Halliburton’s net-debt-to-EBITDA
Halliburton’s (HAL) net-debt-to-adjusted-TTM (trailing 12-month) EBITDA (earnings before interest, tax, depreciation, and amortization) multiple increased from 4Q14 through 2Q16. In 2Q16, the multiple was ~3.5x, or 333% higher than the previous year. Its EBITDA has been adjusted for nonrecurring charges such as impairment and merger and integration charges.
Net-debt-to-adjusted EBITDA reflects how easily a company can repay its debts from its operational earnings and available cash. Oceaneering International’s (OII) net debt at the end of 1Q16 was $429 million, compared to HAL’s at $9.8 billion. HAL makes up 0.33% of the iShares Core US Value (IUSV).
Halliburton’s indebtedness
In 2Q16, Halliburton’s total debt increased 65% compared to the previous quarter, while its cash and marketable securities increased only 13%. Net debt, in effect, nearly doubled during the same period. HAL’s adjusted EBITDA was cut by more than half as the energy sector continued to cave under weak prices. So HAL’s net-debt-to-EBITDA skyrocketed in 2Q16.
Halliburton’s liquidity and Macondo-related payment obligations
In 2Q16, Halliburton mandatorily redeemed $2.5 billion of debt in conjunction with the April 1, 2016, termination of the Baker Hughes transaction. With the debt redemption and a $3.5 billion merger termination fee paid to Baker Hughes, HAL ended up with ~$3.2 billion in cash and marketable securities at the end of 2Q16.
In addition, HAL has ~$3 billion available under its revolving credit facility. So its liquidity stood at more than $6 billion on June 30, 2016. The company expects to pay $367 million in 2016 in connection with the Macondo well-related incident, which took place in 2010.
Halliburton’s operating cash flows and capex
In this part of the series, we’ll see how Halliburton’s (HAL) operating cash flows have trended over the past few quarters. We’ll also see how its free cash flow (or FCF) was affected given its capex (capital expenditure).
Halliburton’s cash from operating activities (or CFO) turned negative in 2Q16 compared to 2Q15. Its CFO was -$3.6 billion in 2Q16. The negative CFO was mainly driven by a $3.5 billion termination fee paid to Baker Hughes in 2Q16.