uploads/2018/04/Top-Cover-page-1.jpg

The Top 5 Oilfield Companies by Net Debt-To-Equity Ratio

By

Updated

Net debt-to-equity ratios

In this series, we’ll analyze the top five OFS (oilfield equipment and service) companies by net debt-to-equity ratio in fiscal 2017. We’ve excluded offshore drillers and selected OFS companies with a market capitalization over $100 million. Net debt-to-equity ratios, calculated by dividing net debt by stockholder equity, measure financial leverage. Net debt is short- and long-term debt minus cash and equivalents.

Article continues below advertisement

Net debt-to-equity ratios represent the level of risk associated with a company’s funding. Typically, the lower the ratio, the less financial risk. A negative value could mean that the company has net cash (its cash and equivalents exceed its debt) or negative equity. This series will focus on the least leveraged companies, meaning they have net cash.

Top five OFS companies

  • Dril-Quip (DRQ) had the lowest net debt-to-equity ratio as of December 31, 2017, and ranks at the top of our chart on the OFS industry. DRQ designs, manufactures, sells, and services drilling and production equipment for upstream energy producers across various applications.
  • RPC (RES) had the second-lowest net debt-to-equity ratio as of December 31, 2017. RES operates through its Technical Services and Support Services segments. The company provides a range of oilfield services and equipment for upstream producers.
  • Tenaris (TS), which provides seamless and welded steel tubular products to energy upstream companies and other industrial customers, had the third-highest net debt-to-equity ratio.
  • Oil States International (OIS) ranks fourth in the top five list. OIS, through its Well Site Services and Offshore/Manufactured Products segments, provides specialty products and services to upstream energy companies.
  • Baker Hughes, a GE company (BHGE), ranks fifth on the list. On July 3, 2017, BHGE was formed by combining Baker Hughes with GE (GE) Oil & Gas. For a comparison of BHGE with OFS industry peer National Oilwell Varco (NOV), read How Baker Hughes and National Oilwell Varco Stack Up after 4Q17.

Industry comparison

All five OFS companies but Baker Hughes had negative net debt-to-equity ratios as of December 31, 2017. In comparison, the average net debt-to-equity ratio in the OFS industry was 0.44. This figure excludes Weatherford International (WFT), which had negative stockholder equity in 2017.

Advertisement

More From Market Realist