6-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

Form 6-K

REPORT OF FOREIGN PRIVATE ISSUER

PURSUANT TO RULE 13a-16 OR 15d-16

UNDER THE SECURITIES EXCHANGE ACT OF 1934

For the month of June 2023

Commission File Number 001-39327

Seadrill Limited

(Exact name of Registrant as specified in its Charter)

Park Place

55 Par-la-Ville Road

Hamilton HM 11 Bermuda

(Address of principal executive office)

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.

Form 20-F ☒                    Form 40-F ☐

EXPLANATORY NOTE

As previously disclosed in Seadrill Limited’s (“Seadrill”) Annual Report on Form 20-F filed with the SEC on April 19, 2023 (the “2022 Form 20-F”), on December 22, 2022, Seadrill entered into the Agreement and Plan of Merger by and among Seadrill, Aquadrill LLC (formerly Seadrill Partners), a Marshall Islands limited liability company (“Aquadrill”), and Seadrill Merger Sub, LLC, a Marshall Islands limited liability company (“Merger Sub”), pursuant to which Merger Sub merged with and into Aquadrill, with Aquadrill surviving the merger as a wholly owned subsidiary of Seadrill (the “Merger”). On April 3, 2023, Seadrill completed the Merger. In connection with the Merger, Seadrill issued approximately 29.9 million common shares, par value $0.01 per share (“Common Shares”), to Aquadrill unitholders and equity award holders, representing approximately 37% of the post-Merger issued and outstanding Common Shares.

As a result of the Merger, Seadrill acquired Aquadrill’s four drillships, one semi-submersible and three tender-assist units. As of the date of this report, Seadrill (i) owns 22 drilling units, which includes 12 floaters (comprising seven 7th generation drillships, three 6th generation drillships and two benign environment semi-submersible units), three harsh environment rigs, four benign environment jackups and three tender-assisted rigs and (ii) manages seven additional rigs under management service arrangements with Sonadrill Holding Ltd. and SeaMex Limited.

Included in this Report on Form 6-K (this “Form 6-K”) is financial information related to Seadrill and Aquadrill. Exhibit 99.1 to this Form 6-K includes unaudited financial statements for the three months ended March 31, 2023 and 2022 for Aquadrill. Exhibit 99.2 to this Form 6-K includes unaudited pro forma financial information for the three months ended March 31, 2023 and 2022 for Seadrill.

As previously disclosed, Gulfdrill LLC (“Gulfdrill”), a 50:50 joint venture between Seadrill and Gulf Drilling International, was awarded contract extensions by a leading operator for three jackup rigs working in Qatar. The West Castor jackup rig, which is bareboat chartered to Gulfdrill by Seadrill, received a contract extension, together with the two jackup rigs that are bareboat chartered to Gulfdrill by a third-party shipyard. The total contract value of the three contract extensions is approximately $343 million and extends these contracts until 2026. The bareboat charter rates payable in connection with the associated extension periods represent a significant increase relative to the existing rates. Also as previously disclosed, Seadrill’s Order Backlog as of May 23, 2023, is $2.6 billion.

This Form 6-K should be read in conjunction with the 2022 Form 20-F, the Form 6-K for the three months ended March 31, 2023 filed by Seadrill on May 23, 2023, and any other documents Seadrill has filed with or furnished to the SEC subsequent to April 19, 2023.

EXHIBITS

Exhibit No.	Description
99.1	Unaudited consolidated financial statements of Aquadrill LLC as of March 31, 2023 and December 31, 2022 and for the three months ended March 31, 2023 and 2022.
99.2	Unaudited pro forma condensed combined financial information of Seadrill Limited as of March 31, 2023, for the year ended December 31, 2022 and for the three months ended March 31, 2023 and 2022.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	SEADRILL LIMITED
Date: June 21, 2023	By:	/s/ Grant Creed Name: Grant Creed
		Title: Principal Financial Officer of Seadrill Limited

THIS REPORT ON FORM 6-K IS HEREBY INCORPORATED BY REFERENCE INTO THE REGISTRATION STATEMENT ON FORM F-3 (NO. 333-271916) ORIGINALLY FILED WITH THE SECURITIES AND EXCHANGE COMMISSION (“SEC”) ON MAY 15, 2023.

EX-99.1

Exhibit 99.1

Index to Condensed Consolidated Financial Statements of Aquadrill LLC

Condensed Consolidated Statements of Operations for three months ended March 31, 2023 and 2022 (Unaudited)	1
Condensed Consolidated Balance Sheets as of March  31, 2023 (Unaudited), and December 31, 2022	2
Condensed Consolidated Statements of Cash Flows for three months ended March 31, 2023 and 2022 (Unaudited)	3
Condensed Consolidated Statements of Changes in Members’ Capital for three months ended March 31, 2023 and 2022 (Unaudited)	4
Notes to Condensed Consolidated Financial Statements	5

AQUADRILL LLC

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

For three months ended March 31, 2023 and 2022

(Unaudited)

(In $ millions)

	Three months ended March 31, 2023			Three months ended March 31, 2022
Operating revenues
Contract revenues		77.0			46.6
Reimbursable revenues		0.5			0.7
Total operating revenues		77.5			47.3
Operating expenses
Vessel and rig operating expenses		59.1			67.3
Depreciation		5.4			2.5
Reimbursable expenses		0.5			0.6
Selling, general and administrative expenses		8.2			2.2
Total operating expenses		73.2			72.6
Other operating items
Gain on sale of assets		—			6.0
Total other operating items		—			6.0
Operating income/(loss)		4.3			(19.3	)
Financial and other items
Foreign currency exchange income/(loss)		0.1			(0.3	)
Restructuring and other income/(expenses)		0.4			(0.4	)
Other financial income/(expenses)		0.2			(0.1	)
Total financial items, net		0.7			(0.8	)
Income/(loss) before income taxes		5.0			(20.1	)
Income tax (expense)/benefit		(3.6	)		3.5
Net income/(loss)		1.4			(16.6	)

A Statement of Other Comprehensive Income has not been presented as there are no items recognized in other comprehensive income.

See accompanying notes that are an integral part of these condensed consolidated financial statements.

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AQUADRILL LLC

CONDENSED CONSOLIDATED BALANCE SHEETS

as of March 31, 2023 and December 31, 2022

(In $ millions)

	(Unaudited)
	March 31, 2023			December 31, 2022
ASSETS
Cash and cash equivalents	$	50.7		$	55.5
Restricted cash		4.6			4.6
Accounts receivable, net		59.6			44.5
Prepaid expenses		13.0			49.6
Income taxes receivable		15.1			14.1
Other current assets		12.0			14.8
Total current assets		155.0			183.1
Non-current assets
Drilling units, net		397.7			371.6
Deferred tax assets		18.8			20.6
Other non-current assets		4.0			4.0
Total non-current assets		420.5			396.2
Total assets		575.5			579.3
LIABILITIES AND MEMBERS’ CAPITAL
Trade accounts payable		10.6			6.3
Accrued expenses		5.5			11.5
Taxes payable		3.0			2.5
Other current liabilities		4.2			9.5
Total current liabilities		23.3			29.8
Non-current taxes payable		24.7			24.7
Other non-current liabilities		51.7			50.7
Total long-term liabilities		76.4			75.4
Commitments and contingencies (see Note 14)
Members’ Capital:
Accumulated Deficit		(90.8	)		(92.2	)
Common unitholders (20,000,000 units at March 31, 2023 and December 31, 2022)		566.6			566.3
Total members’ capital		475.8			474.1
Total liabilities and equity	$	575.5		$	579.3

See accompanying notes that are an integral part of these condensed consolidated financial statements.

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AQUADRILL LLC

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

For three months ended March 31, 2023 and 2022

(Unaudited)

(In $ millions)

	Three months ended March 31, 2023			Three months ended March 31, 2022
Cash Flows from Operating Activities
Net income/(loss)	$	1.4		$	(16.6	)
Adjustments to reconcile net (loss)/income to net cash provided by/(used in) operating activities:
Depreciation		5.4			2.5
Payment for long term maintenance		(9.8	)		(1.6	)
Deferred and other taxes		1.8			(1.2	)
Share based compensation		0.3			0.3
Gain on sale of assets		—			(6.0	)
Changes in operating assets and liabilities, net of effect of acquisitions
Trade accounts receivable		(15.1	)		(7.5	)
Prepaid expenses		36.6			7.8
Trade accounts payable		4.3			(1.8	)
Other assets		1.5			(6.7	)
Other liabilities		(9.8	)		(8.1	)
Net cash provided by/(used in) operating activities		16.6			(38.9	)
Cash Flows from Investing Activities
Additions to drilling units		(21.4	)		(9.0	)
Sale of rigs and equipment		—			14.0
Net cash (used in)/provided by investing activities		(21.4	)		5.0
Net cash used in financing activities		—			—
Net decrease in cash and cash equivalents	$	(4.8	)	$	(33.9	)
Cash and cash equivalents at beginning of the period		60.1			227.9
Cash and cash equivalents, including restricted cash, at the end of the period	$	55.3		$	194.0

See accompanying notes that are an integral part of these condensed consolidated financial statements.

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AQUADRILL LLC

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN MEMBERS’ CAPITAL

For three months ended March 31, 2023 and 2022

(Unaudited)

(In $ millions)

	Common Units		Additional Paid-in Capital		Accumulated (Deficit) / Earnings			Total Equity/ (Deficit)
Balance at January 1, 2022		—		565.1		(61.2	)		503.9
Amortization of share-based awards		—		0.3		—			0.3
Net loss		—		—		(16.6	)		(16.6	)
Balance at March 31, 2022		—		565.4		(77.8	)		487.6
Balance at January 1, 2023				566.3		(92.2	)		474.1
Amortization of share-based awards		—		0.3		—			0.3
Net income		—		—		1.4			1.4
Balance at March 31, 2023		—		566.6		(90.8	)		475.8

See accompanying notes that are an integral part of these condensed consolidated financial statements.

