2014 Full Year Results

Hunting PLC

("Hunting" or "the Company" or "the Group")

2014 Full Year Results

Hunting PLC (LSE:HTG) the international energy services group today announces its full year results for the year ended 31 December 2014.

Financial Highlights*

*        Underlying results are based on continuing operations before amortisation and exceptional items. Reported results are based on the statutory results for continuing operations as reported under International Financial Reporting Standards. 2013 has been restated for the designation of Gibson Shipbrokers as a discontinued operation.

Corporate Overview

Segmental Results from continuing operations - before amortisation, exceptional items, interest and share of associates' post-tax results.

An analyst presentation and webcast will be held at 10.45 a.m. today at the offices of Buchanan, 107 Cheapside, London, EC2V 6DN.

An audio webcast will be available on:

http://vm.buchanan.uk.com/2015/hunting050315/registration.htm

Commenting on the results and outlook for the Group, Dennis Proctor, Chief Executive, said:

"Hunting's record performance in 2014 demonstrates the resilience and underlying strength of the Group's business units, particularly our ability to generate significant levels of cash, while continuing to invest in our long term growth strategy.

"The Group is resetting its operational capabilities to align with the current lower oil and gas price environment, however, given our global footprint and diverse product and services offering, Hunting remains well positioned to capture any growth opportunities across its international operations as and when the wider market improves."

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Notes to Editors:

About Hunting PLC

Hunting PLC is an international energy services provider to the world's leading upstream oil and gas companies. Established in 1874, it is a premium listed public company traded on the London Stock Exchange. The Company maintains a corporate office in Houston and is headquartered in London. As well as the United Kingdom, the Company has principal operations in Canada, China, Indonesia, Mexico, Netherlands, Norway, Singapore, South Africa, Thailand, United Arab Emirates and the United States of America.

Chairman's Statement

Hunting had a good year in 2014, once again generating substantial cash and profits in markets which were strong, particularly in the second half. It continued to implement its policy of establishing new and enhanced manufacturing and distribution facilities in areas of high demand, and internationalising product lines through its wide geographic network.

Well Construction, reporting an underlying profit from operations of $53.0m (2013 - $58.6m), remained profitable and successful across certain of its business lines, however, slow trading and competition issues within the Hunting Electronics and Drilling Tools business units curtailed profits and growth in this segment during the year. Offsetting these, our Premium Connections business continued to take advantage of its strong technical offering, reporting growth following the introduction of new Premium Connection product lines.

Well Completion, reporting an underlying profit from operations of $140.8m (2013 - $124.5m), had an excellent year, aided by a particularly strong performance from Hunting Titan with its perforating systems which are utilised in both conventional and unconventional well environments.

Well Intervention, reporting an underlying profit from operations of $23.8m (2013 - $15.7m), and the smallest of our three core operating segments grew rapidly, thanks to strong international demand, particularly in the Middle East and in South East Asia. Hunting Subsea performed very well in its offshore well sector.

During most of the year, activity was high in our core markets, in both the offshore and onshore sectors. This environment allowed a rise in profits, with underlying profit before tax from continuing operations being $212.4m (2013 - $197.5m). Reported profit before tax from continuing operations was $108.5m (2013 - $136.4m), following a $49.6m impairment to the value of the goodwill held by the Hunting Electronics and Drilling Tools business units, together with a further impairment of $11.3m to the carrying value of the Group's exploration and production assets.

The sharp reduction in the global price of crude oil did not affect our trading results during 2014, however, we continue to monitor our customer activity levels closely going into 2015.

Capital investment was $123.5m (2013 - $94.8m), with major expenditure on facilities in Texas, Louisiana, Maine and South Africa. These new facilities will be commissioned during the coming year.

Underlying diluted earnings per share from continuing operations were 100.0 cents (2013 - 94.5 cents), an increase of 5.8% on the previous year. Reported diluted earnings per share from continuing operations were 44.8 cents (2013 - 69.4 cents).

Despite the current market environment, and with confidence in the longer term fundamentals of our industry, the Board is recommending a final dividend for 2014 of 22.9 cents per share (2013 - 21.8 cents). The final dividend is payable on 26 May 2015 to shareholders on the register on 1 May 2015, giving a total of 31.0 cents for the year (2013 - 29.5 cents), a 5.1% increase. Though declared in US dollars, dividends will continue to be paid in Sterling.

The Board has continued to ensure that its governance processes are appropriate. Andrew Szescila retired from the Board in September 2014 after three years as a non-executive Director. We thank him for his wisdom and for sharing his knowledge of the industry with us. During the current year, following a rigorous search, we have appointed Annell Bay and John ("Jay") Glick to the Board as non-executive Directors. Both are US citizens and have extensive knowledge of the industries and markets we serve.

I thank all of our people for their considerable contribution which has left us in sound operational and financial health.

Richard Hunting, C.B.E.

Chairman

5 March 2015

Group Performance and Development

Introduction

The Group has capitalised on high levels of activity within the industry during 2014, with many of our operations running at high utilisation to deliver record financial results for shareholders.

This success has been supported by our strategy to increase our customer base, deepen our business partner relationships, increase market share in key product lines, while continuing to provide products of high quality and reliability, positioning Hunting as a key partner in the complex energy services supply chain.

While long term indicators for energy demand remain robust, 2014 has also been a reminder that our businesses are impacted by volatility in short term supply and demand dynamics. As the year closed, key oil price benchmarks were showing a 44% decrease compared to the start of the year and therefore Group-wide initiatives have been implemented to respond to the lower levels of activity anticipated across the industry during 2015.

