income and other tax considerations with respect to us and holders of common stock.shares. This discussion does not purport to deal with the tax consequences of owning common stockshares to all categories of investors, some of which, such as dealers in securities, investors whose functional currency is not the United States DollarU.S. dollar and investors that own, actually or under applicable constructive ownership rules, 10% or more of our common stock,shares, may be subject to special rules. This discussion deals only with holders who hold the common stockshares as a capital asset, generally for investment purposes. Shareholders are encouraged to consult their own tax advisors concerning the overall tax consequences arising in their own particular situation under United States federal, state, local or foreign law of the ownership of common stock.shares.
If an entity or arrangement treated as a partnership for U.S. federal income tax purposes holds common stock,shares, the U.S. federal income tax treatment of a partner will generally depend upon the status of the partner and upon the activities of the partnership. Partners of partnerships holding the common stockshares are encouraged to consult their own tax advisers.
Bermuda and Other Non-U.S. Tax Considerations
As at the date of this annual report, whilst Seadrill is resident in Bermuda, we are not subject to taxation under the laws of Bermuda. Distributions we receive from our subsidiaries also are not subject to any Bermuda tax. As at the date of this annual report, there is no Bermuda income, corporation or profits tax, withholding tax, capital gains tax, capital transfer tax, or estate duty or inheritance tax payable by non-residents of Bermuda in respect of capital gains realized on a disposition of our common stockshares or in respect of distributions they receive from us with respect to our common stock.shares. This discussion does not, however, apply to the taxation of persons ordinarily resident in Bermuda. Bermuda shareholders should consult their own tax advisors regarding possible Bermuda taxes with respect to dispositions of, and distributions on, our common stock.shares.
We have received from the Minister of Finance under The Exempted Undertaking Tax Protection Act 1966, as amended, an assurance that, in the event that Bermuda enacts legislation imposing tax computed on profits, income, any capital asset, gain or appreciation, or any tax in the nature of estate duty or inheritance, the imposition of any such tax shall not be applicable to us or to any of our operations or shares, debentures or other obligations, until March 31, 2035. This assurance is subject to the provisoprovision that it is not to be construed to prevent the application of any tax or duty to such persons as are ordinarily resident in Bermuda or to prevent the application of any tax payable in accordance with the provisions of the Land Tax Act 1967. The assurance does not exempt us from paying import duty on goods imported into Bermuda. In addition, all entities employing individuals in Bermuda are required to pay a payroll tax and there are other sundry taxes payable, directly or indirectly, to the Bermuda government. We and our subsidiaries incorporated in Bermuda pay annual government fees to the Bermuda government.
Bermuda currently has no tax treaties in place with other countries in relation to double-taxation or for the withholding of tax for foreign tax authorities.
Dividends distributed by Seadrill Limited out of Bermuda
Currently, there is no withholding tax payable in Bermuda on dividends distributed from Seadrill Limited to its shareholders.
Taxation of rig owning entities
A number of our drilling rigs are owned in tax-free jurisdictions such as Bermuda or Liberia. There is no taxation of the rig owners’ income in these jurisdictions. The remaining drilling rigs are owned in jurisdictions with income or tonnage taxation of the rig owners’ income, being Hungary, Norway and Singapore. There may also be income tax in certain other jurisdictions where rigs are owned by, or allocated to, local branches.
Please also see the section below entitled “Taxation in country of drilling operations.”
Taxation in country of drilling operations
Income derived from drilling operations is generally taxed in the country where these operations take place. The taxation of income derived from drilling operations could be based on net income, deemed income, withholding taxes and/or other bases, depending upon the applicable tax legislation in each country of operation. Some countries levy withholding taxes on bareboat charter payments (internal rig rent), branch profits, crew, dividends, interest and management fees.
Drilling operations can be carried out by locally incorporated companies, foreign branches of operating companies or foreign branches of the rig owning entities. We elect the appropriate structure with due regard to the applicable legislation of each country where the drilling operations occur.
Taxation may also extend to the rig owning entity in some of the countries where the drilling operations are performed. Some countries have introduced new laws and rules since the commencement of certain drilling contracts, which may affect, or have affected, the position of the group, potentially leading to additional tax on rig owners. The group considers the applicability of these to individual companies and contracts based on the relevant facts and circumstances.
In March 2020, the U.S. enacted the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), which grants taxpayers a five-year carryback period for net operating losses arising in tax years beginning after December 31, 2017 and before January 1, 2021. See Note 12 – "Taxation" to the Consolidated Financial Statements included herein for further details of the impact for 2020.
Net income
Net income corresponds to gross income derived from the drilling operations less tax-deductible costs (i.e. operating costs, crew, insurance, management fees and capital costs (internal bareboat fee; tax depreciation; interest costs) incurred in relation to those operations). In addition to net income tax, withholding tax on branch profits, dividends, internal bareboat fees, among other items, may also be levied.

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Net income taxation for an international drilling contractor is complex, and pricing of internal transactions (e.g., rig sales; bareboat fees; services) will allocate overall taxable income between the relevant countries. We apply Organization for Economic Cooperation and Development, or OECD, Transfer Pricing Guidelines as a basis to arrive at pricing for internal transactions. OECD Transfer Pricing Guidelines describe various methods to price internal services on terms believed by us to be no less favorable than are available from unaffiliated third parties. However, some tax authorities could disagree with our transfer pricing methods and disputes may arise regarding the correct pricing.
Deemed income tax
Deemed income tax is normally calculated based on gross turnover, which can include or exclude reimbursables and often reflects an assumed profit ratio, multiplied by the applicable corporate tax rate. Some countries will also levy withholding taxes on the distribution of dividend and/or branch profits at the deemed tax rate.
Withholding and other taxes
Some countries base their taxation solely on withholding tax on gross turnover. In addition, some countries levy stamp duties, training taxes or similar taxes on the gross turnover.
Customs duties
Customs duties are generally payable on the importation of drilling rigs, equipment and spare parts into the country of operation, although several countries provide exemption from such duties for the temporary importation of drilling rigs. Such exemption may also apply to the temporary importation of equipment.
Taxation of other income
Other income related to crewing, management fees and technical services will generally be taxed in the country where the service provider is resident, although withholding tax and/or income tax may also be imposed in the country where the drilling operations take place.
Dividends and other investment income will be taxable in accordance with the legislation of the country where the company holding the investment is resident. For companies resident in Bermuda, there is currently no tax on these types of income.
Some countries levy withholding taxes on outbound dividends and interest payments.
Capital gains taxation
In respect of drilling rigs located in Bermuda, Liberia, Singapore and Hungary, no capital gains tax is payable in these countries upon the sale or disposition of a rig. However, some countries may impose a capital gains tax or a claw-back of tax depreciation (on a full or partial basis) upon the sale of a rig during or attributable to such time as the rig is operating within such country, or within a certain time after completion of such drilling operations, or when the rig is exported after completion of such drilling operations.
Other taxes
Our operations may be subject to sales taxes, value added taxes, or other similar taxes in various countries.
Taxation of shareholders
Taxation of shareholders will depend upon the jurisdiction where the shareholder is a tax resident. Shareholders should seek advice from their tax adviser to determine the taxation to which they may be subject based on the shareholder’s circumstances.
United States Federal Income Tax Considerations
The following are the material United States federal income tax consequences to us of our activities and to U.S. Holders and Non-U.S. Holders, each as defined below, of the ownership of our common stock.shares. This discussion does not purport to deal with the tax consequences of owning common stockshares to all categories of investors, some of which, such as dealers in securities, banks, financial institutions, tax-exempt entities, insurance companies, pension funds, US expatriates, real estate investment trusts, regulated investment companies, investors holding common stockshares as part of a straddle, hedging or conversion transaction, investors subject to the alternative minimum tax, investors who acquired their common stockshares pursuant to the exercise of employee stock options or otherwise as compensation, investors whose functional currency is not the United States DollarU.S. dollar and investors that own, actually or under applicable constructive ownership rules, 10% or more of our common stock,shares, may be subject to special rules. The following discussion of United States federal income tax matters is based on the United States Internal Revenue Code of 1986, as amended, or the Code, judicial decisions, administrative pronouncements, and existing and proposed regulations issued by the United States Department of the Treasury, or the Treasury Regulations, all of which are subject to change, possibly with retroactive effect. The discussion below is based, in part, on the description of our business in this annual report and assumes that we conduct our business as described.

United States Federal Income Taxation of U.S. Holders
As used herein, the term “U.S. Holder” means a beneficial owner of common stockshares that is (1) a U.S. citizen or resident for U.S. federal income tax purposes, (2) U.S. corporation or other U.S. entity taxable as a corporation, (3) an estate the income of which is subject to U.S. federal income taxation regardless of its source or (4) a trust if a court within the United States is able to exercise primary jurisdiction over the administration of the trust and one or more U.S. persons have the authority to control all substantial decisions of the trust.
If an entity or arrangement treated as a partnership holds our common stock,shares, the tax treatment of a partner will generally depend upon the status of the partner and upon the activities of the partnership. If you are a partner in a partnership holding our common stock,shares, you are encouraged to consult your tax adviser.

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Distributions
Subject to the discussion of PFICs below, any distributions made by us with respect to our common stockshares to a U.S. Holder will generally constitute dividends, which may be taxable as ordinary income or “qualified dividend income” as described in more detail below, to the extent of our current or accumulated earnings and profits, as determined under United States federal income tax principles. Distributions in excess of our earnings and profits will be treated first as a non-taxable return of capital to the extent of the U.S. Holder’s tax basis in his common stockshares on a dollar-for-dollar basis and thereafter as capital gain. Because we are not a United States corporation, U.S. Holders that are corporations will not be entitled to claim a dividend received deduction with respect to any distributions they receive from us. Dividends paid with respect to our common stockShares will generally be treated as “passive category income” or, in the case of certain types of U.S. Holders, “general category income” for purposes of computing allowable foreign tax credits for United States foreign tax credit purposes.
Dividends paid on our common stockshares to a U.S. Holder who is an individual, trust or estate, or a “U.S. Individual Holder” will generally be treated as “qualified dividend income” that is taxable to such U.S. Individual Holders at preferential tax rates provided that (1)1) the common stock isshares are readily tradable on an established securities market in the United States or on a foreign securities exchange that is regulated or supervised by a governmental authority of the country in which the market is located (such as the NYSE,OSE, on which our common stock isshares are also traded); (2)2) we are not a PFIC for the taxable year duringin which the dividend is paid or the immediately preceding taxable year (which, as discussed below, we are not and do not anticipate being in the future); (3)3) the U.S. Individual Holder has owned the common stockshares for more than 60 days in the 121-day period beginning 60 days before the date on which the common stock becomesshares become ex-dividend; and (4)4) the U.S. Individual Holder is not under an obligation to make related payments with respect to positions in substantially similar or related property. There is no assurance that any dividends paid on our common stockshares will be eligible for these preferential rates in the hands of a U.S. Individual Holder. Any dividends paid by us which are not eligible for these preferential rates will be taxed as ordinary income to a U.S. Individual Holder.
Special rules may apply to any “extraordinary dividend,” generally, a dividend paid by us in an amount which is equal to or in excess of 10% of a shareholder’s adjusted tax basis (or fair market value in certain circumstances) in a share of common stock.shares. If we pay an “extraordinary dividend” on our common stockshares that is treated as “qualified dividend income,” then any loss derived by a U.S. Individual Holder from the sale or exchange of such common stockshares will be treated as long-term capital loss to the extent of such dividend.
Sale, Exchange or other Taxable Disposition of Common StockShares
Assuming we do not constitute a PFIC for any taxable year, a U.S. Holder generally will recognize taxable gain or loss upon a sale, exchange or other taxable disposition of our common stockshares in an amount equal to the difference between the amount realized by the U.S. Holder from such sale, exchange or other taxable disposition and the U.S. Holder’s tax basis in such stock. Such gain or loss will be treated as long-term capital gain or loss if the U.S. Holder’s holding period is greater than one year at the time of the sale, exchange or other disposition. Such capital gain or loss will generally be treated as United States source income or loss, as applicable, for United States foreign tax credit purposes. A U.S. Holder’s ability to deduct capital losses is subject to certain limitations.
3.8% Tax on Net Investment Income
Certain U.S. Holders, including individuals, estates, or, in certain cases, trusts, will generally be subject to a 3.8% tax on the lesser of (1) the U.S. Holder’s net investment income for the taxable year and (2) the excess of the U.S. Holder’s modified adjusted gross income for the taxable year over a certain threshold (which in the case of individuals is between $125,000 and $250,000). A U.S. Holder’s net investment income will generally include distributions made by us which constitute a dividend for U.S. federal income tax purposes and gain realized from the sale, exchange or other taxable disposition of our common stock.shares. This tax is in addition to any income taxes due on such investment income.
If you are a U.S. Holder that is an individual, estate or trust, you are encouraged to consult your tax advisors regarding the applicability of the 3.8% tax on net investment income to the ownership and disposition of our common stock.shares.
Passive Foreign Investment Company Status and Significant Tax Consequences
Special United States federal income tax rules apply to a U.S. Holder that holds stock in a foreign corporation classified as a PFIC for United States federal income tax purposes. In general, a foreign corporation will be treated as a PFIC with respect to a United States shareholder, if, for any taxable year in which such shareholder holds stock in such foreign corporation, either:
•at least 75% of the corporation’s gross income for such taxable year consists of passive income (e.g. dividends, interest, capital gains and rents derived other than in the active conduct of a rental business); or
•at least 50% of the average value of the assets held by the corporation during such taxable year produce, or are held for the production of, passive income.

For purposes of determining whether a foreign corporation is a PFIC, it will be treated as earning and owning its proportionate share of the income and assets, respectively, of any of its subsidiary corporations in which it owns, directly or indirectly, at least 25% of the value of the subsidiary’s stock.
Income earned by a foreign corporation in connection with the performance of services would not constitute passive income. By contrast, rental income would generally constitute “passive income” unless the foreign corporation is treated under specific rules as deriving its rental income in the active conduct of a trade or business or is received from a related party.
Based on the current and anticipated valuation of our assets, including goodwill, and composition of our income and assets, we intend to take the position that we will not be treated as a PFIC for U.S. federal income tax purposes for our current taxable year or in the foreseeable future. Our position is based on valuations and projections regarding our assets and income. While we believe these valuations and projections to be accurate, such valuations and projections may not continue to be accurate. Moreover, as we have not sought a ruling from the Internal Revenue Service, or IRS, on this matter, the IRS or a court could disagree with our position. In addition, although we intend to conduct our
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affairs in a manner to avoid, to the extent possible, being classified as a PFIC with respect to any taxable year, the nature of our operations may change in the future, and if so, we may not be able to avoid PFIC status in the future.
As discussed more fully below, if we were to be treated as a PFIC for any taxable year, a U.S. Holder would be subject to different United States federal income taxation rules depending on whether the U.S. Holder makes an election to treat us as a “Qualified Electing Fund,” which election we refer to as a “QEF election.” As an alternative to making a QEF election, a U.S. Holder should be able to make a “mark-to-market” election with respect to our common stock,shares, as discussed below. In addition, if we were to be treated as a PFIC for any taxable year a U.S. Holder would be required to file an annual report with the United States Internal Revenue Service, or the IRS, for that year with respect to such U.S. Holder’s common stock.shares.
Taxation of U.S. Holders Making a Timely QEF Election
If a U.S. Holder makes a timely QEF election, which U.S. Holder we refer to as an “Electing Holder,” the Electing Holder must report each year for United States federal income tax purposes his pro rata share of our ordinary earnings and our net capital gain, if any, for our taxable year that ends with or within the taxable year of the Electing Holder, regardless of whether or not distributions were received from us by the Electing Holder. The Electing Holder’s adjusted tax basis in the common stockshares would be increased to reflect taxed but undistributed earnings and profits. Distributions of earnings and profits that had been previously taxed would result in a corresponding reduction in the adjusted tax basis in the common stockshares and would not be taxed again once distributed. An Electing Holder would generally recognize capital gain or loss on the sale, exchange or other disposition of our common stock.shares. A U.S. Holder would make a QEF election with respect to any taxable year during which we are a PFIC by filing a valid IRS Form 8621 with his United States federal income tax return. If we were aware that we or any of our subsidiaries were to be treated as a PFIC for any taxable year, we would, if possible, provide each U.S. Holder with all necessary information in order to make the QEF election described above. If we were to be treated as a PFIC, a U.S. Holder would be treated as owning his proportionate share of stock in each of our subsidiaries which is treated as a PFIC and a separate QEF election would be necessary with respect to each subsidiary. It should be noted that we may not be able to provide such information if we did not become aware of our status as a PFIC in a timely manner.
Taxation of U.S. Holders Making a “Mark-to-Market” Election
Alternatively, if we were to be treated as a PFIC for any taxable year and, as we anticipate, our stock is treated as “marketable stock,” a U.S. Holder would be allowed to make a “mark-to-market” election with respect to our common stock,shares, provided the U.S. Holder completes and files a valid IRS Form 8621 in accordance with the relevant instructions and related Treasury Regulations. The “mark-to-market” election will not be available for any of our subsidiaries. If that election is made, the U.S. Holder generally would include as ordinary income in each taxable year the excess, if any, of the fair market value of the common stockshares at the end of the taxable year over such holder’s adjusted tax basis in the common stock.shares. The U.S. Holder would also be permitted an ordinary loss in respect of the excess, if any, of the U.S. Holder’s adjusted tax basis in the common stockshares over its fair market value at the end of the taxable year, but only to the extent of the net amount previously included in income as a result of the mark-to-market election. A U.S. Holder’s tax basis in his common stockshares would be adjusted to reflect any such income or loss amount. Gain realized on the sale, exchange or other disposition of our common stockshares would be treated as ordinary income, and any loss realized on the sale, exchange or other disposition of the common stockshares would be treated as ordinary loss to the extent that such loss does not exceed the net mark-to-market gains previously included as ordinary income by the U.S. Holder. It should be noted that the mark-to-market election would likely not be available for any of our subsidiaries which are treated as PFICs.
Taxation of U.S. Holders Not Making a Timely QEF or Mark-to-Market Election
Finally, if we were to be treated as a PFIC for any taxable year, a U.S. Holder who does not make either a QEF election or a “mark-to-market” election for that year, whom we refer to as a “Non-Electing Holder,” would be subject to special rules with respect to (1) any excess distribution (i.e., the portion of any distributions received by the Non-Electing Holder on our common stockshares in a taxable year in excess of 125% of the average annual distributions received by the Non-Electing Holder in the three preceding taxable years, or, if shorter, the Non-Electing Holder’s holding period for the common stock)shares), and (2) any gain realized on the sale, exchange or other disposition of our common stock.shares. Under these special rules:
•the excess distribution or gain would be allocated ratably over the Non-Electing Holders’ aggregate holding period for the common stock;shares;
•the amount allocated to the current taxable year and any taxable year before we became a PFIC would be taxed as ordinary income; and

•the amount allocated to each of the other taxable years would be subject to tax at the highest rate of tax in effect for the applicable class of taxpayer for that year, and an interest charge for the deemed deferral benefit would be imposed with respect to the resulting tax attributable to each such other taxable year.
These penalties would not apply to a pension or profit-sharing trust or other tax-exempt organization that did not borrow funds or otherwise utilize leverage in connection with its acquisition of our common stock.shares. If a Non-Electing Holder, who is an individual, dies while owning our common stock,shares, such Non-Electing Holder’s successor generally would not receive a step-up in tax basis with respect to such common stock.shares.
United States Federal Income Taxation of “Non-U.S. Holders”
A beneficial owner of our common stockshares that is not a U.S. Holder or partnership is referred to herein as a “Non-U.S. Holder.”
Dividends on Common StockShares
Non-U.S. Holders generally will not be subject to United States federal income tax or withholding tax on dividends received from us with respect to our common stock,shares, unless that income is effectively connected with the Non-U.S. Holder’s conduct of a trade or business in the United States. If the Non-U.S. Holder is entitled to the benefits of a United States income tax treaty with respect to those dividends, that
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income is subject to United States federal income tax only if it is attributable to a permanent establishment maintained by the Non-U.S. Holder in the United States.
Sale, Exchange or Other Disposition of Common StockShares
Non-U.S. Holders generally will not be subject to United States federal income tax or withholding tax on any gain realized upon the sale, exchange or other taxable disposition of our common stock,shares, unless:
•the gain is effectively connected with the Non-U.S. Holder’s conduct of a trade or business in the United States. If the Non-U.S. Holder is entitled to the benefits of a United States income tax treaty with respect to that gain, that gain is subject to United States Federal Income tax only if it is attributable to a permanent establishment maintained by the Non-U.S. Holder in the United States; or
•the Non-U.S. Holder is an individual who is present in the United States for 183 days or more during the taxable year of disposition and other conditions are met.

If a Non-U.S. Holder is engaged in a United States trade or business for United States federal income tax purposes, the income from the common stock,shares, including dividends and the gain from the sale, exchange or other taxable disposition of the common stockshares that is effectively connected with the conduct of that United States trade or business will generally be subject to United States federal income tax in the same manner as discussed in the previous section relating to the United States federal income taxation of U.S. Holders. In addition, if the Non-U.S. Holder is a corporation, the Non-U.S. Holder’s earnings and profits that are attributable to the effectively connected income, subject to certain adjustments, may be subject to an additional United States federal branch profits tax at a rate of 30%, or at a lower rate as may be specified by an applicable United States income tax treaty.
Backup Withholding and Information Reporting
In general, dividend payments, and other taxable distributions, made by us to you within the United States will be subject to information reporting requirements. Such payments will also be subject to backup withholding if paid to a U.S. Individual Holder who:
•fails to provide an accurate taxpayer identification number;
•is notified by the IRS that he has failed to report all interest or dividends required to be shown on his United States federal income tax returns; or
•in certain circumstances, fails to comply with applicable certification requirements.
Non-U.S. Holders may be required to establish their exemption from information reporting and backup withholding by certifying their status on an applicable IRS Form W-8.
If a Non-U.S. Holder sells his common stockshares to or through a United States office of a broker, the payment of the proceeds is subject to both United States backup withholding and information reporting unless the Non-U.S. Holder certifies that he is a non-United States person, under penalties of perjury, or otherwise establishes an exemption. If a Non-U.S. Holder sells his common stockshares through a non-United States office of a non-United States broker and the sales proceeds are paid to the Non-U.S. Holder outside the United States, then information reporting and backup withholding generally will not apply to that payment. However, United States information reporting requirements, but not backup withholding, will apply to a payment of sales proceeds, even if that payment is made to a Non-U.S. Holder outside the United States, if the Non-U.S. Holder sells his common stockshares through a non-United States office of a broker that is a United States person or has some other connection to the United States.
Backup withholding is not an additional tax. Rather, a taxpayer generally may obtain a refund of any amounts withheld under backup withholding rules that exceed the taxpayer’s United States federal income tax liability by properly filing a refund claim with the IRS.
Individuals who are U.S. Holders (and to the extent specified in the applicable Treasury Regulations, certain individuals who are non-U.S. Holders and certain U.S. entities) who hold “specified foreign financial assets” (as defined in section 6038D of the Code and the applicable Treasury Regulations) are required to file IRS Form 8938 (Statement of Specified Foreign Financial Assets) with information relating to each such asset for each taxable year in which the aggregate value of all such assets exceeds $75,000 at any time during the taxable year or $50,000 on the last day of the taxable year. Specified foreign financial assets would include, among other assets, our common stock,shares, unless the common stockshares were held through an account maintained with certain financial institutions. Substantial penalties apply to any failure to timely file IRS

Form 8938, unless the failure is shown to be due to reasonable cause and not due to willful neglect. Additionally, the statute of limitations on the assessment and collection of U.S. federal income tax with respect to a taxable year for which the filing of IRS Form 8938 is required may not close until three years after the date on which IRS Form 8938 is filed. U.S. Holders and Non-U.S. Holders are encouraged to consult their own tax advisers regarding their reporting obligations under section 6038D of the Code.
Other Tax Considerations
In addition to the tax consequences discussed above, we may be subject to tax in one or more other jurisdictions where we conduct activities. The amount of any such tax imposed upon our operations may be material.


F.DIVIDENDS AND PAYING AGENTS

F.DIVIDENDS AND PAYING AGENTS
Not applicable. 

G.STATEMENT BY EXPERTS

G.STATEMENT BY EXPERTS
Not applicable.

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H.DOCUMENTS ON DISPLAY

H. DOCUMENTS ON DISPLAY

We are subject to the informational requirements of the Exchange Act. In accordance with these requirementsAccordingly, we are required to file or furnish reports and other information with the Commission. These materials,SEC, including this annual reportreports on Form 20-F and reports on Form 6-K.
As a foreign private issuer, we are exempt under the accompanying exhibits, may be inspectedExchange Act from, among other things, the rules prescribing the furnishing and copied atcontent of proxy statements, and our officers, directors and principal shareholders are exempt from the public reference facilities maintained by the Commission at 100 F Street, NE, Room 1580, Washington, D.C. 20549. You may obtain information on the operationreporting and short swing profit recovery provisions contained in Section 16 of the public reference room by calling 1 (800) SEC-0330,Exchange Act. In addition, we are not required under the Exchange Act to file periodic reports and you may obtain copies at prescribed rates fromfinancial statements with the Public Reference Section ofSEC as frequently or as promptly as U.S. companies whose securities are registered under the Commission at its principal office in Washington, D.C.Exchange Act. We are required to make certain filings with the SEC. The CommissionSEC maintains aan internet website (http://www.sec.gov.) that contains reports, proxy and information statements and other information regarding registrantsabout issuers, like us, that file electronically with the Commission. In addition, documents referred to in this annual report on Form 20-F may be inspected at our principle executive offices at Par-la-Ville Place, 14 Par-la-Ville Road, Hamilton HM 08, Bermuda and at the officesSEC. The address of Seadrill Management Ltd., at Building 11, Chiswick Business Park, 566 Chiswick High Road, London, W4 5YS, United Kingdom.that site is www.sec.gov.


I.SUBSIDIARY INFORMATION

I.SUBSIDIARY INFORMATION

Not applicable.


ITEM 11.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to several market risks, including credit risk, foreign currency risk and interest rate risk. Our policy is to reduce our exposure to these risks, where possible, within boundaries deemed appropriate by our management team. This may include the use of derivative instruments.

Credit risk

We have financial assets, including cash and cash equivalents, marketable securities,related party receivables, other receivables and certain amounts receivable on derivative instruments. These assets expose us to credit risk arising from possible default by the counterparty. Most of the counterparties are creditworthy financial institutions or large oil and gas companies. We do not expect any significant loss to result from non-performance by such counterparties.

However, we have established an allowance on our loans and trade receivables due from related parties reflecting their current financial position, lower credit rating and overdue balances.
We do not demand collateral in the normal course of business. The credit exposure of derivative financial instruments is represented by the fair value of contracts with a positive fair value at the end of each period, adjustedperiod. The credit exposure of interest rate swap agreements, currency option contracts and foreign currency contracts is represented by the fair value of contracts with a positive fair value at the end of each period, reduced by the effects of master netting agreements and adjusted for counterparty non-performance credit risk assumptions. It is our policy to enter into master netting agreements with the counterparties to derivative financial instrument contracts, which give us the legal right to discharge all or a portion of amounts owed to a counterparty by offsetting them against amounts that the counterparty owes to us.

Credit risk is also considered as part of our expected credit loss provision. For details on how we estimate expected credit losses refer to Note 5 - "Current expected credit losses" to the Consolidated Financial Statements included herein.
Concentration of risk
There is also a concentration of credit risk with respect to cash and cash equivalents to the extent that most of the amounts are carried with Citibank, Nordea Bank Finland Plc,AB, Danske Bank A/S, BNP Paribas and BTG Bank and ING Bank N.V.Pactual. We consider these risks to be remote.remote, but, from time to time, we may utilize instruments such as money market deposits to manage concentration of risk with respect to cash and cash equivalents. We also have a concentration of risk with respect to customers, including affiliated companies. For details on the customers with greater than 10%

of contract revenues, refer to Note 6 - Segment information."Segment information". For details on amounts due from affiliated companies, refer to Note 3127 - Related Party transactions.

"Related party transactions" to the Consolidated Financial Statements included herein.
Foreign exchange risk

AsIt is customary in the oil and gas industry that a majority of our revenues and expenses are denominated in U.S. dollars, which is the functional currency of most of our subsidiaries and equity method investees. However, a portion of the revenues and expenses of certain of our subsidiaries and equity method investees are denominated in other currencies. We are therefore exposed to foreign exchange gains and losses that may arise on the revaluation or settlement of monetary balances denominated in foreign currencies.

Our foreign exchange exposures primarily relate to foreign denominated cash and working capital balances.balances denominated in foreign currencies. We do not expect these remaining exposures to cause a significant amount of fluctuation in net income and therefore do not currently hedge them. Further, theThe effect of fluctuations in currency exchange rates caused byarising from our international operations generally has not had a material impact on our overall operating results.

Interest rate risk

Our exposure to interest rate risk relates mainly to our floating rate debt and balances of surplus funds placed with financial institutions. We manage this risk through the use of derivative arrangements.

On May 11, 2018, we purchased an interest rate cap for $68 million to mitigate our exposure to future increases of LIBOR. The $4.5 billion of debt principal covered by the cap is significantly in LIBOR on our Senior Credit Facility debt. Theexcess of Seadrill's debt outstanding following the restructuring and the interest rate cap is not designated as a hedge and therefore we do not apply hedge accounting. The capped rate against the 3-month US LIBOR is 2.87%2.877% and covers the period from June 15, 2018 to June 15, 2023.

We have set out our exposure to interest rate risk on our net debt obligations at December 31, 2019 (Successor) in the table below:
(In $ millions) Principal
 Hedging instruments
 Total
 Impact of 1% increase in rates
Senior Credit Facilities 5,662
 (4,500) 1,162
 12
Ineffective portion of interest rate cap 1
 —
 4,320
 4,320
 43
Debt contained within VIEs 621
 —
 621
 6
Debt exposed to interest rate fluctuations 6,283
 (180) 6,103
 61
Less: Cash and Restricted Cash (1,357) —
 (1,357) (14)
Net debt exposed to interest rate fluctuations 2
 4,926
 (180) 4,746
 47
1The 3-month LIBOR rate as at December 31, 20192021 was 1.91%0.209%. At this date,
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As part of reference rate reform, the use of LIBOR will be replaced by other interest cap would mitigate 4% of the impactrate indexes as part of a theoretical 1% point increase innegotiation with our lenders. As at December 31, 2021 our debt facilities and derivatives continue to be linked to the LIBOR interest rate index. The $683 million reinstated facility and $300 million new money facility will be referenced to the SOFR, whilst the Convertible Note will be referenced to the 3-month US LIBOR.
2 The $476 million of Senior Secured Notes are a fixed rate debt instrument and are therefore excluded from the above table.

ITEM 12.DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

ITEM 12.DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

A.DEBT SECURITIES
A.DEBT SECURITIES
 
Not applicable.



B.WARRANTS AND RIGHTS
B.WARRANTS AND RIGHTS
 
Not applicable.



C.OTHER SECURITIES
C.OTHER SECURITIES
 
Not applicable.



D.AMERICAN DEPOSITARY SHARES
D.AMERICAN DEPOSITARY SHARES
 
Not applicable.


PART II
 
ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES


None.The Debtors filing of Chapter 11 Proceedings on the Petition Dates constituted an event of default under our secured credit facilities and bond facilities and were reported as “Liabilities subject to compromise” on the Consolidated Balance Sheets as of the Petition Dates.


ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS


None.


ITEM 15.CONTROLS AND PROCEDURES
 
A. Disclosure Controls and Procedures
Our Management, with participation from the Chief Executive Officer and Chief Financial Officer assessed the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Rule 13a-15 and Rule 15d-15 of the Exchange Act as of December 31, 2019.2021. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of the evaluation date.
B.     Management’s Annual Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rules 13a-15(f) promulgated under the Exchange Act.reporting.
Internal control over financial reporting is defined in Rule 13a-15(f) and 15d-15(f) promulgated under the Exchange Act as a process designed by, or under the supervision of, the Company's principal executive and principal financial officers and effected by the Board, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:
•Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company;
•Provide reasonable assurance that transactions are recorded as necessary to permit the preparation of financial statements in accordance with generally accepted accounting principles, and that the Company's receipts and expenditures are being made only in accordance with authorizations of Company's management and directors; and
•Provide reasonable assurance regarding the prevention or timely detection of unauthorized acquisition, use or disposition of the Company's assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect all misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
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Our Management, with the participation of the Chief Executive Officer and the Chief Financial Officer assessed the effectiveness of the design and operation of our internal control over financial reporting pursuant to Rule 13a-15 of the Exchange Act as of December 31, 2019.
Management conducted an evaluation of2021. In making our assessment, our management used the effectiveness of internal control over financial reporting based oncriteria established in the Internal Control- Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO").Commission. Management reviewed the results of its assessment with the Audit Committee of our Board of Directors. On the basis of this evaluation, Management concluded that, as of December 31, 2019,2021, the Company’s internal control over financial reporting was effective.
C.Attestation Report of the Registered Public Accounting Firm
The independent registered public accounting firm that audited the Consolidated Financial Statements, PricewaterhouseCoopers LLP, has issued an attestation report on the effectiveness of our internal control over financial reporting as at December 31, 2019, appearing under Item 18 "Financial Statements", and such report is incorporated herein by reference.
D.Changes in Internal Control over Financial Reporting
There were no changes in these internal controls during the period covered by this annual report that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

D.Enterprise Risk Management

At Seadrill, we adopt an enterprise-wide approach to risk identification, assessment, management and mitigation that starts by articulating potential exposures and opportunities along our day to day business processes. Our dedicated Quality & Enterprise Risk ("Q&ER") function, established in 2Q 2021, own and facilitate this activity on an annual basis through a network of Q&ER Champions representing all Corporate functions across Seadrill. The Q&ER function own Seadrill’s Quality Management System (a repository for all policies, standards and procedures) and its Enterprise Risk Management System. Both Systems work hand-in-hand to deliver Seadrill’s end-to-end Quality, Audit & Risk Management cycle.
In 2021, we identified 514 individual risks across our Corporate business processes, covering 22 key themes and encompassing strategic, reputational, regulatory, people, safety and operational parameters. Examples of these key themes include Unexpected Tax Liabilities & Exchange Rates Exposures, Third-Party & Supply Cost Management, Contractual & Major Capital Projects Risks and Delivery of our ESG agenda. These risks have informed our three-year Quality Audit Plan, where high-graded functions generating the top-25 risks for the Company have been prioritized for testing in Year-1. We have engaged an external service provider to support our Quality Audit Plan that will commence in Q2 2022.

ITEM 16.RESERVED

Not applicable.


ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT
Our Board of Directors has determined that Birgitte VartdalMark McCollum (Chair), Jan Kjærvik (Committee Member), Jean Cahuzac (Committee Member) and Birgit Aagaard-Svendsen,Karen Dyrskjot Boesen (Committee Member), are independent Directors as defined by the NYSE and are audit committee financial experts as defined by the SEC. See Item 6A - "Directors and Senior Management" for a description of their relevant experience.


ITEM 16B. CODE OF ETHICS
We have adopted a Code of Ethics that applies to all entities controlled by us and its employees, directors, officers and agents of ours. We will provide any person, free of charge, a copy of our Code of Ethics upon written request to our registered office.


ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES


Our principal accountant for the fiscal years ended December 31, 20192021, 2020 and 20182019 was PricewaterhouseCoopers LLP (Firm ID: 876) in the United Kingdom. The following table sets forth the fees related to audit and other services provided by the principal accountants and their affiliates.
 
(In $)Year ended December 31, 2021Year ended December 31, 2020Year ended December 31, 2019
Audit fees (1)
4,296,199 3,272,317 3,308,694 
Audit-related fees (2)
652,676 64,195 100,330 
All other fees (3)
22,699 19,259 17,269 
Total4,971,574 3,355,771 3,426,293 

(1)Audit fees represent professional services rendered for the audit of our annual Consolidated Financial Statements and services provided by the principal accountant in connection with statutory and regulatory filings or engagements.
(2)Audit-related fees consist of assurance and related services rendered by the principal accountant related to the performance of the audit or review of our Consolidated Financial Statements which have not been reported under Audit fees above.
(3)All other fees include services other than audit fees, audit-related fees and taxation fees set forth above, primarily including assistance in the preparation of financial statement for subsidiaries.
76
 Successor  Predecessor
(in $)
Year ended December 31,
2019
 Period from July 2, 2018 through December 31, 2018
  Period from January 1, 2018 through July 1, 2018
Audit fees (1)
3,308,694
 4,035,949
  1,484,600
Audit-related fees (2)
100,330
 252,108
  —
Taxation fees (3)
—
 —
  —
All other fees (4)
17,269
 —
  —
Total3,426,293
 4,288,057
  1,484,600
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(1)
Audit fees represent professional services rendered for the audit of our annual Consolidated Financial Statements and services provided by the principal accountant in connection with statutory and regulatory filings or engagements.
(2)
Audit-related fees consist of assurance and related services rendered by the principal accountant related to the performance of the audit or review of our Consolidated Financial Statements which have not been reported under Audit fees above.
(3)
Taxation fees represent fees for professional services rendered by the principal accountant for tax compliance, tax advice and tax planning.
(4)
All other fees include services other than audit fees, audit-related fees and taxation fees set forth above, primarily including assistance in the preparation of financial statement for subsidiaries.
Audit Committee’s Pre-Approval Policies and Procedures
 
Our Board has adopted pre-approval policies and procedures in compliance with paragraph (c)(7)(i) of Rule 2-01 of Regulation S-X that require the Board to approve the appointment of our independent auditor before such auditor is engaged and approve each of the audit and non-audit-related services to be provided by such auditor under such engagement by us. All services provided by the principal auditor in 2019, 2018 (Successor)2021, 2020 and 2018 (Predecessor)2019 were approved by the Board pursuant to the pre-approval policy.


 
ITEM 16D.EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
Not applicable.


ITEM 16E.     PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
None.



ITEM 16F. CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT

Not applicable.


ITEM 16G.     CORPORATE GOVERNANCE
U.S. companiesSeadrill is committed to good corporate governance. As a company listed onat the NYSE areOSE, Seadrill is subject to the "NYSENorwegian Code of Practice for Corporate Governance: A Practical Guide" which has been published byGovernance, and the NYSECompany complies with such guidelines, with certain deviations, as outlined and is available at nyse.com/cgguide. Asexplained in a foreign private issuer, we are exempt from certain requirements of the NYSE that are applicable to U.S. listed companies, including certainseparate corporate governance practices. Set out below is a listreport made available on or about the date of the significant differences between our corporate governance practicesthis annual report.
i.Internal Control and the NYSE standards applicable to listed U.S. companies.Risk Management
i.Independence of Directors
The NYSE requires that a U.S. listed company maintain a majority of independent directors. Under Bermuda law, we are not required to have a board of directors comprised of a majority of directors meeting the independence standards described in NYSE rules. However, our Board of Directors currently has a majority of independent directors, with five of the seven members being independent under the NYSE's standards for independence applicable to a foreign private issuer.
ii.Executive Sessions
The NYSE requires that non-management directors meet regularly in executive sessions without management. The NYSE also requires that all independent directors meet in an executive session at least once a year. Historically, non-management directors regularly held executive sessions without management. We expect this to continue in the future.
iii.Nominating/Corporate Governance Committee.
The NYSE requires that a listed U.S. company have a nominating/corporate governance committee of independent directors and a committee charter specifying the purpose, duties and evaluation procedures of the committee. As permitted under Bermuda law, we do not currently have a nominating or corporate governance committee.
iv.Corporate Governance Guidelines.
The NYSE requires that a listed U.S. company adopts and discloses corporate governance guidelines. The guidelines must address, among other things, director qualification standards, director responsibilities, director access to management and independent advisers, director compensation, director orientation and continuing education, management succession and an annual performance evaluation. We are not required to adopt such guidelines under Bermuda law, however our current bye-laws include certain matters concerning corporate governance.
Additional Information Concerning Corporate Governance Required by the OSE Continuing Obligations
i.Internal Control and Risk Management
Information concerning the main elements of our internal control and risk management systems associated with the financial reporting process has been provided in "Item 15. ControlsItem 15 - "Controls and Procedures".
ii.Board of Directors and Board Committees
ii.Board of Directors and Board Committees
The composition of our Board of Directors is set out in "Item 6. Directors,Item 6 - "Directors, Senior Management and Employees", as is information pertaining to our Audit and Risk Committee, Compensation CommitteeJoint Nomination and ConflictsRemuneration Committee.
iii.Appointment of Board Members
iii.Appointment of Board Members
Our current bye-laws regulate the process of appointing Board Members. Reference is made to "Item 6. Directors,Item 6 - "Directors, Senior Management and Employees", subsection "C. Board Practices" for information on specific rights concerning Terms of Office, the number of Board Members required in the Board of Directors and appointment procedures. Our current bye-laws have been included under "Item 10. AdditionalItem 10 - "Additional Information", subsection "B. Memorandum of Association and Bye-laws", and set out the full regulation of the procedures for the appointment of Board Members.
iv.Authorization to Acquire Treasury Shares
iv.Authorization to Acquire Treasury Shares
Pursuant to our current bye-laws, the Company has the power to purchase its own shares (treasury shares) for cancellation, as well as to hold such shares as treasury shares. The Board of Directors may exercise all powers of the Company to purchase or acquire its own shares, whether for cancellation or to be held as treasury shares in accordance with Bermuda law.

ITEM 16H. MINE SAFETY DISCLOSURE
Not applicable.




ITEM 16I. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
Not applicable.

PART III
 
ITEM 17.     FINANCIAL STATEMENTS
 
See “Item 18. Financial Statements”Item 18 - "Financial Statements" below.

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ITEM 18. FINANCIAL STATEMENTS


Our Consolidated Financial Statements, together with the reportsreport from PricewaterhouseCoopers LLP thereon, are filed as a part of this Annual Report, beginning on page F-1.
Pursuant to Rule 3-09, the Consolidated Financial Statements and the Management ICFR Report
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Table of Seadrill Partners LLC have been filed as a part of this Annual Report, beginning on page A-1.Contents


ITEM 19.    EXHIBITS
Exhibit

Number
Description
1.1
1.2
1.21.3
1.3
Certificate of Incorporation on Name Change delivered July 2, 2018 (incorporated by reference to Exhibit 3.3 of the amended Registration Statement, filed on Form F-1 on July 18, 2018)
1.4
Certificate of Deposit of Memorandum of Increase of Share Capital delivered July 3, 2018 (incorporated by reference to Exhibit 3.4 of the amended Registration Statement, filed on Form F-1 on July 18, 2018)Seadrill Limited.
2.11.4
1.5
2.1
2.2
2.34.1
2.44.2
2.54.3
2.68.1
4.1
Omnibus Agreement among Seadrill Limited, Seadrill Partners LLC, Seadrill Member LLC, Seadrill Operating LP, Seadrill Operating GP LLC, and Seadrill Capricorn Holdings LLC, dated October 24, 2012 (incorporated by reference to Seadrill Limited’s annual report on Form 20-F, filed on April 21, 2015).
4.2
Transaction Service Agreement
8.1
Subsidiaries of the CompanyCompany.
11.1
Code of Ethics
12.1
12.2
13.1
13.2
13.2
15.1
15.1101.INS
Seadrill Limited consent of independent registered public accounting firm
iXBRL Instance Document
101.INS101.SCHXBRL Instance Document
101.SCHXBRLiXBRL Taxonomy Extension Schema 
101.CALXBRLiXBRL Taxonomy Extension Schema Calculation Linkbase
101.DEFXBRLiXBRL Taxonomy Extension Definition Linkbase
101.LABXBRLiXBRL Taxonomy Extension Label Linkbase
101.PREXBRLiXBRL Taxonomy Extension Presentation Linkbase
104Cover Page Interactive Data File (embedded within the iXBRL document and contained in Exhibit 101)


Seadrill agrees to furnish to the SEC upon request any instrument with respect to long-term debt that Seadrill has not filed as an exhibit pursuant to the exemption provided by the general instructions to Item 19
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SIGNATURES


The registrant hereby certifies that it meets all the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this Annual Report on its behalf.


Seadrill Limited
(Registrant)




Date: April 2, 2020

29, 2022
By:/s/ Grant Creed
Name:Anton DibowitzGrant Creed
Title:
Chief ExecutivePrincipal Financial Officer of Seadrill Management Ltd
(Principal Executive Officer of Seadrill Limited)
Limited








Table ofContents
Seadrill Limited
Index to Consolidated Financial Statements

Consolidated Financial Statements of Seadrill Limited
F-F-11
F-F-22
Consolidated Statements of Operations for the year ended December 31, 2019 (Successor), the period from July 2, 2018 through2021, December 31, 2018 (Successor), the period from January 1, 2018 through July 1, 2018 (Predecessor)2020 and the year ended December 31, 2017 (Predecessor)2019
F-F-54
Consolidated Statements of Comprehensive Loss for the year ended December 31, 2019 (Successor), the period from July 2, 2018 through2021, December 31, 2018 (Successor), the period from January 1, 2018 through July 1, 2018 (Predecessor)2020 and the year ended December 31, 2017 (Predecessor)2019
F-F-65
Consolidated Balance Sheets as at December 31, 2019 (Successor)2021 and 2018 (Successor)2020
F-F-76
Consolidated Statements of Cash Flows for the year ended December 31, 2019 (Successor), the period from July 2, 2018 through2021, December 31, 2018 (Successor), the period from January 1, 2018 through July 1, 2018 (Predecessor)2020 and the year ended December 31, 2017 (Predecessor)2019
F-F-87
Consolidated Statements of Changes in Shareholders' Equity for the year ended December 31, 2019 (Successor), the period from July 2, 2018 through2021, December 31, 2018 (Successor), the period from January 1, 2018 through July 1, 2018 (Predecessor)2020 and the year ended December 31, 2017 (Predecessor)2019
F-F-109
Notes to Consolidated Financial Statements
F-F-1110

F-1
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Report of Independent Registered Public Accounting Firm


TotheBoard of Directors and Shareholders of Seadrill Limited


OpinionsOpinion on the Financial Statements and Internal Control over Financial Reporting


We have audited the accompanying consolidatedbalance sheets of Seadrill Limited and its subsidiaries (Successor) (the “Company”) as of December 31, 20192021 and 2018,2020, and the related consolidated statements of operations, comprehensive loss, changes in shareholders’ equity and cash flowsfor each of the yearthree years in the period ended December 31, 2019 and for the period from July 2, 2018 to December 31, 2018,2021, including the related notes (collectively referred to as the “consolidatedfinancial statements”). We also have audited the Company's internal control over financial reporting as of December 31, 2019, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Companyas of December 31, 20192021 and 2018,2020, and the results of its operations and its cash flows for each of the yearthree years in the period ended December 31, 2019 and for the period from July 2, 2018 to December 31, 2018 2021in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2019, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.

Basis of Accounting

As discussed in Note 1 to the consolidated financial statements, the United States Bankruptcy Court for the Southern District of Texas Victoria Division confirmed the Company's Second Amended Joint Chapter 11 Plan of Reorganization (the "plan") on April 17, 2018. Confirmation of the plan resulted in the discharge of all claims against the Company that arose before September 12, 2017 and substantially alters or terminates rights and interests of equity security holders as provided for in the plan. The plan was substantially consummated on July 2, 2018 and the Company emerged from bankruptcy. In connection with its emergence from bankruptcy, the Company adopted fresh start accounting as of July 2, 2018.


