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Extraction Oil & Gas: Lowest Normalized Free Cash Flow

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Extraction Oil & Gas’s normalized FCF in 2017

As we discussed in Part 1, Extraction Oil & Gas (XOG) had a normalized FCF (free cash flow) of -345% in 2017—the lowest among the upstream producers in the US. To learn more about our ranking and filtering criteria, read Part 1. In this part, we’ll discuss Extraction Oil & Gas’s quarterly FCF and quarterly normalized FCF trends.

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FCF trend

For fiscal 2017, Extraction Oil & Gas reported a negative FCF of -$1.1 billion, which is much larger than its negative FCF of -$760 million in 2016. In 2017, Extraction Oil & Gas’s quarterly FCF remained negative and didn’t show a clear trend.

Normalized FCF trend

In fiscal 2017, Extraction Oil & Gas’s normalized FCF improved to -345% in 2017 from -653% in 2016. The improvement in the normalized FCF could be due to the higher OCF (operating cash flow) in 2017 due to the steep increase in production. However, Extraction Oil & Gas’s OCF is still much smaller compared to its growth-oriented large capital expenditures. In 2017, Extraction Oil & Gas reported production growth of 73% compared to 2016.

Extraction Oil & Gas’s OCF increased from $116 million in 2016 to $317 million in 2017. The company’s capital expenditures increased from $876 million in 2016 to $1.4 billion in 2017.

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From 1Q17 to 4Q17, Extraction Oil & Gas’s quarterly normalized FCF remained in the negative territory. On a sequential basis, the company’s quarterly normalized FCF showed a mixed trend. Extraction Oil & Gas’s quarterly normalized FCF improved in 1Q17 and 2Q17 but deteriorated in 3Q17. The company’s quarterly normalized FCF improved in 4Q17.

Stock performance in 2018

Year-to-date in 2018, Extraction Oil & Gas stock has fallen 26.3%. The Energy Select Sector SPDR Fund (XLE), which represents an index of stocks across the energy sector, decreased 6.1%. Crude oil (USO) has risen 4.9% in 2018.

Next, we’ll discuss Gulfport Resources’ (GPOR) FCF trends.

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