Oil services company Hunting (HTG) has reported deteriorating trading in the fourth quarter and management is becoming increasingly downbeat on 2019.
That's enough to send shares in the company down 3.5% in early trading to 495.5p.
Peers including Wood Group (WG), Petrofac (PFC) and Weir (WEIR) are also on the back foot as investors perceive the rpoblems to be industry-wide, not company specific. Their share prices decline 3.3% to 549p, 1.9% to 451.1p and 2.3% to £13.42 respectively.
Hunting’s news suggests the industry could be reacting quickly to the recent fall in oil prices by cutting their spending, many firms would have been busy coming up with their budgets for 2019 when the latest crash in oil prices came along.
Wood itself warned last week about the outlook for further contract awards. For much of 2018 Hunting was in recovery mode, restoring its dividend alongside first half results in August.
DEMAND DRYING UP
The company’s North American Titan business has benefited from strong demand for its perforating gun, a device used to penetrate oil and gas wells in preparation for production.
Hunting now says: ‘Clients are indicating caution on committed spend for the early part of 2019 as the lower oil price and pipeline bottlenecks in the Permian basin indicate a short term slowing in completion activity.’
Fourth quarter operating profit from Titan are expected to fall compared with the previous two quarters.
Outside of the US the company remains loss-making and it adds that ‘management enter 2019 with a cautious outlook’. The company does at least confirm results for the January to November period were in line with forecasts. It expects to allocate $30m to capital expenditure next year. The company currently has around $44.6m worth of net cash.
