LON: HTG - Hunting Plc

[Anglozurich]

Anyone following?

 

...UK oil & gas equipment manufacturer. Business has a long history since 1870 and Hunting has a solid reputation in the E&P services space. They manufacture higher-end downhole metal tools and perforating systems. Have large US onshore presence and a fair amount of international exposure. No debt, family still own significant percentage of the company. Obviously been clobbered. The stock trades below working capital. Even writing down inventory 50%, it still looks too cheap.

 

Management didn't cry and thumb-suck when the oil price fell through the elevator shaft in March. Used the crisis this year to resize group. Hacked away at the workforce, reducing it by 30%, closed Canada manufacturing operation, partially divested drilling tools business and consolidated US operations.

 

Business is leaner and well-positioned for drilling activity as oil moves higher and services sector consolidates, CEO credible, family still involved, strong balance sheet with staying power if activity/pricing doesnt improve as quick as anticipated, trusted company & brand, international and US exposure, history of dividends and buy backs.

 

If i am missing something, feel free to shout at me.

[rossef2]

Looked at this in the summer but decided to pass. I'm sure they are cash rich and in a financially strong position, however they're margin is only 3% and rely on the shale industry in the US. They make Teklok which is a well known product in the oil and gas industry (A type of clamp for pipes) however I don't think there will be much construction in the near future.

[Anglozurich]

Yes and the Hunting Titan perforating systems are a large chunk of revenue with a solid market position. The IP and reputation provide some protection on margins. Agree this is never going to be a 30 year compounder with a 25% ROCE but you are getting the business for free. If one believes US shale crumbles then it is one to pass but I don't think you need US production to explode back into life at 13m bopd for this to work. I went in late November 2020. The CEO scooped up a few shares earlier and bottom-ticked.

 

I have landed on my chin with O&G before so with the upmost humility.....I am still firmly in the Sam Zell camp of anti mega-trend. Too many investors imo have applied permanence to temporary conditions sometimes consciously but quite often subconsciously. Its been a common psychological mistake since time began. Oil and gas holdings were not just sold off....they were liquidated as if need for hydrocarbons had largely ceased. This sell-off included small to medium sized producing O&G companies with no debt, heavy insider ownership and low finding costs per barrel (or indirectly exposed to). I wrote up Internation Petroleum Corp on this site earlier, which fits this criteria (it has a manageable debt load) - it is starting to work nicely. I am also in Serica Energy, a UK gas production company which i may write up soon.....again...low finding costs per barrel, no debt, heavy insider ownership.....Europe just got hit with a freeze and has a gas shortage.....the windmills and solar panels wont heat Madrid in -10 degrees....just an example of oil and gas still very much relied upon.

[rossef2]

Agreed with Oil and Gas and the good thing is there is still plenty of cheap stocks available. I think everyone was assuming we would be driving about in Teslas by next summer, the summer self off was incredible.

 

I'll take a look International Petroleum cheers, I like Serica however it's a single asset and it mostly produces just the Rhum field, could be wrong about that. I believe they are currently trying to acquire another asset although there are a number of bidders at the moment but that would massively increase their cashflow

[Anglozurich]

Happy Hunting :-)