Hunting PLC (HTG) Earnings Call Transcript & Summary

Right. I think we've got a good number of people on already. So welcome again. We're very pleased to welcome back Hunting today who have released their full year results for the calendar year 2024. A couple of small pieces of admin from myself first. The presentation is being recorded, so you can watch it again. We are keen to try and address all your questions after the presentation. [Operator Instructions] The presentation deck that the management will be referring to will also be available on the Hunting IR website page, along with lots of other useful materials. We're delighted to welcome back Finance Director, Bruce Ferguson, today, and he is joined by the Head of IR and Company Secretary, Dr. Ben Willey. Unfortunately, personal matters have kept Jim Johnson, the CEO in the U.S.A., and we wish him all the best concerning that. So without further ado, I shall pass over to Ben to start the presentation.

Thanks very much, Andy. Good morning to you all. As Andy has just said, unfortunately, Jim couldn't be with us this morning. He's been detained in the U.S. but we're pleased to be here with you to present our full year results for 31st of December 2024. Andy, if you can move to the next slide, please. So just to give you a bit of a background to Hunting. Hunting is a global precision engineering company with a deep knowledge of the global energy industry. A lot of our businesses are focused on oil and gas. Our focus is very much on products and equipment and services, which we sell to international energy services companies and the end users as well. And our core competence are driven around print part manufacturing, precision manufacturing and essentially materials performance engineering. Even though we are very much still focused on oil and gas, which is obviously a theme in the market at the moment, we're also trying to sort of pivot some of our revenue base across the non-oil and gas markets where we have got this expertise of precision engineering, energy transition, particularly geothermal and carbon capture are 2 areas of high growth that we actually see in the short to medium term. In terms of oil and gas, our early entry point markets are aviation, where our Dearborn business, which we'll talk about in a few moments' time, has been very successful winning business in commercial space and for various defense-related contracts. Really, in 2023, we set out some targets at the Capital Markets Day, which we're going to be talking about and reporting against today. We're essentially on track with regard to these growth targets. And Bruce and I will be sort of working through it over the course of the next 25 minutes. Next slide, Andy. So we report against 5 major product groups, of which some of them are more relevant to energy and energy transition and more of them are to do with oil and gas. On the left-hand side of the slide, our oil and gas perforating systems business is very much focused on the U.S. onshore markets. One of the key areas of growth that we're actually seeing at the moment is international markets where places like Argentina and Saudi Arabia are adopting U.S. completion techniques. So that's been a really, really high growth point in the year despite a lower result in the U.S. in the year. Within our Subsea Technologies business, we've had great success over the last 24 months with ExxonMobil, who's had a lot of exploration success in Guyana. There's a number of product lines there, including titanium stress joints, which are used within FPSOs; hydraulic valves and couplings, which are used in subsea systems and also the Enpro subsea business unit, which has got flow access modules and flow intervention systems, again, which sit on the sea floor. OCTG, which is our largest revenue group contains our 3 families of premium connections, which are applied globally to many different resource types. In the year, we've also increased our revenue in India and also in Asia Pacific with large orders with Kuwait Oil Company. Our advanced manufacturing business has been very successfully in pivoting into the aviation market. Our electronics business, which also forms part of Advanced manufacturing, still is very much an oil and gas-oriented business. All of these products in one form or another are related to and can be applied to the energy transition, and we're very much focused on geothermal and carbon capture markets. Geothermal is real revenue for us today. Carbon capture is more likely to be an end of the decade revenue stream. Andy, thanks. Our global operating footprint is very much driven by where the operators are drilling here today. North America, where the highest level of activities remains is where we've got most of our sites. That actually services down into South America, in Europe and in Asia Pacific, that services the region of the Middle East as well. And so between us, we handle both the East and Western Hemispheres. And the other thing is that the energy transition markets are also well aligned to this operating footprint. Thanks, Andy. So moving to our annual results, which