WTI (Feb) $76.57 +$2.65, Brent (Mar) $79.76 +$2.84, Diff -$3.19 +19c
USNG (Feb) $3.99 +28c,  UKNG (Feb) 117.25p +4.35p, TTF (Feb) €47.275 +€3.15

Oil price

Oil kept on rising yesterday still on the back of US sanctions hitting a bigger proportion of internationally traded crude oil that initially thought. Today it is a bit weaker as the Doha talks between Israel and Hamas are reputedly going well….of course they are.

Hunting

Hunting has today issued a year-end trading update ahead of announcing its 2024 Final Results on Thursday 6 March 2025. 

All financial data noted below remains subject to audit.

Highlights 

• Solid strategic progress in respect of the Hunting 2030 Strategy, with key milestones delivered within OCTG and Subsea product groups.
• 2024 trading and financial outturn in line with previous guidance and market expectations, with EBITDA in the range of $123-$126m. Group revenue is expected to be in the range of $1,040-$1,050m.
• EBITDA margin of c.12% is likely to be reported for the year, up from 11% in 2023, as anticipated.
• Strong cash generation delivered in Q4 2024, with total cash and bank / (borrowings)1 at the year-end expected to be $100-$105m, ahead of the guidance provided in October 2024.
• Following a record order book performance in H1 2024, Hunting’s sales order book closed the year at c.$500m following the conversion of large orders into revenue throughout H2 2024. This order book will be completed through 2025 and into 2026 and supports the Group’s anticipated continued EBITDA growth.
• Market conditions, while volatile through Q4 2024, appear more stable in the US with the Henry Hub natural gas price nearing $4 per mmBtu at the close of the year, further underpinned by likely improvements to industry support with the newly elected US administration.
• Continued growth in 2025 with EBITDA expectations being in the range of c.$135-$145m, driven by the Group’s strong order book, and a material cost savings programme, with the higher end of range coming from the expected more positive market conditions in North America.
• 2025 guidance does not include any earnings accretive acquisitions, for which we are in active discussions, nor does it reflect an active tender pipeline, which may contribute further to full year 2025 performance.

Jim Johnson, Chief Executive of Hunting, commented:
“I would like to thank the Hunting team for delivering another year of strong growth, with firm progress towards a number of the key 2030 strategic objectives that we identified at our Capital Markets Day, namely positive growth of revenue, EBITDA, margins, cash and bank and continued diversification of our service offering and revenue streams.

“This growth has been delivered against a challenging industry backdrop through 2024, particularly in North America, which saw lower than expected activity due to depressed gas prices. Pleasingly, these challenges are beginning to subside with the natural gas price in the US ending the year strongly, which will likely lead to more drilling in the US and Canada, which will be further supported by the new US administration.

“2025 should, therefore, deliver a further year of growth and with strong acquisition opportunities, a healthy balance sheet, and a robust cost cutting programme that includes the consolidation of our EMEA operations, our profits and returns should continue to advance in the year ahead.”

It didn’t take long for Hunting to shake off the sackcloth and ashes for the handbags and the glad rags and today sees a welcome, and predicted return to, if not outright laughter then with a sweet smile on its face. Today we see that EBITDA will be in line with guidance of $123-126m with more than a billion dollars of revenue and margins showing welcome growth at 12% (11%).

On the margin front, where I have constantly been at the bullish end of the market, given primarily positive views on progress made into modern more sophisticated products and indeed sectors in which Hunting are now operating things are better. 

Indeed, ‘management notes that the OCTG and Subsea product groups have delivered EBITDA margins well in excess of the target of 15% published at the Company’s Capital Markets Day (“CMD”) in September 2023′. Add to that, and in line with my views ‘The Advanced Manufacturing product group has reported further progress in margin during 2024, while the Perforating Systems product group will likely report low-single digit margin’. 

The order book is some $500m at the year end which includes a huge amount of conversion of the order book in the first half of last year and demonstrates quite how successful the company has been, albeit in some extra special markets but proves that the risk was always worth taking. Add to that the ‘tendering activity continues to be positive across our key regions of operation with opportunities in North and South America, the Middle East, and Asia Pacific’ and you get setting for the future which is highly positive.

Going forward I’m still confident that there is much growth to come from Hunting, they have a big order book with a great deal of long term tendering, they are guiding for 2025 some $135-145m of EBITDA. A return to  growth in the North American market is looking likely as Trump 2.0 is likely to help although I’m still more bullish about conversion of tenders to orders in the hot area of the book.

Finally, these excellent comments might indeed slip through to shareholder returns and whilst the company seems happy with the dividend at the moment they interestingly say ‘when assessing any opportunity, the Group has a disciplined capital allocation policy. In line with this policy, the Group also regularly considers if additional shareholder returns are appropriate’.

I am as happy as one can be with Hunting, I didn’t hear the management call as the IR didn’t say it was coming and it wasn’t a real one with management talking to analysts, if i’ve been dropped from that I will be mad! Hunting is in great shape and it remains the best in class and worth a lot more than even today”s bounce has put it.

