Basic Energy Services’ operating cash flows
Basic Energy Services’ free cash flow
Free cash flow (or FCF) is cash from operations minus capital expenditures (or capex). In the past eight quarters up to 2Q17, BAS generated negative FCF. BAS’s capital expenditure (or capex) rose 12% in 2Q17 over 2Q16. Increased capex resulted from other higher maintenance capex. Higher capex coupled with negative CFO resulted in FCF remaining negative in 2Q17. In 2Q17, BAS’s FCF was -$8.3 million, compared to -$28 million FCF in 2Q16. BAS’s FCF has been negative over the past eight quarters.
In comparison, Halliburton’s (HAL) 2Q17 FCF was -$137 million. National Oilwell Varco’s (NOV) 2Q17 FCF was $106 million while Weatherford International’s (WFT) 2Q17 FCF was -$111 million. Basic Energy Services is 2.0% of the SPDR S&P Oil & Gas Equipment & Services ETF (XES). XES fell 27% compared to a 50% fall in BAS’s stock price from December 30, 2016, to September 22, 2017.
Basic Energy Services’ 2017 capex budget
Basic Energy Services plans to spend $115 million on capex in 2017, which includes capital leases. Of the total capex, $45 million would be in expansion capital and $70 million on sustaining and replacement projects. The 2017 capex is a substantial increase over the 2016 amount, when BAS spent only $32.7 million on capex. BAS typically finances investments through internally generated funds, debt and equity offerings, and borrowing under a senior credit facility.