A Year of Rapid Expansion

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A Year of Rapid Expansion Job: FrontXcover_v4 Proof: 01 Proof Read by: Operator: paul Date: 9 March 2012 7:06 PM Server: studio 2 Set-up: paul First Read/Revisions Hunting PLC Annual Report and Accounts 2011 Hunting PLC Hunting PLC A year of rapid Annual Report and Accounts 2011 expansion FrontXcover_v4.indd< 10mm SPINE 3 09/03/2012 19:58 < PRINTER TO ADJUST Job: FrontXcover_v4 Proof: 01 Proof Read by: Operator: paul Date: 9 March 2012 7:06 PM Server: studio 2 Set-up: paul First Read/Revisions COMPANY OVERVIEW 01 Highlights 02 Chairman’s Statement 04 Global Footprint BUSINESS REVIEW 06 Chief Executive’s Review 10 Our Strategy in Action 16 Operating Review 22 Financial Review 27 Review of Principal Risks and Uncertainties 29 Corporate Social Responsibility Report 34 Board of Directors GOVERNANCE 36 Report of the Directors 2011 40 Remuneration Committee Report 47 Corporate Governance Report FINANCIAL STATEMENTS 52 Report of the Auditors 53 Principal Accounting Policies 60 Consolidated Income Statement 61 Consolidated Statement of Comprehensive Income 62 Consolidated Balance Sheet 63 Company Balance Sheet 64 Consolidated Statement of Changes in Equity 66 Company Statement of Changes in Equity 67 Consolidated and Company Statement of Cash Flows 68 Notes to the Financial Statements 120 Shareholder Information 121 Financial Record 122 Additional Information on the Acquisition of Subsidiaries FrontXcover_v4.indd 4 09/03/2012 19:59 Job: FrontXcover_v4 Proof: 01 Proof Read by: Operator: paul Date: 9 March 2012 7:06 PM Server: studio 2 Set-up: paul First Read/Revisions Hunting at a glance Hunting PLC is a global energy services provider that manufactures and distributes products that enable the extraction of oil and gas for the world’s leading companies. Well Construction 1 Casing Products and services provided in the drilling phase of 2 Connection Technologies 3 Annular Pressure Release Systems exploration and production. 4 Collars The company provides premium casing and Oil Country 5 Logging While Drilling Components 6 Roller Reamer Tubular Goods (“OCTG”) in the construction of the 7 Measurement While Drilling Components wellbore; in-house design (Seal-Lock™) and threading of 8 Non-Magnetic Integral Blade Stabilisers premium connections and associated technologies, which 9 Non-Magnetic Drill Collar are well suited to the deeper and more challenging offshore 10 Vibration Dampening Unit environments as well as onshore shale plays. 11 Mud Motor Hunting Innova’s substantial electronics capability adds to this core mechanical competence and together with the recent acquisitions of Dearborn, Doffing and Specialty, this has led to the formation of an Advanced Manufacturing Group to build a single source MWD/LWD capability. The company is also an innovator in the design, manufacture and leasing of mud motors and associated drilling tools, 1 3 especially for horizontal wells typical of shale formations. 2 Well Completion 1 Two-Step Tubing Manufacturing accessories and completion equipment for the 2 Flow Couplings 3 4 3 Crossovers world’s principal producing regions. 4 Landing Nipples Providing products, proprietary technologies, engineering 5 Bull Plugs 6 6 Flow Tubes expertise and services below the wellhead to allow the flow 7 Connection Technologies of hydrocarbons to the surface. Premium tubing, connections 8 Pup Joints 8 5 and OCTG related goods and services are manufactured by 9 Double Pin Subs 38 company facilities around the world. OEM and in-house 10 Blast Joints designed wellbore tools are used by the major energy service 10 companies and international operators. Clear-Run™ technology provides a significant advantage for running tubing in zero 7 emission environments. 1 The acquisition of Titan during the year projects the company into the design, manufacture and distribution of perforating 9 systems, energetics, associated tools and MWD/LWD Wireline 2 logging equipment. Titan extends the company product line 11 by 43,000 parts alone. 3 4 Well Intervention 1 Stuffing Box Equipment manufacture and supply for the maintenance and 2 Pressure Control 3 Thru-Tubing 4 restoration of producing oil and gas wells from company 4 Coiled Tubing Tools distribution points around the world. 5 Running Tools 6 VariBall Roller System 6 The organic growth of this division, coupled with targeted 7 Slickline Tools acquisitions, has allowed for the integration of an extensive 8 Pulling Tools range of pressure control equipment technologies, Wireline 9 E-Line Tools and Slickline products, together with intervention expertise to 10 Positioning Tools complement the Hunting range of well intervention tools. 