SDRL Seadrill Limited

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 6-K

REPORT OF FOREIGN PRIVATE ISSUER

PURSUANT TO RULE 13A-16 OR 15D-16 OF

THE SECURITIES EXCHANGE ACT OF 1934

For the month of September 2018

Commission File Number 333-224459

SEADRILL LIMITED

(Exact name of Registrant as specified in its Charter)

Par-la-Ville Place, 4th Floor

14 Par-la-Ville Road

Hamilton HM 08 Bermuda

(441)295-6935

(Address of principal executive offices)

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.

Form 20-F  ☒                Form 40-F  ☐

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):

Yes  ☐                No  ☒

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):

Yes  ☐                No  ☒

Explanatory Note

This Form 6-K is being filed solely to update the financial information in our Registration Statement on Form F-1 (Registration No. 333-224459) (the “F-1 Registration Statement”) as required by U.S. securities law. We filed the F-1 Registration Statement as a pre requisite under an investment agreement with certain investors for our emergence from restructuring.

This interim report for the period ended June 30, 2018 relates to our predecessor, Seadrill Limited (SEC File No. 001-34667), prior to its emergence from chapter 11 on July 2, 2018, and this should be borne in mind when reading this interim report.

As publicized previously, the Company will report its first set of financial results on a post emergence basis for the quarterly period ending September 30, 2018 during November 2018, which financial results will reflect the effects of the reorganization post emergence and fresh start reporting.

This Form 6-K will be incorporated by reference into our F-1 Registration Statement which registered the resale by selling shareholders named in the prospectus contained therein of certain of our common shares.

In the F-1 Registration Statement, we include pro-forma financial information as at June 30, 2018 which takes the financial information from this 6-K, representing our predecessor, Seadrill Limited, prior to emergence, and illustrates the effects of the reorganization and fresh start reporting. Under fresh start reporting, the fair value of our assets and liabilities are expected to differ materially from the recorded values of our assets and liabilities as reflected in our Consolidated Financial Statements for reporting periods prior to our emergence from restructuring.

This Form 6-K contains the Management’s Discussion and Analysis of Financial Condition and Results of Operations and the unaudited interim condensed consolidated financial statements and related information and data of our predecessor Seadrill Limited (SEC File No. 001-34667) as of and for the six-month period ended June 30, 2018.

This Form 6-K is hereby incorporated by reference into our Registration Statement on Form S-8 (Registration No.333-227101).

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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

We desire to take advantage of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, or the PSLRA, and are including this cautionary statement in connection therewith. The PSLRA provides safe harbor protections for forward-looking statements in order to encourage companies to provide prospective information about their business.

Forward-looking statements include statements concerning plans, objectives, goals, strategies, future events or performance, and underlying assumptions and other statements, which are other than statements of historical or present facts or conditions.

This report on Form 6-K for the six months to June 30, 2018 and any other written or oral statements made by us or on our behalf may include forward-looking statements which reflect our current views with respect to future events and financial performance. The words “believe,” “anticipate,” “intend,” “estimate,” “forecast,” “project,” “plan,” “potential,” “may,” “should,” “expect” and similar expressions identify forward-looking statements.

The forward-looking statements in this document are based upon various assumptions, many of which are based, in turn, upon further assumptions, including, without limitation, management’s examination of historical operating trends, data contained in our records and other data available from third parties. Although we believe that these assumptions were reasonable when made, because these assumptions are inherently subject to significant uncertainties and contingencies that are difficult or impossible to predict and are beyond our control, we cannot assure you that we will achieve or accomplish these expectations, beliefs or projections.

In addition to these important factors and matters discussed elsewhere in this report on Form 6-K, and in the documents incorporated by reference to this report, important factors that, in our view, could cause actual results to differ materially from those discussed in the forward-looking statements include:

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We caution readers of this report on Form 6-K not to place undue reliance on these forward-looking statements, which speak to circumstances only as at their dates. We undertake no obligation to update any forward-looking statement or statements to reflect events or circumstances after the date on which such statement is made or to reflect the occurrence of unanticipated events. New factors emerge from time to time, and it is not possible for us to predict all of these factors. Further, we cannot assess the impact of each such factor on our business or the extent to which any factor, or combination of factors, may cause actual results to be materially different from those contained in any forward-looking statement.

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Management’s Discussion and Analysis of Financial Condition and Results of Operations

You should read the following discussion of our financial condition and results of operations in conjunction with the interim Financial Statements presented in this report, as well as the historical Consolidated Financial Statements and related notes of Seadrill Limited included in our annual report on Form 20-F filed with the SEC on April 13, 2018 (SEC File No. 001-34667) (the “20-F”). Among other things, those financial statements include more detailed information regarding the basis of presentation for the following information. The unaudited Consolidated Financial Statements of Seadrill Limited included in this report have been prepared in accordance with United States Generally Accepted Accounting Principles (“US GAAP”) and are presented in US Dollars.

Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is designed to provide a reader of our financial statements with a narrative from the perspective of management. Our MD&A is presented in the following sections:

Overview

We are an offshore drilling contractor providing worldwide offshore drilling services to the oil and gas industry. Our primary business is the ownership and operation of drillships, semi-submersible rigs and jack-up rigs for operations in shallow-, mid-, deep- and ultra-deepwater areas, and in benign and harsh environments. We contract our drilling units primarily on a dayrate basis for periods between one and ten years to drill wells for our customers, typically oil super-majors and major integrated oil and gas companies, state-owned national oil companies and independent oil and gas companies.

Significant Developments for the Period January 1, 2018 through and including June 30, 2018

Events related to our refinancing

Confirmation of Plan of Reorganization and subsequent emergence from Chapter 11

On February 26, 2018, Seadrill Limited and certain of its direct and indirect consolidated subsidiaries (the “Debtors”) filed a proposed Second Amended Joint Chapter 11 Plan of Reorganization (the “Plan”) with the Bankruptcy Court and on April 17, 2018 the Bankruptcy Court entered an order confirming the Second Amended Joint Chapter 11 Plan (as modified) of Reorganization. The Plan became effective and the Debtors emerged from bankruptcy on July 2, 2018. As part of the Plan, an investment agreement (the “Investment Agreement”) was entered under which Hemen Investments Limited, an affiliate of Seadrill’s largest shareholder Hemen Holding Ltd. and a consortium of additional investors, including the bondholder parties to the Restructuring Support and Lock-Up Agreement (the “RSA”) (collectively, the “Commitment Parties”), committed to provide up to $1.08 billion in new cash, subject to certain terms and conditions. Under the terms of the Investment Agreement and the transactions contemplated thereby, the commitment parties to the Investment Agreement were issued common stock of Seadrill Limited’s successor (“New Seadrill”) (such shares, “New Seadrill Common Shares”) in connection with their purchase of $880 million principal amount of new secured notes (“New Secured Notes”) and in respect of certain structuring fees and the commitment parties purchased additional common shares of New Seadrill.

Certain other general unsecured creditors of the Debtors were also permitted to participate in a rights offering to participate in (i) a rights offering of up to $119.4 million in principal amount of the New Secured Notes (the “Notes Rights Offering”) and the corresponding pro rata portion of 57.5% of New Seadrill Common Shares issued to holders who participate in the Notes Rights Offering and (ii) a rights offering of up to $48.1 million in value of New Seadrill Common Shares (the “Equity Rights Offering”). The New Secured Notes and the New Seadrill Common Shares acquired by the Commitment Parties under the Investment Agreement were reduced to the extent the Note Rights and Equity Rights were exercised in the Notes Rights Offering and the Equity Rights Offering, respectively.

