Half Year 2026 Hunting PLC Earnings Call Transcript
Key Points
- Titan perforating business delivered a strong turnaround with 45% revenue growth year-over-year, driven by a 45% increase in US rig count and doubled international sales in Argentina and the Middle East.
- Subsea business achieved exceptional 95% year-over-year revenue growth, with high-margin contributions from the FES acquisition and strong activity in key markets like Guyana.
- The company maintains a diversified portfolio across geographies and product lines, reducing reliance on any single basin or market, with non-oil and gas revenues increasing to $38 million.
- Cost reduction initiatives continue to yield results, including a 24% decrease in headcount since 2019 and no share dilution from treasury purchases, supporting shareholder returns through buybacks and a 13% dividend increase.
- Strong market outlook supported by hydrocarbon security, AI-driven power demand, and a broad order book of $386 million with a tender pipeline of nearly $1 billion, positioning for future growth.
- Advanced manufacturing segment improved profitability and EBITDA margins despite lower revenues, driven by a shift to non-oil and gas clients in aerospace, defense, and power generation.
- The company secured a $16 million order for titanium stress joints from a new client in the Gulf of America, expanding market share and validating product technology.
- Enhanced oil recovery (OOR) technology shows positive trial results with clients like Exxon and Harbor, indicating potential for future field projects and production enhancement.
- The balance sheet remains in a pristine position with low leverage, providing flexibility for future capital allocation and M&A opportunities.
- The company is well-positioned to benefit from the global push for energy security and the need for natural gas to meet power demand, with a broad product offering across onshore and offshore markets.
- The cancellation of the KOC tender, which was expected to be the largest in company history at over $300 million, has pushed out revenue to 2027 and reduced EBITDA guidance by approximately $10 million.
- EBITDA margin for the first half was 12%, below the company's target of 15%, with return on capital employed slightly down at 9.1%.
- Working capital increased by $60 million due to receivables build from strong June sales and large Subsea contracts, impacting cash flow and resulting in a net borrowings position of $19 million.
- The Middle East conflict and geopolitical tensions have disrupted supply chains and delivery times, affecting the ability to secure tenders in the region, including the KOC retender.
- The company faces uncertainty in the KOC retender process, with competition and pricing dynamics potentially changing, and no guarantee of success.
- US OCTG business was impacted by a mill outage at a partner, extending beyond expected duration, which could affect supply and customer relationships.
- The company's EPS declined from $19.6 cents to $15.2 cents, reflecting lower profitability in the period.
- The delay in KOC orders has led to a normalization of the order book, with $386 million, down from previous levels, and a need to rebuild confidence in future revenue streams.
- The company's guidance for free cash conversion remains at 50%, which may be lower than investor expectations, and CapEx is expected to step up in the second half.
- The company's reliance on the Middle East for significant tenders exposes it to geopolitical risks, which could continue to impact operations and financial performance.
Good morning, everyone, and good to have you in attendance today to listen to Bruce and I talk about our results for the first half of the year.
Before we get started, as always, I just want to do a thanks out to the team at Hunting. Again, we delivered excellent results in the first half of the year and a lot of hard work to make that happen. Special thanks today to Graham Goodall and the team in the Middle East. As everybody knows, it's a very challenging environment and a lot of stress in that area these days. And so, I just want to say thanks for all that they do.
Getting into our results today, we're very pleased with what has happened in the first six months of the year. I think the results today show that our strategy that we've laid out and put in place is definitely working. We've delivered a diversified array of results and opportunities that have come into our fold, but we've performed very well and we're not focused on just one basin or one geographic area, and it played out today with the broad
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