Change in Accounting Principle


As discussed in Note 3 to the consolidated financial statements, the Company changed the manner in which it accounts for leases as of January 1, 2019.credit losses on financial instruments in 2020.

Basis for Opinions

The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Annual Report on Internal Control over Financial Reporting appearing under Item 15. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

Emphasis of Matter

As discussed in Note 22 to the consolidated financial statements, the Company is in negotiations with its lenders to restructure its debt. Management’s plans regarding this matter are also described in Note 22.


Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.










/s/ PricewaterhouseCoopers LLP
Uxbridge, United Kingdom
April 2, 2020
We have served as the Company’s or its predecessor auditor since 2013.

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders of Seadrill Limited

Opinion on the Financial Statements

We have audited the accompanying consolidated statements of operations, comprehensive loss, changes in shareholders’ equity and cash flows of Seadrill Limited and its subsidiaries (Predecessor) (the “Company”) for the period from January 1, 2018 to July 1, 2018 and for the year ended December 31, 2017, including the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the results of operations and cash flows of the Company for the period from January 1, 2018 to July 1, 2018 and for the year ended December 31, 2017 in conformity with accounting principles generally accepted in the United States of America.

Basis of Accounting

As discussed inNote1 to the consolidated financial statements, the Company filed a petition on September 12, 2017 with the United States Bankruptcy Court for the Southern District of Texas Victoria Division for reorganization under the provisions of Chapter 11 of the Bankruptcy Code. The Company’s Second Amended Joint Chapter 11 Plan of Reorganization was substantially consummated on July 2, 2018 and the Company emerged from bankruptcy. In connection with its emergence from bankruptcy, the Company adopted fresh start accounting.


Basis for Opinion


These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.


We conducted our audits of these consolidatedfinancial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.


Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidatedfinancial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidatedfinancial statements. We believe that our audits provide a reasonable basis for our opinion.



Critical Audit Matters



The critical audit matters communicated beloware mattersarising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that (i) relate to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidatedfinancial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Completeness of uncertain tax positions and valuation of certain uncertain tax positions

As described in Notes 2 and 12 to the consolidated financial statements, the Company had an unrecognized tax benefit of $85 million as of December 31, 2021 of which a majority relates to certain jurisdictions. As disclosed, management recognizes liabilities for uncertain tax positions based on a two-step process. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount that is more than 50% likely of being realized upon settlement. Management regularly assesses the potential outcomes of examinations by tax authorities in determining the adequacy of our provision for income taxes.

The principal considerations for our determination that performing procedures relating to the completeness of uncertain tax positions and valuation of certain uncertain tax positions is a critical audit matter are (i) the significant judgment by management when assessing uncertain tax positions, including a high degree of estimation uncertainty; (ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating management’s timely identification of uncertain tax positions and accurate valuation of certain positions; (iii) the evaluation of audit evidence available to support certain uncertain tax positions is complex and resulted in significant auditor judgment as the nature of the evidence is often highly subjective; and (iv) the audit effort involved the use of professionals with specialized skill and knowledge.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. For the completeness assertion, these procedures included, among others, (i) reviewing management’s memo and exercise of identifying new uncertain tax positions; (ii) reviewing the status of any open tax audits; (iii) reviewing return-to-provision adjustments; (iv) inspecting copies of correspondence occurring during 2021 to evaluate the completeness of information used by
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management in concluding on the related uncertain tax positions; (v) performing an assessment of the jurisdictions in which the Company operates and discussing with management as to whether there has been any correspondence from local tax authorities; (vi) considering the results of our other audit procedures performed to determine whether there are other uncertain tax positions that have not been identified, including whether there have been any significant structural or contractual changes to the business in 2021 which would impact the uncertain tax positions; and (vii) reviewing global tax accounting services newsletters and industry publications to identify changes to tax laws announced during the year, including those specifically for the oil and gas industry. For the valuation assertion for certain jurisdictions, these procedures included, among others (i) testing the completeness, accuracy and relevance of data used in the calculation of the liability for uncertain tax positions, including reviewing agreements, tax positions, and the related final tax returns; (ii) testing the model for calculating the liability for uncertain tax positions by jurisdiction, including management’s assessment of the technical merits of tax positions and estimates of the amount of tax benefit expected to be sustained, including the amount of interest and penalties recorded to recalculate the closing balance; (iii) evaluating the status and results of income tax audits with the relevant tax authorities; and (iv) reviewing new information pertaining to valuation of these certain jurisdictions arising in 2021. Professionals with specialized skill and knowledge were used to assist in the evaluation of the completeness of uncertain tax positions and measurement of the Company’s uncertain tax positions for the certain jurisdictions, including evaluating the reasonableness of management’s assessment of whether tax positions are more-likely-than-not of being sustained and the amount of potential benefit to be realized, the application of relevant tax laws, and estimated interest and penalties.

Valuation of accounts receivable, net and drilling units recognized in the SeaMex business combination

As described in Note 2 and 32 to the consolidated financial statements, on November 2, 2021, the Company obtained the remaining 50% equity interest in SeaMex resulting in the consolidation of SeaMex into NSNCo in a business combination. This resulted in an acquisition of $316 million of accounts receivable, net and $216 million of drilling units. As disclosed, SeaMex’s accounts receivable, net acquired includes a current expected credit loss estimated using a “probability-of-default” model similar to that of Seadrill's. The fair value of drilling units was estimated through the discounted cash flow (“DCF”) approach. The DCF approach derives values of rigs from the cash flows associated with the remaining useful life of the rig. Forecasted revenues used in the DCF model are derived from a “general pool” whereby the rigs will receive a global dayrate assumption. All future cash flows are discounted using a weighted average cost of capital (“WACC”).

The principal considerations for our determination that performing procedures relating to the valuation of accounts receivable, net and drilling units recognized in the SeaMex business combination is a critical audit matter are (i) the significant judgment by management when assessing the valuation of accounts receivable, net and drilling units, including a high degree of estimation uncertainty; (ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating management’s assumptions of current expected credit losses, global dayrate, and WACC; (iii) the evaluation of audit evidence available to support the assumptions is complex and resulted in significant auditor judgment as the nature of the evidence is often highly subjective; and (iv) the audit effort involved the use of professionals with specialized skill and knowledge.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included, among others,(i) testing management’s process for developing the future net cash flows in the DCF model; (ii) evaluating the appropriateness of management’s DCF model and expected credit loss model; (iii) testing the completeness, accuracy, and relevance of the underlying data used in the models; and (iv) evaluating the significant estimates and assumptions used by management related to the current expected credit losses, global day rate, and weighted average cost of capital assumptions. Evaluating management’s significant estimates and assumptions involved evaluating whether the estimates and assumptions used by management were reasonable considering (i) the current and past performance of the drilling units;(ii) the consistency with external market and industry forecast data; and (iii) whether these assumptions were consistent with evidence obtained in other areas of the audit; and (iv) the probability of default in the expected credit loss model. Professionals with specialized skill and knowledge were used to assist in the evaluation of the Company’s WACC, including reviewing management’s calculation and comparing the WACC against comparable companies.



/s/ PricewaterhouseCoopers LLP
Uxbridge,Watford, United Kingdom
March 28, 2019April 29, 2022

We have served as the Company’sCompany's or its predecessorpredecessors’ auditor since 2013.

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Seadrill Limited
(Debtor-in-Possession)
CONSOLIDATED STATEMENTS OF OPERATIONS
for the year ended December 31, 2019 (Successor)2021 , the period from July 2, 2018 through December 31, 2018 (Successor)2020 , the period from January 1, 2018 through July 1, 2018 (Predecessor) and the year ended December 31, 2017 (Predecessor)2019
(In $ millions, except per share data)
 Successor  PredecessorNotesYear ended December 31, 2021Year ended December 31, 2020Year ended December 31, 2019
NotesYear ended December 31,
2019
 Period from July 2, 2018 through December 31, 2018
  Period from January 1, 2018 through July 1, 2018
 Year ended December 31,
2017
(As adjusted)(As adjusted)
Operating revenues         Operating revenues  
Contract revenues 997
 469
  619
 1,888
Contract revenues764 703 997 
Reimbursable revenues*264
 26
  21
 38
Reimbursable revenues35 37 41 
Management contract revenueManagement contract revenue*177 289 338 
Other revenues8 *127
 46
  72
 162
Other revenues8 *32 30 12 
Total operating revenues 1,388
 541
  712
 2,088
Total operating revenues1,008 1,059 1,388 
         
Operating expenses         Operating expenses  
Vessel and rig operating expenses*(770) (357)  (407) (792)Vessel and rig operating expenses(676)(606)(726)
Reimbursable expenses*(262) (24)  (20) (35)Reimbursable expenses(32)(34)(39)
Depreciation (426) (236)  (391) (798)Depreciation(155)(346)(426)
Amortization of intangibles (134) (58)  —
 —
Amortization of intangibles— (1)(134)
Management contract expenseManagement contract expense*(174)(390)(302)
Selling, general and administrative expenses*(130) (62)  (100) (277)Selling, general and administrative expenses(77)(80)(95)
Total operating expenses (1,722) (737)  (918) (1,902)Total operating expenses(1,114)(1,457)(1,722)
         
Other operating items         Other operating items
Impairment of long lived assets —

—

 (414) (696)
Loss on disposals*—

—

 —
 (245)
Loss on impairment of long-lived assetsLoss on impairment of long-lived assets11(152)(4,087)— 
Loss on impairment of intangiblesLoss on impairment of intangibles— (21)— 
Gain on disposalsGain on disposals47 15 — 
Other operating income*39
 21
  7
 27
Other operating income*54 9 39 
Total other operating items939
 21
  (407) (914)Total other operating items9(51)(4,084)39 
         
Operating loss (295) (175)  (613) (728)Operating loss(157)(4,482)(295)
         
Financial and other non-operating items       
  Financial and other non-operating items  
Interest income*69
 40
  19
 60
Interest income*1 9 35 
Interest expense10 *(487) (261)  (38) (285)Interest expense10(109)(409)(421)
Loss on impairment of investments11(302)
—

 —
 (841)Loss on impairment of investments— — (6)
Share in results from associated companies (net of tax)18(115) (90)  149
 174
Share in results from associated companies (net of tax)173 — (22)
(Loss)/gain on derivative financial instrument (37) (31)  (4) 11
Impairment of convertible bond from related party*(11) —
  —
 —
Net (loss)/gain on debt extinguishment

 (22) —
  —
 19
Fair value measurement on deconsolidation of VIEFair value measurement on deconsolidation of VIE— 509 — 
Loss on derivative financial instrumentLoss on derivative financial instrument— (3)(37)
Foreign exchange loss

 (11) (4)  —
 (65)Foreign exchange loss
(4)(23)(11)
Loss on marketable securities

15(46) (64)  (3) —
Reorganization items, net

4—
 (9)  (3,365) (1,337)Reorganization items, net
4(310)— — 
Other financial and non-operating items

*(4)
(3)
 —
 (44)Other financial and non-operating items
*(11)(45)(3)
Total financial and other non-operating items (966) (422)  (3,242) (2,308)
Total financial and other non-operating items, netTotal financial and other non-operating items, net(430)38 (465)
         
Loss before income taxes (1,261) (597)  (3,855) (3,036)Loss before income taxes(587)(4,444)(760)
         
Income tax benefit/(expense)1239
 (8)  (30) (66)
Income tax (expense)/benefitIncome tax (expense)/benefit12(5)(4)40 
Loss from continuing operationsLoss from continuing operations(592)(4,448)(720)
Income/(loss) from discontinued operationsIncome/(loss) from discontinued operations335 (215)(502)
Net loss (1,222) (605)  (3,885) (3,102)Net loss(587)(4,663)(1,222)
         
Net loss attributable to the parent (1,219) (602)  (3,881) (2,973)Net loss attributable to the parent(587)(4,659)(1,219)
Net loss attributable to the non-controlling interest (1) (2)  (6) (129)Net loss attributable to the non-controlling interest— (3)(1)
Net (loss)/gain attributable to the redeemable non-controlling interest (2) (1)  2
 —
Net loss attributable to the redeemable non-controlling interestNet loss attributable to the redeemable non-controlling interest— (1)(2)
         
Basic loss per share (U.S. dollar) (12.18) (6.02)  (7.71) (5.89)
Diluted loss per share (U.S. dollar) (12.18) (6.02)  (7.71) (5.89)
Basic and Diluted loss per share from continuing operations (US dollar)Basic and Diluted loss per share from continuing operations (US dollar)(5.90)(44.29)(7.16)
Basic and Diluted loss per share (U.S. dollar)Basic and Diluted loss per share (U.S. dollar)(5.85)(46.43)(12.18)
* Includes transactions with related parties. Refer to Note 3127 - "Related party transactions". for further details.
See accompanying notes that are an integral part of these Consolidated Financial Statements.


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Seadrill Limited
(Debtor-in-Possession)
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
for the year ended December 31, 2019 (Successor), the period from July 2, 2018 through2021, December 31, 2018 (Successor), the period from January 1, 2018 through July 1, 2018 (Predecessor)2020 and the year ended December 31, 2017 (Predecessor)2019
(In $ millions)
 
 Successor  Predecessor
 Year ended December 31,
2019
 Period from July 2, 2018 through December 31, 2018
  Period from January 1, 2018 through July 1, 2018
 Year ended December 31,
2017
Net loss(1,222) (605)  (3,885) (3,102)
         
Other comprehensive (loss)/income, net of tax: 
     
  
Unrealized gain on marketable securities—
 —
  —
 14
Change in fair value of debt component of Archer convertible bond3
 (3)  —
 —
Actuarial (loss)/gain relating to pensions(1) 1
  —
 (3)
Unrealized gain on interest rate swaps in VIEs and subsidiaries—
 —
  —
 2
Share of other comprehensive loss from associated
companies
(8) (5)  —
 (8)
Other comprehensive (loss)/income:(6) (7)  —
 5
         
Total comprehensive loss for the period(1,228) (612)  (3,885) (3,097)
         
Comprehensive loss attributable to the parent(1,225) (609)  (3,881) (2,976)
Comprehensive loss attributable to the non-controlling interest(1) (2)  (6) (121)
Comprehensive (loss)/income attributable to the redeemable non-controlling interest(2) (1)  2
 —
 Year ended December 31, 2021Year ended December 31, 2020Year ended December 31, 2019
Net loss(587)(4,663)(1,222)
Other comprehensive loss, net of tax, relating to continuing operations:  
Actuarial loss relating to pensions— (2)(1)
Other comprehensive gain/(loss), net of tax, relating to discontinued operations:
Change in fair value of debt component of Archer convertible bond2 4 3 
Share of other comprehensive loss from associated
companies
9 (15)(8)
Other comprehensive gain/(loss)11 (13)(6)
Total comprehensive loss for the period(576)(4,676)(1,228)
Comprehensive loss attributable to the shareholders(576)(4,672)(1,225)
Comprehensive loss attributable to the non-controlling interest— (3)(1)
Comprehensive loss attributable to the redeemable non-controlling interest— (1)(2)
 
See accompanying notes that are an integral part of these Consolidated Financial Statements.









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Seadrill Limited
(Debtor-in-Possession)
CONSOLIDATED BALANCE SHEETS
Asas at December 31, 2019 (Successor)2021 and 2018 (Successor)2020
(In $ millions)
millions, except per share data)
 Successor Successor NotesDecember 31, 2021December 31, 2020
NotesDecember 31, 2019

December 31, 2018
(As adjusted)
ASSETS
 


ASSETS 
Current assets
 
 Current assets  
Cash and cash equivalents
1,115

1,542
Cash and cash equivalents312 491 
Restricted cash14135

461
Restricted cash14160 103 
Marketable securities1511

57
Accounts receivables, net16173

208
Amount due from related parties - current31181

177
Accounts receivable, netAccounts receivable, net15169 125 
Amount due from related parties, netAmount due from related parties, net2728 85 
Assets held for sale - currentAssets held for sale - current331,103 74 
Other current assets17158

322
Other current assets16191 184 
Total current assets
1,773

2,767
Total current assets1,963 1,062 
Non-current assets
 
 Non-current assets  
Investment in associated companies18389

800
Investment in associated companies1727 24 
Drilling units206,401

6,659
Drilling units181,777 2,120 
Restricted cash14107

—
Restricted cash1463 65 
Deferred tax assets124

18
Deferred tax assets1211 9 
Equipment2123

29
Equipment1911 19 
Amount due from related parties - non-current31523

539
Amount due from related parties, netAmount due from related parties, net27— 6 
Assets held for sale - non-currentAssets held for sale - non-current33— 611 
Other non-current assets1759

36
Other non-current assets1627 45 
Total non-current assets
7,506

8,081
Total non-current assets1,916 2,899 
Total assets
9,279

10,848
Total assets3,879 3,961 
LIABILITIES, REDEEMABLE NON-CONTROLLING INTEREST AND EQUITY
 
 
LIABILITIES AND EQUITYLIABILITIES AND EQUITY  
Current liabilities
 
 Current liabilities  
Debt due within one year22343

33
Debt due within one year20— 5,662 
Trade accounts payable
86

82
Trade accounts payable59 45 
Amounts due to related parties - current3119

39
Amounts due to related parties - current27— 7 
Liabilities associated with assets held for sale - currentLiabilities associated with assets held for sale - current33948 546 
Other current liabilities23322

310
Other current liabilities21230 285 
Total current liabilities
770

464
Total current liabilities1,237 6,545 
Liabilities subject to compromiseLiabilities subject to compromise46,235 — 
Non-current liabilities
 
 Non-current liabilities  
Long-term debt226,280

6,881
Long-term debt due to related parties31239

222
Long-term debt due to related parties27— 426 
Deferred tax liabilities1212

87
Deferred tax liabilities129 10 
Other non-current liabilities23128

121
Other non-current liabilities21114 120 
Total non-current liabilities
6,659

7,311
Total non-current liabilities123 556 
Commitments and contingencies (see note 34)


 

Redeemable non-controlling interest2757

38
Commitments and contingencies (see Note 30)Commitments and contingencies (see Note 30)00
EQUITY
 
 EQUITY  
Common shares of par value US$0.10 per share: $0.10 per share: 138,880,000 shares authorized and 100,234,973 issued at December 31, 2019 (US$0.10 per share: 111,111,111 shares authorized and 100,000,000 issued at December 31, 2018)2510

10
Common shares of par value US$0.10 per share 138,880,000 shares authorized and 100,384,435 issued at December 31, 2021 and December 31, 2020Common shares of par value US$0.10 per share 138,880,000 shares authorized and 100,384,435 issued at December 31, 2021 and December 31, 20202310 10 
Additional paid in capital
3,496

3,491
Additional paid in capital3,504 3,504 
Accumulated other comprehensive loss
(13)
(7)Accumulated other comprehensive loss(15)(26)
Retained loss
(1,851)
(611)Retained loss(7,215)(6,628)
Total Shareholder's equity
1,642

2,883
Non-controlling interest26151

152
Total equity
1,793

3,035
Total liabilities, redeemable non-controlling interest and equity
9,279

10,848
Total deficitTotal deficit(3,716)(3,140)
Total liabilities and equityTotal liabilities and equity3,879 3,961 
See accompanying notes that are an integral part of these Consolidated Financial Statements.

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Table ofContents
Seadrill Limited
(Debtor-in-Possession)
CONSOLIDATED STATEMENTS OF CASH FLOWS
for the year ended December 31, 2019 (Successor), the period from July 2, 2018 through2021 and December 31, 2018 (Successor),2020
(In $ millions)
 Year ended December 31, 2021Year ended December 31, 2020Year ended December 31, 2019
(As adjusted)(As adjusted)
Cash Flows from Operating Activities  
Net loss(587)(4,663)(1,222)
Net loss from continuing operations(592)(4,448)(720)
Net income/(loss) from discontinued operations5 (215)(502)
Net operating net loss adjustments related to discontinued operations (1)
(23)191 469 
Adjustments to reconcile net loss to net cash used in operating activities: 
Depreciation155 346 426 
Amortization of unfavorable and favorable contracts— 1 134 
Share of results from associated companies(3)— 22 
Gain on disposals(47)(15)— 
Unrealized loss related to derivatives— 3 37 
Fair value measurement on deconsolidation of VIE— (509)— 
Loss on impairment of long-lived assets152 4,087 — 
Loss on impairment of intangibles— 21 — 
Loss on impairment of investments— — 6 
Deferred tax benefit(3)(7)(61)
Unrealized foreign exchange loss2 19 (3)
Amortization of discount on debt84 122 36 
Change in allowance for credit losses34 144 — 
Non-cash reorganization items176 — — 
Other cash movements in operating activities:
Payments for long-term maintenance(64)(121)(114)
Repayments made under lease arrangements(46)— — 
Changes in operating assets and liabilities, net of effect of acquisitions and disposals: 
Trade accounts receivable(37)48 35 
Trade accounts payable17 (38)4 
Prepaid expenses/accrued revenue(4)(54)(1)
Deferred revenue7 (5)13 
Related party receivables(6)(103)(8)
Related party payables(7)(5)(30)
Other assets(19)35 (13)
Other liabilities65 75 9 
Other, net— 8 5 
Net cash used in operating activities(154)(420)(256)

(1)Relates to adjustments made to the periodnet income/loss from January 1, 2018 through July 1, 2018 (Predecessor)discontinued operations to reconcile to net cash flows in operating activities from discontinued operations. The adjustments are made up of adjustments to reconcile net loss to net cash used in operating activities, other cash movements in operating activities, and changes in operating assets and liabilities, net of effect of acquisitions and disposals. The net cash used in operating activities related to Discontinued operations for the year ended December 31, 2017 (Predecessor)2021 was $18 million (December 31, 2020: $24 million; December 31, 2019: $33 million).
(In $ millions)
 Successor  Predecessor
 Year ended December 31,
2019
 Period from July 2, 2018 through December 31, 2018
  Period from January 1, 2018 through July 1, 2018
 Year ended December 31,
2017
Cash Flows from Operating Activities        
Net loss(1,222) (605)  (3,885) (3,102)
Adjustments to reconcile net loss to net cash provided by operating activities:        
Depreciation426
 236
  391
 798
Amortization of deferred loan charges—
 —
  —
 27
Amortization of unfavorable and favorable contracts134
 58
  (21) (43)
Share of results from associated companies115
 90
  (149) (174)
Impairment of investments302
 —
  —
 841
Share-based compensation expense5
 —
  3
 7
Loss on disposals—
 —
  —
 245
Contingent consideration realized—
 —
  (7) (27)
Unrealized loss/(gain) related to derivative financial instruments37
 31
  4
 (76)
Loss on impairment of long-lived assets—
 —
  414
 696
Deferred tax (benefit)/expense(61) (22)  —
 7
Unrealized foreign exchange gain on long-term debt—
 —
  —
 59
Amortization of discount on debt36
 23
  —
 —
Gain on derecognition of investment in associated company—
 —
  —
 (10)
Impairment of convertible bond from related party11
 —
  —
 —
Net loss/(gain) on debt extinguishment22
 —
  —
 (19)
Unrealized loss on marketable securities46
 64
  3
 —
Non-cash gain on liabilities subject to compromise—
 —
  (2,977) —
Fresh start valuation adjustments—
 —
  6,142
 —
Other re-organization items—
 —
  6
 1,274
Other(3) (3)  (1) (2)
Other cash movements in operating activities        
Distributions received from associated companies11
 32
  17
 39
Payments for long-term maintenance(114) (71)  (78) (58)
Settlement of payment-in-kind interest on Senior Secured Notes(39) —
  —
 —
Changes in operating assets and liabilities, net of effect of acquisitions and disposals        
Trade accounts receivable35
 64
  29
 167
Trade accounts payable4
 (31)  4
 (9)
Prepaid expenses/accrued revenue(1) 12
  42
 (66)
Deferred revenue13
 21
  (23) (107)
Related party receivables(43) 7
  (13) (42)
Related party payables(3) 54
  (42) (44)
Other assets(12) (20)  (62) 93
Other liabilities45
 34
  (10) (75)
Net cash (used in)/provided by operating activities(256) (26)  (213) 399
F-7

Table ofContents



Seadrill Limited
(Debtor-in-Possession)
CONSOLIDATED STATEMENTS OF CASH FLOWS
for the year ended December 31, 2019 (Successor), the period from July 2, 2018 through2021, December 31, 2018 (Successor), the period from January 1, 2018 through July 1, 2018 (Predecessor)2020, and the year ended December 31, 2017 (Predecessor)2019
(In $ millions)
 Year ended December 31, 2021Year ended December 31, 2020Year ended December 31, 2019
(As adjusted)(As adjusted)
Cash Flows from Investing Activities  
Additions to drilling units and equipment(29)(27)(48)
Purchase of call option for non-controlling interest shares— (11)— 
Investment in associated companies— — (25)
Loans granted to related party— (8)— 
Proceeds from disposal of rigs43 — — 
Impact to cash resulting from deconsolidation of VIE— (22)— 
Net cash provided by investing activities - discontinued operations23 36 47 
Net cash provided by/(used in) investing activities37 (32)(26)
 Successor  Predecessor
 Year ended December 31,
2019
 Period from July 2, 2018 through December 31, 2018
  Period from January 1, 2018 through July 1, 2018
 Year ended December 31,
2017
Cash Flows from Investing Activities        
Additions to newbuildings—
 —
  (1) (33)
Additions to drilling units and equipment(48) (27)  (48) (59)
Refund of yard installments—
 —
  —
 25
Contingent consideration received32
 65
  48
 95
Settlement of West Mira
—
 —
  —
 170
Sale of rigs and equipment—
 —
  126
 122
Buyout of guarantee—
 —
  —
 (28)
Investment in associated companies(25) —
  —
 —
Payments received from loans granted to related parties15
 23
  24
 66
Net cash (used in)/provided by investing activities(26) 61
  149
 358
Cash Flows from Financing Activities  
Repayments of secured credit facilities— (132)(34)
Purchase of redeemable AOD non-controlling interest— (31)— 
Net cash used in financing activities - discontinued operations— — (333)
Net cash used in financing activities— (163)(367)
Effect of exchange rate changes on cash and cash equivalents(2)(19)3 
Net decrease in cash and cash equivalents, including restricted cash(119)(634)(646)
Cash and cash equivalents, including restricted cash, at beginning of the year723 1,357 2,003 
Cash and cash equivalents, including restricted cash, at the beginning of year - continuing operations659 1,305 1,632 
Cash and cash equivalents, including restricted cash, at the beginning of year - discontinued operations64 52 371 
Cash and cash equivalents, including restricted cash, at the end of year604 723 1,357 
Cash and cash equivalents, including restricted cash, at the end of year - continuing operations (2)
535 659 1,305 
Cash and cash equivalents, including restricted cash, at the end of year - discontinued operations69 64 52 
Supplementary disclosure of cash flow information 
Interest paid— (181)(391)
Taxes paid(5)(13)(36)
Reorganization items, net paid(100)— — 
Cash Flows from Financing Activities        
Proceeds from debt—
 —
  875
 —
Repayments of secured credit facilities(34) (83)  (153) (754)
Redemption of Senior Secured Notes(333) (121)  —
 —
Debt fees paid—
 (4)  (35) (53)
Repayments of debt to related party—
 —
  —
 (39)
Proceeds from issuance of shares—
 —
  200
 —
Net cash (used in)/provided by financing activities(367) (208)  887
 (846)
         
Effect of exchange rate changes on cash and cash equivalents3
 (1)  (5) 5
         
Net (decrease)/increase in cash and cash equivalents, including restricted cash(646) (174)  818
 (84)
Cash and cash equivalents, including restricted cash, at beginning of the year2,003
 2,177
  1,359
 1,443
Cash and cash equivalents, including restricted cash, at the end of year1,357
 2,003
  2,177
 1,359
         
Supplementary disclosure of cash flow information        
Interest paid, net of capitalized interest(391) (178)  (38) (264)
Taxes paid(36) (16)  (22) (119)


(2)Comprised of cash and cash equivalents $312 million (2020: $491 million, 2019: $1,087 million), restricted cash $160 million (2020: $103 million, 2019: $135 million), and restricted cash included in non-current assets $63 million (2020: $65 million, 2019: $83 million).

See accompanying notes that are an integral part of these Consolidated Financial Statements.



F-8
Table ofContents
Seadrill Limited
(Debtor-in-Possession)
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
for the year ended December 31, 2019 (Successor), the period from January 1, 2018 through July 1, 2018 (Predecessor), theperiod from July 2, 2018 through2021, December 31, 2018 (Successor)2020 and the year ended December 31, 2017 (Predecessor)2019
(In $ millions)

  Common shares
 Additional paid in capital
 Contributed surplus
 Accumulated other comprehensive income/(loss)
 Retained Earnings
 Total equity before NCI
 Non-controlling interest
 Total equity
Balance at December 31, 2016 (Predecessor) 1,008
 3,306
 1,956
 53
 3,198
 9,521
 542
 10,063
Share-based compensation charge —
 7
 —
 —
 —
 7
 —
 7
Other comprehensive income —
 —
 —
 5
 —
 5
 —
 5
Distributions to non-controlling interests —
 —
 —
 —
 —
 —
 (14) (14)
Net loss —
 —
 —
 —
 (2,973) (2,973) (129) (3,102)
Balance at December 31, 2017 (Predecessor) 1,008
 3,313
 1,956
 58
 225
 6,560
 399
 6,959
ASU 2016-01 - Financial Instruments —
 —
 —
 (31) 31
 —
 —

—
ASU 2016-16 - Income Taxes —
 —
 —
 —
 (59) (59) (25)
(84)
ASU 2016-09 - Revenue from contracts —
 —
 —
 —
 7
 7
 —

7
Share-based compensation charge —
 9
 —
 —
 —
 9
 —
 9
Reclassification of non-controlling interest —
 —
 —
 —
 (43) (43) 43
 —
Revaluation of redeemable non-controlling interest —
 —
 —
 —
 127
 127
 (150) (23)
Net loss —
 —
 —
 —
 (3,881) (3,881) (6) (3,887)
Balance at July 1, 2018 (Predecessor) 1,008
 3,322
 1,956
 27
 (3,593) 2,720
 261

2,981
Cancellation of Predecessor equity (1,008) (3,322) (1,956) (27) 3,593
 (2,720) (107)
(2,827)
Balance at July 1, 2018 (Predecessor) —
 —
 —
 —
 —
 —
 154

154
Issuance of Successor common stock 10
 3,491
 —
 —
 —
 3,501
 —

3,501
Balance at July 2, 2018 (Successor) 10
 3,491
 —
 —
 —
 3,501
 154

3,655
Revaluation of redeemable non-controlling interest —
 —
 —
 —
 (9) (9) —

(9)
Net Loss —
 —
 —
 —
 (602) (602) (2)
(604)
Other comprehensive loss —
 —
 —
 (7) —
 (7) —

(7)
Balance at December 31, 2018 (Successor) 10
 3,491
 —
 (7) (611) 2,883
 152

3,035
Net Loss —
 —
 —
 —
 (1,219) (1,219) (1) (1,220)
Other comprehensive loss —
 —
 —
 (6) —
 (6) —
 (6)
Fair Value adjustment AOD Redeemable NCI —
 —
 —
 —
 (21) (21) —
 (21)
Share-based compensation charge —
 5
 —
 —
 —
 5
 —
 5
Balance at December 31, 2019 (Successor) 10
 3,496
 —
 (13) (1,851) 1,642
 151
 1,793
 Common sharesAdditional paid in capitalAccumulated other comprehensive income/(loss)Retained EarningsTotal equity before NCINon-controlling interestTotal equity
December 31, 201810 3,491 (7)(611)2,883 152 3,035 
Net loss from continuing operations— — — (717)(717)(1)(718)
Net loss from discontinuing operations— — — (502)(502)— (502)
Other comprehensive loss from continuing operations— — (1)— (1)— (1)
Other comprehensive loss from discontinued operations— — (5)— (5)— (5)
Fair Value adjustment AOD Redeemable NCI— — — (21)(21)— (21)
Share-based compensation charge— 5 — — 5 — 5 
December 31, 201910 3,496 (13)(1,851)1,642 151 1,793 
ASU 2016-13 - Measurement of credit losses on financial instruments— — — (143)(143)— (143)
January 1, 202010 3,496 (13)(1,994)1,499 151 1,650 
Net loss from continuing operations— — — (4,444)(4,444)(3)(4,447)
Net loss from discontinuing operations— — — (215)(215)— (215)
Other comprehensive loss from continuing operations— — (2)— (2)— (2)
Other comprehensive loss from discontinued operations(11)(11)— (11)
Fair Value adjustment AOD Redeemable NCI— — — 25 25 — 25 
Purchase option on non-controlling interest— — — — — (11)(11)
Deconsolidation of VIE— — — — — (137)(137)
Share-based compensation charge— 9 — — 9 — 9 
Cash settlement for cancellation of share scheme(1)(1)— (1)
December 31, 202010 3,504 (26)(6,628)(3,140)— (3,140)
Net loss from continuing operations— — — (592)(592)— (592)
Net income from discontinued operations— — — 5 5 — 5 
Other comprehensive income from Discontinuing operations— — 11 — 11 — 11 
December 31, 202110 3,504 (15)(7,215)(3,716)— (3,716)
 
See accompanying notes that are an integral part of these Consolidated Financial Statements.







F-9
Table ofContents
Seadrill Limited
(Debtor-in-Possession)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Note 1 – General information
Seadrill Limited is incorporated in Bermuda and is a publicly listed company on the New York Stock Exchange and the Oslo Stock Exchange.Bermuda. We provide offshore drilling services to the oil and gas industry.industry. As at December 31, 2019 2021 we owned 24 drilling rigs, leased 3 and managed and operated 35 offshore drilling units9 rigs on behalf of Aquadrill (formerly Seadrill Partners), SeaMex, and an option to acquire one semi-submersible rig.Sonadrill. Our fleet consists of drillships, jack-up rigs and semi-submersible rigs for operations in shallow and deepwater areas, as well as benign and harsh environments. We also provide management services to our related parties Seadrill Partners, SeaMex, Northern Drilling and Sonadrill.
As used herein, the term "Predecessor""predecessor" refers to the financial position and results of operations of Seadrill Limited prior to, and including, July 1, 2018.February 22, 2022. This is also applicable to terms "we", "our", "Group" or "Company" in context of events prior to and including, July 1, 2018.February 22, 2022. As used herein, the term "Successor" refers to the financial position and results of operations of Seadrill Limited (previously "New Seadrill""Seadrill 2021 Limited") after July 1, 2018.February 22, 2022. This is also applicable to terms "Seadrill Limited""new successor", "we", "our", "Group" or "Company" in context of events after July 1, 2018.February 22, 2022.
The use herein of such terms as "Group", "organization", "we", "us", "our" and "its", or references to specific entities, is not intended to be a precise description of corporate relationships.
Emergence from Chapter 11 Bankruptcy
On February 22, 2022, Seadrill completed its comprehensive restructuring and emerged from Chapter 11 bankruptcy protection. Please refer to Note 4 "Chapter 11 Proceedings" of the accompanying financial statements for further details.
In our report at June 30, 2021, we had raised a substantial doubt as to our ability to continue as a going concern as a result of the fact that we were in Chapter 11 and there was a degree of inherent risk associated with being in bankruptcy and whether the Plan of Reorganization would be confirmed. Having now emerged from Chapter 11 and with access to exit financing, we believe that cash on hand, contract and other revenues will generate sufficient cash flow to fund our anticipated debt service and working capital requirements for the next twelve months. Therefore, there is no longer a substantial doubt over our ability to continue as a going concern for at least the next twelve months following the date of issue of the financial statements.
Financial information in this report has been prepared on a going concern basis of accounting, which presumes that we will be able to realize our assets and discharge our liabilities in the normal course of business as they come due. Financial information in this report does not reflect the adjustments to the carrying values of assets, liabilities and the reported expenses and balance sheet classifications that would be necessary if we were unable to realize our assets and settle our liabilities as a going concern in the normal course of operations. Such adjustments could be material.
Basis of presentation
The Consolidated Financial Statements are presented in accordance with generally accepted accounting principles in the United States of America (U.S. GAAP). The amounts are presented in United States dollar ("U.S. dollar"dollar" or "US$"US$") rounded to the nearest million, unless otherwise stated.
The accompanying Consolidated Financial Statements presentinclude the financial positionstatements of Seadrill Limited, theits consolidated subsidiaries and any variable interest entity ("VIE") in which we are the group’s interest in associated entities. Investmentsprimary beneficiary.
Basis of consolidation
We consolidate investments in companies in which we control or directly or indirectly holds more than 50% of the voting control are consolidated in the Consolidated Financial Statements, as well as certain variable interestrights.
We also consolidate entities of which we are deemed to be the primary beneficiary.
Basis of consolidation
The Consolidated Financial Statements include the revenue, expenses, assets and liabilities of our principal holding company, our majority owned and controlled subsidiaries and certain variable interest entities (“VIE”s) in which we are deemed to be the primary beneficiary. Subsidiaries, even if fully owned, would be excluded from the Consolidated Financial Statements ifhold a variable interest where we are not deemed to be the primary beneficiary as assessed underof the variable interest model. All intercompany balances and transactions have been eliminated on consolidation.
entity. A VIE is defined as a legal entity where either (a) the total equity at risk is not sufficient to permit the entity to finance its activities without additional subordinated financial support; (b) equity interest holders as a group lack either (i) the power to direct the activities of the entity that most significantly impact on its economic success,performance, (ii) the obligation to absorb the expected losses of the entity, or (iii) the right to receive the expected residual returns of the entity; or (c) the voting rights of some investors in the entity are not proportional to their economic interests and the activities of the entity involve or are conducted on behalf of an investor with a disproportionately small voting interest. U.S. GAAP requiresWe are the primary beneficiary of a VIE to be consolidated by its primary beneficiary, being the interest holder, if any, which haswhen we have both (1) the power to direct the activities of the entity which most significantly impact on the entity’s economic performance, and (2) the right to receive benefits or the obligation to absorb losses from the entity which could potentially be significant to the entity. We evaluate our subsidiaries, and any other entities in which
Subsidiaries, even if fully owned, are excluded from the Consolidated Financial Statements if we hold a variable interest, in order to determine whether we are not the primary beneficiary ofunder the entity,variable interest model. All intercompany balances and where it is determined that we are the primary beneficiary we consolidate the entity. We have certain investments in the common stock or in-substance common stock of associated companies. Refer to Note 2 – Accounting policiesfor further information on our equity investments.
Bankruptcy accounting
As set out in Note 4 - Chapter 11 Proceedings, we operated as a debtor-in-possession from September 12, 2017 to July 2, 2018. During this period, we prepared our Consolidated Financial Statements under Accounting Standards Codification 852, Reorganizations ("ASC 852"). ASC 852 required that the financial statements distinguished transactions and events that were directly associated with the reorganization from the ongoing operations of the business. Accordingly, certain expenses, gains and losses that were realized or incurred in the bankruptcy proceedings were recorded in “Reorganization items" on our Consolidated Statements of Operations. In addition, ASC 852 required changes in the accounting and presentation of significant items on the Consolidated Balance Sheets, particularly liabilities. Pre-petition obligations that may have been impacted by the Chapter 11 reorganization process were classified on the Consolidated Balance Sheets within "Liabilities subject to compromise". 

eliminated.
Fresh Start Reporting
Upon emergence from bankruptcy on July 2, 2018 (the "Effective Date")the Effective Date, in accordance with ASC 852, related to fresh start reporting, Seadrill Limited becameexpects to qualify for fresh-start reporting and expects to become a new entity for financial reporting purposes. Upon adoption of fresh startWe will allocate the reorganization value resulting from fresh-start reporting our assets and liabilities were recorded at their fair values. We elected to apply fresh start reporting effective July 2, 2018 (the “Convenience Date”) to coincidein accordance with the timing of our normal third quarter reporting period. We evaluated and concluded that events between July 1, 2018 and July 2, 2018 were immaterial and use of an accounting convenience date was appropriate. The fair values of our assets and liabilities differed materially from the recorded values of our assets and liabilitiespurchase price allocation performed as reflected in the Predecessor historical Consolidated Balance Sheets. The effects of the Plan and the applicationEffective Date.
F-10
Table of fresh start accounting were applied as of July 2, 2018 and the new basis of our assets and liabilities are reflected in our Consolidated Balance Sheet as of December 31, 2018 and the related adjustments thereto were recorded in the Consolidated Statement of Operations of the Predecessor as "Reorganization items", with the related predominantly deferred tax effects through "Income tax expense", during the period from January 1, 2018 through July 1, 2018.Contents
Accordingly, our Consolidated Financial Statements subsequent to July 2, 2018 are not and will not be comparable to the Predecessor Consolidated Financial Statements prior to the Convenience Date. Our Consolidated Financial Statements and related footnotes are presented with a black line division which delineates the lack of comparability between amounts presented on July 2, 2018 and dates prior. Our financial results for future periods following the application of fresh start accounting will be different from historical trends and the differences may be material.
Out of period adjustment
The financial statements for the period from January 1, 2018 through July 1, 2018 (Predecessor) include an income tax expense of $18 million due to an adjustment in the income tax charge for a subsidiary related to prior years. We considered the effect of this prior period correction not to be material in the context of the overall results for the period from January 1, 2018 through July 1, 2018 (Predecessor), the year ended December 31, 2017 (Predecessor), or to any previously reported quarterly or annual financial statements.


Note 2 – Accounting policies
The accounting policies set out below have been applied consistently to all periods in these Consolidated Financial Statements, unless otherwise noted.
Use of estimates
Preparation of financial statements in accordance with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Foreign currencies
The majority of our revenues and expenses are denominated in U.S. dollars and therefore the majority of our subsidiaries use U.S. dollars as their functional currency. Our reporting currency is also U.S. dollars. For subsidiaries that maintain their accounts in currencies other than U.S. dollars, we use the current method of translation whereby the Statement of Operations are translated using the average exchange rate for the period and the assets and liabilities are translated using the year-end exchange rate. Foreign currency translation gains or losses on consolidation are recorded as a separate component of other comprehensive income in shareholders' equity.
Transactions in foreign currencies are translated into U.S. dollars at the rates of exchange in effect at the date of the transaction. Foreign currency assets and liabilities are translated using rates of exchange at the balance sheet date. Gains and losses on foreign currency transactions are included in the Consolidated Statements of Operations.
Related parties
Parties are related if one party has the ability, directly or indirectly, to control the other party or exercise significant influence over the other party in making financial and operating decisions. Parties are also related if they are subject to common control or common significant influence. Refer to Note 31 – Related Party Transactions.
Revenue from contracts with customers
The activities that primarily drive the revenue earned from our drilling contracts include (i) providing a drilling rig and the crew and supplies necessary to operate the rig, (ii) mobilizing and demobilizing the rig to and from the drill site and (iii) performing rig preparation activities and/or modifications required for the contract.contract with a customer. Consideration received for performing these activities may consist of dayrate drilling revenue, mobilization and demobilization revenue, contract preparation revenue and reimbursement revenue. We account for these integrated services as a single performance obligation that is (i) satisfied over time and (ii) comprised of a series of distinct time increments.increments of service.
We recognize considerationrevenues for activities that correspond to a distinct time increment of service within the contract term in the period when the services are performed. We recognize consideration for activities that are (i) not distinct within the context of our contracts and (ii) do not correspond to a distinct time increment of service, ratably over the estimated contract term.

We determine the total transaction price for each individual contract by estimating both fixed and variable consideration expected to be earned over the term of the contract. The amount estimated for variable consideration may be constrained and is only included in the transaction price to the extent that it is probable that a significant reversal of previously recognized revenue will not occur throughout the term of the contract. When determining if variable consideration should be constrained, we consider whether there are factors outside of our control that could result in a significant reversal of revenue as well as the likelihood and magnitude of a potential reversal of revenue. We re-assess these estimates each reporting period as required.Refer to Note 7 - Revenue"Revenue from Contractscontracts with Customers.customers".
Dayrate drilling revenue - Our drilling contracts generally provide for payment on a dayrate basis, with higher rates for periods when the drilling unit is operating and lower rates or zero rates for periods when drilling operations are interrupted or restricted. The dayrate invoices billed to the customer are typically determined based on the varying rates applicable to the specific activities performed on an hourly basis. Such dayrate consideration is allocated to the distinct hourly incrementincremental service it relates to within the contract term, and therefore,to. Revenue is recognized in line with the contractual rate billed for the services provided for any given hour.
Mobilization revenue - We may receive fees (on either a fixed lump-sum or variable dayrate basis) for the mobilization of our rigs. These activities are not considered to be distinct within the context of the contract and therefore, thecontract. The associated revenue is allocated to the overall performance obligation and recognized ratably over the expected term of the related drilling contract. We record a contract liability for mobilization fees received, which is amortized ratably to contract drilling revenue as services are rendered over the initial term of the related drilling contract.
Demobilization revenue - We may receive fees (on either a fixed lump-sum or variable dayrate basis) for the demobilization of our rigs. Demobilization revenue expected to be received upon contract completion is estimated as part of the overall transaction price at contract inception and recognized over the term of the contract. In most of our contracts, there is uncertainty as to the likelihood and amount of expected demobilization revenue to be received. For example, the amount may vary dependent upon whether or not the rig has additional contracted work following the contract. Therefore, the estimate for such revenue may be constrained, as described above, depending on the facts and circumstances pertaining to the specific contract. We assess the likelihood of receiving such revenue based on past experience and knowledge of the market conditions.
Revenues related to reimbursable expenses - We generally receive reimbursements from our customers for the purchase of supplies, equipment, personnel services and other services provided at their request in accordance with a drilling contract or other agreement. Such reimbursable revenue is variable and subject to uncertainty, as the amounts received and timing thereof are highly dependent on factors outside of our influence. Accordingly, reimbursable revenue is fully constrained and not included in the total transaction price until the uncertainty is resolved, which typically occurs when the related costs are incurred on behalf of a customer. We are generally considered a principal in such transactions and record the associated revenue at the gross amount billed to the customer, at a point in time, as “Reimbursable revenues” in our Consolidated Statements of Operations.
Local taxes - In some countries, the local government or taxing authority may assess taxes on our revenues. Such taxes may include sales taxes, use taxes, value-added taxes, gross receipts taxes and excise taxes. We generally record tax-assessed revenue transactions on a net basis.
Deferred contract expenses - Certain direct and incremental costs incurred for upfront preparation, initial mobilization and modifications of contracted rigs represent costs of fulfilling a contract as they relate directly to a contract, enhance resources that will be used in satisfying our performance obligations in the future and are expected to be recovered. Such costs are deferred and amortized ratably to contract drilling expense as services are rendered over the initial term of the related drilling contract.
OtherManagement contract revenues
Other revenues consist of related party revenues, external management fees, and early termination fees. Refer to Note 8 – Other revenues.
Management fees - Revenues related to operation support and management services provided to Aquadrill (formerly Seadrill Partners, Seamex,Partners), SeaMex, Sonadrill, &and Northern Drilling.Ocean. This includes both related and non-related companies.
Other revenues
Other revenues consist of related party revenues, leasing income from rigs leased to Gulfdrill, external management fees, and early termination fees. Refer to Note 8 – "Other revenues". Revenue is recognized as the performance obligation is satisfied, which on our leased rigs is on a straight-line basis.
Early termination fees - Other revenues also include amounts recognized as early termination fees under drilling contracts which have been terminated prior to the contract end date. Contract termination fees are recognized daily as and when any contingencies or uncertainties are resolved.
F-11
Table ofContents
Vessel and Rig Operating Expenses
Vessel and rig operating expenses are costs associated with operating a drilling unit that is either in operation or stacked and include the remuneration of offshore crews and related costs, rig supplies, insurance costs, expenses for repairs and maintenance and costs for onshore support personnel. We expense such costs as incurred.
On emergence, we classified certain costs as "vessel and rig operating expenses" that are directly attributable to rig activities and had previously been classified as "selling, general and administrative expenses" in our Consolidated Statements of Operations.
Mobilization and demobilization expenses
We incur costs to prepare a drilling unit for a new customer contract and to move the rig to a new contract location. We capitalize the mobilization and preparation costs for a rig's first contract as a part of the rig value and recognize them as depreciation expense over the expected useful life of the rig (i.e. 30 years). For subsequent contracts, we defer these costs over the expected contract term (see deferred contract costs above), unless we don'tdo not expect the costs to be recoverable, in which case we expense them as incurred.

