Upstream operators’ capex cut
In the past couple of years, some of the major US upstream and integrated companies have reduced their capital expenditures (or capex) following crude oil’s sharp price decline. From 4Q16 to 1Q17, 19 of the most prominent names in this space, in aggregate, have slashed their capex 21%.
National Oilwell Varco’s EBITDA margin
As shown in the chart above, from 4Q16 to 1Q17, National Oilwell Varco’s (NOV) EBITDA[1. earnings before interest, tax, depreciation, and amortization] margin improved dramatically from -35% to 4.5%. EBITDA margin is a measure of a company’s operating earnings.
National Oilwell Varco comprises 0.06% of the iShares Dow Jones US ETF (IYY). The energy sector makes up 6.0% of IYY.
EBITDA margin for NOV’s peers
Schlumberger’s (SLB) EBITDA margin was ~22% in 1Q17. Halliburton’s (HAL) EBITDA margin was 13.7% in 1Q17. Weatherford International’s EBITDA margin was 6% in 1Q17. The energy sector makes up 6.3% of SPX-INDEX, which has increased 2% since 1Q17 versus an 8% fall in SLB’s stock price.
In 1Q17, Basic Energy Services’ (BAS) EBITDA margin was -2.3%. You can read more about BAS in Market Realist’s Can Basic Energy Services Bounce Back after Bankruptcy?
We’ll look at the earnings growth figures of these companies in the next article.