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AQUADRILL LLC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1—General information

Background

Aquadrill LLC (“Aquadrill”, the “Company,” “we,” “us” or “our”) is a limited liability company incorporated under the laws of the Republic of the Marshall Islands. We provide offshore drilling services to the oil and gas industry. At March 31, 2023, we owned 8 offshore drilling units. Our fleet consists of drillships, semi-submersible rigs and tender rigs for operations in shallow and deepwater areas, as well as benign and harsh environments.

The following discussion is intended to assist you in understanding our financial position at March 31, 2023 and December 31, 2022, and our results of operations for the three months ended March 31, 2023 and 2022.

Basis of Presentation

We prepared the accompanying condensed consolidated financial statements of Aquadrill and its subsidiaries in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The financial information included in this report is unaudited but, in our opinion, includes all adjustments (consisting of normal recurring adjustments) that are necessary for a fair presentation of our financial position, results of operations and cash flows for the interim periods presented. The December 31, 2022, Condensed Consolidated Balance Sheet data was derived from our 2022 audited consolidated financial statements, which had an unmodified opinion issued under AICPA audit standards, but does not include all disclosures required by U.S. GAAP. The preparation of our condensed consolidated financial statements requires us to make certain estimates, judgments and assumptions that affect the reported amounts of assets and liabilities, the related revenues and expenses and disclosures of gain and loss contingencies as of the date of the financial statements. Actual results could differ from those estimates.

Basis of consolidation

The financial statements include the results and financial position of all companies in which we directly or indirectly hold more than 50% of the voting control. We eliminate all intercompany balances and transactions. We have 100% interest in Aquadrill Operating LP and its subsidiaries as well as Aquadrill Capricorn Holdings LLC and its subsidiaries.

Going concern

These condensed consolidated financial statements have been prepared on a going concern basis.

We believe that the cash on hand at March 31, 2023, in combination with our operating revenues and forecasted future cash flows, will generate sufficient cash flow to fund our anticipated working capital requirements for the next twelve months from the issuance of these financial statements. Therefore, there is no substantial doubt over our ability to continue as a going concern for at least the twelve months after the date the financial statements are issued.

We have also assessed our ability to continue as a going concern in the context of the merger with Seadrill Limited on April 3, 2023. One of these risks and uncertainties includes the results of operations or financial condition of the combined company following the merger. While this gives rise to inherent uncertainty, we do not believe that this creates any events or conditions that raise substantial doubt over our ability to continue as a going concern for at least the twelve months after the date the financial statements are issued.

Note 2—Accounting policies

The accounting policies set out below have been applied consistently to all periods in these Condensed Consolidated Financial Statements, with the exception of taxation, where effective tax rate is used to calculate the quarterly tax expense, unless otherwise noted. Please refer to Note 2– “Accounting policies” of our Consolidated Financial Statements from our audited Annual Financial Statements for the year ended December 31, 2022, for the discussion of our significant accounting policies.

Revenue from contracts with customers

We enter into bareboat charter contracts with our Master Service Agreement (“MSA”) Managers for most of our drilling rig fleet to provide the drilling rig to our MSA Manager. Our MSA Managers enter into a contract for drilling services with the third-party customer for a specific drilling rig and our MSA Manager will provide the crew and all related services required by the drilling contract. Our bareboat charter contracts provide the use of the specified drilling rig for a term that typically matches the term of the drilling contract with the third-party customer. The specific structure of the bareboat charter will vary depending on the regulatory requirements and the most cost-efficient structure for the jurisdiction of the drilling operations.

The activities that primarily drive the revenue earned from our drilling contracts include (i) providing a drilling rig and the crew and supplies necessary to operate the rig, (ii) mobilizing and demobilizing the rig to and from the drill site and (iii) performing rig preparation activities and/or modifications required for the contract with a customer. Consideration received for performing these activities may consist of day rate drilling revenue, mobilization and demobilization revenue, contract preparation revenue and reimbursement revenue. We account for these integrated services as a single performance obligation that is (i) satisfied over time and (ii) comprised of a series of distinct time increments of service.

We recognize revenues for activities that correspond to a distinct time increment of service within the contract term in the period when the services are performed. We recognize consideration for activities that are (i) not distinct within the context of our contracts and (ii) do not correspond to a distinct time increment of service, ratably over the estimated contract term.

We determine the total transaction price for each individual contract by estimating both fixed and variable consideration expected to be earned over the term of the contract. The amount estimated for variable consideration may be constrained and is only included in the transaction price to the extent that it is probable that a significant reversal of previously recognized revenue will not occur throughout the term of the contract. When determining if variable consideration should be constrained, we consider whether there are factors outside of our control that could result in a significant reversal of revenue as well as the likelihood and magnitude of a potential reversal of revenue. We reassess these estimates each reporting period as required. Refer to Note 4 – “Contracts with customers”.

Our drilling contracts contain a lease component and we have elected to apply the practical expedient provided under ASC 842 to not separate the lease and non-lease components and apply the revenue recognition guidance in ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606). Our drilling services provided under each drilling contract is a single performance obligation satisfied over time and comprised of a series of distinct time increments, or service periods. Total revenue is determined for each individual drilling contract by estimating both fixed and variable consideration expected to be earned over the contract term. Fixed consideration generally relates to activities such as mobilization revenue and demobilization revenue that are not distinct performance obligations within the context of our contracts and is recognized on a straight-line basis over the contract term. Variable consideration generally relates to distinct service periods during the contract term and is recognized in the period when the services are performed.

The amount estimated for variable consideration is only recognized as revenue to the extent that it is probable that a significant reversal will not occur during the contract term. We have applied the optional exemption afforded in ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606), and have not disclosed the variable consideration related to our estimated future day rate revenues. These agreements have remaining terms ranging up to 15 months which may be extended by the MSA manager if their customer contract is extended.

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Dayrate drilling revenue—Our drilling contracts generally provide for payment on a dayrate basis, with higher rates for periods when the drilling unit is operating and lower rates or zero rates for periods when drilling operations are interrupted or restricted. The dayrate invoices billed to the customer are typically determined based on the varying rates applicable to the specific activities performed on an hourly basis. Such dayrate consideration is allocated to the distinct hourly increment service it relates to. Revenue is recognized in line with the contractual rate billed for the services provided for any given hour.

Mobilization revenue—We may receive fees (on either a fixed lump-sum or variable dayrate basis) for the mobilization of our rigs. These activities are not considered to be distinct within the context of the contract. The associated revenue is allocated to the overall performance obligation and recognized ratably over the expected term of the related drilling contract. We record a contract liability for mobilization fees received, which is amortized ratably to contract drilling revenue as services are rendered over the initial term of the related drilling contract.

Demobilization Revenue—We may receive fees (on either a fixed lump-sum or variable dayrate basis) for the demobilization of our rigs. Demobilization revenue expected to be received upon contract completion is estimated as part of the overall transaction price at contract inception and recognized over the term of the contract. In most of our contracts, there is uncertainty as to the likelihood and amount of expected demobilization revenue to be received. For example, the amount may vary dependent upon whether or not the rig has additional contracted work following the contract. Therefore, the estimate for such revenue may be constrained, as described above, depending on the facts and circumstances pertaining to the specific contract. We assess the likelihood of receiving such revenue based on past experience and knowledge of the market conditions.

Revenues Related to Reimbursable Expenses—We generally receive reimbursements from our customers for the purchase of supplies, equipment, personnel services and other services provided at their request in accordance with a drilling contract or other agreement. Such reimbursable revenue is variable and subject to uncertainty, as the amounts received, and timing thereof are highly dependent on factors outside of our influence. Accordingly, reimbursable revenue is fully constrained and not included in the total transaction price until the uncertainty is resolved, which typically occurs when the related costs are incurred on behalf of a customer. We are considered a principal in such transactions and record the associated revenue at the gross amount billed to the customer, at a point in time, as “Reimbursable revenues” in our Consolidated Statements of Operations.

Deferred Contract Costs—Certain direct and incremental costs incurred for upfront preparation, initial mobilization and modifications of contracted rigs represent costs of fulfilling a contract as they relate directly to a contract, enhance resources that will be used in satisfying our performance obligations in the future and are expected to be recovered. Such costs are deferred and amortized ratably to contract drilling expense as services are rendered over the initial term of the related drilling contract.

Note 3—Recent accounting standards

The company did not adopt any new accounting policies in the three months ended March 31, 2023 or March 31, 2022.

Recently issued accounting standards

There are no recently issued ASUs by the FASB that we have not yet adopted but which could materially affect our Consolidated Financial Statements and related disclosures in future periods.

Other accounting standard updates issued by the FASB

As of the date these financial statements are issued, the FASB have issued several further updates not included above. We do not currently expect any of these updates to materially affect our Consolidated Financial Statements and related disclosures either on transition or in future periods.

Note 4 – Contracts with customers

The following table provides information about receivables and contract liabilities from our contracts with customers:

(In $ millions)	As of March 31, 2023		As of December 31, 2022
Accounts receivable, net		59.6		44.5
Current contract liabilities (deferred revenues) (1)		2.4		3.8

(1) Current contract liabilities balances are included in “Other current liabilities” in our Condensed Consolidated Balance Sheets at March 31, 2023 and December 31, 2022 and are primarily related to deferred mobilization revenues that will be recognized as mobilization revenue over the contract term.

Changes in contract liabilities during the period are as follows:

(In $ millions)	As of March 31, 2023			As of December 31, 2022
Contract liabilities at start of period		3.8			5.6
Decrease due to amortization of revenue that was included in the beginning contract liability balance		(1.4	)		(5.6	)
Increase due to cash received, excluding amounts recognized as revenue		—			3.8
Contract liabilities at end of period		2.4			3.8

The deferred revenues balance of $2.4 million reported in “Other current liabilities” at March 31, 2023 is expected to be realized within the next twelve months.

There were $5.1 million of contract assets at March 31, 2023 and $3.6 million of contract assets at December 31, 2022 reported in “Other current assets”.

Note 5 – Taxation

The income tax expense was $3.6 million for the three months ended March 31, 2023 and income tax benefit was $3.5 million for the three months ended March 31, 2022. The income tax benefit was primarily due to changes to valuation allowances.