we announced this morning. Our results are a good set of results for the year despite a number of market headwinds. In the second half of the year, our performance of that has been driven by orders which have been completed for the Kuwait Oil Company. In May of last year, we announced $231 million of OCTG orders. We began delivering them in September of this year, and they will be completed in the first half of 2025, which contributes to strong revenue profile for the first half of the year. We've also got a profit contribution from our India joint venture as well, where we set up a new facility and got a new API license in the year. And we've also announced a new 5-year manufacturing agreement with Chevron. This sort of indicates that Hunting works with blue-chip customers, giving them critical parts, which are relevant for high-performance field development. Our non-oil and gas and low carbon energy transition strategy is starting to bear fruit. Despite our revenue profile for non-oil and gas remaining broadly flat at $75 million in the year, we were able to announce $60 million of organic oil recovery orders, which has been supplied to the North Sea, and we'll talk about this in a few moments' time. Our energy transition revenue was just under $15 million. And we've also made an additional investment in what we believe to be a high-growth long-term market in the 3D additive manufacturing. One of the areas of focus as we went through 2024 is focused on increasing our cost efficiencies and sustainability of the group in the long term. We've announced a restructuring of Hunting Titan during Q2 2024. And in January 2025, we announced another restructuring of our EMEA operating segment. Earlier this week, we announced the disposal of our Rival Downhole Tools business, which netted us $13 million of cash, which adds to our cash plan, which we're going to be pursuing through acquisitions. Next, Andy. So in terms of financial highlights, our revenues are up 13% to just over $1 billion. EBITDA is up 23% to $126 million, and our free cash flow has been particularly strong in the year with a number of $139 million. This has led to us increasing our dividends by 15%. Our Capital Markets Day ambition is to increase our dividend by at least 10% to the end of the decade, and this fulfills the ambition. And given the strong cash balance that we had at the end of the year, we decided to push the distribution up slightly more than our Capital Markets Day target. So Hunting's EBITDA profile, you can see from this slide on the left has been dominated by our OCTG product line, generating $80 million, followed by $30 million of our subsea businesses. Those 2 have been the standout performers of the group in the year. Unfortunately, we've had a couple of headwinds within our perforating systems business, and we'll talk about more about the restructuring, which will improve profitability in a few slides' time. One of the key Capital Markets Day targets is for us to achieve an EBITDA margin of 15%. And in the year, our Subsea and OCTG product lines achieved that. And you can see the drag that our total margin has had, thanks to our sort of lower perforating systems margin in the year, and that's an area that we look to improving over the next 12 months as the impact of our cost cutting is felt across the group. So just to run through our product groups and the performance over the last 12 months, starting with our OCTG product line. You can see that we generated $436 million of revenue for the group, which is about 44%. That was generated an EBITDA margin of 17%, giving us this EBITDA of $80.2 million. Our order book at the end of the year was up year-on-year, thanks to the KOC orders, and we're very keen to highlight today that, that has also been supported by good market share growth within our North America and Canada businesses, which has increased its sales of our TEC-LOCK Wedge connection. We also have got accessories manufacturing sales as well, which is included in these numbers. And they've had a particularly good year selling down into Guyana and to the likes of Schlumberger, where well completion packages have been sold into the field developments there. Energy transition sales that we've already highlighted are included in these numbers. Moving on to our Subsea, just highlighting a little bit more on our OCTG. Over the last 2 years, we've increased our volumes of OCTG threading within the group by nearly 80%. You can see the contribution on the right-hand bar from our new India joint venture and also the increase in North America and also the impact in -- for the KOC orders, which came through in the second half of last year. We see this as sort of a good validation of Hunting's global position in our OCTG businesses. So moving on to Subsea, another year of great growth, 49% increase in revenue to $147 million and an EBITDA of $30 million. The majority of that growth has come through our Spring business, which manufactures titanium stress joints. These are applied to FPSOs for ExxonMobil. One of the things which we are seeing is that ExxonMobil has got another decade of