Hunting PLC

LSE:HTG

Earnings Call Transcript 2021-Q4

[Arthur James Johnson, Chief Executive Officer, Hunting Plc]

Good

morning,

everybody.

For

all

those

here,

thank

you

for

struggling

through

the

Tube

strikes

and

everything

else

to

make

it

here

today.

For

those

listening

online,

good

morning

or

good

evening

from

wherever

you're

at.

And

thanks

for

taking

time

to

join

us

on

our

call.

I'm

going to

start

off

on

the

page

1

that

says

the

world

has

changed.

But

before

I

get

into

the

details

on

that,

a

lot

of

things

have

changed

more

recently

in

the last

seven

days,

more

–

as

much

so

in

the

last

month

or

so.

But

one

of

the

changes

that

I

just

want

to acknowledge

today

is

with

Richard

Hunting.

So,

Richard

after –

Richard

is

leaving

the

board

and

he's

ending

50

years

of

service

with

the

company.

So,

Richard,

on

behalf

of

all

the

employees

and

all

of

us

at

the

team,

we

just

want

to thank

you

for

your

contribution

over

the

years

and

wish

you

a

great

retirement.

So,

I

just

wanted

to go

and

say

that

first

before

we

get

into

this.

[Richard Hugh Hunting, Non-Executive Director, Hunting Plc]

Thank

you, Jim.

[Arthur James Johnson, Chief Executive Officer, Hunting Plc]

So, thanks.

Getting

into

the

presentation

now,

as

I

mentioned,

it

is

amazing

the

changes

that

we've

seen

in

the

outlook

for

our

business

and

in

the

world

just

in

the

last

couple

months.

When

I

talk

to

everybody,

all

the

analysts

and

investors

on

that

like

a

year

ago,

I

made

the

comment

that

2021

would

be

a

year

of

healing

within

the

industry.

Well,

that

healing

definitely

happened,

and

all

you

have

to

do

is

look

at

the

earnings

announcements

from

the

major

E&P

companies

around

the

world

and

look

at

the

amount

of

cash

that

these

companies

have

been

throwing

off

in

the

last

12

months.

They

have

reduced

debt

dramatically.

They

have

paid

increased

dividends.

They

have

bought

back

shares.

They've

done

about

everything,

but

put

a

lot

of

money

back

into

the

drill

bit.

And

we

had –

in

most

of

2021,

Wall

Street

has

just

been

thrilled

with

this,

and

you've

seen

the

uptick

in

share

price

and

the

like.

So,

fast

forward

now

to

the

end

of

this

year,

even

taking

away

the

fact

of

the

crisis

in

the

Ukraine,

we

ended

up

in

2021

probably

with

the

most

momentum

I've

seen

going

forward

in

the

company

in

at

least

the

last

couple

years.

And

so,

we'll

talk

a

lot

more

about

that

as

we

go

forward.

But

the

key

points

for

us

were

the

COVID

restrictions

are

finally

being

lifted,

and

I

can't

overstate

enough

the

effect

that

COVID

has

had

on

our

operation

and,

I

believe,

everybody

else

in

the

oilfield

service

business

for

the

last

two

years.

So,

the

results

that

we

showed

today –

I

mean,

it

was

a

tough

year,

just

as

a

reference

point,

realize

that

in

2021,

we

had

the

whole

year

of

COVID.

And

2020

is

the

reference

we

go

back

to.

I

have

to

remind

people,

we

actually

had

a

good

Q1

in

2020,

so

when

you're

looking

at

the

comparisons.

But

2021

is

definitely

the

bottom.

COVID

was

a

horrible –

I

mean,

a

horrible

operating

environment

throughout

the

group.

When

we

saw

the

rise

of

the

new

variant

hit

the

world,

it

very

much

affected

our

results,

especially

in

December

and

January,

because

due

to

social

distancing

and

what

we

had

to

do

with

government

regulations,

it

just

made

it

a

horrible

operating

environment

and

a

huge

struggle

to

the

tune

that

we

could

quantify

over

$1

million

of

effect

to

the

bottom

line

in

each

of

the

months

of

December

and

January.

So,

the

good

news

is

that

is

over.

It

is

improving

in

February.

And

we

look

forward

to

putting

this

behind

us

as

all

the

people

in

the world

do

and

getting

the

economy

going

forward

without

these

constraints.

The

effect

over

the

last

couple

– on

the

last

couple

days,

energy

security,

I'm

putting

on

there,

with

all

the

money

that

these

oil

companies

had,

a

lot

of

them

are

now

running

into the

problem,

as

you've

heard

this

week

from

the

bps

and

the

Shells

and

the

Exxons.

All of

a

sudden,

a

lot

of

their

barrels

are

now

going

to

be

off

the

market.

And

I

think

with

the

political

issues

going

on,

energy

security

is

taking

– going to

take

a

[indiscernible]



(00:03:58), just

like

defense

spending

is

going to

increase.

I

think

you're

going to

have

to

see

a

large

ramp-up

in

E&P

spending

as

people

look

to

replace

lost

barrels

and

also

want

more

security

in

their

energy

supply.

For

us,

the

third

point,

our

order

book

has

accelerated

dramatically.

Every

business

unit

in

the

company

has

seen

an

uptick

in

business

–

orders

and

inquiries

since,

I

would

say,

the

end

– since

Christmas

or

middle

of

December.

And

so – and

a

lot of

our

businesses

where

we

instructed,

you

know,

we

went

to

our

clients,

hey,

you

need

to

be

placing

orders,

you

need

to

do

this.

The

budget

constraints

that

most

of

our

clients

were

under

really

hindered

them

being

proactive

in

getting

a

jump

on

activity

for

2022

and

beyond,

but

we

have

seen

that

change

dramatically

in

the

last

couple

weeks.

It's

again

starting

in

late

last

year,

and

I

am

extremely

optimistic

that

we

are

in

the

early

stages

of

a

boom

and

this

company

through

all

the

changes

that

we've

done,

the

restructuring

that

we've

done

in

the

past

two

years

is

in

a

very

excellent

position

to

benefit

from

these

changes

for

the

years

forward.

So,

with

that,

I'm

going to

pass

it

on

to

Bruce

to

go

through

the

finances,

and

then,

I'll

come

back

for

more

narrative

and

questions.

[Bruce Hill Ferguson, Finance Director, Hunting Plc]

Thanks,

Jim.

If

I

can

take

everyone

to

the

slide

2,

and

this

slide

captures

the

main

financial

highlights

for

the

year.

First

point

is

that

we

ended

the

year

with

$114.2

million

of

cash

and

bank,

again

reflecting

a

strong

balance

sheet and

strong

cash

focus

during

the

year.

We

secured

after

months

of

work

the

asset based

lending

facility,

which

will

allow

us

liquidity

of

another $150

million.

Our

balance

sheet

remains

strong,

finished

with

$871

million

of

assets.

Our

EBITDA

for

the

year

finished

at

$3.1

million

for

the

full

year.

That

was

split

between

a

$3.6

million

loss

for

the

first

half.

As

Jim

mentioned,

momentum

picked

up

for

the

second

half and

we

had

an

EBITDA profit

of

$6.7

million.

Revenue

was

$521

million

against

$626

million.

As

Jim

mentioned,

2020

benefited

from

a

strong

quarter

one.

2021

had

the

full

year

impact

of

COVID.

And

a

final

dividend

of

$0.04

per

share

declared

given

our

$0.08

for

full

2021.

If

we

go

to

slide

3,

that's

our

group

income

statement.

We're

showing

a

revenue

at

$521 million,

which

is

$104

million

lower

than

we

saw

in

2020.

Again,

that's

a

slower than

anticipated

growth,

continuing

disruption

through

COVID,

and

a

lot

of

capital

discipline

throughout

the

year

from

a

customer

base

as

well.

Gross

profit

finished

at

$100.6

million,

with

a

19%

margin

against

the

20%

we

saw

in

2020.

Some

pricing

pressures

continued

throughout

the

year.

EBITDA,

as

I

mentioned

earlier,

was

a

$3.1

million

versus

the

€26.1

million

in

2020.

Majority

of

that

€26 million

in 2020

was

generated

in

the

first

quarter.

That

saw

a

widening

of

the

loss

from

operations

in

2021

to

$35.1

million.

We

had a

loss

before

tax

of

$40.6 million, a

small

tax

charge

gives

us

a

loss

after

tax

of

$45.5

million.

And

I

mentioned

the

final

dividend

per share

of

$0.04

to

give

us

a

total

dividend

of

$0.08.

If

we

move

to

slide

4,

we've

got

a

breakdown

of

our

sales

by

our

main

segments.

We

see

Titan

reporting

an

increase

of

17%

year-on-year.

Again,

that

shows

the

stronger

completion

activity

in

the

US

on

the

– and

also

Canada.

We

also

saw international

sales

up

23%

throughout

the

year

as

well.

So

that's

– that

gave

us

a

17%

uplift

on

the

revenue.

