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Hunting PLC (HTG)

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Monday 29 June, 2020

Hunting PLC

Trading Statement

RNS Number : 2754R
Hunting PLC
29 June 2020
 

For Immediate Release

29 June 2020

 

 

 

 

 

 

Hunting PLC

 

("Hunting" or "the Company" or "the Group")

 

H1 2020 Trading Update

 

Hunting PLC (LSE:HTG), the international energy services group, today issues a pre-close trading update, ahead of its Half Year Results to be issued on Thursday 27 August 2020.

 

Highlights

 

· Rapid action to address cost base implemented, with annualised savings of circa.$60m captured;

· Robust balance sheet retained with net cash, before lease liabilities, of circa.$44m to $46m anticipated at 30 June 2020; and

· Offshore market position strengthened, following acquisition of Enpro Subsea Limited in February 2020 and asset acquisition of RTI Energy Systems in August 2019.

 

Group Summary

 

As a consequence of the reduction in the WTI oil price in March 2020 caused by the COVID-19 pandemic, coupled with a market share battle within the OPEC+ group, trading within most of the Group's businesses has reported a decline during Q2 2020, following modest trading results in Q1 2020. Underlying EBITDA in the year to date is expected to be in the range of $22m to $23m, if trading for June 2020 performs in line with expectations.

 

Management actions to address the Group's cost structure, based on this trading environment, have included:

 

i.  closure of three distribution centres in North America and two manufacturing facilities, including Hunting Titan's facility in Oklahoma City and the US Manufacturing facility at Ramsey Road, Houston, Texas;

ii.  immediate actions to reduce working capital, with a focus on inventory management;

iii.  over 50% cut in budgeted capital expenditure with circa.$22m projected for the full year; and

iv.  a 25% reduction in the Group's workforce, as compared to the end of 2019, with the restructuring largely completed by June. Most contract workers across the Group's global operations have been released in the period, with a number of facilities adjusting the number of daily shifts in accordance with the short to medium term operating outlook.

 

Annualised cost savings of these actions are estimated to be circa.$60m.

 

Balance Sheet, Funding and Liquidity

 

The Group's balance sheet remains strong with an expected net cash position at 30 June 2020, before lease liabilities, in the region of $44m to $46m. As noted above, reductions to working capital are underway to generate cash.

 

Capital expenditure has remained modest with approximately $11.0m incurred up to the end of June 2020, primarily for projects started in 2019. Additionally, $11.1m was absorbed on share purchase related transactions completed in Q1 2020 and $4.9m was absorbed paying the interim dividend on 15 May 2020. In February 2020, the Group also purchased Enpro Subsea Limited in cash for $33.0m, excluding costs of $1.2m.

 

Given the Group's healthy cash position, and current expectations for the balance of the year, management does not anticipate drawing down on the Company's $160.0m secured revolving credit facility at this time. Should the economic downturn resulting from COVID-19 be protracted and place additional pressure on liquidity, Hunting continues to have access to this facility, as and when required, subject to the limits and restrictions imposed by the existing covenant regime. The facility agreement runs until December 2022, with an option to extend until December 2023.

 

 

COVID-19

 

The health and safety of the Group's employees is our number one priority. The global spread of COVID-19 during H1 2020 has provided many challenges to our operations globally, and led to the implementation of a range of measures to allow the Group's facilities to continue operating across the period. As an essential industry, oilfield service companies have been allowed to remain open, albeit with social distancing and reduced utilisation levels to protect the Group's employees. Working from home measures have also been adopted for personnel who are able to work remotely.

 

Across the Group's Hunting Titan, US, Canada and EMEA operating segments, facilities have remained operational throughout H1 2020. In Asia Pacific, the Group's China facility was shut for five days in Q1 2020 and in Singapore and Indonesia Hunting's facilities were subject to reduced utilisation levels where maximum employee attendance was circa.25%. During Q2 2020, the Group's Singapore, Indonesia and China facilities returned to utilisation levels of between 50% and 70%. In June 2020, the Group's US based facilities also eased a number of operating restrictions to facilitate more normal shift patterns.

 

It is anticipated that all of the Group's facilities will be operating in a more normalised manner for the balance of 2020, albeit with revised working practices being in place.

