Hunting PLC (HTG) Earnings Call Transcript & Summary

It's a pleasure to be back in London. This is the first time in 18 months that I've been back here in London. And I was thinking about over the week about that case that 18 months ago, I was going home to Houston, and we had just closed the acquisition of Enpro. And skies were blue, life was good, and little did we know what was about to hit us, even though we had been hearing amount of virus -- some virus issue in China. And through all the turmoil of the past 18 months, you do some retrospective, looking at your business, looking at what happened. And I look back at us and I try to say what have -- what we have done different in that past 18 months. And for the life of me, the answer is, there's not much. I think as a company that we took urgent steps quickly to address the catastrophe basically that was in front of us. I think the team at Hunting did an exceptional job. And while I'm not -- we're obviously not thrilled with the financial results for the first half of the year, I think we are very satisfied with the performance results and what we've accomplished as a group. We moved ahead again. We took -- we moved very, very quickly, took laser-focused action to rightsize our businesses to make strategic decisions, both in acquiring new products and in looking at our own product lines for rationalization and the like. And so from that end, I'm very pleased. And when I look at the market today, it's -- there are some people, I think, that are surprised, well, why aren't -- why is the company not performing better? We have $70 Brent, what's going on? Well, the reality is today, I tell people that, in my view, the industry has its own version of post-traumatic stress disorder, the PTSD. And that was caused by all of these factors hitting out over the past 18 months. The COVID incident being one, the total collapse of oil prices actually going negative, all these issues that go and spooked oil company, E&P executives on what are they going to do? We had a political change of office in the U.S. with the Biden Administration. We've got the manic ESG drumbeat out there. And all of these coupled together really go back to what I said a long time ago, that 2021 was going to be a healing year for the industry, a time to reflect, a time to take a step back for many of our clients, it's time to repair balance sheet and focus on how are they going to return cash to shareholders. For us, the recovery in energy prices has been a disconnect from the demand in the oilfield service side. We see natural gas today in the U.S. is nearly $4 an Mcf. You're seeing a lot of talk about gas prices in Europe. You all know what the oil price is right now. But yet, if you read the E&P results of the last quarter, you'll find that most of them didn't get anywhere near that $65 or $70 a barrel mark. The hedges that were put in place because of such uncertainty led to realized prices for a lot of the U.S. players to be in the mid-40 range. So hardly great returns for investment dollars going in. And I will say, when I talk to my oil company friends, nobody is getting fired these days for not drilling an oil and gas well. So the alternative is hold on for what you got, let's see how this whole thing plays out. And for Hunting, it's a story where our macro picture has a dozen micro stories ingrained in it. And as we've tried to explain to all of our analysts and people out there, we're not a one-basin play, a one-product line play, a one -- you can't sum up the company's performance in one sentence. And probably the most dramatic way that I can explain that is just look at the Titan performance. I mean it was the first to take a major hit going down when the downturn happened. I mean I mentioned about leaving London in March. By May, the business was at an unbelievably low revenue levels. And yet the second -- the first half of this year compared to the last, you've seen the dramatic increase at Titan. Other areas have been hit at different times. Our Asia Pac business, for example, had a great year last year. Daniel Tan and his team did a super job, but by the start of the fourth quarter, late third quarter last year, the order book was dry. There was no -- the phone wasn't ringing. And so those effects just hit us in this first half of 2021, just like, again, our U.S. manufacturing business, very focused on the Gulf of Mexico. Gulf of Mexico drilling activities were disastrous. We have 13 rigs working there. We're back to Macondo levels. And so for those things not to be looked at in light of all that's going on, it's really -- it really shows you the disconnect on pricing of the commodity versus activity. So on Page 1, we go there and just highlight some points about growth, things that we've been trying to do. I want to highlight the fact that we haven't been standing still. Strategically, we've been trying to make investments in the business for the future. We'll talk later on, but the Well Data Labs investment has already started to bear some fruit. We're already working on some things in the Rockies. The latest one was our investment with Cumberland, where we actually have taken equity in new technologies, which I'll chat about later. And one of the exciting things that with all the view of the company that's gotten lost has really been the success of the RTI product line since we bought it from Arconic. And if you read Upstream, I think, a week or 2 ago, front page of the Upstream magazine, I'll give them a plug, they talked about Petrobras. They talked about switching to titanium down there for some of the products that we're supplying. And we're in the middle of that right now and have, for the company's first time in history, secured significant business in Brazil with Equinor, the Equinor-Exxon Venture, which is, of course, Petrobras is part of that. The returns -- we did our deal with Rival on the drilling tools. We're continuing to remember the sensitivity of our shareholders by a continuation of our dividend. Balance sheet remains strong. And first and foremost, and again, I want to give my special thanks to the whole team at Hunting, because in these extremely challenging times, we continue to deliver a company record performance in quality and safety. So Greg Farmer, I'll take my hat off to him leading all that up and for all the operational people that make that happen on a daily basis. Next, I'm going to turn it over to Bruce. I think I've talked enough.