Our effective tax rate was 72.0% for the three months ended March 31, 2023 and (17.4)% for the three months ended March 31, 2022.

Note 6 – Other operating items

During the three months ended March 31, 2023, we did not recognize a gain on sale of assets. During the three months ended March 31, 2022, we recognized a gain on sale of assets of $6.0 million from sale of the Leo.

We review the carrying value of our long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may no longer be appropriate. During the first quarter of 2023 and 2022, no impairment triggering events were identified, and as such the Company determined no impairments were necessary for these periods.

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Note 7 – Restricted cash

Restricted cash at March 31, 2023 and December 31, 2022 consists of $0.7 million for cash held as collateral for a guarantee with DNB Bank ASA to provide security for the payment, discharge and performance of secured obligations, $0.5 million held in the Segregated Account related to the MSA Settlement Order related to the Chapter 11 proceedings, $2.3 million for bankruptcy related costs, $0.6 million for cash that has been frozen in Nigeria for the ongoing tax audit for services provided by the Capella and $0.5 million related to the Energy Drilling MSA.

Note 8 – Accounts receivable, net

We had accounts receivable, net of $59.6 million and $44.5 million as of March 31, 2023 and December 31, 2022, respectively. Such receivables were the result of payments due under long-term contracts with a limited number of counterparties, net of reimbursable expenses to certain MSA managers and customer disputes, all of which are investment grade and have no history of default under the current contracts. We assess the credit risk associated with these counterparties based on the default rates of similarly rated companies. Based on the analysis performed we concluded that any allowance for credit losses was immaterial to the financial statements at March 31, 2023 and December 31, 2022.

There was no movement in the allowance for expected credit losses balance in the period.

Note 9 – Drilling units

The below table shows the gross value and net book value of our drilling units at March 31, 2023 and December 31, 2022.

(In $ millions)	Cost		Accumulated depreciation			Net Book Value
Opening balance at December 31, 2022		393.4		(21.8	)		371.6
Additions		31.5		—			31.5
Depreciation		—		(5.4	)		(5.4	)
Closing balance at March 31, 2023		424.9		(27.2	)		397.7

Depreciation related to our drilling units was $5.4 million and $2.5 million, during the three months ended March 31, 2023 and March 31, 2022.

The drilling unit balance is inclusive of construction in progress relating to machinery and equipment with a carrying value of $1.1 million at March 31, 2023 and a carrying value of $0.7 million at December 31, 2022.

Note 10 – Other liabilities

Other liabilities are comprised of the following:

(In $ millions)	As of March 31, 2023		As of December 31, 2022
Employee and business withheld taxes, social security and vacation payment		1.6		1.8
VAT payable		—		3.7
Deferred mobilization/demobilization revenues (see Note 4 – “Contracts with customers”)		2.4		3.8
Current lease liability		0.2		0.2
Total other current liabilities		4.2		9.5
Uncertain tax position		51.7		50.6
Long-term lease liability		—		0.1
Total other non-current liabilities		51.7		50.7
Total other liabilities		55.9		60.2

Note 11 – Share-based compensation

On the Effective Date, we established the Aquadrill LLC 2021 Long-Term Incentive Plan (the “2021 LTIP”). At the Effective Date, an aggregate of 1,052,631 common units were authorized and reserved for issuance pursuant to the 2021 LTIP. On May 24, 2021, our Board of Directors approved the issuance of 27,359 Restricted Stock Units (“RSUs”) to each of the four Company directors to vest over a three-year period.

The RSUs are valid for one common unit of the Company. A majority of the awards were determined to be equity-classified; however, a portion of these awards were initially able to be cash settled, resulting in liability classification. On September 21, 2021, the Board approved an amendment to certain RSU Award Agreements issued under the 2021 LTIP such that the form of settlement is at the discretion of the Committee rather than at the discretion of the grantee. The amendment removes the optionality for cash or equity settlement and requires all awards to be settled in Company common units, or in cash at the option of the Committee. Upon the Board’s approval of the amendment, the awards were remeasured at the modification-date fair value and will be accounted for as an equity-classified award going forward, so long as there are no further changes to the award. The previously liability classified RSUs were reclassified to equity as part of the modification.

The fair value of the awards is based on the fair value of the underlying common units on the Effective Date (the “Award Date”) as well as September 21, 2021 (the “Modification Date”). The fair value of the equity awards issued was $2.0 million on the Award Date, and the fair value of the liability awards was $1.3 million on the Award Date. The awards vest over a period of three years (25% in each of the first two years and 50% in the third year). Note that the incremental compensation cost due to the modification was less than $0.1 million. The fair value of the awards is based on the fair value of the underlying common units at a 1 to 1 ratio, and as such the fair value of one award equals the fair value of one common unit. The fair value of the common units was calculated at the Award Date and the Modification Date utilizing the income approach of valuation, plus cash on hand to determine the Company’s total Enterprise Value, divided by the total common units outstanding to arrive at a per unit fair value. As part of the utilization of the income method of valuation, the Company utilized a risk-free rate equal to the yield of the US Treasury composite with 20-years to maturity. As the fair value of the awards relies on the underlying value of our common units, the volatility of our common units will affect the fair value of the awards. The volatility of the common units is closely related to our operations, which the Company estimates utilizing expected volatility in the analysis of the fair value of the common units. On the Modification Date the liability awards were remeasured as equity awards and had a fair value of $1.3 million. The weighted average remaining term of these awards is 1.5 years as of March 31, 2023. No shares were exercised for the period ended March 31, 2023 and 2022.

On March 1, 2022, pursuant to the terms of the 2021 LTIP, we adopted and established an unfunded bonus plan for employees and contractors of the Company by offering long term incentives which is known as the Aquadrill LLC 2022 Phantom Equity Plan (the “Phantom Equity Plan”). The Phantom Equity Plan is designed to attract and retain highly qualified employees and contractors by aligning the interests of those employees and contractors with the financial success of the Company. The Phantom Equity Plan involves the payment

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of cash or consideration in the currency of a future change of control of the Company based certain events as defined in the Phantom Equity Plan and elections made by the Company’s common unitholders and is based on value of the Phantom Equity of the Company as of the applicable Distribution Event. Total awards granted under the Phantom Equity Plan were 675,700. The awards vest over a period of five years with vesting in equal installments of 20% on each of the first five anniversaries of the legal grant date or upon a change in control of the Company and are payable on the Payment Date (defined in the Phantom Equity Plan as the date on which the Participant will receive a distribution of their vested account balance in connection with a Distribution Event. With respect to a Distribution Event other than a change in control, the Payment Date shall be December 15 in the year in which the event occurs. If the event is a change in control, the participant’s Payment Date shall be the same date that the Company’s selling shareholders receive consideration for the sale of their Common Units (including any amount which is placed in escrow or otherwise held back), in accordance with Section 409A of the Code.).

On May 25, 2022, pursuant to the terms of the 2021 LTIP, our Board of Directors approved the issuance of 3,167 RSUs to each of the four non-executive directors with a third of the awards vesting on the first anniversary and two thirds of the awards vesting on the second anniversary. The fair value of these awards was $0.4 million on the Award Date. The RSUs are valid for one common unit of the Company.

$0.3 million in compensation expense related to the RSU awards is recognized in “Selling, general and administrative expenses” on our Consolidated Statements of Operations, for the three months ended March 31, 2023 and 2022. Due to the change in control performance condition, the exercise of the Phantom awards is not deemed to be probable until it occurs, and as such, compensation cost associated with the Phantom Awards will not be recognized until a change in control occurs.

The following table summarizes unvested activity during the three months ended March 31, 2023, and 2022 for RSUs under our 2021 LTIP:

	Director RSUs
Nonvested awards at January 1, 2022		109,436
Awards granted		—
Awards vested		—
Awards forfeited (recognized as forfeited)		—
Nonvested awards at March 31, 2022		109,436
Nonvested awards at January 1, 2023		94,745
Awards granted		—
Awards vested		—
Awards forfeited (recognized as forfeited)		—
Nonvested awards at March 31, 2023		94,745

Note 12 – Risk management and financial instruments

We are exposed to various market risks, foreign currency exchange and concentration of credit risks. Our policy is to reduce our exposure to these risks, where possible, within boundaries deemed appropriate by the Board and Audit Committee.

Foreign currency risk

We use the U.S. Dollar as the functional currency of all our subsidiaries because the majority of our revenues and expenses are denominated in U.S. Dollars. Therefore, we also use U.S. Dollars as our reporting currency.

Our foreign currency risk arises from:

• the measurement of monetary assets and liabilities denominated in foreign currencies converted to U.S. Dollars, with the resulting gain or loss recorded as “Foreign currency exchange loss”; and

• the impact of fluctuations in exchange rates on the reported amounts of the Company’s revenues and expenses which are denominated in foreign currencies.

We do not use foreign currency forward contracts or other derivative instruments related to foreign currency exchange risk.

Credit risk

We have financial assets, including cash and cash equivalents and other receivables. These assets expose us to credit risk arising from possible default by a counterparty. Our counterparties primarily include our customers and MSA managers, which are international oil companies, national oil companies or large independent companies. We consider these counterparties to be creditworthy and do not expect any significant loss due to credit risk. We do not demand collateral from our counterparties in the normal course of business. Credit risk is also considered as part of our expected credit loss provision.

Concentration of credit risk

There is also a concentration of credit risk with respect to cash and cash equivalents as most of the amounts are deposited with Citibank, Bank BRI and DNB. We consider these risks to be remote given the investment grade credit rating of these banks. We consider these risks to be remote, but, from time to time, we may utilize instruments such as money market deposits to manage concentration of risk with respect to cash and cash equivalents. We also have a concentration of risk with respect to customers.

Off balance sheet credit exposure

The Company does not have any off-balance sheet credit exposure for the three months ended March 31, 2023 and the year ended December 31, 2022.

