Good day and good afternoon, and welcome to the Seadrill Limited Q1 2020 Results for the Quarter Ended March 31, 2020 Conference Call. [Operator Instructions] Please note this event is being recorded. Before we get started, I'd like to remind everyone that much of the discussion today will not be based on historical facts, but rather consist of forward-looking statements that are subject to uncertainties. Included on Page 2 of the presentation is a comprehensive list covering forward-looking statements. For additional information and to view our SEC filings, please visit our website at www.seadrill.com. I would now like to turn the conference over to Anton Dibowitz, Chief Executive Officer. Please go ahead.

Thank you. Good morning, and welcome to Seadrill's earnings call for the quarter ended March 31, 2020. Thank you to those dialing in today to listen. I'm Anton Dibowitz, the Chief Executive. I will first take you through some of the highlights for the quarter, provide an overview of market conditions and how we're meeting some of the challenges, including navigating the COVID-19 pandemic. I'll then hand over to Stuart Jackson, our CFO, to take you through our financial performance before we open up the line for questions. During the Q&A session, we will also have Leif Nelson, Chief Operating Officer and Matt Lyne, Chief Commercial Officer, available to answer questions. During Q1, we have continued to deliver for our customers and demonstrated our ability to adapt to the new reality imposed by COVID-19. I particularly would like to express deep gratitude to all of our people who have gone above and beyond to ensure operational continuity for Seadrill and our customers this quarter. I continue to be humbled by their dedication. Turning now to the results of the quarter, which Stuart will give you more detail on later. Technical utilization for the quarter was a solid 95%. We had adjusted EBITDA of $55 million and we closed the quarter with $1.2 billion in cash on hand. Operationally, we're monitoring and managing the impacts of COVID-19 and the effect this and the weaker oil price is having on our customers' behavior. Amidst these challenges, we had a solid operational quarter and we continue to receive recognition from our customers during the quarter for excellent operational delivery on both our owned and managed rigs. We remain laser focused on improving the efficiency with which we run our business, which I'll come back to later. On the commercial side, we added $77…

Thank you. Anton. I'll start with Slide 9, which is the revenue and EBITDA bridge for the quarter. Revenue for the quarter was $321 million compared to $398 million for the fourth quarter of 2019. This 19% reduction was predominantly a result of a reduction in our reimbursable revenue from Northern Ocean and from Sonadrill under the management contracts we have for their rigs. We also saw a reduction in the rig operating days during the quarter. EBITDA for the quarter was $55 million compared to $39 million in the fourth quarter of 2019. Most material change in relation to the operating costs were we had lower repair and maintenance expenses and lower personnel costs as a result of the completion of contracts. We're also starting to see some of the early benefits of the SG&A reductions, which Anton mentioned. Our EBITDA margin for the quarter was at 17%, which compares to 10% in the fourth quarter of 2019. Turning then to the abbreviated income statement below adjusted EBITDA. Our income statement is obviously dominated by the rig impairments we've taken during the quarter, and I will come back to those later. Of the other material movements, depreciation and amortization is down as a result of the completion of favorable drilling contracts recognized on fresh start. Our share of results in associated companies predominantly relates to our share of the loss in Seadrill Partners, which has taken material impairments during the quarter. From an investment perspective, we've also written down the value of our Seadrill Partners holding to zero as we expect this entity will move into a comprehensive restructuring of its balance sheets in the coming future. Finally, with respect to our investment in the Archer convertible bond, we took an impairment of the carrying value having reached an…

Now, we'll open the line for questions.

[Operator Instructions] The first question comes from Lukas Daul of ABG. Please go ahead.

Talking a little bit about your decision to sort of go ahead with scrapping the assets, and in particular, the semis. Can you sort of put a bit more color on that in terms of how much of that decision was influenced by the CapEx that would be necessary to bring them back to service? And how much is sort of influenced by your view on the demand for these assets going forward?