Okay. If we can turn to Slide 2, please, that will show the group income statement. We've actually added a comparison for a table for H2 2020. We believe that's a more meaningful comparison for our first half trading. If you look at the revenue, it's remarkably similar to H2. We delivered $244 million of sales for the first half of '21. Gross profit of $44.1 million, and that's a gross margin percentage of 18%. If you look at the phasing of that, we had -- we were 15% gross margin percentage for quarter 1, and that picked up to 21% for quarter 2. So that's a nice trend as we saw the factories getting busier, absorbing overheads and also reflecting some improvement on price as well. Our EBITDA for the period for H1 was $3.6 million loss. Again, quarter 1 that's a $4.4 million loss and that improved $0.8 million gain in the second quarter. But the flow that through, our loss before tax was $25.1 million, a little bit of tax payable, which gives a negative effective tax rate of 8%, and a dividend per share paid of $0.04 for the period. The next slide is on Slide 3, and that's just breaking down our revenue and operating results for what we call our 4 main segments. As Jim mentioned there, if you look at our Titan business compared to H2 2020, we delivered 50% higher revenue as that business came back the quickest of our product lines in terms of the U.S. land activity. That did reflect a slight small loss in terms of $1.6 million. That tends to absorb most of our central cost overhead. So there was $6 million of central costs allocated to the Titan business, but showing a nice trend in terms of sales recovery there. North America was a bit of a mixed bag. We had our -- some of the business there related to the Gulf, the 13 rigs working in the Gulf and that suffered some, and an order book that was lighter coming into the first half of the year and resulted in some slower sales for the [ USM ] business and also Subsea. In total, that segment was 8% lower at $122 million. EMEA was stable, still a tough market, still down at 5, 6 rigs in the North Sea, still affected by the COVID in terms of operations and confidence there, but returned a revenue of $27.6 million and a slightly smaller operating loss. Asia Pac, as Jim mentioned, their order book really unwound towards the back end of last year. So coming into this year, it was very light. Some pricing pressures in the Middle East as well, which has been traditionally good market for them, and some slight increases on the Chinese steel. Raw material prices made them a little bit less competitive for that quarter, too. Also, we have seen a rebound in July for the operations and some good orders being booked and backed up in profit for July. So in total, that gave us a $244 million revenue, with an operating loss of $23 million. Slide 4, we'll go into a little more detail by product line. Not surprisingly, our best performer was the Perforating Systems. That was a 50% increase. Again, U.S. land conditions coming back, the timing that was important, as Jim said. But also we saw our factory-loaded guns being well received by the market. We believe we've got the #1 market share in the U.S. on the back of that and also some new technology coming through as well. OCG (sic) [ OCTG ], sales are 20% down. They don't include our Canadian OCG (sic) [ OCTG ]. We came out of that business towards the back end of last year. So that does skew the number slightly. Away from the fact that has been a tougher international market, the rig count has decreased, and that reflects to the numbers there. And also, as I said, COVID has hampered operations throughout some of our sectors, especially in the North Sea. Advanced Manufacturing group, a slight drop there again, the weaker order book, lower oil and gas spend coming through the capital spend. But again, some good progress being made with the likes of Dearborn and expanding the SpaceX, the origin business. Also electronics getting some certification, which helps them get into medical as well. So that helps our diversification there as well. Subsea, a small drop there as well. Again, the Stafford business, the coupling business, again, affected by less capital spend, but very positive in terms of the RTI business, as Jim mentioned, in terms of the titanium joints going into Brazil, also some good decommission work coming through Enpro for the North Sea and expanding into other sectors as well. Intervention Tools, again, that's driven by the CapEx of our customers, that's being constrained, and that's reflected in the sort of a low revenue numbers coming through there. Drilling Tools, now we're out of that business in terms of directly, but we've got our investment in Rival. A slight -- we've got a little breakdown there in terms of non-oil and gas. At the moment, we are 7% of our business is non-oil and gas, but with these moves by Dearborn, electronics and some investments that we've made over the last quarter, actually that should help our diversification year-on-year. The next slide, if we can turn to Slide 5. Nothing much going on here in terms of amortization and exceptionals. We've only got 3.5 net there. The majority of impairments were taken, if you remember the half year, last year. So only 3.5 they report. Moving on to Slide 6, balance sheet. Still we believe a strong balance sheet, $940 million of net assets. Our property and plants has decreased slightly. Our CapEx numbers have been light and that's just depreciation knocking down that negative value there. Goodwill down at $202 million after impairments at the first half '20. Working capital coming down $23.6 million to $334 million and still a strong liquidity, strong cash position of $105 million. Moving on to Slide 7, a little bit more breakdown of our working capital. If you look at our inventory figures, we're making progress in terms of reductions from December 2020, June 2021, main sectors. Our net inventory is now sitting at $267 million, which is $21 million down from our year-end position. Receivables and payables fairly stable, but that is driving a slight improvement in terms of ratios on inventory days and receivables as well. Slide 8, in terms of cash flow. The main components there, small earnings are main positive cash. There was a working capital movement of $24 million, which drove a free cash flow of $22.4 million. As I said, very little capital spend of $4.7 million and then reflect an investment in Well Data of $2.5 million. Our dividend payments of $6.4 million and some net purchase of treasury shares for our employee trust for $5 million, positive movement of $4 million. Okay. With that, I'll hand back to Johnson.