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The Plan provided for New Seadrill to serve as the parent holding company for Seadrill’s subsidiaries after Seadrill’s and the other Debtors’ emergence from bankruptcy. New Seadrill was initially formed as a wholly-owned subsidiary of Seadrill and did not conduct any material operations prior to the effective date of the Plan. As part of the Debtors’ emergence from bankruptcy on July 2, 2018, the economic interests in the existing shares of Seadrill were extinguished, Seadrill is in the process of being dissolved under Bermuda law, and common shares of New Seadrill were issued to the parties entitled thereto under the Plan and under the Investment Agreement. The corporate reorganization also included the formation of two intermediate holding company subsidiaries of New Seadrill and the formation of NSNCo, which issued its New Secured Notes to the commitment parties and to participants in a rights offering to purchase New Secured Notes.

As a result of the Reorganization, the Plan equitized approximately $2.4 billion in unsecured bond obligations, more than $1.0 billion in contingent newbuild obligations, substantial unliquidated guaranty obligations, and approximately $250 million in unsecured interest rate and currency swap claims, while extending near term debt maturities, providing the Company with over $1.0 billion in new capital and leaving employee, customer and ordinary trade claims largely unimpaired. Refer to Note 3 “Chapter 11 Proceeding” of our consolidated financial statements included herein for more information.

Global settlement agreement

On February 26, 2018, the Debtors announced a global settlement with an ad hoc group of holders of unsecured bonds (the “Ad Hoc Group”), the official committee of unsecured creditors (the “Committee”) and other major creditors in their Chapter 11 cases, including Samsung Heavy Industries Co., Ltd. (“Samsung”) and Daewoo Shipbuilding & Marine Engineering Co., Ltd. (“DSME”), two of the Debtors’ newbuild shipyards, and an affiliate of Barclays Bank PLC (“Barclays”), another holder of unsecured bonds. The Debtors entered into an amendment to the RSA signed on September 12, 2017 and an amendment to the Investment Agreement. The amendments to the RSA and Investment Agreement provided for the inclusion of the Ad Hoc Group and Barclays into the capital commitment as Commitment Parties, increased the Capital Commitment from $1.06 billion to $1.08 billion, increased recoveries for general unsecured creditors of Seadrill, NADL and Sevan under the plan of reorganization, an agreement regarding the allowed claim of certain newbuild shipyards and an immediate cessation of all litigation and discovery efforts in relation to the plan of reorganization.

Following the allowed claim agreement in respect of the certain newbuild shipyards Samsung and DSME, we recognized a liability of $1.064 billion in the year ended December 31, 2017. Due to the Plan anticipating these specific rejection and termination of the newbuild contracts, we recognized an impairment of the newbuild assets in those shipyards related to the West Dorado, West Draco, West Aquila and the West Libra, totaling $696 million, in the year ended December 31, 2017.

Other significant developments

West Rigel settlement agreement

On April 5, 2018, we entered into a settlement and release agreement, subject to Bankruptcy Court approval, with Jurong in respect of the West Rigel , which was held as an asset held for sale as at December 31, 2017. The agreed share of proceeds from the sale of the West Rigel by Jurong was $126 million. The sale completed and the proceeds were received on May 9, 2018.

Interest Rate Cap

On May 11, 2018, we purchased an interest rate cap for $68 million to mitigate our exposure to future increases in LIBOR on our floating rate debt. The capped rate against the 3-month US LIBOR is 2.87% and covers the period from June 15, 2018 to June 15, 2023. The principal amount covered by the cap as at June 30, 2018 is $4.5 billion. As at June 30, 2018, the fair value of the interest rate cap was $61 million.

West Leo early termination litigation

On July 18, 2018 we announced that Seadrill Partners LLC, a company in which Seadrill holds a 46.6% investment interest, in a combination of common and subordinated units, received approximately $248 million relating to the West Leo early termination litigation award, of which $204 million was recognized as revenue in Seadrill Partners LLC’s Statement of Operations for the second quarter ended June 30, 2018.

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Commercial

The following commercial developments took place during the six months ended June 30, 2018:

Contract Backlog

Our contract backlog, as of September 27, 2018, totaled approximately $2.2 billion. Of the total contract backlog, $0.7 billion is attributable to our semi-submersible rigs and drillships and $1.5 billion attributable to our jack-up units. We expect approximately $0.2 billion of our contract backlog to be realized in the remainder of 2018.

Contract backlog for our drilling fleet is calculated as the contract dayrate multiplied by the number of days remaining on the contract, assuming full utilization. Contract backlog excludes amounts for mobilization and demobilization, contract preparation, and customer reimbursables. The amount of actual revenues earned and the actual periods during which revenues are earned will be different from the backlog projections due to various factors. Downtime, caused by unscheduled repairs, maintenance, weather and other operating factors, may result in lower applicable dayrates than the full contractual operating dayrate.

Market Overview and Trends

We provide operations in oil and gas exploration and development in regions throughout the world and our customers include integrated oil and gas companies, state-owned national oil companies and independent oil and gas companies. Over the course of the last three years, oil and gas companies have focused on preserving cash and reducing their spend, in some cases consciously allowing the production decline rate on producing fields to accelerate. The more recent improvements and stability in oil price has resulted in an increase in contracting activity for offshore drilling units. The increased volume of work has not yet been reflected in pricing, however taking into account the need to reverse production decline rates and grow production, we expect demand for offshore drilling units to continue to increase with dayrate improvements expected to follow.

Operating Results for the Six Months Ended June 30, 2018 compared to Six Months Ended June 30, 2017

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The following table sets forth our operating results for the six months ended June 30, 2018 and 2017.

Total operating revenues

Total operating revenues were $712 million for the six months ended June 30, 2018, compared to $1,146 million for the six months ended June 30, 2017, a decrease of $434 million or 38%. Total operating revenues consist of contract, reimbursable and other revenues. The decrease in total operating revenues was primarily due to additional idle units and new contracts at lower dayrates.

Total operating revenues in the floaters segment were $482 million for the six months ended June 30, 2018, compared to $744 million for the six months ended June 30, 2017, a decrease of $262 million or 35%. The decrease was primarily due the conclusion of several contracts and commencement of new contracts at lower dayrates, partially offset by an additional unit in operation.

Total operating revenues in the jack-ups segment were $193 million for the six months ended June 30, 2018 compared to $360 million for the six months ended June 30, 2017, a decrease of $167 million or 46%. The decrease was primarily due to additional idle units and new contracts at lower dayrates.

Loss on disposals

For the six months ended June 30, 2018 there was no gain or loss on disposals (six months ended June 30, 2017: loss of $166 million). The share of proceeds from the sale of the West Rigel by Jurong was equal to its book value, and therefore did not generate a gain or loss on disposal. In April 2017 we agreed to sell the West Triton , West Mischief and West Resolute to Shelf Drilling, recognizing a loss on disposal of $166 million.

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Contingent consideration recognized

Contingent consideration recognised for the six months ended June 30, 2018 was $7 million compared to $11 million for the six months ended June 30, 2017. As part of the consideration for the sale of the West Vela and West Polaris to Seadrill Partners we agreed to receive a portion of earned dayrates. The reduction relative to the comparable period is related to the conclusion of the West Polaris contract.

Impairment of long-lived assets

As at June 30, 2018, we determined that the continuing downturn in the offshore drilling market was an indicator of impairment on certain assets. Following an assessment of recoverability, an impairment was recorded of $414 million.

Total operating expenses (excluding impairment of long-lived assets)

Total operating expenses were $918 million for the six months ended June 30, 2018 compared to $1,008 million for the six months ended June 30, 2017, a decrease of $90 million, or 9%. Total operating expenses consist of vessel and rig operating expenses, depreciation and amortization, reimbursable expenses and general and administrative expenses. The decrease was primarily due to additional idle units and lower general and administrative expense as professional and advisory fees were recognized as reorganization items.

Total operating expenses for the floaters operating segment were $595 million for the six months ended June 30, 2018 compared to $660 million for the six months ended June 30, 2017, a decrease of $65 million, or 10%. The decrease was primarily due lower general and administrative expense as professional and advisory fees were recognized as reorganization items and lower personnel costs.

