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Nabors Industries’ Cash Flow Projections for 2018

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Nabors Industries’ operating cash flows

Nabors Industries’ (NBR) cash flow from operating activities (or CFO) deteriorated sharply to -$81.7 million in the first quarter compared to the first quarter of 2017.

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Nabors Industries’ capex and free cash flow

Year-over-year, NBR’s capex decreased 49% in the first quarter. Despite lower capex, negative CFO resulted in free cash flow (or FCF) of -$175.7 million compared to -$241.4 million in the first quarter of 2017. Its FCF has been negative in five of the past six quarters.

Nabors accounts for 2.3% of the VanEck Vectors Oil Services ETF (OIH), which tracks an index of 25 oilfield equipment and services companies. OIH has risen 4.6% in the past year compared to a 21% fall in NBR stock during the same period.

Its oilfield services peer McDermott International’s (MDR) FCF was $18.7 million in the first quarter. In the first quarter of 2017, it was -$14.4 million. Although its CFO decreased in the first quarter compared to a year ago, its capex fell even more steeply for the same period. That resulted in FCF improving in the first quarter over the previous year.

NBR’s free cash flow and capex outlook

In 2018, NBR’s management expects to generate strong annualized cash flows due to the following:

  • expanding US margins and international activity
  • the start of its ultra-deepwater platform drilling rig MODS-400
  • continued growth in its Drilling Solutions segment
  • recovery in its Rig Technologies segment

Next, we’ll take a look at National Oilwell Varco’s (NOV) cash flow and capex.

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