Okay. On Slide 9, I've got my customary slide on the COVID response, and it can't go without saying enough that the team has worked very hard to continue to keep our people safe. I would say, from an operational point of view, whether you're on the service side or the manufacturing side, it has been -- it continues to be extremely challenging with government limitations in certain places on social distancing and manufacturing plants. But if you look at our performance in the last 6 months, there is no way it could perform as efficient as it was pre-COVID just because of the requirements we have had to put in place. I think that needs to be factored in and thought about because as a manufacturer, time is money, efficiencies are ultimately important, and you just couldn't operate the same way that you did in the past. But we -- I think the team has stepped up. The issue is still -- it's still very fluid right now. We actually had our first company fatality a little over a week ago with personal hamper because of COVID. So just to notice that, as we all know, this is -- we're not done with this yet. On Slide #10, talk more about the market overview. Most of this, you guys should already all know because you're reading the same things I am and talking to them, but our customers continue to be focused on capital discipline. As I mentioned at the start of my topic, nobody is getting fired for not drilling enough oil and gas wells. And today, you're seeing that in the slow recovery in all sectors of the business. On the onshore side, our DUC levels continue to fall. As you see, operators cash out on the investments that they've made. And sooner or later, because of depletion, and that's why I'm so bullish on '22, they are going to have to go back to spending money on the drill bit. Subsea activity. Just a reminder that offshore spending is something like the lowest in 30 years. We continue to have depressed offshore rig activity, but I was encouraged this week by the comments made by Transocean. The outlook is getting brighter in the offshore segment. And as I've said many times, that's the area with the best margins, the best technology. It's an area we have focused in on our strategy to develop new product lines. And I believe that we will see a turn next year with increased activity there. An important fact on one of the other bullet points about OPEC. We looked at our Asia Pac business, as we mentioned earlier, and that affected the bulk of our OCTG decline, which was going on right there. But when you look again, we have $70 a barrel oil, but we have the biggest group of producers in the world constrained in what they're doing as far as production goes. And if you look at the rig count of the 4 main OPEC players of the UAE, Iraq, Kuwait and Saudi Arabia, you'll see our rig counting in the second quarter was somewhere in the neighborhood of about 120 to 123 million compared to 233 prior to COVID during the first quarter of 2020. You saw Saudi Arabia's rig count cut in half from 60 down to 30. So you've had a lot of changes there that have also constrained the international activity going on. And lastly, as I keep harping on, there is, without a doubt, a disconnect with oil prices versus activity levels. And that's why people are saying, why aren't you doing better? Forget the oil price, it hasn't translated down into activity levels yet that I would normally have seen in my many years in that [ business ]. On Slide 11, just kind of an overview of the frac spread count recovery. We are thankful for that. As Bruce and I have said earlier, you can see that turning up in the dramatic rebound in the Titan numbers. I think that we're probably going to flat line, to be honest, at these levels going towards the end of the year. But what I am hearing now is I'm not expecting as big a seasonal decline in December as maybe we used to see, as, again, everybody has been more calmly progressing with their plans. And so we're hoping that the normal December slow period isn't as bad. On Slide 12, I'm not going to -- I won't read all these, but just some kind of points on a regional point. U.S., we are seeing a rise in inquiries across all levels of our business. Every area is seeing more interest. In some areas, clients are seeing the potential of inflation in the years ahead, and we're seeing budgetary quotations being thrown out and perhaps an attempt to lock in prices and things like that. But it is