TIDMHTG
RNS Number : 2754R
Hunting PLC
29 June 2020
For Immediate Release 29 June 2020
Hunting PLC
("Hunting" or "the Company" or "the Group")
H1 2020 Trading Update
Hunting PLC (LSE:HTG), the international energy services group,
today issues a pre-close trading update, ahead of its Half Year
Results to be issued on Thursday 27 August 2020.
Highlights
-- Rapid action to address cost base implemented, with
annualised savings of circa.$60m captured;
-- Robust balance sheet retained with net cash, before lease
liabilities, of circa.$44m to $46m anticipated at 30 June 2020;
and
-- Offshore market position strengthened, following acquisition
of Enpro Subsea Limited in February 2020 and asset acquisition of
RTI Energy Systems in August 2019.
Group Summary
As a consequence of the reduction in the WTI oil price in March
2020 caused by the COVID-19 pandemic, coupled with a market share
battle within the OPEC+ group, trading within most of the Group's
businesses has reported a decline during Q2 2020, following modest
trading results in Q1 2020. Underlying EBITDA in the year to date
is expected to be in the range of $22m to $23m, if trading for June
2020 performs in line with expectations.
Management actions to address the Group's cost structure, based
on this trading environment, have included:
i. closure of three distribution centres in North America and
two manufacturing facilities, including Hunting Titan's facility in
Oklahoma City and the US Manufacturing facility at Ramsey Road,
Houston, Texas;
ii. immediate actions to reduce working capital, with a focus on inventory management;
iii. over 50% cut in budgeted capital expenditure with
circa.$22m projected for the full year; and
iv. a 25% reduction in the Group's workforce, as compared to the
end of 2019, with the restructuring largely completed by June. Most
contract workers across the Group's global operations have been
released in the period, with a number of facilities adjusting the
number of daily shifts in accordance with the short to medium term
operating outlook.
Annualised cost savings of these actions are estimated to be
circa.$60m.
Balance Sheet, Funding and Liquidity
The Group's balance sheet remains strong with an expected net
cash position at 30 June 2020, before lease liabilities, in the
region of $44m to $46m. As noted above, reductions to working
capital are underway to generate cash.
Capital expenditure has remained modest with approximately
$11.0m incurred up to the end of June 2020, primarily for projects
started in 2019. Additionally, $11.1m was absorbed on share
purchase related transactions completed in Q1 2020 and $4.9m was
absorbed paying the interim dividend on 15 May 2020. In February
2020, the Group also purchased Enpro Subsea Limited in cash for
$33.0m, excluding costs of $1.2m.
Given the Group's healthy cash position, and current
expectations for the balance of the year, management does not
anticipate drawing down on the Company's $160.0m secured revolving
credit facility at this time. Should the economic downturn
resulting from COVID-19 be protracted and place additional pressure
on liquidity, Hunting continues to have access to this facility, as
and when required, subject to the limits and restrictions imposed
by the existing covenant regime. The facility agreement runs until
December 2022, with an option to extend until December 2023.
COVID-19
The health and safety of the Group's employees is our number one
priority. The global spread of COVID-19 during H1 2020 has provided
many challenges to our operations globally, and led to the
implementation of a range of measures to allow the Group's
facilities to continue operating across the period. As an essential
industry, oilfield service companies have been allowed to remain
open, albeit with social distancing and reduced utilisation levels
to protect the Group's employees. Working from home measures have
also been adopted for personnel who are able to work remotely.
Across the Group's Hunting Titan, US, Canada and EMEA operating
segments, facilities have remained operational throughout H1 2020.
In Asia Pacific, the Group's China facility was shut for five days
in Q1 2020 and in Singapore and Indonesia Hunting's facilities were
subject to reduced utilisation levels where maximum employee
attendance was circa.25%. During Q2 2020, the Group's Singapore,
Indonesia and China facilities returned to utilisation levels of
between 50% and 70%. In June 2020, the Group's US based facilities
also eased a number of operating restrictions to facilitate more
normal shift patterns.
It is anticipated that all of the Group's facilities will be
operating in a more normalised manner for the balance of 2020,
albeit with revised working practices being in place.