Despite the current economic environment in the sector, Hunting remains focused on the longer term outlook for the industry, with commentators forecasting daily global oil demand to exceed 109 million barrels by 2035. To support the levels of activity required to achieve this demand, Hunting has continued to invest in new manufacturing capacity during 2014. Our major capital projects in the US and South Africa are scheduled to be commissioned during 2015, which will support regional activity levels across the Americas and Africa, while increasing efficiencies and accelerating the development of new product lines. On completion of these growth projects, Hunting will have a more efficient manufacturing capability, strategically located across the key regions of global drilling activity, positioning the Group to compete for growth opportunities, once the supply/demand balance has been restored across the industry.

While the short term outlook for the Group is difficult to fully evaluate, the Company is well equipped for the anticipated recovery with 2.8 million square feet of global manufacturing capacity, with 1,176  machines contained across 43 facilities and 34 distribution centres in 13 countries.

When existing development programmes are completed a further two operating sites and an additional 0.5 million square feet of operating and distribution capacity will be available.

Group Summary Income Statement

* Restated following the designation of Gibson Shipbrokers as a discontinued operation.

** Results for the year before amortisation and exceptional items.

Overview

Hunting's key activity indicators all reported growth during 2014, with global drilling spend increasing 5.8% compared to 2013, drilling footage in the US increasing 9.7% in the year and strong activity in the Gulf of Mexico driving a number of key businesses within the Group.

Across the Group's US operations, Hunting's Premium Connections, Manufacturing and Accessories, Hunting Dearborn and Hunting Specialty businesses reported excellent results in the year. Hunting Titan had an exceptionally strong year, delivering profits well ahead of management's expectations as it captured market share in key drilling basins and in new regions throughout Hunting's international network. Hunting's Subsea activities also reported excellent year-on-year growth as international activity remained strong, particularly in the Gulf of Mexico. Hunting's pressure control products also saw good demand across the Middle East and Asia Pacific. The Group's operations in Canada reported a return to profitability during the year, as new customers were secured, supported by good levels of drilling activity.

Offsetting the strong growth in these businesses, Hunting's Drilling Tools business reported a disappointing year, as weather-related problems and operational issues led to a reduction in anticipated profits. In addition, Hunting Electronics continued to report subdued trading due to customer destocking, coupled with increasing competition particularly from Far Eastern suppliers. As a result of these issues, goodwill held in respect of these business units has been impaired by $49.6m.

In Europe, Hunting's operations reported a challenging market environment with political and fiscal uncertainty in the UK leading to lower investment and near record lows of drilling activity. Hunting's Asia Pacific operations reported further profit growth, supported by new customer initiatives and continued drilling throughout the region.

During 2014, the employees of Gibson Shipbrokers began negotiations to purchase the business from Hunting through an employee trust with a target completion date of 31 March 2015. An agreement has been reached and approved by the Board. As a result, the business has been reported as a discontinued operation, with appropriate restatements of prior year financial information.

Hunting has focused on internal investment and growth throughout the year, with major capital investments being made within a number of regions and business platforms providing the Group with its longer term capacity needs to meet customer requirements. All key projects are scheduled to complete in 2015.

Premium Connections Manufacturing and Testing Facility

Houston, Texas, US

The Group's Premium Connections business is investing in a new 155,000 square feet facility in Texas, US, to support anticipated long term growth. The $48.6m facility will have Premium Connection manufacturing capability to meet global customer requirements and is scheduled to be commissioned in late 2015.

As part of Hunting's long term development programme for new connection products, an $11.8m testing and certification facility will be incorporated into the new site which will help develop new product lines and new thread forms for longer term commercialisation.

Premium Threading and Accessories Manufacturing Facility

Cape Town, South Africa

As part of the Group's strategic plan to be located in regions of major drilling activity, Hunting is investing $20.0m in a new threading and accessories facility in Cape Town to support business development across Sub-Sahara Africa. The facility will be commissioned over the coming months as engineers are hired and trained.

Manufacturing and Accessories Facility

Houma, Louisiana, US

Hunting's Gulf of Mexico business has grown strongly over the past two years and as part of the Group's efforts to consolidate its facilities and provide customers with a stronger regional presence the $36.4m final expansion at Houma, Louisiana, is now complete, bringing the total site to a 281,000 operational square feet facility.

High Precision Machining Facility

Fryeburg, Maine, US

Hunting Dearborn's $18.8m expansion of its Fryeburg facility is advancing and will provide an additional 65,000 square feet of manufacturing capacity. The facility is scheduled to be operational in Q4 2015.

Results from Continuing Operations

The Group reported revenue of $1,386.5m in 2014, an increase of 7% over 2013, driven by the continued level of industry growth throughout the year. As a consequence of this, underlying EBITDA increased 11% to $269.8m (2013 - $244.0m). EBITDA margin remained unchanged from the prior year at 19%.

Underlying profit from continuing operations was $217.8m (2013 - $200.0m), leading to an underlying profit margin in 2014 of 16% compared to 15% in 2013.