busier there. The rest of those points I've pretty much talked about. The Europe, Middle East, Africa area, tough business in the North Sea; U.K. activity continues to be low; Middle East, I've already talked about with the rig count. Slide 13, on Asia Pac. One of the areas where we do have still manufacturing hindered in places like our Indonesian operation because of COVID restrictions. Our main go-to-market product in Asia Pac has been Chinese supplied OCTG from one of the main 3 mills that we deal with. The Chinese have been raising prices. They've done some things relative to duties on export assistance. So Chinese steel today is a little less competitive than what it was 6 months ago. Hence, our guys in Singapore were ahead of the game. Our relationship with Jindal out of India continues to expand, and that has delivered some very strong results in the first half of this year. Canada, Randy Walliser has done a great job for us in our remodeling of the business plan up in our Calgary operation. In the time period, we closed the Calgary facility. We liquidated the equipment that we didn't need. Some of it, we moved to different locations that was of more higher quality. But at the end of the day, we went to a business model that got us out of selling pipe. That's the bottom line. So when you look at OCTG, that is one of the things that's not apples-to-apples comparison. Because if we were still in that business today, our inventory level would probably be $15 million higher as we would have to have pipe on the ground for programs and the like. And now we are working with distribution, and it's actually working out very well. Slide #14, just some updates on Titan. Again, it's great to see that business back to life because the disastrous decline we saw from March to May and June of 2020 was literally unthinkable. And it was just a total collapse. But as we've shown with the frac spread increase, it's doing better. Jason Mai and his team continue to work on developing new products, continue to focus on the customer. We received -- we didn't point in the presentation, but we received 4 U.S. patents in the first half of the year, 4 within the Titan product line. We make point there, talking about Oklahoma City has been reopened because of increased demand on perforating guns. We've opened another distribution center up because of the natural gas play in North Louisiana. We continue to, again, with the H-3, some new product lines coming on. The factory-loaded gun business has exploded for us, no pun intended, but it has done very, very well. And we're now supplying the factory-loaded guns from 3 locations in the U.S. And then lastly, out there, we have implemented price increases on all of our perforating guns and charge product lines effective September 1. I think some of our competitors tried to make the move maybe a little early. But right now with customer inventory levels having been destocked and trying to get ahead of the industry inflation that we know is happening. We feel these are prudent moves, and so we've notified clients on September 1, this goes into effect. On Slide 15, just talks about some of the new product lines that we've -- or products that we've had. The det cord facility, it's not a new story, but it is up and running. It has been very successful for us. The new rock charges, primarily conventional -- focused on conventional plays in the export market. The H3 perforating system, lower cost, high performance, shorter guns and it has taken off and done very, very well. The recon power charge is the power charge we've talked about in the past for setting plugs, and it's the first and only power charge out there with an addressable switch, so you have better dependability and know that the plugs are going to be going off. And then the dual-mode firing head, that is specifically for tubing-conveyed perforating operations. And so not a huge market, but it's an important market and has good -- provides us good exposure. Slide 16. Again, a little bit by overview by product line. I've already talked about the perforating side, but just putting that up there. The collaboration with Well Data Labs is ongoing. We have 2 clients in the Rockies that we're doing pilot projects on in a way for us to get better understanding of analytics and provide that data back to our clients real time. OCTG, we didn't put in our customary TEC-LOCK's line because how many times do you won't put