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How Schlumberger Plans to Spend Its Free Cash Flow

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Schlumberger’s operating cash flows

In this article, we’ll analyze how Schlumberger’s (SLB) operating cash flows have trended over the past few quarters. We’ll also discuss how its free cash flows (or FCF) have been affected given its capital expenditures (capex).

Schlumberger’s cash from operating activities (or CFO) fell ~8% in 4Q16 over 4Q15. SLB generated $2.0 billion in CFO in 4Q16. SLB’s revenue has fallen in the past year, leading to its lower CFO.

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Schlumberger’s free cash flow and capex

SLB’s capital expenditure (or capex) increased ~4% in the past one year until 4Q16. Higher capex coupled with CFO’s shrinkage resulted in FCF decreasing 29% in the past one year. In 4Q16, SLB’s FCF was $1.1 billion, compared to ~$1.5 billion a year-ago. Schlumberger’s FCF has been positive in the past 13 quarters.

By comparison, National Oilwell Varco’s (NOV) 4Q16 FCF was $71 million, Baker Hughes’s (BHI) was $454 million, and Weatherford International’s (WFT) was $68 million. SLB makes up ~0.7% of the iShares S&P 500 Value ETF (IVE).

Read about BHI’s latest deal in Baker Hughes Makes Another Deal: An OFS Newco Explained.

Schlumberger’s capex plans for 2017

In 2017, SLB plans to spend $2.2 billion in capex. Compared to 2016, its capex is expected to rise ~5% in 2017.

Free cash flow and dividend plans

Schlumberger’s management believes that the company can use its FCF to reinvest in itself for future growth or return funds to shareholders through dividend payments or share repurchases. In the following article, we’ll discuss Schlumberger’s dividend and shareholder returns.

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