SLB, HAL, BHGE, and NOV: How Do Debt Positions Stack Up?
In this series, we’ll compare four large market cap oilfield equipment & services (or OFS) companies based on their balance sheet strength, market indicators, as well as relative valuation multiples. We’ll start our discussion by comparing these companies’ net debt in 3Q17.
Analyzing net debt
Net debt is total debt less cash, cash equivalents, and short-term marketable securities. We’ll be analyzing net debt for our set of OFS companies as of September 30, 2017, in this article. These companies include Schlumberger (SLB), Halliburton Company (HAL), Baker Hughes, a GE Company (BHGE), and National Oilwell Varco (NOV). Read more on these stocks in Market Realist’s Oilfield Services after 3Q17: SLB, HAL, BHGE, and NOV.
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SLB’s 3Q17 net debt growth was highest
As of September 30, 2017, Schlumberger’s (SLB) net-debt growth was the highest among our set of OFS companies. SLB’s 3Q17 total borrowing fell 19% over a year ago. SLB’s cash and marketable securities fell 54% during the same period, which more than offset the total fall in debt. In effect, net debt rose 16% in 3Q17 compared to 3Q16. SLB makes up 4.1% of the SPDR S&P Oil & Gas Equipment & Services ETF (XES). XES fell 6% in the past year compared to a 16% dip in SLB’s stock price during the same period.
Analyzing net debt for Halliburton in 3Q17
In 3Q17, Halliburton’s net debt remained unchanged over 3Q16. In 3Q17, although HAL’s total debt decreased 11% over a year ago, its cash and marketable securities fell 42% during the same period. In effect, net debt was at the same level on September 30, 2017, compared to net debt on September 30, 2016.
Baker Hughes’s net debt in 3Q17
In 3Q17, net debt of Baker Hughes, a GE Company, turned to a positive $128 million compared to a -$714 million in the year-ago quarter. BHGE’s 3Q17 total borrowing rose 62% over the past one year, while cash and marketable securities’ growth rose 28%. On September 30, 2017, cash and equivalents include $1.3 billion of cash held on behalf of GE (GE), following Baker Hughes’s merger with GE’s oil and gas business. A corresponding liability was reported in the short-term borrowings. In effect, net debt turned positive in 3Q17.
National Oilwell Varco’s net debt
National Oilwell Varco’s (NOV) total debt remained nearly unchanged in 3Q17 over a year ago. Its cash and marketable securities rose ~13% this period. So, NOV’s net debt decreased ~12% in 3Q17 over 3Q16.
In the next article, we’ll look at dividend growth and dividend yields for our select set of OFS companies.