that in there. But the fact is the TEC-LOCK business has again increased period-over-period. Mike Mock and his team have done a great job on the onshore business. We have not lost market share. If any, I think we've gained market share in that product line. So it continues to do well. And what I don't want is anybody confusing that with our OCTG story and that revenue being down. The OCTG numbers are down because of Asia Pac and because we exited the pipe business in Canada. So I've said it like 5 times to make sure everybody understands how we're doing that. And again, with OCTG, we're excited about the benefits we've seen from the relationship with Jindal Steel in India. Slide 17. Advanced Manufacturing continues to do well. It is an area where we have the best potential upside for non-oil and gas business and exposure. That businesses performed well in the period. The electronics side of AMG was impacted by Titan because that's where the switch manufacturing is done. So it has come back strong along with the Titan business. We've also, as Bruce mentioned earlier, picked up different certifications that we're now actually supplying the U.S. military with electronics. So good growth there, good opportunities. The oilfield side is still hampered by the lack of capital spending going on, even though there has been a steady stream of orders coming in. And mentioned afore, we've been very excited with SpaceX and the Blue Origin business, just kind of a whole new area that we think has a lot of growth potentials in the future. On Intervention Tools, it's been a tough, tough business, and the story is real simple. This is a total capital expenditure, and this is a product sold to other service companies. And nobody was writing purchase orders in the first half of the year. So when the business comes back, we've got the inventory there, we've got the people in place, we've got the technology to make this product line do well. It's just going to be as equipment wears out, as the cannibalization starts to cease within this product line, we will see a pickup in the Intervention Tools side. Subsea Technologies on Slide 18. I talked about that earlier, same bullet points are on there. Very, very excited about what we've seen with RTI. Again, as you all remember, it was a business that was dead and in hibernation. And I think a very shrewd purchase on our part, and it's performing well, delivering profits. And I think it's still early innings in the opportunity for that business. The Enpro business, I mentioned the last time I was here, we just closed the deal. It's been a profitable business. They have met their plans. We're happy with the performance. But coupled with the slowdown that COVID has had on the industry, it has slowed down general interest in people looking at this product. Right now, we're seeing new opportunities in the U.S. Gulf of Mexico come up. Dane Tipton and the team are doing a great job in being in front of the clients, and we're looking forward to great success with that going forward. Slide 19, just kind of an update on Well Data Labs. Really wanting us to keep our -- increasing our focus on the digital aspect of the business and looking at artificial intelligence and machine learning. We've enjoyed the relationship with Josh Churlik and his team on Denver. Again, it's early innings. He's working well with Jason Mai, our team at Titan, on some initiatives for marrying their technology with our technology in the perforating side. And we've also started undertaking a look at some other product lines, which I'm not going to get into details on now, but on using the Well Data Labs expertise, perhaps enhancing other businesses. Slide 20, a business we haven't talked about much in the past. But thanks to our tremendous overspending of U.S. Government money and the stimulus programs, we are seeing an uptick in our Trenchless Division. And this is a product line that supports people like Ditch Witch. You see the Ditch Witch or Vermeer machines out in the field, doing directional drilling and trenching on for utility applications, fiberoptic lines, water lines, things like that. So business has gotten stronger. We expect it to actually increase substantially in the next year, even though it's going from a small base right now. It's one of those businesses that always makes money, always gives a return. And the team in [ Broussard ] always does a great job of being efficient and