Operating cash flow represents cash flow from a company’s core operations. In 3Q17, Transocean’s (RIG) cash flow from operations rose to $384 million from $319 million in the previous quarter.
Transocean’s capex stood at $128 million in 3Q17. The expenditure was mainly related to the company’s contracted newbuild drillships. In 2Q17, its capex was $136 million. In its 3Q17 conference call, Transocean gave its capex guidance. In 4Q17, the company expects its capex to be $125 million, of which $110 million is expected to be associated with newbuilds and $15 million expected to go towards maintenance and other capital expenditure. In 2018, the company anticipates its capex to be $140 million, with $75 million going towards newbuild capex and $65 million towards maintenance capex.
Free cash flow
In 3Q17, Transocean’s capex was lower than its cash flow from operations, which left the company with positive cash flow. The company had positive free cash flow in 2016, like peers Ensco (ESV), Atwood Oceanics (ATW), and Noble (NE). Diamond Offshore Drilling (DO) had negative free cash flow.
In early October, Transocean accessed the debt market and issued $750 million in senior secured notes with 2026 maturity. The company received new proceeds of $742 million, of which the company plans to use $550 million to repay 2017 and 2018 debt maturities. The remaining amount will be reserved for the Songa acquisition.
Transocean has reduced its net debt by 25% since June 2016, and maintained a cash balance of more than $2 billion. The company ended the third quarter with liquidity of $5.7 billion, which includes a $3 billion undrawn revolving credit facility.