Geordie Kidston, Head of Research
52 week high yield£6.77 – £2.32
Hist / pros per8.4 – 67.2
Equity market cap£460m
As with all the oil services sector, Hunting shares sold off significantly on the back of weakness in the oil price. Hunting typically has limited visibility on its order book, which has historically been volatile. Guidance is that earnings will fall 85–90% in 2015. This is supported by recent reports of significant cuts to the US rig count; the acquisition of BG Group by Royal Dutch Shell implies a troughing in the oil sector and a pick-up in M&A activity. The emergence of the North American gas export market should be a material driver of cyclical recovery in the medium term. Hunting may well be a target for a major oil field services group wishing to integrate into downstream areas. Hunting is expected to directly address the covenant worries by providing a clearer outlook on liquidity. Analysts also believe that working capital outflows will drive year end 2015 debt down sequentially to $126m. Hunting will not be acquiring during this cycle, due to balance sheet constraints, and I continue to believe them vulnerable to ongoing consolidation within the North American shale sector. Despite depressed trading, their broad technological template remains a significant asset.