Seadrill (SDRL) risk factors, FY2024 10-K

Risks Relating to Our Business and Industry

1. 01Our business depends on the level of oil and gas exploration, development and production in offshore areas worldwide that is influenced by oil and gas prices and market expectations of potential changes in these prices
2. 02The success and growth of our business depend on the level of activity in the offshore oil and gas industry generally, and the drilling industry specifically, which are both highly competitive and cyclical, with intense price competition and volatility
3. 03Consolidation in our industry may impact our results of operations
4. 04Upgrades, refurbishment, repair and surveying of rigs are subject to risks, including delays and cost overruns, that could have an adverse impact on our available cash resources and results of operations
5. 05Compliance with, and breach of, the complex laws and regulations governing international trade could be costly, expose us to liability and, together with policy changes affecting international trade, adversely affect our operations
6. 06Increasing attention to environmental, social and governance matters and climate change may impact us
7. 07Our aspirations, goals and initiatives related to sustainability, including emissions reduction and our public statements and disclosures regarding the same, expose us to numerous risks
8. 08We require highly skilled personnel in the right locations to operate and provide technical services and support for our business
9. 09Because our Consolidated Financial Statements reflect fresh start accounting adjustments made upon emergence from bankruptcy in 2022, financial information in other periods of our financial statements are not comparable to Seadrill’s financial information from the 2022 prior period
10. 10Our customers may seek to cancel or renegotiate their contracts to include unfavorable terms such as unprofitable rates, particularly in the circumstance that operations are suspended or interrupted
11. 11Reduced dayrates in our customer contracts and cancellation of drilling contracts (with or without early termination payments) may adversely affect our financial performance and lead to reduced revenues from operations
12. 12We may not be able to renew or obtain new and favorable contracts for our drilling units
13. 13Our contract backlog for our fleet of drilling units may not be realized
14. 14Our business and operations involve numerous operating hazards, and in the current market we are increasingly required to take additional contractual risk in our customer contracts, which may not be adequately covered by our insurance
15. 15No assurance can be made that we will be able to maintain adequate insurance in the future at rates that we consider reasonable, or that we will be able to obtain insurance against certain risks
16. 16Operating and maintenance costs of our rigs may be significant and may not correspond to revenue earned
17. 17Inflation has adversely affected, and in the future may adversely affect, our operating results
18. 18As part of our business strategy, we have pursued and completed, and may continue to pursue, mergers, acquisitions or dispositions of businesses or assets or other strategic transactions that we believe will enable us to strengthen or broaden our business
19. 19The integration of the businesses and the properties we have acquired or may in the future acquire could be difficult and may divert management's attention away from our existing operations
20. 20Our fleet is largely concentrated to benign floaters and drillships, which leaves us vulnerable to risks related to lack of diversification
21. 21The international nature of our operations involves additional risks, including the mobilization and demobilization of our rigs to and from such locations and the potential that sabotage or political and social unrest could negatively impact our operations or the market for our drilling services
22. 22We are subject to complex environmental laws and regulations that can adversely affect us
23. 23Failure to adequately protect our sensitive information, operational technology systems and critical data, or our service providers’ failure to protect their systems and data could have a material adverse effect on us
24. 24We are incorporating artificial intelligence technologies into our processes and these technologies may present business, compliance, and reputational risks
25. 25Any violation of anti-bribery, anti-corruption or ethical business practice laws and regulations could have a negative impact on us
26. 26We have suffered, and may continue to suffer, losses through our investments in other companies in the offshore drilling and oilfield services industry, which could have a material adverse effect on us
27. 27Labor costs restrictions could increase following collective bargaining negotiations and changes in labor laws and regulations
28. 28The physical effects of, and regulations and disclosure requirements with respect to, greenhouse gas emissions and climate change could have a negative impact on our business
29. 29Our drilling contracts with national oil companies may expose us to greater risks than with non-governmental customers
30. 30Control of oil and natural gas reserves by national oil companies may affect the demand for our services and products and create additional risks in our operations
31. 31There can be no assurance that the use of our drilling units will not infringe the intellectual property rights of others

Financial and Tax Risks

1. 32We have a significant amount of debt, and we may still be able to incur substantially more debt in the future. Such debt and debt service obligations may adversely affect us
2. 33As of December 31, 2024, we had (i) $625 million aggregate principal amount of long-term debt and (ii) $225 million of committed availability for future borrowings under the Revolving Credit Facility (as defined herein), of which $225 million was available
3. 34The agreements governing our debt contain various covenants that impose restrictions on us and certain of our subsidiaries that may affect our ability to operate our business
4. 35We may be unable to meet our capital allocation framework goal of returning at least 50% of Free Cash Flow to shareholders through dividends and share repurchases, which could decrease expected returns on an investment in our Shares
5. 36We are a holding company, and we are dependent upon cash flow from subsidiaries and joint ventures to meet our obligations
6. 37We may recognize impairments on long-lived assets and intangible assets or recognize impairments on equity method investments
7. 38Fluctuations in exchange rates and the non-convertibility of currencies could result in losses to us
8. 39A change in tax laws in any country in which we operate could result in higher tax expense

Regulatory and Legal Risks

1. 40The issuance of share-based awards may dilute investors’ holding of Shares, and substantial sales of or trading in Shares could occur, which could cause the price of Shares to be adversely affected
2. 41Because we are a foreign corporation, you may not have the same rights that a shareholder in a U.S. corporation may have
3. 42Our Bye-Laws limit shareholders’ ability to bring legal action against our officers and directors
4. 43Legislation enacted in Bermuda as to Economic Substance may affect our operations
5. 44We may be subject to litigation, arbitration, other proceedings and regulatory investigations that could have an adverse effect on us
6. 45The loss of our status as a “foreign private issuer” could result in additional cost