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.

PROMOTED VIDEO
Life and Style
techCould new invention save millions in healthcare bills?
Sport
David Moyes gets soaked
sport Moyes becomes latest manager to take part in the ALS challenge
Voices
A meteor streaks across the sky during the Perseid Meteor Shower at a wind farm near Bogdanci, south of Skopje, Macedonia, in the early hours of 13 August
voicesHagel and Dempsey were pure Hollywood. They only needed Tom Cruise, says Robert Fisk
News
peopleEnglishman managed quintessential Hollywood restaurant Chasen's
Life and Style
food + drinkHarrods launches gourmet food qualification for staff
Arts and Entertainment
Michael Flatley prepares to bid farewell to the West End stage
danceMichael Flatley hits West End for last time alongside Team GB World champion Alice Upcott
News
ebooksAn evocation of the conflict through the eyes of those who lived through it
Life and Style
Horst P Horst mid-fashion shoot in New York, 1949
fashionFar-reaching retrospective to celebrate Horst P Horst's six decades of creativity
News
Members and supporters of the lesbian, gay, bisexual, transgender (LGBT) community walk with a rainbow flag during a rally in July
i100
Life and Style
Black Ivory Coffee is made using beans plucked from elephants' waste after ingested by the animals
food + drinkFirm says it has created the "rarest" coffee in the world
Arts and Entertainment
Jamie T plays live in 2007 before going on hiatus from 2010
arts + entsSinger-songwriter will perform on the Festival Republic Stage
Life and Style
food + drinkThese simple recipes will have you refreshed within minutes
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

C#.NET Server Side Developer (C#, XML, WCF, Unit Testing,SQL)

£30000 - £40000 per annum + benefits+bonus+package: Harrington Starr: C#.NET ...

Junior Database developer (SQL, T-SQL, Excel, SSRS)

£20000 - £30000 per annum + benefits+bonus+package: Harrington Starr: Junior D...

Business Analyst - Banking - London - £550 - £650

£550 - £650 per day: Orgtel: Business Analyst - Traded Credit Risk - Investmen...

Data Centre Engineer - Linux, Redhat, Solaris, SAN, Puppet

£55000 per annum: Harrington Starr: A financial software vendor at the forefro...

Day In a Page

All this talk of an ‘apocalyptic’ threat is simply childish

Robert Fisk: All this talk of an ‘apocalyptic’ threat is simply childish

Chuck Hagel and Martin Dempsey were pure Hollywood. They only needed Tom Cruise
Mafia Dons: is the Camorra in control of the Granite City?

Mafia Dons: is the Camorra in control of the Granite City?

So claims an EU report which points to the Italian Mob’s alleged grip on everything from public works to property
Emmys look set to overhaul the Oscars as Hollywood’s prize draw

Emmys look set to overhaul the Oscars as Hollywood’s prize draw

Once the poor relation, the awards show now has the top stars and boasts the best drama
What happens to African migrants once they land in Italy during the summer?

What happens to migrants once they land in Italy?

Memphis Barker follows their trail through southern Europe
French connection: After 1,300 years, there’s a bridge to Mont Saint-Michel

French connection: After 1,300 years, there’s a bridge to Mont Saint-Michel

The ugly causeway is being dismantled, an elegant connection erected in its place. So everyone’s happy, right?
Frank Mugisha: Uganda's most outspoken gay rights activist on changing people's attitudes, coming out, and the threat of being attacked

Frank Mugisha: 'Coming out was a gradual process '

Uganda's most outspoken gay rights activist on changing people's attitudes, coming out, and the threat of being attacked
Radio 1 to hire 'YouTube-famous' vloggers to broadcast online

Radio 1’s new top ten

The ‘vloggers’ signed up to find twentysomething audience
David Abraham: Big ideas for the small screen

David Abraham: Big ideas for the small screen

A blistering attack on US influence on British television has lifted the savvy head of Channel 4 out of the shadows
Florence Knight's perfect picnic: Make the most of summer's last Bank Holiday weekend

Florence Knight's perfect picnic

Polpetto's head chef shares her favourite recipes from Iced Earl Grey tea to baked peaches, mascarpone & brown sugar meringues...
Horst P Horst: The fashion photography genius who inspired Madonna comes to the V&A

Horst P Horst comes to the V&A

The London's museum has delved into its archives to stage a far-reaching retrospective celebrating the photographer's six decades of creativity
Mark Hix recipes: Try our chef's summery soups for a real seasonal refresher

Mark Hix's summery soups

Soup isn’t just about comforting broths and steaming hot bowls...
Tim Sherwood column: 'It started as a three-horse race but turned into the Grand National'

Tim Sherwood column

I would have taken the Crystal Palace job if I’d been offered it soon after my interview... but the whole process dragged on so I had to pull out
Eden Hazard: Young, gifted... not yet perfect

Eden Hazard: Young, gifted... not yet perfect

Eden Hazard admits he is still below the level of Ronaldo and Messi but, after a breakthrough season, is ready to thrill Chelsea’s fans
Tim Howard: I’m an old dog. I don’t get too excited

Tim Howard: I’m an old dog. I don’t get too excited

The Everton and US goalkeeper was such a star at the World Cup that the President phoned to congratulate him... not that he knows what the fuss is all about
Match of the Day at 50: Show reminds us that even the most revered BBC institution may have a finite lifespan – thanks to the opposition

Tom Peck on Match of the Day at 50

The show reminds us that even the most revered BBC institution may have a finite lifespan – thanks to the opposition