Forum Energy Technologies’ net debt to EBITDA
Forum Energy Technologies’ (FET) net debt to TTM (or trailing 12 months) EBITDA (earnings before interest, tax, depreciation, and amortization) has been trending up between 3Q14 and 3Q15. In 4Q15 and 1Q16, Forum Energy Technologies’ TTM EBITDAs were negative. Thus, its net debt to EBITDA ratio was not meaningful.
Net debt to EBITDA reflects how easily a company can repay its debts from its operational earnings and available cash. Net debt for Forum Energy Technologies’ peer Helmerich & Payne (HP) by the end of 1Q16 was -$411 million compared to FET’s $264 million. HP’s cash balance exceeded its long-term debt, leading to a negative net debt. FET makes up 3.9% of the SPDR S&P Oil & Gas Equipment & Services ETF (XES).
Forum Energy Technologies’ indebtedness
Forum Energy Technologies’ net debt to TTM EBITDA ratio decreased gradually from 3Q13 until 3Q14. Since then, the multiple has increased steadily. In 3Q15, total debt decreased marginally over 3Q14. Cash and marketable securities also remained steady during the same period, leading to 6% lower net debt. However, FET’s TTM EBITDA decreased 39% during the same period. In effect, the net-debt-to-EBITDA ratio went significantly higher.
In 1Q16, FET’s total debt decreased 15% while its cash and marketable securities increased 57%. Net debt, in effect, decreased 31%. The company’s net debt to EBITDA was not meaningful, however, as a result of negative TTM EBITDA in 1Q16.
Next, we’ll discuss Forum Energy Technologies’ free cash flows.