We incur costs to transfer a drilling unit to a safe harbor or different geographic area at the end of a contract. We expense such demobilization costs as incurred. We also expense any costs incurred to relocate drilling units that are not under contract. 
Repairs, maintenance and periodic surveys
Costs related to periodic overhauls of drilling units are capitalized and amortized over the anticipated period between overhauls, which is generally five years. Related costs are primarily yard costs and the cost of employees directly involved in the work. We include amortization costs for periodic overhauls in depreciation expense. Costs for other repair and maintenance activities are included in vessel and rig operating expenses and are expensed as incurred.
Income taxes
Seadrill is a BermudanBermuda company that has subsidiaries and affiliates in various jurisdictions. Currently, Seadrill and our Bermudan subsidiaries and affiliates are not required to pay taxes in Bermuda on ordinary income or capital gains as they qualify as exemptexempted companies. Seadrill and our subsidiaries and affiliates have received written assurance from the Minister of Finance in Bermuda that we will be exempt from taxation until March 2035. Certain subsidiaries operate in other jurisdictions where taxes are imposed. Consequently, income taxes have been recorded in these jurisdictions when appropriate. Our income tax expense is based on our income and statutory tax rates in the various jurisdictions in which we operate. We provide for income taxes based on the tax laws and rates in effect in the countries in which operations are conducted and income is earned. Refer to Note 12 – Taxation."Taxation".
The determination and evaluation of our annual group income tax provision involves interpretation of tax laws in various jurisdictions in which we operate and requires significant judgment and use of estimates and assumptions regarding significant future events, such as amounts, timing and character of income, deductions and tax credits. There are certain transactions for which the ultimate tax determination is unclear due to uncertainty in the ordinary course of business.
We recognize liabilities for uncertain tax liabilitiespositions based on our assessmenta two-step process. The first step is to evaluate the tax position for recognition by determining if the weight of whether our tax positions areavailable evidence indicates that it is more likely than not sustainable, based solelythat the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the technical merits and considerationstax benefit as the largest amount that is more than 50% likely of being realized upon settlement. While we believe we have appropriate support for the relevant taxing authorities widely understood administrative practices and precedence. Changes in tax laws, regulations, agreements, treaties, foreign currency exchange restrictions or our levels of operations or profitability in each jurisdiction may impactpositions taken on our tax liabilityreturns, we regularly assess the potential outcomes of examinations by tax authorities in any given year. Whiledetermining the adequacy of our annual tax provision is based on the information available to us at the time, a number of years may elapse before the ultimate tax liabilities in certain tax jurisdictions are determined. for income taxes.
Current income tax expense reflects an estimate of our income tax liability for the current year, withholding taxes, changes in prior year tax estimates as tax returns are filed, or from tax audit adjustments.
Income tax expense consists of taxes currently payable and changes in deferred tax assets and liabilities calculated according to local tax rules. We recognize the income tax effects of intercompany sales or transfers of assets, other than inventory, in the Consolidated Statement of Operations as income tax expense (or benefit) in the period of sale or transfer occurs.
Deferred tax assets and liabilities are based on temporary differences that arise between carrying values used for financial reporting purposes and amounts used for taxation purposes of assets and liabilities and the future tax benefits of tax loss carry forwards.
Our deferred tax expense or benefit represents the change in the balance of deferred tax assets or liabilities as reflected on the balance sheet. Valuation allowances are determined to reduce deferred tax assets when it is more likely than not that some portion or all of the deferred tax assets will not be realized. To determine the amount of deferred tax assets and liabilities, as well as at the valuation allowances, we must make estimates and certain assumptions regarding future taxable income, including where our drilling units are expected to be deployed, as well as other assumptions related to our future tax position. A change in such estimates and assumptions, along with any changes in tax laws, could require us to adjust the deferred tax assets, liabilities, or valuation allowances. The amount of deferred tax provided is based upon the expected manner of settlement of the carrying amount of assets and liabilities, using tax rates enacted at the balance sheet date. The impact of tax law changes is recognized in periods when the change is enacted.
Foreign currencies
The majority of our revenues and expenses are denominated in U.S. dollars and therefore the majority of our subsidiaries use U.S. dollars as their functional currency. Our reporting currency is also U.S. dollars. For subsidiaries that maintain their accounts in currencies other than U.S. dollars, we use the current method of translation whereby items of income and expense are translated using the average exchange rate for the period and the assets and liabilities are translated using the year-end exchange rate. Foreign currency translation gains or losses on consolidation are recorded as a separate component of other comprehensive income in shareholders' equity.
Transactions in foreign currencies are translated into U.S. dollars at the rates of exchange in effect at the date of the transaction. Foreign currency denominated monetary assets and liabilities are remeasured using rates of exchange at the balance sheet date. Gains and losses on foreign currency transactions are included in the Consolidated Statements of Operations.
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Loss per share
Basic loss per share (“LPS”) is calculated based on the loss for the period available to common stockholdersshareholders divided by the weighted average number of shares outstanding. Diluted loss per share includes the effect of the assumed conversion of potentially dilutive instruments such as our restricted stock units. The determination of dilutive loss per share may require us to make adjustments to net loss and the weighted average shares outstanding. Refer to Note 13 – Loss"Loss per share.share".
Fair value measurements
We estimate fair value at a price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants in the principal market for the asset or liability. Hierarchy Levels 1, 2 and 3 are terms for the priority of inputs to valuation techniques used to measure fair value. Hierarchy Level 1 inputs are unadjusted quoted prices for identical assets or liabilities in active markets. Hierarchy Level 2 inputs are significant other observable inputs, including direct or indirect market data for similar assets or liabilities in active markets or identical assets or liabilities in less active markets. Hierarchy Level 3 inputs are significant unobservable inputs, including those that require considerable judgment for which there is little or no market data. When a valuation requires multiple input levels, we categorize the entire fair value measurement according to the lowest level of input that is significant to the measurement even though we may have also utilized significant inputs that are more readily observable.
Current and non-current classification
Generally, assets and liabilities (excluding deferred taxes and liabilities subject to compromise) are classified as current assets and liabilities respectively if their maturity is within one year of the balance sheet date. In addition, we classify any derivative financial instruments whose fair value is a net liability as current. Current liabilities will include where amounts from lenders are payable on demand at their discretion due to event of default clauses being met.
Generally, assets and liabilities are classified as non-current assets and liabilities respectively if their maturity is beyond one year of the balance sheet date. In addition, we classify loan fees based on the classification of the associated debt principal and we classify any derivatives financial instruments whose fair value is a net asset as current.principal.
Cash and cash equivalents
Cash and cash equivalents consist of cash, bank deposits and highly liquid financial instruments with maturities of three months or less. Amounts are presented net of allowances for credit losses.

Restricted cash
Restricted cash consists of bank deposits which are subject to restrictions due to legislation, regulation or contractual arrangements. Restricted cash amounts with maturities longer thanthat are expected to be used after one year from balance sheet date are classified as non-current assets. Amounts are presented net of allowances for credit losses, which are assessed based on consideration of whether the balances have short-term maturities and whether the counterparty has an investment grade credit rating, limiting any credit exposure. Refer to Note 14 – Restricted cash"Restricted cash".
Receivables
Receivables, including accounts receivable, are recorded in the balance sheet at their nominal amount lessnet of expected credit losses and write-offs. Interest income on receivables is recognized as earned. Refer to Note 15 – "Accounts receivable".
Allowance for credit losses
In 2020 we adopted the current expected credit loss ("CECL") model which replaced the “incurred loss” model required under the guidance for FY 2019. The CECL model requires recognition of expected credit losses over the life of a financial asset upon its initial recognition. Periods prior to adoption are presented under the previous guidance with an allowance for doubtful accounts.against a receivable balance recognized only if it was probable that we would not recover the full amount due to us. We establish reserves fordetermined doubtful accounts on a case-by-case basis when it is unlikely that required payments of specific amounts will occur. In establishing these reserves, we considerand considered the financial condition of the customer as well as specific circumstances related to the receivable such as customer disputes. Receivable
The CECL model contemplates a broader range of information to estimate expected credit losses over the contractual lifetime of an asset. It also requires to consider the risk of loss even if it is remote. We estimate expected credit losses based on relevant information about past events, including historical experience, current conditions, and reasonable and supportable forecasts of events which may affect the collectability. We estimate the CECL allowance using a “probability-of-default” model, calculated by multiplying the exposure at default by the probability of default by the loss given default by a risk overlay multiplier over the life of the financial instrument (as defined by ASU 2016-13). Our critical judgements relate to internal credit ratings and maturities used to determine probability of default, the subordination of debt to determine loss given default and the performance status of the receivable that can impact any management overlay. We determine management risk overlay based on management assessment of defaults, overdue amounts determinedand other observable events that provide information on collection. Our internal credit ratings are based on the Moody’s scorecard approach (based on several quantitative and qualitative factors) and our approach relies on statistical data from Moody’s ‘Default and Ratings Analytics’ to derive the expected credit loss. We monitor the credit quality of receivables by re-assessing credit ratings, assumed maturities and probability-of-default on a quarterly basis. Due to the inherent uncertainty around these judgmental areas, it is at least reasonably possible that a material change in the CECL allowance can occur in the near term. We grouped financial assets with similar risk characteristics based on their contractual terms, historical credit loss pattern, internal and external credit ratings, maturity, collateral type, past due status and other relevant factors.
The CECL model applies to external trade receivables, related party receivables and other financial assets measured at amortized cost as being unrecoverablewell as to off-balance sheet credit exposures not accounted for as insurance. We have elected to calculate expected credit losses on the combined balance of both the amortized cost and accrued interest from the unpaid principal balance.
The allowance for credit losses reflects the net amount expected to be collected on the financial asset. Any change in credit allowance is reflected in the Consolidated Statement of Operations based on the nature of the financial asset receivable.
Amounts are written off. Interest income on receivablesoff against the allowance in the period when efforts to collect a balance have been exhausted. Any write-offs in excess of credit allowance by category of financial asset reduces the asset's carrying amount and is reflected in the Consolidated Statement of
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Operations. Expected recoveries will not exceed the amounts previously written-off or current credit loss allowance by financial asset category and are recognized as earned. Refer to Note 16 – Accounts receivable & Note 31 – Related party transactions.in the Consolidated Statement of Operations in the period of receipt.
Contract assets and liabilities
Accounts receivables (see above)receivable are recognized when the right to consideration becomes unconditional based upon contractual billing schedules. If we are required to recognize revenue ahead of this point, we categorize the balance asalso recognize a contract asset. Contract assetassets balances consistrelate primarily ofto demobilization revenues which have been recognized during the period but are contingent onassociated with probable future demobilization activities.
Contract liabilities include payments received for mobilization, as well as rig preparation and upgrade activities which are allocated to the overall performance obligation and recognized ratably over the initial term of the contract.
Related parties
Parties are related if one party has the ability, directly or indirectly, to control the other party or exercise significant influence over the other party in making financial and operating decisions. Parties are also related if they are subject to common control or common significant influence. 10% shareholders that do not have significant influence are also considered to be related parties. Amounts receivable from related parties are presented net of allowances for expected credit losses and write-offs. Interest income on receivables is recognized as earned. Refer to Note 27 –" Related party transactions" for details of balances and material transactions with related parties.
Business Combinations
We account for business combinations in accordance with ASC 805 - Business Combinations. As described in Note 32 - Business Combinations, on November 2, 2021, NSNCo (wholly owned subsidiary of Seadrill Limited) consolidated SeaMex in a business combination. Management determined that the Transaction qualified as a business combination under ASC 805 because (i) SeaMex as the acquiree met the definition of a business and (ii) NSNCo as the acquirer obtained control of SeaMex. As a result, the acquisition method was applied, and the identifiable assets acquired and liabilities assumed were recognized at fair value on the acquisition date.
i. Accounts receivable, net
SeaMex's CECL model estimates the allowance using a similar “probability-of-default” model to that of Seadrill's. Refer to Allowance for Credit Losses section above.
ii. Drilling Units
The fair value of drilling units are estimated through the DCF approach. The DCF approach derives values of rigs from the cash flows associated with the remaining useful life of the rig. Forecasted revenues used in the DCF model are derived from a "general pool" whereby the rigs receive a global dayrate assumption and a contract probability factor. All future cash flows are discounted using a WACC. Key assumptions used in the DCF include contracted dayrate and utilization forecasts.
iii. Contracts
Management values the favorable intangible drilling contracts by comparing the signed contract rates against the expected rates achievable for the rig type in the market, both adjusted for economic utilization and taxes. The gain or loss on the signed contract compared to the market rates are then discounted using an adjusted WACC.
iv. Convenience date
Where a business combination does not occur on a natural period end reporting date, the Company assesses the use of a convenience date based on materiality.
Equity investments
Investments in common stock are accounted for using the equity method of accounting if the investment gives uswe have the ability to exercise significantsignificantly influence, but not control, over, the investee. Significant influence is generally deemedpresumed to exist if our ownership interest in the voting stock of the investee is between 20% and 50%, although. We also consider other factors such as representation on the investee’s Boardboard of Directorsdirectors and the nature of commercial arrangements, are also considered. We classify our other equity investments eitherinvestees as "Marketable Securities" or "Investments in Associated Companies" depending on their nature.. We classifyrecognize our share of earnings or losses from our equity method investments in the Consolidated Statements of Operations as “Share in results from associated companies". We record gains or losses on investments held fair value as "Loss on Marketable Securities"companies”. Refer to Note 1517 – Marketable securities and Note 18 – Investment"Investment in associated companies.companies".
We analyzeassess our equity method investments for impairment at each reporting period to evaluate whether an eventwhen events or change in circumstances has occurred insuggest that period that may have a significant adverse effect on the valuecarrying amount of the investment.investments may be impaired. We record an impairment charge for other-than-temporary declines in value when the value is not anticipated to recover above the cost within a reasonable period after the measurement date, unless there are mitigating factors that indicate impairment may not be required.date. We consider (1) the length of time and extent to which fair value is below carrying value, (2) the financial condition and near-term prospects of the investee, and (3) our intent and ability to hold the investment until any anticipated recovery. If an impairment chargeloss is recorded,recognized, subsequent recoveries in value are not reflected in earnings until sale of the equity method investee occurs.
All other equity investments which consist ofincluding investments that do not givesgive us the ability to exercise significant influence as well asand investments in equity instruments other than common stock, are accounted for at fair value, if readily determinable. We classify our other equity investments as "marketable securities" with gains or losses on remeasurement to fair value recognized as "loss on marketable securities". If we can’tcannot readily ascertain the fair value, we record the investment at cost less impairment. We perform a qualitative impairment analysis for our equity investments recorded at cost at each reporting period to evaluate whether an event or change in circumstances has occurred in that period that indicates that the investment'sinvestment is impaired. If an event or change in circumstances has occurred in that period that indicates that the investment's is impaired, then weWe record an impairment charge forloss to the difference betweenextent that the estimated fair valuecarrying amount of the investment andexceeds its carrying amount.estimated fair value.
For periods before we adopted ASU 2016-01, we reviewed our marketable securities for other-than-temporary impairment at each reporting date. Refer to Note 11 - Impairment loss on investments in associated companies for details.
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Generally, the carrying value of drilling units under construction (“Newbuildings”) represents the accumulated costs at the balance sheet date. Cost components usually include payments for yard installments and variation orders, construction supervision, equipment, spare parts, capitalized interest, costs related to first time mobilization and commissioning costs. During construction, capitalized interest of newbuildings is based on accumulated expenditures for the applicable project at our current rate of borrowing. The amount of interest expense capitalized in an accounting period is determined by applying the interest rate (“the capitalization rate”) to the average amount of accumulated expenditures for the asset during the period. We don't capitalize amounts beyond the actual interest expense incurred in the period.
We ceased capitalization of interest on newbuildings when we operated as a debtor-in-possession as interest payments made during bankruptcy proceedings were treated as adequate protection payments. On emergence from Chapter 11, the Newbuildings carrying value was adjusted to a fair value of nil. In addition, we have not capitalized interest since emergence as work on our Newbuild projects had substantially ceased. Refer to Note 5 – Fresh Start Accounting and Note 19 – Newbuildings.

Drilling units
Rigs, vessels and related equipment are recorded at historical cost less accumulated depreciation. The cost of these assets, less estimated residual value is depreciated on a straight-line basis over their estimated remaining economic useful lives. The estimated residual value is taken to be offset by any decommissioning costs that may be incurred. The estimated economic useful life of our floaters and, jack-up rigs, when new, is 30 years. The direct and incremental costs of significant capital projects, such as rig upgrades and reactivation projects, are capitalized and depreciated in accordance with the nature of the investment. Significant investments that are deemed to increase an asset’s value for its remaining useful life are capitalized and depreciated over the remaining life of the asset. Refer to Note 20 – Drilling units.
Drilling units recognized throughacquired in a business combination or through the application of fresh start accounting are measured at fair value as ofat the date of acquisition or the date of emergence, respectively.acquisition. Cost of property and equipment sold or retired, with the related accumulated depreciation and write-downs areimpairment is removed from the Consolidated Balance Sheet, and resulting gains or losses are included in the Consolidated Statement of Operations.
We re-assess the remaining useful lives of our drilling units when events occur which may impact our assessment of their remaining useful lives. These include changes in the operating condition or functional capability of our rigs, technological advances, changes in market and economic conditions as well as changes in laws or regulations affecting the drilling industry.
Equipment
Equipment is recorded at historical cost less accumulated depreciation and impairment and is depreciated over its estimated remaining useful life. The estimated economic useful life of equipment, when new, is between 3 and 5 years depending on the type of asset. Refer to Note 19 – "Equipment".
Assets held for sale
Assets are classified as held for sale when all of the following criteria are met: Management, having the authority to approve the action,management commits to a plan to sell the asset (disposal group), the asset is available for immediate sale in its present condition subject only to terms that are usual and customary for sales of such assets, an active program to locate a buyer and other actions required to complete the plan to sell the asset (disposal group) have been initiated, the sale of the asset is probable, and transfer of the asset is expected to qualify for recognition as a completed sale, within 1 year. The term probable refers to a future sale that is likely to occur, the asset is being actively marketed for sale at a price that is reasonable in relation to its current fair value and actions required to complete the plan indicate that it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn.
Equipment
Equipment is recorded Assets held for sale are measured at historical costthe lower of carrying value or fair value less accumulated depreciation and is depreciated over its estimated remaining useful life. The estimated economic useful life of equipment, when new, is between 3 and 5 years depending on the type of asset. Refercosts to Note 21 – Equipment.sell.
Leases
Lessee - When we enter into a new contract, or modify an existing contract, we identify whether that contract has a finance or operating lease component. We do not have, nor expect to have any leases classified as finance leases. We determine the lease commencement date by reference to the date the rig (or other leased asset) is available for use and transfer of control has occurred from the lessee. At the lease commencement date, we measure and recognize a lease liability and a right of use ("ROU") asset in the financial statements. The lease liability is measured at the present value of the lease payments not yet paid, discounted using the estimated incremental borrowing rate ("IBR") at lease commencement. The ROU asset is measured at the initial measurement of the lease liability, plus any lease payments made to the lessor at or before the commencement date, minus any lease incentives received, plus any initial direct costs incurred by us.

After the commencement date, we will adjust the measurementcarrying amount of the lease liability by the amount of payments made in the period as well as the unwinding of the discount over the lease term using the effective interest method. After commencement date, we will subsequently adjust the measurement of the ROU asset by amortizingamortize the ROU asset by the amount required to keep total lease expense including interest constant (straight-line over the lease term).

Absent an impairment of the ROU asset, the single lease cost is calculated so that the remaining cost of the lease is allocated over the remaining lease term on straight-line basis. Seadrill will determine whetherassesses a ROU asset is impairedfor impairment and shall recognizerecognizes any impairment loss in accordance with the companyaccounting policy on impairment of long-lived assets. If
We applied the followingsignificant assumptions and judgments in accounting for our leases.
•We apply judgment in determining whether a ROUcontract contains a lease or a lease component as defined by Topic 842.
•We have elected to combine leases and non-lease components. As a result, we do not allocate our consideration between leases and non-lease components.
•The discount rate applied to our operating leases is our incremental borrowing rate. We estimated our incremental borrowing rate based on the rate for our traded debt.
•Within the terms and conditions of some of our operating leases we have options to extend or terminate the lease. In instances where we are reasonably certain to exercise available options to extend or terminate, then the option was included in determining the appropriate lease term to apply. Options to renew our lease terms are included in determining the right-of-use asset and lease liability when it is determined to be impaired, then itreasonably certain that we will exercise that option.
•Where a leasing arrangement is a failed sale and leaseback transaction as no transfer of control has occurred as defined by Topic 606, any monies received will be measured at its carrying amount immediately after the impairment less any accumulated amortization. Aftertreated as a ROU asset has been impaired, we will unwind the remaining asset on a straight-line basis over the remaining lease term.financing transaction.

Lessor - When we enter into a new contract, or modify an existing contract, we identify whether that contract has a sales-type, direct financing or operating lease. We do not have, nor expect to have any leases classified as sales-type or direct financing. For our operating lease, the underlying asset remains on the balance sheet and we record periodic depreciation expense and lease revenue.
Impairment of long-lived assets
We review the carrying value of our long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may no longer be appropriate. We first assess recoverability of the carrying value of the asset by estimating the
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undiscounted future net cash flows expected to resultbe generated from the asset, including eventual disposal. If the undiscounted future net cash flows are less than the carrying value of the asset, then we compare the carrying value of the asset with the discounted future net cash flows, using a relevant weighted-average cost of capital. The impairment loss to be recognized during the period, will beis the amount by which the carrying value of the asset exceeds the discounted future net cash flows.

Other intangible assets and liabilities
Intangible assets and liabilities were recorded at fair value on the date of Seadrill's previous emergence from Chapter 11 in 2018 less accumulated amortization. The amounts of these assets and liabilities less theany estimated residual value if any, is generallyare amortized on a straight-line basis over the estimated remaining economic useful life or contractual period. For periods after emergence we have applied a new accounting policy toWe classify amortization of these intangible assets and liabilities within operating expenses. Our intangible assets include favorable and unfavorable drilling contracts and management services contracts. Refer to Note 1716 – Other assets."Other assets". Our intangible liabilities include unfavorable drilling contracts and unfavorable leasehold improvements. Refer to Note 2321 – Other liabilities.
Prior to emergence, we classified the amortization of these intangible assets or liabilities within other revenues."Other liabilities".
Derivative financial instruments and hedging activities
None of ourOur derivative financial instruments have been formallyare measured at fair value and are not designated as a hedging instruments, and therefore are recorded at fair value.instruments. Changes in fair value are recorded as a gain or loss as a separate line item within "financial items" in the Consolidated Statements of Operations. Refer to Note 3228 – Financial"Financial instruments and risk management and Note 33 - Fair values of financial instrumentsmanagement".
Trade payables
Trade payables are recorded in the balance sheet to recognize a liabilityliabilities to a supplier for a good or service they have provided to us.
Deferred charges
Loan related costs, including debt issuance, arrangement fees and legal expenses, are capitalized and presented in the balance sheet as a direct deduction from the carrying amount of the related debt liability, amortized over the term of the related loan and theloan. The amortization is included in interest expense. On emergence from Seadrill's previous Chapter 11 in 2018, our loan costs were reduced to nil and we recordednil. We recognized a discount againston our debt to reduce its carrying value to equal its fair value. The debt discount willwas due to be unwound over the remaining terms of the debt facilities. Refer to Note 5 – Fresh Start Accounting and Note 10 – Interest expense.
Debt
We have financed a significant proportion of the cost of acquiring our fleet of drilling units through the issue of debt instruments. At the inception of a term debt arrangement, or whenever we make the initial drawdown on a revolving debt arrangement, we will incur a liability for the principal to be repaid. On emergence from the Chapter 11, we issued new debt instruments and the carrying values of our third-party debt liabilities were adjusted to fair value.instruments. Refer to Note 520 – Fresh start accounting and Note 22 – Debt"Debt" for more information on our debt instruments.
Pension benefits
We have several defined benefit pension plans, defined contribution pension plans and other post-employment benefit obligations which provide retirement, death and early termination benefits. We recordrecognize the service cost, as “Vessel and rig operating expenses” or as "Selling, general and administrative expenses" in our Consolidated Statements of Operations depending on the whether or not the related employee's role is directly attributable to rig activities.
Several defined benefit pension plans cover a number of our Norwegian employees that are all administered by a life insurance company. Our net obligation is calculated by estimating the amount of the future benefit that employees have earned in return for their cumulative service. The aggregated projected future benefit obligation is discounted to present value, from which the aggregated fair value of plan assets is deducted. The discount rate is the market yield at the balance sheet date on government bonds in the relevant currency and based on terms consistent with the post-employment benefit obligations.
We record the actuarial gains and losses in the Consolidated Statements of Operations when the net cumulative unrecognized actuarial gains or losses for each individual plan at the end of the previous reporting year exceed 10 percent of the higher of the present value of the defined benefit obligation and the fair value of plan assets at that date. These actuarial gains and losses are recognized over the expected remaining working lives of the employees participating in the plans. Otherwise, recognition of actuarial gains and losses is included in other comprehensive income.  Refer to Note 30 - Pension benefits for more informationThose amounts will be subsequently recognized as a component of net periodic pension cost on the same basis as the amounts recognized in accumulated other comprehensive income.
On retirement, or when an employee leaves the company, the member’s pension liability is transferred to the life insurance company administering the plan, and the pension plan no longer retains an obligation relating to the leaving member. This action is deemed to represent a settlement under U.S. GAAP, as it represents the elimination of significant risks relating to the pension obligation and related assets. Under settlement accounting, for these pension benefits / pension expense.the portion of the net unrealized actuarial gains/losses corresponding to the relative value of the obligation reduction is recognized through the Consolidated Statement of Operations. However, settlement accounting is not required if the cost of all settlements in a year is not deemed to be significant in the context of the plan. We deem the settlement not to be significant when the cost of settlements in the year is less than the sum of service cost and interest cost in the year.In this case, the difference between the reduction in benefit obligation and the plan assets transferred to the life insurance company is recognized within “other comprehensive income,” rather than being recognized in the Consolidated Statement of Operations.
Loss contingencies
We recognize a loss contingency in the Consolidated Balance Sheets where we have a present legal or constructive obligation as a result of a past event, and it is probable that an outflow of economic benefits will be required to settle the obligation and a reliable estimate of the amount can be made. If the effect is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability. Refer to Note 3430 – Commitments"Commitments and contingencies.contingencies".
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Treasury shares
Treasury shares are recognized at cost as a component of equity. We record the nominal value of treasury shares purchased as a reduction in share capital. The amount paid in excess of the nominal value is treated as a reduction of additional paid-in capital. OnUpon Seadrill's previous emergence from Chapter 11 in 2018, we no longer had any treasury shares.
Share-based compensation
SinceAfter emerging from the Previous Chapter 11, we have made several awards under our employee benefit plan (see Note 2925 – Share"Share based compensation). We record an accounting charge equal tocompensation"), which have been cancelled in July 2020 for a cash payment. The compensation for our unvested awards at date of cancellation was based on the fair value of the Shares at the cancellation date. The cash compensation paid to settle the award was charged directly to equity. For our cancelled awards thatany remaining unrecognized compensation cost for unvested awards was recognized immediately on the settlement date.
Before cancellation we expensed the fair value of stock-based compensation issued to employees and non-employees over the period the awards are expected to vest. The expense iswas classified as compensation cost and recognized ratably over the vesting period.period during which the individuals are required to provide service in exchange for the reward.
Guarantees
Guarantees issued by us, excluding those that are guaranteeing our own performance, are recognized at fair value at the time that the guarantees are issued and reported in "Other current liabilities" and "Other non-current liabilities". If it becomes probable that we will have to perform under a guarantee, we remeasure the liability if the amount of the loss can be reasonably estimated. The offsetting entryrecognition of fair value is recorded directlynot required for certain guarantees such as the parent's guarantee of a subsidiary's debt to equity.a third party. Financial guarantees written are assessed for credit losses and any allowance is presented as a liability for off-balance sheet credit exposures where the balance exceeds the collateral provided over the remaining instrument life. The allowance is assessed at the individual guarantee level, calculated by multiplying the balance exposed on default by the probability of default and loss given default over the term of the guarantee.
 

Note 3 - Recent Accounting Standards

1) Recently adopted accounting standards
We recently adopted the following accounting standard updates ("ASUs") in the year::
a) ASU 2016-02 Leases (also 2018-10, 2018-11, 2018-20, 2019-01 & 2019-10)
In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). The update requires an entity to recognize right-of-use assets and lease liabilities on its balance sheet and disclose key information about leasing arrangements. It also offers specific accounting guidance for a lessee, a lessor and sale and leaseback transactions. Lessees and lessors are required to disclose qualitative and quantitative information about leasing arrangements to enable a user of the financial statements to assess the amount, timing and uncertainty of cash flows arising from leases. The guidance became effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years using a modified retrospective application.
We transitioned to the new standard using the modified retrospective approach as permitted by the standard. We determined that our drilling contracts contain a lease component (from a lessor perspective) as well as a revenue component. We have elected to apply the practical expedient provided to lessors and will not separate the lease and nonlease components within our drilling contracts. We will continue to apply the Topic 606 to our drilling contracts instead of Topic 842 because the nonlease component is the predominant component within our drilling contracts. As a result, our pattern of revenue recognition did not change significantly compared to prior accounting standards due to the adoption of this update.
In addition, within our operating leases, where we are lessees, we elected not to separate nonlease components from lease components and instead we account for each separate lease component and the nonlease components associated with that lease component as a single lease component in accordance with Topic 842. We have also elected not to apply the recognition requirements in Topic 842 to short-term leases, being leases lasting less than one year. Instead, we recognize short-term lease payments in our Consolidated Statement of Operations on a straight-line basis over the lease term and variable lease payments in the period in which the obligation for those payments is incurred.
We recognized an aggregate lease liability of $25 million and a right-of-use asset of $23 million on adoption on January 1, 2019. There was no impact to our opening retained earnings as a result of adopting this update. Prior period amounts are not adjusted and continue to be reported in accordance with the previous guidance in Topic 840.
b) Other accounting standard updates
We additionally adopted the following accounting standard updates in the year which did not have any material impact on our Consolidated Financial Statements and related disclosures:
ASU 2018-07 Compensation - Stock compensation (Topic 718)
ASU 2018-16 Derivatives and Hedging (Topic 815)
2) Recently issued accounting standards
We have kept abreast of recently issued ASUs by the FASB that we have not yet adopted but which could affect our Consolidated Financial Statements and related disclosures in future periods:
a) ASU 2016-13 - Financial Instruments - Measurement of Credit Losses (Also 2019-04, 2019-05, 2019-10 & 2019-11)
In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which revises guidance for the accounting for credit losses on financial instruments within its scope. The new standard introduces an approach to estimate expected lifetime credit losses (CECL model) on financial assets ranging from short term trade accounts receivable to long-term financings and modifies the impairment model for available-for-sale debt securities. In April 2019, the FASB issued ASU 2019-04, Codification Improvements to Topic 326, Financial Instruments—Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments, which provides additional guidance on the accounting for credit losses. In May 2019, the FASB issued ASU 2019-05, Financial Instruments-Credit Losses (Topic 326): Targeted Transition Relief, which provides transition guidance for entities to elect the fair value option of certain financial instruments. The guidance will be effective for annual and interim periods beginning after December 15, 2019, with early adoption permitted only from January 1, 2019. Entities are required to apply the standard’s provisions as a cumulative-effect adjustment to retained earnings as at the beginning of the first reporting period in which the guidance is adopted.
We are in the process of evaluating the impact of this standard update. Financial assets held by us subject to evaluation under the CECL model include our external trade receivables and related party receivables (See Note 31 for details). Our external customers are international oil companies, national oil companies and large independent oil companies with high credit standing and with whom we have had a low incidence of bad debt expense. Therefore we do not expect this guidance to create any significant reserve on our external receivables. We are however expecting to establish an allowance on our loans and trade receivables due from related parties under the new guidance to reflect the current financial position of the counterparties. We estimate that we will record an initial reserve in the range of $75 - $135 million, which will be booked in a credit loss allowance account as an offset to equity. The allowance will be reassessed quarterly with any adjustment to the reserve recorded as credit loss expense in the P&L.

b) ASU 2018-13 Fair Value Measurement - Changes to the Disclosure Requirements for Fair Value Measurement
In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement. The update is intended to improve the effectiveness of disclosures in the notes to financial statements by facilitating clear communication of the US GAAP information requirements that are most important to users of an entity's financial statements. The guidance will be effective for annual and interim periods beginning after December 15, 2019, with early adoption permitted. The guidance is expected to result in the following additional disclosures; 1) The changes in unrealized gains and losses for the period included in other comprehensive income for recurring Level 3 fair value measurements held at the end of the reporting period; 2) The range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements; 3) For recurring fair value measurements categorized within Level 3 of the fair value hierarchy, a reconciliation from the opening balances to the closing balances for each class of assets and liabilities, except for derivative assets and liabilities, which may be presented net. We continue to evaluate the impact of this standard update on our consolidated financial statements and related disclosures.
c) ASU 2018-14 Compensation - Changes to the Disclosure Requirements for Defined Benefit Plans
In August 2018, the FASB issued ASU 2018-14, Compensation-Retirement Benefits-Defined Benefit Plans-General (Subtopic 715-20): Disclosure Framework-Changes to the Disclosure Requirements for Defined Benefit Plans. The update is intended to improve the effectiveness of disclosures in the notes to financial statements by facilitating clear communication of the US GAAP information requirements that are most important to users of an entity's financial statements. The guidance will be effective for annual and interim periods beginning after December 15, 2020, with early adoption permitted. We are in the process of evaluating the impact of this standard update on our consolidated financial statements and related disclosures.
d) ASU 2018-15 Intangibles
In August 2018, the FASB issued ASU 2018-15, Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract (a consensus of the FASB Emerging Issues Task Force). The update is intended to provide additional guidance on the accounting for costs of implementation activities performed in a cloud computing arrangement that is a service contract. The guidance will be effective for annual and interim periods beginning after December 15, 2019, with early adoption permitted. We are in the process of evaluating the impact of this standard update on our consolidated financial statements and related disclosures.
e) ASU 2018-17 Consolidation: Targeted Improvements to Related Party Guidance for Variable Interest Entities
In October 2018, the FASB issued ASU 2018-17, Consolidation (Topic 810): Targeted Improvements to Related Party Guidance for Variable Interest Entities. The update is intended to improve general purpose financial reporting by considering indirect interests held through related parties in common control arrangements on a proportional basis for determining whether fees paid to decision makers and service providers are variable interests. The guidance will be effective for annual and interim periods beginning after December 15, 2019, with early adoption permitted. We are in the process of evaluating the impact of this standard update on our consolidated financial statements and related disclosures.
f) ASU 2019-08 Compensation - Stock Compensation (Topic 718) and Revenue from Contracts with Customers (Topic 606)
In November 2019, the FASB issued ASU 2019-08. The amendments in this Update require that an entity measure and classify share-based payment awards granted to a customer by applying the guidance in Topic 718. The amount recorded as a reduction of the transaction price is required to be measured on the basis of the grant-date fair value of the share-based payment award in accordance with Topic 718, not as a reduction of transaction price at contract inception under ASC 606. The guidance will be effective for annual and interim periods beginning after December 15, 2019, with early adoption permitted. We are in the process of evaluating the impact of this standard update on our consolidated financial statements and related disclosures.
g) ASU 2019-12 Income Taxes (Topic 740) -: Simplifying the accounting for income taxes
In December 2019, the FASB issued ASU 2019-12. The amendments in this Update simplify the accounting for income taxes by removing certain exceptions to the general principles in Topic 740. The amendments also improve consistent application of and simplify GAAP for other areas of Topic 740 by clarifying and amending existing guidance. We adopted ASU 2019-12 effective January 1, 2021. The adoption of this guidance willdid not have a material impact on our consolidated financial statements.
b) ASU 2021-08 Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers
We early adopted ASU 2021-08 effective July 1, 2021. Requires contract assets and liabilities (i.e., deferred revenue) acquired in a business combination to be effectiverecognized and measured on the acquisition date in accordance with ASC 606. This did not have a material impact on our financial statements.
c) ASU 2016-13 - Financial Instruments - Measurement of Credit Losses (Also 2018-19, 2019-04 and 2019-11)
In June 2016, the Financial Accounting Standards Board (the “FASB”) issued ASU 2016-13 Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments and subsequent amendments, including ASU 2018-19, ASU 2019-04 and ASU 2019-11: Codification Improvements to Topic 326 “Financial Instruments-Credit Losses”. Topic 326 replaces the incurred loss impairment methodology (that recognizes losses when a probable threshold is met) with a requirement to recognize lifetime expected credit losses (measured over the contractual life of the instrument) immediately, based on information about past events, current conditions and forecasts of future economic conditions. Under the CECL measurement financial assets are reflected at the net amount expected to be collected from the financial asset, CECL measurement is applicable to financial assets measured at amortized cost as well as off-balance sheet credit exposures not accounted for annual and interimas insurance (including financial guarantees).
Seadrill adopted the requirements of Topic 326 in FY 2020. Reporting periods beginning after January 1, 2020 are presented under Topic 326 while comparative periods continue to be reported in accordance with previously applicable GAAP and have not been restated. The allowance for credit losses is presented as a deduction from the asset’s amortized cost (or liability for off-balance sheet exposures) and the net balance shown on the Consolidated Balance Sheet with associated credit loss expense in the Consolidated Statement of Operations.
The CECL allowance related primarily to subordinated loan receivables due from related parties (refer to Note 27 - "Related party transactions"). Our external customers are mostly international or national oil companies with high credit standing. We have historically had a very low incidence of credit losses from these customers. Therefore, adoption of the new guidance has not had a material impact on receivables due from our customers.

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d) Other accounting standard updates
We additionally adopted the following accounting standard updates in the year which did not have any material impact on our Consolidated Financial Statements and related disclosures:
•ASU 2020-01 - Clarifying the interactions between Topic 321, Topic 323 and Topic 815
•ASU 2020-08 - Codification Improvements to Subtopic 310-20, Receivables—Nonrefundable Fees and Other Costs
•ASU 2020--9 - Debt (Topic 470): Amendments to SEC Paragraphs Pursuant to SEC Release No. 33-10762
•ASU 2020-10 - Codification Improvements
•ASU 2020-11 - Financial Services—Insurance (Topic 944): Effective Date and Early Application
2) Recently issued accounting standards
Recently issued ASUs by the FASB that we have not yet adopted but which could affect our Consolidated Financial Statements and related disclosures in future periods:
a) ASU 2020-04 Reference Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting
In March 2020, the FASB issued ASU 2020-04. The amendments provide temporary optional expedients and exceptions for applying U.S. GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The applicable expedients for us are in relation to modifications of contracts within the scope of Topics 310, Receivables, 470, Debt, and 842, Leases. This optional guidance may be applied prospectively from any date beginning March 12, 2020 and cannot be applied to contract modifications that occur after December 15, 2020, with early adoption permitted. 31, 2022.We are in the process of evaluating the impact of this standard update on our consolidated financial statements and related disclosures.
h)b) ASU 2021-04 Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options
The FASB issued this update to clarify and reduce diversity in an issuer’s accounting for modifications or exchanges of freestanding equity-classified written call options (for example, warrants) that remain equity classified after modification or exchange. We do not anticipate this will have a material impact on our financial statements.
c) ASU 2021-05 Leases (Topic 842) Lessors-Certain Leases with Variable Lease Payments
The amendments in this Update affect lessors with lease contracts that (1) have variable lease payments that do not depend on a reference index or a rate and (2) would have resulted in the recognition of a selling loss at lease commencement if classified as sales-type or direct financing. We do not anticipate this will have a material impact on our financial statements.
d) ASU 2021-10 Government Assistance (Topic 832): Disclosures by Business Entities about Government Assistance.
The FASB issued this Update to increase the transparency of government assistance including the disclosure of (1) the types of assistance, (2) an entity’s accounting for the assistance, and (3) the effect of the assistance on an entity’s financial statements. We do not anticipate this will have a material impact on our financial statements.
e) Other accounting standard updates issued by the FASB
As of FebruaryApril 29, 2019,2022, the FASB have issued several further updates not included above. We do not currently expect any of these updates to affect our Consolidated Financial Statements and related disclosures either on transition or in future periods.
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Note 4 - Chapter 11 Proceedings
Summary
On February 22, 2022, Seadrill concluded its comprehensive restructuring process and emerged from Chapter 11 bankruptcy protection. The following major changes to Seadrill’s capital structure were achieved through the restructuring:
1.Additional $350 million of liquidity raised;
2.Obligations under external credit facilities decreased from $5,662 million to $683 million of reinstated debt with maturity in 2027;
3.Future obligations under finance lease arrangements in respect of the West Taurus, West Hercules and West Linus substantially eliminated; and
4.Elimination of guarantees previously provided to holders of the senior notes previously issued by the NSNCo group.
Seadrill emerged from bankruptcy with cash of $486 million, of which $335 million was unrestricted and $151 million was restricted. Seadrill also had $125 million undrawn on its new revolving credit facility which together with the unrestricted cash provided $460 million of liquidity to the Successor company. Following emergence, Seadrill had total debt obligations of $908 million. This comprised $683 million outstanding on reinstated credit facilities; $175 million drawn on its new term loan; and a $50 million convertible bond. This left the Successor company with net debt of $422 million after adding back its post-emergence cash.
In order to substantially eliminate future commitments under capital lease arrangements with SFL Corporation Ltd (“SFL”), Seadrill rejected the West Taurus lease through the bankruptcy court in early 2021 and negotiated amendments to the leases of West Hercules and West Linus in August 2021 and February 2022, respectively. The amended leases for West Hercules and West Linus are short term and we expect to deliver both rigs back to SFL in 2022. In addition to reducing the lease terms, the lease amendments extinguished Seadrill’s obligations to purchase the units at the end of the leases (amongst other changes).
As part of Seadrill’s wider process, NSNCo, the holding company for investments in SeaMex, Seabras Sapura, and Archer, concluded a separate restructuring process on January 20, 2022. The restructuring was achieved using a pre-packaged chapter 11 process and had the following major impacts:
1.Holders of the senior secured notes issued by NSNCo (“notes”, “noteholders”) released Seadrill from all guarantees and securities previously provided by Seadrill in respect of the notes;
2.Noteholders received a 65% equity interest in NSNCo with Seadrill’s equity interest thereby decreasing to 35% and
3.Reinstatement in full of the notes on amended terms.
4.Related to the NSNCo restructuring, the noteholders also financed a restructuring of the bank debt of the SeaMex joint venture. This enabled NSNCo to subsequently acquire a 100% equity interest in the SeaMex joint venture by way of a credit bid, which was executed on November 2, 2021.
In this notethe sections below, we have provided a detailed account of the comprehensive restructuring process.

Background and Objectives

i.Macro-economic background and impact of COVID-19
Since the mid-2010s, the industry had experienced a sustained decline in oil prices which had culminated in an overviewindustry-wide supply and demand imbalance. During this period, market day rates for drilling rigs were lower than was anticipated when the debt associated with acquiring our rigs was incurred. This challenging business climate was further destabilized by challenges that arose due to the COVID-19 pandemic. The actions taken by governmental authorities around the world to mitigate the spread of COVID-19, had a significant negative effect on oil consumption. This led to a further decrease in the demand for our services and had an adverse impact on our business and financial condition.
After the global impact of this pandemic, the global offshore rig market has experienced a recovery, at least in utilization, in many regions. The price of Brent crude has risen and stabilized at more than $90 over the past several months before increasing to over $100. Additionally, oil companies and rig owners have mostly managed to navigate through many of the logistical hurdles posed by the COVID-19 pandemic. Drilling programs that had been postponed have now begun or are back on schedule. As a result, the number of contracted rigs has rebounded, and fleet utilization (jack ups, semi-submersibles and drillships) is nearing March 2020 pre-pandemic levels. Dayrates for some rig types in certain regions, such as for US Gulf of Mexico drillships, have risen dramatically. Conversely, dayrates for rigs in other regions have remained stagnant or only risen modestly.
ii. Default on senior debt obligations and other commitments in 2020
Since the end of 2019, we had been working with senior creditors to provide a solution to Seadrill's high cash outflow for debt service and potential future breaches of liquidity covenants by converting certain interest payments under our credit facilities to payment-in-kind ("PIK") interest and by deferring certain scheduled amortization payments. In our 2020 first quarter earnings release, published on June 2, 2020, we announced that we would no longer proceed with efforts to obtain bank consent for a short-term solution and had instead appointed financial
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advisors to evaluate comprehensive restructuring alternatives to reduce debt service costs and overall indebtedness. We further stated that a comprehensive restructuring may require a substantial conversion of Seadrill's indebtedness to equity.
In September 2020, we did not pay interest on our secured credit facilities, which constituted an event of default. This triggered cross-default covenants for the senior secured notes, guarantee facility agreement and leasing agreements in respect of the West Hercules, West Linus and West Taurus ("SFL rigs"). As a result, we entered into forbearance agreements with certain creditors in respect of our senior secured credit facility agreements, senior secured notes, and guarantee facility agreement. Pursuant to these agreements the creditors agreed not to exercise any voting rights, or otherwise take actions, in respect of the default.
In October 2020 we did not make the required charter payments due on the leasing arrangements for the SFL rigs. This constituted an event of default under the leasing agreements. From November 2020, we restarted making partial payments based on a percentage of the total due in return for SFL granting us permission to use certain restricted cash balances to cover operating costs of the SFL rigs.
In December 2020, after triggering an additional event of default through not paying interest on our secured credit facilities, we entered into a further forbearance agreement with certain creditors. On January 15, 2021, we did not make the semi-annual cash interest payment due on our senior secured notes. The forbearance agreements ended on January 29, 2021.
The events of default in September 2020 and December 2020 due to non-payment of interest on our senior credit facilities and further violation of the cross-default covenant for the Senior Secured Notes, meant that the debt was callable on demand and therefore classified as current in our December 31, 2020 balance sheet. The scheduled interest and fees were converted to loan principal tranches and incurred payment-in-kind interest at their original rates plus an additional 2%.
iii. Three objectives of the comprehensive restructuring
Seadrill's largest debt obligation at the petition date was the $5.7 billion owed to lenders under its senior credit facilities. The primary objective of the restructuring was to enter an agreement with stakeholders to provide new liquidity and to substantially decrease liabilities under these facilities through the issuance of new equity.
In addition, as of the petition date, Seadrill was committed to $1.1 billion in aggregate lease obligations under the arrangements for SFL rigs. As these lease arrangements were not considered sustainable under a new capital structure, the rejection or restructuring of these lease obligations was considered an integral part of obtaining the requisite level of creditor approval in support of the Plan.
Following Seadrill’s previous restructuring on July 2, 2018, NSNCo had issued 12.0% senior secured notes due July 2025, of which $0.5 billion remained outstanding as of the petition date. Seadrill held 100% of the equity interest in NSNCo and had provided guarantees over its debt obligations. One of the key terms of the restructuring was to negotiate the release by the Noteholders of all existing guarantees and security and claims with respect to Seadrill Limited and its subsidiaries. This was likely to involve the disposal of part of Seadrill's equity interest in the NSNCo group.
Seadrill Chapter 11 Process

i.Introduction and Chapter 11 filing
Chapter 11 is the principal business reorganization chapter of the Bankruptcy Code. In addition to permitting debtor rehabilitation, chapter 11 promotes equality of treatment for creditors and similarly situated equity interest holders, subject to the priority of distributions prescribed by the Bankruptcy Code. The commencement of a chapter 11 case creates an estate that comprises all of the legal and equitable interests of the debtor as of the date the chapter 11 case is commenced. The Bankruptcy Code provides that the debtor may continue to operate its business and remain in possession of its property as a “debtor in possession.”
Following the defaults in 2020, and expiry of forbearance agreements described above, the Debtors filed voluntary petitions for reorganization under the Chapter 11 Proceedings in the Bankruptcy Court on February 7, 2021 and February 10, 2021. These filings triggered a stay on enforcement of remedies with respect to our debt obligations.
These filings excluded the NSNCo group, with Seadrill and NSNCo noteholders continuing to negotiate a refinancing outside of bankruptcy.
ii. Plan of Reorganization
Consummating a chapter 11 plan is the principal objective of a chapter 11 case. A bankruptcy court’s confirmation of a plan binds the debtor, any person acquiring property under the plan, any creditor or equity interest holder of the debtor, and any other entity as may be ordered by the bankruptcy court. Subject to certain limited exceptions, the order issued by a bankruptcy court confirming a plan provides for the treatment of the debtor’s liabilities in accordance with the terms of the confirmed plan.
On July 23, 2021, the Company entered into a Plan Support and Lock-Up Agreement (the “Plan Support Agreement”) with the Company, the Company Parties, certain Holders of Claims under the Company’s Credit Agreements, and Hemen. On July 24, 2021, the Company filed the first versions of the Joint Chapter 11 Plan of Reorganization and related transactions.Disclosure Statement. On August 31, 2021, the Company filed the First Amended Plan of Reorganization and the First Amended Disclosure Statement (the “Disclosure Statement”) and on September 2, 2021, the Court approved the First Amended Disclosure Statement (as Modified) and the solicitation of the Plan of Reorganization. On October 11, 2021, the Company’s creditor classes voted to accept the plan of reorganization. On October 26, 2021, Seadrill’s Plan of Reorganization was confirmed by the U.S. Bankruptcy Court for the Southern District of Texas.


