- Two principals buy in as oil services market remains under pressure
- Conditions in the US onshore segment do not indicate a quick recovery
Hunting (HTG) reached a 16-year low this month, thanks to its reliance on the onshore US oil and gas industry, to which it sells parts and services. This has been the hardest hit part of the sector given the higher cost production and storage limitations of the region. The valuation is now well below its 30 June working capital balance of $429m (£331m), at £229m.
Investor pessimism comes from the oil price staying low and the squeezed balance sheets of US onshore producers. Last year was considered a tough year for the producers, so the price crash in March hit extra hard. In response, Hunting mothballed one plant and shut another permanently, and let go over 600 workers to cut costs in the first half. This is a sizeable number for a company of around 2,200 people.
Despite the challenges and massive fall in value, the dividend has returned - pushing the yield to almost 3 per cent – while Hunting has held onto a net cash position of $5.5m as of 30 June. It impaired inventory to the tune of $33m.
It is perhaps with these factors in mind that chief executive Jim Johnson and finance director Bruce Ferguson bought 50,000 and 14,000 shares each respectively, in the first week of October. Mr Johnson paid 122p a share, making his new stake worth £61,000, while Mr Ferguson paid 122.6p.
Hunting’s state will be clearer after it releases a September quarter trading update on 27 October. Barclays analyst Mick Pickup flagged possible inventory discounts as a further problem, although said the share price was “covered” up to a 50 per cent drop. In the half-year results, the company impaired its inventory value by $33m because of the weaker market. The company has had better results from its subsea division, although those contracts have also fallen.
Consultancy Rystad Energy forecast global offshore spending commitments at $34bn for 2020, down from $101bn in 2019. Onshore is in even worse shape, falling to $19bn from $89bn, although Rystad sees a strong recovery in 2022 to over $100bn. Conditions in the US do not indicate a quick recovery for the onshore industry and therefore Hunting’s key Titan division. At 140p, Hunting could be a steal, and the bosses might have picked the bottom. But there could also easily be more pain to come given circumstances out of the company’s hands. Sell.
Last IC view: Sell, 189p, 27 Aug 2020
Buys | ||||||
Company | Director/PDMR | Date | No. of shares | Price (p) | Aggregate value (£) | Comments |
Admiral Group | Geraint Jones (cfo) | 5 Oct 20 | 193 | 2,692 | 5,196 | |
Anglo American | Marcelo Bastos | 10 Oct 20 | 500 | 1,859.4 | 9,297 | |
Harworth | Katerina Patmore (cfo) | 8 Oct 20 | 11,212 | 89.2 | 10,001 | |
Harworth | Lynda Shillaw (ce - elect) | 12 Oct 20 | 52,545 | 95 | 49,760 | |
Headlam Group | Philip Lawrence | 8 Oct 20 | 11,184 | 266.7 | 29,822 | |
Hunting | Bruce Ferguson (fd) | 6 Oct 20 | 14,000 | 122.6 | 17,164 | Holding 101,835 shares |
Hunting | Jim Johnson (ce) | 6 Oct 20 | 50,000 | 122 | 61,000 | Holding 367,629 shares |
Kromek | Rakesh Sharma | 8 Oct 20 | 178,454 | 11.2 | 19,987 | Holding 1,611,473 shares (1.88 per cent) |
Naked Wines | Nicholas Devlin (ce) | 9 Oct 20 | 8,250 | 420 | 34,650 | |
Naked Wines | Nicholas Devlin (ce) | 12 Oct 20 | 2,030 | 438.8 | 8,907 | Holding 65,480 shares (0.09 per cent) |
Next Fifteen Communications | Richard Eyre (ch) | 9 Oct 20 | 5,000 | 492.1 | 24,606 | Holding 20,000 shares (0.13 per cent) |
Power Metal Resources | Ed Shaw | 9 Oct 20 | 1,000,000 | 1.3 | 12,985 | |
Power Metal Resources | Paul Johnson (ce) | 9 Oct 20 | 1,000,000 | 1.3 | 13,010 | SIPP - Holding 59,000,000 shares (7.21 per cent) |
Quixant | Jon Jayal (ce) | 12 Oct 20 | 4,191 | 119 | 4,987 | |
Quixant | Jon Jayal (ce) | 12 Oct 20 | 4,156 | 120 | 4,987 | Holding 383,547 shares |
River and Mercantile | James Barham (ce) | 8 Oct 20 | 12,900 | 152.4 | 19,665 | Holding 178,454 shares (0.05 per cent) |
River and Mercantile | Simon Wilson (cfo) | 8 Oct 20 | 6,314 | 157.4 | 9,938 | |
Rolls-Royce | George Culmer | 9 Oct 20 | 8,760 | 227 | 19,885 | |
Silence Therapeutics | Iain Ross (ch) | 9 Oct 20 | 9,750 | 410 | 39,975 | SIPP - Holding 54,443 (0.07 per cent) |
Silence Therapeutics | David Lemus | 9 Oct 20 | 1,250 | 400 | 5,000 | Holding 6,876 shares (0.01 per cent) |
Silence Therapeutics | James Ede-Golightly | 9 Oct 20 | 3,000 | 409 | 12,270 | Initial stake |
Silence Therapeutics | Dr. Giles Campion | 9 Oct 20 | 4,945 | 404 | 19,978 | Holding 14,945 shares (0.02 per cent) |
Stagecoach | Lynne Weedall | 12 Oct 20 | 12,000 | 38.8 | 4,654 | |
Tesco | Simon Patterson | 8 Oct 20 | 70,423 | 211.2 | 148,719 | |
TP ICAP | Richard Berliand (ch) | 9 Oct 20 | 25,000 | 229.3 | 57,330 | |
TP ICAP | Nicolas Breteau (ce) | 9 Oct 20 | 10,000 | 230 | 23,000 |
Sells | ||||||
Company | Director/PDMR | Date | No. of shares | Price (p) | Aggregate value (£) | Comments |
Anpario | Karen Prior (fd) | 8 Oct 20 | 74,751 | 400 | 299,004 | Holding 74,751 shares (0.3 per cent) |
Gamma Communications | Andrew Stone | 5 Oct 20 | 12,000 | 1,650 | 198,000 | |
Gamma Communications | Andrew Stone | 5 Oct 20 | 88,000 | 1,656 | 1,457,293 | Holding 600,601 shares (0.6 per cent) |