Total operating expenses for the jack-ups operating segment were $286 million for the six months ended June 30, 2018 compared to $309 million for the six months ended June 30, 2017, a decrease of $23 million, or 7%. The decrease was primarily due to additional idle units and lower general and administrative expense as professional and advisory fees were recognized as reorganization items, offset by $48 million of bad debt expense recognized in the six months ended June 30, 2018.

Interest expense

Interest expense was $38 million for the six months ended June 30, 2018 compared to $195 million for the six months ended June 30, 2017, a decrease of $157 million, or 81%. The decrease was primarily due to post-petition contractual interest expenses incurred on secured credit facilities of $104 million related to debt held as subject to compromise which have not been recognized in the Consolidated Statement of Operations for the six months ended June 30, 2018. This has been recorded as a reduction to debt principal value in the Consolidated Balance Sheet (nil in the six months ended June 30, 2017). The Debtors have discontinued recording interest on the unsecured bonds classified as liabilities subject to compromise from the Petition Date. Contractual interest on liabilities subject to compromise not reflected in the consolidated statements of operations was approximately $76 million for the six months ending June 30, 2018.

Other financial items and reorganization items

Other financial items reported in the Consolidated Statement of Operations include the following items:

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Interest income was $19 million for the six months ended June 30, 2018 compared to $36 million for the six months ended June 30, 2017, a decrease of $17 million, or 47%. The decrease was primarily due to lower related party interest received from Seadrill Partners after the West Vencedor loan was repaid and interest on cash deposits held by Debtor entities were recognized through reorganization items while in Chapter 11 Proceedings.

Share in results from associated companies was $149 million for the six months ended June 30, 2018 compared to $91 million for the six months ended June 30, 2017, an increase of $58 million or 64%. The increase was primarily related to our investment in Seadrill Partners, which benefited from a litigation ruling in its favor.

The loss on derivative financial instruments was $4 million for the six months ended June 30, 2018 compared to a gain of $7 million for the six months ended June 30, 2017, a change of $11 million or 157%. The loss in the six months ended June 30, 2018 was related to an interest rate cap for on our floating rate debt, partially offset by a gain in the fair value adjustment in the conversion option held in Archer. The gain in the six months ended June 30, 2017 was related to cross currency interest rate swaps, partially offset by interest rate swap losses

There was no gain on debt extinguishment for the six months ended June 30, 2018 compared to $19 million for the six months ended June 30, 2017. The gain in the six months ended June 30, 2017 was due to the conversion of subordinated loans provided to Archer, inclusive of associated fees and interest, into a new convertible debt instrument.

There was no foreign exchange loss for the six months ended June 30, 2018 compared to a loss of $29 million for the six months ended June 30, 2017. The loss recognized in the six months ended June 30, 2017 was related to our NOK and SEK denominated bonds. From the Chapter 11 filing date, September 12, 2017, the bonds were no longer revalued, therefore reducing our exposure to foreign currency movements.

Other financial items were nil for the six months ended June 30, 2018 compared to an expense of $25 million for the six months ended June 30, 2017. The expense in the six months ended June 30, 2017 was primarily due to pre-petition professional and advisory fees related to our reorganization. After filing, these were held as reorganization items within the Consolidated Statement of Operations.

Reorganization items for the six months ended June 30, 2018 were an expense of $109 million. These include post-petition professional and advisory fees incurred during our restructuring, partially offset by interest on cash deposits held by filed entities.

Income taxes

Income tax expense was $36 million for the six months ended June 30, 2018 compared to a credit of $12 million for the six months ended June 30, 2017. The change is primarily due to an increase in uncertain tax positions and an $18 million tax expense due to an adjustment in the income tax charge for a subsidiary related to prior years.

Liquidity and Capital Resources

We operate in a capital-intensive industry. Historically our investments in newbuildings, secondhand drilling units and acquisitions of other companies have been financed through borrowings from commercial banks and export credit agencies, cash generated from operations, and a combination of equity, bond and convertible bond offerings.

Our funding and treasury activities are conducted within corporate policies to maximize returns while maintaining appropriate liquidity for our operating requirements. Cash and cash equivalents are held mainly in US dollars, with lesser amounts held in Norwegian Kroner, Malaysian Ringgit, British Pounds and Brazilian Reais.

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Our liquidity requirements relate to servicing and repaying debt, funding investment in drilling units, funding working capital requirements and maintaining adequate cash reserves to mitigate the effects of fluctuations in operating cash flows. Most of our contract and other revenues are generally received between 30 and 60 days in arrears, and most of our operating costs are paid on a monthly basis. We have historically relied on our cash generated from operations to meet our short-term liquidity needs. However, as a result of the downturn in the offshore industry, we were required to obtain additional liquidity to fully meet our short-term liquidity requirements. To obtain this additional liquidity and to implement the transactions contemplated as part of the RSA and Investment Agreement, we commenced Chapter 11 proceedings under the Bankruptcy Code on September 12, 2017. In our 20-F for the year ended December 31, 2017, we reported that these conditions gave rise to a substantial doubt over our ability to continue as a going concern for a period of at least twelve months after the date the financial statements were issued.

On July 2, 2018, we emerged from the Chapter 11 Proceedings. The emergence from the Chapter 11 Proceedings and consummation of the Plan addressed our liquidity concerns as it provided for $1.08 billion of in new capital, equitized approximately $2.4 billion in unsecured bond obligations and approximately $250 million in unsecured interest rate and currency swaps, eliminated near-term amortization obligations and extended maturities on debt. We emerged from Chapter 11 with $2.1 billion of post emergence cash and $7.6 billion of outstanding debt principal. We believe that cash on hand, liquid investments, contract and other revenues will generate sufficient cash flow to fund our anticipated debt service and working capital requirements for the next twelve months. Therefore, there is no longer a substantial doubt over our ability to continue as a going concern for at least the twelve months after the date the financial statements are issued.

The financial information included herein has been prepared on the basis that we will continue as a going concern, which presumes that we will be able to realize our assets and discharge our liabilities in the normal course of business as they come due.

Upon emergence from Chapter 11 (the “Effective Date”), we expect to adopt fresh start reporting. Under fresh start reporting, the fair value of our assets and liabilities as of that date are expected to differ materially from the recorded values of our assets and liabilities as reflected in our historical Consolidated Financial Statements. In addition, we expect the adoption of fresh start accounting to materially affect the results of operations following the fresh start reporting date, as we will have a new basis for our assets and liabilities. Consequently, our historical financial statements would not be reliable indicators of our financial condition and results of operations for any future period should we apply fresh start accounting.

As at June 30, 2018, we had cash and cash equivalents totaling $0.8 billion, as compared to $1.3 billion as at December 31, 2017, and in addition we had $409 million of short-term restricted cash, compared to $104 million as at December 31, 2017. In the six months ended June 30, 2018, we used cash from operations of $132 million, generated $149 million in investing activities, and used $153 million in financing activities. In the six months ended June 30, 2017 we generated cash from operations of $219 million, generated $287 million in investing activities, and used $510 million in financing activities.

As at June 30, 2018, we had contractual commitments under eight newbuilding contracts totaling $1.7 billion ($1.7 billion as at December 31, 2017). The newbuilding commitments are for eight jack-up contracts that we have with the Dalian shipyard. These contracts are all with limited liability subsidiaries of Seadrill Limited that do not have the benefit of a Seadrill Limited guarantee. We continue discussions with Dalian regarding taking delivery of these units.

The table below shows the maturity schedule for the newbuilding contractual commitments as of June 30, 2018 which reflects the previous deferral agreements with Dalian. It also reflects the global settlement reached under the Plan, under which the contracts with Samsung and DSME were rejected and terminated. Refer to Note 3 “Chapter 11 Proceedings” of our Consolidated Financial Statements included herein for further information.

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Cash Flows

Net cash used in / provided by operating activities

Net cash used in operating activities was $132 million for the six months ended June 30, 2018 and net cash provided by operating activities was $219 million for the six months ended June 30, 2017. The decrease is primarily due to additional idle rigs and new contracts at lower dayrates, partially offset by lower operating costs.

