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EXPLANATORY NOTE
We are furnishing this Current Report on Form 6-K (this “Form 6-K”) to reflect changes to the presentation of our financial information as set forth in our Annual Report on Form 20-F for the fiscal year ended December 31, 2021 (the “2021 Form 20-F”), as filed with the Securities and Exchange Commission (the “SEC”) on April 29, 2022. The information in this Form 6-K is not an amendment to the 2021 Form 20-F or a restatement of the financial statements included therein.
As previously disclosed in our Current Report on Form 6-K furnished to the SEC on October 18, 2022, on September 1, 2022, Seadrill entered into a share purchase agreement (the “Jackup SPA”) with subsidiaries of ADES Arabia Holding Ltd. (together, “ADES”) for the sale of entities that own and operate seven jackup units (the “Jackup Sale”) in the Kingdom of Saudi Arabia (the “KSA Business”). On October 18, 2022, the Jackup Sale closed and the rigs AOD I, AOD II, AOD III, West Callisto, West Ariel, West Cressida, and West Leda are now owned by ADES. ADES also employs the crews operating the rigs and holds the drilling contract related to the rigs. The Jackup Sale represented a strategic shift in Seadrill’s operations, which will have a major effect on its operations and financial results going forward.
As required by the SEC, Seadrill has reclassified the KSA Business as a discontinued operation and the assets and liabilities of the KSA Business as held for sale as of September 1, 2022. Seadrill has prepared this report to retrospectively reclassify the KSA Business in discontinued operations for all prior periods presented in its audited consolidated financial statements as of December 31, 2021 and 2020 and for the years ended December 31, 2021, 2020 and 2019, and to retrospectively revise its managements’ discussion of Seadrill’s results of operations for such years.
Portions of the following items from the 2021 Form 20-F have been updated and superseded to reflect these changes: Part I, Item 5. “Operating and Financial Review and Prospects” and Part III, Item 18. “Financial Statements”.
No items in the 2021 Form 20-F other than those identified above are being updated by this Form 6-K. Information in the 2021 Form 20-F is generally stated as of December 31, 2021 and this Form 6-K does not reflect any subsequent information or events other than the changes noted above and certain other events disclosed in Note 34 – Subsequent events within Item 18 below. Without limiting the foregoing, this Form 6-K does not purport to update the “Operating and Financial Review and Prospects” contained in the 2021 Form 20-F for any information, uncertainties, transactions, risks, events, or trends occurring, or known to management, other than the events described above. For a discussion of events and developments subsequent to the filing of the 2021 Form 20-F, please refer to our SEC filings and furnishings since that date.
This Form 6-K should be read in conjunction with the 2021 Form 20-F, and any other documents we have filed with or furnished to the SEC subsequent to April 29, 2022.
INDEX
3 | ||||
5 | ||||
F-1 | ||||
F-2 | ||||
F-5 | ||||
F-6 | ||||
Consolidated Balance Sheets as at December 31, 2021 and 2020 | F-7 | |||
F-8 | ||||
F-10 | ||||
F-11 |
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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.
This annual report and any other written or oral statements that reflect the Company’s current views with respect to future events and financial and operational performance. 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 the 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:
• | our ability to maintain relationships with suppliers, customers, employees and other third parties following emergence from the Chapter 11 Proceedings; |
• | our ability to maintain and obtain adequate financing to support our business plans following emergence from the Chapter 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; |
• | the impact of inflation on our results of operations and financial condition; |
• | 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 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 flows for our obligations; |
• | downtime and other risks associated with offshore rig operations and ability to successfully employ our drilling units; |
• | our expected debt levels; |
• | the impact of the operating and financial restrictions imposed by covenants in our debt agreements; |
• | 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; |
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• | 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; |
• | wage and price controls and the imposition of trade barriers; |
• | our ability to attract and 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 U.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 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 6-K 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. 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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ITEM 5. | OPERATING AND FINANCIAL REVIEW AND PROSPECTS |
MANAGEMENT DISCUSSION AND ANALYSIS
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.
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 the Consolidated Financial Statements for a discussion of the basis on which the Consolidated Financial Statements are prepared.
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 jackup 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 a major international offshore drilling contractors. As of December 31, 2021, we owned 24 drilling rigs, leased three from our related parties SFL (two) and Northern Ocean (one), and managed nine rigs on behalf of SeaMex (five), Aquadrill (formerly Seadrill Partners) (two), and Sonadrill (two). Since December 31, 2021, we sold the West Venture in January 2022, the Sevan Brasil and Sevan Driller in April 2022, and the AOD I, AOD II, AOD III, West Callisto, West Ariel, West Cressida, and West Leda (refer to Discontinued operations section below) in October, 2022.
We are recognized for providing high quality operations, in some of the most challenging sectors of offshore drilling. We employ 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) harsh environment; (ii) floaters; and (iii) jackup rigs, as further explained below and in “Operating and Financial Review”.
Our relatively modern fleet, among the youngest in the industry, is well positioned compared with other major offshore drillers. As of December 31, 2021, our owned fleet of 24 drilling units included six drillships, six semi-submersible rigs and 12 jackup rigs (seven of which have been included in discontinued operations held for sale).
We categorize the drilling units in our fleet as floaters, jackups and harsh environment.
2) Discontinued operations
As set out in Note 4—Chapter 11 proceedings to these financial statements, Seadrill concluded a comprehensive restructuring of its balance sheet on February 22, 2022. As part of this restructuring process, Seadrill disposed of 65% of its equity interest in Paratus Energy Services (formerly Seadrill New Finance Limited “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 agreed sale of 65% of NSNCo meant that the assets and liabilities were classified as held-for-sale as at December 31, 2021 and its results were reported as “discontinued operations” in the statement of operations. The comparative periods of the consolidated financial statements were adjusted for this classification and all balances presented in the remainder of this filing represent those for continuing operations unless otherwise indicated.
On September 1, 2022, Seadrill entered into a sale and purchase agreement (“Jackup SPA”) with subsidiaries of ADES Group for the sale of the entities that own and operate seven jackup units (the “Jackup Sale”) in the Kingdom of Saudi Arabia (the “KSA Business”). The sale represented a strategic shift in Seadrill’s operations which will have a major effect on its operations and financial results going forward and therefore we have reclassified the KSA Business as a discontinued operation and its results have been reported separately from Seadrill’s continuing operations for both the current and comparative periods. In addition, the assets and liabilities of the KSA Business were reclassified as held for sale in all periods presented.
On October 18, 2022, the Jackup Sale closed and the rigs AOD I, AOD II, AOD III, West Callisto, West Ariel, West Cressida, and West Leda are now owned by ADES. ADES employs the crews operating the rigs and holds the drilling contract related to the rigs. The consideration for the Jackup Sale was $670 million, comprising initial consideration of $628 million and reimbursements to Seadrill of $50 million for estimated working capital and project costs spent, at the time of closing, in relation to the reactivation of the three stacked jackups: the West Ariel, West Cressida and West Leda, less $8 million held in escrow until completion of these rig reactivation projects. The consideration is subject to any further adjustment for working capital, project costs, and other items. We have determined an accounting gain on disposal of $276 million, subject to final post-closing adjustments.
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3) Changes to our fleet
The below table shows the number of owned drilling units included in our fleet for each of the periods covered by this report.
Drilling units owned | December 31, 2021 | December 31, 2020 | December 31, 2019 | |||||||||
Harsh environment floaters | 2 | 4 | 4 | |||||||||
Harsh environment jackup rigs | 1 | 1 | 2 | |||||||||
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Total harsh environment rigs | 3 | 5 | 6 | |||||||||
Drillships | 6 | 6 | 6 | |||||||||
Semi-submersible rigs | 4 | 7 | 7 | |||||||||
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Total floaters | 10 | 13 | 13 | |||||||||
Jackup rigs (1) | 11 | 13 | 13 | |||||||||
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Total drilling units (2) | 24 | 31 | 32 | |||||||||
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(1) | Includes seven rigs held for sale as part of the Jackup sale. |
(2) | We sold the West Venture (Harsh environment floater) in January 2022 and both the Sevan Driller and the Sevan Brasil (both Semi-submersible rigs) in April 2022 from the above fleet. See Note 34 – Subsequent events to the Consolidated Financial Statements included herein for further details. |
The reduction in our owned fleet is driven by sales under our 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).
The below table shows the number of managed/leased drilling units included in our fleet for each of the periods covered by this report:
Drilling units managed/leased | December 31, 2021 | December 31, 2020 | December 31, 2019 | |||||||||
Managed rigs | ||||||||||||
Floater | 4 | 10 | 10 | |||||||||
Jackup / Tender | 5 | 8 | 8 | |||||||||
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Total managed rigs | 9 | 18 | 18 | |||||||||
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Harsh environment - floaters | 2 | 4 | 3 | |||||||||
Harsh environment - Jackup | 1 | 1 | 1 | |||||||||
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Total drilling units | 3 | 5 | 4 | |||||||||
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The decrease in managed rigs during 2021 was due to the termination of nine Aquadrill management contracts. Rigs under Seadrill’s management remained unchanged between 2019 and 2020.
The decrease in leased rigs during 2021 was due to the redelivery of the West Mira to Northern Ocean and West Taurus to SLF Corporation. Leased rigs increased by one unit in 2020 due to the new lease agreement with Northern Ocean relating to the West Bollsta.
There are no newbuildings for 2021 and 2020. We had an option, which expired on June 30, 2020 and was not exercised, to acquire the semi-submersible rig Sevan Developer.
4) Contract backlog
Contract 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. Contract backlog excludes revenues for mobilization, demobilization and contract preparation or other incentive provisions and excludes backlog relating to non-consolidated entities. Contract backlog excludes management contract revenue from Seadrill Partners, SeaMex, Sonadrill and Northern Ocean, some of which are on rolling contracts.
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The contract backlog for our fleet was as follows as at the dates specified:
(In $ millions) Contract backlog | ||||||||||||
December 31, 2021 | December 31, 2020 | December 31, 2019 | ||||||||||
Harsh environment (1) | 810 | 1,476 | 1,805 | |||||||||
Floaters | 1,309 | 132 | 364 | |||||||||
Jackups (2) | 149 | 249 | 375 | |||||||||
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Total | 2,268 | 1,857 | 2,544 | |||||||||
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(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 was redelivered to SFL in 2022, at which point Seadrill novated the associated drilling contract to the new manager. |
(2) | Included in Jackups is backlog related to the seven jackup units in the Kingdom of Saudi Arabia that were sold to ADES on October 18, 2022 of $149 million (December 31, 2020:$249 million and December 31, 2019: $370 million). |
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 dayrate may be reduced to zero if, for example, repairs extend beyond a stated period.
We project our December 31, 2021 contract backlog to unwind over the following periods.
