Ensco’s cash flow
Ensco’s (ESV) operating cash flows represent cash flows from its core operations. In the first three months of 2017, Ensco saw cash flows from operations of $104 million, as compared to $233 million in 1Q16.
Ensco’s capital expenditure for the first quarter of 2017 was $283 million. This included the milestone payment for the Ensco DS-10. The company forecasts its 2017 capex to be $140 million, which includes rig enhancements, minor upgrades, and planned investments in patented technology to increase drilling efficiencies.
Ensco made the milestone payment for the Ensco DS-10 in January, and the company now has $300 million in contractually obligated payments remaining to shipyards.
In 2018, Ensco expects its capex to entail $225 million toward newbuilds and $100 million toward enhancements and improvements. In 2019, its newbuild capex is expected to drop to $75 million.
Free cash flow
As you can see, Ensco’s operating cash flow is lower than its capital expenditure, and this led to negative free cash flow. Remember, free cash flow is a measure of company’s financial performance and is calculated as operating cash flow minus capital expenditures. Otherwise put, free cash flow represents the cash that a company is able to generate after spending money, which is required to maintain or expand its asset base.
In 1Q17, Ensco recorded negative free cash flow of $2.2 million. However, analysts expect the company to earn a positive free cash flow over the next four quarters. In 2016, Ensco, Transocean (RIG), Diamond Offshore (DO), Noble (NE), and Atwood Oceanics (ATW) all had a positive free cash flow.