Net cash provided by investing activities

Net cash provided by investing activities for the six months ended June 30, 2018 was $149 million driven by our share of proceeds from the sale of the West Rigel , proceeds from Seadrill Partners for contingent consideration with regard to the West Vela and payments received from loans granted to Seadrill Partners, offset by capital expenditure.

Net cash provided by investing activities for the six months ended June 30, 2017 was $287 million driven by the settlement of the West Mira construction contract, sale of the West Resolute and West Triton , proceeds from Seadrill Partners for contingent consideration related to the West Vela and West Polaris and payments of interest and remaining principal on loans granted to Seadrill Partners, offset by capital expenditures and a payment to remove guarantees on Archer debt.

Net cash used in financing activities

Net cash used in financing activities during the six months ended June 30, 2018 was $153 million. During bankruptcy proceedings, we no longer made repayments of debt principal held as subject to compromise. We continued to make interest payments on these facilities, representing adequate protection payments, however these were treated as a reduction in the principal.

Net cash used in financing activities during the six months ended June 30, 2017 was $510 million reflecting repayments of debt and revolving lines of credit.

Borrowing Activities

Our bankruptcy filing on September 12, 2017 constituted an event of default with respect to our pre-bankruptcy debt obligations and as a result of the filing, certain pre-petition long-term debt facilities are included in Liabilities Subject to Compromise in the Consolidated Balance Sheets as of December 31, 2017 and June 30, 2018. Refer to Note 3 “Chapter 11 Proceedings” of the unaudited interim financial statements included herein for information of our pre-bankruptcy debt

As at June 30, 2018, we had total outstanding borrowings under our secured credit facilities of $6.2 billion, of which $5.4 billion was classified as Liabilities Subject to Compromise, and $2.3 billion of unsecured bonds outstanding. We recognized $0.7 billion of loans relating to the Ship Finance entities which we consolidate into our Consolidated Financial Statements as VIEs. In addition, we had interest bearing debt of $0.3 billion under loan agreements with related parties.

Our secured credit facilities were secured by, among other things, liens on our drilling units. In addition, all of our loan agreements contained cross-default provisions, meaning that if we defaulted under one of our loan agreements, amounts outstanding under our other loan agreements may also have been in default, accelerated and become due and payable. Our unsecured debt consisted of bonds denominated primarily in U.S. dollars, but also in Norwegian Kroner and Swedish Kronor, with both fixed and floating rates of interest. For the floating bonds in NOK and SEK, we had entered into cross currency interest rate swaps to fix the interest and exchange rates to the dollar.

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On September 12, 2017, we filed voluntary petitions for reorganization under Chapter 11 and entered into the RSA together with our consolidated subsidiaries NADL and Sevan and certain other consolidated subsidiaries. Ship Finance International Limited and three of its subsidiaries, which charter three drilling units to the Company Parties, also executed the RSA. The RSA contemplated that each of the Company Parties’ credit facilities were amended to provide, amongst other things:

The RSA and Investment Agreement contemplated the formation of an intermediate holding company to issue the new secured notes. Rig-owning entities and certain other assets will be contributed to a subsidiary of that intermediate holding company, which will guarantee and facilitate cross-collateralization of the amended credit facilities. The RSA provides for amendments to SFL’s charter agreements with the Company Parties on terms generally consistent with the credit facility amendments.

Please refer to Note 17 “Debt” of the unaudited interim financial statements included herein for detailed information on our borrowings and credit facilities.

Covenants contained in our debt facilities

The full list of our covenants is disclosed in Note 17 “Debt” of the unaudited interim financial statements included herein.

Following emergence from Chapter 11 on the Effective Date, with the exception of minimum liquidity requirements, we are exempt from financial covenants until Q1 2021. Thereafter, in addition to minimum liquidity requirements we are required to maintain and satisfy certain financial ratios and covenants, relating to net leverage and debt service coverage.

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In addition to the above, we have recognized uncertain tax positions, inclusive of interest and penalties, of $75 million as at June 30, 2018 (December 31, 2017: $67 million).

Quantitative and Qualitative Disclosures About Market Risk

We are exposed to various market risks, including changes in interest rates, foreign currency fluctuations, equity and credit risk. Our policy is to hedge our exposure to these risks where possible, within boundaries deemed appropriate by management. We accomplish this by entering into a variety of derivative instruments and contracts to maintain the desired level of risk exposure. We may enter into derivative instruments from time to time for speculative purposes.

Interest Rate Risks

Our exposure to interest rate risk relates mainly to our floating interest rate debt and balances of surplus funds placed with financial institutions. The exposure related to our floating interest debt has reduced since filing for Chapter 11. We have historically managed this risk through the use of interest rate swaps and other derivative arrangements and continue to do so for some of our facilities which are not subject to compromise. Our objective is to obtain the most favorable interest rate borrowings available without increasing our foreign currency exposure. The extent to which we utilize interest rate swaps and other derivatives to manage our interest rate risk has been determined by the net debt exposure.

Interest rate swaps

At the date of filing for Chapter 11, or September 12, 2017, we had interest rate swap agreements with maturity dates between November 2, 2017 and January 29, 2027, which swapped the floating element of interest on our facilities for fixed LIBOR rates ranging between 0.74% and 3.34%. In addition, we had an interest rate swap contract principal, which was entered into in February 2014 with a forward start in March 2016, under which it pays a floating rate of LIBOR and receive a fixed rate of 2.12%. These agreements did not qualify for hedge accounting, and accordingly any changes in the fair values of the swap agreements are included in the Consolidated Statement of Operations under “Loss / gain on derivative financial instruments”. We recognized total realized and unrealized losses of $18 million for the six months to June 30, 2017. No gains or losses were made in the six months to June 30, 2018 following the termination of interest rate swaps under the International Swaps and Derivatives Agreements (“ISDA”).

Cross currency interest rate swaps

At the date of filing for Chapter 11, or September 12, 2017, we had outstanding cross currency interest rate swaps with maturity dates between March 2018 and March 2019 at fixed rates ranging from 4.94% to 6.18%. These agreements did not qualify for hedge accounting and accordingly any changes in the fair values of the swap agreements were included in the Consolidated Statement of Operations under “Loss / gain on derivative financial instruments”. We recognized total realized and unrealized gains of $29 million for the six months to June 30, 2017. No gains or losses were made in the six months to June 30, 2018 following the termination of the cross-currency interest rate swaps under the ISDA.

Interest rate cap

On May 11, 2018, we purchased an interest rate cap for $68 million to mitigate our exposure to future increases in LIBOR on our floating rate debt. The capped rate against the 3-month US LIBOR is 2.87% and covers the period from June 15, 2018 to June 15, 2023. The principal amount covered by the cap as at June 30, 2018 is $4.5 billion. As at June 30, 2018, the fair value of the interest rate cap was $61 million.

We did not designate the interest rate cap for hedge accounting and accordingly changes in the fair value of the interest rate cap are recorded in net income. We classified the unrealized loss in the period to June 30, 2018 of $7 million under the line item “(Loss) / gain on derivative financial instruments” in the Consolidated Statement of Operations.

Hedge accounted interest rate swaps

A Ship Finance subsidiary consolidated by Seadrill as a Variable Interest Entity (“VIE”) (refer to Note 23 “Variable Interest Entities”) has entered into interest rate swaps in order to mitigate its exposure to variability in cash flows for future interest payments on the loans taken out to finance the acquisition of the West Linus . These interest rate swaps qualify for hedge accounting and any changes in fair value are initially recorded within Other Comprehensive Income and then reclassified to the Consolidated Statement of Operations on settlement of the swap.

In the six months ended June 30, 2018, the VIE Ship Finance subsidiary recorded $0.3 million fair value gains (six months ended June 30, 2017: $1 million fair value gains). Any such gains or losses recorded by the VIE in OCI are allocated to non-controlling interests due to their ownership by Ship Finance.