Amortisation and exceptional items totalled $103.9m in the year (2013 - $61.1m) which comprised the amortisation of intangible assets totalling $42.8m (2013 - $43.4m); impairments to goodwill of $49.6m (2013 - $nil); an impairment to the value of the Group's oil and gas reserves totalling $11.3m (2013 - $10.5m); a charge of $4.8m (2013 - $nil) relating to the release of foreign exchange reserves arising on company liquidations; and a credit of $4.6m (2013 - $nil) on the release of excess property provisions. Exceptional charges incurred in 2013 for retention bonuses of $2.9m and inventory fair value adjustments of $4.3m did not recur in 2014.

Reported profit from continuing operations therefore reduced 18% compared to the prior year to $113.9m (2013 - $138.9m).

Net finance costs during the year were $4.9m (2013 - $2.9m) with the Group continuing to pay down borrowings and benefiting from the low interest rates attached to the Group's revolving credit facility. Adverse movements in foreign exchange and other net finance costs did, however, give rise to an increase.

Underlying profit before taxation was $212.4m (2013 - $197.5m) reflected by the increase in activity across the Group compared to 2013. Reported profit before taxation was $108.5m (2013 - $136.4m).

The underlying tax charge for the year was $57.2m (2013 - $52.1m). The Group's underlying tax rate was 27% (2013 - 26%) as the mix of profits from the Group's global operations were relatively unchanged during the year compared to 2013. As a consequence of the lower reported profit from operations following the charges for amortisation and exceptional items, the reported tax charge for the year was $36.7m (2013 - $28.8m) and the reported tax rate was 34% (2013 - 21%).

Underlying diluted EPS increased 6% to 100.0 cents (2013 - 94.5 cents) and reported diluted EPS decreased by 35% to 44.8 cents (2013 - 69.4 cents).

Results from Discontinued Operations

Following the designation of Gibson Shipbrokers as a discontinued operation, the results from discontinued activities comprise the trading results of Gibson Shipbrokers in addition to legacy matters from the disposals of Gibson Energy in 2008 and Field Aviation in 2012.

Gibson Shipbrokers reported a return to profit in the year compared to 2013, with a profit from operations of $0.5m (2013 - loss of $1.5m) as the global shipbroking industry saw an improving market environment.

In October 2014, the Group received $3.9m after costs from Field Aviation in settlement of the promissory note owed to Hunting and the repayment of balances held in an environmental escrow account. Following the receipt of these funds, all outstanding matters relating to the sale of Field Aviation have now been completed and a profit of $0.9m has been recorded.

Other matters relating to discontinued operations totalled a credit of $0.2m during the year.

For 2014, the total reported profit from discontinued operations was $1.4m (2013 - $14.0m).

Segmental Trading Review

Hunting Energy Services

Hunting Energy Services comprises the Well Construction, Well Completion and Well Intervention segments.

In 2014, Hunting Energy Services reported revenue of $1,376.4m (2013 - $1,285.6m), a 7% increase compared to 2013. Underlying profit from operations increased 9% in the year to $217.6m (2013 - $198.8m). This performance has been driven by strong results from the Well Completion and Well Intervention segments, offset by lower trading results within the Well Construction segment. Reported profit from continuing operations was $125.0m compared to $148.2m in 2013.

Well Construction

The Well Construction segment includes Hunting's Premium Connections, Drilling Tools, Construction OCTG, Advanced Manufacturing Group, Hunting Specialty and the Hunting Trenchless business platforms. In 2014 revenue was marginally below the prior year at $378.3m (2013 - $380.9m) following continued subdued trading within the Hunting Electronics platform and issues within the Drilling Tools business which persisted throughout the year.

Underlying profit from operations reduced by 10% compared to the 2013 result at $53.0m (2013 - $58.6m). As a consequence of the continued lower trading levels within the Hunting Electronics and Drilling Tools business units, and following a detailed analysis of future trading trends, a $49.6m impairment has been recorded against the goodwill held within these businesses, which has been presented as an exceptional item in the consolidated income statement. Reported loss from operations was $4.1m in 2014 compared to a profit of $51.2m in 2013.

Premium Connections

Hunting's major connection product lines centre on the SEAL-LOCK™ range of premium connection technologies and in the year the SEAL-LOCK™ semi-flush and high torque connections were the top performing product groups within the business platform, primarily driven by strong international demand for deep water drilling applications.

During 2014, the Group continued to commercialise two new premium connection product groups, including the SEAL-LOCK XD™ connection for use in heavy oil extraction and the WEDGE-LOCK™ connection. Both lines moved from final development and testing at the start of the year to secure first sales and delivery to Hunting's global customer base during the year.

The development of new premium connections for use across the diverse segments of the energy sector is a key strategy of the Group and during 2014, design and construction of a new premium connections manufacturing facility at Houston, Texas, continued. As part of the facility's design, an $11.8m development and testing laboratory to accelerate the commercialisation of the Group's new premium connections has been constructed, which will be operational towards the end of 2015.

New, more efficient, manufacturing equipment has been added during the year enabling the platform to improve productivity and delivery times, utilising lean manufacturing principles.

Drilling Tools

The Drilling Tools platform reported disappointing results during 2014 due to the severe weather reported across North America earlier in the year and higher levels of tool repair and refurbishment costs in the latter part of the year. Remedial initiatives have been undertaken, including changes to the management team, which is improving operating efficiency and business focus.

Hunting's business is driven by the rental of mud motors to customers drilling across the onshore basins in North America and throughout 2014 the platform remained the preferred supplier of mud motors within the Williston basin, with other opportunities pursued in the Permian basin in West Texas.

This business is sensitive to drilling activity declines and is likely to face difficult market conditions in 2015, which has led to the $9.6m impairment to goodwill.

