Hunting PLC Annual Report 2012
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Hunting PLC PLC Hunting Hunting PLC Annual Report 2012 3 Cockspur Street London SW1Y 5BQ Tel: 020 7321 0123 Fax: 020 7839 2072 Annual Report 2012 www.huntingplc.com Welcome to Hunting Professional Advisers Solicitors CMS Cameron McKenna LLP Auditors PricewaterhouseCoopers LLP Joint Corporate Brokers Deutsche Bank and Barclays Bank Financial Advisers DC Advisory Partners Limited Insurance Brokers Willis Limited Pension Advisers & Actuary Lane Clark & Peacock LLP Financial Public Relations Buchanan Communications Limited Registrars & Transfer Office Equiniti Limited Aspect House Spencer Road, Lancing West Sussex BN99 6DA Telephone: 0871 384 2173 Registered Office: 3 Cockspur Street, London SW1Y 5BQ Registered Number: 974568 (Registered in England and Wales) Telephone: 020 7321 0123 Facsimile: 020 7839 2072 www.huntingplc.com Designed by Emperor Printed by Park Communications on paper manufactured from Elemental Chlorine Free (ECF) pulp sourced from sustainable forests Park Communications is certified to ISO 14001:2004 Environmental Management System and is a CarbonNeutral® company Hunting PLC Annual Report 2012 01 Company Overview OverviewCompany “ The management team and 02 Strength in Numbers 04 Hunting at a Glance assets are fit for purpose and 06 Chairman’s Statement set for growth.” 08 Growing our Global Presence Dennis Proctor, Chief Executive Business Review 10 Chief Executive’s Review 12 Five Years of Progress 14 Operating Review 22 Financial Review 27 Review of Principal Risks and Uncertainties Business Review 29 Corporate Social Responsibility Report Governance 34 Board of Directors 36 Report of the Directors 40 Corporate Governance Report 44 Remuneration Committee Report 52 Audit Committee Report Financial Statements 54 Report of the Auditors Governance 55 Consolidated Income Statement 56 Consolidated Statement of Comprehensive Income 57 Consolidated Balance Sheet 58 Company Balance Sheet 59 Consolidated Statement of Changes in Equity 60 Company Statement of Changes in Equity 61 Consolidated and Company Statement of Cash Flows 62 Notes to the Financial Statements Statements Financial 116 Financial Record Other Information 117 Shareholder Information 118 Glossary IBC Professional Advisers Other Information For more information please visit: www.huntingplc.com 02 Hunting PLC Annual Report 2012 Strength in Numbers 3,866Employees +12% Diluted EPS 57. 5 p +49% PBT £123.6m +55% 8.44mHunting Energy Services Hours Worked 14.4m Parts Produced Hunting PLC Annual Report 2012 03 Operational Highlights OverviewCompany ``Record operational performance. Revenue increasing 36% to £825.8m (2011 – £608.8m). ``Successful integration of recent acquisitions. ``Further international expansion into the US, UK and China. ``Facilities footprint now exceeding 2.7m square feet. ``New WEDGE-LOCK™ and SEAL-LOCK™ connection products introduced in the year. ``Sale of Field Aviation completed in the year. ``Planned strategic investment into South Africa to capture new geographic market share. Business Review Financial Highlights* ``Further record year of profits: Z`Underlying profit from continuing operations £128.8m (2011 – £81.0m). Z`Reported profit from continuing operations £85.9m (2011 – £41.0m). Z`Underlying diluted earnings per share from continuing operations 57.5p (2011 – 38.7p). Z`Reported diluted earnings per share from continuing operations 40.0p (2011 – 20.3p). ``Strong cash flows generated in year with gearing reducing to 20% (2011 – 30%). Governance ``Capital expenditure across global operations increasing to £61.6m (2011 – £58.0m). ``27% increase in final dividend proposed of 14.0p (2011 – 11.0p), subject to approval by shareholders. * Underlying – results for the year, as reported under IFRS, adjusted for amortisation and exceptional items. Reported – results for the year under IFRS. Revenue £825.8m Statements Financial +36% Other Information 350 Patents 04 Hunting PLC Annual Report 2012 Hunting at a Glance Hunting’s three main manufacturing divisions Casing & Connection cover the entire wellbore, from surface Technologies equipment to fracturing, from the beginning of the well’s life cycle to the end, with its Well Construction, Well Completion and Well Intervention business units. Meeting market demand Our Clients The Group’s Premium Connection Hunting Equipment Management We work with the international and business manufactures a range of Services (“HEMS”) provides downhole national oil companies in all the major connections including the Group’s in rental tools and equipment into the producing regions of the world as well house designed SEAL-LOCK™ and European market and is pursuing as with all the major energy service WEDGE-LOCK™. These proprietary additional market