(In $ millions) | ||||||||||||||||||||
Contract backlog | Total | 2022 | 2023 | 2024 | Thereafter | |||||||||||||||
Harsh environment | 810 | 313 | 191 | 72 | 234 | |||||||||||||||
Floaters | 1,309 | 264 | 356 | 352 | 337 | |||||||||||||||
Jackups | 149 | 107 | 33 | 9 | — | |||||||||||||||
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Total | 2,268 | 684 | 580 | 433 | 571 | |||||||||||||||
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Continuing operations | 2,119 | 577 | 547 | 424 | 571 | |||||||||||||||
Discontinued operations | 149 | 107 | 33 | 9 | — |
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 |
(In $ millions) | Year ended December 31, 2021 | Year ended December 31, 2020 | Year ended December 31, 2019 | |||||||||
Operating revenues | 907 | 961 | 1,254 | |||||||||
Operating expenses | (1,012 | ) | (1,358 | ) | (1,589 | ) | ||||||
Other operating items | (51 | ) | (4,084 | ) | 39 | |||||||
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Operating loss | (156 | ) | (4,481 | ) | (296 | ) | ||||||
Interest expense | (109 | ) | (398 | ) | (407 | ) | ||||||
Reorganization items, net | (296 | ) | — | — | ||||||||
Other financial and non-operating items | (11 | ) | 448 | (44 | ) | |||||||
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Loss before income taxes | (572 | ) | (4,431 | ) | (747 | ) | ||||||
Income tax benefit | — | 1 | 44 | |||||||||
Loss from discontinued operations | (15 | ) | (233 | ) | (519 | ) | ||||||
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Net loss | (587 | ) | (4,663 | ) | (1,222 | ) | ||||||
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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:
(In $ millions) | Year ended December 31, 2021 | Year ended December 31, 2020 | Year ended December 31, 2019 | |||||||||
Contract revenues (a) | 663 | 605 | 863 | |||||||||
Reimbursable revenues (b) | 35 | 37 | 41 | |||||||||
Management contract revenue (c) | 177 | 289 | 338 | |||||||||
Other revenues (d) | 32 | 30 | 12 | |||||||||
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Total operating revenues | 907 | 961 | 1,254 | |||||||||
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a) Contract revenues
Contract revenues represent the revenues that we earn from contracting 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, 2021 | Year ended December 31, 2020 | Year ended December 31, 2019 | |||||||||
Harsh environment | 437 | 376 | 313 | |||||||||
Floaters | 226 | 210 | 477 | |||||||||
Jackups | — | 19 | 73 | |||||||||
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Contract revenues | 663 | 605 | 863 | |||||||||
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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.
i. | Average number of owned or leased rigs on contract |
We calculate the average number of rigs on 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, 2021 | Year ended December 31, 2020 | Year ended December 31, 2019 | ||||||||||
Harsh environment | 4 | 4 | 4 | |||||||||
Floaters | 3 | 3 | 5 | |||||||||
Jackups | — | 1 | 3 | |||||||||
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Average number of rigs on contract | 7 | 8 | 12 | |||||||||
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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
There has been no change in the average number of floaters on contract between 2021 and 2020, although we have benefited from improved activity during the second half of 2021 and had five floaters operating at the end of year. In addition, our two cold stacked drillships, West Jupiter and West Carina, 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 Brasil and Sevan Driller) in April 2022. We are marketing the remaining unit (West Eclipse) but would reactivate her if suitable work is secured that would provide an appropriate investment return on the reactivation cost.
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The average number of floaters on contract decreased by two between 2020 and 2019 primarily due to the West Jupiter and West Saturn completing their contracts in 2019.
Jackups
The average number of jackup rigs on contract presented above excludes three rigs leased to Gulfdrill (West Castor, West Telesto and West Tucana) as the charter revenue on those leases are included in “Other revenue”(discussed below). The average number of jackups on contract decreased by one between 2021 and 2020 primarily due to the West Tucana completing its contract in April 2020 and being leased to Gulfdrill and West Cressida ceasing operations in Thailand in May 2020.
The average number of jackups on contract decreased by two between 2020 and 2019 primarily due to the West Telesto and West Castor completing their contracts in 2019 and being leased to Gulfdrill in 2020.
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, 2021 | Year ended December 31, 2020 | Year ended December 31, 2019 | |||||||||
Harsh environment | 263 | 242 | 215 | |||||||||
Floaters | 199 | 196 | 247 | |||||||||
Jackups | — | 67 | 63 |
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 contract as 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.
Floaters
The average contractual dayrate for floaters increased by $3k per day between the years ended December 31, 2021 and 2020. This was primarily due to the West Saturn ,which was previously warm stacked, and Sevan Louisiana both operating at higher dayrates in 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 $51k per day between the years ended December 31, 2020 and 2019. This was primarily due to the West Jupiter completing a legacy dayrate contract at the end of 2019. This was partly offset by the Sevan Louisiana operating at a higher dayrate in 2020 compared to 2019.
Jackups
The average contractual dayrate for jackups increased by $4k per day between the years ended December 31, 2020 and 2019. This was primarily due to the West Cressida being on higher day rates in 2020.
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%.
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Economic utilization for each of the periods presented in this report is set out in the below table:
Year ended December 31, 2021 | Year ended December 31, 2020 | Year ended December 31, 2019 | ||||||||||
Harsh environment | 93 | % | 92 | % | 90 | % | ||||||
Floaters | 84 | % | 88 | % | 92 | % | ||||||
Jackups | — | % | 99 | % | 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.
The economic utilization for harsh environment rigs increased by 2% from 2019 to 2020, 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 unplanned BOP on the West Tellus. Economic utilization for jackups increased by 1% in 2020 primarily due to improvements on the West 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.
c) Management contract revenue
We have analyzed management contract revenues by segment in the table below.
(In $ millions) | Year ended December 31, 2021 | Year ended December 31, 2020 | Year ended December 31, 2019 | |||||||||
Harsh environment | 29 | 129 | 184 | |||||||||
Floaters | 125 | 126 | 119 | |||||||||
Jackups | 12 | 17 | 13 | |||||||||
Other | 11 | 17 | 22 | |||||||||
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Management contract revenue | 177 | 289 | 338 | |||||||||
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Harsh environment management contract revenues decreased between the years ended December 31, 2021, 2020 and 2019 due to a lower recharge to Northern Ocean relating to the West Bollsta as the first mobilization project 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 Quenguela and the Libongos, which returned to operations after being suspended in 2020.
d) Other revenues
Other revenues include the following:
(In $ millions) | Year ended December 31, 2021 | Year ended December 31, 2020 | Year ended December 31, 2019 | |||||||||
Leasing revenues (i) | 26 | 19 | 1 | |||||||||
Early termination fees (ii) | 6 | 11 | 11 | |||||||||
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Other revenues | 32 | 30 | 12 | |||||||||
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i. | Leasing revenues |
Lease revenue increased between the years ended December 31, 2021 and 2020 due to higher charter fees for West Tucana which commenced operations in November 2020. Lease revenue increased between the years ended December 31, 2020 and 2019 due to the West Castor, West Telesto and West Tucana being leased to Gulfdrill.
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ii. | Early termination fees |
Early termination fees were received for the West Bollsta in 2021, the West Gemini in 2020, and the West Jupiter and West Castor in 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, 2021 | Year ended December 31, 2020 | Year ended December 31, 2019 | |||||||||
Vessel and rig operating expenses (i) | (612 | ) | (541 | ) | (655 | ) | ||||||
Depreciation (ii) | (127 | ) | (318 | ) | (397 | ) | ||||||
Amortization of intangibles (iii) | — | (1 | ) | (105 | ) | |||||||
Reimbursable expenses | (32 | ) | (34 | ) | (39 | ) | ||||||
Selling, general and administrative expenses (iv) | (67 | ) | (74 | ) | (91 | ) | ||||||
Management contract expense (v) | (174 | ) | (390 | ) | (302 | ) | ||||||
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Operating expenses | (1,012 | ) | (1,358 | ) | (1,589 | ) | ||||||
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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 repairs and maintenance.
We have analyzed vessel and rig operating expenses by segment in the table below:
(In $ millions) | Year ended December 31, 2021 | Year ended December 31, 2020 | Year ended December 31, 2019 | |||||||||
Harsh environment | 373 | 250 | 243 | |||||||||
Floaters | 231 | 272 | 342 | |||||||||
Jackups | 8 | 19 | 70 | |||||||||
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Vessel and rig operating expenses | 612 | 541 | 655 | |||||||||
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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.
For detail on the movement in operating rigs in each period presented, please refer to 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 increase 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 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.
Jackup rigs saw a decrease in expenses for the year ended December 31, 2021 due to the sale of West Vigilant and West 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 number of operating rigs as well as rigs being leased to Gulfdrill.
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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.
Depreciation decreased in 2021 compared to 2020 as a result of the impairments recognized on our drilling fleet in both March and December 2020, compounded by a further impairment of the West Hercules in June 2021. See Note 11 – “Loss on impairment of long-lived assets” to the Consolidated Financial Statements included herein for more information.
Similarly depreciation decreased in 2020 from 2019 due to the impairments recognized 2020 that resulting in lower carrying values of our drilling units and equipment, on which the depreciation charge is based.
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. We amortize these assets and liabilities over the remaining contract period and report the amortization under operating 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.
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, 2021 | Year ended December 31, 2020 | Year ended December 31, 2019 | |||||||||
Management contract expense | (30 | ) | (92 | ) | (79 | ) | ||||||
Reimbursable expenses | (108 | ) | (156 | ) | (223 | ) | ||||||
Expected credit losses | (36 | ) | (142 | ) | — | |||||||
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Total management contract expense | (174 | ) | (390 | ) | (302 | ) | ||||||
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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 Libongos, 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 Consolidated Financial Statements included herein for more information regarding expected credit losses.
3) Other operating items
Other operating items include losses on impairment of long-lived assets and 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, 2021 | Year ended December 31, 2020 | Year 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 | |||||||||
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Other operating items | (51 | ) | (4,084 | ) | 39 | |||||||
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i. | Impairment of long-lived assets |
The West Hercules was impaired in 2021 following an amendment to the terms 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 on December 1, 2020.
iii. | Gain on sale of assets |
The gain on sale of assets in 2021 was due to the sale of the West Vigilant, West Pegasus, West Freedom, West Alpha, West Orion, West Eminence and West Navigator. These disposal were part of our rig disposal program.
The gain on sale of assets in 2020 was due to the sale of the West Epsilon and the sale of spare parts on the West Telesto to our Gulfdrill joint venture partner, GDI.
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, 2021 | Year ended December 31, 2020 | Year 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 | — | — | |||||||||
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Other operating income | 54 | 9 | 39 | |||||||||
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i. | Pre-petition liabilities write-off |
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 |
The 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.
iii. | Receipt of overdue receivables |
Receipt of overdue receivables in 2019 which had not been recognized as an asset as part of fresh start accounting.
iv. | Others |
Primarily relates to a $22 million rebate of previously incurred war insurance premiums from The Norwegian Shipowners’ Mutual War Risks Insurance Association (“DNK”).
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4) Interest expense
We have analyzed interest expense into the following components:
(In $ millions) | Year ended December 31, 2021 | Year ended December 31, 2020 | Year ended December 31, 2019 | |||||||||
Cash and payment-in-kind interest on debt facilities (i) | (25 | ) | (256 | ) | (360 | ) | ||||||
Interest on SFL Leases (ii) | (84 | ) | (12 | ) | — | |||||||
Unwind of discount debt | — | (44 | ) | (47 | ) | |||||||
Write off discount debt (iii) | — | (86 | ) | — | ||||||||
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Interest expense | (109 | ) | (398 | ) | (407 | ) | ||||||
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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, 2021 | Year ended December 31, 2020 | Year ended December 31, 2019 | |||||||||
Senior credit facilities and unsecured bonds | (25 | ) | (229 | ) | (313 | ) | ||||||
Debt of consolidated Variable Interest Entities | — | (27 | ) | (47 | ) | |||||||
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Cash and payment-in-kind interest on debt facilities | (25 | ) | (256 | ) | (360 | ) | ||||||
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Our 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 the Previous Chapter 11 Proceedings. On February 7, 2021, after filing for Chapter 11, we recorded contractual interest payments against debt held as subject to compromise (“adequate protections payments”) as a reduction to debt in the Consolidation Balance sheet and not as an expense to Consolidated Statement of Operations. For further information on our bankruptcy proceedings refer to Note 4—Chapter 11 of our Consolidated Financial Statements included herein.
ii. | Interest on SFL Leases |
In the fourth 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 consolidation.
iii. | Write off of discount on debt |
In September 2020 and December 2020, there were non-payments of interest on our secured credit facilities that constituted an event of cross-default. The event of default resulted in the expense of unamortized debt discount of $86 million.
5) Reorganization items, net
We have analyzed reorganization items, net into the following components:
(In $ millions) | Year ended December 31, 2021 | Year ended December 31, 2020 | Year ended December 31, 2019 | |||||||||
Advisory and professional fees after filing (i) | (113 | ) | — | — | ||||||||
Remeasurement of terminated lease to allowable claim (ii) | (186 | ) | — | — | ||||||||
Interest income on surplus cash invested (iii) | 3 | — | — | |||||||||
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Total reorganization items, net | (296 | ) | — | — | ||||||||
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i. | Advisory and professional fees |
Expenses 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 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, net in accordance with US GAAP bankruptcy accounting guidance.