15

Any change in fair value resulting from hedge ineffectiveness is recognized immediately in earnings. The VIE, and therefore the Company, recognized no gain or loss due to hedge ineffectiveness in the consolidated financial statements during the six months ended June 30, 2018 (six months ended June 30, 2017: no fair value gain or loss). The net cash settlements on these swaps for the six months ended June 30, 2018 was $0.1 million (six months ended June 30, 2017: $0.6 million).

As of June 30, 2018, our net exposure to floating interest rate fluctuations within the Statement of Operations on our outstanding external debt was $947 million, compared with $996 million as of December 31, 2017, offset by $4.5 billion total notional principal on our interest rate cap. The interest rate cap covers exposed floating interest rate debt held within subject to compromise, but as interest payments are treated as reductions in debt principal value, this does not impact the Statement of Operations. As such, a 1% increase or decrease in short-term interest rates would increase our net income on an annual basis by approximately $9 million on for the six months to June 30, 2018, compared to an increase or decrease of $10 million in as at December 31, 2017.

Foreign exchange risk management

We and the majority of our subsidiaries use the U.S. dollar as the functional currency because the majority of the revenues and expenses are denominated in U.S. dollars. Accordingly, our reporting currency is also U.S. dollars. We do, however, earn revenue and incur expenses in other currencies and there is thus a risk that currency fluctuations could have an adverse effect on the value of our cash flows. Prior to entering Chapter 11 we were exposed to the impact of changes in currency exchange rates on NOK and SEK denominated debt. Prior to September 13, 2017, we had entered into derivative agreements to mitigate the risk of exchange rate fluctuations.

Foreign currency forwards not qualified for hedge accounting

As at June 30, 2018 and 2017 we had no outstanding forward currency agreements.

Other derivative agreements

Archer convertible debt instrument

On April 26, 2017 we agreed with Archer to convert total outstanding subordinated loans provided to Archer, inclusive of associated fees and interest, with a carrying value of $37 million, into a $45 million loan. The new loan receivable is a convertible debt instrument comprised of a debt instrument and a conversion option, classed as an embedded derivative. Both elements are required to be measured at fair value at each reporting date. The fair value of the new loan receivable as at inception, April 26, 2017, was $56 million, resulting in a $19 million gain on the extinguishment of the original subordinated debt in the statement of operations.

At June 30, 2018 the fair value of the convertible debt instrument was $58 million of which the split between debt and embedded derivative option was $46 million and $12 million respectively. The debt and embedded derivative option was revalued at the period end and we have recognized a fair value gain on the debt component of $2 million and a fair value gain on the embedded conversion option of $4 million for the six months ending June 30, 2018.

Critical Accounting Estimates

The preparation of the Consolidated Financial Statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosures about contingent assets and liabilities. We base these estimates and assumptions on historical experience and on various other information and assumptions that we believe to be reasonable. Critical accounting estimates are important to the portrayal of both our financial condition and results of operations and require us to make subjective or complex assumptions or estimates about matters that are uncertain. The basis of preparation and significant accounting policies are disclosed in our annual report on Form 20-F.

Critical accounting estimates that have significantly impacted the six months ended June 30, 2018 are as follows:

Impairment of long-lived assets

We review the carrying value of our long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may no longer be appropriate. We first assess recoverability of the carrying value of the asset by estimating the undiscounted future net cash flows expected to result from the asset, including eventual disposal. If the undiscounted future net cash flows are less than the carrying value of the asset, we then compare the carrying value of the asset with its fair value to determine an impairment loss to be recognized during the period. The determination of expected undiscounted cash flow amounts requires significant estimates, judgments and assumptions, including future dayrates, contract probabilities, economic utilization, capital and operating expenditure, applicable tax rates and asset lives. We operate in a highly cyclical industry which can’t always be predicted with a high level of accuracy. Therefore, differences between previous judgments and estimates and actual results will occur. We reassess judgments and estimates in the period in which significant differences are observed and may conclude that a triggering event has occurred and perform a recoverability test.

16

The downturn in the offshore drilling market, which started in 2013, has continued into the period to June 30, 2018. During this time, we have observed contract dayrates have been below the levels assumed in our previous forecasts. We considered this to be an indicator of potential impairment and reassessed recoverability of our drilling units by evaluating their estimated undiscounted future net cash flows based on updated projections of future dayrates, contract probabilities, economic utilization, capital and operating expenditures, applicable tax rates and asset lives. We calculated that the estimated undiscounted future net cash flows for three of our rigs were lower than their carrying values. This was primarily driven by lower assumptions on future dayrates and future contract probabilities. As a result, we recorded an impairment charge to reduce the value of these rigs to their fair value. The impairment expense totaled $414 million and was classified within “Loss on impairment of long-lived assets” on the Consolidated Statement of Operations. We derived the fair value of the rigs using an income approach. The cash flows were estimated over the remaining useful economic lives of the assets and discounted using an estimated market participant weighted average cost of capital of 11.4%. To estimate these fair values, we were required to use various unobservable inputs including assumptions related to the future performance of our rigs as explained above. We based all estimates on information available at the time of performing the impairment test. These estimates represented Level 3 fair value measurements.

Redeemable non-controlling interests

Subsequent to filing bankruptcy petitions, Seadrill executed a Transaction Support Agreement (“TSA”) on April 4, 2018 with a minority shareholder of one of Seadrill’s subsidiaries, Asia Offshore Drilling Limited (“AOD”). The purpose of the TSA was to provide a framework for a monetization event for the minority shareholder of AOD as well as obtain unanimous approval of the AOD board of directors (which included the minority shareholder) in order for AOD to become a party to the RSA and participate in Seadrill’s broader debt restructuring under its Chapter 11 reorganization.

The TSA executed between the parties provides an option to the holders of non-controlling interest shares to sell the shares it owns to Seadrill subject to a price ceiling (“Put Option”). After the end of the effective period of the Put Option, if the right remains unexercised, Seadrill has the option to purchase the non-controlling interest in AOD at a price subject to the floor price (“Call Option”). The Put Option generates a redemption feature for the non-controlling interest holder that is outside the control of Seadrill.

The embedded redemption feature of the put option causes the fair value of the non-controlling interest held in AOD to be reclassified from equity to “Redeemable non-controlling interest” within the Consolidated Balance Sheets. Any fair value adjustments to generate an expected redemption value have been taken through retained earnings. The impact of this adjustment reduces non-controlling interest by $150 million, created redeemable non-controlling interest of $25 million, with a fair value adjustment through retained earnings of $127 million.

To calculate the fair value of the non-controlling interest shares, we first estimated the fair value of AOD in total and then allocated this between the shares held by us and by those held by the non-controlling interest. We estimated the fair values of AOD in total by adjusting the Consolidated Balance Sheet position of AOD as at June 30, 2018 for an updated fair value of the three drilling units: AOD I, AOD II and AOD III . We derived the fair value of the three drilling units using a market approach.

Income taxes

Seadrill is a Bermuda company that has a number of subsidiaries and affiliates in various jurisdictions. We are not currently required to pay income taxes in Bermuda on ordinary income or capital gains because we qualify as an exempt company. We have received written assurance from the Minister of Finance in Bermuda that we will be exempt from taxation until March 2035. Certain of our subsidiaries operate in other jurisdictions where income taxes are imposed. Consequently, income taxes have been recorded in these jurisdictions when appropriate. Our income tax expense is based on our income, statutory tax rates and tax planning opportunities available to us in the various jurisdictions in which we operate. We provide for income taxes based on the tax laws and rates in effect in the countries in which our operations are conducted and income is earned. The income tax rates and methods of computing taxable income vary substantially between jurisdictions. Our income tax expense is expected to fluctuate from year to year because our operations are conducted in different tax jurisdictions and the amount of pre-tax income fluctuates.