Small

operational

loss

of

$0.9

million,

also

we

didn't

make

up

operational

profit

for

quarter

four.

And

North

America,

we

were

down

18%

with

operating loss

of

$16.1 million.

Again,

results

were

impacted

by

the

continuing

effect

of

COVID.

We've

also

got

the

capital

discipline

from

our

customers

kicking

in

there

as

well,

meaning

less

purchases

and

decline

in

main

offshore

basins

like

the

Gulf

of

Mexico,

which

we

support

through

North

America.

EMEA

reported

sales

of

$58.1

million,

again

26%

down

on

2020.

Capital

discipline

kicking

in

there,

less

drilling

for

the

North

Sea,

so

that

impacted

our

numbers

there.

A

tough

year

for

AsiaPac,

we

saw

the

biggest

drop

there

from

$109

million

in

2020 to

$48.1 million.

Again,

some

of

our

key

markets

like

the

Middle

East

that

was

down

22%

in

terms

of

rig

count.

Again,

the

Chinese pipe was

less

compared

to

last

year

as

the

government

removed

some

export

rebates

as

well.

So

that

was

56%

down

on

our

previous

revenues.

If

we

move

on

to

slide

5,

what we've

done here

is

breakdown

the

H1

and

H2

numbers

just

to

give

a

little

bit

of

more

analysis.

We

see

the $521

million

split

from

H1

and

H2.

So

we

see

the

first

half

of the

year

was

$244

million

and

that

increased

14%

to

$277

million. So

if

you

look

at

the

Titan

sales

on

that

were

up

from

$88

million

in

H1,

up to

$100.6

million.

A

larger

increase,

if

you

look at

H2 2020,

when

we were

down

at

$59.2

million,

so

we're

70%

higher

in

H2 2021

compared

to

H2 2020.

If

you

look

at

the

results

from

operations,

we

had a

loss

of

$23

million

in

H1

and

that

decreased

to

$12

million

in

H2,

again

showing

an

improvement

through

H2.

Moving

on

to

slide

6,

we

break

down

our

sales

by

our

key

product

groups.

Not

surprisingly,

the

Perforating

Systems

–

our

Titan

business

was

the

largest

product

line

for

the

year,

and

we

saw

an

18%

improvement

on

sales

on

2020. OCTG,

as

a

product

line,

was

the

hardest

hit,

35%

down.

Majority

of that

came

through

our

APAC

division

and

the

remainder

split

evenly

over

EMEA

and

North

America.

Advanced

Manufacturing

was

20%

down.

Again,

that

was

impacted

by

the

reduction

in capital

spend

for some of our main

customers.

Subsea,

the

client

was

a

little bit

more

modest.

Good

gains

in

our

RTI

acquisition,

but

there was

some

decline

in

the

Stafford

and ENPRO

business.

Intervention

Tools,

which

is

dependent

on

CapEx

from

customer

base

was

affected

by

the

capital

discipline

and

that was

down

at

$25.8

million.

So,

that

gave

us

our

$521.6

million.

Out

of

that,

oil

and

gas

was $484

million,

with

non-oil

and

gas

$37.6

million, which

is

[ph]



7% (00:10:40),

which

is

similar

to

previous

years.

Moving

on

to

slide

7.

It's

a

breakdown

of

our amortization and

exceptional

items.

We

had

our $7

million

from

amortization

of

acquired

intangible

assets

which

relates

them

[ph]

in

Titan

like (00:10:54)

acquisitions. In

terms

of

impairment,

our

largest

item

is

$25.9

million

relating

to

our

inventory. This

is

our

– normally

[indiscernible]

(00:11:04)

levels

of

trading,

reduced our

return

rates,

and

increased

the

aging

of

inventory.

$5.2

million

of

that

relates

to

the

North

Sea

restructuring.

There

was

$10

million

for

our PC

equipment

in

the

States

as

well. But

a

lot

of

this equipment

is

still

good

equipment. It's

not

obsolete.

And we

believe

we'll

get

value

for

that

going

forward

as

well.

The

$8.6

million

of

the property

that

relates

to

our Fordoun property

up

in

Aberdeen,

and that

was

a

result

of

the

write-down

after

the

North

Sea

restructuring.

And

remainder,

of

course,

their

restructuring

cost, which

is

some

redundancy

cost

in

US,

and

AsiaPac.

And

that

all

came

to

the

$44.9

million.

Moving

on to

slide

8,

a

breakdown

of our

balance

sheets.

We

see

our

PPE

coming

down

from

$307 million

to

$274

million.

That

reflects

low

CapEx.

We

only

got

$6.5

million

of

CapEx

during

the

year.

We've

got

$29

million

[indiscernible]



(00:11:57).

And

we've

got

that

$8.6

million

impairment

on

the Fordoun

property.

We've

got

the IFRS

16 $24.7

million

asset

there.

Goodwill,

quite

constant.

We

hold

our

Rival

and

Cumberland

investments in

the

$19.4

million.

Working

capital

showed

a

good

reduction

from

$358

million

to $278

million.

Majority

of that

is

through

our

inventory

reductions.

We've

got

our

$114

million

of

bank and

cash.

And

that

gives

us

our

net

assets

of

$871

million in

total

versus

$976 million

in

2020.

A

further

breakdown

of our

working

capital

showing

our

gross

inventories

coming

down

from

$325

million

to

$263

million.

That

was

good

progress

there.

It

does

reflect

$31.5

million

that

came

– reduction

due

to

the

North

Sea

restructuring.

After

provision

for

inventories,

we

see

that

–

which

includes

$25.9

million.

That

gives

our

net

inventory

position

of

the

end

year

of

$204

million.

We

see our

receivables

perk

up

a

little

bit

as

the

trading

improves,

and

payables

reflecting

some

more

purchases

coming

through

as

well.

In

terms

of

the

ratios,

we're

favorable

with

our

reduced

inventory

figure,

down

to 163

days,

and

receivable

days

going

the

right

way

down

to

87.

Just

take

you

through

the

group

cash

flow.

For

the

year,

we

had

a

free

cash

flow

of

$54

million.

There's

two

main

components

to

that.

One

was

the

proceeds

from

the

North

Sea

restructuring

and

a

small

assets

held

for

sale,

$4.4

million,

that

gives

a

$34.9

million.

And

then

we've got

the

working

capital

improvements

as

well,

gave

us

$54.4

million

free

cash

flow,

which

helped.

We

then

had

some

spend –

limited

spend

on

capital

intangible

assets

and

some

investments

in

businesses

in

terms

of

Well

Data

and

Cumberland.

The

dividends

of

$12.8

million,

some

treasury

shares

for

future

share

awards

and

that

gave

us

[indiscernible]



(00:13:53)

$12.5

million in our

cash and

bank.

Next

slide,

slide

11.

Looks

at

that

minimal

CapEx

amount.

Nothing

much

really

on

here

other

than

just

some

maintenance

spend

and

some

equipment

upgrades

for

Ameriport

and Trenchless

for

$6.6

million in total, along with

intangible

assets

of

$2.7

million,

gives

us

$9.3

million.

Our

slide on

12,

just

a

little bit

more

information

on

our

order

book,

as

Jim

mentioned,

has

increased

over

the

period.

Just

to –

the

graphic

at

the

bottom

show

the

order

books

have

increased

41%

since

31st

of December

2020.

Majority

of

that

is

in

North

America.

Subsea

Spring,

which

is

our

RTI

acquisition,

has

$31.8

million

of

orders.

A

lot

of

that

is

for

our stress

joints

for

the

Gulf

of

Mexico

and

South

America.

We've

seen

improvement,

which

is

not

reflected

on

these

numbers,

but

now

AsiaPac

has won

$26

million

of

orders

from

China.

All

businesses

across

the

board

are

reporting

an

increase

in

inquiries,

RFQs

and

orders.

Our

book-to-bill

ratio

in

quarter

four

was

1.45.

The

last

slide

is

just

I

mentioned

at

the

start

our

asset-based

lending

facility,

which

we

completed

in

February.

This

is

a

$150

million

ABL. We

have

two

banks

participating,

HSBC

and

Wells

Fargo.

It

has an

additional

accordion

feature

of $50

million,

which

is

subject

to the

lending

group's

consent.

It

is

a

flexible

funding

arrangement,

which

is

on

the

back

of

our

balance

sheet.

And

it

reduces

our

sensitivity

to

the

earnings-based

covenants.

It

makes

sense

in

that

the

balance

sheet

values

are

more

stable

than

EBITDA

given

our

volatile

sector.

And

then,

the

classes

of

assets

we

look

to

borrow

against

are

receivables,

inventories

and

our

freehold

properties.

So

we've

got an

open

availability of

$100 million,

the freehold

properties

will

be

coming

on

by

the

end

of

the

month,

and

that will

give

us

roundabout

[indiscernible]



(00:15:50).

Okay.

And

that's

me,

finished

my

slides.

Back

to

Jim.

