Hunting soars on back of energy boom

Oilfield equipment and services company Hunting (HTG) swung back into cash profitability for 2022 as oil and gas prices soared, and the value of its order book more than doubled in the year to 31 December, to $473mn (£395mn). 

The company beat forecasts for its cash profit and sales, but missed forecasts on operating profit ($2mn against RBC Capital Markets’ forecast of $11.6mn) due to legal fees and a goodwill writedown. 

The order book indicates strong sales for this year as well, but the US sector has held back from opening the spending taps fully. The Baker Hughes rig count for February showed a slowdown is already under way this year in the US onshore sector, with a decline of seven rigs in the week to 24 February, although the count is still 103 higher than a year ago at 753. Gas rigs make up around a fifth of total rigs. 

Hunting chief executive Jim Johnson said there would be some weakness in the US onshore gas sector to come, but “in the long term I think the gas business in North America is going to be very strong”. He also highlighted the growth in subsea spending across the Americas and Asia. ExxonMobil is building one of the world’s biggest oilfields in Guyana, and Hunting is providing titanium stress joints. 

The company’s divisions are spread across the US onshore sector (Hunting Titan), the offshore industry (subsea) and a collection of businesses outside the oil and gas space. Titan saw a 40 per cent uptick in sales in 2022, while the North America division (effectively non-Titan services and equipment sales) grew the same amount. Profitability remains a challenge, though – both these divisions shifted into the black, but North America only managed a $1mn profit and Titan $10mn. 

On top of the 2022 results, Hunting released a new set of goals for 2030. Number one for investors is a 15 per cent Ebitda (earnings before interest, tax, depreciation and amortisation) margin goal. This was last reached in 2018 and, since then, the company has struggled with consistency.

Johnson said focusing on the more-profitable offshore business would help hit this target, as well as “getting the resources in place to benefit from all the government support that is going on in transitional energy plays as it relates to geothermal and carbon capture”. Carbon capture is hardly proven on either commercial or environmental levels, but for Hunting the opportunity is in the building, not the performance of the technology. 

The company is right to focus on the offshore market and its perhaps cynical approach to carbon capture will stand it in good stead as spending ramps up. Buy. 

Last IC View: Buy, 261p, 25 Aug 2022