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Chapter 11 (Tables)

6 Months Ended

Jun. 30, 2023

The breakout shown below shows the equity allocation before and after the conversion of the Convertible Bond.


Recipient of Shares	Number of shares	% allocation		Equity dilution on conversion of convertible bond
Allocation to predecessor senior secured lenders	41,499,999	83.00	%	78.85	%
Allocation to new money lenders - holders of subscription rights	6,250,001	12.50	%	11.87	%
Allocation to new money lenders - backstop parties	2,125,000	4.25	%	4.04	%
Allocation to predecessor shareholders	124,998	0.25	%	0.24	%
Allocation to convertible bondholder	—	—	%	5.00	%
Total shares issued on emergence	49,999,998	100.00	%	100.00	%

Schedule of liabilities subject to compromise

Liabilities subject to compromise prior to emergence from Chapter 11 proceedings, as presented on the consolidated balance sheet at February 22, 2022 immediately prior to emergence, included the following:


(In $ millions)			February 22, 2022 (Predecessor)
Senior under-secured external debt			5,662
Accounts payable and other liabilities			35
Accrued interest on external debt			34
Amounts due to SFL Corporation under leases for the West Taurus and West Linus			506
Liabilities subject to compromise			6,237
Attributable to:
Continuing operations			6,119
Discontinued operations			118

Schedule of fresh-start adjustments

The following table summarizes the reorganization items recognized in the three and six months ended June 30, 2023 (Successor), the three months ended June 30, 2022 (Successor), the period from February 23, 2022 through June 30, 2022 (Successor), and the period from January 1, 2022 through February 22, 2022 (Predecessor).


	Successor		Successor		Predecessor
(In $ millions)	Three months ended June 30, 2023	Three months ended June 30, 2022	Six months ended June 30, 2023	Period from February 23, 2022 through June 30, 2022	Period from January 1, 2022 through February 22, 2022
Gain on settlement of liabilities subject to compromise (a)	—	—	—	—	3,581
Fresh Start valuation adjustments (b)	—	—	—	—	242
Loss on deconsolidation of Paratus Energy Services (c)	—	—	—	—	(112)
Advisory and professional fees (d)	—	(5)	—	(9)	(44)
Gain on write-off of related party payables	—	—	—	—	—
Expense of predecessor Directors & Officers insurance policy	—	—	—	—	(17)
Remeasurement of terminated lease to allowed claim	—	—	—	—	—
Interest income on surplus cash	—	—	—	—	1
Total reorganization items, net	—	(5)	—	(9)	3,651
Attributable to:
Continuing operations	—	(5)	—	(9)	3,683
Discontinued operations	—	—	—	—	(32)

a.Gain on liabilities subject to compromise

On emergence from Chapter 11 proceedings, we settled liabilities subject to compromise in accordance with the Plan. This includes extinguishment of our secured external debt and amounts due under our sale and leaseback agreements with SFL Corporation. Refer to Note 4 - "Fresh Start accounting" for further information.

b. Fresh Start valuation adjustments

On emergence from Chapter 11 proceedings and under the application of Fresh Start accounting, we allocated the reorganization value to our assets and liabilities based on their estimated fair values. The effects of the application of Fresh Start accounting applied as of February 22, 2022. The new basis of our assets and liabilities are reflected in the Consolidated Balance Sheet at June 30, 2023 (Successor) and December 31, 2022 (Successor) and the related adjustments were recorded in the Consolidated Statements of Operations in the Predecessor. Refer to Note 4 - "Fresh Start accounting" for further information.

c. Loss on deconsolidation of Paratus Energy Services Ltd

The loss on deconsolidation reflects the impact of the sale of 65% of Seadrill's interest in Paratus Energy Services Ltd (formerly NSNCo), as we deconsolidated the carrying value of the net assets of Paratus and recorded the 35% retained interest at fair value. The difference between the net assets deconsolidated and retained 35% interest represents a loss on deconsolidation.


(In $ millions)			January 20, 2022
Carrying value of Paratus Energy Services Ltd equity at January 20, 2022			(152)
Fair value of retained 35% interest in Paratus Energy Services Ltd			56
Reclassification of NSNCo accumulated other comprehensive losses to income on disposal			(16)
Loss on deconsolidation of Paratus Energy Services Ltd			(112)

d. Advisory and professional fees

Professional and advisory fees incurred for post-petition Chapter 11 expenses. Professional and advisory expenses have been incurred post-emergence but relate to our Chapter 11 proceedings.The explanatory notes provide additional information with regard to the adjustments recorded, the methods used to determine fair value and significant assumptions or inputs.


