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Analyzing Baker Hughes’s Net Debt-To-Equity

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BHGE’s net debt

In 2017, net debt for Baker Hughes, a GE company (BHGE) was $1.4 billion, rising 176% from its net debt of -$1.6 billion in 2016. While Baker Hughes was nearly debt-free before the merger with GE Oil & Gas, its long-term debt is now ~$6.3 billion and its short-term debt is $2.0 billion. As of December 31, 2017, BHGE had cash and marketable securities of $7.0 billion, and ~$3.2 billion of BHGE’s cash and equivalents were held by foreign subsidiaries. Despite having higher cash and equivalents, BHGE’s net debt turned positive in 2017 due to its total debt rising.

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BHGE’s shareholder equity

Between 2016 and 2017, Baker Hughes’s shareholder equity rose 210% due to a $7.4 billion cash contribution received from GE and $24.8 billion in Class A common stock being issued following its acquisition by GE.

BHGE’s net debt-to-equity ratio

BHGE’s positive net debt led to its net debt-to-equity ratio turning positive in 2017, switching from -0.12x to 0.03x. BHGE’s net debt-to-equity ratio has been negative in only one of the past five years. BHGE accounts for 5.6% of the iShares US Oil Equipment & Services ETF (IEZ), which tracks an index composed of US equities in the oil equipment and service sector. In the past year, IEZ has fallen 24%, whereas BHGE has fallen 32%.

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