6) Other financial and non-operating items
We have analyzed other income and expense into the following components:
Successor | ||||||||||||
(In $ millions) | Year ended December 31, 2021 | Year ended December 31, 2020 | Year ended December 31, 2019 | |||||||||
Interest income (i) | 1 | 8 | 33 | |||||||||
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 (vii) | (11 | ) | (43 | ) | (1 | ) | ||||||
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Other financial and non-operating items | (11 | ) | 448 | (44 | ) | |||||||
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i. | Interest Income |
Interest income relates to interest earned on cash deposits and other financial assets. Interest income decreased in both 2021 and 2020 as a result of a decrease in cash deposits and a fall in interest rates.
ii. | Share of results in associated companies (net of tax) |
Share of results in associated companies represents our share of earnings or losses in our investments accounted under the equity method.
The share of results from associated companies in 2021 and 2020 reflect a share in after-tax profits from our investment in Sonadrill partly offset by a share of losses from our investment in Gulfdrill. The share in after tax loss of associated companies for the 2019 reflects a share in losses in our investments in Seadrill Partners and Sonadrill.
iii. | Loss of impairment 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 $6 million across the investments we hold in Seadrill Partners.
iv. | Loss 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. 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 |
In the year ended December 31, 2020 a non-cash gain of $509 million arose following the deconsolidation of Ship Finance SPVs, which were previously consolidated by Seadrill under the variable interest model. The Ship Finance SPVs are the legal owners of the West Taurus, West Hercules, and West Linus, which were leased to Seadrill under capital lease arrangements. Following certain events in the period, 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 lease liabilities was lower than the carrying values of the liabilities, this resulted in a large non-cash gain.
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 U.S. dollar.
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The foreign exchange movement is primarily driven by collateral placed with BTG Pactual in May 2019, under a letter of credit arrangement, of 330 million Brazilian Reais.
vii. | Other financial items |
Other financial items for the year ended December 31, 2020 primarily comprised 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 items, net in February 2021 following filing for Chapter 11.
7) Income tax expense/benefit
Income tax expense/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. The $44 million tax benefit recognized in 2019 was primarily due to the reversal of uncertain tax positions in the US.
B. | LIQUIDITY AND CAPITAL RESOURCES |
1) Emergence from Bankruptcy
On February 22, 2022, Seadrill completed its comprehensive restructuring and emerged from 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 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.
2) Liquidity
Seadrill Limited’s short-term liquidity requirements relate to servicing debt by way of amortization, repayments and interest payments, and funding working capital requirements. Sources of liquidity include existing cash balances, short-term investments and contract and other revenues. The Company has historically relied on cash generated from operations to meet its short-term liquidity needs. However, as a result of the downturn in 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 is described in Note 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.
(In $ millions) | Year ended December 31, 2021 | Year ended December 31, 2020 | Year ended December 31, 2019 | |||||||||
Unrestricted cash | 293 | 485 | 987 | |||||||||
Restricted cash | 223 | 168 | 218 | |||||||||
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Cash and cash equivalents, including restricted cash - continuing operations | 516 | 653 | 1,205 | |||||||||
Cash and cash equivalents, including restricted cash- discontinued operations | 88 | 70 | 152 | |||||||||
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Cash and cash equivalents, including restricted cash | 604 | 723 | 1,357 | |||||||||
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We have shown our sources and uses of cash by category of cash flows in the below table:
(In $ millions) | Year ended December 31, 2021 | Year ended December 31, 2020 | Year 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 | |||||||
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Change in period | (119 | ) | (634 | ) | (646 | ) | ||||||
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This reconciles to the total cash and cash equivalents, including restricted, which is as follows:
(In $ millions) | Year ended December 31, 2021 | Year ended December 31, 2020 | Year ended December 31, 2019 | |||||||||
Opening cash and cash equivalents, including restricted cash | 723 | 1,357 | 2,003 | |||||||||
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Opening cash and cash equivalents, including restricted cash - continuing operations | 653 | 1,205 | 1,572 | |||||||||
Opening cash and cash equivalents, including restricted cash - discontinued operations | 70 | 152 | 431 | |||||||||
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Change in period - continuing operations | (137 | ) | (552 | ) | (367 | ) | ||||||
Change in period - discontinued operations | 18 | (82 | ) | (279 | ) | |||||||
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Closing cash and cash equivalents, including restricted cash | 604 | 723 | 1,357 | |||||||||
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Closing cash and cash equivalents, including restricted cash - continuing operations | 516 | 653 | 1,205 | |||||||||
Closing cash and cash equivalents, including restricted cash - discontinued operations | 88 | 70 | 152 | |||||||||
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a) Net cash used in operating activities
Net 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 used in operating activities using the indirect method as summarized in the below table:
(In $ millions) | Year ended December 31, 2021 | Year ended December 31, 2020 | Year ended December 31, 2019 | |||||||||
Net loss | (587 | ) | (4,663 | ) | (1,222 | ) | ||||||
Net operating income adjustments related to | 10 | 211 | 526 | |||||||||
Adjustments to reconcile net loss to net cash provided by operating activities (2) | 522 | 4,183 | 540 | |||||||||
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Net loss after adjustments | (55 | ) | (269 | ) | (156 | ) | ||||||
Payments for long-term maintenance | (55 | ) | (110 | ) | (105 | ) | ||||||
Repayments made under lease arrangements | (46 | ) | — | — | ||||||||
Changes in operating assets and liabilities | 2 | (41 | ) | 5 | ||||||||
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Net cash used in operating activities | (154 | ) | (420 | ) | (256 | ) | ||||||
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(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. |
(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. |
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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, 2021, 2020 and 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, costs incurred for our comprehensive restructuring, and tax payments.
b) Net cash provided by/used in investing activities
Net cash provided by/used in investing activities include purchases and sales of drilling units and equipment, investments in non-consolidated entities and cash receipts from loans granted to related parties.
Net cash provided 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.
Net cash used in investing activities for the year ended December 31, 2019 were primarily 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 used in financing activities
Net 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 used in financing activities for the year ended December 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 year ended December 31, 2019 were driven by redemptions of Senior Secured Notes and debt repayments within our Ship Finance SPVs.
3) Information on our borrowings
An overview of our debt as at the 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 date | Maturity date | ||||||
Secured credit facilities | ||||||||
$683 million facility | 683 | June 2027 | ||||||
$300 million facility (a) | 175 | December 2026 | ||||||
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Total secured credit facilities | 858 | |||||||
Unsecured | ||||||||
$50 million convertible note | 50 | August 2028 | ||||||
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Total debt | 908 | |||||||
Capitalized debt issuance costs and fresh start adjustments | — | |||||||
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| |||||||
Total net debt | 908 |
(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 $5,544 million of senior secured credit facilities. Under the Plan on the Effective Date, these facilities were in part reinstated in the form of the $683 million senior secured credit facility (as further described below), in part equitized through issuance of new shares, and in part settled in cash.
Secured credit facilities and unsecured convertible note
$300 Million New Money Facility
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In February 2022 as part of the Reorganization, Seadrill entered into a $300 million super senior secured credit facility with a syndicate of lenders secured on a first lien basis. The facility has a maturity of December 15, 2026 and consists of a $175 million term loan facility and a $125 million revolving credit facility (“RCF”). The term loan facility bears interest at a margin of 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 February 2022 as part of the Reorganization, Seadrill entered into a senior secured credit facility with a syndicate of lenders to partially 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.
Covenants contained in the Company’s debt facilities
Seadrill is subject to certain financial covenants and certain non-financial covenants under our financing documentation, which govern the above-mentioned secured facilities, being the Reinstated Facility and the New Money Facility. These non-financial covenants include, but are not limited to, liens on our drilling units 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, whereby, in certain circumstances, a default under one given facility might result in defaults under other facilities.
C. | RESEARCH AND DEVELOPMENT, PATENTS AND LICENSES, ETC. |
We recognize the significant impact that technology is having on our industry and through adopting new technologies, improving connectivity and digitizing the way we operate, we have enhanced processes associated with monitoring and managing our assets. Innovation remains at the heart of our business 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 helps us to optimize our performance for Customers and ensure care and maintenance of our equipment, without compromising 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 |
The below table show the average oil price over the period 2017 to 2021. The Brent oil price at March 31, 2022 was $108.
2017 | 2018 | 2019 | 2020 | 2021 | ||||||||||||||||
Average Brent oil price ($/bbl) | 55 | 71 | 64 | 42 | 71 |
Although we saw Brent prices stabilize between 2018-2019, the oil price plummeted in 2020 creating significant uncertainty on the Oil and Gas. In general, production cuts agreed between OPEC and non-OPEC members as well as effective vaccination campaigns have had a positive impact on the industry. Oil demand demonstrated robust recovery in 2021 and, based on various industry forecasts, may achieve the pre-pandemic levels in 2022. However, uncertainty related to the market balance and timing of the demand recovery remains, largely driven by future COVID-19 variants.
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The below table shows the global number of rigs on contract and marketed utilization for the year ended December 31, 2021, and for each of the four preceding years.
2017 | 2018 | 2019 | 2020 | 2021 | ||||||||||||||||
Contracted rigs | ||||||||||||||||||||
Harsh environment jackup (1) | 26 | 28 | 32 | 26 | 28 | |||||||||||||||
Harsh environment floater | 30 | 31 | 35 | 25 | 25 | |||||||||||||||
Benign environment floater | 120 | 116 | 119 | 107 | 106 | |||||||||||||||
Benign environment jackup (1) | 128 | 140 | 171 | 175 | 174 | |||||||||||||||
Marketed utilization | ||||||||||||||||||||
Harsh environment jackup (1) | 76 | % | 85 | % | 94 | % | 75 | % | 80 | % | ||||||||||
Harsh environment floater | 83 | % | 85 | % | 87 | % | 77 | % | 77 | % | ||||||||||
Benign environment floater | 71 | % | 73 | % | 77 | % | 77 | % | 80 | % | ||||||||||
Benign environment jackup (1) | 70 | % | 75 | % | 85 | % | 82 | % | 81 | % |
(1) | Rigs with water depth greater than 350 feet |
Floater
Marketed 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 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.
Jackup
Marketed utilization in the benign jackup 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 limited 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 harsh environment floater segment due to a better supply and demand balance. Harsh environment jackup utilization improved through 2021 closing the year at 85%. However, with limited incremental demand in 2022 improvements in marketed utilization in both segments will be challenging in 2022.
E. | CRITICAL ACCOUNTING ESTIMATES |
Preparation of our Consolidated Financial Statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses and the 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. Management also needs to exercise judgement in applying the group’s accounting policies. Uncertainty about these assumptions, estimates and judgments could result in outcomes that require material adjustments to the carrying amount of assets or 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.
Carrying 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, 2021, the carrying amount of our drilling units was $1.4 billion, representing 37% of our total assets.
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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 jackup 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.
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.
Impairment recognized and methodology
In 2020 there was a significant decrease in the price 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 market had an impact on our industry with expected decreases in utilization going forward and downward pressure on dayrates. We therefore concluded that an impairment triggering event had occurred for our drilling unit fleet in the year ended December 31, 2020 and recorded an impairment charge of $4.1 billion.
The crude oil price has increased significantly since December, 2020. After the global 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 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 (jackups, 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, 2021.
However, changes to our forecast assumptions regarding the future of the West Hercules, whereby we expected it to be more likely than not that the rig would be sold or otherwise disposed of 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 the West Hercules by first evaluating the estimated undiscounted future net cash flows based on a number of assumptions, including projected dayrates, utilization of the units, operating costs, maintenance costs, reactivation costs, likelihoods of any required scrapping activity, and applicable tax rates. The West Hercules carrying amount was not deemed to be recoverable. Based on a fair value using a discounted cash flow model based on the same inputs as at year-end, the West Hercules was impaired by $152 million down to its deemed fair value of $137 million. These assumptions are necessarily subjective and the use of different assumptions could produce results that differ from those reported. These include uncertainties over future demand for services, dayrates, expenses and other market-based future events, and expectations may not be indicative of future outcomes.
