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Schlumberger and Halliburton’s Free Cash Flow in 1Q18

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Free cash flow 

In this part, we’ll discuss Schlumberger (SLB) and Halliburton’s (HAL) FCF (free cash flow) growth. FCF is the CFO (cash flow from operations) less the capex.

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Schlumberger’s 1Q18 FCF was lower

Schlumberger’s FCF was $114 million in 1Q18—excluding Schlumberger’s capex on SPM (Schlumberger Production Management) investments and multiclient seismic data capitalized. Schlumberger’s 1Q18 FCF decreased 59% from ~$275 million the previous year. Schlumberger’s CFO decreased 13% in 1Q18—compared to 1Q17. Despite higher year-over-year revenues, negative changes in working capital led to lower CFO generation in 1Q18. The lower CFO and increased capex led to the lower FCF in 1Q18.

Schlumberger accounts for 3.6% of the iShares Global Energy ETF (IXC). IXC tracks an index composed of global equities in the energy sector. The oil and gas equipment and services sector accounts for 7.4% of IXC. IXC increased 9% in the past year—compared to a 4% fall in Schlumberger’s stock price during the same period.

Halliburton’s FCF increased in 1Q18

Halliburton’s FCF was $71 million in 1Q18—a sharp turnaround compared to its FCF of -$260 million in 1Q17. Led by a sharp rise in the revenue, Halliburton’s CFO increased steeply in 1Q18—compared to 1Q17. In 1Q17, Halliburton’s CFO was lower due to a $335 million payment related to the Macondo oil spill incident. Although Halliburton’s capex increased in 1Q18, it couldn’t offset the rise in the CFO, which led to the FCF improvement in 1Q18.

To learn more about the oilfield equipment and services industry, read The Oilfield Equipment and Services Industry: A Primer.

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