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Why Does Forum Energy Technologies Expect Steady Free Cash Flow?

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Forum Energy Technologies’ operating cash flows and capex

In this article, we’ll analyze how Forum Energy Technologies’ (FET) operating cash flows trended over the past few quarters. We’ll also discuss how its free cash flows (or FCF) were affected by its capex.

Forum Energy Technologies’ cash from operating activities (or CFO) fell 44.6% in 1Q16 over 1Q15. FET generated $27 million in CFO in 1Q16. FET’s revenues fell in the past one year, leading to the lower CFO.

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Forum Energy Technologies’ free cash flow

In 12 out of the past 13 quarters until 1Q16, Forum Energy Technologies generated positive FCF. FET’s capex, which has typically been low, was lower in the past one year through 1Q16. However, lower capex could not offset CFO’s shrinkage, and in effect, FCF decreased 39% in the past one year. In 1Q16, FET’s FCF was $23 million compared to $37 million a year ago.

In comparison, Oceaneering International (OII), FET’s larger market cap peer, switched to positive FCF in 1Q16 compared to a year ago. OII generated $32.4 million in FCF in 1Q16. FET makes up 0.06% of the iShares Russell 2000 ETF (IWM).

FET’s management outlook on FCF and capex

Despite falling revenues, Forum Energy Technologies’ management expects to generate $20 million in FCF per quarter throughout 2016. The company expects to reduce working capital, although its interest payment could rise in 2Q16. FET plans to spend $20 million on capital expenditure in 2016, which is 38% less than in 2015. In April, it acquired the wholesale completion packer business of Team Oil Tools.

Next, we’ll discuss Forum Energy Technologies’ dividend and share repurchases.

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