Segmental Highlights
Hunting Titan has seen a sales decline of circa.40% during H1
2020 compared to H2 2019, as a result of reduced US onshore
activity levels. Actions to align the business with the lower
outlook for the US onshore market have included headcount
reductions as well as closing a number of manufacturing and
distribution facilities. The business remains focused on developing
technologies that will assist in lowering operating costs for
customers. In the period, Hunting Titan has launched a number of
variants to its perforating systems product portfolio. The segment
reports an increase in the adoption of the EQUA-Frac(TM) shaped
charge system, which continues to report period-on-period increases
in sales. Hunting Titan has also commissioned its detonation cord
manufacturing line located at the Group's Milford Facility during
June 2020, which will increase sales and reduce our costs.
The Group's US segment reported positive results for the first
half of the year, though a decline in trading in June 2020 is
anticipated. The Group's Premium Connections business has reported
continued demand for its major product lines, with offshore focused
products showing some resilience throughout Q2 2020. Within the
Advanced Manufacturing Group, the Hunting Electronics business has
reported a good performance in H1 2020, supported by an increasing
level of non-oil and gas work. Hunting Dearborn has reported stable
results in the period, with aerospace and military work supporting
the business as oil and gas orders declined. The Group's Drilling
Tools and Specialty businesses have been impacted by the decline in
US onshore activity following the record lows in the US rig count.
Hunting's Subsea technologies group, which comprises the Stafford,
RTI and Enpro businesses, have reported positive trading momentum
in the year to date with new offshore orders continuing to be
placed. Highlighting this trend, $20m of new orders have been
received by the RTI business in the year to date for the Gulf of
Mexico.
Hunting's Canada business continues to be impacted by difficult
market conditions, following the decline in the global oil price.
The business has reduced its operations to a two-shift pattern
since March 2020 and reduced contract staff in the period to save
further costs.
Across the Group's EMEA operations, Hunting's UK and Netherlands
OCTG businesses have traded well for the majority of the period, as
demand for chrome-based OCTG remained steady. As the segment
reached the half-year point clients have begun to defer or cancel
orders, given the general market outlook. In the Middle East, the
response to the reduced oil price has led to mixed results with
projects in Oman continuing, and some orders in Iraq being
cancelled.
Hunting's Asia Pacific business was impacted by COVID-19 early
in Q1 2020. The segment has continued to complete orders for Middle
East and Asia Pacific customers and has seen a steady improvement
in sales through Q2 2020 as COVID-19 lock-down measures were
eased.
Commenting on the Group's trading, Jim Johnson, Chief Executive
said:
"I am proud of the performance of our team in what has been an
unprecedented decline in oilfield activity, coupled with the
challenges of COVID-19. We have reacted quickly to the changes in
our market, which has unfortunately resulted in a significant
reduction in the global workforce.
"The continued opening of economies around the world will
support oil prices going forward, which should lead to an improving
financial position for our clients, and spur increased demand for
our products as drilling activity recovers. Depletion rates
continue unabated, and with a growing number of
drilled-but-uncompleted wells, the onshore US region should see
improved activity later in the year."
"We have continued to address the needs of our customers with
the launch of more innovative technology that lower drilling and
completion costs and increase safe operations. Our business is
likely to continue to see volatile trading throughout Q3 2020, but
the Group's cost base has now been recalibrated to current market
conditions, and the strength of our balance sheet ensures we are
well positioned to remain resilient through these challenging
market conditions."
For further information, please contact:
Hunting PLC Tel: +44 (0) 20 7321 0123
Jim Johnson, Chief Executive
Bruce Ferguson, Finance Director
Tarryn Riley, Investor Relations
Buchanan Tel: +44 (0) 20 7466 5000
Ben Romney
Chris Judd
Notes to Editors:
About Hunting PLC
Hunting PLC is an international energy services provider to the
world's leading upstream oil and gas companies. Established in
1874, it is a premium listed public company traded on the London
Stock Exchange. The Company maintains a corporate office in Houston
and is headquartered in London. As well as the United Kingdom, the
Company has operations in Canada, China, Indonesia, Mexico,
Netherlands, Norway, Saudi Arabia, Singapore, United Arab Emirates
and the United States of America.
The Group reports in US dollars across five operating segments:
Hunting Titan; US; Canada; Europe, Middle East and Africa ("EMEA")
and Asia Pacific.
Hunting PLC's Legal Entity Identifier is
2138008S5FL78ITZRN66.
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END
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