development in South America for the various discoveries, which have been made in the year. And we've been pretty pleased that Exxon has standardized onto our titanium stress joint for its FPSOs. And so we see a really good runway of opportunities going into the future. Our Enpro business, which we purchased back in 2020, has also had another good year, and they've been successful in cross-selling their flow intervention systems to Exxon, demonstrating that our strategy is working of taking all our various product lines into blue-chip clients like ExxonMobil. Moving on. Our Advanced Manufacturing has also walked up its revenues and EBITDA in the year. EBITDA margin is 9%. Our Electronics business is still majority an oil and gas-focused business. On the other side, our Dearborn business, which is a high-precision engineering business unit has successfully pivoted its order book to aviation sales and commercial space opportunities with the likes of Elon Musk, SpaceX and Blue Origin. And we see that as one of the key drivers of our pivots of our revenue to more non-oil and gas sales. At the end of the year, Dearborn actually had a sales order book of $100 million, of which 80% was non-oil and gas sales. So our perforating systems business has seen some headwinds in the year. Revenues were down 9% due to lower rig counts and unfortunately, a lower gas price, which curtailed activity. This had an impact on volumes and margins. And so we are looking to improve that in the year ahead, thanks to the cost restructuring, which we commenced at the half year last year. We've announced some more cost restructuring today, which will hopefully restore our EBITDA margin to high single digit or even 10% EBITDA margin in 2025, and that's one of our growth drivers and profit for the year ahead. Internationally, the sales have actually increased. The areas of growth are Argentina and Saudi Arabia, where they take accessories instead of systems, they want the various components, which are high-margin business and those opportunities continue to grow steadily in those regions. So moving on to the manufacturing business. That revenue also increased in the year. Our EBITDA has dropped off year-on-year. This is predominantly due to the fact which we disposed of a small oil and gas interest in 2023. Our organic oil recovery business comes into this product line, and you can see the impact of the $60 million of orders, which are recorded in the right-hand bar in the sales order book. We expect this to be a high-growth product line into the medium term. So moving to our 2030 strategic objectives. In 2023, we laid out some performance drivers that we believe are going to be useful for investors to guide our investment case into the medium term. As we've already talked about, our OCTG product line is now 44% of group revenue. Just to give you a little bit of geographic context to that. The $463 million of sales, $200 million of that is from North America and $261 million of that comes from our Middle East, Asia Pacific and European businesses. And that was one of our drivers to increase international sales for that product line, which we've been successful in doing. We've also been successful in our offshore subsea business with our stress joints as we've talked about. And this has helped us walk up our group EBITDA margin to 12%. And that's despite the drag on our profitability with the perforating systems business. Our EBITDA to free cash flow conversion at 111% is probably a high point for us. We expect a long-term run rate of about a conversion rate of 50%. But in the year, we've generated a really, really strong result, leading to the cash balances of $105 million of cash at the end of the year, which has allowed us to increase our dividends by 15%. Our long-term objective is to continue that dividend growth by at least 10% per annum to the end of the decade. And so with that, on the next slide, we want to talk a little bit more about our organic oil recovery. We believe this to be a really high-growth opportunity for Hunting. It is a production-enhancing -- enhanced oil recovery technology. It's low CapEx and a lot of clients, which you see the logos on the screen are getting interested in it. And all these clients are either piloting, sampling or trialing the technology to enhance production. We're excited about it because it's a new product line, which is high gross margin to the group, which we believe to be earnings enhancing in the medium term. On our next slide. With the cash pile that we've got and our borrowing facilities, we've got liquidity and firepower of over $345 million to support our growth. We are looking at subsea acquisitions and intelligent well completions as well as non-oil and gas opportunities. Management continue to look and are very, very disciplined with that. But these are the key areas which we hopefully deliver these acquisitions in the short term. The attractive multiples for oil and gas are manageable for us, and we're also happy to pay slightly higher multiples if a good nonenergy business is presented to us. So passing over to Bruce for the finances.

