Broker tips: Hunting, Gulf Keystone

(Sharecast News) - Analysts at Berenberg raised their target price on oil and gas industry supplier Hunting from 275.0p to 325.0p on Friday, stating momentum was building into an improving outlook. Berenberg said Hunting had delivered "strong" interim results on 25 August that were broadly in line with consensus for revenue but also included "a strong beat" for underlying earnings at $21.0m versus guidance of $16.0m-18.0m.

In addition to this, Berenberg noted that Hunting's management expects improved delivery into the second half and 2023, supported by high commodity prices and a growing backlog. It also added that further margin growth was likely through operational gearing as utilisation levels continue to increase.

"Gradually increasing US activity levels, combined with the potential for an offshore and international recovery, leave the stock attractively valued, in our view," said the German bank, which also reiterated its 'buy' rating on the stock.

"Momentum has clearly accelerated during the first half of the year, with Q2 EBITDA more than double Q1 levels at circa $13.9m, driven by the Hunting Titan segment. Further improvements to profitability during H2 are expected due to an order book which nearly doubled from $215.0m at year-end to circa $400.0m at the end of August. We expect further margin growth to materialise into 2023, mainly driven by improved utilisation due to the high level of operational gearing."

Analysts at Canaccord Genuity reiterated their 'buy' rating and 370.0p target price on exploration and production outfit Gulf Keystone on Friday following the group's first-half results.

Canaccord Genuity said Gulf Keystone had delivered another "very strong set of results" both operationally and financially, with a further $25.0m dividend declared for 2022.

Operationally, Gulf Keystone has done a good job of maintaining production at current levels while it accelerates the implementation of water handling facilities at both production facilities on Shaikan.

The Canadian bank said Gulf's "solid production base", combined with high oil prices, has led to an "outstanding financial performance", allowing the company to increase full-year total shareholder returns to $215.0m.

Furthermore, Canaccord highlighted that after H122, Gulf Keystone had been able to redeem its $100.0m bonds a year early.

"Despite that total return of $315m to shareholders and creditors and increased capex (due to the addition of a well), we expect the company to maintain a very strong balance sheet, and we project around $170.0m cash and no debt at YE22," said Canaccord.