opportunities in the companies and independent operators premium connections and associated Middle East/North Africa region. in the principal producing regions. technologies are well suited to challenging offshore environments and onshore Hunting’s Oil Country Tubular Goods Well Construction shale plays. (“OCTG”) business includes casing We provide products and services related products and management services. to the initial drilling and construction Hunting’s Drilling Tools business The Group has key relationships with phase of the wellbore. This division provides mud motors, shock tools, steel manufacturers to facilitate just-in- includes Hunting’s new Advanced non-magnetic drill collars and other time logistics and inventory. Hunting has Manufacturing Group comprised of technologies that assist in the efficient the technology, resources, established Hunting Innova, Hunting Dearborn drilling of oil and gas wells. Demand mill relationships and experience to and Hunting Doffing. The division also for these products is being driven by supply all tubular needs on time, includes casing connection technologies shale drilling activities in North America anywhere in the world. with premium proprietary threads; and through international sales in annular pressure release systems; MWD/ the Middle East and Asia Pacific. LWD components; roller reamer, non-magnetic drill collars; vibration dampening units and mud motors. Hunting PLC Annual Report 2012 05 Well Completion Premium tubing is supplied into the Organic growth and acquisition has OverviewCompany This division is a global manufacturer energy industry for both conventional and allowed for the integration of our of accessories, premium tubing, unconventional extraction from the shale extensive range of pressure control connections and OCTG-related products plays of North America to the established equipment technologies and wireline and services that are manufactured at 41 offshore arenas and emerging regions, and slickline products coupled with the centres around the world for the including East Africa and the Middle East. Group’s expertise and experience. completion phase of the wellbore. The division provides products, proprietary Hunting’s Well Completion division also The Group is widely regarded within technologies, engineering expertise includes a thread protection group that the oil and gas industry as one of and services below the wellhead. The provides protection solutions including the leading providers of Thru-Tubing acquisition of Hunting Titan puts the SealLube™ thread compound, Preserve- services for downhole solutions for Group into the design, manufacture A-Thread corrosion protection and the coiled tubing business. Thru-Tubing Business Review and distribution of perforating systems, CLEAR-RUN™ an environmentally safe technology aligns with the suite of energetics, associated tools and MWD/ advanced tubular solution for use in zero well intervention tools that are now LWD wireline logging equipment. It emission environments. packaged and deployed to operating also provides a network of distribution customers throughout the world. centres to satisfy the short order Well Intervention demand that characterise onshore This division manufactures equipment The Subsea technologies capability field operations. for the maintenance and restoration includes chemical injection systems, of producing wells to ensure the hydraulic valves and couplings. optimum flow of oil or gas throughout the well life cycle. Governance OEM Perforating Financial Statements Financial MWD/LWD Tools & Other Information Logging Equipment Mud Motors 06 Hunting PLC Annual Report 2012 Chairman’s Statement The Group has had another successful The Group is well placed in the shale “ Despite the world economic year of further expansion as management revolution, particularly following the uncertainty, global demand for integrate the activities of the companies 2011 acquisition of Hunting Titan, and is acquired in 2011 and continue to invest actively exporting their technology to energy continued to grow.” substantial capital in new facilities. other areas of shale potential such as Europe and the Far East. Underlying profit before tax from continuing operations in 2012 was Activity in the Gulf of Mexico has fully £123.6m (2011 – £79.8m), a 55% returned to the levels it enjoyed prior to increase. Reported profit before tax the tragic Macondo incident of 2010. Our from continuing operations was facilities serving that market are stretched, £80.7m (2011 – £38.8m). with further expansion under way. In Europe, the North Sea is busy and, once Despite the world economic uncertainty, again, several of our recently expanded global demand for energy continued to facilities are experiencing high utilisation. grow in the year. The industry we serve