Hunting reports rise in earnings, flags some cash challenges

Oil services provider Hunting said in a trading update on Wednesday that it had surpassed expectations for first-quarter EBITDA, which rose to $28.9m from $22.4m a year earlier, although it was facing challenges in managing its cash position.

The FTSE 250 company reported a healthy sales order book, which stood at $544m, with a robust tender pipeline for new OCTG orders.

Moreover, the OCTG and subsea product groups saw a strong first quarter, surpassing management's expectations.

The advanced manufacturing business also delivered a positive quarter, benefiting from a favourable mix of energy and non-oil and gas sales.

However, the perforating systems segment experienced a slower start to the year, primarily due to soft US onshore markets.

Management was still optimistic about the outlook for the second half, however, with international activities set to drive new drilling initiatives.

Despite the positive momentum in key operational metrics, the company said it faced challenges in managing its cash and bank-borrowings position, which stood at -$33.6m at the end of the first quarter.

The board put the figure down to the impact of new orders, which drove higher inventory and receivables.

However, it said it was confident in the company’s ability to effectively manage its working capital and navigate the challenges.

Looking ahead, Hunting maintained its full-year guidance, targeting EBITDA within the range of $125m to $135m, with an EBITDA margin of 12% to 13%.

It also anticipated an EBITDA-to-free cash flow conversion rate of 50% for the full year, driven by increased EBITDA and robust working capital management strategies.

“The year has started positively for the group, with first quarter results marginally ahead of management's expectations, and well ahead of the first quarter 2023 result, which demonstrates the continued growth momentum of the group,” said chief executive officer Jim Johnson.

“Our OCTG, subsea and advanced manufacturing product groups are continuing to see strong momentum as offshore and international activity remains robust.

“While perforating systems has had a slow start to the year, the second half is likely to see stronger activity as increased LNG exports in the US drive natural gas demand.”

Johnson said it was “particularly pleasing” to see the firm’s first quarter EBITDA result surpass the last quarter of 2023, given the strong result delivered in the prior quarter, with subsea being a standout performer.

“2024 is likely to be a further year of growth for the industry driven by geopolitical and macroeconomic factors.

“Therefore, management remains confident of delivering its current EBITDA guidance, given the broad-based strength of the global oil and gas sector.”

At 0816 BST, Hunting shares were down 3.73% at 344.65p.

Reporting by Josh White for Sharecast.com.