Hunting Regulatory News (HTG)

Hunting PLC

("Hunting" or "the Company" or "the Group")

H1 2019 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 29 August 2019.

The Group continues to trade in line with management's expectations, with the US onshore completions market improving during the first half of the year, following a cautious start due to the volatility in the WTI oil price during Q4, 2018. Revenue has increased compared to the corresponding period last year, with EBITDA currently expected to be marginally ahead of H1, 2018. The WTI oil price has increased from $45 to $58 per barrel, which has provided some improved stability within the US market, while supporting Hunting's international businesses, including the Group's Asia Pacific and EMEA businesses. These operating segments both reported improved trading in the year to date, however, the Canadian market remains subdued.

Hunting Titan has reported revenue broadly in line with H1, 2018. Operating profits and margins in the period were lower compared to the corresponding period, as a result of management actions to reduce excess inventories coupled with some price rebasing on certain product lines to maintain market share in Q1, 2019. During Q2, 2019, trading performance strengthened, supported by the introduction of new technologies, including the H-2 Perforating System, the T-Set One setting tool and a new power charge offering. Further, the capacity expansion programmes within the segment, which includes automated manufacturing lines for perforating systems and increased/automated energetics production capacity, are now largely complete and expected to make a contribution to production efficiencies going forward.

The Group's US segment has traded ahead of expectations during the period, with demand for Premium and Semi-Premium Connections and Accessories, Advanced Manufacturing and Subsea products all having increased, as broad based market sentiment and demand stabilised in the US and internationally. Hunting Electronics, in particular, has contributed strongly to operating profits as new orders for measurement tool printed circuit boards, coupled with ongoing support to Hunting Titan in the manufacture of addressable switches, has led to the business reporting strong period-on-period profit growth.

In Canada, the general operating environment remains challenging, given the oil and gas production offtake constraints in Alberta, coupled with the government-mandated production slow down for oil and gas companies in the early months of the year, which impacted overall activity. Further, extreme weather in January and February in western Canada also led to oil and gas production ceasing for a short time, which has resulted in the segment reporting an operating loss in the period. Cost cutting initiatives have been implemented during Q2, 2019, which will help narrow losses going forward.

Hunting's newly formed EMEA segment is reporting reduced operating losses in the period as activity in the North Sea and, in particular, the Middle East, has contributed to a good improvement in OCTG business, with sales being recorded in Northern Iraq and Oman.

The Group's Asia Pacific segment has also reported a good increase in activity, with OCTG sales into the Middle East, and Australia leading to a return to operating profit for the segment during the period. Of particular note has been the strong domestic demand in China as conventional and unconventional oil and gas developments continue to grow in the country.

The Group's balance sheet remains strong with a predicted net cash balance at 30 June 2019 in the range of $85m to $90m. As expected, working capital has absorbed some cash during the period on the back of increased activity levels. Trade receivable and trade payable balances have both moved adversely within working capital, whereas inventory levels are expected to be around $340m at the end of June, reflecting a modest reduction compared to the $348.2m reported at 31 December 2018. Capital invested has also remained modest with approximately $22m incurred up to the end of June 2019. Approximately $5.0m has been spent on purchasing shares to partially satisfy future employee share award vestings and $8.3m was absorbed in paying the 2018 final dividend.

Hunting has adopted IFRS 16, Leases, with effect from 1 January 2019. While the net impact on the consolidated income statement is nominal, the Group's consolidated balance sheet at 30 June 2019 recognises approximately $46.5m of lease liabilities. The net cash balance noted above, does not include these lease liabilities.

Overall the Board is comfortable with the current market consensus for the full year 2019. While there are some encouraging signs in the US segment and increased activity levels in the North Sea and Middle East, we continue to acknowledge the potential impact of a volatile oil price on markets and activity levels coupled with cash spend disciplines exercised by our clients to stay free cash-flow positive and within budget. Management will continue to provide regular trading updates with the next being the Group's Half Year Results announcement.

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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 six operating segments: Hunting Titan; US; Canada; Europe, Middle East and Africa ("EMEA"); Asia Pacific and Exploration and Production.

Hunting PLC's Legal Entity Identifier is 2138008S5FL78ITZRN66.