Nabors Industries Case
3. Cash Flow Analysis:
In June 2016, Nabors Industries’ share price was 18% higher than its share price in December 2015. Because Nabors Industries adjusted earnings were negative, Nabors Industries P/E ratio multiple was not meaningful in 2016 because of its negative earnings. Nabors Industries’ PE multiple fluctuated between 2009 and 2014.
Nabors Industries’ cash from operating activities started declining in 2014. NBR generated -$26.5M in CFO in the 3Q17. In comparison, in 3Q16, NBR’s CFO was $68M. A higher working capital requirement as a direct result of higher drilling activity led to deteriorating CFO in 3Q17 versus a year ago.
Nabors Industries capital expenditure rose from -867.1 in 2015 to -395.5 in 2016. A negative CFO, coupled with higher capex, led to negative and deteriorating free cash flow 2016. In 2016, Nabors Industries free cash flow 136.5 compared to -10.6 in 2015. In three of the last 8 years of free cash flows, the free cash flows have been negative on the statement of cash flows. …show more content…
William J. Restrepo, Nabors Industries CFO, commented on the third quarter of 2017 earnings call, “Our longer-term forecast continued to indicate material cash flow generation starting 2018 and ramping up through 2020. Our free cash flow will be allocated primarily to debt reduction.”
Quoted from Simply Wall St,
“The calculations below outline how an intrinsic value for Nabors Industries is arrived at by discounting future cash flows to their present value. These are estimates of cash flows going forward 5 years.”
5-Year Cash Flow Forecast 2017 2018 2019 2020 2021
Levered FCF (USD, Millions) $-431.99 $116.18 $201.84 $254.33 $213.64
Present Value Analyst 9 Analyst 7 Analyst 5 Analyst 3 Extrapolated @ (-16%, capped from
In June 2016, Nabors Industries’ share price was 18% higher than its share price in December 2015. Because Nabors Industries adjusted earnings were negative, Nabors Industries P/E ratio multiple was not meaningful in 2016 because of its negative earnings. Nabors Industries’ PE multiple fluctuated between 2009 and 2014.
Nabors Industries’ cash from operating activities started declining in 2014. NBR generated -$26.5M in CFO in the 3Q17. In comparison, in 3Q16, NBR’s CFO was $68M. A higher working capital requirement as a direct result of higher drilling activity led to deteriorating CFO in 3Q17 versus a year ago.
Nabors Industries capital expenditure rose from -867.1 in 2015 to -395.5 in 2016. A negative CFO, coupled with higher capex, led to negative and deteriorating free cash flow 2016. In 2016, Nabors Industries free cash flow 136.5 compared to -10.6 in 2015. In three of the last 8 years of free cash flows, the free cash flows have been negative on the statement of cash flows. …show more content…
William J. Restrepo, Nabors Industries CFO, commented on the third quarter of 2017 earnings call, “Our longer-term forecast continued to indicate material cash flow generation starting 2018 and ramping up through 2020. Our free cash flow will be allocated primarily to debt reduction.”
Quoted from Simply Wall St,
“The calculations below outline how an intrinsic value for Nabors Industries is arrived at by discounting future cash flows to their present value. These are estimates of cash flows going forward 5 years.”
5-Year Cash Flow Forecast 2017 2018 2019 2020 2021
Levered FCF (USD, Millions) $-431.99 $116.18 $201.84 $254.33 $213.64
Present Value Analyst 9 Analyst 7 Analyst 5 Analyst 3 Extrapolated @ (-16%, capped from