The only fly in the ointment, which I record with huge embarrassment is the restructuring of the company’s EMEA division which is being caused by ‘the low levels of future drilling activity anticipated in the North Sea’ and in a company with a fine world wide portfolio and where I have historically visited its huge operations to service Aberdeen and the UKCS is a sad day. Another way that only our Government, with its shameful and over eager reliance on net zero, without consideration that industry is already reshaping its carbon profile in its own back yard for a competitive and cleaner-than-most industry with its workforce which is amongst the best in the world. 

2024 Full Year Trading Summary

Trading in Q4 2024 remained in line with management’s expectations and with the guidance issued in October 2024, with EBITDA anticipated to be in the range of $123-$126m for the full year. EBITDA margin is likely to be c.12%.

Working capital has reduced since Q3 2024, to close the year at c.$360m driven by lower inventory and improved receivables collections. Capital investment will total c.$32m for the full year.f

EBITDA to Free Cash Flow conversion is likely to be c.110% for 2024, with year-end total cash and bank / (borrowings)1 now anticipated to be above the previous guidance at $100-$105m, supported by the accelerated receivables programmes and discounted letters of credit used during H2 2024.

As noted in October 2024, the carrying values of the Hunting Titan operating segment are being assessed for impairment, with management expecting to book a reduction in carrying value as an adjusting item.

Delivery of Hunting 2030 Strategic Milestones

Hunting has delivered a number of strategic milestones during the year, with a strong operational performance from the Group’s OCTG and Subsea product groups, and further growth from the Advanced Manufacturing and Other Manufacturing product groups. As noted in the Q3 2024 Trading Update, the operating performance of the Perforating Systems product group has been below 2023 during the year due to the lower US onshore rig count and average price for natural gas.

Management notes that the OCTG and Subsea product groups have delivered EBITDA margins well in excess of the target of 15% published at the Company’s Capital Markets Day (“CMD”) in September 2023. The Advanced Manufacturing product group has reported further progress in margin during 2024, while the Perforating Systems product group will likely report low-single digit margin. 

Free Cash Flow has improved significantly in the year, with a c.110% conversion to EBITDA. The working capital to revenue ratio is also likely to be c.30%, which is better than the CMD target.

Capital Allocation

The Group has considerable balance sheet strength, and we continue to pursue value accretive opportunities to grow and diversify our portfolio in line with the strategic goals outlined at Hunting’s CMD.

When assessing any opportunity, the Group has a disciplined capital allocation policy. In line with this policy, the Group also regularly considers if additional shareholder returns are appropriate.

The Group’s dividend distribution ambitions remain on track.

EMEA Restructuring and Cost Savings

As announced separately today, the Directors have taken the decision to restructure the Group’s EMEA operating segment, given the low levels of future drilling activity anticipated in the North Sea.

The Directors reiterate the strong outlook for the global oil and gas industry; and recognise that its operating footprint needs to align with future activity, which will likely focus on North and South America, the Middle East, Africa and Asia Pacific out to 2030.

A review of sales, general and administration costs is also underway.

In total, management plans to eliminate up to c.$10m of costs in the year, the majority of which being from the restructuring of the EMEA operating segment, noted above.

Further information on this initiative will be reported at the Company’s 2024 Final Results, on Thursday 6 March 2025.

2025 Full Year Trading Guidance

Following a record order book in H1 2024, the Group’s sales order book continued to be strong with a year-end position of c.$500m following the conversion of large orders into revenue in H2 2024. Tendering activity continues to be positive across our key regions of operation with opportunities in North and South America, the Middle East, and Asia Pacific.

Management continues to pursue earnings accretive bolt-on acquisitions that are focused on subsea opportunities, which remains a robust end-market to the end of the decade. Active discussions are underway with a number of targets, in line with the Hunting 2030 Strategic ambitions. Following the securing of the new banking facilities, as detailed in the October 2024 update, the Company has total liquidity2 of c.$400m, as of today’s date, available to pursue this focused growth initiative.

As noted above, in addition to the organic growth in the business, a programme of cost savings and restructuring is underway underpinning the EBITDA guidance for the full year 2025 of $135-$145m.

Free Cash Flow conversion continues to be an area of focus for the Group, with management anticipating an EBITDA to free cash flow conversion of c.50%. Year-end total cash and bank / (borrowings)1 are targeted to be $135-$145m.

Hunting also today announced a major restructuring of the Group’s EMEA operating segment.

As noted in today’s trading update, which has been released separately, the Directors announce that a major restructuring of Hunting’s operating presence across the EMEA operating segment has commenced following a detailed review of the outlook for the Group’s European operations, which has taken into account the confirmation of the tax regime of the UK North Sea oil and gas industry and the parallel strategy of the UK government to decarbonise its energy supply.

The segment currently operates from seven operating sites in the UK, the Netherlands, Norway, Saudi Arabia and the UAE. Given the market and trading outlook in Europe, and the previously announced consolidation in the Netherlands where Hunting’s well testing manufacturing and assembly business is being transferred to Dubai, the Directors have now decided to extend the restructuring to align the Group’s cost base to the medium-term outlook for the region. 

Total cost savings to the Group, as separately announced, are likely to be in the region of up to c.$10 million, including a contribution from a review of sales, general and administration costs.

Original article   l   KeyFacts Energy Industry Directory: Malcy's Blog