James Moore: Worth tracking down - Hunting is in right place at the right time

Hunting

Our view: Hold

Share price: XP (-XP)

Having set aside any scruples and looked at the pure investment case for big oil, it's worth examining the companies that help to get the stuff out of the ground. The argument for these metal bashers, consultants and project managers is just as powerful. Their share prices are also less directly linked to the oil price, being as much dependent on their ability to pick up work. Of which there is a lot about.

The aptly named Hunting showed this yesterday, capping a buoyant reporting season for the sector. Its profits soared by 70 per cent, boosted by it successfully bringing down four acquisitions. Pre-tax profits before one-offs came in at £80m against a consensus forecast of £75.3m. That sort of performance is not to be sniffed at.

Hunting is in the right place at the right time. Its main business is the construction and maintenance of wells, which has had a shot in the arm from the pick-up in activity in the Gulf of Mexico. It has also benefited from the increasing interest in extracting oil from shale in the US. At 15.5 times forecast 2012 earnings, yielding 2.4 per cent, the shares are now looking pricey. But they are worth holding for the long term.

Amec has long been a favourite of this column, and is one of The Independent's 10 to follow for 2012. The shares have gained around 20 per cent since we tipped it at 907.5p at the start of the year.

They have slowed down a bit recently, but even so, at 13.6 times forecast earnings for 2012, with a prospective yield of 3 per cent, they are doing no more than trading in line with the sector.

Amec was chosen because it looked undervalued, partly as a result of concerns that it would use its formidable £500m cash pile to overpay for an acquisition or three rather than returning the cash to shareholders. This was despite the fact that the company never looked likely to over-pay for something that wasn't worthwhile.

Last month it announced a £400m share buyback alongside profits up 12 per cent and a 15 per cent hike in the dividend. Amec is still on the hunt for deals – and may borrow a bit to finance them. But with no debt on the books, there are no grounds for concern as long as the company retains a conservative approach to its balance sheet. Even now, it still doesn't look overpriced. It is still a buy.

The sector heavyweight is Petrofac, which trades on a similar multiple to Amec but finished the year with a reduced order backlog of $10.8bn ($6.8bn) from $11.7bn. Petrofac explains this by dint of the fact that its onshore business was focused on execution this year, such as handling its $3.4bn contract in Turkmenistan. This year it says it will be more active. Petrofac thinks it has a solid pipeline of opportunities with up to $40bn worth of work out there (although it will only win a fraction of that).

The company also recently announced an alliance with Schlumberger of the US, the world's largest oilfield services company. The aim is to open the door to bidding for bigger projects.

Petrofac has an interesting model, having struck a deal with the Mexican state-controlled energy group Pemex, which will pay Petrofac a "prize" of $5 a barrel if it delivers production over and above predicted rates. The group is looking to strike similar deals. It appears that they are out there.

Competition in the Middle East is tough, although the numbers look good. Revenue rose by a third to $5.8bn, and net profit, excluding one-off gains, jumped by $433m to $539m. This is a hard one to call. Petrofac isn't cheap. But jump in if the shares show signs of weakness.

Aberdeen-based John Wood is another tough call. It has been just over a year since this column last looked at the company, when a buy at 643p was advised after the group produced figures slightly ahead of hopes. The shares have performed acceptably and earnings were better than had been expected this year. But there was a sting in the tail, with problems at its well maintenance unit continuing.

The Wood Group PSN production services business accounts for nearly 40 per cent of group earnings. However, it was hit by losses of about $30m on projects in Colombia and Oman, which took the gloss off a strong performance from the North American and North Sea businesses. Some of the problems are likely to persist this year.

The shares are looking no better than fair value at 14 times earnings, with a forecast yield of just 1.5 per cent. The company has just sneaked into the FTSE 100 though, which may offer a short-term boost. A very tough call but this might be an opportunity to take profit.