Overview
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Prioriii. Amendment to terms of existing facilities
As of the Petition Date, the Debtors were liable for approximately $6.2 billion in aggregate funded debt obligations. These obligations included $5.7 billion due under 12 Prepetition Credit Facilities (silos) and $0.5 billion due under the NSNCo Secured Notes. Seadrill Limited was a guarantor under all 12 Prepetition Credit Facilities and the Notes. The facilities were secured by, among other things, (a) a first priority, perfected mortgage in one or more of the Debtors’ drilling rigs, (b) guarantees from the applicable rig-owning entities and intra-group charterers. No financial institution possessed a blanket lien over the Debtors’ entire fleet. Instead, the Prepetition Credit Facilities were secured by non-overlapping subsets of the Debtors’ rigs.
The Plan, among other things, provided that holders of Allowed Credit Agreement Claims would (a) receive $683 million (adjusted for AOD cash out option) of take-back debt (amortizing beginning in March 2023, with a maturity date of December 2026 and margin of LIBOR + 5% cash-pay + 7.5% PIYC) whereby Seadrill either pays the PIYC interest in cash or the equivalent amount is capitalized as principal outstanding (dependent on certain conditions set out in the facility agreement) and (b) be entitled to participate in a $300 million new-money raise under the New First Lien Facility, and (c) receive 83 percent of equity in Reorganized Seadrill, subject to dilution by the Management Incentive Plan and the Convertible Bond Equity, on account of their Allowed Credit Agreement Claims, and 16.75 percent of equity in Reorganized Seadrill if such holders elected to participate in the Rights Offering (including the Backstop Parties).
iv. Rights offering and backstop of new $300m facility
In bankruptcy, a rights offering allows a debtor to offer creditors or equity security holders the right to purchase equity in the post-emergence company. In a rights offering, debtors grant subscription rights to a class (or classes) of creditors (or equity holders) in conjunction with the chapter 11 plan of reorganization. Rights offerings function as a source of exit financing, allowing debtors to raise capital to fund emergence costs and plan distributions, or to ensure that the company has sufficient liquidity post-emergence in a de-leveraged capital structure. Nearly all rights offerings are fully backstopped pursuant to agreements between the backstop party (or parties) and the debtors. Under a backstop agreement, backstop parties commit to purchase a certain amount of securities offered under the plan and to purchase additional securities if the issuance is under-subscribed, receiving additional securities in exchange for their agreement to backstop a rights offering.
Holders of the Subscription Rights, which include the Backstop Parties, received the right to lend up to $300 million under the New First Lien Facility in accordance with and pursuant to the filingPlan, the Rights Offering Procedures, the Backstop Commitment Letter, and the New Credit Facility Term Sheet. Rights Offering Participants also received, in consideration for their participation in the Rights Offering, 12.5% (the “Rights Offering Percentage”) of the issued and outstanding New Seadrill Common Shares as of the Effective Date (subject to dilution by the Management Incentive Plan and the Convertible Bond Equity). The New First Lien facility is structured as (i) $175 million term loan and (ii) $125 million revolving credit facility (RCF). The term loan facility bears interest at a margin of 7% per annum plus a compounded risk-free rate (and any applicable credit adjustment spread). The RCF bears interest at a margin of 7% per annum plus a compounded risk-free rate (and any applicable credit adjustment spread), and a commitment fee of 2.8% per annum is payable in respect to any undrawn portion of the RCF commitment.
As consideration for the Backstop Commitment of each Backstop Party, the Backstop Parties were issued the number of New Seadrill Common Shares equal to the sum of: (i) 12.50% minus the Rights Offering Percentage (if under-subscribed) plus (ii) 4.25% multiplied by the total number of New Seadrill Common Shares issued and outstanding on the Effective Date (subject to dilution by the MIP and the Convertible Bond Equity) (the “Equity Commitment Premium”, and together with the foregoing clause, the “Backstop Participation Equity”); and (b) the Debtors paid in cash to the Backstop Parties a premium (the “Commitment Premium”) equal to 7.50% of the $300 million in total commitments under the New First Lien Facility.
As at the Effective Date, the outstanding external debt is repayable as set out in the table below:
(In $ millions)20222023202420252026 and thereafterTotal
Total Debt Repayments (a)0404040788908
(a) The repayment schedule is net of fees and assumes that all interest is paid in cash as opposed to any capitalized pay-if-you-can interest, as further outlined in the existing facility section above.
v. Hemen $50m convertible bond
$50 million convertible bonds with margin of LIBOR + 6% cash-pay and maturity date of March 2028 were issued to Hemen at par upon emergence. The bonds are convertible into the Conversion Shares in an amount equal to 5% of the fully-diluted ordinary shares. The principal amount of the Bonds is convertible (in full not part) into the Conversion Shares at the option of the Lender at any time during the Conversion Period, being the period from the earlier of (i) the date on which the Issuer’s ordinary shares are listed and begin trading on the NYSE and (ii) the date on which the Issuer’s ordinary shares are listed and begin trading on the OSE, Shares at the option of the Lender at any time during the Conversion Period.
vi. Emergence and new Seadrill equity allocation table
Seadrill met the requirements of the plan of reorganization and emerged from Chapter 11 on February 22, 2022. Companies emerging from chapter 11 qualify for fresh-start reporting if two conditions are met: (1) the reorganization value of the entity’s assets is less than the total of all claims and post-petition liabilities; and (2) the holders of pre-confirmation voting shares will receive less than 50 percent of the voting shares upon emergence. Upon emergence from the Chapter 11 Proceedings, (as defined below)we expect to meet the requirements and will apply fresh start accounting to our financial statements in accordance with the provision set forth in ASC852. Entities that adopt fresh-start reporting must
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assign the reorganization value to the entity’s assets and liabilities in accordance with procedures specified in ASC 805. The guidance defines reorganization value as the value attributed to the reconstituted entity, as well as the expected net realizable value of those assets that will be disposed of before reconstitution occurs. Therefore, this value is viewed as the value of the entity before considering liabilities and it approximates the amount a willing buyer would pay for the assets of the entity immediately after the restructuring.
Under the Plan and prior to any equity dilution on conversion of the convertible bond, the Company issued 83.00% of the Company’s equity to Class 4 Credit Agreement Claimants, 12.50% to the Rights Offering Participants, 4.25% to the Backstop Parties through the Equity Commitment Premium, and the remaining 0.25% to Class 9 predecessor shareholders.
The breakout shown below shows the equity allocation before and after the conversion of the convertible bond.
Recipient of SharesNumber of shares% allocationEquity dilution on conversion of convertible bond
Allocation to predecessor senior secured lenders41,499,99983.00 %78.85 %
Allocation to new money lenders - holders of subscription rights6,250,00112.50 %11.87 %
Allocation to new money lenders - backstop parties2,125,0004.25 %4.04 %
Allocation to predecessor shareholders124,9980.25 %0.24 %
Allocation to convertible bondholder— — %5.00 %
Total shares issued on emergence49,999,998 100.00 %100.00 %

NSNCo Restructuring

i Introduction
As part of Seadrill’s wider process, NSNCo, the holding company for investments in SeaMex, Seabras Sapura, and Archer, concluded a separate restructuring process on January 20, 2022. The restructuring was achieved using a pre-packaged chapter 11 process and had the following major impacts:
1.Holders of the senior secured notes issued by NSNCo released Seadrill from all guarantees and securities previously provided by Seadrill in respect of the notes;
2.Seadrill sells 65% of its equity interest in NSNCo to the holders of NSNCo senior secured notes. Seadrill's equity interest thereby decreasing to 35%; and
3.Reinstatement in full of the notes on amended terms.
Related to the NSNCo restructuring, the noteholders also financed a restructuring of the bank debt of the SeaMex joint venture. This enabled NSNCo to subsequently acquire a 100% equity interest in the SeaMex joint venture by way of a credit bid, which was executed on November 2, 2021.
As Seadrill lost its controlling interest in NSNCo through the sale of 65% of its equity interest on January 20, 2022 (the date the bankruptcy court heard the filing for NSNCo's prepackaged Chapter 11), we have presented the results of NSNCo, including the consolidated results of SeaMex from November 2021 onwards, as discontinued operations in Seadrill’s financial statements for the period ended December 31, 2021. NSNCo’s assets and liabilities have similarly been classified as held-for-sale in Seadrill’s December 2021 balance sheet. All periods presented have been recast for this change.
ii. Purchase of SeaMex by NSNCo through credit bid
Credit bidding is a mechanism, whereby a secured creditor can ‘bid’ the amount of its secured debt, as consideration for the purchase of the assets over which it holds security. In effect, it allows the secured creditor to offset the secured debt as payment for the assets and to take ownership of those assets without having to pay any cash for the purchase.
On June 18, 2021, John C. McKenna of Finance & Risk Services Ltd and Simon Appell of AlixPartners UK LLP were engagedappointed as joint provisional liquidators (the “JPLs”) over SeaMex by an order of the Supreme Court of Bermuda. Further, the joint venture agreement governing the SeaMex joint venture between one of NSNCo’s subsidiaries, Seadrill JU Newco Bermuda Ltd., and an investment fund controlled by Fintech was terminated with immediate effect.
On July 2, 2021, a restructuring support agreement ("RSA") was reached with the NSNCo Noteholders with regards to a comprehensive restructuring of the debt facility. A key step in extensive discussionsthe RSA was the sale of the assets of SeaMex out of provisional liquidation to a newly incorporated wholly owned subsidiary of NSNCo under a share purchase agreement. On November 2, 2022, the sale of assets of SeaMex to a subsidiary of NSNCo was completed.
Management determined that the Transaction qualified as a business combination under ASC 805 because (i) SeaMex as the acquiree met the definition of a business and (ii) NSNCo as the acquirer obtained control of SeaMex. As a result, the acquisition method was applied, and the identifiable assets acquired and liabilities assumed were recognized at fair value on the acquisition date. The consideration of the business combination was determined to be $0.4 billion, which is based on the value of various forms of debt instruments that were forgiven and were owed to NSNCo. The fair value of the net assets acquired equaled the amount of the purchase consideration and no amount was ascribed to
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goodwill nor bargain purchase. A gain was recognized in discontinued operations in connection with our secured lenders, certain holdersthe step acquisition of our unsecured bondsSeaMex by NSNCo and potential new money investors regardingrelates primarily to the reversal of previously established expected credit loss allowances against loans previously advanced by the NSNCo Group to the SeaMex joint venture. The book value of the equity method investment was nil prior to the acquisition date.
We assessed whether SeaMex qualified as held-for-sale upon the acquisition. SeaMex, being a subsidiary of NSNCo, also meets the HFS criteria on the acquisition date and will be reported in discontinued operations as of December 31, 2021 measured at its carrying value, as it is less than the fair value less cost to sell.
iii. NSNCo Sale
NSNCo filed a pre-packaged bankruptcy that was heard on January 12, 2022 in a separate petition filing from Seadrill in the U.S. Bankruptcy Court for the Southern District of Texas. On January 20, 2022, NSNCo emerged from bankruptcy, having implemented the terms of the RSA described above.
On a comprehensive restructuring. Seadrill consolidated group basis, the assets, liabilities, and equity of NSNCo will be derecognized as at the date of sale, when control is lost, on January 20, 2022 (the date the court heard the filing for the pre-packaged bankruptcy), with any gain or loss on disposal being recognized. Upon NSNCo’s emergence date, Seadrill will retain a 35% interest in NSNCo, which will be recognized as an equity method investment.
Management determined that it meets the criteria for being held-for-sale (“HFS”) as of December 31, 2021 and represent a strategic-shift resulting in discontinued operations reporting on Seadrill’s financial statements for reporting on the Form 20-F.
Renegotiation of leases with SFL
SFL is a company that owns and charters shipping vessels in the tanker, bulker, container and offshore segments. Since 2013, Seadrill had entered into sale and leaseback arrangements with certain subsidiaries of SFL (SFL Hercules Ltd., SFL Deepwater Ltd. and SFL Linus Ltd. Under those arrangements, the semi-submersible rigs West Taurus and West Hercules and the jack-up rig West Linus were leased to certain fully owned Seadrill entities under long term charter agreements (collectively, the “Prepetition SFL Charters”).
The objectivesoriginal charters had been accounted for as failed sale leasebacks due to contractual call options and purchase obligations, resulting in the rigs being kept on balance sheet. As they were treated as financing transactions, this resulted in the recognition of financial liabilities to SFL held at fair value on initial recognition (upon deconsolidation of the ship finance VIEs in 2020). The Chapter 11 Proceedings afforded Seadrill the option to reject or amend the leases.
Shortly after the Petition Date, the Debtors sought court authority to reject the Prepetition Taurus Charter and abandon certain related personal property. On March 9, 2021, the West Taurus lease rejection motion was approved by the Bankruptcy Court, and the rig was redelivered to SFL in April 2021, in accordance with the West Taurus settlement agreement. The lease termination led to a remeasurement of the outstanding amounts due to SFL held within liabilities subject to compromise to claim value, resulting in a $186 million loss within "Reorganization items, net" on the Consolidated Statement of Operations in 2021.
On August 27, 2021, the Bankruptcy Court of the Southern District of Texas entered an approval order for an amendment to the original SFL Hercules Charter, whereby Seadrill would pay a lower charter hire and whereby the expiry of the SFL Charter would mirror the completion of work under the Equinor (Canada) Contract in October 2022 (subject to extension, if Equinor exercises certain options rights). The amended charter is accounted for as an operating lease, resulting in the recognition of a ROU asset and an associated lease liability. The removal of the call options and purchase obligations meant that sale recognition was no longer precluded. The rig asset and finance liability to SFL were derecognized in 2021, resulting in a $10 million non-cash gain within "Reorganization items, net" on the Consolidated Statement of Operations in 2021.
On February 18, 2022, Seadrill signed a transition agreement with SFL pursuant to which the West Linus rig will be redelivered to SFL upon assignment of the ConocoPhillips drilling contract to SFL. The interim transition bareboat agreement with SFL will see Seadrill continuing to operate the West Linus until the rig is handed back to SFL and a new Manager, Odfjell, for a period of time estimated to last approximately 6 to 9 months from Seadrill’s emergence. The amendment charter no longer contains a purchase obligation and will therefore result in the derecognition of the rig asset of $175 million and liability of $158 million at emergence from Chapter 11 on February 22, 2022. The interim transition bareboat agreement will be accounted for as a short-term operating lease.
Detailed timeline
We have provided a detailed timeline covering the core events of the restructuring wereprocess below.
September 2020 - We did not pay interest on our secured credit facilities, which constituted an event of default. This triggered cross-default covenants for the senior secured notes, guarantee facility agreement and leasing agreements in respect of the West Hercules, West Linus and West Taurus. As a result, we entered into forbearance agreements with certain creditors in respect of our senior secured credit facility agreements, senior secured notes, and guarantee facility agreement.
December 2020 - After triggering an additional event of default through not paying interest on our secured credit facilities, we entered into a forbearance agreement with certain creditors. Pursuant to buildthis agreement, the consenting creditors had agreed not to act until January 29, 2021 in respect of certain events of default that may have arisen under nine of our twelve senior secured credit facility agreements, as a bridge to a recoveryresult of the group not making certain interest payments.
January 2021 - We did not make the semi-annual cash interest payment due on our senior secured notes.
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February 7, 2021 and achieve a sustainable capital structure. To achieve this, we had proposed an extension to our bank maturities, reduced debt amortization payments, amendments to financial covenants and raising of new capital.
On September 12, 2017, OldFebruary 10, 2021 - Seadrill Limited certainand the majority of its subsidiaries (together "the Company Parties") and certain Ship Finance companies entered into a restructuring support and lock-up agreement ("RSA") with a group of bank lenders, bondholders, certain other stakeholders, and new-money providers. In connection with the RSA, the Company Parties entered into an "Investment Agreement" under which Hemen Investments Limited, an affiliate of Old Seadrill Limited's largest shareholder Hemen Holding Ltd. and certain other commitment parties, committed to provide $1.06 billion in new cash commitments, subject to certain terms and conditions (the "Capital Commitment").
On September 12, 2017, to implement the transactions contemplated by the RSA and Investment Agreement, Old Seadrill Limited and certain of its subsidiaries (the "Debtors") commenced prearrangedfiled voluntary petitions for reorganization proceedings (the "Chapter 11 Proceedings") under Chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court for the Southern District of Texas Victoria Division. DuringTexas.
March 2021 - The West Taurus lease rejection motion was approved by the bankruptcy proceedings,Bankruptcy Court.
April 2021 – The West Taurus rig was redelivered to SFL
June 2021 – John C. McKenna of Finance & Risk Services Ltd and Simon Appell of AlixPartners UK LLP were appointed as joint provisional liquidators over SeaMex by an order of the Debtors continuedSupreme Court of Bermuda to operate the business as debtors in possession.
After September 12, 2017, the Debtors negotiated with their variousmaximize value for creditors and on February 26, 2018 announcedother stakeholders.
July 2, 2021 – A restructuring support agreement was reached with the NSNCo Noteholders with regards to a "Global Settlement", following which there werecomprehensive restructuring of the debt facility.
July 9, 2021 - NSNCo concluded a solicitation process 80% of the principal noteholders approving amendments to the RSAindenture governing the Notes.
July 23, 2021 - The Company entered into a Plan Support and Investment Agreement. These amendments provided for, amongst other things,Lock-Up Agreement with the inclusionCompany, the Company Parties, certain Holders of certain other creditors as Commitment Parties, an increase of the Capital Commitment to $1.08 billion, increased recoveries for general unsecured creditorsClaims under the PlanCompany’s Credit Agreements, and an agreement regarding allowed claims from certain newbuild shipyards.Hemen.
On February 26, 2018,July 24, 2021 - The Company filed the Debtors filed a proposed Second Amendedfirst versions of the Joint Chapter 11 Plan of Reorganization and Disclosure Statement.
August 27, 2021 - The Bankruptcy Court of the Southern District of Texas entered an approval order for an amendment to the original SFL Hercules Charter.
August 31, 2021 - The Company filed the First Amended Plan of Reorganization and the First Amended Disclosure Statement (the "Plan"“Disclosure Statement”) with.
September 2, 2021 - The Court approved the Bankruptcy Court.First Amended Disclosure Statement and the solicitation of the Plan of Reorganization.
October 11, 2021 - The Company’s creditor classes voted to accept a court confirmed plan.
October 26, 2021 - Seadrill’s Plan of Reorganization was confirmed by the U.S. Bankruptcy Court on April 17, 2018.for the Southern District of Texas.
November 2, 2021 – The Plan became effectivesale of SeaMex to a subsidiary of NSNCo was completed.
Subsequent Events
January 11, 2022 – NSNCo filed for a pre-packaged bankruptcy in a separate petition filing from Seadrill in the U.S. Bankruptcy Court for the Southern District of Texas.
January 20, 2022 – Sale of 65% of NSNCo following emergence from its pre-packaged chapter 11 process.
February 18, 2022 - Seadrill signed a short-term transition agreement with SFL, whereby Seadrill will continue to operate the West Linus until the rig is handed back to SFL.
February 22, 2022 - Seadrill concluded its comprehensive restructuring process and the Debtors emerged from Chapter 11 Proceedings on July 2, 2018 (the "Effective Date").bankruptcy protection.
The Plan extinguished approximately $2.4 billion in unsecured bond obligations, more than $1.0 billion in contingent newbuild obligations, substantial unliquidated guarantee obligations, and approximately $250 million in unsecured interest rate and currency swap claims, while extending near term debt maturities, providing Seadrill with over $1.0 billion in new capital and leaving employee, customer and ordinary trade claims largely unimpaired.Other matters
Key terms of the Plan of Reorganizationi.Liabilities subject to compromise
As set out above, the Plan was confirmedLiabilities subject to compromise distinguish pre-petition liabilities which may be affected by the Bankruptcy Court on April 17, 2018 and became effective when the Debtors emerged from Chapter 11 Proceedingsproceedings from those that will not. The liabilities held as subject to compromise are disclosed on July 2, 2018. The Plan provided for, among other things, that:a separate line on the consolidated balance sheet.
Liabilities subject to compromise, as presented on the Consolidated Balance Sheet as at December 31, 2021, include the following:
(In $ millions)December 31, 2021
Senior under-secured external debt5,662
Accounts payable and other liabilities36
Accrued interest on external debt34
Amount due to related party503
Liabilities subject to compromise6,235
◦There was a corporate reorganization whereby Seadrill Limited became the ultimate parent holding company of Old Seadrill Limited's subsidiaries.
◦The Commitment Parties and subscribers to an equity rights offering subscribed for a total 23,750,000 shares in Seadrill Limited for aggregate consideration of $200 million.
◦The Commitment Parties and subscribers to a notes rights offering subscribers purchased a total $880 million principal amount of New Secured Notes and were issued 54,625,000 shares in Seadrill Limited for an aggregate consideration of $880 million.
◦The holders of general unsecured claim were issued 14,250,000 shares in Seadrill Limited.
◦The former holders of Old Seadrill Limited Equity and certain other claimants were issued 1,900,000 shares in Seadrill Limited.
◦Certain Commitment Parties received a fee of 475,000 shares in Seadrill Limited and Hemen received a fee of 5,000,000 shares in Seadrill Limited.
◦An employee incentive plan was implemented (the “Employee Incentive Plan”) which reserved an aggregate of 10% of the Seadrill Limited Shares, for grants to be made from time to time to Seadrill employees and other parties.
This is summarizedii. Interest expense
The Debtors have discontinued recording interest on the under-secured debt facilities from the Petition Date, in the below table:
    Percentage
Recipient of Common Shares Number of shares
 Prior to dilution by Primary Structuring Fee and the shares reserved under the Employee Incentive Plan
 Prior to dilution by the shares reserved under the Employee Incentive Plan
 Fully diluted
Commitment Parties (in exchange for cash paid pursuant to the Investment Agreement) and Equity Rights Offering Subscribers 23,750,000
 25.00% 23.75% 21.38%

    Percentage
Recipient of Common Shares Number of shares
 Prior to dilution by Primary Structuring Fee and the shares reserved under the Employee Incentive Plan
 Prior to dilution by the shares reserved under the Employee Incentive Plan
 Fully diluted
Recipients of Senior Secured Notes (including Commitment Parties and Notes Rights Offering Subscribers) 54,625,000
 57.50% 54.63% 49.16%
Holders of General Unsecured Claims 14,250,000
 15.00% 14.25% 12.82%
Former Holders of Old Seadrill Limited Equity and Seadrill Limited 510(b) Claimants 1,900,000
 2.00% 1.90% 1.71%
Fees to Select Commitment Parties 475,000
 0.50% 0.47% 0.43%
All creditors, excluding Primary Structuring Fee 95,000,000
 100.00% 95.00% 85.50%
Hemen (on account of Primary Structuring Fee) 5,000,000
 -
 5.00% 4.50%
Total, prior to dilution by shares reserved under the Employee Incentive Plan 100,000,000
 -
 100.00% 90.00%
Reserved for the Employee Incentive Plan 11,111,111
 -
 -
 10.00%
Total, fully diluted 111,111,111
 -
 -
 100.00%
Reorganization items
Expenses and income directly associatedline with the Chapter 11 cases are reported separatelyguidance of ASC 852-10, Reorganizations. Contractual interest on liabilities subject to compromise not reflected in the Consolidated Statement of Operations was $298 million. Interest continued to be recognized on the Notes in 2021 as "Reorganization items"NSNCo did not file for chapter 11 until January 2022. Refer to Note 10 – Interest expense to the Consolidated Financial Statements included herein for more information regarding interest expense.

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iii. Reorganization items, net
Incremental costs incurred directly as required by ASC 852, Reorganizations. This category was used to reflect the net expenses and gains and losses that are thea result of the bankruptcy filing and any gains or losses on adjustment to the expected allowed claim value under the plan of reorganization are classified as "Reorganization items, net" in the Consolidated Statement of the business.
Operations. The following table summarizes the components included within reorganization items:
 Successor  Predecessor
(In $ millions)Year ended December 31,
2019
 Period from July 2, 2018 through December 31, 2018
  Period from January 1, 2018 through July 1, 2018
 Year ended December 31,
2017
Professional and advisory fees—
 (9)  (187) (66)
New investor commitment fees—
 —
  —
 (53)
Loss on Newbuilding global settlement claim—
 —
  —
 (1,064)
Loss on other pre-petition allowed claims—
 —
  —
 (3)
Gain on liabilities subject to compromise—
 —
  2,958
 —
Fresh start valuation adjustments—
 —
  (6,142) —
Write-off of debt issuance costs—
 —
  —
 (66)
Reversal of credit risk on derivatives—
 —
  —
 (89)
Interest income on surplus cash invested—
 —
  6
 4
Total reorganization items, net—
 (9)  (3,365) (1,337)
i. Advisory and professional fees
Professional and advisory fees incurred for post-petition Chapter 11 expenses. Professional and advisory expenses have been incurred post-emergence but relate to our Chapter 11 filing.
ii. New investor commitment fees
Commitment fee of 5% ofitems recognized in the committed funds agreed under the terms of the investment agreement.

iii. Loss on Newbuilding global settlement claim
Under the Bankruptcy Code, the Debtors had the right to reject certain contracts, subject to the approval of the Bankruptcy Court and certain other conditions. Subject to certain exceptions, this rejection relieves the debtor from performing its future obligations under the contract but entitles the counterparty to assert a pre-petition general unsecured claim for damages. As part of the Global Settlement Agreement, it was agreed that the Debtors would reject and terminate the newbuild contracts for the drillships West Dorado, West Libra, West Aquila and West Libra. In return the newbuild shipyards Samsung and DSME received an allowed claim for $1,064 million. In addition to the re-organization expense shown above, we also recorded a non-cash impairment charge against these Newbuild assets of $696 million atyear ended December 31, 2017. Refer to Note 19 - Newbuildings for further details.
iv. Gain on liabilities subject to compromise
On emergence from Chapter 11 we settled our liabilities subject to compromise in accordance with the Plan. This includes settlement on our unsecured bonds, Newbuild global settlement claim (see above) and interest rate and cross-currency interest rate swaps. Refer to Note 5 – Fresh Start Accounting for further information.
v. Fresh start valuation adjustments
On emergence from Chapter 11, our assets and liabilities were recorded at fair value in accordance with ASC 852 related to fresh start reporting. The effects of the application of fresh start accounting were applied as of July 2, 2018 and the new basis of our assets and liabilities are reflected in the Consolidated Balance Sheet as of December 31, 2018 (Successor) and the related adjustments thereto were recorded in the Consolidated Statement of Operations in the Predecessor. Refer to Note 5 – Fresh Start Accounting for further information.
vi. Write-off of debt issuance costs
On filing for Chapter 11, $66 million of unamortized debt issuance costs on the impaired secured credit facilities and unsecured bonds were expensed.
vii. Reversal of credit risk on derivatives
The filing for Chapter 11 triggered an event of default under our derivative agreements, and therefore our interest rate and cross-currency interest rate swaps were held at a terminated value. As such, any credit risk adjustment on these arrangements was taken to the Consolidated Statement of Operations.
viii. Interest income on surplus cash invested
Interest income recognized on cash held within entities that had filed for Chapter 11.

Note 5 – Fresh Start Accounting
Fresh Start Accounting
Upon emergence from bankruptcy, we applied fresh start accounting to our financial statements in accordance with the provision set forth in ASC852 as (i) the holders of existing voting shares of the Company prior to emergence received less than 50% of the voting shares of the Company outstanding following its emergence from bankruptcy and (ii) the reorganization value of the Company’s assets immediately prior to confirmation of the plan of reorganization was less than the post-petition liabilities and allowed claims.
We elected to apply fresh start accounting effective July 2, 2018 (the "Convenience Date"), to coincide with the timing of the normal third quarter reporting period, which resulted in Seadrill becoming a new entity for financial reporting purposes. We evaluated and concluded that events between July 1, 2018 and July 2, 2018 were immaterial and that the use of an accounting Convenience Date of July 1, 2018 was appropriate. The effects of the Plan and the application of fresh start accounting were applied as of July 2, 2018 and the new basis of our assets and liabilities are reflected in our Consolidated Balance Sheet as of December 31, 2018 and the related adjustments thereto were recorded in the Consolidated Statement of Operations of the Predecessor as "Reorganization items" during the period from January 1, 2018 through July 1, 2018. As a result of the application of fresh start accounting and the effects of the implementation of the Plan, the Consolidated Financial Statements for the period after July 2, 2018 (the “Successor”) will not be comparable with the Consolidated Financial Statements prior to that date.
Reorganization Value
Reorganization value represents the fair value of the Successor Company’s total assets and is intended to approximate to the amount a willing buyer would pay for the assets immediately after restructuring. Under fresh start accounting, we are required to allocate the reorganization value to individual assets based on their estimated fair values.
The Plan presented on February 26, 2018, and confirmed by the Bankruptcy Court on April 17, 2018, estimated a range of distributable value for the Successor Company of between $10.2 billion and $11.8 billion. We derived the reorganization value based on the mid-point of this range of estimated distributable values. This was approximately $11.0 billion. Fair values are inherently subject to significant uncertainties and contingencies beyond our control. Accordingly, there can be no assurance that the estimates, assumptions, valuations, and financial projections will be realized, and actual results could vary materially.

Valuation of Drilling Units
Our principal assets comprise our fleet of drilling units. With the assistance of valuation experts, we determined a fair value of these drilling units based primarily on an income approach utilizing a discounted cash flow analysis. We established an estimate of future cash flows for the period ranging from emergence to the end of life for each rig and discounted the estimated future cash flows to present value. The expected cash flows used in the discounted cash flows were derived from earnings forecasts and assumptions regarding growth and margin projections.
A discount rate of 11.4% was estimated based on an after-tax weighted average cost of capital ("WACC") reflecting the rate of return that would be expected by a market participant. The WACC also takes into consideration a company specific risk premium reflecting the risk associated with the overall uncertainty of the financial projects used to estimate future cash flows. We used a replacement cost approach to value capital spares and other property plant, and equipment.
Valuation of Equity Method Investments
The fair value of equity method investments was derived using an income approach, which discounts future free cash flows. The estimated future free cash flows associated with the investments were primarily based on expectations around applicable day rates, drilling unit utilization, operating costs, capital and long-term maintenance expenditures, applicable tax rates and industry conditions. The cash flows were estimated over the remaining useful economic lives of the underlying assets but no longer than 30 years in total, and discounted using an estimated market participant WACC as follows:
2021:
Investment(In $ millions)WACC
Year ended December 31, 2021
Seadrill Capricorn Holdings LLCAdvisory and professional fees after filing11.4(127)%
Seadrill Operating LPRemeasurement of terminated lease to allowed claim12.0(186)%
Seadrill Deepwater Drillship Ltd12.0%
Seabras Sapura HoldingInterest income on surplus cash14.33 %
Seabras Sapura ParticipacoesTotal reorganization items, net13.7(310)%
SeaMex12.7%
iv. Condensed Combined Debtors Financial Statements
When one or more entities in the consolidated group are in bankruptcy and one or more entities in the consolidated group are not in bankruptcy, the reporting entity is required to disclose the condensed combined financial statements of only the entities in bankruptcy (“debtor in possession” or “DIP”).
The discounted cash flow model derived an enterprise valuereclassification of the investments, after which associatedNSNCo group to discontinued operations has resulted in the continuing operations elements of Seadrill's financial statements being aligned to the combined financial statements of only the entities in bankruptcy, aside from the exceptions noted below. Separately presented DIP results would include:
•a $24 million reduction in current restricted cash, to $136 million, and an $8 million reduction in unrestricted cash, to $304 million, due to cash held by entities not in bankruptcy;
•the recognition of current and non-current intra-group receivables due to DIP from entities not in bankruptcy of $21 million and $9 million respectively;
•additional intra-group liabilities subject to compromise of $8 million owed by DIP to entities not in bankruptcy; and
•an additional $4 million net debt was subtracted to provide equity values. The implied valuationcash outflows from changes in the above assets.
As such, we have not separately presented Condensed Combined Financial Statements of the direct ownership interests in Seadrill Partners derived from the discounted cash flowentities that filed for bankruptcy.

Note 5 – Current expected credit losses

The CECL model was crosschecked against the market price of Seadrill Partners’ common units. Dueapplies to the significant influence we have on Seadrill Partners, there is an implied significant influence premium, which represents the additional value we would place over and above the market price of Seadrill Partners in order to maintain this significant influence. This is similar in thought to an implied control premium. We have evaluated the difference by reviewing the implied control premium as compared to other market transactions within the industry. We deem the implied control premium to be reasonable in the context of the data considered.
Valuation of debt
We recorded third partyour external trade receivables and related party debt obligations at a fair value of $7.3 billion which we determined using an income approach. Wereceivables. Our external customers are amortizinginternational oil companies, national oil companies and large independent oil companies. The following table summarizes the difference betweenmovement in the $7.6 billion face amount and the fair value recorded in fresh start accounting over the life of the debt. We estimated the fair value of the debt using Level 2 inputs.
For further information on fresh start accounting, please refer to the Seadrill Limited Annual Report on Form 20-Fallowance for credit losses for the year ended December 31, 2018.2021.

 (In $ millions)
Allowance for credit losses - other current assetsAllowance for credit losses - related party STAllowance for credit losses related party LTTotal Allowance for credit losses
January 1, 2020— 9 — 9 
Credit loss expense3 139 2 144 
December 31, 20203 148 2 153 
Credit loss expense— 36 (2)34 
Write-off(1)/(2)
(3)(183)— (186)
December 31, 2021— 1 — 1 
Reconciliation(1) In April 2021 we signed a settlement agreement with Aquadrill (formerly Seadrill Partners) which waived all claims on pre-petition positions held and resulted in a write-off of distributable value$54 million of trading receivables.
(2) Following the cancellation of the Wintershall contract, a settlement agreement was reached with Northern Ocean to fair valueextinguish all outstanding claims. The agreement became effective in December 2021 resulting in the write-off of Successor common stock$129 million of trading receivables and $3 million of reimbursement receivables.



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Table ofContents
The followingbelow table reconcilesshows the distributable valueclassification of the credit loss expense within the Consolidated Statements of Operations.
(In $ millions)Year ended December 31, 2021Year ended December 31, 2020
Management contract expenses36142
Other financial items(2)2 
Total34 144 
Changes in expected credit loss allowance for external and related party trade receivables are included in operating expenses, while changes in the allowances for related party loan receivables are included in other financial items. The decrease in the allowance for the year ended December 31, 2021 was due to the estimated fair valuewrite-off of Successor common stockNorthern Ocean and Aquadrill balances following settlement agreements. Refer to Note 27 – "Related party transactions" for details. There is no expected credit loss allowance on the SeaMex trade receivables and loan balances as atthey were expected to be settled shortly after emergence from Chapter 11. Both the Effective Date:trading and loan balances were fully settled in March 2022.

(In $ millions)As at July 2, 2018
Distributable value11,056
Less: non-controlling interest(154)
Less: fair value of debt(7,301)
Less: fair value of other non-operating liabilities(108)
Add: fair value of tax attributes8
Fair value of Successor common stock issued upon emergence3,501
Shares issued and outstanding on July 2, 2018100.0
Per share value35.01


Reorganization value and distributable value were estimated using numerous projections and assumptions that are inherently subject to significant uncertainties and resolution of contingencies that are beyond our control. Accordingly, the estimates set forth herein are not necessarily indicative of actual outcomes, and there can be no assurance that the estimates, projections or assumption will be realized.

The following table reconciles the distributable value to the estimated reorganization value as at the Effective Date: 
(In $ millions)As at July 2, 2018
Distributable value11,056
Add: other working capital liabilities478
Add: other non-current operating liabilities57
Add: fair value of tax attributes8
Add: redeemable non-controlling interest30
Total reorganization value11,629

Consolidated Balance Sheet

The adjustments included in the following Consolidated Balance Sheet reflect the effects of the consummation of the transactions contemplated by the Reorganization Plan (reflected in the column “Reorganization Adjustments”) as well as fair value adjustments as a result of the adoption of fresh start accounting (reflected in the column “Fresh Start Adjustments”). The explanatory notes highlight methods used to determine fair values or other amounts of the assets and liabilities as well as significant assumptions or inputs.
 As of July 1, 2018
(In $ millions)Predecessor Company
 Reorganization Adjustments
 Fresh Start Adjustments
 Successor Company
ASSETS       
Current assets       
Cash and cash equivalents809
 790
(a)—
 1,599
Restricted cash409
 169
(a)—
 578
Marketable securities121
 —
 —
 121
Accounts receivable, net272
 —
 —
 272
Amount due from related parties - current181
 —
 14
(l)195
Other current assets247
 —
 181
(m)428
Total current assets2,039
 959
 195
 3,193
Investment in associated companies1,615
 —
 (687)(n)928
Newbuildings249
 —
 (249)(o)—
Drilling units12,531
 —
 (5,734)(p)6,797
Deferred tax assets8
 —
 —
 8
Equipment35
 —
 (6)(q)29
Amount due from related parties - non-current565
 —
 11
(r)576
Assets held for sale - non-current—
 —
 —
 —
Other non-current assets3
 —
 95
(s)98
Total assets17,045
 959
 (6,375) 11,629
LIABILITIES AND EQUITY       
Current liabilities       
Debt due within one year90
 —
 (33)(t)57
Trade accounts payable96
 17
(b)—
 113
Amounts due to related parties - current4
 4
(c)—
 8
Other current liabilities229
 100
(d)32
(u)361
Total current liabilities419
 121
 (1) 539
Liabilities subject to compromise9,050
 (9,050)(e)—
 —
Long-term debt856
 6,292
(f)(104)(t)7,044
Long-term debt due to related parties294
 —
 (94)(v)200
Deferred tax liabilities105
 —
 (6)(w)99

 As of July 1, 2018
(In $ millions)Predecessor Company
 Reorganization Adjustments
 Fresh Start Adjustments
 Successor Company
Other non-current liabilities57
 3
(b)2
(x)62
Total non-current liabilities1,312
 6,295
 (202) 7,405
        
Redeemable non-controlling interest25
 —
 5
(y)30
        
Equity       
Predecessor common shares1,008
 (1,008)(g)—
 —
Predecessor additional paid-in capital3,316
 (3,322)(g)—
 —
 
 6
(h)
 
Predecessor contributed surplus1,956
 (1,956)(g)—
 —
Predecessor accumulated other comprehensive income41
 —
 (41)(z)—
Predecessor (loss)/retained earnings(146) 7,110
(i)(6,964)(z)—
Successor common shares—
 10
(j)—
 10
Successor contributed surplus—
 2,860
(j)631
(aa)3,491
Total Shareholders' equity6,175
 3,700
 (6,374) 3,501
Non-controlling interest64
 (107)(k)197
(bb)154
Total equity6,239
 3,593
 (6,177) 3,655
Total liabilities and equity17,045
 959
 (6,375) 11,629

Reorganization Adjustments:

(a)Adjustments to cash and cash equivalents including the following:
Cash and Cash Equivalents
(In $ millions)
Proceeds from debt commitment (1)
875
Proceeds from equity commitment200
Payment to newbuild counterparty members(18)
Amendment consent fees to senior secured creditors(26)
Funding of the escrow account for Senior Secured Notes collateral(227)
Payment of closing fees for the debt commitment(9)
Payment new commitment parties fee(1)
Payment to the bank coordinating committee(4)
Change in cash and cash equivalents790
(1)
Pursuant to the Investment Agreement, on the Effective Date we received cash of $875 million for the issuance of Senior Secured Notes, consisting of $880 million par value notes net of $5 million pre-issuance accrued interest.
Restricted Cash
(In $ millions)
Funding of the escrow account per terms of Senior Secured Notes227
Payment of post confirmation accrued professional fees in connection with emergence(31)
Payment of success fees incurred upon emergence(22)
Distribution from the cash pool to general unsecured claims(2)
Payment of unsecured creditor committee advisor fees(3)
Change in restricted cash169
(b)Reflects the reinstatement of trade accounts payable and other non-current liabilities included as part of liabilities subject to compromise
(c)Reflects the reinstatement of amounts due to related party included as part of liabilities subject to compromise.
(d)Reflects the adjustment to other current liabilities upon emergence:

Other current liabilities upon emergence
(In $ millions)
Success fees accrued upon emergence28
Undistributed cash pool balance for general unsecured claims on emergence35
Cash payment made for post confirmation accrued professional fees in connection with emergence(31)
Reinstatement of other current liabilities as part of liabilities subject to compromise64
Amendment fees on SFL loans accrued upon emergence4
Change in other liabilities100
(e)    Liabilities subject to compromise were settled as follows in accordance with the Plan:
Gain on liabilities subject to compromise
(In $ millions)
Senior undersecured or impaired external debt5,266
Unsecured bonds2,334
Newbuild claims1,064
Accrued interest payable49
Derivatives previously recorded at fair value249
Accounts payable and other liabilities84
Amount due to related party4
Liabilities subject to compromise9,050
Less: Distribution from cash pool to holders of general unsecured claims on emergence(2)
Less: Undistributed cash pool balance for holders of general unsecured claims on emergence(35)
Less: Payment to newbuild counterparty members(17)
Less: Fair value of equity issued to holders of general unsecured claims(498)
Less: Reinstatement of amount due to related party(4)
Less: Reinstatement of trade accounts payable(84)
Less: Reinstatement of senior undersecured or impaired external debt(5,266)
Less: Recognition of adequate protection payments on senior undersecured or impaired external debt(186)
Gain on settlement of liabilities subject to compromise2,958
(f)Increase in long-term debt includes reinstatement of certain liabilities subject to compromise as well as the issuance of Senior Secured Notes. The net increase reflects the following:
(In $ millions)
Reinstated Senior undersecured or impaired external debt5,266
Recognition of adequate protection payments186
Lender consent fee(26)
Total reinstated senior secured credit facilities5,426
Issuance of Senior Secured Notes880
Capitalized pre-issuance interest for Senior Secured Notes for 8% paid-in kind10
Debt issuance cost in related to the issuance of the Senior Secured Notes(9)
Discount on Senior Secured Notes for the pre-issuance interest paid upon emergence (4% cash interest of $5 million and 8% paid-in kind interest of $10 million)
(15)
Net increase in long-term debt6,292
(g)Reflects the cancellation of Predecessor Company common stock, contributed surplus, and additional paid in capital to retained earnings
(h)Represents the unamortized stock compensation recognized upon cancellation of the Predecessor Company common stock, contributed surplus, and additional paid in capital.
(i)Reflects the change in predecessor retained (loss)/earnings

(In $ millions)
Gain on settlement of liabilities subject to compromise2,958
Cancellation of predecessor common stock, contributed surplus, and additional paid in capital6,286
Recognition of unamortized stock compensation expense upon cancellation of the Predecessor Company common stock, contributed surplus, and additional paid in capital(6)
Fair value of Successor Common Shares issued upon emergence(2,176)
Success fees incurred upon emergence(51)
New Commitment Parties, bank coordinating committee, and unsecured creditor committee advisor fees(8)
Elimination of NADL and Sevan non-controlling interest107
Total change in predecessor retained (loss)/earnings7,110
(j)Reflects the issuance of 23,750,000 shares of common stock at a per share price of $8.42 in connection with the equity commitment, 55 million shares of common stock with estimated fair value of $35.01 per share issued in connection with the debt commitment, 14 million shares of common stock issued to the holders of general unsecured claims at an estimated fair value of $35.01 per share, 2 million shares of common stock issued to former holders of Predecessor equity at an estimated fair value of $35.01 per share, and 5 million shares of common stock issued for structuring fees to the select commitment parties and Hemen at an estimated fair value of $35.01 per share.
(k)As determined in the Plan, NADL and Sevan became wholly owned subsidiaries and the non-controlling interests of NADL and Sevan were eliminated.