Note 13 – Fair value measurement

Fair value of financial assets and liabilities measured at amortized cost

The carrying value and estimated fair value of our financial instruments that are measured at amortized cost as of March 31, 2023, and December 31, 2022, are as follows:

	March 31, 2023				December 31, 2022
(In $ millions)	Fair Value		Carrying Value		Fair Value		Carrying Value
Assets
Cash and cash equivalents		50.7		50.7		55.5		55.5
Restricted cash		4.6		4.6		4.6		4.6

Level 1

The carrying value of cash and cash equivalents and restricted cash, which are highly liquid, is a reasonable estimate of fair value.

8

Level 2

Fair value considerations on non-recurring transactions

Certain classes of our assets and liabilities are required to be measured at fair value on a nonrecurring basis in accordance with U.S. GAAP. Level two inputs are significant other observable inputs, including direct or indirect market data for similar assets or liabilities in active markets or identical assets or liabilities in less active markets.

Level 3

Unobservable inputs for which there is little or no market data available. These inputs reflect management’s assumptions of what market participants would use in pricing the asset or liability. Generally, we record assets at fair value on a nonrecurring basis as a result of impairment charges. There were no impairment charges recorded on long-lived assets in three months ending March 31, 2023 and 2022.

Note 14 – Commitments and contingencies

Legal Proceedings

From time to time the Company is a party, as plaintiff or defendant, to lawsuits in various jurisdictions in the ordinary course of business or in connection with its acquisition or disposal activities. Our best estimate of the outcome of the various disputes has been reflected in these financial statements as of March 31, 2023, and as of December 31, 2022.

Nigerian Cabotage Act litigation

Aquadrill Mobile Units (Nigeria) Limited, formerly known as Seadrill Mobile Units Nigeria Ltd (“SMUNL”) commenced proceedings in May 2016 against the Honourable Minister for Transportation, the Attorney General of the Federation and the Nigerian Maritime Administration and Safety Agency with respect to interpretation of the Coastal and Inland Shipping (Cabotage) Act 2003 (the “Act”). On June 28, 2019, the Federal High Court of Nigeria delivered a judgement finding that: (1) Drilling operations fall within the definition of “Coastal Trade” or “Cabotage” under the Act and (2) Drilling Rigs fall within the definition of “Vessels” under the Act. The impact of this decision is that the Nigerian Maritime Administration and Safety Agency (“NIMASA”) may impose a 2% surcharge on contract revenue from offshore drilling operations in Nigeria as well as requiring SMUNL register for Cabotage with NIMASA and pay all fees and tariffs as may be published in the guidelines that may be issued by the Minister of Transportation in accordance with the Act. However, on July 22, 2019, SMUNL filed an appeal to the Court of Appeal challenging the decision of the Federal High Court. Due to the volume of cases currently being handled by the Court of Appeal sitting in Lagos we anticipate a decision within five years.

Although we intend to strongly pursue this appeal, we cannot predict the outcome of this case. We do not believe that it is probable that the ultimate liability, if any, resulting from this litigation will have a material effect on our financial position and results of operations and cash flows. Accordingly, no loss contingency has been recognized within the Condensed Consolidated Financial Statements.

Other claims or legal proceedings

We are not aware of any other legal proceedings or claims that we expect to have, individually or in the aggregate, a material adverse effect on the Company.

Commitments

We had no material lease commitments or unconditional purchase obligations at March 31, 2023 and December 31, 2022.

As of March 31, 2023, we have received $19.6M of funding requests from our rig managers which we expect to fund within 30 days after the end of the balance sheet date. There were no outstanding funding requests as of March 31, 2022.

Guarantees

We have issued performance guarantees under our bank guarantee facility with DNB Bank ASA in favor of third parties as beneficiaries totaling $0.8 million. As of March 31, 2023, and December 31, 2022, we have not recognized any liabilities for these guarantees, as we do not consider it is probable for the guarantees to be called.

Note 15 – Acquisition of the company

On December 22, 2022, Aquadrill entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Seadrill Merger Sub, LLC (“Merger Sub”), providing for the acquisition of Aquadrill by Seadrill. Seadrill Merger Sub, LLC is a 100% subsidiary of Seadrill Limited (“Parent” or “Seadrill”), an exempted company limited by shares incorporated under the laws of Bermuda and was incorporated on October 15, 2021. Pursuant to the terms of the Merger Agreement, Aquadrill merged with and into Seadrill, with Aquadrill surviving the merger as a wholly owned subsidiary of Parent (the “Merger”).

Note 16 – Subsequent events

For the purposes of these financial statements, the Company has evaluated the subsequent events through June 21, 2023.

On April 3, 2023 (the “Closing Date”), Aquadrill completed the Merger with Seadrill pursuant to the Merger Agreement, dated December 22, 2022, for a total purchase price of $1,243.0 million consisting primarily of Seadrill stock, and became a wholly owned subsidiary of Parent.

Pursuant to the terms and conditions of the Merger Agreement, at or immediately prior to, as applicable, the effective time of the Merger (the “Effective Time”), among other things:

• Each common unit representing a membership interest of Aquadrill (each, an “Aquadrill Common Unit”) that was issued and outstanding was converted into the right to receive 1.41295 Seadrill common shares, par value $0.01 per share (the “Seadrill Common Shares”).

• Each Aquadrill restricted settlement unit award that was outstanding (“Aquadrill RSUs”) was cancelled in exchange for the right to receive 1.41295 Seadrill Common Shares.

• Each Aquadrill phantom appreciation right that was outstanding was cancelled in exchange for the right to receive 0.70101 Seadrill Common Shares, net of applicable tax withholding.

• Each Aquadrill phantom common unit award that was outstanding was cancelled in exchange for the right to receive 1.41295 Seadrill Common Shares, net of applicable tax withholding.

In each of the above cases, cash will be exchanged in lieu of any fractional shares that otherwise would have been issued.

Certain holders of Aquadrill RSUs elected to receive cash from Aquadrill in lieu of Seadrill Common Shares pursuant to the Merger Agreement. Aquadrill paid approximately $1.3 million of cash in connection with such elections. As a result of the foregoing, and the issuance of Seadrill Common Shares pursuant to the termination of the Aquadrill sale bonus award agreement, Seadrill issued an aggregate of 29,866,505 Seadrill Common Shares in the Merger to former Aquadrill unitholders and equity award holders.

Subsequent to period-end, the Company entered into definitive sale and purchase agreements under which it will sell the tender-assist units known as the West Vencedor, T-15 and T-16 (the “Tender-Assist Units”) to certain affiliates of Energy Drilling Pte. Ltd. for aggregate cash proceeds of approximately $85.0 million (the “Transaction”). The Transaction is subject to customary closing conditions and is expected to close in early Q3 2023.

9

EX-99.2

Exhibit 99.2

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

The unaudited pro forma condensed combined financial statements of Seadrill Limited (“Seadrill” or the “Company”) and the accompanying explanatory notes (the “Pro Forma Financial Information”) have been prepared to illustrate the following transaction:

• Business Combination: On April 3, 2023 (the “Closing Date”), pursuant to the definitive merger agreement, dated December 22, 2022 (the “Merger Agreement”), by and among Seadrill, Seadrill Merger Sub, LLC, a Marshall Islands limited liability company, wholly owned subsidiary of Seadrill (“Merger Sub”), and Aquadrill LLC, a Marshall Islands limited liability company (“Aquadrill”), Aquadrill merged with and into Merger Sub (the “Merger” or the “Business Combination”) with Aquadrill surviving the Merger as a wholly owned subsidiary of Seadrill. Pursuant to the Merger Agreement, Aquadrill unitholders received (i) 29.9 million Seadrill common shares, (ii) cash consideration of $1 million, and (iii) $30 million settled by tax withholding in lieu of common shares. The Merger is accounted for as a business combination pursuant to Accounting Standards Codification (“ASC”) Topic 805, Business Combinations (“ASC 805”), where Seadrill is the accounting acquirer as disclosed in Note 2.

The Pro Forma Financial Information also reflects the impact of the following transactions that have been completed since January 1, 2022, but have not been included in the results of operations for the entire period presented for the pro forma condensed combined statements of operations (collectively, the “Completed Transactions”):

• Seadrill Reorganization: On February 22, 2022 (the “Effective Date”), Seadrill concluded its comprehensive restructuring process and emerged from bankruptcy reorganization under Chapter 11 (the “Seadrill Reorganization”).

• Paratus Energy Services Limited (“PES”) Sale: On October 26, 2021, Seadrill New Finance Limited and its subsidiaries (formerly “NSNCo” and now “PES”) were classified as a discontinued operation following the Bankruptcy Court’s approval of a proposed sale of 65% of Seadrill’s equity interest in PES to its lenders. The sale was conducted as part of Seadrill’s comprehensive restructuring and was completed on January 20, 2022. On February 24, 2023, Seadrill sold the remaining 35% equity interest, collectively the “PES Sale”. In connection with the PES Sale, on March 14, 2023, the Company provided each of PES and SeaMex Holdings Ltd (“SeaMex Holdings”) with a termination notice regarding (i) the Master Services Agreement by and between PES and Seadrill Management Ltd (“SML”), dated January 20, 2022 (the “Paratus MSA”), and (ii) the Master Services Agreement by and among SeaMex Holdings, certain operating companies party thereto and SML, dated January 20, 2022 (the “SeaMex MSA”), respectively. The Paratus MSA will terminate effective July 12, 2023; and the SeaMex MSA will terminate effective September 10, 2023. The Company does not believe these terminations will have a material effect on the financial condition of Seadrill.

• Sale of Jackup Units: On October 18, 2022, Seadrill sold the entities that own and operate seven jackup units (the “Jackup Sale”) in the Kingdom of Saudi Arabia to ADES Arabia Holding Ltd. (“ADES”). The Jackup Sale caused immediate cash repayment obligations under the secured second lien facility. The repayment obligations, contractually referred to as mandatory payments, were based on the proceeds received and resulted in a minimum payment of $204 million, comprised of $192 million in debt principal, $10 million in exit fee, and $2 million in accrued interest.

For further information on the adjustments for the Completed Transactions for Statements of Operations, refer to Note 6.