[Arthur James Johnson, Chief Executive Officer, Hunting Plc]

Okay. Thanks, Bruce.

On

slide

number

14,

just

some

bullet

points

there

on

our

thoughts

on

the

E&P

CapEx

optimism

that

we

feel

out

there

right

now.

And

again,

we

put

this

slide

together

before

the

events

of

the

last

seven

days.

So,

really,

at

the

end

of

the

day,

this

is

following

a

cycle

that

is

not

new

that

we

have

seen

many

times

over

the

last

30

years.

The

price

of

oil

and

gas

is

the

fuel that's

going

to

drive

activity.

And

right

now,

that

fuel

price

is

in

overdrive.

And

so,

we

think

that

animal

instincts

will

once

again

kick

in.

Depletion

does

not

go

away. The

lack

of

investment

since

2014

is

showing

up

on

the

reserve

base

of

a

lot

of

operators

around

the

world.

And

at the

end

of

the

day,

you

got

to put

the

drill

bit

to

work.

The

ESG

pressures,

while

they've

been

very

pronounced

in the

last

couple

years,

they

will

still

be

there

on

the

E

side

that

I

believe

that

the

energy

security

issue

and

the

outrage

from

consumers

over

high

– the

high

effects

of

natural

gas

prices

and

gasoline

prices

are

going

to have

an

effect

to

get

people

back

to

work.

Keep

in

mind

also

for

the

last

two

years,

even

if

you

weren't

a

company

like

Hunting,

the

service

companies

at

the

rig

site,

the

drilling

contractors,

I

know

from

numerous

conversations

I

had

with

our

team

in

Southeast

Asia,

COVID

restrained

a

lot

of

potential

activity.

I

mean,

especially

Malaysia

was

hard

hit.

There

were

a

lot

of

things

there

that

did

not

happen

because

of

COVID.

So,

we're –

again,

we're

just

very,

very

optimistic

that

this

thing

is

going

to

take

off.

And

I've

never –

I

don't

feel

I've

ever

sat

in

a

position

like

I

am

today

as

far

as

seeing

what

I

think

is

just

a

stellar

outlook

going

forward.

On

slide

15 and

we're

going

to take

a

few

minutes

and

talk

regionally

wise.

Slide

15

is

really

focused

on

the

DUC

count

and

the

rig

activity

in

the

US.

We

have

seen

the

rig

count

accelerate

back.

Still,

in

my

many

years

in

business,

this

would

be

a

very

poor

rig

count

in

total.

But

rigs

today

are

more

efficient. And

we've

been

hearing

of

spud

to

completion,

spud

to

the

end

of

drilling

times,

averaging

something

like

17

days

in

parts

of the

Permian.

So,

because

of

the

technology,

the

oilfield

service

industry

has

put

in

place,

the

drilling

in

that

is

much

more

efficient.

So,

600

rigs

today

is

probably

the

same

as

700

rigs

five

years

ago.

So,

that's

an

efficiency

factor

to

keep

in

place.

The

DUC

level

is

continuing

to

decline.

You

can

see

the

graph

showing

the

December

2021

number.

And

in

reality,

I

think

half

of

those

don't

even

exist,

because

as

I've

stated

in

the

past,

some

of

these

were

bad

wells,

wells

drilled

to

hold

acreage,

companies

went

bankrupt,

whatever

the

situation

is.

The

bottom

line

to

it

is

that

you

got

to keep

drilling

to

stay

in

business.

And

so,

as

the

easy

money

was

made,

keep

in

mind,

entering

the

downturn,

these

wells

were

already

drilled

just

sitting

there,

so

half

the

cost

was

already

done.

Now,

with

that

being

– when

those

being

completed

away,

again,

it's

a

fundamental

that's

going to

make

the

future

look,

I

think, very,

very

bright

for

us.

One

of

the

areas

that

I

don't

have

a

slide

on

though

is

in

the

Gulf

of

Mexico.

It

has

been

a

laggard

in

its

response

back

activity

wise.

A

week

ago,

the

rig

count

was

down

to

a

historic

low

of 12.

But

I

have

been

encouraged

by

the

recent

dialogue

that

I've

seen

from

Transocean

and some

of

the

other

drillers

on

new

contracts

being

picked

up

in

the

Gulf

of

Mexico

and

in

the

international

market.

And

keep

in

mind,

this

is

a

long

cycle

business.

So,

you can't

just pick

up

a

rig

and start

putting

a hole

in

the ground

in

a

month. So,

the

trend is

going positive

in

the

offshore marketplace.

You've

seen

Transocean announce

day

rate increases.

So,

even

though

the

number

today

is

not

healthy,

I

think

that

it'll

be

a

significant improvement

by year-end.

Slide

number

16, we

kind

of

go

around

the

world.

I'm

not going

to go

through and

read all

of

these. Canada

was

a

very nice

surprise for

us

last year.

Our Canadian

business from

Titan

increased

24%

year-over-year

and

the

new

business

model,

our

team

in

Canada

has

managed,

where

we

got

out

of

the OCTG

distribution

business

and

into

using

the

distributor

model,

turned

that

from

losses

to

profits

in

the

year.

And

so,

we're

happy

that –

on

how

that

has

turned

out.

And,

again,

good

returns

with

limited

capital

employed.

In

the

North

Sea,

Bruce

kind

of

touched

on,

a

big

issue

for

us

there

was

the

disposal

of

our

UK

OCTG

business,

and

I'll

talk

more

about

that

later.

But,

the

company,

I

think

we're

well positioned

in

that

marketplace

going

forward

with

some

additional

optionality

that we

didn't

have

prior

to

that

disposal.

AsiaPac,

the

team

there

struggled

last

year.

That

was

the

last

of

the

regions,

one

of the

last

regions

to

see

the

downturn

affect

them.

So,

they've

been

later

in

seeing

the

recovery.

The

good

news

is

that

they've

started

the

year

off

with

a

bang.

I

think

that

we'll

have

a

very

good

year

in

AsiaPac.

Middle

East,

they

always

say

that the

last

barrel

of

oil

ever

produced

is

going to

come

out

of

Saudi

Arabia.

So,

capital

spend

has

been

restrained

there.

The

rig

count

in

the

Middle

East

is

still

significantly

below

where

it

was

pre-COVID.

But,

again,

depletion

doesn't

sleep

and

they'll

have

to

pick

up

the

drilling

again.

Offshore

South

America

has

been

an

area

that

I

have

really

been

pleased

with

for

Hunting.

And

I

think

probably

our

business

in

2022

in

offshore

Brazil

and

in

the

Guyana,

Suriname

region

will

be

the

biggest

ever

in

the

company's

history.

Based

on

this

success,

the

titanium

stress

joint

business

has

had,

in

those

two

markets,

as

well

as

the

general

recovery

in

Subsea.

So,

a

great

job

for

our

team

there.

And

then

Africa;

Africa

is

still

tough.

There's

talks

of

things

changing

there

as

far

as

government

fiscal

policies

and

the

like.

I

think

everybody

probably

saw

Shell

announced

a

big

find

off

Namibia

here

earlier

this

week.

So,

to

me,

that's

an

evolving

story,

but

at

the

end

of

the day,

it's

still

– you

still

deal

with

the

difficulties

of

Africa.

On

slide

17,

just

some

points

on

Titan.

Jason

Mai and

his

team,

I

think,

did

a

very,

very

good

job

in

the

year

in

a

very,

very

challenging

marketplace.

They

continued

to

improve

year-on-year,

focusing

on

technology,

focusing

on

new

products

coming

into

line,

a

list

of

those

are

all

there.

For

us,

again,

we

saw

our

business

improve

9%

quarter-on-quarter

at

the

end

of

2021.

We

were

the

first

ones

to

come out

and

announce

price

increases

in

late-Q3

of

2021.

We've

announced

another

round

of

price

increases

in

the

neighborhood

of

7%

in

February

for

these

product

lines.

And

our

job

is

to

try

to

make

sure

we

stay

ahead

of

the

inflation

in

the

industry,

which

we

will

do,

and

continue

to

enjoy

our

number

one

market

position

place

in

this

segment.

Systems

sales

continued

to

increase.

And

right

now,

about

20%

of

our

total

revenue

dollars

in

Titan

are

now

factory

loaded

guns

going

out

to

the

field.

We're

still

selling

components,

we

sell

systems,

we

sell

guns.

One

of

the

changes

that

we

have

done

is

we

have

on

purpose

left

some

of

the

commodity

and

gun

business

because

I'm

just

not going

to

play

in

the

dirt

at

those

low

levels

of

pricing

in

today's

marketplace.

So,

again,

a

good

year

overall

relative

to

the

rest

of

the

market,

not

what

we

had

seen

in

the

past,

but

we

did

see

good

growth

in

a

number

of

geographic

areas.

And

like

Bruce

had

said

earlier,

we

were

very

pleased

with

the

uptick

in

our

international

sales

year-over-year.