Fresh Start Adjustments
(l)
Adjustment to record the current portion of the contingent consideration receivable from Seadrill Partners related to the West Vela with the fair value of $14 million.
(m)Adjustment to write-off $9 million of current deferred mobilization costs to fair value, which is offset by recording the fair value of certain favorable drilling contracts of $190 million. The value was based on the contracted rates compared to the prevailing market rates.
(n)Adjustment to decrease the carrying value of the investments in associated companies to their estimated fair values determined using a discounted cash flow analysis utilizing the assumption noted above the Valuation of Equity Method Investments.
(o)Adjustment to record the newbuildings at fair value based on the value derived from an income approach compared to the current contractual obligations remaining to be paid.
(p)Adjustment to the drilling units to record the fair value of the rigs and capital spares utilizing a combination of income-based and market-based approaches. The discount rate of 11.4% was used for the discounted cash flow analysis under the income-based approach. A cost-based approach was utilized to determine the fair value for the capital spares.
(q)Adjustment to record equipment at fair value based on a cost approach.
(r)
Adjustment to record the non-current portion of the contingent consideration receivable from Seadrill Partners related to the West Vela and West Polaris with the fair value of $17 million. This amount is offset with a $3 million reduction on the recoverability of the receivable due from Seabras Participacoes and $2 million adjustment to record the embedded conversion option component of the Archer convertible debt instrument at the emergence date fair value.
(s)Adjustment to write-off $2 million of deferred mobilization cost and $1 million of unamortized favorable contracts to fair value. These are offset by recording the fair value of certain favorable drilling and management service contracts of $98 million. The value was based on the contracted rates compared to the prevailing market rates.
(t)Fair value adjustment to record discount of $188 million on the senior secured credit facilities and Ship Finance loans. This reduction is offset by a $51 million write-off of discounts on the Senior Secured Notes, unamortized debt issuance cost and lender consent fees.
(In $ millions)       
As at July 2, 2018Senior Secured Notes
  Senior Secured Credit Facilities
  Ship Finance Loans
  Total
Carrying value after reorganization adjustments866
 5,636
 736
 7,238
Adjustments to record debt at fair value:
 
 
 —
Write-off of unamortized debt issuance costs9
 26
 1
 36
Write-off of discounts for pre-issuance accrued interest settled upon issuance of Senior Secured Notes (4% cash interest of $5 million and 8% paid-in kind interest of $10 million)15
 —
 —
 15
Fair value adjustment to record discount on the senior secured credit facilities and Ship Finance Loans—
 (155) (33) (188)
Estimated fair value of debt at emergence890
 5,507
 704
 7,101

(u)Adjustment to write-off $27 million, primarily related to deferred mobilization revenue, for which we have determined to have no future performance obligations. These are offset by recording the fair value of certain unfavorable drilling contracts of $59 million. The value was based on the contracted rates compared to the prevailing market rates.
(v)Adjustment to reflect a fair value discount on the loans due to related parties. The value was based on an income approach using level 2 inputs.

(w)Adjustments to the deferred tax liabilities as a result of applying fresh start accounting.
(x)Adjustment to write-off $7 million of deferred mobilization revenue, for which we have determined to have no future performance obligations, offset by the fair value of certain unfavorable drilling contracts of $9 million. The value was based on the contracted rates compared to prevailing market rates.
(y)Adjustment to record redeemable non-controlling interest to the emergence date fair value.
(z)Reflects the fresh start accounting adjustment to reset retained (loss) earnings and accumulated other comprehensive income.
(aa)Reflects the increase in fair value of the 24 million shares of common stock issued in connection with the equity commitment from $8.42 to $35.01 per share.
(bb)Adjustment to record the non-controlling interest in the Ship Finance VIEs and Seadrill Nigeria Operations Limited to fair value.


Note 6 – Segment information
We use the management approach to identify our operating segments. We identified the Board of Directors as the Group’s Chief Operating Decision Maker ("CODM") which regularly reviews internal reports when making decisions about allocation of resources to segments
and in assessing their performance.
We provide drillinghave the following 3 reportable segments:
1.Harsh environment: Includes contract revenues, management contract revenue, reimbursable revenue and related services to the offshore oilassociated expenses for harsh environment semi-submersible and gas industry. We have three operating segments:jack-up rigs.

2.Floaters: Includes contract revenues, management contract revenue, reimbursable revenue and associated expenses for benign environment semi-submersible rigs and drillships.
1.
Floaters: Services encompassing drilling, completion and maintenance of offshore exploration and production wells. The drilling contracts relate to semi-submersible rigs and drillships for harsh and benign environments in mid-, deep- and ultra-deep waters;

2.
Jack-up rigs: Services encompassing drilling, completion and maintenance of offshore exploration and production wells. The drilling contracts relate to jack-up rigs for operations in harsh and benign environments in shallow waters; and

3.
Other: Operations including management services to third parties and related parties. Income and expenses from these management services are classified under this segment.

3.Jack-ups: Includes contract revenues, management contract revenue, reimbursable revenue and associated expenses for benign environment jack-up rigs.
Segment results are evaluated on the basis of operating income and the information givenpresented below is based on information used for internal management reporting. The remaining incidental revenues and expenses not included in the reportable segments are included in the "other" reportable segment.

The below section splits out total operating revenue, depreciation, amortization of intangibles, operating net loss, drilling units and capital expenditures by segment:
Total operating revenue
Operating revenues consist of contract revenues, reimbursable revenues, management contract revenues and other revenues. The segmental analysis of operating revenues is shown in the table below.
(In $ millions)Year ended December 31, 2021Year ended December 31, 2020Year ended December 31, 2019
Harsh environment495 526 510 
Floaters363 358 625 
Jack-up rigs139 157 229 
Other11 18 24 
Total1,008 1,059 1,388 
F-26
 Successor  Predecessor
(In $ millions)Year ended December 31,
2019
 Period from July 2, 2018 through December 31, 2018
  Period from January 1, 2018 through July 1, 2018
 Year ended December 31,
2017
Floaters686
 322
  482
 1,387
Jack-up rigs362
 167
  193
 617
Other340
 52
  37
 84
Total1,388
 541
  712
 2,088
Table ofContents

Depreciation
We record depreciation expense to reduce the carrying value of drilling unit and equipment balances to their residual value over their expected remaining useful economic lives. The segmental analysis of depreciation is shown in the table below.
Successor  Predecessor
(In $ millions)Year ended December 31,
2019
 Period from July 2, 2018 through December 31, 2018
  Period from January 1, 2018 through July 1, 2018
 Year ended December 31,
2017
(In $ millions)Year ended December 31, 2021Year ended December 31, 2020Year ended December 31, 2019
Harsh environmentHarsh environment73 93 125 
Floaters346
 190
  298
 601
Floaters37 176 224 
Jack-up rigs80
 46
  93
 197
Jack-up rigs44 48 48 
OtherOther1 29 29 
Total426
 236
  391
 798
Total155 346 426 
Amortization of intangibles
We record amortization of favorable and unfavorable contracts over the remaining lives of the contracts. The segmental analysis of amortization is shown in the table below.
(In $ millions)Year ended December 31, 2021Year ended December 31, 2020Year ended December 31, 2019
Harsh environment— 1 — 
Floaters— — 105 
Jack-ups— — 29 
Total— 1 134 

Impairment of drilling units and intangible assets
We review the carrying value of our long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may no longer be appropriate. The segmental analysis of impairment is shown in the table below.
(In $ millions)Year ended December 31, 2021Year ended December 31, 2020Year ended December 31, 2019
Harsh environment152 419 — 
Floaters— 3,555 — 
Jack-ups— 86 — 
Other— 48 — 
Total152 4,108 — 
F-27
Table ofContents
 Successor  Predecessor
(In $ millions)Year ended December 31,
2019
 Period from July 2, 2018 through December 31, 2018
  Period from January 1, 2018 through July 1, 2018
 Year ended December 31,
2017
Floaters106
 37
  —
 —
Jack-ups28
 21
  —
 —
Total134
 58
  —
 —


Operating profit/(loss) - net loss
The segmental analysis of operating net losses is shown in the table below.
Successor

Predecessor
(In $ millions)Year ended December 31,
2019
 Period from July 2, 2018 through December 31, 2018
  Period from January 1, 2018 through July 1, 2018
 Year ended December 31,
2017
(In $ millions)Year ended December 31, 2021Year ended December 31, 2020Year ended December 31, 2019
(As adjusted)(As adjusted)
Harsh environmentHarsh environment(138)(396)(69)
Floaters(340) (161)  (446) (622)Floaters(21)(3,781)(201)
Jack-up Rigs23
 (16)  (167) (112)
Jack-upsJack-ups16 (87)(2)
Other22
 2
  —
 6
Other(14)(218)(23)
Operating loss(295) (175)  (613) (728)Operating loss(157)(4,482)(295)
Unallocated items: 
  
     
Unallocated items:  
Total financial items and other(966) (422)  (3,242) (2,308)Total financial items and other(430)38 (465)
Loss before income taxes(1,261) (597)  (3,855) (3,036)Loss before income taxes(587)(4,444)(760)
Drilling assets - Total assets

The segmental analysis of drilling assets and total assets is shown in the table below.
Total assets by operating segment are as follows:
(In $ millions)December 31, 2021December 31, 2020
(As adjusted)
Harsh environment rigs709 1,032 
Floaters524 528 
Jack-up Rigs544 560 
Total Drilling Units1,777 2,120 
Unallocated items:
Investments in associated companies27 24 
Assets held for sale1,103 685 
Cash and restricted cash535 659 
Other assets437 473 
Total assets3,879 3,961 
 Successor
 Successor
(In $ millions)December 31, 2019
 December 31, 2018
Floaters5,297
 5,508
Jack-up Rigs1,104
 1,151
Total Drilling Units and Newbuildings6,401
 6,659
    
Unallocated items:   
Investments in Associated companies389
 800
Marketable securities11
 57
Cash and restricted cash1,357
 2,003
Other assets1,121
 1,329
Total9,279
 10,848

Drilling units - Capital expenditures (1)

The segmental analysis of capital expenditures is shown in the table below.
(In $ millions)Year ended December 31, 2021Year ended December 31, 2020Year ended December 31, 2019
Harsh environment30 26 34 
Floaters35 110 111 
Jack-ups28 12 17 
Total93 148 162 
(1)Capital expenditure by operating segment are as follows:

includes long term maintenance projects.
F-28
 Successor  Predecessor
(In $ millions)Year ended December 31,
2019
 Period from July 2, 2018 through December 31, 2018
  Period from January 1, 2018 through July 1, 2018
 Year ended December 31,
2017
Floaters139
 74
  93
 128
Jack-ups23
 24
  24
 22
Total162
 98
  117
 150
Table ofContents
(1)
The successor periods include additions to equipment

Geographic segment data
Revenues
Revenues are attributed to geographical segments based on the country of operations for drilling activities, i.e. the country where the revenues are generated. The following presents our revenues and fixed assets by geographic area:

(In $ millions)Year ended December 31, 2021Year ended December 31, 2020Year ended December 31, 2019
Norway486 480 469 
Angola125 89 215 
Brazil121 51 137 
United States105 107 74 
Saudi Arabia100 98 130 
Nigeria— — 198 
Others (1)
71 234 165 
Total Revenue1,008 1,059 1,388 
Revenues(1)Other countries represent countries in which we operate that individually had revenues representing less than 10% of total revenues earned for any of the periods presented.
 Successor  Predecessor
(In $ millions)Year ended December 31,
2019
 Period from July 2, 2018 through December 31, 2018
  Period from January 1, 2018 through July 1, 2018
 Year ended December 31,
2017
Norway469
 117
  82
 219
Nigeria198
 108
  105
 193
Brazil137
 91
  188
 358
Saudi Arabia130
 78
  79
 159
United States74
 34
  30
 291
Angola215
 29
  100
 482
Others (1)
165
 84
  128
 386
Total Revenue1,388
 541
  712
 2,088
(1)
Other countries represent countries in which we operate that individually had revenues representing less than 10% of total revenues earned for any of the periods presented.


Fixed assets – drilling units (1)

Drilling unit fixed assets by geographic area based on location as at end of the year are as follows:
(In $ millions)December 31, 2021December 31, 2020
Norway710 1,044 
Saudi Arabia224 234 
Brazil169 79 
Qatar156 151 
Malaysia126 185 
USA92 87 
Spain47 49 
Others (2)
253 291 
Total1,777 2,120 
(1)Asset locations at the end of a period are not necessarily indicative of the geographic distribution of the revenues or operating profits generated by such assets during such period.
(2)Other countries represent countries in which we operate that individually had fixed assets representing less than 10% of total fixed assets for any of the periods presented.
F-29
 Successor
 Successor
(In $ millions)December 31, 2019
 December 31, 2018
Norway1,818
 1,326
Malaysia805
 1,070
USA644
 658
Spain615
 875
Brazil332
 688
Others (2)
2,187
 2,042
Total6,401
 6,659

(1)
Asset locations at the end of a period are not necessarily indicative of the geographic distribution of the revenues or operating profits generated by such assets during such period.

(2)
Other countries represent countries in which we operate that individually had fixed assets representing less than 10% of total fixed assets for any of the periods presented.
Major customers
In the years endedended December 31, 2019, the period from July 2, 2018 through December 31, 2018 (Successor), the period from January 1, 2018 through July 1, 2018 (Predecessor)2021, 2020 and the year ended December 31, 2017 (Predecessor)2019, we had the following customers with total revenues greater than 10% in any of the years presented:

SegmentYear ended December 31, 2021Year ended December 31, 2020Year ended December 31, 2019
ConocoPhillipsHarsh Environment17 %16 %11 %
EquinorHarsh Environment13 %12 %16 %
Saudi AramcoJack-ups10 %9 %10 %
LundinFloaters12 %2 %— %
Northern OceanHarsh Environment3 %12 %12 %
TotalEnergiesFloaters— %4 %18 %
Other45 %45 %33 %
Total100 %100 %100 %

 Successor  Predecessor
 Year ended December 31,
2019
 Period from July 2, 2018 through December 31, 2018
  Period from January 1, 2018 through July 1, 2018
 Year ended December 31,
2017
Total18% 24%  19% 23%
Equinor16% 7%  5% 4%
Northern Drilling12%
—%  —% —%
ConocoPhillips11% 13%  8% 6%
Saudi Aramco10% 14%  11% 8%
Petrobras7% 10%  23% 17%
LLOG4% 6%  4% 14%
ExxonMobil—% —%  10% 7%


Note 7 - Revenue from Contractscontracts with Customers
customers
The following table provides information about receivables, contract assets and contract liabilities from our contracts with customers:
(In $ millions)December 31, 2021 December 31, 2020
Accounts receivable, net169 125 
Current contract liabilities (deferred revenues) (1)
 (25)(18)
Non-current contract liabilities (deferred revenues) (1)
 (10)(13)
  Successor Successor
(In $ millions) December 31, 2019
 December 31, 2018
Accounts receivable, net 173
 208
Current contract assets (1)
 —
 1
Non-current contract assets (1)
 —
 —
Current contract liabilities (deferred revenues) (1)
 (20) (12)
Non-current contract liabilities (deferred revenues) (1)
 (9) (9)
(1)
(1)Current contract assets and liabilities balances are included in “Other current assets” and “Other current liabilities,” respectively in our Consolidated Balance Sheets as of December 31, 2019 (Successor).


Significant changes in the contract assets and the contract liabilities balances during the period from January 1, 2018 through July 1, 2018 (Predecessor)are included in “Other current assets” and period from July 2, 2018 through“Other current liabilities,” respectively in our Consolidated Balance Sheets as at December 31, 2018 (Successor) are as follows:
(In $ millions)  Contract Assets Contract Liabilities Net Contract
Balances
Net contract liability at January 1, 2018 (Predecessor)  7
 (55) (48)
Amortization of revenue that was included in the beginning contract liability balance  —
 25
 25
Cash received, excluding amounts recognized as revenue —
 (2) (2)
Cash received against the beginning contract asset balance  (7) —
 (7)
Contract assets recognized during the period  9
 —
 9
Net contract liability at July 1, 2018 (Predecessor)  9
 (32) (23)
Fresh start adjustments —
 32
 32
       
       
Net contract asset at July 2, 2018 (Successor)  9
 —
 9
Cash received, excluding amounts recognized as revenue —

(21)
(21)
Cash received against the beginning contract asset balance  (9)
—

(9)
Contract assets recognized during the period  1
 —
 1
Net contract liability at December 31, 2018 (Successor)  1
 (21) (20)

2021.
Significant changes in the contract assets and the contract liabilities balances during the year ended December 31, 2019 (Successor)2020 were as follows:
(In $ millions)  Contract AssetsContract LiabilitiesNet Contract
Balances
Net contract liability at January 1, 2020  — (29)(29)
Amortization of revenue that was included in the beginning contract liability balance  — 23 23 
Cash received, excluding amounts recognized as revenue— (25)(25)
Net contract liability at December 31, 2020  — (31)(31)
Significant changes in the contract assets and the contract liabilities balances during the year ended December 31, 2021 are as follows:
(In $ millions)  Contract AssetsContract LiabilitiesNet Contract
Balances
Net contract liability at January 1, 2021  — (31)(31)
Amortization of revenue that was included in the beginning contract liability balance  — 24 24 
Cash received, excluding amounts recognized as revenue— (28)(28)
Net contract liability at December 31, 2021  — (35)(35)
(In $ millions)  Contract Assets Contract Liabilities Net Contract
Balances
Net contract liability at January 1, 2019 (Successor)  1
 (21) (20)
Amortization of revenue that was included in the beginning contract liability balance  —
 14
 14
Cash received, excluding amounts recognized as revenue —
 (22) (22)
Cash received against the beginning contract asset balance  (1) —
 (1)
Contract assets recognized during the period  —
 —
 —
Net contract liability at December 31, 2019 (Successor)  —
 (29) (29)

Deferred revenue - The deferred revenue balance of $20of $25 million reported in "Other current liabilities" at December 31, 2019 (Successor)2021 is expected to be realized within the next twelve months and $9the $10 million reported in "Other non-current liabilities" is expected to be realized within the following next twelve months. The deferred revenue included above consists primarily of mobilization and upgrade revenue for both wholly and partially unsatisfied performance obligations as well as expected variable mobilization and upgrade revenue for partially unsatisfied performance obligations, which has been estimated for purposespurposes of allocating across the entire corresponding performance obligations. The amounts are derived from the specific terms within drilling contracts that contain such provisions, and the expected timing for recognition


Note 8 – Other revenues
Other revenues consist of the following:
(In $ millions)Year ended December 31, 2021Year ended December 31, 2020Year ended December 31, 2019
Leasing revenues (i)
26 19 1 
Early termination fees (ii)
6 11 11 
Total other revenues32 30��12 
 Successor  Predecessor
(In $ millions)Year ended December 31,
2019
 Period from July 2, 2018 through December 31, 2018
  Period from January 1, 2018 through July 1, 2018
 Year ended December 31,
2017
Related party management fees109
 46
  43
 110
Other management fees6
 —
  —
 1
Leasing revenues1
 —
  —
 —
Amortization of unfavorable contracts—
 —
  21
 43
Early termination fees11
 —
  8
 8
Total other revenues127
 46
  72
 162

Related party revenues
Related party revenues relate to management support and administrative services provided during the year to Seadrill Partners, SeaMex, Northern Drilling and Sonadrill. Refer to Note 31 - Related party transactions for more information.
Other management fees
Revenue from management services provided to third parties.
i.Leasing revenues
Revenue earned on the charter of the West Castor, West Telesto and West Tucana to Gulfdrill.Gulfdrill, one of our related parties. Refer to Note 27 – "Related party transactions" for further details.
Amortization of unfavorable contracts
We recognize an intangible asset or liability if we acquire a drilling contract in a business combination and the contract had a dayrate that was above or below market rates at the time of the business combination. For the periods before emergence from Chapter 11 and the application of fresh start accounting, we classified the amortization of these intangible assets or liabilities within other revenues. For the periods after emergence from Chapter 11 and the application of fresh start accounting, we have applied a new accounting policy, which is to classify amortization of these intangible assets and liabilities within operating expenses. The unfavorable contract values in the Predecessor periods arose from our acquisition of Sevan Drilling Limited.
ii. Early termination fees
TheEarly termination fee revenuefees were received in the year ended December 31, 2019 relates to the fees recognized2021 for the West Bollsta, in 2020 for the West Gemini and in 2019for theWest Jupiter andWest Castor, the period from January 1, 2018 through July 1, 2018 relates to the fees recognized for the West Pegasus and the termination revenue in 2017 relates to the West Hercules.

Note 9 – Other operating items
Other operating items consist of the following:
Successor  Predecessor
(In $ millions)
Year ended December 31,
2019
 Period from July 2, 2018 through December 31, 2018
  Period from January 1, 2018 through July 1, 2018
 Year ended December 31,
2017
(In $ millions)
Year ended December 31, 2021Year ended December 31, 2020Year ended December 31, 2019
Impairment of long lived assets (i)
—
 —
  (414) (696)
Impairment of long lived assets (i)
(152)(4,087)— 
Loss on disposals (ii)
—
 —
  —
 (245)
Other operating income (iii)
39
 21
  7
 27
Impairment of intangibles (ii)
Impairment of intangibles (ii)
— (21)— 
Gain on disposals (iii)
Gain on disposals (iii)
47 15 — 
Other operating income (iv)
Other operating income (iv)
54 9 39 
Total other operating items39
 21
  (407) (914)Total other operating items(51)(4,084)39 
i. Impairment of long lived assets
In June 2021, the year ended December 31, 2017 (Predecessor), as partWest Hercules was impaired by $152 million. Refer to Note 11 – "Loss on impairment of long-lived assets" for further details.
In 2020, we determined the global impact of the Chapter 11 reorganization, we terminated the newbuild contracts for the drillships West Draco, West Dorado, West AquilaCOVID-19 pandemic, and West Libra and the shipyards, Samsung and DSME, received an allowed claim. As a result, we recorded a $696 million non-cash impairment charge against the newbuild assets for these rigs. We also recorded a reorganization expense of $1,064 million for the allowed claim.
In the period from January 1, 2018 through July 1, 2018 (Predecessor), we determined that the continuing downturncontinued down cycle in the offshore drilling market was an indicatorindustry, were indicators of impairment on certain assets. Following an assessmentassessments of recoverability in March 2020 and December 2020, we recorded antotal impairment chargecharges of $414$4,087 million against threeour drilling fleet.
ii. Impairment of our older rigs.intangibles

We derived the fair value of the rigs using an income approach based on updated projections of future dayrates, contract probabilities, economic utilization, capital and operating expenditures, applicable tax rates and asset lives. The cash flows were estimated over the remaining useful economic lives of the assets and discounted using an estimated market participant weighted average cost of capital of 11.4%. To estimate these fair values,On December 1, 2020, Seadrill Partners announced it had filed a voluntary petition under Chapter 11. Under Chapter 11 we were required to use various unobservable inputs including assumptions relatedcontinue to provide the future performance of our rigs as explained above.management services only at market rate. We based all estimates on information available atconcluded that we no longer had a favorable contract and the time of performing the impairment test.intangible asset relating to Seadrill Partners was fully impaired.
ii. Lossiii. Gain on disposals
There were no loss on asset disposalsFollowing the impairments recognized in the years ended December 31, 2019 (Successor) or 2018 (Successor). There was a loss on disposal for the year ended December 31, 2017 (Predecessor)2020, Seadrill disposed of 7 rigs in 2021, and 1 rig in 2020, all of which comprised the following:
(In $ millions)
 
Net proceeds/recoverable amount
 
Book value on
disposal

 Loss
Sale of West Triton
75
 109
 (34)
Sale of West Mischief
75
 146
 (71)
Sale of West Resolute
75
 136
 (61)
Disposal of Sevan Developer contract
—
 75
 (75)
Sale of West Rigel
126
 128
 (2)
Other—
 2
 (2)
Total for year ended December 31, 2017 (Predecessor)351
 596
 (245)
1) Sale of West Triton, West Mischief and West Resolute
On April 29, 2017 we reached an agreement with Shelf Drillinghad previously been impaired in full. The full consideration, less costs to sell, the West Triton, West Mischief and West Resolute forwas recognized as a total considerationgain.
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2) Disposal of Sevan Developer contract
In October 2014, Sevan entered an agreement with Cosco to defer the delivery date of the Sevan Developer for twelve months with four subsequent options to extend the date for further periods of six months, until October 2017. On October 30, 2015, April 15, 2016 and October 15, 2016 three of the options were enacted, with $26.3 million, or 5% of the contract price, plus associated costs, refunded to Sevan on each occasion.
On April 27, 2017, the final delivery deferral agreement for the Sevan Developer was deferred to May 31, 2017 to finalize negotiations. As an agreement was not reached, the remaining installment of $26.3 million was refunded to Sevan, taking the delivery installment back to the $526.0 million contract price.
In July 2017, Sevan and Cosco agreed to defer the Sevan Developer delivery period until June 30, 2020. The contract amendment included a contract termination clause for Cosco and therefore it was deemed that Sevan had lost control of the asset and therefore derecognized the newbuild asset, which was held at $620 million, construction obligation held at $526 million, and accrued interest and other liabilities held at $19 million, resulting in a net loss on disposal of $75 million.
3) West Rigel settlement agreement
On April 5, 2018, we entered into a settlement and release agreement, subject to Bankruptcy Court approval, with Jurong in respect of the West Rigel whereby we agreed that the share of sale proceeds from the sale of the West Rigel by Jurong would be $126 million. We recognized a $2 million loss on disposal in the year ended December 31, 2017, reflecting the share of sales proceeds as the value of the asset held for sale.
On May 9, 2018 the West Rigel was sold by Jurong and we received a share of proceeds totaling $126 million.

iii.iv. Other operating income
Other operating income consist of the following:
  Successor  Predecessor
 (In $ millions)
 Year ended December 31,
2019
 Period from July 2, 2018 through December 31, 2018
  Period from January 1, 2018 through July 1, 2018
 Year ended December 31, 2017
Loss of hire insurance settlement (a)
 10
 —
  —
 —
Receipt of overdue receivable (b)
 26
 21
  —
 —
Contingent consideration (c)
 —
 —
  7
 27
Settlement with shipyard 3
 —
  —
 —
Total other operating income 39
 21
  7
 27
 (In $ millions)
Year ended December 31, 2021Year ended December 31, 2020Year ended December 31, 2019
Pre-petition liabilities write-off (a)
27 — — 
War risk insurance rebate (b)
22 — — 
Loss of hire insurance settlement (c)
2 9 10 
Receipt of overdue receivable (d)
— — 26 
Other3 — 3 
Total other operating income54 9 39 
a) Prepetition liabilities write-off
Write-off of prepetition lease liabilities to Northern Ocean for the West Bollsta of $19 million and pre-petition liabilities to Aquadrill of $8 million following settlement agreements reached in 2021.
b) War risk insurance rebate

Receipt of $22 million distribution from The Norwegian Shipowners' Mutual War Risks Insurance Association ("DNK"), representing a rebate of past premium paid.

c) Loss of hire insurance settlement
Settlement of a claim on our loss of hire insurance policy following an incident on the Sevan Louisiana.
b)d) Receipt of overdue receivablereceivables
Receipt of overdue receivables in 2019 which had not been recognized as an asset as part of fresh start accounting.
c) Contingent consideration
Amounts recognized for contingent consideration from the sales of the West Vela and West Polaris to Seadrill Partners in 2014 and 2015. On emergence from Chapter 11 we recognized receivables equal to the fair value of expected future cash flows under these arrangements and have therefore not recognized further income in the 2018 Successor period and year ended 2019.

Note 10 – Interest expense


Interest expense consists of the following:
 (In $ millions)
Year ended December 31, 2021Year ended December 31, 2020Year ended December 31, 2019
(As adjusted)(As adjusted)
Cash interest on debt facilities (a)
(25)(266)(374)
Interest on SFL leases (b)
(84)(12)— 
Unwind of discount debt— (44)(47)
Write off of discount on debt (c)
— (87)— 
Interest expense(109)(409)(421)
 Successor  Predecessor
 (In $ millions)
Year ended December 31,
2019
 Period from July 2, 2018 through December 31, 2018
  Period from January 1, 2018 through July 1, 2018
 Year ended December 31,
2017
Cash and payment-in-kind interest on debt facilities(440) (237)  (37) (286)
Unwind of discount debt(47) (24)  —
 —
Loan fee amortization—
 —
  (1) (27)
Capitalized interest—
 —
  —
 28
Interest expense(487) (261)  (38) (285)
1)(a) Cash and payment-in-kind interest on debt facilities
We incur cash and payment-in-kind interest on our debt facilities. This is summarized in the table below.
 (In $ millions)
Year ended December 31, 2021Year ended December 31, 2020Year ended December 31, 2019
(As adjusted)(As adjusted)
Senior credit facilities and unsecured bonds(25)(239)(327)
Debt of consolidated variable interest entities— (27)(47)
Cash interest(25)(266)(374)
 Successor  Predecessor
 (In $ millions)
Year ended December 31,
2019
 Period from July 2, 2018 through December 31, 2018
  Period from January 1, 2018 through July 1, 2018
 Year ended December 31,
2017
Senior credit facilities and unsecured bonds(327) (162)  (116) (320)
Less: adequate protection payments—
 —
  104
 81
Senior Secured Notes(66) (50)  —
 —
Debt of consolidated variable interest entities(47) (25)  (25) (47)
Cash and payment-in-kind interest(440) (237)  (37) (286)

We are charged interest on ourOur senior credit facilities incurred interest at LIBOR plus a margin. For periods after July 2, 2018, this margin increased by one1 percentage point following the emergence from Chapter 11. There has also been an increase in LIBOR rates, which when combined with the additional post-emergence margin, has led to an increased effective interest rate on our senior credit facilities in the year ended 2019.
During the period we were inPrevious Chapter 11 (September 12, 2017 to July 1, 2018),Proceedings. On February 7, 2021, after filing for Chapter 11, we recorded contractual interest payments against debt held as subject to compromise ("adequate protectionprotections payments") as a reduction to debt in the ConsolidatedConsolidation Balance Sheetsheet and not as an expense to the Consolidated Statement of Operations. We then expensed the adequate protection paymentsFor further information on emergence from Chapter 11.
On emergence fromour bankruptcy proceedings refer to Note 4 - Chapter 11 Proceedings of our Consolidated Financial Statements included herein.
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(b) Interest on SFL Leases
In the fourth quarter of 2020 we issued $880 million of Senior Secured Notes. We incur 4% cash interest and 8% payment-in-kind interest on these notes. On November 14, 2018 and April 10, 2019 there were two redemptions. Afterdeconsolidated the two redemptions there was a remaining $476 million principal outstanding on the notes, which includes $18 million of accrued payment-in-kind interest on our Senior Secured Notes which was compounded on July 15, 2019 and additional notes were issued.
Our Consolidated Balance Sheet includes approximately $0.6 billion of debt facilities held by subsidiaries of Ship Finance thatSPVs as we consolidate aswere no longer the primary beneficiary of the variable interest entities. OurFollowing the deconsolidation, we recognized the liability, and related interest expense, includesbetween Seadrill and the interest incurred by these entitiesSPVs that was previously eliminated on those facilities.consolidation.
2) Unwind(c) Write off of discount on debt
On emergence from Chapter 11In September 2020 and applicationDecember 2020, there were non-payments of fresh start accounting, we recorded a discount againstinterest on our debt to reduce its carrying value to equal its fair value.secured credit facilities that constituted an event of cross-default. The event of default resulted in the expense of unamortized debt discount is unwound over the remaining terms of the debt facilities.$87 million in 2020.
3) Loan fee amortization
We amortize loan issuance costs over the expected term of the associated debt facility. We expensed capitalized loan issuance costs for debt subject to compromise when we filed for Chapter 11 on September 12, 2017. No new debt facilities have been entered into since emerging from Chapter 11.
4) Capitalized interest
We capitalize the interest cost incurred to finance Newbuilds. This ceased when we filed for Chapter 11 on September 12, 2017. No Newbuild finance has been entered into since emerging from Chapter 11.


Note 11 – Impairment lossLoss on investmentsimpairment of long-lived assets
We review the carrying value of our long-lived assets for impairment whenever events or changes in associated companiescircumstances indicate that the carrying amount of an asset may no longer be appropriate.
Each reporting period, we are required
In 2020, the significant decrease in the price of oil due to consider (i) whetherthe actions of OPEC and its partners combined with the global impact of the COVID-19 pandemic resulted in expected decreases in utilization going forward and downward pressure on dayrates. We concluded that an impairment triggering event had occurred for our drilling unit fleet and, based on the results of further testing, recorded an impairment charge of $4.087 billion.

While there have been anyno further macro-economic indicators of ’other than temporary impairment’ (“OTTI”)impairment in 2021, with the oil price increasing by 50% from December 2020, changes to our forecast assumptions regarding the future of our equity method investmentsthe West Hercules and (ii) whether there has beenWest Linus have led us to conclude that an impairment triggering event has occurred for these two rigs.

During 2021, the undiscounted future net cash flows to be generated for Seadrill by the West Hercules and West Linus were revised due to anticipated changes in leasing arrangements that may result in the rigs being handed back to SFL before the end of investments held at costtheir estimated useful lives. The revised undiscounted future net cash flows for the West Hercules were less impairment. We recordthan the rig's carrying value meaning that the "step one" or "asset recoverability" test was failed for that rig. Following this assessment, we recorded an impairment charge for other-than-temporary declines inof $152 million to reduce the rig's book value to its estimated fair value, whenwhich we estimated using a discounted cash flow model. There was no impairment charge for the fair value is not anticipated to recover aboveWest Linus as it passed the carrying value within a reasonable period after the measurement date, unless there are mitigating factors that indicateasset recoverability test.

The impairment may not be required.
We have recognized the following impairments on investments in associated companies:
 Successor  Predecessor
(In $ millions)Year ended December 31,
2019
 
Period from July 2, 2018 through December 31, 2018


  Period from January 1, 2018 through July 1, 2018
 Year ended December 31,
2017
Impairments of Investment in associated companies and joint ventures (refer to Note 18)
        
Seadrill Partners - Direct ownership investments248
 —
  —
 723
Seadrill Partners - Subordinated units—
 —
  —
 82
Seadrill Partners - Seadrill member interest and IDRs54
 —
  —
 —
SeaMex Limited—
 —
  —
 36
Total impairment of investments in associated companies and joint ventures302
 —
  —
 841

        
Total impairment of investments302
 —
  —
 841


Impairment loss recognizedof $152 million for the year ended December 31, 2019 (Successor)
1) Seadrill Partners
Seadrill Partners primary debt finance comes from a $2.6 billion Term Loan B (“TLB”) which comes due for repayment in February 2021 and will need to be refinanced. There has been a decrease in the share priceclassified within "Impairment of Seadrill Partners common units since November 2018 which culminated in the common units being suspended from tradinglong-lived assets" on the NYSE in August 2019 as the market capitalization decreased below $15 million for a periodour Consolidated Statement of 30 consecutive days. Operations.

We interpreted this decrease in share price as both (i) an indicator of OTTI for the subordinated units and direct interests and (ii) an impairment indicator for the IDRs.
Having identified an indicator of OTTI, we were required to value our investments in Seadrill Partners to calculate the impairment. At the time of the impairment review, we calculatedderived the fair value of our investments in Seadrill Partners direct interests and IDRs to be $134 million and nil, compared to pre-impairment book values of $382 million and $54 million respectively. As a result, we recorded an impairment charge of $302 million. We have recognized the impairment of these investments within “Loss on impairment of investments” in our Consolidated Statement of Operations for the year ended December 31, 2019.
We valued our investments in the direct interestsrigs using an income approach which discountedbased on updated projections of future free cash flows (“DCF model”).dayrates, contract probabilities, economic utilization, capital and operating expenditures, applicable tax rates and asset lives. The cash flows were estimated over the remaining useful economic lives of the underlying assets but no longer than 30 years in total, and discounted using an estimated market participant weighted average cost of capital "WACC" of between 11.25-12.25%11.8%. The DCF model derived an enterprise value of the OPCOs, after which associated debt was subtractedTo estimate these fair values, we were required to provide equity values. Our DCF model considered a range of scenarios to reflect different potential refinancing outcomes for Seadrill Partners. The key assumptions used in the DCF were derived from significantuse various unobservable inputs including assumptions related to the future performance of our rigs as explained above. We based all estimates on our best judgments and assumptionsinformation available at the time of performing the impairment test.
The underlying assumptions used to model future rig cash flows used a methodology that examined historical data for each rig, considering the rig’s age, rated water depth and other attributes and then assessed its future marketability considering the current and projected market environment at the time of assessment. Other assumptions, such as operating, maintenance and inspection costs, were estimated using historical data adjusted for known developments and future events that are anticipated by management at the time of the assessment. These assumptions are necessarily subjective and are an inherent part of our asset impairment evaluation, and the use of different assumptions could produce results that differ from those reported.
We valued our IDR investments using an option pricing model. The assumptions used in the model were derived from both observable and unobservable inputs and are based on management’s judgments and assumptions available at the time of performing the impairment test. The method values different tranches in the capital structure in sequence of seniority. We employ significant judgment in developing these estimates and assumptions.
Impairment loss recognized for the year ended December 31, 2017 (Predecessor)
1) Seadrill Partners
In 2017, there was a sustained decrease in the trading price of Seadrill Partners common units, which we determined to be an indicator of other than temporary impairment against our equity method investments in Seadrill Partners. We therefore performed an impairment test at December 31, 2017. The findings of the review were that (i) the carrying value of the subordinated units exceeded the fair value by $82 million, and the carrying value of the direct ownership interests exceeded the fair value by $723 million. We recognized this impairment of the investments within “Loss on impairment of investments” in the Consolidated Statement of Operations.
The fair value of these investments were derived using a DCF model. The estimated future free cash flows associated with the investments were primarily based on expectations around applicable day rates, drilling unit utilization, operating costs, capital and long-term maintenance expenditures, applicable tax rates and industry conditions. The cash flows were estimated over the remaining useful economic lives of the underlying assets but no longer than 30 years in total and discounted using an estimated market participant weighted average cost of capital of 9.75%. The DCF model derived an enterprise value of the investments, after which associated debt was subtracted to provide equity values.
The assumptions used in the DCF model were derived from significant unobservable inputs (representative of level 3 inputs for fair value measurement) and were based on management’s judgments and assumptions available at the time of performing the impairment test. We employed significant judgment in developing these estimates and assumptions.
2) SeaMex Limited - Impairment of investment in Joint Venture
The deteriorating market conditions in the oil and gas industry and supply and demand conditions in the offshore drilling sector in which SeaMex operates was considered to be an indicator of impairment. We determined the length and severity of the deterioration of market conditions to be representative of an other than temporary impairment. As such we measured and recognized an other than temporary impairment of the investment in SeaMex as at December 31, 2017.
The fair value was derived using a DCF model. The estimated future free cash flows associated with the investment were primarily based on expectations around applicable day rates, drilling unit utilization, operating costs, capital and long-term maintenance expenditures and applicable tax rates. The cash flows were estimated over the remaining useful economic lives of the underlying assets but no longer than 30 years in total and discounted using an estimated market participant weighted average cost of capital of 10.25%. The DCF model derived an enterprise value of the investments, after which associated debt was subtracted to provide equity values. The carrying value of the investment was found to exceed the fair value by $36 million. We have recognized this impairment of the investments within "Loss on impairment of investments" in the Consolidated Statement of Operations.

Note 12 – Taxation
 
Income taxes consist of the following:

Successor  Predecessor
(In $ millions)Year ended December 31,
2019
 Period from July 2, 2018 through December 31, 2018
  Period from January 1, 2018 through July 1, 2018
 Year ended December 31,
2017
(In $ millions)Year ended December 31, 2021Year ended December 31, 2020Year ended December 31, 2019
Current tax (benefit)/expense:        
(As adjusted)(As adjusted)
Current tax expense/(benefit):Current tax expense/(benefit):  
Bermuda—
 —
  —
 —
Bermuda— — — 
Foreign22
 30
  34
 56
Foreign7 11 22 
Deferred tax (benefit)/expense:        
Deferred tax expense/(benefit):Deferred tax expense/(benefit):
Bermuda—
 —
  —
 —
Bermuda— — — 
Foreign(61) (22)  (4) 10
Foreign(2)(7)(62)
Total tax (benefit)/expense(39) 8
  30
 66
Total tax expense/(benefit)Total tax expense/(benefit)5 4 (40)
Effective tax rate3.1% (1.3)%  (0.8)% (2.2)%Effective tax rate(0.9)%(0.1)%5.3 %
 
The effective tax rate for the year ended December 31, 2019 (Successor),2021, the period from July 2, 2018 throughyear ended December 31, 2018 (Successor)2020 and the period from January 1, 2018 through July 1, 2018 (Predecessor) was 3.1%, (1.3)% and (0.8)% respectively. For the year ended December 31, 2017 (Predecessor) the rate2019 was (2.2)(0.9)%., (0.1)% and 5.3% respectively.


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We are incorporated in Bermuda, where a tax exemption has been granted until 2035. Other jurisdictions in which we and our subsidiaries operate are taxable based on rig operations. A loss in one jurisdiction may not be offset against taxable income in another jurisdiction. Thus, we may pay tax within some jurisdictions even though itwe might have losses in others.


Due to the CARES Act in the US, we recognized a tax benefit in 2021 of $2 million (2020: $5 million) which included the release of valuation allowances previously recorded and carrying back net operating losses to previous years.

The income taxes for the year ended December 31, 2019 (Successor),2021, the period from July 2, 2018 throughyear ended December 31, 2018 (Successor), the period from January 1, 2018 through July 1, 2018 (Predecessor)2020 and the year ended December 31, 2017 (Predecessor)2019 differed from the amount computed by applying the BermudanBermuda statutory income tax rate of 0% as follows:
(In $ millions)Year ended December 31, 2021Year ended December 31, 2020Year ended December 31, 2019
(As adjusted)(As adjusted)
Effect of change on unrecognized tax benefits7 (1)(7)
Effect of unremitted earnings of subsidiaries— (2)(17)
Effect of taxable income in various countries(2)7 (16)
Total tax expense/(benefit)5 4 (40)
 Successor  Predecessor
(In $ millions)Year ended December 31,
2019
 Period from July 2, 2018 through December 31, 2018
  Period from January 1, 2018 through July 1, 2018
 Year ended December 31,
2017
Income taxes at statutory rate—
 —
  —
 —
Effect of change on unrecognized tax benefits(6) 49
  12
 (5)
Effect of unremitted earnings of subsidiaries(17) (10)  —
 3
Effect of taxable income in various countries(16) (31)  18
 68
Total tax (benefit)/expense(39) 8
  30
 66



Deferred income taxes
 
Deferred income taxes reflect the impact of temporary differences between the amount of assets and liabilities recognized for financial reporting purposes and such amounts recognized for tax purposes. The net deferred tax assets/(liabilities) consist of the following:
 

Deferred tax assets:
(In $ millions)December 31, 2021 December 31, 2020
Pensions and stock options3 1 
Provisions31 31 
Property, plant and equipment51 — 
Net operating losses carried forward330 251 
Intangibles— 4 
Other9 3 
Gross deferred tax assets424 290 
Valuation allowance(413)(219)
Deferred tax assets, net of valuation allowance11 71 
 Successor
 Successor
(In $ millions)December 31,
2019
 December 31,
2018
Pensions and stock options2
 4
Provisions30
 28
Net operating losses carried forward259
 263
Gross deferred tax assets291
 295
Valuation allowance(255) (254)
Deferred tax assets, net of valuation allowance36
 41


Deferred tax liabilities:
Successor
 Successor
(In $ millions)December 31,
2019
 December 31,
2018
(In $ millions)December 31, 2021 December 31, 2020
Property, plant and equipment30
 49
Property, plant and equipment— 30 
Unremitted Earnings of Subsidiaries10
 27
Unremitted Earnings of Subsidiaries8 8 
Deferred gainDeferred gain— 34 
Intangibles4
 34
Intangibles1 — 
Gross deferred tax liabilities44
 110
Gross deferred tax liabilities9 72 
Net deferred tax liability(8) (69)
Net deferred tax asset/(liability)Net deferred tax asset/(liability)2 (1)
 
As at December 31, 2019 (Successor),2021, deferred tax assets related to net operating loss (“NOL”NOL”) carry forwards was $259$330 million (December 31, 2018 (Successor): $2632020: $251 million), which can be used to offset future taxable income. NOL carry forwards which were generated in various jurisdictions, include $249$244 million (December 31, 2018 (Successor): $2572020: $241 million) that will not expire and $10$86 million (December 31, 2018 (Successor): $62020: $10 million) that will expire between 20212022 and 20392041 if unutilized.not utilized.


As at December 31, 2019 (Successor),2021, deferred tax liability related to intangibles from the application of fresh start accounting was $4$1 million (December 31, 2018 (Successor): $34 million)2020: nil).


We establish a valuation allowance for deferred tax assets when it is more likely than not that the benefit from the deferred tax asset will not be realized. The amount of deferred tax assets considered realizable could increase or decrease in the near-term if our estimates of future taxable income change. Our valuationvaluation allowance consists of $259$330 million on NOL carry forwards as at December 31, 2019 (Successor)2021 (December 31, 2018 (Successor): $2422020: $251 million).
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Uncertain tax positions


As at December 31, 2019 (Successor),2021, we had a total amount of unrecognized tax benefits of $89$85 million excluding interest and penalties of which $65 million was included in other non-current liabilities, and $24 million was presented as a reduction of deferred tax assets.penalties. The changes to our balance related to unrecognized tax benefits were as follows:

Successor  Predecessor
(In $ millions)Year ended December 31,
2019
 Period from July 2, 2018 through December 31, 2018
  Period from January 1, 2018 through July 1, 2018
 Year ended December 31,
2017
 (In $ millions)Year ended December 31, 2021Year ended December 31, 2020Year ended December 31, 2019
Balance at the beginning of the period132
 61
  55
 44
Balance at the beginning of the period82 89 132 
Increases as a result of positions taken in prior periods8
 69
  7
 23
Increases as a result of positions taken in prior periods4 1 8 
Increases as a result of positions taken during the current period29
 18
  1
 —
Increases as a result of positions taken during the current period2 — 29 
Decreases as a result of positions taken in prior periods(34) (9)  (2) (9)Decreases as a result of positions taken in prior periods(1)(4)(34)
Decreases as a result of positions taken in the current period—
 —
  —
 —
Decreases due to settlements(46) (7)  —
 (3)Decreases due to settlements(1)(1)(46)
Decreases as a result of a lapse of the applicable statute of limitationsDecreases as a result of a lapse of the applicable statute of limitations(1)(3)— 
Balance at the end of the period89
 132
  61
 55
Balance at the end of the period85 82 89 
 

Accrued interest and penalties totaled $18$19 million and $26 million as ofat both December 31, 2019 (Successor)2021 and December 31, 2018 (Successor) respectively2020 and were included in "Other liabilities" on our Consolidated Balance Sheets. We recognized expensesexpenses/(benefits) of $7$1 million, $11 million($1 million), and $3 million($7 million) during the year ended December 31, 2019 (Successor), the period from July 2, 2018 through December 31, 2018 (Successor) and the period from January 1, 2018 through July 1, 2018 (Predecessor), respectively ($10 million expense recognized in2021, the year ended December 31, 2017 (Predecessor)),2020 and the year ended December 31, 2019, respectively, related to interest and penalties for unrecognized tax benefits on the income tax expense line in the accompanying Consolidated Statement of Operations.
As of December 31, 2019 (Successor)2021, $83$85 million of our unrecognized tax benefits, including penalties and interest, would have a favorable impact to the Company’s effective tax rate if recognized.
The decrease in our unrecognized tax benefits was primarily related to recognizing the U.S. position following a guidance from the U.S. Department of Treasury. The liability for the U.S. unrecognized tax benefit was originally recorded in the fourth quarter of 2018.

Tax returns and open years

We are subject to taxation in various jurisdictions. Tax authorities in certain jurisdictions examine our tax returns and some have issued assessments. We are defending our tax positions in those jurisdictions.