Altering the dayrate and other assumptions used in our cash flow forecasts could have led to significantly different estimated fair values. As a result, the assessment as to whether an asset should have been impaired or otherwise was dependent on the timing of assessment and market expectations at that time. As the long-range outcomes are unpredictable due to this volatility, it is not possible to reasonably quantify the impact of changes in the assumptions used in our projected cash flows.
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On August 27, 2021, the Bankruptcy Court approved an amendment to the original West Hercules bareboat charter, which removed the call options and purchase obligations in the original 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).
We also assessed the recoverability of the West Linus at year-end, which was amended to a short-term transition charter subsequent to year-end, in a similar manner to that of the West Hercules. The carrying value was deemed to be recoverable.
Fair Value of SeaMex
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 the acquisition date in accordance 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 a 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 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 and a contract probability factor. All future cash flows are discounted using a weighted average cost of capital (“WACC”) range of 11% to 14%. Key assumptions used in the DCF include contracted dayrate and utilization forecasts.
Contracts
Management valued 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 were then discounted using an adjusted WACC of 14%.
Uncertain 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 exempted 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 recognize 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.
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 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. For details on our tax position, refer to Note 12 – “Taxation” to the Consolidated Financial Statements included herein.
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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 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.
F. | SAFE HARBOR |
Forward-looking information discussed in this operating and financial review 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.
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ITEM 18. | FINANCIAL STATEMENTS |
Consolidated Financial Statements of Seadrill Limited | ||||
F-1 | ||||
F-2 | ||||
F-5 | ||||
F-6 | ||||
F-7 | ||||
F-8 | ||||
F-10 | ||||
F-11 |
Notes | Year ended December 31, 2021 | Year ended December 31, 2020 | Year ended December 31, 2019 | |||||||||||||
(As adjusted) | (As adjusted) | (As adjusted) | ||||||||||||||
Operating revenues | ||||||||||||||||
Contract revenues | 663 | 605 | 863 | |||||||||||||
Reimbursable revenues | 35 | 37 | 41 | |||||||||||||
Management contract revenue | * | 177 | 289 | 338 | ||||||||||||
Other revenues | 8 | * | 32 | 30 | 12 | |||||||||||
Total operating revenues | 907 | 961 | 1,254 | |||||||||||||
Operating expenses | ||||||||||||||||
Vessel and rig operating expenses | (612 | ) | (541 | ) | (655 | ) | ||||||||||
Reimbursable expenses | (32 | ) | (34 | ) | (39 | ) | ||||||||||
Depreciation | (127 | ) | (318 | ) | (397 | ) | ||||||||||
Amortization of intangibles | — | (1 | ) | (105 | ) | |||||||||||
Management contract expense | * | (174 | ) | (390 | ) | (302 | ) | |||||||||
Selling, general and administrative expenses | (67 | ) | (74 | ) | (91 | ) | ||||||||||
Total operating expenses | (1,012 | ) | (1,358 | ) | (1,589 | ) | ||||||||||
Other operating items | ||||||||||||||||
Loss on impairment of long-lived assets | 11 | (152 | ) | (4,087 | ) | — | ||||||||||
Loss on impairment of intangibles | — | (21 | ) | — | ||||||||||||
Gain on disposals | 47 | 15 | — | |||||||||||||
Other operating income | * | 54 | 9 | 39 | ||||||||||||
Total other operating items | 9 | (51 | ) | (4,084 | ) | 39 | ||||||||||
Operating loss | (156 | ) | (4,481 | ) | (296 | ) | ||||||||||
Financial and other non-operating items | ||||||||||||||||
Interest income | * | 1 | 8 | 33 | ||||||||||||
Interest expense | 10 | (109 | ) | (398 | ) | (407 | ) | |||||||||
Loss on impairment of investments | — | — | (6 | ) | ||||||||||||
Share in results from associated companies (net of tax) | 17 | 3 | — | (22 | ) | |||||||||||
Fair value measurement on deconsolidation of VIE | — | 509 | — | |||||||||||||
Loss on derivative financial instrument | — | (3 | ) | (37 | ) | |||||||||||
Foreign exchange loss | (4 | ) | (23 | ) | (11 | ) | ||||||||||
Reorganization items, net | 4 | (296 | ) | — | — | |||||||||||
Other financial and non-operating items | * | (11 | ) | (43 | ) | (1 | ) | |||||||||
Total financial and other non-operating items, net | (416 | ) | 50 | (451 | ) | |||||||||||
Loss before income taxes | (572 | ) | (4,431 | ) | (747 | ) | ||||||||||
Income tax benefit | 12 | — | 1 | 44 | ||||||||||||
Loss from continuing operations | (572 | ) | (4,430 | ) | (703 | ) | ||||||||||
Loss from discontinued operations, net of income taxes | 33 | (15 | ) | (233 | ) | (519 | ) | |||||||||
Net loss | (587 | ) | (4,663 | ) | (1,222 | ) | ||||||||||
Net loss attributable to the parent | (587 | ) | (4,659 | ) | (1,219 | ) | ||||||||||
Net loss attributable to the non-controlling interest | — | (3 | ) | (1 | ) | |||||||||||
Net loss attributable to the redeemable non-controlling interest | — | (1 | ) | (2 | ) | |||||||||||
Basic and Diluted loss per share from continuing operations (US dollar) | (5.70 | ) | (44.11 | ) | (7.00 | ) | ||||||||||
Basic and Diluted loss per share (U.S. dollar) | (5.85 | ) | (46.43 | ) | (12.18 | ) |
* | Includes revenue received from related parties of $189 million, $305 million and $333 million and costs paid to related parties of $70 million, $12 million, and $3 million for the years ended December 31, 2021, 2020 and 2019, respectively. Refer to Note 27 - “Related party transactions” for further details. |
Year ended December 31, 2021 | Year ended December 31, 2020 | Year ended December 31, 2019 | ||||||||||
(As adjusted) | (As adjusted) | |||||||||||
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 bond | 2 | 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 | ) |
Notes | December 31, 2021 | December 31, 2020 | ||||||||||
(As adjusted) | (As adjusted) | |||||||||||
ASSETS | ||||||||||||
Current assets | ||||||||||||
Cash and cash equivalents | 293 | 485 | ||||||||||
Restricted cash | 14 | 160 | 103 | |||||||||
Accounts receivable, net | 15 | 158 | 110 | |||||||||
Amount due from related parties, net | 27 | 28 | 85 | |||||||||
Assets held for sale - current | 33 | 1,145 | 109 | |||||||||
Other current assets | 16 | 197 | 187 | |||||||||
Total current assets | 1,981 | 1,079 | ||||||||||
Non-current assets | ||||||||||||
Investment in associated companies | 17 | 27 | 24 | |||||||||
Drilling units | 18 | 1,431 | 1,755 | |||||||||
Restricted cash | 14 | 63 | 65 | |||||||||
Deferred tax assets | 12 | 10 | 9 | |||||||||
Equipment | 19 | 11 | 19 | |||||||||
Amount due from related parties, net | 27 | — | 6 | |||||||||
Assets held for sale - non-current | 33 | 347 | 976 | |||||||||
Other non-current assets | 16 | 27 | 45 | |||||||||
Total non-current assets | 1,916 | 2,899 | ||||||||||
Total assets | 3,897 | 3,978 | ||||||||||
LIABILITIES AND EQUITY | ||||||||||||
Current liabilities | ||||||||||||
Debt due within one year | 20 | — | 5,545 | |||||||||
Trade accounts payable | 53 | 41 | ||||||||||
Amounts due to related parties - current | 27 | — | 7 | |||||||||
Liabilities associated with assets held for sale - current | 33 | 983 | 692 | |||||||||
Other current liabilities | 21 | 219 | 277 | |||||||||
Total current liabilities | 1,255 | 6,562 | ||||||||||
Liabilities subject to compromise | 4 | 6,117 | — | |||||||||
Liabilities subject to compromise associated with assets held for sale | 4 | 118 | — | |||||||||
Non-current liabilities | ||||||||||||
Long-term debt due to related parties | 27 | — | 426 | |||||||||
Deferred tax liabilities | 12 | 9 | 10 | |||||||||
Liabilities associated with assets held for sale - non-current | 33 | 2 | — | |||||||||
Other non-current liabilities | 21 | 112 | 120 | |||||||||
Total non-current liabilities | 123 | 556 | ||||||||||
Commitments and contingencies (see Note 30) | ||||||||||||
EQUITY | ||||||||||||
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, 2020 | 23 | 10 | 10 | |||||||||
Additional paid in capital | 3,504 | 3,504 | ||||||||||
Accumulated other comprehensive loss | (15 | ) | (26 | ) | ||||||||
Retained loss | (7,215 | ) | (6,628 | ) | ||||||||
Total deficit | (3,716 | ) | (3,140 | ) | ||||||||
Total liabilities and equity | 3,897 | 3,978 | ||||||||||
Year ended December 31, 2021 | Year ended December 31, 2020 | Year ended December 31, 2019 | ||||||||||||||||||
(As adjusted) | (As adjusted) | (As adjusted) | ||||||||||||||||||
Cash Flows from Operating Activities | ||||||||||||||||||||
Net loss | (587 | ) | (4,663 | ) | (1,222 | ) | ||||||||||||||
Net loss from continuing operations | (572 | ) | (4,430 | ) | (703 | ) | ||||||||||||||
Net loss from discontinued operations | (15 | ) | (233 | ) | (519 | ) | ||||||||||||||
Net operating net loss adjustments related to discontinued operations (1) | 10 | 211 | 526 | |||||||||||||||||
Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||||||||||||||
Depreciation | 127 | 318 | 397 | |||||||||||||||||
Amortization of unfavorable and favorable contracts | — | 1 | 105 | |||||||||||||||||
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 assets | 152 | 4,087 | — | |||||||||||||||||
Loss on impairment of intangibles | — | 21 | — | |||||||||||||||||
Loss on impairment of investments | — | — | 6 | |||||||||||||||||
Deferred tax benefit | (3 | ) | (7 | ) | (60 | ) | ||||||||||||||
Unrealized foreign exchange loss | 2 | 19 | (3 | ) | ||||||||||||||||
Amortization of discount on debt | 84 | 121 | 36 | |||||||||||||||||
Change in allowance for credit losses | 34 | 144 | — | |||||||||||||||||
Non-cash reorganization items | 176 | — | — | |||||||||||||||||
Other cash movements in operating activities: | ||||||||||||||||||||
Payments for long-term maintenance | (55 | ) | (110 | ) | (105 | ) | ||||||||||||||
Repayments made under lease arrangements | (46 | ) | — | — | ||||||||||||||||
Changes in operating assets and liabilities, net of effect of acquisitions and disposals: | ||||||||||||||||||||
Trade accounts receivable | (41 | ) | 49 | 25 | ||||||||||||||||
Trade accounts payable | 15 | (37 | ) | 3 | ||||||||||||||||
Prepaid expenses/accrued revenue | (4 | ) | (54 | ) | (1 | ) | ||||||||||||||
Deferred revenue | 7 | (5 | ) | 13 | ||||||||||||||||
Related party receivables | (6 | ) | (103 | ) | (8 | ) | ||||||||||||||
Related party payables | (7 | ) | (5 | ) | (30 | ) | ||||||||||||||
