21st Jul 2016 11:09
LONDON (Alliance News) - Oilfield services provider Hunting PLC Thursday said improved stability within core markets is supporting a "more positive" outlook in the medium-term, although things will remain difficult in the meanwhile, as the company unveiled changes to its bank facilities.
The downturn in the global oil and gas markets took longer to trickle down to the oilfield services sector as the knock-on effect of lower prices began to eventually prompt producers and developers to delay or cancel projects.
Hunting is expecting revenue this year, for example, to be 30% to 40% lower year-on-year even though the downturn in oil markets started in the middle-to-late 2014, and on Thursday Hunting warned that even that guidance is still dependent on the market improving later on in 2016.
In 2015, Hunting saw revenue plummet by 42% year-on-year to USD810.5 million, suggesting revenue this year is expected to be roughly within the region of USD567.0 to USD486.0 million, or even lower if the market doesn't improve in line with Hunting's expectations.
Unsurprisingly, Hunting is responding by cutting costs and expenditure has been reduced to "essential spend only" as the company tries to hoard as much cash as possible.
Hunting has made extreme cuts, with capital expenditure this year only budgeted at USD16.0 million, more than 80% less than the USD81.1 million spent last year, whilst the company's workforce is 45% smaller than it was at the start of 2015, standing at 2,200 staff, implying around 1,000 staff have been let go in the last 18 months.
Hunting said reducing the headcount has delivered annual savings of around USD96.0 million.
Net debt at the end of June stood at USD90.0 million, falling from USD110.5 million at the end of 2015 as Hunting continues to pay down debt.
Although Hunting looks set for a challenging couple of years, the company has seen signs of improvements within the market.
"Management notes signs of stability within its core markets over the past two months, which includes an improving US rig count from the record lows reported, supported by the price of WTI crude oil which is now approximately USD46 per barrel, giving operators a degree of confidence," said the company.
WTI is the benchmark price for crude oil that is less light and sweet than the other major benchmark Brent, with prices tending to move in line with one another. WTI was trading just under USD46 on Thursday and Brent was trading at USD47.
A further update on the company's performance and outlook will be provided on Septmber 5 when the interim results are published.
Hunting also unveiled the results of its revised covenants and terms for its revolving credit facility, which will expire at the end of June 2018, as it attempts to make its facility work better for the company in the shorter term whilst market conditions remain tough.
Although discussions have concluded, Hunting can elect to revert back to the previous terms and covenants if trading conditions improve.
In the meanwhile, the facility has been reduced to USD200.0 million from USD350.0 million to "reflect the group's reduced requirements" and earnings before interest, tax, depreciation and amortisation, alongside finance charges, have been suspended during the amendment period.
The main security placed against the facility is the company's trade receivables and inventories held in the US, UK and Canada, alongside security against properties in the US and UK. Drawdowns will be covered by those secured assets.
Notably, Hunting will not be allowed to spend more than USD30.0 million per year on capital expenditure in 2017 and 2018 as part of its covenants.
Hunting will pay USD400,000 for the amendment and the interest over LIBOR on funds drawn will increase to 2.75%, it said.
"Hunting is seeing a level of stability returning to its core markets, which coupled with increased customer enquiries indicates potential for a more positive short to medium term outlook for the group," said Chief Executive Dennis Proctor. "With the conclusion of our bank discussions, Hunting remains adequately funded with the continued support of our lenders".
Hunting shares were up 5.0% to 471.0 pence per share on Thursday, 53% higher than at the start of 2016 but 9.7% lower than this time last year.
By Joshua Warner; [email protected]; @JoshAlliance
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