A Look At Seadrill’s (SDRL) Valuation After The US$480 Million Petrobras Contract Extension

Seadrill (SDRL) is back in focus after announcing a 1,095-day contract extension with Petrobras for the West Polaris drillship, adding about US$480 million to backlog in Brazil.

See our latest analysis for Seadrill.

The Petrobras extension has landed at a time when momentum in Seadrill’s stock is already strong, with a 30 day share price return of 15.61% and a year to date share price return of 39.00%. The 1 year total shareholder return of 157.45% shows how recent contract wins and improved earnings visibility are feeding into investor sentiment over both shorter and longer horizons.

If this kind of contract driven story has your attention, it could be a good moment to look for other oil and resource names benefiting from specialized assets and long term demand, starting with our screener of 27 best rare earth metal stocks

With shares up strongly over the past year and the stock trading only slightly below the average analyst price target of US$50.71, the key question now is simple: is Seadrill still undervalued, or is the market already pricing in future growth?

Most Popular Narrative: 35.6% Undervalued

With Seadrill last closing at $48.58 against a widely followed fair value estimate of $75.41, the current narrative leans heavily toward upside potential based on future contracts and earnings power.

The convergence of global energy security priorities and a shift by key customers from onshore to offshore, with projected deepwater spending growth exceeding 80% in 2026 and 130% in 2027, positions Seadrill to unlock record contract backlogs and sustained cash flow generation. The company's advanced digitalization and highly trained workforce represent a structural advantage, which, combined with a disciplined capital strategy and lowest peer leverage, enables outsized earnings growth and potential return of capital to shareholders even as competitors face higher reinvestment risk or obsolescence.

Read the complete narrative.

Curious what revenue path, margin rebuild, and future earnings multiple need to line up to support that $75.41 figure? The narrative leans on aggressive profitability improvement, richer dayrates, and a premium earnings valuation that looks more like a growth name than a traditional driller.

Result: Fair Value of $75.41 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, you also need to weigh risks, such as potential pressure on offshore demand from energy transition and the capital burden of maintaining or upgrading an aging fleet.

Find out about the key risks to this Seadrill narrative.

Another Way To Look At Valuation

The bullish fair value of $75.41 leans heavily on future earnings power, but the current P/S of 2.2x tells a different story. It sits well above the US Energy Services industry at 1.4x, the peer average at 1x, and even the fair ratio of 1.1x. This suggests less room for error if growth or margins fall short. So is this a valuation cushion or a tightrope?

See what the numbers say about this price — find out in our valuation breakdown.

Next Steps

With sentiment this positive, it helps to stress test the story against the underlying numbers yourself and decide how comfortable you are with the risk and reward on offer. To see what investors are optimistic about and how those strengths are assessed, check out the 2 key rewards

Looking for more investment ideas?

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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