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

Despite a 4.6% decline in the 1 day share price and a 5.3% 7 day share price pullback to US$46.01, Seadrill still shows a 7.3% 30 day and 30.4% 90 day share price return, alongside a 1 year total shareholder return of about 1.4x.

If the Petrobras contract puts offshore drilling on your radar, it could be worth scanning other energy related names with emerging themes such as 93 nuclear energy infrastructure stocks.

With Seadrill shares pulling back in the short term but still sitting on strong recent gains, the key question is whether current earnings and contract visibility justify today’s US$46 price or if markets already reflect future growth.

Most Popular Narrative: 39% Undervalued

The most followed narrative sets Seadrill’s fair value at about $75.41 per share versus the last close at $46.01, framing the Petrobras extension within a much bigger backlog and earnings story.

The convergence of global energy security priorities and a shift by key customers from onshore to offshore, with projected deepwater spending growth well above recent levels, positions Seadrill to unlock record contract backlogs and sustained cash flow generation.

Curious what earnings path has to play out for that fair value to stack up? The narrative leans on faster top line growth, wider margins, and a richer future profit multiple than the broader energy services group. The full story connects those assumptions directly to Seadrill’s contract wins and fleet profile.

Result: Fair Value of $75.41 (UNDERVALUED)

However, this upbeat story still hinges on offshore oil demand holding up, as well as on Seadrill managing legal, leverage and aging fleet risks that could pressure margins and earnings.

Another Take From Market Pricing

The narrative points to Seadrill trading well below fair value, yet the current P/S ratio of 2.1x is higher than the US Energy Services industry at 1.3x and above the 1.5x peer average. It is also sitting above a fair ratio of 1.1x. Is the market already baking in a lot of optimism here, or is it misreading the story?

Next Steps

If this mix of optimism and caution feels familiar, treat it as your cue to check the numbers yourself. Move quickly while sentiment is fresh, then weigh those signals against the 2 key rewards.

Looking for more investment ideas?

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