Hunting to tap investors for more cash

In a trading update for the third quarter, the FTSE 250 company reported that revenues had stabilised after the declines seen in the first and second quarters.

Its underlying loss from operations was reduced by about 23%, when compared to the second quarter, thanks to cost cuts and improved trading within its perforating systems and specialty manufacturing businesses.

Certain businesses reported increased enquiry levels; however, market sentiment for its customers is “likely to remain uncertain in the short term”, Hunting said.

Nonetheless, the company maintained its guidance for the full-year outturn.

Barclays and Deutsche Bank are to be joint bookrunners and corporate brokers for placing, with admission of the new shares expected on 31 October.

Given the improvement in the price of West Texas Intermediate crude oil and in the US rig count, the company believes that some of its businesses have reached the bottom of the market and will return to growth, courtesy of improving onshore activity in the US, while offshore deepwater and international drilling activity remains subdued in the short term.

During the downturn, Hunting took steps to manage its cost base, improve operating efficiencies and reduce net debt such as reducing its headcount by 46%, which resulted in savings of $97m and lowering inventory from $381.8m to $277m.

Chief executive Dennis Proctor said: "Hunting's perforating systems and specialty manufacturing businesses have reported improvements in trading, particularly from onshore activities, during the last quarter which indicates that certain areas of our customer base are committing to investment in new projects."

The company said it was “mindful that while the overall outlook for the group remains subdued, it is important to capitalise on the localised areas of market recovery in order to preserve and enhance its competitive position” by, in the short term, monetising its inventory position in order to release additional capital to fund the business, targeting a reduction in the value of its inventory from $288.9m to about $260m.

Even so, management deemed that a placing was in the best interests of the company so as to boost its balance sheet flexibility and reduce its gearing.

The company also negotiated revised banking terms with its lending group about its revolving credit facility which will remain unchanged following the placing.

Shares in Hunting were down 5.4% to 480.10 at 0945 BST.