HUNTING CUTS 2026 PROFIT FORECAST AGAIN AS MIDDLE EAST CONFLICT DISRUPTS OPERATIONS

British energy services and precision engineering company Hunting plc has cut its full year 2026 profit forecast for the second time this year after prolonged conflict in the Middle East disrupted trading, logistics, shipping and oilfield activity across several of its key markets. The London listed company now expects adjusted EBITDA of between $128 million and $133 million, down from its previous forecast of between $138 million and $141 million, as weakening activity in the Middle East and delays across some other businesses weigh on its fourth quarter performance.

Hunting Chief Executive Jim Johnson said the continuing conflict had already affected the company’s third quarter results and that conditions had deteriorated further during the early part of the fourth quarter. He said attacks on shipping and regional infrastructure, combined with logistical problems and lower drilling activity in Saudi Arabia, were limiting demand for some of the company’s products and delaying orders that management had previously expected to contribute to 2026 earnings.

The reduction marks another significant change in Hunting’s financial expectations this year. The company had maintained guidance of between $145 million and $155 million earlier in 2026 before lowering the range to between $138 million and $141 million after delays involving a major Kuwait Oil Company tender. The latest forecast of $128 million to $133 million means the expected upper end of full year earnings is now more than $20 million below the level anticipated earlier in the year.

Hunting reported year to date EBITDA of approximately $89 million, representing a margin of around 12 percent. Management said several businesses continue to perform strongly, particularly its subsea operations, but those gains have not been sufficient to offset weaker activity in the Middle East, slower deliveries and supply chain difficulties affecting parts of its North American manufacturing operations.

The company provides precision engineered equipment, components and services to oil and gas producers around the world. Its products are used in drilling, well completion, subsea production and other energy related operations, meaning its performance depends not only on oil prices but also on whether producers are actually drilling wells, awarding contracts and moving equipment through international supply chains.

That distinction is particularly important in the current environment because elevated oil prices do not automatically translate into stronger earnings for every company operating in the energy sector. Oil producers may benefit from higher commodity prices, but equipment manufacturers and service companies can still suffer if wars interrupt shipping routes, damage infrastructure, delay drilling programmes or prevent customers from starting planned projects.

Hunting said the Middle East conflict has increasingly created exactly those problems. Tender activity across the region remains difficult, while attacks affecting shipping and infrastructure have complicated the movement of equipment and materials. Rig activity in Saudi Arabia has also fallen, reducing demand connected to the Jafurah unconventional energy development and affecting Hunting Titan, one of the company’s key operating businesses.

Johnson said Hunting continues to believe the long term fundamentals of the region remain attractive. Management expects significant opportunities once hostilities ease and suspended projects resume, but the company acknowledged that the timing of any recovery remains uncertain and that the short term effect on 2026 earnings is now greater than previously anticipated.

The Kuwait Oil Company contract remains another important factor. Hunting had expected a major OCTG tender from Kuwait Oil Company to contribute to its business, but the original process was delayed and eventually had to be rerun. The company confirmed that the new tender was published on October 12, with a decision expected before the end of 2026.

Even if Hunting succeeds in securing a substantial portion of that contract, product shipments are not expected to begin until the second half of 2027. That means the Kuwait opportunity can no longer provide meaningful support to 2026 earnings, although management continues to regard it as an important potential source of future revenue.

The company said it remains well positioned in the Kuwait process because of its long relationship with Kuwait Oil Company and years of technical collaboration and supply chain qualification. However, there is no guarantee that Hunting will win the tender, and any future financial contribution will depend on the size of the award, delivery schedule and final commercial terms.

Hunting’s Europe, Middle East and Africa operation returned to profitability during the third quarter following restructuring, including the closure of its Fordoun site in Aberdeen. Cost reductions from that restructuring have begun to improve performance, but management now expects the segment to record a small EBITDA loss for the full year because of Middle East disruption.

Asia Pacific performance has also been affected by the Kuwait tender delay and weaker tender activity across the Middle East. Hunting now expects that part of the business to produce a roughly break even result in the second half after recording a small profit during the first six months of the year.

North America has produced a more mixed picture. Hunting Titan recorded stronger year to date performance in its domestic market, supported by improved activity and increasing international sales, but management has become more cautious about the fourth quarter because of seasonal factors, customer budget constraints and weaker operator confidence.

The company also reported that the expected recovery in its Electronics and Dearborn businesses had been slower than planned. Third party supply chain problems reduced deliveries and delayed completion of customer orders, adding another source of pressure beyond the Middle East conflict.

Subsea Technologies remains one of Hunting’s strongest businesses. Management said profitability in the division continues to be robust, supported by sustained demand and disciplined execution across its product portfolio. The subsea business has benefited from continued investment in offshore projects, including work connected to Guyana and other deepwater markets.

Hunting has also continued developing its Organic Oil Recovery technology, which is designed to improve production from existing wells. The company said customer interest remains strong in South America, the North Sea and the Middle East, with additional pilot testing and sampling orders received during the third quarter.

These stronger areas provide some protection against weakness elsewhere because Hunting has deliberately expanded beyond traditional drilling products into subsea systems, advanced manufacturing and other technologies. Management has argued that diversification will allow the company to continue growing over the medium term even when particular markets experience temporary disruption.

The latest guidance reduction nevertheless demonstrates how geopolitical risk can quickly affect companies operating across international energy markets. Conflict can increase oil prices while simultaneously reducing the ability of service companies to deliver equipment, access drilling sites or complete contracts. The financial impact therefore varies significantly depending on where a company sits within the energy supply chain.

