Hunting Plc (LON: HTG)

Business Overview
Hunting Plc 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.

Recent News
On 19^th March 2020, the company announced that it had purchased 241,958 ordinary shares on 18^th March 2020 as the part of the company's share buyback programme to purchase up to 2 million ordinary shares. Now the buyback programme had completed. The Company had repurchased total of 2 million ordinary shares at an average purchase price of 208.4669 pence per share.

Financial Highlights – Financial year 2019 (USD Million)
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, Advanced Manufacturing, and Subsea. The increase in revenue was also driven by an improvement in financial performance of 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. 
 
Share Price Performance  

Daily Chart as on 31^stMarch 2020, before the market closed (Source: Thomson Reuters)

On March 31, 2020, at the time of writing (before the market close, at 9:18 AM GMT), Hunting Plc shares were trading at GBX 188.14, up by 5.70 per cent against the previous day closing price. Stock’s 52 weeks High and Low are GBX 657.00/GBX 148.90. 

Valuation Methodology

*Peers: Petrofac Ltd, Tullow Oil Plc, Genel Energy Plc, ADES International Holdings Plc, John Wood Group Plc, Polarcus Ltd and Premier Oil Plc.
*Currency exchange rate taken for 1 USD = 0.8119 GBP.
 
Conclusion
The group introduced new technologies and techniques to upgrade its portfolio of services and products to meet the requirements of faster pace gas and oil industry. The company acquired Enpro (Enpro Subsea Limited) and RTI (RTI Energy Systems Inc.) for cash shows the ability to expand operations quickly. The company has initiated a share buyback programme, and this programme is the first time in history. The group’s Asia Pacific business impacted due to outbreak of COVID-19, as it put trade restrictions in the Chinese region.

For 2020, the outlook stays uncertain. Despite 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 “Speculative Buy” recommendation at the closing price of GBX 178 (as on 30th March 2020), with lower double-digit upside potential based on 6.90x NTM Price/Earnings (approx.) on FY20E Earnings per share (approx.).

Premier Oil Plc (LON: PMO)

Business Overview
Premier Oil Plc is a London, United Kingdom-based multinational oil and gas exploration and production company. 

The group will announce its trading and operational update on 12^th May 2020.

Trading Update (as on 13^th March 2020)
On 13th March 2020, Premier Oil released an update for trading related to market volatility. The company’s assets performed well with a production of 76.6 kboepd in February end, and production guidance for full year is expected to be in between from 70 kboepd to 75 kboepd. The group has hedged around 30 per cent of its oil and gas entitlement production for FY2020 at $60/bbl of an average oil equivalent price. The company has decent liquidity with undrawn facilities of around USD 330 million and unrestricted cash of USD 135 million in February end.The group’s management is in discussions to reduce the capex programme in 2020 and has suggested savings and deferrals of USD 100 million can be achieved with the reductions. With the assumption of reducing USD 100 million from capex 2020 and oil price of $35/bbl for the remaining year, the company expect its cash flow to be neutral in FY2020 excluding the positive cash flows from potential disposal proceeds or the proposed UK acquisitions.

Share Price Performance

Daily Chart as of March 31^st, 2020, before the market close (Source: Thomson Reuters)

Premier Oil Plc shares were trading at GBX 17.465 at the time of writing before the market close (at 9:10 AM GMT) on 31^st March 2020 and up by 5.40% versus the previous day closing price. Stock's 52 weeks High is GBX 120.70 and Low is GBX 10.02.

Valuation Methodology

*Peers: Pharos Energy Plc, Genel Energy Plc, Hurricane Energy Plc and Kosmos Energy Ltd.

*Currency Exchange rate taken for 1 USD = 0.81197
Conclusion
Due to the outbreak of coronavirus (COVID-19), the oil prices have fallen substantially in the first quarter of 2020. This impact might be driven globally. Presently, the company also faces volatility in the macro-environment.  The company has made substantial growth against its strategic targets during 2019. The robust operational performance resulted in reducing debt levels and record free cash flows. In UK production, the proposed acquisitions expect to add material cash generative. All operated projects would be developed by the company on a net-zero emissions basis. The group remained discipline while investing in the new projects, as the recent macro-economic factors are making the environment more challenging.

Based on the above rationale which are supported by valuation done using the above method, we have given a “Speculative Buy” recommendation at the closing price of GBX 16.57 (as on 30th March 2020) with lower double-digit upside potential based 3.35x NTM Price/Earnings (approx.) on FY20E earnings per share (approx.).
 
 
*All forecasted figures and peers information 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.