Cash from operations
Now that we’ve looked at Diamond Offshore Drilling’s (DO) revenue, costs, and EBITDA (earnings before interest, tax, depreciation, and amortization), let’s look at its cash from operations. Let’s see how its capital expenditure affected its free cash flow.
A company’s operating cash flow is comprised of cash flow from its core operations. For the first nine months of 2017, Diamond Offshore had cash flow from operations of $366 million compared to $491 million in the same period of the prior year.
For the first nine months of 2017, Diamond Offshore incurred $100 million in capex (capital expenditure), mainly related to rig equipment and replacements. The company didn’t incur any capex related to the construction of rigs. That lowered its capex significantly from $598 million in the same period last year. The company doesn’t have any newbuilds in its pipeline. It expects its 2017 capex to be $125 million.
Free cash flow
Diamond Offshore’s capex for the first nine months of 2017 was lower than its cash flow from operations, which left the company with a positive cash flow. Looking at the company’s 2017 capex estimates, it could remain in positive free cash flow at the end of the year. For the past three years, it had a negative free cash flow. In 2016, Ensco (ESV), Transocean (RIG), Atwood Oceanics (ATW), and Noble Corporation (NE) all had positive free cash flows.