Construction OCTG

Hunting's construction OCTG business platform reported good activity levels throughout 2014, supported by improving margins and a robust order book. The platform has focused on optimising its inventory during the year, and given the current oil price environment and in anticipation of lower levels of trading activity during 2015 has accelerated its programme to further reduce its global inventories.

Advanced Manufacturing Group

The Advanced Manufacturing Group ("AMG") comprises the Hunting Dearborn and Hunting Electronics business platforms. The Hunting AMG single-source supply initiative for Measurement-While-Drilling and Logging-While-Drilling ("MWD/LWD") tools has continued to report favourable progress within the Group's customer base during the year.

During the year Hunting Dearborn performed well, delivering results ahead of management's expectations and the business has maintained a strong order book throughout the whole of the year, which is forecast to extend into the first part of 2015. The unit has benefited from strong demand from customers within and outside of the energy industry, with the overall outlook remaining positive for the near future. The expansion of the manufacturing facility is progressing and will assist in reducing the order times for key customers to more acceptable levels.

Within the Hunting Electronics business, results remained below expectations, resulting from customer destocking programmes reported previously, coupled with increased competitive pressures, particularly from Asian suppliers. While management anticipates that trading momentum will improve in the medium term, the Group has assessed the carrying value of goodwill held for the business, particularly in light of the current macro-economic environment the industry is facing and concluded that a $40.0m impairment to goodwill should be recorded against the $68.7m recognised on acquisition.

Hunting Specialty

Hunting Specialty has reported strong results ahead of management's expectations with the business investing in new equipment in the year, broadening the business's manufacturing capabilities and enabling previously outsourced processes to be brought in-house to retain additional margin.

Hunting Trenchless

The Hunting Trenchless business has continued to market its products through third party distribution networks. The business manufactures and sells drill stems and during the year broadened the range of accessories it manufactures following investment in new machinery.

Well Completion

The Well Completion segment incorporates Hunting Titan, Manufacturing and Accessories and Hunting's International Completion businesses. In 2014, revenues increased 8% to $862.6m and underlying profit from operations increased 13% from $124.5m in 2013 to $140.8m in 2014. Hunting Titan was the key driver behind the segment's improved performance. Manufacturing and Accessories also performed well but International Completion was below expectations with North Sea activity being particularly weak. Reported profit from continuing operations was $106.1m (2013 - $82.2m).

Hunting Titan

Hunting Titan reported improving monthly sales and profit records throughout the majority of 2014 as key growth initiatives, including new products and technologies, generated improvements in market share in a number of key drilling basins across North America and through increased international sales through Hunting's global operating hubs.

In 2014, Titan introduced to customers the ControlFire™ switch system which enhances field safety and new Spectra™ jet cutters which allows for more efficient well intervention procedures to be completed.

During the year, Titan manufactured a record 8.6m energetics charges for use in perforating procedures, pushing the facility in Milford, Texas, to full capacity for most of the year. Plans to expand the manufacturing capacity at Milford are under consideration, subject to the wider industry outlook improving.

During the year, Titan continued to manufacture its wide range of perforating guns in the US, Canada, Mexico and China which has enabled lead times to be reduced while actively managing the cost base. The business has also benefited from the implementation of lean manufacturing processes which has been completed at a number of facilities.

Titan has continued to expand operations in the Williston and Permian basins and in Canada has benefited from the broadened distribution network following the acquisition of the XLPP business in 2013.

Titan continues to increase its international presence through Hunting's existing network of manufacturing facilities. During 2014, initiatives to develop regional sales in Aberdeen, UK; Jakarta, Indonesia; Dubai, UAE and Brisbane, Australia, also progressed as new market opportunities or existing demand from customers enabled Titan to commence initiatives to stock its broad range of products and tools closer to customer demand.

Manufacturing and Accessories

Hunting's Manufacturing and Accessories platform has also reported results ahead of expectations during the year, as activity levels in the Gulf of Mexico remained robust. The platform benefited from a number of global master supply agreements being agreed with major energy service companies, which has meant that Hunting has been able to tender for contracts across its global operations.

During Q4 2014, the Group completed the final phase of expansion of its facility in Houma, Louisiana, to service clients operating in the Gulf of Mexico. The total manufacturing capacity is 281,000 square feet, making the facility the Group's second largest manufacturing site after Wuxi, China.

As part of the Group's plan to consolidate its operations, Hunting Doffing was incorporated into the Hunting Manufacturing and Accessories platform. The business is shortly to move to a new leased facility to enable further manufacturing efficiencies to be captured and to complement the capabilities of the other facilities within the Manufacturing and Accessories business platform.

International Completion

Hunting's global completion businesses have reported mixed results in the year, impacted by regional conditions.

Within Canada, drilling activity recovered during 2014 which led to the region reporting a profit in the year. Hunting's premium connections have seen good demand for customers utilising 'Vacuum Insulated Tubing' technology which assists with the production of heavy oil, leading to continued demand throughout the year for a number of connection product lines.

In the Middle East, Hunting has delivered results ahead of management's expectations.  The unit has maintained good levels of business in Iraq, despite the political unrest in-country throughout the year. The business has also progressed its plans for expansion in Saudi Arabia, with the formation of a joint venture with SG Petroleum nearing completion.

