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Analyzing Schlumberger’s Indebtedness after 3Q17

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Nov. 20 2020, Updated 3:51 p.m. ET

Schlumberger’s net debt

A company’s net debt is its aggregate short and long-term debt less cash and cash equivalents. Schlumberger’s (SLB) net debt rose 16% in 3Q17—compared to 3Q16. Its net debt was ~$12.2 billion in 3Q17. Compared to 2Q17, Schlumberger’s net debt fell 3%. Read Which Oilfield Service Stocks Look Attractive in 4Q17? to learn more about top oilfield services companies’ debt.

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Schlumberger’s debt

Schlumberger’s total debt fell ~19% in 3Q17—compared to 3Q16. Cash and marketable securities fell 54% during the same period. In effect, the net debt increased in the past year. In April 2016, Schlumberger acquired Cameron International and paid Cameron’s shareholders $2.8 billion in cash. It reduced Schlumberger’s cash balance in the past two years, while its net debt rose 73% from 1Q16 through 3Q17.

Schlumberger’s indebtedness

Schlumberger’s net debt-to-trailing 12-month EBITDA (earnings before interest, tax, depreciation, and amortization) was ~7x in 3Q17. The net debt-to-EBITDA ratio (or indebtedness) rose in 3Q17—compared to 3Q16, primarily due to a sharp decline in the EBITDA. Schlumberger accounts for 2.9% of the SPDR S&P Oil & Gas Equipment & Services ETF (XES). XES fell 21% in the past year and outperformed the 24% fall in Schlumberger’s stock price during the same period.

Net debt for Schlumberger’s peers

Flotek Industries’ (FTK) indebtedness was $35.6 million in 3Q17. Nabors Industries’ (NBR) net debt was $3.7 billion in 3Q17, while Weatherford International’s (WFT) net debt was ~$7.5 billion. Read Will Nabors Industries’ Weak Run Continue? to learn more.

Next, we’ll discuss Schlumberger’s free cash flows.

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