The Pro Forma Financial Information has been prepared under the following assumptions:

• The unaudited pro forma condensed combined statements of operations for the three months ended March 31, 2023, the three months ended March 31, 2022, and the year ended December 31, 2022 assume that the Business Combination and Completed Transactions had occurred on January 1, 2022. The impacts from the Completed Transactions have already been reflected in the historical consolidated statement of operations of Seadrill for the three months ended March 31, 2023 and therefore no pro forma statement of operations adjustments were made for the respective interim period.

• The unaudited pro forma condensed combined balance sheet as of March 31, 2023, assumes that the Business Combination had occurred on March 31, 2023. The impacts from the Completed Transactions have already been reflected in the historical consolidated balance sheets of Seadrill as of March 31, 2023 and therefore no pro forma balance sheet adjustments were made.

The Pro Forma Financial Information presented herein is provided for informational and illustrative purposes only and is not necessarily indicative of the financial results that would have been achieved had the Business Combination and the Completed Transactions occurred on the dates assumed, nor is this pro forma financial information necessarily indicative of the operations results in future periods. The pro forma adjustments are based on currently available information and certain assumptions that Seadrill believes are reasonable and factually supportable. The Pro Forma Financial Information should be read in conjunction with the following:

• The audited historical consolidated financial statements and notes of Seadrill as of December 31, 2022 and December 31, 2021 and for each of the three years ended December 31, 2022 included in Seadrill’s Annual Report on Form 20-F for the fiscal year ended December 31, 2022, filed with the Securities and Exchange Commission (the “SEC”) on April 19, 2023, incorporated by reference herein.

• The unaudited historical consolidated financial statements and notes of Seadrill included in Seadrill’s Report on Form 6-K for the three months ended March 31, 2023 filed with the SEC on May 23, 2023, and incorporated by reference herein.

• The historical audited consolidated financial statements and notes of Aquadrill as of December 31, 2022 and December 31, 2021 and for each of the two years ended December 31, 2022 included in Seadrill’s Form 6-K filed with the SEC on May 12, 2023, and incorporated by reference herein.

• The unaudited historical consolidated financial statements and notes of Aquadrill as of March 31, 2023 and December 31, 2022 and for the three months ended March 31, 2023 and 2022 included elsewhere within this Form 6-K filed with the SEC on June 21, 2023.

Seadrill Limited

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS

For the three months ended March 31, 2023

(In $ millions, except per share data)	Seadrill Historical			Aquadrill Historical (Note 3)			Transaction Accounting Adjustments			Note		Pro Forma Combined
Operating revenues
Contract revenues		186			77			—					263
Reimbursable revenues		6			1			—					7
Management contract revenues		64			—			—					64
Other revenues		10			—			—					10
Total operating revenues		266			78			—					344
Operating expenses
Vessel and rig operating expenses		(115	)		(59	)		—					(174	)
Reimbursable expenses		(6	)		(1	)		—					(7	)
Depreciation and amortization		(36	)		(5	)		(12	)		4b		(53	)
Management contract expense		(45	)		—			—					(45	)
Merger and integration related expenses		(3	)		(3	)		—					(6	)
Selling, general and administrative expenses		(14	)		(5	)		—					(19	)
Total operating expenses		(219	)		(73	)		(12	)				(304	)
Other operating items
Gain on disposals		4			—			—					4
Total other operating items		4			—			—					4
Operating profit		51			5			(12	)				44
Financial and other non-operating items
Interest income		7			—			—					7
Interest expense		(16	)		—			—					(16	)
Share in results from associated companies		3			—			—					3
Other financial and non-operating items		(1	)		—			—					(1	)
Total financial and other non-operating items		(7	)		—			—					(7	)
Profit before income taxes		44			5			(12	)				37
Income tax (expense)/benefit		(1	)		(4	)		—					(5	)
Profit from continuing operations		43			1			(12	)				32
EPS: continuing operations ($)
Basic		0.86											0.40
Diluted		0.83											0.39
Weighted-average shares outstanding
Basic		50						30			4d		80
Diluted		53						30			4d		83

Seadrill Limited

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS

For the three months ended March 31, 2022

(In $ millions, except per share data)	Adjusted Seadrill Historical (Note 6)			Aquadrill Historical			Transaction Accounting Adjustments			Note		Pro Forma Combined
Operating revenues
Contract revenues		190			46			—					236
Reimbursable revenues		8			1			—					9
Management contract revenue		57			—			(1	)		4a		56
Other revenues		7			—			—					7
Total operating revenues		262			47			(1	)				308
Operating expenses
Vessel and rig operating expenses		(147	)		(67	)		1			4a		(213	)
Reimbursable expenses		(7	)		(1	)		—					(8	)
Depreciation and amortization		(28	)		(3	)		—			4b		(31	)
Management contract expense		(44	)		—			—					(44	)
Merger and integration related expenses		—			—			(13	)		4c		(13	)
Selling, general and administrative expenses		(14	)		(2	)		—					(16	)
Total operating expenses		(240	)		(73	)		(12	)				(325	)
Other operating items
Gain on disposals		2			6			—					8
Total other operating items		2			6			—					8
Operating profit/(loss)		24			(20	)		(13	)				(9	)
Financial and other non-operating items
Interest income		1			—			—					1
Interest expense		(19	)		—			—					(19	)
Share in results from associated companies		2			—			—					2
Gain on derivative and foreign exchange		9			—			—					9
Other financial and non-operating items		12			(1	)		—					11
Total financial and other non-operating items		5			(1	)		—					4
Profit/(loss) before income taxes		29			(21	)		(13	)				(5	)
Income tax expense		(2	)		4			—					2
Profit/(loss) from continuing operations		27			(17	)		(13	)				(3	)
EPS: continuing operations ($)
Basic		0.54											(0.04	)
Diluted		0.51											(0.04	)
Weighted-average shares outstanding
Basic		50						30			4d		80
Diluted		53											80

Seadrill Limited

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS

For the year ended December 31, 2022

(In $ millions, except per share data)	Adjusted Seadrill Historical (Note 6)			Aquadrill Historical (Note 3)			Transaction Accounting Adjustments			Note		Pro Forma Combined
Operating revenues
Contract revenues		698			190			—					888
Reimbursable revenues		31			8			—					39
Management contract revenue		239			—			(4	)		4a		235
Other revenues		44			—			—					44
Total operating revenues		1,012			198			(4	)				1,206
Operating expenses
Vessel and rig operating expenses		(536	)		(213	)		4			4a		(745	)
Reimbursable expenses		(28	)		(7	)		—					(35	)
Depreciation and amortization		(150	)		(16	)		(11	)		4b		(177	)
Management contract expense		(179	)		—			—					(179	)
Merger and integration related expenses		(3	)		(2	)		(13	)		4c		(18	)
Selling, general and administrative expenses		(60	)		(21	)		—					(81	)
Total operating expenses		(956	)		(259	)		(20	)				(1,235	)
Other operating items
Gain on disposals		3			27			—					30
Total other operating items		3			27			—					30
Operating profit/(loss)		59			(34	)		(24	)				1
Financial and other non-operating items
Interest income		14			1			—					15
Interest expense		(93	)		—			—					(93	)
Share in results from associated companies		7			—			—					7
Gain/(loss) on derivative and foreign exchange		17			(2	)		—					15
Other financial and non-operating items		(8	)		(1	)		—					(9	)
Total financial and other non-operating items		(63	)		(2	)		—					(65	)
Loss before income taxes		(4	)		(36	)		(24	)				(64	)
Income tax (expense)/benefit		(12	)		5			—					(7	)
Loss from continuing operations		(16	)		(31	)		(24	)				(71	)
Basic/Diluted EPS: continuing operations ($)		(0.32	)										(0.89	)
Weighted-average shares outstanding, Basic/Diluted		50						30			4d		80

Seadrill Limited

UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET

As at March 31, 2023

(In $ millions)	Seadrill Historical		Adjusted Aquadrill Historical (Note 3)			Transaction Accounting Adjustments			Note		Pro Forma Combined
ASSETS
Current assets
Cash and cash equivalents		376		51			(1	)		5a		426
Restricted cash		39		4			—					43
Accounts receivable, net		119		60			—					179
Amounts due from related parties, net		19		—			—					19
Other current assets		166		40			(7	)		5b		199
Total current assets		719		155			(8	)				866
Non-current assets
Investments in associated companies		56		—			—					56
Drilling units		1,658		397			854			5c		2,909
Restricted cash		76		—			—					76
Deferred tax assets		16		19			—					35
Equipment		9		1			—					10
Other non-current assets		77		4			—					81
Total non-current assets		1,892		421			854					3,167
Total assets		2,611		576			846					4,033
LIABILITIES AND EQUITY
Current liabilities
Debt due within one year		10		—			—					10
Trade accounts payable		66		11			—					77
Other current liabilities		252		12			92			5d		356
Total current liabilities		328		23			92					443
Non-current liabilities
Long-term debt		348		—			—					348
Deferred tax liabilities		8		—			—					8
Other non-current liabilities		182		77			—					259
Total non-current liabilities		538		77			—					615
Equity
Common shares		—		567			(567	)		5e		—
Additional paid-in capital		1,499		—			1,243			5e		2,742
Accumulated other comprehensive income		2		—			—					2
Retained earnings/(loss)		244		(91	)		78			5e		231
Total equity		1,745		476			754					2,975
Total liabilities and equity		2,611		576			846					4,033

Notes to the Pro Forma Financial Information

Note 1: Basis of Presentation

The Pro Forma Financial Information has been prepared by Seadrill in accordance with Article 11 of Regulation S-X as amended by the final rule, Release No. 33-10786 “Amendments to Financial Disclosures about Acquired and Disposed Businesses.” The pro forma adjustments include transaction accounting adjustments, which reflect the application of required accounting for the Business Combination and the Completed Transactions. Article 11 permits presentation of reasonably estimable synergies and other transaction effects that have occurred or are reasonably expected to occur, otherwise known as Management’s Adjustments. Seadrill has elected not to present Management’s Adjustments as the Company is continuing to evaluate the realizability of synergies including timing and cost to achieve. The Company will only be presenting Transaction Accounting Adjustments in the unaudited pro forma condensed combined financial statements.