Hunting's Asia Pacific business delivered a result slightly ahead of management's expectations, following the exceptionally strong performance in 2013. While regional steel producers continue to compete strongly on price across the region, Hunting's pipe supply and threading offering remains a highly attractive proposition for operators in the region, which enabled the business to continue to grow its presence throughout the year. Given the focus of the global energy industry on the eastern hemisphere, and the associated competition for talent, Hunting opened a Regional Training Academy in Singapore during the year, to attract and retain new talent and develop the skill sets of the wider work force. The Group now has 4 facilities in Singapore and future investment plans in the region focus on consolidating these facilities to capture further cost and manufacturing efficiencies in the medium term.

In Europe, Hunting's North Sea and European operations saw near record lows in activity as fiscal and political uncertainty hindered customer investment in the region. Hunting's European operations have identified new opportunities within Norway and during the year opened a sales and distribution site and appointed a country manager to oversea growth on the Norwegian Continental Shelf.

Well Intervention

The Well Intervention segment includes the Hunting Subsea and Well Intervention businesses. In 2014, revenue increased 25% leading to a 52% increase in underlying profit from operations from $15.7m in 2013 to $23.8m. Reported profit from operations was $23.0m (2013 - $14.8m).

Hunting Subsea

Hunting Subsea delivered a result ahead of management's expectations in the year driven by strong international offshore demand. Sales of hydraulic couplings and valves have grown, with new supply agreements being signed in the year leading to coupling production achieving a record level of output during Q3 2014. Subsea's order book remains strong as global deep water projects continue to progress, with activity likely to be sustained into Q1 2015.

During the year, Hunting Subsea appointed new global sales personnel to drive international growth for its product lines. Opportunities in the UK and Norwegian continental shelves have been identified which should lead to new revenue streams being developed in the future.

Well Intervention

Hunting's Well Intervention business lines focus on pressure control systems and Thru Tubing intervention products and services for the Group's global client base. During the year sales throughout the Middle East and Asia Pacific have been particularly strong with a number of major orders being completed in the year which has driven strong growth.

Exploration and Production

Hunting's exploration and production business has oil and natural gas well investments mainly in the Southern US and shallow waters offshore Gulf of Mexico, holding equity interests in 49 producing properties. On a Barrel of Oil Equivalent basis ("BOE") production in the year was 143,000 BOE (2013 - 128,000 BOE) with reserves at 31 December 2014 being 0.9m BOE (2013 - 1.1m BOE). In 2014, the business reported an underlying profit from operations of $0.2m (2013 - $1.2m).

During 2014, the unit participated in drilling 5 oil and gas wells. This resulted in 4 successful outcomes and 1 which was deemed non-commercial, resulting in dry hole costs of $1.7m (2013 - $2.6m), which are shown as an exceptional item.

Following a year end valuation of reserves which requires individual oil and gas properties to be impaired when the estimated realisable value is less than the book value based on future production and commodity prices, the business has taken an impairment charge of $9.6m (2013 - $7.9m), which has been shown as an exceptional item, reflecting a reduction in reserve estimates and higher retirement obligation cost estimates. Reported loss from operations for 2014 was $11.1m (2013 - $9.3m).

Cash Flow

Summary Group Cash Flow

* Restated following the designation of Gibson Shipbrokers as a discontinued operation.

EBITDA increased 11% during the year reflecting strong trading conditions and good performance. While the business grew over 2014, working capital was tightly managed and ended the year broadly unchanged.

Net interest paid decreased in the year to $5.6m from $6.5m in 2013 reflecting lower average net debt. Tax paid in the year increased by $6.7m to $26.6m from $19.9m in 2013 due to higher taxable profits, an increase in rates and because 2013 benefited from a shielding effect of losses brought forward.

Replacement capital investment increased 54% to $69.0m in 2014 (2013 - $44.8m) and included $25.4m on the new Houma facility, which replaces other sites. Other key components included $19.2m on drilling tools and rental equipment and $16.4m on machinery and equipment. Exploration and production capital investments totalled $7.0m during the year as contractually committed wells were drilled by the unit's business partners.

Other operating cash and non cash movements at $9.9m were $14.4m favourable to 2013. This reflected higher adjustments for losses on the sale of plant, equipment and machinery, higher share based payment charges with the 2004 Long-Term Incentive Plan being replaced with the Hunting PSP, and higher pension charges.

As a result of the above investments, free cash flow increased by $36.7m to $182.3m in the year (2013 - $145.6m).

Expansion capital investment during 2014 reached $54.5m (2013 - $50.0m) as the Group's internal capital investment programme progressed. The Group incurred $23.0m on its new premium threading and test facility at Houston, Texas, $3.7m on the new regional facility in Cape Town, $9.7m on drilling tools and rental equipment, $12.9m on machinery and equipment and $3.1m at Hunting Dearborn. Other expansion capital investments totalled $2.1m.

Total dividend payments of $46.6m were paid, with $2.5m of this relating to non-controlling interests. The $44.1m paid to equity shareholders reflected the payment of the final dividend for 2013 of 21.8 cents (12.9 pence) and the 2014 interim dividend of 8.1 cents (5.1 pence). All dividends will continue to be declared in cents, with a Sterling equivalent paid, following a formal process of conversion. The final dividend for 2014 is proposed at 22.9 cents, and, if approved by shareholders, is expected to result in an outflow of $33.7m.

During 2014 the Group paid $3.0m being the final payment on the Specialty Supply acquisition, which together with other cash inflows of $0.2m and foreign exchange movements of $3.0m resulted in a net cash inflow from continuing operations of $75.4m.