safe in what they do. Slide 21. This was one that I've been championing to go forward. We're moving forward with an ADR listing. The logic to that is when I sit in them constantly compared to Wood Group, I'm totally frustrated about that. We're not the Wood Group. Wood Group is a great company, but we do nothing like the Wood Group. And it seems like the focus for a lot of U.K. investors is lumping in that with the group of companies. Let me put it this way, with a lack of a group of companies to compare ourselves to. So I've had many comments from investors, potential investors in the U.S. We are going to move forward with this ADR for the sheer purpose of getting better exposure, more churn of shares, more interest by analysts on that side of the pond. And again, the bulk of our business is in the U.S. So we're not leaving the U.K. listing. We're not diluting any shareholders, so it will have no negative effects on dividend payments or anything like that. And last but not least, Slide 22 is our latest deal that we did, and it's our investment into additive manufacturing or called 3D printing for lack of a better term. And we're excited about this opportunity. I want to thank Dawne Hickton and John Jenkins of Cumberland for working with putting this deal -- working with us to get this deal put together, Sid Harper from our team did an amazing job, and we were just glad to get this thing closed. And this has a really similar story compared to RTI. One of our staff, our senior engineering person at RTI, a fellow by the name of Chris Caldwell, actually brought this to my attention after we spent a number of months and time looking internally on how to enter this new technology. And what we found was that we could spend many, many multitudes of millions of dollars and be on a giant learning curve that would take years, I'd probably be retired before we'd see any benefits. And it was much more complicated than what we thought when you start getting into the exotic side of the business, or to put it bluntly, the side of the business that makes money and charges the most. So we came across this company from Cumberland. Its original founding was actually in around 2006. It was called Direct Manufacturing and came out of California. In 2014, RTI purchased this company and moved it to Texas, was going to be in the 3D printing business. And then the chaos started. In 2015, Alcoa bought RTI. In 2016, it was switched to Arconic. In 2017, it was turned into an R&D Center. And so the business just lost -- it lost focus and lost within Arconic. And then once again, like our deal with RTI, Arconic spun this off to some existing employees and management of what was the Cumberland group. So they've got a very good -- they've got an excellent track record. They know what they're doing. They are -- when we took a deep dive into it, their expertise in metallurgy is really what impressed us the most. So this isn't people making little tchotchkes of plastic or whatever. This is the company that made the first ever 3D printed parts on an Airbus. So I mean, these guys know what they're doing. We're excited to be a part of that right now. Today, it's a sub-$10 million a year business. We expect it to grow multitudes of that. And one of the interesting things is that this business right now is a hot sector because of the need to grow and develop this technology. A few months ago, as an example, there was a company called Morf3D, another California-based 3D printing company, that had 30 employees, had $5 million to $7 million of revenue. And Nikon, the Japanese company, you're all familiar with, with cameras and the likes, they came in and paid $91 million for a majority stake in that business. So we think we made a great investment. We're excited about the potential upside on the synergies with our Dearborn business in U.S. manufacturing, and we look forward to a long prosperous relationship with Cumberland. And then lastly, I'll jump in the slide, the last slide, which is our compulsatory ESG slide. It talks about all the things that we are doing on the ESG front. As always, Hunting has always been a superior corporate citizen. We continue to strive to be that way to look at things to enhance our ESG ratings out there. As you can see, the MSCI rating below was AA, and I think that's as good or better than any of our oilfield service peers. So with that, our presentation is done, and we can take some questions.

