Hunting hikes revenue guidance as US shale boom rumbles on
Hunting expects stronger full year revenues and a "modest" pre-tax profit thanks to continued strong levels of US onshore oil drilling.
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The FTSE 250 energy services company has grown revenues each quarter growth through 2017 and, with no disruption from the hurricane season, has now pencilled in $700m for the full year, around $50m better than previously indicated.
Having returned to positive EBITDA in the first half, the group has generated $33m in the nine months to 30 September as revenues rise and management control spending and costs.
A modest pre-tax profit is expected before charges for intangible asset amortisation and any exceptional items, though there are no exceptional items recorded thus far.
In the first half of the year the group cut underlying losses 82% to $9.1m on revenues up 40% to $318.9m as it cited increased confidence in onshore operators in onshore, tight, or shale oil - though it acknowledged that this was a major contributor to the persisting global oversupply concerns that was keep pressure on oil prices and therefore also on wider drilling activity.
Net debt increased to roughly $15m as a result of the increase in revenues and the resultant working capital build up, though as capital expenditure is being tightly controlled, year end there is expected to be a positive net cash position.
Looking at performance by division, businesses focusing on offshore and international drilling markets remain subdued, though losses are narrowing thanks to tight cost management, with the upside all coming from businesses focused on US onshore drilling, with Hunting Perforating Systems and Hunting Specialty making strong contributions.
The Premium Connections, Trenchless and European OCTG businesses were said to have "supported the group's positive performance", while Electronics "is seeing an improved trading environment", partly driven by activity levels in the major US shale basins.
Hunting shares surged almost 7% to 488.2p by 0930 BST on Tuesday.
Broker Canaccord Genuity reckoned the group had a particularly strong September, with activity levels in the perforating gun systems business Titan particularly strong.
"We expect these strong activity levels to continue into October. We are upgrading our forecasts for this year to a small net profit, and making some upgrades to later years," Canaccord said, noting the drop-through from revenues into EBITDA is typically around 40%.
"We continue to believe that the recovery in the oil industry is taking hold, and current oil prices suggest that there is likely more to go for."