Thanks, Ben. If I can just look at the financial overview, just to follow up on what Ben has taken us through there. If I can summarize our financial performance for '24, we've had a very good earnings performance, up 23% year-on-year. We're sitting with a very strong and efficient balance sheet due to the -- if you look at the working capital cycle, it's reduced almost -- it's almost halved from 215 days to 109 days. We're really pleased with that performance. It's a combination of us reducing our inventory on -- in product lines such as Titan, we've taken a lot of inventory and convert that to cash. We've also been very smart in terms of what working capital instruments we've used to get receivables quicker, like letter of credit discounting on some of those large contracts we talked about for KOC. So we're in a very good place in terms of our earnings, really good place in terms of our balance sheet and its efficiency. With that, [indiscernible] we managed to add $300 million of liquidity. So really well positioned for M&A growth, further shareholder distributions and also supporting our growth through organic projects as well. Next slide. As Ben mentioned, we're looking at -- we've had a tail -- some headwinds in certain areas of the business, and it's really important that we address that to get our blended margin back to where we want to be. Last year, we looked at our Titan business, which we had to restructure due to the reduction in U.S. completion work, and that took $6.5 million of costs out. We're looking at a similar situation in EMEA. I think we all know about the reduction in U.K. oil and gas activity, which has really hit that area, and we need to resize that business. So that will take the form of further cost restructures -- significant cost restructures that's ongoing at the moment. We're engaging with the workforce and key stakeholders there. So with that, that will get that business back into shape and get us back to the returns we need. We're also looking at pivoting that business more from the Europe down towards Middle East, which is much more active and much closer to customers. So a combination of reduced costs and getting closer to customer base and more active customer market down in the Middle East. We'll continue to trim costs where we can. That will be in areas such as further cost reductions in Titan, further reductions in electronics in the States, and we'll look at improving efficiency across the board. So those total annual cost savings altogether when we get to first quarter of 2026, it will be around about $10 million. We'll benefit half of that this year as well. We're also looking to improve return on capital where we've got businesses that are not getting that return, we'll look to exit and redeploy that capital into more margin-enhancing product lines. So an example of that is our disposal of the Rival Downhole Tool joint venture. We'll get $30 million of that, and we'll put that to play into more margin accretive work. Following up on our revenue growth, you can see our 5 product lines here. We've had revenue growth in 4 out of the 5. The star there was Subsea at 49% year-on-year, fantastic performance there based on that growth coming through the Guyana projects, but also into new customer bases into the likes of Turkey offshore as well. OCG really building on a very strong 2023, still managed 17% growth there at the same time. Next slide. If we look at our profit and loss, look at the key areas, we see the growth in top line, up 13%, just over $1 billion with the margins of those drags on margins in EMEA and Titan, still minus 1 point improvement on our gross margin, which is great to see. EBITDA growing 13% up to 126%. We've got an EBITDA margin of 12% there. So we ideally want to see that up towards 15%. And we believe we can get that there over the next 12 months with the combination of cost reductions, focus on the high-margin product lines, adding some quality M&A in there as well. Running through that, that gives us a profit for the year of $55.8 million, which gives that adjusted EPS growth of 55%, which is great to see from 2023 up to 31.4%. And we've got a dividend per share declared of $11.5, which is a 15% increase year-on-year. We've also tried to give our investors and stakeholders a closer look and more transparent look at the business. The way we do this on this slide is by showing our performance by the segment along the top areas such as Titan in North America. And we also look at down the Y-axis on the product lines down the side as well. So that shows that combined performance all the way down to EBITDA lines. So you can see there the OCG at 17%, EBITDA margin is doing well, top performer subsea. But it also shows the distressed areas like EMEA, which is a 9% negative EBITDA margin. That's part we're going through a major restructure and some of the other areas like Hunting Titan, which is basically 0%. So those are the areas we're going to focus on through a combination of the leadership changes, cost restructures, looking at new markets, and we'll get them back to where they need to be in terms of double-digit growth. Next slide, please. I mentioned the strong balance sheet, something we're very proud of. It gives us that resilience in uncertain times, but also gives us a lot of firepower and optionality, whether that's we want to deploy that into M&A or different other areas of capital allocation. One area I would highlight, we did have a right an impairment -- noncash impairment of $109 million in our Titan business. That's our U.S. business. That was primarily due to lower growth rates in the model, higher discount rates due to interest rates. It's very sensitive to that. So in terms of when we're going through the audit, that throughout the $109 million goodwill write-off. It's a noncash measure. It reflects the distressed nature of the U.S. completions market. And that still leaves us with net assets of over $900 million. Within this, you can see the cash balance there of over $100 million, which we're in a really good shape from that balance sheet. And also on the working capital, we saw a [ $60 million ] reduction. So we converted $60 million of that working capital into cash, which again, really talks to that working capital efficiency. A little more data on the working capital. There's 2 parts to that. One is you can see the inventories at that top line. We had $140 million of inventory in Titan