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Hunting warns on 2019 profits

Slowdown in October and November could see cash profits fall below expectations
December 18, 2019

Oil and gas services company Hunting (HTG) says it needs a strong performance in December to reach its expected cash profits for the year.

IC TIP: Sell at 387p

Its warning came after October and November saw onshore US clients pulling back spending. The company said activity levels within the North American oil and gas industry continued to slow at an increasing pace, particularly within the US onshore market. 

While Hunting could still achieve cash profit for the year within current market expectations – Bloomberg puts the consensus forecast at $142m (£108m), flat on 2018 – it would require big spending by its clients this month. This seems optimistic given revenue and operating profits for October and November were below the monthly average for the three months to September.

The poor trading news comes after the company had already flagged a drop in performance in the third quarter compared with the first half of 2019 because of the weak shale-related demand, although non-US demand did help prop up revenue. 

Looking to 2020, research house Rystad Energy has forecast another lean year for shale, with investments contracting by 12 per cent. However, Rystad does think the US production profile looks “robust” for the next three years. Hunting’s Titan division, which accounted for 40 per cent of first-half turnover and three-quarters of profit, relies on investment in the shale sector to fuel demand.

Consensus estimates compiled by Bloomberg see Hunting’s 2019 earnings per share at 28.4ȼ, almost half the 2018 level, falling to 26.9ȼ in 2020.