Against the Odds: How Schlumberger Keeps Delivering
Schlumberger’s operating cash flows
Now let’s analyze how Schlumberger’s (SLB) operating cash flows has trended over the past few quarters, staring with how its free cash flows, or FCF, have been affected, given the company’s capital expenditure or capex.
Schlumberger’s CFO (cash from operating activities) decreased by 44% in 4Q15 over 4Q14. SLB generated about $2.2 billion CFO in 4Q15. SLB’s revenues declined in the past one year, leading to the lower CFO.
Schlumberger’s free cash flow
Schlumberger’s FCF has been positive in the past 12 quarters, but SLB’s capex nearly halved during the past year until 4Q15. Still, the lower capex could not offset CFO’s shrinkage, and in effect, FCF decreased by 42% during the past year. In 4Q15, SLB’s FCF was $1.6 billion, compared to the nearly $2.7 billion one year ago.
By comparison, Noble Corporation (NE) saw a 3.5x FCF rise in 4Q15 over 4Q14. Noble is Schlumberger’s lower market-cap peer, generating $367.3 million FCF in 4Q15. Schlumberger makes up 7.8% of the Energy Select Sector SPDR ETF (XLE).
Schlumberger’s capex plans for 2016
In 2016, SLB plans to spend $2.4 billion in capex, excluding SPM investments and multi-client seismic data capitalized. Compared to 2015, capex is expected to remain unchanged. During 1Q16, Schlumberger is obligated to make $500 million cash investment into a new SPM project. SPM (Schlumberger Production Management) projects are typically tied to long-term agreements.
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