Seadrill delivered a quarter that looked weaker on the income statement than in its commercial and cash-flow story. Earnings Whispers adjusted EPS of $0.22 topped the $0.20 consensus but missed the $0.24 Earnings Whisper number by 8.3%. Revenue of $428.0 million beat the $382.0 million consensus by 12.0%. Year over year, earnings grew 229.4% and revenue rose 17.9%. The GAAP picture was harsher: a net loss of $30 million, or $0.49 per diluted share, compared with net income of $29 million in the second quarter. Management attributed part of that loss to a legal provision. The central tension is that near-term earnings are rolling over sequentially while the forward book has strengthened considerably.
The sequential numbers show why the beat deserves scrutiny. Total operating revenue fell from $449 million in the second quarter to $428 million. Contract revenue dropped from $355 million to $329 million as the West Carina came off contract and the West Vela, West Elara and Sevan Louisiana sat idle between jobs. Adjusted EBITDA slid to $121 million from $144 million. Margin excluding reimbursables compressed to 29.7% from 33.5%, and economic utilization dipped to 94.5% from 95.5%. Below the operating line, other financial and non-operating items swung to a $48 million charge. Combined with higher depreciation and a $19 million tax bill, that pushed the GAAP result into the red. The one clear positive inside the quarter was pricing: average contractual dayrates rose to $376,000 from $360,000 even as the average rig count fell from 10 to 9.
Cash is where Seadrill delivered on its stated promises. Operating cash flow was $195 million and free cash flow reached $179 million, a sharp reversal from the $43 million of negative free cash flow in the second quarter. Cash climbed to $506 million, net debt fell to $244 million, and buybacks rose modestly to $22 million. Investors should note that the inflection was flattered by a lump-sum West Tellus mobilization fee and a working-capital release, so $179 million is not a clean quarterly run rate.
The call preserved a credible growth story. Full-year revenue guidance rose to $1.56-$1.58 billion excluding reimbursables, up from $1.50-$1.55 billion. Adjusted EBITDA guidance increased to $440-$460 million from $420-$450 million. This was the third consecutive raise, and the EBITDA range now sits well above the $350-$400 million range set at the start of the year. Commercially, Seadrill added roughly $800 million of contract value since August, versus about $200 million in the prior period. The headline addition was a West Carina award in Indonesia worth about $420 million over 880 firm days. That contract carries an $85 million mobilization fee and completes the repricing of all three legacy contracts. The West Capella was extended to February 2028, with unpriced options exercised in the mid-$400,000s. The Sonangol Libongos is committed into 2030. More than 85% of 2027 drillship days are now booked, down from roughly 30% open at the second-quarter call. Leading-edge rates have moved into the mid-to-high $400,000s.
Bears have legitimate ammunition, however. The raised guidance still implies a softer fourth quarter, burdened by repairs, maintenance and West Carina preparation costs. Management described the U.S. Gulf as oversupplied by a few drillships, and the Sevan Louisiana has limited 2027 visibility beyond short Kosmos and LLOG programs. Petrobras is releasing about one-fifth of its drillship fleet, with its next award wave not expected until the first half of 2027. The West Gemini has no follow-on work after January 2027. Management also conceded that IOCs remain capital-disciplined and are contracting for discrete programs rather than long terms.
Investors appear to have priced in that ambiguity. Earnings Whispers sentiment weakened from 0.14 to essentially neutral at 0.01, a meaningful cooling of expectations heading into the report. Shares have gone nowhere since the August report, sitting 0.6% below the post-report open at $46.32. The stock trades just 2.6% above its $45.15 200-day moving average. Price, momentum and AVWAP trend readings are positive, while sequential growth remains negative, which fits a business whose reported quarters are softening even as its outlook improves.
The bottom line is that Seadrill traded near-term earnings softness for a far more secure 2027. The whisper miss, the GAAP loss and the margin compression are real, and fourth-quarter costs will keep pressure on reported results. Still, three straight guidance raises, repriced legacy contracts, rising dayrates and better than 85% 2027 coverage give the stock earnings visibility that a neutral sentiment reading does not fully reflect. The open questions are the U.S. Gulf, Brazil and whether free cash flow holds up once one-time mobilization receipts fade.