Will Flotek Industries’ Capital Expenditure Rise in 2017?



Flotek Industries’ operating cash flows

In this article, we’ll analyze how Flotek Industries’ (FTK) operating cash flows have trended over the past few quarters. We’ll also discuss how its free cash flow (or FCF) was affected given its capital expenditure (capex).

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Flotek Industries’ free cash flow

In the three quarters leading up to 2Q16, Flotek Industries generated negative FCF. FTK’s capex rose by 41% in the year leading up to 2Q16. Higher capex combined with lower CFO led to negative FCF in 2Q16. In 2Q16, FTK’s FCF was -$1.5 million compared to $1 million a year ago.

In comparison, Helix Energy Solutions Group’s (HLX) 2Q16 FCF was -$10.6 million. HLX is Flotek Industries’ large-market-cap peer.

Flotek Industries makes up 0.26% of the iShares S&P Small-Cap 600 Value ETF (IJS).

Does FTK have any restrictions on capex?

Effective March 31, 2016, Flotek Industries amended its credit facility with PNC Bank, National Association. The amendment contains an annual limit of ~$25 million on 2016 capex. In 2017, the annual limit will increase to $32 million. By comparison, Flotek Industries’ capex was $20.4 million in 2015.

Next, we’ll discuss whether FTK’s internal fund generation suffices for its external fund requirements.


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