Seadrill LtdSDRL
Seadrill Ltd Stock Compensation Disclosure
Share based compensation
On August 6, 2022, the Board of Directors adopted the Seadrill Limited 2022 Management Incentive Plan, which was amended and restated on September 25, 2023 and approved by the shareholders at Seadrill's annual general meeting held on November 17, 2023 (the "Management Incentive Plan") and reserved 2,910,053 common shares of the Company for issuance thereunder. As of February 20, 2026, 2,330,410 Shares remain available for issuance with respect to awards that have been or may be granted from time to time under the Management Incentive Plan.
During the year ended December 31, 2022, members of management were granted 125,553 time-based restricted stock units ("MIP 2022 RSUs") and 292,955 performance-based restricted stock units ("MIP 2022 PSUs"), and during the year ended December 31, 2023, the Company granted an additional 6,412 MIP 2022 RSUs and 14,960 MIP 2022 PSUs.
On February 1, 2023, the Company granted 65,492 restricted stock units ("LTIP 2023 RSUs") and 58,481 performance stock units ("LTIP 2023 PSUs") with similar terms to the 2022 grants. On September 25, 2023, under the same Management Incentive Plan, the Company granted 125,841 time-based restricted stock units ("MIP 2023 TRSUs") and 293,629 performance-based restricted stock units ("MIP 2023 PRSUs") to employees, 60% of which are subject to the achievement of a total shareholder return ("TSR") market condition and 40% of which are subject to the achievement of a performance condition based on free cash flow metrics ("FCF"). The time-based restricted stock units vest in three equal installments over a period of three years. The performance-based restricted stock units cliff vest over an explicit service period of to three years.
These awards were to be settled only in cash until November 17, 2023 (the "Modification Date"), when a shareholder approval of the Management Incentive Plan was obtained. From and after the Modification Date, these awards may be settled in cash or common shares of the Company at the election of the Joint Nomination and Remuneration Committee (the "Committee").
Since the liability-classified awards were modified to equity-classified awards without changing any other terms of the awards, the fair value of the units at the Modification Date became the measurement basis from that point forward. For the MIP 2022 RSU, LTIP 2023 RSU, MIP 2023 TRSU and MIP 2023 PRSU – FCF, the Company used the market price of the underlying share listed on the NYSE on the Modification Date of $41.83. For the MIP 2022 PSU, LTIP 2023 PSU and MIP 2023 PRSU – TSR, the Modification Date fair values were $32.48, $16.96 and $51.24 respectively.
On April 17, 2024, the Company granted 22,283 time-based restricted stock units ("Board LTIP 2024 TRSUs") to the Board of Directors, vesting over a period of one year. The Company also granted 176,340 time-based restricted stock units ("LTIP 2024 TRSUs") and 220,454 performance-based restricted stock units ("LTIP 2024 PRSUs") to employees, 60% of which are subject to the achievement of a total shareholder return ("TSR") market condition and 40% of which are subject to the achievement of a performance condition based on free cash flow metrics ("FCF"). The time-based restricted stock units vest in three equal installments over a period of three years, and the performance-based restricted stock units cliff vest over an explicit service period of three years. For the Board LTIP 2024 TRSU, LTIP 2024 TRSU and LTIP 2024 PRSU – FCF, the grant date fair value was $49.81. For the LTIP 2024 PRSU - TSR, the grant date fair value was $63.18.
On April 25, 2025, the Company also granted 343,433 time-based restricted stock units ("LTIP 2025 TRSUs") and 431,708 performance-based restricted stock units ("LTIP 2025 PRSUs") to employees, 60% of which are subject to the achievement of a total shareholder return ("TSR") market condition and 40% of which are subject to the achievement of a performance condition based on free cash flow metrics ("FCF"). The time-based restricted stock units vest in three equal installments over a period of three years, and the performance-based restricted stock units cliff vest over an explicit service period of three years. For the LTIP 2025 TRSU and LTIP 2025 PRSU – FCF, the grant date fair value was $20.62. For the LTIP 2025 PRSU - TSR, the grant date fair value was $14.97.
On May 14, 2025, the Company granted 44,955 time-based restricted stock units ("Board LTIP 2025 TRSUs") to the Board of Directors, vesting over a period of one year. For the Board LTIP 2025 TRSU, the grant date fair value was $25.15.