The Brazilian tax authorities have issued a series of assessments with respect to our returns for certain years up to 20122017 for an aggregate amount equivalent to $161$124 million including interest and penalties. As a positive development in relation to the earlier years' assessments, the first tier judicial court has ruled in favor of Seadrill. However, an appeal has since been filed by the tax authorities to the second tier judicial court. The relevant group companies are robustly contesting these assessments including filing the relevant appeals. An adverse outcome on these proposed assessments could result in a material adverse impact on our Consolidated Balance Sheets, Statements of Operations or Cash Flows. Duringappeals to the year ended December 31, 2019,tax authorities and counter-appeal to the Company posted approximately $83 million collateral with a financial institution in order to continue the appeal against certain tax years. The collateral is included in "Restricted Cash" on our Consolidated Balance Sheets.

higher court. 
The Nigerian tax authorities have issued a series of claims and assessments both directly and lodged through the Previous Chapter 11 processProceedings, with respect to returns for subsidiaries for certain years up to 2016 for an aggregate amount equivalent to $171 million. The relevant group companies are robustly contesting these assessments including filing relevant appeals in Nigeria and it is also intended that one or more formal objections against these claims for distribution purposes will be filed in the U.S. court.Nigeria. An adverse outcome on these proposed assessments could result in a material adverse impact on our Consolidated Balance Sheets, Statements of Operations or Cash Flows.

The Kuwaiti tax authorities have issued a series of assessments with respect to our returns for years up to 2015 for an aggregate amount equivalent to $12 million including interest and penalties. The relevant group company is robustly contesting these assessments including filing relevant appeals.
The Mexican tax authorities have issued a series of assessments with respect to our returns for certain years up to 2014 for an aggregate amount equivalent to $95 million including interest and penalties (across our continuing and discontinued operations of $49 million and $46 million respectively). The relevant group companies are robustly contesting these assessments including filing relevant appeals. 
An adverse outcome on these proposed assessments could result in a material adverse impact on our Consolidated Balance Sheets, Statements of Operations or Cash Flows.
The following table summarizes the earliest tax years that remain subject to examination by other major taxable jurisdictions in which we operate. 
JurisdictionEarliest Open Year
Kuwait2012
Nigeria2014
United States2018
Mexico2011
Norway2015
Brazil2008
JurisdictionEarliest Open Year
Angola2015
Nigeria2014
United States2016
Norway2015
Brazil2008



F-35
Table ofContents
Note 13 – Loss per share
The computation of basic loss per share (“LPS”) is based on the weighted average number of shares outstanding during the period. Diluted LPS includes the effect of the assumed conversion of potentially dilutive instruments.
The components of the numerator for the calculation of basic and diluted LPS are as follows:
Successor  Predecessor
(In $ millions)Year ended December 31,
2019
 Period from July 2, 2018 through December 31, 2018
  Period from January 1, 2018 through July 1, 2018
 Year ended December 31,
2017
(In $ millions)Year ended December 31, 2021Year ended December 31, 2020Year ended December 31, 2019
(As adjusted)(As adjusted)
Net loss from continuing operationsNet loss from continuing operations(592)(4,448)(720)
Profit /(loss) from discontinued operationsProfit /(loss) from discontinued operations5 (215)(502)
Net loss attributable to the parent(1,219) (602)  (3,881) (2,973)Net loss attributable to the parent(587)(4,663)(1,222)
Less: Allocation to participating securities—
 —
  —
 —
Less: Allocation to participating securities— — — 
Net loss available to stockholders(1,219) (602)  (3,881) (2,973)Net loss available to stockholders(587)(4,663)(1,222)
Effect of dilution—
 —
  —
 —
Effect of dilution— — — 
Diluted net loss available to stockholders(1,219) (602)  (3,881) (2,973)Diluted net loss available to stockholders(587)(4,663)(1,222)
The components of the denominator for the calculation of basic and diluted LPS are as follows:
Successor  Predecessor
(In $ millions)Year ended December 31,
2019
 Period from July 2, 2018 through December 31, 2018
  Period from January 1, 2018 through July 1, 2018
 Year ended December 31,
2017
(In millions)(In millions)Year ended December 31, 2021Year ended December 31, 2020Year ended December 31, 2019
Basic loss per share:        Basic loss per share:
Weighted average number of common shares outstanding100
 100
  504
 505
Weighted average number of common shares outstanding100 100 100 
Diluted loss per share: 
  
     
Diluted loss per share:  
Effect of dilution—
 —
  —
 —
Effect of dilution— — — 
Weighted average number of common shares outstanding adjusted for the effects of dilution100
 100
  504
 505
Weighted average number of common shares outstanding adjusted for the effects of dilution100 100 100 
The basic and diluted loss per share are as follows:
(In $)Year ended December 31, 2021Year ended December 31, 2020Year ended December 31, 2019
Basic Loss per share from continuing operations(5.90)(44.29)(7.16)
Diluted Loss per share from continuing operations(5.90)(44.29)(7.16)
Basic loss per share(5.85)(46.43)(12.18)
Diluted loss per share(5.85)(46.43)(12.18)
ASC 260 ‘Earnings per Share’ requires the presentation of diluted earnings per share where a company could be called upon to issue shares that would decrease net earnings per share. As the Company reported net losses for the year ended December 31, 2021, the effect of including potentially dilutive instruments in the calculation would result in a reduction in loss per share, which is anti-dilutive. Under these circumstances, these instruments are not included in the calculation due to their anti-dilutive effect and as a result the basic and diluted loss per share are equal.

F-36
 Successor  Predecessor
(In $)Year ended December 31,
2019
 Period from July 2, 2018 through December 31, 2018
  Period from January 1, 2018 through July 1, 2018
 Year ended December 31,
2017
Basic loss per share(12.18) (6.02)  (7.71) (5.89)
Diluted loss per share(12.18) (6.02)  (7.71) (5.89)
Table ofContents

Note 14 – Restricted cash
Restricted cash consists of the following:
(In $ millions)December 31, 2021December 31, 2020
(As adjusted)
Accounts pledged as collateral for performance bonds and similar guarantees (i)
42 48 
Proceeds from rig sales (ii)
47 — 
Demand deposit pledged as collateral for tax related guarantee (iii)
63 65 
Accounts pledged as collateral for SFL leases (iv)
37 22 
Other34 33 
Total restricted cash223 168 
 Successor
 Successor
(In $ millions)December 31, 2019
 December 31, 2018
Accounts pledged as collateral for Senior Secured Notes (1)
24
 328
Accounts pledged as collateral for performance bonds and similar guarantees104
 101
Demand deposit pledged as collateral for tax related guarantee (2)
83
 —
Other31
 32
Total restricted cash242
 461
(i)Cash collateral in respect to bank guarantee facilities with Danske Bank and DNB.

(1)
The balance as at December 31, 2018 was used to repurchase Senior Secured Notes on April 10, 2019 (see Note 22 - Debt for further details). In 2019, Seabras Sapura repaid $24 million of related party and shareholder loans, with the cash proceeds held in escrow against a future redemption of Senior Secured Notes. This is held as non-current within the Consolidated Balance Sheet.
(2)
We placed a total of 330 million Brazilian Reais of collateral with BTG Bank under a letter of credit agreement. This related to long-running tax disputes which are currently being litigated through the Brazilian courts. This is held as non-current within the Consolidated Balance Sheet.

(ii)Proceeds from rig disposals to be paid to the lenders in 2022 and classified as restricted until then.
(iii)We placed a total of 330 million Brazilian Reais of collateral with BTG Pactual under a letter of credit agreement. This related to long-running tax disputes which are currently being litigated through the Brazilian courts. This is held as non-current in the Consolidated Balance Sheet.
(iv)Accounts pledged to SFL for lease arrangements for the West Linus and West Hercules.

Restricted cash is presented in our Consolidated Balance Sheets as follows:
(In $ millions)December 31, 2021December 31, 2020
(As adjusted)
Current restricted cash160 103 
Non-current restricted cash63 65 
Total restricted cash223 168 

 Successor
 Successor
(In $ millions)December 31, 2019
 December 31, 2018
Current restricted cash135
 461
Non-current restricted cash107
 —
Total restricted cash242
 461


Note 15 – Marketable securities
Effective January 1, 2018, we adopted ASU 2016-01, which applies to equity investments that are neither (i) accounted for under the equity method or (ii) result in consolidation. Under ASU 2016-01 we record such investments at fair value and recognize any changes directly in net income, unless there is no readily ascertainable fair value, in which case we record the investment at cost less impairment. We hold investments in certain marketable securities which we account for at fair value through profit and loss per this guidance. We use quoted market prices to determine the fair value of our marketable securities and categorize them as level 1 on the fair value hierarchy.
For fiscal periods beginning prior to January 1, 2018, marketable securities not accounted for under the equity method were classified as available-for-sale. Unrealized gains and losses on equity securities classified as available-for-sale were recognized in other comprehensive income. When we adopted ASU 2016-01 for the first time at January 1, 2018, we reclassified $31 million of previously recognized fair value gains from accumulated other comprehensive income to retained earnings on January 1, 2018.
The below table shows the carrying value of our investments in marketable securities for periods presented in this report.
  Successor
 Successor
(In $ millions) December 31, 2019
 December 31, 2018
Seadrill Partners - Common units 2
 45
Archer 9
 12
Total marketable securities 11
 57
The below table shows the gain and losses recognized through net income for the periods presented in this report since the adoption of ASU 2016-01.
  Successor  Predecessor
(In $ millions) Year ended December 31,
2019
 Period from July 2, 2018 through December 31, 2018
  Period from January 1, 2018 through July 1, 2018
Seadrill Partners - Common Units - unrealized loss on marketable securities (43) (45)  (5)
Archer - unrealized (loss)/gain on marketable securities (3) (19)  2
Total unrealized loss on marketable securities (46) (64)  (3)
The below table shows the gain and losses recognized through other comprehensive income for the periods presented in this report before the adoption of ASU 2016-01.
Predecessor
(In $ millions)Year ended December 31, 2017
Seadrill Partners - Common Units - unrealized loss on marketable securities(14)
Archer - unrealized gain on marketable securities28
Total unrealized gain on marketable securities14
Until April 2017, we accounted for our investment in Archer under the equity method. However, as part of a financial restructuring, Archer completed two share issuances in March and April 2017, which diluted our ownership interest to 15.7%. Also, as part of this restructuring, we agreed with Archer to convert total outstanding subordinated loans, fees and interest provided to Archer, with a carrying value of $37 million, into a $45 million loan. The fair value of the new loan receivable at the date of conversion was $56 million resulting in a gain of $19 million on debt extinguishment, which is presented within “Gain on debt extinguishment” in our Predecessor Consolidated Statement of Operations.
As a result of these activities, we concluded that we no longer had significant influence over Archer's financial and operating decisions, primarily as a result of the reduction in our shareholding and the significant reduction in our interests in related debt and guarantees. We reclassified our equity method investment in Archer, which had a carrying value of nil, to an investment in marketable security, also with a carrying value of nil. We then revalued the investment in marketable security to fair value based on Archer's share price. We recognized the gain through other comprehensive income.
For periods before we adopted ASU 2016-01, we reviewed our marketable securities for other-than-temporary impairment at each reporting date. However, there were no impairments recorded against our investments in marketable securities during any of the periods presented.


Note 1615 – Accounts receivable
Accounts receivablesreceivable are held at their nominal amount less an allowance for doubtful accounts. Doubtful accounts are recognized when it is unlikely that required payments of specific amounts will occur as a result of the financial condition of the customer. expected credit losses. Refer to Note 6 - "Current expected credit losses" for further information.

Note 16 – Other assets
As at December 31, 2019 (Successor) we had no allowances for doubtful accounts netted against our accounts receivable (December 31, 2018 (Successor): nil).
The below table sets out the bad debt expense incurred for the periods presented in this report.
SuccessorPredecessor
(In $ millions)
Year ended December 31,
2019
Period from July 2, 2018 through December 31, 2018
Period from January 1, 2018 through July 1, 2018
Year ended December 31,
2017
Bad debt expense—
—
48
—
Total bad debt expense—
—
48
—
In November 20182021 and January 2019, we recovered a total of $47 million from a $48 million overdue receivable that was fully provided against in the Predecessor company. This was recognized as other operating income in our 2018 and 2019 Successor periods.

Note 17 – Other assets
As at December 31, 2019 and 2018 (Successor),2020, other assets included the following: 
(In $ millions)December 31, 2021December 31, 2020
(As adjusted)
Prepaid expenses54 67 
Taxes receivable48 32 
Right of use asset24 57 
Restructuring backstop commitment fee20 — 
Deferred contract costs15 14 
Reimbursable amounts due from customers13 11 
Favorable drilling and management services contracts9 10 
Other35 38 
Total other assets218 229 


F-37
 Successor
 Successor
(In $ millions)As at December 31,
2019

As at December 31,
2018
Favorable drilling and management services contracts33
 186
Taxes receivable38
 50
Prepaid expenses33
 32
Right of use asset35
 —
Reimbursable amounts due from customers (1)
21
 10
Deferred contract costs12
 15
Derivative asset - interest rate cap (2)
3
 39
Insurance receivable (3)
14
 1
Other28
 25
Total other assets217
 358
Table ofContents
(1) Includes related party balances of $5 million from Northern Drilling. For further information refer to Note 31 - Related party transactions.
(2) Refer to Note 32 - Financial instruments and risk management.
(3) In January 2019, there was a loss incident on the Sevan Louisiana related to a malfunction of its subsea equipment. As of December 31, 2019, we have incurred $19 million of costs to repair the equipment, of which $4 million has been recovered and an additional $14 million will be recoverable under our physical damage insurance.

Other assets are presented in our Consolidated Balance Sheets as follows:
(In $ millions)December 31, 2021December 31, 2020
(As adjusted)
Other current assets191 184 
Other non-current assets27 45 
Total other assets218 229 

 Successor
 Successor
(In $ millions)As at December 31,
2019
 As at December 31,
2018
Other current assets158
 322
Other non-current assets59
 36
Total other assets217
 358

Favorable drilling contracts and management services contracts
On emergence from Chapter 11, we recognized favorable drilling and management service contracts at fair value, which will be amortized over their remaining contract period. The amounts recognized represent the net present value of the existing contracts at the time of emergence compared to the current market rates at that time, discounted at the weighted average cost of capital.
The gross carrying amounts and accumulated amortization included in 'Other current assets' and 'Other non-current assets' for favorable contracts in the Consolidated Balance Sheet are as follows:
  As at December 31, 2019 As at December 31, 2018
(In $ millions) Gross Carrying Amount
Accumulated amortization
Net carrying amount
 Gross Carrying Amount
Accumulated amortization
Net carrying amount
Favorable contracts        
Balance at beginning of period 287
(101)186
 287
—
287
Amortization of favorable contracts —
(153)(153) —
(101)(101)
Balance at end of period 287
(254)33
 287
(101)186
The amortization is recognized in the Consolidated Statements of Operations under "Amortization of intangibles". The weighted average remaining amortization period for the favorable contracts is 20 years, 6 months.
The table below shows the amounts relating to favorable contracts that is expected to be amortized over the following periods:
  Period ended December 31,
(In $ millions) 2020
2021
2022
2023
2024 and after
Total
Amortization of favorable contracts 2
2
2
2
25
33

Note 1817 – Investment in associated companies
We have the following investments in associated companies:
Ownership percentageJoint venture partnerDecember 31, 2021December 31, 2020
Gulfdrill (i)
Gulf Drilling International50.0 %50.0 %
Sonadrill (ii)
Sonangol E.P.50.0 %50.0 %
 Successor
 Successor
Ownership percentageDecember 31, 2019
 December 31, 2018
Seadrill Partners and Seadrill Partner subsidiaries ("SDLP investments") (a) (b)
(a)
 (a)
Seabras Sapura (b)
50.0% 50.0%
SeaMex Ltd. ("SeaMex") (b)
50.0% 50.0%
Sonadrill (b)
50.0% —%
Gulfdrill (b)
50.0% —%
(a)
Refer to the Seadrill Partners subsidiaries paragraph below for additional information.
(b)
For transactions with related parties refer to Note 31 - Related party transactions.
Seadrill Partners
Seadrill Partners investments consist of the following:
(a) Subordinated units - Our holdings of subordinated units of Seadrill Partners are accounted for under theWe own 50% equity method on the basis that the subordinated units are considered to be ‘in-substance common stock’. The subordination period will end on the satisfaction of various tests as prescribed in the Operating Agreement of Seadrill Partners. Upon the expiration of the subordination period, the subordinated units will convert into Common Units. Our holding in the subordinated units represents 18% of the limited partner interests in Seadrill Partners.

(b) Direct ownership interests - All of our direct ownership interests in subsidiaries of Seadrill Partners are accounted for under the equity method. We deem these investments to represent significant influence over the investees through their voting rights and by virtue of Seadrill’s representation on the Board of Seadrill Partners. We hold ownership interests in the following entities controlled by Seadrill Partners as at December 31, 2019:
i.
42% in Seadrill Operating LP: Seadrill Operating LPabove entities. The remaining 50% equity interest is a limited partnership and is controlled by its General Partner, Seadrill Operating GP LLC, which is wholly owned by Seadrill Partners.
ii.
49% Seadrill Capricorn Holdings LLC: Seadrill Capricorn Holdings LLC is a limited liability company. There is only one class of member interest which is deemed to represent voting common stock.
iii.
39% in Seadrill Deepwater Drillship Ltd and 49% indirect interest in Seadrill Mobile Units (Nigeria) Ltd.: Both entities are limited companies and only have one class of stock, which is deemed to represent voting common stock.
(c) Member interestsand IDR's - Seadrill applies the cost method to account for its investment in Seadrill member interest and Incentive Distribution Rights (“IDR’s”) on the basis that they do not represent common stock interests and their fair value is not readily determinable. The investments are held at cost less impairment.
We additionally hold an investment in the common units of Seadrill Partners, which are classified as marketable securities on our Consolidated Balance Sheet. Refer to Note 15 - Marketable Securities for further information.
Seabras Sapura
Seabras Sapura is 50% owned by Sapura Energy, and 50% owned by Seadrill.the above joint venture partners. We account for our 50% investmentinvestments in Seabras Sapurathe joint ventures under the equity method. For transactions with related parties refer to Note 27 - "Related party transactions".
SeaMexi.Gulfdrill
We own a 50% equity interest in SeaMex. The remaining 50% is owned by Fintech. We account for our 50% investment in the joint venture under the equity method.
Sonadrill
We own a 50% equity interest in Sonadrill. The remaining 50% is owned by Sonangol E.P. We account for our 50% investment in the joint venture under the equity method.
Gulfdrill
We own 50% equity interest in Gulfdrill. The remaining 50% is owned by Gulf Drilling International. Gulfdrill is a joint venture that will managemanages and operate fiveoperates 5 premium jack-ups in Qatar with Qatargas. We have a 50% ownership stake in Gulfdrill. The remaining 50% interest is owned by Gulf Drilling International ("GDI"). We lease 3 of our jack-up rigs to the joint venture, with an additional 2 units being leased from a third party shipyard.
Fresh start accountingii. Sonadrill
Sonadrill is a joint venture that will operate 4 drillships focusing on opportunities in Angolan waters. We have a 50% ownership stake in Sonadrill. The remaining 50% interest is owned by Sonangol EP ("Sonangol"). Both Seadrill and Sonangol agreed to bareboat two units each into the joint venture with Seadrill due to manage the two Sonangol owned drillships. On emergence from bankruptcy, our equity method investments were measured at fair value which resulted in a different basis fromOctober 1, 2019, the underlying carrying values offirst bareboat and management agreements for the investees' net assets at the date of emergence. The basis differences comprise of (i)Sonangol drilling unit, basis differences which are depreciated overLibongos, became effective. The rig commenced its first drilling contract on October 10, 2019. The Libongos, iscurrently operating in Angola, while the remaining useful life ofQuenguela is contracted to start with Total in early 2022. The two committed Seadrill rigs will be leased to the associated asset and (ii) contract basis differences which are amortized over the remaining term of the contract. The unwinding of the basis difference is recognized as a "Share in results from associated companies" in the Consolidated Statement of Operations.joint venture when required; to date no further contracts have been secured for these rigs.


Share in results from associated companies
Our share in results of our associated companies (net of tax) were as follows:
(In $ millions)Year ended December 31, 2021Year ended December 31, 2020Year ended December 31, 2019
(As adjusted)(As adjusted)
Seadrill Partners— — (21)
Sonadrill5 (2)(1)
Gulfdrill(2)2 — 
Total share in results from associated companies (net of tax)3 — (22)









F-38
 Successor  Predecessor
(In $ millions)Year ended December 31,
2019
 Period from July 2, 2018 through December 31, 2018
  Period from January 1, 2018 through July 1, 2018
 Year ended December 31,
2017
Seadrill Partners - Direct ownership interests(107) (82)  77
 82
Seadrill Partners - Subordinated units(17) (20)  22
 22
Seabras Sapura29
 24
  46
 80
SeaMex(19) (12)  4
 —
Sonadrill(1) —
  —
 —
Archer—
 —
  —
 (10)
Total share in results from associated companies (net of tax)(115) (90)  149
 174
Table ofContents

Summary of Consolidated Statements of Operations for our equity method investees
The results of the Direct ownership interests in the SDLP companies and our share in those results (net of tax) were as follows:
SDLPSuccessor  Predecessor
(in $ millions)Year ended December 31,
2019
 Period from July 2, 2018 through December 31, 2018
  Period from January 1, 2018 through July 1, 2018
 Year ended December 31,
2017
Operating revenues750
 426
  612
 1,128
Net operating income51
 100
  257
 464
Net income(187) (127)  201
 235
         
Net (loss)/income allocated to SDLP direct ownership interests(92) (59)  77
 93
Amortization of basis differences(15) (23)  —
 (11)
Share in results of SDLP direct investments (net of tax)(107) (82)  77
 82
         
Net (loss)/income allocated to SDLP subordinated units(17) (15)  22
 24
Amortization of basis differences—
 (5)  —
 (2)
Share in results of SDLP subordinated units (net of tax)(17) (20)  22
 22
The results of the Seabras Sapura companies and our share in those results (net of tax) were as follows:
Seabras SapuraSuccessor  Predecessor
(in $ millions)Year ended December 31,
2019
 Period from July 2, 2018 through December 31, 2018
  Period from January 1, 2018 through July 1, 2018
 Year ended December 31,
2017
Operating revenues434
 232
  241
 487
Net operating income198
 124
  125
 244
Net income113
 88
  92
 160
         
Seadrill ownership percentage50% 50%  50% 50%
Share of net income57
 44
  46
 80
         
Amortization of basis differences(28) (20)  —
 —
Share in results from Seabras Sapura (net of tax)29
 24
  46
 80

The results of the SeaMex companies and our share in those results (net of tax) were as follows:
SeaMexSuccessor

Predecessor
(in $ millions)Year ended December 31,
2019

Period from July 2, 2018 through December 31, 2018


Period from January 1, 2018 through July 1, 2018

Year ended December 31,
2017
Operating revenues232
 118
  121
 239
Net operating income70
 40
  40
 80
Net income18
 4
  7
 —
         
Seadrill ownership percentage50% 50%  50% 50%
Share of net income9
 2
  4
 —
         
Amortization of basis differences(28) (14)  —
 —
Share in results from SeaMex (net of tax)(19) (12)  4
 —

The results of the Sonadrill companies and our share in those results (net of tax) were as follows:
Sonadrill
(In $ millions)Year ended December 31, 2021Year ended December 31, 2020Year ended December 31, 2019
Operating revenues94 56 22 
Net operating income/(loss)18 (2)(1)
Net income/(loss)11 (5)(2)
Seadrill ownership percentage50 %50 %50 %
Share of results from Sonadrill (net of tax)5 (2)(1)
SonadrillSuccessor

Predecessor
(in $ millions)Year ended December 31,
2019

Period from July 2, 2018 through December 31, 2018


Period from January 1, 2018 through July 1, 2018

Year ended December 31,
2017
Operating revenues22
—
—
—
Net operating income(1)—
—
—
Net income(2)—
—
—
Seadrill ownership percentage50%—%—%—%
Share of net income(1)—
—
—
Share in results from Sonadrill (net of tax)(1)—
—
—


The results of the Gulfdrill companies and our share in those results (net of tax) were as follows:
Gulfdrill
(In $ millions)Year ended December 31, 2021Year ended December 31, 2020Year ended December 31, 2019
Operating revenues142 44 — 
Net operating income/(loss)(4)6 — 
Net income/(loss)(4)4 — 
Seadrill ownership percentage50 %50 %50 %
Share of results from Gulfdrill (net of tax)(2)2 — 

Book value of our investments in associated companies
At the year end, the book values of our investments in our associated companies were as follows:
 Successor Successor
(In $ millions)December 31, 2019
 December 31, 2018
Seadrill Partners - Direct ownership interest122
 479
Seadrill Partners - Subordinated units—
 17
Seadrill Partners - IDRs—
 54
Seabras Sapura98
 77
Seabras Sapura Holding GmbH - shareholder loans held as equity123
 132
SeaMex Ltd22
 41
Sonadrill24

—
Total389
 800
(In $ millions)December 31, 2021December 31, 2020
Sonadrill27 22 
Gulfdrill— 2 
Total27 24 
Quoted market prices for all of our investments are not available.

Summarized Consolidated Balance sheets for our equity method investees
The summarized balance sheets of the directly owned SDLP companies and our share of recorded equity in those companies was as follows:
SDLPSuccessor Successor
(in $ millions)December 31, 2019
 December 31, 2018
Current assets833
 1,110
Non-current assets4,847
 5,076
Current liabilities(533) (433)
Non-current liabilities(2,623) (3,039)
Net Assets2,524
 2,714
    
Seadrill share of book equity1,305
 1,399
Basis difference allocated to rigs (2)
(1,220) (1,019)
Basis difference allocated to contracts (2)
37
 99
SDLP book equity allocated to direct investments122
 479
    
SDLP book equity allocated to subordinated units (1)
—
 17
(1)
Seadrill Partners subordinated units have a lock-up period during which they have subordinated liquidation and dividend rights. On application of fresh start accounting the units were valued with reference to the market price of common units and adjusted for a discount for lack of marketability (because of the subordination period). The value of the subordinated units on application of fresh start accounting was $37 million. Since application of fresh start accounting we allocated a share of the net loss incurred by Seadrill Partners to the subordinated units using a Hypothetical Liquidation at Book Value methodology. We allocated a net loss of $20 million for the period from July 2, 2018 through December 31, 2018. After allocating this loss the remaining balance of the investment in subordinated units at December 31, 2018 was $17 million. We allocated a further net loss of $17 million for the year ended December 31, 2019. After allocating this loss the remaining balance of the investment in subordinated units was nil.
(2)
In September 2019, an impairment of $302 million was recognized against the Seadrill Partners direct ownership interests and IDRs in the Consolidated Statements of Operations within "Loss on impairment of investments" (December 31, 2018 (Successor), nil). See Note 11 – Impairment loss on investments in associated companies.
The summarized balance sheets of the Seabras Sapura companies and our share of recorded equity in those companies was as follows:
Seabras SapuraSuccessor Successor
(in $ millions)December 31, 2019
 December 31, 2018
Current assets195
 255
Non-current assets1,495
 1,567
Current liabilities(510) (599)
Non-current liabilities(504) (637)
Net Assets676
 586
Seadrill ownership percentage50% 50%
Seadrill share of book equity338
 293
    
Shareholder loans held as equity (1)
123
 132
Basis difference allocated to rigs(369) (394)
Basis difference allocated to contracts129
 178
Total adjustments(117) (84)
Book value of Seadrill investment221
 209
(1) In September 2019, Seabras Sapura repaid $9 million of shareholder loans, with the cash proceeds held in escrow against a future redemption of Senior Secured Notes.

The summarized balance sheets of the SeaMex companies and our share of recorded equity in those companies was as follows:
SeaMexSuccessor Successor
(in $ millions)December 31, 2019
 December 31, 2018
Current assets260
 253
Non-current assets939
 977
Current liabilities(141) (149)
Non-current liabilities(586) (627)
Net Assets472
 454
Seadrill ownership percentage50% 50%
Seadrill share of book equity236
 227
    
Basis difference allocated to rigs(341) (357)
Basis difference allocated to contracts127
 171
Total adjustments(214) (186)
    
Book value of Seadrill investment22
 41

The summarized balance sheets of the Sonadrill companies and our share of recorded equity in those companies was as follows:
Sonadrill
(In $ millions)December 31, 2021December 31, 2020
Current assets72 54 
Current liabilities(18)(11)
Net Assets54 43 
Seadrill ownership percentage50 %50 %
Book value of Seadrill investment27 22 

F-39
Table ofContents
SonadrillSuccessorSuccessor
(in $ millions)December 31, 2019
December 31, 2018
Current assets57
—
Non-current assets—
—
Current liabilities(9)—
Non-current liabilities—
—
Net Assets48
—
Seadrill ownership percentage50%—%
Seadrill share of bookThe summarized balance sheets of the Gulfdrill companies and our share of recorded equity24
—
Book value of Seadrill investment24
—

Note 19 – Newbuildings
Changes in drilling units for the periods presented in this report werethose companies was as follows:
Gulfdrill
(In $ millions)December 31, 2021December 31, 2020
Current assets120 67 
Non-current assets173 102 
Current liabilities(182)(135)
Non-current liabilities(113)(31)
Net (liabilities)/assets(2)3 
Seadrill ownership percentage50 %50 %
Book value of Seadrill investment— 2 
(In $ millions)


Opening balance as at January 1, 2018 (Predecessor)
248
Additions
1
Closing balance as at July 1, 2018 (Predecessor)
249
Fresh Start adjustments
(249)
Balance as at July 2, 2018, December 31, 2018 and December 31, 2019 (Successor)—


On emergence from Chapter 11, the carrying values of our newbuilds were adjusted to fair value. The loss was recognized in the Consolidated Statement of Operations under the heading "Reorganization items".

Note 2018 – Drilling units
Changes in drilling units for the periods presented in this report were as follows:
 (In $ millions)
CostAccumulated depreciationNet book value
January 1, 20207,048 (647)6,401 
Additions147 — 147 
Depreciation— (341)(341)
Impairment(4,087)— (4,087)
December 31, 20203,108 (988)2,120 
Additions93 — 93 
Depreciation— (147)(147)
Impairment (1)
(152)— (152)
Disposal (2)
(364)227 (137)
December 31, 2021 (1)(2)
2,685 (908)1,777 
 (In $ millions)
  Cost
 Accumulated depreciation
 Net book value
Opening balance as at January 1, 2018 (Predecessor)  17,335
 (4,119) 13,216
Additions  117
 —
 117
Depreciation  —
 (388) (388)
Impairment  (414) —
 (414)
Closing balance as at July 1, 2018 (Predecessor)  17,038
 (4,507) 12,531
Fresh Start adjustments  (10,241) 4,507
 (5,734)
        
        
Opening balance as at July 2, 2018 (Successor)  6,797
 —
 6,797
Additions  93
 —
 93
Depreciation  —
 (231) (231)
Closing balance as at December 31, 2018 (Successor)  6,890
 (231) 6,659
Additions  158
 —
 158
Depreciation  —
 (416) (416)
Closing balance as at December 31, 2019 (Successor)  7,048
 (647) 6,401
We recognized(1) In June 2021 we recorded an impairment expense of $414$152 million (December 31, 2020: $4.1 billion) which was classifiedreported within "Loss on impairment of long-lived assets" on our Consolidated Statement of Operations for the period from January 1, 2018 through July 1, 2018 (Predecessor).Operations. Please refer to Note 9- Other operating items11 – "Loss on impairment of long-lived assets" for further information.details.
On emergence(2)In August, 2021, the lease agreement with SFL for the West Hercules was amended such that the rig was derecognized from Chapter 11, the carrying values of our drilling units were adjusted to fair value and the accumulated depreciationreplaced with a right of eachuse asset was reset to nil. The loss of $5,734 million was recognized in the Consolidated Statement of Operations under the heading "Reorganization items".within other assets.
As at December 31, 2019, as part of the joint venture with Gulfdrill, we have leased the West Castor to Gulfdrill. The net book value of the West Castor was $53 million split between $72 million cost offset by $19 million accumulated depreciation. Refer to Note 24 - Leases for further information.

Note 2119 – Equipment
Equipment consists of office equipment, software, furniture and fittings. Changes in equipment balances for the periods presented in this report were as follows:
 (In $ millions)
CostAccumulated depreciationNet book value
January 1, 202038 (15)23 
Additions1 — 1 
Depreciation— (5)(5)
December 31, 202039 (20)19 
Depreciation— (8)(8)
December 31, 202139 (28)11 

F-40
 (In $ millions)
  Cost
 Accumulated depreciation
 Net book value
Opening balance as at January 1, 2018 (Predecessor)  84
 (55) 29
Additions  9
 —
 9
Depreciation  —
 (3) (3)
Closing balance as at July 1, 2018 (Predecessor)  93
 (58) 35
Fresh Start adjustments  (64) 58
 (6)
        
        
Opening balance as at July 2, 2018 (Successor)  29
 —
 29
Additions  5
 —
 5
Depreciation  —
 (5) (5)
Closing balance as at December 31, 2018 (Successor)  34
 (5) 29
Additions  4
 —
 4
Depreciation  —
 (10) (10)
Closing balance as at December 31, 2019 (Successor)  38
 (15) 23

Table ofContents
On emergence from Chapter 11, the carrying value of our equipment was adjusted to fair value and the accumulated depreciation of each asset was reset to nil. The loss of $6 million was recognized in the Consolidated Statement of Operations under the heading "Reorganization items".



Note 2220 – Debt
As at December 31, 2019 (Successor)2021 and 2018 (Successor),2020, we had the following liabilities for third party debt agreements:
(In $ millions)December 31, 2021December 31, 2020
(As adjusted)
Secured credit facilities5,662 5,662 
Total debt principal5,662 5,662 
Less: Debt balance held as subject to compromise(5,662)— 
Carrying value— 5,662 
  Successor
 Successor
(In $ millions) December 31, 2019
 December 31, 2018
Secured credit facilities 5,662
 5,662
Senior Secured Notes 476
 769
Credit facilities contained within variable interest entities 621
 655
Total debt principal 6,759
 7,086
Less: debt discount and fees (136) (172)
Carrying value 6,623
 6,914
This was presentedCertain subsidiaries filed for Chapter 11 bankruptcy protection on February 7, 2021 and February 10, 2021. As a result, the outstanding balance of the senior credit facilities were classified within liabilities subject to compromise ("LSTC") in our Consolidated Balance Sheet as follows.
  Successor
 Successor
(In $ millions) December 31, 2019
 December 31, 2018
Debt due within one year 343
 33
Long-term debt 6,280
 6,881
Total debt principal 6,623

6,914

In the next sections we cover key terms of our debt facilities at December 31, 2019:2021.
Secured Credit Facilities
We have summarized the key terms ofFor further information on our secured credit facilities as at December 31, 2019 in the table below:
  Facility nameMaturityRepayments before maturity ($m)
Final Repayment (3)
($m)

Total ($m)
Margin on LIBOR floating interest (2)
Collateral vesselsBook value of collateral vessels ($m)
Notes
$400 million facility4Q 202247
88
135
3.50%West Cressida West Callisto West Leda150
 
$2,000 million facility1Q 2023248
660
908
3.00%West Alpha West Venture West Phoenix West Navigator West Epsilon West Elara732
 
$440 million facility3Q 202323
41
64
4.25%West Telesto58
 
$1,450 million facility4Q 202388
235
323
3.35%-4.00%West Tellus332
(2) 
$360 million facility4Q 202373
137
210
3.75%AOD I AOD II AOD III191
(1) 
$300 million facility1Q 202448
96
144
4.00%West Tucana West Castor107
 
$1,750 million facility1Q 2024299
576
875
3.50%-3.90%Sevan Driller Sevan Brasil Sevan Louisiana865
(2) 
$450 million facility2Q 202454
211
265
3.50%West Eminence275
 
$1,500 million facility4Q 2024355
770
1,125
2.70%-4.78%West Saturn West Neptune West Jupiter1,020
(2) 
$1,350 million facility4Q 2024351
594
945
3.00%West Pegasus West Gemini West Orion895
 
$950 million facility4Q 2024198
368
566
3.00%-4.42%West Eclipse West Carina648
(2) 
$450 million facility (2015)4Q 202463
39
102
3.85%West Freedom West Vigilant West Prospero West Ariel176
 
Total secured credit facilities5,662
    
(1)
The facility is held by AOD, by which we hold a 67% ownership.
(2)
Certain debt facilities are split into different tranches set at different margins. Under the ACE facility the margin is 5.5%.
(3)
The final repayment shown in the above table includes balloon amount due on maturity and one quarters worth of amortization payments deferred in the fourth quarter of 2019 under the ACE facility amounting to $63 million. We have the ability to defer a further $437 million of amortization payments that would otherwise fall due between June 2020 and March 2021 through future use of the ACE facility.

Senior Secured Notes
On July 2, 2018, we raised $880 million of aggregate principle amount of 12.00% Senior Secured Notes due in 2025. The notes bear interest at the annual rate of 4.00% payable in cash plus 8.00% payment-in-kind. The principal borrowed on the notes included the initial $880 million principal value of the notes plus $10 million of payment-in-kind interest that was compounded into the principal on emergence from Chapter 11.
Per the terms of the Senior Secured Notes, we were required to redeem a proportion of the principal and interest outstanding on the notes using our share of the West Rigel sale proceeds. We received $126 million proceeds from the sale of the West Rigel on May 9, 2018 and used this to make a mandatory redemption of $121 million of principal and $5 million of accrued interest on November 1, 2018.

We were also required to make an offer to repurchase a proportion of the Senior Secured Notes using proceeds from a deferred consideration arrangement relating to the sale of our tender rig business to Sapura Energy in 2013. We made an offer to purchase up to $56 million of the Senior Secured Notes on October 10, 2018. On expiry of the offer, $0.1 million in aggregate principal amount of the notes were validly tendered. We accepted and made payment for the tendered notes on November 14, 2018.
On April 10, 2019, we repurchased $311 million of our principal Senior Secured Notes for $342 million. The $31 million additional cash paid represents the 7% purchase premium and settlement of accrued payment-in-kind and cash interest.
After the two redemptions, there was a remaining $476 million principal outstanding on the notes.
The Senior Secured Notes are secured by, among other things, our investments in Seadrill Partners, SeaMex and Seabras Sapura. Refer to Note 18 - Investment in associated companies for further information.

Credit facilities contained within variable interest entities
We consolidate three legal subsidiaries of Ship Finance that own the West Taurus, West Hercules and West Linus. Pleasebankruptcy proceedings refer to Note 35 for further details of this arrangement. These facilities were also amended during the period to conform with the charter payment schedules which were amended as part of the RSA linked to our reorganization.4- "Chapter 11 Proceedings".
The terms of these facilities are set out in the below table:
Facility NameMaturityRepayments before maturity ($m)
Final Repayment ($m)
Total ($m)
Margin on LIBOR floating interestCollateral vesselsBook value of collateral vessels ($m)
$390 million facility4Q 202243
144
187
Margin not disclosedWest Taurus271
$375 million facility2Q 202353
149
202
Margin not disclosedWest Hercules322
$475 million facility2Q 202352
180
232
Margin not disclosedWest Linus191
Total credit facilities within VIEs621
   

Debt maturities
The outstanding debt as at December 31, 2019 is repayable as follows:
(In $ millions) December 31, 2019
2020 343
2021 569
2022 984
2023 1,774
2024 2,613
2025 and thereafter 476
Total debt principal 6,759

Covenants and restrictions contained in our debt facilities
We have provided a summary of the main financial covenants contained within our debt facilities below:
The below financial covenants contained in our credit facilities post emergence are measured at the RigCo group level. Details of the levels which are required to be maintained under the credit facilities are as follows:
Aggregated minimum liquidity requirement for the Group: In summary, and as more particularly set out in the credit facilities, to maintain cash and cash equivalents of at least $525 million within the Group at any time during the period from and including the Effective Date to and including 31 December 2018; and $400 million at any time during the period from and including 1 January 2019 to the final maturity date of the credit facilities. Breach of this covenant leads to an event of default.
Net leverage ratio: to maintain a ratio of net debt to EBITDA as set out below (which will be tested on each financial quarter commencing with the financial quarter ending on March 31, 2022 until the final maturity date of the credit facilities):
Twelve months endedNet leverage ratio
March 31, 20224.5x
June 30, 20224.2x
September 30, 20223.9x
December 31, 20223.7x
March 31, 20233.4x
June 30, 20233.3x
September 30, 20233.1x
December 31, 20233.0x
March 31, 20242.8x
June 30, 20242.7x
September 30, 20242.4x
December 31, 20242.2x
Debt service coverage ratio: in summary to maintain a ratio of EBITDA to debt services (being all finance charges and principal, as more particularly set out in the credit facilities) equal to or greater than 1:1 (which will be tested on each financial quarter commencing with the financial quarter ending on March 31, 2022 until the final maturity date of the credit facilities).
For the periods ended March 31, 2021, June 30, 2021, September 30, 2021 and December 31, 2021 a margin increase of 0.25% per quarter, which is capped at 1%, will be enacted if:
Debt service coverage ratio is less than 0.8:1 in respect of the applicable period; and/or
Net leverage ratio is greater than:
Twelve months endedNet leverage ratio
March 31, 20217.3x
June 30, 20216.6x
September 30, 20216.2x
December 31, 20215.8x

In addition to the above there are various non-financial covenants.

The covenants included in the Senior Secured Notes agreements limit our ability to:
Pay dividends or make certain other restricted payments or investments;
Incur additional indebtedness and issue disqualified shares;
Create liens on assets;
Amalgamate, merge, consolidate or sell substantially all our, NSNCo's, IHCo's, RigCo's and their respective subsidiaries and the guarantors' assets;
Enter into certain transactions with affiliates;
Create restrictions on dividends and other payments by our subsidiaries; and
Guarantee indebtedness by our subsidiaries.
The above covenants are subject to important exceptions and qualifications.

Since the fourth quarter of 2019, we have been engaged in discussions with our secured lenders regarding potential amendments to our credit facilities to provide operational flexibility and additional near-term liquidity by, among other things, converting certain interest payments under our credit facilities to payment-in-kind (“PIK”) interest and deferring certain scheduled amortization payments (or increasing the aggregate amount of such payments that may be converted to loans payable at the final scheduled maturity date of the relevant facility pursuant to the amortization conversion election provisions contained in the facility agreements). Our debt service is anticipated to be primarily comprised of interest through at least Q1 2021 because our facility agreements contain certain provisions that allow us to elect to defer and convert up to $500 million in the aggregate of scheduled amortization payments under certain of our credit facilities. We have already elected to use a portion of this capacity with respect to the first scheduled amortization installments under our credit facilities occurring in Q1 2020. We intend to continue exercising this option for each subsequent scheduled amortization payment date until such capacity is fully utilized; however, we cannot guarantee that we will be able to satisfy the conditions set forth in the facility agreements in order to be able to do so. We have also requested that our lenders consent to an extension of the periods before which we are required to comply with the net leverage and debt service coverage financial covenants in our facility agreements because we currently anticipate that we will not be able to meet these requirements when such covenants begin to be tested at the end of Q1 2021. If we are unable to comply with the net leverage and debt service coverage covenants in our debt agreements between Q1 2021 and Q4 2021, this will lead to an interest margin increase of up to 100 bps in the form of PIK interest; however, this does not constitute an event of default. Thereafter, if we are unable to comply with any of these restrictions and covenants, and we are unable to obtain a waiver or amendment from our lenders for such non-compliance, a default could occur under the terms of those debt agreements. We have also forecasted that we will not be able to meet the requirements under our ongoing liquidity financial covenant contained in the facility agreements during certain periods occurring after the twelve-month period following the date of this report. If our amendment requests for certain liquidity enhancing measures are not successful, including with respect to the conversion of certain interest payments to PIK and the deferral of certain scheduled amortization payments then there is an increased risk that we will breach these liquidly requirements sooner than currently anticipated after such twelve-month period following the date of this report. Failure to comply with such liquidity requirements could result in a default under the terms of our facility agreements if we are unable to obtain a waiver or amendment from our lenders for such non-compliance.
Although lender discussions are well advanced and significant progress has been made, until such time as an agreement is reached, uncertainty remains and therefore we are also preparing certain contingency plans. The Company's business operations remain unaffected by these amendment negotiations and related contingency planning efforts, and the Company expects to meet its ongoing customer and business counterparty obligations as they become due.


Note 2321 – Other liabilities
As at December 31, 20192021 and 2018 (Successor),December 31, 2020, other liabilities included the following:  
Successor
 Successor
(In $ millions)As at December 31,
2019
 As at December 31,
2018
(In $ millions)December 31, 2021December 31, 2020
(As adjusted)
Uncertain tax positionsUncertain tax positions85 79 
Accrued expensesAccrued expenses81 110 
Employee withheld taxes, social security and vacation paymentsEmployee withheld taxes, social security and vacation payments46 47 
Lease liabilitiesLease liabilities35 68 
Contract liabilitiesContract liabilities35 31 
Taxes payable33
 42
Taxes payable27 27 
Contract liabilities29
 21
Unfavorable drilling contracts8
 27
Employee withheld taxes, social security and vacation payments51
 40
Accrued interest expense40
 61
Accrued interest expense— 10 
Accrued expenses137
 107
Lease liabilities36
 —
Uncertain tax provisions83
 100
Other liabilities33
 33
Other liabilities35 33 
Total Other Liabilities450
 431
Total Other Liabilities344 405 
Other liabilities are presented in our Consolidated Balance Sheet as follows:
(In $ millions)December 31, 2021December 31, 2020
(As adjusted)
Other current liabilities230 285 
Other non-current liabilities114 120 
Total Other Liabilities344 405 

Note 22 - Leases
 Successor
 Successor
(In $ millions)As at December 31,
2019
 As at December 31,
2018
Other current liabilities322
 310
Other non-current liabilities128
 121
Total Other Liabilities450
 431
Unfavorable contracts
On emergence from Chapter 11As of December 31, 2021, we held operating leases for both the West Bollsta and applicationWest Hercules. As of fresh start accounting, we recognized intangible assets and liabilities for favorable and unfavorable drilling contracts at fair value. The amounts recognized representDecember 31, 2021, the net present value of the existing contracts at the time of emergence compared to the current market rates at the time of acquisition, discounted at the weighted average cost of capital. We amortize these assets and liabilitiesnegotiations over the remaining contract period and classifyWest Linus lease amendment had not been concluded yet. Therefore, we still maintain the amortization under operating expenses. For periods before emergence from Chapter 11 and application of fresh start accounting we recognized intangible assets orrig asset on balance sheet along with the finance liability to SFL (held in liabilities only where we acquired a drilling contract in a business combination. The accounting policy we applied in the Predecessor wassubject to classify amortization expense for such contracts within other revenues.
The gross carrying amounts and accumulated amortization included in 'Other current liabilities' and 'Other non-current liabilities' for unfavorable contracts in the Consolidated Balance Sheets as follows:
  December 31, 2019 December 31, 2018
(In $ millions) Gross Carrying Amount
Accumulated amortization
Net carrying amount
 Gross Carrying Amount
Accumulated amortization
Net carrying amount
Unfavorable contracts        
Balance at beginning of period (66)39
(27) (66)—
(66)
Amortization of unfavorable contracts —
19
19
 —
39
39
Balance at end of period (66)58
(8) (66)39
(27)
The amortization is recognized in the Consolidated Statement of Operations under "Amortization of intangibles"compromise). For periods before emergence from Chapter 11 and application of fresh start accounting we recognized intangible liabilities only where we acquired a drilling contract in a business combination. We classified amortization expense for such contracts within other revenues in the Predecessor. The weighted average remaining amortization period for the unfavorable contracts is 7 years, 9 months.