Slide

number 18,

I'm

not

going

to

spend

a

lot

of

time

on

this,

but

it

just

shows

that

the

team

at

Titan

has

not

been

standing

still.

A

lot

of

development

and time

going

into

developing

our

Charge

technology,

even

more

responding

to

the

needs

of

our

client,

working

on

areas

within

our

existing

product

lines

to

reduce

the

cost

bases,

because

I

really

believe

our

performance

levels

are

second

to

none

out

there

as

far

as

safety

and

dependability

go.

So,

right

now,

it's

looking

at

the

product

and

just

making

sure

that

we

can

maximize

our

ability

to

play

in

the

business.

Slide

number

19,

I'm

going

into

North

America.

A

tough

year

overall,

again,

the

COVID

downturn

hit

literally

every

business

and

had

effects.

2021's

passed.

We're

on

to

2022.

There's

encouraging

upside

in

everything

in

the

– every

business

unit

in

the

US

for

2022.

Our

AMG

business

is

seeing

backlogs

expand

aggressively.

The

Subsea

business,

I

talked

about

doing

very,

very

well.

Premium

Connections,

our

US

Manufacturing

business,

all of

them

seeing

an

uptick

in

activity,

and

we

believe

it'll

go

back

to

delivering

very

good

results

this

year.

Slide

number

20,

the

EMEA

update.

Tough

year

last

year,

the

restructuring

in

place,

Bruce

and

I

lost a

lot

of

– had a

lot

of

sleepless

nights,

and

there

was

just

a

very

long

drawn

out

process

to

get

this

done,

but

it

was

one

of

our

strategic

goals

to

exit

a

business

that;

A,

we

didn't

– we

really

didn't

sell

our

own

products

through

this.

So,

strategically,

it

was

questionable.

The

market

has

changed.

And

again,

the

amount

of

capital

tied

up

was

just

– it's

just

too

much

for

that

size

of

a

marketplace.

So,

going

forward,

we're

a

much

leaner

operation.

I

mean,

even

looking

at

February's

results,

which

were

just

starting

to

come

in

off,

I

mean,

we

have

positive

results

in

EMEA

driven

by

a

change

of

profitability

in

Aberdeen.

So,

I'm

excited.

I'm

thankful

for

what

the

team

did.

We

were

able

to

reduce

some

SG&A

costs

with

this

transaction.

So

for

those

Hunting

employees

that

were

part

of

the

transaction,

I

do

want

to say,

a

special

thanks

for

all

that you

did

and

we

wish

Marubeni-Itochu

all

the

best

in

the

future,

because

we'll

be

working

a

lot

with

those

guys.

But

the

opportunities

going

forward,

I

think

we

have

more

optionality

with

our

business

now,

because

we're

not

competing

in

that

certain

segment

of

the

pipe

business.

And

yet,

we

are

continuing

to

look

at

things

like

the

enhanced

oil

recovery,

improvements

in

wells,

and

intervention

and

the

like

to

enhance

our

profitability

in

that

region.

AsiaPac,

tough

year

for

the

guys

in

Singapore.

It

was

even

compounded

more

by

some

of

the

fiscal

terms

in

China

affecting

OCTG.

But

the

bulk –

the

thing

I

got

to highlight

is

the

bulk

of

the

dollars

going

into

AsiaPac

are

actually

OCTG sales,

and

a

lot

of

it

was

to

the

Middle

East.

And

as

I

said

earlier,

with

the

Middle

East

rig

count

down

33%

there,

we

just

had

not

seen

that

recovery

in

demand.

Going

forward

into

2022,

we

are

very

fortunate

to

have

the

relationship

with

Jindal,

which

we'll

talk

about

some

more

going

– in

the

next

couple

of slides.

That

has

already

paid

dividends

to

us

with

orders

with

ONGC

and

other

players

in

the

Indian

market.

So,

we're

very

thankful

for

that

and

Daniel

Tan

and

his

team

did –

have

done

a

great

job

on

pushing

that

across

the

line

for

us

for

the

joint

venture.

But

Chinese

fiscal

terms

regarding

taxes and

the

like

have

improved

in

China.

But

one

important

other

note

that

nobody's

talked

about

yet

is,

with

the

situation

in

the

Ukraine

and

Russia.

There's

all of

a

sudden

going

to

be

a

gap

of

many,

many

thousands

of

tons

of

Russian

pipe

that

will

not

be

in

the

international

marketplace.

So,

we

see

people

like

the

TMKs and

the

like

as

competitors

in

the

Middle

East,

in

Southeast

Asia.

I'm

pretty

sure

those

tons

are

going

away

now

with

all

the

sanctions

in

place.

So,

that

has

to

be

a

positive

for

OCTG

opportunities

going

forward

in

2022,

even

though

it's

driven

by

a

sad

state

of

affairs.

Slide

number

22

talks

about

our

strategic

accomplishments.

Bruce

has

talked

some

about

the

ABL.

We've

talked

about

the

Aberdeen

selling

of

the

OCTG.

We

still

look

internally

for

ways

to

save

money,

reduce

our

costs.

We've

done

some

things

on

consolidating

some

business

units.

You'll

see

a

slide

later where

we'll

talk

about

Singapore.

So,

we're

not

resting

on

our

laurels

as

far

as

where

we're

at

today,

and

we

continue

to

put

our

lean

manufacturing

initiatives

in

place

and

the

like

to

drive

our

cost

base

down.

Our

middle

slide

investment

in

non-oil

and

gas,

we

looked

at

our

current

portfolio,

we

like

what

we

have,

but

we

want to

enhance

it.

We

want

to

find

out

how

to

grow

better

in

new

areas

and

pick

up

new

technologies.

Two

investments;

one

Well

Data

Labs,

Denver-based

company,

focusing

on

analytics

and

machine

learning.

We

have

been

collaborating

with

them

along

the

lines

or

with

the

Titan,

our

Titan

business

unit,

to

look

for

ways

to

provide

better

analytics

and

machine

learning

data

for

our

customers

and

to

sell

our

products

better

in

the

perforating

side

of

the

business.

And

so,

we're

pleased

with

that

relationship

and

it

continues

to

go

forward

and

we

continue

to learn

more.

On

Cumberland,

when

we

looked

at

our

Advanced

Manufacturing

business,

it

was

an

area

where

we

can

see

the

trend,

especially

in

non-oil

and

gas

areas

like

aerospace

and

defense

where

3D

printing

is

becoming

more

and more

prevalent

and

more

and

more

the

way

to

have

things

done.

Organically,

it

would

be

extremely

difficult

and

costly

for

us

to

do

that.

We

came

across

– made

a

relationship,

came

across

some

people.

And

so,

we're

very

pleased

with

that

investment.

And

we've

already

been

funneling

opportunities

to

the

Cumberland

people

and

kind

of

using

them

as

our

3D

printing

option

when

we

look

at

supplying

products.

Expanding

markets

in

the

next

slide.

The

Jindal

relationship,

again,

I'll

talk

some

more

about

a

great

accomplishment

for

the

team

this

year

to

get

done.

The

Nammo

defense

system

delayed

– time

delayed

fuse

deal. Jason

Mai

put

that

together.

Great

job.

It

is

primarily

focused

on

the

TCP

market

which

is

more

offshore,

but

it's

also

going to

open

up

some

doors

for

us

for

military

applications

and

aerospace

that

we

are

working

with

right

now.

The

organic

oil

recovery

finally

making

steps

with

positive

purchase

orders.

Nobody

probably

knows

that

business

better

than

Bruce,

so

I'll

let

him

take

the

questions

on

that.

But

good

results

there.

And

again,

it's

one

of

those

ESG

stories

where

companies

can

do

more

with

less.

And

so,

we're

happy

to

see

that

continue

to

be

nurtured.

And

then

lastly,

the

Eden

Geothermal

project

in

the

UK.

That

just

highlights

to

me

a

fact

that

for

30

years,

Hunting

has

been

involved

in

the

geothermal

market,

whether

it's

been

the

Eden

project,

whether

it's

been

in

the

Philippines,

Indonesia,

Southern

California,

so

we

have

a

good

history

of

that.

Today,

it's

a

small

market.

So,

we're

hoping

that

that

does

expand.

Slide

23,

just

some

more

bullet

points

on

the

Jindal

relationship

and

the

joint

venture

that

we

have

going

on

there.

We're

hoping

this

is

up

and

running

and

threading

pipe

by

the

end

of

the

year.

And

again,

with

the

supply

issues

in

AsiaPac,

with

what

we

see

as

a

potential

for

accelerated

drilling

in

India

and

in

the

Middle

East,

we

think

this

is

a

great

relationship

going

– going to

be

a

great

relationship

for

the

company

going

forward.

And

we're

very,

very

thankful

to

the

Jindal

people

for

working

with

us

to

put

this

together.

So,

I

think

it'll

be

very

good.

On

the

lines

of

pipe

and

OCTG,

on

slide

24,

just

wanted

to give

you

a

shot

there

showing

the

continued

growth

in

our

TEC-LOCK

product

line.

