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Weatherford International’s Capex Plan: Why It’s Higher in 2017

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Weatherford International’s operating cash flows

In this part of the series, we’ll analyze how Weatherford International’s (WFT) CFO (cash flow from operations) and FCF (free cash flow) have trended over the past few quarters. Its CFO turned negative again in 1Q17 after briefly switching to positive in 4Q16. WFT generated -$179.0 million in CFO in 1Q17. Lower revenues in 1Q17 over 4Q16, coupled with weak working capital management, led to a negative CFO in 1Q17.

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Weatherford International’s FCF

Weatherford International’s FCF was negative in the past eight quarters looking at the past 13 quarters until 1Q17. WFT reduced its capex (capital expenditure) by 16.0% in the past year until 1Q17. Despite lower capex, negative CFO led to FCF turning negative again in 1Q17 after it was positive in 4Q16. In 1Q17, FCF was -$221.0 million, which was a small improvement over -$255.0 million in 1Q16. FCF is cash flow from operations less capex.

FCF for WFT’s peers

By comparison, Superior Energy Services’ (SPN) FCF was -$64.0 million in 1Q17. Halliburton’s (HAL) was -$416.0 million, and Nabors Industries’ (NBR) was -$258.0 million. WFT makes up 2.8% of the SPDR S&P Oil & Gas Equipment & Services ETF (XES), which has fallen 18.0% in the past year.

Weatherford’s capex plan

Weatherford plans to keep its capex budget at $250.0 million in 2017, compared to $204.0 million in 2016. So capex is projected to rise 23.0% in 2017 over the previous year. Weatherford’s management expects higher drilling activity and rig count in 2017, which is expected to support its higher capex plan for the year.

You can find out more about the OFS industry in Market Realist’s The Oilfield Equipment and Services Industry: A Primer.

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