Hunting sales surge despite shale weakness

Oil and gas equipment company Hunting (HTG) reported a surge in orders and sales for the first half, driven by heavier spending in Asia, the Middle East and South America. The only blemish was flat performance at its North American shale business, Hunting Titan, as lower gas prices and mergers in the space caused a development slowdown.

The company reported a cash profit of $49mn (£38mn), on a margin of 10 per cent. Hunting’s long-term goal is to get that to 15 per cent. Chief executive Jim Johnson said gross margins on oil country tubular goods (OCTG), which means piping and similar products, had already hit record levels, and was confident of pushing up that cash profit margin further. 

The North America division, which covers sales in the region not counted as part of the Titan and subsea units, saw sales go from $123mn a year ago to $191mn. The biggest gains were in the Asia Pacific region, where sales almost tripled to $87mn. The order book in that region soared to $176mn from $33mn a year ago. 

There was still a cash outflow in the period of $40mn, despite the strong increase in sales, which was largely down to an $86mn working capital outflow. 

Hunting is keen to do more than just surf the waves of the oil and gas industry and will lay out a diversification plan next month. Investors might need more immediate action – the shares fell 10 per cent in reaction to the half-year results, possibly in disappointment the recently raised guidance was not beaten significantly. We are more optimistic than those selling and think the current share price weakness doesn’t reflect the ex-Titan strength of the business. Buy. 

Last IC View: Buy, 332p, 2 Mar 2023