Hunting Plc (LON: HTG)

Business Overview
Hunting Plc (LON: HTG) provides services to upstream oil and gas companies. The company manufactures premium, tools and components required to extract hydrocarbons across the oil and gas well.

Financial Highlights – FY 2019
For the financial year 2019, the company’s revenue increased to $960 million as compared with the previous year (2018: $911.4 million), driven by an increase in OCTG and Premium Connections (up 29%), Advanced Manufacturing (up 6%), and Subsea (up 46%). The increase in revenue was also driven by an improvement in the US, EMEA (Europe, Middle East and Africa), and the Asia Pacific regions. The underlying EBITDA stood at $139.7 million. The ROCE for 2019 stood at 8%, a decrease of 1% against 9% in 2018. Before lease liabilities, the net cash increased to $123.1 million against the previous year (31 December 2018: $61.3 million). The Board has proposed a final dividend per share of 6 cents. The company has initiated a share buy-back programme of 2 million shares with a cash cost of $8 million.

Share Price Performance  

Daily Chart as on 5^thMarch 2020, before the market closed (Source: Thomson Reuters)

On March 5, 2020, at the time of writing (before the market close, at 1:40 PM GMT), Hunting Plc shares were trading at GBX 301.6, down by 0.39 per cent against the previous day closing price. Stock's 52 weeks High and Low are GBX 657/GBX 283. 

From the technical standpoint, 14 days-Relative Strength Index of the stock is hovering near the oversold zone, which is strengthening the upside move.

Valuation Methodology

*Peers: John Wood Group Plc, TechnipFMC Plc, Akastor ASA and Saipem SpA

*Currency exchange rate taken for 1 USD = 0.7739 GBP.
 
Conclusion
The gas and oil industry are evolving at an ever-faster pace and Hunting's portfolio of services and products, as well as new technology introduced in the year, continue to meet this changing market. RTI (RTI Energy Systems Inc.) and Enpro (Enpro Subsea Limited) were acquired for cash and reflect the ability to move swiftly to secure bolt-on businesses. The company has initiated a share buyback programme, and this programme is the first time in history. The impact of the coronavirus continues to be assessed by the Asia Pacific businesses, given the continuing restrictions in place in China. For 2020, the outlook stays uncertain. In spite of this uncertainty, Hunting stays in a good position to deliver shareholder value with its robust financial footing and balanced portfolio of products.

Based on the decent prospects and supported by valuation as done using the above method, we have given a “Buy” recommendation at the current price of GBX 294.80 (as on 5th March 2020 at 9:06 AM GMT) with lower double-digit upside potential based on 11.78x NTM P/E (approx.) on FY20E EPS (approx.)

Hurricane Energy Plc (LON: HUR)

Business Overview
AIM-listed Hurricane Energy Plc is a United Kingdom-based oil production and exploration company, which mainly focused on naturally fractured basement reservoirs. It was founded in 2005. The company operate a portfolio of contiguous offshore licences on the United Kingdom Continental Shelf, West of Shetland.

Recent News
On 27^th February 2020, the company announced that Alistair Stobie had resigned as Chief Financial Officer of the Company. Richard Chaffe would replace him as an Acting Chief Financial Officer.

Operational Update (As on 6^th February 2020)
The GWA (Greater Warwick Area) Partners (comprising Hurricane GWA and Spirit Energy) seek regulatory consent from the Oil and Gas Authority to delay the abandonment of the Lincoln Crestal Well in order to obtain interference data during well testing in 2020.

Hurricane is focussed on drilling an additional production well on Lancaster in 2020 with a first oil date in around Q1 2022.

Trading and Operational Update (as on 29th January 2020)
The company provides its first quarterly production update, and an operational and trading update ahead of its results for the financial year 2019. The result will be released on 19th March 2020. In the third quarter of 2019, the Lancaster EPS production of oil was 15,400 barrels per day. In Q4 FY19, the Lancaster EPS production of oil stood at 11,800 barrels per day. In the financial year 2019, the production was 3 million barrels of oil and oil sales stood at 2.9 million barrels of oil. The company’s revenue for the year ended 31st December 2019 was $170 million.

Share Price Performance  

Daily Chart as on 5^thMarch 2020, before the market closed (Source: Thomson Reuters)

On March 5, 2020, at the time of writing (before the market close, at 1:40 PM GMT), Hurricane Energy Plc shares were trading at GBX 15.61, down by 2.74 per cent against the previous day closing price. Stock's 52 weeks High and Low are GBX 64.70/GBX 13.94. 

From the technical standpoint, 14 days-Relative Strength Index of the stock is hovering near the oversold zone, which is strengthening the upside move.

Valuation Methodology

*Peers: Genel Energy Plc, EnQuest Plc, Zoetic International Plc and Ascent Resources Plc

*Currency exchange rate taken for 1 USD = 0.7739 GBP.

Conclusion
On 13th December 2019, the company announced that Hurricane's 2020 work programme has been amended with the P1368 licence extension, which will include the terms of the 205/26b-14 (Lincoln Crestal) well suspension approval and the drilling of one or more appraisal wells on Lincoln. The company is also exploring numerous options to drill an extra Lancaster production well in the year 2020 to allow for the full utilisation of the Aoka Mizu FPSO's (Floating production storage and offloading vessel’s) throughput capacity and to deliver dynamic data from another part of the Lancaster reservoir.

In the Lancaster EPS, the company’s start-up has gone very well, with the production of 2019 surpassing the guidance. The company has also had a robust head start to the year 2020, with the six Well test ongoing on Lancaster, providing steady production. The two-well production return is imminent. For the Lancaster EPS wells, the company’s production performance is above the base case anticipations, and it stays on target to deliver an update at the Capital Markets Day in March 2020. Hurricane remains focussed on providing returns to shareholders. The company is looking attractive and is in the growth phase and provide opportunities for long term investment.
Based on the decent prospects and supported by valuation as done using the above method, we have given a “Speculative Buy” recommendation at the current price of GBX 15.01 (as on 5th March 2020 at 15:00 PM GMT) with lower double-digit upside potential based on 2.49x NTM P/E (approx.) on FY20E EPS (approx.)
 
 
*All forecasted figures have been taken from Thomson Reuters.

Disclaimer

PLEASE BE ADVISED THAT YOUR CONTINUED USE OF THIS SITE OR THE INFORMATION PROVIDED HEREIN SHALL INDICATE YOUR CONSENT AND AGREEMENT TO THESE TERMS.
References to ‘Kalkine’, ‘we’, ‘our’ and ‘us’ refer to Kalkine Limited.
This website is a service of Kalkine Limited. Kalkine Limited is a private limited company, incorporated in England and Wales with registration number 07903332.
The article has been prepared for informational purposes only and is not intended to be used as a complete source of information on any particular company. Kalkine is not responsible for material posted on this website and does not guarantee the content, accuracy, or use of the content in this site. No advice or information, whether oral or written, obtained by you from Kalkine or through or from the service shall create any warranty not expressly stated.
Kalkine do not offer financial advice based upon your personal financial situation or goals, and we shall NOT be held liable for any investment or trading losses you may incur by using the opinions expressed in our publications, market updates, news alerts and corporate profiles. Kalkine does not in any way endorse or recommend individuals, products or services that may be discussed on this site. You should discuss your portfolios and the risk tolerance level appropriate for your personal financial situation, with a professional licensed financial planner and adviser.