Other assets | (21 | ) | 33 | (16 | ) | |||||||||||||||
Other liabilities | 59 | 73 | 14 | |||||||||||||||||
Other, net | — | 8 | 5 | |||||||||||||||||
Net cash used in operating activities | (154 | ) | (420 | ) | (256 | ) |
(1) | Relates to adjustments made to the net loss from 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, 2021 was $5 million (December 31, 2020: $22 million; December 31, 2019: $7 million generated from operating activities). |
Year ended December 31, 2021 | Year ended December 31, 2020 | Year ended December 31, 2019 | ||||||||||||||||||
(As adjusted) | (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 rigs | 43 | — | — | |||||||||||||||||
Impact to cash resulting from deconsolidation of VIE | — | (22 | ) | — | ||||||||||||||||
Net cash provided by investing activities - discontinued operations | 23 | 36 | 47 | |||||||||||||||||
Net cash provided by/(used in) investing activities | 37 | (32 | ) | (26 | ) | |||||||||||||||
Cash Flows from Financing Activities | ||||||||||||||||||||
Repayments of secured credit facilities | — | (36 | ) | (34 | ) | |||||||||||||||
Purchase of redeemable AOD non-controlling interest | — | (31 | ) | — | ||||||||||||||||
Net cash used in financing activities - discontinued operations | — | (96 | ) | (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 year | 723 | 1,357 | 2,003 | |||||||||||||||||
Cash and cash equivalents, including restricted cash, at the beginning of year - continuing operations | 653 | 1,205 | 1,572 | |||||||||||||||||
Cash and cash equivalents, including restricted cash, at the beginning of year - discontinued operations | 70 | 152 | 431 | |||||||||||||||||
Cash and cash equivalents, including restricted cash, at the end of year | 604 | 723 | 1,357 | |||||||||||||||||
Cash and cash equivalents, including restricted cash, at the end of year - continuing operations (2) | 516 | 653 | 1,205 | |||||||||||||||||
Cash and cash equivalents, including restricted cash, at the end of year - discontinued operations | 88 | 70 | 152 | |||||||||||||||||
Supplementary disclosure of cash flow information | ||||||||||||||||||||
Interest paid | — | (174 | ) | (378 | ) | |||||||||||||||
Taxes paid | (3 | ) | (10 | ) | (29 | ) | ||||||||||||||
Reorganization items, net paid | (100 | ) | — | — |
(2) | Comprised of cash and cash equivalents $293 million (2020: $485 million, 2019: $987 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). |
Common shares | Additional paid in capital | Accumulated other comprehensive income/(loss) | Retained Earnings | Total equity before NCI | Non-controlling interest | Total equity | ||||||||||||||||||||||
(As adjusted) | (As adjusted) | (As adjusted) | (As adjusted) | (As adjusted) | (As adjusted) | (As adjusted) | ||||||||||||||||||||||
December 31, 2018 | 10 | 3,491 | (7 | ) | (611 | ) | 2,883 | 152 | 3,035 | |||||||||||||||||||
Net loss from continuing operations | — | — | — | (700 | ) | (700 | ) | (1 | ) | (701 | ) | |||||||||||||||||
Net loss from discontinuing operations | — | — | — | (519 | ) | (519 | ) | — | (519 | ) | ||||||||||||||||||
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, 2019 | 10 | 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, 2020 | 10 | 3,496 | (13 | ) | (1,994 | ) | 1,499 | 151 | 1,650 | |||||||||||||||||||
Net loss from continuing operations | — | — | — | (4,426 | ) | (4,426 | ) | (3 | ) | (4,429 | ) | |||||||||||||||||
Net loss from discontinuing operations | — | — | — | (233 | ) | (233 | ) | — | (233 | ) | ||||||||||||||||||
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, 2020 | 10 | 3,504 | (26 | ) | (6,628 | ) | (3,140 | ) | — | (3,140 | ) | |||||||||||||||||
Net loss from continuing operations | — | — | — | (572 | ) | (572 | ) | — | (572 | ) | ||||||||||||||||||
Net loss from discontinued operations | — | — | — | (15 | ) | (15 | ) | — | (15 | ) | ||||||||||||||||||
Other comprehensive income from Discontinuing operations | — | — | 11 | — | 11 | — | 11 | |||||||||||||||||||||
December 31, 2021 | 10 | 3,504 | (15 | ) | (7,215 | ) | (3,716 | ) | — | (3,716 | ) | |||||||||||||||||
• | We apply judgment in determining whether a contract 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 andnon-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 |
• | 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 treated as a financing transaction. |
• | ASU 2020-01 - Clarifying the interactions between Topic 321, Topic 323 and Topic 815 |
• | ASU 2020-08 - Codification Improvements to Subtopic310-20, 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 |
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 West Linus |
4. | Elimination of guarantees previously provided to holders of the senior notes previously issued by the NSNCo group. |
1. | Holders of the senior secured notes issued by NSNCo (“ notes “noteholders |
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. |
i. | Macro-economic background and impact of COVID-19 |
i. | Introduction and Chapter 11 filing |
(In $ millions) | 2022 | 2023 | 2024 | 2025 | 2026 and thereafter | Total | ||||||||||||||||||
Total Debt Repayments (a) | 0 | 40 | 40 | 40 | 788 | 908 |
(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 |
Recipient of Shares | Number of shares | % allocation | Equity dilution on conversion of convertible bond | |||||||||
Allocation to predecessor senior secured lenders | 41,499,999 | 83.00 | % | 78.85 | % | |||||||
Allocation to new money lenders - holders of subscription rights | 6,250,001 | 12.50 | % | 11.87 | % | |||||||
Allocation to new money lenders - backstop parties | 2,125,000 | 4.25 | % | 4.04 | % | |||||||
Allocation to predecessor shareholders | 124,998 | 0.25 | % | 0.24 | % | |||||||
Allocation to convertible bondholder | — | — | % | 5.00 | % | |||||||
Total shares issued on emergence | 49,999,998 | 100.00 | % | 100.00 | % | |||||||
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. |
i. | Liabilities subject to compromise |
(In $ millions) | December 31, 2021 | |||
Senior under-secured external debt | 5,662 | |||
Accounts payable and other liabilities | 36 | |||
Accrued interest on external debt | 34 | |||
Amount due to related party | 503 | |||
Liabilities subject to compromise | 6,235 | |||
Attributable to: | ||||
Continuing operations | 6,117 | |||
Discontinued operations | 118 | |||
(In $ millions) | Year ended December 31, 2021 | |||
Advisory and professional fees after filing | (127 | ) | ||
Remeasurement of terminated lease to allowed claim | (186 | ) | ||
Interest income on surplus cash | 3 | |||
Total reorganization items, net | (310 | ) | ||
Attributable to: | ||||
Continuing operations | (296 | ) | ||
Discontinued operations | (14 | ) | ||
• | 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 cash outflows from changes in the above assets. |
(In $ millions) | Allowance for credit losses - other current assets | Allowance for credit losses - related party ST | Allowance for credit losses related party LT | Total Allowance for credit losses | ||||||||||||
January 1, 2020 | — | 9 | — | 9 | ||||||||||||
Credit loss expense | 3 | 139 | 2 | 144 | ||||||||||||
December 31, 2020 | 3 | 148 | 2 | 153 | ||||||||||||
Credit loss expense | — | 36 | (2 | ) | 34 | |||||||||||
Write-off (1)/(2) | (3 | ) | (183 | ) | — | (186 | ) | |||||||||
December 31, 2021 | — | 1 | — | 1 | ||||||||||||
(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 awrite-off of $54 million of trading receivables. |
(2) | Following the cancellation of the Wintershall contract, a settlement agreement was reached with Northern Ocean to extinguish all outstanding claims. The agreement became effective in December 2021 resulting in the write-off of $129 million of trading receivables and $3 million of reimbursement receivables. |
(In $ millions) | Year ended December 31, 2021 | Year ended December 31, 2020 | ||||||
Management contract expenses | 36 | 142 | ||||||
Other financial items | (2 | ) | 2 | |||||
Total | 34 | 144 | ||||||
1. | Harsh environment |
2. | Floaters |
3. | Jackups |
(In $ millions) | Year ended December 31, 2021 | Year ended December 31, 2020 | Year ended December 31, 2019 | |||||||||
(As adjusted) | (As adjusted) | (As adjusted) | ||||||||||
Harsh environment | 495 | 526 | 510 | |||||||||
Floaters | 363 | 358 | 625 | |||||||||
Jackup rigs | 38 | 59 | 95 | |||||||||
Other | 11 | 18 | 24 | |||||||||
Total | 907 | 961 | 1,254 | |||||||||
(In $ millions) | Year ended December 31, 2021 | Year ended December 31, 2020 | Year ended December 31, 2019 | |||||||||
(As adjusted) | (As adjusted) | (As adjusted) | ||||||||||
Harsh environment | 73 | 93 | 125 | |||||||||
Floaters | 37 | 176 | 224 | |||||||||
Jackup rigs | 16 | 20 | 19 | |||||||||
Other | 1 | 29 | 29 | |||||||||
Total | 127 | 318 | 397 | |||||||||
(In $ millions) | Year ended December 31, 2021 | Year ended December 31, 2020 | Year ended December 31, 2019 | |||||||||
(As adjusted) | ||||||||||||
Harsh environment | — | 1 | — | |||||||||
Floaters | — | — | 105 | |||||||||
Total | — | 1 | 105 | |||||||||
(In $ millions) | Year ended December 31, 2021 | Year ended December 31, 2020 | Year ended December 31, 2019 | |||||||||
Harsh environment | 152 | 419 | — | |||||||||
Floaters | — | 3,555 | — | |||||||||
Jackups | — | 86 | — | |||||||||
Other | — | 48 | — | |||||||||
Total | 152 | 4,108 | — | |||||||||
(In $ millions) | Year ended December 31, 2021 | Year ended December 31, 2020 | Year ended December 31, 2019 | |||||||||
(As adjusted) | (As adjusted) | (As adjusted) | ||||||||||
Harsh environment | (138 | ) | (396 | ) | (69 | ) | ||||||
Floaters | (21 | ) | (3,781 | ) | (201 | ) | ||||||
Jackups | 17 | (86 | ) | (3 | ) | |||||||
Other | (14 | ) | (218 | ) | (23 | ) | ||||||
Operating loss | (156 | ) | (4,481 | ) | (296 | ) | ||||||
Unallocated items: | ||||||||||||
Total financial items and other | (416 | ) | 50 | (451 | ) | |||||||
Loss before income taxes | (572 | ) | (4,431 | ) | (747 | ) | ||||||
(In $ millions) | December 31, 2021 | December 31, 2020 | ||||||
(As adjusted) | (As adjusted) | |||||||
Harsh environment rigs | 709 | 1,032 | ||||||
Floaters | 524 | 528 | ||||||
Jackup rigs | 198 | 195 | ||||||
Total Drilling Units | 1,431 | 1,755 | ||||||
Unallocated items: | ||||||||
Investments in associated companies | 27 | 24 | ||||||
Assets held for sale | 1,492 | 1,085 | ||||||
Cash and restricted cash | 516 | 653 | ||||||
Other assets | 431 | 461 | ||||||
Total assets | 3,897 | 3,978 | ||||||
(In $ millions) | Year ended December 31, 2021 | Year ended December 31, 2020 | Year ended December 31, 2019 | |||||||||
(As adjusted) | (As adjusted) | (As adjusted) | ||||||||||
Harsh environment | 30 | 26 | 34 | |||||||||
Floaters | 35 | 110 | 111 | |||||||||
Jackups | 19 | 1 | 8 | |||||||||
Total | 84 | 137 | 153 | |||||||||
(1) | Capital expenditure includes long term maintenance projects. |
(In $ millions) | Year ended December 31, 2021 | Year ended December 31, 2020 | Year ended December 31, 2019 | |||||||||
