Market Prognosis

A concise summary of the major macro events of the past 24 hours, and selected UK company-specific news.

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August 24, 2023

Hunting for hydrocarbons remains unloved

Macro & overnight

Confirmation of a continued boom in demand for Nvidia GPUs and ancillary AI products is likely to underpin recent NASDAQ strength.

Interest rate fears ebbed overnight as PMI data takes pressure off inflation.

Lower yields + more AI bubble = RISK ON.

Meanwhile, in Sweden, new housing starts are running down 57% year on year.

Central bankers gather in Jackson Hole.

UK Company News

Harbour Energy reported H1 production of 196,000 boepd with a unit operating cost of $15 a barrel. Its loss after tax was $8 million compared with a profit of $1.0 billion H1 last year, driven by a higher UK tax rate and one-off tax charges. It has zero net debt and narrowed its guidance to 185-195 ‘000 boepd. Capex guidance has been marginally reduced, but its forecast free cash flow remains unchanged at c.$1.0 billion with lower commodity prices, especially UK natural gas prices, offset by reduced capex and positive working capital movements. After investing, it plans to return any excess capital to shareholders to ensure a resilient and sustainable business and maintain the capacity for meaningful but disciplined M&A. 

Hunting H1 revenue increased by 42%, and its order book increased by 63%. Reported profit was $26.2m (H1 2022 – $4.7m), and it says that drilling continues to grow in momentum in South America, West Africa, the Middle East and Asia Pacific. Its borrowing position will unwind by the year-end as projects complete in H2. 

Hunting continues to recover strongly. It is a market leader in critical areas of downhole technology. It has extensive global reach that supports the search for new hydrocarbon reserves in places such as South America, Africa and East Asia. It is also supporting energy transition projects in geothermal and offshore wind. It is hard to imagine Hunting would trade below the value of its net book value if it were listed in North America.  

Sopheon, the InnovationOps software company, reported H1 revenue $17.0m compared to $15.7m in H1 2022. (Note here).   

Tribal Group‘s H1 results are dominated by the contract with Nanyang Technology University, terminated in March. Commercial discussions are underway with NTU, but the potential outcome is uncertain. Meanwhile, it is currently trading in line with Board expectations.

Prognosticator 

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