Hunting PLC · LSE:HTG
Hunting — H1 2018 Earnings Presentation
21 slides from Hunting's earnings presentation, August 2018
Slide 1: Responding to an Improving Market Environment
RESPONDING TO AN IMPROVING MARKET ENVIRONMENT Hunting Ballistic Release Tool designed for long lateral wellbores typical of shale formations Results Presentation: August 2018 1
Slide 2: Group Summary
Group Summary Responding well to improving market environment Improving financial results supporting a recommencement of dividends Reputation for delivering quality / reliable products under the Hunting brand Strategically focused to deliver shareholder value - Profit margins returning to near
Slide 3: Group Income Statement
Group Income Statement1 US onshore completions market driving results and margins H1) H1) 2018 Margin 2017 Margin $m % $m % Revenue 442.8) 318.1) • Hunting Titan driving growth Gross profit 137.3) 31 70.8) 22 • Margins nearing 2014 levels EBITDA 72.6) 16 11.9) 4 Profit (loss) from operations 53.5) 1
Slide 4: Segmental Results
Segmental Results1 International and offshore markets remain challenging H1 H1 2018 2017 Results from Results from Revenue Operations Revenue Operations $m $m $m $m Hunting Titan 216.7) 57.3) 133.4) 19.1) US 145.8) 7.1) 96.1) (13.4) Canada 21.7) (1.3) 15.8) (1.9) Europe 45.0) (5.6) 47.2) (4.3) Asia
Slide 5: Revenue by Product Grouping
Revenue by Product Grouping Increased revenues with Perforating Systems out-performing H1 H1 2018 2017 $m $m Change OCTG and Premium Connections 123.6 114.8 +8% Perforating Systems 209.4 131.6 +59% Subsea 13.4 9.6 +40% Intervention Tools 22.3 14.5 +54% Drilling Tools 13.1 10.2 +28% Advanced Manufact
Slide 6: Amortisation & Exceptional Items
Amortisation & Exceptional Items Closure of African operations H1 H1 2018 2017 $m $m Amortisation of acquired intangible assets 14.6) 14.6 Closure of African operations - Release of excess provision on Cape Town closure (2.0) - - Provision for closure of Kenyan operations 2.0) - 14.6) 14.6 Results P
Slide 7: Group Balance Sheet
Group Balance Sheet Strength of balance sheet maintained June December 2018 2017 $m $m Property, plant and equipment 365.3) 383.3) • Modest capital spend levels Goodwill and intangible assets 341.1) 355.7) • 80% of Goodwill and intangible assets is Hunting Titan related Working capital 410.0) 344.9)
Slide 8: Working Capital
Working Capital Increase in line with higher activity June December 2018 2017 $m $m Inventories - Raw materials 96.7) 92.2) - Work-in-progress 72.3) 44.7) - Finished goods 153.4) 144.1) 322.4) 281.0) Receivables 217.6) 185.5) Payables (130.0) (121.6) Total 410.0) 344.9) Results Presentation: August
Slide 9: Capital Investment
Capital Investment Investment focused on adding production capacity H1 2018 $m Hunting Titan – capacity increase projects 3.1 US – Drilling Tools – mud motor fleet 2.8 US – Dearborn – plant and machinery 1.2 Other plant and machinery 4.3 11.4 Results Presentation: August 2018 9
Slide 10: Group Cash Flow
Group Cash Flow Working capital pressures being managed H1 H1 2018 2017 $m $m EBITDA 72.6) 11.9) • Strong growth Add: share-based payments 7.1) 7.1) 79.7) 19.0) Working capital (66.2) (31.8) • Inventory and receivables Finance charges (0.4) (1.6) Tax paid (1.4) (0.1) Capital investment (11.4) (4.5)
Slide 11: US Onshore Fundamentals in the Permian
US Onshore Fundamentals in the Permian $2 out of every $10 spent globally on oilfield services and equipment is spent in the Permian, a 50% increase over the 2014 peak Several Hunting Every well drilled has to be perforated and completed to enable production and product lines sold cash generatio
Slide 12: US Onshore Outside of the Permian and It's Not Just Oil
US Onshore Outside of the Permian and It’s Not Just Oil Much industry talk regarding the lack of pipeline capacity within the Permian. As resources get constrained in one area, operators move to where the economics and logistics are more favourable Seeing increases in activity levels across most
Slide 13: US Onshore Outside of the Permian - continued
US Onshore Outside of the Permian - continued Hunting has a network of 21 regional distribution centres – with representation in all of the major basins Hunting Distribution Centres Source: RBC Capital Markets Results Presentation: August 2018 13
Slide 14: Focusing Capital on US Onshore Completions
Focusing Capital on US Onshore Completions Driven by US onshore activity, Hunting Titan sales have increased over 60% since the first half of 2017 To support Hunting Titan, $18.4m of capital expansion projects have been sanctioned - Increase and automate Shaped Charge production at Milford, $11.
Slide 15: Onshore Completion Capital Investment: Power Charge Facility
Onshore Completion Capital Investment Power Charge Facility Capital investment of $2.9m to construct a highly automated power charge manufacturing line with our own patented design replacing charges currently supplied by outside vendors The investment will generate an incremental annual EBIT of
Slide 16: Early Indicators that Offshore Markets are Returning
Early Indicators that Offshore Markets are Returning Offshore markets are seeing an increase in rig utilisation rates: Jack-up rigs are over 66% and Floating rigs are at 68% Current tailwinds in offshore investment should lead to 100 new global FIDs at $100bn in 2018 Positive reports of increa
Slide 17: Regional highlights: North America
Regional highlights: North America US: - Generated profit from operations in the period - Doubled sales of Pressure Control Equipment - Significant increase in AMG orders - Introduced the TEC-LOCKTM semi-premium connection with positive market acceptance - Positive reception of the US Drilling Too
Slide 18: Semi Premium Connections: TEC-LOCK
US Onshore Shale Connection Development TEC-LOCKTM Premium Connections Hunting TEC-LOCKTM connection was designed Expensive Highly for the growing US onshore market for semi- Engineered premium type connections TEC-LOCK Wedge - Most US onshore wells traditionally use low cost, low tech commodity A
Slide 19: US Drilling Tools ENDURANCE-ML (Mud Lube)
US Drilling Tools ENDURANCE-MLTM (Mud Lube) Mud motor performance continues to evolve Conventional designs relied on a sealed bearing configuration: - Prone to seal failure and foreign material entering the tool resulting in performance decline Hunting engineered the ENDURANCE-MLTM mud lube mo
Slide 20: Regional highlights: Europe, Asia Pacific, MENA
Regional highlights: Europe, Asia Pacific, MENA Europe: - Increase in North Sea activity - Introduction of TEK-HUBTM technology collaboration platform fostering new innovative technology companies offering manufacturing facilities and marketing expertise - Successful products to date are: - Grip-G
Slide 21: Summary of Investment Case
Summary of Investment Case Robust financial footing Broad technology based product portfolio focused on the oil and gas industry Modern, well-equipped and geographically well-positioned facilities within global energy markets Financial strength for bolt on technology-focused acquisitions E