Business Overview

Hunting PLC is a global provider of specialised energy services and products, with a particular focus on precision-manufactured components and technology used in the oil and gas sector. The company’s product portfolio spans precision-machined components used in well construction, downhole tools, perforating systems, premium connections for tubulars, advanced Manufacturing services and a growing portfolio of products supporting energy transition applications. Hunting operates manufacturing facilities across the United States, the United Kingdom, the Netherlands, Mexico, Singapore and the Middle East, providing global reach to serve major energy customers.

Hunting has been actively reshaping its portfolio toward higher-Margin, higher-value products and services. The OCTG premium connections business, the perforating systems business and the advanced manufacturing capabilities represent particularly strong growth platforms. In addition, the company has been expanding into adjacent sectors including subsea, geothermal, hydrogen and carbon capture and storage, broadening its addressable market and reducing dependence on traditional oilfield drilling activity. The combination of specialist technical capabilities, global manufacturing footprint and growing exposure to energy transition applications supports our positive view.

Sector Backdrop

The global energy services sector is experiencing a sustained recovery, supported by multi-year underinvestment in Upstream development during the 2014-2020 downturn and increased upstream activity in response to supportive Commodity prices. International and offshore drilling activity, in particular, has been recovering strongly, with major operators committing to multi-year development programmes. This benefits specialist service and product providers like Hunting that have global reach and exposure to international upstream markets. Demand for premium connections, perforating systems and advanced manufacturing services has been robust across multiple regions.

Beyond traditional oil and gas, demand from energy-transition adjacent sectors including geothermal, hydrogen, carbon capture and offshore wind has been growing. Many of the specialist manufacturing capabilities developed by Hunting for oilfield applications translate well to these emerging markets, providing additional growth optionality. As the energy transition progresses, the convergence of upstream oil and gas technology with emerging clean-energy applications provides opportunities for established service providers with broad technical capabilities. Hunting is well positioned to participate in this evolution.

Investment Thesis

Our Buy view on Hunting PLC is built on four pillars. First, the company has reshaped its portfolio toward higher-margin, higher-value products and services, supporting margin expansion as activity scales. Second, the global manufacturing footprint and specialist technical capabilities provide a competitive moat that is difficult to replicate. Third, the order book has been recovering strongly, supported by international upstream development activity and growth in adjacent end-markets including subsea and energy transition applications. Fourth, Hunting has a strong Balance Sheet with low Leverage, providing significant flexibility for both organic growth investment and selective acquisitions.

Combined, these factors create a compelling proposition. The international and offshore upstream cycle remains in a multi-year recovery phase, providing a sustained demand backdrop. The portfolio reshaping toward higher-value products and services means that Revenue growth should translate into stronger margin and Earnings growth. The expansion into adjacent end-markets provides additional growth optionality and reduces dependence on traditional oilfield activity. With Hunting trading at reasonable valuation multiples relative to its earnings recovery and growth potential, we believe the Equity offers attractive risk-reward.

Energy Market Exposure

Hunting’s revenue is primarily exposed to global upstream oil and gas activity, with significant weight toward international and offshore markets. Within this, the largest exposures include precision components for OCTG premium connections used in completion of high-specification wells, perforating systems used in well completions, and advanced manufacturing services supporting subsea, drilling and completion equipment. Geographic exposure spans North America, Europe, the Middle East, Asia and Latin America, providing Diversification across multiple regional dynamics.

Increasingly, the company also has exposure to adjacent markets including subsea infrastructure, geothermal drilling, hydrogen handling and carbon capture and storage. These markets, while currently a smaller portion of total revenue, provide growth optionality and reduce dependence on traditional drilling activity cycles. The blend of traditional upstream services and growing adjacent-market exposure supports a balanced through-cycle revenue profile and provides multiple paths for Long-term Growth.

Growth Drivers and Strategic Initiatives

Several growth drivers underpin our positive view. The international and offshore upstream recovery is the most significant near-term driver, with multi-year development programmes supporting sustained demand for premium connections, perforating systems and other specialist products. The Middle East and Asia-Pacific markets are particularly important, with major upstream investment programmes underway. Hunting’s established presence in these markets provides a Competitive Advantage.

In the US market, Hunting continues to be a leading provider of perforating systems and other completion products. While shale activity has been more cyclical, the underlying market remains substantial and the company has maintained a strong competitive position. The OCTG premium connections business, with manufacturing capacity in the US and abroad, is well positioned to benefit from a multi-year recovery in international well completions.

On the technology side, Hunting continues to invest in product development, including next-generation perforating systems, advanced premium connections and digitalisation of equipment. The expansion into subsea applications represents an important growth platform, with significant order intake from major subsea infrastructure projects. The growing exposure to geothermal, hydrogen and carbon capture applications provides additional medium-term optionality. Combined, these growth platforms provide multiple paths to revenue and earnings growth.

Operational Highlights

Hunting has demonstrated strong operational performance, with significant improvements in order intake, revenue and margins as the upstream cycle has recovered. Manufacturing capacity has been ramping to meet growing demand, with operational efficiency improvements supporting margin expansion. The portfolio reshaping has been progressing, with higher-margin businesses growing as a share of total revenue. The Subsea business, in particular, has been a strong contributor to order intake, supported by major deepwater infrastructure projects.

