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



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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