On February 14, 2017, Halliburton (HAL) disclosed that it will repay $1.4 billion of its long-term debt. The long-term notes were due to be repaid in September 2018 and September 2019. Halliburton will also pay a make-whole premium associated with the senior notes. It includes a lump-sum payment based on the net present value of future coupon payments on the notes. For a comparative analysis on Halliburton and its peers, read Energy’s Price Recovery Prompts an Oilfield Services Revival.
After the redemption on March 15, 2017, Halliburton’s total debt will fall to $10.97 billion from ~$12.4 billion as of December 31, 2016. Halliburton’s net debt-to-adjusted trailing 12-month EBITDA (earnings before interest, tax, depreciation, and amortization) or indebtedness is also expected to improve. Halliburton’s indebtedness rose from 4Q15 through 4Q16. In 4Q16, Halliburton’s net debt-to-adjusted EBITDA multiple was ~3.7x or 238% higher than a year ago. It was higher mainly due to lower EBITDA from the weak energy market environment.
Receive e-mail alerts for new research on BHI:
Interested in BHI?
Don’t miss the next report.
Net debt-to-adjusted EBITDA reflects how easily a company can repay its debts from its operational earnings and available cash. Halliburton accounts for 14.7% of the VanEck Vectors Oil Services ETF (OIH).
Net debt is aggregate short and long-term debt less cash and marketable securities. By the end of 4Q16, Schlumberger’s (SLB) net debt was ~$10.5 billion—compared to Halliburton’s net debt of ~$8.4 billion. Nabors Industries’ (NBR) net debt was ~$3.3 billion on September 30, 2016. To learn more, read What Analysts Expect from Nabors Industries’ 4Q16 Earnings.
Halliburton has been repaying debt since 2016. During 2Q16, Halliburton redeemed $2.5 billion in debt in conjunction with the termination of the Baker Hughes (BHI) transaction. The transaction was terminated on April 1, 2016. In 3Q16, Halliburton repaid $600 million in debt that matured in August. As of December 31, 2016, Halliburton’s cash balance was $4.0 billion.
Next, we’ll discuss Halliburton’s returns compared to its peers and the industry.