Within discontinued operations, an inflow of $3.9m following the settlement of a loan note from Field Aviation and the return of unutilised environmental escrow funds together with other cash inflows of $0.2m, were broadly offset by cashflow movements within Gibson Shipbrokers. Therefore, net debt reduced by $74.8m during 2014 to end the year with a net debt position of $131.0m (2013 - $205.8m).

Group Funding and Position at Year End

Financial Capital Management

Capital employed is managed with the aim of maintaining an appropriate level of financing available for the Group's activities. The balance of debt and equity (as reflected in the gearing ratio which is net debt expressed as a percentage of total equity) is managed having due regard to the respective cost of funds and their availability.

The Group operates a centralised treasury function with policies and procedures approved by the Board. These cover funding, banking relationships, foreign currency, interest rate exposures, cash management and the investment of surplus cash.

The Group operates on a global basis and hence results originate in a number of currencies. The US dollar is the most significant functional currency used; however, where this is not the case the Group is subject to the effects of foreign exchange rate fluctuations with respect to currency conversions. Currency exposure on the balance sheet is, where practical, reduced by financing assets with borrowings in the same currency. Spot and forward foreign exchange contracts are used to cover the net exposure of purchases and sales in non-domestic currencies.

2014 has been a year of growth for the Group, as activity levels improved within a number of the Group's core businesses leading to an increase in revenues and underlying profits from continuing operations. Cash generation has been sufficient not only to fund our capital investment programme requirements but also to reduce net debt by $74.8m to $131.0m (2013 - $205.8m), with gearing reducing to 9% at 31 December 2014 (2013 - 15%).

The Group's financial position remains robust, with total credit facilities of $649.8m in place (2013 - $688.8m) of which $584.7m or £375.0m (2013 - $621.1m or £375.0m) is committed. The committed facility is a £375.0m Sterling denominated multi-currency revolving credit facility ("RCF") from a syndicate of ten banks which extends to 5 August 2016. Further details regarding the facility can be found in note 30 of the 2014 Annual Report and Accounts.

The ratio of net debt to EBITDA permitted under the RCF must not exceed a maximum of 3 times. EBITDA must also cover relevant finance charges by a minimum of 4 times. For covenant testing purposes, the Group's EBITDA is adjusted to exclude exceptional items, include the share of associates' post-tax results and exclude the fair value charge for share awards. EBITDA, for covenant test purposes, is based on the previous twelve month period, measured twice yearly at 30 June and 31 December. At 31 December 2014 both these covenants were comfortably met.

The Group's net debt is monitored by Group Treasury on a daily basis and a variety of cash forecasts looking at different time horizons are prepared on a periodic basis. The covenants are monitored on a monthly basis and all external covenant requirements have been met during the year.

Management's judgement is that the level of headroom remaining is adequate to provide ongoing flexibility and to support the investment in key projects outlined in this strategic report.

Return on average capital employed is a KPI management use to assess business unit performance. The Group's underlying return on average capital employed has improved to 13% (2013 - 12%) reflecting the strong results in the year despite the ongoing capital investment programme on expansion projects, which do not provide an immediate financial return.

The Board considers each ordinary dividend proposed based on the merits of the information available to it at the time. Consideration is given to the financial projections of business performance and capital investment needs, together with feedback from shareholder discussions.

Further detail on financial risks is provided within note 30 of the 2014 Annual Report and Accounts.

Balance Sheet

Following the Group's annual impairment review exercise, whereby the carrying value of goodwill for each relevant

cash generating unit across the Group is evaluated based on future cash projections, an impairment of $49.6m to the goodwill held in respect of the Drilling Tools and Hunting Electronics business units has been recognised. Further details of the reasons for the impairment are detailed in note 16 of the 2014 Annual Report and Accounts. Other changes to goodwill relate to an adverse impact from foreign exchange of $3.2m and a reclassification to assets held for sale of $1.8m. As a result, the Group's goodwill has decreased by $54.6m compared to 2013.

Other intangible assets have reduced by $38.2m, the main movements being an amortisation expense for the year of $42.8m offset by the capitalisation of technology and software development costs of $4.8m.

Property, plant and equipment has increased by $41.2m.  Additions of $125.1m were offset by depreciation of $52.3m and impairment of dry hole costs and oil and gas assets of $11.3m. The net book value on disposals amounted to $13.7m, exchange adjustments were an adverse $6.1m and $0.5m was reclassified as held for sale.

Working capital has increased by $3.0m since 2013 with increases in receivables more than offsetting that on payables. Inventory balances were relatively neutral.

Tax balances payable have increased to $55.2m at 31 December 2014. The increase largely reflects additional deferred tax on the reversal of timing differences.

Provisions have reduced by $8.7m during the year primarily due to the release of unutilised onerous property provisions with a settlement agreement reached with the landlord in respect of certain vacant properties.

As a result of the above changes, capital employed in the Group has reduced by $51.3m to $1,569.3m.

Cash generation in the final months of the year has been particularly strong resulting in an overall cash inflow in 2014 of $74.8m reducing net debt to $131.0m at 31 December 2014.

Net assets at 31 December 2014 were $1,438.3m, which, after non-controlling interests of $30.2m, result in equity shareholders' funds of $1,408.1m. This is an increase of $24.2m over 31 December 2013, which reflects the retained result for the year of $69.2m offset by other items of $0.9m and $44.1m of dividend payments.