The table below shows the amounts relating to unfavorable contracts that is expected to be amortized over the following periods:
  Period ended December 31,
(In $ millions) 2020
2021
2022
2023
2024 and after
Total
Amortization of unfavorable contracts (1)(1)(1)(1)(4)(8)

Note 24 - Leases
Wealso have operating leases relating to our premises, the most significant being our offices in London, Liverpool, Oslo, Stavanger, Singapore, Houston, Rio de Janeiro and Dubai. In accordance with Topic 842, we record lease liabilities and associated right-of-use assets for our portfolio of operating leases.
On August 15, 2019 We continue to lease 3 of our benign environment jack-up rigs, West Castor, West Telesto and September 3, 2019, in connection with the GulfdrillWest Tucana, to our joint venture, Gulfdrill, for a contract with GDI in Qatar.
In March, 2020, Seadrill was awarded a contract to provide drilling services for 10 firm wells and 4 optional wells. To fulfill this contract Seadrill entered charter agreements to lease three jack-up rigs from a third-party shipyard. These arrangements are to be novated to Gulfdrill prior to the commencement of its operations. On November 27, 2019, we received delivery of the jack-up rig Lovanda (formerly Zhenhai 5) under a charter agreement to lease the West Bollsta rig from Northern Ocean. The rig was mobilized and commenced operations in early October after being available at the drill location in September, 2020. This operating lease arrangement resulted in the recognition of a lease liability and offsetting right of use asset. During 2021, the charter was amended to cancel the drilling of the 10th well, resulting in an early termination fee of $6 million and right-of-use asset impairment charge of $10 million being recorded.
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Table ofContents
Seadrill entered into sale and leaseback arrangements for the West Herculessemi-submersible rig with SFL Hercules Ltd in 2008, the West Linus Jack-up rig with SFL Linus Ltd in 2014, and the West Taurus semi-submersible rig with SFL Deepwater Ltd (“Deepwater”) in 2008, all wholly owned subsidiaries of SFL Corporation Ltd ("SFL"), a related party.
The West Taurus lease was terminated in March 2021 and the West Taurus was delivered back to SFL on May 6, 2021.
On August 27, 2021, the Bankruptcy Court approved an amendment to the original SFL charter based on the current Equinor contract in Norway and in direct continuation (after a period of mobilization) of the subsequent Equinor contract in Canada. The buy-back obligation, that previously resulted in the failed sale and lease back treatment, was removed in this amendment, resulting in a deemed disposal of the West Hercules. Seadrill is leasing the West Hercules from SFL under an operating lease until the end of the Canada contract. The lease is expected to end in October 2022. Refer to Note 27 – “Related party transactions” for further information.
Seadrill leases and operates the West Linus on a drilling contract with ConocoPhillips, the term of which were recognized accordingly.
Below areexpected to end in December, 2028. The existing lease with SFL is not considered sustainable as part of the significant assumptionsnew capital structure. Chapter 11 affords Seadrill the option to reject or renegotiate this lease on more economically viable terms. On February 18, 2022, subsequent to year-end, Seadrill entered an interim transition charter with SFL, which will see Seadrill continuing to operate the West Linus until the rig is delivered back to SFL. The amendment is expected to result in the recognition of a short-term operating lease and judgments we appliedthe removal of the buyback obligation is expected to account for our leasesresult in accordance with Topic 842.a deemed disposal of the West Linus.
1.We apply judgment in determination whether a contract contains a lease or a lease component as defined by Topic 842.
2.We have elected to combine leases and non-lease components. As a result, we do not allocate our consideration between leases and non-lease components.
3.The discount rate applied to our operating leases is our incremental borrowing rate. We estimated our incremental borrowing rate based on the rate for our traded debt.
4.Within the terms and conditions of some of our operating leases we have options to extend or terminate the lease. In instances where we are reasonably certain to exercise available options to extend or terminate, then the option was included in determining the appropriate lease term to apply. Options to renew our lease terms are included in determining the right-of-use asset and lease liability when it is reasonably certain that we will exercise that option.
For operating leases where we are the lessee, our future undiscounted cash flows are as follows:
 Successor
(In $ millions) Year ended December 31, 2019
(In $ millions)Year ended December 31, 2021
2020 17
2021 16
2022 9
202232 
2023 2
20233 
2024 and thereafter 1
202420241 
2025 and thereafter2025 and thereafter1 
Total 45
Total37 
The following table gives a reconciliation between the undiscounted cash flows and the related operating lease liability recognized in our Consolidated Balance Sheet as at December 31, 2019:2021:
Successor
(In $ millions)Year ended December 31, 2019
Total undiscounted cash flows45
Less short term leases(1)
Less discount(8)
Operating lease liability36
Of which:
Current12
Non-current24


Prior to the adoption of the New Lease Accounting Standard, rental commitments on an undiscounted basis were approximately $38 million at December 31, 2018 under long-term non-cancelable operating leases and were payable as follows: $11 million in 2019, $9 million in 2020, $9 million in 2021, $5 million in 2022, $3 million in 2023 and $1 million thereafter.
(In $ millions)Year ended December 31, 2021Year ended December 31, 2020
Total undiscounted cash flows37 79 
Less short term leases— — 
Less discount(2)(11)
Operating lease liability35 68 
Of which:
Current30 51 
Non-current5 17 
Total35 68 
The following table gives supplementary information regarding our lease accounting at December 31, 2019:2021:
(In $ million)Year ended December 31, 2021Year ended December 31, 2020Year ended December 31, 2019
Operating Lease Cost:
Operating lease cost42 19 12 
Short-term lease cost1 2 1 
Total lease cost43 21 13 
Other information:
Cash paid for amounts included in the measurement of lease liabilities- Operating Cash flows42 21 13 
Right-of-use assets obtained in exchange for operating lease liabilities during the period24 53 19 
Weighted-average remaining lease term in months191418
Weighted-average discount rate10 %24 %13 %
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Table ofContents
Successor
(In $ million)Year ended December 31,
2019
Operating Lease Cost:
Operating lease cost13
Total Lease cost13
Other information:
Cash paid for amounts included in the measurement of lease liabilities- Operating Cash flows13
Right-of-use assets obtained in exchange for operating lease liabilities during the period19
Weighted-average remaining lease term in months18
Weighted-average discount rate13%
We also have operating subleases, whereOn November 25, 2019, March, 15 2020 and November 15, 2020 we areleased the lessor, relating West Castor,West Telesto and West Tucana to some of our premises.Gulfdrill. The most significant subleases being our offices in Stavanger and Houston. We do not expect to derive further value from the subleased portion of our right-of-use assets following the end of the sublease term. These subleases do not include variable payments, and do not include options for a lessee to purchase the underlying asset. We do not allocate lease consideration between lease and non-lease components because we have elected not to separate lease and non-lease components for our operating leases where Seadrill is the lessor.
For our operating subleases, theestimated future undiscounted cash flows on these leases are as follows:
(In $ millions)Year ended December 31, 2021
202228 
202328 
202421 
202518 
2026 and thereafter2 
Total97 
  Successor
(In $ millions) Year ended December 31,
2019
2020 1
2021 1
2022 1
2023 —
2024 and thereafter —
Total 3
Refer to Note 8 - "Other revenues" for comparative information on income from operating leases.
Rental expense was as follows:
 Successor  Predecessor
(In $ millions)Year ended December 31,
2019
 Period from July 2, 2018 through December 31, 2018
  Period from January 1, 2018 through July 1, 2018
 Year ended December 31,
2017
Rent expense13
 7
  9
 19
Total rent expense13
 7
  9
 19

On November 25, 2019 we leased the West Castor to Gulfdrill.
For operating leases where we are the lessor, our future undiscounted cash flows are as follows:
  Successor
(In $ millions) Year ended December 31,
2019
2020 10
2021 10
2022 10
2023 9
2024 and thereafter —
Total 39
Successor
(In $ million)Year ended December 31,
2019
Operating Lease Income:
Operating lease income1
Total Lease income1

Note 2523 – Common shares
The common shares presented in our Consolidated Balance Sheet is that of the Predecessor Company, prior to our emergence from Chapter 11. The information included in this note presents the common share transactions of the predecessor. For information on the common shares held on emergence from Chapter 11, refer to Note 4- "Chapter 11".
Changes in predecessor common shares for the periods presented in this report were as follows:
 Issued and fully paid share capital $0.10 par value each
Shares$ millions
December 31, 2019100,234,973 10 
2020 RSU share issuance149,462 — 
December 31, 2020 and December 31, 2021100,384,435 10 
 Issued and fully paid share capital $0.10 par value each Issued and fully paid share capital $2.00 par value each Treasury shares held by the Company - $2.00 par value each
 Shares
 $ millions
 Shares
 $ millions
 Shares
 $ millions
At January 1, 2017, December 31, 2017 and July 1, 2018 (Predecessor)—

—

508,763,020

1,017

(4,244,080)
(9)
Cancellation of Predecessor Company common stock—

—
 (508,763,020)
(1,017)
4,244,080
 9
Successor Company share issuance100,000,000

10

—

—

—

—
            
            
At July 2, 2018 (Successor)100,000,000
 10
 —
 —
 —
 —
At December 31, 2018 (Successor)100,000,000
 10
 —
 —
 —
 —
RSU share issuance234,973
 —
 —
 —
 —
 —
At December 31, 2019 (Successor)100,234,973
 10
 —
 —
 —
 —
CommonPredecessor common share transactions for periods presented
On the Effective Date, theFebruary 10, 2020 and June 17, 2020, a total of 149,462 common stock of the Predecessor Company was cancelled and the Successor Company allocated 100,000,000 shares of $0.10 par value in accordance with the Plan. The Successor Company's authorized share capital on the Effective Date was 111,111,111 common shares each with a par value of $0.10. The unissued 11,111,111 common shares were reserved for issuance under our employee incentive plan (see note 29).
On June 5, 2019 an additional 27,768,889 authorized share capital was approved at a par value of $0.10. This increased authorized share capital to 138,880,000.
On September 4, 2019, 234,973 shares were issued to employees following a vesting of restricted stock units awarded under our employee incentive plan.


Employee Incentive Plan.
Key terms of shares issued and outstanding
All our issued and outstanding common shares are and will be fully paid. Subject to the Bye-Laws, the Board of Directors is authorized to issue any of the authorized but unissued common shares. There are no limitations on the right of non-Bermudians or non-residents of Bermuda to hold or vote in the Company's common shares.
Holders of common shares have no pre-emptive, redemption, conversion or sinking fund rights. Holders of common shares are entitled to one vote per common share on all matters submitted to a vote of holders of common shares. Unless a different majority is required by law or the Bye-Laws, resolutions to be approved by holders of common shares require the approval by an ordinary resolution (being a resolution approved by a simple majority of votes cast at a general meeting at which a quorum is present). Under the Bye-Laws, each common share is entitled to dividends if, as and when dividends are declared by the Board of Directors, subject to any preferred dividend right of the holders of any preference shares.
In the event of liquidation, dissolution or winding up of the Company, the holders of common shares are entitled to share equally and ratably in the Company's assets, if any, remaining after the payment of all its debts and liabilities, subject to any liquidation preference on any issued and outstanding preference shares.
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Table ofContents
Note 26 – Non-controlling interest
Changes in non-controlling interests for the periods presented in this report were as follows:
(In $ millions)North Atlantic Drilling Ltd
 Sevan Drilling Limited
 Asia Offshore Drilling Ltd
 Ship Finance VIEs
 Seadrill Nigeria Operations Limited
 Total
January 1, 2017 (Predecessor)165
 291
 149
 (69) 6
 542
Changes in 2017—
 —
 —
 (14) —
 (14)
Net (loss)/income attributable to non-controlling interest in 2017(89) (65) —
 24
 1
 (129)
December 31, 2017 (Predecessor)76
 226
 149
 (59) 7
 399
Adoption of new accounting standard ASU 2016-16 - Income Taxes(25) —
 —
 —
 —
 (25)
Net (loss)/income attributable to non-controlling interest in period from January 1, 2018 to July 1, 2018
(160) (10) 1
 7
 2
 (160)
Redeemable non-controlling interest—
 —
 (150) —
 —
 (150)
Elimination of NCI of North Atlantic Drilling Ltd and Sevan Drilling Limited109
 (216) —
 —
 —
 (107)
Fair value adjustment of the non-controlling interest in the Ship Finance VIEs and Seadrill Nigeria Operations Limited—
 —
 —
 199
 (2) 197
July 1, 2018 (Predecessor)—
 —
 —
 147
 7
 154
            
            
July 2, 2018 (Successor)—
 —
 —
 147
 7
 154
Net (loss)/income attributable to non-controlling interest in period from July 2, 2018 to December 31, 2018—
 —
 —
 (2) —
 (2)
December 31, 2018 (Successor)—
 —
 —
 145
 7
 152
Net (loss)/income attributable to non-controlling interest in 2019—
 —
 —
 (5) 4
 (1)
December 31, 2019 (Successor)—
 —
 —
 140
 11
 151
On emergence from Chapter 11 the non-controlling interest was adjusted to fair value. Refer to Note 5 - Fresh Start Accounting for further information.
North Atlantic Drilling Ltd and Sevan Drilling Limited
In the predecessor, we held a 70.36% interest in NADL and 50.11% interest in Sevan. The amount of shareholders' equity not attributable to us was included in non-controlling interests. As determined in the plan of reorganization, both companies became wholly owned subsidiaries of Seadrill and the non-controlling interests were eliminated prior to emergence on July 2, 2018.

Asia Offshore Drilling Ltd
We hold a 66.24% interest in Asia Offshore Drilling Ltd. In the predecessor, the amount of shareholders' equity not attributable to us was included in non-controlling interests. Subsequent to filing bankruptcy petitions, the predecessor executed a Transaction Support Agreement on April 4, 2018, which included a put option to the holders of the non-controlling interest shares. This redemption feature caused the fair value of the non-controlling interest held in AOD to be reclassified from equity to 'Redeemable non-controlling interest' within the Consolidated Balance Sheets. Refer to Note 27 - Redeemable non-controlling interest for further information.
Ship Finance VIEs
In 2007, 2008 and 2014, we entered into sale and leaseback arrangements for drilling units with SFL Corporation Ltd, who incorporated subsidiary companies for the sole purpose of owning and leasing the drilling units. We concluded that we are the primary beneficiary of these companies and therefore consolidate them under the variable interest model. Accordingly, these subsidiary companies are included in our Consolidated Financial Statements, with the SFL Corporation Ltd equity in these companies included in non-controlling interest. Refer to Note 35 – Variable Interest Entities for more information.
On emergence from Chapter 11 the non-controlling interest was adjusted to fair value. Refer to Note 5 – Fresh Start Accounting for further information.
Seadrill Nigeria Operations Limited
HH Global Alliance Investments Limited ("Heirs Holdings"), an unrelated party registered in Nigeria, owns a non-controlling interest in one of our subsidiaries, Seadrill Nigeria Operations Limited, which holds a 10% interest in our drillship West Jupiter and previously supported the West Jupiter's operations whilst it was under contract with Total in Nigeria. The equity attributable to Heirs Holdings is classified as a non-controlling interest in our consolidated balance sheet. In February 2020, we paid $11 million to Heirs Holdings for an option to buy the non-controlling interest at any point in the future for a $1 purchase price.

Note 27 - Redeemable non-controlling interest
Changes in redeemable non-controlling interests for the periods presented in this report were as follows:
(In $ millions) Asia Offshore Drilling Ltd
As at January 1, 2018 (Predecessor)—
Reclassification from non-controlling interest150
Fair value adjustment on initial recognition(127)
Net income attributable to redeemable non-controlling interest2
Fresh start fair value adjustment5
As at July 1, 2018 (Predecessor)30
As at July 2, 2018 (Successor)30
Net loss attributable to redeemable non-controlling interest(1)
Fair value adjustment9
As at December 31, 2018 (Successor)38
Net loss attributable to redeemable non-controlling interest(2)
Fair value adjustment21
As at December 31, 2019 (Successor)57
We hold a 66.24% interest in Asia Offshore Drilling Limited (“AOD”), which owns the benign environment jack-up rigs AOD 1, AOD 2 and AOD 3. The remaining 33.76% interest is owned by Mermaid Maritime Public Company Limited ("Mermaid").
On April 4, 2018, subsequent to filing bankruptcy petitions, the Predecessor executed a Transaction Support Agreement (“TSA”) with Mermaid in order to (i) provide a framework for a monetization event for Mermaid and (ii) obtain unanimous approval for AOD to become a party to the RSA and participate in Seadrill’s broader debt restructuring under its Chapter 11 reorganization.
The TSA provided Mermaid with put option that gave them the right (with no obligation) to sell their non-controlling interest shares to Seadrill. The repurchase price is based on the fair value of the shares, determined by a valuation expert, subject to a price ceiling of $125 million. The exercise window for the put option started on October 1, 2019 and ends on September 30, 2020.
If Mermaid do not exercise their option, Seadrill will have a call option that gives them the right (with no obligation) to buy Mermaid's non-controlling interest shares for fair value, subject to a price floor of $75 million. The exercise window for the call option starts on October 1, 2020 and ends on March 31, 2021.

If the purchase price is less than $50 million then it will be settled in cash. If the purchase price is greater than $50 million, then Seadrill is required to settle the first $50 million in cash and any excess fair value in a variable number of Seadrill common shares (based on the 60 day volume-weighted average price).
The put option generated a redemption feature for Mermaid that is outside the control of Seadrill. This caused the fair value of Mermaid's non-controlling interest shares to be reclassified from equity to "Redeemable non-controlling interest" within the consolidated balance sheet of the Predecessor. Each reporting period, we are required to (i) attribute Mermaid's share of AOD's profit to the redeemable non-controlling interest and (ii) make an adjustment to record the redeemable non-controlling interest shares at fair value, with the offsetting entry going to equity. These entries are set out in the table above.

Note 2824 – Accumulated other comprehensive income/(loss)
Changes in accumulated other comprehensive income/(loss) for the periods presented in this report were as follows:
(In $ millions)Actuarial gain/(loss) relating to pensionShare in unrealized losses from associated companiesChange in debt component on Archer facilityTotal
January 1, 2020— (13)— (13)
Other comprehensive (loss)/income(2)(15)4 (13)
December 31, 2020(2)(28)4 (26)
Other comprehensive income from continuing operations— — — — 
Other comprehensive income from discontinued operations— 9 2 11 
December 31, 2021(2)(19)6 (15)
(In $ millions)Unrealized gain on marketable securities
 Unrealized gain on foreign exchange
 Actuarial gain/(loss) relating to pension
 Share in unrealized gains from associated companies
 Change in unrealized gain on interest rate swaps in VIEs
 Change in debt component on Archer facility
 Total
Balance as at December 31, 2017 (Predecessor)31
 36
 (26) 15
 2
 —
 58
Adoption of accounting standard update(31) —
 —
 —
 —
 —
 (31)
Balance as at January 1, 2018 (Predecessor)—
 36
 (26) 15
 2
 —
 27
Reset accumulated other comprehensive (loss)/income—
 (36) 26
 (15) (2) —
 (27)
Balance as at July 1, 2018 (Predecessor)—
 —
 —
 —
 —
 —
 —
              
              
Other comprehensive income/(loss) before reclassifications—
 —
 1
 (5) —
 (3) (7)
Balance as at December 31, 2018 (Successor)—
 —
 1
 (5) —
 (3) (7)
Other comprehensive (loss)/income—
 —
 (1) (8) —
 3
 (6)
Balance as at December 31, 2019 (Successor)—
 —
 —
 (13) —
 —
 (13)
In January 2016, the FASB issued ASU 2016-01 "Recognition and Measurement of Financial Assets and Financial Liabilities" to enhance the reporting model for financial instruments to provide users of financial statements with more decision-useful information. ASU 2016-01 became effective for fiscal years and interim periods beginning after December 15, 2017. We adopted ASU 2016-01 starting from January 1, 2018 on a modified retrospective basis, with no changes recognized in the prior year comparatives and a cumulative catch up adjustment recognized in the Predecessor opening retained earnings. Upon adoption of ASU 2016-01, we reclassified $31 million of unrealized gains related to our marketable securities from accumulated other comprehensive income to retained earnings in the Predecessor. As a result of the adoption of this guidance we are required to recognize the movement in the fair value of our marketable securities in the Consolidated Statement of Operations. Refer to Note 15 "Marketable securities" for further information.
On emergence from Chapter 11, the accumulated other comprehensive income of the Predecessor was reset to nil. For further information refer to Note 5 - Fresh start accounting.
The applicable amount of income taxes associated with each component of other comprehensive income in the Successor is nil, other than on the actuarial loss on pension, due to the fact that the items relate to companies domiciled in non-taxable jurisdictions. For actuarial loss related to pension the accumulated applicable amount of income taxes is nil for the year ended December 31, 2019 (Successor) (nil for the period July 2, 2018 to December 31, 2018 (Successor) and $1 million for the period from January 1, 2018 to July 1, 2018 (Predecessor) as this item is related to companies domiciled in Norway where the tax rate is 22% (December 31, 2018 (Successor): 23%).


Note 2925 – Share based compensation
The share-based compensation expense for our share options and Restricted Stock Unit ("RSU") plans in the Consolidated Statements of Operations are as follows:
 (In $ millions)
Year ended December 31, 2021Year ended December 31, 2020Year ended December 31, 2019
Share-based compensation expense— 8 5 
Total share-based compensation expense— 8 5 
 Successor  Predecessor
 (In $ millions)
Year ended December 31,
2019
 Period from July 2, 2018 through December 31, 2018
  Period from January 1, 2018 through July 1, 2018
 Year ended December 31,
2017
Share-based compensation expense (1)
5
 —
  9
 7
Total share-based compensation expense5
 —
  9
 7
(1)
The $9 million expense for the period from January 1, 2018 through July 1, 2018 included a charge of $6 million for schemes cancelled on emergence from Chapter 11. This was classified within reorganization items.
On August 16, 2018, following emergence from the previous Chapter 11, we established an employee incentive plan with a limit of 11.1 million shares in Seadrill Limited.of our common shares.
On September 4, 2018 we made a grant of 0.5 million RSUs to certain employees and directors under the employee incentive plan. The awards were subject to a service condition and vest 33% per year over the three-year period to September 4, 2021. On September 4, 2019, the first tranche of RSUs vested and 0.2 million Seadrillof our common shares were issued to employees and directors.
On April 26, 2019, we made a grant of 1.7 million performance shares to certain employees under our employee incentive plan. The awards are subject to service and performance conditions and the vesting period ends on March 31, 2022.
On August 23, 2019, we made a grant of 0.3 million restricted stock units to directors. The awards were subject to a service condition and vest 33% per year over the three-year period to August 23, 2022.
The compensation cost for non-vestedOn July 29, 2020, we made a one-off compensatory cash payment to holders of performance share unit and restricted share unit awards not yet recognized as at December 31, 2019 is $9 million (December 31, 2018: $9 million), withthat had been granted under our company incentive plans that amounted to $0.5 million. On cancellation of the schemes the remaining charge relating to the unvested awards have been expensed to the consolidated statement of operations. Company Directors and Senior Management held 510,234 performance share units and 188,369 restricted stock units, which resulted in a weighted average vesting periodcash payment of 2 years.$0.2 million.
No further grants have been made since all schemes were cancelled and there are no unvested awards.

Note 3026 - Pension benefits


Defined benefit plans

We have several defined benefit pension plans covering a number of our Norwegian employees. All the plans are administered by a life insurance company. Our net obligation is calculated separately for each plan by estimating the amount of the future benefit that employees have earned in return for their cumulative service. The aggregated projected future benefit obligation is discounted to present value, from which the aggregated fair value of plan assets is deducted. The discount rate is the market yield at the balance sheet date on government bonds in the relevant currency and based on terms consistent with the post-employment benefit obligations.

Actuarial gains and losses are recognized in the Consolidated Statement of Operations when the net cumulative unrecognized actuarial gains or losses for each individual plan at the end of the previous reporting year exceed 10 percent of the higher of the present value of the defined benefit obligation and the fair value of plan assets at that date. These gains and losses are recognized over the expected remaining working lives of the employees participating in the plans. Otherwise, recognition of actuarial gains and losses is included in other comprehensive income. Those amounts will be subsequently recognized as a component of net periodic pension cost on the same basis as the amounts recognized in accumulated other comprehensive income.

On retirement, or when an employee leaves the company, the member’s pension liability is transferred to the life insurance company administering the plan, and the pension plan no longer retains an obligation relating to the leaving member. This action is deemed to represent a settlement under U.S. GAAP, as it represents the elimination of significant risks relating to the pension obligation and related assets. Under settlement accounting, the portion of the net unrealized actuarial gains/losses corresponding to the relative value of the obligation reduction is recognized through the Consolidated Statement of Operations. However, settlement accounting is not required if the cost of all settlements in a year is not deemed to be significant in the context of the plan. We deem the settlement not to be significant when the cost of settlements in the year is less than the sum of service cost and interest cost in the year. In this case, the difference between the reduction in benefit obligation and the plan assets transferred to the life insurance company is recognized within “other comprehensive income,” rather than being recognized in the Consolidated Statement of Operations.


For onshore employees in Norway, who are participants in the defined benefit plans, the primary benefits are a retirement pension of approximately 66 percent of salary at retirement age of 67 years, together with a long-term disability pension. The retirement pension per employee is capped at an annual payment of 66 percent of the total of 12 times the Norwegian Social Security Base. Most employees in this group may choose to start a pre-retirement pension at 62 years of age.



F-44
Table ofContents
Consolidated Balance Sheet position

 Successor
 Successor
(In $ millions)December 31, 2019
 December 31, 2018
Accrued pension liabilities - Non-current liabilities2
 4
Less: Deferred tax (Asset)(1) (1)
Shareholders' equity1
 3
Net defined benefit pension asset/(obligation) is as follows:
(In $ millions)December 31, 2021December 31, 2020
Defined benefit obligation - Non-current liabilities(5)— 
Deferred tax asset1 1 
Net defined benefit pension (obligation)/asset(4)1 
 
Annual pension cost

We record pension costs in the period during which the services are rendered by the employees.
(In $ millions)Year ended December 31, 2021Year ended December 31, 2020Year ended December 31, 2019
Service cost— 1 3 
Interest cost on prior years’ benefit obligation— — 1 
Gross pension cost for the year— 1 4 
Expected return on plan assets— — (1)
Net pension cost for the year— 1 3 
Impact of settlement/curtailment of defined benefit plans2 1 — 
Total net pension cost2 2 3 
 Successor  Predecessor
(In $ millions)Year ended December 31,
2019
 Period from July 2, 2018 through December 31, 2018
  Period from January 1, 2018 through July 1, 2018
 Year ended December 31,
2017
Service cost3
 2
  1
 2
Interest cost on prior years’ benefit obligation1
 1
  —
 2
Gross pension cost for the year4
 3
  1
 4
Expected return on plan assets(1) (1)  —
 (1)
Net pension cost for the year3
 2
  1
 3
Impact of settlement/curtailment funded status—
 —
  —
 (1)
Total net pension cost3
 2
  1
 2


The funded status of the defined benefit plan

 Successor
 Successor
(In $ millions)December 31, 2019
 December 31, 2018
Projected benefit obligations at end of period40
 37
Plan assets at market value(39) (33)
Accrued pension liabilities1
 4
Funded defined benefit pension obligation is as follows:

(In $ millions)December 31, 2021December 31, 2020
Projected defined benefit obligations(16)(16)
Plan assets at market value11 16 
Funded defined benefit pension obligation(5)— 

Change in projected benefit obligations

Change in projected benefit obligation is as follows:
(In $ millions)Year ended December 31, 2021Year ended December 31, 2020Year ended December 31, 2019
Projected benefit obligations at beginning of period16 40 37 
Interest cost— — 1 
Service cost— 1 3 
Benefits paid(1)(1)(2)
Change in unrecognized actuarial gain1 2 — 
Settlement (1)
— (25)— 
Foreign currency translations— (1)1 
Projected benefit obligations at end of period16 16 40 
(1)Two Norwegian defined benefit plans were settled and paid out in the year ending 31 December, 2020.
F-45
 Successor  Predecessor
(In $ millions)December 31, 2019
 December 31, 2018
  June 30, 2018
Projected benefit obligations at beginning of period37
 36
  38
Interest cost1
 1
  —
Service cost3
 1
  1
Benefits paid(2) (1)  (1)
Change in unrecognized actuarial gain—
 2
  (2)
Foreign currency translations1
 (2)  —
Projected benefit obligations at end of period40
 37
  36
Table ofContents

Change in pension plan assets

 Successor  Predecessor
(In $ millions)December 31, 2019
 December 31, 2018
  June 30, 2018
Fair value of plan assets at beginning of year33
 33
  33
Estimated return1
 1
  —
Contribution by employer6
 —
  2
Administration charges—
 —
  —
Benefits paid(2) (1)  (1)
Actuarial gain—
 2
  (1)
Foreign currency translations1
 (2)  —
Fair value of plan assets at end of year39
 33
  33
Change in pension plan assets is as follows:

(In $ millions)December 31, 2021December 31, 2020December 31, 2019
Fair value of plan assets at beginning of year16 39 33 
Estimated return— — 1 
Contribution by employer1 6 6 
Benefits paid(1)(1)(2)
Actuarial gain— — — 
Settlement (2)
(1)(27)— 
Foreign currency translations— (1)1 
Other (1)
(4)— 
Fair value of plan assets at end of year11 16 39 
(1)In 2021, we received the contribution back for two Norwegian defined benefit plans that were terminated in 2020.
(2) Two Norwegian defined benefit plans were settled and paid out in 2020.

The accumulated benefit obligation for all defined benefit pension plans was $37$15 million and $33$15 million at December 31, 2019 (Successor)2021 and 2018 (Successor),December 31, 2020, respectively.


Pension obligations are actuarially determined and are critically affected by the assumptions used, including the expected return on plan assets, discount rates, compensation increases and employee turnover rates. We periodically review the assumptions used and adjust them and the recorded liabilities as necessary.
 
During the year ended December 31, 2017, a number of employees left and as a result, the defined benefit scheme transferred the pension liability for these employees to the life insurance company administering the scheme. The difference between the reduction in benefit obligation and the plan assets transferred to the life insurance company has been recognized within “Other comprehensive income.” The settlement is not deemed to be significant in the context of the overall scheme and as such net unrecognized actuarial losses have not been recycled as a result of the settlement.

The expected rate of return on plan assets and the discount rate applied to projected benefits are particularly important factors in calculating our pension expense and liabilities. We evaluate assumptions regarding the estimated rate of return on plan assets based on historical experience and future expectations on investment returns, utilizing the asset allocation classes held by the plan’s portfolios. The discount rate is based on the covered bond rate in Norway. Changes in these and other assumptions used in the actuarial computations could impact the projected benefit obligations, pension liabilities, pension expense and other comprehensive income.


Assumptions used in calculation of pension obligations
Year ended December 31, 2021Year ended December 31, 2020Year ended December 31, 2019
Rate of compensation increase at the end of year2.25 %2.25 %2.25 %
Discount rate at the end of year1.50 %1.70 %2.30 %
Prescribed pension index factor1.20 %1.20 %2.00 %
Expected return on plan assets for the year2.90 %2.60 %2.60 %
Employee turnover4.00 %4.00 %4.00 %
Expected increases in Social Security Base2.25 %2.00 %2.50 %
 Successor  Predecessor
 Year ended December 31,
2019
 Period from July 2, 2018 through December 31, 2018
  Period from January 1, 2018 through July 1, 2018
 Year ended December 31,
2017
Rate of compensation increase at the end of year2.25% 2.75%  2.50% 2.50%
Discount rate at the end of year2.30% 2.60%  2.40% 2.40%
Prescribed pension index factor2.00% 2.00%  2.00% 1.50%
Expected return on plan assets for the year2.60% 2.60%  2.40% 2.40%
Employee turnover4.00% 4.00%  4.00% 4.00%
Expected increases in Social Security Base2.50% 2.50%  2.25% 2.25%



The weighted-average asset allocation of funds related to our defined benefit plan at December 31, was as follows:


Pension benefit plan assets
December 31, 2021December 31, 2020
Equity securities9.7 %7.2 %
Debt securities65.3 %68.2 %
Real estate13.6 %13.6 %
Money market10.6 %10.6 %
Other0.8 %0.4 %
Total100.0 %100.0 %
 Successor
  Successor
 December 31, 2019
  December 31, 2018
Equity securities13.6%  12.7%
Debt securities58.4%  70.0%
Real estate11.0%  9.9%
Money market16.5%  6.9%
Other0.5%  0.5%
Total100.0%  100.0%


The investment policies and strategies for the pension benefit plan funds do not use target allocations for the individual asset categories. The investment objectives are to maximize returns subject to specific risk management policies. WeThe life insurance company diversify ourthe allocation of plan assets by investing in both domestic and international fixed income securities and domestic and international equity securities. These investments are readily marketable and can be sold to fund benefit payment obligations as they become payable.

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Table ofContents
Effective January 1, 2020 the company terminated 2 of the defined benefit plans and replaced it with a defined contribution plan. The termination/settlement cost relating to the defined benefit plans has been recognized within 'Selling, general and administrative expenses' within the Consolidated Statement of Operations.
 
Cash flows - Contributions expected to be paid
 
The table below shows our expected annual pension plans contributions under defined benefit plans for the years ending December 31, 2020-2029.2021-2030. The expected payments are based on the assumptions used to measure our obligations at December 31, 20192021 and include estimated future employee services. 
(In $ millions)December 31, 2021
20221 
20231 
20241 
20251 
2025-20303 
Total payments expected during the next 10 years7 
(In $ millions)December 31, 2019
20204
20212
20222
20233
20242
2025-202913
Total payments expected during the next 10 years26


Defined contribution and other plans


WeWe made contributions to personal defined contribution pension and other plans totaling $16$18 million for the year ended December 31, 2019 and $9 millionfor the period from July 2, 2018 through December 31, 2018 (Successor) and $102021, $18 million for the period from January 1, 2018 through July 1, 2018 (Predecessor). Foryear ended December 31, 2020, and $16 millionfor the year toended December 31, 2017 (Predecessor) the charge was $17 million.2019. These were charged as operational expenses as they became payable.



Note 3127 – Related party transactions
OurPrior to emerging from Chapter 11 on February 22, 2022, our main related parties includeincluded (i) affiliated companies over which we holdheld significant influence, (ii) affiliated companies and (ii)(iii) companies who arewere either controlled by or whose operating policies may bewere significantly influenced by ourHemen, who was a major shareholder Hemen.of the Predecessor Company. On emergence, Hemen's equity interest in Seadrill will substantially decrease and companies who were either controlled by or whose policies were significantly influenced by Hemen will no longer be related parties.
Companies inover which we hold significant influence include (i) Seadrill Partners, (ii)Seabras Sapura, Sonadrill and Gulfdrill. In addition, prior to November 2, 2021, SeaMex was an affiliated company with which we held a 50% interest. On November 2, 2021, we purchased the residual equity in SeaMex, which led to it becoming a wholly owned subsidiary. Our investments in both SeaMex and (iii) Seabras Sapura (iv) Sonadrillare included within assets held for sale and (v) Gulfdrill. liabilities associated with assets held for sale in our Consolidated Balance Sheet.
Aquadrill (formerly Seadrill Partners) was an affiliated company until it emerged from Chapter 11 in May 2021. The information presented within this note includes all services performed prior to May 2021.
Companies that are controlled by, or whose operating policies may be significantly influenced by, Hemen include (i) Ship Finance, (ii)SFL, Archer, (iii) Frontline, (iv) Seatankers, Northern Drilling and (v) Northern Drilling.Ocean. In the following sections we provide an analysis of (i) transactions with related parties and (ii) balances outstanding with related parties.
Related party revenue
The below table provides an analysis of related party revenues for periods presented in this report.
Successor  Predecessor
(In $ millions)
Year ended December 31,
2019
 Period from July 2, 2018 through December 31, 2018
  Period from January 1, 2018 through July 1, 2018
 Year ended December 31,
2017
(In $ millions)
Year ended December 31, 2021Year ended December 31, 2020Year ended December 31, 2019
(As adjusted)(As adjusted)
Management fee revenues (a)109
 41
  41
 84
Management fee revenues (a)
98 135 113 
In country support services revenues (b)—
 —
  1
 23
Related party inventory sales1
 1
  1
 —
Reimbursable revenues (b)
Reimbursable revenues (b)
65 148 218 
Leasing revenues (c)
Leasing revenues (c)
26 19 1 
Other—
 4
  —
 3
Other— 3 1 
Total related party operating revenues110
 46

 43

110
Total related party operating revenues189 305 333 
(a) We provide management and administrative services to Seadrill PartnersSeaMex, Sonadrill and, SeaMex and operationuntil May 2021, Aquadrill, as well as operational and technical support services to Seadrill Partners, SeaMex, Sonadrill, Northern Ocean and, Northern Drilling.until May 2021, Aquadrill. We charge our affiliates for support services provided either on a cost-plus mark upmark-up or dayrate basis.
(b) We previously provided in country support services to the Seadrill Partners rig West Polaris when it operated in Angola. The West Polaris's contract ended in December 31, 2017, so we no longer earn revenues under this arrangement.
In addition to the amounts shown above, we recognized reimbursable revenues and expenses from Northern Drilling of $167 millionOcean for work performed to mobilize the Northern Ocean rigs West Mira and West Bollsta, as well as from Sonangol relating to preparation costs for the year ended Quenguela contract commencing in January 2022. Following the cancellation of the Wintershall contract, a settlement agreement has been signed with Northern Ocean extinguishing all outstanding claims. In
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December 31, 20192021, the agreement became effective and the CECL provision of $138 million was written off against the receivable. The remaining receivable of $18 million was net was settled for workno cash against the lease liability owed to performNorthern Ocean for the first mobilizationWest Bollsta.
(c) Lease revenue earned on the charter of the Northern Drilling rigs, West MiraCastor, West Telesto and West Bollsta. As at December 31, 2019 our Consolidated Balance Sheet included a $55 million receivable from Northern Drilling included in related parties and $5 million unbilled reimbursables amounts within Other Assets for costsTucana to be recovered from this arrangement.Gulfdrill.
Related party operating expenses
The below table provides an analysis of related party operating expenses for periods presented in this report.
 (In $ millions)
Year ended December 31, 2021Year ended December 31, 2020Year ended December 31, 2019
West Bollsta lease (d)
57 10 — 
West Hercules lease (e)
10 — — 
Other related party operating expenses (f)
3 2 3 
Total related party operating expenses70 12 3 
 Successor  Predecessor
 (In $ millions)
Year ended December 31,
2019
 Period from July 2, 2018 through December 31, 2018
  Period from January 1, 2018 through July 1, 2018
 Year ended December 31,
2017
In country support services expenses (c)—
 —
  1
 8
Related party inventory purchases1
 —
  —
 3
Other related party operating expenses (d)2
 1
  3
 3
Net bareboat charter arrangements (e)—
 —
  —
 (1)
Total related party operating expenses3
 1
  4
 13
(d) Seadrill entered a charter agreement to lease the West Bollsta rig from Northern Ocean in 2020. Refer to Note 22 - "Leases" for details.
(c)Seadrill Partnerspreviously provided us with(e) Lease expense following the change to operating lease in country support servicesAugust 2021. Refer to Note 22 - "Leases" for the West Jupiter in Nigeria. This arrangement ended in early 2018. In addition, SeaMex previously provided us with in country support services for the West Pegasus and West Freedom when those rigs operated in Mexico and Venezuela.details.
(d)(f) We received services from certain other related parties. These included management and administrative services from Frontline warehouse rental from Seabras Sapura and other services from Archer and Seatankers.
(e) We previously acted as an intermediate charterer for the Seadrill Partners rig West Aquarius, during its contract with Hibernia in Canada, which ended in April 2017.

Related party financial items
The below table provides an analysis of related party financial income for periods presented in this report.
 Successor  Predecessor
 (In $ millions)
Year ended December 31,
2019
 Period from July 2, 2018 through December 31, 2018
  Period from January 1, 2018 through July 1, 2018
 Year ended December 31,
2017
Interest income (f)26
 15
  12
 34
Gains on related party derivatives—
 —
  —
 1
Interest income recognized on deferred contingent consideration (g)4
 1
  2
 3
Total related party financial items30
 16
  14
 38
(f) We earnIn 2021, $1 million (2020; nil) interest income was recognized on our related party loansan $8 million "Minimum Liquidity Shortfall" loan issued to SeaMex and Seabras Sapura (see below). We also previously earned interest income on our related party loans to Seadrill Partners in 2017.
(g) We record interest income on deferred consideration receivables from Seadrill Partners (see item (i) below).during 2020.
Related party receivable balances
The below table provides an analysis of related party receivable balances for periods presented in this report.
(In $ millions)December 31, 2021December 31, 2020
(As adjusted)
Related party loans and interest (g)
9 8 
Trading balances (h)
20 236 
Allowance for expected credit loss (i)
(1)(153)
Total related party receivables28 91 
Of which:
Amounts due from related parties - current28 85 
Amounts due from related parties - non-current— 6 
Total amounts due from related parties28 91 
  Successor
 Successor
(In $ millions) December 31, 2019
 December 31, 2018
Related party loans and interest (h) 488
 476
Deferred consideration arrangements (i) 31
 59
Convertible bond (j) 35
 43
Trading balances (k) 150
 138
Total related party receivables 704
 716
Of which:    
Amounts due from related parties - current 181
 177
Amounts due from related parties - non-current 523
 539
(h) We have(g) Sponsor Minimum Liquidity Shortfall loan receivables outstandingreceivable from SeaMex and Seabras Sapura. We previously had loan receivables from Seadrill Partners, which have been repaid. We have summarized the amounts outstanding in the table below:
  Successor
 Successor
(In $ millions) December 31, 2019
 December 31, 2018
SeaMex seller's credit and loans receivable 422
 398
Seabras loans receivable 66
 78
Total related party loans and interest 488
 476
SeaMex loans include (i) $250 million "sellers credit" provided to SeaMex in March 2015 which matured in December 2019 but is subordinated to SeaMex's external debt facility, which matures in March 2022, and therefore cannot be repaid. As such, we have classified this balance as non-current on our Consolidated Balance Sheets. (ii) $45 million working capital loan advanced in November 2016 and (iii) $127 million accrued interest on above loans and other funding. The sellers credit and working capital loan both earnearns interest at 6.5% andplus 3-month US LIBOR.
(h) Trading balances are subordinated to SeaMex's external debt facility.
Seabras loans include a series of loan facilities that we extended to Seabras Sapura between May 2014 and December 2016. The $66 million balance shown in the table above includes (i) $54 million of loan principal and (ii) $12 million of accrued interest. The loans are repayable on demand, subject to restrictions on Seabras Sapura's external debt facilities. We earn interest of between 3.4% - LIBOR + 3.99% on the loans, depending on the facility. We received repayments against these related party loans of $15 million during 2019.
In addition to the Seabras loans referred above, we have made certain other shareholder loans to Seabras Sapura, which we classify as part of our equity method investment in Seabras Sapura. See Note 18 - "Investments in Associated Companies" for further details. We received repayments against these shareholder loans of $9 million during 2019.

(i) Deferred consideration arrangements include receivables due to us from Seadrill Partners from the sale of the West Vela and the West Polaris to Seadrill Partners in November 2014 and June 2015 respectively. We have summarized amounts due for each period in the table below:
  Successor
 Successor
(In $ millions) December 31, 2019
 December 31, 2018
West Vela - Mobilization receivable
 17
 31
West Vela - Share of dayrate
 14
 27
West Polaris —
 1
Total deferred consideration receivable 31
 59
On adoption of fresh start accounting, we recorded receivables for West Vela share of dayrate and West Polaris earnout. These amounts were previously accounted for as gain contingencies so were only recognized when realized. The receivables were recognized at fair value of $29 million and $1 million respectively and the gain was recognized in reorganization items.
We recorded the following gains in other operating income for these arrangements.
 Successor  Predecessor
(In $ millions)Year ended December 31,
2019
 Period from July 2, 2018 through December 31, 2018
  Period from January 1, 2018 through July 1, 2018
 Year ended December 31,
2017
West Polaris earn out realized
—
 —
  —
 13
West Vela earn out realized
—
 —
  7
 14
Total contingent consideration recognized—
 —
  7
 27
(j) On April 26, 2017, we converted $146 million, including accrued interest and fees, in subordinated loans provided to Archer into a $45 million convertible loan. The subordinated convertible loan bears interest of 5.5%, matures in December 2021 and has a conversion right into equity of Archer Limited in 2021. At inception, the fair value of the convertible bond was $56 million whereas the previous loan had a carrying value of $37 million. We therefore recognized a gain on debt extinguishment of $19 million in 2017 because of this transaction.
The loan receivable is a convertible debt instrumentprimarily comprised of a debt instrument and a conversion option, classed as an embedded derivative. Both elements are measured at fair value at each reporting date. As at December 31, 2019, Archer were in negotiations with their lenders to refinance their debt obligations, which we expected to result in an extension to maturities for all lenders, including Seadrill. As a result, we recorded an other than temporary impairment against our investment in the convertible bond issued to us by Archer. Following the other-than-temporary impairment, the fair value of the convertible debt instrument was $35 million of which the split between debt and embedded derivative option was $35 million and nil respectively. See Note 33 - Fair values of financial instruments for further details.
Subsequent to the year end, on March 13, 2020, Archer announced that it had successfully secured a consensual amendment and extension to its debt facilities. This included a reduction to the principal and accrued interest on the convertible loan due to us from Archer, in exchange for a reduced stock conversion price and removal of certain restrictions regarding the sale or conversion of the loan. Following the amendment, the principal due on the loan would be $13 million and the stock conversion price would decrease from $2.083 per share to $0.40. The maturity date of the loan would also extend to April 1, 2024. The transaction is subject to execution of final agreements and completion of closing conditions.
The fair value gain/(loss) on the convertible bond for periods presented is summarized below:
 Successor  Predecessor
 (In $ millions)
Year ended December 31,
2019
 Period from July 2, 2018 through December 31, 2018
  Period from January 1, 2018 through July 1, 2018
 Year ended December 31,
2017
Other than temporary impairment(11) —
  —
 —
Fair value gain / (loss) of Archer debt component3
 (3)  2
 1
Fair value (loss) / gain of Archer embedded conversion option—
 (9)  2
 (4)
(k) Trading balances primarily comprise receivables from Seadrill Partners,Gulfdrill for lease income, as well as from SeaMex Northern Drilling and Sonadrill for related party management and crewing fees. In addition, certain receivables and payables arise when we pay an invoice on behalf of Seadrill PartnersPer our contractual terms these balances are either settled monthly or SeaMex and vice versa. Receivables and payables are generally settled quarterly in arrears.arrears, or in certain cases, in advance. After its emergence from Chapter 11 in May 2021, Aquadrill is no longer considered a related party and any amounts due from them have been reclassified to "Accounts receivable, net" in our Consolidated Balance Sheets.