It

continues

to

expand.

Connection

business

continues

to

do

well.

We

continue

to

work

with

a

group

of

independent

mills

that

supply

us

access into

the

marketplace.

But

again,

all

this

is

through

distribution.

So,

Hunting

is

not

owning

the

pipe

on

this.

We're

selling

the

Connection

Technology.

We're

threading

the

product

at

our

own

facilities

in

Houston

or Marrero, Louisiana

or

through

licenses

in

the

Gulf

Coast

or

through

licensees

in

Canada.

But

just

kind

of

a

snapshot

there.

Next,

slide

25,

big

home

run

for

our

Subsea

business

this

year.

The

–

I

mean,

I'm

just

thrilled

with

how

this

has

progressed

considering

what

we

paid

for

this

business

in

September

of

2019.

As

the

line

shows,

we've

booked

$68

million

worth

of

business

in

two

years.

I

think

this

will

continue

to

accelerate.

The

business

we

picked

up

at

the

end

of

the

year

with

Exxon

in

Guyana

is

the

largest

order

that

I

think

has

ever

been

secured

for

the

titanium

stress

joints

with

the

company.

It

exceeds

$20

million

and

again,

because

of

that

technology,

because

of

some

cost

savings

measures,

clients

are

seeing

by

utilizing

this

over

some

other

solutions,

I

think

there's

big,

big

upside

into

this.

ENPRO

had

a

tough

year.

A

lot

of

it's

stagnant

because

of

the

COVID-affected

downturn,

but

the

inquiry

levels

are

up

and

we're

expecting

a

good

year

for

ENPRO

this

year,

as

well

as

our

historic

business

at

Stafford

on

the

coupling

side,

which

is

directly

related

to

Subsea

Tree awards.

We

continue

to

be

the

market

leader

in

supplying

those

products

and

we

just

need

the

activity

to

pick

up,

which

it

will.

Slides

number

26

and

27,

I've

already

kind

of

talked

about,

but

just

some

bullet

points

there

for

everybody

on

Cumberland

and

on

Well

Data

Labs.

Slide

number

28

talks

about

one

of

our

cost

savings

initiatives.

It's

a

consolidation

move

we're

making

in

Singapore

right

now,

consolidating

three

– basically

three

into

one,

reducing

our

footprint,

getting

more

efficient.

And

it

shows

you

that

when

real

estate

issues

allow

us

and

we

can

make

these

moves,

we're

constantly

looking

at

ways

to

improve

our

performance

and

this

is

one

that

we're

doing.

Slide

number

29,

our

ESG

slide.

A

lot

of

points

on

there.

I'm

not going

to

go

through

them

all.

We

continue

to

strive

to

be

in

the

– a

high

performer

in

all

of

those

areas

and

to

do

the

best.

It's

nothing

that

we

haven't

done

in

the

past.

For

the

year,

in

2021,

just

to

kind

of

bring

it

all

together,

we

had

record

HS&E

performance,

great

quality

performance.

So,

Greg

Farmer

and

his

team

did

a

super

job.

It

continues

to

be

part

of

the

culture

at

Hunting,

and

I

just

want to

say

my

thanks

to

the

– all

of

the

Hunting

team

for

their

efforts

in

that

area

as

well

as

for

all

the

contributions

made

in

a

very

difficult

marketplace

in

2021.

Lastly,

on

page

30,

our

summary

of

our

investment

case.

And

honestly,

it's

kind

of

like

when

I

look

at

our

oil

company

clients

and

say,

well,

if

you

don't

drill

now,

when?

When

I

look

at

our

share

price

and

our

value

in

the

marketplace

today

and

talk

to

investors

like,

if

you

don't

buy

now,

then

when

will

you?

Because

honestly,

we've

got

a

great

runway

ahead

of

us, we

have

great

product

line

that

has

been

streamlined

and

made

more

efficient,

new

product

technologies

which

are

taking

off

for

us.

And

I

just

believe,

again,

we're

in

the

early

stages

of

a

boom

that's

going to

be

multiyear.

So,

with

that,

I

think

I'm

done.

And

I

will

now

open

it

up

to

questions.

Anybody

has

any?

Thank

you,

Jim

and

Bruce.

We're

going to

take

questions

from

the

room

first.

Ask

– anyone

asking

the

question

to

state

their

name

and

company

into

the

microphone

for

the

benefit

of

those

on

the

webcast.

Thank

you.

[Mick Pickup, Analyst, Barclays Capital Securities Ltd.]

Hi.

It's

Mick

Pickup

here

from

Barclays.

[Arthur James Johnson, Chief Executive Officer, Hunting Plc]

Hey,

Mick.

[Mick Pickup, Analyst, Barclays Capital Securities Ltd.]

Can

you

just

talk

about

the

Titan

business?

Obviously,

you've

seen

the

frac

count,

frac count recover.

And

if

I

look

at

the number

of completions,

it's

back

up

at

900 a

month.

And

I

think

we

peaked

about

1,300. So,

it's

come

back

a

long

way. But

your

revenues

in

that

business

aren't

what

they

used

to

be, if

I

look

on

a

like-for-like

basis. So,

you

started

talking

about

pricing

at

7%

now,

but

you're

used

to

20%

margins

in

that

business.

So,

when

the

conditions

come,

you

can

get

back

to

20%

margin, because

it

looks

like

prices

got

a

long

way

to

go?

[Arthur James Johnson, Chief Executive Officer, Hunting Plc]

Well,

I

can

tell

you

for

the

year,

the

margins

were

not.

But

I

can

tell

you,

in

Q4,

margins

were

over

23%.

So,

they

are

trending

in

the

right

way

and

should

continue

to

go

positive.

On

the

revenue

dollars

themselves,

the

market

is

not

what

it

was

two

years

ago

as

far

as

the

quantity

of

completions

out

there.

We

also –

as

I

had

mentioned,

we

are

passing

on

some

of

the

commodity

into

the

business,

Mick,

because

it's just

– you're

just

burning

up

and

using

steel

for

no

purpose.

So,

we

want

to

focus

more

on

the

technology

side.

Pricing

is

not

– obviously

not

where

we

want

it

and

not

where

it

was

in

2018,

and

that

will

be

an

evolution

of

suppliers

getting

back

to

that

level.

But

in

certain

segments

of

the

business,

like

on

the

Charge

side,

one

of

our

competitors

has

been

out

there

leading

the

low

end

of

the

pricing.

I'm

not

going

to

say

who.

On

the

systems

side,

I

think

we're

pretty

consistent

with

our

– the

number

– us

and

the

number

two

supplier.

Others

out

there,

it's

kind

of –

still

kind

of

a –

there's

still

kind

of

too

much

inconsistency

out

there

in

the

marketplace.

So,

what

we

all

need

is

demand.

What

we

all

need

to

do

is

realize

replacement

costs

are

going

to

be

needed

to

go

forward,

because

steel

has

risen.

Powder

prices

have

risen.

But

it's

not

a

–

I

can't

give

you

a quick

answer

and

say

June

13

pricing

will

be

up

$50

a gun.

But

I

think

the

steps

are

that

it's

going

in

the

right

direction.

[Mick Pickup, Analyst, Barclays Capital Securities Ltd.]

Okay.

And

then,

secondly,

you

say

your

order

book

is

up

40-something-percent

year-on-year.

Obviously,

a

lot

of

your

business

has

quite

fast

turnover.

[Arthur James Johnson, Chief Executive Officer, Hunting Plc]

Correct.

[Mick Pickup, Analyst, Barclays Capital Securities Ltd.]

So,

what's

it

been

up

on

end of

3Q

into

4Q?

I'm

just

looking

about

run

rates

today

for

this

year

going

forward

and the

US

spend

is

going to

be your

best

by

30%

on

our

estimate.

So,

just

thinking

how

is

that

progressing

at

this

juncture.

[Arthur James Johnson, Chief Executive Officer, Hunting Plc]

Well,

I

mean,

Mick,

it's

all

going

positive.

I

mean,

the

key

point

with

the

number

we

gave

was

the

order

volume

is

accelerating

rapidly.

I

mean,

it's

– I

can't

give

you

that

number.

Bruce,

you

got anything

you

can

add

to

that?

[Bruce Hill Ferguson, Finance Director, Hunting Plc]

Nothing. Certainly,

quarter

four

is

what

we're

seeing

coming

through

with

the

Subsea,

as

we

mentioned

there

as

well.

And

then,

post-year-end

as

well

with

the

orders we

mentioned,

these

are

packed

and

also

the

RTI

again

[ph]



we're seeing China (00:39:22)

starting

to

coming

through

as

well. The

[indiscernible]



(00:39:27)

in quarter

four,

most

definite, it's

an upward

trend that

we

saw

through

the

backend of

last

year, Mich.

[Arthur James Johnson, Chief Executive Officer, Hunting Plc]

Yeah.