The determination and evaluation of our annual group income tax provision involves the interpretation of tax laws in the various jurisdictions in which we operate and requires significant judgment and the use of estimates and assumptions regarding significant future events, such as amounts, timing and the character of income, deductions and tax credits. There are certain transactions for which the ultimate tax determination is unclear due to uncertainty in the ordinary course of business. We recognize tax liabilities based on our assessment of whether our tax positions are more likely than not sustainable, based solely on the technical merits and considerations of the relevant taxing authorities widely understood administrative practices and precedence. Changes in tax laws, regulations, agreements, treaties, foreign currency exchange restrictions or our levels of operations or profitability in each jurisdiction may impact our tax liability in any given year. While our annual tax provision is based on the information available to us at the time, a number of years may elapse before the ultimate tax liabilities in certain tax jurisdictions are determined. Current income tax expense reflects an estimate of our income tax liability for the current year, withholding taxes, changes in prior year tax estimates as tax returns are filed or from tax audit adjustments. Our deferred tax expense or benefit represents the change in the balance of deferred tax assets or liabilities as reflected on the balance sheet. Valuation allowances are determined to reduce deferred tax assets when it is more likely than not that some portion or all of the deferred tax assets will not be realized. To determine the amount of deferred tax assets and liabilities, as well as at the valuation allowances, we must make estimates and certain assumptions regarding future taxable income, including where our drilling units are expected to be deployed, as well as other assumptions related to our future tax position. A change in such estimates and assumptions, along with any changes in tax laws, could require us to adjust the deferred tax assets, liabilities or valuation allowances.

17

Seadrill Limited

(Debtor-in-Possession)

INDEX TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

F-1

F-2

See accompanying notes that are an integral part of these consolidated financial statements.

F-3

F-5

F-6

See accompanying notes that are an integral part of these consolidated financial statements.

F-7

Seadrill Limited

Seadrill Limited

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

The consolidated financial statements have been prepared as if we are a going concern and reflect the application of Accounting Standards Codification 852, Reorganizations (“ASC 852”). ASC 852 requires that the financial statements, for periods subsequent to filing bankruptcy petitions, distinguish transactions and events that are directly associated with the reorganization from the ongoing operations of the business. Accordingly, certain expenses, gains and losses that are realized or incurred in the bankruptcy proceedings are recorded in “Reorganization items” on our Consolidated Statements of Operations. In addition, ASC 852 provides for changes in the accounting and presentation of significant items on the Consolidated Balance Sheets, particularly liabilities. Pre-petition obligations that may be impacted by the Chapter 11 reorganization process have been classified on the Consolidated Balance Sheets within “Liabilities subject to compromise”. These liabilities are reported at the amounts expected to be allowed by the Bankruptcy Court, even if they may be settled for lesser amounts.

Please see Note 28 – Subsequent Events for fresh start reporting considerations upon emergence.

Liquidity and ability to continue as a going concern

The Consolidated Financial Statements are prepared on a going concern basis and contemplate the realization of assets and satisfaction of liabilities in the normal course of business. We have historically relied on our cash generated from operations to meet our short-term liquidity needs. However, as a result of the downturn in the offshore industry, we were required to obtain additional liquidity to fully meet our short-term liquidity requirements. To obtain this additional liquidity and to implement the transactions contemplated as part of the RSA and Investment Agreement, we commenced Chapter 11 proceedings under the Bankruptcy Code on September 12, 2017. In our form 20-F covering our annual report for the fiscal year ended December 31, 2017, issued on April 12, 2018, we reported that these conditions gave rise to a substantial doubt over our ability to continue as a going concern for a period of at least twelve months after the date the financial statements were issued.

On July 2, 2018, we emerged from the Chapter 11 Proceedings. The emergence from the Chapter 11 Proceedings and consummation of the Plan addressed our liquidity concerns as it provided for $1.08 billion of in new capital, equitized approximately $2.4 billion in unsecured bond obligations and approximately $250 million in unsecured interest rate and currency swaps, eliminated near-term amortization obligations and extended maturities on debt. We emerged from Chapter 11 with $2.1 billion of post emergence cash and $7.6 billion of outstanding debt principal. We believe that cash on hand, liquid investments, contract and other revenues will generate sufficient cash flow to fund our anticipated debt service and working capital requirements for the next twelve months. Therefore, there is no longer a substantial doubt over our ability to continue as a going concern for at least the twelve months after the date the financial statements are issued.

Note 2 – Recent accounting pronouncements

Recently adopted accounting standards

We adopted the following accounting standard updates (“ASUs”) in the year

ASU 2014-09 Revenue from contracts with customers

In May 2014, the Financial Accounting Standards Board, or FASB, issued Accounting Standards Update, or ASU, No. 2014-09, Revenue from Contracts with Customers (Topic 606), or ASU 2014-09, which supersedes the revenue recognition requirements in ASU Topic 605, Revenue Recognition. Under the new guidance, revenue is recognized when a customer obtains control of promised goods or services and in an amount that reflects the consideration the entity expects to receive in exchange for those goods or services.

We adopted ASU 2014-09 and its related amendments, or collectively Topic 606, effective January 1, 2018 using the modified retrospective method. Accordingly, we have applied the five-step method outlined in Topic 606 for determining when and how revenue is recognized to all contracts that were not completed as of the date of adoption. Revenues for reporting periods beginning after January 1, 2018 are presented under Topic 606, while prior period amounts have not been adjusted and continue to be reported under the previous revenue recognition guidance. For contracts that were modified before the effective date, we have considered the modification guidance within the new standard and determined that the revenue recognized and contract balances recorded prior to adoption for such contracts were not impacted. While Topic 606 requires additional disclosure of the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers, its adoption has not had a material impact on the measurement or recognition of our revenues.

F-9

Seadrill Limited

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

As we have transitioned to the new standard under the modified retrospective method, we have recorded the cumulative impact of applying the new guidance as an adjustment to opening retained earnings on January 1, 2018. The total adjustment was $7 million which represented the earned portion of demobilization revenue expected to be received for contracts not completed as of December 31, 2017, which was not previously recognized until demobilization occurred.

See Note 6 “Revenue from contracts” for further information.

ASU 2016-01 Financial Instruments—Recognition and Measurement of Financial Assets and Financial Liabilities

In January 2016, the FASB issued ASU 2016-01, Financial Instruments—Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities, which made targeted improvements to the recognition and measurement of financial assets and financial liabilities.

The update changes how entities measure equity investments that do not result in consolidation and are not accounted for under the equity method and how they present changes in the fair value of financial liabilities measured under the fair value option that are attributable to their own credit. The new guidance also changes certain disclosure requirements and other aspects of current U.S. GAAP. The standard does not change the guidance for classifying and measuring investments in debt securities.

After adopting ASU 2016-01 we will continue to record equity investments that do not result in consolidation and are not accounted for under the equity method at fair value (unless the fair value is not readily ascertainable). However, we will record changes in fair value directly to net income whereas previously we recorded such changes to other comprehensive income until realized. We have made the election available under ASC 321-10-35-2 to record equity investments with no readily ascertainable fair value at cost less impairment.

We transitioned to the new standard using the modified retrospective approach. Accordingly, we have recorded the cumulative effect of adopting the update at the date of adoption. We reclassified $31 million of previously recognized fair value gains from accumulated other comprehensive income to retained earnings on January 1, 2018.

ASU 2016-16 Income Taxes—Income taxes intra-entity transfers of assets other than inventory

In October 2016, the FASB issued ASU 2016-16, Income Taxes (Topic 740): Income taxes Intra-Entity Transfers of Assets other than Inventory, which requires companies to recognize the income tax effects of intercompany sales or transfers of assets, other than inventory, in the Consolidated Statement of Operations as income tax expense (or benefit) in the period of sale or transfer occurs. The exception to recognizing the income tax effects of intercompany sales or transfers of assets remains in place for intercompany inventory sales and transfers, i.e. companies will still be required to defer the income tax effects of intercompany inventory transactions.