News
people'It can last and it's terrifying'
Sport
Danny Welbeck's Manchester United future is in doubt
footballGunners confirm signing from Manchester United
Sport
footballStriker has moved on loan for the remainder of the season
Sport
footballFeaturing Bart Simpson
PROMOTED VIDEO
New Articles
Olivia Colman topped the list of the 30 most influential females in broadcasting
tv
News
Kelly Brook
peopleA spokesperson said the support group was 'extremely disappointed'
News
The five geckos were launched into space to find out about the effects of weightlessness on the creatures’ sex lives
i100
Life and Style
techIf those brochure kitchens look a little too perfect to be true, well, that’s probably because they are
Sport
Andy Murray celebrates a shot while playing Jo-Wilfried Tsonga
TennisWin sets up blockbuster US Open quarter-final against Djokovic
Arts and Entertainment
Hare’s a riddle: Kit Williams with the treasure linked to Masquerade
booksRiddling trilogy could net you $3m
Arts and Entertainment
Alex Kapranos of Franz Ferdinand performs live
music Pro-independence show to take place four days before vote
News
ebooksAn unforgettable anthology of contemporary reportage
News
news Video - hailed as 'most original' since Benedict Cumberbatch's
News
i100
Life and Style
The longer David Sedaris had his Fitbit, the further afield his walks took him through the West Sussex countryside
lifeDavid Sedaris: What I learnt from my fitness tracker about the world
Arts and Entertainment
Word master: Self holds up a copy of his novel ‘Umbrella’
booksUnlike 'talented mediocrity' George Orwell, you must approach this writer dictionary in hand
News
i100
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

SQL Implementation Consultant (VB,C#, SQL, Java, Eclipse, integ

£40000 - £50000 per annum + benefits+bonus+package: Harrington Starr: SQL Impl...

Head of IT (Windows, Server, VMware, SAN, Fidessa, Equities)

£85000 per annum: Harrington Starr: Head of IT (Windows, Server, VMware, SAN, ...

Technical Software Consultant (Excel, VBA, SQL, JAVA, Oracle)

£40000 - £50000 per annum: Harrington Starr: You will not be expected to hav...

SQL DBA/Developer

£500 per day: Harrington Starr: SQL DBA/Developer SQL, C#, VBA, Data Warehousi...

Day In a Page

'I’ll tell you what I would not serve - lamb and potatoes': US ambassador hits out at stodgy British food served at diplomatic dinners

'I’ll tell you what I would not serve - lamb and potatoes'

US ambassador hits out at stodgy British food
Radio Times female powerlist: A 'revolution' in TV gender roles

A 'revolution' in TV gender roles

Inside the Radio Times female powerlist
Endgame: James Frey's literary treasure hunt

James Frey's literary treasure hunt

Riddling trilogy could net you $3m
Fitbit: Because the tingle feels so good

Fitbit: Because the tingle feels so good

What David Sedaris learnt about the world from his fitness tracker
Saudis risk new Muslim division with proposal to move Mohamed’s tomb

Saudis risk new Muslim division with proposal to move Mohamed’s tomb

Second-holiest site in Islam attracts millions of pilgrims each year
Alexander Fury: The designer names to look for at fashion week this season

The big names to look for this fashion week

This week, designers begin to show their spring 2015 collections in New York
Will Self: 'I like Orwell's writing as much as the next talented mediocrity'

'I like Orwell's writing as much as the next talented mediocrity'

Will Self takes aim at Orwell's rules for writing plain English
Meet Afghanistan's middle-class paint-ballers

Meet Afghanistan's middle-class paint-ballers

Toy guns proving a popular diversion in a country flooded with the real thing
Al Pacino wows Venice

Al Pacino wows Venice

Ham among the brilliance as actor premieres two films at festival
Neil Lawson Baker interview: ‘I’ve gained so much from art. It’s only right to give something back’.

Neil Lawson Baker interview

‘I’ve gained so much from art. It’s only right to give something back’.
The other Mugabe who is lining up for the Zimbabwean presidency

The other Mugabe who is lining up for the Zimbabwean presidency

Wife of President Robert Mugabe appears to have her sights set on succeeding her husband
The model of a gadget launch: Cultivate an atmosphere of mystery and excitement to sell stuff people didn't realise they needed

The model for a gadget launch

Cultivate an atmosphere of mystery and excitement to sell stuff people didn't realise they needed
Alice Roberts: She's done pretty well, for a boffin without a beard

She's done pretty well, for a boffin without a beard

Alice Roberts talks about her new book on evolution - and why her early TV work drew flak from (mostly male) colleagues
Get well soon, Joan Rivers - an inspiration, whether she likes it or not

Get well soon, Joan Rivers

She is awful. But she's also wonderful, not in spite of but because of the fact she's forever saying appalling things, argues Ellen E Jones
Doctor Who Into the Dalek review: A classic sci-fi adventure with all the spectacle of a blockbuster

A fresh take on an old foe

Doctor Who Into the Dalek more than compensated for last week's nonsensical offering