Halliburton’s net debt to EBITDA
Net debt to adjusted EBITDA reflects how easily a company can repay its debts from its operational earnings and available cash. Halliburton’s peer Fairmount Santrol Holdings’ (FMSA) net debt by the end of 3Q16 was $469 million compared to HAL’s $9.0 billion. HAL makes up 0.33% of the iShares Core US Value (IUSV). Patterson-UTI Energy’s (PTEN) net debt was $574 million, while Schlumberger’s (SLB) net debt was $10.5 billion on September 30.
In 3Q16, Halliburton’s total debt rose 56% compared to a quarter earlier, while its cash and marketable securities rose 46%. Net debt, in effect, rose 60% during the same period. HAL’s adjusted EBITDA, meanwhile, fell as the energy price weakness continued. So, the net debt to EBITDA shot up in 3Q16.
In 3Q16, HAL repaid $600 million in debt that matured in August. HAL’s cash and cash equivalent balance in 3Q16 improved over 2Q16, driven by working capital improvements. This included a reduction in days sales outstanding (or DSO) and tax refunds receipts. On September 30, HAL had $3.0 billion available under its revolving credit facility.
In 2Q16, Halliburton mandatorily redeemed $2.5 billion of debt in conjunction with the termination of the Baker Hughes transaction. The transaction was terminated on April 1. Given the debt redemption plus the $3.5 billion termination fee that was paid to Baker Hughes related to the merger termination, HAL’s cash balance fell sharply at the end of 2Q16.
Next, we’ll discuss Halliburton’s free cash flows.