The fair value of performance-based restricted stock units subject to the achievement of a total shareholder return is estimated using a Monte Carlo simulation to model future share prices of the Company and a peer group of companies. The volatility assumption is based on historical experience, and the risk-free interest rate is based on a U.S. Constant Maturity Yield Curve, with a maturity similar to the remaining term of the restricted stock units. The assumptions for volatility, dividend yield and risk-free interest rate are presented in the table below:
| Expected volatility | Expected dividend yield | Risk-free interest rate | |||||||||||||||
| Year ended December 31, 2023 | |||||||||||||||||
| LTIP 2023 PSU | 45.0 | % | — | % | 4.8 | % | |||||||||||
| MIP 2023 PRSU - TSR | 45.0 | % | — | % | 4.8 | % | |||||||||||
| Year ended December 31, 2024 | |||||||||||||||||
| LTIP 2024 PRSU - TSR | 45.0 | % | — | % | 4.8 | % | |||||||||||
| Year ended December 31, 2025 | |||||||||||||||||
| LTIP 2025 PRSU - TSR | 51.0 | % | — | % | 3.7 | % | |||||||||||
A summary of the time-based restricted stock units and performance-based restricted stock units granted and vested, is presented below:
| Year ended December 31, 2025 | Year ended December 31, 2024 | Year ended December 31, 2023 | |||||||||||||||
| Awards subject to service or external market conditions | |||||||||||||||||
| Weighted-average grant date/modification date fair value ($ per share) | 18.67 | 55.15 | 38.74 | ||||||||||||||
Total fair value of share awards vested during the period (in $ millions) (1) | 12 | 4 | 2 | ||||||||||||||
| Awards subject to internal performance conditions | |||||||||||||||||
| Weighted-average grant date/modification date fair value ($ per share) | 20.62 | 49.81 | 41.83 | ||||||||||||||
| Total fair value of share awards vested during the period (in $ millions) | 4 | — | — | ||||||||||||||
(1) During 2023, 43,988 awards vested prior to the Modification Date and were cash-settled at the settlement date fair value.
The following table summarizes time-based share awards activity for the year ended December 31, 2025:
| Awards subject to service or external market conditions | Awards subject to internal performance conditions | |||||||||||||||||||||||||||||||||||||
| Shares | Weighted average grant date fair value (in $) | Weighted average remaining contractual term (in years) | Shares | Weighted average grant date fair value (in $) | Weighted average remaining contractual term (in years) | |||||||||||||||||||||||||||||||||
| Non-vested restricted share units at January 1, 2025 | 857,350 | 44.86 | 1.31 | 224,840 | 44.96 | 1.51 | ||||||||||||||||||||||||||||||||
| Granted during the year | 647,413 | 18.67 | — | 172,683 | 20.62 | — | ||||||||||||||||||||||||||||||||
| Vested during the year | (324,003) | 39.57 | — | (105,067) | 41.83 | — | ||||||||||||||||||||||||||||||||
| Forfeited during the year | (22,476) | 34.02 | — | (3,766) | 35.20 | — | ||||||||||||||||||||||||||||||||
| Change in units based on performance | (243,932) | 44.07 | — | (115,430) | 33.25 | — | ||||||||||||||||||||||||||||||||
| Non-vested restricted share units at December 31, 2025 | 914,352 | 28.68 | 1.72 | 173,260 | 30.66 | 1.66 | ||||||||||||||||||||||||||||||||
The Company accounts for forfeitures as they occur. Using the straight-line method of expensing the restricted stock grants, the weighted average estimated value of the Shares calculated at the Modification Date or grant date are recognized as compensation cost in the Consolidated Statements of Operations over the period (ranging from to three years) to the vesting date.
A summary of share based compensation expense is presented below:
| (In $ millions) | Year ended December 31, 2025 | Year ended December 31, 2024 | Year ended December 31, 2023 | ||||||||||||||
| Selling, general and administration expense | 18 | 16 | 11 | ||||||||||||||
| Vessel and rig operating expense | 2 | 1 | 1 | ||||||||||||||
| Income tax benefit | 2 | 2 | 2 | ||||||||||||||
As of December 31, 2025, there was $18 million of total estimated unrecognized share based compensation expense, which will be recognized over a remaining weighted average period of 1.7 years.
About Stock Compensation Disclosures
Stock-based compensation disclosures detail the equity awards granted to employees and executives — including stock options, restricted stock units (RSUs), and performance shares — along with the valuation methods and assumptions used to expense them. This section reveals the true cost of talent retention and the alignment between management incentives and shareholder interests.
Key signals: total unrecognized compensation expense and its expected recognition period signal future earnings headwinds from already-granted awards. For stock options, examine Black-Scholes assumptions — expected volatility, risk-free rate, and expected term — as understating any of these reduces reported compensation expense. Compare stock compensation expense as a percentage of revenue against peers to assess dilution cost. Watch vesting schedules for acceleration clauses tied to change-of-control events. Performance-based awards with undemanding targets may indicate weak governance. Add back stock compensation to operating cash flow to calculate a more conservative free cash flow figure.