And

the

Titan

business

as

we've

always

said,

the

Titan

business

stays

the

same.

There's

still

no

visibility.

I

couldn't

tell

you

what

the

number's

going

to

be

in

April,

because

you

are

basically

month

to

month

and,

I

think

this

one

graph

even

shows

as

we

track

that,

you'll

see

the

number

for

Titan.

You're

never

going

to walk

in

and

say

I

have

a

$100 million

backlog

at

Titan.

So,

it's

really

the

AMG

business,

the

Subsea

business,

the

AsiaPac

Premium

Connection

business

with pipe. Those

are

the

areas

where

you

establish

a

backlog

and

it

takes

the

time

to

get

those

through

the

system.

[Erwan Kerouredan, Analyst, RBC Capital Markets]

Hi,

there.

Erwan

from

RBC.

So,

my

first

question

on

pricing

in

Titan

has

been

answered.

I

guess

I

have

two

other

questions.

First

on

potential

like

small

targeted

M&A.

I

remember

two

years

ago,

deepwater,

a

proprietary

acquisition

were

like

a

main

area

of

focus.

How

do you

think

about

it

now?

Has

it

changed?

[Arthur James Johnson, Chief Executive Officer, Hunting Plc]

It

hasn't

changed,

unfortunately.

What

you

just

explained

was

RTI,

it's

been

a home

run for us.

So,

I

think

– so

we

proved

that.

But,

going

forward,

it's

one

of

those

cases

that

we're

continuing

to

look

at

acquisitions.

We've

got

the

firepower

to

do

it.

Our

focus

is

on

same

thing

hasn't

changed,

deepwater,

proprietary

technology,

completion

related

in

that

side

on

the

oilfield

services.

On

non-oil

and

gas,

more

on

the

high

technology

industrial

side,

perhaps

aerospace,

industrial

product

size.

The

issue is,

it's

no

different

than

us not

wanting

to

sell

our

shares

at

£2

a

piece.

Everybody

had

poor

earnings

to

try

to

do

multiples

on

in – from

2020 and

2021.

So

what

are

you

basing

this

on?

And

so,

some

companies

that

we

have

had

dialogue

with,

they'd

fit

the

bill

of

what

I'm

talking

about.

The

main

message

has

been

we got to

at

least

wait

till

the

end

of

this

year,

because

one,

we

need

to

prove

out,

pay

the

new

products

we've

brought

online

are

generating

earnings.

We

don't want to

sell

ourselves

short.

And

unless

it's

a

private

equity

firm

needing

to

exit,

there's

just

thin

pickings

whether

it's

oil

and

gas

or

non-oil

and

gas

right

now,

just

because

the

value

trying

to

relate

to

putting

a

value

to

EBITDA

earnings,

for

example,

[Erwan Kerouredan, Analyst, RBC Capital Markets]

Sounds

good.

Okay.

And

maybe

a

slight

follow-up

to

that,

but

getting

back

to

the

Russia

situation.

So,

for our

other

companies

under

coverage,

we

do

see

companies

diverting

their

crude

sourcing

away

from

Russia,

including

into

North

Sea,

North

Sea

oil.

So,

you

touched

on

this

a

little

bit,

but

can

you

clarify

that

you've

seen,

that

you

heard

more

interesting

conversations

over

the

past

couple

of weeks

in

terms

of

pick-up

outside

of

US

onshore

and

in

new

areas?

And

that's –

like

getting

back

to the

previous

question,

like

non-

oil

and

gas

is

a

potential

area

of

interest

in

terms

of

growth

and

does

this

situation

change

it?

[Arthur James Johnson, Chief Executive Officer, Hunting Plc]

No.

I

mean,

our

– we

will

– we

are

an

oilfield

service

company.

We're

going to

always

be

an

oilfield

service

company.

On

the

diversification

front,

the

key

is

that

we

recognize

that

we've

had

– we

have

rainy

days,

the

sun

is

going to

shine,

right?

So,

the

sun's

coming

out

right

now in

our

industry.

But

there

will

be

another

rainy

day

at

some

time.

I

don't

know

when.

What

would

be

– an

advantage

would

be

to

have

the

skills

of

the

company

in

the

engineering,

in

our

technology,

be

able

to

brought

into

other

product

lines

that

can

get

a

more

steady

stream

of

earnings

long-term

across

the

board.

As

far

as

the

topic

of

the

Russian

impact

and

all,

we've –

again,

we

saw

a big

uptick

in

activity

literally

since

Christmas.

A

lot

of

it

was

clients

were

told

you

cannot

spend

money

in

2021

period.

And

we

had

many

cases

where

we

went

out

and

told

them,

you

need

to

get

orders

in

place

now.

You

needed

this.

We

can't.

And

then,

January

1

hit,

and

it's

like

we

have

a

new

budget,

we

can

now

spend

money.

So,

there's

still

been

a

lot

of

capital

discipline

in

the

industry,

but

that

– we're

just

seeing

all

the

right

signs

that

that

is

going

to

be

changing.

And

especially

when

you

look

in

the

US

at

the

amount

of

private

operators

that

are

out

there.

I

mean,

we're

doing

business

with

companies

I

never

heard

of

three

years

ago.

These

are

not

–

I'll

bet

you

guys

haven't

heard

the half

of them.

And

they're

small

operators

running

five

rigs

in

the

Haynesville

drilling

natural

gas,

or

three

rigs

in

the

Permian,

and

its

private

equity

money,

and

they're

not

worried

about

returning

cash

to

shareholders

today.

They're

worrying

about

– which

they

are.

I'm

getting

that

$90

a

barrel

and

off

we

go.

And

another

factor

I

think

that's

going

to

benefit

us

all

going

forward

is,

last

year,

much

of

the

production

produced

by

a

lot

of

the

big

companies, a

lot

of

the

big

independents,

they

had

hedges

way

under

what

the

$80,

$90

barrel

range

was

that

they

were

seeing

in

the

open

marketplace.

So,

these

guys

were

not

realizing

$80

or

$90

a

barrel

or

realizing

$4

or

$5

an

Mcf

gas

price.

Those

are

all

falling

off.

If

you

like

– if

you

thought

the

cash

flow

was

great

in

2021,

the

cash

flow

is

going to

be

extraordinary

in

2022

for

E&P

players

in

North

America.

[Erwan Kerouredan, Analyst, RBC Capital Markets]

Yeah.

Understood.

Thank

you.

[Thomas Rands, Analyst, Investec Bank Plc]

Thank

you.

Thank

you.

Thomas

Rands

from

Investec.

One

for

Bruce,

organic

oil

recovery,

your

specialty

subject.

Could

you

give

us

an

update

on

where

that

is

with

the

agreement

with

the

kind

of

the

IP

owner

and

how

you

see

the

kind

of

that

product

expanding

in

the

Middle

East,

but

also

what

the

opportunity

is

for Fairfield,

please?

[Bruce Hill Ferguson, Finance Director, Hunting Plc]

Sure.

In

terms of

agreements,

so

we've

been

– we

worked

really

closely

with

owners

of IP

over

the

last

four

or

five

years.

So,

we

really

sort of

step

in

step

with

them.

We're

in

discussions

around,

let's

leave

it

there

just

in

terms

of

securing

a

longer-term

agreement

from

that

site.

The

Middle

East

has

been

really

exciting.

That's

been

a

target

area

for

us.

I

think

every

major

operator is

either

testing

the

product

or

commercial

status.

So,

it's

an

area

that

lends

itself

well

to

the

technology

itself,

in

terms

of

the

land

wells,

in

terms

of

the

geology

and

the

ease

of

getting

the

product

to

the

rig

site

as

well.

So,

we

have

secured

some

purchase

orders

out

there

for

some

of the

major

operators.

So

we're

really

looking

to

build

on

that

success

in the

Middle

East

and

just

really

rule

that

product

out

over

the

region.

We're

also

in

other

areas

such

as

Pakistan,

the

Far

East

as

well.

In

terms

of

the

North

Sea,

we

have

a

major

product

– major

project

coming

up

in

North

Sea

with

one

of

the

major

operators

there.

That

should

be

deployed

around

about anytime. So,

that'll

give

us

our

offshore

focus

as

well.

So,

our

land

projects

in

the Middle

East,

we'll

also

have

the

commercial

project

in

the

North

Sea

as

well. So,

that's

going

to

be

exciting

year

because

it

does

take

a

long

time

to

get

acceptance

on

new

technology.

The

test

results

have

been

very

good.

We're

now

getting

proven

out

with

these

major

guys

and

we're

seeing

the

benefits

of the

POs

coming

through

as

well.

So

really, 2022

is

about

just

building

on

that

success.

[Thomas Rands, Analyst, Investec Bank Plc]

All

right.

[Bruce Hill Ferguson, Finance Director, Hunting Plc]

Okay.

Hi.

It's

[indiscernible]



(00:46:51).

Just

a

quick

question

on

Russia.

I'm

sure

you

do

have

sales

into

Russia

over

the

last

couple

of

years.

