“I am confident that Seadrill will emerge from this downturn even stronger and that we will resume our distributions in the future.”
— John Fredriksen, November 2014
Less than three years later, Seadrill was bankrupt.
“Having restructured our business, we are now well positioned to capitalize on the recovery.”
— Anton Dibowitz, Seadrill CEO, November 2018
Just over two years later, Seadrill was bankrupt again.
Rewind to 2013, when promising was easy.
John Fredriksen owned the most aggressive drilling company on earth.
Sixty nine rigs, twenty one of them still sitting in shipyards. A $19 billion backlog. A market value around $22 billion. The Norwegian tanker billionaire told investors Seadrill would remain a high growth, high dividend stock. He meant it. Both halves. At the same time.
The company paid $1.4 billion in dividends in 2013. Another $1.5 billion in 2014. While it still owed the shipyards another $7 billion for rigs that did not exist yet. I need you to hold those two numbers next to each other. Please. Three billion out the door to shareholders. Seven billion in invoices still in the mail.
Oil had been falling for five months when, on November 26, 2014, the board suspended the dividend. The stock lost 23 percent in a day. Fredriksen’s promise at the top of this page comes from that exact announcement. The distributions never resumed. Not to this day.
By April 2017, Fredriksen was telling a Norwegian newspaper he was working 18 hours a day and did not have a minute to waste. Five months later, on September 12, 2017, Seadrill filed Chapter 11 in Houston. An $895 million bond was due that same week. Twelve point seven billion dollars of debt sat on the table.
The old shareholders walked out of that courtroom with 1.9 percent of the new company.
Some of them stayed. New investors came in behind them, and who can blame them. The new CEO was saying it out loud. Restructured. Well positioned to capitalize on the recovery. That is the second promise at the top of this page.
Less than four years later, Seadrill was back in the same courthouse.
The second restructuring cut $5.6 billion of bank debt down to $683 million. When the company emerged in February 2022, everyone who had held the stock through it, including every investor who bought after the first bankruptcy believing lightning does not strike twice, owned 0.24 percent of the new Seadrill.
Not 24 percent. Zero point two four.
Twice in five years, Seadrill turned its owners into a rounding error.
The third Seadrill
The rigs never sank. Through both bankruptcies, Seadrill’s ships kept drilling, kept getting hired, kept being some of the best assets on water. What died, twice, was the balance sheet wrapped around them.
The company that exists today is the third attempt, and it is built like a survivor of two heart attacks. About 62.5 million shares. Gross debt of $750 million against $360 million of cash. Net debt of $390 million, which is less than one year of the EBITDA it just guided to. A $2.9 billion contract backlog. A share count that has shrunk 22 percent since September 2023 because the company has been eating itself.
Regular readers know where my own offshore money sits. I own Transocean, the leveraged bet on this cycle. My wife asked when we sell. I said when the thesis plays out. We have not spoken since July. 🙂 I wrote about the cycle itself that month.
Seadrill is the opposite corner of the same trade. Transocean is the biggest fleet with the biggest debt. Seadrill is the cleanest balance sheet in the industry attached to seven of the youngest drillships on earth.
And right now it trades at roughly 7.5 times this year’s EBITDA guidance and about a third of what its fleet would cost to build.
Below the line, I will show you the seven ships that matter, the supply math that cannot unwind before 2030, the 2027 earnings arithmetic step by step, who is quietly buying, and the two things that can still kill this. One of them involves Petrobras and a $213 million invoice from a ghost.