that went down to $108 million, again, converting that into cash. You can then see the total working capital down $60 million to $355 million. We use the metric of working capital to revenue as a yardstick to see how our efficiency is. Last year, we at 46%. Now we're down to 29%. So we really performed well. We'd hoped to get to 40%, so we've overachieved. In many ways, that's due to the capital -- working capital instruments like letter of credit discounting, which are all done at a very cost-effective way. It's actually cheaper using these instruments because we're using confirmation of banks in the Middle East compared to our balance sheet. So it's cheaper to borrow through these instruments or use bank acceptance bonds than it is to borrow through our debt facility. So very efficient and also we get the benefit of the cash in the balance sheet. Going through our inventory days, receivable days, all going the right way and very pleasing to say. We've actually halved our working capital cycle from 211 down to 109. So really pleased with the efficiency there. That will flow through to cash generation. You can see our EBITDA, our earnings at the top with our share-based payments, we're back at [ $140 million ]. We got benefit of the working capital inflow of $53 million. Capital investment for the company is not high. It's actually less depreciation. So we're just mostly maintenance CapEx going forward. There's not a lot of cash required in terms of maintaining our capital base there at all. We have a little bit of shelter in terms of our cash payments due to our deferred tax, assets and our capital structure. So that gave us that $140 million of free cash flow, which is 111% of our EBITDA to free cash flow. So look going forward, we look at that more normalized at 50%. It has been exceptional in terms of those working capital instruments, but really pleased with that performance, and that gave us that fantastic cash figure in the year of $106 million. In terms of our guidance, how do we see 2025? Again, good steady progress in terms of our earnings. We're looking at upping our EBITDA guidance to $135 million to $145 million from what we saw in '24. EBITDA margins increasing around with that 12%, 13% mark. CapEx, again, will be in the $35 million to $40 million mark, no more than that. Our free cash flow conversion will still be strong at 50%, and that will flow through to a total cash in bank of $135 million to $145 million. So the last few slides are just looking at what gives us that confidence in '25 and beyond. So if I just look at the order book is obviously key. We've got $500 million of an order book. That doesn't include the $240 million worth of Titan that we'll do this year. Majority of that $508 million will be invoiced and recognized in 2025. Behind that order book, we've got a very active and a healthy tender pipeline of over $1 billion. That's in key areas such as the OCTG, it's also subsea and also advanced manufacturing as well. And we really believe in the market fundamentals. That pivot towards that offshore international subsea, long term, deepwater, ultra-deepwater, multiyear programs, critical parts, high margin, that's where we are, and that will continue for the foreseeable. Another strength we see that's going to support '25 and beyond is North America. We're seeing the Henry Hub gas price up at $4, which is a significant increase in what we saw through '24. That will help activity. We're also seeing a lot of capacity increases on the LNG export pipelines. That's going to double over the next 4 years between 2025 and 2028. Carbon capture opportunities are there as well. That will be more towards the back end of the decade, but we're well placed with our product line to service that market. We all know that U.S. electricity demand is going through the roof. We've got data centers, and that's going to be supplied and that's going to require energy. LNG is going to be a really good example of that, natural gas. And also well placed in geothermal. There are still projects. Some of them have been delayed. But again, we're well positioned to benefit. We did see some sales coming through 2024, and that will continue to increase over the next 2 or 3 years. A real success story for us has been South America. 5 years ago, we had less than $10 million revenue. We're now up at $100 million for the continent. So we are supplying all our product lines. Guyana is our subsea product lines of titanium joints into ExxonMobil, along with completion accessories into Schlumberger. Suriname is a really exciting discovery next door, same geological formations. So it will be the same product lines going there. Brazil is a really growing area in terms of deepwater, FPSOs going there, OCG supply there. In Argentina, we're supplying lots of titan perforating guns into that as well. So that whole continent, we're touching that with all our product lines and it's a very -- it's up to 10% of our total revenue. Just touching on the rest of this -- a lot of these areas in terms of Middle East, in terms of India, our joint venture in India, some really strong tender contracts coming out of Middle East and areas like Saudi, KOC, Bahrain, Turkmenistan and down West Africa. So we're now very much at the top table. We've demonstrated our ability to deliver a [ $230 million ] contract with KOC. We've now got the product and technical qualifications to access those tenders, and we see them coming through at a pace. We've got people down in Iraq, that's opening up as well and dealing with major international oil companies down there. Preference systems, similar formations inside to what we see in the States. So a very fertile ground for our Titan business. Organical oil recovery, it's getting some great traction down in the Middle East, places like Oman, down in Qatar, et cetera, really great rates of return on that one. So that's going to be exciting. And as I said, the Indian joint venture is doing very well, over $2 million profit in our first year. So all going well. So I can summarize the year, another strong year for 2024 despite some headwinds we faced. Our 2030 strategy, we talked about at the Capital Markets Day, very much on track, strategic ambitions in place. We've got a very strong balance sheet, $350 million liquidity that gives us that optionality and that resilience to kick the business forward. And our 2025 guidance indicates for the year of good growth. Thanks, Andy.