 

Segmental Highlights

 

Hunting Titan has seen a sales decline of circa.40% during H1 2020 compared to H2 2019, as a result of reduced US onshore activity levels. Actions to align the business with the lower outlook for the US onshore market have included headcount reductions as well as closing a number of manufacturing and distribution facilities. The business remains focused on developing technologies that will assist in lowering operating costs for customers. In the period, Hunting Titan has launched a number of variants to its perforating systems product portfolio. The segment reports an increase in the adoption of the EQUA-Frac™ shaped charge system, which continues to report period-on-period increases in sales. Hunting Titan has also commissioned its detonation cord manufacturing line located at the Group's Milford Facility during June 2020, which will increase sales and reduce our costs.

 

The Group's US segment reported positive results for the first half of the year, though a decline in trading in June 2020 is anticipated. The Group's Premium Connections business has reported continued demand for its major product lines, with offshore focused products showing some resilience throughout Q2 2020. Within the Advanced Manufacturing Group, the Hunting Electronics business has reported a good performance in H1 2020, supported by an increasing level of non-oil and gas work. Hunting Dearborn has reported stable results in the period, with aerospace and military work supporting the business as oil and gas orders declined. The Group's Drilling Tools and Specialty businesses have been impacted by the decline in US onshore activity following the record lows in the US rig count. Hunting's Subsea technologies group, which comprises the Stafford, RTI and Enpro businesses, have reported positive trading momentum in the year to date with new offshore orders continuing to be placed. Highlighting this trend, $20m of new orders have been received by the RTI business in the year to date for the Gulf of Mexico.

 

Hunting's Canada business continues to be impacted by difficult market conditions, following the decline in the global oil price. The business has reduced its operations to a two-shift pattern since March 2020 and reduced contract staff in the period to save further costs.

 

Across the Group's EMEA operations, Hunting's UK and Netherlands OCTG businesses have traded well for the majority of the period, as demand for chrome-based OCTG remained steady. As the segment reached the half-year point clients have begun to defer or cancel orders, given the general market outlook. In the Middle East, the response to the reduced oil price has led to mixed results with projects in Oman continuing, and some orders in Iraq being cancelled.

 

Hunting's Asia Pacific business was impacted by COVID-19 early in Q1 2020. The segment has continued to complete orders for Middle East and Asia Pacific customers and has seen a steady improvement in sales through Q2 2020 as COVID-19 lock-down measures were eased.

 

Commenting on the Group's trading, Jim Johnson, Chief Executive said:

 

"I am proud of the performance of our team in what has been an unprecedented decline in oilfield activity, coupled with the challenges of COVID-19. We have reacted quickly to the changes in our market, which has unfortunately resulted in a significant reduction in the global workforce.

 

"The continued opening of economies around the world will support oil prices going forward, which should lead to an improving financial position for our clients, and spur increased demand for our products as drilling activity recovers. Depletion rates continue unabated, and with a growing number of drilled-but-uncompleted wells, the onshore US region should see improved activity later in the year."

 

"We have continued to address the needs of our customers with the launch of more innovative technology that lower drilling and completion costs and increase safe operations. Our business is likely to continue to see volatile trading throughout Q3 2020, but the Group's cost base has now been recalibrated to current market conditions, and the strength of our balance sheet ensures we are well positioned to remain resilient through these challenging market conditions."

 

For further information, please contact:

 

Hunting PLC

Jim Johnson, Chief Executive

Bruce Ferguson, Finance Director

Tarryn Riley, Investor Relations

 

Tel: +44 (0) 20 7321 0123

Buchanan

Ben Romney

Chris Judd

Tel: +44 (0) 20 7466 5000

 

Notes to Editors:

 

About Hunting PLC

 

Hunting PLC is an international energy services provider to the world's leading upstream oil and gas companies. Established in 1874, it is a premium listed public company traded on the London Stock Exchange. The Company maintains a corporate office in Houston and is headquartered in London. As well as the United Kingdom, the Company has operations in Canada, China, Indonesia, Mexico, Netherlands, Norway, Saudi Arabia, Singapore, United Arab Emirates and the United States of America.

 

The Group reports in US dollars across five operating segments: Hunting Titan; US; Canada; Europe, Middle East and Africa ("EMEA") and Asia Pacific.

 

Hunting PLC's Legal Entity Identifier is 2138008S5FL78ITZRN66.


This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact [email protected] or visit www.rns.com.
 
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