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Linking TechnipFMC’s Margin to Upstream Operators’ Capex

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TechnipFMC’s EBITDA margin

From 2Q17 to 3Q17, TechnipFMC’s (FTI) EBITDA (earnings before interest, tax, depreciation, and amortization) margin (or EBITDA as a percentage of revenues) fell from 13.7% to 10.1%. An EBITDA margin is a measure of a company’s operating earnings.

TechnipFMC makes up 1.0% of the Vanguard Energy ETF (VDE). From September 29, 2017, to November 8, 2017, VDE rose 2% compared to a ~4% rise in FTI stock for the same period.

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Upstream operators’ capex 

From 2Q17 to 3Q17, 20 of the top upstream companies by market capitalization in the SPDR S&P Oil & Gas Exploration & Production ETF (XOP) increased their capex (capital expenditure) by 21% in aggregate, as you can see in the above graph.

EBITDA margin for FTI’s peers

Basic Energy Services’ (BAS) EBITDA margin was 9.7% in 3Q17. Schlumberger’s (SLB) EBITDA margin was 22.7% in 3Q17, while Patterson-UTI Energy’s (PTEN) EBITDA margin was 24.5%.

Rig count

As of the week ended November 3, 2017, the US rig count was 898, which was 4% lower than the count on September 29, 2017. The international rig count, on the other hand, rose 2% in October 2017 compared to the previous month. Acceleration or deceleration in the rig count could affect FTI’s revenues and earnings growth in 4Q17.

Next, we’ll take a look at TechnipFMC’s net debt.

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