Seadrill adopted fresh start accounting in accordance with ASC Topic 852, Reorganizations (“ASC 852”), upon the emergence from reorganization under Chapter 11, resulting in reorganized Seadrill becoming the successor entity (“Successor”) for financial reporting purposes. In accordance with ASC 852, with the application of fresh start accounting, Seadrill allocated reorganization values to individual assets based on estimated fair values in conformity with ASC 805. Liabilities subject to compromise of the predecessor of Seadrill (“Predecessor”) were either reinstated or extinguished as part of the reorganization. Refer to Note 6 for the results of the Seadrill Reorganization for the year ended December 31, 2022.

The historical financial statements of Seadrill and Aquadrill were prepared in accordance with generally accepted accounting principles in the United States and shown in U.S. dollars. The unaudited pro forma condensed combined statements of operations for the three months ended March 31, 2023, the three months ended March 31, 2022, and the year ended December 31, 2022 assumes that the Business Combination and Completed Transactions had occurred on January 1, 2022. The impacts from the Completed Transactions have already been reflected in the historical consolidated statement of operations of Seadrill for the three months ended March 31, 2023 and therefore no pro forma statement of operations adjustments were made for the interim period. The unaudited pro forma condensed combined balance sheet as of March 31, 2023, assumes that the Business Combination had occurred on March 31, 2023. The impacts from the Completed Transactions have already been reflected in the historical consolidated balance sheet for Seadrill as of March 31, 2023 and therefore no pro forma balance sheet adjustments were made to the respective interim period.

Note 2. Business Combination with Aquadrill and Estimated Purchase Consideration

Business Combination

In accordance with the Merger Agreement, on the Closing Date (i) Merger Sub merged with and into Aquadrill, with Aquadrill surviving the merger as a wholly owned subsidiary of Seadrill, (ii) Aquadrill unitholders received (a) 29.9 million Seadrill common shares, (b) cash consideration of $1 million, and (c) $30 million settled by tax withholding in lieu of common shares.

The Pro Forma Financial Information was prepared using the acquisition method of accounting in accordance with ASC 805, which requires, among other things, that assets acquired and liabilities assumed in a business combination be recognized at their fair values as of the acquisition date with limited exceptions. The combined company name, ticker symbol, and headquarters will remain consistent with that of Seadrill. As the equity consideration issuing company, Seadrill will hold overall decision-making power of the combined company. As of the Closing Date, the board of directors is comprised of seven individuals designated by Seadrill and two individuals designated by Aquadrill. As a result, Seadrill is the accounting acquirer of Aquadrill in accordance with ASC 805.

Preliminary Purchase Agreement Consideration

The allocation of the consideration, including any related tax effects, is preliminary and pending finalization of various estimates, inputs and analyses used in the valuation assessment of the specifically identifiable tangible and intangible assets acquired. The value of total consideration has been determined based on the closing price of Seadrill shares on April 3, 2023 and the number of issued and outstanding Aquadrill common shares immediately prior to closing. Since the Pro Forma Financial Information has been prepared by Seadrill based on preliminary fair values attributable to the Business Combination, the actual amounts eventually recorded in accordance with the acquisition method of accounting may differ materially from the information presented.

ASC 805 requires, among other things, that the assets acquired and liabilities assumed in a business combination be recognized at their fair values as of the acquisition date. Any consideration transferred or paid in a business combination in excess of the fair value of the assets acquired and liabilities assumed should be recognized as goodwill, while any excess fair value of the assets acquired and liabilities assumed beyond the consideration transferred or paid in a business combination should be recognized as a bargain purchase gain. Seadrill management’s estimate as of the date of this filing is that the fair value of the net assets and liabilities acquired is equal to the purchase price. Thus, no goodwill or bargain purchase gain has been recognized on the pro forma condensed combined balance sheet as of March 31, 2023. This preliminary determination is subject to further assessment and adjustments by Seadrill pending additional information sharing between the parties to the Merger, more detailed third-party appraisals, natural changes in net assets acquired between the pro forma date used herein and the closing date, and other potential adjustments.

The following table presents the calculation of consideration based on the closing price per share of Seadrill shares on the New York Stock Exchange on April 3, 2023, the number of issued and outstanding Aquadrill common shares immediately prior to closing, and the 20 day volume-weighted average price immediately preceding the close.

(In $ millions, except per share data)	Aquadrill Shares		Final Exchange Ratio		As at March 31, 2023
Aquadrill outstanding shares as of April 3, 2023		20,000,000		1.4129		28,258,965
Aquadrill restricted stock units		122,104		1.4129		172,527
Aquadrill phantom award units		105,700		1.4129		149,349
Aquadrill phantom appreciation rights		570,000		0.7010		399,576
Total Aquadrill shares converted to Seadrill shares		20,797,804				28,980,417
Company Sale Bonus (1)						1,664,743
Total Seadrill shares eligible for purchase of Aquadrill						30,645,160
Less: Tax withholding in lieu of common shares (2)						744,150
Less: Seadrill shares settled in cash (3)						34,505
Seadrill shares issued for purchase of Aquadrill						29,866,505
Seadrill share price at April 3, 2023 market close						41.62
Consideration issued in Seadrill shares						1,243
Consideration settled by tax withholding (2)						30
Consideration settled in cash (3)						1
Total consideration						1,274

(1) Immediately prior to the Closing Date, the Sale Bonus Award Agreement, dated as of May 24, 2021, by and between Aquadrill and Steven Newman, the Chief Executive Officer and a Director of Aquadrill, was terminated and in connection with such termination at the Effective Time and in accordance with the Merger Agreement, Mr. Newman received 1,013,405 Seadrill common shares and $26 million tax withholding in lieu of Seadrill common shares.

(2) Pursuant to the Merger Agreement, in lieu of issuing Seadrill common shares, the Company elected to pay $30 million of tax withholding.

(3) Pursuant to the Merger Agreement, in lieu of issuing Seadrill common shares, certain non-employee board members elected to receive $1 million cash in lieu of Seadrill common shares.

The preliminary allocation of the purchase price consideration is as follows:

(In $ millions)	Book Value		Preliminary Fair Value Adjustment			Notes		Preliminary Fair Value
Total current assets		155		(7	)		5b		148
Total non-current assets		421		854			5c		1,275
Total assets		576		847					1,423
Total current liabilities		23		49			5d		72
Total non-current liabilities		77		—					77
Total liabilities		100		49					149
Net assets		476		798					1,274
Total consideration									1,274

Note 3: Reclassifications

The reclassifications presented below were made as a result of the Business Combination to conform Aquadrill’s historical financial information to Seadrill’s presentation. There were no reclassifications to the Unaudited Pro Forma Condensed Combined Statement of Operations for the three months ended March 31, 2022.

Reclassifications included in the Unaudited Pro Forma Condensed Combined Statement of Operations for the three months ended March 31, 2023

March 31, 2023 (in $ millions)
Aquadrill Presentation	Amount			Presentation Reclassifications			Amount			Seadrill Presentation
Operating revenues										Operating revenues
Contract revenues		77			—			77		Contract revenues
Reimbursable revenues		1			—			1		Reimbursable revenues
Total operating revenues		78			—			78		Total operating revenues
Operating expenses										Operating expenses
Vessel and rig operating expenses		(59	)		—			(59	)	Vessel and rig operating expenses
Reimbursable expenses		(1	)		—			(1	)	Reimbursable expenses
Depreciation		(5	)		—			(5	)	Depreciation and amortization
		—			(3	)a		(3	)	Merger and integration related expenses
Selling, general and administrative expenses		(8	)		3	a		(5	)	Selling, general and administrative expenses
Total operating expenses		(73	)		—			(73	)	Total operating expenses
Other operating items										Other operating items
Gain on sale of assets		—			—			—		Gain on disposals
Total other operating items		—			—			—		Total other operating items
Operating loss		5			—			5		Operating loss
Financial and other items										Financial and other non-operating items
Foreign currency exchange loss		—			—			—		Foreign exchange loss
Interest income		—			—			—		Interest income
Restructuring and other expenses		—			—			—		Other financial items
Total financial items, net		—			—			—		Total financial and other non-operating items, net
Loss before income taxes		5			—			5		Loss from before income taxes
Income tax benefit		(4	)		—			(4	)	Income tax benefit
Net Loss		1			—			1		Loss from continuing operations

a. Selling, general, and administrative expenses – To reclassify selling, general, and administrative expenses in the amount of $3 million to merger and integration related expenses.

Reclassifications included in the Unaudited Pro Forma Condensed Combined Statement of Operations for the year ended December 31, 2022

December 31, 2022 (in $ millions)
Aquadrill Presentation	Amount			Presentation Reclassifications			Amount			Seadrill Presentation
Operating revenues										Operating revenues
Contract revenues		190			—			190		Contract revenues
Reimbursable revenues		8			—			8		Reimbursable revenues
Total operating revenues		198			—			198		Total operating revenues
Operating expenses										Operating expenses
Vessel and rig operating expenses		(213	)		—			(213	)	Vessel and rig operating expenses
Reimbursable expenses		(7	)		—			(7	)	Reimbursable expenses
Depreciation		(16	)		—			(16	)	Depreciation and amortization
		—			(2	)a		(2	)	Merger and integration related expenses
Selling, general and administrative expenses		(23	)		2	a		(21	)	Selling, general and administrative expenses
Total operating expenses		(259	)		—			(259	)	Total operating expenses
Other operating items										Other operating items
Gain on sale of assets		27			—			27		Gain on disposals
Total other operating items		27			—			27		Total other operating items
Operating loss		(34	)		—			(34	)	Operating loss
Financial and other items										Financial and other non-operating items
Foreign currency exchange loss		(2	)		—			(2	)	Loss on derivative and foreign exchange
Interest income		1			—			1		Interest income
Restructuring and other expenses		(1	)		—			(1	)	Other financial and non-operating items
Total financial items, net		(2	)		—			(2	)	Total financial and other non-operating items
Loss before income taxes		(36	)		—			(36	)	Loss before income taxes
Income tax benefit		5			—			5		Income tax benefit
Net loss		(31	)		—			(31	)	Loss from continuing operations

a. Selling, general, and administrative expenses – To reclassify selling, general, and administrative expenses in the amount of $2 million to merger and integration related expenses.

