Why Superior Energy Services’ Free Cash Growth Beats Peers’
Superior Energy Services’ FCF growth
In 2Q17, Superior Energy Services’ (SPN) free cash flow (or FCF) was $24.3 million, compared to $5.8 million FCF in 2Q16. FCF rose 3.2x in 2Q17 over a year ago. Cash from operating activities (or CFO) increasing more than the increase in capex led to positive and improved FCF in 2Q17 compared to 2Q16. SPN’s FCF had been positive in 11 out of the past 13 quarters.
Superior Energy Services’ CFO increased 70% in 2Q17 over 2Q16 and was positive—a sharp reversal of negative cash flows in the previous two quarters. SPN’s CFO was $60 million in 2Q17, compared to $35 million CFO in 2Q16. Higher revenue in the past year resulted in higher CFO in 2Q17.
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Why SPN’s cash flows improved
In 2Q17, the worldwide rig count rose 10% compared to 1Q17. US rig count growth was even sharper (up 21%) during the same period. Rig counts typically indicate upstream companies’ activity level. The increase in US land market drilling activity largely contributed to SPN’s overall revenue increase, which contributed to the cash flow rise.
SPN’s capex plan
Superior Energy Services’ capital expenditure (or capex) rose 21% in 2Q17 over 2Q16. The increase in capex was mainly attributable to SPN’s Onshore Completion and Drilling Products and Services segments’ asset maintenance. SPN expects to spend ~$125 million to $150 million on capital expenditures in 2017.
Free cash flow compared with peers
Basic Energy Services’ (BAS) 2Q17 FCF was -$8.3 million while Flotek Industries’ (FTK) 2Q17 FCF was -$7.3 million. Superior Energy Services is 1.9% of the VanEck Vectors Oil Services ETF (OIH). Since June 30, 2017, OIH has fallen 11% compared to a 19% decline in SPN’s stock price.
Next, we’ll discuss National Oilwell Varco’s (NOV) free cash flow.