So we have the webcast from James Thompson, JPMorgan. What is the outlook for OCTG in the second half of '21?

So OCTG in 2021 will continue to improve because of the Asia Pac. So we feel that we've seen the bottom of that. As Bruce said, in July, we returned to an operating profit in OCTG out of that business, thankfully, for some Middle Eastern business. So I think the bottom is there. On the U.S., it hasn't got down. And if we have any benefit at all in the fourth quarter of the offshore Gulf of Mexico picking up, that will be a big plus for us as well. Bruce can comment. He's closer to the North Sea asset that we...

Yes. I think there's a pickup due in the quarter 4 of the North Sea in terms of some trading work related to through the Dutch facility, general pickup in drilling as well. Plain improvement in quarter 4, we expect.

Okay. Great. I got a second question from James. What are your expectations for U.S. E&P CapEx budgets in 2022?

Higher.

Given what you've been talking about it, it will be quite easy to put together all the things -- well, what I'm looking at is a slide that you could produce for full year before COVID appears, probably not even gone, but say, this year and then say 2 years' time. In terms of your geographical split because you've been talking about, and we've all been talking about how in America that's normal again. Actually, the oil price is high and the natural gas price is very high. People only recognize yesterday saying -- people still don't understand why the natural gas prices are high particularly in Europe because the Russians just own [indiscernible]. And you talked about just mentioned it again that the price is picking up, but it went into it very slowly. Would you see -- and because you mentioned the ADR, which I was saying, that it is getting back to the States, would you see any significant changes in your geographical position until sort of 3 to 5 years of impact to say with '19 or '20 as your base?

Well, I think that the U.S. will continue to be the dominant location for our business. But I think one of the trends you have to look at is, and we talked about this at our Board meeting yesterday. If you go out even further than that, the ESG pressures on some of -- especially the super majors, you see they're going to get rid of this business or whatever. But you're going to see the OPEC players and other players in third party -- third-world countries and the like, you're going to see that business continue to grow. They're not going to push back. The UAE is not going to quit drilling or back off because of ESG issues. So I think you have the potential to see us do more international going forward as well. And when I say that that's probably ex North Sea, just because of the situation in the North Sea. But we're bullish on Southeast Asia. We're bullish on the Middle East. We have a facility in Saudi Arabia that really has been handcuffed because of the downturn, because of the COVID restrictions and all. So I think, again, USA will be in a top position, and there's room for growth internationally.

I'll ask Jim. It's Mark Wilson from Jefferies. When you [indiscernible] frac crew -- is it possible to say how many of those frac crews that Hunting supply?

No, we don't know. We don't -- it would be very difficult. What you can do is look -- well, you can't even really do that because we know our market share from our other 3 public competitors and what percentage of sales we have there. We don't know private guys that compete in the marketplace. We don't know what Halliburton's in-house supply is. So it's -- it would be an educated guess.

There is a lot a talk about supply and cost pressure and supply line pressures globally, what are you seeing there, certainly for the manufacturing business?