We have adopted the new standard effective January 1, 2018 under the modified retrospective approach. As a result of the modified retrospective application, “Other Assets” is reduced in our Condensed Consolidated Balance Sheet with a cumulative adjustment to retained earnings of $59 million and non-controlling interests of $25 million.

ASU 2016-18 Statement of Cash Flows—Restricted Cash

In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash, to address classification of activity related to restricted cash and restricted cash equivalents in the cash flows. The standard eliminates the presentation of transfers between cash and cash equivalents and restricted cash and restricted cash equivalents in the statement of cash flows. When cash, cash equivalents and restricted cash equivalents are presented in more than one line item on the balance sheet, a reconciliation of the totals in the cash flows to the related captions in the balance sheet are required, either on the face of the cash flow or in the notes to the Consolidated Financial Statements. Additional disclosures are required for the nature of the restricted cash and restricted cash equivalents.

F-10

Seadrill Limited

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

The standard is effective for fiscal years beginning after 15 December 2017. We have adopted the new standard effective January 1, 2018 under the retrospective approach. The result of this adoption was a classification adjustment on our Consolidated Statement of Cash Flows for each of the years presented.

Other ASUs

We additionally adopted the following accounting standard updates in the year which did not have any material impact on our Consolidated Financial Statements and related disclosures:

Recently issued accounting standards

The FASB have issued the following ASUs that we have not yet adopted but which could affect our consolidated financial statements and related disclosures in future periods

ASU 2016-02 Leases (also 2018-10 and 2018-11)

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). The update requires an entity to recognize right-of-use assets and lease liabilities on its balance sheet and disclose key information about leasing arrangements. It also offers specific accounting guidance for a lessee, a lessor and sale and leaseback transactions. Lessees and lessors are required to disclose qualitative and quantitative information about leasing arrangements to enable a user of the financial statements to assess the amount, timing and uncertainty of cash flows arising from leases. The guidance will be effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years and early adoption is permitted, using a modified retrospective application.

We have started to assess the impact of this standard update on our Consolidated Financial Statements and related disclosures. We have determined that our drilling contracts contain a lease component as well as a revenue component. Based on our work to date, we don’t expect our pattern of revenue recognition to change significantly compared to current accounting standards.

Additionally, we will recognize lease liabilities and corresponding right-of-use assets for leasing arrangements where we are a lessee. Unless there is a significant change in these arrangements between the date of this report and the date we adopt the standard, we expect to recognize an aggregate lease liability and right-of-use asset of between $30 million and $50 million on adoption.

ASU 2016-13 - Financial Instruments - Measurement of Credit Losses on Financial Instrument s

In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which revises guidance for the accounting for credit losses on financial instruments within its scope. The new standard introduces an approach, based on expected losses, to estimate credit losses on certain types of financial instruments and modifies the impairment model for available-for-sale debt securities. The guidance will be effective for annual and interim periods beginning after December 15, 2019, with early adoption permitted only from January 1, 2019. Entities are required to apply the standard’s provisions as a cumulative-effect adjustment to retained earnings as at the beginning of the first reporting period in which the guidance is adopted.

F-11

Seadrill Limited

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

We are in the early stage of evaluating the impact of this standard update. Our customers are international oil companies, national oil companies and large independent oil companies. Our financial assets are primarily held with counter parties with high credit standing and, other than the bad debt expense recognized in the current period, we have historically had a low incidence of bad debt expense. Therefore, we do not currently expect this guidance to significantly affect our consolidated financial statements and related disclosures when we adopt it.

ASU 2018-07 Compensation - Stock Compensation

In June 2018, the FASB issued ASU 2018-07, Stock Compensation (Topic 718): Improvements to non-employee share-based payment accounting, which intended to reduce cost and complexity and to improve financial reporting for share-based payments issued to non-employees. The guidance will be effective for annual and interim periods beginning after December 15, 2019, with early adoption permitted.

We are in the process of evaluating the impact of this standard update on our consolidated financial statements and related disclosures.

ASU 2018-13 Fair Value Measurement - Changes to the Disclosure Requirements for Fair Value Measurement

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement. The update is intended to improve the effectiveness of disclosures in the notes to financial statements by facilitating clear communication of the US GAAP information requirements that are most important to users of an entity’s financial statements. The guidance will be effective for annual and interim periods beginning after December 15, 2019, with early adoption permitted.

We are in the process of evaluating the impact of this standard update on our consolidated financial statements and related disclosures.

Note 3 – Chapter 11 Proceedings

On September 12, 2017, the Company and certain of its subsidiaries, “the Debtors”, filed voluntary petitions for reorganization under Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the Southern District of Texas Victoria Division, “Bankruptcy Court”. On February 26, 2018, the Debtors filed a proposed Second Amended Joint Chapter 11 Plan of Reorganization with the Bankruptcy Court and on April 17, 2018 the Bankruptcy Court entered an order confirming the Second Amended Joint Chapter 11 Plan (as modified) of Reorganization, as amended and supplemented the “Plan”. The Debtors’ subsequently emerged from bankruptcy on July 2, 2018 following the satisfaction of each of the conditions precedent to the Plan. Although we are no longer a debtor-in-possession, we are a debtor-in-possession for the entire period ended June 30, 2018 and therefore the matters related to the bankruptcy proceedings are summarized below.

Throughout bankruptcy proceedings the Debtors were able to operate their businesses in the ordinary course. The first-day motions provided for, among other things, the payment of certain pre-petition employee and retiree expenses and benefits, the use of the Debtors’ existing cash management system, the payment of certain pre-petition amounts to certain critical vendors, the ability to pay certain pre-petition taxes and regulatory fees, the payment of certain pre-petition claims owed on account of insurance policies and programs and authorizing the use of cash collateral. During the pendency of the Chapter 11 case, all transactions outside the ordinary course of business required prior approval of the Bankruptcy Court.

In accordance with the Plan confirmed by the Bankruptcy Court, the following significant transactions occurred upon our emergence from bankruptcy on July 2, 2018:

Plan of Reorganization

Consistent with the RSA, the Debtors filed a proposed plan of reorganization and disclosure statement with the Bankruptcy Court on September 12, 2017, as well as a disclosure statement relating to the proposed plan of reorganization.

Subsequent to September 12, 2017, the Debtors negotiated with its various creditors, including the Ad Hoc Group and ship yards with which the Debtors had a contractual relationship to build new rigs. On February 26, 2018, the Debtors announced a global settlement with an Ad Hoc Group, the Committee and other major creditors in their Chapter 11 cases, including Samsung, Barclays, and another holder of unsecured bonds. The Debtors entered into an amendment to the RSA and an amendment to the Investment Agreement. The amendments to the RSA and Investment Agreement provided for the inclusion of the Ad Hoc Group and Barclays into the Capital Commitment as Commitment Parties, increased the Capital Commitment to $1.08 billion, increased recoveries for general unsecured creditors of Seadrill, NADL, and Sevan under the plan of reorganization, an agreement regarding the allowed claim of the newbuild shipyards and an immediate cessation of all litigation and discovery efforts in relation to the plan of reorganization.

The Investment Agreement, as amended, provided for certain milestones for the Debtors’ restructuring: (1) the Bankruptcy Court must enter an order confirming the Plan by June 9, 2018 (the “Confirmation Date”) and (2) the Effective Date of the Plan must occur within 90 days of the Confirmation Date and, in any event, no later than August 8, 2018.

F-12

Seadrill Limited

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

In connection with the global settlement, on February 26, 2018, the Debtors filed a proposed Second Amended Joint Chapter 11 Plan of Reorganization with the Bankruptcy Court (the “Plan”). On February 26, 2018, the Bankruptcy Court entered an order approving (i) the adequacy of the Disclosure Statement, (ii) the solicitation and notice procedures with respect to confirmation of the Debtors’ proposed Plan, (iii) the rights offering procedures for the rights offerings contemplated by the Plan and (iv) other related matters. On April 17, 2018, the Bankruptcy Court entered an order confirming the Debtors’ Second Amended Joint Plan (as modified) of Reorganization. The Plan became effective on July 2, 2018. Under the Plan and the terms of the Investment Agreement and the transactions contemplated therein, the Commitment Parties to the Investment Agreement were issued certain common shares of New Seadrill and purchased additional common shares of New Seadrill in connection with the completion of the Notes Rights Offering and Equity Rights Offering to holders of claims against the Debtors.

