Oilfield Services Stocks: Free Cash Flow Winners and Losers

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Oilfield Services Stocks: Free Cash Flow Winners and Losers PART 1 OF 10

Best and Worst Oilfield Services Stocks by Free Cash Flow Growth

Comparing oilfield services and equipment companies

In this series, we’ll examine some of the best-known US oilfield services and equipment (or OFS) companies based on the highest and lowest free cash flow growth in 2Q17 versus 2Q16. The companies we have selected for comparison include:

  • Schlumberger (SLB)
  • Baker Hughes, a GE Company (BHGE)
  • Halliburton (HAL)
  • Weatherford International (WFT)
  • National Oilwell Varco (NOV)
  • Superior Energy Services (SPN)
  • Core Laboratories (CLB)
  • Nabors Industries (NBR)
  • Fairmount Santrol Holdings (FMSA)
  • Flotek Industries (FTK)
  • Oil States International (OIS)
  • Oceaneering International (OII)
  • Patterson-UTI Energy (PTEN)

By market capitalization, these companies range from $312 million to $87.4 billion.

Free cash flow is operating cash flow less capital expenditure. In this series, we’ll analyze how these OFS companies’ operating cash flows trended over the past few quarters. We’ll also discuss how their free cash flows (or FCF) were affected, given their capital expenditures (capex).Best and Worst Oilfield Services Stocks by Free Cash Flow Growth

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Top FCF growth OFS stocks

Superior Energy Services saw significant FCF improvement in 2Q17 over a year ago. National Oilwell Varco, Halliburton, and Fairmount Santrol Holdings were also among the top FCF growth OFS companies in our select group here. National Oilwell Varco is 0.05% of the SPDR S&P 500 ETF (SPY). Since June 30, National Oilwell Varco has fallen 8% compared to a 1% rise in SPY.

Bottom-ranked OFS stocks by FCF growth

On the other hand, Patterson-UTI Energy and Baker Hughes, a GE company, are the two OFS companies with the steepest free cash flow declines in 2Q17 over 2Q16. Read a comparison of the top OFS companies in Market Realist’s SLB, HAL, NOV, WFT: How They Stack Up after 2Q17.

Why is free cash flow important?

Free cash flow indicates a company’s capacity to make investments, make acquisitions, pay dividends, buy back shares, and reduce the debt load. As crude oil prices tumbled in 2016, upstream companies’ capex reduced, hitting OFS companies revenues strongly. Free cash flows in most of the OFS companies turned red. However, in 2017, crude oil prices are showing recovery signs, which has improved some of the OFS companies’ free cash flow generation ability. In this series, we’ll discuss why some of these OFS companies are growing FCF while some are lagging behind.

We’ll start our discussion with Superior Energy Services’ free cash flow trend.


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