(As adjusted) | (As adjusted) | (As adjusted) | ||||||||||
Norway | 486 | 480 | 469 | |||||||||
Angola | 125 | 89 | 215 | |||||||||
Brazil | 121 | 51 | 137 | |||||||||
United States | 105 | 107 | 74 | |||||||||
Nigeria | — | — | 198 | |||||||||
Others (1) | 70 | 234 | 161 | |||||||||
Total Revenue | 907 | 961 | 1,254 | |||||||||
(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. |
(In $ millions) | December 31, 2021 | December 31, 2020 | ||||||
(As adjusted) | (As adjusted) | |||||||
Norway | 710 | 1,044 | ||||||
Brazil | 169 | 79 | ||||||
Qatar | 156 | 151 | ||||||
Malaysia | 40 | 94 | ||||||
USA | 92 | 87 | ||||||
Spain | 47 | 49 | ||||||
Others (2) | 217 | 251 | ||||||
Total | 1,431 | 1,755 | ||||||
(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. |
Segment | Year ended December 31, 2021 | Year ended December 31, 2020 | Year ended December 31, 2019 | |||||||||||
(As adjusted) | (As adjusted) | (As adjusted) | ||||||||||||
ConocoPhillips | Harsh Environment | 18 | % | 18 | % | 12 | % | |||||||
Equinor | Harsh Environment | 15 | % | 13 | % | 18 | % | |||||||
Lundin | Floaters | 13 | % | 2 | % | — | % | |||||||
Northern Ocean | Harsh Environment | 4 | % | 13 | % | 13 | % | |||||||
TotalEnergies | Floaters | — | % | 5 | % | 20 | % | |||||||
Other | 50 | % | 49 | % | 37 | % | ||||||||
Total | 100 | % | 100 | % | 100 | % | ||||||||
(In $ millions) | December 31, 2021 | December 31, 2020 | ||||||
(As adjusted) | (As adjusted) | |||||||
Accounts receivable, net | 158 | 110 | ||||||
Current contract liabilities (deferred revenues) (1) | (25 | ) | (18 | ) | ||||
Non-current contract liabilities (deferred revenues)(1) | (10 | ) | (13 | ) |
(1) | Current contract liabilities balances are included in “Other current liabilities,” in our Consolidated Balance Sheets as at December 31, 2021. |
(In $ millions) | Contract Assets | Contract Liabilities | Net 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 | ) | |||||||
(In $ millions) | Contract Assets | Contract Liabilities | Net 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) | Year ended December 31, 2021 | Year ended December 31, 2020 | Year ended December 31, 2019 | |||||||||
Leasing revenues (i) | 26 | 19 | 1 | |||||||||
Early termination fees (ii) | 6 | 11 | 11 | |||||||||
Total other revenues | 32 | 30 | 12 | |||||||||
(In $ millions) | Year ended December 31, 2021 | Year ended December 31, 2020 | Year ended December 31, 2019 | |||||||||
Impairment of long lived assets (i) | (152 | ) | (4,087 | ) | — | |||||||
Impairment of intangibles (ii) | — | (21 | ) | — | ||||||||
Gain on disposals (iii) | 47 | 15 | — | |||||||||
Other operating income (iv) | 54 | 9 | 39 | |||||||||
Total other operating items | (51 | ) | (4,084 | ) | 39 | |||||||
(In $ millions) | Year ended December 31, 2021 | Year ended December 31, 2020 | Year ended December 31, 2019 | |||||||||
Pre-petition liabilitieswrite-off (a) | 27 | — | — | |||||||||
War risk insurance rebate (b) | 22 | — | — | |||||||||
Loss of hire insurance settlement (c) | 2 | 9 | 10 | |||||||||
Receipt of overdue receivable (d) | — | — | 26 | |||||||||
Other | 3 | — | 3 | |||||||||
Total other operating income | 54 | 9 | 39 | |||||||||
(In $ millions) | Year ended December 31, 2021 | Year ended December 31, 2020 | Year ended December 31, 2019 | |||||||||
(As adjusted) | (As adjusted) | (As adjusted) | ||||||||||
Cash interest on debt facilities (a) | (25 | ) | (256 | ) | (360 | ) | ||||||
Interest on SFL leases (b) | (84 | ) | (12 | ) | — | |||||||
Unwind of discount debt | — | (44 | ) | (47 | ) | |||||||
Write off of discount on debt (c) | — | (86 | ) | — | ||||||||
Interest expense | (109 | ) | (398 | ) | (407 | ) | ||||||
(In $ millions) | Year ended December 31, 2021 | Year ended December 31, 2020 | Year ended December 31, 2019 | |||||||||
(As adjusted) | (As adjusted) | (As adjusted) | ||||||||||
Senior credit facilities and unsecured bonds | (25 | ) | (229 | ) | (313 | ) | ||||||
Debt of consolidated variable interest entities | — | (27 | ) | (47 | ) | |||||||
Cash interest | (25 | ) | (256 | ) | (360 | ) | ||||||
(In $ millions) | Year ended December 31, 2021 | Year ended December 31, 2020 | Year ended December 31, 2019 | |||||||||
(As adjusted) | (As adjusted) | (As adjusted) | ||||||||||
Current tax expense/(benefit): | ||||||||||||
Bermuda | — | — | — | |||||||||
Foreign | 2 | 6 | 17 | |||||||||
Deferred tax expense/(benefit): | ||||||||||||
Bermuda | — | — | — | |||||||||
Foreign | (2 | ) | (7 | ) | (61 | ) | ||||||
Total tax expense/(benefit) | — | (1 | ) | (44 | ) | |||||||
Effective tax rate | — | % | — | % | (5.9 | )% |
(In $ millions) | Year ended December 31, 2021 | Year ended December 31, 2020 | Year ended December 31, 2019 | |||||||||
(As adjusted) | (As adjusted) | (As adjusted) | ||||||||||
Effect of change on unrecognized tax benefits | 2 | (8 | ) | (11 | ) | |||||||
Effect of unremitted earnings of subsidiaries | — | (2 | ) | (17 | ) | |||||||
Effect of taxable income in various countries | (2 | ) | 9 | (16 | ) | |||||||
Total tax expense/(benefit) | — | (1 | ) | (44 | ) | |||||||
(In $ millions) | December 31, 2021 | December 31, 2020 | ||||||
(As adjusted) | ||||||||
Pensions and stock options | 3 | 1 | ||||||
Provisions | 30 | 31 | ||||||
Property, plant and equipment | 51 | — | ||||||
Net operating losses carried forward | 320 | 240 | ||||||
Intangibles | — | 4 | ||||||
Other | 9 | 3 | ||||||
Gross deferred tax assets | 413 | 279 | ||||||
Valuation allowance | (403 | ) | (208 | ) | ||||
Deferred tax assets, net of valuation allowance | 10 | 71 | ||||||
(In $ millions) | December 31, 2021 | December 31, 2020 | ||||||
(As adjusted) | ||||||||
Property, plant and equipment | — | 30 | ||||||
Unremitted Earnings of Subsidiaries | 8 | 8 | ||||||
Deferred gain | — | 34 | ||||||
Intangibles | 1 | — | ||||||
Gross deferred tax liabilities | 9 | 72 | ||||||
Net deferred tax asset/(liability) | 1 | (1 | ) | |||||
(In $ millions) | Year ended December 31, 2021 | Year ended December 31, 2020 | Year ended December 31, 2019 | |||||||||
(As adjusted) | ||||||||||||
Balance at the beginning of the period | 82 | 89 | 132 | |||||||||
Increases as a result of positions taken in prior periods | 2 | 1 | 8 | |||||||||
Increases as a result of positions taken during the current period | 2 | — | 29 | |||||||||
Decreases as a result of positions taken in prior periods | (1 | ) | (4 | ) | (34 | ) | ||||||
Decreases due to settlements | (1 | ) | (1 | ) | (46 | ) | ||||||
Decreases as a result of a lapse of the applicable statute of limitations | (1 | ) | (3 | ) | — | |||||||
Balance at the end of the period | 83 | 82 | 89 | |||||||||
Jurisdiction | Earliest Open Year | |||
Kuwait | 2012 | |||
Nigeria | 2014 | |||
United States | 2018 | |||
Mexico | 2011 | |||
Norway | 2015 | |||
Brazil | 2008 |
(In $ millions) | Year ended December 31, 2021 | Year ended December 31, 2020 | Year ended December 31, 2019 | |||||||||
(As adjusted) | (As adjusted) | (As adjusted) | ||||||||||
Net loss from continuing operations | (572 | ) | (4,430 | ) | (703 | ) | ||||||
Profit /(loss) from discontinued operations | (15 | ) | (233 | ) | (519 | ) | ||||||
Net loss attributable to the parent | (587 | ) | (4,663 | ) | (1,222 | ) | ||||||
Less: Allocation to participating securities | — | — | — | |||||||||
Net loss available to stockholders | (587 | ) | (4,663 | ) | (1,222 | ) | ||||||
Effect of dilution | — | — | — | |||||||||
Diluted net loss available to stockholders | (587 | ) | (4,663 | ) | (1,222 | ) | ||||||
(In millions) | Year ended December 31, 2021 | Year ended December 31, 2020 | Year ended December 31, 2019 | |||||||||
Basic loss per share: | ||||||||||||
Weighted average number of common shares outstanding | 100 | 100 | 100 | |||||||||
Diluted loss per share: | ||||||||||||
Effect of dilution | — | — | — | |||||||||
Weighted average number of common shares outstanding adjusted for the effects of dilution | 100 | 100 | 100 | |||||||||
(In $) | Year ended December 31, 2021 | Year ended December 31, 2020 | Year ended December 31, 2019 | |||||||||
Basic Loss per share from continuing operations | (5.70 | ) | (44.11 | ) | (7.00 | ) | ||||||
Diluted Loss per share from continuing operations | (5.70 | ) | (44.11 | ) | (7.00 | ) | ||||||
Basic loss per share | (5.85 | ) | (46.43 | ) | (12.18 | ) | ||||||
Diluted loss per share | (5.85 | ) | (46.43 | ) | (12.18 | ) |
(In $ millions) | December 31, 2021 | December 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 | ||||||
Other | 34 | 33 | ||||||
Total restricted cash | 223 | 168 | ||||||
(i) | Cash collateral in respect to bank guarantee facilities with Danske Bank and DNB. |
(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 West Hercules. |
(In $ millions) | December 31, 2021 | December 31, 2020 | ||||||
(As adjusted) | ||||||||
Current restricted cash | 160 | 103 | ||||||
Non-current restricted cash | 63 | 65 | ||||||
Total restricted cash | 223 | 168 | ||||||
(In $ millions) | December 31, 2021 | December 31, 2020 | ||||||
(As adjusted) | (As adjusted) | |||||||
Prepaid expenses | 51 | 65 | ||||||
Taxes receivable | 48 | 32 | ||||||
Right of use asset | 24 | 57 | ||||||
Deferred contract costs | 15 | 14 | ||||||
Reimbursable amounts due from customers | 13 | 11 | ||||||
Favorable drilling and management services contracts | 9 | 10 | ||||||
Restructuring backstop commitment fee | 20 | — | ||||||
Other | 44 | 43 | ||||||
Total other assets | 224 | 232 | ||||||
(In $ millions) | December 31, 2021 | December 31, 2020 | ||||||
(As adjusted) | (As adjusted) | |||||||
Other current assets | 197 | 187 | ||||||
Other non-current assets | 27 | 45 | ||||||
Total other assets | 224 | 232 | ||||||
Ownership percentage | Joint venture partner | December 31, 2021 | December 31, 2020 | |||||||
Gulfdrill (i) | Gulf Drilling International | 50.0 | % | 50.0 | % | |||||
Sonadrill (ii) | Sonangol E.P. | 50.0 | % | 50.0 | % |
(In $ millions) | Year ended December 31, 2021 | Year ended December 31, 2020 | Year ended December 31, 2019 | |||||||||
(As adjusted) | (As adjusted) | |||||||||||
Seadrill Partners | — | — | (21 | ) | ||||||||
Sonadrill | 5 | (2 | ) | (1 | ) | |||||||
Gulfdrill | (2 | ) | 2 | — | ||||||||
Total share in results from associated companies (net of tax) | 3 | — | (22 | ) | ||||||||
(In $ millions) | Year ended December 31, 2021 | Year ended December 31, 2020 | Year ended December 31, 2019 | |||||||||
Operating revenues | 94 | 56 | 22 | |||||||||
Net operating income/(loss) | 18 | (2 | ) | (1 | ) | |||||||
Net income/(loss) | 11 | (5 | ) | (2 | ) | |||||||
Seadrill ownership percentage | 50 | % | 50 | % | 50 | % | ||||||
Share of results from Sonadrill (net of tax) | 5 | (2 | ) | (1 | ) | |||||||
(In $ millions) | Year ended December 31, 2021 | Year ended December 31, 2020 | Year ended December 31, 2019 | |||||||||
Operating revenues | 142 | 44 | — | |||||||||
