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Seadrill’s Backlog and Contract Updates

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Backlog

On February 28, 2017, Seadrill (SDRL) had a backlog of $2.5 billion, compared with $3 billion in November 2016. A company’s backlog helps gauge its future revenue.

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Backlog details

Seadrill’s backlog for 2017 is ~$1.7 billion, which is just 52% of its 2016 revenue. If the company isn’t able to secure new contracts, its revenue is set to plunge in 2017.

Going forward, the backlog for 2018 is ~$750 million, or ~24% of its revenue over the last four quarters. Of Seadrill’s total backlog of $2.5 billion, its floater segment’s backlog is $1.7 billion, and its jack-up segment’s backlog is $0.8 billion. The average contract duration is 14 months for floaters and 15 months for jack-ups. Offshore drillers (XLE) Transocean (RIG), Ensco (ESV), Rowan Companies (RDC), Pacific Drilling (PACD), and Diamond Offshore (DO) have also seen their backlog fall.

Contract updates

Let’s take a look at contract developments in 4Q16.

  • The West Phoenix was awarded a 90-day contract with Total in the United Kingdom, for which the backlog is estimated to be $17 million.
  • The West Saturn has gained a one-well contract at $225,000 per day with ExxonMobil, which has increased Seadrill’s backlog by $9 million.
  • Seadrill has agreed to reduce the total remaining contract value on the West Jupiter by $144 million.
  • The AOD III secured a three-contract extension from Saudi Aramco. The contract is extended up to December 2019 and has added $112.5 million in backlog.
  • The Cardon IV‘s contract has been extended for three months at a day rate of $225,000.

There have been several developments in 1Q17 as well.

  • The West Phoenix was awarded one more contract, with a backlog of $17 million.
  • The West Elara was awarded a one-well extension, which added a backlog of $10 million.
  • The West Cressida was awarded a two-month extension at a day rate of $64,500. The contract now expires in April 2017.
  • SeaMexSeadrill’s 50-50 joint venture, agreed to a 29-month contract extension at current day rates for five jack-ups contracted with Pemex. A discount on day rates was given to Pemex. The net impact was a backlog increase of $580 million.
  • The West Saturn secured one well contract, which will commence in 2Q17. The contract backlog is $5.5 million.
  • Seadrill received a termination order for the West Mischief. The backlog loss will be $9 million.
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