Cost discipline has been maintained throughout the recovery, with management focused on operational leverage as revenue scales. Capital-management/">Working Capital Management has been an area of focus, with initiatives to improve cash conversion. Safety and operational metrics have remained strong across global manufacturing facilities. The overall operational platform is well positioned to support continued growth as the upstream cycle progresses.

Financial Performance

Hunting’s financial performance has reflected the impact of the recovery in international upstream activity, growing contributions from higher-margin businesses and ongoing portfolio reshaping. Revenues have been growing strongly, EBITDA margins have been expanding and free Cash Flow has been improving. The order book has reached multi-year highs, providing visibility on future revenue. The company has used surplus cash to invest in growth, fund a progressive Dividend and maintain a strong balance sheet.

The balance sheet remains in robust shape, with low net Debt or a net cash position depending on the timing of working capital movements. This provides significant flexibility for continued investment in organic growth, selective acquisitions and Shareholder returns. Reserve metrics are not applicable for a services and products company, but order book visibility provides a useful equivalent indicator of forward earnings potential. The combination of revenue growth, margin expansion and balance-sheet strength provides a compelling financial profile.

Capital Allocation and Returns

Hunting’s capital framework prioritises a strong balance sheet, disciplined investment in organic growth, a progressive dividend and selective acquisitions. The company has a track record of progressive dividend payments through varying market conditions, with payments supported by free cash flow generation. The strong balance sheet provides flexibility to pursue selective bolt-on acquisitions that strengthen technical capabilities or expand market reach. With order book growth supporting forward earnings visibility, the framework is well positioned to deliver sustainable shareholder returns over time.

For income-oriented investors, the progressive dividend provides a useful component of total return. While the Yield is more modest than some pure-play E&Amp;P names, the combination of dividend income and earnings growth potential provides a balanced total-return proposition. The company has indicated that as cash flow scales, capital framework considerations will continue to evolve to balance growth investment with shareholder returns.

Valuation Perspective

Hunting trades at reasonable multiples relative to its earnings recovery, order book and growth potential. On forward price-to-earnings, EV-to-EBITDA and free-cash-flow yield bases, the equity screens attractively against UK and international energy services peers. The valuation reflects market caution around the energy services sector and uncertainty about the pace of the upstream cycle, but it does not fully reflect the quality of the portfolio reshaping, the strength of the order book or the growth optionality from adjacent markets. As earnings continue to recover and the higher-margin portfolio becomes more visible, we expect the valuation to re-rate.

Sum-of-the-parts analysis highlights significant value in the Subsea business, the premium connections business and the growth optionality from energy-transition adjacent markets. The strong balance sheet provides additional support, and the progressive dividend policy provides ongoing income to shareholders during the re-rating process.

Key Risks

Risks include a downturn in upstream oil and gas activity, particularly in international and offshore markets; cyclical pressure on equipment and services demand; competitive dynamics in specialist manufacturing markets; project execution risk on large subsea and infrastructure projects; raw material and Supply chain cost Inflation; currency exposure given the global manufacturing footprint; and the broader risk that the pace of the energy transition affects long-term oil and gas activity levels. The diversified portfolio, strong balance sheet and growing exposure to adjacent end-markets help mitigate these risks but do not eliminate them.

Specific to Hunting, the perforating systems business in the US is particularly sensitive to North American shale completion activity, which can be volatile. The Subsea business, while growing strongly, is dependent on continued investment in deepwater infrastructure projects, which can be lumpy in timing. Investors should be prepared for variability in quarterly results given the project-based nature of much of the business.

Comparative Position in the Sector

Within the global energy services peer group, Hunting stands out for the combination of specialist technical capabilities, diversified product portfolio, global manufacturing footprint and balance-sheet strength. Compared with broader oilfield services providers, Hunting offers more focused exposure to higher-margin specialist products and services with stronger technical differentiation. Compared with smaller specialist providers, the company benefits from greater scale, broader geographic reach and stronger balance-sheet resilience. Compared with pure-play subsea or perforating companies, Hunting’s diversified portfolio reduces dependence on any single product line.

These attributes position Hunting as a particularly well-balanced participant in the energy services recovery and energy-transition adjacent growth opportunity. The combination of cyclical recovery in international offshore activity and structural growth in adjacent markets including subsea infrastructure, geothermal and hydrogen provides a dual demand driver that few peers can match. For investors seeking quality energy services exposure with both cyclical and structural growth drivers, Hunting offers a compelling profile.

Conclusion

Hunting PLC combines a reshaped portfolio toward higher-margin specialist energy products and services, a global manufacturing footprint, a recovering and diversifying order book, and a strong balance sheet. The shares offer a combination of cyclical recovery, structural margin expansion and growth optionality that is, in our view, compelling for investors seeking energy services exposure. We assign a Buy rating, reflecting our confidence in the company’s ability to deliver continued earnings growth, capture additional value from energy-transition adjacent markets and reward shareholders through a balanced combination of dividends and earnings growth.