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Why National Oilwell Varco’s Free Cash Flow Turned Negative in Q1

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Operating cash flows

National Oilwell Varco’s (NOV) cash flow from operating activities (or CFO) turned negative in the first quarter to -$129 million despite 3% higher year-over-year revenues. Adverse changes in working capital led to the fall in CFO.

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NOV’s free cash flow

National Oilwell Varco’s capex decreased 7% in the first quarter over the first quarter of 2017. Despite that, its capex exceeded its CFO. Its free cash flow (or FCF) was -$168 million in the first quarter compared to $69 million in Q1 2017. NOV’s FCF has been negative once in the past six quarters.

NOV’s oilfield services peer U.S. Silica Holdings’ (SLCA) FCF was $5.2 million in the first quarter. In Q1 2017, it was -$43.1 million. Year-over-year, its CFO increased in the first quarter, which more than offset the rise in capex and resulted in FCF improvement.

NOV makes up 3.1% of the SPDR S&P Oil & Gas Equipment & Services ETF (XES). XES provides exposure to the oil and gas equipment and services segment. XES has risen 5.5% in the past year compared to a 24.7% rise in NOV stock during the same period.

Next, we’ll take a look at Tenaris’s (TS) cash flow and capex.

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