Seadrill Options Skew Hits Record as Sector Sells Off

SDRL is the least shorted name in its peer group heading into today's print, yet options traders have swung to their most defensive posture on record.

Short interest at Seadrill has been falling for weeks and now sits at 6.8% of the free float, the lowest level in at least a year. Closest peers NE, RIG and VAL all carry heavier short positioning. Availability in the lending market is exceptionally loose at 2,487%, meaning roughly 25 shares remain available to borrow for every one already lent out, so there is no squeeze dynamic to watch here. Borrowing costs have drifted higher over the past month, up about 42%, but remain low in absolute terms at 0.62%. The stock dropped 2.9% on Tuesday and is down 9.1% over the past week, a steeper decline than the peer median of roughly 4.1%.

Against that retreat, the options market has moved in a direction that stands apart. The put/call ratio reached 2.41 on Tuesday, more than four standard deviations above its 20-day average of 0.30, and the highest reading of the past 52 weeks. That is the clearest sign in the data that options traders sharply ramped up downside protection into the earnings date, demand for puts dwarfing calls by more than two-to-one. The sector-wide selloff amplifies the question: Seadrill fell harder than NE (down 4.9% on the week) and RIG (down 4.6%), despite carrying a lighter short base.

The fundamental debate is a straightforward split between contract visibility and macro anxiety. The bull case rests on operational delivery: 96% economic utilization in the most recent quarter, revenue that came in well ahead of estimates, and a backlog that stretches through early 2030 for certain rigs including the Sonangol Libongos. Contract extensions in Indonesia and Malaysia reinforce the near-term earnings floor. Bears focus on oil-price direction, arguing that operators will slow new award decisions if crude stays weak, leaving Seadrill exposed to a gap between its full 2026 rig calendar and a thinner outlook for backlog renewal from 2027 onward. The mean analyst price target is $54, implying roughly 17% upside from Tuesday's close of $46.32, though that consensus was last struck in early September. The most recent bellwether move was Barclays upgrading to Overweight in May, raising its target to $59 from $41; no major-firm action has followed since.

One complicating thread is Elliott Investment Management, which filed a Schedule 13D when it first disclosed its position and remains on the activist register despite trimming its stake below 5% as of its most recent filing in October. Elliott reported 4.9% of the class, down from 5.8% previously, cutting roughly 1.3 million shares. As the disclosure note requires: Schedule 13D/G positions are event-driven around the 5% threshold, and a holder dropping below that level may not file again. Whether Elliott is exiting, repositioning or simply managing its size is not visible from the filing alone, but the direction of travel adds an overhang question to an already unsettled ownership picture.

Today's report will test whether the operational consistency Seadrill has delivered through the year is sufficient to separate the stock from a sector that the market is repricing lower, and whether the backlog story holds its weight when oil-price sentiment is working against it.