Seadrill (SDRL) recently announced two ultra deepwater contracts with LLOG Exploration in the U.S. Gulf, adding about US$260 million to its backlog and extending work for the West Neptune and West Vela drillships.

These new ultra deepwater awards follow strong recent momentum, with a 30 day share price return of 5.83%, a 90 day share price return of 23.37%, and a 1 year total shareholder return of 131.65% at a latest share price of US$47.72. Taken together, these point to investors reassessing both growth prospects and risk around future contract coverage.

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With the share price already at US$47.72 and sitting close to analyst targets, along with a recent 1 year total shareholder return above 100%, you may want to consider whether there is still a buying opportunity here or whether any potential future growth is already reflected in the price.

Most Popular Narrative: 38% Undervalued

The widely followed narrative on Seadrill pegs fair value at about $76.37, well above the last close of $47.72, and builds a case around future contract driven earnings power.

The convergence of global energy security priorities and a shift by key customers from onshore to offshore, with projected deepwater spending growth exceeding 80% in 2026 and 130% in 2027, positions Seadrill to unlock record contract backlogs and sustained cash flow generation.

Curious how that backlog story turns into a higher fair value? The core of this narrative is faster revenue growth, rising margins, and a richer earnings multiple working together.

Result: Fair Value of $76.37 (UNDERVALUED)

However, this upbeat backlog story can be knocked off course if energy transition policy softens offshore demand, or if legal and impairment costs weigh more heavily on earnings.

Another Way To Look At Valuation

The bullish fair value story leans heavily on future cash flows, but the current price tells a different tale. Seadrill trades on a P/S of 2.2x versus 1.4x for the US Energy Services industry and a fair ratio of 1.1x. This points to a richer pricing profile. So is this a quality premium or valuation risk building up?

Next Steps

Feeling encouraged by the tone so far but still unsure what it all means for you? Act while the data is fresh and weigh the balance of risks and rewards using the 2 key rewards.

Ready For More Investment Ideas?

If Seadrill’s story has your attention, do not stop here. Broaden your watchlist now so you are not chasing the next opportunity after it has moved.

• Target potential mispricings by scanning companies that look attractively valued using the 54 high quality undervalued stocks.
• Build a steadier income stream by reviewing companies highlighted in the 13 dividend fortresses.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.