	February 22, 2022					February 23, 2022
(In $ millions)	Predecessor	Reorganization Adjustments		Fresh Start Adjustments		Successor
ASSETS
Current assets
Cash and cash equivalents	262	74	(a)	−		336
Restricted cash	135	(50)	(b)	−		85
Accounts receivable, net	169	−		−		169
Amount due from related parties, net	42	−		−		42
Asset held for sale - current	63	−		11	(k)	74
Other current assets (u)	194	(17)	(c)	20	(k)	197
Total current assets	865	7		31		903
Non-current assets
Investment in associated companies	81	−		(17)	(l)	64
Drilling units (u)	1,434	(175)	(d)	316	(m)	1,575
Restricted cash	69	−		−		69
Deferred tax assets	8	−		1	(n)	9
Equipment	11	−		(2)	(o)	9
Asset held for sale - non-current	345	−		(34)	(m,p)	311
Other non-current assets (u)	13	−		26	(p)	39
Total non-current assets	1,961	(175)		290		2,076
Total assets	2,826	(168)		321		2,979
LIABILITIES AND EQUITY
Current liabilities
Trade accounts payable	53	−		−		53
Liabilities associated with asset held for sale - current	64	−		−		64
Other current liabilities	164	52	(e)	17	(q)	233
Total current liabilities	281	52		17		350
Liabilities subject to compromise	6,119	(6,119)	(f)	−		−
Liabilities subject to compromise associated with asset held for sale	118	(118)	(f)	−		−
Non-current liabilities
Long-term debt	−	951	(g)	−		951
Deferred tax liabilities	7	−		(1)	(r)	6
Liabilities associated with asset held for sale - non-current	2	−		−		2
Other non-current liabilities	108	−		63	(s)	171
Total non-current liabilities	117	951		62		1,130
EQUITY
Predecessor common shares of par value	10	(10)	(h)	−		−
Predecessor additional paid-in capital	3,504	(3,504)	(h)	−		−
Accumulated other comprehensive loss	(1)	1	(h)	−		−
Retained (deficit)/earnings	(7,322)	7,080	(i)	242	(t)	−
Successor common shares of par value	−	−		−		−
Successor additional paid-in capital	−	1,499	(j)	−		1,499
Total shareholders’ (deficit)/equity	(3,809)	5,066		242		1,499
Total liabilities and equity	2,826	(168)		321		2,979

* The total valuation of drilling units amounts to $1,882 million, of which $1,575 million relates to continuing operations and $307 million relates to discontinued operations.

Reorganization Adjustments

(a)Reflects the net cash receipts that occurred on the Effective Date as follows:


(In $ millions)			February 22, 2022 (Predecessor)
Receipt of cash from the issuance of the Term Loan Facility			175
Receipt of cash from the issuance of the Convertible Bonds			50
Proceeds from the issuance of the Second Lien Facility			683
Settlement of the Prepetition Credit Agreement			(683)
Payment of the AOD cash out option			(116)
Payment of success-based advisor fees			(28)
Payment of the arrangement & financing fee for the Term Loan Facility			(5)
Transfer of cash to restricted cash for the professional fee escrow account funding			(2)
Change in cash and cash equivalents			74

(b)Reflects the net restricted cash payments that occurred on the Effective Date as follows:


(In $ millions)			February 22, 2022 (Predecessor)
Payment of net scrap rig proceeds to holders of Prepetition Credit agreement claims			(45)
Return of cash collateral to SFL for the amended West Linus lease agreement			(7)
Cash transferred from unrestricted cash for the professional fee escrow account funding			2
Change in restricted cash			(50)

(c)Reflects the change in other current assets for the following activities:


(In $ millions)			February 22, 2022 (Predecessor)
Expense of Predecessor Directors & Officers insurance policy			(17)
Expense of the Commitment Premium and other capitalized debt issuance costs			(24)
Recognition of the right-of-use asset associated with the modified West Linus bareboat lease			24
Change in other current assets			(17)

(d)Reflects the change in drilling units for the derecognition of the West Linus of $175 million associated with modification of lease.

(e)Reflects the change in other current liabilities:


(In $ millions)			February 22, 2022 (Predecessor)
Accrued liability due to holders of Prepetition Credit agreement claims for sold rig proceeds			27
Recognition of lease liability and other accrued liability associated with the amended West Linus lease			25
Change in other current liabilities			52

(f)Liabilities subject to compromise were settled as follows in accordance with the Plan:


(In $ millions)			February 22, 2022 (Predecessor)
Senior under-secured external debt			5,662
Accounts payable and other liabilities			35
Accrued interest on external debt			34
Amounts due to SFL Corporation under leases for the West Taurus and West Linus			506
Total liabilities subject to compromise			6,237
Attributable to:
Continuing operations			6,119
Discontinued operations			118