Net operating income/(loss) | (4 | ) | 6 | — | ||||||||
Net income/(loss) | (4 | ) | 4 | — | ||||||||
Seadrill ownership percentage | 50 | % | 50 | % | 50 | % | ||||||
Share of results from Gulfdrill (net of tax) | (2 | ) | 2 | — | ||||||||
(In $ millions) | December 31, 2021 | December 31, 2020 | ||||||
Sonadrill | 27 | 22 | ||||||
Gulfdrill | — | 2 | ||||||
Total | 27 | 24 | ||||||
(In $ millions) | December 31, 2021 | December 31, 2020 | ||||||
Current assets | 72 | 54 | ||||||
Current liabilities | (18 | ) | (11 | ) | ||||
Net Assets | 54 | 43 | ||||||
Seadrill ownership percentage | 50 | % | 50 | % | ||||
Book value of Seadrill investment | 27 | 22 | ||||||
(In $ millions) | December 31, 2021 | December 31, 2020 | ||||||
Current assets | 120 | 67 | ||||||
Non-current assets | 173 | 102 | ||||||
Current liabilities | (182 | ) | (135 | ) | ||||
Non-current liabilities | (113 | ) | (31 | ) | ||||
Net (liabilities)/assets | (2 | ) | 3 | |||||
Seadrill ownership percentage | 50 | % | 50 | % | ||||
Book value of Seadrill investment | — | 2 | ||||||
(In $ millions) | Cost | Accumulated depreciation | Net book value | |||||||||
(As adjusted) | (As adjusted) | (As adjusted) | ||||||||||
January 1, 2020 | 6,624 | (605 | ) | 6,019 | ||||||||
Additions | 136 | — | 136 | |||||||||
Depreciation | — | (313 | ) | (313 | ) | |||||||
Impairment | (4,087 | ) | — | (4,087 | ) | |||||||
December 31, 2020 | 2,673 | (918 | ) | 1,755 | ||||||||
Additions | 84 | — | 84 | |||||||||
Depreciation | — | (119 | ) | (119 | ) | |||||||
Impairment (1) | (152 | ) | — | (152 | ) | |||||||
Disposal (2) | (364 | ) | 227 | (137 | ) | |||||||
December 31, 2021 (1)(2) | 2,241 | (810 | ) | 1,431 | ||||||||
(1) | In June 2021 we recorded an impairment of $152 million (December 31, 2020: $4.1 billion) which was reported within “Loss on impairment of long-lived assets” on our Consolidated Statement of Operations. Please refer to Note 11 – “Loss on impairment of long-lived assets” for further details. |
(2) | In August, 2021, the lease agreement with SFL for the West Hercules |
(In $ millions) | Cost | Accumulated depreciation | Net book value | |||||||||
January 1, 2020 | 38 | (15 | ) | 23 | ||||||||
Additions | 1 | — | 1 | |||||||||
Depreciation | — | (5 | ) | (5 | ) | |||||||
December 31, 2020 | 39 | (20 | ) | 19 | ||||||||
Depreciation | — | (8 | ) | (8 | ) | |||||||
December 31, 2021 | 39 | (28 | ) | 11 | ||||||||
(In $ millions) | December 31, 2021 | December 31, 2020 | ||||||
(As adjusted) | (As adjusted) | |||||||
Secured credit facilities | 5,545 | 5,545 | ||||||
Total debt principal | 5,545 | 5,545 | ||||||
Less: Debt balance held as subject to compromise | (5,545 | ) | — | |||||
Carrying value | — | 5,545 | ||||||
(In $ millions) | December 31, 2021 | December 31, 2020 | ||||||
(As adjusted) | (As adjusted) | |||||||
Uncertain tax positions | 83 | 79 | ||||||
Accrued expenses | 78 | 107 | ||||||
Employee withheld taxes, social security and vacation payments | 43 | 44 | ||||||
Lease liabilities | 35 | 68 | ||||||
Contract liabilities | 35 | 31 | ||||||
Taxes payable | 23 | 25 | ||||||
Accrued interest expense | — | 10 | ||||||
Other liabilities | 34 | 33 | ||||||
Total Other Liabilities | 331 | 397 | ||||||
(In $ millions) | December 31, 2021 | December 31, 2020 | ||||||
(As adjusted) | (As adjusted) | |||||||
Other current liabilities | 219 | 277 | ||||||
Other non-current liabilities | 112 | 120 | ||||||
Total Other Liabilities | 331 | 397 | ||||||
(In $ millions) | Year ended December 31, 2021 | |||
2022 | 32 | |||
2023 | 3 | |||
2024 | 1 | |||
2025 and thereafter | 1 | |||
Total | 37 | |||
(In $ millions) | Year ended December 31, 2021 | Year ended December 31, 2020 | ||||||
Total undiscounted cash flows | 37 | 79 | ||||||
Less short term leases | — | — | ||||||
Less discount | (2 | ) | (11 | ) | ||||
Operating lease liability | 35 | 68 | ||||||
Of which: | ||||||||
Current | 30 | 51 | ||||||
Non-current | 5 | 17 | ||||||
Total | 35 | 68 | ||||||
(In $ million) | Year ended December 31, 2021 | Year ended December 31, 2020 | Year ended December 31, 2019 | |||||||||
Operating Lease Cost: | ||||||||||||
Operating lease cost | 42 | 19 | 12 | |||||||||
Short-term lease cost | 1 | 2 | 1 | |||||||||
Total lease cost | 43 | 21 | 13 | |||||||||
Other information: | ||||||||||||
Cash paid for amounts included in the measurement of lease liabilities- Operating Cash flows | 42 | 21 | 13 | |||||||||
Right-of-use | 24 | 53 | 19 | |||||||||
Weighted-average remaining lease term in months | 19 | 14 | 18 | |||||||||
Weighted-average discount rate | 10 | % | 24 | % | 13 | % |
(In $ millions) | Year ended December 31, 2021 | |||
2022 | 28 | |||
2023 | 28 | |||
2024 | 21 | |||
2025 | 18 | |||
2026 and thereafter | 2 | |||
Total | 97 | |||
Issued and fully paid share capital $0.10 par value each | ||||||||
Shares | $ millions | |||||||
December 31, 2019 | 100,234,973 | 10 | ||||||
2020 RSU share issuance | 149,462 | — | ||||||
December 31, 2020 and December 31, 2021 | 100,384,435 | 10 | ||||||
(In $ millions) | Actuarial gain/(loss) relating to pension | Share in unrealized losses from associated companies | Change in debt component on Archer facility | Total | ||||||||||||
January 1, 2020 | — | (13 | ) | — | (13 | ) | ||||||||||
Other comprehensive loss from continuing operations | (2 | ) | — | — | (2 | ) | ||||||||||
Other comprehensive (loss)/income from discontinued operations | — | (15 | ) | 4 | (11 | ) | ||||||||||
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) | Year ended December 31, 2021 | Year ended December 31, 2020 | Year ended December 31, 2019 | |||||||||
Share-based compensation expense | — | 8 | 5 | |||||||||
Total share-based compensation expense | — | 8 | 5 | |||||||||
(In $ millions) | December 31, 2021 | December 31, 2020 | ||||||
Defined benefit obligation—Non-current liabilities | (5 | ) | — | |||||
Deferred tax asset | 1 | 1 | ||||||
Net defined benefit pension (obligation)/asset | (4 | ) | 1 | |||||
(In $ millions) | Year ended December 31, 2021 | Year ended December 31, 2020 | Year 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 plans | 2 | 1 | — | |||||||||
Total net pension cost | 2 | 2 | 3 | |||||||||
(In $ millions) | December 31, 2021 | December 31, 2020 | ||||||
Projected defined benefit obligations | (16 | ) | (16 | ) | ||||
Plan assets at market value | 11 | 16 | ||||||
Funded defined benefit pension obligation | (5 | ) | — | |||||
(In $ millions) | Year ended December 31, 2021 | Year ended December 31, 2020 | Year ended December 31, 2019 | |||||||||
Projected benefit obligations at beginning of period | 16 | 40 | 37 | |||||||||
Interest cost | — | — | 1 | |||||||||
Service cost | — | 1 | 3 | |||||||||
Benefits paid | (1 | ) | (1 | ) | (2 | ) | ||||||
Change in unrecognized actuarial gain | 1 | 2 | — | |||||||||
Settlement (1) | — | (25 | ) | — | ||||||||
Foreign currency translations | — | (1 | ) | 1 | ||||||||
Projected benefit obligations at end of period | 16 | 16 | 40 | |||||||||
(1) | Two Norwegian defined benefit plans were settled and paid out in the year ending 31 December, 2020. |
(In $ millions) | December 31, 2021 | December 31, 2020 | December 31, 2019 | |||||||||
Fair value of plan assets at beginning of year | 16 | 39 | 33 | |||||||||
Estimated return | — | — | 1 | |||||||||
Contribution by employer | 1 | 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 year | 11 | 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. |
Year ended December 31, 2021 | Year ended December 31, 2020 | Year ended December 31, 2019 | ||||||||||
Rate of compensation increase at the end of year | 2.25 | % | 2.25 | % | 2.25 | % | ||||||
Discount rate at the end of year | 1.50 | % | 1.70 | % | 2.30 | % | ||||||
Prescribed pension index factor | 1.20 | % | 1.20 | % | 2.00 | % | ||||||
Expected return on plan assets for the year | 2.90 | % | 2.60 | % | 2.60 | % | ||||||
Employee turnover | 4.00 | % | 4.00 | % | 4.00 | % | ||||||
Expected increases in Social Security Base | 2.25 | % | 2.00 | % | 2.50 | % |
December 31, 2021 | December 31, 2020 | |||||||
Equity securities | 9.7 | % | 7.2 | % | ||||
Debt securities | 65.3 | % | 68.2 | % | ||||
Real estate | 13.6 | % | 13.6 | % | ||||
Money market | 10.6 | % | 10.6 | % | ||||
Other | 0.8 | % | 0.4 | % | ||||
Total | 100.0 | % | 100.0 | % | ||||
(In $ millions) | December 31, 2021 | |||
2022 | 1 | |||
2023 | 1 | |||
2024 | 1 | |||
2025 | 1 | |||
2025-2030 | 3 | |||
Total payments expected during the next 10 years | 7 | |||
(In $ millions) | Year ended December 31, 2021 | Year ended December 31, 2020 | Year ended December 31, 2019 | |||||||||
(As adjusted) | (As adjusted) | |||||||||||
Management fee revenues (a) | 98 | 135 | 113 | |||||||||
Reimbursable revenues (b) | 65 | 148 | 218 | |||||||||
Leasing revenues (c) | 26 | 19 | 1 | |||||||||
Other | — | 3 | 1 | |||||||||
Total related party operating revenues | 189 | 305 | 333 | |||||||||
(a) | We provide management and administrative services to SeaMex, Sonadrill and, until May 2021, Aquadrill, as well as operational and technical support services to SeaMex, Sonadrill, Northern Ocean and, until May 2021, Aquadrill. We charge our affiliates for support services provided either on a cost-plus mark-up or dayrate basis. |
(b) | We recognized reimbursable revenues from Northern Ocean for work performed to mobilize the Northern Ocean rigs West Mira West Bollsta Quenguela West Bollsta |
(c) | Lease revenue earned on the charter of the West Castor, West Telesto West Tucana |
(In $ millions) | Year ended December 31, 2021 | Year ended December 31, 2020 | Year ended December 31, 2019 | |||||||||
West Bollsta (d) | 57 | 10 | — | |||||||||
West Hercules (e) | 10 | — | — | |||||||||
Other related party operating expenses (f) | 3 | 2 | 3 | |||||||||
Total related party operating expenses | 70 | 12 | 3 | |||||||||
(d) | Seadrill entered a charter agreement to lease the West Bollsta — |
(e) | Lease expense following the change to operating lease in August 2021. Refer to Note 22 - |
(f) | We received services from certain other related parties. These included management and administrative services from Frontline and other services from Seatankers. |
(In $ millions) | December 31, 2021 | December 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 receivables | 28 | 91 | ||||||
Of which: | ||||||||
Amounts due from related parties - current | 28 | 85 | ||||||
Amounts due from related parties - non-current | — | 6 | ||||||
Total amounts due from related parties | 28 | 91 | ||||||
(g) | Sponsor Minimum Liquidity Shortfall loan receivable from SeaMex which earns interest at 6.5% plus 3-month US LIBOR. |
(h) | Trading balances are primarily comprised of receivables from Gulfdrill for lease income, as well as from SeaMex and Sonadrill for related party management and crewing fees. Per our contractual terms these balances are either settled monthly or quarterly in 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. |