So,

what sort

of

percentage

would

that

be?

[Bruce Hill Ferguson, Finance Director, Hunting Plc]

Sales

to

Russia

last

year

and

the

Ukraine

were

less

than

$300,000.

So,

it's

not

– it's

meaningless

for

us.

And

the

year

before?

[Bruce Hill Ferguson, Finance Director, Hunting Plc]

About

probably

less

or

the

same.

[Arthur James Johnson, Chief Executive Officer, Hunting Plc]

Yeah.

Okay.

Thanks.

And

I,

sort

of

– you

have

an

energy

transition

project

team

in

Aberdeen

to

look

at

different

projects.

Could

you

just

talk

about

that

a

little

bit?

Sort

of

what

things

are

they

looking

at?

What

things

have

they

executed

so

far?

[Arthur James Johnson, Chief Executive Officer, Hunting Plc]

Sure.

What's

the

sort

of

vision

for

that

team

in

Aberdeen?

[Arthur James Johnson, Chief Executive Officer, Hunting Plc]

Do

you

want me

to take

that one?

[Bruce Hill Ferguson, Finance Director, Hunting Plc]

Go

ahead.

[Arthur James Johnson, Chief Executive Officer, Hunting Plc]

Yeah.

Well,

the

team

is

set

up.

Obviously

the

traditional

core

business

on

the

drilling

side

declines

for

the

last

– since

really

2015. So,

looking

to

diversify

into

areas

that

such

as

–

we

saw

some

casing

to

the

Eden

project

as

a

geothermal

well.

Other

areas

we're looking

at

is

the

– on

the

carbon

capture

side.

And

then,

more

medium-term

is

looking

at

things,

what's

going to

happen

with

the

[indiscernible]



(00:47:56) project,

hydrogen,

et cetera

as

well.

So, there's

a

lot

of

wind

projects,

floating

wind,

fixed

wind

there,

and

looking

how

we

can

sort

of

deploy

our

assets

to

help

secure

new

work

into

those

areas.

Okay.

Thanks.

Okay.

We're

going

to

take

some

questions

that

have

been

submitted

by the – via

the

webcast

now. The

first

one

comes

from

Mark

Wilson

of

Jefferies.

He

says,

can

you

speak

to

the

quantum

of

defense

market

exposure

through

Advanced

Manufacturing

business?

And

there's a

follow-up

question,

which

I

think

you've

already

addressed,

Jim,

with

regards

to,

do

you

expect

to

grow

that

market

– into

that

market

strategically

maybe

through

M&A?

[Arthur James Johnson, Chief Executive Officer, Hunting Plc]

So,

the

defense

business

that

we're

doing

right

now

has

hit

three

areas

of

the

company.

At

Dearborn

and

Fryeburg,

Maine

is

the

largest

segment

of

it.

And

there,

about

60%

of

the

business

is

non-oil

and

gas.

And

so,

I

would

say

30%

of

that

is

defense-related.

And

those

numbers –

I

mean,

I'd

have

to

take

a

minute

to

go

calculate

all

that

out,

but –

I

mean,

when

you

look

at

our

overall

numbers

being

8%,

let's

say,

your

revenue,

you're

talking

maybe

2%

defense

then

–

2%

or

3% of

total

Hunting revenue

when you

look

at

defense.

And then

on

the gross

side

–

I'm

sorry,

on

the

other

areas,

we

have

picked

up

defense

business

and

Electronics

and

in

our

US

Manufacturing

business,

the

recent

ones

being

with

[ph]



Textron (00:49:25).

But

again,

it's

small

numbers

today.

So,

defense,

aviation

together

60%

in

Dearborn and then –

and

that

includes

the

satellite

business

and

then

the

rest

of

it

has

been

oil

and

gas.

So,

it's

small

and

growing

but

it's

a

focus

of

ours

to

continue

to

grow

on

that

business.

Great.

Another

question

from

Mark

Wilson

of

Jefferies

which

relates

to

the

bottom

line

for

2020

and

guidance.

Order

book

is

up

and

consensus

shows

a

15%

year-on-year

growth,

but

where

do

you

see

EBITDA

trending?

And

do

you

think

net

profit

in

absolute

terms

should

be

expected?

[Arthur James Johnson, Chief Executive Officer, Hunting Plc]

Well,

I'm

not

going to

give

guidance

right

now,

but

you

mean

our

goal

is

to

have,

yes,

a

net

profit

in

whole

for

the

year

and

for

– to

massively

exceed

what

we

did

this

year.

How

I

see

the

year

playing

out

is

the

first

quarter

is

going

to

be

still

relatively

flat

or

comparable

to

Q4.

Part

of

it

is

because,

as

I've

mentioned,

much

of

the

backlog

we're

building

right

now

is

not

short

lead

time.

So,

you

just

don't

walk

down

to

the

corner

store

and

get

30

feet

of

titanium

tomorrow.

So,

it

takes

time

to

get

all

of

this

into

the

system.

I

think

also

the

first

quarter

I'm

hoping

will

be

the

last

quarter

that

we

had

severe

effects

on

COVID

within

the

operation

of

the

company

because

as

I

had

mentioned,

January's

impact

to

the

bottom

line

alone

was

over

$1

million,

just

in

excess

of

inventory,

the

loss

absorption

and

the

likes

throughout

the

company.

So,

I

think

this

will

be

an

expanding

year

quarter-by-quarter

improvement.

And

how

that

comes

along

and plays

with

supply

chain

issues

and

the

like

remains

to

be

seen,

but

I'm

extremely

optimistic

for

the

year.

We've

got

a

question

from

Kevin

Roger of

Kepler. It

seems

that

frac

crews

are

almost

sold

out

in

the

US.

How

should

we

think

about

the

impact

for

your

activity

going

forward?

And

is

there

any

bottleneck

on

the

client

side?

[Arthur James Johnson, Chief Executive Officer, Hunting Plc]

Well,

frac

crews

available

[ph]



are (00:51:22)

sold

out,

but

I

read

the last

week

of

somebody

just

turning

back

on

two

more.

So,

I

believe

it's

the

old

story,

money

talks.

And

as

money

improves,

whether

it's

Transocean

saying

they're

going to

reactivate

one

of

their

deepwater

rigs

from

cold

stack,

the

client's

calling

and

asking

the

units

will

be

reactivated

and

they'll

be

there.

It

all

comes

down

to

what

are

the

economics.

I

do

believe

that

these

frac

operators

are

going

to be

much

more

disciplined,

understanding

that

we're

just

not

bringing

this

out

for

one

job.

You're

going to

have

to

do

a

long-term

contract

for

us.

So,

I

think

on

the

frac

spread

count in

the

US,

one,

they're

more

efficient

today,

so

they

are

doing

more.

You

can

go

and

look.

I've

looked

at

a

half

a

dozen

of

them

in

the

last

month,

whether

it's

EOG

or

Devon

and

the

like,

or

even

EQT

back

in

Pennsylvania,

they

all

talk

about

how

much

faster

they're

completing

these

wells

than

they

were

two

years

ago.

So,

you

have

the

same

kind

of

dynamics,

I

think,

moving

forward

with

the

efficiency

of

the

frac

spread

crews.

But

the

other

upside

for us

is

international.

And

I

think

we're

going

to –

we

had a –

I

thought

we

had

a

very

good

year

on

the

international

side,

and

I think

we're

going

to

see even

faster

growth

in

the

international

segment

for

Titan

than

what

you

do

domestically.

Question

from

James

Thompson

of

JPMorgan.

Could

you

provide

a

bit

more

color

on

the

revenue

generation

through

H2

and

what

were

the

key

drivers

there?

And

how

much

of

an

improvement

in

top

line

do

you

see

sequentially

in

the

first

half

of

2022?

[Bruce Hill Ferguson, Finance Director, Hunting Plc]

Well,

in

terms

of

our

H2

numbers,

we

were

14%

higher

in

H2 2021

compared

to

the

first

half

of

the

year.

I

think,

as

Jim

mentioned

there,

it's

difficult

to

see

through

everything

together

to

see

how

that's going

to

play

out.

We

are

looking

at

a

more

tepid

growth,

I

guess,

in

quarter

one

for

the

reasons that

Jim

just

outlined.

And

in

quarter

two,

once

we're

through

our

COVID

disruptions

on

operations,

we've

got

the

demand

there

especially

for

the

short

cycle

in

Titan

and we

see

that

improving

as

well.

But

there

is

a

lot

of uncertainty

there

as

well. But

certainly

second

half

2021

was

14%

higher

than

first

half

2021.

[indiscernible]

[Arthur James Johnson, Chief Executive Officer, Hunting Plc]

(00:53:33)

not going

to

give

numbers.

With

supply

chains

issues

and

the

like,

all

I

can

tell

you

is

it's

going

to

get

better.

It

should

significantly

get

better.

The

backlog

is

speaking

to

that.

The

oil

price

is

speaking

to

that.

