In this series, we’ll compare Schlumberger (SLB) and Halliburton (HAL), two of the largest oilfield equipment and services (or OFS) companies by market cap. We’ll look at their balance sheet strength, market indicators, as well as relative valuation multiples. We’ll start our discussion by comparing these companies’ net debt in 4Q17.
Comparing debt profiles
Net debt is total debt less cash, cash equivalents, and short-term marketable securities. We’ll analyze net debt for our set of OFS companies as of December 31, 2017, in this article. Read more on Schlumberger in Market Realist’s Schlumberger: What to Expect after Strong 4Q17 Earnings.
SLB’s 4Q17 net debt growth was high
As of December 31, 2017, Schlumberger’s total borrowing decreased 7% over a year ago. SLB’s cash and marketable securities decreased 45% during the same period, which more than offset the fall in total debt. In effect, net debt increased 27% in 4Q17 over 4Q16. Compared to 3Q17, SLB’s net debt increased ~7% in 4Q17. SLB makes up 3.3% of the SPDR S&P Oil & Gas Equipment & Services ETF (XES). XES fell 21% in the past year compared to an 11% dip in SLB’s stock price during the same period.
Analyzing net debt for Halliburton in 4Q17
In 4Q17, Halliburton’s net debt increased marginally over 4Q16. In 4Q17, HAL’s total debt decreased 12% over a year ago, while its cash and marketable securities decreased 42% during the same period. In effect, net debt increased 3% as of December 31, 2017, compared to net debt as of December 30, 2016.
In the next article, we’ll look at dividend growth and dividend yields for our select set of OFS companies.