Reclassifications included in the Unaudited Pro Forma Condensed Combined Balance Sheet as at March 31, 2023

March 31, 2023 (in $ millions)
Aquadrill Presentation	Amount			Presentation Reclassifications			Amount			Seadrill Presentation
ASSETS										ASSETS
										Current assets
Cash and cash equivalents		51			—			51		Cash and cash equivalents
Restricted cash		4			—			4		Restricted cash
Accounts receivable, net		60			—			60		Accounts receivable, net
Other current assets		12			28	a, b		40		Other current assets
Prepaid expenses		13			(13	) a		—
Income taxes receivable		15			(15	) b		—
Total current assets		155			—			155		Total current assets
Non-current assets										Non-current assets
Drilling units, net		398			(1	) c		397		Drilling units
Deferred tax assets		19			—			19		Deferred tax assets
		—			1	c		1		Equipment
Other non-current assets		4			—			4		Other non-current assets
Total non-current assets		421			—			421		Total non-current assets
Total assets		576			—			576		Total assets
LIABILITIES AND MEMBERS’ CAPITAL										LIABILITIES AND EQUITY
										Current liabilities
Trade accounts payable and accruals		11			—			11		Trade accounts payable
Accrued expenses		5			(5	) d		—
Taxes payable		3			(3	) e		—
Other current liabilities		4			8	d, e		12		Other current liabilities
Total current liabilities		23			—			23		Total current liabilities
										Non-current liabilities
Deferred tax liability		—			—			—		Deferred tax liabilities
Non-current taxes payable		25			(25	)f		—
Other non-current liabilities		52			25	f		77		Other non-current liabilities
Total non-current liabilities		77			—			77		Total non-current liabilities
Members’ capital										Equity
Common unitholders		567			—			567		Common shares
Accumulated deficit		(91	)		—			(91	)	Retained loss
Total member’s capital		476			—			476		Total equity
Total liabilities and equity		576			—			576		Total liabilities and equity

a. Prepaid expenses – To reclassify Prepaid expenses of $13 million to Other current assets

b. Income taxes receivable – To reclassify Income taxes receivable of $15 million to Other current assets

c. Drilling units, net - To reclassify a portion of Drilling units, net in the amount of $1 million to Equipment

d. Accrued expenses – To reclassify Accrued expenses of $5 million to Other current liabilities

e. Taxes payable – To reclassify Taxes payable of $3 million to Other current liabilities

f. Non-current taxes payable – To reclassify Non-current taxes payable of $25 million to Other non-current liabilities

Note 4: Unaudited Pro Forma Combined Statements of Operations

a. Management contract revenues and Vessel and rig expenses – Reflects the elimination of the preexisting relationship between Seadrill and Aquadrill which related to the Global Services Agreement and other service arrangements. Upon the close of the Business Combination, Seadrill and Aquadrill became a combined company and intercompany relationships were eliminated.

(In $ millions)	Three months ended March 31, 2023		Three months ended March 31, 2022			Year ended December 31, 2022
Seadrill contract revenue removal		—		(1	)		(4	)
Aquadrill contract expense removal		—		1			4
Total adjustment to remove preexisting relationships		—		—			—

b. Depreciation and amortization – Reflects the estimated increase in depreciation and amortization expense based on preliminary asset values and useful lives for drilling units and preliminary contract related intangibles as a result of the Merger. See Note 2. The pro forma adjustments to depreciation and amortization expense were calculated as follows:

(In $ millions)	Three months ended March 31, 2023			Three months ended March 31, 2022			Year ended December 31, 2022
Removal of historical depreciation expense		5			2			16
Estimated depreciation expense for fair value of drilling units (1)		(17	)		(17	)		(69	)
Estimated amortization expense for unfavorable contract liabilities, net (2)		—			15			42
Total adjustment to Depreciation and amortization		(12	)		—			(11	)

(1) Drilling units less estimated residual value are depreciated using the straight-line basis over their estimated remaining useful lives. The preliminary estimated remaining useful lives for the acquired drilling units range from 15 to 21 years. See Note 5c.

(2) The preliminary assessment of the fair value of the existing MSA contracts showed a $49 million unfavorable contract liability and a $7 million favorable contract asset, recorded as a net unfavorable contract liability (as outlined in Note 5d). The off-market contracts result from higher or lower revenue and margin shares now being received by the managers under the MSA arrangements compared to their original cost rates as a result of favorable market conditions or variable cost terms within the contract, respectively.

c. Merger and integration costs – Reflects the recognition of expenses directly attributable to the Merger. These expenses are not expected to recur in any period beyond the twelve months from the close of the Business Combination.

(In $ millions)	Three months ended March 31, 2022			Year ended December 31, 2022
Remaining transaction costs (1)		(9	)		(9	)
Aquadrill employee severance (2)		(2	)		(2	)
Directors and officers insurance required in connection with the transaction (3)		(2	)		(2	)
Total adjustment to Merger and integration related expenses		(13	)		(13	)

(1) Transaction costs incurred directly in connection with the Business Combination are recorded to Merger and integration related expenses. These balances consist primarily of legal and professional fees. Merger and integration related expenses incurred through March 31, 2023, and reflected in the historical financial statements, were $6 million and $5 million for Seadrill and Aquadrill, respectively. The pro forma adjustment reflects $9 million of Seadrill’s remaining transaction costs expected to be incurred directly related to the Business Combination. See Note 5d.

(2) The severance expense to be paid to Aquadrill employees as a result of the Merger. See Note 5d.

(3) Reflects the recognition of the expense associated with Aquadrill Directors’ and Officers’ policy as required by the Merger Agreement. This expense is not expected to recur in any period beyond twelve months from the close of the Business Combination. See Note 5d.

d. Basic/Diluted Weighted Average Shares Outstanding – Reflects the preliminary weighted average shares outstanding as a result of the Business Combination.

(In millions)	Three months ended March 31, 2023		Three months ended March 31, 2022		Year ended December 31, 2022
Seadrill weighted average shares outstanding		50		50		50
Seadrill shares issued to Aquadrill unitholders (Note 2)		30		30		30
Total pro forma weighted average shares outstanding - basic		80		80		80
Dilutive impact of Seadrill’s pre-transaction convertible bond (1)		3		—		—
Adjusted weighted average shares outstanding - diluted (2)		83		80		80

(1) If exercised, the convertible bond would increase common shares in an amount equal to approximately 3% of the fully-diluted common shares outstanding, pro forma for the Merger.

(2) For the three months ended March 31, 2022 and the year ended December 31, 2022, the pro forma condensed combined statements of operations shows a net loss. As a result, diluted loss per share is the same as basic, as any dilutive securities would reduce loss per share.

Note 5: Unaudited Pro Forma Combined Balance Sheet Adjustments

a. Cash and cash equivalents -– Reflects the $1 million adjustment for share-based compensation settled in cash that is directly attributable to the Merger. See Note 2.

b. Other current assets – Reflects the decrease in Other current assets directly attributable to the Business Combination. See Note 4b for preliminary fair value of drilling units and contract related intangible assets.

(In $ millions)	As at March 31, 2023
Removal of deferred mobilization costs		(5	)
Preliminary fair value adjustment related to prepaid fuel reserves		(2	)
Total adjustment to Other current assets		(7	)

c. Drilling units – Reflects the preliminary fair value adjustment of $854 million to increase the historical net book value of drilling units. See Note 4b.

d. Other current liabilities – Reflects the increase in Other current liabilities directly attributable to the Business Combination.

(In $ millions)	As at March 31, 2023
Current portion of preliminary fair value adjustment related to unfavorable contracts (Note 4b)		42
Tax withholding in lieu of common shares (Note 2)		30
Remaining transaction costs (Note 4c)		9
Expenses incurred “on the line” (1)		7
Directors and officers insurance required in connection with the transaction (Note 4c)		2
Aquadrill employee severance (Note 4c)		2
Total adjustment to Other current liabilities		92

(1) The $7 million expenses incurred “on the line” relate to closing costs, and therefore, were not recognized in the Unaudited Pro Forma Condensed Combined Statement of Operations. This adjustments includes $5 million of success fees and $2 million of expenses that were contingent on the transaction closing.

e. Total equity – Reflects the adjustments made to equity captions based on the Business Combination transaction.

(In $ millions)	As at March 31, 2023
Issuance of common shares of par value US $0.01 per share (Note 2)		—
Elimination of historical Aquadrill common shares		(567	)
Capital in excess of par value (Note 2)		1,243
Common shares and Additional paid-in capital		676
Elimination of historical Aquadrill retained loss		91
Remaining transaction costs (Note 4c)		(9	)
Directors and officers insurance required in connection with the transaction (Note 4c)		(2	)
Aquadrill employee severance (Note 4c)		(2	)
Retained earnings		78
Total adjustments to Total equity		754

Note 6: Adjusted Seadrill Historical Statement of Operations

The following table reflects Seadrill historical adjustments included in the Unaudited Pro Forma Condensed Combined Statements of Operations for the three months ended March 31, 2022 and the year ended December 31, 2022 assuming the Completed Transactions had occurred on January 1, 2022. The impacts from the Completed Transactions have already been reflected in the historical consolidated statement of operations of Seadrill for the three months ended March 31, 2023 and therefore no pro forma statement of operations adjustments were made for the interim period.