Payment of the AOD cash out option			(116)
Issuance of the Second Lien Facility			(717)
Premium associated with the Term Loan Facility			(9)
Debt issuance costs			(30)
Payment of the rig sale proceeds			(45)
Amounts due to Prepetition Credit agreement claims for sold rig proceeds not yet paid			(27)
Issuance of New Seadrill Common Shares to holders of Prepetition Credit Agreement claims			(1,244)
Issuance of New Seadrill Common Shares to the Rights Offering Participants			(187)
Issuance of New Seadrill Common Shares associated with the Equity Commitment Premium			(64)
Derecognition of West Linus rig and return of cash collateral			(182)
Reversal of the release of certain general unsecured operating accruals			(35)
Pre-tax gain on settlement of liabilities subject to compromise			3,581

(g)Reflects the changes in long-term debt for the following activities:


(In $ millions)			February 22, 2022 (Predecessor)
Issuance of the Term Loan Facility			175
Issuance of the Second Lien Facility			683
Issuance of the Convertible Bonds			50
Record the premium on the Term Loan Facility and Second Lien Facility			43
Change in long-term debt			951

(h)Reflects the cancellation of the Predecessor’s common shares, additional paid in capital, and accumulated other comprehensive income.

(i)Reflects the cumulative net impact on retained loss as follows:


(In $ millions)			February 22, 2022 (Predecessor)
Pre-tax gain on settlement of liabilities subject to compromise			3,581
Release of general unsecured operating accruals			35
Payment of success fees recognized on the Effective Date			(28)
Expense of Predecessor Directors & Officers insurance policy			(17)
Impact to net income			3,571
Cancellation of Predecessor common shares and additional paid in capital			3,513
Issuance of New Seadrill Common Shares to Predecessor equity holders			(4)
Net impact to retained loss			7,080

(j)Reflects the reorganization adjustments made to the Successor additional paid-in capital:


(In $ millions)			February 22, 2022 (Predecessor)
Fair value of New Seadrill Common Shares issued to holders of Prepetition Credit Agreement claims			1,456
Fair value of New Seadrill Common Shares issued to Predecessor equity holders			4
Fair value of the conversion option on the Convertible Bond			39
Successor additional paid-in capital			1,499

Fresh Start Adjustments

(k)Reflects the fair value adjustment to other current assets for the following:


(In $ millions)			February 22, 2022 (Predecessor)
Record fair value adjustment for favorable drilling and management service contracts			68
Write-off of current portion of deferred mobilization costs held at amortized cost			(15)
Off-market right-of-use asset adjustment for the West Hercules and West Linus			(22)
Change in other current assets			31
Attributable to:
Continuing operations			20
Discontinued operations			11

(l)Reflects the fair value adjustment to the investments in Paratus of $14 million and in Sonadrill of $3 million.

(m)Reflects the fair value adjustment to drilling units and the elimination of accumulated depreciation.


(In $ millions)			February 22, 2022 (Predecessor)
Total Fresh start adjustments			279
Attributable to:
Continuing operations			316
Discontinued operations			(37)

(n)Reflects the fair value adjustment to deferred tax assets of $1 million for favorable management contracts.

(o)Reflects the fair value adjustment to equipment and the elimination of accumulated depreciation.

(p)Reflects fair value adjustment to other non-current assets for the following:


(In $ millions)			February 22, 2022 (Predecessor)
Record fair value adjustment for favorable drilling and management service contracts			42
Write-off of non-current portion of historical favorable contracts held at amortized cost			(9)
Write-off of non-current portion of deferred mobilization costs held at amortized cost			(4)
Change in other non-current assets			29
Attributable to:
Continuing operations			26
Discontinued operations			3

(q)Reflects the fair value adjustment to other current liabilities for the following:


(In $ millions)			February 22, 2022 (Predecessor)
Record fair value adjustment for unfavorable drilling contracts			18
Write-off of current portion of historical unfavorable contracts held at amortized cost			(1)
Change in other current liabilities			17

(r)Reflects the fair value adjustment to deferred tax liabilities of $1 million to write-off previously recognized Fresh Start balances.

(s)Reflects the fair value adjustment to other non-current liabilities for the following:


(In $ millions)			February 22, 2022 (Predecessor)
Record fair value adjustment for unfavorable drilling contracts			67
Write-off of non-current portion of historical unfavorable contracts held at amortized cost			(4)
Change in other non-current liabilities			63

(t)Reflects the cumulative impact of the Fresh Start accounting adjustments discussed above.


(In $ millions)			February 22, 2022 (Predecessor)
Total Fresh start adjustments			242
Attributable to:
Continuing operations			266
Discontinued operations			(24)