Nabors Industries’ operating cash flows
Nabors Industries’ free cash flow
NBR’s capital expenditure (or capex) rose 45% in the past year up to 3Q17. So a negative CFO, coupled with higher capex, led to negative and deteriorating FCF in 3Q17 versus 3Q16. In 3Q17, NBR’s FCF was -$160 million, compared to -$24 million FCF a year ago. In seven of the past 13 quarters, Nabors Industries’ FCF had been negative.
FCF comparison with peers
Tesco Corporation (TESO) generated -$8 million in FCF in 3Q17. Oceaneering International’s (OII) FCF was $8 million in 3Q17. Fairmount Santrol Holdings’ (FMSA) 3Q17 FCF was $31 million. Nabors Industries is 0.09% of the iShares North American Natural Resources ETF (IGE). IGE fell 4% in the past year, compared to a 57% fall in NBR’s stock price.
What are NBR’s capex and cash flow outlook?
In 2017, NBR expects to spend between $500 million and $550 million in capex, which would be approximately 29% higher than its 2016 capex. William J. Restrepo, NBR’s CFO, commented on the 3Q17 earnings call, “Our longer-term forecast continued to indicate material cash flow generation starting 2018 and ramping up through 2020. Our free cash flow will be allocated primarily to debt reduction.”