Thank you very much, gentlemen. Very, very thorough -- lots of ground covered. And let's dive straight into some related questions. Maybe I want to start with you, Bruce. Excellent performance on working capital in 2024. How would you expect '25 to pan out? And indeed, looking slightly longer term, have you made all of the easy wins so far? Or is this going to be an ongoing process of further improvement?

Yes, we had an exceptional year for '24 in terms of working capital. There are some areas we're still looking at in terms of self-help. We're looking at our inventory levels in -- Titan can go a little bit further in some of the other areas in the North America. So I think there's more to come in terms of reducing that inventory levels to get stock turns up. And we're also looking at, while the KOC discounting and accelerating those receivables really led to that exceptional performance. We're continuing to have that optionality for some of those that were coming in from the Middle East, other customers. We're using those bank acceptance bills for the Chinese mills, which the first payment as well. So I think a combination of those 2 things, the self-help plus the working capital instruments will get us towards more -- I'd say, more normalized to be 35% of our revenue via working capital. So improvement, certainly a big improvement. We tend to be 50%. So that's a big drop of 15% to get to those working capital levels, and that will release capital that we can deploy in other areas.

You mentioned the KOC contract, clearly a very material one. Can you give us a little more detail about how it's progressing and indeed, how you see the potential for further follow-on orders from that client?

Yes. Well, it's progressing well. One thing is to win the order, but you've got to then deliver tens of thousands of joints of pipe from -- through the supply chain. So we've delivered 4 shipments from July through to December. The customer is very happy. He's got his deliveries. He's paid the bills, very satisfied with our execution there. The team has done a fantastic job in KOC, and that's going to help us with potential business, not just for KOC, but also a demonstration of that supply for our customers down there as well. So that's gone well. There will be other opportunities. Kuwait is looking to get from 2.6 million barrels a day up to 4 million barrels a day. So they've got a very intense oil and gas development program. We have won further work in the KOC tender. It wasn't quite as much as we'd hoped, but it was still a significant amount of business. There's a future mega tender coming out for KOC. They're going to double up there as well. So that's one we've got our eye on, and that will come out later on this year as well. So lots going on in that region. And I think our track record, our delivery on this project can only help us going forward.

Great. And staying with the Middle East, we have a question. Is the new facility in Dubai aimed at strengthening existing client relationships? Or do you also expect it to help you win new clients in the region?

I was down there 2 weeks ago, Andy, and it's -- the facility looks great. It's a larger facility in the [indiscernible] free trade zone. So it's really well positioned for strengthening existing relationships on our well testing business. We're going to move our well testing business from Holland down there. A key market for us is Saudi, Abu Dhabi. So that's going to strengthen those existing but also gives us a chance to widen that customer base into that wider region as well through the operators and also the service companies down there at the same time. We're also looking to do a little bit of expansion down in Saudi. That's a very good growth area for us as well. That's mostly completion business, but we're doing a small expansion in there to capitalize on that strong market at the same time.

Okay. Thank you. Very quick. Now a question that pops up quite regularly, and it may have changed in the last 10 minutes, but someone is understandably asking, as much as anybody can predict the direction and severity of American tariffs, in the light of what we've seen from exports into the U.S. being punished so far, how do you think that this might affect Hunting going forward?

I think directly, we've got quite small exposure. So I think we're quite fortunate. The areas that we might touch on is, for example, we do supply perforating systems from our U.S. base to service the Canadian market. We do have -- actually what we've done ahead of the tariffs, we've actually put more stock on the ground in Canada to get ahead of that. So that will keep us going for 9 months. And I think in this uncertain time, 9 months is a long time in tariff world. So I think hopefully, things will normalize by then. So we're ahead of that game there. There is a little bit of tariffs affecting some of the perforating guns coming in from outside the States, and we see one of our competitors actually raising prices. But it's not a material amount to go pass that tariffs on to our customer base in line with what our competitors are doing. So in terms of direct tariffs, because we've got a lot of onshore supply chain within the States, we're not reliant on imports. The impact will not be material. It will be pretty minimal for us. I guess the wider question is what's going to happen on the geopolitics of tariffs and recessions, inflations as well, which really are with our control. But what we can control, I think we're in a pretty good place in terms of the impact on tariffs.

You can only look after what you control and self-help is a very important factor in your margin plans as well. That makes perfect sense. Right. We're pinging around a little bit. Capital allocation. I'm sure shareholders are very pleased with the 15% increase in the dividend. Was that an easy decision for the Board to make given that you have substantial investment plans and as you referred to, M&A ambitions as well?

