At year end, Schlumberger had a war chest of $4.4 billion in cash and short-term investments. This alone could pay off all of the company’s $3.9 billion in debt. Schlumberger is also extremely liquid with cash and investments minus debt at $1.2 billion against $731 million for 1998. Debt to equity is lower than the peer group at around 50%. But the best thing about Schlumberger financially is that it generated $318 million in free cash flow in 1999. Free cash flow could be used to buyback stock, make acquisitions, fund future operations, pay down debt, etc.
Halliburton, though not as liquid as Schlumberger, still has $466 million cash on hand. Debt to equity is 54 percent. Halliburton is less leveraged than its peer group. Overall, Halliburton is solid financially but it could improve upon its cash flows. Until it does, the company will probably find it necessary to fund some of its future operations through new debt.
Baker Hughes (BH) has very little cash on hand - only $16.9 million although the company has sufficient funds to cover liabilities. Debt to equity is high at 92 percent. BH is weak financially, though the company generated $541 million in operating cash flow in 1999, interest on debt is eating into earnings. Unless BH can generate more significant cash flow in the future and pay down current debt, the company will have to continue to rely on external financing to fund future endeavors.
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