Operating cash flow represents the cash flow from a company’s core operations. In 2Q16, Noble Corporation (NE) had a cash flow from operations of $862 million, compared to $175 million in 1Q16 and $767 million in 2Q15.
- With falling revenue, Noble has drastically reduced its capex (capital expenditure) over the past few quarters to maintain a positive free cash flow.
- In 2Q16, Noble’s capex was $69 million, which included $14 million toward newbuilds and $26 million toward major projects. The company’s capex was substantially lower than its guidance. Its 1H16 capex totaled $121 million.
- Noble’s capex for 3Q16 is expected to be $500 million.
- For 2016, Noble has reduced its capex guidance to $675 million from the previous estimate of $800 million. The company mentioned that the $125 million reduction is attributable to lower revised expenditures across all spending categories.
Cash flow to capex
In the above chart, you can see that for the past five quarters, the company’s capex has been lower than the cash it obtained through core operations. This helped the company maintain a positive free cash flow in 2015 and 1H16. With a higher capex in 2016 due to newbuild deliveries, the company reduced its dividends in the first quarter to improve its liquidity position. The company maintained this reduced dividend in the second quarter.
The company reduced its quarterly dividend to $0.02 per share from $0.15 per share to preserve liquidity in the uncertain market and to support future operational and strategic decisions. Earlier, offshore drillers (OIH) Ensco (ESV), Diamond Offshore Drilling (DO), and Transocean (RIG) decreased their per-share dividends. Ocean Rig (ORIG) and Seadrill (SDRL) have discontinued their dividends.