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What’s Halliburton’s Free Cash Flow and Capex Plan?

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Halliburton’s operating cash flows and capex

In this part of the series, we’ll see how Halliburton’s (HAL) operating cash flows have trended over the past few quarters. We’ll also see how its free cash flow (or FCF) was affected given its capex (capital expenditure).

Halliburton’s cash from operating activities (or CFO) turned negative in 2Q16 compared to 2Q15. Its CFO was -$3.6 billion in 2Q16. The negative CFO was mainly driven by a $3.5 billion termination fee paid to Baker Hughes in 2Q16.

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Halliburton’s free cash flow

HAL’s capex declined 59% in the past one year until 2Q16. Lower capex, however, couldn’t offset its CFO shrinkage, and in effect, FCF turned negative in 2Q16. In 2Q16, HAL’s FCF was -$3.8 billion compared to $664 million a year ago. The latest quarter’s FCF was also lower than in 1Q16 when HAL’s FCF was -$405 million. FCF has been negative in four of the past 13 quarters.

In comparison, Carbo Ceramics’ (CRR) FCF was $17.3 million in 2Q16. Carbo is Halliburton’s lower market-cap peer. Halliburton makes up 2.3% of the iShares North American Natural Resources ETF (IGE).

Halliburton’s capex and cash flow plans for 2016

In 2016, HAL plans to spend $850 million in capex. That’s 61% lower than 2015. In 2016, the majority of HAL’s capex is expected to be spent on the following:

  • Production Enhancement, Production Solutions, Cementing (all under HAL’s Completion and Production segment)
  • Wireline and Perforating product service lines (under HAL’s Drilling and Evaluation segment)

HAL plans to improve earnings and working capital to achieve break-even cash flow by the end of 2016.

Next, we’ll look at Halliburton’s dividends and dividend yields.

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