The below table provides an analysis of the receivable balance:.
 (In $ millions)Year ended December 31, 2021Year ended December 31, 2020
Northern Ocean— 140 
Aquadrill— 61 
Gulfdrill13 17 
Sonadrill4 10 
NSNCo/SeaMex (Discontinued operations)3 8 
Gross amount receivable20 236 
Less: CECL allowance(1)(153)
Receivable net of CECL allowance19 83 
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(i) Allowances recognized for expected credit losses on our related party loan and trade receivables following adoption of accounting standard update 2016-13 - Measurement of Credit Losses on Financial Instruments. Refer to Note 5 – "Current expected credit losses" for details.
Related party payable balances
The below table provides an analysis of related party payable balances for periods presented in this report.
(In $ millions)December 31, 2021December 31, 2020
Liabilities from Seadrill to SFL (k)
503 426 
Trading balances (l)
— 7 
Total related party liabilities503 433 
Of which:
Amounts due to related parties - current— 7 
Long-term debt due to related parties— 426 
Liabilities subject to compromise503 — 
  Successor
 Successor
(In $ millions) December 31, 2019
 December 31, 2018
Related party loans payable (n) 239
 222
Trading balances (o) 19
 39
Total related party liabilities 258
 261
Of which:    
Amounts due to related parties - current (19) (39)
Long-term debt due to related parties (239) (222)
(n) Related party loans includeOn filing for Chapter 11, our prepetition related party loans from Ship Financepayables were reclassified to the Ship Finance subsidiaries that we consolidated as variable interest entities (see Note 35 – Variable Interest Entities (VIEs) for further details). The carrying amount of the loans was $239 million"liabilities subject to compromise" in our Consolidated Balance Sheets at December 31, 2019 (2018: $222 million).2021. For further information on our bankruptcy proceedings refer to Note 4 - Chapter 11 of our Consolidated Financial Statements included herein.
(k) The principal outstandingliabilities to SFL represented $1.1 billion of lease liabilities between Seadrill and certain special purpose vehicles ("SPVs"), that are legal subsidiaries, of SFL. Seadrill consolidated these SPVs under the variable interest model until December 2020, when their deconsolidation was triggered by default on the loans was $314 millionleases. Refer to Note 4 - Chapter 11 for further details. On deconsolidation, Seadrill recognized the lease liabilities at a significant discount, reflecting its credit position at the time.
The following table provides a summary of the lease liabilities to SFL as at December 31, 2019, (2018: $314 million).2021 and December 31, 2020.
There is a right of offset of trading balance assets against the loans, the net position is disclosed within “Long-term debt due to related parties”
(In $ millions)December 31, 2021December 31, 2020
West Taurus lease liability
345 147 
West Linus lease liability
158 142 
West Hercules lease liability
— 137 
Total lease liabilities to SFL503 426 
The lease on the Consolidated Balance Sheets. AsWest Taurus was rejected through the bankruptcy court which resulted in a remeasurement of the liability to its expected claim value, which will be extinguished on emergence from chapter 11.
The West Hercules and West Linus leases were modified in August 2021 and February 2022 respectively, with the associated liabilities being derecognized at December 31, 2019 (Successor) the trading position was a net liability positionpoint of nil.lease amendment. See Note 34 – Subsequent events for more details on the West Linus.
The loans bear interest at a fixed rate of 4.5% per annum and mature between 2023 and 2029. The total interest expense incurred for the year ended December 31, 2019 (Successor) was $14 million, the period from July 2, 2018 through December 31, 2018 (Successor) was $7 million, the period from January 1, 2018 through July 1, 2018 (Predecessor) was $7 million (year ended December 31, 2017 (Predecessor): $15 million).
(o)(l) Trading balances in 2020 primarily includeincluded related party payables due from our Ship Finance variable interest entities to Ship FinanceAquadrill and trading balances due from us to SeaMex and Seadrill Partners.SeaMex. As part of the settlement agreement with Aquadrill all claims on pre-petition positions held were waived.
Other related party transactions
Seabras SapuraWe have made certain guarantees - In November 2012, a subsidiaryover the performance of Seabras Sapura Participações S.A. entered into a $179 million senior secured credit facility agreement in order to part fund the acquisitionNorthern Ocean and Sonadrill on behalf of the Sapura Esmeralda pipe-laying support vessel, with a maturity in 2032. During 2013 an additional facility of $36 million was entered into, with a maturity in 2020. As a condition to the lenders making the loan available, we provided a sponsor guarantee, on a joint and several basis with the joint venture partner, Sapura Energy, in respect of the obligations of the borrower. The total amount guaranteed by the joint venture partners as at December 31, 2019 (Successor) was $146 million (December 31, 2018 (Successor): $165 million).
customers. We have not recognized a liability for any of the above guarantees as we did not consider it to be probable that the guarantees would be called.
Other guarantees - In addition, we have made certain guarantees over the performance of Seadrill Partners and SeaMex on behalf of customers. Please refer to Note 34 - "Commitments and contingencies" for details.
Omnibus agreement - In 2012 we entered into an Omnibus Agreement with Seadrill Partners. The agreement outlines the following provisions: (i) a non-competition agreement with Seadrill Partners for any drilling rig operating under a contract for five or more years; (ii) rights of first offer on any proposed sale, transfer or other disposition of drilling rigs; (iii) rights of first offer on any proposed transfer, assignment, sale or other disposition of any equity interest in Seadrill Operating LP, Seadrill Capricorn Holdings LLC and Seadrill Partners Operating LLC (the "OPCO"); and (iv) indemnification – Old Seadrill Limited agreed to indemnify Seadrill Partners against certain environmental and toxic tort liabilities with respect to the assets contributed or sold to Seadrill Partners, and also certain tax liabilities. Refer to exhibit 4.4.

Note 3228 – Financial instruments and risk management
We are exposed to several market risks, including credit risk, foreign currency risk and interest rate risk. Our policy is to reduce our exposure to these risks, where possible, within boundaries deemed appropriate by our management team. This may include the use of derivative instruments.
Credit risk
We have financial assets, including cash and cash equivalents, marketable securities,related party receivables, other receivables and certain amounts receivable on derivative instruments. These assets expose us to credit risk arising from possible default by the counterparty. Most of the counterparties are creditworthy financial institutions or large oil and gas companies. We do not expect any significant loss to result from non-performance by such counterparties. However, we have established an allowance on our loans and trade receivables due from related parties reflecting their current financial position, lower credit rating and overdue balances.
We do not demand collateral in the normal course of business. The credit exposure of derivative financial instruments is represented by the fair value of contracts with a positive fair value at the end of each period. The credit exposure of interest rate swap agreements, currency option contracts and foreign currency contracts is represented by the fair value of contracts with a positive fair value at the end of each period, reduced by the effects of master netting agreements and adjusted for ourcounterparty non-performance credit risk assumption.assumptions. It is our policy to

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enter into master netting agreements with the counterparties to derivative financial instrument contracts, which give us the legal right to discharge all or a portion of amounts owed to a counterparty by offsetting them against amounts that the counterparty owes to us.
Credit risk is also considered as part of our expected credit loss provision. For details on how we estimate expected credit losses refer to Note 5 - "Current expected credit losses".
Concentration of risk
There is also a concentration of credit risk with respect to cash and cash equivalents to the extent that most of the amounts are carried with Citibank, Nordea Bank Finland Plc,AB, Danske Bank A/S, BNP Paribas and ING Bank N.V.BTG Pactual. We consider these risks to be remote.remote, but, from time to time, we may utilize instruments such as money market deposits to manage concentration of risk with respect to cash and cash equivalents. We also have a concentration of risk with respect to customers, including affiliated companies. For details on the customers with greater than 10% of contract revenues, refer to Note 6 - Segment information."Segment information". For details on amounts due from affiliated companies, refer to Note 3127 - Related Party transactions."Related party transactions".
Foreign exchange risk
AsIt is customary in the oil and gas industry that a majority of our revenues and expenses are denominated in U.S. dollars, which is the functional currency of most of our subsidiaries and equity method investees. However, a portion of the revenues and expenses of certain of our subsidiaries and equity method investees are denominated in other currencies. We are therefore exposed to foreign exchange gains and losses that may arise on the revaluation or settlement of monetary balances denominated in foreign currencies.
Our foreign exchange exposures primarily relate to foreign denominated cash and working capital balances.balances denominated in foreign currencies. We do not expect these remaining exposures to cause a significant amount of fluctuation in net income and therefore do not currently hedge them. Further, theThe effect of fluctuations in currency exchange rates caused byarising from our international operations generally has not had a material impact on our overall operating results.
Interest rate risk
Our exposure to interest rate risk relates mainly to our floating rate debt and balances of surplus funds placed with financial institutions. We manage this risk through the use of derivative arrangements.
On May 11, 2018, we purchased an interest rate cap for $68 million to mitigate our exposure to future increases of LIBOR. The $4.5 billion of debt principal covered by the cap is significantly in LIBOR on our Senior Credit Facility debt. Theexcess of Seadrill's debt outstanding following the restructuring and the interest rate cap is not designated as a hedge and therefore we do not apply hedge accounting. The capped rate against the 3-month US LIBOR is 2.87% and covers the period from June 15, 2018 to June 15, 2023.
We have set out our exposure to interest rate risk on our net debt obligations at December 31, 2019 (Successor) in the table below:
(In $ millions) Principal
 Hedging instruments
 Total
 Impact of 1% increase in rates
Senior Credit Facilities 5,662
 (4,500) 1,162
 12
Ineffective portion of interest rate cap (1)
 —
 4,320
 4,320
 43
Debt contained within VIEs 621
 —
 621
 6
Debt exposed to interest rate fluctuations 6,283
 (180) 6,103
 61
Less: Cash and Restricted Cash (1,357) —
 (1,357) (14)
Net debt exposed to interest rate fluctuations (2)
 4,926
 (180) 4,746
 47
(1)The 3-month LIBOR rate as at December 31, 20192021 was 1.91%. At this date,0.209%
As part of reference rate reform, the use of LIBOR will be replaced by other interest cap would mitigate 4% of the impactrate indexes as part of a theoretical 1% point increase in LIBOR.
(2) The $476 million of Senior Secured Notes are a fixed ratenegotiation with our lenders. As at December 31, 2021 our debt instrumentfacilities and are therefore excluded fromderivatives continue to be linked to the above table.





Gains and losses on derivatives reported in consolidated statement of operations
Gains and losses on derivatives reported in our consolidated statement of operations included the following:
 Successor  Predecessor
(In $ millions)Year ended December 31,
2019
 Period from July 2, 2018 through December 31, 2018
  Period from January 1, 2018 through July 1, 2018
 Year ended December 31,
2017
(Loss)/gain recognized in the Consolidated Statement of Operations relating to derivative financial instruments        
Interest rate cap agreement(37) (22)  (6) —
Archer convertible debt instrument—
 (9)  2
 (4)
Interest rate swaps not designated for hedge accounting—
 —
  —
 (31)
Cross currency swaps not designated for hedge accounting—
 —
  —
 46
Loss/(gain) on derivative financial instruments(37) (31)  (4) 11
a) Interest rate cap
This represents changes in fair value on ourLIBOR interest rate cap agreement referred above.
b) Archer convertible debt instrument
This represents gainsindex. The $683 million reinstated facility and losses on the conversion option included within a $45$300 million convertible bond issued to us by Archer. Please see Note 31 - Related party transactions for further details.
c) Interest rate swaps and cross currency swaps
Prior to filing for Chapter 11 (Predecessor), we used interest rate swaps and cross currency swaps to mitigate the impact of currency and interest rate fluctuations on our debt. When we filed for Chapter 11 we triggered a default under these agreements and our counterparties terminated the contracts and received an allowed claim for damages suffered. We reversed the liabilities for these instruments and recorded liabilities equalnew money facility will be referenced to the expected value ofSOFR, whilst the allowed claims received by our counterparties. The allowed claim values were higher thanConvertible Note will be referenced to the previous fair values, which factored in a discount for our own credit risk, so this led to an expense of $89 million. We classified the expense within reorganization items (see Note 4 for further details).3-month US LIBOR.
Derivative financial instruments included in our Consolidated Balance Sheet
Derivative financial instruments included in our Consolidated Balance Sheet, within "Other Assets" included the following:
 (In $ millions)Maturity dateApplicable rateOutstanding principal - December 31, 2019
As at December 31, 2019
As at December 31, 2018
 
 Interest rate capJune 20232.87% LIBOR cap4,500
3
39
     3
39



Note 3329 - Fair values of financial instruments
Fair value of financial instruments measured at amortized cost
The carrying value and estimated fair value of our financial instruments that are measured at amortized cost as at December 31, 2019 (Successor)2021 and December 31, 2018 (Successor)2020 are as follows:
December 31, 2021December 31, 2020
(As adjusted)
(In $ millions)Fair
value		Carrying
value		Fair
value		Carrying
value
Assets
Related party loans receivable (Level 2)
9 9 6 6 
Liabilities
Liability subject to compromise- Secured credit facilities (Level 3)
2,094 5,662 1,193 5,662 
Liability subject to compromise - Related Party Loans Payable (Level 3)
176 503 424 426 
 Successor Successor
 December 31, 2019 December 31, 2018
(In $ millions)
Fair
value

 
Carrying
value

 
Fair
value

 
Carrying
value

Assets       
Related party loans receivable (1) (Level 2)
395
 488
 476
 476
        
Liabilities       
Secured credit facilities (Level 2)
5,464
 5,549
 5,388
 5,519
Credit facilities contained within variable interest entities (Level 2)
590
 598
 612
 626
Senior Secured Notes (Level 1)
404
 476
 770
 769
Related party loans payable by the VIE (Level 2)
229
 239
 222
 226
(1)
Excludes Archer convertible debt receivable, which is measured at fair value on a recurring basis
Level 12
The fair value of the Senior Secured Notes are derived using market traded value. We have categorized this at level 1 on the fair value measurement hierarchy. Refer to Note 22 – Debt for further information.
Level 2
Upon the adoption of fresh start accounting, the related party loans receivable from SeaMex and Seabras Sapura were recorded at fair value. We estimate the fair valuebalances are assumed to be equal to thetheir carrying value, after adjusting for expected credit losses on the loans. The debt is not freely tradable and cannot be recalled by us at prices other than specified in the loan note agreements and the loans were entered into at market rates.losses. The loans are categorized as level 2 on the fair value measurement hierarchy. Other trading balances with related parties are not shown in the table above and are covered under in Note 3127 - Related"Related party transactions.transactions".
Level 3
The fair values of the secured credit facilities as at December 31, 2021 are determined by reference to the secured credit facilities holder allocation of the Seadrill fair value post emergence, as this is the expected amount of equity they would be entitled to, as well as the value of
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the issuance of second lien debt facility and cash payment of AOD debt. The fair value is derived using a discounted cash flow model of other trading balances with related parties are also assumedfuture free cash flows from each rig, using a weighted average cost of capital range of 10% to be equal to their carrying17.0%. We have categorized this at level 3 of the fair value after adjusting for expected credit losses on the receivables.
hierarchy. The fair value of the secured credit facilities and Ship Finance loans areas at December 31, 2020, was determined by reference to the fair value of the collateral of each facility, the rigs, as this is the expected amount recoverable on enforcement of an event of default. The fair values were derived using thea combination of discounted cash flow model using a cost of debt of 6%.
The fair value of the loans provided by Ship Finance to our VIE's are derived using the discountedfuture free cash flow model, using a cost of debt of 11%. We have categorized this at level 2 on the fair value measurement hierarchy. Refer to Note 31 - Related party transactions for further information.

Financial instruments measured at fair value on a recurring basis
The carrying value and estimated fair value of our financial instruments that are measured at fair value on a recurring basis at December 31, 2019 (Successor) and December 31, 2018 (Successor) are as follows: 
 Successor Successor
 December 31, 2019 December 31, 2018
(In $ millions)
Fair
value

 
Carrying
value

 
Fair
value

 
Carrying
value

Assets       
Cash and cash equivalents (Level 1)
1,115
 1,115
 1,542
 1,542
Restricted cash (Level 1)
242
 242
 461
 461
Marketable securities (Level 1)
11
 11
 57
 57
Related party loans receivable - Archer convertible debt (Level 3)
35
 35
 43
 43
Interest rate cap (Level 2)
3
 3
 39
 39
        
        
Temporary equity       
Redeemable non-controlling interest (Level 3)
57
 57
 38
 38

Level 1
The carrying value of cash and cash equivalents and restricted cash, which are highly liquid, is a reasonable estimate of fair value and categorized at level 1 on the fair value measurement hierarchy. Quoted market prices are used to estimate the fair value of marketable securities, which are valued at fair value on a recurring basis.
Level 2
The fair value of the interest rate cap as at December 31, 2019 is calculated using well-established independent valuation techniques and counterparty non-performance credit risk assumptions. The calculation of the credit risk in the swap values is subject to a number of assumptions including an assumed credit default swap rate based on our traded debt, and recovery rate, which assumes the proportion of value recovered, given an event of default. We have categorized these transactions as level 2 on the fair value measurement hierarchy.
Level 3
The Archer convertible debt instrument is bifurcated into two elements. The fair value of the embedded derivative option is calculated using a modified version of the Black-Scholes formula for a currency translated option. Assumptions include Archer's share price in NOK, NOK/ USD FX volatility and dividend yield. The fair value of the debt component is derived using the discounted cash flow model including assumptions relating to cost of debt and credit risk associated to the instrument.
The redeemable non-controlling interest in AOD is calculated by applying a fair value to the three AOD rigs and debt facility using a discounted cash flow model. The rig values are determined using an income approach based on projected future dayrates, contract probabilities, economic utilization, capital and operating expenditures, applicable tax rates and asset lives, discountedflows using a weighted average cost of capital of 11%. 17.0% and the market approach from each rig. Refer to Note 20 - "Debt" for further information.
The fair value of the debt isrelated party loans payable as at December 31, 2021, for the West Taurus was derived using the court approved maximum cash settlement amount of $0.25 million. For the West Linus the fair value was derived using a discounted cash flow model of future free cash flows based on the contractual cash flows under the bareboat charter agreement together with the LIBOR linked interest payments, as well as assumed cash outflows under the mandatory repurchase obligation at the end of the lease term. These cash flows were discounted using athe weighted average cost of debtcapital of 6%10%.
Fair value considerations on one-time transactions
Archer convertible bond fair value
As at December 31, 2019 we reassessed2020 the fair value was derived using a discounted cash flow model of future free cash flows based on the contractual cash flows under the bareboat charter agreement together with the LIBOR linked interest payments, as well as assumed cash outflows under the mandatory repurchase obligation at the end of the Archer convertible bond held as a related party balance as a resultlease term. These cash flows were discounted using the Senior Secured Note yield of the current negotiations to restructure Archer's debt with senior lenders and Seadrill.37%. We have re-assessedcategorized this at level 3 on the fair value of the bond using a discounted cashflow model approach. For the purposes of the valuation, we have assumed that the maturity date of the bond will be pushed outhierarchy. Refer to December 2024, which we expect to be required in orderNote 27 - "Related party transactions" for Archer to refinancefurther information.
Our cash and cash equivalents, and restricted cash, accounts receivable, and accounts payable are by their bank borrowings to which the Seadrill bond is subordinate. We applied a discount rate of 14%.
nature short-term. As a result, an impairment of $11 million was recognizedthe carrying values included in theour Consolidated Statements of Operations within "Impairment of convertible bond from related party" and $3 million recognized in the Consolidated Statements of Comprehensive loss within "Change inBalance Sheets approximate fair value of debt component of Archer convertible bond" for the year ended December 31, 2019.value.
The convertible bond outstanding as at December 31, 2019 was $35 million (December 31, 2018: $43 million). For further information and fair value considerations, refer to Note 31 - Related Party Transactions.
Impairment of investments in associated companies
On September 6, 2019, Seadrill Partners LLC received notification from the New York Stock Exchange ("the NYSE") that trading of their common units had been suspended due to the Company's low market capitalization. We determined that this was a trigger of other-than-temporary impairment against our investments in Seadrill Partners. As a result, we recognized an impairment of $302 million against the Seadrill Partners direct ownership interests, subordinated units and IDRs. This expense was classified under the line item "Loss on impairment of investments" in the consolidated statement of operations, in the year ended December 31, 2019.
Fresh start valuations
The Plan presented on February 26, 2018, and confirmed by the Bankruptcy Court on April 17, 2018, estimated a range of distributable value for the Successor Company of which a reorganization value was derived based on the mid-point of this range of estimated distributable values. The reorganization value represents the fair value of the Successor Company’s total assets and, under fresh start accounting, we are required to allocate the reorganization value to individual assets based on their estimated fair values. For further information, refer to Note 5 - Fresh Start Accounting.
Drilling unit impairment
In our reported Predecessor period ended July 1, 2018 (Predecessor), we recorded an impairment expense of $414 million against our drilling units, derived from a fair value using an income approach based on updated projections of future dayrates, contract probabilities, economic utilization, capital and operating expenditures, applicable tax rates and asset lives. For further information, refer to Note 9 - Other operating items.

Impairment of marketable securities and investments in associated companies and joint ventures
In the year ended December 31, 2017 we recognized impairments on our investments in marketable securities, associated companies and joint ventures following deteriorating conditions in the oil and gas industry and supply and demand conditions in the offshore drilling sector.
For further information and fair value considerations, refer to Note 11 - Impairment loss on investments in associated companies.
Note 3430 – Commitments and contingencies
Legal Proceedings
From time to time we are a party, as plaintiff or defendant, to lawsuits in various jurisdictions for demurrage, damages, off-hire and other claims and commercial disputes arising from the construction or operation of our drilling units, in the ordinary course of business or in connection with our acquisition or disposal activities. We believe that the resolution of such claims will not have a material impact, individually or in the aggregate, on our operations or financial condition.results. Our best estimate of the outcome of the various disputes has been reflected in our Consolidated Financial Statements as at December 31, 2019.2021.
Seabras SapuraOro Negro
The CEO of Perforadora Oro Negro, S. DE R.L. DE C.V ("Oro Negro"), a Mexican drilling rig contractor, filed a complaint personally and in his capacity as foreign representative of Oro Negro on June 6, 2019 in the United States Bankruptcy Court, Southern District of New York, within Oro Negro’s Chapter 15 proceedings ancillary to its Mexican insolvency process. The complaint names Seadrill and its joint venture
partner as co-defendants along with other defendants including Oro Negro bondholders. With respect to Seadrill, the complaint asserts claims relating to alleged tortious interference but does not seek to quantify damages. On August 25, 2019, Seadrill submitted a motion to dismiss the complaint on technical legal grounds. Oro Negro responded to this motion on October 25, 2019. The Sapura Esmeralda operates under a Brazilian flag. The rightCompany has the opportunity to operate under such Brazilian flag is being challengedreply to this in the Brazilian courts. An adverse decision in the Brazilian courts could affect the operationsfurther support of the Sapura Esmeralda and potentially impact its commercial agreements and related financing. Due to the backlog of cases we estimate a decision within approximately 3 years.
Dalian Newbuilds
As at December 31, 2019, all eight of the newbuilding contracts with Dalian had been terminated by both parties. Accordingly, the Seadrill contracting entities had no contractual obligation to take delivery of the rigs.
In January 2019, Dalian appointed an administrator to restructure its liabilities. In March 2019, the Seadrill contracting parties commenced arbitration proceedings in London for all eight rigs and will claim for the return of the paid installments plus interest and further damages for losses.
The Seadrill contracting parties have filed their claims against Dalian in the Dalian insolvency and the insolvency administrator is currently considering whether to accept or reject the claims in the insolvency. The arbitrations are currently not being progressed by agreement of the parties, pending the insolvency administrator's decision whether to accept or reject the Seadrill contracting parties' claims. Dalian has stated that it has claims for damages in respect of each of the rigs, but it has not quantified those damages. The administrator has submitted a draft reorganization plan to the insolvency court which has stated that it will convene a creditor’s meeting 30 days from when it receives the same for a vote on the draft plan. The contracts are all with limited liability subsidiaries of Seadrill. There are no parent company guarantees. As at 31 March 2020,motion, the date of which has not yet been determined. Seadrill intends to vigorously defend against the creditor’s meeting remains unconfirmed.claims Oro Negro asserts and dispute the allegations set forth in the complaint. The proceedings have been stayed since March 2020. On August 6, 2021 the United States Bankruptcy Court was notified that the auction of Oro Negro’s assets was approved by the Mexican Concurso court.
The stay in the bankruptcy proceeding will continue whilst a purchase is agreed.
Nigerian Cabotage Act litigation
Seadrill Mobile Units Nigeria Ltd (“SMUNL”("SMUNL") commenced proceedings in May 2016 against the Honourable Minister for Transportation, the Attorney General of the Federation and the Nigerian Maritime Administration and Safety Agency with respect to interpretation of the Coastal and Inland Shipping (Cabotage) Act 2003 (the “Act”"Cabotage Act"). SMUNL is an Aquadrill entity which is the litigating party on behalf of both Aquadrill and Seadrill as the litigation relates to the West Capella (an Aquadrill rig) and the West Saturn and West Jupiter (Seadrill rigs). On June 28, 2019, the Federal High Court of Nigeria delivered a judgement finding that: (1) Drilling operations fall within the definition of “Coastal Trade”"Coastal Trade" or “Cabotage”"Cabotage" under the Act and (2) Drilling Rigs fall within the definition of "Vessels" under the Cabotage Act. The impact of this decision is that the Nigerian Maritime Administration and Safety Agency (“NIMASA”("NIMASA") may impose a 2% surcharge on contract revenue from offshore drilling operations in Nigeria, as well as requiring SMUNL register for Cabotage with NIMASA and pay all fees and tariffs as may be published in the guidelines that may be issued by the Minister of Transportation in accordance with the Cabotage Act. However, on July 22, July, 2019, SMUNL filed an appeal to the Court of Appeal challenging the decision of the Federal High Court. Due to the volume of cases currently being handled by the Court of Appeal sitting in Lagos wethe Group anticipate a decision within 3-5 years.
Although we intend to strongly pursue this appeal, weit cannot predict the outcome of this case. We do not believe that it is probable that the ultimate liability, if any, resulting from this litigation will have a material effect on our financial position. Accordingly, no loss contingency has
Lava Jato
On September 23, 2020, Seadrill's subsidiary Seadrill Serviços de Petroleo, Ltda was served with a search and seizure warrant from the Federal Police in Rio de Janeiro, Brazil as part of the phase of Operation Lava Jato relating to individuals formally associated with Seadrill Serviços. Seadrill is cooperating with the investigation. The Brazilian markets have experienced heightened volatility in recent years due to the uncertainties derived from the ongoing investigations being conducted by the Office of the Brazilian Federal Prosecutor, the Brazilian Federal Police, the Brazilian Securities Commission (Comissão de Valores Mobiliários), the Securities and Exchange Commission, the U.S. Department of Justice, the Norwegian National Authority for Investigation and Prosecution of Economic and Environmental Crime (Økokrim) and other Brazilian and foreign public authorities, including the largest such investigation known as Lava Jato, and the impact that such investigations have on the Brazilian economy and political environment. Numerous elected officials, public servants and executives and
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other personnel of large and state-owned companies have been recognized withinsubject to investigation, arrest, criminal charges and other proceedings in connection with allegations of political corruption, including the Consolidated Financial Statements.
Oro Negro
Oro Negro, a Mexican drilling rig contractor, filed a Complaintacceptance of bribes by means of kickbacks on June 6, 2019contracts granted by the government to several infrastructure, oil and gas and construction companies, among others. The profits of these kickbacks allegedly financed the political campaigns of political parties that were unaccounted for or not publicly disclosed and served to personally enrich the recipients of the bribery scheme. Individuals who have had commercial arrangements with Seadrill have been identified in the United States Bankruptcy Court, Southern DistrictLava Jato investigations and the investigations by the Brazilian authorities are ongoing. The outcome of New York, within Chapter 15 proceedings ancillarycertain of these investigations is uncertain, but they have already had an adverse impact on the business, image and reputation of the implicated companies, and on the general market perception of the Brazilian economy. We cannot predict whether such allegations will lead to its Mexican insolvency process. The Complaint names Seadrillfurther political and its JV partner as co-defendants along with other defendants including Oro Negro bondholders. With respect to Seadrill, the Complaint asserts claims relating to alleged tortious interference but does not seek to quantify damages. On August 26, 2019, we submitted a motion to dismiss the Complaint on technical legal grounds. Gil White, the CEO of Oro Negro responded to this motion on October 25, 2019. On January 3, 2020, Oro Negro’s foreign representative was changed to Jose Gerardo Badin Cherit. As a consequence there has been an extension to Seadrill responding to Gil White’s response in further support of its motion to dismiss until further notice. . We intend to vigorously defendeconomic instability or whether new allegations against the claims Oro Negro asserts and dispute the allegations set forthgovernment officials or executives will arise in the Complaint. The costsfuture. We also cannot predict the outcome of defendingany such allegations on the claims against SeadrillBrazilian economy, and the Lava Jato investigation including its JV partner are being met byrecent phases, could adversely affect our business and operations.
Any other material disputes or litigation
During the joint venture, SeaMex.

course of the preceding twelve months, the Company has not been involved in any other material litigation or legal proceedings.
Guarantees
We have issued guarantees in favor of third parties as follows, which is the maximum potential future payment for each type of guarantee:
 (In $ millions)
December 31, 2021December 31, 2020
(As adjusted)
Guarantees in favor of customers
Guarantees to Northern Ocean (1)
150 100 
Guarantees to Sonadrill (2)
400 50 
Total550 150 
 Successor
 Successor
 (In $ millions)
December 31, 2019
 December 31, 2018
Guarantees in favor of customers (1)(2)(3)
215
 7
Guarantees in favor of banks (4)
146
 165
Guarantees in favor of suppliers—
 1
Total361
 173
(1)Guarantees to Seadrill Partners - Guarantees in favor of customers are performance guarantees provided on behalf of Seadrill Partners of $15 million (December 31, 2018 (Successor): $7 million). Guarantees in favor of suppliers includes guarantees on behalf of Seadrill Partners of nil (December 31, 2018 (Successor): $1 million). Contractual maturity from 2020-2021.
(2)Guarantees to Northern Drilling - Guarantees in favor of customers are performance guarantees provided on behalf of Northern DrillingOcean of $150 million (December 31, 2018 (Successor): $nil). These guarantees are indemnified by Northern Drilling. Contractual maturity till2020: $100 million) for a contract that matures in 2022.
(3)Guarantees to Sonadrill -(2) Guarantees in favor of customers are performance guarantees provided on behalf of Sonadrill of $50$400 million (December 31, 2018 (Successor): $nil). Contractual maturity till 2021 and remains in full force and effect until all obligations under the contract have been discharged and in any event shall terminate on the 90th day after completion of demobilization.
(4) Guarantees to Seabras Sapura - Guarantees in favor of banks are guarantees provided by a subsidiary of Seadrill Limited on behalf of Seabras Sapura Participacoes and Seabras Sapura Holdco totaling $146 million (December 31, 2018 (Successor): $1652020: $50 million). ContractualContract maturity till 2021.in November 2022 ($50 million) and March 2023 ($350 million).
As of December 31, 20192021 we have not recognized any liabilities for the above guarantees, as we do not consider it is probable for the guarantees to be called.
On March 26, 2020 we signed a joint sponsor guarantee with Fintech Investments Ltd over the senior secured debt held by SeaMex. The total amount guaranteed is up to $22 million of which we are joint and severally liable.
Other contingencies
Sevan Louisiana loss incident
InOn January 2019, there was a loss incident on the Sevan Louisiana related to a malfunction of its subsea equipment. As ofat December 31, 2019,2021 this claim had been closed out and we have incurred $19recovered $23 million of costs to repairinsurance income from our Hull & Machinery policy for the equipment, of which $4 million has been recovered and an additional $14 million will be recoverable under our physical damage insurance.claim.
The loss incident also resulted in a period of downtime for the Sevan Louisiana.Louisiana. As a result, we have recovered $10$20 million insurance income from the loss of hire of the Sevan Louisiana, covering the period until May 2019. As any further loss of hire in bringing the rig back to work in August 2019 was not readily determined as at December 31, 2019 we have not recognized the gain contingency for further amounts recoverable under the policy.
Note 35 – Variable Interest Entities
Between 2007 and 2013, we entered into sale and leaseback arrangements for drilling units with SFL Corporation Ltd, who incorporated subsidiary companiespolicy for the sole purposeSevan Louisiana. The Loss of owning and leasing the drilling units ("Ship Finance VIEs"). We concluded that we are the primary beneficiary of these companies and therefore consolidate them under the variable interest model.Hire claim is now closed.
As at December 31, 2019 (Successor), the Ship Finance VIEs lease two semi-submersible rigs and a jack-up rig to certain fully owned Seadrill entities under long-term charter agreements. These agreements include options for the Seadrill entities to purchase the rigs during the charter periods and obligations to purchase the assets at the end of the lease.

The following table gives a summary of the sale and leaseback arrangements and repurchase options, as at December 31, 2019:
Unit 
Effective
from
 
Sale value
(In $ millions)
 
First
repurchase
option
(In $ millions)
 
Month of first
repurchase
option
 
Last
repurchase
option (1)
(In $ millions)
 
Month of last
repurchase
Option (1)
West Taurus Nov 2008 850 418 Feb 2015 154 Dec 2024
West Hercules Oct 2008 850 580 Aug 2011 138 Dec 2024
West Linus June 2013 600 370 Jun 2018 170 May 2029
(i)     Ship Finance has a right to require us to purchase the West Linus for $86 million if we don’t exercise the final repurchase option.
The bareboat charter rates are set on the basis of a Base LIBOR Interest Rate for each bareboat charter contract, and thereafter are adjusted for differences between the LIBOR fixing each month and the Base LIBOR Interest Rate for each contract. A summary of the average bareboat charter rates per day for each unit is given below for the respective years.
(In $ thousands) 2020 2021 2022 2023 2024
West Taurus 101 96 96 181 177
West Hercules 100 96 96 183 176
West Linus 99 99 92 189 153
The Ship Finance VIEs are fully consolidated in our Consolidated Financial Statements. The equity attributable to Ship Finance in the VIEs is included in non-controlling interests. The rigs are reported within drilling units in our balance sheet. No gain from the sale of the units was recorded at the time of each transaction. The investment in the capital leases recorded in the Ship Finance VIEs are eliminated on consolidation against the corresponding capital lease liability held within Seadrill entities. The other assets and liabilities of the VIEs are fully reflected within the Consolidated Financial Statements.

The balance sheets of the VIEs on a stand-alone basis at December 31, 2019 and December 31, 2018 (Successor) were as follows:
  Successor
 Successor
 
(In $ millions)		 As at December 31, 2019
 As at December 31, 2018
Cash and cash equivalents 22
 2
Investment in finance lease 972
 1,024
Total assets of the VIEs (1)
 994
 1,026
     
Short-term interest bearing debt (2)
 48
 33
Long-term interest bearing debt (2)
 550
 593
Other liabilities 5
 2
Short-term amounts due to related parties 12
 31
Long-term debt due to related parties (3)
 239
 222
Total liabilities of the VIEs 854
 881
Equity of the VIEs 140
 145
(1) Book value of units in the Company's consolidated financial statements as at December 31, 2019 was $784 million (December 31, 2018: $823 million).
(2)
Total interest bearing debt comprises principal outstanding of $621 million offset by $23 million debt discount (December 31, 2018: $655 million principal outstanding offset by $29 million debt discount).
(3)
We present balances due to/from Ship Finance on a net basis, due to the fact that there is a right to offset established in the long-term loan agreements, and the balances are intended to be settled on a net basis as shown in the table below:

 Successor Successor
(In $ millions)As at December 31, 2019
 As at December 31, 2018
Debt principal outstanding314
 314
Debt discount(75) (88)
Trading liability positions held against long-term loan—
 (4)
Long-term loan due to related parties239
 222

Note 3631 - Supplementary cash flow information

The table below summarizes the non-cash investing and financing activities relating to the periods presented:
SuccessorPredecessor

 
(In $ millions)		Year ended December 31,
2019 2021
Period from July 2, 2018 through December 31, 2018
Period from January 1, 2018 through July 1, 2018
Year ended December 31,
2017 2020
Year ended December 31, 2019
Non-cash investing activities
SaleProceeds from sale of rigs and equipment West Epsilon rig (1)
—
—12 
— —
103
Non-cash financing activities
Proceeds from repayment of short-term loan from related parties due to Seadrill Partners insulation from Seadrill Limited (2)
—
—
—
109
Derecognition of Sevan Developer newbuild asset (3)
—
—
—
620
Derecognition of Sevan Developer construction obligation (3)
—
—
—
(526)
Non-cash financing activities
Repayment of debt following sale of rigs and equipment West Epsilon rig (1)
—
—(12)
— —
(103)
Repayment of debt following insulation of Seadrill Partners from Seadrill Limited (3)
—
—
—
(109)
Dividend to non-controlling interests in VIEs (4)
—
—
—
(14)

(1)
During the year ended December 31, 2017 (Predecessor), we completed the sale of the West Triton, West Resolute and West Mischief to Shelf Drilling, receiving cash consideration of $122 million. This comprised sales value of $225 million offset by $103 million of debt repayments. Refer to Note 9 - Other operating items for further information.

(2)
During the year ended December 31, 2017 (Predecessor), Seadrill Partners amended certain credit facilities to insulate itself from Seadrill Limited. This resulted in a $109 million repayment in respect to the $440 million secured debt facility. Refer to Note 31 - Related party transactions for further information on related party transactions.
(3)
During the year ended December 31, 2017 (Predecessor), Sevan and Cosco agreed to defer the Sevan Developer delivery period until June 30, 2020. The contract amendment included a contract termination clause for Cosco and therefore it was deemed that Sevan had lost control of the asset and therefore derecognized the newbuild asset, which was held at $620 million, construction obligation held at $526 million, and accrued interest and other liabilities held at $19 million, resulting in a net loss on disposal of $75 million. Refer to Note 9 – Other operating itemsfor further information.

(4)

(1)During September 2020, the West Epsilon was sold for net proceeds of $12 million. The proceeds were paid directly to the banks as an early repayment against our external debt.

Note 32 - Business combination
On August 31, 2021, Seadrill Limited entered into a restructuring implementation deed (RID) with NSNCo and the JPLs and refinanced SeaMex senior secured bank debt by the issuance of new senior secured notes (the “New SeaMex Notes”).
On September 2, 2021, the parties entered into a share purchase agreement (“SPA”) to sell the assets of SeaMex out of provisional liquidation to a newly incorporated wholly owned subsidiary of NSNCo in return for the extinguishment of $0.4 billion of the various forms of debt
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instruments owed to NSNCo, gross of expected credit loss allowances previously recognized totaling $65 million. On November 2, 2021 the SPA closed and NSNCo obtained the remaining 50% equity interest in SeaMex, resulting in the consolidation of SeaMex into NSNCo in a business combination.
We have used a convenience date for this transaction and concluded that SeaMex is consolidated into the Seadrill Group effective November 1, 2021. Prior to this date it was accounted for as a joint venture on the Seadrill consolidated Balance Sheet.
The following is a summary of SeaMex's identifiable assets acquired and liabilities assumed as at acquisition date:
During the years ended
(In $ millions)As at acquisition
Carrying amounts of major classes of assets
Cash and cash equivalents41 
Restricted cash21 
Accounts receivable, net316 
Intangible drilling contracts172 
Drilling units216 
Other assets17 
Total assets783
Carrying amounts of major classes of liabilities
Amounts due to related parties133 
Long-term debt234 
Other liabilities88 
Total liabilities455
Net asset acquired328
Prior to November 2021, 50% of the net income or loss from SeaMex was recognized as a share in results from associated companies in Seadrill's Consolidated Statement of Operations, and subsequently reclassified to results from discontinued operations. From November 2021 onwards, 100% of SeaMex's results from operations form part of Seadrill's consolidated results and have been reported as income from discontinued operations.
The following is a summary of SeaMex's operation results since the acquisition date included in the discontinued operations for the reporting period:
(In $ millions)Period November 2, 2021 until December 31, 2017, the Ship Finance VIEs declared dividends payable to Ship Finance. Refer to Note 35 - Variable interest entities for further information.2021
Results from business combination
Operating revenues
Contract revenues36
Total operating revenues36
Operating expenses
Vessel and rig operating expenses(25)
Selling, general and administrative expenses(2)
Total operating expenses(27)
Operating profit9
Financial and non-operating items
Interest expense(4)
Others(1)
Total financial items(5)
Income before tax4
Income tax benefit2
Income after tax6


Note 33 - Assets and Liabilities Held for Sale/ Discontinued Operations
As set out in Note 4 - Chapter 11 proceedings, the Company concluded a comprehensive restructuring of its balance sheet on February 22, 2022. As part of this wider restructuring process, the Company sold 65% of its equity interest in NSNCo on January 20, 2022. Prior to year end, on November 2, 2021, NSNCo completed the acquisition of the residual 50% equity interest in SeaMex Ltd, a company that it had previously held as a joint venture with Fintech. The consideration of the business combination was $0.4 billion, based on the value of the various forms of debt instruments forgiven and owed to NSNCo. The agreed sale of 65% of NSNCo meant that the assets and liabilities were to be classified as held for sale as at December 31, 2021 and any financial information generated would be reported as "discontinued operations".
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The table below shows the carrying amounts of major classes of assets and liabilities classified as held-for-sales:
(In $ millions)As at December 31, 2021As at December 31, 2020
Carrying amounts of major classes of assets included as part of discontinued operations
Cash and cash equivalents48 35 
Restricted cash21 29 
Accounts receivable318 — 
Intangible drilling contracts165 — 
Drilling units215 — 
Investment in associated companies239 224 
Amount due from related parties69 387 
Deferred tax assets6 — 
Other assets22 10 
Total assets of discontinued operations classified as held for sale1,103 685 
Carrying amounts of major classes of liabilities included as part of discontinued operations
Trade accounts payable7 — 
Amounts due to related parties12 — 
Long-term debt814 515 
Uncertain tax positions25 — 
Other liabilities90 31 
Total liabilities of discontinued operations classified as held for sale948 546 

Major classes of line items constituting profit/(loss) of discontinued operations:
(In $ millions, except per share data)Year ended December 31, 2021Year ended December 31, 2020Year ended December 31, 2019
Operating revenues
Contract revenues36 — — 
Total operating revenues36 — — 
Operating expenses
Operating expenses(27)— — 
Total operating expenses(27)— — 
Operating profit9 — — 
Financial and other non-operating items
Interest income18 26 34 
Interest expense(77)(60)(66)
Share in results from associated companies (net of tax)14 (77)(93)
Loss on impairment of investments— (47)(296)
Loss impairment of convertible bond from related party— (29)(11)
Net loss on debt extinguishments— — (22)
Gain/(loss) on marketable securities2 (3)(46)
Other financial items37 (24)(1)
Total financial items(6)(214)(501)
Net profit/(Loss) before tax from discontinued operations3 (214)(501)
Income tax benefit/(expense)2 (1)(1)
Net profit/(Loss) after tax from discontinued operations5 (215)(502)
Basic Earning/(Loss) per share from discontinued operations0.05 (2.14)(5.02)
Diluted Earning/(Loss) per share from discontinued operations0.05 (2.14)(5.02)




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Related party transactions
Seabras Sapura guarantees - In November 2012, a subsidiary of Seabras Sapura Participações S.A. entered into a $179 million senior secured credit facility agreement in order to part fund the acquisition of the Sapura Esmeralda pipe-laying support vessel, with a maturity in 2032. During 2013 an additional facility of $36 million was entered into, but this facility matured in 2020. As a condition to the lenders making the loan available, a subsidiary of Seadrill has provided a sponsor guarantee, on a joint and several basis with the joint venture partner, Sapura Energy, in respect of the obligations of the borrower. The total amount guaranteed by the joint venture partners as at December 31, 2021 was $127 million (December 31, 2020: $132 million).

Note 3734 – Subsequent Eventsevents

Emergence from Chapter 11
Archer convertibleOn February 22, 2022, Seadrill concluded its comprehensive restructuring process and emerged from Chapter 11 bankruptcy protection. The restructuring reduced debt obligations under external credit facilities from $5,662 million to $683 million and raised an additional $350 million of liquidity through issuance of new debt. In addition, future obligations under finance lease arrangements in respect of the West Taurus, West Hercules and West Linus were substantially eliminated. Please see note 4 for further details.

NSNCo Emergence
On March 13, 2020, Archer announcedJuly 2, 2021, a RSA was reached with the NSNCo Noteholders with regards to a comprehensive restructuring of the debt facility. A key step in the RSA was the sale of the assets of SeaMex out of provisional liquidation to a newly incorporated wholly owned subsidiary of NSNCo under a share purchase agreement. On November 2, 2021, the sale of the assets of SeaMex to a subsidiary of NSNCo was completed.
NSNCo filed a pre-packaged bankruptcy that itwas heard on January 12, 2022 in a separate petition filing from Seadrill in U.S. Bankruptcy Court for the Southern District of Texas. NSNCo, soon to be Paratus Energy Services, emerged from their Chapter 11 on January 20, 2022. As a result, NSNCo’s net assets, which had successfully secured a consensual amendmentbook value of $155 million as at December 31, 2021, and extensionare shown within the held-for-sale line items, were de-recognized and replaced with an equity method investment, representing the 35% retained interest. We anticipate that this will lead to an accounting loss on disposal to be recorded by Seadrill in its debt facilities. This included a reductionfirst quarter 2022 financial statements. We are still evaluating what the accounting loss will be.
In exchange for Seadrill being released from all guarantees and securities provided to the principalNSNCo lenders in respect of the notes, we disposed of 65% of our equity interest in NSNCo to the noteholders . Whilst these guarantees have substantial value to all parties, they are not reflected as a discrete liability on Seadrill’s balance sheet under applicable accounting rules. Accordingly, there will be no accounting gain when they are extinguished which is expected to result in the overall accounting loss of disposal referenced. In addition, Seadrill received improved payment priority on certain balances owed by SeaMex to Seadrill and interestreinstatement of management agreements for SeaMex. The notes were also reinstated on amended terms.
West Linus lease arrangement
On February 19, 2022, Seadrill signed a transition agreement with SFL pursuant to which the convertible loanWest Linus rig will be delivered back to SFL upon assignment of the ConocoPhilips drilling contract to SFL. Seadrill has been leasing the harsh environment jack -up rig, West Linus, from SFL, which had been accounted for as a failed sale leaseback due to us from Archer,contractual purchase obligations in exchangethe original charter, resulting in Seadrill recognizing the rig asset on its balance sheet and fair value of the liability to SFL for future bareboat payments within LSTC. The Chapter 11 Proceedings afforded Seadrill the option to reject or amend the lease.
The interim transition bareboat agreement with SFL will see Seadrill continuing to operate the West Linus until the rig is handed back to SFL and a new Manager, Odfjell, for a reduced stock conversion priceperiod of time estimated to last approximately 6 to 9 months from Seadrill’s emergence. The amendment charter no longer contains a purchase obligation and removal of certain restrictions regardingwill therefore result in the sale or conversionde-recognition of the loan (see Note 31 - "Related party transactions" for detailsrig asset of loan). Following the amendment, the principal due on the loan would be $13$175 million and liability of $158 million at emergence from Chapter 11 on February 22, 2022. The interim transition bareboat agreement will be accounted for as a short-term operating lease.
Rig disposals
The West Venture was sold for scrapping to Rota Shipping Inc. for $7 million on January 19, 2022. As the stock conversion price would decrease from $2.083 per sharerig was fully impaired the total consideration, less any costs to $0.40. sell, will be recognized as a gain on disposal.
The maturity date ofSevan Driller and the loan would also extendSevan Brasil were sold to New Fortress Energy for $18 million and $6 million respectively on April 1, 2024. The transaction is subject to execution of final agreements and completion of closing conditions.



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