Historical adjustments included in the Unaudited Pro Forma Condensed Combined Statement of Operations for the three months ended March 31, 2022

							Seadrill Reorganization
(In $ millions, except per share data)	Predecessor Company Period from January 1, 2022 through February 22, 2022			Successor Company from February 23, 2022 through March 31, 2022			Reorganization Adjustments			Fresh Start Adjustments			PES Sale			Jackup Sale			Adjusted Seadrill Historical
Operating revenues
Contract revenues		124			66			—			—			—			—			190
Reimbursable revenues		4			4			—			—			—			—			8
Management contract revenue		36			21			—			—			—			—			57
Other revenues		5			2			—			—			—			—			7
Total operating revenues		169			93			—			—			—			—			262
Operating expenses
Vessel and rig operating expenses		(76	)		(56	)		(15	) a		—			—			—			(147	)
Reimbursable expenses		(4	)		(3	)		—			—			—			—			(7	)
Depreciation and amortization		(17	)		(13	)		1	b		1	g		—			—			(28	)
Management contract expense		(31	)		(13	)		—			—			—			—			(44	)
Merger and integration related expenses		—			—			—			—			—			—			—
Selling, general and administrative expenses		(6	)		(8	)		—			—			—			—			(14	)
Total operating expenses		(134	)		(93	)		(14	)		1			—			—			(240	)
Other operating items
Gain on disposals		2			—			—			—			—			—			2
Total other operating items		2			—			—			—			—			—			2
Operating profit/(loss)		37			—			(14	)		1			—			—			24
Financial and other non-operating items
Interest income		—			1			—			—			—			—			1
Interest expense		(7	)		(10	)		(9	) c		—			—			7	k		(19	)
Share in results from associated companies		(2	)		2			—			—			2	i		—			2
Gain on derivative and foreign exchange		9			—			—			—			—			—			9
Reorganization items, net		3,683			(4	)		(3,525	) d		(266	)h		112	j		—			—
Other financial and non-operating items		21			15			(24	) e		—			—			—			12
Total financial and other non-operating items		3,704			4			(3,558	)		(266	)		114			7			5
(Loss)/profit before income taxes		3,741			4			(3,572	)		(265	)		114			7			29
Income tax expense		(2	)		—			—			—			—			—			(2	)
(Loss)/Income from continuing operations		3,739			4			(3,572	)		(265	)		114			7			27
Earnings per share: continuing operations ($)
Basic		37.25			0.08															0.54
Diluted		37.25			0.08															0.51
Weighted-average shares outstanding
Basic		100			50			(50	) f											50
Diluted		100			53															53

Historical adjustments included in the Unaudited Pro Forma Condensed Combined Statement of Operations for the year ended December 31, 2022

							Seadrill Reorganization
(In $ millions, except per share data)	Predecessor Company Period from January 1, 2022 through February 22, 2022			Successor Company from February 23, 2022 through December 31, 2022			Reorganization Adjustments			Fresh Start Adjustments			PES Sale			Jackup Sale			Adjusted Seadrill Historical
Operating revenues
Contract revenues		124			574			—			—			—			—			698
Reimbursable revenues		4			27			—			—			—			—			31
Management contract revenue		36			203			—			—			—			—			239
Other revenues		5			39			—			—			—			—			44
Total operating revenues		169			843			—			—			—			—			1,012
Operating expenses
Vessel and rig operating expenses		(76	)		(445	)		(15	) a		—			—			—			(536	)
Reimbursable expenses		(4	)		(24	)		—			—			—			—			(28	)
Depreciation and amortization		(17	)		(135	)		1	b		1	g		—			—			(150	)
Management contract expense		(31	)		(148	)		—			—			—			—			(179	)
Merger and integration related expenses		—			(3	)		—			—			—			—			(3	)
Selling, general and administrative expenses		(6	)		(54	)		—			—			—			—			(60	)
Total operating expenses		(134	)		(809	)		(14	)		1			—			—			(956	)
Other operating items
Gain on disposals		2			1			—			—			—			—			3
Total other operating items		2			1			—			—			—			—			3
Operating profit/(loss)		37			35			(14	)		1			—			—			59
Financial and other non-operating items
Interest income		—			14			—			—			—			—			14
Interest expense		(7	)		(98	)		(9	) c		—			—			21	k		(93	)
Share in results from associated companies		(2	)		(2	)		—			—			11	i		—			7
Gain on derivative and foreign exchange		9			8			—			—			—			—			17
Reorganization items, net		3,683			(15	)		(3,514	) d		(266	) h		112	j		—			—
Other financial and non-operating items		21			(5	)		(24	) e		—			—			—			(8	)
Total financial and other non-operating items		3,704			(98	)		(3,547	)		(266	)		123			21			(63	)
(Loss)/profit before income taxes		3,741			(63	)		(3,561	)		(265	)		123			21			(4	)
Income tax expense		(2	)		(10	)		—			—			—			—			(12	)
(Loss)/Income from continuing operations		3,739			(73	)		(3,561	)		(265	)		123			21			(16	)
Basic/Diluted EPS: continuing operations ($)		37.25			(1.46	)														(0.32	)
Weighted-average shares outstanding, Basic/Diluted		100			50			(50	) f											50

Reorganization Adjustments

a. Vessel and rig operating expenses – In conjunction with the Seadrill Reorganization, the Company entered into an amended lease agreement with SFL Corporation Ltd. (“SFL”) for the West Linus drilling unit. Prior to the amendment, this lease was classified as a finance lease and, as a result of the modification, was reclassified as an operating lease. The adjustment below reflects the operating lease expense associated with the modification and reversal of the gain on extinguishment of previously accrued operating costs on the Effective Date.

(In $ millions)	Three months ended March 31, 2022			Year ended December 31, 2022
West Linus operating lease expense		(3	)		(3	)
Reversal of gain on release of previously accrued operating costs extinguished on the Effective Date		(12	)		(12	)
Total adjustment to Vessel and rig operating expenses		(15	)		(15	)

b. Depreciation and amortization – Reflects the removal of the historical depreciation expense associated with the modification of the lease for the West Linus drilling unit.

c. Interest expense – Reflects the adjustment to remove the historical interest expense for the Predecessor debt instruments and unwind on the SFL leases, and to record the interest expense associated with the new debt instruments. The pro forma adjustments to interest expense were calculated as follows:

(In $ millions)	Three months ended March 31, 2022			Year ended December 31, 2022
Write-off of Predecessor interest expense		7			7
Pro forma interest expense on the new first lien facility		(3	)		(3	)
Pro forma interest expense on the new second lien facility		(13	)		(13	)
Pro forma interest expense on the convertible bonds		(1	)		(1	)
Amortization of debt premium		1			1
Total adjustment to Interest expense		(9	)		(9	)

Assuming an increase in interest rates on the new debt instruments of 1/8%, pro forma interest would increase by nil for the period from January 1, 2022 through February 22, 2022. The interest rates used for the purposes of calculating pro forma interest expenses for the new first lien facility, new second lien facility, and convertible bonds were 7.94%, 13.44%, and 6.96% respectively.

d. Reorganization items, net – Reflects the removal of reorganization items which represent charges directly attributable to the bankruptcy. The balance excludes the fresh start valuation adjustments which are described in Note 6h below.

(In $ millions)	Three months ended March 31, 2022			Year ended December 31, 2022
Pre-tax gain on settlement of liabilities subject to compromise		(3,589	)		(3,589	)
Advisory and professional fees		48			59
Expense of Predecessor directors and officers insurance policy		17			17
Interest income on surplus cash		(1	)		(1	)
Total adjustment to Reorganization items, net		(3,525	)		(3,514	)

e. Other financial and non-operating items – In conjunction with the Seadrill Reorganization, the accrual related to the Dalian yard postponement was extinguished. The adjustment reflects the reversal of the gain on extinguishment of $24 million which is directly attributable to the bankruptcy and is not representative of the Successor.

f. Basic/Diluted Weighted Average Shares Outstanding – Reflects the cancellation of the Predecessor equity and issuance of 50 million Successor common shares, which reduced the weighted-average common shares outstanding from 100 million to 50 million.

(In $ millions)	Three months ended March 31, 2022			Year ended December 31, 2022
Seadrill weighted average shares outstanding		100			100
Cancellation of Predecessor equity		(100	)		(100	)
Issuance of Successor common stock		50			50
Total pro forma weighted average shares outstanding - basic/diluted (1)		50			50
Dilutive impact of Seadrill’s pre-transaction convertible bond		3			—
Adjusted weighted average shares outstanding - diluted (2)		53			50

(1) For the year ended December 31, 2022, the adjusted historical statement of operations shows a net loss. As a result, diluted loss per share is the same as basic, as any dilutive securities would reduce loss per share.

(2) If exercised, the convertible bond would increase common shares in an amount equal to approximately 5% of the fully-diluted pro forma common shares outstanding.

Fresh Start Adjustments

g. Depreciation and amortization – Reflects the pro forma decrease in depreciation and amortization expense based on new asset values and useful lives for drilling units and revaluation of drilling and management contracts as a result of adopting fresh start accounting. The pro forma adjustments to depreciation and amortization expense were calculated as follows:

(In $ millions)	Three months ended March 31, 2022			Year ended December 31, 2022
Write-off of Predecessor depreciation expense on drilling units		16			16
Pro forma depreciation expense on drilling units		(13	)		(13	)
Pro forma amortization of drilling and management contracts		(2	)		(2	)
Total adjustment to Depreciation and amortization		1			1

h. Reorganization items, net – Remove the cumulative effect of the fresh start accounting adjustments of $266 million.

PES Sale Adjustments

i. Share in results from associated companies – Reflects the removal of the Successor’s remaining 35% investment in PES.

j. Reorganization items, net – Reflects the removal of the loss on deconsolidation of PES which represents a charge directly attributable to the NSNCo restructuring reflected in the Predecessor period.

Jackup Sale Adjustments

k. Interest expense – In conjunction with the Jackup Sale, a mandatory payment was required on the new second lien facility. This adjustment reflects the removal of Successor and Predecessor interest expense related to the mandatory payment.

(In $ millions)	Three months ended March 31, 2022		Year ended December 31, 2022
Removal of Successor interest expense related ot Jackup sale		3		17
Removal of Predecessor interest expense related ot Jackup sale		4		4
Total adjustment to Interest expense		7		21