Hunting’s exposure to Saudi Arabia provides a clear example. Higher oil prices can improve the economics of production, but reduced rig activity in the kingdom directly lowers demand for equipment used in well completion. If customers postpone drilling or slow project schedules, Hunting receives fewer orders even when the underlying commodity remains valuable.

Shipping disruption creates another layer of difficulty. Precision equipment often needs to move between manufacturing centres, ports and customer locations across several countries. Attacks on shipping or infrastructure can increase transportation costs, delay deliveries and force companies to hold additional inventory, all of which can reduce profitability.

The Middle East has become increasingly important to Hunting’s long term strategy because several countries in the region are investing heavily in oil, gas and unconventional resource development. Saudi Arabia, Kuwait and other producers have large multiyear investment programmes that require advanced drilling and completion technologies.

Management therefore continues to expect the region to contribute significantly once stability improves. Johnson said the company sees considerable upside after hostilities end, particularly if suspended drilling and tender activity returns quickly.

The challenge is that the company cannot predict precisely when that recovery will happen. As a result, Hunting has chosen to reduce its 2026 guidance rather than maintain assumptions that depend on a rapid improvement in geopolitical conditions.

The company is also continuing a cost reduction and restructuring programme intended to lower expenses and simplify operations. Hunting plans to combine its Europe, Middle East and Africa business with its Asia Pacific segment from January 2027, creating a single International operating division.

Management is also reviewing administrative costs and disposing of businesses considered non core. These measures are designed to improve efficiency and protect margins while the company shifts its portfolio toward areas with stronger long term growth prospects.

Hunting reported total cash and bank borrowings of approximately negative $11 million at the end of September, an improvement from negative $19 million at the end of June. The change reflected stronger operating cash generation and working capital management during the third quarter.

The company now expects to finish 2026 with cash and bank balances of approximately $40 million to $45 million. That is below earlier expectations but still leaves Hunting with a balance sheet management considers capable of supporting investment and potential acquisitions.

Capital spending for the full year is expected to be approximately $35 million to $45 million. Hunting is also continuing its share buyback programme, which is expected to absorb about $42 million during 2026, while the company’s interim dividend of seven cents per share is scheduled for payment on October 30.

The board continues to evaluate acquisition opportunities, particularly businesses connected to subsea technologies and well completion. Management believes those areas offer stronger structural growth because energy producers are increasingly investing in offshore projects, complex wells and technologies capable of improving production from existing fields.

Hunting’s longer term strategy is also linked to rising global energy demand. The company has highlighted increased electricity requirements from data centres and artificial intelligence infrastructure in North America as one factor supporting energy investment, while governments around the world are placing greater emphasis on energy security and domestic production.

South America is another area of opportunity. Offshore development in Brazil, Guyana and Suriname is creating demand for subsea equipment, while unconventional oil and gas production continues to expand in Argentina.

West Africa also remains part of Hunting’s growth strategy, particularly offshore activity in Angola and Namibia. The company believes deeper water developments in those markets could support demand for its subsea and well completion technologies into the next decade.

Those opportunities explain why management remains positive about the medium term outlook despite cutting its immediate earnings forecast. The company is not describing the latest guidance reduction as evidence of a collapse in underlying energy demand but as the result of severe short term disruption across important operating regions.

That distinction will matter to investors assessing whether the earnings decline is temporary or structural. If Middle East activity rebounds and Hunting wins additional Kuwait and Saudi contracts, some of the revenue delayed from 2026 could reappear in later periods. If conflict and infrastructure disruption persist, however, the recovery could take longer.

The Kuwait Oil Company tender will therefore be closely watched before the end of the year. A significant award could strengthen Hunting’s 2027 order book even though deliveries would not begin until the second half of that year.

Investors will also monitor Saudi rig activity because a recovery there would directly benefit Hunting Titan. The Jafurah development remains one of the world’s most important unconventional gas projects, and a return to stronger drilling activity could restore demand for the company’s completion products.

The latest update provides another reminder that movements in crude oil prices do not tell the entire story of the energy industry. A producer selling oil at a higher price can benefit immediately, while a service company may simultaneously lose revenue because equipment cannot reach a customer or a drilling project has been delayed.

For Hunting, that contradiction has become central to its 2026 performance. Global energy security concerns and supply shortages support long term demand for its products, but the same geopolitical instability contributing to higher oil prices has also disrupted the company’s operations.

The company now enters the final months of the year with a narrower earnings target and a more cautious view of near term trading. Management expects full year EBITDA of $128 million to $133 million and year end cash of approximately $40 million to $45 million while continuing restructuring measures intended to protect profitability.

Despite the second profit downgrade of the year, Hunting continues to argue that its order pipeline, international footprint and growing subsea business provide a foundation for stronger performance once regional conditions improve.

The immediate question is whether the Middle East conflict stabilises quickly enough to allow customers to restart delayed drilling and tender activity. Until that happens, Hunting expects logistical disruption and slower investment decisions to remain a significant constraint on its results.

The company’s latest announcement therefore highlights a wider reality across the global energy sector. High oil prices can create strong incentives for future investment, but companies supplying the equipment and technology needed to produce that energy still depend on stable shipping routes, functioning infrastructure and customers willing to proceed with projects.

For Hunting, those conditions have weakened enough to force another reduction in its 2026 expectations. The company remains optimistic about future demand, but its latest forecast shows that the economic consequences of the Middle East conflict are already being felt well beyond the countries directly involved.