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 two oilfield equipment and services (or OFS) companies as of December 31, 2017, in this article. Read more on Baker Hughes in Market Realist’s Baker Hughes’s 4Q17: An Earnings Hit and a Revenue Miss.
BHGE’s 4Q17 net debt growth was high
As of December 31, 2017, Baker Hughes’s total borrowing was significantly higher compared to a year ago. A year ago, before the Baker Hughes and GE Oil & Gas business merger, BHGE’s cash and marketable securities exceeded its total debt. So, BHGE’s net debt was negative. Following the merger, Baker Hughes incurred substantial total debt, which amounted to ~$8.4 billion as of December 31, 2017. Although its cash and marketable securities increased 6.2x, it could not offset the rise in total debt. As a result, BHGE’s net debt was $1.3 billion as of December 31, 2017. BHGE makes up 3.0% of the SPDR S&P Oil & Gas Equipment & Services ETF (XES). XES fell 32% in the past year compared to a 35% dip in BHGE’s stock price during the same period.
Analyzing net debt for National Oilwell Varco in 4Q17
In 4Q17, National Oilwell Varco’s net debt decreased over 4Q16. In 4Q17, NOV’s total debt decreased 15.6% over a year ago, while its cash and marketable securities remained nearly unchanged during the same period. In effect, net debt decreased 28% as of December 31, 2017, to $1.3 billion compared to the 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.