A company’s operating cash flow represents the cash flow from its core operations. For the first nine months of 2016, Diamond Offshore (DO) had a cash flow from operations of $491 million, compared to $466 million in the same period last year.
Despite a steep fall in revenue, the company has higher cash from operating activities, primarily due to its costs.
For the first nine months of 2016, Diamond Offshore incurred $582 million in capex (capital expenditure). The company expects its 2016 capex to be $625 million, which can be broken down as $500 million toward the delivery of its Ocean GreatWhite and $125 million in maintenance capital costs. The company’s maintenance capital costs are almost 40% lower than they were in 2015.
Free cash flow
Diamond Offshore’s 2015 capex exceeded its cash flow from operations. This left the company with a free cash flow of -$94 million in 2015. In 2016, except for 2Q16, the company’s cash flow has been more than its capex. Given its current capex forecast, we can expect Diamond Offshore to have a positive free cash flow in 2016.
In 2015, offshore drillers (XLE) Transocean (RIG), Seadrill (SDRL), Noble (NE), and Rowan Companies (RDC) posted positive free cash flows. On the other hand, Diamond Offshore posted a negative free cash flow.