The operating cash flow represents the cash flows from a company’s core operations. In 3Q15, Noble Corporation (NE) had cash flow from operations of $484 million compared to $399 million in the prior quarter.
- Amid falling revenue and cash flows, Noble drastically reduced its capital expenditure over the past few quarters to maintain a positive free cash flow.
- In 3Q15, Noble’s capital expenditure was $110 million including capitalized interest. This was well below the company’s guidance of $180 million. The company stated that the lower capital expenditure was due to a combination of cost control measures and the timing of spending across all of the capital categories.
- The company’s capital expenditure for the first nine months of 2015 stands at $280 million. The company stated that the capital expenditure in 2015 is down significantly because there aren’t newbuild deliveries in 2015.
Capital expenditure guidance
- The capital expenditure for 4Q15 is expected to be $170 million.
- Noble is expected to take delivery of its high specification Jack-up Noble Lloyd Noble in 2016. The company expects its capital expenditure to be $800 million.
- Excluding the capital expenditure amount for newbuilds, the remaining capital expenditure for 2016 stands at $340 million. This is lower compared to the 2015 guidance of $390 million excluding newbuild capital.
Cash flow to capital expenditure
From the above chart, you can see that for the past four quarters the company’s capital expenditure has been significantly lower than the cash it obtained through the company’s core operations. This will help the company to be free cash flow positive in 2015. With a higher capital expenditure in 2016 due to newbuild delivery, the company reduced its dividends to improve the liquidity position.
The company stated that it will reduce the quarterly dividend to $0.15 per share from $0.38 per share to preserve liquidity in the uncertain market and to support future operational and strategic decisions. Earlier this year, other offshore drillers (OIH) ENSCO (ESV), Diamond Offshore (DO), and Transocean (RIG) decreased their per-share dividends. Ocean Rig (ORIG) and Seadrill (SDRL) didn’t pay any dividends in 2Q15.