Yes. It is -- we are concerned about inflation going forward. If I look at it, again, like I said, the story, the macro story at Hunting versus the micro, every business is totally different on the effects of inflation. If you look at OCTG, I'm not concerned about inflation because higher price to me is actually a better deal. Because in certain cases, in the U.S., for example, the price of the connection gets lost in the pipe prices. So it becomes less of an issue with the client, for example, if price is important. On the international market, we quote based on ex mill pricing, having the mills compete. And as long as the Tenaris' and Sumitomo's of the world are also raising prices, it's not an issue. From the areas like Titan or Subsea, where we're buying steel, we're monitoring that closely. That's part of the reason why we've been jumping ahead on price increases. One of the upsides to the inventory position that we've had is, it hasn't hit our system yet. And so we have really been pretty unaffected as far as inflation and supply chain issues to date, but it's coming.

Okay. And can we also ask how much of the Canadian business was included in that, in the first half '20? Is it -- are we talking $10 million single digits?

I think it's $10 million to $15 million.

Yes.

A few more questions through the webcast, one from Mick Pickup of Barclays. On the dividend, you typically paid a higher final than interim. Given the more positive outlook, what you're thinking about the dividend from here?

Steady as she goes.

Okay. And we've got a few questions from Thomas Rands at Investec. First question, please, can you update us on the organic oil recovery opportunity.

Bruce, you can take that.

Yes, yes. It's -- we've got some exciting times ahead. We've got some good interest, especially in the Middle East with some of the national oil companies there, some successful technical trials. So really, this -- between now and end of the year, it's all about commercializing the technology. That's in the Middle East, but we've also got a number of pilots -- pilot trials going around Pakistan, Yemen, Hungary and also a commercial opportunity for the North Sea, which align [indiscernible] the large operators as well. So looking good and just really concentrating to commercialize the technology and building from there.

Great. Second question from Thomas. Could you detail the inventory impairments?

Well, there was none for this period.

No. Third question, how do you view the non-oil and gas revenue developing over the next 5 years?

My comment on our movement is that non-oil and gas growth in our company will be evolutionary, not revolutionary. So we're going to be prudent. We're not going to run out there and find stupid ways to lose money. We're going to focus on trying to grow the business in areas that are tangential to what we know what we're doing. Hence, the 3D printing and some other things we're looking at along those lines. There's just -- there's too many other easy ways to lose money, and we don't want to be there. But we view it as something that we want to do. Electronics is a case in point where we've put a big emphasis on getting certification in military and medical and the like, but it's going to be a slow evolution.

Okay. I think that talks really to the final question from Thomas, which is regarding your view on energy transition strategy.

My total view on energy transition is that the hype does not equal the math. And when I listen to the latest Spears report, which tells me that there's something like 1.5 billion internal combustion engines on the face of the Earth today, and EVs make up less than 1% of that total. You've got, even if EV acceptance or growth -- demand grows by 30% compounded every year, in 2030, we're still going to have 300 million more internal combustion engine vehicles on the face of the earth. So it's -- the math just doesn't add up. This business is going to be here for a long, long time. And we'll always look at ways to diversify our profit stream, and the keyword is profit and find them to make money because a lot of these things people are chasing right now, they don't make money, and they're not going to make money. And that's -- I don't have the luxury of being able to be a nonprofit supporter.

Okay. Got another question from Mick Pickup of Barclays. You mentioned RTI and Joints in Brazil a number of times, he says he thinks the article you referred to mentioned Petrobras' own designs. Are you working for them or offering a competitive product?

We're offering a competitive product and Petrobras, like every major oil company, like Saudi Aramco and the like, they don't want to be single sourced on anything. And all I can say to Petrobras good luck, knock yourself out. Because this metallurgy with titanium, the design of the fatigue-resistant things you have to do with these products, this isn't something that you go and develop in 12 months. So I think Brazil is an up and coming market for us. Keep in mind that prior to Hunting buying this product line, the salespeople from RTI were not allowed to even make contact with anybody in Brazil. I mean it was bizzare. But we've turned that corner, and I'm just -- I'm very excited about our upside.

We've got a question from Victoria McCulloch of RBC. You've made a number of strategic investments over the last 12 to 18 months. Would you be interested in bigger positions in any of these? And should we expect to see more of these in the coming 6 to 12 months?