Yes. I think we're always -- that capital allocation is always something we -- that does create a lot of discussion at Board level. I think it was appropriate. We did highlight and we try and be consistent with our Capital Markets Day targets, medium-term targets. So we're not spinning all over the place. But we did mention 10%. The reason we went to 15% was because of that exceptional cash position we held at the year-end, over $100 million in cash, we thought it was right to return some of that to shareholders. But we've always got a view to what that -- what we're going to require our cash for. Is that M&A? Is that going to be a big organic project as well. So just the timing-wise, we thought it was appropriate to do almost a little bit of an exceptional 15% increase on dividend. I feel going forward, that will probably return at 10% because I do believe that our M&A will start kicking in throughout the course of '25, and that will absorb some of the cash surplus we have at the moment.

Ben, thank you. Organic oil recovery, which the word excited appears in your statement today. Can you give a little more regional information about where the opportunity may lie in this? Is it a global opportunity? Or is it very much focused on the North Sea and Europe? And in that -- in that context, you're wisely saying this is a longer-term end-of-decade projects. But can you give the audience a little perspective about what it might grow to in terms of scale in 5 to 10 years' time?

Yes. Well, it is -- we are very excited about the product. It's something we've been working with the partners with for a long time, the technology partners in the States. I think the reason we're excited is that it does -- it's applicable to what we say sandstone and carbonate oil fields. So that basically covers the globe. So it's not a regional from that sense, it covers -- it's a wide envelope of applicable fields. It is a low-cost option. It's called enhanced oil recovery. So traditionally, 60% to 70% of oil remains in the ground despite it just -- it doesn't have the energy, the molecules are too large for it to flow. What this technology allows is to treat the resident microbes in the oil well and allow them to basically break down those oil particles to allow the oil to flow. So there's a lot of complex science but it's -- the application is quite simple, which the operators like. So the scalability is very good. We've actually engaged with over 71 customers. There's 71 active customers around the globe that are either doing NDA stage at pilot stage or commercial application stage. So we're very well advanced with a number of plates spinning with -- in terms of commercialization on this. The results have been fantastic in terms of the pilots. We've had case studies where we've done a pilot sample and the payback has been on 2 weeks because the return, if you're enhancing the recovery, not just accelerated, but actually getting all out of the ground that would normally stay there, that's incremental revenue. So the economics are fantastic for the operator, that makes it attractive. There's no CapEx upfront compared to other similar technologies like polymer flooding. There's a field in the North Sea that's over $1 billion of spending just to put the capital infrastructure in place. This doesn't require that. It's just a nutrient package that treats the existing microbes. Nothing can go wrong. So all we're doing is treating existing microbes that have been flowing in that reservoir for millions of years. So there's no downside to the operator. So all of that together is what is getting the customers excited. And it can be applied to early life fields. It can be applied to later life fields. When they're looking at some of the -- the customers were seeing in the North Sea, the ones that are going to decommissioning, they're saying, well, okay, let's try this out and they're finding they can extend the life of that field because they're extracting oil they didn't believe they could get out of the ground. So the economics are actually deferring the decommissioning of that field and actually paying for the decommissioning of that field. So the returns and from our point of view to address that global market, we've currently got maybe 10, 12 people to increase that -- the scalability, we've got to hire maybe another 6, 8 microbiologists. That's all we require. And that will allow us to address that whole global market. So that scalability, the economics and the elegance of the technology is what's really causing us there. In terms of how we project that in terms of modeling, there's nothing much in that '25 numbers we've talked about. I would like to see this being -- we've got ambitions to get this to $100 million revenue in 3 years, $250 million revenue by the end of the decade. It really is the best technology that I've come across in my 30 years in the industry. And the traction we're getting with the guys like BP and Shell, you don't get access to their reservoirs unless this works. These are multibillion-dollar reservoirs. Saudi Aramco or all these guys, you don't get that traction unless this technology has worked. It's gone through all the technical qualifications, all that rigor. And now I think the economic benefits are going to be fantastic. So that's hence the excitement to the [indiscernible].

I think you've justified the word excited, Bruce. And obviously, some elements of sustainability involved in this as well as significant returns for your clients for Hunting on a marginal increase in your cost base. So fingers crossed, we'll check up on you in 3 years' time, if not sooner on that to that. Right. We've got lots of questions on marketplace, so we'll move on and perhaps finish with those. So firstly, just on M&A, a couple of -- again, I think expected questions. What sort of pricing parameters do you have or financial constraints internally do you put on targets? And how do you see the markets or markets because I'm sure you've got diverse areas that you will be looking to purchase at the moment. Is it a good time to be buying?

