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Offshore drilling has declined but the gloom should be short-lived

Global spending on offshore drilling is forecast to rise 32% over the period 2009-2013 compared with 2004-2008, despite reduced spending in 2009 and 2010. According to the latest edition of the ‘World Offshore Drilling Spend Forecast 2009-2013’ published today by Douglas-Westwood and Energyfiles, $278bn was spent between 2004 and 2008 on offshore drilling. Full text

Hunting PLC (LSE: HTG), the international energy services company today announces the acquisition of National Coupling Company Inc. ("NCC"), a leading developer and manufacturer of subsea hydraulic equipment, for a cash consideration of US$55 million.

The consideration of US$55m is payable in cash on completion with an additional US$5m to be paid after one year provided that certain financial performance targets are achieved.  The acquisition is conditional on the completion of environmental testing at NCC's Houston, Texas, facility which is expected to be completed by the end of April 2009.  It is expected the acquisition will be earnings enhancing in 2009.

NCC was founded in 1968 and is the worldwide leader in subsea hydraulic coupling technology. Its product lines are focused on critical subsea hydraulic couplings that require a metal seal for ultra deepwater, extreme high pressure and high temperature applications up to 22,500 psi and 400°F.  NCC was a privately owned company with the majority of shares held by the family of the founding owner. None of the majority owners will be involved in the company going forward.

NCC recently developed two new subsea product lines which have expanded its operating and financial profile:  

  • Chemical Injection System is a positive displacement metering system that delivers multiple chemicals for subsea applications with the highest degree of precision and efficiency.

  • Special hydraulic valves are designed to meet the industry's highest standards of specifications for subsea and surface applications.

NCC has 68 US patents with over 300 US and international patents, 11 patents pending and six trademarks.  The company has over 100 employees located in modern, well equipped premises headed by a highly qualified management team with an extensive engineering background.

NCC's 2008 normalised profits before tax were US$4.6m with an EBITDA of US$6.5m. These are after adjusting for non-recurring items of US$3.1m. The net assets and gross assets of NCC at 31 December 2008 were US$15.6m and US$20.8m respectively.

The manufacturing techniques employed by NCC will enhance Hunting's existing facilities. Over the last three years, NCC has averaged R&D spend in excess of US$2m, primarily for the Subsea Chemical Injection System.

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The acquisition of NCC marks a step change in Hunting's presence in the target market of high pressure deep water drilling.  In the past five years, approximately US$46 billion has been spent globally on subsea equipment, drilling and completion. It is forecast that US$80 billion will be spent over the next five years  by the industry with participants including Petrobras, Shell, Total, Chevron, BP, Exxon and Statoil. These projects are less likely to be subject to delay or cancellation given that subsea exploration and production is expected to continue to enable the replacement of reserves and the growth in production for international oil companies.


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