11 Kickover Tools 12 Hydraulic Couplings and Valves The subsea technologies capability is being expanded to 13 Chemical Injection Systems include chemical injection systems, hydraulic valves and couplings. This has been enhanced by the growing activities of Hunting Welltonic who are widely regarded as one of the leading Thru-Tubing service providers at the forefront of supplying down hole solutions to the world’s coiled tubing operators. FrontXcover_v4.indd 5 09/03/2012 19:59 Job: FrontXcover_v4 Proof: 01 Proof Read by: Operator: paul Date: 9 March 2012 7:06 PM Server: studio 2 Set-up: paul First Read/Revisions 12 13 11 3 5 8 9 5 6 8 10 6 7 10 7 9 11 FrontXcover_v4.indd 6 09/03/2012 19:59 Job: Highlights_v9 Proof: 01 Proof Read by: Operator: paul Date: 9 March 2012 6:42 PM Server: studio 2 Set-up: paul First Read/Revisions COMPANY OVERVIEW BUSINESS REVIEW GOVERNANCE FINANCIAL STATEMENTS Highlights “ In 2011, we achieved a number of significant milestones in our growth strategy.” Revenue Operational Highlights (£m) ``Four acquisitions completed in the year totalling £597.9m, including Titan, 11 608.8 the largest in the Group’s history. 10 423.3 `` 09 309.9 Strong market growth leading to excellent operating performance reported in the year. £608.8m +44% ``Existing businesses delivering strong double-digit growth. EBITDA* `` (£m) Good contributions from acquisitions. 11 102.5 ``Continued investment in global facilities – operating footprint now exceeds 10 62.6 2.5 million square feet across 38 manufacturing facilities. 09 42.8 ``New facilities being completed in China, Scotland and the US. £102.5m +64% ``Many businesses exceeding historic operating highs. Profit from Operations* (£m) Financial Highlights 11 81.0 ``Robust growth in revenue and profit before tax delivered from 10 45.0 continuing operations. 09 29.1 ``Strong increase in final dividend proposed of 11.0p (2010 – 8.3p). Total dividend % £81.0m +80 in the year, subject to approval by shareholders, of 15.0p (2010 – 12.0p). Diluted EPS* ``Capital expenditure across all operations increased to £58.0m (2010 – £49.0m). (p) `` 11 38.7 Equity placing of 13.2 million shares completed, raising £83.5m. 10 22.7 ``New £375 million 5 year multi-currency credit facility. 09 14.1 ``Reported profit from continuing operations £41.0m (2010 – £31.0m). % 38.7p +70 ``Reported diluted earnings per share from continuing operations 20.3p Dividend per share (2010 – 15.4p). (p) 11 15.0 10 12.0 09 10.5 15.0p +25% * Continuing operations before amortisation and FOR MORE INFORMATION PLEASE VISIT: exceptional items. WWW.HUNTINGPLC.COM Hunting PLC Annual Report and Accounts 2011 01 Highlights_v9.indd 1 09/03/2012 19:59 Job: ChairmanXsXstatement_v21 Proof: 01 Proof Read by: Operator: paul Date: 9 March 2012 7:40 PM Server: studio 2 Set-up: paul First Read/Revisions Chairman’s Statement Making significant strides “ We are well The Group has once again produced excellent results in a year of continuing expansion. Profit placed to take before tax from continuing operations and before advantage of this amortisation and exceptional items in 2011 was £79.8m (2010 – £47.0m), a 70% increase. After growth and look amortisation and exceptional items, profit before forward to the tax from continuing operations was £38.8m opportunities and (2010 – £33.0m). challenges ahead.” Outstanding acquisition opportunities arose and the Group took advantage of these, with the support of our banks and equity shareholders, as well as existing cash, to buy four companies – Titan being the largest purchase we have ever made. Despite this and the continuing investment in our manufacturing plants and service facilities, the balance sheet remains strong and healthy. Industry trends identified in previous years continued in 2011, with high oil prices, low natural gas prices (at least in North America) and an even more emphatic rush to develop unconventional, especially shale, resources. Global financial worries have not seriously impacted the demand for energy in most of our markets, so that customers have continued with their development and investment programmes – leading to high demand for our products. Activity levels in the Gulf of Mexico, an important market for us, are beginning to recover to somewhere near their pre-2010 levels. Meanwhile, the abundant resources available in shale deposits onshore in the United States and elsewhere are being tapped at an increasing rate, with the emphasis moving to liquids for reasons of price. 02 Hunting PLC Annual Report and Accounts 2011 ChairmanXsXstatement_v21.indd 2 09/03/2012 19:56 Job: ChairmanXsXstatement_v21 Proof: 01 Proof Read by: Operator: paul Date: 9 March 2012 7:40 PM Server: studio 2 Set-up: paul First Read/Revisions COMPANY OVERVIEW BUSINESS REVIEW GOVERNANCE FINANCIAL STATEMENTS “ Customers have A higher proportion of wells than ever before are George Helland, a non-executive Director since being drilled horizontally and the Group has a 2001, retired from the Company during the year. continued with comprehensive suite of products to support this The Board thanks him for his thorough and their development trend. Our 2011 acquisitions give us even more constructive work, particularly in the role of strength in MWD (“measurement-while-drilling”) Remuneration Committee Chairman. and investment and LWD (“logging-while-drilling”) applications, programmes while the growing demand for fracturing shale Andrew Szescila, a US citizen and former Chief deposits is well served by Hunting Titan, the Operating Officer of Baker Hughes, joined the – leading to high largest acquisition.
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