I think it's a good time, Andy. Obviously, we've got the cash there. The multiples are -- we tend to with the traditional multiple be EV to EBITDA. So we're seeing them a sensible range compared to what we are trading at. It's that 4 to 6 range. So it's fairly sensible in terms of the expectations from the seller. We are in a position that there's not that much private equity looking at oil and gas, given their experiences -- over the poor experiences they've had over the many -- back in 2014, '15. So there's not that many buyers out there with our balance sheet, with our reputation in the market as well. So it's a good time to buy. The areas we're looking at are the Subsea, intelligent completions. And also, we look at some if there's a non-oil and gas component that we could achieve the right margins, but also at the right multiple because they tend to be a higher multiple. So that's always a trade-off there. But we really like that Subsea space. There's some good intelligent completions businesses out there at high margin. We're engaged -- actively engaged in a number of these companies across those areas we've talked about. And that, combined with our balance sheet, the fact we've got that firepower to actually execute on the deal gives -- I feel gives us an advantage in that market as well.

Yes. very sensible. A nice one here. I might paraphrase it slightly. But in terms of immediate sentiment, there has been a move back to traditional fuels. And the question is, do you regard the rhetoric of drill baby drill or BP's recent move back towards fossil fuels as evidence of a material shift in the market? And are you already seeing the benefits of that? Or is it -- is there going to be a lag before you see more drilling work?

I think I'll take that, Andy. At the end of the day, the Hunting Board led by Jim and Bruce through the sort of the pandemic and as we've come sort of out of it and it's 5 years behind us now, they did not jump into the [indiscernible] of energy transition and renewable energy and divesting oil and gas assets. They always believed in the long-term energy demand profile for oil and gas. Yes, the energy mix is probably going to change over the next 3 or 4 decades. You hear that BP is very much focused on gas. For Hunting, we are agnostic to oil or gas for our equipment. And at the same time, we're actually building up in a very, very steady and measured way our sort of non-oil and gas and low carbon solutions and business lines. One of the things that we set out at the Capital Markets Day was to say we do not want to dilute returns or our margins by doing something jumping into an area which was either lower margin or lower return when we knew and we were convinced of the long-term demand for oil and gas. So we think that people like BP are just retrenching back into a position that they were quite a long time ago and just realigning themselves with their peers.

Yes. [indiscernible] we are talking decades. And another, I suppose, related question to that, as you both mentioned in your market commentary at the moment, you've got natural gas prices up at $4 which I believe is probably about a 2-year high. You've got West Texas going the other way. So there is a question, are you responsive to these commodity moves? Or is there really quite a long lag time for people and your clients to make significant capital investments as they see what may be a short-term blip turn into a more sustainable trend?

I think again, this is sort of slightly out of the Hunting wheelhouse to comment on global economies. But we see that governments like Saudi Arabia do a fairly good job of managing the oil price around the $70 to $80 oil price because they need that for their local economic benefits. Most oil fields have taken a lot of costs out of the -- out of their systems over the last decade. And so the average price generally globally is -- the lifting cost is less than $40. So that a lot of companies will still make a reasonable amount of money in a $60 to $70 plus trading environment. Now as I say, Saudi Arabia has done a good job over the last 10 years of actually keeping it in the mid-70s.

Great. And perhaps the final question, we talked about the positive trends towards fossil fuels. Do you see that dampening interest in geothermal and carbon capture at the moment? Or it sounds again that they are sort of longer-term developments that just makes sense to sovereigns or large corporates involved in the sector to have diversity?

Yes. I think you've got to look at an energy picture, which is a mix, which is going to change over the next 2 or 3 decades. When you read things like big nuclear facility because they want to have low carbon solutions. You can see that there is sort of ebbs and flows into lower carbon technologies, which we're quite happy to see because if you look at the electricity demand profile within our presentation, data center usage, just general sort of tech energy demand is only going to go in one direction. And oil and gas is just going to be a solid part of that mix to the end of the century really.

Yes. I think it was in one of your slides, the ongoing use of electricity in America and globally is a rapidly growing trend that is not going to change.

Yes, we agree.

Great. Well, I think we're done. Thank you very much to our audience for their attention, their questions. You will receive a feedback form, and I'm sure the company would be very interested in your observations if you can just spend a minute on that. Particular thanks to Bruce and Ben for their time and Ben stepping in like a natural in this occasion. And as mentioned already, there will be a recording of this event coming up on both the equity development and the Hunting website, I would imagine, and the slides already on the Hunting website. So lots of follow-up to do. And we wish Hunting and both of you and of course, Jim, all the best for what is hopefully another very successful year like 2024.

Thanks very much, Andy.

Thank you.