Oilfield services firm Hunting rides the US shale boom, but low oil prices undercut profits

Courtney Goldsmith
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Hunting's half-year results are out 24 August (Source: Getty)

Oilfield services firm Hunting said it is reaping the benefits of the US shale boom, but low oil prices are weighing on the company's future prospects.

The rapid increase in onshore drilling in the US, particularly in areas like the Permian Basin in Texas, has caused Hunting's first half performance to beat management's expectations, chief executive Dennis Proctor said in a trading update.

To meet demand for its popular perforating system, it has recommissioned a previously mothballed facility and added personnel to that unit.

The FTSE 250 firm's share price rose 0.84 per cent to 495.4p.

However, the US offshore and international drilling markets remain weak because of low oil prices.

The Organisation of the Petroleum Exporting Countries (Opec) has brokered a deal between its members and non-members like Russia to cut output to rebalance the market. However, rising production of shale gas in the US has spurred fears that Opec's cuts aren't doing enough to reduce the global supply glut. Brent crude oil prices fell below $45 a barrel last month compared with a price of around $57 a barrel earlier this year.

"Drilling budgets continue to be reduced by global operators, which adversely impacts Hunting's businesses focused on these markets," Proctor said.

Hunting's well construction and well intervention segments experienced difficult trading conditions in the period, especially while deepwater drilling activity remained subdued.

The firm, which provides drilling and infrastructure support to oil explorers, expects to report positive core earnings but remain loss-making at the profit before tax level.

The outlook for the remainder of the year is based on sustained US onshore drilling activity driving the group's performance, accompanied by cautious optimism for stable offshore and international markets.

Read more: Here is why Hunting shares have jumped five per cent

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