The

industry

comments

from

our

clients

is

speaking

to

that.

Where

that

hits,

whether

it

hits

in

May

or

July

or

–

at

this

point,

it's

too

much

of

a

moving

target

to

try

to

put

a

number

and

then

be

held

to

it.

Okay.

And

another

question

from

James

at

JPMorgan.

You

talk

about

more

orders

and

more

inquiries.

Can

you

add

any

more

color

to

those

comments?

[Arthur James Johnson, Chief Executive Officer, Hunting Plc]

On

the

inquiry

front,

keep

in

mind

a

lot

of what

we

do

is

provide

capital

equipment

to

operators.

So

if

you

look

at

our

Well

Intervention

business,

that's

basically

a

CapEx.

And

in

the

last

two

years,

the

amount

of

CapEx

spend

needed

by

our

big

– other

big

OFS

customers

was

nil.

When

you

have

1,200

rigs

and

600

of

them

are

sitting

doing

nothing,

you

go

steal

from

Joe's

rig

to

put

it

on

your

rig.

That

happens

a

lot

in

downturns.

It's

not

anything

extraordinary,

and

it

happened

big

time

in

this

downturn.

I

can

tell

you

specifically

in

areas

like

our

specialty

supply

business,

had

a

good

month

in

February.

Nice

turnaround

after

a

horrible

year

or

so.

That's

a

division

of

our

company

that

makes

replacement

parts

for

MWD

equipment,

same

part

of

the

cycle.

It's

a

business

that

a

couple

of years

ago

generated

$10 million

in

earnings

but

last

year

lost

$1

million,

just

to

kind

of

show

you

the

swing. But

it's

a

business that

relies on

CapEx

spend.

And

so,

no

different, when

you had 1,000

MWD

units

out

there

and 500

of them

are

sitting on

the shelf

and not

being used,

you

don't go

and

buy replacement

kit.

So,

that's

one anecdotal

thing

that

I

can tell

you.

We're

seeing

a pickup

in that,

for example,

that one

thing

there.

We're seeing –

actually,

I

can

tell

you

that the

backlog

for

well

intervention

equipment

in

Aberdeen

for

Q1

almost

exceeds

the

whole

revenue

for

last

year,

and

that's

only

happened

in the

last

60

days.

So,

like

I

said,

we're

seeing

indications

that

people

have

got

to

start

replacing

this

equipment,

and

that's

driving

my

optimism

for

the

year

going

forward.

Okay.

We've

got

no

more

questions

via

the

webcast.

So,

does

anybody

else

in

the

room

have

any

other

questions

yet?

Back

to

the

Mick.

[Mick Pickup, Analyst, Barclays Capital Securities Ltd.]

I've

got

a

couple of

questions, if

I

may.

Can

I

just

ask

about

your

views

on

the

US

OCTG

market because,

obviously,

that

market's

been

dominated

by

a

couple

of

major

seamless

plays

over

the recent

years

and

the

HRC

prices

are

collapsing...

[Arthur James Johnson, Chief Executive Officer, Hunting Plc]

Right.

[Mick Pickup, Analyst, Barclays Capital Securities Ltd.]

...or

have

come

down.

So,

at

some

point,

you've

got

to

assume

that

the

domestic

mills

will

start,

and

I've

got to

think

that

that gives

you

an

option

for

the threading

of those

pipes

for

you

as

that

happens.

So,

what

are you

seeing

on

the

US

market, how

do

you

view

it?

And, obviously,

I

appreciate

your

views.

[Arthur James Johnson, Chief Executive Officer, Hunting Plc]

The

US

market

is –

I

won't

say

which

mill,

but

I

talk

to

my

competitors

in

the

industry

on

a

regular

basis,

you

deal

with

the industry

things

just

like

I

see with

the

guys

from

[ph]



at

Oil

States

or

what

–

pick,

pick

one (00:56:35).

I

can

tell

you

that

some

of

the

mills

in

the

US

are

already

completely

booked

into

– well

into

Q4.

And,

right

now

you

can't

make

enough

5.5-inch

P110

collapse

seamless

product

for

the

US

marketplace

because

that

– that's

the

shale

wells.

And

then, there

are

some

changes

in

the

sizes,

but

all of

them

are

doing

well.

Tenaris

has

reactivated

their

operation

in

Pennsylvania.

So,

they're

going to

start

making

tubing

again.

U.S.

Steel,

they

still

have

not

fired

up

their

Lorain

operation

but

their

Fairfield,

Alabama

operation

is

running

full

tilt.

Other

independent

mills

that

we're

working

with

are

very,

very

busy.

OCTG

prices

are

very

high

in

the

US.

They're

some

of

the

highest

in

the

world.

That's

not

– it's

not

going to

change

this

year

for

sure.

So,

very

buoyant

market,

strong

for

steel.

[Mick Pickup, Analyst, Barclays Capital Securities Ltd.]

And the

new

domestic

supply

reactivating,

does

that

give

you

an

opportunity?

[Arthur James Johnson, Chief Executive Officer, Hunting Plc]

Yeah.

I

mean,

the

thing

was

for

a

while

they're

seamlessly

– seamless

was

actually

less

expensive

than

ERW.

Like

you

said,

the

hot

rolled

coil

prices

had

just

gone

astronomically

through

the

roof.

That

is

starting

to

change.

So,

I

think

ERW

mills

will

become

more

efficient

in

the

year

–

as

the

year

goes

on,

that

will –

it

might

put

a

lid

on

pricing

but

it's

not going

to

reduce

it.

Because

the

demand

is

so

strong

and

that

means

5.5-inch

for

an

ERW

mill

is

a

sweet

spot

or

7-inch

or

[indiscernible]



(00:58:06)

that

they

use

on

these

mills –

or

these

wells.

So,

we

have

a

certain

number

of

mills

that

we

work

with.

Some

of

our

competitors'

mills

have

our

connections

put

on

them for

offshore

business.

So

again,

remember

it's

a

distribution

market.

So,

except

for Tenaris,

which

is

doing

the

rig

direct

model,

distributors

are

out

there

buying

[indiscernible]



(00:58:27),

buying

whatever

and

that's

how

we've

been

able

to

benefit

in

the

marketplace

plus

working

with

some

of

our

independents

out

there.

[Mick Pickup, Analyst, Barclays Capital Securities Ltd.]

Okay. And can

I

ask

about

this

subsea

couplings

business?

[Arthur James Johnson, Chief Executive Officer, Hunting Plc]

Yeah.

[Mick Pickup, Analyst, Barclays Capital Securities Ltd.]

I

think

one of

the

surprises we

had

last

week

was

one

of

the

subsea

tree manufacturers

saying

we're

back

to

2020, not

2014/2015

sort of

levels

on

subsea

trees...

[Arthur James Johnson, Chief Executive Officer, Hunting Plc]

Yeah.

[Mick Pickup, Analyst, Barclays Capital Securities Ltd.]

...

[ph]

which

is

about

350

being

ordered

(00:58:46) this

year...

[Arthur James Johnson, Chief Executive Officer, Hunting Plc]

Yeah.

[Mick Pickup, Analyst, Barclays Capital Securities Ltd.]

...which

is

a

lot

higher.

What are

you

seeing?

Because

you

should

see

a

direct

feed-through

of

that optimism?

[Arthur James Johnson, Chief Executive Officer, Hunting Plc]

No,

we

will.

And

that's

one

of

the

things

that

I'm

excited

about

going

–

that's

not

a

today

issue.

I

mean,

they

order

those

trees, you're

talking

the

[indiscernible]



(00:59:00) I

mean

their

lead

times

are

way

out

on

that.

Our

couplings

are going

to

be

later

in

the

cycle.

But,

honestly,

when

I

look

at

our

Subsea

business

today,

there's

no

business,

I'll

probably

have

more

optimism

about

it

in

general

than

that

is

going

forward

because,

again,

we

have

the

technology

with

the

proprietary

product

line.

I

just

am

very

optimistic.

And,

yeah,

I

follow

FMC

and

see

what

they

said.

And

that

will

feed

directly

into

our

Stafford

coupling

business.

[Mick Pickup, Analyst, Barclays Capital Securities Ltd.]

Okay.

Thank

you.

[Arthur James Johnson, Chief Executive Officer, Hunting Plc]

We're

all

done.

Great.

Well,

again,

thank

you

for

everybody

that's

listening.

Again,

I

want

to thank

the

team

at

Hunting

for

all

the

accomplishments

that

were

made

in

a

very,

very

challenging

year.

I'm

glad

COVID

is

getting

behind

us.

We're

all

sitting

here.

By

the way,

nobody

has

a

mask

on,

so

that's

a

wonderful

thing

today.

So,

again,

stay

tuned.

I

think

this

is

in –

if

baseball

terms,

this

is

probably

the

second

inning

of

what

I

think

is

a

long-term

game

for

us,

and

we're

well

positioned

for,

I

think,

a

super

year.

So,

thanks

for

being here.