Outlook

Over the last few years, a quiet revolution in North America has taken place which has reshaped the supply of hydrocarbons. Hydraulic fracturing (fracking) initially transformed the US natural gas market from a concerning deficit to an exportable abundance. Further advances in fracking and horizontal drilling have now made a positive impact on US oil production and coupled with global supplies, have created a temporary imbalance to the world's supply/demand curve.

Accordingly, oil prices have declined dramatically, and the global oil and gas industry is quickly resetting its expenditure and profitability expectations. Rig counts continue to decline each week with varying estimates of future levels. Operators initially set modest targets of contraction, but have escalated those reductions depending on their geographic focus, debt position and cost structure.

This rapid decline in industry expenditure and activity will inevitably feed through to our revenue and profitability levels for 2015. Depending on the geographic location and product description, profit levels will vary. North America onshore activity will be the most affected and will be the target region for most of Hunting's initial cost actions including, headcount reduction, hiring and salary freezes and capital investment constraints. Since year end, approximately 500 employees or 13% of the Group's global workforce have been affected. The offshore Gulf of Mexico, primarily deep water drilling and production, will have modest changes in rig count and expenditure.

Internationally, we expect the Middle East and Asia Pacific to remain at activity levels seen in 2014 however, tubular margins will decline. Canada and the North Sea has and will continue to experience contraction in rig counts and activity at varying levels dependent upon the individual operator's cost points.

Despite the subdued consensus for the short term oil market, Hunting remains confident in the long term fundamentals for oil and gas demand. Our capital investment programme for additional and more efficient capacity will be completed throughout 2015 with a strong belief in preparedness for the eventual recovery. Our balance sheet remains solid with modest levels of net debt. Our unique products, global footprint, flexible manufacturing capacity and experienced personnel will enable us to manage the downturn yet capture opportunities which often appear in cyclical environments.

We do not know the length or depth of the industry contraction. We will however endeavour to provide updates more often than required regarding the activity and developments we see in the markets and clients we serve. Your Company has an excellent team of experienced managers to respond quickly during this period and react to the changing developments of individual clients, commodity prices, geopolitical influences and financial requirements. They remain committed to improving further the Company's Health, Safety and Environment record. They will introduce new products that will aid in reducing customer costs for oil and gas extraction. And finally, they will be mindful of shareholder value and the need to operate as if Hunting were their personal company.

Supplementary Information

The following disclosures can be found at the end of this announcement:

·       Business Strategy;

·       Performance Indicators;

·       Principal Risk and Uncertainties.

Statement of Directors' Responsibilities

The Directors confirm that the 2014 Annual Report and Accounts, which will be issued on 12 March 2015, complies with the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority in respect of the requirement to produce an annual financial report.

The Directors confirm that to the best of their knowledge and belief:

•        the financial statements have been prepared in accordance with International Financial Reporting Statements ("IFRSs") as adopted by the European Union, give a true and fair view of the assets, liabilities, financial position and profit of the Group and the Company;

•        the Annual Report, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess a company's performance, business model and strategy;

•        the Strategic Report in the 2014 Annual Report and Accounts, from which this narrative is extracted, includes a fair review of the development and performance of the Group's operations and the year-end position of the Group and the Company, together with a description of the principal risks and uncertainties they face. The Strategic Report also details the Group's policies on human rights, gender balance and its scope 1 and 2 greenhouse gas emissions.

A list of current Directors is maintained on the Hunting PLC website: www.huntingplc.com.    

This responsibility statement has been prepared in connection with the 2014 Annual Report and Accounts of the Company for the year ended 31 December 2014. Certain parts of the Annual Report and Accounts are not presented within this announcement.

By order of the Board

Ben Willey

Company Secretary

5 March 2015

Forward-looking statements

This announcement contains certain forward-looking statements. The forward-looking statements are not intended to be guarantees of future performance but are based on current views and assumptions and involve known and unknown risks, uncertainties and other factors that may cause actual results to differ from any future results or developments expressed or implied from the forward-looking statements.
 

Consolidated Income Statement

For the Year Ended 31 December 2014

* 2013 has been restated for the designation of Gibson Shipbrokers as a discontinued operation.

Consolidated Statement of Comprehensive Income

For the Year Ended 31 December 2014

Consolidated Balance Sheet

At 31 December 2014

Consolidated Statement of Changes in Equity

Consolidated Statement of Cash Flows

For the Year Ended 31 December 2014

Notes to the Financial Statements

1.  Basis of Preparation

The financial statements consolidate those of Hunting PLC (the 'Company') and its subsidiaries (together referred to as the 'Group') and include the Group's interests in associates.

The financial statements have been prepared in accordance with the Companies Act 2006 and those International Financial Reporting Standards ('IFRS') and International Financial Reporting Interpretations Committee ('IFRIC') Interpretations as adopted by the European Union. The financial statements have been prepared on a going concern basis under the historical cost convention as modified by the revaluation of available for sale financial assets and those financial assets and financial liabilities held at fair value through profit or loss.

The Group is engaged in a process to sell Gibson Shipbrokers to an employee benefit trust formed by Gibson Shipbrokers' employees. It is expected that this transaction will be completed on 31 March 2015. As Gibson Shipbrokers was previously reported as a separate segment within continuing operations, its results and cash flows for 2013 have been re-presented as a discontinued operation. The assets and liabilities of Gibson Shipbrokers at 31 December 2014 have been treated as held for sale.

