5th Mar 2015 10:44
LONDON (Alliance News) - Hunting PLC Wednesday said it has increased its final dividend by 5% despite its pretax profit falling in 2014 due to higher impairment charges, as the company braces itself for a hit from the recent fall in oil prices.
The FTSE 250-listed energy services group saw its shares rise by 8% on Thursday morning to 511.50 pence per share.
It reported a pretax profit of USD108.5 million in 2014, down from USD136.4 million a year earlier, as it recorded a USD103.9 million impairment charge attributable to the Hunting Electronics and Drilling Tools business units alongside a further USD11.3 million charge against its exploration and production assets. This is compared with a total of USD61.1 million in impairment charges in 2013.
"Hunting's Drilling Tools business reported a disappointing year, as weather-related problems and operational issues led to a reduction in anticipated profits. In addition, Hunting Electronics continued to report subdued trading due to customer destocking, coupled with increasing competition particularly from Far Eastern suppliers," it said.
Profit from continuing operations, before impairment charges, totalled USD217.8 million, up from USD200 million a year earlier as revenue rose to USD1.38 billion, up significantly from GBP1.29 billion in 2013. The rise came from its well completion and well intervention units, partially offset by a fall in revenue from its well construction unit.
Despite the fall in pretax profit, the company increased its final dividend by 5% to 22.9 cents per share from the 21.8 cents per share paid a year earlier, as Hunting has "confidence in the longer term fundamentals of our industry." The company's total dividend for the year will rise to 31.0 cents from 29.5 cents.
"The sharp reduction in the global price of crude oil did not affect our trading results during 2014, however, we continue to monitor our customer activity levels closely going into 2015," said Hunting.
Its well construction division was the only unit to experience a fall in revenue and profit in 2014. Revenue fell to USD378.3 million from USD380.9 million, with profit falling to USD53 million from USD58.6 million.
The well completion unit's revenue climbed to USD862.6 million from USD796.1 million, and profit rose to USD140.8 million from USD124.5 million. The well intervention division's revenue rose to USD135.5 million, from USD108.6 million in 2013, while profit increased to GBP217.6 million from USD198.8 million.
Hunting's exploration and production activities also experienced a rise in revenue, to USD10.1 million in 2014 from USD8 million in 2013, but profit fell to only USD200,000 compared with USD1.2 million a year earlier.
The company warned in February that the the full impact of lower oil prices would not hit the company until the second quarter of 2015, and said it will be curtailing any non-essential costs across its global supply chain, including lowering the headcount in any departments that are severely hit.
In February, Hunting said its well completion and well construction businesses will be hit the most by reduced activity resulting from the low oil price, whilst its well intervention business will be impacted "to a lesser extent".
"We expect lower levels of industry activity as global rig counts decline and commodity prices remain subdued which will feed through to the group's profitability for the year ahead," said Hunting at the time.
Hunting has not provided any financial guidance for 2015, and in its statement in February, the company said it did not feel it was appropriate to provide any form of financial guidance for 2015 at present given the changes happening in the market.
"The group is resetting its operational capabilities to align with the current lower oil and gas price environment, however, given our global footprint and diverse product and services offering, Hunting remains well positioned to capture any growth opportunities across its international operations as and when the wider market improves," said Chief Executive Dennis Proctor on Thursday.
By Joshua Warner; [email protected]; @JoshAlliance
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