Comparing free cash flow growth
In this part, we’ll discuss the FCF (free cash flow) growth for Schlumberger (SLB), Halliburton (HAL), Baker Hughes, a GE company (BHGE), and National Oilwell Varco (NOV). Free cash flow is the CFO (cash flow from operations) less the capital expenditures. For more on the top performing OFS stocks, read The Top 5 Oilfield Companies by Free Cash Flow.
Halliburton’s FCF was positive
Halliburton recorded $523 million in FCF in 9M17. It was a significant improvement compared to 9M16 when Halliburton’s FCF was -$3.4 billion. Led by the revenue rise and changes in working capital, Halliburton’s CFO turned positive in 9M17—compared to a negative CFO in 9M16. So, despite the higher capex, the CFO’s sharp rise led to a free cash flow rise in 9M17.
Schlumberger’s FCF was lower
Schlumberger generated $1.9 billion in FCF in 9M17. Schlumberger’s 9M17 FCF decreased 32% from ~$2.8 billion a year ago. Schlumberger’s CFO decreased 20% in 9M17 over 9M16 due to negative changes in working capital during the same period. Its capex increased, as we discussed in the previous part. The higher capex and lower CFO led to lower FCF in 9M17—compared to 9M16.
National Oilwell Varco was the FCF laggard
National Oilwell Varco generated $384 million in FCF in 9M17. National Oilwell Varco’s 9M17 FCF decreased 34% from a year ago. National Oilwell Varco’s CFO declined 37% in 9M17 over 9M16 due to lower revenues and changes in working capital. Its capex also fell during the same period. However, the lower capex couldn’t offset the lower CFO, which led to lower FCF in 9M17.
Baker Hughes’s negative FCF
Baker Hughes’s 9M17 FCF fell further into the negative territory compared to 9M16 due to its negative and falling CFO in 9M17. In 9M17, Baker Hughes’s FCF was -$1.0 billion. Baker Hughes accounts for 3.8% of the SPDR S&P Oil & Gas Equipment & Services ETF (XES). XES decreased 21% in the past year—compared to a 20% crash in its stock price during the same period.