(In $ millions) | Year ended December 31, 2021 | Year ended December 31, 2020 | ||||||
Northern Ocean | — | 140 | ||||||
Aquadrill | — | 61 | ||||||
Gulfdrill | 13 | 17 | ||||||
Sonadrill | 4 | 10 | ||||||
NSNCo/SeaMex (Discontinued operations) | 3 | 8 | ||||||
Gross amount receivable | 20 | 236 | ||||||
Less: CECL allowance | (1 | ) | (153 | ) | ||||
Receivable net of CECL allowance | 19 | 83 | ||||||
(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– |
(In $ millions) | December 31, 2021 | December 31, 2020 | ||||||
Liabilities from Seadrill to SFL (k) | 503 | 426 | ||||||
Trading balances (l) | — | 7 | ||||||
Total related party liabilities | 503 | 433 | ||||||
Of which: | ||||||||
Amounts due to related parties - current | — | 7 | ||||||
Long-term debt due to related parties | — | 426 | ||||||
Liabilities subject to compromise | 503 | — |
(k) | The liabilities to SFL represented $1.1 billion of lease liabilities between Seadrill and certain special purpose vehicles (“ SPVs |
(In $ millions) | December 31, 2021 | December 31, 2020 | ||||||
West Taurus | 345 | 147 | ||||||
West Linus | 158 | 142 | ||||||
West Hercules | — | 137 | ||||||
Total lease liabilities to SFL | 503 | 426 |
(l) | Trading balances in 2020 primarily included related party payables due to Aquadrill and SeaMex. As part of the settlement agreement with Aquadrill all claims on pre-petition positions held were waived. |
December 31, 2021 | December 31, 2020 | |||||||||||||||
(As adjusted) | (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) | 1,966 | 5,544 | 922 | 5,545 | ||||||||||||
Liability subject to compromise - Related Party Loans Payable (Level 3) | 176 | 503 | 424 | 426 |
(In $ millions) | December 31, 2021 | December 31, 2020 | ||||||
(As adjusted) | ||||||||
Guarantees in favor of customers | ||||||||
Guarantees to Northern Ocean (1) | 150 | 100 | ||||||
Guarantees to Sonadrill (2) | 400 | 50 | ||||||
Total | 550 | 150 | ||||||
(1) | Guarantees in favor of customers are performance guarantees provided on behalf of Northern Ocean of $150 million (December 31, 2020: $100 million) for a contract that matures in 2022. |
(2) | Guarantees in favor of customers are performance guarantees provided on behalf of Sonadrill of $400 million (December 31, 2020: $50 million). Contract maturity in November 2022 ($50 million) and March 2023 ($350 million). |
(In $ millions) | Year ended December 31, 2021 | Year ended December 31, 2020 | Year ended December 31, 2019 | |||||||||
Non-cash investing activities | ||||||||||||
Proceeds from sale of West Epsilon (1) | — | 12 | — | |||||||||
Non-cash financing activities | ||||||||||||
Repayment of debt following sale of West Epsilon (1) | — | (12 | ) | — |
(1) | During September 2020, the West Epsilon |
(In $ millions) | As at acquisition | |||
Carrying amounts of major classes of assets | ||||
Cash and cash equivalents | 41 | |||
Restricted cash | 21 | |||
Accounts receivable, net | 316 | |||
Intangible drilling contracts | 172 | |||
Drilling units | 216 | |||
Other assets | 17 | |||
Total assets | 783 | |||
Carrying amounts of major classes of liabilities | ||||
Amounts due to related parties | 133 | |||
Long-term debt | 234 | |||
Other liabilities | 88 | |||
Total liabilities | 455 | |||
Net asset acquired | 328 | |||
(In $ millions) | Period November 2, 2021 until December 31, 2021 | |||
Results from business combination | ||||
Operating revenues | ||||
Contract revenues | 36 | |||
Total operating revenues | 36 | |||
Operating expenses | ||||
Vessel and rig operating expenses | (25 | ) | ||
Selling, general and administrative expenses | (2 | ) | ||
Total operating expenses | (27 | ) | ||
Operating profit | 9 | |||
Financial and non-operating items | ||||
Interest expense | (4 | ) | ||
Others | (1 | ) | ||
Total financial items | (5 | ) | ||
Income before tax | 4 | |||
Income tax benefit | 2 | |||
Income after tax | 6 | |||
As at December 31, 2021 | As at December 31, 2020 | |||||||||||||||||||||||
(In $ millions) | NSNCo | Jackup Sale | Total | NSNCo | Jackup Sale | Total | ||||||||||||||||||
Assets held for sale | ||||||||||||||||||||||||
Current | 1,103 | 42 | 1,145 | 74 | 35 | 109 | ||||||||||||||||||
Non-current | — | 347 | 347 | 611 | 365 | 976 | ||||||||||||||||||
Total assets held for sale | 1,103 | 389 | 1,492 | 685 | 400 | 1,085 | ||||||||||||||||||
Liabilities associated with assets held for sale | ||||||||||||||||||||||||
Current | 948 | 35 | 983 | 546 | 146 | 692 | ||||||||||||||||||
Liabilities subject to compromise | — | 118 | 118 | — | — | — | ||||||||||||||||||
Non-current | — | 2 | 2 | — | — | — | ||||||||||||||||||
Total liabilities associated with assets held for sale | 948 | 155 | 1,103 | 546 | 146 | 692 | ||||||||||||||||||
(In $ millions) | Year ended December 31, 2021 | Year ended December 31, 2020 | Year ended December 31, 2019 | |||||||||
NSNCo | 5 | (215 | ) | (502 | ) | |||||||
Jackup Sale | (20 | ) | (18 | ) | (17 | ) | ||||||
Total loss from discontinued operations, net of tax | (15 | ) | (233 | ) | (519 | ) | ||||||
Basic/diluted loss per share from discontinued operations | (0.15 | ) | (2.32 | ) | (5.18 | ) |
(In $ millions) | Year ended December 31, 2021 | Year ended December 31, 2020 | Year ended December 31, 2019 | |||||||||||||||||
Net cash (used in)/provided by operating activities | (5 | ) | (22 | ) | 7 | |||||||||||||||
NSNCo | (18 | ) | (24 | ) | (33 | ) | ||||||||||||||
Jackup Sale | 13 | 2 | 40 | |||||||||||||||||
Net cash provided by investing activities | 23 | 36 | 47 | |||||||||||||||||
NSNCo | 23 | 36 | 47 | |||||||||||||||||
Jackup Sale | — | — | — | |||||||||||||||||
Net cash used in used in financing activities | — | (96 | ) | (333 | ) | |||||||||||||||
NSNCo | — | — | (333 | ) | ||||||||||||||||
Jackup Sale | — | (96 | ) | — |
(In $ millions) | As at December 31, 2021 | As at December 31, 2020 | ||||||
Carrying amounts of major classes of assets included as part of discontinued operations | ||||||||
Cash and cash equivalents | 19 | 6 | ||||||
Accounts receivable | 12 | 15 | ||||||
Drilling units | 346 | 365 | ||||||
Other assets | 12 | 14 | ||||||
Total assets of discontinued operations classified as held for sale | 389 | 400 | ||||||
Carrying amounts of major classes of liabilities included as part of discontinued operations | ||||||||
Trade accounts payable | 6 | 4 | ||||||
Long-term debt (including current portion) | — | 117 | ||||||
Uncertain tax positions | 2 | — | ||||||
Other liabilities | 29 | 25 | ||||||
Total liabilities of discontinued operations classified as held for sale | 37 | 146 | ||||||
Carrying amounts of liabilities subject to compromise included as part of discontinued operations | ||||||||
Liabilities subject to compromise | 118 | — |
(In $ millions, except per share data) | Year ended December 31, 2021 | Year ended December 31, 2020 | Year ended December 31, 2019 | |||||||||
Operating revenues | ||||||||||||
Contract revenues | 101 | 98 | 134 | |||||||||
Total operating revenues | 101 | 98 | 134 | |||||||||
Operating expenses | ||||||||||||
Operating expenses | (102 | ) | (99 | ) | (133 | ) | ||||||
Total operating expenses | (102 | ) | (99 | ) | (133 | ) | ||||||
Operating (loss)/profit | (1 | ) | (1 | ) | 1 | |||||||
Financial and other non-operating items | ||||||||||||
Interest income | — | 1 | 2 | |||||||||
Interest expense | — | (11 | ) | (14 | ) | |||||||
Reorganization items, net | (14 | ) | — | — | ||||||||
Other financial items | — | (2 | ) | (2 | ) | |||||||
Total financial items | (14 | ) | (12 | ) | (14 | ) | ||||||
Net loss before tax from discontinued operations | (15 | ) | (13 | ) | (13 | ) | ||||||
Income tax expense | (5 | ) | (5 | ) | (4 | ) | ||||||
Net loss after tax from discontinued operations | (20 | ) | (18 | ) | (17 | ) | ||||||
Basic loss per share from discontinued operations | (0.20 | ) | (0.18 | ) | (0.16 | ) | ||||||
Diluted loss per share from discontinued operations | (0.20 | ) | (0.18 | ) | (0.16 | ) |
(In $ millions) | As at December 31, 2021 | As at December 31, 2020 | ||||||
Carrying amounts of major classes of assets included as part of discontinued operations | ||||||||
Cash and cash equivalents | 48 | 35 | ||||||
Restricted cash | 21 | 29 | ||||||
Accounts receivable | 318 | — | ||||||
Intangible drilling contracts | 165 | — | ||||||
Drilling units | 215 | — | ||||||
Investment in associated companies | 239 | 224 | ||||||
Amount due from related parties | 69 | 387 | ||||||
Deferred tax assets | 6 | — | ||||||
Other assets | 22 | 10 | ||||||
Total assets of discontinued operations classified as held for sale | 1,103 | 685 | ||||||
Carrying amounts of major classes of liabilities included as part of discontinued operations | ||||||||
Trade accounts payable | 7 | — | ||||||
Amounts due to related parties | 12 | — | ||||||
Long-term debt | 814 | 515 | ||||||
Uncertain tax positions | 25 | — | ||||||
Other liabilities | 90 | 31 | ||||||
Total liabilities of discontinued operations classified as held for sale | 948 | 546 | ||||||
(In $ millions, except per share data) | Year ended December 31, 2021 | Year ended December 31, 2020 | Year ended December 31, 2019 | |||||||||
Operating revenues | ||||||||||||
Contract revenues | 36 | — | — | |||||||||
Total operating revenues | 36 | — | — | |||||||||
Operating expenses | ||||||||||||
Operating expenses | (27 | ) | — | — | ||||||||
Total operating expenses | (27 | ) | — | — | ||||||||
Operating profit | 9 | — | — | |||||||||
Financial and other non-operating items | ||||||||||||
Interest income | 18 | 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 securities | 2 | (3 | ) | (46 | ) | |||||||
Other financial items | 37 | (24 | ) | (1 | ) | |||||||
Total financial items | (6 | ) | (214 | ) | (501 | ) | ||||||
Net profit/(Loss) before tax from discontinued operations | 3 | (214 | ) | (501 | ) | |||||||
Income tax benefit/(expense) | 2 | (1 | ) | (1 | ) | |||||||
Net profit/(Loss) after tax from discontinued operations | 5 | (215 | ) | (502 | ) | |||||||
Basic Earning/(Loss) per share from discontinued operations | 0.05 | (2.14 | ) | (5.02 | ) | |||||||
Diluted Earning/(Loss) per share from discontinued operations | 0.05 | (2.14 | ) | (5.02 | ) |
Exhibit Number | Description | |
101.INS | Inline XBRL Instance Document | |
101.SCH | Inline XBRL Taxonomy Extension Schema | |
101.CAL | Inline XBRL Taxonomy Extension Schema Calculation Linkbase | |
101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase | |
101.LAB | Inline XBRL Taxonomy Extension Label Linkbase | |
101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase | |
104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
Table of Contents
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
SEADRILL LIMITED
Date: February 27, 2023
By: | /s/ Grant Creed | |
Name: | Grant Creed | |
Title: | Principal Financial Officer of Seadrill Limited |