I'll start with that and see if Stuart has something to add afterwards. I mean, I think Lukas, both of those are significant components of it. I mean we continue - continually assess the viability and competitiveness of our assets in the market. One part of it is how much CapEx is required to be reactivate it and obviously the longer rig is stacked or - and hasn't been in the market. The most significant is going to be the CapEx that's required to bring it back into the market. And then the next thing is, what the forward outlook for the market looks like. And as Stuart said, factoring what sort of return when you look at those together, combination of the market and the investment required, whether it justifies the long-term viability of the assets. We've always been, I would say, quite financially disciplined with how we spend our CapEx and not bringing rigs back into a market that can't support it. But this is an ongoing process. And obviously, the changes that we've seen in the market for the last six months have moved some of those factors that go into that calculus and henceforth, we've come to this - these decisions to take these impairments.

I think if I just add to that, I think Anton has mentioned in his quote that the industry has been set with too many assets and too much debt. So, while we've been having discussions with our banks around an interim solution, then moving to comprehensive restructuring, which is addressing the liability side of the asset, it's also incumbent on us to address the asset side of the balance sheet. And in that respect, we've made sure we introduce investment return measures associated with the future investment for assets which are currently cold stacked. And that investment is based upon recovering the cold stacking costs and the reactivation costs. Obviously, as oil prices have declined and demand has gone down, we expect assets to be in cold stack for longer and therefore making a return becomes more difficult.

I understand. And I think sort of it's - although it's a difficult decision, it's probably the right thing to do. But on that note, I think it will be equally important that sort of others in the industry follow through on that. And we have seen some of your publicly listed peers doing a similar thing. But I was wondering whether you have an opinion on what the smaller private companies might do in the light of this downturn.

I can't - obviously, I can't speculate or know what's in folks' minds. I would say, overall, the way we view it and let's just talk about the high-spec floater side. We'd like to see and we are, as Stuart said, going to do our part, but would probably like to see around 50 rigs taken out of the market.

[Operator Instructions] The next question comes from Patrick Fitzgerald of Baird. Please go ahead.

Did the large receivable get paid by - at PEMEX when the contract was successfully renegotiated?

Sorry, question about PEMEX receivables?

Yes.

We have received payments from PEMEX during the first quarter. The challenges with payments from contractors or subcontractors are not just about us. Of course, I think having concluded the negotiations and having a clear path forward with them, we believe will help that, but we did receive some monies during the quarter and in due course we expect to continue to collect.

Okay. But you still have, like, net debt to third parties went up despite you generating a decent amount of the EBITDA in the quarter. So - like, we don't get to see a full balance sheet for that entity, but it seems to me reasonable to assume that the receivable balance is still very high relative to historical levels there, right?

The receivable balance is high, then we would like it to be. But - and I think as you rightly put it, these long-dated negotiations that we were having while certainly not the only factor played into it partly, and having concluded those fairly recently, I believe that we'll work through that.

And just a question about how the market index day rate works. For example, like what type of day rate can we expect for the second quarter of this year?

Let Matt answer that, maybe I'll come back afterwards.

So, look, I don't - I won't get into specifics, but with respect to the mechanism, it does have a floor and a ceiling. So there is potential for upside. I think the floor protects us from where we think the market will go in the near term. And you can probably take a read from the first six months worth of fixed rate that you'll see in the fleet status as an indication of where that sits. So where it's going to go in six months to 12 months time, I think there will be some downward rate pressure given the drop in the number of tenders and activity in the market compared to what we have seen in Q4 and the first half of Q1, before COVID hit.

And what is the - and sorry, but this is a simple question, but I actually don't know the answer. What is the rate and the maturity of the debt at the third-party debt at SeaMex and Seabras?

In terms of SeaMex, the maturity date is March of 2021, but we don't expect all of debt will be repaid at that time, it's being amortized as we go ahead. But the contracts go beyond the point at which we anticipate repayment of all the debt. And at Seabras, there are different maturities from 2025.

The maturities there on the third parties debt start at 2025?

Mature by 2025, on the large development at the Seabras.

And what are the blended rates of those two entities?

Blended interest rates?

Yes.

I haven't got that information on top of my head, we can provide you that later.

This concludes our question-and-answer session. I would like to turn the conference back over to Anton Dibowitz for any closing remarks.

I'd like to thank everybody for your interest and calling in today. And we look forward to talking to you again next quarter. Thanks a lot, and have a great day.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.