The principal accounting policies applied in the preparation of these financial statements are the same as those used in the last published set of financial statements updated for the adoption of new standards, amendments and interpretations as shown below. These policies have been consistently applied to all the years presented.

The financial information set out below does not constitute the Company's statutory accounts for the years ended 31 December 2014 or 31 December 2013, but is derived from those accounts.  Statutory accounts for 2013 have been delivered to the Registrar of Companies and those for 2014 will be delivered in due course.  The auditors have reported on those accounts; their reports were unqualified, did not draw attention to any matter by way of emphasis without qualifying their report and did not contain statements under S498(2) or (3) of the Companies Act 2006. Whilst the financial information included in this preliminary announcement has been computed in accordance with International Financial Reporting Standards, this announcement does not itself contain sufficient information to comply with IFRS.

Restatement of Previously Reported Results

Adoption of New Standards, Amendments and Interpretations

The following standards, amendments and interpretations have been adopted and are effective for the Group's accounting period beginning on or after 1 January 2014:

-   IAS 28 (revised) Investments in Associates and Joint Ventures

-   IAS 32 (amendment) Financial Instruments: Presentation - Offsetting Financial Assets and Financial Liabilities

-   IFRS 10 Consolidated Financial Statements

-   IFRS 11 Joint Arrangements

-   IFRS 12 Disclosure of Interests in Other Entities

-   IFRIC 21 Levies

Although the adoption of these standards, amendments and interpretations represents a change in accounting policy, comparative figures for 2013 have not been restated for these as the changes do not impact the financial performance or position of the Group.

The following standards, amendments and interpretations are effective subsequent to the year end and are being assessed to determine whether there is a significant impact on the Group's results or financial position:

-   IFRS 9 Financial Instruments*

-   IFRS 15 Revenue from Contracts with Customers*

-   Amendments to IFRS 10, IFRS 12 and IAS 28 Investment Entities: Applying the Consolidation Exception*

-   Amendments to IAS 1 Disclosure initiative*

-   Amendments to IFRS 10 and IAS 28 Sale or Contribution of Assets between an Investor and its Associate or Joint Venture*

-   Amendments to IAS 27 Equity Method in Separate Financial Statements*

-   Amendments to IAS 16 and IAS 38 Clarification of Acceptable Methods of Depreciation and Amortisation*

-   Amendments to IFRS 11 Accounting for Acquisitions of Interests in Joint Operations*

-   Amendments to IAS 19 - Defined Benefit Plans: Employee Contributions

-   Annual Improvements to IFRSs 2010-2012 Cycle - effective 1 July 2014

-   Annual Improvements to IFRSs 2012-2014 Cycle - effective 1 January 2016*

*Not yet endorsed by the European Union.

2.  Critical Accounting Estimates and Judgements

The preparation of financial statements requires management to make judgements and assumptions about the future, resulting in the use of accounting estimates. These will, by definition, seldom equal the related actual results and adjustments will consequently be necessary. Estimates are continually evaluated, based on experience, consultation with experts and reasonable expectations of future events. Accounting estimates are applied in determining the carrying amounts of the following significant assets and liabilities:

3.  Segmental Reporting

Group

The Group reports on seven operating segments, three of which are discontinued operations, in its internal management reports, which are used to make strategic decisions. The Group's continuing segments are strategic business units that offer different products and services to international oil and gas companies and undertake exploration and production activities.

The Group measures the performance of its operating segments based on revenue and profit from operations, before exceptional items and the amortisation of intangible assets. Accounting policies used for segment reporting reflect those used for the Group. Inter-segment sales are priced on an arm's length basis.

Continuing operations

The Well Construction segment provides products and services used by customers for the drilling phase of oil and gas wells, along with associated equipment used by the underground construction industry for telecommunication infrastructure build-out and precision machining services for the energy, aviation and power generation sectors.

The Well Completion segment provides products and services used by customers for the completion phase of oil and gas wells.

The Well Intervention segment provides products and services used by customers for the production, maintenance and restoration of existing oil and gas wells.

The Exploration and Production segment includes the Group's oil and gas exploration and production activities in the Southern US and offshore Gulf of Mexico. The Board of Hunting will not be making any new capital investment, beyond where the division has contractual commitments and so the division will in future focus on producing out its remaining reserves, with a view to winding down the operation.

Costs and overheads incurred centrally are apportioned to the continuing operating segments on the basis of time attributed to those operations by senior executives.

Discontinued operations

Gibson Shipbrokers is a global energy shipping broker headquartered in London. The business has been presented as a discontinued operation and its results have been restated to exclude central overheads previously allocated to the division.

The discontinued operations comprise Gibson Shipbrokers, as noted above, which has been classified as held for sale at 31 December 2014, Field Aviation, which was sold in 2012, and Gibson Energy, which was sold in 2008. Gibson Energy and Field Aviation continue to generate accounting entries due to sale related transactions and are required for reconciliation purposes.

The following tables present the results of the operating segments on the same basis as that used for internal reporting purposes to the Chief Operating Decision Maker.

Results from operations

Gibson Shipbrokers' results for the year ended 31 December 2013 have been re-presented as a discontinued operation and its results have been restated to exclude central overheads previously allocated to the division.

Other Segment Items

Geographical Information

The Group operates across a number of geographical areas. The UK is the domicile of Hunting PLC. The table below shows revenues from external customers, which are attributed to individual countries on the basis of the location in which the sale originated. Information on the location of non-current assets is also presented below. Non-current assets exclude defined benefit assets and deferred tax assets.