The Plan provided for, among other things, that:

Rights Offerings

Pursuant to the Plan, eligible holders in certain classes of general unsecured claims against the Debtors were offered the right to participate in (i) the “Notes Rights Offering” of up to $119.4 million in aggregate principal amount of New Secured Notes issued by a subsidiary of the Company (“NSNCo”) and a corresponding pro rata portion of 57.5% of the New Seadrill Common Shares issued to holders who participate in the Notes Rights Offering and (ii) the Equity Rights Offering of up to $48.1 million in value of the New Seadrill Common Shares. The New Secured Notes and the New Seadrill Common Shares to be acquired by the Commitment Parties under the Investment Agreement are reduced to the extent the rights are exercised in each of the Notes Rights Offering and the Equity Rights Offering.

Issuance and Distribution of the New Securities under the Plan and the Investment Agreement

On the Effective Date, we have approximately 100 million New Seadrill Common Shares outstanding. The New Common Shares will be allocated as set forth below, in accordance with provisions of the Plan and issued on the Effective Date:

An employee incentive plan has been implemented by the Successor (the “Employee Incentive Plan”) which will (a) reserve an aggregate of 10% of the New Seadrill Common Shares, on a fully diluted, fully distributed basis, for grants made from time to time to employees of the Successor; and (b) otherwise contain terms and conditions (including with respect to participants, allocation, structure, and timing of issuance) generally consistent with those prevailing in the market at the discretion of the board of directors of the Successor.

F-13

Seadrill Limited

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

New Secured Notes

On the Effective Date, NSNCo issued $880 million in principal amount of New Secured Notes. As described above, the Successor also expects to issue approximately 57.5% of the New Seadrill Common Shares (prior to dilution by the Primary Structuring Fee and the Employee Incentive Plan) on a pro rata basis to the purchasers of the New Secured Notes (collectively with the New Secured Notes, the “NSN Securities”). Subject to the conditions of the Investment Agreement, the Commitment Parties agreed to purchase the full principal amount of the NSN Securities for $880 million in cash, less the principal amount purchased by participants in the Notes Rights Offering.

Board of Directors

In connection with the Reorganization, our board of directors was expanded to seven members who were appointed by certain Commitment Parties in accordance with the Investment Agreement. Pursuant to the Investment Agreement, Hemen was entitled to appoint four directors to our board, two of whom were required to be independent directors. Centerbridge and the Select Commitment Parties were each entitled to appoint one independent director. The remaining director was required to be an independent director appointed by mutual agreement of Hemen, Centerbridge and the Select Commitment Parties.

Interest Expense

During bankruptcy proceedings we continue to make interest payments on the secured credit facilities. These are treated as adequate protection payments which are recognized as a reduction in the principal balance of secured credit facilities held within “Liabilities subject to compromise” in the Consolidated Balance Sheets. $81 million of adequate protection payments were recognized from Petition Date to December 31, 2017, with an additional $104 million in the six months ended June 30, 2018. The Debtors have discontinued recording interest on unsecured bond facilities classified as liabilities subject to compromise from the Petition Date. Contractual interest on liabilities subject to compromise not reflected in the consolidated statements of operations was approximately $76 million for the six months ending June 30, 2018.

Potential Claims

The Debtors filed with the Bankruptcy Court schedules and statements setting forth, among other things, the assets and liabilities of the Debtors, subject to the assumptions filed in connection therewith. The schedules and statements may be subject to further amendment or modification after filing.

All holders of pre-petition claims except governmental units were required to file proofs of claim by January 3, 2018 (the ‘‘Bar Date’’). Governmental units holding claims against the Debtors were required to file proof of claim by March 12, 2018. As of June 15, 2018, 1,597 claims totaling approximately $19.2 billion had been filed with the Bankruptcy Court against the Debtors. It is possible that claimants will file amended claims in the future, including claims amended to assign values to claims originally filed with no designated value. Through the claims resolution process, we have identified, and we expect to continue to identify, claims that we believe should be disallowed by the Bankruptcy Court because they are duplicative, have been later amended or superseded, are without merit, are overstated or for other reasons. We will file objections with the Bankruptcy Court as necessary for claims we believe should be disallowed. Claims we agreed are allowable are reflected in ‘‘Liabilities Subject to Compromise’’ in the Consolidated Balance Sheets as at June 30, 2018.

Through the claims resolution process, differences in amounts scheduled by the Debtors and claims filed by creditors are investigated and resolved, including through the filing of objections with the Bankruptcy Court where appropriate. In light of the number of claims filed, the claims resolution process will take additional time to complete, and it may continue after our emergence from bankruptcy. Accordingly, the ultimate number and amount of allowed claims is not presently known, nor can the ultimate recovery with respect to allowed claims be presently ascertained.

F-14

Seadrill Limited

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Executory Contracts

Under the Bankruptcy Code, the Debtors have the right to assume, amend and assume, or reject certain contracts, subject to the approval of the Bankruptcy Court and certain other conditions. Generally, the assumption of a contract requires a debtor to satisfy pre-petition obligations under the contract, which may include payment of pre-petition liabilities in whole or in part. Rejection of a contract is typically treated as a breach occurring as of the moment immediately preceding the Chapter 11 filing. Subject to certain exceptions, this rejection relieves the debtor from performing its future obligations under the contract but entitles the counterparty to assert a pre-petition general unsecured claim for damages. Parties to contracts rejected by a debtor may file proofs of claim against that debtor’s estate for damages.

As part of the Chapter 11 proceedings, the Debtors negotiated and announced a global settlement with various creditors, including Samsung Heavy Industries Co., Ltd. (“Samsung”) and Daewoo Shipbuilding & Marine Engineering Co., Ltd (“DSME”). The amendments to the RSA and Investment Agreement provided for, among other items, an agreement regarding the allowed claim of the newbuild shipyards Samsung and DSME, and an immediate cessation of all litigation and discovery efforts in relation to the plan of reorganization as well as the Debtors’ rejection and recognized termination of the newbuild contracts. The settlement agreement was contingent on confirmation of the Plan. Following the allowed claim agreement in respect of the Samsung and DSME, we recognized a liability of $1.064 billion at December 31, 2017, and due to the Plan including the rejection and termination of the newbuild contracts we recognized an impairment of the newbuild assets related to the West Dorado, West Draco, West Aquila and the West Libra, totaling $696 million, in the year ended December 31, 2017.

Note 4 – Liabilities subject to compromise

Liabilities subject to compromise in the Consolidated Balance Sheets include pre-petition liabilities that may be affected by the plan of reorganization at the amounts expected to be allowed, even if they may be settled for lesser amounts. If there is uncertainty about whether a secured claim is under-secured, or will be impaired under the plan of reorganization, the entire amount of the claim is included in liabilities subject to compromise. Differences between liabilities we have estimated and the claims to be filed will be investigated and resolved in connection with the claims resolution process in the Chapter 11 Cases. Liabilities subject to compromise includes amounts the Bankruptcy Court allowed as claim amounts resulting from the Debtors’ rejection of various executory contracts, such as the rejection and termination of the newbuild contracts with Samsung and DSME. We will continue to evaluate these liabilities throughout the Chapter 11 Cases and adjust amounts as necessary. Such adjustments may be material.

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Seadrill Limited

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

The Consolidated Balance Sheets include amounts classified as liabilities subject to compromise that we believe the Bankruptcy Court will allow as claim amounts resulting from the Debtors’ rejection of various executory contracts and unexpired leases and defaults under the debt agreements.